Uruguay has offered Paraguay full access to its diplomatic network and infrastructure in mainland China. The announcement by Uruguay’s foreign minister, Luis Almagro, has raised hopes that this may help save a Paraguayan woman facing a death sentence in China. It has also sparked speculation that it could lead to the establishment of formal diplomatic relations between China and Paraguay, the only South American country to recognise the government of Taiwan as legitimate.

Almagro’s announcement came during a 5 February visit to Paraguay, where he met his peer, Eladio Loizaga, as well as President Horacio Cartes. In a statement, Almagro said that Uruguay had offered Paraguay the use of its diplomatic network in China, as well as in any other countries in which Paraguay lacks diplomatic representation, as part of efforts to promote international trade. Almagro noted that having access to Uruguayan embassies and consulates in China could be “beneficial” for Paraguay, which has “strong commercial interests in China”.

Paraguay, the world’s fourth largest soya producer, counts China as one of its main export markets. In recent years the Asian giant has also become one of Paraguay’s main import suppliers (with much of the bilateral trade handled by Uruguayan ports). Yet Paraguay has not had diplomatic relations with China since ties were severed by the right-wing military dictatorship led by General Alfredo Stroessner (1954-1989). In 1957, the Stroessner government cut relations with China and recognised the government of Taiwan instead. Since then, Paraguay has maintained diplomatic relations with Taipei.

Almagro also said that in offering its diplomatic network in China, Uruguay would also “do everything in its power” to assist Paraguay in the case of Rosalía Amarilla, a Paraguayan national sentenced to death in China for drug trafficking in 2012. Amarilla’s execution had been scheduled for 20 March. But following Loizaga’s participation in the inaugural summit between China and the new Community of Latin American and Caribbean States (Celac), held in Beijing on 8-9 January, China announced that Amarilla’s execution has been postponed until July, when her case is to be reviewed. While in Beijing, Loizaga held a private meeting with his Chinese counterpart, Wang Yi, and the two reportedly discussed Amarilla’s case.

  • A diplomatic dilemma

On 11 January Diógenes Martínez, a former Paraguayan senator, said that it would be “absolutely impossible” for Paraguay to establish diplomatic relations with mainland China. Martínez, who in the past has called for the establishment of relations with Beijing, pointed to the ‘non-diplomatic aggression pact inked by Taiwan and China in 2008, under which the two agreed to respect each other’s diplomatic allies. According to Martínez the two last Paraguayan governments explored the possibility of establishing diplomatic relations with Beijing, only to find that this could lead to a diplomatic confrontation in Asia. Martínez explained that if Paraguay were to “even express an interest, Taipei could interpret this as breach of its agreement with Beijing”.

Published in Postscript
Friday, 30 January 2015 11:20

GUYANA: Questions of energy and power

By most metrics, Guyana's economy has performed well in recent years. Progress through 2015-2017 will depend significantly on two factors. One is the arrangement of finances for the Amaila Falls Hydroelectric Project (AFHP). The other is the possible lack of access to credit through Venezuela’s discount oil scheme, Petrocaribe. All this is at a time that Guyana's political situation is complex. On 10 November, President Donald Ramotar prorogued (suspended) Guyana's parliament. On 21 January, the president announced that a general election will be held on 11 May next.

According to the United Nations' Economic Commission for Latin America and the Caribbean (ECLAC), Guyana's economy was the fastest growing in the Caribbean in calendar 2014, expanding by an estimated 4.5% year-on-year in real terms. By this measure, Guyana has been a sub-regional outperformer. Real growth was 3.3% in 2009, and has since ranged between 4.4% (in 2010) and 5.4% (in 2011). For the sub-region as a whole, the corresponding figures have been -3.6% and 0.3% (in 2010 and 2011) and 1.9% (in 2014).

The growth has been boosted by expansion in the primary industries that dominate Guyana's export mix. According to the International Monetary Fund (IMF), exports of just six commodities – rice, timber, shrimp, bauxite, gold and sugar – account for around 60% of the total basket. These exports are vulnerable to fluctuations in price and/or adverse weather conditions. By comparison with most other (but not all) countries in the Caribbean sub-region, Guyana also has the advantage of relatively low gross and net debt ratios (estimated by the IMF at 58% and 53% of GDP respectively for 2014), as chart 1 shows. The debt ratio fell sharply in 2007, when the Inter-American Development Bank (IDB) cancelled its debt of almost US$470m, at that time equivalent to 21% of GDP. Thanks to this and other debt forgiveness, the gross debt ratio stood at 65% in 2009.

Chart 1: Guyana's economy: as the IMF sees it

2011 2012 2013 2014 2015 2016 2017 2018 2019
Gross domestic product, constant prices, % change 5.44 4.82 5.22 3.32 3.83 4.85 4.31 4.23 3.23
Gross domestic product, current prices, US$ bn 2.58 2.85 2.99 3.14 3.33 3.56 3.80 4.04 4.26
Gross domestic product per capita, current prices, US$ 3,263 3,581 3,755 3,945 4,173 4,445 4,730 5,012 5,271
Total investment, % GDP 19.69 19.09 18.26 19.66 23.12 28.10 32.20 25.94 19.49
Gross national savings, % GDP 6.63 7.51 5.41 5.08 7.24 7.14 16.83 9.18 10.40
Inflation, end of period consumer prices, % 3.25 3.43 0.90 4.27 4.28 4.53 4.28 3.78 3.78
Volume of imports of goods and services, % change 2.95 13.12 -4.65 2.34 8.01 13.11 -2.27 5.62 -8.42
Volume of Imports of goods, % change 4.86 13.54 -7.05 1.45 7.72 14.53 -4.83 5.40 -12.70
Volume of exports of goods and services, % change 6.13 11.33 -2.32 5.38 1.95 1.99 1.80 1.67 1.65
Volume of exports of goods, % change 10.38 19.70 3.09 4.28 1.44 1.54 1.38 1.28 1.24
Population, mn 0.79 0.80 0.80 0.80 0.80 0.80 0.80 0.81 0.81
General government revenue, % GDP 27.62 26.56 26.69 28.37 29.74 28.06 27.92 25.89 25.28
General government total expenditure, % GDP 30.64 31.22 31.10 31.97 32.92 30.97 31.20 29.30 25.86
General government primary net lending/borrowing, % GDP -1.49 -3.54 -3.23 -2.41 -1.97 -1.79 -2.21 -2.43 0.51
General government net debt, % GDP 63.33 55.86 52.15 52.78 53.29 53.07 52.47 51.51 50.29
General government gross debt, % GDP 65.16 62.56 56.87 57.77 58.86 59.15 59.02 56.44 54.96
Current account balance, US$ bn -0.34 -0.33 -0.38 -0.46 -0.53 -0.75 -0.58 -0.68 -0.39
Current account balance, % GDP -13.07 -11.57 -12.85 -14.59 -15.88 -20.96 -15.37 -16.76 -9.09

