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At the end of April, the Panama Canal authority (ACP) announced that the Panama Canal had begun the transition to become carbon neutral by 2030. With the Canal’s future already called into question over water shortage concerns [SSR-20-07], the announcement comes amid other claims by the government led by President Laurentino Cortizo that it is taking its commitment to tackling climate change seriously.

The ACP made the announcement in a 28 April report which highlights existing achievements in reducing carbon emissions. It notes that in 2020 the Panama Canal contributed to a reduction of over 13m tonnes of C02 equivalent emissions by offering a shorter route for ships compared with the most likely alternative routes. The ACP report also highlights the importance of making its own operation carbon neutral by 2030. It points out the Panama Canal first began tracking its carbon footprint in 2013 while its plans to become carbon neutral were bolstered in 2017 with the launch of its Emissions Calculator, a tool enabling shipping lines to measure their greenhouse gas (GHG) emissions per route and strengthens the Canal’s analysis of the emissions produced by its own day-to-day operations.

As regards other efforts to begin the transition to “a greener Canal”, the ACP highlights the acquisition of four electric vehicles as part of a pilot programme that will “collect data to inform the migration of the Canal’s entire fleet away from fossil fuel dependence”. It also underlines that its strategic decarbonisation plan includes tugboats and launches that use alternative fuels; the substitution of electricity production processes in favour of photovoltaic plants; the use of hydraulic energy; and ensuring that all facilities and infrastructure projects are environmentally responsible and sustainable.  

The ACP report comes six days after President Cortizo sanctioned a law establishing Panama’s meteorological and hydrological institute (IMHP), an autonomous entity which he said would enable Panama to begin a “new path towards climate resilience”. Cortizo said the IMHP would enable Panama to generate warnings, weather predictions, and provide meteorological and hydrological information regarding the state and behaviour of the atmosphere and all hydro resources. The president said the new institute would enable Panama to meet international environmental obligations contained in treaties such as the Escazú Agreement, the first regional environmental treaty in Latin America and the Caribbean and the world’s first agreement with provisions on human rights defenders in environmental matters, which took effect on 22 April. So far, only Panama and Nicaragua in Central America have ratified the treaty.

Other actions

The ACP also highlighted in its report that on 22 April the Panama Canal joined the declaration of the ‘50 First Carbon-Neutral Organizations’, an initiative led by Panama’s environment ministry to integrate national efforts to accelerate measurable climate actions. As part of the new national initiative, the Canal will develop an annual greenhouse gas inventory, as well as an action plan with measurable targets to reduce emissions.

Deforestation

In a video interview with Thomson Reuters Foundation, the United Kingdom-based charitable arm of Canadian news conglomerate Thomson Reuters, on 20 April, Environment Minister Milciades Concepción said deforestation rates in Panama are set to show a decline due to extra efforts to stop the illegal logging of forests largely driven by agriculture expansion. Concepción told the Thomson Reuters Foundation that Panama has “one of the highest levels of forest cover in Central America, with rainforests on about 65% of its land, as well as mangrove and cloud forest ecosystems”. Yet, increased farming and cattle ranching, along with “abuse” of logging permits have caused a rise in deforestation rates in recent years. According to the Thomson Reuters Foundation article, Panama lost nearly 2% of its forest cover from 2012 to 2019 - equivalent to around 8,000 hectares a year. The same source also notes that as part of a 2014 agreement between the government and private sector as well as its national climate action plan, Panama aims to reforest 1m hectares by 2050.

MEXICO | German head of state visits Mexico. Germany’s head of state, President Frank-Walter Steinmeier, visited Mexico on 20 September to meet Mexico’s President Andrés Manuel López Obrador, along with other high-level officials and representatives from the public and private sectors of both countries.

López Obrador said the pair had discussed the economy, trade, human rights, justice, and peace and that the purpose of the meeting was to strengthen commercial ties with Germany. Speaking to the press following the meeting, Steinmeier said López Obrador had “offered to step up cooperation on liquefied natural gas”, without adding more details.

MEXICO | GDP recovers amid challenges. In a new report, Mexico’s central bank Banco de México (Banxico) stated that Mexico’s GDP grew by 0.92% in the second quarter of 2022 compared with the preceding quarter, in seasonally adjusted terms. The report put year-on-year growth with seasonally adjusted figures at 1.9%.

However, Banxico flagged challenges for further economic growth, underscoring the possible slowdown of the US economy and “uncertainty generated by controversies” within the US-Mexico-Canada Agreement (USMCA) likely in reference to the dispute settlement consultations requested by the US and Canada over Mexico’s energy policies.

The relentless killing of social leaders and human rights defenders has long marked Colombia as one of the most dangerous countries in the world for frontline environmental and social campaigners. Since 2017, targeted assassinations have also threatened the stability of the peace agreement with the Fuerzas Armadas Revolucionarias de Colombia (Farc) guerrilla group, with demobilised Farc guerrillas also being slain in significant numbers as they attempt to reintegrate into civilian life. On 6 September, the government led by President Gustavo Petro unveiled a new scheme aimed at stemming this violence, dubbed Puestos de Mando Unificados por la Vida (PMUVs).

According to a tally kept by the Colombian NGO Indepaz, as of 21 October 147 social leaders and human rights defenders had been assassinated in 2022. Indigenous and civic activists were the most featured on Indepaz’s list, but those targeted came from a wide range of pressure groups including trade unionists, LGBT and black rights activists, and those campaigning for land redistribution. Over the same period, Indepaz tallied the murders of 35 former Farc guerrillas who had signed the 2016 peace accords. In its latest report, published 27 September, the United Nations Verification Mission in Colombia noted that security threats faced by ex-guerrillas “continue to jeopardise reintegration” and emphasised that “the long-term success of the [peace] process is contingent on former combatants’ security guarantees”.

The killing of social leaders also hampers the fulfilment of the accords by eliminating activists who have sought to organise the implementation of key components of the peace agreement – for example, the rollout of voluntary coca crop substitution programmes, and maintaining pressure for land redistribution. This sees them challenge powerful vested interests in regions that may have only seen an extremely limited state presence in recent decades. With their assassination, the influence of illegal armed groups, drug traffickers, and businesses or politicians linked to these becomes greater, and communities are intimidated into silence.

Petro’s government, which took office on 7 August promising to significantly accelerate the implementation of the peace agreement, has moved swiftly to try and address the threats faced by activists and demobilised guerrillas. On 6 September, a joint statement from the defence and interior ministries announced details of the PMUV scheme, describing it as an “inter-institutional mechanism to attend to the public order situation in the regions”. The PMUVs, which are comprised of officials from the municipal, departmental, and national governments, members of the security forces, and congressional representatives, are intended to form a rapid response system to threats received by social leaders, campaigners, and former Farc guerrillas. As of 21 October, 20 PMUVs had been established, according to Interior Minister Alfonso Prada, while a further 45 PMUVs were scheduled to be launched.

Whilst it is too early to say whether the PMUV rollout will have a decisive impact on assassinations, Indepaz did note that the eight social leaders killed in September was the lowest figure recorded in 2022, compared to the murder of at least 13 per month in the first eight months of the year. Colombia’s peace commissioner, Danilo Rueda, attributed this fall to armed groups’ desire to enter peace talks with the Petro administration. The outcome of those talks, rather than the PMUVs, is likely to have the most decisive impact on the safety of activists and demobilised rebels.

Petro meets Maduro

On 1 November, Colombia’s President Gustavo Petro and Venezuela’s President Nicolás Maduro met in Venezuela’s capital, Caracas, where they pledged to end years of bad blood between the two nations. The two presidents signed an 11-point joint statement in which they pledged to “move firmly and with conviction towards unity and peace between our two nations”. They agreed to security cooperation along the length of the shared border; the improvement of binational transport routes; and dialogue aimed at establishing “complementarity” in energy matters, among other, vaguer pledges of cooperation. Venezuela’s opposition leader, Juan Guaidó, had called on Petro not to “normalise a dictatorship” and instead join “demands for free and fair elections in Venezuela”. He tweeted that Petro’s decision “to visit the dictator Maduro and call him ‘president’ is an action that could dangerously normalise human rights violations”.

Scheduled blackouts took place across Ecuador this week amid an ongoing energy crisis caused by low water levels at hydroelectric power stations. The government of President Daniel Noboa says that water levels in power stations are at their lowest levels since the 1960s, necessitating overnight power cuts to reduce strain on the electricity grid. In the event many blackouts extended beyond night-time. Meanwhile, drought conditions have allowed fires to spread, one of which has forced some residents to flee their homes in Quito.

