Monday, 26 October 2015 11:14

Argentina: Bad news for Kirchnerismo

Development: In general elections on 25 October Argentina’s opposition presidential candidate, Mauricio Macri, did better than expected, forcing a second round run-off with Daniel Scioli, the candidate of the ruling Frente para la Victoria (FPV, Kirchneristas) faction of the Partido Justicialista (PJ, Peronists), scheduled for 22 November.

Significance: In the space of 24 hours the likely political complexion of the next Argentine government – due to take office on 10 December – has changed radically. With 83% of the votes counted, Scioli led the presidential race with 35.7%, but his main opponent, Macri, did better than expected with 35.3%. The third-placed candidate, dissident Peronist Sergio Massa, gained 21.2% of the vote. As Scioli failed to meet the threshold for victory in the first round (45% of the vote, or 40% and a ten-percentage point lead over his nearest rival) there will be a second round run-off. Nothing is assured, but now Macri, rather than Scioli, must be considered the favourite.

  • A six-hour overnight delay in releasing the full preliminary election results led some to suspect that the numbers stunned the government of outgoing President Cristina Fernández. Yet apart from some relatively minor incidents there were no claims of electoral irregularities.
  • A run-off ballot had always been on the cards, but Macri’s numbers were much stronger than expected. Opinion polls had put Scioli’s lead at eight, nine, or ten percentage points, but in the end it was reduced to a barely-there 0.4%. President Fernández had rather reluctantly endorsed Scioli, the governor of the Buenos Aires province, because it was felt that he could deliver the votes in Argentina’s largest electoral constituency, a traditional Peronist stronghold. But in an unprecedented result, María Eugenia Vidal of Macri’s centre-right Propuesta Republicana party (PRO), swept to victory in the Buenos Aires province gubernatorial elections with 39.6% against 35.0% of the vote for the FPV candidate, Aníbal Fernández.
  • The Cambiemos opposition coalition that backs Macri’s presidential bid also won the governorships in the densely populated provinces of Córdoba, Santa Fe and Mendoza. Massa’s Unidos por una Nueva Alternativa (UNA) coalition took Jujuy. The FPV retained a number of smaller provinces: one of its consolation prizes was Santa Cruz, where the President’s sister-in-law, Alicia Kirchner, won the governorship and her son, Máximo Kirchner, was elected as a national deputy.
  • The first results indicate that the FPV has also lost its outright majority in the lower chamber of the national congress. With its allies it is projected to remain the largest single grouping with 116 seats, but short of the 129 needed for a majority. There will be a similar situation in the federal senate, where the FPV is likely to have 11 seats with the remaining 13 divided up among a range of other parties. Whoever wins the presidential second round run-off will therefore need to govern through a series of pacts and alliances, reinforcing the view that Argentine politics is moving towards the centre.

Looking Ahead: The outcome of the second round now depends in part on who Massa will endorse: much suggests that Macri and the opposition now have the edge on Scioli and the FPV. How hard-core kirchneristas, in power for over a decade, will react to this setback is also uncertain.

Published in Southern Cone
Thursday, 22 October 2015 12:15

COSTA RICA: Solís calls for new strategy

President Luis Guillermo Solís is calling for a new inter-institutional strategy in order to tackle the wave of homicides currently afflicting Costa Rica, particularly the capital San José and the Caribbean port city of Limón, which local authorities attribute to a rise in organised crime.

President Solís’s announcement, which he made on 15 October, came on the heels of a proposal presented by Security Minister Gustavo Mata and backed by the attorney general, Jorge Chavarría, which would create a specialised unit in the judicial investigations office (OIJ), a branch of the supreme court (CSJ), to be exclusively tasked with investigating organised crime. Mata also told reporters that on 11 August he had met the president of the CSJ, Zarella Villanueva, to whom he formally presented a proposal regarding the creation of the new unit which would be tasked with coming up with comprehensive national policies to address organised crime.

