Friday, 29 January 2016 12:37

Corporate Radar

Eurnekian bets on IPOs: Argentine businessman Eduardo Eurnekian is reported to be planning up to four IPOs on the New York Stock Exchange (NYSE) this year, arguing that conditions could be “ideal” for such a move if Argentina successfully resolves its long legal dispute with the hold-out creditors. Reuters said that Eurnekian, one of the country’s most successful businessmen, was thinking of floating shares in his airports operating company, in his energy unit Compañía General de Combustibles (CGC), in his nanotechnology group (which trades as Unitec Blue in Argentina and as Unitec in Brazil), and in his agricultural company as well. He said launching the IPOs would be a complex process, but he hoped it could develop in tandem with Argentina’s gradual re-insertion into global capital markets. He would use proceeds from the IPOs to fund expansion of his holding group, Corporación América, into other South American markets such as Brazil, Ecuador, and Peru. Corporación América, which has overseas interests as far away as Italy, Morocco, and Armenia, has an estimated annual revenue of US$2bn. Eurnekian said he was optimistic about the long term outlook for gas – through GGC he has an interest in gas fields in Patagonia.

Foreign companies betting on Brazil: When things get really bad, then it’s time to buy. That may – or may not – be a thought going through the minds of Brazil-focused corporate investors. What is clear, according to two separate studies, is that last year foreign companies were more active in Brazilian mergers and acquisitions (M&A) than the Brazilians themselves. According to KPMG, in 2015 there were 773 M&A transactions. Of the total, more than half – 396 – involved purchases by foreign companies. According to KPMG partner Luis Motta: “The current state of the economy and the depreciation of the real may have been accelerating the arrival and expansion of foreign companies in Brazil, despite worsening growth expectations and rising country risk”. According to a separate report by PwC, foreign investors accounted for 51% of a total of 672 acquisitions and capital increases that it analysed last year, up from 38% in 2014. PwC expects the proportion to rise a little further to 55% this year. PwC Brasil partner Rogerio Gollo said “Foreigners are going to remain interested in Brazil while domestic companies will continue to have financing difficulties”. One of the biggest transactions last year was the US$3.37bn purchase of the Jupiá and Ilha Solteira hydroelectric generators by Three Gorges Corp of China. New York-based Coty Inc also agreed to pay US$1bn for the beauty-care unit of Hypermarcas of São Paulo. Gollo said the sectors likely to attract most interest in 2016 are information technology, trade, agribusiness, and renewable energies.

Ford plans new plant in San Luis Potosí: According to press reports – yet to be formally confirmed – Ford Motor Co will in the first quarter of this year announce a major new investment in an assembly plant in the state of San Luis Potosí in Mexico. It is believed the plant will be used to launch a new model in the car company’s range. It is thought to involve investment of US$1.5bn and would produce some 350,000 units per annum. Earlier, in April 2015, the company said it was investing US$2.5bn to expand its engine and transmission manufacturing in central and north Mexico. The Mexican automobile industry continues on a strong growth trajectory. Last year Mexico produced an all-time record of 3.4m vehicles, up 5.6% on 2014. Exports rose by 4.4% to 2.76m vehicles. This consolidated its position as Latin America’s leading carmaker, ahead of Brazil (where production slumped by 21.6% to 2.33m vehicles). Globally Mexico is the seventh largest car producer; some estimate that this year it could overtake India and move up to sixth position. North of the border, a new agreement with one of the main US auto industry trade unions, the United Auto Workers (UAW), may also be positive for Mexico. Under its terms companies such as General Motors, Ford, and Fiat Chrysler have offered improved pay and health care to their US workforce in return for the right to boost output of some cheaper, lower-margin passenger cars in Mexico. Average wage costs in the Mexican industry are around $5 an hour compared to $29 in the US. The agreement may therefore lead to further relocation of plants from the US to Mexico.

