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Industrial action by truck drivers in at least 12 states over the past week has impacted food production, exports and fuel supplies. Major roads in Pará, Ceará, Mato Grosso, Bahia, Goiás, Mato Grosso do Sul, Minas Gerais, Espírito Santo, São Paulo, Paraná, Santa Catarina and Rio Grande do Sul have been blocked by the truckers, who are demanding cuts in the prices of diesel and road tolls. The protesters also want President Dilma Rousseff to veto recent legislation that allows for variable shift patterns for drivers. Though the government is anxious to end the strike as soon as possible, the task is complicated by the lack of leadership among the drivers.

Around 58% of all Brazilian goods are transport by lorry, according to the ministry of transport. That percentage is even higher for agricultural goods. In 2013, 65% of the country’s soya was transported by road. Brazil is currently in the middle of the soya harvest. In Paraná and Santa Catarina, JBS, the meat wholesalers, has shut down eight production units, of fowl and pigs, as it is unable to guarantee the supply of feed for its animals. In some states, local courts have ordered the strikers to go back to work, on pain of severe financial penalties, but the drivers have yet to abandon their picket lines.

In some senses, the government has become a victim of its own success. While Brazilian infrastructure remains disappointing by most global comparisons, there have been some improvements over the past few years. In particular, waiting times on the access routes to the ports of Santos and Paranaguá have been much reduced, largely thanks to a new electronic booking system that assigns lorries particular time slots. As a result of this, and improved storage facilities for agricultural goods, freight costs have come down. This has attracted new players into the freight business, lowering the costs yet further.

As a result, the business is now fiercely competitive, meaning the truckers’ margins have been squeezed. The recent increase in the cost of diesel and road tolls has piled on even more pressure. According to the most recent data available, there are over 1m freight operators in Brazil, and 860,000 of them operate independently. If the strike continues, the truckers could easily clog the main transport arteries of the country. The government arranged its first meeting with the truckers and transport firms in the presidential palace on 25 February.

• Brazil’s Swiss bank accounts

According to the campaign group, Tax Justice, Brazil comes second in the world rankings for tax evasion, behind only Russia. Around US$280bn escapes the clutches of the Receita Federal each year, an amount which corresponds to 13.4% of Brazil’s GDP. It is perhaps unsurprising then that Brazilians should feature prominently among the individuals helped by the Swiss branch of HSBC to avoid taxes [WR-15-06].
The leak from the International Consortium of Investigative Journalists shows 6,606 bank accounts at HSBC linked to Brazilians, with a total amount of money deposited of US$7bn. Among the few names cited were Edmond Safra, the deceased banking mogul; the Steinbruch family, owners of the textile industry Vicunha and 11 people linked to ‘Operation Car Wash’, the investigation into the corruption scheme at Petrobras, including eight members of the Queiroz Galvão family.
Also named were 31 Brazilians linked to the companies which control Rio de Janeiro’s buses. Jacob Barata, 83, the “bus king”, who owns part of 16 different bus companies in the city. Between 2006 and 2007, Barata, together with his wife and children, kept US$17.6m in a Geneva branch of HSBC. After that period the money was transferred to a company called Bacchus Assets Limited, based in the British Virgin Islands, a well-known tax haven.

• Odebrecht and HSBC

Brazilian investigators believe the construction company Odebrecht, one of those under investigation for its role in the Petrobras scandal, paid bribes through bank accounts in the Swiss branch of HSBC bank. One of the State’s witnesses in the case, former Petrobras director Pedro Barusco, said he had 19 accounts in Swiss banks to receive kickbacks, totalling at least US$6m. As much as US$110m may have been deposited in HSBC accounts in Geneva by 11 people cited as having bribes in the investigation.

The Jamaican authorities continue to win plaudits from the International Monetary Fund (IMF) for meeting fiscal and monetary targets. Returning Jamaica to a path of growth that is sustainable and inclusive will be challenging, not least because the authorities are attempting reforms on many fronts.

On 16 June, the IMF completed the eighth review of Jamaica’s economic performance in accordance with an Extended Fund Facility (EFF) program. The EFF program gives the government access to around US$932m in IMF funds over the four years to mid-2017. The latest review resulted in the approval of a US$39.8m disbursement.

The IMF’s assessment was upbeat. It noted that the fall in the cost of oil imports over the last year or so, and the ending of a recent drought, should contribute to real annual GDP growth of around 2% in 2015-16 and lower inflation. Inflation has fallen to a 48-year low: this meant that the Bank of Jamaica (BOJ, the central bank) was able to lower its main policy interest rate by 25 basis points to 5.5% in mid-April 2015.

The IMF also pointed out that the Jamaican authorities had met nine of the 11 fiscal and monetary targets to which they had committed to achieve by March this year. [1] Only two targets – the primary balance of the central government and overall tax revenues – were missed, and then only narrowly. The IMF highlighted that the primary fiscal surplus is around 7.5% of GDP, another key objective for the overall program. Recent positive developments include rises in business and consumer confidence and, in April 2015, the government’s signature of a US$625m concession agreement for the upgrading and expansion of the Kingston Container Terminal (KCT). Development of the KCT is a central part of the government’s plan to promote Jamaica as a regional logistics hub.

The IMF identified a number of risks and challenges. One is the possibility that economic growth fails to improve significantly, with the result that the public ceases to support reform and fiscal austerity. Another is an external shock, arising possibly from a final tightening in monetary policy by the US Federal Reserve. In any event, the government has little ability to raise funds through issuance of bonds in the domestic market. Even if public sector debt diminishes as the IMF expects, it will still represent around 103% of GDP in 2020.

However, what makes Jamaica’s situation unusual is that the authorities are attempting reforms on many fronts simultaneously. The budgetary position should be strengthened by a reduction in costs and an improvement in revenues. The government is looking to cut the public sector wages bill from 9.9% of GDP in 2015-16 to 9% in 2016-17. Electricity payments will be subject to value added tax (VAT) and petroleum excise duty is being increased by JMD7 per litre. The Property Tax law is being amended, while the government is looking to introduce a Minimum Business Tax. The authorities are also improving the efficiency of tax revenue administration and management of cash. In March, the government appointed a new Chief Information Officer, who will direct the tax agency’s IT strategy.

Other changes involve the domestic bond market. By the end of the year, the BOJ will publish its first report on its move to an inflation-targeting policy framework. The central bank is also looking at ways to improve liquidity in the domestic bond market. To date, securities dealers in the bond market have relied on short-term deposit-like instruments (‘retail repos’) to finance their positions in bonds. The problem with this is that the dealers have effectively been borrowing short-term in order to make long-term loans. By the end of August 2015, it is hoped that retail investors will be investing substantially through a trust structure: this will mean that bond investments are held safely and that positions can be unwound in an orderly fashion in the event that a securities dealer finds itself in financial difficulties. In time, collective investment schemes (CIS) should play a more important role in mobilising investment into government bonds.

A number of structural reforms should promote economic growth over the long term. The authorities are looking to reduce the bureaucratic red tape that is needed for development applications and the establishment of businesses. In accordance with the government’s obligations to the World Trade Organisation (WTO), the existing Export Free Zones (EFZs) will be replaced by Special Economic Zones (SEZs). The SEZs may be a useful tool with which new businesses can be attracted to Jamaica, boosting employment. New credit bureaux and a collateral registry should make it easier for small and medium-sized enterprises (SMEs) to access credit. In any event, the Development Bank of Jamaica (DBJ) is increasing its lending to small businesses.

There are various other positive changes. In the electricity sector, moves towards Liquid Natural Gas (LNG)-powered generation should reduce energy costs. The Inter-American Development Bank (IDB) rates Jamaica as eighth out of 19 countries in the region for the government’s readiness and ability to undertake private-public partnership (PPP) deals such as the KCT: the country’s rating is improving. A preferred bidder for the privatisation of the Kingston airport should be selected in November 2015. Adoption and implementation of a new Customs Act should expedite clearance of imports through customs. Social reform programs include PATH, a conditional cash transfer program, and Steps To Work.

Looking forward, the IMF is confident that Jamaica’s economy can be moved onto a new trajectory of higher growth, greater job creation, improving social welfare and sustainable debt, thanks to ‘tremendous’ program implementation. The IMF’s next two reviews are scheduled for September and December 2015.

While risks and challenges exist, we would suggest that there are also a number of positive wildcards over the medium term. These include the possibility that growth surprises on the upside from 2016-17 onwards thanks to the development of the KCT, the benefits of the changes in the electricity sector and, perhaps, further growth in Jamaica’s tourism sector. Over the long term, the authorities hope that Jamaica will receive investment from companies in the business process outsourcing (BPO) industry.

