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Mantener una tapa sobre la enconada disputa que bulle dentro de la coalición derechista Alianza por Chile a raíz del triunfo electoral de la ex presidenta, Michelle Bachelet (2006-2010), el 15 de diciembre está resultando crecientemente difícil. Pero, lo que resulta realmente interesante es monitorear las palpables dificultades experimentadas por la Nueva Mayoría, una no muy firme alianza electoral de siete partidos de todo el espectro político de la izquierda que apoyo a Bachelet en las elecciones, en definir su futuro rol una vez que ella asuma el poder el 11 de marzo. La misma Bachelet ha hecho un llamado a la unidad dentro de Nueva Mayoría, algo que brilló por su ausencia durante su último periodo en el poder, cuando ella encabezada la más ideológicamente acorde, y menos difícil de manejar, cuatripartita coalición- Concertación.

El 21 de diciembre, en una entrevista con el diario nacional La tercera, Andrés Allamand, un senador electo por Renovación Nacional (RN), el socio menor en la Alianza, fue inequívoco en cargar la culpa por la derrota electoral sobre el Presidente Sebastián Piñera. “Esto está claro”, dijo Allamand, “que la responsabilidad principal por el fracaso electoral descansa sobre Piñera y su gobierno […] el gobierno pensaba que atiborrando a los chilenos con cifras de buen desempeño económico mantendría su confianza y no veía la profundidad del debate ideológico que emergió en la sociedad y no reaccionó adecuadamente ante esto”.

Allamand insinuó que Piñera se había concentrado mucho más en mejorar su propia imagen ante un intento de reelección en el 2017. Otro senador electo de RN, Manuel José Ossandón, dijo “este gobierno es mejor que el de Bachelet en el manejo y la administración pero políticamente es pésimo”.

En comparación, patricio Melero, el presidente del socio de RN en la coalición, la Unión Demócrata Independiente (UDI), ha sido un modelo de ecuanimidad. Melero pidió unidad dentro de la Alianza y prometió que él no proveerá “una oposición destructiva” a Bachelet, haciendo la compleja tarea de gobernar más difícil “como la Concertación ha hecho para el Presidente Piñera”.

Una de las grandes interrogantes en los meses por delante es cuán constructivamente la Nueva Mayoría de Bachelet trabajará junta y si le complicará la tarea de gobernar. El 21 de diciembre, el presidente del Partido Comunista de Chile (PCCh), Guillermo Teillier, reveló que el partido había informado a Bachelet de su “histórica” decisión de participar en su gobierno. Teillier dijo que habiendo tomado parte en la campaña electoral y jugado un rol en la victoria, el partido se sentía justificado en pertenecer al gobierno. Él dijo que la decisión entre los 100 delegados del partido  fue “unánime”. El PCCh obtuvo seis bancas en la cámara baja y, aunque Teillier lo niega, está pensando en un ministerio.

Ignacio Walker, el presidente del Partido Demócrata Cristiano (PDC), el más centrista de los partidos en la Nueva Mayoría que tiene  agudas diferencias históricas e ideológicas con el PCCh y que profundamente desconfía de sus intenciones, dijo que los miembros de Nueva Mayoría necesitan “asumir los costos y los beneficios [de gobernar] durante los buenos tiempos y los malos tiempos”. Y agregó: “Puedo decir con seguridad que la DC será leal al gobierno, pero me pregunto si todos los partidos en la Nueva Mayoría pueden decir lo mismo”. La obvia implicación fue que el PCCh podría tratar de presionar al gobierno, con marchas por ejemplo, si es que no acepta su camino.

“Yo no sé lo que ha comido él”, Teillier respondió en una entrevista con La Tercera el 22 de diciembre, agregando que el PCCh sería resueltamente leal al programa de Bachelet. También respondió a una pregunta relacionada con las serias diferencias entre el PDC y el PCCh sobre Cuba enfatizando que “nuestro compromiso es con Chile; nosotros cumpliremos con lo que dice el programa con relación a la política exterior, una política de Estado que se opone a desestabilizar a otros gobiernos o interferir en asuntos internos, y [aboga] por la integración y la buena vecindad”.

Este tenso intercambio formó el telón de fondo para una reunión entre los presidentes de la Nueva Mayoría el 6 de enero, su primera reunión desde la victoria de Bachelet, para decidir  sobre la identidad del agrupamiento: ¿gobierno de coalición o pacto político? Después de la reunión, Walker dijo que se había logrado un acuerdo para definir a la Nueva Mayoría como ‘un acuerdo político programático’ que expirará en marzo del 2018, en otras palabras, un matrimonio de conveniencia no una coalición muy unida como la Concertación. Teillier describió la Nueva Mayoría como “un pacto de gobernabilidad para mantener el programa de la presidenta Bachelet por cuatro años”. Los presidentes de partidos acordaron que el vocero para el grupo sería rotativo sobre una base mensual.

