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Germán Ávila Plazas has been sworn-in as Colombia’s new finance minister as was widely expected following the resignation on 18 March of his predecessor, Diego Guevara, who had only been in the role since December [WR-25-11]. Like President Gustavo Petro, Ávila has a radical background as a guerrilla fighter during his youth, although he has spent most of the last three decades working in social housing.

A key question for bond markets is whether Ávila will, like Guevara, push hard for cuts to cover a Col$12tn (US$2.9bn) hole in the 2025 budget. A disagreement with President Petro on this issue was reportedly the reason for Guevara’s exit. Guevara apparently demanded a spending freeze that was rejected by Petro, who feels that congress has tried to force him into austerity measures by rejecting the budget which Petro then issued by decree [WR-24-38].

There are reasons to believe that Ávila will keep a looser hold on the purse strings than his predecessor. He has a friendship with Petro that dates back four decades, to when they were both members of the M-19 guerrilla group which demobilised in 1990. Unlike Guevara – a centre-left economist whose experience was primarily in the academic sector – Ávila has a long background in progressive politics and social activism. He spent the best part of three decades as director of the national federation for social housing (Fenavip, 1993-2003, 2005-2023), and was secretary general of the left-wing party Polo Democrático Alternativo (PDA) in 2005. More recently, since 2024, he has been the president of Grupo Bicentenario, a holding firm for state companies, where Petro tasked him with boosting the so-called ‘popular economy’.

Regardless of his long personal friendship with Ávila, Petro will not be able to ignore the hole in the budget without breaching the country’s fiscal anchor, which imposes a legal cap on government borrowing, or raising taxes. Ávila said on 21 March that he will opt for the latter option, although he can expect stiff resistance in congress. “We’ll continue to meet our public debt obligations and make the necessary adjustments to improve tax revenues to allow us to address our tight fiscal situation,” he said. “My appointment should not cause any shocks to the country’s economy,” he added, in response to the selloff of Colombian assets that followed Guevara’s resignation. He insisted that Colombia’s “macroeconomic variables show an economy with sustainable GDP growth, controlled inflation in a reasonable range, and a controlled exchange rate”.

But whilst the economic warning signs may not be flashing red, they have turned orange in recent months. The fiscal deficit is running at 7% of GDP, causing unease among investors, and inflation is sticky, running at 5.28% in annual terms in February. On 6 March the international credit ratings agency Fitch lowered Colombia’s outlook from ‘stable’ to ‘negative’, highlighting a “deterioration in its fiscal position and uncertain prospects for corrective measures”.

The general election due in May 2026 will further reduce Petro’s appetite for spending cuts. Whilst he is barred from seeking a second term, Petro will be aiming to keep his base motivated in order to boost the odds of a left-wing continuity candidate winning the presidency. Petro’s first finance minister, José Antonio Ocampo (2022-2023), now a frequent critic of the government, has said that Ávila’s main challenge will be reining in Petro’s costly spending plans. Warning of a surge in bond yields if Petro does not cut spending, Ocampo said on 23 March that “this job demands him to say ‘no’ to the president when it is necessary”.

Petro hits out at Milei and Trump

President Gustavo Petro compared Argentina’s President Javier Milei with the Italian dictator Benito Mussolini and US President Donald Trump with Adolf Hitler during a 22 March interview with the radio station La Pizarra. Noting Milei’s Italian ancestry, Petro said: “I think Milei is nostalgic for Mussolini… Trump must look upon Milei as inferior, just as Hitler used to look on the Jews as inferior”. He added that “the Argentine people need to do something, you know what I’m talking about, but I’m not going to say it because I respect the principle of sovereignty”.

Development: On 11 October the indigenous marchers protesting against the construction of a road through an indigenous territory (Tioc) and national park, Isiboro Sécure (Tipnis), announced they would delay arriving in La Paz until after the 16 October national election to pick a judiciary.

Significance: The announcement means that there will not be a confrontation between the protesters and supporters of President Evo Morales who has called a massive rally for today (12 October) in support of the 16 October vote. The indigenous groups, which Morales has accused of seeking to sabotage the vote, took the decision to avoid being accused of politicising the electoral process, which anyway looks like it could deliver a fresh embarrassment to the government.

Key points:

• The political opposition has sought to turn the election into a plebiscite on the government, calling for the electorate to register its discontent by voting “no” or leaving their ballot papers blank. As there is a lack of interest on the part of the electorate in the contest, this looks a sensible option. A recent poll by Ipsos y Apoyo showed that 92% of respondents knew little or nothing about the 115 candidates competing for 56 positions in the country’s top courts (including the supreme and constitutional courts); while 85% said that they had insufficient information to make a choice.

• That Morales, who trumpets the election as an effort to make the judiciary more representative, is nervous is suggested by recent initiatives which the opposition claims are efforts to boost his popularity, which, at 37% in September is at its second lowest since taking office in January 2010. These recently announced initiatives include the payment of a one-off B$1,000(US$140) bonus to thousands of public servants (at a total cost to the state of B$46m/US$6.8m) as well as the distribution of 130,000 free laptops to school teachers, worth B$350m (US$49m), which have a stencilled image of a smiling Morales on the back.

The opinion-poll-frontrunner for the 2012 presidential election, Enrique Peña Nieto, suggested, in an interview with the Financial Times on 18 October, that he may modify Petróleos Mexicanos’s monopoly over the oil industry in Mexico

Peña Nieto, from the Partido Revolucionario Institucional, who has just retired as governor of the estado de México, the country’s richest and most populous state, said that he would encourage the state oil monopoly, Petróleos Mexicanos, to do more with private oil companies. Peña Nieto’s comments were clearly designed to attract the business vote (which has gone, largely, in the last two elections to the ruling Partido Acción Nacional) and to reassure the US

Energy industry analysts in Mexico all agree that Pemex needs another shake-up. The current government of President Felipe Calderón Hinojosa, did stir the company a bit and has, apparently managed to stop the relentless slide in crude oil output, but the company clearly needs to do three things

The first is to increase its refining capacity. Mexico is now on a treadmill in which it exports crude oil then pays international oil companies for more expensive refined products. This means that Mexico’s net oil exports are falling even faster than crude oil production and bear out the gloomy forecasts that by 2018 Mexico will be a net oil importer, unless something changes. The second move the next government needs to make is to work out a scheme to exploit the deeper water oil deposits that probably lie in Mexico’s portion of the Gulf of Mexico. The third thing the next government needs to do is to purge the company of its extraneous staff, operations and influences

Peña Nieto observed, accurately, that Pemex and Mexico had been a “hostage” to ideology, which had slowed development and dynamism in the energy sector. He argued that Pemex, one of the world’s largest oil companies with annual sales exceeding US$100bn, “can achieve more, grow more and do more through alliances with the private sector.

As Pemex’s director Juan José Suárez Coppel admitted, the company has been through difficult times since production from its mega field Cantarell peaked in 2004 and began to decline precipitately

Pemex has long been a national icon following its nationalisation by President Lázaro Cárdenas in 1938: Cárdenas’s wife famously contributed her jewellery to pay compensation to the expropriated owners of the oil companies which had been nationalised to form Pemex. The Cárdenas clan is still powerful politically: Lázaro’s son, Cuauhtémoc, has run three times for the presidency, and his grandson, another Lázaro, is a former governor of the clan’s home state of Michoacán.

The constitution currently prohibits Pemex from making joint-risk contracts with third parties. Currently Pemex’s partners cannot claim a share of any oil they find but have to be content with a fixed commission on each barrel produced.

It is interesting that Peña Nieto floated the idea of energy reform rather than media or telecoms liberalisation. Peña Nieto is very close to the dominant broadcasting company, Televisa, which wants to break the virtual monopoly Carlos Slim, the country’s richest man, has on the telecoms industry.

Peña Nieto appears to favour the way Brazil liberalised its oil industry. Brazil opened up areas to exploration by foreign companies, and its state oil company, Petrobras, to private shareholders, but also set up new state-owned oil company Petrosal, to manage the development of the most attractive deepwater oilfields.

Peña Nieto’s phrases to the FT were: “Mexico cannot waste this opportunity… I believe that it is possible to find mechanisms that guarantee, on one hand, the state’s ownership of the oil in Mexico but on the other, mechanisms to achieve and encourage a greater involvement of the private sector...[] we have to take much more audacious steps.”