GUATEMALA | Resolución favorable de la OMC. El 20 de julio la Cámara Agrícola de Guatemala celebró la resolución favorable por la Organización Mundial del Comercio (OMC) sobre la disputa comercial de Guatemala con Perú. Desde el 2001 Perú ha impuesto tarifas adicionales sobre un rango de productos agrícolas incluido el arroz, el azúcar, el maíz, y los productos lácteos cuando los precios de las importaciones de estos están por debajo de ciertos niveles. El Sistema de Franja de Precios (SFP), un sistema de bandas de precios, fue diseñado para proteger a los productores agrícolas de Perú, cuando los precios internacionales de los productos agrícolas llegan a niveles muy bajos.

Guatemala denunció esta práctica como una barrera discriminatoria al comercio, inconsistente con el Artículo 4.2 del Acuerdo Agrícola de la OMC y presentó una queja formal ante la OMC en el 2013 (a la cual se adhirieron terceros países, incluidos Argentina, Brasil, EU, Ecuador, Colombia, El Salvador, y Honduras).  Un panel de adjudicación de la OMC apoyó la queja de Guatemala en noviembre del 2014. Perú apeló la resolución sobre el hecho de que el SFP estaba basado en las reglas enmarcadas bajo el tratado de libre comercio (TLC) Perú-Guatemala, firmado en el 2011.

Pero la resolución ahora ha sido sostenida por la OMC. Esto fue saludado por la Cámara Agrícola de Guatemala, que dijo que “establece un importante precedente […] pues esta resolución […] garantiza que Perú mantendrá las reglas acordadas en un parcial acuerdo [económico] que firmó con Guatemala”.

De hecho, después de que la OMC emitiera su última resolución, el gobierno peruano difundió una declaración en el cual expresaba que aunque no estaba de acuerdo con la resolución, la cumpliría e implementaría todas las recomendaciones hechas por la OMC, incluida una completa revisión del SFP, dentro del marco de tiempo establecido para solucionar estas cuestiones (9 a 18 meses). Mientras que en el 2012 (después de que el TLC bilateral entrara en vigencia) Perú importó US$8,7m de productos agrícolas de Guatemala, esta cifra se incrementó a US$11,8m el año pasado, con el hule y el azúcar entre las exportaciones líderes de Guatemala al país andino.

With indicators still continuing to deteriorate, any green shoots appear very far away.

The index of industrial production (IP) fell by 10.9% year-on-year in September, according to the national statistics institute (Ibge,) the biggest fall since April 2009 (-14.1%.).  Industrial output has now fallen for 19 consecutive months, with an accumulated fall of 7.4% in the first nine months of this year.  The 12-month rolling rate, which fell by 6.5% in the period ending in September, registered its worst result since December 2009 (-7.1%)

As the table below indicates, there is little positive to find anywhere in the data, with capital goods output in particular continuing to register steep falls as the key auto sector, which accounts for about a fifth of the country’s industrial park, remains in the doldrums. This is heavily weighing on the headline figure but the picture is no better in other categories and is indicative of the depths of Brazil’s recession now.  The local consensus is now for a full year contraction of 7.4% in industrial output, followed by another contraction of 2% next year.

Layoffs continue

The metropolitan unemployment rate in September was 7.6%, up from 4.9% a year earlier. There are now almost 2m people unemployed, on official data (the true figure is likely higher). The unemployed population rose by 57% between September 2014 and September 2015, meaning that 670,000 more people are out of work/looking for work. Average earnings are also down, with workers taking home 4.3% less in September compared to a year ago, with earnings of  R$2,179, compared to R$2,279 12 months ago.

Monica de Bolle, visiting fellow at the Washington-based Peterson Institute of International Economics, expects unemployment to reach close to double digits within the next six to nine months. “I don’t think the situation has any chance of reversing right now. If the government manages to overcome its deadlock, the situation could turn stable by the second half of 2016, but the gloom would likely continue until then.”

The government led by President Michelle Bachelet last week unveiled a programme of 22 measures aimed at boosting the economy. The move came two days after Chile’s central bank (BCCh) announced that it was revising down its growth figures for 2016 – the latest sign of a continued slowdown caused in part by the fall in international copper prices, Chile’s main export. The leftist Nueva Mayoría coalition government claims that the latest stimulus measures were the fruit of negotiations with the private sector. However, the move comes amid strained relations with the private sector as the government attempts to pass a new labour reform – one of Bachelet’s key policy priorities.

Finance Minister Rodrigo Valdés announced the 22 measures on 30 March, flanked by the economy minister Luis Felipe Céspedes and deputy finance secretary Alejandro Miccom. Worth a total of US$8bn, the initiative comprises three main planks: expanding finance; promoting the export of services; and simplifying procedures for enterprise and investment. Without providing specifics, Valdés said that three of the measures were already in the process of being implemented; nine were being finalised via administrative means; and 10 were undergoing legal modifications.

In its report on the first quarter of 2016, released on 28 March, the BCCh forecast GDP growth of between 1.25% and 2.25% for 2016, down from 2.0%-3.0% forecast in its previous quarterly report released in December 2015. In its March report, the BCCh also expects growth to rise to between 2% and 3% in 2017. The latest BCCh figures for Chile’s Imacec (the monthly economic activity index which incorporates around 91% of the goods and services included in the country’s GDP measure), released on 5 April, showed growth of 2.8% in February 2016 compared with the same month in 2015, bringing the 12-month rate to 1.9%. The latest (January 2016) report by the United Nations Economic Commission for Latin America and the Caribbean (Eclac) puts Chile’s GDP growth at 2.0% in 2015, up from 1.9% in 2014.

While the government hailed the February Imacec figures as better than expected, in his statement announcing the 22 measures, Valdés acknowledged that “economic growth has been relatively disappointing in the last few years and also in the last few months”. He added that, “the external situation is not looking good, but it is out of our control. There are things we can do internally to grow more: let’s do them. Those we can control”.

Bone of contention

While likely to welcome the government’s latest attempt to boost the economy, the private sector is considerably less enthused over its efforts to pass a proposed labour reform bill which will strengthen trade unions. Among other things, the initiative makes it obligatory for large and medium-sized companies and voluntary for small businesses to negotiate with workers from trade unions across companies; forbids the replacement of striking workers, except to ensure continuity of “basic services”; and ratifies the right of unions to information in order to better negotiate.

A mixed legislative commission approved the labour reform on 5 April following its ratification by the senate and lower chamber in March. At the time of writing, the final version was due to be voted on in both houses. The umbrella trade union Central Unitaria de Trabajadores (CUT) [WR-16-11] had initially objected to a change introduced by the senate which struck out the provision requiring large and medium-sized companies to negotiate with workers from trade unions across companies (see box). However this was amended by the mixed commission and the final version was well received by the Partido Comunista de Chile (PCCh), a CUT ally and member of the Nueva Mayoría. PCCh Deputy Lautaro Carmona said that it “responded to the expectations” of CUT affiliates.

Private-sector organisations continue to come out strongly against the initiative. On 5 April Alberto Salas, the president of the Confederación de la Producción y del Comercio (CPC), which groups together businesses in the industrial, mining, banking, agricultural, and retail sectors, described the reform as “bad”, complaining that it only served “to strengthen the rights of unionists”.

Protests

Thousands of people took to the streets in Santiago and across the rest of the country on 22 March in protests organised by CUT against the proposed labour reform bill. More than 10 unions took part including the national teachers’ union, Colegio de Profesores de Chile; the journalists’ association, Colegio de Periodistas de Chile; and the health workers’ union (Fenpruss). CUT figures cited by the local press put turnout at more than 100,000 in Santiago with another 50,000 across the rest of the country.

• Popularity

The most recent monthly survey by pollster Cadem, published on 28 March, put President Bachelet’s approval at 24%, the lowest since September 2015. The Cadem survey, which interviewed 2,836 people and had a 1.8% margin of error, showed that the worst ranked areas of government were anti-corruption efforts (8%), followed by efforts to combat delinquency (11%).

The government led by President Pedro Pablo Kuczynski seems to be edging closer to releasing imprisoned former president Alberto Fujimori (1990-2000). His release would help smooth the government’s difficult relationship with Fuerza Popular (FP), the populist right-wing party led by his daughter Keiko Fujimori which has a majority in congress. But the how and the why is politically tricky.

Alberto Fujimori remains a deeply divisive figure in Peru – his government is remembered both for its economic success and for its political repression. Fujimori pére has been in prison since 2005, sentenced to 25 years’ incarceration for crimes against humanity (including responsibility for the murder of 25 people at the hands of the security forces) and for acts of corruption. He is 78 and in frail health.

