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LatinNews Daily Report - 26 July 2013

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Main Briefing

Development: In the week to 26 July, there have been widespread gunfights and attacks in different parts of the Mexican state of Michoacán, as drug cartels, federal police and local self-defence militia vie for control of small towns and highways, particularly in the Tierra Caliente region. According to the daily Reforma, the death toll in the past week alone is at least 42.

Significance: If the capture of Miguel Angel Treviño Morales, the leader of the Los Zetas drug gang, was a notable security success for the new government led by President Enrique Peña Nieto, the flare-up of violence in Michoacán this week is a reminder of the federal government’s continuing inability to fill a power vacuum in certain parts of the country. Ironically, it was in Michoacán that Peña Nieto’s predecessor Felipe Calderón (2006-2012) sought to tackle the drug gangs by sending in the army six years ago, a policy that is widely considered to have failed. Six years later, in this state at least, government policy is still not working.

Key points:

  • Michoacán has all the ingredients of an intractable problem. It has many pockets of rural poverty, particularly in the Tierra Caliente lowlands region of 19 municipalities that the government says form the epicentre of the violence. This is the stronghold of the drug gang calling itself Los Caballeros Templarios (the Knights Templar). However another gang, Jalisco Nueva Generación, has been battling to gain control of the area. A third factor is the local self-defence militia groups that have sprung up in many villages. State politics are complicated by the fact that Governor Fausto Vallejo Figueroa, of the federally-ruling Partido Revolucionario Institucional (PRI), has been on sick leave since April. His temporary replacement, Jesus Reyna, has struggled to cope with the deteriorating security situation but insists that Michoacán is not “a failed state”. He has claimed that the violence evidences the fact that the drug gangs are feeling the pressure, a line supported by the federal government, which has described the latest attacks as a sign of the gangs’ “desperation”.
  • Local accounts paint a different picture. According to Tierra Caliente residents, the Knights Templar offered to ‘protect’ rural communities, in exchange for being allowed to get on with their drug trafficking business unmolested. According to José Manuel Mireles Valverde, a representative of the Tepalcatepec militia (formally known as Consejo de Autodefensa de Tepalcatepec), the Knights eventually failed to keep their word and began extorting payments from everyone in the community. José Reveles, a regional specialist, explained: “They made a list of how many kilos of lemon, meat, or avocados everyone produced, and of the floor space of their homes in square metres. Then they’d demand payment. That’s why people got fed up”.
  • It seems that Jalisco Nueva Generación in turn offered to protect people from the Knights Templar. The militias are sometimes genuine expressions of the communities, sometimes sucked into close alliances with one particular drug gang to fend off the other. The situation has become extreme, many say, because the state government simply disappeared from many municipalities, leaving a power vacuum.

Pointer: Michoacán is again emerging as a test case for federal and state government anti-crime policies. Ironically, it highlights the lack of intelligence work by the authorities, which President Peña Nieto says should be at the centre of national anti drugs policy. Former presidential candidates Cuauhtémoc Cárdenas, whose father and son have been Michoacán governors, has stressed the point. “Talk to people in any town, and they’ll tell you that such and such is happening here, and that so-and-so lives behind that hill or over on that farm”, Cárdenas said, adding “If they tell you that, if they’ll tell the doctor, or the vet, or the neighbour, then certainly the authorities should know”.  How Mexican public opinion rates the government’s competence on security issues may turn on whether it can develop better intelligence in Michoacán.

Andean

Development: On 25 July Colombia’s President Juan Manuel Santos admitted that the State had been guilty of "serious human rights violations" during its five decades-old battle with left-wing insurgent groups including the Fuerzas Armadas Revolucionarias de Colombia (Farc).

Significance: This is the first time that the State has recognised responsibility for human rights violations committed during the armed conflict, although President Santos was clear that the rebels must also take responsibility for their actions. He made his comments during an audience convened by the constitutional court, which yesterday began examining the constitutionality of the so-called ‘legal framework for peace’ Approved by congress in June 2012, this modified the constitution and created a legal framework to deal with war crimes perpetrated by both sides and reparations for victims. It also provides the legal basis for the peace process between the government and the Farc.

An NGO, Comisión Colombiana de Juristas, took a case against it to the constitutional court, arguing that it could provide “a backdoor amnesty” for many war crimes and force victims to seek redress in international courts. Gustavo Gallon, a lawyer with the NGO, filed a legal challenge to three phrases in the text of the law that he says would allow lawmakers to select which cases of genocide, crimes against humanity and other war crimes could be investigated and punished, leading to impunity for many.

The hearing comes at a particularly testing time for the Santos government and the peace process, after a deadly attack by the Farc killed 19 soldiers and the group kidnapped a US national and offered to arm rural peasant farmers protesting against the government.

