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ARGENTINA | Coming out of recession. The domestic economy registered 0.3% year-on-year growth in the first quarter of the year, and 1.1% growth compared with the final quarter of 2016, Argentina’s national statistics institute (Indec) reported on 21 June. These results break the trend of three consecutive quarters of negative year-on-year growth and technically mean that Argentina’s economy is no longer in recession but is now undergoing a tentative recovery after posting three consecutive quarter-on-quarter positive GDP growth results.

Argentina’s year-end GDP result in 2016 was -2.3%, so the return to positive growth is encouraging for the government led by President Mauricio Macri, which is now hoping that the domestic economy can attain the official growth target of 3.5%. Following the release of the first quarter results, Finance Minister Nicolás Dujovne stated that “We believe the economy will grow at a rate of around 3% this year.” This projection may be marginally lower than the current official target but it is still higher than the consensus forecast of private economists of 2.6%. However, the emerging economic recovery provides the Macri government with clear evidence that its economic policies are having a positive impact, just as the pre-campaigning ahead of the 22 October mid-term federal legislative elections gets underway.

URUGUAY | Unemployment starts to fall. National unemployment stood at 8.5% in April, half a percentage point lower than the 10-year record high rate of 9% recorded the previous month, Uruguay’s national statistics institute (INE) reported on 22 June.

This is the first time that the monthly unemployment rate has fallen since the start of the year, bucking a negative trend that had raised concerns among local economists that even though the domestic economy has been consistently growing and avoiding dipping into recession, this had not stopped the loss of jobs. Yet the INE figures show that April’s unemployment is one decimal higher than the 8.4% rate recorded in the same month last year, suggesting that a lot more jobs need to be created before there is a significant reduction in unemployment.

The latest opinion surveys ahead of the 1 April presidential second round run-off show the two contenders – Fabricio Alvarado Muñoz of the small conservative Partido Restauración Nacional (RN) and Carlos Alvarado Quesada of the ruling centre-left Partido Acción Ciudadana (PAC) – in a technical tie. Further compounding uncertainty ahead of the second round, Costa Rica’s two main parties, Partido de Liberación Nacional (PLN) – which registered its worst-ever electoral performance in the first round in February – and Partido Unidad Social Cristiana (PUSC), remain deeply divided, offering little guidance to their support base as to which Alvarado to back.

The most recent survey by the centre for research and policy studies (Ciep) at the Universidad de Costa Rica (UCR), released on 23 March, showed Alvarado Muñoz on 43% of voting intentions, just ahead of Alvarado Quesada, a former minister of labour (2016-2017) and human development & social well-being (2014-2016), on 42% (within the 2.8% error margin). Alvarado Muñoz took 24.99% of the vote in the February first round to 21.63% for the PAC candidate. The same survey, which also revealed that 15% of the 1,202 respondents were undecided, showed that while the RN candidate had attracted more support from those who abstained from voting in the first round, Alvarado Quesada had more success in winning over those who had voted for other parties. That Alvarado Muñoz, an evangelical preacher, remains a polarising figure was suggested by the fact that 37% of respondents said they would never vote for him (compared with 25% who said they would never vote for the PAC candidate).

With the latest surveys shedding little light as to who will assume the presidency on 8 May, the PLN and PUSC, which took 18.63% and 15.99% of the vote respectively in the first-round contest, remain divided over which candidate to back. On 23 March, Alvarado Quesada presented a document calling for a “national unity government” in which PLN heavyweights declared their support for the PAC candidate. Signatories included former justice minister Fernando Ferraro (2012-2013); former education minister Leonardo Garnier (2010-2014); and Vicky Ross Gamboa, the running mate of the PLN’s defeated presidential candidate Antonio Álvarez Desanti. Alvarado Quesada already received explicit backing earlier this month from the PUSC’s defeated presidential candidate, Rodolfo Piza, along with his running mate Edna Camacho, a former deputy finance minister (1998-2002) who is now the coordinator of Alvarado Quesada’s economic team.

Yet Álvarez himself has thrown his weight behind Alvarado Muñoz, who on 7 March presented his economic team which featured figures closely linked to the PLN. These include Gerardo Corrales, part of Álvarez’s economic advisory team, along with former ministers Edgar Ayales (finance, 2010-2014); Alfredo Volio (agriculture & economy, 2006-2007); and Rubén Pacheco (tourism, 2002-2006). While the PUSC’s presidential candidate may have plumped for Alvarado Quesada, other PUSC members have backed the RN candidate. These include the country’s former vice-president Lineth Saborío (2002-2006) and former presidential candidate (in 2006) Ricardo Toledo.

Church involvement in RN’s campaign stokes controversy

Religion unexpectedly played a key role in the first round after January’s ruling on same-sex marriage by the Inter-American Court of Human Rights (Corte IDH) propelled Alvarado Muñoz to victory and shook-up the political establishment, exposing deep conservatism within Costa Rican society. (A Ciep poll released in January showed 67% of respondents were against the ruling).

Concerns regarding the involvement of the religious establishment in the election have intensified ahead of the run-off. Article 136 of the constitution outlaws the use of religion for political propaganda in any form, and earlier this month the electoral authorities (TSE) reprimanded the Catholic and Evangelical churches for using religion to influence the vote. Most recently, on 26 March, the TSE ordered the RN to refrain from invoking religious motifs in its campaign. This was after receiving 86 complaints following media reports of an event which took place on 16 March in which Alvarado Muñoz met some 250 evangelical pastors whom he reportedly asked for economic support. In its 26 March order, the TSE also warned that these parallel economic contributions could breach electoral legislation if not reported correctly.

• Religion

The latest report on international religious freedom released by the US State Department in 2017 cites a 2013 Ciep survey which estimates that 72.8% of Costa Rica’s population is Catholic, 14.8% Protestant (including evangelical Protestants), 3.6% other religious groups, and 8.4% without religious affiliation.

The government led by President Mauricio Macri has come under pressure from all sides as it continues to struggle to convince Argentines, financial markets, and the international community that its economic policies are sound and can fix the country’s current economic problems. The government’s inability to reduce inflation, its insistence on maintaining its plans to increase utility tariffs to help reduce the fiscal deficit, and its controversial decision to seek financial assistance from the International Monetary Fund (IMF) has produced significant political tensions and is once again leading to widespread public discontent. In this scenario, the Macri administration will need to rely on its ability to cut political deals to ensure governability.

Following the painful political defeat suffered by the government last week when the opposition-controlled federal congress approved a bill that aimed to roll back the utility tariff increases it has implemented and limit any future increases [WR-18-21], President Macri responded defiantly and vetoed the bill. Macri delivered a televised address on 31 May in which he explained the reasons for his veto. Macri said that, while painful, the tariff increases are necessary to balance the domestic economy and the government’s books by reducing the onerous energy sector subsidies.

• Utility tariff increases

President Macri said that if his veto is overturned and utility tariff increases are capped it would cost the government Ar$115bn (US$4.6bn) and that as a result it would have to cut spending on social programmes, among other things.

Macri went on to call on the political opposition in the federal congress to take this into consideration and to accept his veto rather than attempt to overturn it. He also appealed for understanding from all those civil society groups and trade unions that have been demonstrating against the tariff increases, and the high cost of living, and urged them to be patient and to have faith that his government’s policies will eventually lead to lower inflation and sustainable economic growth.

Macri once again defended the decision to turn to the IMF insisting that this was a contingency measure that would ensure that his government has access to sufficient funds to avoid a financial crisis. He was adamant that any deal his government reaches with the IMF will not lead to the imposition of painful conditions.

However, Macri’s message fell on deaf ears. The opposition, led by the Partido Justicialista (PJ, Peronists), the largest party in congress, criticised the veto as “anti-democratic”. They accuse Macri of favouring the interest of energy firms over the Argentine people and threatened to overturn the veto (which would require two-third majorities in both chambers of congress). This was supported by those civil-society groups that had been protesting against the tariff increases and they staged mass demonstrations outside the federal congress on 1 July demanding the repeal of the veto.

Meanwhile, the unions, led by the Confederación General del Trabajo (CGT) umbrella union movement, began demanding the opening of a new collective salary negotiation for this year, arguing that the inflation rate remains above the 15% government forecast on which the last such negotiations were based. The CGT threatened to stage a general strike this month if the government refused to heed its demand.