Mientras tanto, Bachelet, tuvo una cena con los senadores y senadores electos de Nueva Mayoría para recalcar la importancia de la unidad, enfatizando que ella estaba decidida empezar con el pie derecho diciendo que  las propuestas prioritarias para su primer año de gobierno: educación, impuestos y reforma constitucional– ya estaban siendo elaboradas.

• Los afanes de RN

Como un signo más de la tensión dentro de la gobernante Alianza por Chile después de su rotunda derrota en las elecciones de diciembre, tres diputados de Renovación Nacional (RN) anunciaron que se retirarían del partido el 7 de enero a fin de formar un nuevo partido político. El nuevo grupo político, Amplitud, como su nombre denota, está diseñado para llegar más allá de los confines tradicionales de la Derecha, hasta los votantes independientes.

• Liderazgo del congreso

Extrañamente, Nueva Mayoría acordó que la presidencia de la cámara baja sería para el Partido Demócrata Cristiano (PDC) y la vicepresidencia para el Partido Comunista. El PDC también ocupa las presidencias de nueve comisiones, incluidas las tres más emblemáticas para el programa de gobierno de Michelle Bachelet: finanzas, educación, constitucional.

Dogged by unanswered questions about its feasibility, funding, and environmental impact, many have doubted whether the proposed ‘Grand Canal’ project in Nicaragua – the construction of a second inter-oceanic waterway across the Central American isthmus – will ever get off the ground. Yet in December the Nicaraguan government insisted that all was going to plan, and that building work would begin that same month. A national protest demonstration against the Canal was held on 10 December.

The basic outlines of the project – and many of the unknowns – remain unchanged since it was first announced. What is proposed is the excavation of a 278kms waterway linking the Atlantic and Pacific oceans and running through Lake Nicaragua (one of the world’s largest freshwater lakes). Its proponents say that the Nicaraguan ‘Grand Canal’ will be longer, deeper and wider than the existing100-year old Panama Canal. It will therefore accommodate the new generation of mega-container ships (with capacity to carry 18,000 twenty-foot equivalent units or TEUs), which are too large to pass through the Panama Canal, even after the US$5bn project to widen it is completed in 2016. Without holding a competitive tender, the Nicaraguan government led by President Daniel Ortega granted an initial 50-year build-operate concession (which can be extended to 100 years) to HKND, a little-known Hong Kong-based company led by a Chinese businessman, Wang Jin. The cost of the project - which also includes two ports, a free trade zone, an international airport, new roads, cement and steel plants, and a power station -  is loosely estimated at US$50bn, more than four times Nicaragua’s annual GDP (US$11.3bn in 2013, on World Bank data). Construction work, employing up to 50,000 workers, is expected to take at least five years.

Government officials are keen to stress all is going well. Paul Oquist, an adviser to the president and chair of the Grand Canal Commission has described the launch of the project as “a big Christmas present” for the Nicaraguan people. He says the Canal will double Nicaraguan GDP and eradicate poverty. “There is nothing else in Nicaragua that could achieve that within our lifetimes – and it is within grasp. It has never been closer than it is now.” Oquist is also keen to stress that proper feasibility and environmental studies have been commissioned, claiming that some US$900m is being spent on them, including some commissioned from the London-based consultancy Environmental Resource Management (ERM) and the US-based McKinsey consultancy. Bill Wild, chief project adviser for HKND, says, “In the first year we’ll build the infrastructure to build the project – the roads and other means of access. The biggest challenge is not the technical engineering. This has all been done before. It is the logistics.”

But none of this reassures the critics. Concerns range from the source of the funding and the apparent lack of a public business plan through to questions about the engineering and the environmental impacts. On the funding, there is still little clarity over how Wang will raise the money: many suspect he is covertly backed by the Chinese government, and that Beijing sees in the project an opportunity to gain a valuable strategic asset and project its global trade interests. Following a visit to Managua by Russia’s President Vladimir Putin last July, there has also been speculation about potential Russian financial involvement. But both Wang and Nicaraguan officials have denied any financial participation by either the Chinese or Russian governments.

Some business observers lament the lack of competitive bidding for the overall project and its various sub-components, which they say limits transparency and increases the risk of corruption. China’s Xuzhou Construction Machinery Group, (XCMG), for example, appears to have the exclusive rights to supply all equipment to the project. According to the Nicaraguan current affairs magazine Confidencial, a ‘web’ of fifteen companies registered in Hong Kong, the Netherlands, the Cayman Islands and Nicaragua supports HKND. Writing for CNN, journalist Frida Ghitis has noted that the Grand Canal is “almost an Ortega family project” kicked off when the president’s son Laureano visited China in 2012. And writing in Latin Trade, an analyst with a US military background, Evan Ellis, suggests that the project’s backers may be focusing on developing a new Pacific Port at Brito, a lucrative project on its own, even if the wider Canal never gets built.