A government statement announcing the blackout measures highlighted the “lowest water levels in 61 years” at hydroelectric power stations. The government imposed a curfew during the blackouts, amid fears that the darkness could be exploited by criminal groups.

The four-day ration plan when it came into effect on 23 September lasted for up to 14 hours a day, affecting homes, businesses, and industry. President Noboa went ahead with his visit to New York for the United Nations General Assembly (UNGA), after acknowledging that the situation was “chaotic”. The energy and environment ministers were left firefighting at home. Showing graphs to explain the severity of the situation, the energy minister, Antonio Gonçalves, said that “records are being broken, unfortunately the wrong kind”. The Mazar reservoir, for instance, which feeds three hydroelectric power stations (Paute, Molino, and Sopladora) that generate a total of 1,757MW of power, has reached critical levels and power generation was suspended.

Gonçalves said the government was working to try and shake up Ecuador’s energy matrix, as the country relies on hydroelectric energy for 90% of its power demand, particularly the Coca Codo Sinclair, the largest dam in the country, producing 1,500MW of power, located in the northern province of Napo. The government has said it will make use of permanent power generators on land, import natural gas, and promote energy generation in the private sector, inter alia.

Gonçalves acknowledged that for now the government would need to look at the figures on a weekly basis to decide on what to do as it was dependent on rain and “only God knows” when that might come. The lack of rain has led to water rationing being imposed in Quito this week, and it has turned forests into a tinder box. Various fires broke out in the mountainous forests surrounding Quito this week, with dense smoke hanging over the capital. The mayor of Quito, Pabel Muñoz, advised residents to stay indoors, but one fire which broke out in the Guápulo neighbourhood on 24 September has reached the Parque Metropolitano, the large urban park in the city, forcing him to declare a state of emergency a day later as some inhabitants fled their homes.

The government has previously implemented rolling blackouts, in April, when it declared a state of emergency in the energy sector [WR-24-15], and prior to that, at the end of last year. It has tried to pin the blame on climate change and short-sighted energy policies by previous governments. But its management of the present crisis will have political repercussions with elections due early in 2025. Noboa’s decision to go ahead with his trip to the US was heavily criticised and he decided to cut it short on 24 September, just before his scheduled address to the UNGA, as the fires raged in and around Quito. Noboa said authorities were investigating whether the fires were started deliberately, adding that, if so, culprits would be charged with terrorism offences.

Boosting energy supplies

In an effort to confront the energy deficit in the short-term, the government hired a floating power barge from the Turkish company Karpowership on 17 September. The barge, Emre Bey, is expected to provide 100MW to the country’s power system.

URUGUAY | Big loan approved. The World Bank marked the 80^th anniversary of relations with Uruguay this week by signing off on a US$300m loan to boost private investment, growth, employment, and fiscal sustainability. The vice president of the World Bank for Latin America and the Caribbean, Susana Cordeiro Guerra, praised Uruguay’s “foundation of stability and institutional strength”, but underlined the need to “leverage that strength to make Uruguay a more competitive country, with a more productive economy that generates more quality jobs”. She said the World Bank financing would help the country in “taking that next step”.

Salvajes fluctuaciones en el crecimiento económico de año a año en Paraguay están proporcionando verdaderos desafíos para los planificadores del presupuesto y para los estrategas en la formulación de políticas de Gobierno. Paraguay informó de un crecimiento real del PIB de un 3,8% en el 2011, anunció el banco central la semana pasada. En el 2010, el crecimiento del PIB alcanzó un extraordinario 15% año en año, pero esto ocurrió después de una fuerte contracción de un 3,8% en el 2009. Hay advertencias de otra dramática declinación en el 2012, que podría crear dificultades reales, dada la propensión de los gobiernos en funciones de incrementar el gasto antes de las elecciones presidenciales y legislativas, la próxima de las cuales se celebrará en abril del 2013.

El ministerio de finanzas y el banco central (BCP) están en el proceso de revisar hacia abajo la predicción de crecimiento del PIB de 3,7% en el 2012, principalmente como resultado del doble golpe al sector agrícola: una seria sequía y la suspensión de las exportaciones de carne debido al brote de aftosa en setiembre pasado. Será interesante ver cuánto decide reducir su cifra dado que un informe del 28 de marzo del gigante banco privado brasilero, Itaú Unibanco alega que el PIB no solamente será significativamente menor que eso sino de hecho se contraería un 1,5% en el 2012. Las exportaciones cayeron un 5,4% en el primer trimestre del 2012, a US$1,09mm, informó el BCP, como resultado de las dificultades del sector agrícola: las exportaciones de soja  cayeron un 32,6% año en año, a US$192,8m, y las exportaciones de carne en 19,7% a US$69,5m.

Con toda probabilidad, la economía volverá a recuperarse en el 2013 con condiciones climáticas más benignas y la remoción de restricciones a las exportaciones de carne. Pero los ciclos de boom y caída complican seriamente la administración macroeconómica e impide el desarrollo sustentable. Estos problemas económicos internos están siendo exacerbados por las políticas de la vecina Argentina. El 1 de febrero el gobierno argentino implementó un nuevo régimen de licencias de importación, que ya ha tenido un efecto perjudicial en las exportaciones de Paraguay, cayendo un 60% año en año en ese mes, informó el ministerio de industria y comercio. Paraguay fue el único país en la región que enviaba más del 10% de sus exportaciones a Argentina en el 2011: 11,9%, de acuerdo con la agencia paraguaya de promoción de la inversión y las exportaciones (Rediex).

El único punto positivo, sobre el cual el gobierno está apuntalado, es que la actividad de la construcción, está creciendo, aumentando un 21% año en año en el 2011. El ministro de finanzas, Dionisio Borda, anunció esta semana que el gobierno estaba considerando un nuevo plan para usar los US$240m de recursos extras recibidos por el estado en concepto del incrementado pago de Brasil por la energía de la represa hidroeléctrica binacional de Itaipú para llevar adelante proyectos de infraestructura y para crear un fondo para los tiempos difíciles (ver abajo).

• Itaipú

El gobierno envió al congreso un proyecto de ley al congreso en junio pasado, que ni siquiera ha pasado el nivel de las comisiones legislativas, para crear un fondo de desarrollo económico y social (Fondes) para los fondos adicionales de Itaipú. La oposición alega que el Fondes será un fondo opaco, similar al llamado Fonden en Venezuela, que permitirá a la administración del Presidente Fernando Lugo llevar adelante proyectos populistas y promover la elección del sucesor elegido por Lugo. El ministro de finanzas, Dionisio Borda, dijo que el proyecto de ley ahora podría ser retirado; y que el nuevo plan, que podría distribuir algunos fondos directamente a los gobernadores y autoridades municipales exclusivamente para obras de infraestructura, también retendrá una parte para la inversión pública del gobierno central, y para establecer un fondo de estabilización anti-cíclico.

Development: On 23 August Venezuela’s defence minister, Henry Rangel Silva, said that 8,000 army officers would be deployed across the 29 municipalities of the western state of Táchira, bordering Colombia, in order to reinforce border security.

Significance: Táchira, which has been administered by the ruling Partido Unido Socialista de Venezuela (PSUV) for eight years, fell to the opposition in the 2008 municipal elections. Its conservative governor, César Pérez Vivas, has been very critical of the central government led by President Hugo Chávez for starving the state both of funds and security. Colombian left-wing guerrillas and right-wing paramilitaries, along with drug traffickers and contraband criminal groups, have long moved fairly freely around Venezuela’s western border areas. Ahead of President Chávez’s bid for re-election this year, the central government has latterly moved to boost security in the state. It has also clamped down on the massive fuel smuggling trade. Pérez Vivas is expected to retain his post in the scheduled 16 December regional elections.

Key points:

• Some 3,500 officers will be deployed to the border municipalities (Bolívar, Junín, García de Hevia, Urdaneta, Panamericano and Pedro María Ureña), identified as priority areas under Plan Centinela, the government’s border security program.

• Minister Rangel, accompanied by the army’s commander in chief of operational strategy, Wilmer Barrientos, made the announcement at the Sabana Petrolera border station (Llano Jorge, municipality of Bolívar) yesterday, stressing that the operation would have the full cooperation of Colombia.

• “This has a very special connotation because it ratifies the security and defence polices of the national government”, Rangel stated.

PARAGUAY | Histórico descubrimiento de petróleo. Compañías de prospección de petróleo han hallado un “abundante” depósito de petróleo en la región del Chaco de Paraguay, cerca de la frontera con Argentina, anunció ll Presidente Federico Franco en una conferencia de negocios en Asunción el 26 de noviembre. Aunque desde hace tiempo hay rumores de que hay petróleo en el Chaco paraguayo, que cubre la mayor parte del área occidental del país, éste es el primer descubrimiento de petróleo jamás hecho en Paraguay.