For 2012 the Calderón government and the PRI-controlled congress agreed that the budget should use an oil price forecast of US$84.9 a barrel for 2012. Significantly, the current forecast looks much more bullish than the government’s forecast, which was made in August. In August, Mexican crude was selling for US$102 a barrel. Now the price is down to US$95 a barrel and the price has been lower in September.

The oil price forecast is the most crucial element in the budget because about 35% of the government’s income comes from oil revenues. The PRI is assuming that the world’s demand for oil will remain firm, which is not necessarily what the oil market is saying.

Pemex itself is forecasting that by the end of 2011 its average production of crude oil will be back to over 2.6m barrels per day (bpd) so that the average oil production for 2011 will be 2.57m bpd. Pemex’s director Suárez Coppel claimed that finally the long decline in crude output which had started in 2005 had been halted. He admitted, however, that in the first half of 2011 average production had been 2.56m bpd, 1% below the level achieved in the first half of 2010.

Suárez Coppel argued, in testimony to lower house’s finance and energy committees on 19 October, that by the end of President Felipe Calderón Hinojosa’s term on 30 November 2012, crude oil production would be back over 2.7m bpd. More boldly, he forecast that by 2016 or 2017, provided there was no cut in Pemex’s investment budget, oil production would be back over 3m bpd.

Development: On 12 January the ministers of defence of Colombia and Ecuador, Juan Carlos Pinzón and Javier Ponce respectively, began a two-day meeting in Boyacá, Colombia, to discuss bilateral cooperation relating to arms, people and drugs trafficking and illegal mining.

Significance: While most of these issues have long been part of the bilateral agenda, illegal mining is a new addition. Ponce told the local media upon his arrival that this is a “modern scourge” that hinders development and that the conversations should lead to the adoption of “effective measures” to counteract water pollution in the waterways where illegal mining is practiced. Some of these waterways are shared by both nations and the treatment of environmental damage as a national defence issue represents a new approach for both countries.

Key points:

• Ponce arrived in Bogotá yesterday, where he was met by Pinzón. The two ministers then travelled together to Villa de Leyva, Boyacá, a three-hour trip by land, where they held bilateral talks that will continue this morning. The long period of time spent together indicates the high level of specificity of the talks. They will deliver a joint press conference at 11am local time today (13 January).

• This meeting is part of the renewed bilateral cooperation between the two nations and aims to strengthen ties. On 18 December last when President Juan Manuel Santos visited his Ecuadorean counterpart, Rafael Correa, in Quito, the latter stated that the visit had been the best Christmas present he could expect; Santos’s trip marked an important and positive turn in bilateral relations, which had been shattered by the 2008 Colombian air raid on a Fuerzas Armadas Revolucionarias de Colombia (Farc) camp in Ecuadorean territory.

HONDURAS | Model cities but no model police force. Nine months after the supreme court (CSJ) ruled that the ‘model cities initiative’ championed by President Porfirio Lobo was unconstitutional, the legislative assembly has approved a bill creating a surrogate: economic development and employment zones (Zede). The new law envisages a dozen different types of ‘Zedes’, including international financial centres, autonomous cities, special economic zones, agri-industrial zones, tourist zones and mining zones. They will be “autonomous entities” with their own laws and tax system. They will remain under the sovereignty of the State but overlapping competencies could cause considerable tension with local authorities.

The newlook model cities have not yet been complemented with a new look model police force. The security and defence minister, Arturo Corrales, suspended all 2,200 members (including 1,400 agents) of the criminal investigation branch (DNIC) of the national police force last week pending confidence tests. DNIC agents account for some 10% of the police force.

Corrales said that the DNIC had been leaking intelligence to organised crime and that the suspensions were part of the ongoing purging of the police force which began two years ago.

The ruling Partido dos Trabalhadores (PT) is running out of stalling tactics to prevent a full congressional inquiry (CPI) into mismanagement and corruption at the state-run oil company, Petrobras. On 23 April the supreme court judge, Rosa Weber, decided to limit the CPI to Petrobras, rejecting the government’s request that the inquiry be widened to include an investigation into the São Paulo metro and the port of Suape in the state Pernambuco. The rest of the supreme court has to approve Weber’s decision and the government can still appeal it; the opposition wants the CPI to begin immediately.

Widening the inquiry would have had two effects. Principally, it would have made any investigation so onerous on the investigators that they would have been unlikely to find much new information. Secondly, it could also have damaged President Dilma Rousseff’s main rivals. Aécio Neves’ party, the Partido da Social Democracia Brasileiro (PSDB), would have faced questions over the metro; Eduardo Campos’ Partido Socialista Brasileiro (PSB) over Suape. With few parliamentary days left until the start of the World Cup, the government will be hoping to stall the inquiry for as long as possible, but the danger is that it could be approved during the run-up to the election in October.

President Rousseff is under fire over her handling of Petrobras’ purchase of a refinery in Pasadena, Texas, in 2006. Petrobras paid massively over the odds; Rousseff on the oil company’s advisory board approved the deal. In justification Rousseff has said her decision was based on incomplete information. Closer scrutiny of the deal is likely to jeopardise the president’s reputation for managerial competence. The CEO of Petrobras at the time of the deal, José Sergio Gabrielli, told O Estado de São Paulo last week that both he and Rousseff were responsible for the purchase, and she should shoulder her part of the blame.

Once seen as the star at the centre of Brazil’s rise to become a major oil exporter, Petrobras is today the world’s most indebted oil company and has lost half of its market value in Rousseff’s three years in office.

Operation 'Lava Jato' steps up a gear

Formal charges have now been filed against Alberto Yousseff, the financier, and six others accused of laundering R$10bn (US$4.5bn). Already there is evidence Yousseff laundered some of the money by funnelling it into political parties’ election campaigns. Meanwhile Paulo Roberto Costa, the former head of refining and supply at Petrobras, has been charged with impeding police investigation. As yet no formal charges have been filed against him over his relationship with Yousseff, though the police believe that the two men collaborated to demand payments from companies wishing to secure a contract with Petrobras.

• Marco Civil becomes law; debate not over

President Dilma Rousseff opened NETMundial, the global conference on internet governance in São Paulo, by signing into law the Marco Civil, a civil rights’ framework for the internet. While internet activists have hailed the move, there are concerns that there may be more leeway than intended in one of the law’s key provisions: net neutrality.

On 24 April, Alessandro Molon, the PT deputy largely responsible for pushing the bill through congress, denied claims by telecoms companies that they would be able to charge customers different amounts for different types of content. According to Molon, the telecoms companies cannot sell faster speeds to customers who wished to access specific websites, such as the film and TV-streaming website, Netflix, for example. But the telecoms companies argue that according to the wording of the text approved, they can do that as long as they make the same service available for everyone. Meanwhile, internet rights’ activists have complained that the provision in the law that obliges Internet Service Providers to store user data for six months after its generation compromises privacy.

• Refugees

Statistics published on 24 April show Brazil hosts 5,208 people seeking refugee status. Half of them are Colombian or Angolan. Requests for asylum in Brazil have grown exponentially in the last few years. In 2013, 5,256 people requested asylum; in 2010, that number was just 126.

BOLIVIA | Getting paid by new Argentine government. On 6 January the head of Bolivia’s state-owned oil company Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), Guillermo Achá, said that Argentina’s state-energy firm, Energía Argentina Sociedad Anónima (Enarsa), had paid a third of its outstanding debt with YPFB for the provision of natural gas.

Achá’s comments were made a day after he held a meeting in Buenos Aires with officials from the new Argentine government led by President Mauricio Macri to discuss Enarsa’s debt. According to YPFB reports in December Enarsa owed the Bolivian firm US$300m. Achá said that after the meeting with Argentina’s new energy & mining minister, Juan José Aranguren, and Enarsa’s president, Hugo Balboa, the Macri government had agreed to make a US$100m payment to YPFB. Achá added that he also received a commitment by the Argentine officials that the totality of the debt would be paid off by March.

In addition, Achá noted that he had received assurances from Aranguren that the Macri government is interested in “continuing to work closely” with YPFB to ensure Argentina’s natural gas supply, allaying concerns that, following the change in government, the Macri administration would seek to re-negotiate or cancel the terms of the contract signed by his predecessor, Cristina Fernández (2007-2015), with the Bolivian government led by President Evo Morales.