Among the engineering critics is Jaime Incer Barquero, a former environment minister in Nicaragua, who says the project “will lead to the contamination and death of aquatic life in Lake Nicaragua, which is Latin America’s biggest tropical lake. It will also mean that Lake Nicaragua may lose forever its capacity to provide potable water for all of Nicaragua”.  Critical experts say repeated dredging of the Lake will be necessary to allow super tankers through, which would release millions of tonnes of mud and sediments, depleting oxygen and killing fish. Pedro Alvarez, a civil engineering specialist at Rice University in Texas, says his greatest fear is that the project could be abandoned before completion, leaving a legacy of severe environmental damage to the Lake. Ten Nicaraguan environmental lobbies (known as the Grupo Cocibolca) and the Nicaraguan Academy of Sciences have expressed opposition to the project. They are particularly concerned that work is beginning even through environmental studies by ERM and others have not been completed.

On 10 December several thousand demonstrators marched in the capital Managua to protest against the project. Among them were many farmers who have smallholdings on the shores of the Lake and along the proposed canal route, and who fear expropriation without fair compensation. The demonstrators chanted “Nicaragua for the Nicaraguans and not for the Chinese”. But Oquist dismisses these concerns. “This entire issue has a short shelf life” he says. “It will expire when compensation kicks in. The criterion is that at the end of the day, everyone’s going to be better off than they were before… the ones who complain will be the ones that miss out”.

COLOMBIA | Optimism for Colombian exports. On 8 February Colombia’s finance minister, Mauricio Cárdenas, said that the domestic economy would recover in 2017 and he expected the country’s exports to increase. The total value of Colombia’s exports fell from US$60bn in 2013 to US$33bn in 2016, according to the latest data released by the national statistics agency (Dane).

The fall in the value of exports has been mainly attributed to the lower international price of oil and lower global economic activity. However, Cárdenas said that the decline in value of exports is already being reversed, with Dane reporting that exports increased by 32.7% in the final month of 2016 (although the absolute figure was 13% lower than in December 2015).

Meanwhile the president of the association of Colombian exporters (Analdex), Javier Díaz, said that he was optimistic about export prospects for 2017. Díaz noted that the sectors that experienced the biggest fall in exports were the hydrocarbons and extractive industries, which fell by 21.7%, and manufacturing, which fell by 10%. By contrast, Colombia’s flower exports reached their highest level in nine years in 2016, shipping 225,000 tonnes valued at some US$1.1bn.

The record performance of the flower industry was highlighted by Agriculture Minister Aurelio Iragorri, who said that the 2016 result consolidated Colombia as the world’s second-largest flower exporter behind the Netherlands. Iragorri also noted that last year’s flower export record could be broken this year thanks to an expected improvement in climatic conditions and a high level of global demand for flowers ahead of Valentine’s Day (14 February), with export orders for some 500m flowers, mainly for the US, already being received by Colombian producers, valued at some US$140m. Iragorri also said that better weather conditions should mean that Colombia’s coffee producers increase their exports by 4% to 14.8m sacks this year.

• Museum dedicated to Morales

On 2 February Bolivia’s President Evo Morales inaugurated the ‘Museo de la Revolución Democrática Revolucionaria’ in his hometown Orinoca, Oruro department. Although the museum is a tribute to the indigenous peasant struggle from colonial times, the image of Morales, Bolivia’s first indigenous president, is prominent in the museum, including a statue. Most of the items on display are gifts received by Morales during his time in power, as well as several videos of his most famous speeches. The cost of the museum, covering more than 10,000 square meters, making it the largest in the country, reached US$8m. This has led the political opposition to denounce the museum as an expensive homage to Morales.

The openness of Brazil’s President Luiz Inácio Lula da Silva to foster diplomatic relations with every world power, regardless of geopolitical tensions, has forced him to walk a diplomatic tightrope, a task made more complicated because of his reluctance to condemn Russia’s aggression against Ukraine explicitly. But Lula has been trying to regain the favour of Ukraine’s European allies, as suggested in his meeting with Dutch Prime Minister Mark Rutte on 9 May, and in sending his chief foreign policy adviser, Celso Amorim, to visit Kyiv on 10 May.

Rather than send arms or supplies to Ukraine, President Lula has been seeking to establish Brazil as a neutral mediator for potential peace talks. Amorim met the Ukrainian president, Volodymyr Zelensky, and other officials from the government in Kyiv, primarily to discuss the prospect of peace negotiations. After meeting Amorim, Ukraine’s deputy foreign minister Andrii Melnik tweeted that “Brazil can play an important role to stop Russian aggression & reach a lasting & just peace. We also strive to reinvigorate a [Ukraine-Brazil] 2009 Strategic Partnership”, in reference to the host of economic agreements signed on Lula’s last visit to Kyiv during his previous presidency (2003-2011). 

This was by no means a concession by the Ukrainian government that it would agree to a peace deal which would involve ceding territory to Russia, although Brazil, along with China, could perhaps be among the third parties to lead any potential peace negotiations, due to economic and diplomatic ties with several of Ukraine’s European allies and with Russia. The Brazilian government hosted Russia’s foreign minister, Sergei Lavrov, on 17 April, and Amorim even visited Moscow on 30 April. However, if Brazil is to present itself as a credible peacemaker, Lula also needs to strengthen ties with the western nations providing concrete support for Ukraine’s defence.

