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Argentina’s President Javier Milei received significant gifts over the festive season. After two years of battling a hostile congress, Milei saw the passage of key legislative initiatives in late December as his far-right La Libertad Avanza (LLA), bolstered by October’s mid-term election result, started to make its presence felt. Milei’s main priority is to move the economy on to a sounder footing, bringing inflation down towards a single-digit annual rate and lifting international reserves to better insulate the country against financial crises and external shocks.

The first gift from congress came in the form of the 2026 budget for Ar$148tn (US$102bn). The first budget approved since Milei took office in December 2023, it won approval in the lower chamber of congress on 17 December by 132 votes to 97 with 19 abstentions as the enlarged LLA bloc was joined by the right-of-centre Propuesta Republicana (PRO), the centrist Unión Cívica Radical (UCR), and the Movimiento de Integración y Desarrollo (MID), as well as some dissident Peronists. The government did suffer one setback as allied parties refused to approve an article that sought to repeal laws boosting funding for universities and declaring an emergency in the disability benefits system approved by the previous congress. 

The senate approved the budget by 46 votes to 25 on 26 December, prompting President Milei to celebrate. “In 2025 we broke the inertia of Argentine decadence,” Milei said. “In 2026 the reconstruction of Argentina will begin.” Milei pointed to the primary fiscal surplus of 1.5% of GDP contained within the budget as a sign of his government’s transformation of the country’s finances. The budget is predicated on GDP growth of 5% in 2026 and annual inflation of 10.1%.

Despite the government’s success at bringing inflation down from 117.8% in 2024 to accumulated inflation of 27.9% in the first 11 months of 2025, taming it further will be contingent in no small part on the government’s ability to bolster international reserves. One of the principal criticisms directed at the Milei administration by the International Monetary Fund (IMF), amid the many plaudits, has been its failure to increase reserves.

Low reserves engender uncertainty over the exchange rate, pushing up inflation, as evidenced most recently when political uncertainty over the outcome of the mid-term elections forced the central bank (BCRA) to use precious reserves to prop up the peso, prompting more concern about depleting reserves. This vicious circle was only cut short by the intervention of the US Department of the Treasury, restoring some financial stability which helped the LLA to pick up seats in congress in a victory for Milei that might otherwise have eluded him in the mid-term elections.

The Milei administration launched a new monetary programme on 2 January to try and lift international reserves. This alters the semi-floating currency band, which will henceforth be adjusted in line with monthly inflation, which stood at 2.5% in November, rather than at a rate of 1% per month, in a bid to prevent overvaluation of the peso. The BCRA, meanwhile, will increase foreign currency purchases to boost reserves. It bought US$21m on the foreign exchange market on 5 January after the new monetary programme took effect.

On the same day as it launched the monetary programme, the government promulgated a law approved by congress on 26 December, which it hopes will do far more to boost reserves than the BCRA’s foreign currency purchases. The so-called ‘fiscal innocence law’ significantly increases the tax thresholds for criminal investigation into possible tax evasion (from just US$1,500 to US$100,000 for an investigation into simple tax evasion and US$15,000 to US$1m for aggravated tax evasion). “This law is revolutionary. We are protecting the savings of the Argentine people forever,” Milei said. “No government that comes after us will be able to steal [their] savings.”

The cabinet chief, Manuel Adorni, went further, arguing that the law was “probably one of the most important in Argentina’s recent history”, ensuring that “instead of being treated as suspects, all citizens are presumed innocent until the courts prove otherwise”. This paradigm shift, the government hopes, will be sufficient to persuade Argentines that have an estimated US$254bn of ‘dollars under the mattress’, a sum that dwarfs BCRA reserves, to insert some of them into the formal financial system. Such is the entrenched distrust of Argentina’s banking system, however, and the suspicion that political upheaval is just one election away, that many savers might still prefer the security of their mattress.

Milei to visit UK in Spring

President Milei will become the first Argentine head of state to visit the UK since 1998 in April this year, according to remarks he made in an interview with The Telegraph newspaper last month. Milei said he would seek to meet Prime Minister Keir Starmer and the leader of the right-wing Reform party, Nigel Farage. Milei is keen for the UK to lift a weapons ban in place since the Falklands/Malvinas War of 1982.

PANAMA | Crecimiento. Panamá registró un crecimiento real del PIB de 10,3% en los primeros seis meses de 2011, de acuerdo con un informe difundido el 15 de setiembre por el instituto nacional de estadísticas (Inec). El Inec ubica el PIB nominal de Panamá en la primera mitad de 2011 en US$11,28bn, subiendo de US$10,23bn un año antes. En términos de resultados, el de la primera mitad fue conducido por el sector de la construcción, donde la actividad se elevó 17,3% año en año, y la minería (subiendo 16,5%).

La actividad en la Zona de Libre Comercio de Colón registró un incremento de 15,1%, con las operaciones del Canal subiendo 11,4%, los servicios de puerto en 22,3% y el transporte aéreo en 21,9%. Un informe reciente de la Comisión Económica para América Latina y el Caribe de la ONU (Cepal) pronostica que Panamá podría registrar un crecimiento del PIB para 2011 de 8,5%, comparado con el promedio regional de 4,7%.

Por otro lado, la autoridad nacional de aduanas (ANA) informó de un incremento de 32,56% en los ingresos de aduanas año en año, a US$799,84m en el primer semestre de 2011 –gran parte de ese incremento  fue atribuido a los crecientes niveles de comercio a través del Canal, especialmente entre Sudamérica y Asia. La ANA espera recibir US$1,3bn para finales de año.

BELICE-EL SALVADOR | Lista negra de EU. El Departamento de Estado de EU difundió la semana pasada  su lista negra anual de países que figuran como grandes productores o rutas de tránsito para narcóticos ilegales, que por primera vez incluye a Belice y El Salvador –los únicos dos países centroamericanos que no figuraban previamente. El informe estima que “hasta el 90% de unas 700 toneladas métricas de cocaína embarcadas anualmente desde Colombia y otros países productores que intentan ingresar a los mercados de EU, pasan a través de países de Centroamérica”, con 4 toneladas (t) pasando a través de El Salvador en 2009 y unas 10t que se cree que pasaron a través de Belice en 2010.

EL SALVADOR-CUBA | Acuerdo parcial de comercio. La semana pasada, Cuba y El Salvador anunciaron la finalización de un Acuerdo Parcial de Comercio (APC) bilateral según el cual 70% de las líneas de productos a ser incluidos (433 de los cuales son salvadoreños y 618 son cubanos) se beneficiarán del estatus libre de impuestos, con las tarifas a ser reducidas en los restantes. De acuerdo con cifras del Banco Central de Reserva (BCR) de El Salvador, las importaciones de Cuba a El Salvador llegaron a US$126.193 en 2010, mientras que las exportaciones sumaron US$3,08m.

El acuerdo comercial sigue a la restauración de los lazos diplomáticos entre los dos países poco después que el Presidente Mauricio Funes asumió el poder en junio de 2009, que luego fue seguido por una visita de Funes a la isla en octubre de 2010 [IL-10-40]. El día después de firmarse el acuerdo, el 29 de setiembre, tuvo lugar el primer vuelo directo entre los dos países, como parte de un servicio de tres veces semanales operado por la aerolínea Avianca-TACA.