Si, como dice Franco, el tamaño de los depósitos es significativo será de gran provecho económico para el país que, actualmente, es completamente dependiente de sus vecinos regionales para la provisión de combustibles fósiles. Durante un almuerzo organizado por el foro comercial Brasilero-Paraguayo, Franco dijo que recientemente había sido informado que la firma EU-Británica, President Petroleum, había hallado “petróleo de la mejor calidad y en abundancia” en la cuenca del río Pirity a unos 500kms de Asunción en el departamento noroccidental de Boquerón. Franco luego se vanaglorió de que Paraguay no sólo será “el campeón del mundo” en la producción de energía hidroeléctrica, sino que también pronto “se unirá las filas de los países productores de petróleo”.

Según Franco, la perforación de pozos comenzará en diciembre; y la producción de petróleo podría comenzar en junio del año próximo. “Esto significará un sustancial nivela de crecimiento económico en Paraguay,” dijo Franco. Se espera que Paraguay tendrá un crecimiento negativo de 1,5% este año debido a un desastroso año para su sector agrícola.

Una declaración de la compañía President expresa que después de realizar exploraciones en un área de 16.000kms² en el área de la cuenca del río Pirity cree que ha encontrado un depósito de hidrocarburos conteniendo 150m de barriles de petróleo recuperable. La declaración agrega que mientras el depósito está en un área relativamente sin explotar del mundo, la compañía estaba familiarizada con el sistema petrolero, dado que tiene operaciones a través de la frontera en la provincia argentina de Formosa. President, registrada en el Reino Unido, está formada por las subsidiarias locales de las firmas de EU, Crescent Global Oil y PetroVictoria, respectivamente, Crescent Global Oil Paraguay y Pirity Hidrocarburos, que recientemente se fusionaron para unir sus recursos en Paraguay. Esto, después de que el 4 de octubre Franco revocó un decreto firmado por su enjuiciado predecesor Fernando Lugo (2008-2012) en el 2010, prohibiendo a Pirity Hidrocarburos continuar con sus esfuerzos de exploración en el Chaco en medio de preocupaciones acerca del contrato de concesión que le fue otorgada.

Un representante de la cámara de hidrocarburos del Paraguay, Richard Kent, confirmó que él había sido informado del descubrimiento de President y señaló que ahora también hay planes para llevar adelante exploraciones en los departamentos de Paraguay de Alto Paraná y San Pedro en los cuales President también tiene concesiones para la exploración.

REGION | Agro productores se rebelan contra Monsanto. El 22 de noviembre, Bernardo Calvo, el presidente de Monsanto Latinoamérica Sur, la subsidiaria regional de la multinacional de biotecnología agrícola de EU, Monsanto, se reunió con representantes de la asociación paraguaya de productores de soja (APS) a fin de tratar de llegar a un acuerdo sobre el pago de royalties por el uso de la genéticamente modificada Roundup Ready (RR) variedad de soja desarrollada por Monsanto (ver abajo). Esto se produce después de que la APS decidió recurrir a una corte local para tratar de obtener una orden que les permitirá dejar de pagar royalties a Monsanto por el uso de semillas de RR. Monsanto desarrollo su cepa RR en 1994, y su contrato de provisión con los productores del Cono o Sur establece que ellos deben pagar un royalty de US$4 por tonelada de soja producida por 10 años, después de lo cual se considera que la patente de Monsanto sobre RR ha expirado. Sin embargo, esto ha sido cuestionado por los productores en el Cono Sur, quienes señalan que la patente original de RR en EU expiró en el 2010.

Los cuestionamientos primero provinieron de Argentina donde, después de una larga batalla legal, en la cual Monsanto alegó que había hecho modificaciones a su cepa original de RR que extendía su patente hasta el 2014, una corte no reconoció la patente exclusiva de Monsanto sobre la soja RR en el 2011. Más recientemente, en octubre, una corte en Mato Grosso, Brasil, dictaminó que de acuerdo con la ley brasilera, las patentes de productos modificados genéticamente solamente pueden durar el tiempo por el cual fue otorgada la patente original en el país de origen. Y ordenó a Monsanto a que deje de recolectar los royalties inmediatamente. Monsanto tuvo que anunciar que estaba suspendiendo temporalmente la recolección de los royalties en Brasil, mientras apela el dictamen. Este dictamen hizo que la APS anuncie que suspendería sus pagos de royalties y presentará su caso sobre la misma base en las cortes locales.

Brasil, Argentina, y Paraguay, son respectivamente el segundo, tercero y cuarto mayores productores de soja del mundo.

• Monsanto

Luego de llegar a Paraguay, Bernardo Calvo, el presidente de Monsanto Latinoamérica Sur, dijo que él había venido para hablar con los productores de soja a fin de encontrar una solución a la disputa sobre el pago de royalties por el uso de la cepa de soja genéticamente modificada, Roundup Ready (RR), desarrollada por Monsanto para que así “ambas partes puedan continuar beneficiándose de la sociedad en el futuro”.

POLITICS | TSJ president suggests wiggle room for Chávez. The president of Venezuela’s supreme court of justice (TSJ), Luisa Estella Morales, yesterday appeared to hint at some room for manoeuvre over the presidential investiture date, which in the 1999 constitution is clearly stated as 10 January. “Remember that the constitution has as its transversal axis popular participation, a very important fact, and right, when it comes to evaluating a constitutional matter”, she stated. Her comments closely echoed those of national assembly president, Diosdado Cabello, who earlier this week speculated that the cancer-struck President Hugo Chávez, who was handily re-elected for a fourth consecutive term in October, could delay his investiture beyond the constitutionally scheduled date. “You can’t tie the will of the people to one date. If you didn’t do it that day, doesn’t the will of 8m people count?” Cabello asked rhetorically. Under the constitution the president-elect can swear-in before the national assembly or alternatively before the TSJ. There is now even some speculation that the TSJ might decamp to the Venezuelan embassy in Havana, Cuba, to allow Chávez to swear-in there. Yesterday Vice-President Nicolás Maduro said that Chávez was “conscious”.

Rafael Correa comenzó esta semana oficialmente su campaña electoral como un simple candidato, habiendo pasado temporalmente el título de presidente a su vicepresidente, Lenín Moreno, en la etapa previa a las elecciones del 17 de febrero. Las encuestas de opinión sugieren que él debería ganar con facilidad. Sin embargo, Correa está decidido no solamente en asegurar su reelección, sino una codiciada mayoría para su partido gobernante Alianza País (AP) en la Asamblea Nacional para acelerar la aprobación de una agenda de reformas “progresista” que él alega que es intrínseca para su revolución ciudadana.

“Ni un solo voto por el pasado: un voto por 35 (la lista de AP para el congreso) es un voto por Correa,” dijo Correa en el inicio de su campaña en la ciudad costera de Guayaquil. Correa, quien instruyó a sus partidarios a que hagan campaña como si él no tuviera ningún apoyo en absoluto, se lamentó el hecho de que ciertas leyes, como la del código penal, permanecen estancadas en la Asamblea Nacional porque la AP carece de una mayoría. Él dijo que un fuerte apoyo legislativo era esencial para profundizar su revolución ciudadana, consolidar sus avances sociales y avanzar más con, por ejemplo, una ley de seguridad social universal. Agregó que una mayoría era también necesaria a fin de poder transformar la matriz productiva del país, sobre-dependiente del petróleo, y para impulsar la controversial ley del agua.

Frecuentemente, Correa descarga su frustración con la Asamblea Nacional durante sus transmisiones de los sábados. El año pasado, se enzarzó en un amargo intercambio epistolar con el presidente de la Asamblea Nacional, Fernando Cordero,  cuando acusó a los disputados de desperdiciar su tiempo en debates sin sentido y de una “grosera interferencia” en la rama ejecutiva del gobierno [IL-12-16].

No hay nada que sugiera que Correa esta buscando un consenso político en la futura asamblea de Ecuador, con otros partidos políticos, a todos los cuales él amontona juntos bajo el termino  peyorativo de ‘partidocracia’. La Asamblea Nacional está siendo ampliada de 124 a 137 diputados, por lo tanto, para obtener una mayoría simple, la AP requerirá 69 bancas.

• Lasso

Guillermo Lasso, un ex banquero y principal rival político del Presidente Correa en las elecciones de este año (aunque, el está en un distante segundo lugar en las encuestas de opinión) se ha comprometido a una nueva estrategia de campaña: revelar una nueva propuesta cada día. Propio de un político cuyo partido es conocido como Movimiento Creando Oportunidades (Creo), él está prometiendo crear 1m de empleos si resulta electo. Los detalles de cómo exactamente planea lograr esto son escasos, aunque la propuesta incluye abrir a Ecuador a una mayor inversión extranjera.