The threat of a general strike that would further undermine economic activity prompted an immediate reaction from the government. After the three CGT leaders announced that they would be holding a meeting on 7 June to analyse calling a general strike, the government invited them to hold an emergency meeting with Treasury Minister Nicolás Dujovne and the deputy cabinet chief, Mario Quintana, that same day to discuss their grievances.

The government’s hope is that Dujovne, who is also leading the negotiations with the IMF and who has announced that all economic policy decisions (including government spending cuts for this year) will now depend on the outcome of these negotiations, will be able to dispel the general strike threat. Should Dujovne fail, the next few weeks could prove to be testing for the Macri administration.

An attack carried out by a group of hackers targeting the computer systems of Mexico’s state-owned oil firm, Pemex, has produced significant concern about cyber security in Mexico. The hackers, who have managed to seize control of some of Pemex’s computers, have demanded the payment of a ransom in exchange for their release. The fear is that other Mexican firms could be targeted by such attacks, as these also appear to have weak protections.

Pemex reported that it was a victim of a cyberattack on 13 November. A company statement said that its computer systems and network were targeted by unidentified hackers on 10 November, and while many of the attacks were neutralised, the hackers had succeeded in seizing control of 5% of the firm’s computers. The statement emphasised that the attack had not affect Pemex’s operations, as its main operating systems had not been compromised and that hydrocarbon production and supply were continuing normally. It also said that Pemex computer engineers were working to try to recover the computers that had been hacked. Reuters reported that Pemex servers and thousands of employee accounts containing potentially sensitive files had been seized by hackers.

Local sources reported that the hackers who managed to infiltrate the Pemex systems (reportedly via ransomware malicious software) were demanding a US$5m ransom to allow Pemex access to its systems which, according to Reuters, included the company’s payment system. Mexico’s energy minister, Rocío Nahle, confirmed on 13 November that a ransom was being demanded. Nahle did not confirm what the amount demanded was, but she insisted that Pemex was not going to pay any ransom and that its engineers would continue to try to regain access to the hacked devices and accounts. Nahle also refused to say what systems had been affected but she did reveal that most of the hacked computers were in Pemex’s main headquarters in Mexico City.

Nahle was questioned by reporters over whether the recent cuts to Pemex’s budget could have weakened its cybersecurity systems. Local sources have noted that programmes aimed at improving the security of Pemex’s computer network were launched in 2014 but their implementation has been delayed following the restructuring of Pemex conducted by the previous government (2012-2018), designed to reduce costs at the financially troubled firm, and the cuts to Pemex’s budget implemented by the incumbent administration as part of its government austerity programme. Nahle denied this saying that any firm is at risk of being affected by such attacks. “Big firms are exposed to hacking, viruses”, Nahle said insisting that Pemex’s security systems are adequate and that any firm could have fallen victim to the attack.

In fact, Nahle said that other state-owned firms, such as the federal electricity committee (CFE), the state-owned utility, could also be targets for such attacks. Computer security experts agreed with Nahle that any company is now liable to be targeted. But they disagree with Nahle’s assessment that Pemex’s cybersecurity mechanisms are adequate. They note that a report published in June by the Auditoría Superior de la Federación (ASF), the federal government’s federal oversight body, warned that not all of Pemex’s computer systems were appropriately protected and that there was a high risk that the firm could be targeted after it terminated contracts with third party computer security firms in December as part of a cost-cutting drive. According to the experts, as a result of this cost-cutting move, the levels of cybersecurity at Pemex are now below acceptable standards for such a large firm and they have recommended that cybersecurity standards be improved at Pemex and all government entities.

Targeted attack

Computer security experts said the number of speculative ransomware attacks such as the 2017 WannaCry attack that affected computers worldwide have become less common in recent years. Instead they said that cybercriminals have become more selective in their attacks, targeting firms or networks that they perceive to be vulnerable, and from which they believe they can secure a payment. In this sense the consensus view among the experts is that the attack on Pemex was targeted, although they do not believe that its objective was necessarily to deliver a blow to Mexico’s domestic economy by taking out critical infrastructure at Pemex so as to thwart all of its operations.  

HONDURAS | Latest poverty figures. On 30 January the Honduran government presented new poverty statistics which were calculated using a more precise methodology by the national statistics institute, with the support of the Inter-American Development Bank (IDB), Honduras’ central bank (BCH), the World Bank (WB), and the United Nations Economic Commission for Latin America and the Caribbean (Eclac).

Under the old method, in 2018, 61.9% of Hondurans were classified as living in poverty, with 38.7% living in extreme poverty. However, the price of a basic food shop, which forms part of the calculation of poverty rates, had not been updated since 1978, and so the new report used more recent prices. Additionally, the new report included Christmas bonuses and the value of a person’s home in the calculations. Under the new method, statistics show that 48.3% of Hondurans live in poverty, and 22.9% live in extreme poverty.

Ecuador’s fiscal deficit has fallen significantly from over US$7bn in 2020 (around 7% of GDP), to US$3.7bn in 2021 (around 3.5% of GDP) in 2021, thanks to a recovery in tax and oil revenue as well as adjustments in spending. President Guillermo Lasso’s government estimates that this year the deficit will fall further, to around 2% of GDP, a projection it may even surpass with the help of an unexpected oil income windfall.

According to central bank figures, between 2009 and 2019 Ecuador ran an average fiscal deficit of around 3.6% of GDP, as public spending became the main motor of growth, financed primarily by the oil boom and, after crude prices plummeted in 2014, increasing debt. In 2019, short of cash and convinced of the need for structural changes to the economy, the Lenín Moreno administration (2017-2021) signed an Extended Fund Facility (EFF) agreement with the International Monetary Fund (IMF), with “fiscal sustainability” being the principal objective. The EFF programme, which was renegotiated under Moreno in 2020 and under Lasso in 2021, seeks to achieve this through sustained reductions in spending and reforms to increase revenue from ‘permanent’ sources of income. Foremost among these permanent revenue streams is taxation, which has represented around 40% of total state income in recent years as opposed to non-sustainable oil income, which has represented around 22%.

With the arrival of the coronavirus (Covid-19) pandemic in 2020 the health of Ecuador’s public finances unsurprisingly deteriorated, as tax and oil revenues took a serious hit at the same time as social spending was temporarily increased to mitigate the social impacts of the pandemic. Nonetheless, despite GDP not yet recovering to 2019 levels, the Lasso administration was able to almost halve the deficit in 2021, impressing both investors and the IMF. The swift improvement owes primarily to the rebound in tax and oil revenue. In year-on-year terms, Ecuador’s tax-take increased by US$1.2bn to hit US$12.7bn in the first eleven months of 2021, the most recent dates for which figures are available. Meanwhile, oil exports in 2021 totalled US$8.6bn, up from US$5.2bn in 2020. The government has consolidated the fiscal recovery by reducing permanent spending, which fell by US$441m last year; this was largely due to cuts to public sector payrolls and purchasing, aided by lower debt interest payments.

Short of a crisis, this fiscal consolidation will continue this year, with the finance ministry expecting the deficit to fall to around 2% of GDP, aided by continued upturns in tax and, in particular, oil revenue. Tax income will be boosted by the ongoing recovery from Covid-19, as demonstrated by the 19% increase in revenue in January 2022 compared to the same month in 2021. Later this year Ecuador’s fiscal consolidation will be further propelled by the tax reform passed last November, which is expected to rake in an additional US$2bn over 2022 and 2023 [EB-22-01].

With respect to oil incomes, global supply pressures following Russia’s invasion of Ukraine have supercharged crude prices far above the US$59 per barrel base scenario factored into Ecuador’s 2022 budget. Increased state revenue makes it much less likely that Ecuador will turn to markets for financing as the IMF programme draws to a close this year, as Lasso has himself indicated. Nonetheless, the improved fiscal scenario has also started to generate social and political pressure for enhanced public works spending, the absence of which has been notable in recent years. Thus, the Lasso administration’s next challenge will be to balance these demands with its objective of ensuring durable fiscal sustainability.

Brazil’s general election four years ago was widely considered to have been blighted by fake news. Although disinformation and distortions of facts had featured in previous electoral cycles, the scale of fake news and the role played by social media in spreading it in the 2018 elections was unprecedented. Fake news went on to be a constant feature of the four years that followed, often spread by President Jair Bolsonaro himself and his supporters. Implementing safeguards against disinformation ahead of the October 2022 elections was therefore of paramount importance to the country’s institutions.