The issue of Ukraine was high on the agenda during the state visit of Dutch Prime Minister Rutte to Brazil from 8-10 May. When they met in Brasília on 9 March, Lula continued to pitch his peace plans to Rutte, even though the Netherlands is one of the countries committed to sending arms to Ukraine. But, accompanied by a delegation of business representatives, the focus of Rutte’s visit was to foster economic cooperation, with his first stop being Brazil’s major business hub of São Paulo before travelling to the capital.

The positive signals of Dutch interest in Brazil are in line with Lula’s foreign engagements in recent weeks with Spain, Portugal, and the UK – all member states of the North Atlantic Treaty Organization (NATO), who have sent weapons or supplies to Ukraine. Lula’s rhetoric during his high-profile visit to China last month had worried the US and Ukraine’s European allies that Brazil would be further aligned with the BRICS group of developing countries (comprised of Brazil, Russia, India, China, and South Africa). But for the moment Lula’s diplomatic pendulum is swinging towards Europe.

Lula’s climate diplomacy boost

On 5 May, Britain’s Prime Minister Rishi Sunak announced that the UK would donate R$500m (US$100m) to the Amazon Fund, a mechanism for financing initiatives to reduce emissions from deforestation. Tackling the climate crisis and protecting the biodiversity of the Amazon rainforest will continue to be a point of common interest between Brazil and its western allies, such as the US and European countries, a multilateral objective which Lula is keen to use as a platform to improve Brazil’s standing on the world stage.

ECUADOR | Nuevo presidente en el banco central. El presidente interino, Lenín Moreno, tomó juramento esta semana al nuevo presidente del banco central, Diego Martínez. Martínez reemplaza a Pedro Delgado, el primo del Presidente Rafael Correa, quien presentó su renuncia el pasado diciembre después de admitir que él había mentido acerca de haber obtenido un título en economía, a fin de poder cursar un MBA en la Incae Business School en Costa Rica hace 22 años. Delgado hizo su admisión en respuesta a acusaciones de la oposición. Martínez ha estado sirviendo como viceministro de planificación y desarrollo.

Delgado todavía está en Miami, adonde viajó luego de entregar su renuncia. A inicios de este mes, el Presidente Correa dijo que Delgado le había informado a él antes de partir para Miami que se estaba yendo para esa ciudad para asistir a la boda de su hijo, pero que retornaría a Ecuador después de Navidad (ver abajo).

• Delgado

El 8 de enero, el fiscal general de Ecuador, Galo Chiriboga, pidió la prisión preventiva de Delgado, y el Presidente Correa requirió que EU le retire la visa a Delgado, pues él no había regresado a Ecuador como había prometido. Correa también acusó a Delgado de “una tremenda traición a la confianza del presidente [y] un gran bochorno para la revolución ciudadana”.

POLITICS | Colombian governor arrested. On 12 October the governor of the northern department of La Guajira, José Francisco Gómez Cerchar, known locally as ‘Kiko Gómez’, was arrested on charges of murder and collaboration with right-wing paramilitaries. According to Colombia’s deputy attorney general, Jorge Perdomo, Gómez is accused of responsibility for the murder in 1997 of a Barrancas town councillor, Luis López Peralta, as well as that of two local citizens, Luis Alejandro Rodríguez and Rosa Mercedes Cabrera, in 2000. He is also accused of links to Rodrigo Tovar Pupo, alias ‘Jorge 40’, commander of the (now defunct) right-wing Autodefensas Unidas de Colombia (AUC), and other paramilitary groups active in the region. Days earlier the attorney general’s office accused Gómez of irregularities in the awarding of contracts, while a journalist, Claudia López, who subsequently fled Colombia, alleged links between  Gómez and Marquitos Figueroa, the leader of an emerging criminal organisation (Bacrim). Gómez, who was twice mayor of Barrancas ((1995-1997 and 2001-2003), was elected governor in 2011 for the Cambio Radical party, which expelled him on 11 October. His court hearing has been scheduled for 30 October in Bogotá.

POLITICS | Chavista mayor detained for corruption. On 12 October the mayor of Valencia, Edgardo Parra of the ruling Partido Unido Socialista de Venezuela (PSUV), was arrested on corruption charges. Valencia, capital of the PSUV-governed Carabobo state, is Venezuela’s third largest city (pop 2.2m) and Parra’s arrest is the most high-profile to date in President Nicolás Maduro’s declared crackdown on corruption, which he describes as “the greatest threat” to the Bolivarian Revolution. Parra’s fate looked to be sealed after the PSUV state governor, Francisco Ameliach, accused Parra, along with his son Edgardo Parra Guardia and the city’s treasury chief Alberto Terán (who has reportedly fled to Colombia), of being implicated in corruption; and called on the authorities to intervene. “We will not protect anyone who commits a crime involving public funds, which are sacred because it's the people's money. There are no untouchables here," Ameliach told state media. Parra was arrested hours later. The attorney-general's office said agents from Venezuela’s intelligence service (Sebin) had found "criminal items of interest" in the raid. It added that two other people had been detained and accused of running "a parallel office" that managed more than a dozen cooperatives and companies with the mayor's office. Parra is not running for re-election in the upcoming 8 December municipal elections, after Governor Ameliach’s chief of staff Miguel Flores won the local nomination instead. The arrest comes as President Maduro has requested decree powers from the PSUV-controlled national assembly to fight corruption and tackle the domestic economic crisis.