Under the terms of the current contract, Bolivia exports 16m cubic metres of natural gas to Argentina per day at a price of US$5m per British thermal unit (BTU, where one cubic metre of natural gas equals approximately 1000 BTU).

COLOMBIA | Coffee production hits 23-year high. Colombia’s agriculture ministry released a statement on 5 January showing that the country had produced approximately 14m bags of coffee, the equivalent of 840,000 tonnes (t), last year. This is the highest level of production in decades.

From December 2014 to November 2015 the coffee harvest registered 13.8m bags (828,000 t), representing a 13% increase compared to the 12.2m bags (732,000 t) registered in the previous comparable harvest period. The results were celebrated by Agriculture Minister Aurelio Iragorri Valencia, who reiterated his willingness to continue working with Colombia’s national federation of coffee producers (FNC) in 2016 in order to “increase the profits made by producers”.

In 2015, Colombia invested over US$25m in the coffee-producing sector in projects designed to increase productivity and the commercialisation of Colombian coffee all over the world.

On 6 January Iragorri released a statement on his twitter account saying that coffee production in 2015 finally reached 14.2m bags (852,000m t), representing the highest coffee production in the past 23 years.

PERU | Inflation exceeds central bank target. On 1 January Peru’s national statistics institute (Inei) released a statement showing that the country’s inflation rate reached 4.4% in 2015, the highest rate of inflation in the past four years and above the target of between 1% and 3% set by the Peruvian central bank (BCRP).

The director of Inei, Aníbal Sánchez, indicated that in December 2015, prices increased by 0.45% in Lima. Sánchez also explained that inflation was boosted by the increase of electricity and water tariffs, and the increase in the prices of certain staple food products, such as potatoes.

Inflation in the price of housing, fuel and electricity reached 7.75%, largely due to the increase in residential electricity tariffs (18.7%) and running water tariffs (8.1%). Food and drink product prices increased by 5.37% on the back of an increase in the price of tubers (53.5%), caused by their lower production due to poor climatic conditions caused by the ‘El Niño’ climatic phenomenon in the final months of last year in Peru.

Following the release of the Inei inflation figures, the BCRP has said that it expects the country’s inflation to reach 2.9% in 2016.

• Cultural heritage

Bolivia’s President Evo Morales sanctioned a law last week declaring the wines and singani (a traditional grape-based liquor) produced in the country to be part of Bolivia’s cultural heritage. Morales said that the law “will guarantee the production and industrialisation of the grape”. The new law designates the promotion of singani and Bolivian wines, produced at between 1,800 and 2,300 metres above sea level (earning them the moniker of ‘high wines’ for being produced at a higher altitude than anywhere else in the world), as a strategic interest to the Bolivian state, allowing producers to receive tax benefits. The last Friday of February was also declared ‘national Bolivian wine day’.

Amid new restrictions to contain the spread of the coronavirus (Covid-19) pandemic, and a fragmenting indigenous vote, the outcome of the second-round presidential ballot on 11 April between the leftist Andrés Arauz and conservative Guillermo Lasso remains uncertain.

Arauz, an acolyte of former president Rafael Correa (2007-2017), did well in the first round on 7 February. The candidate of the left-wing Unión por la Esperanza (Unes) won most votes - 32.72% - approximately 13 percentage points ahead of second-placed Lasso, the candidate for the centre-right Movimiento Creo, who took 19.74% of the votes. To turn this around Lasso needs to win over a large proportion of the voters who backed unsuccessful first round candidates.

This is no tall order. Yaku Pérez, the indigenous candidate from the Pachakutik party who came third in the first round with 19.39% and who claims to be the victim of fraud, has refused to endorse any of the two candidates left in the race. Although Xavier Hervas of Izquierda Democrática (ID), who came fourth with 15.68% of the vote, has endorsed Lasso, not all of his supporters may heed his call.

A poll by Cedatos published on 31 March showed that almost one in three voters (28.8%) remained undecided. But the pollster, part of Gallup International, suggested Lasso could come from behind and win the run-off ballot with a 52%-48% lead over Arauz.

The situation remains volatile. Faced by rising Covid-19 cases the government declared a state of emergency, a curfew, and a ban on public meetings in eight provinces, including Pichincha and Guayas, the most densely populated in the country. This pushed more of the campaign onto social media, where Lasso may have an edge, but also where there is a proliferation of dubiously sourced material and fake news items. Tensions over claims and counterclaims of fraud-in-the-making have also been rising. There was a road blockade and stone-throwing between rival groups on 2 April during an attempt by Lasso to visit the town of Guamote in the central province of Chimborazo.

Under pressure, the indigenous movement has begun to fragment. Officially, Pachakutik remains committed to a policy described as backing “ideological null ballots” – urging its supporters to cast null votes in protest over the alleged first-round fraud. Under existing regulations if the total number of null ballots exceeds the total of valid votes cast for the two candidates in the run-off, then the entire election is voided.

However, on 3 April Jaime Vargas, the president of the umbrella indigenous organisation Confederación de Nacionalidades Indígenas de Ecuador (Conaie), of which Pachakutik is the political arm, suddenly broke ranks and declared his support for Arauz. This came shortly after Virna Cedeno, who had been Pachakutik’s vice-presidential candidate, had announced her support for Lasso. 

This division has caused bitter tensions. Ecuarunari, one of the three regional branches of Conaie put out a statement condemning both what it called the new right (represented by Arauz and Correísmo) and the old right (Lasso and the conservatives). On 5 April, Pérez and the national coordinator of Pachakutik, Marlon Santi, said the executive committee had suspended Vargas and that they would begin a disciplinary process since he betrayed the movement and “sold out” in exchange for the offer of a ministerial job (no evidence for this was presented, however).

How the Pachakutik vote splits could be critical for the outcome of the presidential election. Local political analyst Santiago Basabe commented “the difference between the two presidential finalists may be so small that the valid votes cast by those who initially planned to issue null ballots could be the determining factor”.

Lasso edges ahead

There are suggestions that the Lasso campaign picked up momentum after a television debate on 21 March [WR-21-13], in which the conservative candidate was perceived to have outperformed his rival. A report for consultancy Atrevia, aggregating four recent polls, also suggested he could win with a margin of just over one percentage point.

*International credit ratings agency Moody’s has downgraded the Salvadorean government's long-term foreign-currency issuer rating and long-term foreign-currency senior unsecured debt ratings to Caa3 from Caa1. The outlook is negative. Moody’s said its decision “reflects an increased probability of a credit event – restructuring, distressed exchange, or default – with relatively high severity, as the sovereign faces a challenging debt amortisation schedule with bond maturities in 2023 and 2025 in a context of continued funding stress and persistently high financing needs”.  Concurrently, Moody's lowered El Salvador's foreign-currency country ceiling to Caa1 from B2 “to reflect the low predictability of institutions and government policies, weak policy effectiveness and the government's relatively large share in the country's total external debt”. According to Moody’s, El Salvador's repayment capacity is compromised by an “extremely high cost of funding ahead of a challenging debt amortisation schedule that includes bond maturities of US$800m in January 2023 and again in January 2025. High yields on the sovereign's outstanding external market debt, with sovereign spreads in excess of 2,200 basis points, and reliance on costly short-term domestic debt have led to a material increase in credit risks”. Moody's estimates indicate that El Salvador will likely face a funding gap of about 1% of GDP this year as the government moves to cover financing needs equivalent to 16.2% of GDP.

There has been some optimistic talk about the weak Cuban economic recovery, which began in 2021, beginning to gather some pace in 2022. However, a more detailed look at trends in the island suggests activity will remain depressed.

One cause for optimism came on 16 May when the US administration led by President Joe Biden announced a slight easing of economic sanctions against Cuba, the first since they were tightened during the “maximum pressure” strategy followed by his predecessor Donald Trump (2017-2021). These changes make it easier for Cuban Americans in the US to send family remittances back home; they ease travel restrictions to the island; and they envisage Washington offering 20,000 family reunion visas. Previously family remittances had been capped at no more than US$1,000 per quarter. Travel restrictions are also being slightly relaxed with scheduled and charter airlines allowed to use other airports apart from Havana.