As the 2022 election campaign kicked off earlier this year, there was a sense that the country was better equipped to deal with fake news. Steps had been taken by the electoral authorities and big tech platforms to better flag fake news and restrict its dissemination, while the phenomenon as a whole is now better understood by society, thus making it easier to spot. Bolsonaro and his allies’ campaign to discredit Brazil’s electronic voting system, which raised concerns about Brazilian democracy itself [SSR-22-02], made efforts to debunk disinformation all the more crucial.

A programme to fight disinformation, set up by the supreme electoral court (TSE) in 2019, was made permanent in 2021, and involved partnerships with over 150 political parties, civil society organisations, social media companies, and government institutions to monitor and flag disinformation, disseminate accurate information about the election, and train society to identify misleading content. Even famously private messaging app Telegram signed up to the programme earlier this year after a faceoff with Brazil’s judicial authorities [SSR-22-04].

WhatsApp, which was used for a mass messaging campaign believed to have benefited Bolsonaro’s election in 2018, also sought to clean up its game and collaborate with Brazilian authorities. WhatsApp is the primary messaging app used in Brazil and, according to a September survey by the Reuters Institute for the Study of Journalism, Brazilians trust the news they read on WhatsApp more than news media in general (they also trust Google more than news in general, but consider Facebook, Twitter, and TikTok to be less reliable sources). The messaging app, owned by Facebook parent company Meta, now caps the number of group members to 256 and flags messages that have been forwarded multiple times. The platform has created a channel to receive complaints and suspended accounts for misconduct.

Writing in Americas Quarterly just ahead of the October general election, Cristina Tardáguila, the founder of one of Brazil’s first fact-checking platforms Agência Lupa, argued that Brazil was well-prepared to tackle fake news this year. “It’s clear that Brazilians, including the authorities, are much more alert and ready to combat those lies [peddled by parties and candidates],” she wrote.

Yet, despite this foresight and preparation, Brazil’s 2022 election campaign was awash with fake news, coming from both sides of the political spectrum. This completely distracted from a debate of any substance and pushed electoral authorities into taking sometimes questionable decisions in a bid to try and contain the flood of disinformation.

Cannibalism and Satanism

This year’s election ultimately saw former president Luiz Inácio Lula da Silva (2003-2011) beat incumbent Bolsonaro in an extremely tight runoff. With the country deeply polarised, both candidates eliciting high rejection rates, and a stronger than expected performance from Bolsonaro in the first round, the runoff campaign centred around a toxic exchange of misinformation-based attacks. The result was not only an absence of discussions about actual policy, but also a constant back-and-forth with the courts, with requests for retractions and rights to respond, and orders for content to be taken down.

• Elections

Lula beat Bolsonaro with 50.9% of the vote, the closest election in Brazilian history. Almost a month after the election, Bolsonaro had yet to explicitly concede, although the transition of power was moving forward. Meanwhile, hardcore supporters of the outgoing president refuse to accept the results. To read the latest analysis on Brazil’s election runoff and the transition period, see our sister Latin American Weekly Report.

One of the more absurd pieces of fake news to circulate against Lula was the news that he had made a pact with Satan to guarantee his victory (leading his team to publish a statement clarifying that Lula had never had dealings with the Devil), while Lula’s side jumped on old videos of the president and extrapolated their content to associate Bolsonaro with evils ranging from cannibalism to paedophilia. Content associating Lula with criminals from drug trafficking organisations also frequently did the rounds on Bolsonarista WhatsApp groups and Telegram channels.

André Janones

The intense use of social media to spread distorted or simply untrue information has long been a tried-and-tested technique of the Bolsonaro camp. The STF has been investigating the existence of a supposed ‘hate bureau’ within the very Bolsonaro government, that was supposedly tasked with spreading misinformation about the government’s critics, including members of the high court itself [SSR-20-07].

In 2018, the campaign of leftist Fernando Haddad was caught short by the barrage of vitriolic and sometimes simply absurd fake news that came its way. But this year, Lula’s campaign had a new asset: the support of André Janones, a prolific social media user and federal deputy for Minas Gerais.

Janones was first elected to congress in 2018, having raised his profile online with his support for a lorry drivers’ strike earlier that year and anti-establishment discourse. At the time he swore to back neither Bolsonaro nor Lula. But this year Janones, who had initially considered a presidential bid for his centrist Avante party, announced his support for Lula.

Sometimes described as a “social media phenomenon”, Janones tried to beat the Bolsonaristas at their own game, engaging in what he recognised to be a “digital war” of fake news. His methods raised some eyebrows but there is a consensus that he wrongfooted the Bolsonaro camp on a few occasions to Lula’s advantage.

The proliferation of fake news and personal attacks eventually led the TSE to approve a resolution to increase its own powers to fight disinformation. On 20 October, 10 days before the runoff, the TSE voted in favour of giving itself the power to order the removal of content it deemed misleading, incorrect, or offensive without first turning to the prosecutors, while social media platforms were given two hours (down from 24) to comply with the demand.

The measure, which was upheld by the STF, elicited criticism for essentially concentrating the power for determining what constitutes or not fake news into the hands of Alexandre de Moraes, a supreme court justice and head of the TSE. For some the move was necessary in the face of the barrage of fake news flooding the election campaign; others worried that it was a misguided attempt to limit disinformation; others still – the Bolsonaristas amongst them – cried censorship and slammed it as another case of judicial overreach.

The election results and widespread international recognition of Lula’s victory did not put an end to the floods of fake news in the country. Thousands of radical Bolsonaro supporters refuse to accept the results and weeks after the election, some remained camped outside military barracks demanding that the armed forces intervene to prevent Lula returning to the presidency. Getting their news from WhatsApp, these individuals have at various points believed the fake news that Justice de Moraes had been arrested and even that Lula had died. 

The bitter infighting within Bolivia’s ruling left-wing Movimiento al Socialismo (MAS) engendered by the determination of former president Evo Morales (2006-2019) to run for top office yet again took a new turn this week. Tensions have been escalating between Morales and the government led by President Luis Arce for months, with neither politician prepared to back down in their pursuit of the presidency in 2025. But this time a new actor was drawn into the internal acrimony: Álvaro García Linera. Morales lashed out at his longtime former vice president after García Linera cautioned that factionalism could result in electoral defeat for the MAS and urged both Arce and Morales to make way for a new generation in the party.

García Linera suggested in an interview last week that Morales and Arce would split the vote and that the current president of the senate, Andrónico Rodríguez, was “the face of the Bolivia that we have created” and would be the best candidate to stand for president for the MAS. “[Rodríguez] represents the new popular, indigenous, and professional Bolivia,” García Linera said, arguing that it was time for “the next generation of indigenous MAS to lead a second phase of the plurinational state”. He said the torch was not being passed on because “the old leaders are clinging on”.

Morales did not take kindly to his comments. He accused García Linera on 25 February of becoming “one more enemy…siding with the empire and the right”. Morales insinuated that García Linera was bitter because he would no longer be his vice presidential candidate. “If I had been vice president of a comrade for 14 years through good times and bad I would defend him to the hilt if he was loyal, with principles, morals, and ethics,” Morales said.

If Rodríguez, 35, shares García Linera’s view that it is time for a new generation to assume the mantle of leadership within the MAS he was not giving anything away. An ally of Morales within the Seis Federaciones del Trópico de Cochabamba faction of the MAS, Rodríguez thanked García Linera for his comments but insisted that they were “very particular to the former vice president and not official decisions”. Rodríguez insisted that he was fully focused on his legislative role and was not “promoting candidacies, least of all my own”.

Morales was anointed as the MAS presidential candidate last October in a party congress which also saw the expulsion of Arce, but the supreme electoral tribunal (TSE) ordered that the internal elections be nullified and restaged. On 29 December the plurinational constitutional tribunal (TCP) upheld a 2021 ruling from the Inter-American Court of Human Rights (Corte-IDH) declaring that indefinite re-election is not a human right [WR-24-01], and a president could not serve for more than 10 years. In doing so the TCP overturned a 2017 ruling obtained by Morales domestically to allow him to sidestep a constitutional bar on re-election.

Citing the TCP ruling, the justice minister, Iván Lima, told journalists on 26 February that Morales was ineligible to run for the presidency. MAS lawyers, loyal to Morales, disputed this interpretation of the TCP ruling, arguing that it did not apply to Morales who was not currently president. They also contended that Morales had not served for 10 years as president; they said his first term did not count because it was under the old constitution and his third term was cut short, meaning he had actually only been in office for nine years and nine months.

