LatinNews Daily - 25 November 2021

On 24 November Haiti’s Prime Minister Ariel Henry swore in a new 18-member cabinet, which includes eight new appointments.

Analysis:

Henry took over Haiti’s leadership following the July assassination of President Jovenel Moïse (2017-2021) which plunged the country into further crisis. His unveiling of the new cabinet is the fruit of intense negotiations with members of the radical opposition Secteur Démocratique et Populaire (SDP) and other opposition parties, and follows an agreement announced in September with these groups to establish a transitional government. With the country facing a multifaceted security and political crisis – most recently evidenced by the gangs’ recent blockading of fuel supplies over demands for Henry to resign, the challenges facing the new government are enormous. As well as addressing the security situation, another key task is that of staging long overdue elections to elect Moïse’s successor (Moïse’s presidential term, according to the US and international community, ends on 7 February 2022, although the opposition maintains that it ended in February this year), as well as a referendum on a new constitution.

• New appointments include Jean Victor Géneus, a former minister for Haitians living abroad and ambassador in various posts, to replace foreign minister Claude Joseph, a political rival of Henry. Former education minister Nesmy Manigat (2014-2016) and former public health minister Alex Larsen (2008-2011) reprised their roles, while lawyer Berto Dorcé takes over as justice minister.
• Indicative of efforts to include opposition figures, other new appointments include Rosemond Pradel, secretary general of opposition party Fusion, a signatory of the September accord, who resumes his former post as public works minister which he held from 1993-1994, and Ricard Pierre, a former senator for the opposition Pitit Dessalines, who takes over as minister for planning & foreign cooperation.
• Other new appointments include Odney Pierre Ricot, a former director of programming and research at the social affairs ministry, who heads up the ministry and Raymonde Rival (youth & sports).
• Indicative of the pressure facing Henry, the previous day SDP wrote to him demanding to see the new cabinet list. The letter, which was circulated in the local press, recalled that SDP would not participate in a government “dominated by those who have destroyed the country for the past decade” – a reference to supporters of Moïse and Moïse’s mentor, former president Michel Martelly (2011-2016) both of the ruling Parti Haïtien Tèt Kale (PHTK).
• Those present at the inauguration included signatories of the 11 September accord including SDP leader André Michel and Sorel Jacinthe of the opposition party Inite, among others.
• It remains to be seen how gang leaders such as former police officer Jimmy Chérizier (who supported Moïse) respond to the latest announcement. Gangs last month began blocking access to major fuel terminals which Chérizier said would be lifted if Henry resigns. On 12 November Chérizier announced that this would be temporarily lifted to allow for Henry to resign and for a “week of reflection” among Haitians to commemorate the 18 November 1803 Battle of Vertières, a major battle of the Second War of Haitian Independence. He warned that the blockade would resume if Henry did not resign – a threat which has yet to be fulfilled.

Looking Ahead: Addressing the security crisis remains an immediate priority for the new government. This has made headlines following the kidnapping of 17 North American missionaries on 16 October, two of whom were released on 21 November. Also indicative of the worsening security situation, on 10 November the US embassy urged its citizens to leave Haiti and the following day the Canadian government announced that it was temporarily withdrawing non-essential Canadian employees as well as family members of Canadian embassy staff from Haiti.

On 24 November, Colombia’s President Iván Duque said he was not formally notified of plans from US President Joe Biden to remove the Fuerzas Armadas Revolucionarias de Colombia (Farc) guerrilla group from the US State Department’s list of foreign terrorist organisations.

Analysis:

Removing the Farc from the US list of terrorist organisations is seen by many as a necessary step towards reintegrating former combatants into civilian life. However, any de-listing would likely incite opposition from members of President Duque’s hardline administration, which has been critical of the 2016 peace agreement, and may also trigger right-wing pushback in the US.

• Reports that the Biden administration is seeking to remove the Farc from the terror blacklist first emerged on 22 November. Without directly confirming the reports, US State Department spokesman Ned Price said on 23 November that “the Department of State has provided congress with notifications of upcoming actions we are taking with regard to” the Farc.
• Proponents of removing the Farc from the terror blacklist argue that it would reduce the likelihood of former guerrillas returning to arms. Elizabeth Dickinson, a Colombia analyst at the Brussels-headquartered NGO International Crisis Group, said that “US sanctions have handicapped economic and political reintegration, penalising ex-combatants” by making it difficult for them to open bank accounts or participate in US-sponsored aid projects.
• Speaking alongside United Nations Secretary General António Guterres at an event to commemorate the fifth anniversary of the peace agreement, President Duque yesterday said he “has not been formally notified” of any plan to de-list the Farc, or of other reported plans to add the dissident Farc units Segunda Marquetalia, led by Luciano Marín Arango (‘Iván Márquez’), and the 7^th Front, led by Miguel Botache Santillana (‘Gentil Duarte’), to the US blacklist.
• Guterres expressed concern at the continued assassinations of former Farc combatants, which he said are “melting the hopes” for peace. Duque said that this sort of violence is “present in many peace processes,” and said that, of the more than 13,000 ex-guerrillas to demobilise, 254, or 1.4%, had been killed – a lower mortality rate, he said, than that experienced by previously demobilised paramilitary and guerrilla groups in Colombia.