Trouble with the Isagen sale: The Colombian government’s long-running plans to divest a majority stake in power generator Isagen have finally concluded with a sale – but a legal challenge is on the way. In January the government sold 57.6% of the company’s shares to Canadian investment fund Brookfield Asset Management for COP6.49trn – around US$2bn. Formally this was a sale by auction, but Brookfield was the only bidder after Chile’s Colbún, the only other company left in the race, decided to drop out after the government raised the minimum share price. Brookfield’s bid came in at the minimum and was accepted. The government says it has met all legal requirements for a successful privatisation. Medellín-based Isagen operates six hydroelectric and one thermal power station, with an installed capacity of 3,032MW. It generates about 16% of total electricity supply in Colombia. It is regarded as well-run and profitable. But an unusual alliance of left and right wing opposition members of Congress is mounting a legal challenge on the grounds that the sale was not competitive. On the right, former President Álvaro Uribe, using a calculation based on the cost of acquiring new generating capacity, claims Colombian tax payers have been short-changed by as much as US$1.5bn. But local brokers say the sale price actually exceeded fair value. On the left Clara López Obregón of Polo Democrático has claimed electricity tariffs are likely to go up as a result of the privatisation. The government intends to use the proceeds from the sale to fund its ‘Fourth Generation’ (4G) road-building programme.

Development: On 15 January the US Center for Disease Control and Prevention (CDC) warned pregnant women not to travel to 14 countries in Latin America, including Brazil, due to an outbreak of the zika virus.

Significance: The zika virus, common in Africa and Asia, was detected in Brazil for the first time in May 2015. Like dengue, yellow fever and chikungunya, it is transmitted by the Aedes Aegypti mosquito, which breeds easily in any small pool of stagnant water. Initially, zika was thought to be relatively mild; only one in five carriers developed symptoms. But in October 2015, health specialists in north-eastern Brazil noticed a strong correlation between pregnant women with zika and an increase in cases of microcephaly, a type of brain damage in babies.

  • Included in the CDC’s warning are Brazil, Colombia, El Salvador, French Guiana, Guatemala, Haiti, Honduras, Martinique, Mexico, Panama, Paraguay, Suriname, Venezuela, and Puerto Rico. It is Brazil, however, which is currently experiencing the worst known outbreak of the disease. Though the link between microcephaly and zika is still unclear, in a normal year around 150 babies are born with the condition; last year 3,500 babies were born with the condition.
  • With no vaccine and no cure, Brazil’s health authorities are limited to public information campaigns about eliminating breeding sites for the Aedes Aegypti mosquito. On 16 January, the health ministry announced the roll-out of new testing kits for zika, dengue and chikungunya, with pregnant women to have priority for their usage. The ministry also announced new funding for research into creating an anti-zika vaccine.

Looking Ahead: In the city of Rio de Janeiro, the local authorities are worried about the CDC’s warning on the impact on international tourism ahead of the 2016 Summer Olympic Games, due to start in August. A spokesman from the local organising committee said that they would have a team scouring the venues on a daily basis to eliminate possible mosquito breeding sites.

Published in Brazil
Wednesday, 16 December 2015 13:48

Region: Corporate Radar

New management at Aerolíneas Argentinas: A radical change is underway at the top of state airline Aerolíneas Argentinas. Out goes president and general manager Mariano Recalde and a group of senior managers closely identified with La Cámpora, the youth wing of the Frente Para la Victoria (FPV) faction of the Peronist party, which was voted out of office in November. His critics accused Recalde of running the loss-making airline as a political fiefdom. In comes Isela Costantini, appointed by newly elected President Mauricio Macri to bring in some private sector management expertise. Costantini was previously CEO of GM Argentina and president of ADEFA, the association of Argentine automobile manufacturers. Aerolíneas has had a troubled history, being controversially privatised in 1990 and equally controversially re-nationalised in 2008. During the election campaign, President Macri denied claims he would launch a new privatisation attempt; instead, he said, the company would remain in public ownership and efforts would be made to run it more efficiently. This job now falls to Costantini, who takes over in January. Significantly, the Brazilian born Argentina executive, listed by Forbes in 2013 as one of the world’s top 50 business women, has a reputation as a tough negotiator. She will have to establish good relations with Aerolíneas multiple and often militant trade unions.