President Kuczynski took a step towards debating some kind of release this week. On 24 April he said the government was studying the issue. On 26 April, at a ceremony to commemorate the 20^th anniversary of Operación Chavín de Huántar (a successful 1997 military operation to re-take the Japanese embassy from guerrillas and release 72 hostages) Kuczynski welcomed Keiko’s presence (this was the first official event the leader of the opposition had attended since last year’s election) and spoke of the need to “turn a new page” and seek reconciliation in Peru. Keiko later tweeted her agreement with Kuczynski’s words, adding, “Peruvians should build a common agenda supported by everyone”.

But how to release the former president poses some tricky questions. The government has ruled out issuing a pardon or passing any legislation that could be seen as tailor made to benefit one individual. FP has for long favoured a presidential pardon. It prefers any release to be part of a wider agreement on reconciliation.

Other parties and human rights groups remain potentially very hostile to any release. So a debate has begun, with various proposals starting to be discussed. Carlos Bruce, the official spokesman for the ruling Peruanos Por el Kambio (PPK) party said “If anyone asked me, I’d free Alberto Fujimori”. Bruce has suggested that a modification of the penal code might be appropriate to allow prisoners of a certain age and in certain states of health to complete their sentences at home.

Bruce’s idea was welcomed by Luis Galarreta, the FP’s congressional spokesman. However, Galarreta continues to argue that the simplest route to a release is for Kuczynski to pardon the elder Fujimori. Roberto Vieira, an independent member of congress who was expelled from the PPK, has already tabled a bill that would allow prisoners aged over 75 who have completed one third of their sentences and are in ill health to be released.

However, some of his former colleagues oppose the bill, noting it allows full release, rather than just house arrest which they would prefer; there are also differences of opinion over Fujimori’s real state of health. Juan Sheput, another PPK member of congress, has argued that any release should be part of a wider debate in which Fujimori’s victims take part.

Sheput also said that legislation should not benefit another aging prisoner: Abimael Guzmán, the notorious leader of the Sendero Luminoso guerrilla movement who is serving a life sentence, is 83 years old, and is in ill health. Finding a formula that allows Fujimori, but not Guzmán to be released could be challenging.

The government will also have to consider those who oppose the whole idea of releasing the elder Fujimori. One of them is the country’s main trade union organisation, the Confederación General de Trabajadores del Perú (CGTP), which has issued a statement describing the former President as the leader of a “corrupt and repressive” government responsible among other things for the assassination of Pedro Huilca, the CGTP general secretary, in 1992 (see sidebar).

• CGTP opposition

The Confederación General de Trabajadores del Perú (CGTP) said former president Alberto Fujimori should not benefit from a pardon or from an amnesty; neither should he be assisted by a general law designed to help specific categories of prisoners, as being currently discussed.

The Costa Rican NGO Fundación Neotrópica recently revealed the latest results of research which show that drug trafficking is a major driving factor in the deforestation of protected areas.

Research shows a correlation between known drug-trafficking routes and deforestation hotspots, a phenomenon known as narco-deforestation. In the latest May 2018 update on a long-running study carried out in conjunction with the US Texas State University and Oregon State University, experts describe the two main drivers of narco-deforestation as the establishment of drug-trafficking routes and economic activities linked to money laundering. The study focused on deforestation in five key areas in Central America: the Mayan Biosphere in Guatemala, the Mesoamerican biological corridor between Honduras and Nicaragua, the Jiquilisco nature reserve in El Salvador, the ACOSA (Área de Conservación Osa) region in Costa Rica, and the Darién Gap in Panama.

Protected areas such as these are the perfect target for organised crime groups, which can establish areas of territorial control out of reach of state actors. In many cases these protected areas are in border zones or international waters, which makes it easier for traffickers to transport their illegal cargo. According to a 2017 study published in the journal Environmental Research Letters, activity linked to drug trafficking accounted for 15%-30% of deforestation in Central America from 2000-2014, with protected areas and indigenous territories the worst affected. In order to establish trafficking routes, crime groups clear trees to make clandestine landing strips, roads and other necessary infrastructure. They also use the forest to launder dirty money from the drug trade, and one of the most common ways to do so is by clearing vast tracts of land to keep cattle that have been bought in poorly-regulated markets.

While narco-deforestation remains a huge problem, the study’s authors propose various potential solutions. As well as strengthening enforcement in protected areas and improving coordination between law enforcement services, they say that alternative models of governance should be supported. “In protected areas where the state doesn’t have much power, such as the Mayan Biosphere in Guatemala, community management of forestry concessions is the most effective method of protecting biodiversity,” said Jennifer Devine of Texas State University at a 16 May event presenting the latest research at the University of Costa Rica in San José.

Without community management, the lack of state control affects the safety of conservation officials and community leaders as the social fabric breaks down and people become fearful. “Communities are paying a very high price and various people have been executed for defending their territory inside the protected areas,” said David Wrathall, professor of natural hazards at Oregon State University at the event in San José. “Indigenous communities are forced from their land; they are the worst affected.”

• INCB

In March 2018 a report by the International Narcotics Control Board (INCB) for 2017 cited a study published in May 2017 which estimates that 15%-30% (1,500 to 3,000 ha) of the forest loss in Guatemala, Honduras and Nicaragua in the past decade was caused by cocaine trafficking. Of that forest loss, 30%-60% occurred within nationally or internationally protected areas. Such deforestation due to cocaine trafficking has been observed throughout the sub-region but is less severe in the other countries of Central America. The study links drug-trafficking to land purchases for illegal logging and cattle farming in order to launder money. Additionally, the construction of secret roads and clandestine airstrips to facilitate the movement of illicit drugs is cited as a factor contributing to forest loss.

“Never has Argentina conducted an [economic] adjustment of such magnitude without the [incumbent] government falling.” With these words Argentina’ finance minister, Nicolás Dujovne, greeted the news that a version of the zero-deficit 2019 draft budget tabled by the government led by President Mauricio Macri had been given final approval by the opposition-controlled federal senate. Securing approval of the budget is a major political victory for the Macri government, meaning that it can fulfil the commitment it has made to the International Monetary Fund (IMF) to eliminate the fiscal deficit by next year. However, the austere budget, which includes deep government cuts, remains unpopular, and Macri and the centre-right ruling Cambiemos coalition will have to work hard to maintain public support from now until next October’s general election.

The Macri government offered to reduce the primary fiscal deficit to zero in 2019 in exchange for the IMF agreeing to expand the credit line it had agreed to extend to Argentina by US$7bn to US$57bn. The Macri administration believes that this credit line will be sufficient to overcome the loss of confidence in the Argentine peso that has buffeted the domestic economy in recent months and provide a solid foundation on which to continue advancing its proposed economic adjustments aimed at fixing the country’s historic macroeconomic imbalances. But the government’s view is not shared by all, with some political opposition quarters opposed to any adjustment plan involving indebtedness to the IMF and having to accept tough economic prescriptions.

The resistance to the government’s budget was already on show last month, when its passage through the chamber of deputies was marked by an intense debate between Cambiemos and hard-line legislators from the main opposition Partido Justicialista (PJ, Peronists), and by mass public protests against the budget organised by local civil-society groups outside the congress building. This scene was repeated this week when the senate started voting on the budget on 14 November. The debate dragged on for 13 hours but in the end, much like in the chamber of deputies, the budget was approved with a vote of 45-24 with one abstention, after the minority Cambiemos bench succeeded in retaining the critical support of moderate PJ senators and splitting the majority PJ bench.

The approved budget maintains the projection of a primary fiscal balance next year down from the current deficit of around 2.7%, along with a GDP growth forecast of -0.5% and a year-end inflation projection of 23%. Both Cambiemos and moderate PJ senators recognised that these figures were far from ideal but insisted that the budget was what is needed at a time of “social and economic emergency in the country”. Senator Miguel Ángel Pichetto, the moderate leader of the PJ bench, said that he and his colleagues had opted to vote for the “least bad” option compared with the alternative of rejecting the government’s budget and potentially scuppering the financial life-line secured with the IMF.

However, hard-line opposition senators insisted that the budget and the economic adjustment plan does not address Argentina’s structural economic problems and would only result in Argentina once again becoming indebted to the IMF and in pain and misery for the population. “You don’t come out of a recession by cutting spending…what we are going to do with this budget is deepen the suffering of society and it will be a useless sacrifice,” former president and incumbent senator Cristina Fernández said, as thousands of people demonstrated outside congress. The danger for Macri is that if there is no improvement in the domestic economy – and in particular if the inflation rate does not start to fall – there will be growing public discontent that could lead to unrest in the short-term and an electoral defeat in next October’s polls.