ECONOMY | Pdvsa to go back to market by year end. According to a 14 October story in the financial newswire Bloomberg Venezuela’s state oil company Petróleos de Venezuela (Pdvsa) may issue to up US$3.0bn in dollar bonds by the end of the year. Citing anonymous company sources, the newswire suggested the notes would be sold in a private placement to Venezuela’s central bank (BCV) for currency auctions, as well as to oil service providers to pay off debt. The BCV will restart dollar auctions though the secondary exchange rate agency Sicad this week (16 October), selling an estimated US$100m a week in a bid to staunch the decline of the Bolívar on the black market (now at BF45/US$, seven times the official rate of BF6.3/US$) and boost essential imports before December’s municipal elections and the busy Christmas season. Meanwhile, Pdvsa is studying ways to swap or repurchase debt with maturities from 2014 to 2017, the source told Bloomberg, adding that Pdvsa was “studying two maturity options for the bond sale including 2025 or a date further out on the debt curve…The company wants to bring its annual debt maturity burden to a manageable level of $2.5 to $3.5 billion and is planning a roadshow next year…to present its results and financial model to investors”. Yields on Pdvsa’s benchmark 2017 bonds were up at 12.15% on 11 October. Bloomberg pointed out that Venezuela’s borrowing costs are now the highest in the world, with investors demanding a premium of 10.27 percentage points to hold Venezuelan dollar bonds over US Treasuries.

PARAGUAY | The increasing relevance of tourism. On 10 October the vice-president of Paraguay’s association of travel agencies and tourism operators (Asatur), Osvaldo Morínigo, said that the local tourism sector now contributes some US$350m a year to Paraguay’s domestic economy, making it the country’s seventh most important economic sector.

The rise in prominence of the tourism sector is encouraging news for the Paraguayan economy, which has traditionally been heavily dependent on the agricultural and energy generation sectors. This dependence means that the country’s economic performance is very much dictated by these two sectors, which are liable to underperform from time to time. As it happens, last week Paraguay’s central bank (BCP) decided to revise down its economic growth forecast for the year from 4.8% to 4% as a result of the weaker-than-expected performance in these two sectors on the back of lower projected energy production at the country’s two main hydroelectric plants, Itaipú (shared with Brazil) and Yacyretá (shared with Argentina); and lower international prices for soya, the country’s main export commodity. This downwards revision brought the BCP’s forecast in-line with that of the International Monetary Fund (IMF), which also slashed its growth forecast for Paraguay last week in its World Economic Outlook (WEO) report.

However, at the opening of Paraguay’s 2014 international tourism fair (Fitpar), Morínigo, who heads up the Fitpar organising committee, said that the tourism sector has been consistently growing in recent years, making it an increasingly important economic activity. According to Morínigo, currently some 600,000 tourists directly arrive in Paraguay each year, while an additional 2.5m visitors take a short “excursion” into Paraguay from neighbouring countries, choosing to remain there for one or two days.

Morínigo said that Asatur’s goal is to carry on working with Paraguay’s tourism secretariat (Sectur) to continue promoting the country as a tourism destination. This year Fitpar was attended by representatives of 10 different countries including the US, Mexico, Chile, Cuba, the Dominican Republic and Uruguay. Uruguay’s deputy tourism minister, Antonio Carámbula, attended Fitpar. Pointing out that some 45,000 Paraguayans now visit Uruguay every year, Carámbula said that the Paraguayan market is “a growing one and this fair is important for us”.

• Alas Uruguay

On 14 October Alas Uruguay, the airline created by the staff of Uruguay’s recently bankrupted state-owned national carrier Pluna, was formally launched at an event in Montevideo’s Carrasco international airport. Alas Uruguay was formed after a group of Pluna workers secured support and financial backing from the government led by President José Mujica to set up a national airline to service the domestic and regional markets ensuring Uruguay’s air transport links. A company statement said that Alas Uruguay “arrives to cover the region’s connectivity needs… and to contribute to the country’s economic, touristic and social development”. It added that the firm, which currently employs 225 people and owns four Boeing 737-300 planes, will shortly begin flying to destinations in Argentina, Brazil, Chile and Paraguay.

COLOMBIA | Slowing growth

Colombia’s national statistics agency (Dane) revealed on 14 June that the country’s GDP had increased by 2.8% in the first quarter of 2015. This represents a 3.7-percentage-point decrease compared with the 6.5% growth registered in the first quarter of 2014. According to Dane, seven economic sectors registered growth in the first quarter, and that growth in “five of them was above 2.8%”. The sectors that drove the growth were trade (which increased by 5%), construction (4.9%), and financial & real estate (4.4%). The sectors that performed less well were manufacturing (-2.1%) and mining (-0.1%).