The announcement was seen as positive for the Cuban economy since increased remittances and travel will ease foreign exchange shortages and boost small and medium sized enterprises in the tourism sector. Only two days earlier Economy Minister Alejandro Gil had delivered an upbeat message to local law makers, saying recovery had begun in some sectors after the two-year-long coronavirus (Covid-19) pandemic. He emphasised that first-quarter exports had surged 38% in part due to rising global prices for nickel, a key Cuban export. “We are beginning to see a clear and gradual recovery” the minister said, although he also revealed that import values had surged by nearly US$700m in the same period, outpacing export gains as Cuba struggled with rising prices for fuel, maize, and wheat.

Gil also indirectly acknowledged difficulties with Cuba's dual official and black-market exchange rates. He said the central bank would begin selling dollars at a price between the two rates, to a select group of state-run and privately owned enterprises so as to boost imports needed for production of high demand products. The economy minister also avoided giving any detailed statistics on GDP. According to statistics institute ONEI, GDP fell by 0.2% in 2019, contracted by another 10.9% in 2020, and managed a weak 1.5% recovery in 2021.

• Forecasts

Earlier this year Cuban officials spoke of meeting a 4% growth target this year, but recently there have been fewer mentions of that number.

The more pessimistic view is based on a number of factors. One is that the relaxation of US sanctions will have no more than a small effect at the margins. Another is that data from some key sectors of the economy is pointing to a much gloomier underlying message. Cuba's sugar harvest in the 2021-2022 season has come in at 474,000 tonnes (t), almost half the preceding season's 800,000t, and only 52% of the official target. This major shortfall was attributed to a drastic lack of inputs, including oxygen, fertilisers, pesticides, fuel, and spare parts for machinery. The status of earlier reports that Cuba had secured a contract to sell 400,000t to China is unclear - at current output rates it would be difficult to meet that demand.

News from the tourism sector is also discouraging. The economy minister told a meeting of the council of ministers in late May that 447,714 tourists visited the country in the first four months of this year, 71.3% of the target. Despite an improvement in April, here too it seems likely that Cuba will struggle to meet its target of attracting 2.5m visitors in calendar 2022. That compares with a pre-pandemic visitors total of 4.3m in 2019. Tourism industry executives have pointed out that Cuba's visitor numbers are lagging the post-pandemic recovery curve elsewhere in the Caribbean. Tourism normally represents around 10% of Cuban GDP and is a key source of foreign currency.

The political protests of July 2021 were also cited as a factor persuading holidaymakers to go elsewhere in the region. Capacity utilisation in hotels and cruise ships has been low. Paolo Spadoni, an expert on the Cuban economy from the US’s Augusta University in Georgia, earlier this year said, “Cuba is an adventure, a one-time destination for many, and with the pandemic these people look for familiar, safe places and not for risk”. However, he did acknowledge that Cuba's Covid-19 health protocols are “competitive” and may help build up visitor numbers.

Former Cuban economy minister José Luis Rodríguez (1995-2009) says the global economy presents exceptionally complex challenges for Cuba this year. Despite the slight easing in May, he cites the US trade embargo as an important and ongoing negative. Among other negatives there has been a significant fall in remittances since last year; big increases in shipping freight rates; sharp rises in global food prices; a big spike in international oil and gas prices related to the war in Ukraine; high levels of foreign debt; and limited convertibility of the Cuban peso.

Any political truce between Argentina’s governing alliance and the opposition after the failed assassination attempt on Vice President Cristina Fernández on 1 September was abruptly terminated last week. The decision by the ruling left-of-centre Frente de Todos (FdT) to push through the senate a bill tripling the size of the supreme court (CSJN) incensed the right-of-centre opposition Juntos por el Cambio (JxC), which contended that it was interested solely in ensuring impunity for Fernández, who is standing trial for corruption, not in improving the judicial system.

Under the proposed reform, the CSJN would be enlarged from five to 15 magistrates. With FdT backing, the bill was approved by 36 votes to 33 in the 72-seat senate; the entire 33-seat JxC bloc opposed it. The ferocity of the attack on the CSJN by FdT senators united the JxC in opposing the initiative. The head of the FdT bloc in the senate, José Mayans, said the judiciary was “highly questioned” and that the country needed it to be “trustworthy”; senators representing Kirchnerismo, the FdT faction of Fernández loyalists, accused the CSJN of being overtly biased and comprised of “cowardly…criminals”.

The JxC argued that the pretence that the FdT was motivated by a desire to reform the CSJN to make it more representative was exposed by the speed with which it dropped its initial proposal to ensure that an expansion, of any sort, was approved. Kirchnerista senators sold the proposal as satisfying a request from provincial governors for a 25-member CSJN, but when it became apparent that this would not win enough votes it promptly dropped this commitment to a “more federal” CSJN and agreed to a 15-strong body, without explaining which 10 provinces would miss out.

It is noteworthy that in 2006, when she was serving in the senate and her late husband Néstor Kirchner (2003-2007) was in power, Fernández supported a bill to reduce the size of the CSJN from nine to five members. This lends credence to the JxC’s suspicion that the urge to expand the court now is not driven by a considered plan but rather the fact that it is not stacked in her favour. Fernández currently enjoys immunity from imprisonment but not prosecution and if she is convicted of corruption, the CSJN is the last court of appeal where the case would end up.

The reform initiative must still be approved by the 257-seat lower chamber where the going will be much tougher; the FdT lost control of the body in last year’s legislative mid-term elections. But it would not be unprecedented for some opposition legislators to flip in return for benefits of some sort. Even if it overcomes this obstacle, appointing a magistrate to the CSJN requires a two-thirds majority vote in the senate. This cannot be mustered without an agreement with the opposition.

Growth

The monthly economic activity index (Emae) in Argentina expanded by 5.6% year-on-year in July, according to the national statistics institute (Indec), which produces the early proxy for GDP growth. But there are signs that the economy is slowing down sharply as a result of the political and financial tensions that saw three different economy ministers between 3 July and 3 August, giving even more momentum to soaring inflation. There was zero growth in July compared with June. The introduction of the ‘soy dollar’ by the current economy minister, Sergio Massa, at the start of the month should help to spur growth in September, however, as farmers raced to take advantage of the favourable exchange rate to export soybeans, according to the agriculture minister, Juan José Bahillo, who said the target of US$5bn for the month had already been surpassed.

ARGENTINA | Foreign minister affirms Brazil partnership. On 15 April the foreign minister, Diana Mondino, visited Brazil and met the country’s vice president, Geraldo Alckmin, and her Brazilian counterpart, Mauro Vieira. This marks Mondino’s first official visit to Brazil since taking up her post last December.

Despite the ideological differences between Argentina’s far-right president, Javier Milei, and his left-wing counterpart in Brazil, Luiz Inácio Lula da Silva, the foreign ministers sought to shore up bilateral relations. Speaking at a press conference in Brasília, the ministers said that they discussed a range of potential areas in which the countries could boost cooperation, such as infrastructure in border regions, trade, energy, security, education, science, and technological innovation.

CHILE | Government calls for investment in lithium projects. Chilean government ministers, including Aurora Williams (mining), Mario Marcel (finance), and Nicolás Grau (economy), launched a request for information (RFI) process on 15 April for national and international investors to express interest in projects to explore or extract lithium in the Atacama salt flats. The launch of the RFI process, in which investors will have 60 days to express interest, marks the latest stage of Chile’s state-led national lithium strategy unveiled last year. The RFI process will run in parallel with consultations with indigenous communities for the mining contracts.

PARAGUAY | Taiwan ties. Senate president Silvio Ovelar and a group of Paraguayan legislators were in Taipei on 16 April and met Taiwan’s President Tsai Ing-wen and Vice President William Lai, who will succeed Tsai in May following his election victory in January. Lai said that under his presidency Taiwan will deepen its ties with Paraguay, the only South American country with which it maintains diplomatic ties, while Ovelar expressed Paraguay’s continued support for Taiwan.

Brazil’s President Luiz Inácio Lula da Silva hosted Japan’s Prime Minister Fumio Kishida on 3 May, opening the event in Brasília with an affirmation of support for the people of Rio Grande do Sul. The Japanese government similarly declared its solidarity with the victims in southern Brazil. Since late April, heavy rain and storms have struck the state, renewing debates about the lack of preparedness of Brazilian towns, cities, and infrastructure amid increasingly frequent and intense weather patterns.