Odebrecht leaves Odebrecht: After six months in prison facing corruption charges linked to the “car wash” scandal centred on state oil company Petrobras, Marcelo Odebrecht has formally stepped down from his role as president and chief executive of Grupo Odebrecht, one of Brazil – and Latin America’s – largest civil engineering and construction companies. Marcelo, from the third generation of the family that founded and still controls the enterprise, also stepped down from a number of other companies in the group, including Braskem (petrochemicals) and other subsidiaries in oil and gas and real estate. The company has said it is confident that when the case comes to trial it will be cleared of any wrongdoing. But in November the federal police said it was widening its investigations to include the possible payment of bribes in construction contracts related to the 2016 Olympic Games in Rio de Janeiro. Odebrecht is reputed to be involved in half the Olympic Games construction contracts, measured by value.

Development: On 7 December Venezuela’s national electoral council (CNE) published a second electoral bulletin giving the main opposition coalition, Mesa de la Unidad Democrática (MUD), 107 national assembly seats following the day-earlier legislative elections, to 55 for the ruling Partido Socialista Unido de Venezuela (PSUV).

Significance: The MUD insists that it will have 112 of the 167 seats as of 5 January, thanks to three indigenous representatives that also hail from opposition parties plus another two seats not yet confirmed but also opposition-leaning. That would give it a two-thirds majority, enabling it to propose or modify organic laws, put constitutional reform proposals to referendum, and even convoke a constituent assembly. It is the worst possible outcome for President Nicolás Maduro, with some right-wing MUD factions now warning that Maduro is unlikely to see out his term, due to end in January 2019. However, there are also warnings by moderate opposition voices that the MUD should not get drunk on power, and that the vote was less in favour of the opposition than against the Maduro government and the severe economic crisis in the country.

  • The results are nothing less than a landslide for the MUD, which won in every single Caracas district and also took every district in eight states including Barinas, home state of the late Hugo Chávez. Overall, it won in 20 of the country’s 23 states, plus the federal district. There are now calls on the Chavista website Apporea for Maduro to resign as PSUV party president before he and the party leadership “assassinate” Chávez’s legacy.
  • Maduro himself yesterday called for a debate that would be “critical, self-critical and one of action” to “reconstruct the revolutionary majority”, starting with broad new consultations with the party base. Maduro and Diosdado Cabello, the current legislative assembly president and PSUV second-in-command, are taking the line that the Revolution needs to fight back against a usurping right-wing conspiracy.
  • Opposition blogger Juan Cristobal Nagel points out that under Article 73 of the 1999 constitution, a two-thirds legislative majority can initiate a referendum on special matters, including one to revoke the president’s mandate. Articles 343 and 348 allow it to initiate constitutional reform and/or convoke a constituent assembly.
  • Elsewhere, under Art 205 it can approve organic laws, while under Art 193 it can create or eliminate congressional committees – for example into official corruption. Art. 265 permits the removal of judges, including supreme court magistrates found to have committed ‘serious errors’ by the ‘Poder Ciudadano’ (the comptroller general, the prosecutor general, and the public ombudsman). It can also renew the Poder Ciudadano and the CNE. And finally it would also be able to review and repeal laws, treaties and international agreements to which the state is a signatory.

Looking Ahead: In order not to disappoint the 7.7m Venezuelans that voted for change, it will be incumbent upon the MUD to avoid revenge politics. The moderate MUD leader Henrique Capriles Radonski yesterday called on Maduro to abandon his confrontational language and sit down with the opposition to deliver relief from the current economic crisis to ordinary citizens. With oil prices at a near seven-year low, that will not be easy, and with radical factions agitating on both sides, both MUD and PSUV unity will be put to the test.

Published in Andean
Wednesday, 18 November 2015 15:00

Region: Corporate Radar

CMPC and SCA accused of running a cartel: Chile's economic prosecutions office (Fiscalía Nacional Económica) accused the powerful CMPC group (controlled by the Matte family) and Swedish-owned SCA of operating a price cartel in the country's paper products market for over 10 years. In a complaint filed with the competition tribunal (Tribunal de Defensa de la Libre Competencia – TDLC), the FNE said the two companies colluded on fixing quotas and prices on toilet paper, paper towels, paper serviettes, facial tissues, and cosmetic tissues. The two companies have combined sales in Chile of around US$400m per annum and control 90% of the market. CMPC owner Eliodoro Matte officially apologised to the public and the company’s consumers for what he described as “these repudiable acts”. President Michelle Bachelet said the matter was “very serious” and that she would submit a bill in congress raising the level of fines for market rigging. Apart from Chile, CMPC, which is also involved in forestry and cellulose, has operations in Argentina, Brazil, Colombia, Mexico, Peru, and Uruguay.