Bond issuance

Bolivia’s central bank (BCB) announced a dollar-denominated bond issue on 26 February with terms to maturity ranging from three months to three years and yield rates of between 4.5% and 6.5%. The bond issuance forms part of the 10 measures announced by the economy minister, Marcelo Montenegro, last week after consultation with representatives of prominent private firms to address the shortage of US dollars and mounting fiscal deficit [WR-24-07].

*** SUPPORT FOR OIL DRILLING BAN IN THE BAHAMAS. A survey that was organised by Bahamian environmental lobby group Our Islands, Our Future (OIOF) has shown strong support in The Bahamas for a permanent ban on drilling for oil. The survey was completed in December 2023 and included 400 respondents. It showed 86% of participants supporting legislation for a permanent ban on all fossil fuel exploration. Only 4% of respondents said that they oppose a ban on oil drilling. Also, 74% said that they support moving away entirely from the use of fossil fuels and replacing these with renewable energy.

Rashema Ingraham, the executive director of NGO Waterkeepers Bahamas, one of the founding organisations of the OIOF coalition, said: “This survey is the strongest evidence to date that the Bahamian public opposes any further attempts to gamble with our future through the reckless, dangerous practice of fossil fuel exploration. Clearly, Bahamians at large recognise that there is no such thing as ‘safe’ oil drilling and that we simply have too much to lose in terms of our tourism and fisheries industries, the lifeblood of so many communities and households. We encourage [Prime Minister Philip Davis’ government] to take legislative action in accordance with public opinion and its own stated agenda of creating a sustainable future for The Bahamas.”

The ruling left-wing Partido dos Trabalhadores (PT) has chosen Edinho Silva as its next national party president, succeeding Gleisi Hoffmann, who led the party during its most turbulent times. It is unclear if Silva will be able to strengthen the party’s status as the spearhead of the Brazilian left. With his four-year term due to start in August this year, Silva will chair the party during the 2026 general elections and will be responsible for negotiating electoral alliances with centrist and conservative parties to ensure that they do not rally behind candidates aligned with the far right.

Hoffmann assumed the party presidency in 2017, when Brazil was still in the midst of the political earthquake resulting from the sprawling Lava Jato corruption investigation which implicated members of the PT and other establishment parties. After Lava Jato, public trust in the PT plummeted and many of its centre-left members defected to other parties. Hoffmann’s leadership was marked by her vocal support for left-wing causes, with rhetoric to galvanise the party faithful who did not jump ship after Lava Jato. She stepped down from the role in March this year after President Luiz Inácio Lula da Silva appointed her as his institutional relations minister.

Silva’s tenure is expected to be more moderate rather than providing much in the way of red meat for the party’s more left-wing supporters. According to some media outlets, Silva’s victory, which was confirmed on 7 July, will come as a relief to Finance Minister Fernando Haddad. Hoffmann had frequently taken to social media to criticise hawkish monetary policy decisions by the central bank (BCB) and even criticised Haddad when he advocated for more fiscal discipline, whereas Silva is known to be a more centrist figure who is likely to be less confrontational.

Despite his reputation as a moderate, Silva might need to align the PT with the messaging from the presidential palace. Lula has not yet confirmed his re-election bid for the 2026 presidential race, but it is expected that he would be the most competitive left-wing candidate and may need to ride the wave of polarisation to defeat whichever right-wing rival he might face. In recent weeks, Lula has been using his public speeches and media interviews to hammer home a narrative of social justice, arguing for the need to increase taxes on the wealthy.

Silva served as the mayor of Araraquara municipality, São Paulo state, from 2001-2009 and again from 2017-2025, so he is keenly aware of how fierce an electoral battleground the state can be. Unfortunately for the PT, the 2024 mayoral race for Araraquara resulted in a defeat for Silva’s chosen successor, Eliana Honain (PT), and a victory for Luís Cláudio Lapena Barreto of the right-wing Partido Liberal (PL). This is only one municipal election from 2024 and does not necessarily mean that the PT has lost its hold over all towns and cities in São Paulo, but shoring up the party’s influence in the country’s most populous state is likely to be a major priority for Silva.

Although Silva won an overwhelming majority of votes, with over 73% of party members choosing him, the PT is likely to remain divided on how to win over voters next year and might not agree with a more centrist approach. Silva has previously spoken of the importance of engaging with working-class voters by learning from the narratives of right-wing figures who appeal to entrepreneurialism; for example, by seeking to make gig economy workers feel like they are self-made businessmen rather than a class of exploited labour, even though this messaging would go against the PT’s historical identity and roots in Brazil’s trade union movement in the 1970s-1980s.

Popularity

On 8 July Brazilian polling firm AtlasIntel released new figures showing public approval for President Lula at 47.3% while disapproval was 51.8%. This latest approval rating is up from 45.4% in AtlasIntel’s previous poll in May, while the disapproval rating is down from 53.7% in May. The poll also included a section about voter intention for the 2026 presidential race. If Lula were to face São Paulo’s governor, Tarcísio de Freitas, in the second round, 47.6% of survey respondents said they would choose Lula, while 46.9% would vote for De Freitas. If Lula’s second-round opponent were Michelle Bolsonaro, 48.0% would choose Lula and 47.5% said they would vote for the former first lady.

The United Nations climate change conference (COP30) in the Amazonian city of Belém, running from 10-21 November, is considered the top highlight of the foreign policy calendar this year for Brazil’s government led by President Luiz Inácio Lula da Silva. World leaders gathered in Belém in the days before the start of the summit, and Lula had a chance to promote Brazil’s green credentials and climate finance proposals. The first day of the summit also got off to a relatively smooth start, with no delays in agreeing on the agenda of the conference. However, there are still tensions, not only regarding the diverging interests of governments but also with civil society groups, with some activists making headlines by attempting to storm the restricted zone of the conference venue on 11 November.

From 6-7 November President Lula chaired a leaders’ summit in Belém before the main COP summit. At the precursor event, Lula had the chance to have one-on-one meetings with leaders such as Germany’s Chancellor Friedrich Merz, France’s President Emmanuel Macron, and Portugal’s Prime Minister Luís Montenegro.

The main highlight was the launch on 6 November of the Tropical Forests Forever Facility (TFFF), a financing mechanism led by Brazil that aims to raise US$125bn in public and private funding to support global rainforest conservation efforts. Brazil has already pledged US$1bn to the TFFF, and some other governments have also announced financial support. Indonesia pledged US$1bn, Norway has promised US$3bn, France has promised over US$500m, and Portugal has pledged US$1m.

However, the lack of support from the world’s two largest economies for the TFFF could be a blow to Lula’s ambitions to promote Brazil-led multilateral climate initiatives. Neither the US nor China has contributed to the mechanism and neither country’s president, Donald Trump and Xi Jinping, even came to Belém.

The Chinese government sent a delegation led by Vice Premier Ding Xuexiang, while the US federal government did not send any officials to COP30. The US was instead represented by Democrat state governors, such as California’s governor Gavin Newsom and New Mexico’s governor Michelle Grisham.

Another point of tension looming over COP30 was the criticisms by environmentalists over the Lula government’s support for oil exploration in the equatorial margin. In a separate event in Belém on 12 November, prominent Brazilian indigenous activist Raoni Metuktire said that he will continue pressuring the Lula administration to stop backing plans to drill for oil in the Amazon.

• Oil exploration

On 20 October Brazil’s environmental regulator (Ibama) approved plans for the state oil giant Petrobras to explore for oil in an offshore block near the mouth of the Amazon River [WR-25-42].

The previous day, on the second day of COP30, dozens of protesters, including some indigenous activists, tried to enter the Blue Zone of the COP venue, a restricted area where government delegations conduct negotiations, but they were stopped by security guards. The protesters reportedly carried placards expressing various demands, including calls to stop drilling for oil in the Amazon region.

A bright spot from the opening day of the conference highlighted by the national and international press was the swift agreement on the agenda of the conference; in some previous COP summits, negotiations were delayed due to disagreements over the points to be discussed. However, the summit has only just begun, and it is unclear how the final agreement will look, especially the sections regarding the responsibility of wealthy countries to fund climate adaptation and climate-related losses and damages in developing countries.