NB Estimates start after 2012
Source: IMF World Economic Outlook Database

Still, challenges are considerable. As the IMF notes, per capita GDP (at a little under US$3,400) is the lowest in the British Caribbean. In its 2014-15 Global Competitiveness Report, the World Economic Forum (WEF) assessed Guyana as being the 117th most competitive of the 144 countries it assessed. Relative to other countries, Guyana's competitiveness appears to have been falling over recent years. Areas of comparative weakness include the small size of the local market (ranking 135th of the WEF’s 144 assessed countries). Areas of relative strength include financial market development (ranked 82nd); goods market efficiency (83rd) and higher education/training (82nd). As chart 2 indicates, (perceived) corruption is – by quite a margin – the most problematic factor facing businesses, according to those surveyed by the WEF.

Chart 2: The most problematic factors for doing business in Guyana
Weighted responses (%)

Guyana Chart

Source: World Economic Forum, Global Competitiveness Report, 2014-15

Several other aspects of the general economy are worthy of note. The government has been running a fiscal deficit of around 3% of GDP in recent years: however, according in its October 2014 World Economic Outlook, the IMF projected that debt ratios would continue to decline over time. The Bank of Guyana, the central bank, has generally kept inflation under control (and has maintained an exchange rate of around US$1:GYD205 since 2007). Gross reserves of about US$800m are substantial in the context of GDP of a little over US$3.0bn and by most other metrics. Remittances from expatriate Guyanese workers have been running at approximately US$350m or so each year, and are an important source of foreign exchange.

Crucially though, investment (at about 20% of GDP, but expected to rise) has dwarfed domestic savings (of around 5%-7% of GDP in recent years). The corollary of this has been a current account deficit, which has risen from US$340m in 2011 to a projected US$460m in 2014. The current account deficit has been funded mainly by net inwards foreign direct investment (FDI), which was around US$300m in each of 2012 and 2013, and grants (which have been running at about US$50m annually).

Petrocaribe, of which Guyana is a member, has been an important, if variable source of funding for the current account deficit. Over recent years, the norm has been for a minority of the amounts lent to the government of Guyana under its arrangements for Petrocaribe to be actually spent on imports of fuel. The majority has been saved – outside Guyana. In September 2014, at the time of its previous Article IV country report on Guyana, the IMF estimated that the government would save around US$75m in funds advanced from Petrocaribe in each year from 2014 to 2017 inclusive. Amounts lent through Petrocaribe and saved in 2013 were well in excess of US$100m.

The implication of this is that, should events in 2015 result in a disruption to Guyana's arrangements with Petrocaribe, the government would have to consider alternative sources of funds with which it could finance the current account deficit. This challenge would be made more complex if the disruption to Petrocaribe also curtailed growth in other countries in the region: one likely outcome of this would be that remittances from expatriates would shrink.

Unfortunately, developments over the last 18 months with the Amaila Falls Hydroelectric Project (AFHP) mean that the government may have difficulties in attracting significant new FDI in the event of problems with its arrangements with Petrocaribe. The AFHP involves the construction of a dam (and hydro plant) at the confluence of the Amaila and the Kuribrong rivers, about 270km of twin 230 kV high voltage transmission lines from the plant to Georgetown via Linden, along with access roads. According to the government, the AFHP “will generate reliable, affordable and clean energy for the people of Guyana for decades to come”. It will reduce the country's carbon footprint, dependence on imported hydrocarbons and vulnerability to disruptions in power supply. In September 2014, the IMF indicated that the AFHP would require investment of about 30% of GDP (or a little under US$900m). The deal has been structured as a public-private partnership (PPP) under which the state-owned power utility, Guyana Power Limited (GPL), will operate the AFHP for 20 years, taking all the power generated. GPL will move to take full ownership of the project after that time.

The development and construction risk of the project was to have been borne by a subsidiary of the multinational group Sithe Global. However, Sithe Global withdrew from the project on 11 August 2013. The main problem was that the People's National Congress (PNC), the main party in the opposition coalition, did not support the project. In Sithe Global's words, this had been “a necessary prerequisite [for the AFHP] receiving international development funds required to complete it”.

In discussions with the IMF in relation to the September 2014 Article IV report, the government suggested that, “ongoing reforms and investment in the electricity sector will ensure that the AFHP remains economically and financially viable”. The government also noted the possibility that Sithe Global, which has a long track record of building and developing power stations, might re-engage.

In practice, the proroguing of parliament by President Donald Ramotar on 10 November means that it is very unlikely that progress will be made in discussions with Sithe Global (or other interested parties such as China Development Bank and the Inter-American Development Bank [IDB]) prior to the elections in May. We expect that this most important project will remain in limbo for some months to come.

The trajectory of investment spending and imports over the coming years will be determined to a significant extent by whether the government can get the AFHP back on track, and on what terms. Possible loss of access to Petrocaribe loans and declining remittances from expatriate Guyanese will complicate matters. The coming year will be a challenging year for Guyana's policymakers, regardless of the outcome of the forthcoming elections.

Thursday, 29 January 2015 14:06

BELIZE: Homicide & other crime data dissected

Belizeans seem unsure about how to assess the public security situation over the past year. Some celebrate the fact that the country’s homicide rate per 100,000 inhabitants was the third-lowest since 2008 while others note that the number of homicide cases was 22% higher than in 2013 — a year when Belize was able to boast, inaccurately, that it was the only country in Central America to record a falling homicide rate. Statistics show steady escalation since 1993.