Al cierre del horario bancario de la Ciudad de Nueva York, el 30 de julio, Argentina ya había formalmente caído en default de su deuda externa, por segunda vez en más de 12 años, al no poder realizar los pagos vencidos de US$539m al grueso de sus tenedores de bonos. Los pagos fueron bloqueados por orden del juez de Nueva York, Thomas Griesa, quien ha dictaminado que Argentina no puede pagar a sus tenedores de bonos a menos que también pague US$1,33mm más intereses al grupo de acreedores ‘holdouts’ liderado por el fondo de riesgo, NML Capital. A pesar de las negociaciones de último momento del ministro de economía de Argentina, Axel Kicillof, y de una oferta de ayuda de parte de la asociación de bancos privados de la Argentina (Adeba), no se alcanzó ningún acuerdo entre Argentina y los holdouts. ¿Cuáles son las consecuencias políticas?

Fundamentalmente, las consecuencias políticas del último punto muerto son inciertas, y dependen de lo que ocurra ahora. Pero al menos dos cosas esta claras. Primero, que el tono y el estilo del manejo de la cuestión  por parte de Argentina (una combinación de desafío, intransigencia, y de política arriesgada) fue establecido por la Presidenta Cristina Fernández y Kicillof, con muchos otros miembros del gobierno acompañándolos. Segundo, el duo Fernández-Kicillof parece haber creído que al asumir una línea dura, resumida en la frase ‘patria o buitres’ galvanizaría la opinión pública en apoyo del gobierno. Algunos comentaristas de Buenos Aires dijeron que el gobierno había comisionado sondeos privados de la opinión pública que respaldan esta visión. Ciertamente existe muy poca simpatía por los fondos de riesgo con sede en EU –los ‘buitres’– que compraron bonos de la afligida deuda Argentina con enormes descuentos y ahora esperan obtener el pago del 100% de su valor nominal.

Pero como ha señalado la diputada opositora, Elisa Carrió, de la Coalición Cívica ARI, la decisión de ‘malvinizar’ la disputa es una decisión de alto riesgo. La referencia es al conflicto en el Atlántico Sur entre Argentina y el Reino Unido sobre las islas Malvinas/Falklands en 1982. En ese entonces, el gobierno militar de Argentina buscó presentar a la población con una simple opción: podían optar por el patriotismo y apoyar al régimen militar –o, ser traidores, vendiéndose a los intereses foráneos. Las opciones intermedias (tales como apoyar el reclamo de soberanía sobre las islas, pero oponiéndose a la intervención militar) fueron excluidas. Este tipo de opción entre ‘nosotros o el diablo’ puede ser un mecanismo eficaz de coincidencia en el corto plazo, y puede ser maravilloso para un gobierno que al final se encuentra el lado triunfador. De hecho, si Argentina hubiese ganado el conflicto del Atlántico Sur, nadie duda que el entonces presidente [de facto], el General Leopoldo Galtieri (1981-1982), habría permanecido en el gobierno por mucho más tiempo. Pero eso no ocurrió –Galtieri fue depuesto y en poco más de un año el gobierno militar había terminado.

La disputa de la deuda externa de hoy es, por supuesto, un conflicto político diferente en una Argentina diferente. Y el default puede ser visto como un fracaso de la estrategia negociadora del gobierno, y si es así, la responsabilidad recaería sobre Fernández y Kicillof. El gobierno podría tratar de presentarlo como una victoria –pero esto tensaría la credibilidad. O, lo más factible, el gobierno lo puede presentar como un punto coyuntural en algo que aún no ha terminado. El default, de hecho puede ser visto como una pausa, antes de un nuevo intento para llegar a un acuerdo. Esto reducirá el costo político para el gobierno. El peligro, por supuesto, es que el default que en este momento es selectivo (en parte debido al hecho de que los pagos de intereses hechos por Argentina a algunos de los tenedores de bonos reestructurados fueron liberados por el juez Griesa a último momento [ver más abajo]), puede ser peor (otros acreedores aún no afectados podrían buscar invocar cláusulas de default-cruzado), disparando una recesión más profunda. En este caso, el eslogan ‘patria o buitres’ podría ser visto como una apuesta que resultó mala.

También podría haber algunas riñas internas dentro del gobierno. La intervención de último momento de Adeba para tratar de resolver el punto muerto ofreciendo recaudar dinero (US$250m o más) para hacer un desembolso inicial a los fondos de riesgo de EU, no pareció tener la bendición de Kicillof. En cambio, se dijo que se había planteado a pedido del presidente del Banco Central de la Argentina (BCRA), Juan Carlos Fábrega, y el jefe del gabinete de Fernández, Jorge Capitanich, ambos han sido a menudo considerados como rivales de Kicillof por la influencia dentro de la administración. En su conferencia de prensa en la Ciudad de Nueva York, Kicillof fue bastante despectivo con la propuesta, diciendo que él solamente había leído acerca de la oferta en la prensa. Algunas fuentes afirman que Kicillof lo había dejado de lado deliberadamente, y hay rumores en Buenos Aires de que Fábrega ahora está considerando su renuncia. Si alguna versión del plan de Adeba eventualmente prospera, Kicillof no podrá reclamar el crédito del mismo.

Griesa autoriza pago parcial

El 28 de julio el Juez Thomas Griesa reveló que había permitido la liberación de US$87m en pagos de intereses hechos por Argentina sobre bonos denominados en dólares emitidos en Buenos Aires pero retenidos en el exterior.

La decisión fue en respuesta a un pedido de clarificación del Citibank, que quería saber si la resolución de Griesa afectaba estos pagos. Griesa explicó que así era, pero que había decidido permitir que esto siga su curso “esta única vez” debido a que “la corte no quiere afectar los acuerdos [de Argentina] con Repsol –entre los bonos que recibieron el pago están aquellos en poder de la firma petrolera española, bonos que fueron parte de la compensación pagada a la misma por Argentina en febrero por la expropiación del 2012 de su participación mayoritaria en la firma petrolera nacional de Argentina, Yacimientos Petrolíferos Fiscales (YPF).

Griesa dijo que su decisión estaba basada en el hecho de que el Citibank le había explicado que no era capaz de diferenciar entre los bonos emitidos para Repsol y otros bonos argentinos, pues comparten el mismo International Securities Identification Number (ISIN). “Solamente por esta razón Citibank puede pagar los intereses adeudados sobre bonos retenidos por Repsol y otros bonos de la deuda reestructurada y denominada en pesos y dólares”, dijo Griesa en una declaración. Sin embargo, Griesa también pidió al Citibank que establezca un mecanismo para diferenciar los diversos bonos en el futuro.

The new centre-left Partido Acción Ciudadana (PAC) government led by President Luís Guillermo Solís is facing unrest on various fronts. Dock workers in the Atlantic port city of Limón began a strike on 22 October following a supreme court decision to award the concession for a new terminal to a foreign firm. When President Solís ordered the docks to be reopened, police arrested 68 people who were blocking ships from unloading at the Limón and Moín terminals, resulting in violent clashes. Meanwhile Costa Rica’s main union, Asociación Nacional de Empleados Públicos y Privados (Anep) is up in arms over attempts to cut the 2015 State budget proposal which it warns will impact public spending.

The 9 October supreme court upheld a decision to grant a US$1bn concession to the Dutch firm APM Terminals for the construction and operation of a new terminal at Puerto Limón/Moín complex, which currently comprises two docks either side of the city. The complex handles around 80% of Costa Rica’s maritime trade. Under the terms of the agreement, APM Terminals has the exclusive rights to handle container traffic at the port for the next 33 years. According to World Bank data, Costa Rica has some of the worst-rated port infrastructure in the region.

The dockers’ union, the Sindicato de Trabajadores de Japdeva (Sintrajap), claims that the contract, signed in 2011 under the previous Laura Chinchilla administration (2010-2014), is unconstitutional, as it would create an “illegal monopoly”. However the Solís government is clear that the project will go ahead, arguing that the expansion plan would quadruple the amount of cargo the port can handle.

On the morning of 22 October, Sintrajap successfully paralysed both the Limón and Moín docks, but later that same day they were ejected by the police, who made a large number of arrests. The following day, the docks reopened with foreign contracted labour under a police guard. The public security minister Celso Gamboa said the police would remain for as long as necessary to ensure the port’s continued operation. Sintrajap’s leader, Ronaldo Blears, said the dockers would not be intimidated and the union would take legal action against Gamboa for the evictions.