A 13 October official statement by Mata notes that 426 homicides were committed between 1 January and 9 October, most of which are believed to be linked to organised crime as rival gangs compete for the same territory. This figure suggests that the total number of homicides registered in 2014 (477 – a rate of 10 per 100,000 inhabitants) is set to be surpassed.

The same statement by Mata also cites studies which were carried out up to August 2015 (at which point 370 homicides had been registered), which attribute 202 (55%) of these murders to organised crime. According to the same statement, so far this year, authorities have dismantled 110 criminal organisations, of which 27 were international drug trafficking organisations (DTOs) and 83 were local DTOs.

Recent drug hauls also indicate Costa Rica’s growing usage as a transit country for narcotics. Most recently seven individuals linked to the N’drangheta Italian criminal group for allegedly smuggling cocaine to the US were arrested on 14 October (see sidebar). According to Mata, so far this year the authorities have seized 14 tonnes (t) of cocaine while the most recent (2015) US State Department International Narcotics Control Strategy Report (INCSR) notes that Costa Rican law enforcement seized 26t of cocaine in 2014, up from 19.8t in 2013.

While security is emerging as a priority for the Solís government, it is worth pointing out that it is not the chief public concern. According to a survey by the Universidad de Costa Rica (UCR) carried out in August and September, among the main problems cited, 29.4% of respondents listed unemployment, followed by the high cost of living (18.3%) and the poor performance of the government (16.5%). Just 9.4% of respondents said that security was their main concern.

  • Links to N’drangheta

In the latest sign of international drug trafficking activity in Costa Rica, on 14 October the local authorities announced the arrests of seven people (a Cuban national and six Costa Ricans) who are suspected of smuggling several tonnes of cocaine to the US and Europe. The seven are thought to be part of a crime ring linked to the N’drangheta Italian criminal organisation and allegedly run out of a New York pizzeria.

Wednesday, 21 October 2015 11:23

Brazil's Cunha gains time

Development: A debate over parliamentary rules looks set to delay the opening of the Brazilian congress' ethics committee inquiry into Eduardo Cunha, the speaker of the lower chamber of congress, and the man with the sole responsibility to initiate impeachment proceedings against President Dilma Rousseff.

Significance: Members of the left-wing Partido Socialismo e Liberdade (PSOL) and Rede Sustentabilidade, the party of former presidential candidate Marina Silva, had hoped to start the inquiry this week. But Cunha’s allies in the congressional committee have argued that three ordinary parliamentary sessions need to elapse from the time the complaint was first presented. With the latest revelations showing that Cunha’s name and passport was used to open bank accounts in Switzerland, despite him telling congress earlier that he had no foreign bank accounts, the speaker’s support on the 21-person committee is estimated at between five and nine. Even many of his erstwhile allies expect Cunha to be stripped of his mandate as deputy (there is no mechanism for removing him as speaker). The question is how long that process will take and what damage Cunha will wreak in the meantime

  • José Araújo, the president of the ethics committee, said, “if it was up to me the session would have already started. But the committee directorate thinks differently”. Araújo added that he hoped the case would be concluded by the end of the year, but admitted it could be subject to further delays. On 19 October, Cunha, from the nominally-government allied Partido do Movimento Democrático Brasileiro (PMDB), reiterated that he had no intention of quitting and that his enemies would have to wait until the next speaker’s elections to see him replaced.
  • Cunha has also been engaging in a trans-Atlantic war of words with President Rousseff, while tours Sweden and Finland. While Rousseff publicly lamented the latest corruption allegations against Cunha, whom the public ministry believes had US$24m in Swiss bank accounts, Cunha responded by regretting the fact the “Brazilian government was involved in the worst corruption scandal in the world”. Rousseff then shot back that the Brazilian government was not involved in corruption, only some individuals. Last night Cunha provoked her again: “I didn’t realise Petrobras [the state-controlled oil firm] wasn’t part of the government”.
  • How seriously to take this trade of insults is difficult to tell. Many in the opposition who favour impeachment are reluctant to criticise Cunha as they need him to begin impeachment proceedings against Rousseff. On the other hand, the government sees an opportunity to reach out to Cunha, with the possibility of going easy on the investigation against him in return for the dismissal of the impeachment claims. Also, the government needs congress to function effectively in order to pass more austerity measures and prevent a credit rating downgrade by a second international ratings agency, which would result in serious capital flight.