Despite the fact that this year’s first quarter growth rate was lower than in 2014, Finance Minister Mauricio Cárdenas revised up his growth forecast for the year by 0.1 of a percentage point to 3.6%, arguing that economic activity will pick up in the coming months. Last year Colombia registered GDP growth of 4.6% but since then economic activity has slowed down primarily as a result of lower exports from the country’s oil and mining sector due to the fall in international oil prices. This led the finance ministry to revise down its 2015 growth forecast from 4.2% to 3.5% at the start of the year.

However, Cárdenas pointed out that Colombia’s 2015 first quarter growth was still higher than that of the region’s largest economies, with Brazil posting growth of 1.6%, Peru 1.7% and Chile 2.5%. Indeed Cárdenas added that, according to his projections, Colombia may close 2015 with the second fastest economic growth rate among the region’s largest economies behind Peru (4.3%) and followed by Chile (2.9%), Mexico (2.8%), Argentina (-0.6%) and Brazil (-1.1%).

But not everyone is as optimistic about Colombia’s economic prospects this year as Cárdenas. In its latest economic outlook, released on 3 June, the Organisation for Economic Co-operation and Development (OECD) cut its Colombia growth forecast from 4.4% to 3.3%. The OECD report pointed out that it expected Colombia’s growth to diminish this year as a result of “the gradual readjustment of investment and exports due to weaker commodity prices in 2015”.

PERU | Growth starts to pick up

Peru’s GDP increased by 4.25% in April compared with the same month in 2014, Peru’s national statistics institute (Inei) revealed in its latest economic growth figures released on 15 June. This is the highest monthly growth rate registered by the Peruvian economy since the start of the year, suggesting that domestic economic activity is starting to pick up after suffering a marked slowdown since mid-2013.

The April figure does not only mean that Peru has now posted 69 consecutive months of economic growth, but it also brings the cumulative growth rate for the past 12 months to 1.74% and to 2.39% so far this year. The accompanying Inei report highlighted the fact that the increased growth came on the back of a recovery in activity in sectors such as mining, fishing and manufacturing. In particular the Inei report points out that metallic mining activity increased by 18.15%, the highest rate since 2008. Activity in the manufacturing sector posted an increase of 6.10% after 11 months of negative growth. On the downside, activity in the construction sector contracted by 8.57%.

Despite the positive results for April, Peru’s central bank has not yet revised up its conservative 2015 growth forecast of 2.36%. In its latest Global Economic Prospects report, published on 10 June, the World Bank (WB) cut its economic growth forecast for Peru for this year by 0.9 of a percentage point to 3.9%. The WB attributed its decision to the fall in commodity prices in international markets. However, the WB’s Peru forecast remains one of the highest for the region behind Panama (6.2%), Bolivia (4.8%) and Guatemala (4%).

BOLIVIA | Total investment

On 11 June Bolivia’s hydrocarbons & energy ministry announced that French oil firm, Total S.A., has pledged to invest US$980m in the second stage of natural gas prospecting in the Incahuasi field located in the eastern department of Santa Cruz. A ministry statement said that the firm’s pledge came after a meeting that Hydrocarbon & Energy Minister Luis Alberto Sánchez held with Total’s CEO, Patrick Pouyanné, in Belgium.

The statement adds that Total’s investment will guarantee the coming on stream of the Incahuasi field in 2016, which will help to increase national natural gas production by 6.5m cubic metres per day. Bolivia currently produces 60.3m cubic metres of natural gas a day. Pouyanné and Sánchez also evaluated the possibility of Total working in a solar energy generation project in the south-eastern department of Potosí.

• Schengen visa exemption

On 10 June Colombia’s President Juan Manuel Santos and his Peruvian peer, Ollanta Humala, signed the agreement guaranteeing the visa exemption for Peruvian and Colombian citizens that wish to visit the European Union (EU) for a period of up to 90 days in a ceremony in Brussels, Belgium. The negotiations between the EU and the two Andean countries over securing a visa exemption for the Schengen Area, which comprises 22 EU member states plus Norway, Iceland, Switzerland and Liechtenstein, started in May 2015 and, following the signing of the agreement, is due to come into effect in the coming months. President Santos said that the agreement would have a “very positive” impact on trade and investment ties between Colombia, Peru and the EU.

Former senator and founding member of the conservative opposition Unión Demócrata Independiente (UDI) Jovino Novoa has become the first politician to receive a prison sentence in relation to the illegal campaign financing scandal involving Penta, one of Chile’s largest financial groups, which rocked the country over a year ago. The ongoing investigations into ‘Pentagate’ as well as the case involving the mining company Sociedad Química y Minera S.A. (SQM) which have also implicated members of the ruling Nueva Mayoría coalition such as Fulvio Rossi, a senator for President Michelle Bachelet’s Partido Socialista (PS), are subjecting Chile’s institutions to serious scrutiny. Given this, Bachelet’s recent appointment of Jorge Abbott Charme, a relative of Penta’s current manager, as Chile’s new attorney general, raised eyebrows.