• Triaca resigns

The intense negotiations that the government led by President Macri has been conducting with the opposition and local trade unions all week to try to garner support for its draft budget have taken their toll on the cabinet. The clearest example of this was the 14 November announcement that Labour Minister Jorge Triaca will step down on 3 December. Triaca’s resignation comes after he struck a deal with the unions under which the government established that private sector employees are to receive a Ar$5,000 (US$140.69) year-end bonus to help alleviate the loss of workers’ purchasing power resulting from Argentina’s high inflation rate, a concession to the unions that came at the expense of the private sector.

The past year has been a difficult one for Brazil as a whole, but the inhabitants of Manaus, the capital of the northern state of Amazonas, have arguably had it particularly tough: the city of two million deep in the Amazon jungle was one of the country’s worst-hit areas in both the first and second wave of coronavirus (Covid-19) infections; it has recently been affected by flooding due to heavy rains; and it is now suffering from a wave of criminally driven violence.

The violence, which has taken the form of vandalism with public vehicles and buildings being set alight, began over the night of 5-6 June. Authorities understand it to be retaliation from the Comando Vermelho (CV), a drug trafficking organisation (DTO), for the killing of one of its presumed members by the state’s military police (PM). Erick Batista Costa, known as ‘Dadinho’, died in a confrontation with the PM’s Rocam patrol on the evening of 5 June.

The violence continued through the start of the week, although it began to wane after 7 June. The Amazonas state governor, Wilson Lima, announced a stronger presence of the security forces on the streets of Manaus in a bid to bring the situation under control, and on 6 June requested reinforcements from the federal government. The justice ministry complied a day later, authorising the deployment of the national guard (FNSP). At that point, at least seven bank branches, eight public buildings (including a health centre), and 29 vehicles (including 18 municipal buses, two police cars, and one ambulance) had been set on fire in Manaus and some other municipalities.

As of 8 June, 38 people had been arrested in relation to the attacks, of whom four were believed to be CV leaders. The state’s public security secretariat (SSP-AM) announced the creation of a dedicated taskforce in the civil police to investigate the violence and plans to charge all those arrested with belonging to a criminal organisation. The order for the violent response to Costa’s death is believed to have come from inside one of Manaus’ prisons. The CV controls the drug trade and the prisons across Amazonas state since defeating rival DTO Família do Norte (FDN) in a turf war early last year; the region is an important one in the international drug trade, and not one the dominant DTO would give up without a fight.

It is the local population, already worn down by the impact of the Covid-19 public health crisis and the recent floods (see below), that bears the brunt of the DTO’s show of force. The vandalism disrupted public transport for over 24 hours and schools were unable to function normally at the start of the week. The local press reported that the city’s Covid-19 vaccination efforts had to be suspended on 7 June, and that many shops did not open, as residents stayed home out of fear. “There is fear, there is insecurity, because no one knows when the next attack might happen […] there is an appearance of calm, but the population is frightened,” Alexandre Hisayasu, a local journalist, told news site G1’s daily news podcast ‘O Assunto’ on 9 June.  

Wilson Lima under investigation

Governor Wilson Lima was the target of a federal police (PF) operation on 2 June, investigating the suspected embezzlement of emergency Covid-19 funds by the Amazonas state government. The PF are notably looking into suspicions of over-billing for the construction of a field hospital; the state’s health authorities are also under investigation. Lima rejects the allegations of wrongdoing. The investigation has sped up his being summoned to give evidence before the parliamentary commission of inquiry (CPI) in the senate, which is investigating the federal government’s handling of the pandemic as well as the use of emergency federal resources by state governments; Lima was called to appear before the CPI on 10 June, although he has been granted habeas corpus relief allowing him to refuse to go. 

Río Negro flooding

The Río Negro, one of the Amazon’s main tributaries which flows through Manaus, reached a new record depth on 5 June: 30 metres, the highest level since records began in 1902 and three centimetres above the previous record depth, measured in 2012. Heavy rains have been causing rising water levels for weeks, with flooding affecting neighbourhoods of Manaus and other cities upstream of the river since mid-May. An estimated 24,000 people have been impacted by the floods in Manaus alone, many of them displaced from their homes.

The chief prosecutor at the International Criminal Court (ICC) in The Hague, Karim Khan, announced on 3 November that the court will open a full investigation into alleged crimes against humanity under the government of Venezuela’s Nicolás Maduro. Khan’s announcement came at the end of a three-day visit to Venezuela and was hailed as “historic” by the Americas director of the NGO Human Rights Watch, José Miguel Vivanco, who noted that it is the first time that the ICC has opened a full-scale investigation into a Latin American country. Whilst the decision has been welcomed by the opposition, the ICC’s reliance on cooperation from national authorities makes it unlikely that any high-ranking officials will be brought to trial.

Khan’s announcement will lead to the expansion of a preliminary examination that the ICC opened into Venezuela in 2018 in relation to alleged extrajudicial killings, arbitrary detentions, and other human rights abuses. That preliminary examination, which began during the tenure of Khan’s predecessor, Fatou Bensouda (2012-2021), had been slow to get off the ground and was hampered by a barrage of legal appeals by the Maduro administration, which argued that it was “discriminatory”. Those appeals were rejected by the ICC in July this year, opening the door to a full criminal investigation if Khan gave the go-ahead.  

He has now done so, although he offered few public insights into his findings during his visit to Caracas. The prosecutor’s silence during his three days in Venezuela, and uncertainty over the details of his schedule there, caused many in the opposition to warn that he was being led on a carefully stage-managed tour by Maduro. Mindful of the ICC crosshairs on his back, Maduro dropped his usually bellicose rhetoric and maintained an uncharacteristic silence on his 1 November meeting with Khan, bar a brief statement from his office welcoming the prosecutor’s “focus on understanding in depth the situation in Venezuela, and his willingness to meet in person with the national authorities”.

The silence was broken on 3 November, when Khan and Maduro presented a memorandum of understanding (MoU) stating that Khan “has determined that he will proceed to open an investigation to establish the truth” about the alleged crimes against humanity. The MoU notes that the Maduro administration does not consider there to be a “justification for the transition from the preliminary examination phase to the investigation phase” and “believes that the claims [of human rights abuses] should be investigated in the country by the national institutions that were created for such a purpose”.

With no further details yet to emerge from the ICC, it is unclear how broad the scope of the court’s investigation will be. It can expect further attempts at obstruction from the Venezuelan government, with Diosdado Cabello, the vice president of the ruling Partido Socialista Unido de Venezuela (PSUV), stating that the government will appeal to stop the investigation on the grounds that the preliminary examination was not given sufficient time to run its course. However, the ICC’s rejection of Venezuela’s appeals in July effectively ruled out any chance of the government preventing the investigation.

That does not mean that Maduro will be quaking at the prospect of a full ICC inquiry. With the court possessing no independent enforcement powers, any successful prosecutions would be reliant on the national authorities handing the accused over to the ICC. That seems far from likely while Maduro is in power, although it could create problems for him and other officials under a future government.

Guaidó’s bid to restructure Monómeros rejected

Opposition leader Juan Guaidó’s proposal to restructure the opposition-controlled state fertiliser company Monómeros Colombo Venezolanos was rejected on 2 November. Guaidó had submitted his proposal to the Comisión Delegada – the heads of each commission in the opposition’s parallel government – arguing that the company’s economic collapse and its subsequent administration by Colombia’s business regulator had exposed the opposition to allegations of incompetence and corruption [WR-21-37]. Guaidó’s proposal was struck down with 10 votes against, five in favour, and three abstentions.

The tensions which have been brewing in Bolivia’s ruling left-wing Movimiento al Socialismo (MAS) for the past two years burst to the fore on 4 October. After snubbing a MAS party congress, President Luis Arce was unceremoniously expelled from the party, while former president Evo Morales (2006-2019) was declared its candidate for the 2025 election. These decisions made at the congress were later nullified by the supreme court, which ordered that the congress be re-held. But regardless of this verdict, there appears to have been a definitive rupture between Arce and Morales’ factions. Arce already seems to be considering forming a new political party that could see him face off against Morales in 2025.

President Arce had snubbed the MAS congress that was held in Morales’ stronghold in Cochabamba department from 3-4 October, accusing the party’s leadership – which is steadfast in its loyalty to the former president – of blocking the attendance of trade unions loyal to the government. Before the congress began, he accused the MAS leadership of “flattening social organisations” which he said are “being ejected from their own political instrument”. Within a week, Arce was to find himself cast out of the MAS. On 4 October the party’s political committee approved a motion announcing the “self-expulsion” of Arce and Vice President David Choquehuanca, “for not attending the MAS congress”. A further four MAS deputies in the national assembly, all aligned with Arce, were also expelled from the party, as were 20 departmental legislators and party activists.