Petrobras announces further losses: State-owned oil company Petrobras announced net third quarter losses of BRL3.76bn (US$1.01bn) as a result of lower international oil prices, the depreciation of the real, and a deep domestic recession. The loss was over three times larger than the market had been expecting, although smaller than in Q314, when the company was in the red by BRL5.34bn. Net revenue fell 6.9% to BRL82.2bn in Q315. But analysts noted that operating results improved, with Ebitda up by 82% to BRL15.5bn. Meanwhile the company was hit in early November by a stoppage by oil workers’ union FUP that reduced output by around 115,000 barrels per day, or 5.5% of the total. On 11 November management offered a 9.5% salary increase, but the union, which is demanding an 18% rise, was reported to have rejected the offer and demanded a meeting with chief executive Aldemir Bendine.


LATAM denies IAG talks: Rumours of discussions on a strategic alliance or even a takeover bid by International Airlines Group (IAG – the alliance between British Airways and Iberia) for LATAM Airlines (the merger formed by LAN of Chile and TAM of Brazil) have been denied. The reports led to a 6% rise in LATAM share prices on 9 November. They were based on a discussion between IAG chief executive Willie Walsh and a group of analysts. According to press reports of the meeting Walsh had said IAG wanted to work more closely with LATAM and might even consider a takeover. However IAG later denied that this had been said, and LATAM issued a formal statement saying the company was “not in conversation with IAG on an ownership stake.” Both companies are members of the Oneworld alliance and have code-sharing agreements.


Pemex further in the red: Mexico’s state oil company Pemex reported net losses of MXN167.57bn (US$9.921bn) in Q315 on the back of lower international oil prices, a fall in crude oil output, and a depreciating peso. The losses were more than double the MXN59.654bn loss in the comparable year-earlier period. Net revenues fell by 22.8% in the quarter to MXN313.77bn. Crude output fell by 5.5% to 2.266m barrels per day (bpd). The price of Mexican mix crude was down by 53.8% to US$41.75 a barrel.

Tuesday, 10 November 2015 10:57

MEXICO: Where the guns have been turning up

In the year to the end of last June the authorities seized 413 firearms from suspected members of organised crime. Just under two-thirds of them were picked up in three states ― Tamaulipas, Guerrero and Jalisco ― and 74 of them were long-barrelled weapons of a military-issue kind. The new data comes from the annual report of the federal procurator-general’s office (PGR), submitted last month to congress.

Tamaulipas accounted for 34% of all seizures, Guerrero and Jalisco for just under 14% each. Next among the top five sources were Sinaloa (10%) and Sonora (8%). Attempts have been made to correlate these figure with the data on major crimes and produce a new ‘map of violence’, but they have stumbled on the same problem as when trying to calculate the flows of illegal drugs from the amounts seized by the authorities. Seizures can indicate either the efficiency of the law-enforcement agencies or the ability of the criminals to elude them.

What has attracted much attention is the type of firearms seized by the Mexican authorities: 74% were long-barrelled (rifles and machineguns). The PGR report classifies the breakdown by calibre, showing three types of assault rifles accounting for 71% of all seizures: 48% were 7.62 x 39mm (typically the AK-47 type); 18% were .223 (typically the AR-15) and 5% were 5.56 x 45mm (typically the HK-G36).

In the year under review the authorities also seized 66 explosive artifacts and munitions. Of these, 32% were fragmentation grenades, 29% were 40mm munitions for grenade launchers, and 23%, different kinds of anti-personnel mines.

With the last year’s information the PGR has built up a database of 9,180 firearms and 2,108 grenades, the provenance of which it is trying to track. As we reported in June, data published by the US Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) show that the US was probably the main source of slightly more than 45% of the 26,430 illegal firearms seized by the Mexican authorities and sent in 2011-14 to the US for tracing [SSR-15-06].