Following his conviction for tax fraud on 27 November, Novoa received a three-year prison sentence for tax fraud five days later to be served out in an open prison. He was also ordered to pay just over Ch$7.6m (some US$11,000), the equivalent of roughly 50% of fiscal damages caused, which he can pay in 10 instalments. On leaving court, prosecutor Carlos Gajardo remarked that “this clearly sets a precedent: it’s the first conviction, but I doubt it will be the last.”

As well as Novoa, other politicians to have been charged in relation to the case – which forced the resignations of UDI president and vice-president Deputy Ernesto Silva and Senator Iván Moreira back in March [WR-15-11] – include: Deputy Felipe de Mussy; former mayor of Santiago (2008-2012) Pablo Zalaquett (both from the UDI); and Alberto Cardemil, a former deputy (1994-2014) for the centre-right opposition Renovación Nacional (RN). Also under investigation are UDI Senator Ena von Baer; the UDI’s initial choice of presidential candidate in 2013, Laurence Golborne; and former economy minister Pablo Longueira (2011-2013), another UDI member who briefly stood as presidential candidate in 2013.

With UDI deputies like José Antonio Kast and Gustavo Hasbún accusing the tax authorities (SII) of serving the government’s interests and failing to take action against Nueva Mayoría members implicated in the cases, President Bachelet’s choice of Abbott was curious. Abbott, the cousin of Alfredo Moreno, a former foreign minister (2010-2014), is Penta’s current manager.

A former executive director of the state prosecutor’s office and a former regional prosecutor for Valparaíso, Abbott took over for an eight-year term on 1 December replacing Sabas Chahuán. Abbott’s appointment was questioned not only by the opposition but also Nueva Mayoría coalition members like the Partido por la Democracia (PPD). Abbott has already said that he will not lead the investigation into Penta and has reassigned the SQM case to another prosecutor.

• Penta heavyweightsPenta’s founders Carlos Eugenio Lavín and Carlos Alberto Délano (also the president) and Pablo Wagner, deputy mining minister under former president Sebastián Piñera (2010-2014), had been put under house arrest in relation to ‘Pentagate’, but on 7 December a guarantees judge changed their conditions, instead releasing them on bail (but still barring them from leaving the country).

TC deals blow to Bachelet

President Bachelet last week received a setback after the constitutional court (TC) ruled against provisions of her flagship education reform – specifically the mechanism for determining which higher education establishments should be entitled to state funds in order to provide free university education for certain students in 2016.

The ruling raises doubts over Bachelet’s pledge to introduce universal free education which, together with constitutional and fiscal reform, was one of her three main electoral promises in 2013. The TC took issue with the fact that the funds that would come from the state budget were accessible to limited institutions, like those represented in the council of university rectors (Cruch) and several other private establishments.

President Bachelet has since said that the government will investigate alternative options for funding free university education, such as scholarships.

President Juan Carlos Varela last month announced progress vis-à-vis efforts to strengthen and implement measures against money laundering, the financing of terrorism, and proliferation of weapons of mass destruction. The issue has been a major priority for the Partido Panameñista (PPA)-led El Pueblo Primero (EPP) coalition government following the ‘Panama Papers’ scandal – the biggest leak of secret information in history which made headlines in April 2016 [RC-16-04]. President Varela made his remarks at the start of a 15-26 May visit by a delegation from the Financial Action Task Force of Latin America, Gafilat, an intergovernmental organisation that belongs to the Paris-based Financial Action Task Force (FATF) and is tasked with evaluating the progress of implementation of these measures.

In a presidential press release issued on 15 May, Varela said that legal developments in these areas is a high priority for the government in order to guarantee protection against organised crime and meet international transparency standards. Highlighting that “these kinds of criminal activities undermine state authority, promote corruption, and damage legitimate economic activity”, President Varela noted that “cooperation with other countries is crucial in order for the government to have the adequate tools for fighting transnational criminal activity”.

In June 2014, Panama was blacklisted by the FATF for lacking a legal framework in these areas, prompting the Varela administration the following month to proceed with several improvements, agreed with FATF, with regard to due diligence, international cooperation, previous offences, and strengthening the financial analysis unit (UAF), a state security entity. In April 2015, the Varela government approved a new law which replaced legislation dating back to 2000 and toughened supervision of various non-financial sectors, requiring lawyers, real estate brokers, casinos, and construction firms, among others, to report suspicious financial transactions. This all led the FATF to remove Panama from its black list in February 2016. Gafilat began a pre-evaluation process in October 2016, and it will conclude with a summary of the total evaluation in December 2017.

Economy minister Dulcidio De La Guardia expressed optimism about the evaluation, telling reporters that Panama has been improving its legal framework during the last three years and has been preparing for Gafilat’s visit for a year. The local press is also reporting that the government is evaluating the criminalisation of tax evasion, which was a recommendation not only by FATF but also the United Nations (UN) – see sidebar – and the International Monetary Fund (IMF) – see box. Currently, tax evasion is considered an administrative fault but not a criminal offence. De La Guardia said that this is an issue that Panama must start evaluating and debating, telling reporters that the government will study tax evasion laws in other countries in the region and promote a debate on tax evasion as a criminal activity.

