‘Welcome to Hell’ read the banner unfurled by a few dozen police officers and firefighters at the arrivals gate of the new terminal 2 of Rio de Janeiro’s international Galeão airport: ‘Police and firefighters don’t get paid and whoever comes to Rio de Janeiro will not be safe’. As protests go, it was clever and well-timed, prompting headlines around Brazil and the world. With one month to go until the Olympics, there are serious concerns about Rio’s state of preparedness. While this is nothing unusual ahead of any sporting mega-event, the scale of Rio’s particular problems appears unprecedented.

Infrastructure

Almost all of the sporting venues are complete, with a few final touches necessary for both the velodrome and tennis centre, neither of which will have hosted a test event. The new express bus lane, the Transolímpica, connecting the main Olympic Village in Barra da Tijuca to Deodoro, another of the four Olympic Zones, was opened on 4 July. The biggest question remains whether the metro line extension, linking Rio’s touristic South Zone, with Barra, will be ready by its scheduled opening date of 1 August, four days before the opening ceremony. In an interview on 6 July, Rio’s mayor Eduardo Paes, gave a “100% guarantee” it would be open on time.

In the mayor’s own words, transport is the great legacy of the Games for Rio de Janeiro, but there are questions as to spending priorities. Almost R$1.8bn (US$500m) was spent on 28km of track for the new tram line in Rio’s redeveloped port area; the same amount that has been invested over the past decade on the 270km of track of Rio’s Supervia, its municipal railway network, used by the city’s working-class commuters. The so-called ‘rationalisation’ of Rio’s bus lines, by which many lines were taken out of circulation to reduce congestion with little or no information to the public, has angered many.

While local authorities admit that the new network of so-called Bus Rapid Transit (BRT) lanes is not as good as a metro, they argue it will cut commuter journeys down by avoiding Rio’s heavily congested roads. But the quality of workmanship has proved questionable, with the Transoeste line, completed in a rush ahead of Paes’ re-election in 2012, already showing signs of wear and tear. The lack of reinforced concrete means the road has buckled in places, damaging the high-speed buses and forcing some off the roads, prompting long queues and overcrowding on the ones that remain. Potholes also emerged on the Elevado do Joá, the new road connecting the Zona Sul and Barra, just one week after it opened; another illustration of shoddy workmanship.

The environment

Perhaps the Olympic goal that has received the most attention outside of Brazil was the city’s failed ambition to clean up the Guanabara Bay. Campaigns to clean up the water have been ongoing since at least the early nineteenth century, when slaves used to hurl barrels full of human faeces into the bay. As part of its bid process, Rio promised to treat 80% of the raw sewage flowing into the bay by the start of the Games; in fact the seven treatment stations installed along the edge of the bay have increased the amount treated from 16% to 48%. Though even that final number is disputed.

Various newspaper investigations have discovered high levels of viruses and super-bacteria in the water, which may prove dangerous for the open-water swimmers and sailors who will have to compete there. Once again, the city is putting a brave face on the situation, with the mayor arguing that the fact that the Games are taking place during the dry season means that there will be less effluence running off into the waters (see sidebar).

But it was not just the Guanabara Bay target that was missed. All of Rio’s environmental pledges during its bid procedure were abandoned in the course of delivering the Games. The lake at Jacarepaguá, abutting the Olympic Village itself, remains a fetid latrine; its drainage was suspended after the licencing process was questioned by independent public prosecutors. The goal of turning the Rodrigo de Freitas lagoon in Ipanema, the venue for the rowing, into a waterway safe for swimmers was also quietly shelved, as was a plan to plant seedlings to restore some of the much denuded Atlantic Forest.

Security

With military police officers threatening strike action over recent weeks, following delays in their salaries due to the bankruptcy of the state, acting governor Fernando Dornelles declared a state of “public calamity”. While arguably necessary to access federal funding usually reserved for the aftermath of a natural disaster, it is clear that it was hardly a masterful example of PR. Rio de Janeiro now has R$2.9bn (US$870m) of federal government funding, which the state government has promised to use to pay police officers, many of whom complained not just about delays in their salaries, but lack of equipment, including money for petrol in patrol cars.

Starting on 6 July, 85,000 security personnel, drawn from the armed forces as well as police services across the country, have started to patrol the streets of Rio. Combined with various private-sector initiatives to provide high-profile policing of tourist hotspots, it seems likely that violent crime against tourists will be kept to a minimum.

At the same time, there is a concern that the concentration of effort on the wealthier parts of the city could lead to a deterioration in the security situation in other, poorer areas. In the run-up to the Games, there has been a significant uptick in violent crime. While some of this has been attributed to Brazil’s dire economic situation, other security experts claim that drug gangs have been competing for territory ahead of a potentially lucrative period over the Olympics.

Brazil has little history of terrorism, but the intelligence agency, Abin, has warned of possible ‘lone-wolf’ style attacks and has advised locals to be vigilant. Abin has warned of increased Islamic State chatter suggesting the Olympics as a possible target, with one confirmed threat from an IS French militant. The terrorist group is also using the Telegram messaging app in an attempt to reach Portuguese-language sympathisers. Another cause of concern is the tri-border area between Brazil, Argentina and Paraguay, which has gained a degree of notoriety as a haven for financiers of terrorism. Abin is stepping up its coordination with the 110 foreign intelligence agencies which will be present in Brazil during the Games.

Zika

Another major issue of concern to visitors is the Zika virus. However, both the Brazilian authorities, and perhaps more credibly, the World Health Organization (WHO), have insisted that the colder winter months mean that the mosquito population is much lower, and therefore the risk of transmission is much lower. Although Zika may be a new and frightening development, Brazil has a long history of dealing with mosquito-borne illnesses; historical data shows that transmission rates for dengue and chikungunya drop significantly during the winter months.