The Belize Police Department (BPD) has reported, on the strength of data up to 19 December, that the number of homicide cases was indeed up by 22% (to 121), which raised the homicide rate by four points to 34 per 100,000. Overall, the BPD reports, major crimes were up by 6% last year. This, however, results from declines in the number of robberies (by 0.7% to 294) and burglaries (by 7.8% to 821) offsetting rises in the number of cases of theft (by 18% to 1,192) and rape (by 62% to 42). It is, of course, the absolute numbers that make the difference, as variations between small numbers loom larger in percentage terms.

The police’s arrest rates have not kept up with the increases in certain categories of crime. Overall, arrests of suspects of major crimes were down by 15%; in the specific case of homicides, by 24% — corresponding to 28% of all homicide cases (a gross figure that reflects the absence of a case-by-case breakdown).

Following a chart compiled from BPD data by the newspaper Amandala, three phases of escalation of homicides can be discerned since 1993:

▪ In the first one, from 1993 to 2001, the number of cases averaged 49 a year (ranging in all but one year from 42 to 62), while the rates per 100,000 averaged 22 (ranging from 21 to 25 in eight of the nine years).

▪ In the second one, from 2002 to 2009, the annual number of cases averaged 87 (ranging in all but one year from 86 to 103) and the rates averaged 32 (ranging from 32 to 35 in all but one year).

▪ In the third phase, from 2010 to 2014, the number of cases averaged 124 (ranging from 121 to 145 in four of the five years) and the rates averaged 38 (ranging from 34 to 45 in all but one year).

Homicide in Belize 2005-2014

Number of  cases & rate per 100,000 inhabitants











































*To 19 December.


Source: Belize Police Department.

President Cristina Fernández, and other senior government officials, “covered up” the involvement of Iranians in the 1994 bombing of the headquarters of the Amia Jewish association in Buenos Aires, according to Alberto Nisman, the lead prosecutor in the investigation into the attack. In a document released on 14 January, Nisman demanded a freeze of Arg$200m (US$23m) of Fernández’s assets and the right to question her, foreign minister Héctor Timerman, and the head of the Kirchnerista youth group, Andrés Larroque. According to Nisman’s report, the government sought to “ease” Iran out of the Amia case in order to ensure good trade relations.

The attack on the Asociación Mutual Israelita Argentina headquarters was the deadliest bombing in Argentine history. Eighty-five people were killed and hundreds were injured. No one has been prosecuted over the attack, and the case has been marked by accusations of cover-ups and incompetence. In October 2006, Nisman and another prosecutor formally accused Hezbollah of directing the attack, with the backing of the Iranian government; a charge Teheran has repeatedly denied.

In January 2013, Iran and Argentina reached an agreement about creating a truth commission, the terms of which were seriously criticised by the US, Israel and the Argentine opposition, to investigate the bombing. In May 2014 the Argentine supreme court struck down the agreement to hold the commission and the investigation has been in stasis ever since.

According to Nisman’s 300-page document, President Fernández and her officials wished to exonerate leading Iranian officials suspected of involvement in order to “establish trade relations to mitigate Argentina’s severe energy crisis, through an exchange of oil for grains”. In his report, he claims that “the President diverted the investigation, abandoning years of a legitimate demand for justice and sought to free the accused Iranians, despite their proven ties with the attack. She decided to fabricate ‘the innocence of Iran’”. Nisman argues that Buenos Aires and Teheran set up a clandestine communications channel to facilitate this agreement. The evidence for his claim is principally based on phone intercepts.

The government has robustly denied the charges. Aníbal Fernández, the secretary to the presidency, called the accusations “ridiculous”. At a press conference on 14 January, he said, “filing a complaint against the President for using her constitutional powers is nonsense”. The potential presidential candidates linked to the ruling Frente para la Victoria (FPV) also dismissed the charges. Senior opposition politicians, however, have asked to meet Nisman to discuss the allegations. Sergio Massa, a leading opposition presidential candidate, said Nisman’s report showed the futility of signing a memorandum of understanding with a country “which supports terrorism”.

It is unclear how this will play out, politically. The accusations are likely to increase the level of paranoia within government circles. The President and her ministers have often spoken of “coup-mongering” within the opposition. Nisman’s report also sounds the death knell for the truth commission itself, although it was looking extremely unlikely to succeed in uncovering anything useful. A successful prosecution of any of the culprits is further away than ever.

The timing of the report is also interesting. Timerman is under fire at present over his decision to attend the solidarity rally in Paris on Sunday for the French satirical magazine Charlie Hebdo as a private citizen, rather than as a representative of the government. Opposition politicians have suggested he did so at the President’s request, to avoid antagonising Iran. Once again, the government has strongly denied this.

  • Argentine Jews respond

Representatives of Argentina’s 200,000-strong Jewish community responded cautiously to Alberto Nisman’s report. Julio Schlosser, the head of the Argentine-Jewish Association said the news was completely unexpected. “We are now waiting to see if we can meet Nisman to know in detail something we heard about through the media,” he said.

Published in Brazil & Southern Cone
Thursday, 18 December 2014 16:42

Obama sets bold new course on Cuba

Barack Obama has made history – and cast his legacy – by becoming the first US President to make a decisive move to end the last Cold War anachronism in the Americas. On 17 December President Obama used his executive powers to decree a major change in US-Cuba policy, paving the way for the restoration of diplomatic relations after 53 years. “These 50 years have shown that isolation has not worked,” Obama said. “It’s time for a new approach.”

The US Congress, which will shortly be controlled by the Republicans, will endeavour to block, or at the very least hold up, the executive measures decreed by President Obama (see below). Only Congress has the authority to lift the reviled trade embargo on the island. Congress can also refuse to ratify any ambassadorial appointment by Obama to head a planned new US embassy in Havana, although Obama would be able to appoint a more junior diplomat to run the post. But none of this can detract from the scale of Obama’s unprecedented gesture, which will have repercussions throughout the region. The reaction in Latin America was unanimously positive. Even Venezuela’s President Nicolás Maduro recognised Obama’s “brave gesture”, which he portrayed as a victory for Fidel Castro’s pertinacity, as the US also released three convicted Cuban spies.

The first Latin American pontiff, Pope Francis, has also cast his legacy in helping to secure the historic breakthrough, which was announced on his birthday. Cuba’s President Raúl Castro gave a brief televised address at the same time as Obama. After a long preamble which made up half of his address, he said, with classic understatement, that “we have been able to make headway in the solution of some topics of mutual interest for both nations”. Only towards the end did he mention that “We have also agreed to renew diplomatic relations”, before concluding that “We must learn the art of coexisting with our differences in a civilized manner”.