El ministro de economía de El Salvador, Héctor Dada Hirezi, dijo a los periodistas locales que el APC está en línea con la búsqueda del gobierno de nuevos mercados a fin de reducir la dependencia de EU, su principal aliado comercial, y abordar su déficit comercial [IL-11-27]. Hirezi dijo que El Salvador estaba negociando actualmente acuerdos de libre comercio con Perú y Corea del Sur con ese objetivo.

COSTA RICA | Decisión sin precedentes. Recibido como una decisión histórica por los grupos indígenas, una corte administrativa en la provincia de San José ordenó la semana pasada que las personas no-indígenas que viven en la Reserva Indígena Keköldi en el cantón de Talamanca sean reubicados y la tierra devuelta a la tribu BriBrí, a quienes técnicamente ya pertenece.

La Ley Indígena de Costa Rica de 1977 establece que toda la tierra que pertenece a pueblos indígenas pero habitado por personas no-indígenas debe ser renunciado, el comercio de tierra y propiedad de las reservas indígenas solamente pueden tener lugar entre indígenas y todas las transacciones realizadas antes de la aprobación de la ley de 1977 deberán ser declaradas nulas. Sin embargo, hasta ahora la ley no se ha aplicado.

El abogado Danilo Chaverri, que representa a los grupos indígenas, dijo a los periodistas que esta es la primera vez que una corte ha ordenado al estado que comience el proceso de expropiación y desalojo a fin de devolver toda la reserva a los grupos indígenas. De acuerdo con el censo del año 2000, la población indígena de Costa Rica llega a entre 1% y 1,7% del total de la población.

Workers at Brazil’s main port of Santos, one of the country’s main export hubs. walked out for six hours on 22 February in protest at the government’s reform plans for the ports sector, disrupting crucial agri-exports including soya beans and maize. Days earlier (18 February), port workers grouped under Força Sindical seized a Chinese ship at Santos

The seized Zhen Hua 10 ship was carrying construction equipment for a new terminal at the port of Santos, according to a statement by Embraport, who requested its immediate release. The Rousseff government was having none of it, insisting that it intended to go ahead with concessions worth an estimated US$372m to restructure ten ports in the first half of the year. The government has identified as its first concession priorities seven ports in Santos and three in Belem, as part of an overall public-private plan to attract US$27.6bn in investment to the country’s creaking and overburdened ports, where backlogs extend not weeks but months. President Rousseff is determined to resist the union workers - who fear job losses and looser labour conditions under a newly approved regulatory framework. The new law shifts management responsibilities to the central government and away from the port authorities. Proposals would also allow new terminals to directly recruit workers, ending an obligation to source them through a central agency.

João Carlos Gonçalves, Forca Sindical’s secretary general, warned of wider strikes if labour regulations under the new ports law approved late last year are not improved; but Mario Teixeira, the head of Fenccovib, which groups port unions, warned against “radicalism”, stressing the need for dialogue.

The left-wing government has the support of the country’s key agriculture and business sectors in its efforts. Following a private sector meeting with the minister of the presidency, Gleisi Hoffman, to discuss the issue on 18 February, Paulo Godoy, the president of the Brazilian Association of Infrastructure and Capital Goods Industries (Abdib), said that investment in ports would “inevitably” create more jobs. Senator Kátia Abreu, president of the National Agriculture Confederation (CNA), said that those opposing the new ports’ law risked damaging Brazil in their defence of sector “deficiencies”. “Efficiency does not happen without competition”, she noted

Brazil posted a record US$11.4bn current account deficit in January, on the back of a US$4.0bn trade deficit. Shipping out its harvest to key export customers like China and India will be critical to reducing this deficit in coming months. The government eventually reached an agreement with the port workers’ union to suspend further industrial action until 15 March. Talks are now on-going over the issue of Decree 595, aiming to liberalise labour laws at Brazil’s ports.

• Rio’s latest Favela pacification lasts just 25m

On 3 March Rio de Janeiro’s state security secretary, José Mariano Beltrame, celebrated the latest favela pacification operations but warned that the security force takeover was just the first phase of a long process. Thirteen favelas in the Complexo do Caju and Barreira do Vasco (with a population of about 20,000), located near Rio de Janeiro’s international airport and port zone, were taken by 1,400 military and navy officers in about 30 minutes at 5am on Sunday morning. The security forces encountered no resistance from the area’s criminal gangs, who tend to flee well ahead of time. Beltrame signalled that the next target could be the violent and drug gang-ridden Complexo da Maré (est. pop 75,000) also close to the airport. The military will control the areas until special police pacification units (UPPs) are introduced. To date, 30 UPPs have been put in place in Rio, with a target of 40 by 2014. State Governor Sérgio Cabral declared “the renaissance” of the Complexo do Caju.

On 11 June the federal judge with responsibility for electoral affairs, María Servini de Cubría, ruled that several articles of the recently approved law reforming the council of magistrates, the powerful judicial oversight body, are unconstitutional. The articles which prompted Servini de Cubría’s objections relate to the expansion of and election to the council of magistrates. The government had been hoping to hold primary elections to select the candidates for an expanded council on 11 August, and then hold final elections in October, alongside legislative elections.

Servini de Cubría said the bill is “totally incompatible with the necessary political independence that every magistrate must demonstrate”. She also ruled against the proposal to increase the number of members on the council (the law calls for it to be increased from 13 to 19), which, as they too would be elected, would in her opinion alter the internal balance of the body and increase the danger of ‘undue influence’. Servini de Cubría also dismissed the government’s argument that the reforms are necessary to correct the ‘corporatisation’ of Argentina’s judiciary, countering that officials had failed to explain what this concept means, or give concrete examples.

After the ruling, the national electorate director, Alejandro Tullio, said that the primary elections would go ahead, despite the court’s ruling. If the many injunctions against the legal reform bill are not resolved ahead of 11 August it is difficult to see how they can take place. Tullio, however, remained bullish. “Injunctions are, by their very nature, transient and can be revoked at any time,” he said, urging political parties to be prepared anyway, at least until a “definitive sentence” is reached.

The government is now expected to launch a ‘per saltum’ appeal, which would allow the matter to be adjudicated on immediately by the supreme court. The following week will be a busy one for electoral courts – nominations for party lists close on 22 June, while political parties are to formally announce their alliances. Around 30.3m people are registered to vote.

First the good news, then the bad

China’s announcement on 8 June that it had approved three new strains of genetically modified (GM) soya and one of GM maize for import from Argentina should have been unambiguously good news, given the government’s desperation for foreign currency. However, given the conflict between the farming sector and the government, Argentina may not reap the full benefits of China’s decision.

Argentina is one of the world’s top soya exporters and soya is its main export to China. Bilateral trade between Argentina and China totalled around US$14.5bn last year. However, the 35% export tax on soya, first introduced by former president Néstor Kirchner (2003-2007), is deeply resented by the Sociedad Rural Argentina (SRA). On 11 June, it announced plans to suspend all sales of non-perishable products from 15 to 19 June. “We are going to do this because the president does not receive us,” the head of SRA, Luis Etcheverre, said. He added that farming leaders have been waiting for a meeting with President Cristina Fernández “for three months”. Likewise they have not met with the agriculture minister Norberto Yauhar since May 2012.