Controversial points

According to media reports, various country delegations at COP30 wanted to add more points to the summit’s official agenda, but these proposed issues for negotiation will be discussed in separate, informal consultations overseen by the COP president André Corrêa do Lago.

These issues include the implementation of Article 9.1 of the Paris Agreement, which obligates developed countries to provide climate finance, as well as questions over trade barriers relating to environmental concerns.

Some Brazilian media reports suggested that Corrêa do Lago might make a decision based on these informal consultations by 12 November, but at the time of writing no announcements have been made and no changes have been added to the official COP30 agenda.

Other forms of US military pressure against Venezuela preceded and ran in tandem with Maduro’s ouster under Operation Ultimate Resolve. There were two main components. One was a series of attacks to destroy so-called ‘go fast boats’, high-powered speed boats navigating in international waters in the Caribbean and in the Pacific and allegedly used for transporting drugs. According to the official narrative these boats were, and still are, being used by transnational criminal groups for the purposes of drug and people trafficking into the US. Many of these criminal groups had earlier been designated by the Trump administration as foreign terrorist organisations (FTOs). Part of the administration’s rationale for capturing Maduro was the claim that he was directly involved in FTO activities threatening US interests. The US Navy also seized several Venezuelan oil tankers for allegedly violating long-standing US-imposed oil sanctions. US officials, including the president, said that revenue from sanctioned oil sales would be controlled by the US government.

As an example of these ongoing operations, on 23 January US Southern Command reported it had struck a boat in the eastern Pacific, killing two of its crew (a third survived). The navy said the boat had been sailing along a “known narco-trafficking route”. By late January, after four months of these US strikes, a total of 36 boats had been destroyed, with the death toll of crew standing at 125. The US government claims the strikes are part of the lawful pursuit of organised criminals. However, many legal experts reject that view saying that in the absence of due legal process – including the right to trial in a court of law – the deaths must be considered unlawful extrajudicial killings. Opposition members of the US Congress believe they also may be considered war crimes.

Writing for the UK-based Royal United Services Institute (RUSI) analysts Gil Guerra and Emma Isabella Sage say Trump’s justification for military attacks against presumed Venezuelan cartels “is testing the limits of US law and policy…and in this case the end may not justify the means”. They note that the administration’s case is internally inconsistent, the target is amorphous, and there is no clear end-state.

One inconsistency is the claim that Venezuela is a major source of drugs entering the US. In fact, according to the US-compiled Consolidated Counterdrug Database, around 210 tonnes of cocaine transit Venezuela each year on the way to the US, representing less than 10% of the total volume entering that county every year. In fact, about 90% of cocaine entering the US every year does so via Colombia and Mexico.

The RUSI experts add that bypassing the US congress while seeking to ratchet up military pressure on Venezuela is a high-risk approach. The US president might find himself unwittingly escalating a “special military operation” into a “small war” at a time when his supporters question the “forever wars” pursued by his predecessors and his popularity is under pressure ahead of upcoming mid-term elections. Mistakes – such as unintended civilian deaths caused by US military action – could lead to escalation. Tellingly, the authors say that despite legitimate reasons to intervene in Iraq, the US and its allies sought to base the war on the unproven presence of weapons of mass destruction. When that proved false, support for the war collapsed. They argue a similar story could play out in Venezuela, with the White House using “exaggerated narratives” to portray criminal gangs as terrorist groups. “When that narrative inevitably unravels under scrutiny, the administration will have squandered credibility it could have spent on more defensible interventions” the authors conclude.

Ecuador’s health system is in crisis, with the country facing shortages of medicines and having cycled through seven health ministers since President Daniel Noboa took office in November 2023. In his state of the nation address on 24 May, Noboa said that an agreement with India would soon open the doors to a “great purchase” of medicines. This cannot come soon enough. As well as being felt in public hospitals, the shortages are now also spreading to health centres which are focused on treating less serious conditions.

A long list of health ministers have successively failed to get a grip on the crisis in the public healthcare system. A 3 December article by local media outlet GK outlined the various causes of the problem, highlighting a steadily decreasing budget for the public health ministry from 2023 to 2025 (falling from US$3.22bn to US$2.80bn); a failure to use the full allowance in these budgets to purchase medicines and equipment; and a lack of forward planning that has been compounded by the regular rotation of health ministers. One minister in particular was roundly criticised for lacking any experience in the health sector; Édgar Lama, who held the role from February-May 2025, had previously been employed as a legal adviser at the Noboa family’s business conglomerate, Corporación Noboa.

The medicine shortages, which have been escalating for months, are growing increasingly acute. Local media outlet Primicias reported on 10 March that the shortages, which were already being felt in hospitals, are now trickling down to health centres that offer more basic care. This suggests that the shortages are expanding from specialised or expensive drugs and are now affecting more day-to-day healthcare products. Primicias previously reported on 2 March that the public health ministry needed around US$687m for purchases of medicines and equipment as outlined in its 2026 operating budget, but that it had been awarded just US$300m by the finance ministry. Of the US$687m total, 72.4% related to medicines, 22% to medical devices, and the rest to surgical equipment.

During his 24 May state of the nation address to congress, President Noboa said that his administration had reached an agreement with India to import “top-level” medicines that have been approved by the US Food and Drug Administration (FDA). He blamed the shortages on “mafias” who he said had been skimming funds destined for medicines whose value they had inflated. In its analysis of Noboa’s speech, Ecuadorean radio station Radio Centro stated that some public hospitals, such as the Teodoro Maldonado Carbo in Guayaquil, had been overpaying by as much as 1,088% in some medicine purchase contracts.

Noboa did not expand on the deal he said his government has reached with India. And he certainly did not elaborate on whether the medicine shortages are being compounded by the trade war he opened with Colombia at the start of the year in response to Colombia’s alleged failure to confront criminal groups in the border region.

A 20 April analysis of central bank (BCE) import statistics by Ecuadorean newspaper Expreso stated that medicine imports from Colombia, which account for around 14% of Ecuador’s medical supply, began falling sharply in February, when the 30% tariff rate came into force (it was subsequently raised to 100% in May before falling to 75% in June). The article highlighted an 87% drop in imports from Colombia of anaesthetics, an 81% drop in penicillin, and a 55% drop in vitamins in comparison with February 2025.

Noboa meets Vance

President Noboa met US Vice President JD Vance at the White House on 13 May, while President Donald Trump was travelling to China for talks with President Xi Jinping. After the meeting, Noboa wrote on social media that “Ecuador and the US are fighting against enemies that don’t recognise borders”. He said that “today we continued to strengthen an alliance based on strength and the decision to confront drug trafficking together”. According to a statement from Ecuador’s presidency, Noboa and Vance “reaffirmed strategic cooperation ties on security, trade, human mobility, energy, and other issues which Ecuador and the US have in common”.

President Dilma Rousseff’s new industrial policy, dubbed import substitution industrialisation 2.0 (ISI 2.0), is forcing multinationals that want a slice of Brazil’s dynamic domestic market to set up shop locally. As one commentator put it, the main tenor of ISI 2.0 is, “We like imports made in Brazil”.

Brazilians consumed a staggering 185m tins of the energy drink Red Bull in 2011, representing growth of 20% year-on-year. Red Bull was the first energy drink to arrive on the local market back in 1999 and it has consolidated a firm hold on the sector, with a 48% share of the R$500m (US$290m) market in December 2011, according to Nielsen data. Its main rival locally is Burn (distributed by Coca-Cola), with an 18% market share. Cheaper alternatives have around a quarter (25%) of the market. The local drinks giant Ambev got in on the action in early 2011, launching its Fusion Energy Drink.

Brazil represented 4% of Red Bull’s global market sales of 4.6bn tins in 2011.  Red Bull is now returning the favour, announcing that it is in talks to open its third manufacturing facility – and its first outside of  Europe (Austria and Sweden)  – in the Brazilian city of Manaus (the capital of Amazonas state), with a R$509m (US$296.5m) investment over three years.  The factory, to be sited within the Manaus free zone to avail of its attractive tax incentives (import taxes for companies based in the zone are slashed by up to 88%), will have an annual production capacity of 64m litres, or 206m tins.

The move is well-timed, ahead of the 2014 FIFA World Cup and the 2016 Olympics in Brazil. Red Bull has a long association with sports, sponsoring two Formula One motor racing teams. In Brazil itself, the company owns a football club, Red Bull Brasil, based in Campinas (São Paulo), which won a local league title in 2010. It also sponsors some 10 Brazilian surf and skating professionals. Burn is a keen sponsor of extreme sports like snowboarding, skiing and skateboarding.