Looking Ahead: The PMDB’s party conference has been pushed back to November. Cunha has urged his party colleagues to vote to abandon the Partido dos Trabalhadores-led ruling coalition. It is clear that the PMDB is seriously split over the issue: a vote to leave the government, though unlikely, would have a serious impact on governability.

Published in Brazil
Thursday, 15 October 2015 15:46

ARGENTINA: Reaching out to the undecided

With under two weeks to go until polling day, the leading candidates in the Argentine presidential election are attempting to reach out beyond their core supporters. Daniel Scioli, the candidate of the ruling Frente para la Victoria (FPV) faction of the Partido Justicialista (PJ, Peronists), has been seeking to reassure Argentina’s business community in an attempt to gain enough support to win outright in the first round on 25 October. Meanwhile Mauricio Macri, from the centre-right opposition Cambiemos coalition, is attempting to reach out to non-Kirchnerista Peronists, while Sergio Massa, from Una Nueva Alternativa (UNA), is promoting a tough line on law and order issues in the hope of securing a place in a second round run-off.

Speaking at the IDEA business institute in Mar del Plata on 14 October, Scioli sought to strike a conciliatory tone, following the tense relationship between Argentina’s business community and the government under President Cristina Fernández. “Every fiscal, financial or commercial issue that we have to review in this context of low international prices will be reviewed to ensure profitability and to move forward,” Scioli said.

Scioli’s campaign has also hinted at a less protectionist approach under his presidency, under the slogan: ‘more Argentina in the world and more of the world in Argentina’. Earlier this week, Scioli played the part of an international statesman by visiting Tabaré Vázquez in Uruguay and Dilma Rousseff in Brazil. According to local press reports, he told the Brazilian president that he would put an end to some of the import permits that have blocked foreign goods from entering Argentina, and which have been questioned by the World Trade Organization (WTO).

Macri the Peronist

Macri, conscious that his polling numbers have stalled over recent weeks, has been attempting to appeal to traditional Peronists. As well as identifying himself strongly with the agricultural sector, which has long been at loggerheads with the government over export tariffs, Macri has attempted to reclaim Peronism for the centre-right. “Some call themselves Peronists but they dedicate themselves to fiddling the poverty statistics,” he said at the unveiling of a statue to Juan Domingo Perón. “But Peronism is not arrogance and pride, Peronism is social justice, the fight for equal opportunities and zero poverty in Argentina. That is the Peronism that I champion.”

On 14 October, Macri also joined a protest march held in Buenos Aires by three of the country’s leading agricultural organisations. Addressing the marchers, Macri declared, “in December [when he hopes to take over as president] we are going to fix clear rules of the game […] We are going to have zero export taxes for regional economies, zero limitations on exports.”

Massa highlights insecurity

Massa, who appears to be gaining on Macri in recent polls, gave a speech promising to introduce “a unifying programme of all the security forces in urban centres” and “to decree at a national level and in the province of Buenos Aires a security emergency.” With opinion polls showing that insecurity remains one of the most serious concerns of Argentines, despite continued strong support for the government, Massa’s tactic appears sound. Massa has also starting focusing his attacks on Scioli, rather than Macri, criticising Scioli’s term as governor of Buenos Aires province and insisting that schools and hospitals in the region had deteriorated under his rule. Once again, he highlighted Scioli’s absence from the presidential debate on 4 October.