At the time of writing Solís had yet to show any signs of backing down. On 23 October he released a statement reiterating that Costa Rica would respect the terms of the contract as a “country that long ago opted for the rule of law and peace.” Solís said that his administration would commit financial resources and training for workers who may lose their jobs at the port. Over the weekend of 25-26 October, dozens of protesters blocked roads throughout Limón with burning tires and other debris. Police in riot gear who attempted to remove the barricades came under attack. In one reported incident, the police came under fire from an automatic weapon, though no one was injured.

Other unrest

The dockers’ union is not the only unhappy one. On 20 October, Anep members demonstrated in the streets of San José over plans to cut the national budget. The legislative finance committee wants to cut the C$9.7trn (US$14.5bn) budget by a further 1%, on top of the 2.8% cuts announced by Solís to try to tame Costa Rica’s rising budget deficit, which is projected to reach 6% of GDP this year.

Anep argues that the proposed cuts would affect public services and exacerbate inequality. The protests were backed by the left-wing opposition party, Frente Amplio, which, with nine seats, has the third largest presence in the 57-member unicameral national legislature. Solís, whose party has 13 seats in congress, is personally against further budget cuts. In a speech on 19 October he acknowledged the need to tackle the deficit, but insisted that essential public services, such as health, education and security must be protected. The budget must be approved by the legislature by 30 November.

• Fuel prices to drop

On 27 October Costa Rica’s Autoridad Reguladora de los Servicios Públicos (Aresep), the public services regulatory authority, decreed a cut in fuel prices, following the fall in international oil prices. This is the fourth consecutive fuel price decrease.

The impartiality of the recently re-appointed attorney general, Rodrigo Janot, has been called into question by supreme court judge Gilmar Mendes, after the two men clashed over demands from the electoral tribunal (TSE) to look into whether crimes had been committed by President Dilma Rousseff during her re-election campaign last year.

Janot was re-appointed to the post, responsible for overseeing the prosecution of politicians suspected of corruption, following an epic 10-hour cross-examination in the federal congress on 26 August. Under questioning, Janot vehemently denied accusations levelled by the opposition and the speaker of the lower chamber, deputy Eduardo Cunha, that he had struck a deal with the government to go easy on the ruling left-wing Partido dos Trabalhadores (PT), and protect President Rousseff on the way, as the ongoing probe into corruption at the State- controlled oil company Petrobras spread to top figures of the party and other lawmakers, including Cunha himself.

Talking to the current affairs magazine Veja on 31 August, Mendes, a member of Brazil’s supreme court who heads the TSE, declared that “he [Janot] should not act like a lawyer for the PT” and “must not follow a juridical interpretation just to protect the president.”

The interview followed the publication by the daily, O Estado de São Paulo, on 29 August, of an adjudication issued by Janot, in which the attorney general dismissed as “inconvenient” a request made by Mendes to investigate whether graphics company VTBP, employed by Rousseff during her re-election campaign, received money embezzled from Petrobras.

Curiously, Janot issued his adjudication to the TSE on 13 August, a week after Rousseff gave the green light for his re-appointment. In the adjudication, Janot claims “it is not in society’s interest that controversies over the elections continue perpetually.” He went on to say that “those elected must be allowed to enjoy the prerogatives of their positions and the losers must recognise their situation and prepare themselves for the next election.” According to Janot, the date to investigate electoral crimes had expired.

Mendes, on the other hand, demurred saying that “even so, there is the possibility that other [civil] crimes have been committed, such as money laundering” and which do not expire under Brazilian law. “If there is an indication that other crimes were committed which are connected to electoral crimes it is the attorney general’s role to act,” Mendes declared. He then went on to say that “if he [Janot] wants to give his opinion against the [TSE] investigation, he should give his reasons. If he does not see irregularities in how the graphics company was paid, he should say so. But it is not his role to say what the limits of the electoral court are.”

Mendes approved Rousseff’s campaign accounts in December last year, as requested by Brazilian electoral legislation, albeit with reservations and raised his doubts to relevant governing and juridical bodies, including the federal police and the financial ombudsman. As federal police investigations uncovered the extent of corruption at Petrobras, VTPB was one of the companies accused of serving as a front to channel illegal funds. According to the electoral tribunal, there are clear indications now that VTPB received R$26.8m (US$7.3m) from the PT, of which R$23m (US$6.25m) were in relation to works supposedly carried out for Rousseff’s campaign.

Despite Janot’s criticism, the TSE is examining other cases against Rousseff’s re-election campaign, with five of the seven TSE judges voting last week in favour of continuing to look into evidence presented by the opposition. The latest case refers to a marketing company, Mascote Flag, which was registered under the name of Angela Maria do Nascimento, a domestic worker. According to documents seen by the court, the company was paid R$1.6m (US$435,000) to set up street stands to promote Rousseff. “I cannot even imagine how much money that is,” declared Nascimento to the press, claiming she received a mere R$2,000 (US$545) for her work.

• Dirceu to testify to congress

José Dirceu, one time right-hand man of former president Lula da Silva, was summoned to testify in congress after being implicated in the corruption scandal at the State-controlled oil company Petrobras. Dirceu, who fell from grace and served time behind bars after being convicted of masterminding the mensalão scheme, in which congressmen were paid money embezzled from State companies to support the Lula administration in congress, now lies accused of receiving as much as R$8m (US$2.2m) from construction companies to guarantee they won overpriced contracts with Petrobras through his consultancy company JD Consultoria while in prison.

Amid widespread dissatisfaction with the administration led by President Michelle Bachelet, August saw massive demonstrations calling for wholesale reform of Chile’s private pensions system. The central issue behind these protests is that the retirement incomes provided by the system are far too low for many. It should be possible for the government to address the issue. However, a solution will require greater contributions from the government, as well as employers and self-employed workers. Reform will neither be quick nor easy.

Technical assessments of the efficiency of Chile’s private pensions system, which was established in 1981 by the military government led by General Augusto Pinochet are generally favourable (see box 1).

One example is the latest (October 2015) Melbourne Mercer Global Pension Index report. Despite a favourable assessment, the report advocated four changes to strengthen the system. One recommendation suggested a continued review of the minimum pension available for the poorest pensioners. Another suggested an increase in the retirement ages for both men and women. A third suggested measures to promote higher household savings. And finally, the report authors also recommended an increase in the level of mandatory contributions. The aim should be to increase the net replacement rate, which corresponds to the ratio of the average pension paid over a particular time period to the average level of income in that same time period[1].

Other reports have agreed with these recommendations. Wholesale pension reforms undertaken by President Bachelet’s first administration in 2008 improved the social safety net inherent in the pensions system. However, the reforms did not go far enough in addressing the low replacement rate and the low adequacy of the retirement incomes paid out (see box 2).

This deficiency is reflected in the size of the latest demonstrations, which have again demanded wholesale reform of the pensions system. On 9 August, President Bachelet proposed a number of changes. These included:

• An increase in employers’ contributions from 10% to 15% of workers’ incomes over the next decade.
• Strengthening of the ‘solidarity pensions’ paid to the poorest 60% of the population not covered by private pensions.
• Greater input on investment decisions by the pension fund administrators (Administradoras de Fondos de Pensiones, AFPs) from contributors.
• Possible reimbursement of contributors by the AFPs after periods of losses.
• The establishment of a state-run AFP to compete with private sector counterparts.

The first two proposed changes are consistent with the recommendations of the Melbourne Mercer Global Pension Index report and other assessments. The last three are consistent with a significant worsening in the risks of doing business as an AFP relative to the potential returns. The concept that AFPs would, under certain circumstances, compensate contributing members for losses implies that they would become guaranteed funds, which would greatly increase the amount of capital that they would need, however.

The proposed changes also fail to recognise another very fundamental change in the 35 years since the pensions system was originally established. The global economy as a whole has entered an unprecedented period, in which cash and fixed income markets are characterised by near zero (or negative) interest rates and where equity markets are frequently volatile. It is much harder than previously for the AFPs to boost the benefits available to retirees through investment.

Although the proposed changes envisage that the government would contribute to the strengthening of the system by boosting solidarity pensions, as yet there is no suggestion that the government would make co-contributions to AFPs on behalf of retirees (as happens in some other countries with broadly similar systems). The fall in the price of copper – Chile’s main export commodity and an important source of revenues for the government – means that its ability to pay more money into the pensions system is limited.

Amidst these challenges two things are clear. First, reform of Chile’s pensions system will not be a quick process. Objections are likely from employers (and self-employed workers) and almost certainly there will also be objections from the AFPs to President Bachelet’s proposed changes.