The well-known Cuban dissident blogger Yoaní Sánchez was critical of Obama’s move, fearing that the government in Havana would use it to bolster its legitimacy; and critics questioned the lack of any requirement for Castro to initiate a democratic opening or improve human rights in Cuba in exchange for Obama’s undertaking. In an editorial the conservative Washington Post went as far as to suggest that Obama was throwing Cuba a lifeline when the trade embargo, which has failed to achieve its objective in half a century, was close to achieving its aim: “Mr. Obama may claim that he has dismantled a 50-year-old failed policy; what he has really done is give a 50-year-old failed regime a new lease on life.”

The majority of Americans, however, including many Cuban-Americans in the key swing state of Florida, favour normalising relations, according to a nationwide poll carried out by the Atlantic Council earlier this year, and are likely to back Obama’s move, which follows fast on the heels of his earlier executive action on immigration policy which, it has now emerged, was also encouraged by Pope Francis.

The details of the story behind the announcement were as fascinating as the announcement itself, with a full 18 months of secret talks facilitated by Canada and the Vatican since mid 2013 and Pope Francis recently penning personal letters to Presidents Obama and Castro asking for the release on humanitarian grounds of the US government sub-contractor, Alan Gross, in jail in Havana since December 2009 on charges of acts against the Cuban State. The 68-year old Gross has arrived back in the US. Also released from jail were the three remaining members of the ‘Cuban Five’ - Gerardo Hernández, Antonio Guerrero and Ramón Labañino - Cuban intelligence agents arrested in Miami in 1998 and convicted of espionage (two had already been released following completion of their sentences). These were apparently ‘swapped’ for a key US intelligence agent who has been held in Cuba for two decades (thereby allowing the US to say that Gross was not part of any ‘exchange’).

The unknown agent, described by Castro as “a spy of Cuban origin who was working for [the US]”, was called a hero by Obama, who said he had been critical to US operations in past years. Brian P. Hale, director of public affairs for the Office of the Director of National Intelligence, released a statement saying that “Information provided by this person was instrumental in the identification and disruption of several Cuban intelligence operatives in the United States and ultimately led to a series of successful federal espionage prosecutions.” This included the “information that led to the identification and conviction of Defense Intelligence Agency (DIA) senior analyst Ana Belen Montes; former Department of State official Walter Kendall Myers and his spouse Gwendolyn Myers; and members of the Red Avispa network, or ‘Wasp Network,’ in Florida, which included members of the so-called ‘Cuban Five’.” Hale concluded that his “swap for three of the Cuban spies he helped put behind bars is fitting closure to this Cold War chapter of U.S.-Cuban relations”.

Cuba has also agreed to release 53 prisoners identified as political detainees by the US (Cuba denies having any political prisoners). Again, the identity of these dissidents is unknown. Cuba released 75 dissidents in 2010 and 2011 following mediation by the Vatican and the Spanish government. Spain’s foreign minister, José Manuel García-Margallo, who recently visited Havana, said he welcomed “a new stage, which puts an end to a disagreement that has lasted for 50 years”. He stressed, however, that the future in Cuba “can only be built on the basis of respect for democracy and human rights”.

Main measures

The big symbolic move by the US is a promise to restore an embassy in Havana, where former president Jimmy Carter (1977-1981) established an Interests Section in 1977. Obama also announced a range of new measures aimed at facilitating travel, telecommunications and commercial links. Obama did everything he could within the confines of his executive power to promote direct bilateral economic relations with Cuba, but only Congress can repeal the 1961 trade embargo on Cuba, which in 1996 was codified into US legislation under the Helms Burton Act, which explicitly states that the embargo cannot be lifted until the Castros leave power. Republicans will fight tooth and nail to ensure the letter of the law is enforced. It is worth noting that one of the fiercest critics of normalising ties with Cuba, Republican Senator Marco Rubio (Florida), will become chairman of the panel overseeing Western Hemisphere relations in January.

Congress also holds the key to allowing direct and unrestricted tourism to Cuba. But the flow of US visitors to Cuba should increase significantly after Obama made general the various categories of travel licences that previously required approval on a case-by-case basis. He also authorised direct financial transactions between the US and Cuba. Travellers to Cuba will be able to use US credit and debit cards. Obama also lifted the level of permitted remittances sent from US citizens to Cuban relatives from US$500 to US$2,000 per quarter, and travellers will be able to bring in US$3,000 in remittances. Republicans argue that this influx of US dollars will help bolster the Castro regime.

US Secretary of State John Kerry will review Cuba’s designation as a state sponsor of terrorism. Cuba has long petitioned for its removal from that list, which would also facilitate its access to sources of external financing. Finally, good news for US cigar lovers. Licensed US travellers to Cuba will be able to return with US$400 in Cuban goods, including tobacco and alcohol products worth less than US$100 combined. This effectively means that the longstanding ban on importing Cuban cigars is more or less at an end, albeit with limits.

  • Unbridled regional delight

Latin American leaders heralded the announcement as a major step forwards for regional integration. Brazil’s President Dilma Rousseff said it marked a “change in civilization”. Brazil, which has favoured quiet relationship-building with the Castro government in recent years, now stands to benefit from its significant investment in the Cuban port of Mariel development project. Mexico’s President Enrique Peña Nieto applauded the “decisive and historic step”, sentiments echoed by José Miguel Insulza, the secretary general of the Organization of American States (OAS).

It was noteworthy that in concluding his statement President Obama declared: “This April, we are prepared to have Cuba join the other nations of the hemisphere at the Summit of the Americas. But we will insist that civil society join us so that citizens, not just leaders, shape our future.” Panama is hosting the OAS Summit of the Americas on 11 and 12 April, and had confirmed on 12 December that Cuba would attend for the first time.