Brazilian environmental organisation Observatório do Clima stated on 6 May that it and other civil society groups have been warning for years that climate change would lead to stronger storms and events caused by the El Niño weather phenomenon. Observatório do Clima stated that Brazilian authorities will need to adapt to the ‘new normal’ of intense weather patterns. In September 2023, strong winds and heavy rain hit the state of Rio Grande do Sul, and the federal government released funds to support the victims affected by the severe flooding. In April-May 2024, storms have struck the state again, with even more devastating effects.

As of 9 May, state authorities have confirmed a death toll of 107, while 136 people have been declared missing and more than 164,000 people have been displaced, around 67,000 of whom have been moved to temporary shelters. On 7 May the national confederation of municipalities (CNM) estimated that the flood damage to buildings and public infrastructure so far could cost municipal governments around R$4.6bn (US$900m) to repair. The CNM also warned that the state’s agricultural producers will likely bear a heavy financial burden from the floods which have dealt a blow to the state’s harvest of rice, soybeans, and other crops. In a radio interview on the same day, President Lula suggested that Brazil might need to import more rice and beans to contain the potential rise in food prices resulting from the disaster in Rio Grande do Sul, which is a major farming state.

The federal congress has passed legislation allowing for more funding to be diverted towards relief efforts in Rio Grande do Sul, and the Lula administration has sent more personnel to aid in the flood response. However, environmental experts cited in the national press have expressed regret that Brazil has to keep resorting to short-term measures such as setting up temporary shelters, providing food rations, and clearing blocked or submerged roads, among other emergency actions. Over the past week, Brazilians have also taken to social media to make fun of Rio Grande do Sul’s governor, Eduardo Leite, by ironically calling him the “Zelensky of the Guaíba”, in reference to the Guaíba River which runs through Rio Grande do Sul and has flooded the state capital Porto Alegre. Leite has adopted a heroic ‘man of action’ persona on social media and in his TV appearances, personally overseeing flood-response efforts. However, several media outlets have published reports pointing out that, while Leite seeks to boost his own image, his state government has long neglected calls for climate-oriented policies.  

News website UOL has reported that authorities in Rio Grande do Sul have favoured initiatives that benefit the agribusiness sector rather than prioritising investment in long-term climate action, citing environmental activists as describing local leaders as “climate denialists” and pointing out that the state’s government and lawmakers have failed to protect the Pampas. This biome of fertile grasslands spans the south of Brazil and extends into neighbouring Uruguay and Argentina, but agribusiness companies seeking to expand their intensive farming activities are reportedly posing a threat to the native vegetation of the Pampas. Urban planning experts who advocate initiatives to create ‘sponge cities’ have long stressed the importance of preserving local flora and biodiversity to help absorb rain in towns and cities, thereby reducing flood risks.

Other causes of concern for state and federal authorities relate to communications. The floods and storms have damaged electricity transmission lines and phone cables, cutting internet connection, which has further complicated efforts to inform citizens on how to seek shelter, rations, and other provisions. In addition to communications hindered by infrastructure issues, locals in Rio Grande do Sul have also been subjected to a wave of disinformation. The federal police (PF) announced on 7 May that it has been investigating scammers who have been spreading false offers of rescue boats and emergency supplies, as well as scammers posing as government entities and tricking flood victims into urgently transferring funds.

Congress supports flood response

On 7 May the president of Brazil’s senate, Rodrigo Pacheco, promulgated a bill proposed by the Lula government to declare the flood response funding as emergency expenditure which will be exempt from fiscal limits. The senate has also created a special committee comprising lawmakers from Rio Grande do Sul to oversee legislation relating to the relief efforts and reconstruction initiatives. The committee will be chaired by Paulo Paim, affiliated with the ruling left-wing Partido dos Trabalhadores (PT), but includes lawmakers from across the political spectrum, such as conservative senators Hamilton Mourão (Republicanos) and Ireneu Orth (Progressistas).

Japan and Paraguay

After visiting Brasília, the Japanese delegation led by Prime Minister Kishida was hosted in Asunción by President Santiago Peña of Paraguay, the current holder of the six-month rotating presidency of the Southern Common Market (Mercosur). Kishida and Peña reportedly discussed Japan’s interest in negotiating a free trade agreement with the trade bloc.

Japan to invest in Embrapa

Japan’s Prime Minister Kishida signed a series of bilateral cooperation agreements with President Lula on 3 May covering a range of areas, including a sustainable development initiative dubbed the ‘Parceria Verde Japão-Brasil’ (Japan-Brazil Green Partnership). The Parceria Verde will seek to boost Japanese investment in the reforestation and land restoration programmes of the Brazilian government’s agricultural research agency (Embrapa). Bilateral cooperation is also expected to boost support for Embrapa’s research into ‘digital agriculture’ innovations, such as efforts to improve data collection and install ‘Internet of Things’ (IoT) devices on farms to monitor environmental data and other relevant statistics.

China’s National Defence white paper, published on 31 March, contains the usual anodyne protestations about China’s ‘peaceful rise’, but there are one or two significant pointers in the text, and a complaint this week by India adds some interesting context.

The white paper included the now usual assertion that “China will never seek hegemony, nor will it adopt the approach of military expansion now or in the future, no matter how its economy develops.”  Nevertheless, China justifies continued military expansion on the grounds that “international strategic competition and contradictions are intensifying” and “security threats are becoming increasingly integrated, complex, and volatile”.

In further justification, the white paper asserts that “some powers”, by which it means the United States, “have worked out strategies for outer space, cyber space, and the polar regions, developed means for prompt global strikes, accelerated development of missile defence systems, [and] enhanced cyber operations capabilities to occupy new commanding heights”.  It also points out that, in Asia, the US is reinforcing its regional military alliances and increasing its involvement in regional security affairs.

This challenge from the US, together with the objectives of maintaining internal stability, preventing separatism in Xinjiang and Tibet, and furthering the cause of reunification with Taiwan, are used to justify what China sees as reasonable military spending increases.  The 2010 increase was 7.5%.  However, the 2011 defence budget, not discussed in the white paper, saw a return to double-digit increases with a rise of 12.7%.

The US response to all this is to be conciliatory, with reports from Washington suggesting that the Obama administration is unwilling to give formal approval to a $4bn arms deal for Taiwan in order to avoid another rift with China.

India, on the other hand, appears not to be persuaded by China’s protestations of good neighbourliness.  In the latest manifestation of India unease, India’s Northern Army Commander Lt-General KY Parnaik has been expressing concern about China’s presence in Pakistani-occupied Kashmir (PoK).   According to Parnaik, “Chinese presence in Gilgit-Baltistan and the northern areas is increasing steadily”.  The general sees this as part of China’s ‘string of pearls’ policy and says that “Chinese footprints are too close for comfort”.

For General Parnaik, the nexus between the Chinese and Pakistani military “jeopardises our regional strategic interests in the long run and facilitates speedy and enhanced deployment of Pakistan armed forces to complement China’s military operations and thus outranks India”.

Taiwan, for its part, despite greatly improved cross-strait relations since President Ma Ying-jeou came to power in 2008, has rejected (albeit politely) China’s calls in the white paper for military exchanges and other confidence-building measures.

BOLIVIA | Nationalisation controversy. Two think tanks have released reports casting doubt over the scope and success of the nationalisation policy of President Evo Morales. A report by the Centro de Estudios para el Desarrollo Laboral y Agrario (Cedla) claims that only 20% of hydrocarbons production is in state hands via YPFB Chaco (12.17%) and YPFB Andina (7.54%). The 2006 decree “nationalising” the hydrocarbons sector did not expropriate private assets but rather aimed to increase the state’s share of control over hydrocarbons operations and revenues. According to Cedla, Brazil’s Petrobras accounts for some 63% of production (up from 47% in 2004), followed by Repsol (8%) and British Gas Bolivia (4%).

    Meanwhile, a study by the Milenio foundation presented last month claims that only one of the 14 state companies created since Morales took office in 2006 makes a profit. The company in question is the Bolivian-Brazil nut company Empresa Boliviana de Almendras, which, established in 2009 with B$45m (US$6.5m), managed a profit of B$24m (US$3.5m) last year. Two other companies broke even - Lacteosbol (milk production) and Cartonbol (paper & cardboard) - but only due to state subsidies. The Milenio report led Vice-President Alvaro García Linera to go on the defensive. He pointed out that the YPFB, which was originally established in 1936, generated US$2.2bn in state revenue in 2010, up from US$670m in 2006, while total income generated by hydrocarbons exploitation reached US$9.48bn between 2006 and 2010 compared with US$1.66bn between 2000 and 2005.