• The legacy

While it is to be hoped that the Olympics themselves pass off successfully, it is clear that the Games will have done little to address some of Rio’s most serious issues, and in some instances may have exacerbated existing tensions. Tens of thousands of poorer families have been resettled in Rio’s distant and poorly connected West Zone to make way for various Olympic and transport projects. Much of the investment in the Games has been spent in areas, like Barra da Tijuca, which are already relatively wealthy. In short, while local authorities believe the Games will transform Rio as they did Barcelona in 1992, the long-term result is likely to be an ever-more unequal and divided city.

• Clean-up job

Patrols in Guanabara Bay by so-called Ecoboats, which scoop out physical objects, such as plastic bags, discarded television sets and animal carcasses, are also set to increase in the final weeks to ensure there are no major obstacles for the athletes.

Oi files for bankruptcy: Oi, the only locally controlled mobile phone operator in Brazil, filed for bankruptcy protection with debts of BRL65bn (US$19bn) on 20 June, after rescheduling talks ahead of a EUR231m bond repayment failed to produce agreement. The company has been badly affected by the Brazilian recession, but analysts say it also suffered from serious problems caused by an attempt by the previous Partido dos Trabalhadores (PT) government to turn it into a ‘national champion’. Despite big ambitions and government help, the company was mismanaged (it had six chief executives in five years) and became heavily leveraged. State development banks BNDES and Caixa Económica Federal are reported to have lent BRL13bn (US$3.8bn) to the company.

Although it is a big fixed-line player, Oi is the smallest of Brazil’s four main mobile operators, with an 18.6% market share, compared to Vivo (controlled by Telefónica of Spain) with 28.6%, Tim (controlled by Telecom Italia) with 25.9% and Claro (owned by Mexico-based América Móvil with 25.3%). Oi’s future is now uncertain, with options including a takeover by another player (although a previously planned merger with Tim now looks off the table), restructuring, or break-up. Some analysts argue that this might be a good moment for the market to consolidate, reducing to three rather than four main players. The administration led by the interim president, Michel Temer, which is seeking to control fiscal spending and follow more business-friendly policies, has said it will not bail the company out with new loans.

Banco Galicia bets on Argentine recovery: Although there are doubts among some analysts over the speed at which the Argentina government led by President Mauricio Macri will tame inflation and build an economic recovery, Banco Galicia is confident of a positive outcome. The bank announced in June that it would double its investments in infrastructure to US$182m, in expectation of lower inflation and economic growth in 2017. General Manager Fabián Kon said 2016 would be a year of “transition” for the Argentine economy but that the outlook for 2017 was “auspicious”. Kon said the bank would invest ARS2.5bn (US$182m) to open new branches, modernise its headquarters and incorporate new IT systems. As a result of the government’s more market-friendly policies, the bank was expecting a “natural” expansion of credit to individuals and corporates and the emergence of new investment options. Galicia also expected inflation to begin easing down from June, which would play a key role in allowing the banks to move from very short to more longer-term lending. Bank credit is still low as a proportion of GDP, indicating that there is plenty of room for growth. Banco Galicia has round 3.3m customers, ARS107.8bn (US$7.2bn) worth of deposits, 261 branches, 5,700 employees, and net assets of ARS15bn (US$1bn).

Avianca not for sale: Colombia-based airline Avianca is talking with others about potential strategic partnerships, but is not itself up for sale, chairman Germán Efromovich told the Caracol radio station in mid-June. His comments followed reports that HNA Group of China had expressed an interest in acquiring Avianca Holdings and the Avianca Brasil subsidiary, both controlled by Efromovich’s Synergy Group. US-based United Continental Holdings and Delta Air were also reportedly interested. But Efromovich told Caracol, “Avianca is not up for sale. Talks about strategic alliances go on all the time.” He added that the point of them was to seek a faster rate of growth for the business. He added that the talks might lead nowhere, or might on the other hand end up “with an alliance that is very important for the future of the company”. The Avianca group also includes Colombia-based freight service Tampa Cargo SA, Ecuador-based Aerolíneas Galapagos (known as Aerogal) and Grupo TACA of Central America. Avianca Holdings companies carried 28.3m passengers in 2015, and operate a network with 105 destinations in 28 countries using a fleet of 177 aircraft.

New Mexican petrol stations: For the first time in eight decades, there are now petrol stations in Mexico that are not trading under the Petróleos Mexicanos or Pemex brand, owned by the state oil company of the same name. The change is small – only three new stations in early June – but symbolically important, as it marks the introduction of competition into the downstream end of the oil and gas business, as contemplated in the 2014 energy reform. One station is now operating in Mexico City under the Hidrosina brand, while a further two in Campeche and Mérida are selling fuel under the La Gas brand. Grupo Hidrosina, set up in the early 1990s, has operated around 30 Pemex-branded stations as a concessionaire for a number of years. “With the collaboration of Pemex we signed an agreement to use a different brand and test the success that may, or not, work for the clientele”, said Víctor Ruiz Iriarte, director of operations at Hidrosina. Around 20 Hidrosina-branded stations will be piloted this year, he added. More new petrol station brands are due to make their appearance: Gulf Oil of the US has said it will be opening four petrol stations in Mexico in June and July.