A potential loser in all of this could be Venezuela’s President Maduro, who may now find himself a little isolated in the region in his vitriolic anti-US rhetoric. His allies Rafael Correa of Ecuador and Evo Morales of Bolivia have been more measured in their rhetoric latterly, suggestive of tentative efforts to rebuild ties with Washington. Diplomatic efforts by the Vatican earlier this year (and backed by the US) to foster internal dialogue in bitterly-polarised Venezuela failed, but are said to be ongoing behind the scenes. End box

  • Groundbreaking Farc gesture

On the very same day as the momentous US-Cuba announcement, there was another significant development in Havana in the bid to bring to a close the region’s other longstanding intractable conflict. ‘Iván Márquez’ (Luciano Marín Arango), head of the negotiating team of the Fuerzas Armadas Revolucionarias de Colombia (Farc), read a statement declaring an indefinite unilateral ceasefire, which he said “should be transformed into an armistice”, as the Colombian peace process enters the home straight.

The Farc said the ceasefire would begin on 20 December and, unlike previous unilateral ceasefires declared by the guerrilla group (during presidential elections and Christmas holiday periods), this one has no pre-established end point. The Farc attached one major condition, however: the ceasefire will end if the guerrillas come under attack from the Colombian armed forces. This is an attempt to force President Juan Manuel Santos to accept the bilateral ceasefire he has resisted since the peace process began on the grounds that the Farc would merely misuse it to regroup militarily.

Santos did recently accept that while a bilateral ceasefire was out of the question, “this doesn’t mean that in the course of the talks the first steps towards de-escalating the conflict cannot be taken.” He might just be tempted sooner rather than later to make a bold move on this front himself. After Obama’s historic announcement, Santos tweeted that the US policy change on Cuba “will change the history of the hemisphere”, and he too wants to cement his legacy by being the President that delivers peace with the Farc: “Cuba and the US are an example of however large the differences which divide us, with dialogue and perseverance it is possible to resolve them.”

  • Excerpts from President Obama’s address

“To those who oppose the steps I’m announcing today, let me say that I respect your passion and share your commitment to liberty and democracy. The question is how we uphold that commitment. I do not believe we can keep doing the same thing for over five decades and expect a different result. Moreover, it does not serve America’s interests, or the Cuban people, to try to push Cuba toward collapse.....Change is hard – in our own lives, and in the lives of nations. And change is even harder when we carry the heavy weight of history on our shoulders. But today we are making these changes because it is the right thing to do. Today, America chooses to cut loose the shackles of the past so as to reach for a better future – for the Cuban people, for the American people, for our entire hemisphere…..Todos Somos Americanos”.


  • US companies line up

Despite the anticipated congressional moves to block or water down implementation of the new policy changes, potentially by holding up new funding for the Department of Homeland Security (for which funding recently expired), US companies clearly stand to benefit moving forward. Within hours of the White House announcement the financial newswire Bloomberg reported that the US$45m Herzfeld Caribbean Basin Fund, comprising companies that stand to benefit from the removal of US trade restrictions with Cuba, rose 29%, the most since April 2009. The fund includes the airline Copa and Coca-Cola bottler Femsa, among others.

Published in Leader
Wednesday, 17 December 2014 14:44

Bolivia and Peru at odds over quinoa

In November some 500 Bolivian quinoa producers from Oruro and Potosí – Bolivia’s two main quinoa growing regions – held demos outside the presidential palace demanding that the government led by President Evo Morales stem an influx of cheap non-organic Peruvian quinoa into the country. This has become a major concern for local quinoa producers in Bolivia as not only is it driving down prices, but it also risks undermining the reputation of Bolivian organic quinoa.

Led by organisations including the Oruro-based Asociación de Productores de Quinua Salinas, the protesters marched on the capital on 17 November, coinciding with a two-day national congress of quinoa producers starting on the same day. The producers’ big complaint is that an influx of quinoa from Peru is affecting local prices. Peruvian quinoa is cheaper because Peruvian farmers produce more, thanks largely to the use of insecticides and chemical fertilizers, say Bolivian growers. For example, a report published on 18 November by the Bolivian daily La Razón cited a quinoa producer from Oruro who complained that prices at a local market had dropped from B$1,800 (US$260) per quintal (100kg bag) to B$1,200 (US$174), although the report did not specify over what time frame this had happened. In the same article, Bolivia’s deputy minister for rural development & land, Víctor Hugo Vásquez, said that previously (in 2013), prices had been as high as B$2,400 (US$349) per quintal.

Amid evidence of growing tensions (see sidebar), competition remains fierce between Bolivia and Peru, which was the world’s leading quinoa producer from 1997 to 2011 before being overtaken by Bolivia. According to a 23 October report by Bolivia's state mouthpiece, Cambio, the volume of quinoa produced in Bolivia in 2013 “exceeded 61,000 tonnes[t]”, up 79% in volume terms since 2009, of which 57% was exported. A report by Peru’s national statistics institute (INEI) put Peru’s quinoa production at 51,000t in 2013, with exports of 18,300t. However, according to a La Razón report re-published on the World Food Organisation (FAO) website on 8 October last, in the first seven months of this year Bolivia exported 18,130t of quinoa, while Peru exported 19,840t.

  • Border violence

Indicative of the tensions caused by the influx of cheap Peruvian quinoa onto the Bolivian market, on 7 November Bolivian authorities seized two Peruvian trucks carrying 23 tonnes (t) of quinoa at a military border checkpoint on the border town of Guaqui and set light to the contents in front of local media.

Published in Postscript
Tuesday, 16 December 2014 13:55

Executive summary

The ‘militarisation’ of policing has become a matter of concern in much of Latin America, where the recourse to the military to deal with internal security matters has been spreading. Fears have been voiced by some about the potential for abuse and violation of human rights, by others about its adverse effect on efforts to reform policing — so far not counterbalanced by plausible evidence of positive effects.

Recourse to the military is usually justified in terms of the inadequacy of existing police capabilities to deal with ‘new’ internal security threats of a previously unimagined magnitude that have resulted in much of Latin America having become the most dangerous part of the world (on account, mainly, of its high homicide rates).

These threats are mostly associated with ‘organised crime’, by which what is usually meant is the large drug-trafficking ‘cartels’ and their subordinate gangs of ‘enforcers’ — in some countries made extensive to the street gangs known as maras in Central America and similar gangs elsewhere — armed with heavy firearms and in some cases trained in military skills.

In most countries there have long been constitutional provisions for calling on the military to act in support of the police in special circumstances, such as insurgencies or large-scale breakdown of law and order. These provisions had safeguards such as the requirement that a state of emergency or ‘exception’, or in extreme cases of siege, should be declared, with explicit limits on the duration and scope of the military interventions and the powers of the legislatures to end such actions.