Farmers claim that they were deeply offended by Fernández when she said that “we know what they are up to” in reference to farmers’ apparent reluctance to sell their crops for pesos. They have also complained about the price gap between what farmers are paid and the end price for consumers, which in some cases range from a mark-up of 300% to 1,200%. Back in 2008, the Mesa de Enlace alliance of farmers defied the Fernández administration with a 129-day strike over export taxes.

• Football violence

The Argentine Football Association has banned away fans from attending football matches, after the death of a supporter. The ban will apply across the country in all divisions of Argentine football. On 10 June a supporter of visiting club Lanús was killed as fans and police clashed in La Plata, near Buenos Aires, during a match against Estudiantes. Since 2000, more than 70 football supporters have been killed in Argentina.

On 24 March the Venezuelan government introduced another widely trailed modification to its now-multiple exchange rate system. Hailed by some as a move towards greater pragmatism, the jury is out on whether it will help get the region’s most troubled economy back on track.

By launching a second arm of the Sistema Complementario de Administración de Divisas (Sicad 2), the Socialist government moved from having two to three official exchange rates. Prior to 24 March, there were two rates, the official rate of BF6.3/US$, reserved for imports of government-designated essential goods, like certain basic goods and medicines, and the Sicad 1 rate, a heavily managed floating rate linked to irregular auctions run by the Central Bank, which since its been up and running properly has been hovering at around BF11/US$. The Sicad itself was brought in to complement the main FX agency, the Comisión de Administración de Divisas (Cadivi), which used to be the main FX arbiter but was abolished in late 2013, apparently riddled with fraud. Alongside the official rates is an (illegal) ‘parallel’ (i.e. black market) rate, which in an economy dominated by scarcities and rampaging domestic inflation, had soared to around BF85/US$ earlier this year, according to the one or two websites that published it (which took as their benchmark the average black market rate on the Venezuela-Colombia border, where there is a lucrative smuggling trade in fuel, food and, increasingly, all sorts of consumer goods).

With the introduction of the Sicad 2, there are now four exchange rates in the country - three official and one ‘parallel’. Three features of the Sicad 2 stand out. The first is that it is based on a daily trading system, with a range of banks and businesses submitting offers to buy dollars up to 11.30 am every day, and the central bank announcing the average price of the dollars it has sold in the afternoon. The second is that the government launched Sicad 2 at the unexpectedly high rate of BF51.8/US$, implying a potentially significant de facto devaluation (depending of course on the proportion of total transactions that take place at this rate). And the third is that in its first few weeks Sicad 2 appears to have successfully taken some of the steam out of the black market rate, which has dropped back from the high 80s down to the high 50s.

Very broadly speaking, comment on Sicad 2 has divided into two camps. Some see it as a significant change in economic policy, perhaps even a definitive move towards a more market-friendly stance by the authorities. Venezuelan bonds rallied quite strongly on news of the new rate. Other analysts however believe that amid the country’s economic chaos it changes nothing: some are continuing to talk of a possible Venezuelan default later this year, or as Capital Economics put it, a situation where “President [Nicolás] Maduro may soon be faced with a stark choice between servicing the government’s debt or importing basic goods.”

Henkel García of the Caracas-based consultancy Econométrica said: “Without doubt, it’s the biggest monetary adjustment in Venezuela’s history”, although he cautioned that much would depend on Sicad 2’s weighting in overall trade. President Maduro claimed that Sicad 2 would cover only 7%-8% of dollar sales in the country, with 80% still taking place at the lowest official rate of BF6.3/US$. But Alberto Ramos of Citibank said, “It is indeed a stealth devaluation, as many of the transactions in the economy are going to close at this rate, not the official rate. This is a massive devaluation, there’s no doubt about it.” The Wall Street Journal called Sicad 2 “a rare attempt by the Socialist government at loosening currency controls”. Taking the same line, Francisco Rodríguez of Bank of America noted “this is the first time in more than a decade that Venezuelan authorities have tried to fix a problem by reducing instead of increasing regulation.”

Also unusual was the fact that Rodolfo Marco Torres, Venezuela’s newly appointed finance minister (and an army brigadier general), gave signs of seeking some kind of rapprochement with international financial markets in a rare interview granted to the Financial Times of London. “Our debt yields have fallen, and we can get them down much more. We have always paid our debts, we always will. We are a responsible country. Sicad 2 is a beginning. You cannot block out the sun with a single finger,” he said, although he would not be drawn on what other measures, if any, were in the pipeline.

Those that believe that nothing has fundamentally changed see Sicad 2 as a partial devaluation designed purely to help the government administer its massively inefficient top-down, state-controlled economic system. In economic textbooks, devaluations are designed to alter the terms of trade, boosting exports and limiting imports, thereby improving external balances and reserves. But in Venezuela, exports are inflexible - over 90% consist of crude oil, and oil production has been in decline for a decade since the government responded to a crippling Pemex strike in 2003 by firing key managerial staff and heavily intervening in the sector – while private sector imports already have been squeezed to such an extent that the economy is riddled by scarcities (before it suddenly ceased to be published, the central bank’s scarcity index stood at 28% in January, meaning that one in four of a basket of tracked consumer goods was hard to find or unavailable on supermarket shelves).

So the real objective of Sicad 2 may be purely to improve the government’s financial position. Critics point out that by selling its oil revenue dollars at 50-plus bolívares each rather than at 6.3, the government will be better placed to continue to fund its politically important and large-scale social welfare programmes. While reliable statistics are lacking, the government’s budget deficit in 2013 is estimated at anywhere between 9.6% and 15% of GDP, which is both massive and unsustainable. Printing money, incurring debt, and fuelling inflation have been used for years by the Socialist government to fund the deficit, inevitably followed by devaluation. The Sicad 2 will help narrow the deficit this year – perhaps by as much as three percentage points of GDP, as well as reducing the government’s local currency-denominated public debt burden. While most devaluations tend to boost domestic inflation, in Venezuela’s dysfunctional economy the Sicad 2 may actually help reduce inflationary expectations, to the extent that businesses will rely less on the black market exchange rate as their pricing guide (and on the expectation that the supply of goods will also improve).

• Inflation

Inflation was 2.4% month-on-month in February, down from 3.3% in January, but it was a steep 57.3% year-on-year, fuelling the opposition-led protests.

• Reserves stabilise at the US$20bn mark

International reserves held by the central bank stood at US$20.7bn on 16 April, down from US$26bn a year earlier. Venezuela’s oil has averaged US$92.6/barrel to date in 2014, down from US$99.5/b in 2013 and US$103.4/b in 2012. The central bank has not yet published trade data for the final quarter of 2013 or the first quarter of 2014. In the first three quarters of last year exports totalled US$66.9bn and imports US$43.7bn.

MÉXICO | Analistas revisan hacia abajo el pronóstico de crecimiento. El consenso de los analistas económicos local y extranjeros sondeados por el Banco Central de México (Banxico) en la edición de julio de su sondeo mensual fue de revisar hacia abajo el pronóstico de crecimiento económico para el año, de 2.65% el mes anterior a 2.56% en julio.

La revisión se produjo después de la difusión de las cifras oficiales del PIB del primer trimestre, que mostraron que la actividad económica se había incrementado un 0,3% durante el periodo, mucho más bajo de lo que los analistas habían estado esperando. También sigue a la decisión del Fondo Monetario Internacional (FMI) de recortar su pronóstico de crecimiento económico para México este año, del 3% predicho en abril, al 2,4% citado en la última actualización de su Panorama Económico Mundial (WEO, siglas en inglés) difundido el 8 de julio.