Legal wrangles over the Chapo name: A series of potentially costly legal disputes are looming over the media treatment of the life and times of Joaquín ‘El Chapo’ Loera Guzmán, the reputed leader of the Sinaloa drug-trafficking and criminal cartel, currently in a Mexican prison awaiting the outcome of extradition proceedings to the US. The disputes have been triggered by an announcement in May that the US-based Spanish television network Univisión and the global streaming film and TV service Netflix plan to co-produce a “boundary-breaking drama” series called ‘El Chapo’, based on his life and due to be broadcast in 2017. No so fast, said Andrés Granados, a lawyer for the real-life Chapo. According to him, Univisión and Netflix must seek his client’s authorisation, something that could be available “at the right price”, adding that El Chapo was also ready to provide more information to improve the proposed series. Granados has pointed out that El Chapo’s family has already registered his name as a brand with the Instituto Mexicano de la Propriedad Industrial (IMPI). Potentially a further complication is that Granados is the same lawyer who negotiated on his client’s behalf with the Mexican-American actress Kate del Castillo last year, giving her the rights to film a documentary on the drug lord. Mexican security forces tailed Del Castillo and the US actor Sean Penn on their way to a meeting last year with El Chapo in Mexico, who was then at large, and used some of that the information to capture him in January. Presumably Univisión, Netflix and Kate del Castillo would have to come to some kind of an agreement on film and documentary rights. According to Charles J. Glasser, Adjunct Professor of Media Ethics at New York University, under the First Amendment journalistic accounts of newsmakers are protected from such rights claims because “otherwise bad guys could quash coverage”. But those who are the subjects of fictionalised accounts, even if they happen to be criminals, do have a right to negotiate over the intellectual property rights in, for example, the use of their name. As Glasser put it, however, “Netflix and Univisión have a PR problem… how will people feel about them ‘getting permission from’ – and probably paying – a notorious bad guy?”

With the Rio de Janeiro Olympic Games drawing closer (they will be held between 5-21 August) journalists all over the world are looking for things to say about them. Hyper media coverage can at worst trigger something of a feeding frenzy, where all security risks can be amplified and exaggerated. But like any event of this kind, the risks are real: here we seek to outline some of the main ones and put them in context.

At first sight, the list of threats to the Rio Olympics is daunting, and comes under at least seven major headings. In reality, some of these may sound more alarming than they actually are. The list can be summarised as follows: the public health threat of the Zika virus; the threat from international terrorism (with a particular emphasis on so-called Islamic State); high levels of local crime; Brazil’s political crisis; Rio de Janeiro’s financial crisis; and the danger of police over-reaction.

On 27 May over 100 international medical experts called for the Olympics to be postponed or moved away from Rio due to fears over the spread of the Zika virus, which has hit Brazil since last year, is carried by a particular type of mosquito, and has been shown to cause serious birth defects. But the World Health Organisation (WHO) has rejected the call. According to David Heymann, chair of the WHO panel of independent experts on Zika, high levels of globalised travel, not the Rio Olympics themselves, pose the key problem. “People go in and out of Brazil all the time for holiday, for business… The Olympics would be one-time travel. It is actually in the winter months when hopefully transmission of the virus is less. So it is just a false security to say that you’ll postpone the Olympics and postpone the globalisation of the disease,” Heymann said, calling instead for surveillance of athletes and careful consideration of the risks of travel to Brazil by individuals, especially so in the case of pregnant women.

The possibility of a terrorist attack on the games is a wild card that cannot be ruled out. Following the Islamic State attacks that killed 130 people in Paris in November 2015 and 32 in Brussels in March, concerns over the Olympics have increased. 85,000 police and soldiers will patrol Rio, over twice the size of the deployment in London for the 2012 Olympics. Robert Muggah of Rio-based security think tank Instituto Igarapé has described this as “a souped-up response that may seem disproportionate but is helpful in terms of minimising risk”.

Brazil has not been the target of a major international terrorist attack, but that does not necessarily reduce the probabilities of one happening. According to Admiral Ademir Sobrinho, chairman of the Brazilian military’s joint chiefs of staff, after the Paris and Brussels attacks “a bell went off in terms of terrorism”. The games are expected to attract 600,000 visitors. Brazil is sharing intelligence and has set up an anti-terrorism centre with the participation of experts from the US, UK, France and Spain. The authorities now acknowledge that one Islamic State source claimed last November that the organisation had established a cell in Brazil. But this is not believed to be credible. Intelligence sources say there have been no worrying signs from the “triple frontier” between Argentina, Paraguay, and Brazil, an area which in the past has been suspected as a potential centre for radical Islamic activity.

High levels of local crime in Rio are regarded as a serious challenge, exacerbated by economic recession and the state government’s financial difficulties. While Rio is far from being Latin America’s most violent city (a position currently held by Caracas, followed by San Pedro Sula in Honduras), homicides increased by 15.4% in the first four months of the year and armed robberies were up by nearly 25%. Two members of Spain’s Olympic sailing team were robbed at gunpoint in May. However, in the main, security experts say visitors are likely to be well protected in the safer areas of the city. There is also a threat from Brazil’s political crisis, with the possibility that the key stages of the impeachment trial of suspended President Dilma Rousseff may coincide with the games. This could potentially lead to demonstrations and disruption, but both pro- and anti-impeachment camps have little direct incentive to destabilise the Games themselves. Rio’s finances are also a potential threat – on 17 June, less than two months ahead of the games, the state government declared a financial “state of calamity”. However this is seen as a key move to unlock some US$840m in additional federal government funding. Finally, according to human rights lobby Amnesty International, there is a serious threat that Brazilian police may over-react to any public order disturbances during the Games: it accuses the police of following a “shoot first, ask questions later” policy and of regularly violating the human rights of suspects.