Key points:

  • The president said the State "has been responsible, in some cases by default, in other cases by [the] direct action of some state agents, of serious human rights violations and breaches of international humanitarian law". "Our role, as agents of the state, is to guarantee and protect the rights of all citizens. For that reason, our responsibility is that much greater”.
  • In its recently submitted report on the armed conflict – the most comprehensive to date -  the Historical Memory Group (Grupo de Memoria Histórica, GMH) attributed 10.1% of the 220,000 deaths resulting from conflict between 1958-2012 to the state security forces; 38.4% to paramilitary groups; 27.7% to non-identified armed groups and 16.8% to guerrillas, with “others” accounting for the remainder.
  • Judge rapporteur, Jorge Ignacio Pretelt, told reporters that the court was expecting to issue a ruling next month on the package which has aroused strong opposition from figures like Colombia’s attorney general, Alejandro Ordóñez.
  • Local media yesterday reported that three soldiers were killed and another injured in clashes with the the Farc’s 36th front in a rural municipality of Anorí, in the northwest region of Antioquia.

ECONOMY | Sicad 3 on 29 July. The central bank president Edmée Betancourt on 25 July said the bank would hold a new foreign currency auction under the Sistema Complementario de Administración de Divisas (Sicad) on Monday 29 July. The last Sicad auction (and the first since the April presidential election) was held on 11 July, with US$215.3m sold. Betancourt said Sicad auctions would take place every 15 days “bearing in mind that this is a complementary system” and noting that most currency assignations would be done through the main Comisión de Administración de Divisas (Cadivi). Up to date disbursal figures for the Cadivi are publically unavailable, but in 2012, it provided US$141m a day, or US$27bn over the year. Betancourt said  the current inflation spike was coming under control. Without giving any figures, she recognised that inflation this year would be high, but discounted the spectre of hyperinflation. She blamed speculators and opposition sectors for launching an “economic war” against the government that had fuelled inflation from late last year. Accumulated inflation in the first five months was 19.4%.

Brazil

Development: On 26 July a special edition of the monthly omnibus CNI/Ibope poll made for grim reading for Brazilian political leaders.

Significance: This poll, the biggest and most detailed since the June protests, suggests a seismic shift in the Brazilian electorate. The big questions for the political parties revolve around the impact of this on the scheduled October 2014 general election. Does the incumbent Partido dos Trabalhadores (PT) risk being ousted after 12 years in a massive protest vote? Will the PT run with Dilma Rousseff as its presidential candidate or might it fall back on Lula da Silva – who, in contrast to Rousseff, polls suggest would be handily returned to office?  And who in Brazil’s political arena stands to benefit the most politically from the changed electoral mood? These are questions that the likes of João Santana, the PT’s campaign strategist, now will be working on feverishly ahead of 2014.

President Rousseff cancelled all her official appointments yesterday, with the Alvorada Palace citing flu. Political commentators are now asking if this novice president, who though an intelligent, hardworking and dedicated public servant, has the personality and leadership skills to steer Brazil through this period of upheaval.  The public fervour for charismatic leadership was obvious this week, as thousands of people of all ages fell under the spell of the visiting Pope Francis, who yesterday urged Brazil’s youth to keep alive their "sensitivity towards injustice" and drive the fight against corruption in national life.

Key points:

  • Starting with the federal government led by President Dilma Rousseff, its disapproval rating is now higher than its approval rating for the first time in the current term, which began in January 2011. President Rousseff’s popularity dropped 22 percentage points to 45%, from 67% previously, while public approval of her manner of governing fell 26 points to 45%, from 71% previously. The Rousseff government is now for the first time more unpopular than its predecessor administration (led by former president Lula da Silva [2006-2010]. CNI/Ibope made the point that it will be difficult for the Rousseff administration to revert this poll disaster without concrete evidence that it is delivering on the political, social and economic demands articulated by the tens of thousands of Brazilians that poured onto the streets in spontaneous protests in June.

  • Also very notable: for the first time Ibope examined the popularity of 11 state governments –most also fared badly, led by the main urban states of Rio de Janeiro and São Paulo, where the June protests were concentrated. President Rousseff’s weak popularity rating of 31% was just above the average for state governors and mayors of 28%.

  • Ibope carried out 7,686 interviews in 434 municipalities nationwide, of which 2,002 comprised the national sample and a further 5,684 the 11 state-level surveys.
Central America & Caribbean

JUDICIARY | CCR magistrates appointed (again). On 25 July El Salvador’s national assembly appointed justices to the three-member Corte de Cuentas de la República (CCR), a body nominally independent of the three branches of government, whose remit it is to monitor the transparency of public accounts. This is the fourth time that the national assembly has been forced to make the appointments to fill vacancies that have been pending for six months, after the constitutional chamber of the supreme justice court rejected the previous choices on the grounds that they were affiliated to political parties. This had provoked a strong reaction from President Mauricio Funes, who warned that the resultant uncertainty was deterring investors and could even threaten the 2014 March presidential elections, as candidates need to have their accounts scrutinised by the CCR before they can register with the supreme electoral tribunal.