  • Central bank plans

Both Mauricio Macri and Sergio Massa have made it clear they would dismiss Alejandro Vanoli as the president of the central bank if they win. Vanoli has come under fire in recent years due to rising inflation and the emergence of foreign currency black markets. Both Macri and Massa had vowed in the past to put an end to restrictions on the US dollar trade, which Vanoli initially backed. Vanoli has hinted he supports the policy changes promised by Scioli, who has argued that those restrictions could be lifted “gradually”.

Published in Brazil & Southern Cone

Uruguay's opposition political parties have torn into the left-wing government led by President Tabaré Vázquez for shrinking from condemning the Venezuelan government for the heavy prison sentence handed down to one of the leading lights of the country's opposition movement, Leopoldo López, on 10 September. They accused the ruling left-wing Frente Amplio (FA) of subordinating their human rights credentials to its ideological affinity with the Bolivarian Revolution. While such solidarity runs deep, especially on the radical wing of the FA, there are more pragmatic reasons for Uruguay’s silence. The government was putting the finishing touches to a massive trade accord with the Venezuelan government, whose sensitivity to criticism is axiomatic, at the time of the sentence; an accord which could save key dairy companies from going to the wall and that comes at a time when Uruguay’s economic growth is screeching to a shuddering halt.

The FA used its wafer-thin majority in the senate to block a motion presented by Senator Pablo Mieres, the leader of the small opposition Partido Independiente (PI), which condemned the sentencing of López and called on the Venezuelan government to release him ahead of key legislative elections on 6 December. The motion was backed by the opposition Partido Colorado (PC) and Partido Nacional (PN; Blancos) but it fell one short as the 16 FA senators voted as a bloc to oppose it.

Mieres slammed the government for a “hemiplegic” vision, a severe form of paralysis when it comes to condemning the abuses of left-wing governments in the region. He was especially scathing of FA Senator Rafael Michelini, who just days earlier had branded López a “political prisoner”, while his moderate faction of the FA, Nuevo Espacio, had issued a statement criticising López’s imprisonment. Another FA senator, Daniela Payssé of Asamblea Uruguay, had also stated in the days before the vote that Venezuela was “concerning the whole of Latin America”. Blanco Senator Jorge Larrañaga, meanwhile, called for Venezuela to be expelled from the Southern Common Market (Mercosur) for “failing to comply with the [bloc’s] democratic clause”.

There was no prospect of the FA backing the motion still less calling for Mercosur to throw out Venezuela. Michelini made it clear that he had no choice but to set aside his principles, not out of ideological solidarity but rather economic pragmatism. He referred obliquely to “pending issues with Venezuela” making it “an inopportune time for the senate to address the [López] issue”.

He did not specify what the “pending issue” in question was but on 18 September the agriculture and livestock minister, Tabaré Aguerre, was in Caracas signing by far the most important trade accord since President Vázquez came to power last March. This included the reduction of the debt Uruguay’s State energy company Administración Nacional de Combustibles, Alcoholes y Portland (Ancap) held with Petróleos de Venezuela (Pdvsa) from US$434m to US$267m. The accord also confirmed Venezuela’s commitment to buy 265,000 tonnes of food products from Uruguay, a huge import order of US$300m. The ailing dairy industry was one of the main beneficiaries of this accord, with powdered milk and cheese producers given a big lift.

Uruguay needed this trade deal not just to prop up the dairy industry but also the wider economy. The central bank (BCU) published figures last month showing that the economy contracted by 0.1% year-on-year in the second quarter and by 1.8% quarter-on-quarter. Although the economy & finance minister, Danilo Astori, was quick to point out that rather than these negative figures the media should have headlined with the fact that the economy expanded by 2.2% year-on-year in the first half, there is no getting around the fact that Uruguay’s stellar growth of recent years and enviable record of 12 consecutive years of GDP growth is in jeopardy. Maybe not this year but certainly next year. Uruguay’s main trading partners, Argentina and Brazil, face tremendous economic and political uncertainties. Uruguay has diminished its dependence on both but it remains reliant, especially with China’s economy slowing down.