Corpbanca and Itaú Fuse: On 1 April, the Chile-based Corpbanca and the local subsidiary of Brazil’s Itaú Unibanco formalised their long-drawn-out merger process. The merged entity, the fourth largest bank in the Chilean market, will be known formally as Itaú Corpbanca. It will trade under the Itaú brand, and will have US$41bn in assets and a US$31bn loan book. The Brazilian parent, Itaú UInibanco will control the bank, with a 33.58% shareholding. CorpGroup, former owner of Corpbanca, will have 33.13% of the shares, with the remaining 33.29% in the hands of a range of minority shareholders. The merged Chilean bank will have a 66.28% controlling interest in Corpbanca Colombia and 100% of the shares of Itaú Colombia.

Flying Latin Americans: Despite the current slowdown in economic growth, Latin American aviation markets will see “robust expansion”, various industry executives said at FIDAE, the Santiago-based international aviation fair. Germán Efromovich, president of Avianca Holdings, said that “future opportunities are immense”, citing low market penetration. Latin America has 0.4 available aeroplane seats per capita, only one-sixth of the level in the US. At FIDAE, Boeing said that between now and 2035 the region will need to spend US$330bn to purchase 2,040 new commercial aircraft. Demand for air travel in Latin America has grown at an annual average of 7% over the last five years, above the global average of 5%, according to Brazilian plane manufacturer Embraer. According to the regional president of Airbus, Rafael Alonso, by 2034 nine of the world’s 91 mega-cities will be Latin American, boosting the region’s significance in terms of the global aviation market.

Despite the announcement by the Ejército de Liberación Nacional (ELN), Colombia’s second-largest leftist guerrilla group, that it will soon engage in formal peace negotiations with the government, it has launched a military offensive in recent weeks, prompting a counter-offensive by the armed forces. The decision by Clan Úsuga, the country’s largest emerging criminal organisation (Bacrim), to initiate a new campaign of violence in repudiation of the government’s peace negotiations with the guerrillas [WR-16-13] is also a factor in the upsurge of violence in the country. All of this is sparking fears that the peace process being conducted by the Juan Manuel Santos administration could become seriously hindered.

Since announcing on 30 March that it had agreed a six-point formal peace talks’ agenda with the government, the ELN has launched a series of attacks in different parts of the country. On 6 April ELN guerrillas kidnapped two bus drivers after stopping them on a highway linking the north-western departments of Chocó and Risaralda. The guerrillas set fire to their victims’ buses as well as six other private vehicles before making their escape. General Javier Díaz, the commander of the ‘Titán’ military task force charged with combating criminal groups in the area, said that the bus drivers were presumably taken after refusing to pay an extortion fee demanded by the ELN.

General Díaz condemned the incident. He noted that while the government and the ELN had been clear that they would conduct the peace negotiations without declaring a bilateral ceasefire (as the Santos government agreed with the main guerrilla Fuerzas Armadas Revolucionarias de Colombia [Farc]), one of the conditions set by Santos for engaging in peace talks with the ELN was for the latter to release all of its kidnap victims and refrain from targeting the civilian population.

In the wake of the Chocó kidnapping, Colombia’s national congress’s peace commissions called on the ELN to declare a ceasefire in support of the formal peace talks, as the Farc has done, in order to reduce the intensity of the armed conflict. But the ELN ignored this, launching instead a series of attacks targeting the armed forces. This after on 7 April Defence Minister Luis Carlos Villegas confirmed that ELN commander ‘Alejandro’ had been killed during a 30 March navy operation in Juradó, Chocó department. ‘Alejandro’ was the third ELN commander killed by the armed forces in March after ‘Zorillo’, the leader of the ‘Alfredo Gómez Quiñones’ front, was killed in the north-eastern department of Bolívar and ‘Danilo’, the leader of the ELN’s northern front, was killed in the northern La Guajira department. Villegas said that the operation that resulted in Alejandro’s death was part of the offensive ordered by President Santos against the ELN to expedite the peace negotiations. Villegas then demanded the release of the kidnapped bus drivers.

But the ELN opted to strike back. On 10 April ELN guerrillas ambushed an army patrol in the El Tambo municipality of the south-western Cauca department. One soldier was killed and another was wounded in the attack, which General Juan Vicente Trujillo, the commander of the ‘Apolo’ task force, described as “a violation of international humanitarian law and human rights”. General Trujillo explained that at the time of the attack, the patrol was “in a state of indefence” and that their attackers were dressed as civilians.

Clan Úsuga joins the fray

As the clashes between the armed forces and the ELN intensified, the guerrillas also began targeting the Clan Úsuga which was set up by demobilised paramilitary groups and recently began calling itself the Autodefensas Gaitanistas de Colombia (AGC). This led the Farc and the ELN to denounce it as new paramilitary threat and to call on the government to dismantle it so as to ensure the viability of the peace process. On 12 April Colombia’s ombudsman’s office denounced that Clan Úsuga members had been involved in armed clashes with ELN and Farc guerrillas the previous day in Antioquia department.

According to the ombudsman’s report, the clashes took place when “dozens of heavily armed members wearing Farc and ELN badges” entered the municipality of El Bagre, “with the aim of attacking members of Clan Úsuga”. Gun battles between the guerrillas and the criminals broke out, in which three civilians were injured. The report goes on to say that soon afterwards the armed forces arrived in the area, killed two “members of the criminal organisations and wounded another two”, without providing further details. The ombudsman’s office said that the incident was a “clear infringement of international humanitarian law”, adding that it would monitor closely the situation in the area as “the local community is concerned that this new conflict dynamic could lead to a recrudescence of violence in the area”.