Looking Ahead: Removing the Farc from the terror blacklist would not require the authorisation of the US congress, and is the prerogative of US Secretary of State Antony Blinken.

* Colombia’s state oil company Ecopetrol has announced that it will invest US$1.3bn in natural gas exploration by 2023, both in its gas fields in Colombia and abroad. An Ecopetrol statement said that these exploration projects will take place in “the foothills of the plains [that cover much of central and eastern Colombia], the Colombian Caribbean, the Permian basin [in the US], Brazil, and in pilot projects for comprehensive research on unconventional deposits.” The statement added that eight wells have been drilled so far in 2021, and that 2022 will see “unprecedented activity” with the drilling of a further 15 wells.

On 24 November, Brazil’s federal public prosecutor’s office (MPF) called upon a number of public agencies, including the army, the institute for the environmental protection of the Amazon (Ipaam), and the federal environmental regulator (Ibama), to work together to halt an illegal gold rush currently underway on the Madureira River, one of the Amazon River’s largest tributaries. 

Analysis:

Hundreds of dredging rafts have converged around the community of Rosarinho in the municipality of Autazes, Amazonas state, in the last fortnight following rumours that gold had been found in the area. The scale of this illegal gold rush and the authorities’ failure to act to contain it are testimony to the permissive atmosphere currently surrounding environmental crimes in the Amazon. 

• NGO Greenpeace Brasil flew over the area on 23 November and confirmed that at least 300 rafts are illegally hoovering the riverbed for gold, some 110 km east of the state capital Manaus. Photographs show the flotilla of barges stretching the width of the river, in what has been compared to a floating neighbourhood. 
• “While the entire world is looking for solutions to the climate crisis, Brazil is investing in the opposite. What we saw while flying over was a crime unfolding in broad daylight, without the slightest embarrassment”, Danicley de Aguiar, a spokesperson for Greenpeace Brasil’s Amazon campaign, said. Aguiar blames President Jair Bolsonaro, who has hollowed out environmental law enforcement agencies and emboldened illegal miners and other criminals with his talk of developing the Amazon, for the current invasion on the Madureira River. 
• According to press reports, state authorities which have been approached regarding the gold rush, including Ibama and the Ipaam, have said that they have been made aware of the situation in recent days and are gathering information. Aguiar accuses the government of failing to take action. The MPF is now recommending that the police, the army, and environmental agencies take urgent coordinated action to “repress and disarticulate” the invasion of illegal gold miners. 

Looking Ahead: If no action is taken before the dredging rafts move on to their next mining spot, it will serve as further confirmation that the Bolsonaro government says one thing in international fora and does another at home where the environmental protection of the Amazon is concerned.

* The Instituto Brasileiro de Economia (Ibre) at the Fundação Getúlio Vargas (FGV) university has released the latest figures from its index for consumer confidence (ICC), which show that consumer confidence has slumped in Brazil in November. The ICC fell 1.4 points compared with October to 74.9 points, its lowest level since April when the country was suffering a severe wave of coronavirus (Covid-19) infections. Confidence in both the current situation and future outlook has fallen. “Consumer confidence has gone back to showing negative results. Despite the advance of vaccination, its favourable consequences in reducing cases and deaths, and the flexibilisation of restrictive measures [against Covid-19], the increase of economic uncertainty in the face of high inflation, restrictive monetary policy, and higher indebtedness of low-income families means the situation remains uncomfortable and the outlook is still full of threats”, Viviane Seda Bittencourt, coordinator of surveys at the FGV’s Ibre, explains.

* The recent announcement by El Salvador’s President Nayib Bukele’s of a cryptocurrency bitcoin-related US dollar bond issuance “informally confirms a break from the International Monetary Fund (IMF) with an alternative, uncertain funding/growth model” according to a note circulated in the media to clients by Siobhan Morden, head of Latin America fixed income strategy at Amherst Pierpont, a US-based independent global fixed income specialised broker-dealer. The research note follows other concerns regarding the future of El Salvador’s relations with the IMF, stemming from the country’s adoption of the cryptocurrency in September. On 22 November the IMF released a concluding statement following an Article IV mission which is clear that El Salvador should not use bitcoin as legal tender. It states “Given Bitcoin’s high price volatility, its use as a legal tender entails significant risks to consumer protection, financial integrity, and financial stability. Its use also gives rise to fiscal contingent liabilities. Because of those risks, Bitcoin should not be used as a legal tender.” The Bukele government has sought discussions with the IMF over an economic reform programme that could be supported by an IMF financial arrangement to address the impact of the coronavirus (Covid-19) pandemic. The IMF expects El Salvador’s GDP to rise 10% in 2021 and public debt to reach about 85% of GDP by end-2021, having increased during the pandemic by 14 percentage points of GDP.