In the same announcement, the committee proclaimed Morales as the MAS’s “sole candidate” in the 2025 election, in a move aimed at enabling him to seek a return to the presidency without first fighting a primary election. Morales’ coronation as the party’s presidential candidate came just nine days after he had declared his candidacy – an announcement which was initially assumed to mean that he would face Arce in a primary contest. An Arce-Morales primary election would have been a vicious affair that would also have threatened to tear the party apart, but might have enabled its tensions to be resolved democratically.

Instead, the MAS’s future now looks deeply uncertain. Arce has long sought to avoid commenting publicly on the disunity in the party. But on 8 November he launched a retaliatory broadside against Morales, saying that the public is “tired of confrontation between Bolivians, of those who sow hatred and violence, of those who dream of new coups d’état and truncated mandates”. More significantly, since late September Arce seems to have been laying the groundwork for a new political project, called the Pacto de Unidad, comprising MAS-affiliated social movements, trade unions, and indigenous organisations which have backed him over Morales in the party’s civil war.

Bolivia’s supreme electoral court (TSE) offered Arce a route back into the MAS on 31 October, declaring that the party’s congress was illegitimate as it “did not meet the requirements outlined in its statute”. The court ruled that the decisions made at the congress are not binding, and said that the congress should be re-held. In response, Morales promised a legal “battle”, although an appeal to overturn the TSE’s ruling was rejected on 23 November.

Whether Arce decides to engage in a battle with Morales remains to be seen. The evidence so far suggests that he is contemplating a future outside the MAS. The as-yet unofficial formation of the Pacto de Unidad indicates that he may feel he has a chance of winning re-election with a breakaway party, enabling him to step out of Morales’ shadow for good.

Morales calls for protests

Supporters of Morales began demonstrating outside of TSE buildings on 8 November, calling on the electoral court to reverse its nullification of the decisions made at the MAS congress. Demonstrations took place outside of TSE offices in the cities of La Paz, Cochabamba, Santa Cruz, and Tarija. The demonstrators were heeding Morales’ call for “a permanent mobilisation until the TSE recognises the [MAS] congress” which he said should involve “vigils or takeovers at every departmental tribunal in each departmental capital, from 8 November”. Morales also threatened protest marches and roadblocks if the TSE rejects an appeal against its ruling and said that “if some members of the TSE commit crimes with their declarations, the MAS will bring charges against them”.

Balance sheet: Among the economic achievements highlighted in the three-month evaluation of his government, Pérez Molina pointed to austerity measures, which signify a saving of Q$600m (US$78m) for the State. He also singled out: the fact that more than 400,000 doses of vaccines had been given to children with chronic illnesses; the distribution of 2.9m books to 17,000 public schools and 1.9m sacks of fertilizers to boost harvests in rural areas; and noted that construction work had begun on more than 300 tranches of highway, as part of efforts to overhaul more 13,000km of road infrastructure.

Finance minister stalemate: While Pérez Molina also cited as a major achievement the fiscal reform [RC-12-03], this has since been overshadowed by current wrangling between the legislative and executive branches, caused by efforts by the main opposition Libertad Democrática Renovada (Líder) to summon Finance Minister Pavel Centeno for questioning, which began on 16 February. Arguing that the summons was politically motivated and little more than an attempt to stall the legislative agenda, Centeno, a technocrat who had proved pivotal in the approval of the tax reform, resigned in protest on 20 March. His decision was met with disappointment by the country’s influential private sector lobby, Cacif, as well as civil society groups. However, Pérez Molina has refused to accept Centeno’s resignation and congressional activity has ground to a halt as the dispute drags on.

The government may deny that a mass devaluation is on its way but, according to the markets, it is already underway. This week a former minister of economy, Domingo Cavallo (1991-1996 and 2001), said the government is heading for a “corralón” – a clear reference to the “corralito” imposed after the massive devaluation that put an end to his convertibility plan. Making matters worse, Cavallo also said that “the only economist who could get the [government’s] potatoes off the fire, but with few probabilities of success, is [former minister of economy Roberto] Lavagna [2002-2005]”.

The so-called ‘blue dollar’ sky-rocketed this week, hitting a record high of AR$6.8/US$ before closing at AR$6.75 on 18 July. This means that since the administration of President Cristina Fernández introduced controls on the currency exchange market last November, the spread between the official exchange rate (AR$4.5/US$) and the ‘blue dollar’ has increased by 47.7%, and by 17% in the past two weeks alone.

The increasing gap between the two values simply corroborates an undeniable truth: Argentines’ appetite for dollars has remained intact, despite Fernández’s efforts to convince savers that they should put their rainy-day funds away in the local currency [WR-12-22]. The question that remains is whether the gap has reached its top limit; experts simply cannot agree on when the dollar will reach its equilibrium value. The up and down movement on 18 July indicates that the top value (AR$6.8) was simply too high, but no-one can guarantee that what was too expensive this week will remain so next week, or in a month’s time.

While the Argentine central bank (BCRA) argues that only 2% of the currency exchange market is directly related to the value of the blue dollar, economists warn that the blue’s value is the reference used when drafting devaluation and inflation forecasts.

This means that just like the inflation calculations of private consultancies are taken into account in lieu of trustworthy official calculations by the national institute of statistics (Indec), businesses and private savers alike start taking the blue’s value as their true reference point, increasing speculation and stimulating the over-reporting of imports and the under-reporting of exports. The latter can damage the government’s efforts to keep a trade surplus and a stable exchange rate. The market is sending a clear message: devaluation is expected; when or how is anybody’s guess.

Hands off the Famatina range

This week Magistrate Daniel Flores of the district court of Chilecito, province of La Rioja, ruled for the suspension of the mining exploration deal struck by the provincial mining company (Esme) and Canada’s Osisko Mining in relation to the Famatina range. The judge’s decision is based on the supreme court of justice (CSJ)’s ruling, issued earlier this month, which ordered the implementation of the 2010 law of glaciers.

    According to the law, all provinces must keep records of all glacial and periglacial areas in their territories before any mining contracts, for exploration and/or exploitation, can be granted. According to officials from the La Rioja government, there are only a handful of glaciers in the province; geological experts, however, say the definition of glacial and periglacial areas is much broader than what the naked eye can detect and put the total number of glaciers in the province at over 400.

• Famatina, the symbol of a broader struggle

Anti-mining protests in Famatina and Chilecito against exploration of the Cerro General Belgrano, commonly known as the Nevado de Famatina, have become the symbol of anti-mining movements across the country [WR-12-05]. The local mayor, Ismael Bordagaray, had filed an injunction against the exploration deal. The mayor has denounced in the national media that since he challenged the agreement, the federal and provincial governments (which are of his same party, Frente para la Victoria) have cut off payment transfers to the municipality, forcing him and local residents to clean the streets and collect rubbish themselves.

COLOMBIA-VENEZUELA | Inician las obras en la gran carretera internacional. El 27 de septiembre, la agencia nacional de infraestructura  (ANI) de Colombia, anunció que la construcción de la carretera ‘Transversal de las Américas’ de 1.425kms a través del norte de Colombia estaba en marcha. La nueva carretera mejorará los lazos de transporte con la vecina Venezuela. ANI dijo que el proyecto a siete años de US$889m incluye la construcción de nuevos tramos de rutas.

También involucra la ampliación y renovación de rutas existentes a través de siete departamentos, que conectarán el departamento de Chocó en el noroeste, en la frontera con Panamá, con el departamento del nordeste de César, en la frontera con Venezuela. La nueva carretera será construida y más tarde operada por Vías de las Américas, un consorcio de firmas locales de construcción y de ingeniería.

El instituto nacional de vías de Colombia (Invías), una dependencia del ejecutivo nacional, destaca que el proyecto Transversal de las Américas no sólo beneficiará a las comunidades locales de las regiones sur de Bolívar y del Magdalena medio conectándolas con el resto del país, sino a todo el país. Invías afirma que estimulará la competitividad y el turismo, así como también el desarrollo económico y social en la Costa Atlántica.