The incident at El Bagre came after six Colombian civil-society organisations formally denounced the emergence of a “new phase of paramilitarism” in Colombia led by the Clan Úsuga before the Inter-American Commission on Human Rights (IACHR). The complaint, which was filed on 5 April, states that 28 people were killed in February-March in suspected paramilitary activity carried out by the Clan Úsuga. According to the complaint, 13 of these people were social and human-rights activists, while the others were victims of a suspected “social cleansing” exercise designed to instil fear. The Santos government responded by condemning the deaths of all social and human-rights activists; promised to clear up the cases and punish all those responsible; and intensify its efforts to combat the Bacrims, especially the Clan Úsuga (see sidebar). Amid the growing concerns about the resurgence of paramilitarism and its impact on the peace process, the government is under pressure to achieve these goals.

• ELN moots May as possible start of peace negotiations

On 7 April Miguel Atalay, who has identified himself as a spokesperson for Colombia’s Ejército de Liberación Nacional (ELN) guerrillas, announced through Twitter that the ELN had agreed to hold the first formal peace negotiating rounds with Colombian government representatives in May. “The ELN announces to Colombia and the international community that the first public [negotiating] table will be installed in Ecuador in May”, Atalay’s tweet reads. The announcement has not been confirmed nor denied by the government or the ELN leadership.

• Taking the fight to Clan Úsuga

On 11 April President Santos announced that the government would redouble its efforts to combat the country’s Bacrims, in particular the Clan Úsuga. “We are going after the leaders of this Clan, including its maximum leader ‘Otoniel’ [Dairo Antonio Úsuga David]…we are redoubling our efforts”, Santos said before announcing that the reward for any information leading to Úsuga David’s arrest had increased to Col$3bn (US$983,000) from the Col$1.5bn (US$492,00) offered last month. “It is imperative to strengthen actions against all kinds of criminality, but especially criminal organisations…successors of paramilitarism”, Santos added. A week earlier, on 7 April, Santos had announced the arrests of 39 Clan Úsuga members as part of an operation targeting the Bacrim’s leaders.

Marcelo Odebrecht sentenced: Marcelo Odebrecht, former president of Odebrecht SA, Latin America’s largest construction and civil engineering company, has been sentenced to 19 years imprisonment by a Brazilian federal court. The sentence was for his part in the bribery, money laundering and organised crime charges brought against the company, which was found to be a participant in the lava jato (‘carwash’) scandal that engulfed the state-run oil company Petrobras.  Marcelo, 47, is the grandson of the late Norberto Odebrecht, the founder of the company, known across Latin America for its involvement in large-scale building projects. Odebrecht’s lawyer, Nabor Bulhoes, said the sentence was “a serious error by the judiciary” and that his client would appeal against it. Curitiba-based judge Sérgio Moro, who has been at the centre of investigations into the multiple lava jato cases, concluded that Odebrecht and other companies formed a cartel, agreeing among themselves who would win different Petrobras contracts and manipulating contract prices to their benefit. Odebrecht operates in 28 countries and currently has a staff of 168,000 employees. Its revenue in 2014 was US$28.5bn. It has been involved in a range of international projects including building the Port of Mariel in Cuba, the Magdalena river waterway in Colombia, the Panama City metro system, and the Gasoducto del Sur in Peru.

Businesswomen big in beer: Carlos Slim is Mexico’s best-known billionaire, with a business empire based on telecoms group América Móvil and regular appearances in the ranking of the top five richest people in the world. But two Mexican women, both with interests in breweries, may be gaining a little more attention. Eva Gonda Rivera, with assets of US$6.6bn, is now reportedly Mexico’s richest woman. Since the 2008 death of her husband, Eugenio Garza Laguera, she and her daughters control 50% of the B shares in Femsa, Latin America’s largest Coca-Cola and soft drink bottling company, which among other interests also owns Mexico’s Oxxo convenience store chain. Femsa acquired a 20% stake in Heineken in 2010 in exchange for the sale of its Cuauhtémoc Moctezuma brewery, a transaction valued at US$7.347bn. Eva is a graduate of the Instituto Tecnológico de Monterrey. The other prominent businesswoman is María Asunción Aramburuzabala, known as Mariasun, with assets valued at US$5bn. She is the granddaughter of a Spanish immigrant who arrived in Mexico in the 1920s and founded the Grupo Modelo brewery, acquired by Anheuser-Busch InBev for US$20.1bn in June 2012. As part of the deal María acquired shares in Anheuser-Busch InBev (now the world’s biggest brewery) as well as a seat on the board. An accountancy graduate from ITAM, along with her mother and sister María has also set up Tresalia Capital, which has interests in real estate through subsidiary Abilia and in technology through KIO Networks.

American Airlines in on-off Caracas connection: In early March, American Airlines said it would again interrupt its New York-Caracas flights, ceasing the service in April. The airline said the decision, coming only three months after the service was resumed, was a response to low demand. It came amid signs of tough negotiations between the company and the Venezuelan government over the right to repatriate its Venezuelan earnings. The dispute had already led to an 80% reduction in scheduled services in 2014. In January, American said it was writing off US$592m worth of revenues that it has been unable to repatriate from the country. Total unpaid debts to all international airlines serving Venezuela have been estimated at US$3.7bn. American said, however, that it plans to maintain its Caracas-Miami service.