Por otro lado, la Comisión Económica para América Latina y el Caribe de la ONU (Cepal), también redujo su pronóstico para México en su último informe difundido el 4 de agosto. La Cepal ahora cree que el PIB de México crecerá un 2,5% este año, 0,5 puntos porcentuales menos de lo que había calculado antes. Banxico ya había reducido su proyección de crecimiento para el año en mayo, de 3% - 4%, a 2,3% - 3,3%, pero la confirmación de que las cifras del PIB fueron más débiles de lo esperado en el primer trimestre también ha provocado que el ministerio de finanzas de México (SHCP) reduzca su pronóstico de crecimiento por primera vez en este año. La SHCP redujo su pronóstico del 3,9% al 2,7% pese a afirmar que tiene “confianza” en que la actividad económica comenzará a elevarse en la segunda mitad del año.

El economista en jefe de la SHCP, Ernesto Revilla, dijo que se había observado una “muy importante aceleración” en el segundo trimestre, en gran medida gracias al fuerte nivel de las exportaciones a EU, el principal socio comercial de México. “Estamos viendo crecer las exportaciones a un ritmo muy rápido”, dijo Revilla, aunque no proveyó ninguna cifra y se rehusó aventurar un pronóstico de crecimiento del PIB para el segundo trimestre.

El instituto nacional de estadísticas de México (Inegi) debe difundir las cifras oficiales del PIB del segundo trimestre el 21 de agosto, después de lo cual la SHCP tendrá que decidir si mantiene su actual pronóstico o lo ajusta una vez más.

Once again the finance minister, Joaquim Levy, is rumoured to be on the verge of leaving the government. Given such rumours are an almost weekly event, it is worth taking them with a pinch of salt. However, in a departure from previous occasions, markets and traders now appear to be more enthused by his possible replacement, Henrique Meirelles, the former central bank president under Lula da Silva (2003-2011). The Real strengthened slightly against the US dollar, and the market rose on the rumours. Whereas once Levy was believed to be all that stood between the government and another credit ratings downgrade, now Meirelles appears to be an acceptable substitute who would stick to the government’s austerity programme while also keeping the left-leaning base of the ruling Partido dos Trabalhadores (PT) onside.

Over the past few days, Meirelles has been giving increasingly strong endorsements of the government’s fiscal adjustment strategy. At an industry event in Brasília on 11 November, both Levy and Meirelles spoke. Introducing the former central bank president with warm words, Levy said, “I agree with everything he is about to say. We have done many things together and I have complete affinity with his thoughts.” While Meirelles was at the central bank under Lula, Levy was the secretary of the national treasury.

In his speech, Meirelles was remarkably upbeat, insisting that Brazil is in a much better position than it was 20 years ago. He said that Brazil had a consumer market the size of Britain or France and claimed that the country’s basic economic infrastructure was in good shape. Meirelles also pointed to the country’s strong judiciary and free press as an example of the maturing of Brazilian institutions. While acknowledging that inflation was high, he said that it was “controlled” and pointed to Brazil’s healthy stock of foreign reserves, currently valued at US$370bn.

Interestingly, he did accept the criticism that taxation in Brazil was “high” and equivalent to more developed countries. He also argued that the high cost of energy in the country was a brake on growth. Improving infrastructure and the quality of national education would be vital to making Brazil internationally competitive. Still, he has made it abundantly clear in interviews that he believes the government must cut public spending.

The night before, Levy reportedly faced criticism from both Right and Left at a dinner with senators. In particular, the finance ministry’s attempts to introduce a financial transactions tax (CPMF) was rubbished. Though Levy himself has studiously avoided saying anything about his future, President Dilma Rousseff has previously insisted he would stay in place. Asked whether he would be interested in a job in government, Meirelles insisted that he “did not waste time thinking about hypotheticals”.

• Truckers block roads

On 9 November, a group of truckers not aligned to any of the main trade unions began partial blockades on interstate roads in around 15 states across Brazil. Though the group has a few practical demands, it has declared it has no interest in negotiating with the federal government and wants to see the removal of President Dilma Rousseff from power. In response, on 10 November, the government increased the penalties for blocking roads.

COLOMBIA | Poverty reduction. The Colombian government received plaudits from international experts on 2 March for successfully reducing poverty in the country in recent years. The praise from experts from the United Nations Economic Commission for Latin America and the Caribbean (Eclac), the World Bank (WB), and the Inter-American Development Bank (IDB) came during a forum held in the Colombian city of Bucaramanga, where President Juan Manuel Santos revealed that multidimensional poverty in the country had fallen by 1.7 percentage points to 21.9% of the national population in 2015, compared to the previous year. According to Santos this meant that, on figures from the national statistics agency (Dane), some 700,000 Colombians were lifted out of poverty last year.

The Eclac representative in Colombia, Juan Carolos Ramírez, said that despite the adverse international economic scenario, Colombia had “done much better than the rest of the countries in Latin America”. WB director for Colombia, Issam Abousleiman, said that the latest economic figures suggested that “for the first time Colombia’s middle class is larger than the poorer class”. Abousleiman said that it was likely that Colombia would start growing at a faster rate in the near future and join the ranks of nations considered to be “middle income countries” by the WB. This prediction was echoed by IDB representative, Rafael de la Cruz, who said that Colombia was “one of the few countries that currently has the chance to achieve middle income status”. But highlighting the challenge that this poses, De la Cruz said that “in recent years 20 countries have made this jump…[and] social investment has been key”.

Colombia still has a long way to go. According to the latest WB figures it is the second most unequal country in Latin America based on its Gini coefficient score. The richest 10% of Colombians earn four times more than the poorest 40%.

Pavel Centeno, who served as finance minister in the government of disgraced former president Otto Pérez Molina (2012-2015), died during a police operation on 28 October at a house where he was staying in the municipality of Mixco adjacent to Guatemala City. Police had raided the house along with agents of the specialised unit against impunity (Feci) of the attorney general’s office as part of an investigation into money laundering in the Banco de los Trabajadores (Bantrab).

One police officer and one Feci agent were injured during the raid, apparently from shots fired by Centeno, according to preliminary reports. Centeno, a co-founder of Pérez Molina’s Partido Patriota (PP), sustained a bullet wound to the arm and a fatal one to the head, according to a report by the national institute of forensic science (Inacif).

The local press speculated that Centeno had committed suicide, but the whole incident is confused and, indeed, confusing. Centeno was apparently renting the house from Ronald García, the director of Bantrab. García, for whom an arrest warrant has been issued, is one of 10 people implicated in the money-laundering case in connection with Bantrab. Five of these people have been arrested so far.

In a sign that Brazil’s police may be adopting a new strategy against the country’s largest criminal organisation, the Primeiro Comando da Capital (PCC), recent raids have targeted the gang’s financial and money laundering operations. This shift follows years of militarised ‘blitz’ assaults on favelas, a method widely perceived to have had little impact on the criminal operations of drug trafficking organisations (DTOs), while entailing a high civilian death toll. 