Given this context, the government clearly calculated that antagonising Venezuela at such a delicate juncture was not an option. It will have noted the vehement Venezuelan response to the comparatively mealy-mouthed criticism of López’s heavy sentence by Chile’s foreign ministry.

The significance of two open letters
While the Uruguayan government was doing its level best to stay out of the López debate, Luis Almagro, the secretary general of the Organization of American States (OAS), did not so much walk on eggshells as stomp through them. Almagro served as Uruguay’s foreign minister under the administration of José Mujica (2010-2015) and although the Venezuelan government suspected that he was behind an attempt to keep the country out of Mercosur, until very recently he was carefully adhering to the FA line of being careful not to offend Venezuela. Since taking up his position at the head of the OAS six months ago, Almagro had not veered very far from this position. That is until he received a letter from Elías Jaua, one of the main Bolivarian ideologues whose time as foreign minister in Venezuela coincided with much of that of Almagro in Uruguay.

In a letter dated 9 September Jaua called Almagro “a proconsul” of the US and ally of the “Colombian oligarchy” who was “erecting himself as a judge of our Revolution for which you don’t have the political or moral stature”. Jaua’s criticism was based upon Almagro’s decision to meet Henrique Capriles Radonski, an opposition figurehead in Venezuela, and to travel to Cúcuta in Colombia to assess the humanitarian crisis triggered by Venezuela’s decision to close part of its shared border and deport more than 1,000 Colombians.

Almagro responded in a six-page open letter on 18 September (after the sentencing of López). “No revolution worthy of the name, Elías, leaves people with fewer rights than they had, poorer in values and principles, more unequal in judicial recourses and representation and more discriminated against depending upon your thinking or political affiliations. All revolutions mean more rights for more people,” Almagro said in his letter, published on Twitter.

Almagro defended his meetings with the Venezuelan opposition; his visit to Colombia to obtain first-hand information on the border crisis with Venezuela; and his offer to send a team of electoral observers from the OAS to monitor Venezuela’s forthcoming legislative elections. “Democracy is government of the majority but it also about guaranteeing the rights of minorities. There is no democracy without guaranteeing the rights of minorities.”

If this open letter laid bare what many FA politicians think but would never dare to express, another open letter published two days later sought to stir the FA into action. It was from Antonietta Ledezma, the young daughter of the former mayor of Caracas, Antonio Ledezma, addressed to now Senator José Mujica. Antonietta urged Mujica to intercede to secure the release of her father, who was arrested last February on suspicion of plotting a coup and remains under house arrest, and other political prisoners in Venezuela.

Praising Mujica for his “warmth, good humour, marvellous humility, defence of democracy, equality and respect for human rights,” Antonietta said that reading Mujica’s biography ‘A Black Sheep Comes to Power’ inspired her to write to him. She drew parallels between Mujica and her father, who she said came from humble origins before rising to become a national deputy, governor and twice metropolitan mayor of Caracas until his “unjust imprisonment…by an inefficient and repressive dictatorship”. Mujica, while he might be moved by the letter, is also a pragmatist at heart. But if anyone could get away with condemning “so many arbitrary actions” in Venezuela it is probably him.

  • Diplomacy

There were other factors behind the Uruguayan government’s silence. As pro tempore president of the Union of South American Nations (Unasur), President Vázquez had been playing a role in reconciling Venezuela’s President Nicolás Maduro and Colombia’s Juan Manuel Santos, eventually persuading them to meet in Quito on 21 September to discuss the border crisis. A forthright statement over Leopoldo López would have undermined his efforts.

  • “In every case you mention in your letter what is a motive for attacking me is for me a source of pride. With every action that I have carried out I have tried to guarantee the rights of all, this doesn’t make me less Bolivarian or less left-wing. Quite the contrary… He who considers himself left-wing and is not sensitive to the painful humanitarian reality [on the Colombian border] doesn’t deserve to be called left-wing and does not have the moral authority to criticise me.” - OAS Secretary General Luis Almagro.
Published in Uruguay

Development: Today (12 October), Mexico's Coordinadora Nacional de Trabajadores de la Educación (CNTE) teachers' union will stage a 24-hour national strike, complete with marches and road blocks, to protest against aspects of the federal government’s education reform.