Box 1: The view from Melbourne

The October 2015 Melbourne Mercer Global Pension Index[2] report gave the Chilean system a B rating, with a score based on the authors’ proprietary index of 65-75. This indicates “a system that has a sound structure, with many good features, but has some areas for improvement that differentiates it from an A grade system.” Other countries in which the pensions systems are assessed similarly include Sweden, Switzerland, Finland, Canada, Chile and the UK. Australia’s system is accorded a B+ rating (with a score of between 65 and 75). Only two countries – Denmark and the Netherlands – are given an A rating and a score of more than 80. Another 16 countries had ratings of C+ or lower.

The proprietary index is based on three sub-indices. A 40% weighting is assigned to adequacy factors, such as benefits, savings, tax support, the design of benefits and exposure to growth assets. Another 35% weighting is assigned to sustainability factors, which include the number of people covered, total assets, contributions, demographics and exposure to government debt. The remaining 25% is assigned integrity factors, such as regulation, governance, protection, communication and costs.

The headline score for Chile’s pensions system is 69.1. It receives a very high score – 84.8 – for integrity. The score for sustainability is lower, at 65.0. However, the score for adequacy is lower again, at 62.8. In 2014, the score for adequacy was 57.3. The rise in the headline index score – from 68.2 in 2014 to 69.1 in 2015 – was the result of a rise in the household savings rate, which was partly offset by the effect of increased life expectancy.

Box 2:  Problems with Chile’s pensions system

Chile’s pensions system is well regarded internationally. However:

• Between 2007 and 2014, half of retirees received monthly benefits of CLP82,650 per month (about US$150) or less. This amount is about 40% of the minimum wage in 2014 and includes the tax-financed solidarity benefit.

• While half of women of retirement age received monthly benefits equal to or less than CLP42,561, men received benefits of CLP112,333 or less.

• Half of retirees received benefits that were equal to 34% of their average wages over the preceding 10 years.

• Men receiving only the solidarity benefit typically received CLP107,073 per month. For women, the equivalent figure was CLP84,298.

• 70% of the population considered that the benefits provided by the pension system were insufficient for an adequate standard of living.

• Just over two thirds – 69% – of the total workforce made contributions to the system. However, for workers actually affiliated to the system, the corresponding figure was only 50%.

• The wage contribution rate for social security pensions of 10% of taxable income appeared to be low relative those in countries whose overall level of development is similar to that of Chile.

• Retirees can buy an annuity or opt for phased withdrawals from the balance that they have accumulated with their AFP. If they choose the latter, they often experience benefits that decrease over time.

• Annuities for women are more expensive, because they have a longer life expectancy than men.

Source: Fabio Bertranou, International Labour Office, Geneva, ‘Pension benefits in Chile: is it possible to improve adequacy and solidarity’, 29 February 2016, pp8-9.

Brazil is slowly emerging from its worst recession on record. Domestic economy activity grew by a fledgling 0.2% in the three months up to June. While this figure may seem small, economists broadly read this as a positive result, showing that political turbulence from a series of government corruption scandals did not derail the economic recovery.

Brazil’s GDP has inched up for the second consecutive quarter. The second-quarter growth was driven by increased consumer spending thanks to favourable inflation and interest rates and improvements to the local labour market. The inflation rate fell to 2.46% in the last 12 months to August, its lowest level in the last 18 years, helping to stimulate consumption. This in turn has led the central bank (BCB) to start lowering its benchmark interest rates in support of increased economic activity (see sidebar).

However, despite improvements to GDP and inflation figures, Brazil is still struggling to control its gaping fiscal deficit. The deficit is currently equivalent to 9% of GDP, thanks to a fall in tax revenues from the recent recession and increased expenditure on the country’s costly pensions system. As a result of these budgetary imbalances, the federal government has been forced to loosen its fiscal deficit targets for 2017 and 2018. The targets for both years have been increased to R$159bn (US$50.2bn), up from R$139bn for 2017, and to R$129bn (US$40,7bn) in 2018. “For investors, this is a negative sign, showing that the government did not clean up the house,” Alex Agostini, chief economist at credit agency Austin Ratings, told local news site G1.

Brazil desperately needs to rein in the fiscal deficit to recover its prised investment grade rating, which it lost at the height of the economic recession in 2015, under the government led by the impeached former president Dilma Rousseff (2011-2016). To correct this, the administration led by President Michel Temer is coming up with new ways to raise revenue and cut costs. These include: levying a new tax on exclusive investment funds projected to raise an additional R$6bn (US$19.4bn); withdrawing exemption on payroll tax, projected to raise an additional R$4bn (US$1.2bn); scaling down a programme to help exporters projected to produce R$2.6bn (US$843m) in savings; increasing retired public sector contributions from 11% to 14% to generate a R$1.9bn (US$616m) in savings; and a freeze on civil servants’ salaries, producing R$1.2bn (US$389m) in savings. However, analysts have described these as “one-off” measures that fail to address structural problems in Brazil’s fiscal setup.

But the Temer government has also proposed more hard-hitting structural changes to lower the deficit. Chief among these is a bill capping pensions, which is currently being debated in congress, but which faces stiff opposition. If it does not go through, Brazil’s social security spending is scheduled to skyrocket from its current level of 43% of GDP, before interest, to 68% of GDP by 2024 according to Banco Santander. However, by far the government’s most ambitious plan to raise revenue is a large-scale privatisation initiative. On 23 August, the government announced it would sell the assets of 57 state-owned companies including airports, high-power electricity lines, railways, and port terminals. Also for sale are the lottery division of state-run bank Caixa Económica Federal and the Casa de Moeda do Brasil mint.

Two days before, the government announced it would sell its 41% stake in electricity firm Centrais Elétricas Brasileiras (Electrobrás). Shares in Electrobrás jumped by almost 50% on the news. The privatisation of Electrobrás has been welcomed by investors as a sign that the centre-right Partido do Movimento Democrático Brasileiro (PMDB) government led by Temer is committed to pro-market policies; in contrast to the interventionist policies pursued under Rousseff. Mainstream media hailed the sale of the Electobrás stake (due for completion in 2018) as the most important privatisation since the 1990s when the government sold off iron ore mining company Vale do Rio Doce and aircraft manufacturer Embraer. However, on studying the fine print, the sale becomes less attractive. For example, Electrobrás has a controlling stake in the Itaipú hydroelectric dam, which Brazil shares with Paraguay, but Itaipú will not be privatised, which could cause legal complications further down the line.

Nevertheless, the privatisation drive, which was unveiled just before President Temer jetted off to China to attend and international summit (see box), has peaked international attention. Brazil’s ambassador to China, Marcos Caramuru, said he believes that Chinese companies will be particularly interested in the privatisation of the electricity sector, highways, railways, and ports. Meanwhile in another investment-friendly move, the Temer government is continuing to open up the country’s oil and gas sector to private participation. Brazil will hold another round of oil and gas tenders this month (September). In October, Brazil’s national petroleum agency (ANP), the sector’s regulator, is due to start public consultations to renew concessions awarded before 2013.

New development project financing initiatives are also on the cards. Temer is looking to change the role of Brazil’s national development bank (Bndes), used as a source of cheap credit for government-backed sectors under Rousseff. Another bill currently being debated in congress seeks to change the interest rates offered by Bndes so they are more in line with the BCB’s benchmark interest rate, the Selic. Moreover, other state-run banks such as Banco do Brasil (BB) are being encouraged to offer alternative credit lines for major infrastructure development projects. All this means Bndes is to become a less dominant lender than it once was.

Temer defends economic reforms at Brics summit

From 2-5 September, President Temer visited China, where he attended the ninth summit of the Brazil, Russia, India, China, and South Africa (Brics) grouping of emerging economies and made an official visit to his Chinese counterpart, Xi Jinping. In recent years, Brazil has not shone brightly among the Brics, which collectively failed to grow as fast as expected since the term was coined by Jim O’Neill in 2001. The Brics countries were collectively supposed to revolutionise the global economy. But by O’Neill’s concession their performance was disappointing. O’Neill has largely attributed this to poor GDP results from Brazil and Russia, whose economies were blighted by the end of the commodities super-cycle, dragging the rest of the bloc down with them. However, during the summit, President Temer insisted that Brazil’s economy had now turned a corner. Since the country’s GDP is growing again, Brazil is living a “moment of optimism”, Temer told delegates at a Brics business forum held on 3 September. Brazil is looking to “modernise the economy” to foster a more business-friendly environment, Temer continued. “In today’s world there is no room for improvisation. Whoever wants to prosper must do their homework and anticipate the future. In Brazil, we have carried out reforms to put our public accounts in order,” Temer said. Temer was referring to the labour reform (sanctioned in June), the introduction on a cap on public spending (promulgated last year) and his government’s pension reform proposal that is currently before congress. Temer also noted that his administration is seeking to implement other measures to ensure Brazil is a more competitive place to do business. This includes an initiative to simplify taxation in a country notorious for its headache-inducing bureaucracy. “We want entrepreneurs to spend more time on production and job creation and less time filling in forms,” he said.