BOLIVIA | Volviéndose autosuficiente en producción de papas. El viceministro para la agricultura de Bolivia, Víctor Hugo Vásquez, ha anunciado que el gobierno del Presidente Evo Morales ha firmado un acuerdo con los productores locales de papa, comerciantes y restaurantes de comidas rápidas, que apunta a asegurar que estos últimos incrementen la cantidad de papas bolivianas usadas en sus restaurantes, y eventualmente detener la importación de papas extranjeras. De acuerdo con el instituto nacional de innovación agrícola y forestal (Iniaf), unas 1.555 variedades de papas se cultivan en Bolivia, que produce unas 970.000 toneladas (t) de papas al año y exporta unas 44.000 toneladas al año a los países vecinos.

Sin embargo al mismo tiempo, Bolivia importa unas 24.308t de papas al año, una gran proporción de las cuales son de la variedad Désirée, que es en su mayoría usada en restaurantes de comidas rápidas, a fin de satisfacer el alto nivel de la demanda. Iniaf ubica el consumo nacional (la población de Bolivia es de unos 10m de habitantes) en 90kgs de papas por persona por año. Vásquez estima que la demanda anual de papas Désirée es de 4.000t.

Los productores nacionales proveen 266t, o el 6,3% de la demanda total, con el resto importado del vecino Perú. Vásquez dijo que el gobierno está buscando la manera de garantizar “mejores precios para los productores locales, comerciantes y empresarios, para que así nuestro producto nacional pueda competir”.

VENEZUELA | El gobierno rechaza propuesta de TNK-BP. El 27 de septiembre, el ministro de petróleo y minería de Venezuela, Rafael Ramírez, rechazó una propuesta presentada por la firma petrolera Anglo-Rusa, TNK-BP, propiedad del consorcio ruso AAR y de BP del Reino Unido, para elevar su participación en PetroMonagas, una empresa conjunta con la firma petrolera estatal de Venezuela, Pdvsa.

TNK-BP posee una participación del 16,6% en PetroMonagas, que opera en el mayor depósito de petróleo pesado crudo del mundo: la Faja Petrolífera del Orinoco, mientras que Pdvsa posee el resto. A fines del año pasado, TNK-BP señaló su interés en incrementar su participación en PetroMonagas (según informes, hasta el 40%) y se dijo que estaba en conversaciones con Pdvsa. Sin embargo, Ramírez rechazó esta posibilidad, subrayando que el gobierno venezolano no tiene ninguna intención de ceder su participación en PetroMonagas.

Él dijo que, en cambio, Pdvsa había propuesto que TNK-BP ayude a expandir la capacidad de producción de PetroMonagas. Ramírez dijo que es bien sabido que hay grandes reservas de petróleo en el proyecto PetroMonagas, y que la infraestructura básica para expandir su capacidad ya está en su lugar. A comienzos del año, Pdvsa estimó que PetroMonagas podría alcanzar una capacidad de producción de 120.000 barriles por día.

• Perú firma acuerdo con GCC

El 2 de octubre, el canciller de Perú, Rafael Roncaglio, y su contraparte saudí, Nizar Bin Obaid, firmaron un acuerdo marco de cooperación económica, comercial y de inversión entre Perú y el Consejo de Cooperación del Golfo (GCC, siglas en inglés). Así, Perú se convierte en el primer país sudamericano en firmar esta clase de acuerdo con el GCC, que se compone de Arabia Saudita, Bahrain, Kuwait, Qatar, Oman y los Emiratos Árabes Unidos. En una declaración conjunta los cancilleres dijeron que Perú ahora está listo para convertirse en un “socio estratégico” para el GCC. Roncaglio agregó que el nuevo acuerdo “confirma el compromiso de Perú de promover el comercio internacional”. La firma del acuerdo tuvo lugar al margen de la III Cumbre de países Sudamericanos y Árabes (Aspa) celebrada en Lima el 1-2 de octubre.

ECONOMY | Mining protests. On 10 February Nicaraguan police reported that 47 people had been arrested and 17 police officials injured in day earlier clashes with anti-mining protesters in El Cafetal, municipality of Santo Domingo, in the central department of Chontales. Protests against the development of a new (sector-4) high-grade gold zone by Canada’s B2Gold erupted in September 2012 amid concerns about water contamination. Local artisan miners say that they could lose their livelihood if the new B2Gold zone goes ahead. B2Gold operates two of the country’s three main mines - El Limón and La Libertad, both in León department. The government led by President Daniel Ortega has prioritised the mining sector as key to future economic growth. In 2012 gold exports were worth an estimated US$431m, second only to coffee (US$519m). 

COLOMBIA | Pacific Rubiales pronostica producción récord. La firma petrolera canadiense, Pacific Rubiales, anunció el 9 de abril que esperaba registrar un nuevo récord en su producción de petróleo en Colombia para el primer trimestre de este año. En una declaración la firma, que concentra la mayor parte de su producción petrolera en Colombia, dijo que esperando que la producción petrolera para el primer trimestre muestre un incremento del 30% año en año con entre 126.000 y 128.000 barriles de petróleo equivalente por día (bpd). El jefe ejecutivo (CEO) de Pacific Rubiales, Ronald Patin, dijo “Estoy muy satisfecho con este fuerte inicio de la producción de este año”. Indicando que el precio de referencia para el crudo colombiano, West Texas Intermediate (WTI), ha permanecido estable en US$94 por barril durante el primer trimestre; Patin dijo que él esperaba que el petróleo de la compañía alcanzaría un precio de entre US$100 y US$103 por barril. Todo esto ayudará a asegurar que el informe financiero del primer trimestre de Pacific Rubiales, que debe difundirse el 8 de mayo, mostrará cifras positivas.

En este mismo sentido, Patin agregó que él también esperaba que las medidas adoptadas por la compañía para reducir sus costos operativos en Colombia, tales como la construcción de una nueva línea de transmisión de energía conectando los yacimientos petroleros de Rubiales en el área de los Llanos Orientales con la red nacional de energía de Colombia (que se espera que estará completa en las semanas próximas), también ayudará a la firma a mejorar sus operaciones en Colombia.

La declaración también señala que durante los últimos 12 meses se habían realizado 10 actividades de exploración en Colombia y Brasil, seis de las cuales resultaron en el descubrimiento de hidrocarburos. El anuncio es una buena noticia para el sector petrolero de Colombia que continúa expandiéndose. Justo el día anterior a la difusión de la declaración de Pacific Rubiales, el ministerio de minería y energía de Colombia difundió sus cifras de producción petrolera de marzo. De acuerdo con el ministerio, la producción en ese mes totalizó 1,03m de barriles por día, un incremento del 7% sobre el mismo mes del año pasado. El ministerio dijo que las cifras de marzo muestran que los niveles de producción han respondido positivamente a las políticas de sostenibilidad a largo plazo del gobierno nacional, lo que ha permitido “incrementar la actividad exploratoria” que se lleva a cabo en el país.

PERÚ | Esperando un comercio incrementado con China. El presidente de la comisión de relaciones exteriores del congreso de Perú, Víctor Andrés García Belaúnde, dijo el 7 de abril que como un resultado de la gira del Presidente Ollanta Humala por Asia, en la cual él realizó su primera visita oficial a China entre el 6 y el 8 de abril, el gobierno espera que el comercio bilateral entre Perú y China se incremente un 15% anual en el próximo par de años.

La visita de Humala a China ha sido cuestionada en Perú por el hecho de que la delegación que acompañaba al presidente estaba compuesta exclusivamente por miembros del gabinete y no incluyó a ningún empresario peruano. Sin embargo, el gobierno ha defendido la gira señalando que su principal objetivo era atraer inversiones chinas que ayudarán a Perú a desarrollar aún más su economía, permitiéndole incrementar el comercio con todos sus socios económicos, incluyendo aquellos en Asia.

Como el mismo Humala dijo durante una reunión en Shanghai, “desde el 2011, China se ha convertido en el principal socio comercial de Perú [...], sin embargo, hoy nuestro crecimiento económico demanda una serie de servicios y obras [públicas] de infraestructura. Esta es la razón por la cual estamos trabajando desde dentro del gobierno para promover la inversión privada desde Asia y China”. Indicando que durante su participación en el Foro Bo’ao para Asia, la delegación peruana firmó un acuerdo estratégico con el gobierno chino que incrementará el ámbito de la cooperación bilateral, García Belaúnde dijo que los inversionistas chinos ya estaban viniendo al Perú, alentados por las positivas condiciones económicas y las varias oportunidades de inversión. Según García Belaúnde este flujo de inversiones continuará estimulando el comercio bilateral.