Yuppie farmers drive up Jaguar-Land Rover sales

Elsewhere, Jaguar-Land Rover, since 2008 owned by the Indian firm Tata, has also confirmed its plans to build a factory in Brazil. Ralph Speth, the company’s CEO, told Dow Jones in early February, “Brazil and the rest of South America is a very interesting market. It is also an emerging market, growing very aggressively. We are thinking of a kind of a copy-paste facility of the Indian plant in Brazil.”

That is exactly what the Rousseff government wants to hear, underlining that the decision in September 2011 to aggressively raise taxes on imported inputs has had the desired effect – pushing international manufacturers to set up shop locally, creating jobs.

In October 2011, Renault-Nissan also announced a second manufacturing facility in Rio, as well as the extension of its plant in Paraná. Aside from the usual wealthy urban markets of São Paulo and Rio, Jaguar-Land Rover is also enjoying a surge in sales up north, not least in the country’s booming agri states. Brazil and China are the leading growth markets for the car industry, offsetting the massive slump in Europe and the US. According to Speth, the company is seeking a joint-venture partner in China to build an assembly plant there for an estimated US$158m.

Mexican tempers rise over auto pact ‘review’

It’s not all happy camping, however. On 2 February Brazil’s external trade secretary, Tatiana Lacerda Prazeres, confirmed that the Rousseff government was “reviewing” its decade-old auto trade pact (Economic Complementarity Agreement) with Mexico, amid a surge in imports from its northern neighbour.

Brazil’s imports of Mexican cars and car parts rose 40% year-on-year in 2011 to over US$2.0bn, while its auto exports to Mexico came to just US$372m. The 2002 bilateral auto pact liberalised the trade in vehicles and parts made in Brazil and Mexico. In September 2011, Brazil announced that it would lift its tax on industrial products (IPI) by 30 percentage points (to a maximum 55%, depending on engine size) on vehicles failing to meet stricter local content rules. The new measure, effective as of December 2011, stipulated that locally-based manufacturers must source at least 65% of contents from Mercosur or Mexico. Effectively, it is a barrier to imports.

The upshot, however, was that many locally-based manufactures like Fiat simply switched their supply chains from places like Poland to Mexico.  The depreciation of the Mexican peso last year also means that labour and other costs in Mexico are now cheaper than in Brazil, making the Mexican auto sector ever more competitive. Given this turn of events, Brazil now proposes scrapping the accord with Mexico altogether, a radical move that would likely provoke a strong Mexican reaction.

A high-profile Mexican delegation ended two days of negotiations with the Brazilian government and motor industry officials on 9 February, but failed to clinch a deal. Mexico is refusing Brazil’s demands to renegotiate, pointing out that for the first six years of the accord. Brazil ran large surpluses with Mexico. The Mexican delegation also pointed out that thanks to the pact the bilateral auto trade has more than doubled from US$1.1bn in 2003 to US$2.5bn in 2011. It noted that between 2003 and 2011, Mexico’s cumulative trade deficit with Brazil in vehicles was about US$10bn.The two sides agreed to hold another round of meetings in Mexico on 28-29 February.

Playing by the rules

On 31 January the external trade ministry published a list of locally-based auto manufacturers that avoided the increase in their IPI tax bills under the new local content rules. These are: Agrale, Caoa (Hyundai), Fiat, Ford, General Motors, Honda, International Indústria Automotiva da América do Sul, Iveco, MAN Latin America, Mercedes-Benz, MMC Automotores do Brasil, Nissan, Peugeot, Renault, Scania, Toyota, Volkswagen and Volvo. Notably absent is Toyota.

WTO complaints

In late January seven governments came together at the World Trade Organisation (WTO) in Geneva to allege protectionism in Brazil’s domestic automotive industry. Australia, Colombia, the European Union, Hong Kong, Japan, South Korea and the US said that Brazil’s move as of December 2011 to hold stable the tax on industrial products for automotive manufacturers using (65%+) local components was “inconsistent” with international trade regulations. However, the complainants admitted that a formal case was unlikely, as it would probably not be taken up before the end of the temporary measures, which were implemented for a 12-month period.

Auto Sales

According to Brazil’s national association of automotive manufacturers (Anfavea), new vehicle registrations (cars, semi-light vehicles and buses) rose 9.6% year-on-year in January 2012 to 268,273 units. Sales fell 23.2% month-on-month over December 2011, amidst an adjustment in sales of buses and lorries to take account of new environmental regulations.

Breaking down the figures, sales of locally produced vehicles rose 73.0% year-on-year (but fell 21.2% month-on-month); sales of imported units rose 17.9% (but fell 27.9% month-on-month).  Imported vehicles accounted for 25.3% of total new registrations in January.

Despite weaker domestic conditions, Anfavea still expects overall growth of up to 3% in 2012, to reach 3.475m units. A recent report by ScotiaBank forecast total car sales in Brazil of 2.83m units in 2012.

• Top three

GM (23.6%), Volkswagen (21.6%) and Fiat (21.5%) had 66.7% of the domestic Brazilian market between them in January 2012, according to the latest Anfavea figures for new registrations.

The night of looting in the province of Córdoba on 3 December was “exclusively the responsibility of Governor Jose de la Sota,” according to the federal government cabinet chief Jorge Capitanich. One man was killed, 60 injured, and 52 arrested when at least nine supermarkets were looted during a police strike triggered by a pay dispute. De la Sota, a dissident Peronist with a long record of public criticism of President Cristina Fernández, fought back on Twitter, claiming that his appeals for federal help had fallen on deaf ears. As a result of the bad blood between the president and the governor, federal funds have often been delayed, which De la Sota argues has been the major factor in the social and political unrest in the province.

Police had been demanding a salary of at least Arg$13,000 (US$2,100). When negotiations broke down on the afternoon of 3 December, the police force held a meeting to decide their next move. While locked in an assembly, looters began to appear in the streets, targeting some of the main supermarkets in the eponymous provincial capital. On 4 December, the police negotiating team accepted a settlement that would see the highest paid - patrolling police officers - receiving Arg$11,600; “the highest police salary in Argentina,” according to De la Sota.

Córdoba’s police force last came to national prominence in September this year, when Rafael Sosa, the head of the anti-narcotics police division in the province, was arrested on drug trafficking charges. Some local legislators accused the federal government of embellishing the allegations against Sosa as a way of discrediting De la Sota.

De la Sota, a co-founder and leader of the ‘renewal’ movement within the ruling Partido Justicialista (PJ, Peronists), has presidential ambitions of his own. Long a critic of Fernández, ahead of the October mid-term national legislative elections he urged the public to cast “votes that will make the President reflect”. The looting, which occurred while he was on a trip to Panama, will undermine those plans.

On his return, De la Sota toured local TV and radio stations, claiming that he had requested the assistance of the Gendarmería, Argentina’s federal police force, but had received no reply from the government. Capitanich flat-out denied the government had received any such phone call. The cabinet chief said that the national administration would “monitor the situation” but stressed responsibility for the conflict “lies strictly with De la Sota.”

• Expensive summer holidays

On 3 December the government announced an increase in the fees charged on debit and credit card purchases made by Argentines abroad, in an attempt to reduce the outflow of dollars. All card purchases “for tourism and travelling purchases” outside of Argentina will now be subject to a 35% fee, up from 20%.

Cabinet Chief Jorge Capitanich said the increase was necessary to safeguard the economy. “We believe that there is a drain of foreign currency via tourism operations. We must be very careful in the administration of reserves.” The central bank’s dollar reserves have fallen by around 30% this past year.

In an attempt to reduce capital flight and hold on to international reserves, the government first imposed controls on foreign exchange at the end of 2011, ruling that all currency purchases must be pre-approved by the AFIP, the federal tax agency. Increasingly strict controls have been added since then, with locals no longer able to purchase dollars for savings and a ‘tax advance’ surcharge added to purchases made abroad.

This has created an underground market for the exchange of dollars on what is known as the ‘blue’ dollar rate. The gap between the two rates is currently around 50%, though it has reached as high as 80%. On 4 December, a dollar was worth Arg$6.16 and traded at Arg$9.22 on the black market. With the 35% tax, the tourist dollar that residents will have to pay on their credit cards when they travel abroad is about Arg$8.30.