• Brazil slashes interest rates

On 6 September, the BCB cut its benchmark Selic interest rate by one percentage point for the fourth month in a row, bringing the rate to 8.25%. The decision was in line with market expectations. In a statement, the BCB indicated that it would now start to reduce the pace of its monetary easing policy.

• Rio de Janeiro settles debts with gov’t

Brazil’s federal finance minister, Henrique Meirelles, has approved a debt reduction plan for Rio de Janeiro state to repay the federal government. Under the new plan, Rio de Janeiro state must pay back R$29.6bn (US$9.5bn) in annual instalments to the federal government until 2020, down from R$63bn (US$20.2bn). “Rio finds itself in a state of insolvency, with growing and unsustainable deficits,” Meirelles said, justifying the new plan. However, he added that the new agreement was not a blank check and the state must “rigorously” follow belt-tightening measures to “rebalance their finances”.

EL SALVADOR | ‘Plan 10’. The government led by President Salvador Sánchez Cerén has launched an initiative dubbed ‘Plan 10’ for the 10 months leading up to the holding of presidential elections in February 2019. The plan aims to revise utility subsidies, including water, electricity and gas, which had been cut by the government, and provide more resources to hospitals to improve the provision of medication.

The latest initiative is motivated by the heavy defeat suffered by the ruling left-wing Frente Farabundo Martí para la Liberación Nacional (FMLN) in legislative elections last month, and the growing fear that it will be turfed out of government next February after 10 years in power.

NICARAGUA | Reforestation plan. On 13 April, the Frente Sandinista de Liberación Nacional (FSLN) government led by President Daniel Ortega launched a new national reforestation plan which would increase the amount of forest land by 200% of the target for 2017 (albeit without specifying what this was).

The government’s announcement follows a wildfire which began earlier this month in the Indio Maíz biological reserve on Nicaragua’s Caribbean coast which has devastated more than 3,585 hectares (ha) of land. The fire, which is now under control following help from Honduras, El Salvador, Panama, the US, and Mexico, also prompted the environment & natural resources ministry (Marena) on 11 April to declare it illegal to start forest fires for farming purposes.

According to Global Forest Watch, an initiative of the World Resources Institute, between 2001 and 2016 Nicaragua lost 1.11m hectares of tree cover, a loss that is equal to 14.3% of the area’s tree cover extent in 2000.

DOMINICAN REPUBLIC | Dominican tourism. The number of tourists visiting the Dominican Republic in the first quarter of 2018 totalled 1.7m, up by 7.7% year-on-year, according to the Dominican Annual Tourism Exchange (DATE). The president of the Asociación de Hoteles y Turismo de República Dominicana (Asonahores), Joel Santos, said that occupancy rates stood at 85.7% over the quarter. The number of tourists visiting in March was up by 14.7% year-on-year, setting a new record, according to the tourism ministry.

As the Brazilian government continues to be embroiled in internal tensions, and to struggle in the face of an anaemic economy, lately its focus has somewhat drifted away from the public security debate. President Jair Bolsonaro hailed a recent decrease in homicides but pushed forward with plans to relax gun laws, while the ‘anti-crime package’, Justice Minister Sérgio Moro’s flagship security and anti-corruption measure, remains stuck in congress. Violence levels are high despite recent improvements and it is state governments, responsible in the first instance for guaranteeing public security, which must contend with them regardless of the federal government’s focus.

Last week, two separate mass killings served as a stark reminder of this violence, of the organised crime structures from which it often stems, and of the insecurity it generates. Six people (including two minors) died in the metropolitan area of the Bahia state capital Salvador on 18 May, shot down by four men from a car. Three of the suspected killers died in a confrontation with the police the next day. In Belém, the state capital of Pará, 11 people died on the afternoon of 19 May after seven hooded men opened fire during a party in a bar, reportedly shooting directly at people’s heads.

Bahia and Pará are amongst Brazil’s more violent states, with a 2018 homicide rate of 37.89 and 46.55 deaths per 100,000 inhabitants respectively, according to news site G1’s violence monitor. However, violent deaths have been decreasing in both states, following a nationwide trend begun in 2018 [WR-19-08] and which looks set to continue in 2019. Pará’s state secretary for public security, Ualame Machado, had earlier this month celebrated the state’s most significant year-on-year drop in homicides for the month of April since 2010. This could be partly attributed to the presence of federal reinforcements from the national public security force (FNSP). Guamá, the Belém neighbourhood where the mass killings took place, was one of the areas that had benefited from these reinforcements.

In both Bahia and Pará, the crimes are being investigated by the state-run civil police as related to conflicts between local drug trafficking organisations (DTOs). However, an anonymous source in Pará said that the possibility of the killings in Belém being revenge for the death of several military police (PM) officers last week is also being considered.

This draws attention to the issue of police lethality, incidents of which have been rising in many states across the country despite the overall decrease in homicides. Rio de Janeiro state exemplifies this sombre trend, as illustrated by the latest data from Rio’s public security institute (ISP), released on 20 May. ‘Deaths through state agent intervention’, as they are classified by the ISP, increased 23% to 124 deaths in April compared with last year. Overall, police killed 567 people in January-April 2019, 21% more than in January-April 2018. The ISP records 1,405 homicides (excluding deaths at the hands of the police) in the first four months of the year, 26% less than over the same period last year.

Many public security experts see a direct link between this increase in police lethality and the tough-on-crime rhetoric of Rio state governor Wilson Witzel. Earlier in May, a deputy in Rio state’s legislative assembly (Alerj), Renata Souza, denounced Witzel’s public security policy to the Organization of American States (OAS) and the United Nations (UN) for encouraging violence. Witzel glorifies war-like policing tactics and backs hard-line security policies, but rejects accusations that he is promoting a ‘genocidal agenda’.

Federal responsibility

Witzel is closely aligned with President Bolsonaro’s views on security policies, even though different responsibilities often put state and federal authorities at odds with each other where public security is concerned. State governments, which manage the civil and military police forces and much of the penitentiary system, directly handle the fallout from violence and insecurity, and often accuse the federal government of being disconnected from the everyday reality of violence – and thus of failing to successfully respond to it.

On 21 May, 14 state governors (including Bahia’s Rui Costa and Pará’s Helder Barbalho) published an open later asking Bolsonaro to revoke his controversial decree loosening firearms regulation (the government has since made changes to it). “We believe that the measures provided for in the decree will not contribute to making our states safer. On the contrary, such measures will have a negative impact on violence,” the letter reads, with the signatories calling for a concerted effort from municipalities, states and the federal state to strengthen evidence-based security policies and to establish a national plan.

• Bolsonaro backpedals on guns

On 22 May, the government published changes to the 7 May presidential decree which relaxed laws on the purchase, possession and carriage of firearms, following a steady stream of criticism. One of the main changes is that civilians will not be allowed to own, use and carry rifles, as suggested in the initial version of the decree. Brazil’s congress and supreme court (STF) have both received multiple denunciations as to the illegality of the original decree, while it has been denounced as a threat to public security by civil society, NGOs such as Amnesty International, and state governors from both sides of the political spectrum.

Speaking at the United Kingdom’s London School of Economics (LSE) on 18 May, former public security minister Raul Jungmann (2018-2019) lamented the fact that Brazil still does not have a national plan for public security enshrined in law, adding that without it, national public security initiatives will only last the length of the term in office of the public official promoting them. For all Bolsonaro’s tough-on-crime talk, his government’s public security efforts appear to have centred so far on the controversial firearms decrees and on Moro’s anti-crime package – neither of which tackle the issues of firearm mortality or police lethality. The latest criticism of Moro’s proposal came from the Brazilian bar association (OAB), which on 20 May presented the chamber of deputies with a document condemning several points for being unconstitutional or inapt.

• High hopes for pension reform

Despite the Bolsonaro government being rocked by political tensions, political consultants, investors, and the financial markets remain confident that the Brazilian congress will pull together to approve a pension reform, paving the way for further structural reforms. In its latest economic survey, published on 21 May, the Organization for Economic Co-operation and Development (OECD) is optimistic about Brazil’s prospects for sustained economic growth, jobs creation, and investment if a strong pension reform is successfully passed and implemented.