The PGR report also said that in the year reviewed 31 members of 10 cartels had been tried and convicted. There is no strong correlation between the arms-seizure geography and that of the organised crime groups affected. Tamaulipas, top of the arms-seizure league, yielded 5 convictions (4 of Los Zetas, one of Golfo), second-ranking Guerrero also yielded 5, all of them of members of Los Rojos (but none of Guerreros Unidos, main actors in the Iguala massacre), and third-ranking Jalisco yielded 6 (3 each of the Sinaloa-Pacífico and Jalisco Nueva Generación cartels). The biggest number of convictions (9) was of members of the Beltrán Leyva organisation, originally associated with fourth-ranking Sinaloa.

Firearms seized from organised crime

September 2014-Jun 2015












Country total


Source: PGR

Published in Mexico & Nafta
Thursday, 05 November 2015 11:54

HONDURAS: Crocodiles and lions

Victims of the massive scandal that has brought down one of the most prominent families in Honduras, the Rosenthals, now include an estimated 11,000 crocodiles and seven lions kept at the family's 30-hectare ranch, who were at risk of starvation after unpaid workers abandoned the ranch. The Honduran Forest Institute had arranged for the usual supplier to ‘donate’ two tonnes of “cow entrails and chicken”, local media reported in early November, although this would last only a few days at most, the ranch manager admitted.

The fate of the animals is illustrative of the sheer depth of this scandal, which has rocked Honduras to its core. The reach of the Rosenthal family is such that its business interests could account for up to 5% of the country’s GDP, according to the family scion Jaime Rosenthal (‘the richest man in Honduras’), who is now wanted by US justice officials, and whose whereabouts are unknown. His son, Yani Rosenthal, reportedly has turned himself in at the US embassy in Guatemala City, according to late-October media reports, although this has not been confirmed by US authorities. Yankel Rosenthal, Jaime’s nephew, was arrested in Miami on 6 October and is now in custody awaiting a trial before a New York court. Honduran authorities have seized assets including two planes.

The scandal broke publically on 7 October, the day after Yankel’s arrest, when the US Department of the Treasury’s Office of Foreign Assets Control (Ofac) announced the designation of four Honduran businessmen and seven businesses as Specially Designated Narcotics Traffickers pursuant to the Foreign Narcotics Kingpin Designation Act for playing “a significant role in international narcotics trafficking”.

Those affected are Yankel, Jaime and Yani Rosenthal, as well as Andrés Acosta García, a lawyer for the family’s business conglomerate, Grupo Continental. “This action targets the three Rosenthal family members and their properties for their money laundering and drug trafficking activities,” stated Adam J. Szubin, Acting Under Secretary for Terrorism and Financial Intelligence. “This step underscores that the US government is fully committed to protecting the US financial system from criminals like the Rosenthals…[and] working with the Honduran authorities to take the necessary steps to protect the Honduran financial system from abuse by drug traffickers and other illicit actors, in order to further safeguard Honduran financial institutions,” Szubin added.

The Panama-registered Grupo Continental, the holding group for the Rosenthal family’s various businesses, immediately responded with a statement denying that it had been operating one of the region’s biggest money laundering networks for the proceeds of drug trafficking and foreign bribery. The designation affects group businesses including Banco Continental, allowing the freezing of assets under US control. Several offshore companies in the British Virgin Islands were also cited.

The Honduran government moved immediately, as per its obligations under international law, to order the compulsory liquidation of Banco Continental. The bank was banned from trading as of 12 October. Under the Ofac designation, the bank’s assets in the US were frozen, taking its capital adequacy ratio from 11.6% to 5.2%, below that permitted by local legislation (6%). The CNBS offered the bank’s 220,000 customers immediate deposit guarantees of up to HL204,000 (US$9,400) per fixed deposit account, with the funds funnelled for immediate release through four Honduran banks with any outstanding amount above that to be disbursed later. The banking and securities commission (CNBS) stressed that bank employees would receive their outstanding salaries. Emphatic that the wider local banking sector remained “solid”, the regulator urged the public to maintain “full confidence in the national financial sector”.

Meanwhile, the public ministry said that it will evaluate the other local companies linked to Grupo Continental in a bid to offer assistance, so far as reasonable, in support of their continued operation. These companies employ an estimated 11,000 people (with another 25,000 indirect employees), so the ripple effects through the economy could be severe. Grupo Continental has interests in almost every economic sector in Honduras. Aside from banking and insurance (Banco Continental, Banco de Occidente), this includes the media (El TiempoCanal 11, Cablecolor), cement, food packing, bananas, coffee, cocoa, cattle rearing, commercial and residential property.