• Another cabinet change

On 4 December María Cecilia Rodríguez was sworn in as the government’s new security minister, replacing Arturo Puricelli. Rodríguez, a member of the Kirchnerista youth movement La Cámpora, had previously worked in the social development ministry led by Alicia Kirchner. This is the fifth change to President Fernández’s cabinet since she returned to her duties following her 40-day medical leave.

PERU| Optimistic 2015 budget. On 10 September in his last act as Peru’s economy & finance minister, Luis Miguel Castilla, presented the draft 2015 budget to the national congress. Based on the expectation that the economy will make a full recovery from its current economic slowdown, the budget forecasts GDP growth of 6% next year. The Peruvian economy has undergone a marked slowdown since mid-2013, sparking concerns that after more than a decade of posting 6.5% average growth, it is now running out of steam. However, in presenting the PEN130.62bn (US$46.48bn) budget, Castilla said that while the slowdown was more pronounced than expected, with official growth forecasts for this year revised down to 4.2% from 5.7%, this would be fully reverted next year, with the economy to resume its medium term growth trend. Castilla also pointed to encouraging signs that global economic activity is picking up, which should help boost falling demand for Peruvian exports. He added that in support of the recovery the government led by President Ollanta Humala would continue to adopt “appropriate measures” to ensure that Peru’s economy does not stagnate. Castilla said that the 2015 budget, nominally 12% higher than this year’s, was part of government efforts to inject more public funds into the economy to “close gaps” and further stimulate growth. Besides a weaker demand for Peru’s exports, the low level of domestic economic activity this year has been attributed to a fall in private investment, estimated to have decreased by as much as 5% since the start of the year. According to Castilla, US$2.68bn of the 2015 budget has been earmarked for government investment programmes with an additional US$769m assigned for the economic and social sectors. In keeping with the government’s key objective of promoting ‘growth with social inclusion’, Castilla also noted that 40% of the budget would go on promoting social development with a focus on education, health and national security. The problem for the Humala government is that, while positive, the latest domestic economic figures are far from encouraging. The day after Castilla quit and was replaced by Alonso Segura Vasi, on 15 September the national statistics institute (Inei) released the latest official growth figures for July. While the 1.16% July growth figure was four times higher than the 0.3% registered in June (the lowest monthly rate since 2009), prompting the new minister to declare that the slowdown had bottomed out, it was still below the 1.95% consensus market forecast. While most sectors showed an increase in activity, key areas like manufacturing (-5.72%), mining (-1.61%) and construction (-6.02%) were all down. The latest Inei figures led local analysts to again cut their growth projections for 2014 to 3.9% and for 2015 to 5.5%, both lower than the revised official budget projections.

COLOMBIA| Moderate second quarter growth. On 16 September Colombia’s national statistics agency (Dane) released its latest economic figures which showed that growth in the first half of the year was a solid 5.4% year-on-year. The half year results came on the back of moderate 4.3% growth in the second quarter after the economy posted strong growth of 6.5% in the first quarter. A Dane report stated that growth in the first six months of 2014 was driven by the construction and financial sectors, which grew 14.2% and 6.1% respectively. However, the figures showed that economic activity began to slow in general in the second quarter even more than that expected. Prior to the release of Dane’s figures, local analysts forecast that economic activity would drop to 4.6%- considered the economy’s long-term quarterly growth potential- on the back of a seasonal fall in domestic demand. But the Dane report showed that while there was still above average activity in five of the nine economic sectors monitored by the agency, some key sectors including manufacturing (-1.4%) and mining (-2.2%) all posted negative growth. While this led the likes of the national entrepreneurs association (Andi) to express mild concerns, local analysts have said that the deeper-than-expected drop in activity may actually be positive as it could ensure that the economy does not overheat.

• Venezuela-Colombia contraband halved

On 11 September authorities in Colombia and Venezuela suggested that the Venezuelan government’s 9 August decision to temporarily close down the shared border every night (from 10:00pm to 5:00am) has led to a 50% drop in cross border contraband. Data from Colombia’s tax and customs police (Polfa) points to a 40%-50% fall in illegal trade in the Norte de Santander border department following the implementation of the measure. Across the border in Venezuela, the economic studies unit of Arauca state’s chamber of commerce estimates that contraband activity has fallen by 20%-30%. The findings have been hailed as “positive” by the president of the Colombo-Venezuelan chamber of commerce (CCV), Magdalena Pardo. But Pardo was clear that “more needs to be done to eliminate it”.

High levels of crime are frequently cited in general terms by investors and business leaders as one of the downsides of operating in Mexico. Those concerns have recently been given a sharp and specific focus by the murder of Adolfo Lagos Espinosa, a senior executive in the Televisa media group, one of the country’s top companies.

Lagos, director general of Izzi, Televisa’s telecoms division, and a corporate vice president, was shot dead on Sunday 19 November on the outskirts of Mexico City. According to a statement by the prosecutor general of Estado de Mexico (Edomex), Lagos was cycling with a friend and a bodyguard on the Tulacingo-Pirámides highway, when two armed thieves attacked them. There was an exchange of fire in which Lagos was mortally wounded; one of the assailants was also hit. The bodyguard was able to get Lagos into a car and to a hospital in Coacalco, but the executive died there shortly after his arrival.

President Enrique Peña Nieto and top members of the business community in the country condemned the murder. It once more raised the issue of whether the government is doing enough to combat high levels of crime. Gustavo de Hoyos, president of employers’ association Confederación Patronal de la República Mexicana (Coparmex), condemned the murder and demanded that the government take further action against the crime wave in the country.

Coparmex later issued a more detailed statement. It said, “It is urgent to halt the incidence of crime as this can affect growth and investment.” The organisation said Mexico’s security crisis required new actions from government and a systematic approach. “Immediate actions” were necessary to reduce rates of robbery and violent crime. Surveys conducted by national statistics institute Inegi show that crime is regularly listed as the number one preoccupation of respondents, followed by inflation, unemployment and corruption. Based on its regular victimisation survey, Inegi says 31.1m crimes were committed in Mexico in 2016, causing total losses equivalent to1.1% of GDP. Most crimes were robberies and assaults in homes, on the streets, or in public transport.

The Coparmex statement highlighted the effect on business. It said that in 2015, 35.5% of all companies in the country had stated they were the victims of some type of crime. Nine out of ten of these cases were not reported to the police (there are low reporting rates for all types of crime in Mexico, often attributed to low levels of trust in the effectiveness of the police). The Coparmex statement concluded with a call “to tackle and stop this growing problem”. It said it wanted local, state, and federal government to draw up security programmes.

Private security on the increase

There are over 6,000 private security companies operating in Mexico employing approximately 500,000 staff, according to an industry association, the Unión Nacional de Empresas de Seguridad Privada y Adherentes (Unespa), which held its annual meeting in December in Guadalajara. Unespa’s newly elected president, Francisco José Avelar, said the industry can trace its origins in Mexico back to 1948 when the first regulations covering the activities of private police and detective services were introduced. Avelar said however that the real growth in the sector had come from the 1980s onwards, when the economic crisis had led to a surge in both common and organised crime.

Today, regulation remained one of the big issues facing the sector. Avelar said there were many unregistered companies offering a dubious quality of service. “They put uniforms on people and they give them guns – that’s a big risk for the customers” he warned. It was necessary for those hiring security companies to check that they were reputable and properly registered to operate. “Society needs to know that hiring a cheap private security service could turn out to be very expensive in the long run,” Avelar said. Legislation governing the industry was strengthened in 2009. According to national statistics institute Inegi, the private security industry had grown by 56% in 2009-2015, equivalent to an annual growth rate of 9.5%, more than double Mexico’s overall GDP growth rate. Despite efforts to improve overall regulation, there were still a number of companies offering services such as site security, personal protection, cash and asset transfers which were unregistered and of uncertain quality.

President Mauricio Macri’s slender hopes of forcing a second round in Argentina’s presidential elections on 27 October appeared to be extinguished last week when inflation surged once again in Argentina. Monthly inflation in August hit 4%, according to the national statistics institute (Indec), as a result of the sharp depreciation of the peso in the wake of the heavy defeat inflicted on Macri in primary elections on 11 August. Shortly before Indec’s publication of the inflation figure on 12 September, the federal lower chamber of congress voted nearly unanimously to declare a food emergency until 2022. The senate followed suit six days later.