ECUADOR | Tax controversy. “The wealthy, those who buy imported chocolates and perfumes, those who go shopping in Miami, they will have to pay the tax,” President Rafael Correa said last week after announcing that the official gazette would publish a new tax reform on 24 November. The government claims that the tax reform will increase the tax take by US$353m a year. Taxes on cigarettes and alcohol were increased, and the tax on capital outflows bumped up from 2% to 5%. The reform includes a new ‘green’ tax on cars, which increases in line with the age of the vehicle, although owners of old cars will be given time to upgrade. Correa said the extra revenue would allow for increased tax credits for the poor.
    The opposition was incensed by the new tax reform, which was presented to congress on 24 October as “urgent”. Under legislation introduced by the Correa administration this gives the legislature 30 days to approve, modify or reject a bill or else it becomes law by decree. The fragmented opposition actually held together to strike down the bill on 17 November but Correa argued that the vote was illegitimate because a bill could only be rejected by an absolute majority (63 deputies in the 124-seat national assembly) and not a simple majority; the opposition had mustered only 53 votes. He also said that the economic commission had been unable to present its report to allow for a full debate of the issue because the opposition had boycotted the session. Correa claimed he had wanted the bill to be debated rather than passed via the administrative route but that the opposition was entirely to blame: “They create the problem, and then they throw up their hands in horror,” he said.
    The opposition argues that the whole procedure of “urgent” laws introduced by Correa is dubious and was inapplicable in the case of significant reforms of this sort. It claims Correa’s decision to pass the law by decree was a sign that he was prepared to ride roughshod over parliamentary procedure and democracy to get his way.

VENEZUELA | Huge China deal. Ecuador is not the only country in the region being bankrolled by Chinese credit. Venezuela’s President Hugo Chávez announced last week that his government had agreed a massive new US$6bn loan with China. Some US$4bn of the latest loan will apparently be used to bring about a hugely ambitious increase in the country’s oil output from about 100,000 barrels a day to about 330,000 barrels. Another US$1.5bn will go towards refinery projects and the rest to upgrading power plants (energy shortages and blackouts have been a persistent embarrassment for Chávez in recent years). Opposition deputy Miguel Angel Rodríguez accused Chávez of mortgaging the country’s future: he demanded details of the deals and the prices at which Venezuela is selling oil to China.

• Repsol

“The most important investment underway in this [hydrocarbons] sector,” was how Bolivia’s President Evo Morales described the US$640m earmarked for 2010-2014 by Spanish transnational Repsol during a recent meeting with Repsol’s president, Antonio Brufau in which the latter reaffirmed Repsol’s commitment to Bolivia. Accompanied by Morales, Brufau visited the company’s big Bolivian project, the Margarita gas field, where Repsol, along with its partners British Gas and Pan American Energy, is investing in a new plant which will increase production from Margarita to 9m cubic metres a day (cmd) from 3m cmd. The show of cooperation once again illustrates that the nationalisation process has not deterred foreign investors.

Until North Korea’s nuclear test on 12 February, there was a widespread assumption that President Barack Obama was heading to Israel next month to persuade Prime Minister Binyamin Netanyahu not to attack Iran, and that he would be successful – helped in part by news that Iran appears to have resumed converting some of its higher-grade enriched uranium into reactor fuel, thus slowing the growth of its stockpile of material suitable for making weapons.  However, all calculations have been upset by Pyongyang’s test, and the hawkish tendency in Israel is once again in the ascendancy.

Former foreign minister Avigdor Lieberman put it to Army Radio on 13 February: “Anyone who thinks sanctions or negotiations will stop Iran is wrong.”  Alex Fishman, writing in Yedioth Ahronoth, concluded: “Anything that United States President Barack Obama tells us when he comes here next month about the tough negotiations that he plans to hold with Iran will be taken with a grain of salt. Anyone who wants to know where the Iranian nuclear project will progress to next should just take a long, hard look at North Korea.”

Amir Rapaport in Maariv took a similar line, writing: “The announcement by North Korea that it conducted an underground nuclear test should not be considered ‘foreign news’ by Israel: there is more than good reason to assume that Iran, which officially condemned the North Korean test, was actively involved in it and that the test moves the Islamic Republic one step closer to being able to mount a nuclear warhead on a missile capable of reaching Israel.”

Rapaport also argues: “What can the Iranians themselves learn from this week’s events?  That leaders who in effect caved in to Western demands and put the brakes on their nuclear project – leaders like Muammar Gadhafi and Saddam Hussein – are no longer with us.  In contrast, the stubborn leadership of North Korea has survived and even passed on its nuclear project to the next generation.  It now seems that Tehran and Pyongyang are galloping together toward nuclear capability.”

In Israel Hayom Boaz Bismuth wrote: “North Korean handling of international pressure is an object lesson for Tehran, which hopes to do what it always does and use the upcoming meetings they have planned with the International Atomic Energy Agency and the Western power to gain more time.”

Bismuth was also critical of Washington and the Obama administration, saying: “Washington has failed to prevent North Korea becoming a nuclear power.  During the presidency of Barack Obama, the United States has sought to avoid conflict.  The Obama administration has put Asia ahead of the Middle East on its list of priorities.  The failure to rein in Pyongyang is Obama’s failure.”

On 10 February, before the North Korean test, Israel’s Army Radio quoted unnamed officials as saying that Obama was coming to Israel with the following message: "Don't attack Iran, let me handle matters with the Iranians according to my understanding, and if necessary I will take action, we have capabilities that you do not."

That message has suddenly become a much more difficult one to sell, particularly to Netanyahu who has never lost his belief that it is his primary duty in life to prevent Iran from acquiring a nuclear capability.  It will not be lost on Netanyahu that the US contemplated attacking North Korea’s nuclear facilities as long ago as 1994, but it didn’t happen and now North Korea is on the verge of having a usable long-range nuclear capability.

Against the hawks, however, there is still the immense power that the US holds over Israel, and it is clear Obama does not favour an attack on Iran, at least not before the June presidential election in Iran, which could produce change and even possibly a more successful version of the failed Green Revolution that shook Iran in 2009.

In arguing for further delay in taking any military action against Iran, Obama will say that Iran hasn't yet crossed the red line set by Israel: namely accumulating enough uranium enriched to the 20% level to make one nuclear bomb (about 250 kilograms), which is a point that Netanyahu himself accepts.  The Israeli military establishment is also mostly opposed to any unilateral move.

On 11 February, the day before the North Korean test, Netanyahu is reported to have told visiting American Jewish leaders: “The Iranians are closer to the red line.  They haven’t crossed it yet but they are shortening the time needed to cross it.  This must be stopped…”

One year ago there were 14 homicides per day in El Salvador; now there are just five per day. “We have found a solution to diminish violence which is unorthodox but which has brought us very good results,” the justice and public security minister, David Munguía Payés, told the permanent council of the Organization of American States (OAS) this month. That unorthodox solution is the gang truce signed between the country’s two main mara gangs - MS-13 and Barrio 18 – and smaller gangs in March 2012.

There was considerable scepticism one year ago when the truce was signed about whether it could be sustained. That has not entirely dissipated despite the passage of time. But, the OAS secretary general, José Miguel Insulza, suggested that the truce could work as an example for other countries plagued by gang violence in Central America - Guatemala and Honduras.

The Salvadorean authorities claim that the number of homicides from gang violence fell 48.2% in the first quarter compared with the same period in 2012. In absolute terms there were 554 homicides in the first quarter (and 1,069 in the first quarter of 2012).

Munguía Payés highlighted the improvement in security in El Salvador one year after the signing of a truce with mara gangs, which he said had seen a reduction of 3,000 murders over this period. “It’s important that 3,000 homes, Salvadorean mothers, have not had to cry for their sons,” Munguía told the OAS permanent council on 10 April. “We still have a big challenge ahead of us but we have started on a path which represents light and hope at the end of the tunnel,” he said. 