The first known case of Covid-19 infection in Latin America was detected in Sao Paulo in Brazil on 26 February last year. A year later around 21m Latin Americans had tested positive for the virus and some 700,000 had died from it. The virus spread throughout the region at bewildering speed. There were ebbs and flows, some of them superimposed on two major waves (the initial one peaking in the second quarter of the year, with the second rising in late 2020 and in some countries gaining pace into Q1 2021. Despite a range of lockdown and quarantine measures, intermittent travel bans, and ‘circuit breakers’ designed to slow down the rate of transmission, the virus, carried by international travellers and transmitted within communities, took hold in the region’s major cities and from there began to spread out into the countryside.  

A report by the OECD published in November last year assessed the region-wide response to the pandemic. It said that many governments reacted “swiftly and pre-emptively” to the spread of Covid-19, but that they struggled to contain it due to the prevalence of informal employment and the pre-existing limitations of health infrastructure and social protection systems. The countries covered by the report (Argentina, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Paraguay, Peru, and Uruguay) had on average 60% informal employment which made it in many cases “impossible to respect social distancing”. In May 2020, taking into account that nearly 40% of the world’s Covid-19 deaths were concentrated in the LAC area, the World Health Organisation (WHO) declared it to be one of the epicentres of the global pandemic. The OECD says that approximately 140m people in the region’s informal sector receive no state support, and therefore must “work to live”. This means they may be forced to ignore social distancing guidelines, purely as a matter of day-to-day survival.

Percentage of informal employment in selected Latin American countries, 2018 or latest available year

Source: OECD

At the economic level, the report says Latin America was already experiencing slow or negative growth before the pandemic hit, and that governments also had limited fiscal space (available budget funds or borrowing capacity) to respond to a major shock such as the pandemic. Sectors such as travel and tourism were particularly hard hit, reducing household income and private consumption. Falling commodity prices led to a sharp downturn in regional markets and currencies. The IMF had initially predicted average economic growth of 1.6% of GDP in 2020, but it rapidly cut that down to an expected contraction of 8.1% (in the October 2020 edition of the World Economic Outlook). This represented the worst recession in the past century, a downturn that would exceed in severity the Covid-19 recessions induced in other parts of the world such as the Middle East, Africa, and Asia.

COVID-19 Cases, Deaths, and Mortality Rates in Latin American/Caribbean (LAC) Countries (countries with more than 2,000 deaths, as of March 9, 2021)

Source: Johns Hopkins University School of Medicine, Coronavirus Resource Center

On 2 June the media reported that the government led by Mexico’s President Andrés Manuel López Obrador is no longer seeking to nationalise lithium production and instead has plans to attract private investors to extract the metal, which is mostly used to make batteries. In an interview with Reuters, Senator Alejandro Armenta of the ruling Movimiento Regeneración Nacional (Morena) party, and who chairs the senate’s finance committee, said that he will submit a legislative bill in September that seeks to regulate Mexico’s incipient lithium industry. 

Senator Armenta’s announcement was a significant departure from earlier statements made by members of the government and Morena regarding their interest in nationalising lithium production. In March, President López Obrador said that his administration was considering playing a major role in lithium production and was seeking advice from the Bolivian government regarding its own nationalised lithium extraction model. However, by May, Economy Minister Tatiana Clouthier stated that the government was considering public-private partnerships to develop a national lithium industry, suggesting that the state could have a 51% stake in any such venture. This is similar to Senator Armenta’s proposals.

The main lithium prospector in Mexico currently is Bacanora Lithium, a British-Chinese company that holds several concessions in the northern state of Sonora. The company claims that it will be able to extract lithium through a process that involves acid leaching. It currently claims that it will start production of some 17,500 tonnes (t) of lithium carbonate by 2023 (after delaying its initial start date of 2020). Bacanora Lithium also claims that it will subsequently be able to increase production to 35,000t per annum, which would turn Mexico into a major producer. Global lithium production in 2020 was around 82,000t according to the US Geological Survey (this excludes US production). The graph below illustrates lithium production in 2020, as well as confirmed reserves as of January 2021.

Lithium Production in 2020 and Reserves

Source: US Geological Survey

The chart below shows the distribution of global lithium deposits according to the US Geological Survey. While Mexico does appear to have important lithium reserves, as shown by the chart below, it is not clear that commercial production at a significant scale is feasible.

Lithium Resources - global total 86 million tons

Source: US Geological Survey

Crucially, unlike in other countries where lithium is extracted from liquid brine reservoirs or from spodumene rock, Mexican lithium deposits are mostly found in clay soils. According to Fernando Alanis, the chairman of the Mexican mining chamber (Camimex), the lithium in Sonora and Zacatecas states has exceptionally low concentration levels and its extraction is extremely difficult. In a 5 May interview with Mexican daily, La Jornada, Alanis said that spodumene rock deposits have a lithium concentration of 5% per tonne of extracted rock; and liquid brine deposits - mostly commonly found in South America, which produces 74% of global lithium production- only have a concentration of 0.1% (although evaporation is an extremely cost-effective extraction mechanism, which makes up for the relatively low concentration of lithium in brine reservoirs). Meanwhile Mexico’s clay soil deposits have a concentration of only 0.001% per tonne, for which there currently is no cost-effective technology to extract.

In addition, any potential investors will be wary of the López Obrador government’s erratic and occasionally hostile rhetoric towards private firms, as well as its propensity to make decisions regarding investment projects using popular consultations, which significantly exacerbate uncertainty. Indeed, in his 16 June morning press briefing, President López Obrador said that he had not ruled out using a referendum to define whether the country’s lithium industry should be nationalised.

A second suspect was detained last week in relation to the 25 July murder of Carolina Echeverría, a former national legislator for the opposition Partido Liberal (PL) (2006-2010), who was seeking re-election in the 28 November general election. Her murder has reignited familiar concerns regarding political violence ahead of the vote.

A lawyer and former PL legislator representing Gracias a Dios department, Echeverría was killed in an armed attack on her home. While no clear motive has yet been established, her husband Andrés Wilfredo Urtecho Jeamborde, also a lawyer and a former national police (PNH) chief, who was injured in the attack, was clear that it was planned. In an interview with online media Proceso Digital, published on 28 July, he said the perpetrators knocked on the door dressed as doctors, asking to enter as they were aware that a member of the household (Urtecho) was infected with coronavirus (Covid-19) - information which was true and which he said a random attacker could not have known.

Echeverría’s murder was widely condemned - by the PL as well as other parties, including the ruling Partido Nacional (PN) which released a statement dated 26 July urging the authorities to bring the perpetrators to justice. The Honduran bar association (CAH) also released a statement condemning the killing.

With the authorities under pressure to establish who was behind the killing, days later the Instituto Universitario en Democracia, Paz y Seguridad (IUDPAS) of the Universidad Nacional Autónoma de Honduras (UNAH), which is monitoring political violence ahead of the elections, published its second bulletin which registered 35 victims of political violence between 20 December 2020 and 26 May 2021. According to the IUDPAS 30 July report, the incidents include 12 homicides, 11 instances of intimidation, six threats, five attacks, and one abduction, with the PN, the party most affected.

• Political affiliation of victims

The IUDPAS 30 July report on political violence showed that as regards the political affiliation of the victims, most were linked to the PN - 21 of the 35 - followed by the main opposition party Partido Libertad y Refundación (Libre) (eight); PL (five); and Partido Anticorrupción (one).

The politically motivated incidents, which led the IUDPAS to urge authorities responsible for public security to “bolster protection” ahead of the vote, has prompted fears of a repeat of the violence which characterised the previous 2017 electoral cycle. Controversial due to the fact that President Juan Orlando Hernández, who previously held office from 2013-2017, ran only after a 2015 contentious supreme court ruling lifted a constitutional ban on presidential re-election, the election was widely slammed as fraudulent and post-electoral violence resulted in at least 23 dead, 16 of whom were shot by security forces according to the Office of the United Nations (UN) High Commissioner for Human Rights (OHCHR). An IUDPAS report on the 2017 electoral cycle (before and after the election) registers a total of 50 homicide victims (candidates of different political parties, relatives, activists, or protesters).

Voter intentions

With voting intention surveys few and far between, a poll released in May by Centro de Estudio para la Democracia (Cespad), a local think-tank, showed that the PN’s presidential candidate Nasry Asfura would win in November, with just 14.9% of the vote, followed by Xiomara Castro (Libre), on 11.7%, and Salvador Nasralla (Partido Salvador de Honduras) and Yani Rosenthal (PL), on 7.9% and 6.6% of voting intentions respectively. The survey also reflected ongoing disillusionment with the political class, stemming from longstanding complaints about corruption and the lack of any meaningful electoral reform. It showed 51% of respondents did not know for whom they would vote or did not answer. It also showed that 47.98% of respondents said they did not have a party preference followed by 20.56% who named the PN; 11.53%, Libre; and 10.59%, PL.