POLITICS | Government approves partial pensions. On 25 July, the Unidad Nacional del Adulto Mayor (UNAM), which represents senior citizens, announced that the government led by President Daniel Ortega would begin paying out partial pensions to its members on 5 August. This is in line with a 19 July presidential decree awarding partial pensions to people aged 60 and over that had failed to reach the contributions threshold of 750 weeks necessary to claim a full pension. The UNAM has long argued its case, and was a recent source of social unrest for the government.  The decree  authorises a monthly pension of C$1,200 (US$48) to those who managed contributions of between 250-400 weeks; C$2,000(US$80) for accumulated contributions of up to 600 weeks and US$2,800 (US$113) for accumulated contributions of up to 750 weeks. Finance Minister Iván Acosta said the new payouts, which will benefit some 15,000 people, would cost the government between C$600m and C$800m (US$24m-US$32m) annually.

Southern Cone

Development: On 25 July in Montevideo, hundreds of workers took part in a partial strike called by the country’s main labour union, Plenario Intersindical de Trabajadores - Convención Nacional de Trabajadores (PIT-CNT), in demand of better salaries.

Significance: The unrest underlines the discontent in the support base of the left-wing Frente Amplio (FA) coalition government led by President José Mujica. The two main secondary school teachers’ unions, Asociación de Docentes de Enseñanza Secundaria (Ades) and Federación Nacional de Profesores de Enseñanza Secundaria (Fenapes), took to the streets last month. The unions are upping the pressure on the government ahead of the scheduled approval next month of next year’s budget. There are reports of a split within the PIT-CNT, which the government could exploit.

Key points:

  • There were no official figures on the turn out. Local media reported that construction and transport workers adhered to the partial strike, which ran from 9am to 1pm. Health and education workers walked out for 24 hours.
  • The Montevideo branch of the Asociación de Maestros del Uruguay (ADEMU), yesterday announced plans for a 24-hour strike on 12 August, when the chamber of deputies is due to approve the budget.  Other education unions like the Federación Uruguaya de Magisterio (FUM) and Fenapes are holding meetings tomorrow and Sunday to discuss a plan of action.
  • Yesterday (26 July), the PIT-CNT coordinator, Fernando Pereira, recognised that there were some rebellious members of the PIT-CNT challenging the leadership of the PIT-CNT. He dismissed them as “myopic” and after their own interests. According to local press reports, this dissident faction is led by Richard Read, the leader of the Federación de Obreros y Empleados de la Bebida (FOEB).
  • The unrest comes as President Mujica is out of the country on a trip to Cuba that began on 24 July - his first official visit to Cuba since taking office in January 2010.  Mujica, accompanied by his wife, Senator Lucia Topolansky, like him a former  left-wing Tupamaro guerrilla, held an “emotional” meeting with the Cuban revolutionary leader Fidel Castro. According to the Cuban state daily Granma, the two “evoked moments of the revolutionary struggle in both countries.”

  • Mujica, who also met President Raúl Castro, is due to attend the commemoration today (26 July) of the 60th anniversary of the failed assault on the Moncada barracks in Santiago, the event that signalled the beginning of the Cuban Revolution. Venezuela’s President Nicolás Maduro and other regional left-wing leaders also will be present.

Development: On 25 July President Cristina Fernández announced a 25.2% increase in the minimum wage, and said that the half yearly bonus payment (known as the medio aguinaldo) would be paid on a tax-free basis.

Significance: There is clearly a strong electoral inspiration behind these announcements. They were made a little over two weeks before obligatory primaries are held for the mid-term congressional elections, due at the end of October. They were also made just before a pre-election deadline that bans the government from publicising initiatives that could influence voting intentions.

Key points:

  • President Fernández announced that the minimum salary would be increased by 25.2% in nominal terms, to reach A$3,600 (US$658) a month (/mth). She also said that there would be a retrospective tax exemption on mid-2013 bonus payments. Typically in Argentina, workers are paid a ‘13th month’ salary every year as a bonus, half at the end of June and half at the end of December (these payments are known as medio aguinaldos). As taxes have already been deducted from the June payment, the decision means that around 2.196m salary earners (who are also voters) will receive an unexpected windfall refund just around the time they will be getting ready to vote. 

  • The announcements were made after very rapid consultations with the pro-government trade unions, who had supported a claim for a minimum wage improvement of around 25%, and employers, who had offered 20%. There were no consultations with opposition unions, led by Hugo Moyano of the Confederación General del Trabajo (CGT) and Pablo Micheli of the ‘dissident’ Central de Trabajadores de la Argentina (CTA). These groups have been demanding a minimum salary of just over A$5,000/mth.

  • It is hard to predict the electoral impact of these announcements. But an informed guess is that it will do something to improve the government’s popularity from a low base. One good proxy is the monthly Indicador General de Expectativas Económicas (IGEE) compiled by the Universidad Católica Argentina (UCA) and TNS-Gallup. Analysts say it has proven a good predictor of the pro-government vote. In June, it was up by 4% month-on-month, but down 7.7% on June 2012, and 19.5% on October 2011.