Pemex suffering ‘liquidity, not solvency problems’: There have been further signs of financial stress at Pemex, Mexico’s state-owned oil company. At the end of February, it reported fourth quarter losses of US$9.3bn, an increase of 44% year-on-year, which brought losses for calendar 2015 as a whole to a gigantic US$32bn (using quarterly average exchange rates).  Pemex has now lost money for 13 consecutive quarters; in 2015 crude oil output was also down for the 11^th consecutive year. Jose Antonio González Anaya, the newly appointed director general, on 8 March told representatives in the Chamber of Deputies that spending cuts of MXN100bn (US$5.6bn) would be made in various areas. Pemex mangers would cut costs and improve efficiencies, including reducing travel and other non-essential expenditure, and restructuring the company’s E&P (exploration and production) division: this would make savings of MXN29bn (US$1.6bn). Another important area was a postponement and rescheduling of the capital expenditure programme, including exploration, and designed to save MXN65bn (US$3.6bn).  González Anaya told members of the lower house energy commission that “Pemex is facing a liquidity problem, not a solvency problem, and through these adjustments what we are seeking to do is reposition and reshape Pemex as a state-owned productive enterprise, within a new legal and financial framework created by the energy reforms approved by Congress.”

Following the Super Tuesday primaries Donald Trump remains the frontrunner to win the Republican presidential nomination in the US. Nomination is not yet a sure thing. If successful the property tycoon-turned-politician will need to go on to confront a Democratic party opponent, most likely to be Hillary Clinton. Victory over Clinton is also far from assured. But a candidate notorious for his anti-Mexico views has now gone far enough and fast enough in the race to be considered a serious contender for the US presidency. That means Mexican political leaders are starting to imagine what a Trump presidency might be like.

Trump’s views on Mexico have – as he intended – received headline coverage. A brief summary: if elected Trump intends to build a gigantic wall (which appears to get higher every time he mentions it) along the frontier to keep Mexican immigrants out. Mexico is to be forced to foot the cost of the wall, for which various numbers have been mentioned (the latest Trump estimate is US$8bn). In Trump’s view Mexicans entering the US include “rapists”, murderers and drug runners. A Trump government will deport all Mexicans illegally in the US back to Mexico – an operation that could involve up to 11m people.

Opinion remains divided between those who believe Trump should be interpreted literally, and those who see his statements (such as the claim that all Muslims should be denied entry to the US) as more of a deliberately provocative and figurative appeal to a disgruntled middle America, deeply worried by immigration, crime, and terrorism, and eager to be offered simple solutions restoring the country’s perceived loss of global power and status.

Mexican reaction

Mexican responses to Trump appear to have evolved through various stages. An initial response was to condemn Trump’s ideas but to treat him as something of a clown. Various Mexican leaders attempted to ignore him entirely. That began to change as the ‘Trump factor’ showed itself to be resilient and to reflect a not insignificant cross-section of the US electorate. One sign of this was that the proposal to build a wall, along with other hard-line anti-immigrant positions have been adopted, with different variants, by Trump’s Republican rivals. He has framed the debate to his advantage.

Another sign of the real impact of Trump’s rhetoric has come from indications that after slowing over recent years, the flow of immigrants into the US has increased again (see sidebar), with many reasoning that the time to get in is now, ahead of whatever tougher regulations are introduced after a new occupant enters the White House in January 2017. There are reports that people traffickers are encouraging this notion as a way of boosting demand for their services.

While former Mexican presidents have compared Trump to Hitler (see sidebar), Mexican government officials have tried to keep out of the war of words, until now. This week Foreign Minister Claudia Ruiz Massieu said the wall plan was impossible, as well as “impractical, inefficient, wrong and frankly…not an intelligent thing to do”. President Enrique Peña Nieto’s chief of staff, Francisco Guzmán, has said the government will use its consulates across the US to publicise the positive aspects of the two countries’ relationship. Peña Nieto, Guzmán added, believes any leader elected to the US presidency would end up taking a softer and more pragmatic line once in office.

Trump wants to renegotiate the North American Free Trade Agreement (Nafta), slapping higher tariffs on Mexican products. Opponents of Trump point out that bilateral trade has quintupled to US$530bn since Nafta was signed in 1994 and now arguably supports significant job creation in the US as well as in Mexico. Guzmán noted, “It would be difficult to reverse 20 years of integration”.

A number of security experts believe that the “Trump wall” – as described by its main proponent – will never be built. They argue that the cost and technical challenges are prohibitive and that there are legal complications over ownership, right-of-way conflicts, eminent domain disputes, and environmental regulations. But it is feasible that a future US administration would further strengthen and tighten border patrol and deploy advanced technology, including drones and other devices, to make illegal entry significantly more difficult. Mass deportations in the other direction are also possible.

As the process would most probably be accompanied by a sharp cooling in bilateral relations, it is likely that it could be poorly managed and would have serious unintended consequences. One is that a less porous border with fewer illegal drug trafficking routes might intensify the struggle to control those routes between the drug trafficking organisations (DTOs). If Mexican criminals are deported from US prisons and simply dumped on the Mexican side of the border that too is going to increase, not reduce border tensions. US-Mexican security cooperation would most likely decrease sharply and the Mérida initiative – a part US-funded joint security programme – might not survive. Poor security cooperation between the two countries might be seen as a great opportunity by the ever-resourceful DTOs.

• Illegal immigration

According to US border patrol statistics a total of 150,304 immigrants were arrested when trying to enter the US illegally between October 2015 and February 2016, a 24% increase on the same year-earlier period.

• Mexican presidents on Trump

President Vicente Fox (2000-2006) said he would not “pay for that f****** wall”, adding of Donald Trump that “He reminds me of Hitler…he’s going to use the executive power to do what he’d like”. Another former Mexican President, Felipe Calderón (2006-2012), pointed out that Trump is himself the son of immigrants but “is talking about immigrants who have a different skin colour to him. Frankly it’s racist and exploits sensitivities, rather like Hitler did in his day.”

América Móvil profitability facing a squeeze.