Five days earlier, on 5 April, rival gang leaders from the MS-13 and Barrio 18 as well as Mirada Locos, Mao-Mao and Mara Máquina, and gang members attended a public ceremony in San Vicente, the capital of the eponymous department, which declared itself to be the sixth municipality free of violence in El Salvador. Last January the first four municipalities joined the innovative “second phase” of the truce to create ‘sanctuary’ municipalities free of crime: Santa Tecla, the capital of the department of La Libertad; Quezaltepeque, another municipality in La Libertad; Ilopango, in the department of San Salvador; and Sonsonate, the capital of the department of the same name in western El Salvador. Apopa, the seventh biggest city in El Salvador with some 160,000 inhabitants, located in San Salvador department, later signed up.

More than 1,000 people, 10% of them gang members, signed up to the ‘Pacto por la Vida y La Paz’ (pact for life and peace) and promised to keep San Vicente “free from violence”. One of the gang leaders, Wilmer Ordóñez, called on foreigners to come and visit San Vicente, saying that “nobody will steal your wallet or take your watch”. Gang members pledged to clean up gang graffiti and erase gang symbols from walls and buildings. They will also undertake to address universities, schools and other institutions about their experiences.

The big hope for the success of the truce is that it has won cross-party consensus This is not easy to achieve in El Salvador which is heavily polarised between the left-wing Frente Farabundo para la Liberación Nacional (FMLN) and the right-wing Alianza Republicana Nacionalista (Arena), which between them control 211 of the country’s 262 municipalities. Former FMLN legislator Raúl Mijango, one of the mediators of the truce, said that a total of 18 municipalities, covering some 25% of the national population, would eventually join the second stage of the truce. It is no coincidence that both parties have the same number of municipalities in this pilot scheme: eight of the 18 municipalities are governed by Arena mayors; eight are in the hands of the FMLN; and two are controlled by coalitions.

Insulza highlighted further progress required in certain areas, such as “decongesting the prisons”, and separating prisoners who have not been convicted from the rest, but broadly he was full of praise for the “specific results” of the process in El Salvador and how it provided an example for the region.

Notwithstanding the fall in violent crime, specifically homicides, however, it would be a mistake to portray the gang truce as an unqualified success. Small businesses continue to be the subject of extortive practices by mara gangs. The police claimed that the number of reported cases of extortion fell over the past year but the local media has argued that as little as 10% of all extortions are reported, primarily for fear of reprisals.

Munguía Payés has acknowledged that extortion is the main source of revenues for the gangs and says that “they will not cease to extort money because that is their livelihood, unless they are offered an alternative source of revenues, such as jobs - and we know that there is much unemployment.” He said that with the high unemployment rate in the country, a lot of young people entered the gangs because they felt there was no alternative. Unless the government can reach them with social programmes and employment opportunities, this is not going to change. But, Munguía Payés expressed optimism that the fruits of the government’s social programmes would finally get through to some of these vulnerable youths where “in the past the gangs had prevented it”.

The big imponderable is where the funds to carry out reinsertion programmes for the maras and other strategies in the municipalities will come from. Earlier this year Munguía Payés announced a fund of over US$72m available for municipalities that join the scheme. Businessmen, civil society groups and NGOs also formally launched a new organisation, Fundación Humanitaria, presided over by Antonio Cabrales, formerly head of the private non-profit organisation of entrepreneurs (Fusades). Cabrales said members of the foundation shared the common goal to capitalise on this “historic opportunity… to resolve one of the country’s main problems”. He said its main task would be securing resources from the private sector to support the process. This is essential because state resources could become seriously constrained.

• Archbishop Oscar Romero

The election of Argentina’s Jorge Bergoglio as Pope Francis has raised hopes in El Salvador that Archbishop Oscar Romero will soon be beatified as a prelude to his eventual canonisation as a saint. Romero, the iconic champion of the poor in El Salvador, was gunned down by a right-wing death squad while saying mass on 24 March 1980. It is somewhat ironic that the fate of Romero, who was outspoken in his criticism of government-sponsored violence, lies in the hands of Bergoglio who, it has been alleged, turned a blind eye to the excesses of the Argentine junta.

• Venezuelan plot

Venezuela’s acting president Nicolás Maduro has alleged that right-wing mercenaries linked to El Salvador’s opposition party Alianza Republicana Nacionalista (Arena) are behind a plot to assassinate him and to destabilise the country by causing a massive power cut. Maduro said Arena deputy, Roberto d’Aubuisson, son of Major Roberto D’Aubuisson, the founder of Arena, masterminded the plot, along with former Colonel David Koch Arana and Guillermo Cader Acuña, a former member of Arena’s national leadership committee (Coena). President Mauricio Funes ordered the allegations to be investigated, arguing that “Maduro seems to me to be a serious person and would not just make an allegation for the sake of it.”

The government is making a concerted effort to strike a trade deal with the European Union (EU). More than four years after pulling out of talks back in 2009, Ecuador relaunched negotiations with the EU for a trade association agreement on 13 January with five days of talks in Brussels, and aims to conclude a deal in the first half of 2014.

The reason for the sudden haste is that after the trade benefits which Ecuador enjoys under the General System of Preferences (GSP Plus) with the EU expire in December 2014, its exporters would lose ground to Colombian and Peruvian counterparts because of higher tariffs. Peru and Colombia signed a free trade deal with the EU in 2012 as part of the Andean Community (CAN) trade bloc, which was provisionally applied with Peru on 1 March 2013 and with Colombia on 1 August 2013. But Ecuador left these talks, essentially because President Rafael Correa was adamant that he was only interested in an “agreement of trade and cooperation” and not a “free trade treaty”.

The big challenge for the negotiators in the coming months is to define the difference between these two terms, which will require politicians well-versed in semantics. Ecuador’s foreign trade minister, Francisco Rivadeneira, who led the country’s delegation to Brussels, made a fist of it, saying that the deal Ecuador wants would clearly delineate “the asymmetries and particular necessities of the country’s economy”. But, in practice, it is not entirely clear how this can be achieved when, as explained by the higher education, science, technology and innovation minister René Ramírez Gallegos (who attended the talks), “the main text on which we sit to negotiate is the same as Peru and Colombia signed with the EU”.

Still, on 21 January Correa confidently asserted that “practically everything is in place” for a deal to be reached in the first half of the year, as “significant progress” had been made in the first round of talks. Correa, who has publicly maintained that Ecuador would not sign a deal “at any cost”, said there were “no great differences” between the two sides. It could be that Correa is making a virtue of necessity and will accept a deal just as long as there are a few token concessions so that he can maintain that Ecuador got a trade accord on its terms. The bottom line is that Ecuador cannot afford to end 2014 without a deal for fear of ceding ground to Colombia and Peru in EU markets, resulting in a widening of the bilateral trade deficit: Ecuador’s exports to the EU totalled US$2.45bn in 2013; imports from the bloc came to US$2.91bn.

In the first round, negotiators discussed market access for goods and services, and government procurement, as well as certain parts of the text of the agreement. Ramírez told the local pro-government daily El Telégrafo, however, that the big potential stumbling block was intellectual property. He said that Correa had made it clear that investing in knowledge and human talent was the only way Ecuador could enjoy sustainable development in the long-run, rather than relying on oil (a finite resource subject to volatile price changes). Ramírez said that Ecuador planned to invest US$1.1bn in four universities and US$300m more in sending scholars abroad. “A bad bargain (with the EU) would be a strong limiting factor for this investment in scholarships and higher education serves as a structural basis for a change in the pattern of production,” Ramírez said.

Correa has singled out the construction of Ecuador’s first City of Knowledge, Yachay, as “the most important project” of his citizens’ revolution. Yachay, located in the northern province of Imbabura, will include a new university and some 19 research centres, in areas such as life sciences, renewable energy, nanotechnology, and information technology, with the aim of putting Ecuador at the cutting edge of innovation.

• China

While President Correa was celebrating in Guayaquil, Vice-President Jorge Glas was in China seeking to drum up further investment, this time for the delayed US$10bn Pacific refinery. Correa announced on 22 January that it was “just about a done deal” for the Industrial and Commercial Bank of China (ICBC) to fund 70% of the Pacific refinery project, which would have a capacity of 300,000 barrels per day. The China National Petroleum Corp (CNPC) will pick up shares in the project from the Venezuelan state oil company Pdvsa, which was originally supposed to provide the financing. Correa defended the decision to seek Chinese funding in the face of criticism that he is seriously indebting the country to the Asian giant. “China finances the US, but if we go looking for financing from China, we are mortgaging the country…” he said.