Significance: This is the first test of nerve for the new national education minister, Aurelio Nuño. The CNTE is protesting primarily against the introduction of continuous evaluation for teachers, which forms an integral part of the education reform pushed through two years ago by the federal government led by President Enrique Peña Nieto to raise low education standards in Mexico. The locus of the strike will be the southern state of Oaxaca, where the militant Sección 22 of the CNTE led by Rubén Núñez holds sway, but there will also be a protest march to the education ministry (SEP) in Mexico City (DF), as well in as poorer southern states where the CNTE’s influence is strong, such as Chiapas, Guerrero and Michoacán. The CNTE has teamed up with other disaffected groups, such as the Asamblea Nacional de Enfermeros y Enfermeras de México, and relatives of the 43 training teachers abducted from Iguala, Guerrero, to try and bring the protests to 28 federal entities.

  • The CNTE aims to hold disruptive protests outside banks, transnational companies and facilities of the state-controlled oil company, Pemex, and, at least in Oaxaca, at ports and the local airport. Its message is not entirely consistent. While several state CNTE leaders are using the strike to demand talks with Nuño or the federal interior ministry (Segob) about the teacher evaluation process, Oaxaca’s Núñez insists that protests will not end until the complete annulment of the education reform in its entirety.

  • The CNTE strike is being backed by Andrés Manuel López Obrador, the twice former presidential candidate, whose radical left-wing Movimiento Regeneración Nacional (Morena) finished second behind the Partido Revolucionario Institucional (PRI) in the federal congressional elections last June in Oaxaca and is looking for a strong performance here in the gubernatorial elections in 2016. Morena is also now the largest party in the DF.

Looking Ahead: The federal government is standing firm at this stage. Any teachers who fail to go to class will have their salaries docked the SEP has said.

Published in Mexico
Wednesday, 07 October 2015 11:00

Nicaragua: Fatal clashes at 'El Limón' mine

Development: On 6 October Nicaragua’s national police reported that one police officer had been killed and 31 people injured during violent clashes with protesting workers from the ‘El Limón’ mine, located in the department of León.

Significance: For several weeks workers have been demonstrating outside the mine, in which Canada’s B2Gold Corp. has a 95% stake and a local miners’ union the remaining 5%, in protest at the sacking of three union colleagues. They argue that the dismissals, on disciplinary grounds, were unjust and illegal, even though they have been ratified by the labour ministry (Mintrab). With the protesters blocking access to El Limón, the conflict has been affecting operations at the mine, leading to tensions between the protesters, B2Gold and the government led by President Daniel Ortega. There are now fears that tensions will escalate further following yesterday’s fatal incident.

  • Hundreds of El Limón miners began a protest action on 25 September, after Mintrab issued a resolution confirming that three B2Gold miners, all members of the ‘Pedro Roque Blandón’ syndicate, had been sacked for violating the firm’s labour code and its internal disciplinary regulations. B2Gold said that the three worker’s contracts were “justly” terminated after they “failed to meet disciplinary obligations and caused economic damage to the firm”, without providing any further detail.
  • Some fellow miners complained that the sackings are unjust and illegal, citing the fact that no specific reasons were given by B2Gold in the resolution issued by Mintrab. Led by union leader Humberto Rivas, who happens to be one of those sacked, the protestors insist that the dismissals were arbitrary and a violation of labour rights. Since then, some 220 demonstrators have erected a picket line outside the mine, preventing other workers and mine administrators from entering the site.
  • Violence erupted yesterday after, at B2Gold’s request, a police escort was assigned to offer protection to a bus carrying workers from another mine sent in to work at El Limón. The national police chief, Aminta Granera, said that as the bus approached the mine a “criminal group” of protesters hurled sticks, rocks and Molotov cocktails at the bus and the police escort. Police officer Kevin Esaú Valle Carrasco was killed in the attack, with 23 other officers and eight civilians reported as injured. Four B2Gold vehicles as well as a police patrol vehicle were also damaged.