Executive branches have often chafed at these constraints and in many cases have succeeded in getting them eased or removed, on occasion by reforming or amending the constitution. The result of these efforts can be seen in the constellation of models adopted by countries across the region.

Exemplars are the 11 countries reviewed in this report, a range which goes from great dependence on the military in the anticrime efforts, passing through longlasting reliance on the military against low-scale insurgencies, to the almost total militarisation of public security functions and as-yet unclear development of recently acquired powers by the executive:

▪ Four countries (Mexico, El Salvador, Guatemala and Honduras) have become heavily reliant on the deployment of military forces in their efforts to curb violent crime.

▪ Two (Peru and Paraguay) have military forces acting alongside the police against small groups of insurgents active in parts of their territories. The latter has recently amended its legislation to remove the need to declare a state of emergency before sending in the troops.

▪ One (Brazil) gives the executive powers to deploy the military on ‘guarantee of law and order’ missions, which have included the occupation of favelas controlled by drug gangs, but most public security actions are entrusted to the paramilitary state-level military police forces.

▪ Two (Chile and Argentina) keep their military out of internal security actions but rely on paramilitary police forces, the former to deal with two separate armed threats as well as organised crime, the latter facing only challenges on the organised crime front.

▪ One (Ecuador) has recently amended its legislation to remove the constraint on the President’s power to deploy the military to deal with internal security threats.

▪ One (Venezuela) has entrusted public security to a national guard that has been elevated from paramilitary force to become the fourth service of the national armed forces.

In a number of cases the potential for abuses by the military in policing missions has become a reality. Most notable are the complaints about rights abuses against the Mexican armed forces (and the strong suspicions that these may be far more numerous than has so far emerged). Accusations of excessive use of force by Venezuela’s national guard have been documented in its repression of this year’s wave of protests, and they are frequent in Central America’s Northern Triangle.

It must be noted that similar charges have been brought against the paramilitary police forces such as Chile’s Carabineros, Argentina’s Gendarmería and regular police forces across the region.

Another line of criticism of the drift towards ‘militarisation’ is that it conspires against the reform of regular police forces, aided by moves such as Mexico’s drive to subject municipal police forces to state-level single commands, which are inimical to fostering community crime prevention and policing at local level, an approach supported by international organisations as a better solution to crime.

So far this argument has been hard to support with solid evidence. A rare, perhaps unique, case of such evidence was a recent three-year ‘impact evaluation’ commissioned by USAID for its programmes in Central America, conducted by Vanderbilt University’s Latin American Public Opinion Project (Lapop). On the strength of surveys in communities of 13 Central American municipalities it was able to conclude that the outcomes in the treatment communities improved more (or declined less) than they would have if USAID’s programmes had not been administered.

One item absent from the ‘evaluation’ was any mention of the interviewee’s assessments of the role played by the military, which is prominent in three of the four countries reviewed. One worrying ‘qualitative’ finding was that police officers consistently reported that it was no longer possible for gang members to dissociate themselves from their gangs, even after becoming adults in regular employment.

Published in Leader
Friday, 28 November 2014 11:49

The end of the OPEC era

Development: As widely trailed in advance, Saudi Arabia exercised its muscle at the Organization of Petroleum Exporting Countries (Opec) on 27 November, rejecting any cut in the group’s 30m barrel per day (b/d) output target.

Significance: For Latin American oil producers the news is uniformly bad, including for the likes of Mexico, which is gearing up for the first round of concessions under its landmark new energy reform. With Venezuela and Ecuador (both Opec members), Colombia and Brazil also set to be hit by lower oil export income in 2015, the already-subdued economic outlook for the Southern Cone region could get cloudier. Venezuela's preferential oil customers in Central America and the Caribbean will also be nervous about reduced supplies and tighter payment terms. On the upside, for regional oil importers not reliant on Petrocaribe, lower prices will of major assistance. Lower oil prices also mean a stronger US dollar, however, by and large making other categories of regional imports more expensive and potentially reducing investor interest in the region.

  • By far the worst hit by the Opec decision is Venezuela, and the country’s foreign minister (and decade-long energy minister), Rafael Ramírez, reportedly flounced out of the Opec meeting in Vienna yesterday, refusing press questions. Venezuela’s President Nicolás Maduro last night said that Venezuela would defend oil at US$100/b, but that's wishful thinking. The president of the state oil company Petróleos de Venezuela (Pdvsa), Eulogio del Pino, admitted to tough times ahead, but insisted that Pdvsa was prepared for “the worst scenario”.
  • The figures say it all: Venezuela is dependent on oil sales for 96% of export earnings and about 40% of fiscal revenues. Its fiscal deficit is running at anywhere between 7% and 15% of GDP. International reserves were at US$22.2bn on 27 November, of which only about a third are liquid, meaning that import cover runs to days, not months. Foreign exchange debts to internal suppliers are in the region of US$10bn, at least. The country has US$17.6bn in debt service due on bonds in the next three years. Oil production is stagnant at about 2.9m b/d. Analysts calculate that oil export revenues will now drop by about US$15bn in 2015, from an estimated US$75bn in 2014, a fall of 25%. Although the Maduro administration continues to deny it, the fastest way to rectify its fiscal dilemma is to devalue, followed by cuts to the country’s US$12bn-US$15bn annual fuel price subsidy – but with legislative elections due late next year, and hyperinflation entrenched already, that will be tricky.
  • Dollarised Ecuador is in a similar, but less critical, situation. Its 2015 budget is based on an average oil price of US$79.7/b and projects a fiscal deficit of about US$5.4bn (5% of GDP). Oil contributes up to 40% of budget income. Total 2015 financing needs, including debt amortisations of US$3.6bn, are put at US$8.8bn, although real financing needs will be upwards of US$10bn. The left-wing government led by President Rafael Correa will increase borrowing to sustain its high public spending, but it expects the current fiscal squeeze to be temporary, until major new oil reserves come on stream from 2016. Overall public debt remains low at less than 25% of GDP, but 2015 and 2016 nonetheless promise to be tricky years. Fitch Ratings, for example, calculates that because of accumulated fiscal slippage from last year, Ecuador’s 2014 fiscal breakeven oil price is over US$140/b, compared to US$115/b for Venezuela.
  • In Mexico, where oil income accounts for about a third of budget revenues, the CFO of the state oil company Petróleos Mexicanos (Pemex), Mario Beauregard, recently told our sister publication, Latin American Economy & Business, that he was “relaxed” about lower oil prices. Mexico recently completed its 2015 oil hedge, insuring 228m export barrels at US$76.4/b for next year. Energy Minister Joaquin Coldwell appears confident that investor interest in the upcoming oil concessions will not be affected. The cost of production of Mexican deepwater oil is in a range of US$25/b-US$60/b, while Mexican conventional oil costs around US$20/b. So even in a bearish oil price scenario, while development might be slower; it will still be profitable to produce oil across a large part of Mexico’s blocks.
  • For Brazil’s deepwater oil reserves, which are more expensive to reach, some estimates put the breakeven price at up to US$120/b, although the state oil company, Petrobras, puts it at about US$40-US$50/b.  Lower international oil prices will allow Petrobras to reduce the losses it has had to incur between global and government-controlled domestic fuel prices, but the net effect from a sustained rout in global prices will eventually pinch, at a time when it is investing a massive US$227bn in the deepwater sector to 2018; and with the company also hit by a major corruption scandal, coming months will be rough.
  • Colombia depends on oil for about 14% of budget income, but oil exports account for a significant share (about 30%) of total exports, making them critical to the balance of payments position. On some estimates, the country stands to lose US$420m for every US$1 drop in the price of oil, and on that basis has lost US$10bn already in income since July 2014. The country’s efforts to bring in additional investment to the oil sector might be trickier given the much softer price outlook.