On 31 August, the federal police (PF) launched simultaneous raids in 87 cities across Brazil, as almost 1,100 police officers served 422 arrest warrants for PCC gang members. Seventeen days later, police raided properties in the states of Rio de Janeiro, Mato Grosso do Sul, Paraná, Santa Catarina, and Minas Gerais, with arrest warrants for 28 members of Brazil’s second largest criminal organisation, the Comando Vermelho (CV). Whilst police raids against these DTOs are hardly new, these operations indicate that the police’s emphasis may have shifted from seizing illegal goods and arresting or killing low-level gang members, to targeting the gangs’ financial life-support systems.

According to the police report, the raids against the PCC resulted in the seizure of R$252m (US$45m) worth of assets and targeted the gang’s money launderers. Based on intelligence that funds were being channeled to imprisoned PCC leaders via a network of third parties with no known affiliation to the PCC, the raids may have severed a vital link in the revenue stream of a DTO that is often managed from within Brazil’s prisons. Another operation on 30 September dismantled an “important and sophisticated financial branch” of the PCC’s criminal empire, which had been in operation for over a decade, according to a police statement. Over 70 businesses were closed down for alleged money laundering, and bank accounts containing over R$730m were frozen.

The police’s new focus on hitting DTOs in the wallet was confirmed by Elvis Secco, coordinator general of the PF’s unit against drugs, weapons, and criminal gangs. Discussing the PCC raids in a 4 September interview with weekly news magazine Veja, Secco said “our objective now is asset seizures, stamping out money laundering, and identifying [the gang’s] leadership.” Secco elaborated further in a 2 October interview with news site UOL, in which he likened the new strategy to the Lava Jato (‘Car Wash’) anti-corruption investigations. “If you first identify the financial structure, wealth, properties, you can analyse all of these documents, and from there you can identify the next steps to be taken, as was the case with Lava Jato,” he said.

This represents a marked change from the militarised response of recent years, in which the military police would descend on favelas for hours-long shootouts with gang members, before withdrawing, at which point the DTOs would quickly restore their control over the area. This tactic of sporadic, violent raids carries a high death toll – in the first six months of 2020, São Paulo state’s military and civil police killed 514 people, the highest six-month figure since records began in 2001 – but has done little to truly challenge the PCC’s criminal dominance. 

Doubts remain as to whether the seized assets and dismantled money laundering operations will severely weaken a gang with a presence in over 17 countries (see sidebar) and estimated annual income of up to R$800m. Yet these recent operations do represent a major blow to the PCC, following the arrest of top-level trafficker and PCC ally Gilberto ‘Fuminho’ Aparecido dos Santos in Mozambique in April [SSR-20-05]. It now remains to be seen whether the PCC’s decentralised structure is flexible enough to absorb these setbacks.

• International presence

Documents from the Brazilian intelligence services state that PCC members have been identified in 16 countries outside of Brazil, according to UOL, confirming the group’s international reach. The largest number of identified PCC members was found in Venezuela (163), followed by Uruguay (72), Portugal (43), Guyana (35), Argentina (17), Spain (16), Suriname (14), the US (8), Colombia (6), France (3), Italy (2), Holland (1), Switzerland (1), and the United Kingdom (1). The DTO is also known to have an important presence in Paraguay, and to a lesser extent in Bolivia.

‘André do Rap’

Efforts to weaken the PCC were delivered a blow in early October, following a ruling by a supreme court (STF) justice which granted habeas corpus to André ‘André do Rap’ de Oliveira Macedo, a suspected leader of the PCC who faces convictions for international drug trafficking (which he is appealing), and is understood to manage the DTO’s cocaine trafficking operations to Europe with the ‘Ndrangheta mafia. The ruling sparked debate in judicial sectors [WR-20-41], and the STF plenary has since ruled that Macedo’s preventative prison sentence still holds, but the trafficker had already fled. He is believed to be in Bolivia or Paraguay, with police saying it will be hard to re-capture him.   

PANAMA | FTA with South Korea takes effect. On 1 March a free trade agreement (FTA) between Panama and South Korea took effect. Negotiations regarding the FTA began in June 2015 between South Korea and six Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and Panama) and will eventually eliminate tariffs on about 95% of goods traded by both sides. The FTA was approved by Panama’s legislature in July 2020 and has already taken effect in Costa Rica, Nicaragua, El Salvador, and Honduras. The FTA provides immediate access for Panama’s agricultural products such as coffee, palm oil, tomato paste, rum, and sea food. It also includes market access at preferential conditions for some Panamanian exports such as frozen, fresh, or refrigerated mince; frozen pork; yucca; and tropical fruits (pineapples, bananas, watermelon, melon, papaya), among other things. South Korea is Panama’s fourth main trading partner in Asia with trade totalling US$354m in 2019.

REGION | Central America disaster prevention and response plan. On 23 February the Inter-American Development Bank (IDB) presented a plan to help Central America prevent and respond to natural disasters, making US$1.6bn available to Guatemala, Honduras, and Nicaragua over the next two years. These countries can use part of the funds to finance priorities in areas such as developing resilient infrastructure, disaster risk management, and providing basic services to vulnerable communities. Financial facilities will also be created to respond to these challenges, and a knowledge agenda will be created to address resilience and structural problems linked to natural disaster risk management.

Central America & Caribbean:​ Inflation
Monthly year-on-year figures

Argentina’s President Alberto Fernández has opted to carry out an unexpected mini cabinet reshuffle. The stated objective was to foster political ethics by requiring any cabinet members interested in participating in the 12 September open simultaneous and mandatory party primaries (Paso) that will return candidates for the 14 November federal legislative elections to resign from their posts in order to do so. The real aim appeared to be to promote the unity of the ruling Partido Justicialista (PJ, Peronists) ahead of the electoral process. However, Fernández’s new ministerial appointments are likely to exacerbate divisions between moderate PJ factions and the more radical leftist Kirchnerista faction. This risks alienating the non-Kirchnerista Peronist electorate.

The reshuffle came about after Defence Minister Agustín Rossi announced his intention to run in the Paso and seek the PJ’s nomination for senatorial candidate representing his native province of Santa Fe. Rossi’s announcement produced internal tensions because the PJ in Santa Fe had already named Marcelo Lewandowski as its senatorial candidate.

Rossi is an influential figure within Kirchnerismo with a close affinity to President Fernández and Vice President Cristina Fernández, Kirchnerismo’s main leader. But the PJ’s Santa Fe branch is controlled by Governor Omar Perotti, a powerful political leader in the province. Perotti, who is running as an alternate in the senate, is fully behind Lewandowski’s bid.

In the hope of avoiding a divisive primary between Rossi and Lewandowski, the PJ national leadership agreed to settle on a single candidate. The party leaders opted to back Lewandowski. The leadership, including President Fernández, then called on Rossi to withdraw his bid. But Rossi refused, insisting that he wanted to provide a counterweight to the dubious leadership exercised by Perotti in Santa Fe. This prompted President Fernández to announce publicly that he would demand the resignation of any cabinet member seeking to run for an electoral post. Ministers are not legally required to step down to run for public office in Argentina (only before assuming an elected post). But President Fernández said that he wanted to instil new “ethical rules” for the cabinet to ensure that ministers remain focused on their tasks.

The announcement was seen as an attempt to dissuade Rossi by making it clear that disobeying party orders would mean losing his cabinet post. But Rossi said that he would not abandon his senate bid and would resign. This led to President Fernández announcing on 28 July that he had asked all cabinet members that have launched electoral bids to resign. This included some minor cabinet members but also Daniel Arroyo, the social development minister. Arroyo, an affiliate of the Frente Renovador (FR) moderate PJ faction, wants to run for national deputy representing the province of Buenos Aires.