Looking Ahead: Granera has been adamant that the authorities will identify and bring to justice those responsible for the violence. With B2Gold, Nicaragua’s main mineral exporter, insisting that it fully complied with Nicaraguan law in the dismissals process, the conflict may intensify in the short term.

Wednesday, 07 October 2015 10:48

Corporate Radar

Globant seeks to double sales

Globant, the Argentina-based software development company that floated on the New York Stock Exchange in July 2014, is targeting very rapid growth. CEO Martín Migoya told the Reuters news agency that the company is aiming for 25% annual revenue growth, and hopes to double its current US$250m per annum turnover within the next four to five years. Sales last year were worth US$200m, and Migoya says he expects them to total US$249m this year. Migoya has always insisted that Globant relies on skilled and creative software specialists and a growing global network, and as such is not constrained by Argentina’s short-term financial and macroeconomic difficulties. In the Reuters interview, he said that Globant was relying on organic growth, although it did not rule out more acquisitions. Its last acquisition was in May, when it took over an India-based software producer, Clarice Technologies. Globant now employs a staff of 4,500 in nine countries and its client list includes Google, LinkedIn, JWT, and Coca-Cola.


Telefónica – we can still grow in Brazil

Spanish telecoms group Telefónica can still grow in Brazil despite the recession, company director José María Álvarez-Pallete stated at the end of August. Álvarez-Pallete noted that both the mobile brand Vivo and the recently acquired broadband player GVT had managed to increase market share in a difficult market. He added that the depreciation of the Brazilian Real had not neutralised Telefónica’s growth in Brazil, stressing that “although we don’t think the economy will help us, the trend of our business in the country will be positive”. Operationally, the company’s biggest challenge had been to stabilise the fixed line business in São Paulo; with this now largely achieved, Telefónica is in a position to grow nationally and reap the benefits of synergies between Vivo and GVT, Álvarez-Pallete emphasised.


Moody’s says regional corporates paying bills more slowly

As a result of slower growth across the region, and the recession in Brazil, Latin American companies are paying their bills more slowly, according to the ratings agency Moody’s Investors Service. Its calculation of late payments by speculative grade companies in the region rose to 4.2% in the 12 months to June 2015, up from 3.1% in the comparable year-earlier period. Eight of ten overdue payments monitored by Moody’s were happening in Brazil, where GDP slumped by 1.9% in Q215. By sector, they were concentrated in the industrial and construction sectors, and involved companies like OAS and Sare Holding. As of June, Moody’s rated 348 corporate debt securities across 21 Latin American countries. It said that in the year to June, it had issued more ratings downgrades than upgrades for those companies.

Development: On 5 October the Brazilian government's attorney, Luiz Inácio Adams, filed a request against Augusto Nardes, the leading judge in the case in the federal court of accounts (TCU) that is due to issue a ruling tomorrow (7 October) on whether the government led by President Dilma Rousseff engaged in illegal accounting measures to balance its books in 2014.

Significance: If the request is accepted, the TCU’s ruling could be postponed yet again, which might diminish momentum in support of impeachment proceedings against President Rousseff, just as the government seeks to shore up its support in the federal congress on the back of a new cabinet reshuffle. But even if the TCU rules against the government, the validity of the ruling could be put in doubt. Adams also asserts that the whole process has been compromised because of public declarations made by Nardes prior to the judgment, asserting that the Rousseff administration had committed fiscal irregularities.