On 24 November Mexico’s President Andrés Manuel López Obrador announced that he will nominate Victoria Rodríguez Ceja, a deputy finance minister, to be the next president of Mexico’s central bank (Banxico).

Analysis:

Rodríguez’s nomination was unexpected, and markets instantly recoiled amid uncertainty over Mexico's monetary policy at a time when inflation is at its highest level in 20 years. With Rodríguez lacking significant experience in monetary policy, the concern is that she could bend to López Obrador’s will and jeopardise Mexico’s economic recovery from the coronavirus (Covid-19) pandemic.

• Rodríguez, who is currently undersecretary for expenditures at the finance ministry (SHCP), is not widely known. She has previously held several financial positions in the Mexico City (CDMX) government.
• Her nomination comes after the candidate formerly backed by President López Obrador to become the next Banxico president, Arturo Herrera, announced on 23 November that he was no longer being considered for the role.
• López Obrador offered little explanation for Rodríguez’s nomination, but said that she “acted with great responsibility in the management of public investments” and that there is a need to improve gender equity in Mexico’s institutions (Rodríguez would be the first female president of Banxico).
• However, doubts have been raised regarding her experience. Jacobo Rodríguez, director of economic analysis at US-headquartered hedge fund BW Capital, said yesterday that whilst she has “ample experience in public finances,” she “is not experienced in monetary policy, which is generating certain doubts as to whether she can maintain the country’s orthodox and prudent monetary policy.”
• Omotunde Lawal, the head of emerging markets at the international investment manager Barings, expressed concerns over Rodríguez’s independence, warning that “people are worried that this is a roundabout way for [López Obrador] to interfere with the central bank.”
• Reflecting these concerns, the Mexican peso plummeted in relation to the US dollar yesterday, weakening by 1.8% to trade at M$21.6/US$1.
• Rodríguez yesterday pledged to tame inflation, respect the central bank’s independence, and to leave Mexico’s international reserves untouched.

Looking Ahead: Rodríguez’s appointment will require the approval of a majority of the senate, which is dominated by the ruling Movimiento Regeneración Nacional (Morena).

* Mexico’s national statistics institute (Inegi) has released new figures which show that the country’s consumer price index (CPI) rose 0.69% in the first two weeks of November compared with the previous two weeks, pushing the annual inflation rate to 7.05%. Inegi director Julio Santaella tweeted that this was the highest since April 2001. Earlier this month Mexico’s central bank (Banxico) raised its benchmark interest rate by 25 basis points to 5.00%, following increases of the same amount in September, August and June. Banxico said in a report that the decision was taken in response to inflationary pressures, after Mexico registered annual inflation of 6.24% in October, well above Banxico’s 3% +/-1 inflation target range for 2021.

On 24 November Paraguay’s President Mario Abdo Benítez discussed electricity tariffs for energy produced by the jointly owned Itaipú hydroelectric complex, during a meeting with his Brazilian counterpart, Jair Bolsonaro, in Brasília. 

Analysis

The jointly owned Itaipú Binacional remains one of the world’s largest hydroelectric power stations (on some days it generates more electricity than China’s Three Gorges dam). Paraguay wants to maintain the price for the surplus Itaipú electricity it sells to Brazil at US$54 per kilowatt hour (KwH), while Brazil wants the price to be reduced. After their meeting the two heads of state said that talks had “advanced” but gave no further details

• Annex C of the original Itaipú treaty, signed in 1973, says that each of the two partners owns 50% of the electricity generated by Itaipú, and has an obligation to sell any surplus back to the other. In effect, Paraguay uses only about 10% of the Itaipú-generated power, selling the other 40% back to Brazil.
• The Annex established a ‘cost of service’ pricing model. As the original debt incurred to build the complex is now almost completely paid off, operational costs have been falling. Brazilian negotiators therefore aspire to a reduction in the tariff next year. Paraguay on the other hand wants to maximise revenue at a time when commercial electricity tariffs are much higher, due in part to a persistent regional drought.
• While both presidents have a good rapport and share similar right-wing political views, the Itaipú pricing issue appears to lock them into a win-lose transaction. Paraguay holds elections in 2023 and Bolsonaro is seeking re-election next October. For both leaders a ‘victory’ in the Itaipú pricing talks would boost their domestic political standing.
• Manuel María Cáceres, the Paraguayan director of Itaipú, said the Asunción government had advanced “technical and political arguments” for keeping the price at US$54/KwH.

Looking Ahead: Paraguay’s request to hold the electricity tariff at US$54 for next year will need to be resolved by the two governments during December. A further Abdo Benítez-Bolsonaro meeting is scheduled for 13 December.

* Argentina’s national statistics institute (Indec) has released new figures which show that the country’s exports totalled US$6.8bn in October, up 46.5% year-on-year, while imports totalled US$5.25bn, up 31% on October 2020. This leaves a trade surplus of US$1.6bn, up 138% on the amount registered in October 2020. In the first ten months of 2021, Argentina’s exports totalled US$18.3bn, up 39.1% on the same period in 2020, while imports grew 49.1% to total US$16.86bn.