This left vacancies in two key ministries. The defence ministry is traditionally one of the most powerful in the cabinet, while the social development ministry has gained huge political importance as it is in charge of distributing social programme funds around the country, which means that it controls a sizable budget.

Filling the ministerial vacancies posed a political dilemma for President Fernández. He was under pressure to find replacements that would be broadly accepted by the PJ and not upset the balance between Kirchnerismo and moderate PJ factions in the cabinet. After days of deliberations, on 9 August it was announced that President Fernández had appointed Jorge Taiana and Juan Zabaleta, respectively, as the new defence and social development ministers.

The appointments raised eyebrows. Both Zabaleta and Taiana are associated with Kirchnerismo and have links to Vice President Fernández, with both men serving in the previous PJ government (2007-2015) led by her. Rather than seek to maintain balance, the new appointments appear to give Kirchnerismo greater influence in the cabinet and signal the further radicalisation of the Alberto Fernández administration, which won election by running on a moderate platform.

The appointment of Zabaleta, the current mayor of the municipality of Hurlingham in Buenos Aires province, was not so unexpected. There had been rumours that Kirchnerismo was demanding control of the social development portfolio, which Cristina Fernández has long seen as key for ensuring working class votes.

Taiana’s appointment was more surprising. An elected national senator, Taiana is a lifelong Peronist, who was foreign minister (2005-2010) under Néstor Kirchner (2003-2007) and Cristina Fernández until, much like Alberto Fernández, they had a public fallout and he was shuffled out. The two later reconciled and Taiana won election to the senate in 2019 on the ticket of Unidad Ciudadana, Cristina Fernández’s own political movement.

Taiana is said to be a friend of President Fernández and there is intense speculation in Buenos Aires over whether he was the president’s choice or if his appointment was imposed by Vice President Fernández. Either way, the general view is that Taiana’s appointment will satisfy Vice President Fernández and Kirchnerismo but likely upset moderate PJ factions as another prominent ministerial post is handed over to Kirchnernismo, while they lose a minister.

Moreover, there are concerns that Taiana’s appointment could produce frictions with the military. Many Kirchnerista leaders were members of the defunct Montoneros Peronist guerrilla group that operated in the 1960s and 1970s. Relations between the two sides remains fraught.

Rossi, who was not a Montonero, succeeded in establishing a good relationship with the military. But Taiana was a Montonero and he was convicted for carrying out terrorist acts in the 1970s (he was involved in at least one deadly bomb attack targeting military officers).

Taiana’s arrival at the defence ministry could produce discontent among military ranks. More generally the new ministerial appointments could exacerbate internal PJ divisions over the composition of the cabinet. But perhaps more significantly if it is interpreted as a shift towards a more hard-line Kirchnerista administration by the electorate, it could cost the PJ votes in November’s elections.

Geopolitical implications?

While President Fernández has said that Jorge Taiana’s appointment should imply no change in Argentina’s national defence policy, there is some speculation that it could lead to changes in foreign policy. During his time as foreign minister, Taiana sought to forge closer ties with Russia and China. The speculation is that he will seek to do this again as defence minister and try to sign military cooperation agreements, or contracts for the provision of materiel with these nations. This could affect the Fernández administration’s efforts to shore up ties with the US government, with which it has said it wants to cooperate on security issues.

On 16 April the Community of Latin American and Caribbean States (Celac) became the latest in a whole range of regional bodies that have censured Ecuador for its forced entry into the Mexican embassy in Quito at the beginning of this month. But the government of President Daniel Noboa is paying a relatively limited diplomatic price.

The Celac summit, which was held as a virtual meeting, censured Ecuador and expressed support for Mexico in the ‘embassy crisis’ caused by the forced removal of former Ecuadorean vice-president Jorge Glas (2013-2017) from the embassy building in Quito where he had been given political asylum. Unlike the near-unanimous condemnation of Ecuador by the Organization of American States (OAS) on 10 April, some disagreements had emerged.

The meeting had been convened by the pro tempore head of Celac, President Xiomara Castro of Honduras. But a group of five countries to varying degrees on the right of the political spectrum (Argentina, Costa Rica, Paraguay, Peru, and Uruguay) stayed away, maintaining that not enough prior work had been done to build a consensual approach.

Elsewhere criticism of Ecuador’s stance has continued to flow in. Mexico’s President Andrés Manuel López Obrador has reiterated calls for other countries to support Mexico’s complaint to the International Court of Justice (ICJ) which seeks to have Ecuador expelled from the United Nations (UN). The Inter-American Commission on Human Rights (IACHR) criticised Ecuador and called for Glas to receive guarantees of protection. The Venezuelan and Honduran governments closed their embassies in Quito in protest. President Gustavo Petro of Colombia cancelled a pre-planned bilateral cabinet meeting between the two countries.

There is concern over whether the Ibero-American Summit, planned for November this year in the Ecuador’s third most populous city of Cuenca, will be able to go ahead. President Noboa gave a television interview on 15 April with Australian broadcaster SBS during which he insisted that he had “no regrets” over his decision to order the embassy incursion, adding that “the great majority of the Ecuadorean people are happy with my decision”. Noboa expressed his conviction that his government was “on the right side of history” and that some governments use the granting of political asylum as a “façade…to save criminals from their sentences”. Noboa further claimed that Glas had an “escape plan”, saying that he intended to be taken in an embassy car directly to a Mexican military transport aircraft.

Noboa also suggested that he and López Obrador should meet to resolve their differences over shared national dishes. López Obrador promptly slapped the suggestion down, saying there was no room for frivolity over such a serious matter.

While Ecuador will be paying an ongoing diplomatic price, it is probable that the wave of condemnation will begin to lose momentum in the coming weeks, supported perhaps by emerging divisions similar to those seen at Celac. The likelihood of Ecuador becoming an international pariah and being expelled from the UN is extremely low. Only one country, Taiwan, has ever been expelled from the UN (it was replaced by the People’s Republic of China, PRC). The possibility of future support from the International Monetary Fund (IMF) being withheld or of sanctions being imposed by important trade partners is likewise very small.

Domestic reaction

An Ecuadorean court has described the arrest of former vice president Jorge Glas as “illegal” and “arbitrary” (although it acknowledged he must remain in custody to serve out his prison sentence). Teachers’ unions have protested in Quito against what they said was the “militarisation” of the country.

Colombia’s President Gustavo Petro submitted to congress the second tax reform package of his presidency on 10 September. This time the aim is to close a Col$12tn (US$2.8bn) hole in the 2025 budget, while trying to avoid any cuts in social spending. 

According to the finance minister, Ricardo Bonilla, the package has three main elements: first, measures to stimulate the economy; second, action to identify new sources of tax revenue; and third, an adjustment to public sector fiscal responsibility rules.

Among the concrete measures proposed are new taxes on online gambling and hybrid vehicles, along with an increased levy on carbon emissions. Gambling revenues have been growing strongly so this is seen as a promising revenue source. On the other hand, the value added tax (VAT) rate for hybrid vehicles, which had been reduced to 5%, has now been put back up to 19%, since officials seem to have concluded that hybrids still guzzle a lot of fossil fuel. The carbon emission tax, which has been in place since 2016, now goes up to US$75,000 per tonne of carbon dioxide, from US$25,000 previously.  