BOLIVIA | Se elevan las exportaciones regionales de gas natural. El 8 de abril la firma petrolera de propiedad del estado, YPFB, reveló que sus exportaciones de gas natural a Brasil y Argentina en marzo totalizaron 47,4m de metros cúbicos por día, un incremento del 21% comparado con igual mes del año pasado. El presidente de YPFB, Carlos Villegas, explicó que esto fue el resultado de que YPFB haya logrado un nuevo récord de producción, lo que permitió satisfacer la demanda tanto de Brasil como de Argentina, que han venido pidiendo incrementadas importaciones como resultado de los bajos niveles de producción de energía de Brasil debido a los bajos niveles del agua en sus embalses; y bajos niveles de producción de hidrocarburos en Argentina debido a tareas de mantenimiento de la infraestructura.

• El regalo de cumpleaños de Correa a sí mismo

El 6 de abril el Presidente de Ecuador, Rafael Correa, emitió un nuevo decreto ejecutivo congelando todos los salarios de los funcionarios de alto nivel del gobierno incluido él mismo por los próximos dos años. Correa explicó que la medida apunta a reducir los gastos del ejecutivo y hacer más manejable el presupuesto del gobierno. “Vamos a predicar con el ejemplo” dijo Correa, afirmando que “Ecuador actualmente tiene los mejores salarios en toda la región andina”. También recordó que en el 2007, cuando asumió el poder, el salario del presidente era de US$8.000, pero que él lo redujo a la mitad, poniéndolo en línea con el resto de los altos funcionarios del gobierno. "¡Qué buen regalo de cumpleaños!", bromeó Correa que celebraba ese día sus cincuenta años de edad.

The opposition and Peru’s largest business federation Confiep are running scared of President Ollanta Humala’s popularity – and what it might mean. This seems to be the only real explanation for the extreme reaction to his suggestion that the government is mooting the acquisition of shares in an oil refinery held by the Spanish energy company Repsol for the state-owned oil firm Petroperú. This announcement came fast on the heels of Humala’s attendance of the investiture of Venezuela’s President Nicolás Maduro, which they are presenting as proof positive that he is preparing to adopt Chavismo wholesale, including state intervention in the economy and using his popularity to pave the way for his even more popular wife, Nadine Heredia, to succeed him in 2016.

The president of Confiep, Alfonso García Miró, did not mince his words in an interview with the national daily El Comercio on 29 April in response to a meeting between President Humala and the chief executive of Repsol, Antonio Brufau, a week earlier and the subsequent revelation that his government was considering buying a controlling stake in the company’s Pampilla oil refinery (which has a capacity of 102,000 barrels a day and is one of the country’s two main refineries), some 300 petrol stations and Solgas, a liquefied gas plant.

“It is clear to me that this will be the start of the transformation of Peru into a domineering, overbearing and authoritarian State as in Cuba, Bolivia, Venezuela and Argentina,” García Miró said.

Humala made it clear that the government would only proceed with the purchase of Repsol assets if it was in the interests of the Peruvian people and met “technical criteria”. García Miró responded that “with what (Humala) calls ‘technical criteria’ he could end up buying the whole country. It is neither a rational nor an acceptable explanation for the Peruvian people”. He added that “nationalising a competitive sector is the first sign that the government is going against Peru’s economic development”, and that Confiep would oppose it tooth and nail because “this model could be applied to any sector under any pretext”.

Much of the opposition followed suit, with Perú Posible (PP) threatening to sever its ad hoc alliance with the government, and Humala’s predecessor, Alan García (1985-1990, 2006-2011), expressed disbelief that “we are returning to primitivism” by seeking to embrace nationalisation (as he did while in power between 1985 and 1990).

The economy and finance minister, Luis Miguel Castilla, an orthodox economist, called for calm. He said that nothing had been decided and the government was weighing up the costs and benefits of the acquisition. Speaking, ironically enough, on the sidelines of the World Economic Forum meeting taking place in Lima, Castilla insisted that the government was not changing course and that it remained totally committed to protecting, and attracting, private investment in Peru to drive development. He also said that any purchase would involve private investment.

Rumours had circulated that Castilla had considered resigning over the matter - but he denied these. It is worth noting that not only did the prime minister, Juan Jiménez Mayor, stress that “Peru is not on a statist course but an investment course”, but also Heredia came out and praised the private sector and its investment for spurring Peru’s growth. “We are idealists but we are also responsible,” she said, adding that the government would not act in an “improvised manner” or “repeat formulas… that left suffering”. In a televised interview on 28 April, Humala enlarged upon the theme. “The decisions that the government takes, when they have to be taken, will be based strictly and scrupulously on commercial and economic aspects, not ideological ones,” he said.

Confiep’s horror at the prospect of creeping statism was fuelled by Humala’s attendance at Maduro’s inauguration in Venezuela. The careful deliberations over the purchase of Repsol shares (at Brufau’s suggestion), however, does not exactly smack of the impromptu expropriations for which President Hugo Chávez won renown. Neither does Humala’s recognition of Maduro mark him out as an exception in Latin America, where heads of state across the board acknowledged his triumph as legitimate. Humala was also in good company travelling to Caracas for the swearing-in ceremony. The fact that Peru is currently exercising the pro tempore presidency of the Union of South American Nations (Unasur), which had voted to recognise Maduro, meant he had little choice but to go.

The political opposition in Peru is concerned that Humala’s popularity (47% in the latest poll) is unusually high for a Peruvian head of state at this stage of his mandate, and his wife’s stands at 60%. The fierce attack over possible state intervention in the economy from García, Fujimorismo and the PP, to name but three, suggests the opposition, possessed of the deep-rooted conviction that Humala wants to retain power through his wife, is seeking a chink in his armour. Humala ducked a question about Heredia during his televised interview, stressing that “advanced candidates” for 2016 were simply scared of her popularity, which he said she had before he came to power.

• Petroperú regulations

The business federation Confiep also fastened onto the publication of new regulations for the state oil firm Petroperú, published last weekend, as evidence that the Humala administration was intent on deepening state intervention in the economy. The government published regulations allowing Petroperú, to take part in all hydrocarbon activities: exploration; production; industrial processes; and retail.

Ricardo Jaime, el ex ministro de transporte (2003-2009), aún se encontraba prófugo, luego de la orden de una corte para su arresto bajo cargos de corrupción, el 12 de julio. También está bajo severo escrutinio público el nuevo jefe del ejército, el General César Milani, que fue sujeto del popular programa investigativo de la TV de la última semana, Periodismo Para Todos. El presentador, Jorge Lanata, alegó que Milani participó en algunos de los abusos contra los derechos humanos cometidos por la dictadura durante los años ’80. Lanata también planteó la pregunta sobre cómo un hombre en el empleo del estado desde la edad de 19 años había acumulado una fortuna personal tan grande.

Políticos

La semana pasada un juez federal emitió una orden de arresto para Jaime, quien fue ministro de transporte bajo el Presidente Néstor Kirchner (2003-2007). Jaime enfrenta alrededor de 20 casos separados en la corte, que involucran principalmente cargos de fraude administrativo y sobreprecio en los contratos ferroviarios, incluyendo el sobrepago de Arg$2m para renovar el servicio de carga por tren del ferrocarril Belgrano. Actuando bajo instrucciones de la corte, la policía realizó búsquedas en direcciones en Buenos Aires y en Córdoba, pero en vano.

El 16 de julio, el consejero legal de Jaime, Marcelo Brito, leyó una declaración de su cliente en la radio nacional. “Mis abogados de Buenos Aires me han aconsejado no entregarme debido a que la resolución que ordena la detención preventiva ha sido apelada.” Antes de la declaración, Brito ya había dicho que Jaime “permanecerá fugitivo” como “le aconsejaron sus abogados”. Considerando el mal estado de los ferrocarriles, que ha resultado en un número de trágicos accidentes durante los pocos años pasados, la ira pública ante las acciones de Jaime podría resultar políticamente tóxica.

Los militares

El 14 de julio, Jorge Lanata, transmitió un número de revelaciones acerca de la riqueza personal del nuevo comandante del ejército, el General César Milani, quien fue designado a fines de junio. En esencia, estas revelaciones afirman que pese a ganar un salario de las fuerzas armadas desde que se unió al ejército a la edad de 19 años, el general ahora posee una lujosa casa en Buenos Aires, varias propiedades en Córdoba y un auto deportivo Alfa Romeo. En el 2011, el general estaba ganando Arg$15.000 por mes (US$2.800 a la tasa de cambio oficial), pero aún así, compró la casa de Buenos Aires valuada conservadoramente en alrededor de US$600.000.

Lanata parece haber tenido acceso a la correspondencia entre el general y la oficina anticorrupción de Argentina, mostrando cómo Milani se vio en dificultades para explicar cómo había financiado varias adquisiciones, incluyendo la admisión que él había olvidado declarar la compra del auto deportivo.