President Hernández, in whose cabinet Yankel Rosenthal was an investment minister until last June, has sought to distance his government from the action, stressing that this is a strictly a matter for the US judicial authorities and that his government will meet any legal obligations, and will continue working with the US and other countries to defeat transnational crime and drug trafficking.

  • Jaime Rosenthal not safe at home

In January 2012 Honduras amended its constitution to allow for the extradition to the US of nationals charged with drug trafficking, terrorism or crime, partially reversing a ban on extradition in place since 1982.

Published in Central America
Tuesday, 03 November 2015 11:51

ICSID reduces Ecuador award

Development: On 2 November a World Bank tribunal ordered Ecuador to pay US$1.06bn plus interest in compensation to the US oil company Occidental Petroleum (Oxy) for an assets seizure dating to 2006.

Significance: Ecuador had appealed to the World Bank tribunal over a case taken by Oxy to the International Centre for Settlement of Investment Disputes (ICSID) over the seizure in 2006 of its assets. The ICSID in 2012 said the seizure was “tantamount to expropriation” and ordered compensation totalling US$2.3bn. Ecuador appealed, questioning the ICSID’s jurisdiction over the case. The tribunal has now reduced the award by more than half.

  • In May 2006 Ecuador terminated Oxy's operating contract on the grounds that the company had sold part of its local assets (the Block 15 oil field) to the Chinese-owned company Andes Petroleum without prior government consent. At the time, Oxy was the largest producer in the country, with an operating contract for the extraction of 100,000 barrels of oil a day from the Amazon basin — about 20% of Ecuador’s output. Oxy immediately sued Ecuador for $3.37bn.
  • The tribunal cut the 2012 ICSID award arguing that it had “manifestly exceeded its powers by wrongly assuming jurisdiction with regard to the investment now beneficially owned by the Chinese investor Andes”.
  • President Correa yesterday tweeted that the government, which is desperately cash-strapped amidst the oil price crisis, had ‘made an offer’ to Oxy and would continue negotiating, presumably in the hope of getting a further reduction, perhaps in return for an early payment (ahead of the ruling Correa said the government had provisioned for the full amount of US$1.7bn plus US$500m in interest), or in order to hammer out a deal on a repayment plan. It now owes Oxy about US$1.8bn in total, interest included.

Looking Ahead: This is the second piece of good news for the Correa government in its battles with various foreign oil companies. In late October, the star witness for in the US oil company Chevron in its long-running multi billion dollar case against Ecuador, former Ecuadorean judge Alberto Guerra, admitted that he had lied in the case. His latest testimony, according to some observers, could significantly weaken Chevron’s case.

Published in Andean
Thursday, 29 October 2015 11:36

Restoring ties with Cuba

Mexico's newly appointed foreign minister, Claudia Ruiz Massieu [RM-15-08], went to Cuba on 19 October for her first official trip abroad. Upon taking office in December 2012 at the helm of the traditional Partido Revolucionario Institucional (PRI), one of President Enrique Peña Nieto's declared foreign policy objectives was to restore Mexico’s historically close relationship with Cuba. Ties had deteriorated dramatically in the two preceding administrations (2000-2012) led by the conservative Partido Acción Nacional (PAN).

During her one-day visit, Ruiz met with her Cuban counterpart, Bruno Rodríguez, and Cuba’s first vice-president, Miguel Díaz-Canel. According to a statement by the Mexican foreign ministry (SRE), Ruiz and her Cuban hosts discussed the strengthening of “historical ties between the two countries”. The talks covered areas including bilateral trade, technical and scientific cooperation, cultural affairs and the promotion of Mexican investments in Cuba. They also discussed the process of updating the Cuban economic model and the renewed interest of Mexican companies in participating in the business opportunities on the island.

The SRE noted that nine Mexican investment proposals had been submitted for Cuba’s new Special Economic Development Zone of Mariel (ZEDM), located at the revamped deepwater port of Mariel, 40kms west of Havana. In February the Cuban government gave one of these approval (Richmeat, a food processing company), followed by another in June (paint manufacturer Devox General Paint).