The extra money will be used to reduce some corporate income taxes. The general rate will fall to 30% from 35% over five years. In keeping with the government’s pursuit of green credentials, coal, oil and gas companies will not benefit from that reduction. Small and medium sized enterprises (SMEs), on the other hand, will see their rate fall more steeply from 35% to 27%. Other companies will end up paying more: windfall profit tax rates, for example, will rise by five percentage points.

The package also includes special incentives for renewable energy and for tourism in municipalities with fewer than 200,000 inhabitants each. There will be VAT reductions to encourage passengers to take domestic tourism flights to otherwise difficult-to-access areas. VAT rates are also to be tweaked to encourage new automobile purchases.

Finally, nearly half the revenue will come from an accounting change, bringing implementation of the fiscal rule forward by one year to 2025. Bonilla has suggested this alone will give the government up to Col$5tn (US$1.17bn) of extra head room.

Looking forward, there is a major difference between Petro’s first tax reform approved in congress in November 2022, and this one. At that time Petro had just started his four-year term in office and was riding a popularity wave. Although his ruling coalition lacked a majority in congress both centrist and right-wing opposition parties were willing to negotiate deals. The picture is different now. At the halfway mark in his four-year presidency, Petro is less popular and congress, which in the interim has already batted away numerous other government-backed reform proposals, is less minded to cooperate. 

A sign of this legislative rebelliousness is that a group of lawmakers, including members of the ruling coalition, of the opposition, and some independents, are working on a counter proposal. With the fiscal deficit expected to reach 5.6% of GDP this year the group proposes that any increase in tax revenue achieved from the government’s package should be immediately “mirrored” by an equal cut in government spending, a gesture towards greater fiscal orthodoxy. Petro has rejected the idea, saying that the government will continue focusing exclusively on boosting revenues.

Petro versus congress

Like many other leftist leaders, President Petro has shunned conventional fiscal austerity and pledged to avoid or minimise budget spending cutbacks that harm the poor. He may, however, have some trouble persuading congress to agree with him.

Paraguay’s President Santiago Peña and senior officials from the Brazilian government, such as Foreign Minister Mauro Vieira, attended the two-day Expo Paraguay-Brasil 2024 business conference in Luque, in the Asunción metropolitan region, last week. In addition to highlighting the importance of bilateral economic interests, the Peña administration has also signalled alignment with some of Brazil’s foreign policy objectives likely to be on the agenda when it hosts the G20 leaders’ summit in Rio de Janeiro.  

The 15^th edition of the Expo Paraguay-Brasil ran from 7-8 November and was attended by representatives from around 600 companies. On the first day of the conference President Peña said that Paraguay was a stable economy, with relatively low inflation, and legislation favourable to foreign investment. He also maintained that his government had a “win-win” vision for its relations with Brazil, highlighting that “we are historical and strategic partners in Mercosur, the most important trade bloc in South America, which has been fundamental to the promotion of trade and regional integration”.

At the event, Vieira highlighted the importance of bilateral cooperation on energy, embodied in the bi-national Itaipú hydroelectric dam, which sits on the border of the two countries along the Paraná River. Earlier this year, Paraguay and Brazil agreed new terms regarding the pricing and distribution of the electricity generated by the dam, but the two governments still plan to carry out a broader renegotiation of parts of the Itaipú Treaty. The visit to the expo was also a chance for Vieira to meet his Paraguayan counterpart Rubén Ramírez Lezcano to discuss a timeline for the bilateral talks for the renegotiation of Annex C, which determines the financial arrangements of the dam’s operations.

Aside from federal government officials, Brazil’s state governments also sent representatives to Luque, mainly from the states in the south of the country which border Paraguay. The governor of Mato Grosso do Sul, in south-western Brazil, Eduardo Riedel, spoke at the conference and used the event as a chance to meet Paraguay’s trade & industry minister, Javier Giménez, to discuss the so-called ‘Rota Bi-oceânica’ initiative, a series of planned expansions to road networks aiming to connect Brazilian agricultural producer states, such as Mato Grosso do Sul, to ports in Chile, via highways running through Paraguay.

MEXICO| Politics. The latest opinion polls point to a win for President Felipe Calderón Hinojosa’s sister, Luisa María, in the gubernatorial election on 13 November in Michoacán. Michoacán, currently run by the left-wing Partido de la Revolución Democrática (PRD), is the last major election before the general elections in July 2012.

If his sister were to win, President Calderón’s influence in the Partido Acción Nacional (PAN) would probably rise, which in turn could boost Ernesto Cordero, his candidate for the party’s presidential nomination for 2012. Cordero is currently running a poor third in the opinion polls for the PAN nomination behind Josefina Vázquez Mota. The latest opinion polls show Vázquez Mota enjoying the support of about half the potential PAN voters.

The other consequence of a win for Luisa María Calderón in Michoacán would be inside the Partido Revolucionario Institucional (PRI), which has swept all of the elections this year. Its controversial party president, Humberto Moreira, may well be jettisoned if the PRI, which had expected to win the state, fails. Moreira is controversial because of the borrowing spree he went on in Coahuila, which he ran as governor from 2005 to 2011.

MEXICO | Growth downgrade. The Banco de México has downgraded its forecast for GDP and inflation in 2011 from a range of between 3.8% and 4.8% to a range of between 3.5% and 4%, largely because of the weak performance of the US economy. The central bank is forecasting GDP growth of between 3% and 4% in 2012. Inflation in September was 0.67%, bringing the annual rate to 3.2%.

• New jobs

The central bank is forecasting that the economy will create between 560,000 and 620,000 new jobs in 2011 while in 2012 the economy will create between 500,000 and 600,000 new jobs.

After three years of direct rule from the UK, the Turks & Caicos Islands (TCI), a British Overseas Territory, will hold a general election on 9 November.

The suspension of home rule followed the completion of the Sir Robin Auld Commission of Inquiry, which found that there was “a high probability of systemic corruption in government and the legislature and among public officers in the Turks and Caicos Islands in recent years”. 

During the period of direct rule, a new constitution was drawn up and it is under this that the new election will take place.  The number of electoral constituencies has been reduced from 15 to 10, but a further five members will be elected at the national level.  Three parties will contest the elections, with the Progressive National Party (PNP) and the People’s Democratic Movement (PDM) both fielding 15 candidates each.  The People’s Progressive Party (PPP) will field five candidates, and two independents are standing.

The previous election was in February 2007 in which the PNP won 13 of the 15 seats in the House of Assembly.  In an attempt to draw a line under the events that led to the suspension of home rule, the party’s current mission statement claims that “transparency, accountability, and respectfulness will be the guiding principles on how we conduct the affairs of the people”.  It is led by Rufus Ewing.

The PDM won 7 out of 13 seats in the 2003 general election, but it subsequently lost two seats in by-elections and then managed to claim only two seats in the 2007 general election.  It is led by Oswald Skippings.

There has been a degree of confusion in the run-up to the election over the eligibility of candidates with dual citizenship.  A number of proposed candidates were born in The Bahamas or the US and have had to make a rapid renunciation of their dual citizenship to qualify.  There might be further complications following the elections as an Integrity Commission will review the suitability of all elected representatives after the election.  Any that fail this test will be replaced by the candidate with the next highest number of votes.