Lanata también vinculó a Milani con los actos de violencia y tortura llevados adelante por el estado durante la dictadura. El registro de servicios de Milani muestra que él estaba en la provincia de Tucumán cuando el llamado “Operativo Independencia”, una brutal campaña militar contra-insurgencia montada por las fuerzas de seguridad. El argentino laureado con el Premio Nobel de la Paz, Adolfo Pérez Esquivel, comentó que “todos los signos muestran que él [Milani] había estado involucrado en el periodo de represión.”

La presidenta de las Abuelas de Plaza de Mayo, quien está estrechamente vinculada con el gobierno, fue más circunspecta en su reacción ante las revelaciones, pidiendo solamente una investigación en sus registros. “Si presumimos que cada miembro [de las Fuerzas Armadas] estaba involucrado en acciones represivas, entonces tendríamos que enjuiciar a todos ellos, puesto que todos estaban desplegados en alguna parte,” dijo ella.

• El dólar blue se eleva de nuevo

Después de varios meses en suspenso, el mercado en el llamado ‘dólar blue’ –la tasa extraoficial de cambio– ha comenzado a operar de nuevo en julio. El 15 de julio, alcanzó los Arg$8,58 por cada dólar, impulsado por una demanda más alta debido al inicio de las vacaciones de invierno en Buenos Aires. La tasa oficial de cambio está alrededor de los Arg$5,4/US$1.

President Enrique Peña Nieto has made a series of upbeat statements about investment in Mexico. But important questions are still being asked about the quality of the country’s infrastructure.

In May, the president almost doubled his goal for public and private infrastructure investment. Between now and 2018, the aim is to invest MEX7.7trn (US$587bn). “With bigger and better infrastructure, there are more opportunities to attract productive investment, generate jobs and families’ incomes” Peña Nieto said. His market-friendly policies received a boost on 3 July, when the German automaker BMW said it would invest US$1bn in a new luxury car assembly plant in San Luis Potosí. And on 10 July, he welcomed a statement from the Consejo Mexicano de Negocios (which represents 39 top Mexican companies) that its members this year are planning investments worth US$27.45bn. He said it was a sign of confidence in his programme of reforms.

While the growth of actual and planned investment is clearly positive for Mexico, analysts say it is important not to lose sight of the serious infrastructure deficits that are still a live issue. A key part of the government’s strategy is its flagship energy reform (currently under discussion in the senate), which aims to attract international oil companies back into Mexico to help the state-owned Petróleos Mexicanos (Pemex) boost stagnating production and exports. One important area for new oil and gas exploration and production will be offshore, in the Gulf of Mexico.

A private sector corporate adviser pointed out to LatinAmerican Economy & Business that any international oil group operating in the Gulf needs an operational base. Options include Tampico, Coatzacoalcos, Ciudad del Carmen and Veracruz. But he felt that none met all the necessary requirements. These include acceptable levels of security, good pipeline infrastructure, good port facilities, and access to a pool of skilled labour.

While the violent battle between rival drug cartels in Tampico has been given wide coverage, he felt this was not the worst problem. Much more serious were the other factors, particularly the “terrible” state of ports and pipelines, and the acute lack of a well-educated work force, reflecting deficiencies in the Mexican education system. All these would take years to turn around. In the meantime he said the best port from which to run a major offshore operation in the Mexican Gulf was probably New Orleans in the US, for the incentives it offers.  Other options might include the well-established Houston.

German car companies plough US$2.36bn into Mexico

On 3 July BMW announced a US$1.0bn investment to build a new plant in the central Mexican state of San Luis Potosí. Harald Krüger, head of BMW’s manufacturing unit and a member of BMW’s board of directors, said the plant would be an important part of BMW’s global network, and would provide direct employment for an initial workforce of 1,500 by 2019, the first year of production. The plant will have an estimated annual production capacity of 150,000 units.

“Mexico is an ideal location for the BMW Group”, according to Krüger, citing its growing economy, strong industrial capacity and a highly qualified and motivated workforce. He also noted Mexico’s competitive position in the region and its numerous commercial agreements with other countries, including the US, as additional advantages. BMW has been present in Mexico since 1994. In 2013, it sold 13,992 vehicles in Mexico.

A few days earlier, on 30 June, Germany’s Daimler AG announced a plan to invest US$1.36bn to produce next-generation compact cars in Mexico with partner Renault-Nissan. Most of the investment will be in the existing Nissan plant in Aguascalientes state, which will be upgraded to reach an annual production capacity of 300,000 units.

Pemex results slide

According to Pemex’s latest financial figures, published on 28 June, revenues from crude oil exports in the first five months of the year amounted to US$16.3bn, down 10.1% on the US$18.08bn registered in the same year-earlier period. Crude export revenues in May totalled US$3.35bn, down 6.5% year-on-year. The volume of crude exports has also declined. In the first five months of 2014, Mexico exported an average of 1.14m barrels per day (Mob/d), a 3% fall on the 1.18 Mob/d exported in the same period of 2013.

On 30 June, the ministry of finance (SHCP) reported that total oil revenues reached US$37.8bn in the five months to May, a 0.5% fall in real terms over the same year-earlier period. According to the SHCP, the fall was due partly to a 4.2% annualised fall in output at Pemex. Mexican crude export prices have averaged US$92.8/barrel (/b) to date in 2014, from US$100.8/b in 2013.

By historical standards, perhaps, Brazil’s current rate of inflation, an annualised rate of 8.13%, is not outlandishly high. But in terms of recent memory, it is worrying; not since December 2003 has it been higher. For March alone, inflation rose 1.32% compared with 0.92% for the same period of last year. The central bank’s target is, in theory, 4.5% with a band of “tolerance” of plus or minus 2%. The rising cost of living might be more politically palatable if it were accompanied by a commensurate rise in economic growth. But it is not: in 2014, the Brazilian economy grew by just 0.1% and according to the latest central bank survey of 100 economists, it is likely to shrink by 1.01% in 2015.

Until the beginning of the year, inflation had been relatively steady, at around the top of the central bank’s target range of 6.5%. Since January, however, it has started to shoot up, fuelled principally by cuts to energy subsidies driving up the cost of electricity. According to the official statistics institute (Ibge), the average Brazilian electricity bill has gone up 36% in the first quarter of 2015. Food prices were also up in March, as was the tax on gasoline and the cost of bus fares.

According to the economist, Mauro Roclin, from the Fundação Getulio Vargas think-tank, Brazil is paying for past mistakes. “The policy of attempting to control inflation by managing prices was not effective,” he said. “The hikes were avoided in 2014 because it was an election year.”

Levy in charge
This week’s Carta Capital, arguably the only major weekly news magazine in Brazil broadly sympathetic to the ruling Partido dos Trabalhadores (PT), ran with the headline “Joaquim [Levy] in charge”. The magazine detailed the extent to which President Dilma Rousseff appears to defer to her new finance minister. “Levy is extremely important for Brazil today, he has a lot of strength,” Rousseff said in an interview last week with Bloomberg. She also expressed full backing for Levy’s plan to hit a primary fiscal surplus of 1.2% of GDP this year.

While he may not lack strength or the support of Rousseff, and appears to enjoy the confidence of investors, Levy has had some issues with communications. In a slightly muddled interview with journalists on 8 April, Levy was asked whether he thought Brazil would end the year with inflation above the central bank’s target range. “Certainly,” he said, before clarifying subsequently that he meant that the central bank would bring inflation in line with its target. In a recent, English-language interview with University of Chicago students, Levy made comments critical of Rousseff’s first mandate; he has also been forced to apologise for calling his predecessor’s policies of tax breaks for certain industries “a joke”. Coincidentally or not, his main press officer, Fernando Thompson, quit his job on 1 April.

Opening up the Caixa
At the press conference in which he made his gaffe over inflation, Levy raised the possibility of an IPO in shares in the insurance company controlled by the State-owned Caixa Econômica Federal. At present, the government is merely conducting a viability study, but if approved, the offering could happen by the end of the year.

According to Levy, raising new capital through the share sale would strengthen Caixa and benefit insurance buyers in Brazil. Still, the minister, and the CEO of Caixa, Miriam Belchior, was adamant that Caixa would remain “100%” controlled by the public (see sidebar).

• Caixa

The model for the Caixa move was the spin-off of the pension and insurance company BB Seguridade from the State-controlled Banco do Brasil which, according to Levy, “proved a big success”. Banco do Brasil raised R$11.5bn from the sale of BB Seguridade in 2013. Finance Minister Levy would not, however, be drawn on how opening up shares for sale in Caixa might boost the government’s books. Any benefits would be slightly tangential, derived from greater profits resulting in greater dividends for its largest shareholder, the federal government.