  • According to Nardes’s report, the government committed 15 irregularities in its 2014 budget accounts, including using money from federal banks to pay for social programmes, considered an irregular credit transaction. Critics say these irregular accounting measures were used in order to give the appearance that the government was sticking to its budget surplus targets, ahead of Rousseff’s re-election bid in October last year. If the TCU rules against the government, Rousseff could be accused of ‘fiscal irresponsibility’, an impeachable charge. The government has defended its actions by claiming that previous federal administrations have used similar accounting measures and had their accounts approved by the TCU.
  • Several times in the past month, Nardes has stated that he would recommend his TCU peers to reject the 2014 government accounts, saying that in his view, “the public accounts were compromised, with serious irregularities in fiscal management”. Adams argues that these declarations undermine the case. Under Brazilian law, acting magistrates are barred from expressing their opinions prior to the issuing of a verdict, which must then be ratified by congress.
  • Nardes has rejected the accusations by Adams, claiming that he had only repeated what was already contained in his preliminary report on the case released in June. Nardes added that his comments were made after the TCU had postponed its ruling in early September in order to allow the government more time to respond to some of the technical findings in his report.
  • The TCU president, Aroldo Cedraz, has rejected the notion that the TCU might have to throw out the case, saying that there was a precedent whereby members of the court had made public declarations after preliminary reports had been issued. He also said it was strange that the government was only now contesting the capacity of Nardes to lead the case.

Looking Ahead: The government has vowed to go to the supreme court (STF) to contest the legality of the TCU’s verdict, if it goes ahead. Although some jurists suggest that it is unlikely that the STF would accept the government’s argument, the appeal would buy the executive crucial time to rebuild support in congress.

Published in Brazil

The Salvadorean street gangs have responded to the government’s decision to start trying them as terrorists [SSR-15-08] with a sharp increase in homicides, to which the national police (PNC) responded with an escalation of confrontations with the maras. The government has interpreted this as another attempt by the gangs to force the authorities to reverse their policy of confining their leaders to maximum security prisons. One feature in the new wave of violence was a string of attacks with explosives that have been attributed to the maras.

PNC director Mauricio Ramírez Landaverde reported on 1 September that there had been 907 homicides across the country in August, just over twice as many than in July and 162% more than in August 2014. This has taken the total since the beginning of the year to 4,198, or 7.2% more than in the whole of 2014. ‘The situation in August,’ said Ramírez, ‘indicates that the criminal groups have launched a new attempt to impose upon the state the adoption of some measures that favour them,’ an allusion to the reversal of the new confinement régime for their leaders.

Government spokesman Eugenio Chicas said that 85% of the August homicide victims were members of maras. ‘This situation,’ he said, ‘will be maintained for as long as these criminal groups are engaged in their processes of internal purges and dispute the distribution of drugs and control of territories to extort money from the population.’

According to data provided by the PNC’s information analysis unit (UCATI) to the Spanish news agency Efe, 197 gang members were killed in confrontations with the police in the first eight months of the year ― 265% more than in the same period last year and 134% more than in the whole of last year. This largely reflects the fact that the number of occasions on which the police engaged gang members had also increased, to 423 or 171% more than in the same period of 2014 and 75% more than in the whole of that year.

On 28 September the PNC raided a party in Apopa, a municipality 12 kilometres north of San Salvador, and arrested 231 suspected gang members. Prosecutor-general Luis Martínez told the media that they would be charged with inciting acts of terrorism and illicit association. Justice & security minister Benito Lara said that among those arrested were four leaders of a gang (which he did not identify). An unofficial report said that at least 15 had been released when it was discovered that they were not gang members.


On 29 August the defence minister, General David Munguía Payés, announced that a device containing C-4 and shards of glass had been found in a car parked close to the justice & security ministry. He said the device had failed to explode because of improper handling. On 6 September a plastic-wrapped shoebox containing a device with a charge of potassium chlorate and shrapnel was found close to a police station in Panchimalco, a municipality 6km south of the capital. It was preventively detonated by the PNC’s explosives unit. Four days later device with a charge of potassium chlorate and sodium benzoate was found in a car parked in front of the finance ministry. It too was detonated by the police.

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