Los diarios argentinos ampliamente hostiles a la agenda del gobierno publicaron otro anuncio de la American Task Force Argentina (ATFA), el grupo de presión que representa a los tenedores de bonos ‘holdout’ de Argentina el 16 de julio. “El tiempo se acaba para Argentina”, puede leerse en el anuncio. “Es tiempo que Argentina exija que sus líderes se comporten de una manera seria y responsable para salvar al país del default”. Argentina tiene tiempo hasta el final de julio para llegar a un acuerdo con los holdouts, los inversionistas que rechazaron la reestructuración de la deuda hecha por el gobierno después del default del 2002, pero hasta ahora los funcionarios argentinos han descartado sostener conversaciones directas con el mediador, Daniel Pollack.

Jorge Capitanich, el jefe de gabinete, negó que Argentina esté por caer en default. Él también refutó las afirmaciones en avisos anteriores de que Argentina ya estaba en “default técnico”. Este término, él dijo, “es un eufemismo usado por las agencias de rating. En realidad no existe, fuera de la literatura de estas agencias internacionales”. Capitanich dijo que no existe la posibilidad de entrar en default, pues Argentina continúa pagando a sus acreedores de manera regular y continua.

Hablando en la reunión de los jefes de estado de Brasil, Rusia, India, China y Sudáfrica (Brics) con los de la Unión de Naciones Suramericanas (Unasur) en Brasília, la Presidenta Cristina Fernández se hizo eco de esta visión. Argentina, ella dijo, “va a seguir pagando y honrando su deuda. Argentina no entrará en default de su deuda.  Estar significa cesar de pagar, y Argentina es capaz de pagar”.

Desafortunadamente  para el gobierno argentino, esto no es estrictamente cierto. Bajo los términos de las decisiones de la corte de EU, a menos que Argentina llegue a un acuerdo con los holdouts, las instituciones financieras con base en EU bloquearán los pagos que haga Argentina a sus acreedores que han aceptado los términos de la reestructuración, lo que significa que Argentina podría entrar en default después de la fecha límite del 30 de julio para el efectuar el pago de intereses a sus acreedores.

En su visita a Brasil, el 16 de julio, Fernández dijo que Argentina estaba dispuesta “a negociar dentro de la ley”, pero no hay señales de ningún funcionario argentino llevando esto a la práctica en la realidad con acciones concretas. En cambio, el gobierno exige que se reestablezca la suspensión de la ejecución de la orden de la corte para tener más tiempo para las negociaciones.

Argentina espera que la presión de los tenedores de bonos en  Europa, quienes aceptaron los términos de la reestructuración de la deuda, sobre Thomas Griesa, el juez de EU responsable por las resoluciones de la corte, le podría ayudar. Los abogados que representan a este grupo de acreedores alegan que el juez se ha excedido en su jurisdicción al impedir que el Banco de Nueva York y las firmas liquidadoras con base en EU, procesen los pagos de sus clientes. Aún así, tal táctica depende de eventos que están totalmente fuera del control de la Argentina. Griesa tendrá una audiencia con estas instituciones financieras el 22 de julio para explicar los alcances de su orden.

Aunque la guerra en los medios de comunicación entre el gobierno y los holdouts ha alcanzado un nuevo punto de intensidad, los inversionistas permanecen optimistas. Una subida en los precios de los bonos argentinos indica que los mercados piensan que se va a llegar a un acuerdo. En una entrevista con Bloomberg, el 14 de julio, Mario Blejer, un ex gobernador del banco central de la Argentina, dijo que él estaba “absolutamente convencido” de que se alcanzaría un acuerdo antes de la fecha límite del 30 de julio. “El gobierno ha estado bastante decidido a tratar de normalizar la situación con los mercados internacionales de capital”, Blejer dijo.

La inflación continúa bajando

La agencia oficial de estadísticas, Indec, publicó sus últimas cifras de inflación el 15 de julio. El Indice de Precios del Consumidor (IPC) subió solamente un 1,3% en mayo, el crecimiento más bajo mes en mes desde que fue lanzado el nuevo índice a comienzos del año. Durante los primeros seis meses del año, el IPC se elevó un 15%; no se disponen de datos anualizados. El índice del congreso argentino, compilado por legisladores opositores que sondean a consultores privados, afirman que los precios al consumidor realmente habrían subido un 2,2% en el mes, y un 39,9% en la primera mitad del año.

• Reventa de boletos

El vicepresidente de la Asociación de Fútbol de Argentina (AFA), Luis Segura, ha admitido vender algunos de sus boletos que le fueron asignados para la Copa Mundial de la Fifa, pero negó estar involucrado en la reventa de boletos. “Lo que hice desde mi modesta posición fue vender (al valor nominal) a personas que habían viajado a Brasil sin boletos para los partidos, y nosotros tratamos de resolver ese problema para la gente”, Segura dijo. La policía brasilera actualmente está investigando una supuesta red de reventa de boletos vinculada con la Fifa que obtuvo millones de dólares vendiendo entradas para los partidos durante la Copa Mundial.

On 26 November Venezuela’s attorney general, Luisa Ortega Díaz, announced that the deposed opposition national deputy, María Corina Machado, will be charged next week with involvement in an alleged plot to murder President Nicolás Maduro.

In a statement, Ortega's office said that Machado had been summoned to appear at 10am on 3 December before a Caracas-based prosecutor (Katherine Harrington). Machado later told local and international media that she had been presented with a summons by representatives of the Bolivarian intelligence service (Sebin). She said she would present herself, in the knowledge that she has done nothing wrong.  She denies all the charges and has previously accused the government of “infamy”.

Machado, along with the now-imprisoned leader of the radical opposition party Voluntad Popular (VP) Leopoldo López, was at the helm of the ‘La Salida’ movement, which led mass protests in Caracas and western border cities in February-April. La Salida (meaning ‘The Exit’) demanded President Maduro’s resignation, to be followed by early elections (the next general elections are not due until 2018) and a constituent assembly to reform the 1999 constitution promulgated by the late president Hugo Chávez (1999-2013). Over 40 people died in violent clashes with the security forces over the course of the three months, and the protest actions split the main opposition umbrella group, Mesa de la Unidad Democrática (MUD), between moderate and radical factions.

Machado and López insisted that La Salida had only ever called for peaceful public demonstrations. However, the government from the outset accused the pair of instigating violence and seeking to destabilise the country, allegedly with help from far right-wing supporters in Colombia and the US.

On 18 March, the majority ruling Partido Socialista Unido de Venezuela (PSUV) bench in the unicameral national assembly voted in favour of potentially stripping Machado’s parliamentary immunity so that she might face charges of “instigating violence, treason, terrorism and homicide”. A week later, the national assembly president, Diosdado Cabello, simply deposed Machado from her post as national deputy, after she accepted a Panamanian invitation to speak at the Organization of American States (OAS).

In May, senior leaders from the PSUV, led by the powerful mayor of the central Libertador district, Jorge Rodríguez, accused a group of opposition activists of planning an assassination to pave the way for a coup, claiming to have email evidence of correspondence between the conspirators.  The US envoy to Colombia, Kevin Whitaker, was also accused of being involved in the conspiracy.

At the time, Machado was called as a witness in the case and told not to leave the country. Detention orders were issued against a former presidential candidate, Henrique Salas Römer; a well-known former ambassador, Diego Arria; a Venezuelan lawyer, Ricardo Koesling; along with Gustavo Tarre Briceño, Pedro Mario Burelli Briceño and Robert Alonso Bustillo.

Meanwhile López and two opposition mayors remain in solitary confinement in a military jail outside Caracas pending trial.  López’s proceedings have been delayed and postponed on spurious administrative grounds several times, prompting criticism from the US State Department about a lack of due process and “opaque justice procedures”.

• Oil prices

Ahead of the critical meeting of the Organization of the Petroleum Exporting Countries (Opec) in Vienna on 27 November, Brent crude futures for January 2015 delivery fell to US$75.5 per barrel (/b), while West Texas Intermediate (WTI), the reference oil price for Ecuador and Venezuela, tumbled to a four year low of US$72/b, as Saudi officials have indicated that productions cuts are not in the pipeline. The Financial Times noted International Energy Agency estimates  that if October’s record 30.6m barrels per day (b/d) level of Opec production continues into next year, global supply will exceed demand by 1m-1.5m b/d.