Looking Ahead: Finally, Chevron’s plans to develop Argentina’s vast Vaca Muerta shale gas reserves could face re-examination in light of the falling oil prices.

Published in Main Briefing
Thursday, 13 November 2014 10:34

POLITICS & SECURITY: Narco politics

The 16 October murder of an investigative journalist and his assistant by suspected contract killers working for a local mayor has prompted serious concern about just how far organised criminal groups may have infiltrated authorities in Paraguay. With a string of national deputies and even a supreme court (CSJ) judge accused by local media of links to organised crime and drug trafficking, narco politics has shot up the agenda, with pressure on the government led by President Horacio Cartes to act.

Official corruption has long been a problem in Paraguay. Long the largest marijuana producer in South America, Paraguay now is also a transit - and a producer - country for refined narcotics including cocaine and synthetic drugs [RBS-14-10]. However, despite suspicions, concrete evidence of direct involvement by the local authorities has been scant. This has changed somewhat following the murder of journalist Pablo Medina and his young assistant, Antonia Maribel Almada.

Medina, employed as a correspondent for the country’s leading national daily, ABC Color, regularly wrote about drug trafficking. He was killed on 16 October near the town of Curuguaty, in the eastern department of Canindeyú, which borders Brazil. Medina was attacked as he drove home from a field assignment. His car was stopped by another vehicle and he was shot five times from point-blank range by two men. Almada (19), who along with her sister Juana Ruth was accompanying Medina, was in the passenger seat and was killed also. Juana Ruth survived by hiding in the backseat.

A shocking murder

Medina’s murder shocked the country. He was a well-respected journalist who for years had reported on the narco-trafficking underworld that operates along Paraguay’s long land border with Brazil. His brother, also a journalist, was killed in 2001 for his efforts to expose local drug trafficking kingpins (see sidebar). The local press immediately speculated that Medina too had been killed because of his work. ABC Color revealed that Medina had been working on a piece exposing ties between drug trafficking gangs led by Brazilian nationals and local government officials, and had received numerous death threats. The daily accused Vilmar ‘Neneco’ Acosta Marques, the mayor of the border town of Ypejhú, Canindeyú, of masterminding the crime.

In the last decade, there has been a marked increase in the number of marihuana and cocaine seizures in Brazil originating from Canindeyú, home to an estimated 6,000 hectares of marijuana plantations. Acosta previously had been accused of links to organised criminal activity in the area. In 2010, he was implicated in the murder of two people whose bodies were found buried on his family ranch. Acosta denied any involvement and the case was dismissed by the courts.

The fact that Acosta hails from the ruling Asociación Nacional Republicana-Partido Colorado (ANR-PC) prompted press speculation that he had sufficiently strong political connections to ensure that he would be shielded by the authorities. Yet Medina’s murder was condemned by President Cartes himself. Describing it as “not just an affront to peace in our country, but also a violation of human rights and an attack on freedom of expression”, Cartes vowed that that the authorities would find and punish the culprits.

Opening a can of worms

Under such pressure, the authorities moved quickly. Three suspected drug traffickers were arrested almost immediately. The attorney general’s office then confirmed that it was working on the hypothesis that Medina’s murder was connected to narco-trafficking. After Juana Ruth identified Acosta’s brother, Wilson Acosta Marques, as one of the material authors (the other is believed to be Flavio Acosta Rivero, nephew to Vilmar and Wilson), prosecutors declared the mayor and his brother the prime suspects. It then emerged that Wilson was wanted, both in Paraguay and Brazil, on previous criminal charges, including the illegal possession of firearms and murder.

When the authorities went looking for the Acostas, they could not be found (the authorities did find three tonnes of marijuana on the family ranch). Arrest warrants were issued for the brothers on 19 October. Local press reports suggest that Vilmar, who was born across the border from Ypejhú in the Brazilian town of Paranhos and holds dual Brazilian-Paraguayan nationality, may be hiding in Brazil with his brother and nephew. Incidentally, Vilmar’s dual nationality made him ineligible to hold public office in Paraguay. This issue was raised during the ANR-PC primaries ahead of the 2010 municipal elections, when Vilmar’s candidacy was challenged by a rival, Julián Núñez Benítez. But Vilmar got a favourable ruling from the national electoral tribunal (TSJE). Núñez Benítez (killed by unidentified gunmen in August) took his complaint to the CSJ, which has yet to issue a resolution.

With the official investigations seeming to all but confirm Vilmar’s involvement in drug trafficking, and in Medina’s murder, attention turned to his political contacts. ABC Color singled out the ANR-PC national deputy for Canindeyú, María Cristina Villalba, as Vilmar’s political patron and accused her of protecting the fugitive (and now deposed) mayor, and of being involved in drug trafficking herself. Villalba, a former Canindeyú governor (2008-2013), where she is known as ‘La Reina’, is close to President Cartes [RBS-13-11]. She vehemently rejected the accusations, insisting that she had no special relationship with Vilmar. But Villalba also rejected calls, notably been backed by the ANR-PC party leadership, for her to renounce her congressional immunity and collaborate fully with the official investigations.