Mexico-based telecoms giant América Móvil reported a six-fold increase in profits to MXN15.7bn (US$835mn) in the fourth quarter of 2015. The improvement was largely due to a sharp reduction in exchange rate losses, which reduced financial costs. Profits represented MXN0.24 per share or US$0.28 per ADR. In contrast Ebitda, which many analysts see as a better indication of underlying profitability, was MXN63.9bn or US$3.39bn in the quarter, down 2.9% on the same year-earlier period. Fourth quarter revenues grew by 0.6%. Mobile data revenue grew by 10%, fixed line data was up by 7.9%, and pay-TV revenues grew by 6.6%, the company said. For 2015 as a whole profits were down by 24% to MXN35.05bn. In Mexico, the company’s home market, which accounts for around 30% of total income, it is facing increased competition from AT&T and Telefónica, and a tighter regulatory regime. América Móvil said that at a global level it was a smaller company than its two main competitors, but that in spite of that they were effectively being subsidised by it on the local market, due to the nature of Mexico’s “asymmetric regulation” which gave them an extra advantage over the incumbent. Separately América Móvil said it is likely to reduce its capital investment programme by around 25% in 2016 to MXN7.5bn-MXN8bn, given that it has completed most of the modernisation of its network. “Much of what needed to be done has been done, and that’s why we are reducing the intensity of out investment programme over the next five years” said finance director Carlos García Moreno.

HSBC faces new drug money case.

Global bank HSBC faces a new and unprecedented legal challenge filed by US victims of Mexican drug violence in a Texas court. The bank in 2012 agreed to pay the US authorities a US$1.9bn fine, after admitting that it failed to adequately supervise its Mexican subsidiary, which laundered US$881m of drug trafficking money for the Sinaloa drug-trafficking cartel. There the matter seemed to rest. But now a group of US victims of drug violence are suing HSBC saying that it can be held liable under the terms of the US anti-terrorism act, which says survivors of those killed in terrorist incidents may sue for damages. The plaintiffs include relatives of Jaime Zapata, a US Immigration and Customs Enforcement (ICE) special agent murdered in northern Mexico in 2011, and of Lesley Enrique Redelfs, a US consulate employee who was shot dead in Ciudad Juárez in 2010. They argue that by laundering drug cartel money “HSBC materially supported the terrorist acts of cartels”. Whether the case prospers is likely to depend on a number of key legal points. One is whether drug gangs can be considered terrorist organisations under US law – to date they have not. A second is the extent of liability: Redelfs for example was reportedly killed by the Juárez cartel, to which HSBC was not connected, as the bank was only known to be laundering money for the entirely separate Sinaloa organisation. If successful, however, the case could have far-reaching consequences as it would mean that many US organisations that have handled drug money, even indirectly, could be held liable for drug-gang violence. The list could include brokers, real estate agents, car dealers, and even drug users. HSBC has said it will “vigorously” defend itself and that it remains “committed to combating financial crime”.

Development: Peru’s real annual GDP growth came in at 3.26% overall in 2015, the national statistics institute (INEI) reported on 15 February.

Significance: Growth in December was a strong 6.39% year on year, the highest in 23 months, lifting the full-year GDP result above even the government’s own estimated figure of 2.8% (and following a weak annual result of 2.4% in 2014). The country’s economic rebound to date remains very dependent on mining, however.

• While the 2015 figure will be spun as good news by the unpopular government led by President Ollanta Humala ahead of the April general election, the headline rebound remains driven almost exclusively by higher mining volume output, which is helping to compensate for the drop in global commodity prices. Thanks to new reserves coming on stream last year, including at the large Las Bambas mine (operated by MMG), mining output rose by 30.7% year in year in December (amid a 68% monthly spike in copper output), and by 9.3% overall in 2015. Peru is the world’s third largest copper producer and the metal accounts for 60% of total exports.

• Also performing well is fisheries – another key economic sector. It posted overall annual growth of 15.9% last year, thanks to a rise in fishmeal, of which Peru is the world’s main producer.

• By contrast, domestic demand still appears weak, with manufacturing registering an overall annual contraction of 1.67%, while construction too remains in the doldrums, falling by a sharp 5.9% last year.

Looking Ahead: With further additional mining output due to come on stream this year, the government is hoping for a stronger overall boost to growth and has pencilled in a real GDP forecast of 4%. While Peru has held up better than most of the South American commodity exporters, it is not immune to the problems afflicting the region. Inflation, for instance, has spiked up to a four-year high of 4.6% year-on-year on the back of the depreciation of the sol against the US dollar (now at a 13-year low of $3.52/US$), which voters will feel in their pockets ahead of the election. The central bank now says that inflation may only return to its 3% target ceiling by end-year/early 2017. Food prices may spike in coming months due to expected El Nino-related flooding, it has warned.

Until recently, security concerns in the run-up to the Olympics in Rio de Janeiro were dominated by fears that the historically high levels of violence in the city would impact upon the 2016 Games. Added to this were the usual fears that the event might make an inviting target for terrorist organisations, despite Brazil’s lack of obvious enemies. But these major concerns have been swept aside in recent weeks following the panic over the spread of the Zika virus, linked to a surge in cases of microcephaly, a kind of infant brain damage, in Brazil.

Personnel

Around 85,000 security personnel will be deployed across the country during the event (including in the cities outside of Rio that will be hosting part of the football competition and the procession of the Olympic torch), with 38,000 soldiers from the ministry of defence, and a further 47,599 from the National Public Security Force (FNSP), comprising 18,500 officers from the military police (PM); 1,822 from the civil police (PC); 4,620 from the fire brigade and civil defence force; 2,000 from the federal highway police; 1,734 from the department of correctional facilities; 5,810 from the municipal guard; and 9,613 from the National Security Force (FNS). All of these personnel will be under the command of Colonel Nazareno Marcineiro, former head of the military police in the southern state of Santa Catarina.