Mexico is Cuba’s sixth largest trade partner. Bilateral trade is worth about US$500m a year, with the balance favouring Mexico. In 2013, the Peña Nieto government wrote off 70% of Cuba’s outstanding debt with Mexico and re-profiled the rest on favourable conditions. Much like their US counterparts, Mexican businesses are interested in securing market access to Cuba (pop 11m) as the government led by President Raúl Castro gradually opens up the state-run economy to private and foreign participation.

In exchange for such access, Mexico has offered political support for Cuba’s rapprochement with the US and appears willing to come out more strongly in support of Cuba’s calls for the removal of the US economic embargo on Cuba, now a half-century old. On 20 October, after Ruiz’s visit, the Mexican federal senate took the unusual step of issuing a “respectful” call on its US counterpart on Capitol Hill to lift the embargo, and called on the Peña Nieto government to launch an international campaign in support of this. In a statement, the senate urged the federal government to “deploy all convenient diplomatic actions to convince the international community….to demand the immediate removal of the embargo”. As per its usual stance, Mexico on 27 October voted in favour of the United Nations’ annual resolution demanding an end to the embargo.

  • Castro visit confirmed

The SRE also said that President Raúl Castro will conduct a brief official visit to Mexico before year-end, most likely in November. This will be the first visit by a Cuban head of state to Mexico since former president Fidel Castro attended the Special Summit of the Americas held in Monterrey, Nuevo León on 12-13 January 2004.

Published in Politics

Development: On 26 October Colombia's left-wing guerrilla group Ejército de Liberación Nacional (ELN) killed 12 members of the security forces in the central department of Boyacá, as they transported votes from the country's day-earlier regional and municipal elections.

Significance: The attack, one of the deadliest by the ELN in recent years, came less than 24 hours after President Juan Manuel Santos declared the regional elections, in which ruling coalition candidates performed well nationwide, a vote in support of the peace process being conducted by the government with the country’s main guerrilla group, Fuerzas Armadas Revolucionarias de Colombia (Farc). This prompted fresh expectations that the government was about to announce the start of formal peace talks with the ELN, with which government representatives have been in exploratory talks since June 2014. Declaring himself “really broken hearted”, Santos last night ordered a fresh military offensive against the ELN. At the same time, however, a scheduled meeting between government representatives and the ELN scheduled for tomorrow (28 October) appears set to go ahead.

  • The motives for the attack are unclear, but one inference is that it was a show of force by the group ahead of tomorrow’s meeting. Jorge Restrepo, head of the Centro de Recursos para el Análisis de Conflictos (Cerac) local think-tank, noted that in recent weeks the ELN has intensified its activities, effectively ignoring calls to allow the elections to pass off uninhibited. Restrepo and others suggest that the ELN is deeply divided over the peace negotiations, with the latest attack being attributed to hardline ELN commander Gustavo Aníbal ‘Pablito’ Quinchía who, since his release from prison in October 2009, has sought to militarily strengthen the ELN.
  • However, strengthened by the progress with the Farc, Santos was clear that neither the government nor the people of Colombia would tolerate these violent negotiating tactics, or such a blatant attack on the democratic process. “This shows that the ELN has not understood that this is the time for peace and not for war”, the President declared yesterday in announcing the military offensive. “If the ELN thinks that these acts will win them political space or strengthen them in an eventual negotiation, they are completely wrong”.
  • According to Defence Minister Luis Carlos Villegas, the guerrillas attacked the troops with guns and explosives in the Boyacá municipality of Güicán, a remote mountainous area in the Sierra Nevada del Cocuy and formally the territory of the U’wa indigenous group. Eleven soldiers and one police officer were killed, with three soldiers injured. Two further soldiers, a police officer, two election officials and a member of the U’wa tribe remain missing, the defence ministry reported.
  • Jaime Bernal Cuéllar, among those appointed by Santos to facilitate the exploratory talks with the ELN, strongly repudiated the attack. However, Bernal noted that progress with the ELN leadership has been such that a formal dialogue table is in sight.

Looking Ahead: The latest incident illustrates the difficulties in trying to set up a dialogue in the middle of a conflict. However, the ELN’s actions may backfire by weakening rather strengthening its hand at the negotiating table.

Published in Andean
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