More accusations

With the accusations against Villalba still ringing, on 22 October Senator Roberto Acevedo, the head of the senate’s anti-drugs trafficking commission, said that besides Villalba, various other national legislators were suspected of having links to drug trafficking groups. Acevedo, of the main opposition Partido Liberal Radical Auténtico (PLRA), who in the past has been accused of narco links himself, said that the national anti-drugs agency (Senad) had evidence of “five or six senators, from various parties” linked to known drug traffickers, with an “even higher” number of national deputies under suspicion. However, Acevedo said, these officials had not been investigated because of their “political power”.

Acevedo’s remarks prompted politicians from across the spectrum to demand that he name names. He refused, maintaining that this was up to the Senad and national anti-drugs prosecutors. The congress reacted by creating a bicameral commission tasked with investigating Medina’s murder and the extent to which organised crime has infiltrated national authorities. President Cartes responded by calling a meeting with representatives of the legislature and the judiciary on 3 November to discuss ways to combat the influence of narco-trafficking.

Since then, ABC Color has also accused a CSJ magistrate, Víctor Núñez, of protecting Vilmar, after identifying Núñez as one of the judges that threw out the case brought against Vilmar in 2010. Núñez has denied these allegations. But the ANR-PC and opposition legislators have floated the possibility of subjecting Núñez and other CSJ and TSJE magistrates to an impeachment process for their suspected links to organised crime, in what looks like the start of a major purge of government institutions.

  • Salvador Medina

Like his brother, Salvador Medina also dedicated his career to denouncing the links between the authorities and drug traffickers in the departments of Canindeyú and San Pedro. Salvador was shot dead in January 2001, as he left a radio station in Capiibary, San Pedro, where he was working. The material author of the crime, Milciades Maylin, was given a 25-year prison sentence, but the suspected intellectual actors have never been brought to justice. After Salvador’s murder, Pablo and his family received death threats and were assigned police protection, which was terminated just a few months ago.

  • A quarter of judges under suspicion

On 9 November the president of Paraguay’s magistrates’ council, Enrique Riera Escudero, admitted that up to a quarter of all judges in the country could be corrupt. Speaking to journalists following the Medina murder, Riera, who was appointed last year and tasked with vetting the judiciary, stated: “Since I have been in the post, there are around 25% of judges who should have been sanctioned for corruption”. Riera said that many remain in their posts thanks to their political connections. “We need to clean up the judiciary”, Riera said, adding that “drug trafficking is infecting all the powers of State; judges, legislators and officials are all involved”.

Published in Paraguay
Monday, 03 November 2014 17:43

Prosperity Index 2014

LatinNews is excited to announce a new partnership with the Legatum Institute, a London-based public-policy think-tank that produces the highly regarded Prosperity Index, the 2014 issue of which launches this week.

Subscribers to LatinNews will enjoy strong added-value from this collaboration, combining our deep understanding of Latin America and the Caribbean, gained over nearly 50 years of engagement in the region, with the broad range of socio-economic data provided by the Legatum Institute. Watch for our upcoming special focus in the next Latin American Economy & Business report, in which we use the latest Prosperity Index data to examine whether the recent gains in living standards in many Latin American countries are sustainable following the end of the recent commodity boom.

The Legatum Institute’s Prosperity Index uses rigorous research and in‐depth analysis to rank countries based on their performance in eight sub‐indices—Economy, Entrepreneurship & Opportunity, Governance, Education, Personal Freedom, Health, Safety & Security and Social Capital.

The 2014 Index reveals that globally, Norway is the most prosperous country for the sixth year in a row, retaining its place thanks to its high ranking in the Economy (3rd), Health (5th), Education (5th), Governance (7th), and Personal Freedom (2nd) sub-indices. The US ranks 10th overall, and the UK 13th, the most prosperous of all the leading major European Union nations, coming ahead of Germany (14th), France (21st), Spain (26th) and Italy (37th).

Among Latin American and Caribbean countries, Uruguay, Chile and Costa Rica are ranked the most prosperous at 30th, 33rd and 34th respectively. At the other end of the scale sit Venezuela, Honduras and Haiti, at 100th, 105th and 135th. Raw changes in rank from year to year must be viewed in context. As more countries are added to the Index (32 were added in 2012), some countries slip down a place or two as the table grows, but the relative annual ranking is a very useful metric in itself, and the addition of new countries does not account for big falls and gains. Venezuela, for example, has slipped 22 places since 2013, while other countries in the same portion of the table have moved about far less (Haiti, the worst performer in Latin America, has dropped just one place since last year).

Interestingly, the 2014 Index ranks Argentina (relatively) highly, at 46th globally. Despite performing poorly in the Economy (54th), Entrepreneurship & Opportunity (55th) and Social Capital (53rd) indices, and extremely poorly in terms of Governance (97th), it is performing better in Education (44th), Health (42nd) and Safety & Security (47th), and does well in terms of Personal Freedom (30th).

This puts Argentina ahead of the region’s two largest economic actors, Brazil and Mexico, which achieve global rankings of 49thand 64th respectively. Of course the data, while useful, only tell half the story. Without the contextual understanding that LatinNews provides, the raw numbers can be misleading. Key findings in the Index that might indicate an important trend such as an economic improvement, for example Ecuador’s Economy indicator, which has gone from 55th in 2012, to 54th in 2013, to 47th this year, do not explain the drivers of this change, nor the potential fragility of the country’s growth. Similarly, the data show that Bolivia’s Economy indicator has travelled the other way, slipping from 44th to 46th to 51st over the same period. Again, this raises questions for further discussion, and LatinNews is perfectly positioned to answer them.

LatinNews has been an acknowledged authority on Latin America and the Caribbean since 1967, and our new partnership with the Legatum Institute supplies us with an extra tool to help us provide our subscribers across government, business and academia with the crucial and timely analysis they need.

Latin America: Country Rankings

From left (best) to right (worst)

[Hover cursor over image for full size graph]

Latam Ranking

Source: Own presentation of Prosperity Index 2014 data

Published in Special Announcement
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