Other senior figures responsible for the delivery of a safe Olympics include Andrei Rodrigues, the special secretary for major events (which comes under the control of the ministry of justice); General Luiz Felipe Linhares, the special advisor for major events; and José Mariano Beltrame, the security secretary for the state of Rio de Janeiro. A former federal police officer, Rodrigues led the security detail during President Dilma Rousseff’s 2010 presidential election campaign. Linhares is a career army officer. Beltrame, another former federal police officer, is one of the architects of the pacification programme in the favelas of Rio de Janeiro. Though the programme is not without its critics, Beltrame is widely considered a thoughtful and effective administrator.

Sergio Moura da Cunha, director of the Brazilian intelligence agency, Abin; Luiz Fernando Corrêa, the head of security for the Rio 2016 Organizing Committee; and Colonel Wanius Amorim, from the fire brigade and civil defence unit, will also play a key role in the preparations over the coming months.

In terms of the cost of the security procedures, Rodrigues said that the federal government would spend R$1.170bn (US$300m), to be added to R$350m (US$88m) to be spent by the Rio 2016 Organizing Committee. While levels of crime in the city remain high, the latest statistics by the Institute for Public Security (ISP), a state-run agency, show significant reductions in homicides, street muggings, and car theft in Rio de Janeiro (see related article). Security officials also note the relatively successful delivery of the World Cup which, minor incidents aside, was relatively crime free.

Police cooperation

While some experts attribute the fall in crime to the policy of pacification, others argue that a financial incentive system whereby the military police and the civil police are encouraged to work together has proved the most effective strategy. Historically, the two organisations have often functioned as rivals, with the street police of the PM rarely preserving crime scenes or helping out the investigators of the PC.

Now police units can earn bonuses from the federal government of between R$4,500 (US$1,100) and R$13,500 (US$3,400) per police officer per semester for hitting productivity targets. Roberto da Sá, the under-secretary of planning and operational integration for Rio de Janeiro’s security secretariat, said that the federal government’s support had been fitting given the major events coming up in the city. These bonuses, however, are being reviewed in the light of the current financial crisis facing the state.

Terrorism

The Olympics have a history as a terrorist target. Eleven members of the Israeli delegation and a West German policeman were killed by a Palestinian terrorist organisation in the 1972 Munich Games. One person died and another suffered a fatal heart attack after an anti-abortion activist bombed the Centennial Olympic Park in Atlanta in 1992. The explosion wounded over 100 others.

One of the new features for the Olympics will be the creation of the Integrated Centre for Combatting Terrorism (CIET), a joint venture between the ministries of justice, defence and the Abin intelligence agency. This will be the first time Brazil has had an organisation specifically dedicated to the task of tackling terrorism. At a press conference in August last year, Moura said that there had been no indication as yet of planned terrorist activity. “Brazil, traditionally, is not a target for terrorist acts. But this event will provide a huge platform and we must be on the alert,” he said.

But there are concerns that the Brazilian authorities are complacent as regards the terrorist threat. The country’s huge, porous borders; the ease of access to weaponry; and the historically poor coordination between the different security forces of the state, lead some to conclude that an attack would not be overly difficult. According to Fernando Brancoli, a specialist in security at the Fundação Getulio Vargas, Brazil is underprepared. “The country does not have the ability to track [people] internationally or to know whether money is coming here to finance attacks,” he said. “You have to rely on those who do know.”

On 25 November, President Dilma Rousseff signed into law a decree waiving the necessity for certain countries’ citizens to apply for a visa for a 90-day stay in the country over the period of the Olympics. Ostensibly, this appears designed to make the country a more attractive destination for sports fans from the United States, who at the moment have to contend with a complicated, slow visa-process that mirrors its own. While a visa-waiver also went into effect during the 2014 World Cup, it was dependent on the possession of tickets to matches. For 2016 tourists will not need Olympics tickets to benefit from the waiver. It is yet to be determined which countries will benefit from the waiver programme.

With the decree signed in the wake of the latest wave of terrorist attacks in Paris, critics argued that the visa-waiver programme could endanger security at the Games. One European diplomat, speaking to Reuters on condition of anonymity, said, “Brazil is sticking its head in the sand” in terms of security.

Zika

At present, all of these other concerns have been overtaken by the outbreak of the Zika virus. First identified in Brazil in May 2015, the mosquito-borne disease is asymptomatic in four out of five cases, and where it is expressed, it often appears to be only a mild form of dengue, with rashes, joint pain and a low fever. It has, however, been linked to a rise in the number of cases of microcephaly. As such the US Center for Disease Control and Prevention (CDC) has already advised pregnant women to consider postponing their trips to areas where Zika is present. European health agencies have done the same. Over the next few months of Brazil’s hot, wet summer, prime mosquito breeding season, the number of incidences are likely to rise.

So far, the state of Rio de Janeiro has registered almost 4,000 cases of dengue in the first few weeks on 2016, but as the disease appears so similar to Zika, and testing remains complicated and inefficient, authorities are worried cases of Zika could rise. As such, more resources are being dedicated to mosquito eradication programmes. In 2012, Rio de Janeiro successfully reduced a dengue epidemic with a public education and eradication programme and the hope is that this year will prove equally successful. Olympic organisers, meanwhile, state that a specialist team will clear all venues of possible breeding sites in the run-up and during the Games. The Rio 2016 Committee also points out that the event is being held in August, winter in the Southern Hemisphere, when mosquito numbers are likely to be low.