Indec’s inflation figure for August was unwelcome for President Macri but scarcely a surprise after the peso’s plunge. The monthly figure brought annualised inflation to as much as 54.5%. Food inflation for August reached 4.5%, providing justification, in the view of the main opposition Partido Justicialista (PJ, Peronists), for the approval of a bill declaring a food emergency in Argentina.

The ruling centre-right Cambiemos coalition reluctantly went along with the PJ in supporting the bill in the face of street protests, but disagreed with the characterisation of the current situation as a food emergency. It maintained that “the magnitude of the situation” had been overstated.

• Food emergency

Héctor Flores, a deputy for Coalición Cívica para la Afirmación de una República Igualitaria (CC-ARI), part of the ruling Cambiemos, took issue with the declaration of a food emergency in Argentina. Flores argued that “there was a social emergency when the economy wasn’t growing [in 2002] and there was a social emergency when we grew at Chinese rates [under Kirchnerista governments]”.

Under the declared food emergency, there will be a 50% increase in food assistance programmes, with budgetary resources to the tune of some Ar$10bn (US$178m) redirected from other areas, such as public works projects, to assist those in most need. Civil society groups, the Catholic Church, and trade union movements, such as the Central de Trabajadores de la Argentina-Autónoma (CTA-A) and Asociación Trabajadores del Estado (ATE), which staged a large street protest in central Buenos Aires on 10 September, had all backed the call for a food emergency to be declared. Groups of piqueteros gathered outside the federal senate on 18 September to exert pressure on senators not to vote any differently to their colleagues in the chamber of deputies six days earlier.

The Macri administration will hope that the approval of the food emergency will reduce the swelling social protests. But some protesting groups, such as the Trotskyist political party Polo Obrero, insisted that the declared food emergency would resolve nothing, and called for an increase in social subsidies. They are demanding more money to mitigate the impact of the financial crisis, particularly on the poor and vulnerable. The problem for this and the next government is that money is in short supply.

A spokesman for the International Monetary Fund (IMF), Gerry Rice, intimated this week that the release of a US$5.4bn disbursement, which is due from the US$57bn Stand-By Arrangement (SBA), would be postponed. Rice said that “the complex market conditions and policy uncertainty going forward make the situation even more difficult”. Rice added that the IMF had “tried to help” and continued to be “fully engaged”, a non-committal epithet redolent of its reluctance to lend more money to Argentina when enormous uncertainty surrounds the immediate future.

The finance minister, Hernán Lacunza, is scheduled to travel to Washington on 26 September in order to meet IMF officials and discuss the release of the next tranche of the SBA. The imposition of currency controls by the Macri administration, creating a black market for US dollars, has contributed to the “complex market conditions” cited by Rice, while the “policy uncertainty” is an oblique reference to Alberto Fernández, who is odds on to win election on 27 October and take office in December for the radical PJ. Fernández has spoken of Argentina being in “a virtual, hidden default” and called for the need to restructure the country’s debts, including the SBA with the IMF.

At the height of a vicious election campaign in which both candidates were seen as potential threats to the rule of law, Peru’s now President Pedro Castillo and his right-wing opponent, Keiko Fujimori (Fuerza Popular), attended a joint event last May to pledge their commitment to transparency and democratic values. On 20 December a collective of 13 civil society organisations revisited those pledges with a report outlining eight ‘red alerts’ from Castillo’s first 120 days in office.

The unusual sight of both candidates assuring the public that they pose no threat to democracy demonstrated the deep unease with which both Castillo and Fujimori were viewed by much of the public. Since then, a harsh spotlight has been shone on Castillo’s conduct in office, and he has not emerged unscathed. Whilst Castillo insists that the many allegations of misconduct are merely a hangover from the bitterly fought election, the report by Plataforma Vigilantes (PV) portrays a presidency blighted by cronyism and mistrust of the press.

The report’s eight ‘red alerts’ accuse Castillo of backsliding on his May commitments to increase transparency; guarantee adherence to the ministerial code of ethics; not employ high-ranking officials with corruption records; not use aggressive rhetoric against journalists; not discriminate against particular media outlets; and guarantee meritocracy in the police and armed forces [SSR-21-12].

PV’s report did not cover what may become a far more serious issue for Castillo – his alleged overseeing of backroom deals on major infrastructure projects. On 4 January, Peru’s attorney general’s office (AG) announced that it had opened a preliminary investigation into Castillo after chief prosecutor Daniel Soria formally accused him of illicit enrichment and influence peddling. Those accusations stemmed from a series of unofficial meetings between Castillo and the private sector consultant Karelim López Arredondo which took place at Castillo’s private residence in Lima and were revealed by the local media.

The AG statement highlights claims that Castillo “intervened… in the public tender process for the construction of the Tarata bridge over the Huallaga river” in the San Martín region, resulting in the granting of a PEN232.5m (US$60.43m) contract to the Puente Tarata III consortium – López Arredondo’s employer. The AG added that it will also investigate Castillo’s alleged interference in “the acquisition of B100 biodiesel for the domestic market for the January-April 2022 period, with the result that the company Heaven Petroleum Operator [HPO], directed by Samir Abudayeh, won a contract worth US$74m.” The AG cited claims that this contract followed a meeting between Castillo, López Arredondo, Abedayeh, and Hugo Chávez Arévalo, the director of state oil company Petroperú, and noted that Petroperú announced plans to purchase the fuel from HPO on 21 October, just three days after the meeting.

The AG’s investigation does not immediately endanger Castillo, who is protected by presidential immunity until the end of his term in 2026. Nonetheless, it turns the heat up on a president already facing an extremely hostile congress that looks likely to present a further impeachment motion against him in the near future, after the failure of the December effort linked to his cabinet’s alleged sympathies for the Sendero Luminoso (SL) guerrilla group [SSR-21-11]. In the meantime, the scandal will do little to boost his popularity with a public that already seems accustomed to the lack of transparency in government, with an Ipsos poll published on 27 January finding that 63% of Peruvians generally disbelieve Castillo’s statements, while 50% suspect him of corruption.   

Corruption perceptions index

The Andean region did not fare well in the 2021 Corruption Perceptions Index, which was published by Berlin-based NGO Transparency International on 25 January. Colombia was the sole Andean country where perceptions of corruption diminished, with the country ranking 87^th out of 180 countries (improved from 92^nd in 2020). Peru fell 11 places in the table to 105^th, where it was tied with Ecuador – which, having fallen 13 positions down the rankings, had the worst deterioration of any Andean country. Bolivia slid down four notches to 128^th, while Venezuela was in a league of its own at 177^th, down one notch on last year, and only outdone by Somalia, Syria, and South Sudan.

MEXICO | Moody’s downgrades Pemex’s outlook. On 21 July, credit ratings agency Moody’s maintained its B1 rating of Mexico’s state-owned oil firm, Pemex, but downgraded its outlook from ‘stable’ to ‘negative’. In a note Moody’s said the change reflects its view that absent fundamental changes in Pemex’s business strategy, the company is likely to face increased credit risks, given its inability to increase capital investments and improve its financial and operating performance due to liquidity constraints.

Moody’s goes on to say that, while it expects that the government led by President Andrés Manuel López Obrador will continue to financially support Pemex, the new government elected in next year’s general election may find it hard to maintain the necessary level of support. “The next administration - which is set to take office in late 2024 – will find it increasingly burdensome to replicate what has been observed in recent years, the prospects of reduced fiscal space in the coming years would restrict the sovereign’s ability to provide support at levels comparable to those registered throughout the outgoing López Obrador administration.”

Moody’s downgrade came after fellow credit ratings agency Fitch Ratings downgraded Pemex’s Long-term Foreign and Local Currency Issuer Default Ratings (IDRs) on 14 July to ‘B+’ from ‘BB-’, citing Pemex’s weak operating performance and the environmental and social impact associated with multiple accidents at Pemex’s facilities since February, which have resulted in casualties and damages to critical infrastructure and assets.

Pemex, the world’s most indebted oil firm, must pay US$4.6bn in international bond maturities this year and US$10.9bn in 2024.

President López Obrador dismissed the downgrading of Pemex’s rating by two of the three main credit ratings agencies, saying “it is all a joke”. He said the opinion of credit ratings agencies “does not matter” and denied it would affect Pemex. Claiming that under his administration Pemex’s debt had “fallen”, López Obrador said the ratings agencies “act in accordance with their own interests” and are not objective.