A key controversial issue in the election campaign has been the proposed introduction of Value Added Tax (VAT).  The law to introduce VAT was signed in July, and the tax will be introduced from April 2013.  The Turks and Caicos Independent Business Council (TCIBC) has used the election to step up its campaign against VAT, and both main political parties oppose its introduction.  The TCIBC is saying that the tax should be a question for the newly elected government and should not be treated as a fait accompli.  An anti-VAT petition arranged by the TCIBC gained 3,000 signatures, over half the country’s electorate.

The TCIBC has also retained the services of London-based lobbyists, Media House International, which has put out a statement saying: “The UK government despite presiding over a disastrous British economy, really have to understand that they can’t go on behaving like 18^th century colonial masters when they simply don’t understand the nuances of small countries’ fiscal infrastructures.  VAT might work in a population of 60 million, but it’s a different story when the population is 46,000.”

On 6 December Chile’s largest paper and pulp producer, Compañia Manufacturera de Papeles y Cartones (CMPC), announced an investment of US$2.1bn in the expansion of its ‘Guaíba Línea I’ pulp processing plant in Rio Grande do Sul, Brazil, in a bid to become the world’s second largest paper pulp producer.

In a company statement submitted to Chile’s stocks and securities superintendency (SVS), CMPC revealed plans to build a new pulp processing line adjacent to the Guaíba plant so as to allow the complex to increase its pulp production from 450,000 to 1.3m tonnes a year.

As a result, CMPC expects its total production capacity to increase from the current 2.4m tonnes a year to 4.1m tonnes by 2015. This would move CMPC closer to its main regional and global competitor, Brazil’s Fibria, which currently produces 5.0m tonnes of pulp a year.

CMPC only acquired the Guaíba plant in 2009, the same year that Fibria was created upon the merger of two Brazilian firms, Aracruz and VCP. Highlighting the relevance that the pulp business has acquired in the Southern Cone in recent years, the Brazilian multinational food processing company, JBS, on 12 December announced its first foray into the sector with the inauguration of a new US$2.25bn pulp processing plant in Tres Lagoas, Mato Grosso do Sul, with a slated production capacity of 1.5m tonnes a year.

PARAGUAY | New angle to Lindstrom case. The 31 May murder of rancher Luis Lindstrom, attributed to the Ejército del Pueblo Paraguayo (EPP) guerrillas, was the motive for a new deployment of army troops to fight that organisation (see page 16). Doubts have arisen, however, about the EPP’s involvement in that killing. On 21 June it was announced that forensic evidence had identified the bullets that killed Lindstrom as belonging to a batch of 5.56 calibre ammunition that had been bought from Colombia for the Galil rifles used by the Fuerza de Operaciones Policiales Especiales (Fope) in operations against the EPP.

Police sources soon spread the theory that they must have come from a 2011 theft of ammunition, weapons and other equipment from a Fope arsenal, which was only discovered after the event when the bullets were found in the possession of a police officer and a soldier. Court proceedings were initiated against two former Fope chiefs at the time. It is not clear if the forensic evidence collected at the scene of the Lindstrom murder can pinpoint the provenance of the bullets so precisely.

By the time this evidence came to light the police had arrested two suspects and issued arrest warrants against four more. One of the detainees, Carmelo Recalde Pérez, was identified as a member of a peasant organisation the police consider part of the EPP’s ‘political wing’. He has denied this.

Alternative versions now circulating include the possibility that the killers were either political adversaries of Lindstrom’s, or some local narco with whom the victim had a dispute over land.

CHILE | Attacks on Carabineros. On 17 June in Collipulli, Araucanía, two Carabineros were ambushed on their way to a local farm which had been granted night protection since March 2012. Their vehicle was hit by shotgun and small arms fire, but neither was reported injured. The regional Carabineros’ commander, General Iván Bezmalinovic, said that this raised the number of the force’s officers who had come under attack in that area to 40.

In April 2012 a sergeant of the Carabineros’ Grupo de Operaciones Policiales Especiales (Gope) was shot dead there. Later that same month a length of railway track in the area was removed, causing the derailment of a train. In December 2012, in an ambush similar to the latest one, two Carabineros were injured by shotgun fire. The Carabineros assume that the perpetrators of these attacks belong to some group of radical Mapuche activists.

BRAZIL | Drive against road cargo ‘pirates’. On 6 June the federal police announced that an operation across seven states, codenamed Piratas do Asfalto (‘Asphalt Pirates’) and involving 200 officers, had executed 38 arrest warrants and identified another 38 suspects of belonging to a gang dedicated to highway cargo robbery. Investigations launched in February 2012 had led to the identification of this gang which operated across Bahia, Ceará, Goiás, Minas Gerais, Pará, Tocantins and São Paulo, and is believed to have robbed merchandise worth about US$22m.

The gang used a variety of methods: boarding trucks in movement, ambushing them and abducting the drivers and acting in collusion with the drivers or employees of freight companies. They used powerful jamming devices to prevent the tracking of hijacked vehicles (which has led the police to start investigating the possible involvement of firms engaged in electronic security measures and the monitoring of freight movements). They did not specialise in certain types of cargo, seizing foodstuffs, electronic appliances, construction materials and even agricultural equipment (theft of the latter having been estimated at US$1.6m).

Another food crisis looming? The Pérez Molina government is warning of another food crisis as a result of the El Niño weather phenomenon. This follows a forecast made at the end of last month by the national institute of seismology, volcanology, meteorology, and hydrology (Insivumeh) of low rains for the months of May and June and a possible heat in July, potentially putting crops of basic food grains, the main diet of the population, at risk.  The departments most affected will be those in the Dry Corridor, which include Jalapa, Jutiapa, Zacapa, and El Progreso.

At the end of last month Luis Monterroso, head of the secretariat for food security (Sesan), warned that at least 40,800 families could be affected by food shortages this year. This adds to the current crisis affecting the agricultural sector caused by a coffee fungus (see sidebar). Monterroso said the government had earmarked Q$715m (US$92.3m) for a preventative plan for the sector which includes: support to agricultural households; the prevention and treatment of malnutrition through the use of therapeutic foods; the establishment of a nutritional alert system among other measures.  Monterroso did not say whether the latest threat of food crisis would affect President Pérez Molina’s pledge to reduce malnutrition by 10% during his four year term which began in January 2012. In his two-year balance sheet delivered in January 2014, Pérez Molina claimed that through his government’s main flagship social programme, Hambre Cero (Zero Hunger), the rate of deaths as a result of malnutrition dropped to 0.68% down from 2.2%. He also said that 106 children died in 2013 as a result of malnutrition, 28% less than in 2012.

• Coffee rust outbreak continues

As well as the impact of El Niño, Guatemala’s agriculture sector also continues to be affected by an outbreak of coffee rust fungus, which caused President Otto Pérez Molina to declare a national emergency in February 2013 [RC-13-02]. According to the latest figures (February 2014) from the International Coffee Organisation (ICO), coffee rust caused losses of 554,394 bags of coffee (of 60kg each) in the 2012-2013 harvest cycle in Guatemala, second only to Honduras (1.3m bags). According to the same figures, El Salvador reported losses of 322,102 bags, followed by Nicaragua (306,667 bags) and Costa Rica (73,600 bags). Total losses for Central America were estimated at around 2.7m bags, costing a total of US$500m.