IMF visit

Following a visit to Panama City as part of an Article IV consultation, on 4 May the IMF issued a statement highlighting that “measures to strengthen tax transparency and ensure effective exchange of tax information must remain at the top of the policy agenda”. The statement also recognises that Panama’s economy has been the fastest growing in Latin America over the last two decades and is expected to remain among the most dynamic in the region. Noting that economic growth moderated to 4.9% in 2016 “amid external headwinds”, the IMF is projecting growth to pick up slightly to 5.1% in 2017 and about 5.5% over the medium term, “supported by the expanded Canal and the wide range of public and private investment projects”. 

• UN call

On 10 May, the United Nations Independent Expert on foreign debt and human rights, Juan Pablo Bohoslavsky, said that Panama’s financial reform agenda must prioritize combating tax evasion. He made the call following an eight-day visit to Panama. A UN statement notes that Bohoslavsky also “acknowledged…efforts to promote financial and corporate transparency and to strengthen the financial regulatory system, adding that Panama now has a more robust system than it did a few years ago”. He went on to say however that "the most onerous tax evasions must be severely punished within the framework of a comprehensive strategy covering all dimensions of tax fraud".

The UN Economic Commission for Latin America and the Caribbean (ECLAC) has published its annual report on Foreign Direct Investment (FDI), according to which total inflows fell again in 2016, declining by 7.9% to US$167.04bn. A further 5% decline is expected this year.

Regional FDI inflows reached a peak in 2011, at the height of the commodities boom, and since then have been contracting. The report cites three main reasons for this fall. One is the end of the commodities super-cycle. Lower international prices for commodities have led to a downward shift in foreign investment in the natural resources sector. The second reason is connected to the first: since 2011, economic growth in LAC has slowed down substantially in a number of countries, therefore making them less attractive as destinations for new investment across all sectors.

The third reason is particularly interesting. ECLAC says that the global boom in new technologies and the digital transformation of production processes is tending to concentrate transnational investment in developed economies. As a result, there is less capital available to flow out to the world’s developing and emerging economies.

ECLAC executive secretary Alicia Bárcena put it as follows: “Foreign Direct Investment has been an important factor for the development of export activities that are key to the growth of Latin America and the Caribbean, as well as for the creation of new sectors. But the big productivity gaps that persist in the region and the new technological scenarios that the fourth industrial revolution poses requires new policies to harness the benefits of FDI in national processes of sustainable development” she said.

In 2016, the LAC region received 10% of global FDI, similar to 2015, but below the 14% average achieved in 2011-2014. The total was equivalent to 3.6% of regional GDP, showing that Latin America still attracts more FDI than the global average, which stands at 2.0% of GDP.

Another interesting point in the ECLAC report is that despite suffering its second year of steep recession, Brazil, the region’s largest economy, experienced a 5.7% increase in FDI last year, taking the total to US$78.9bn. The suggestion is that international companies still see long-term potential in Brazil, despite its current recession and political crisis. Brazil attracts the lion’s share of LAC FDI – nearly half the total (47%). Mexico, the second largest economy in the region, experienced a 7.9% fall in FDI, which came down to US$32.1bn, representing 19% of the LAC total. Colombia was the third-largest destination for FDI, taking 8% of the regional total. Inflows there rose by a strong 15.9% to reach US$13.6bn. Chile was in fourth place, attracting US$12.2bn (7% of the total). In Central America, the biggest FDI destinations were Panama and Costa Rica. In the Caribbean, the largest FDI flows went to the Dominican Republic and Jamaica.

By economic sectors the share of total FDI going into natural resources fell from an average of 18% in 2010-2015 down to 13% in 2016. The share of manufacturing and services rose respectively to 40% and 47% in 2016. Investments last year were concentrated in renewable energy, telecommunications and the automotive sector. Renewable energy investments represented 18% of total FDI last year and were particularly strong in Chile and Mexico.

Brazil bucks the trend, but FDI is falling
Annual foreign direct investment (FDI) US$bn

Source: ECLAC

As for the sources of FDI, there is little evidence of diversification. More than half (53%) of total investment continued to come from the US, with 20% from the European Union (EU). According to the official figures, FDI from China remains surprisingly low, at only 1.1% of the total. However, ECLAC suggests that the statistics under-represent the real level of Chinese FDI. An analysis of LAC mergers and acquisitions involving Chinese companies last year suggests that the real level of Chinese investment must be higher. Deals announced by Chinese companies in the first half of 2017 also suggest that the country’s share of LAC FDI must be on the increase.

The data suggests that Latin American transnational companies – the so-called multilatinas – had a quiet year in 2016. FDI outflows from LAC countries dropped by 50% to US$24.6bn, suggesting that the multilatinas were a lot less active in M&A terms outside their home markets.

This latest report has a section on Mexico’s automotive industry, which in recent years has experienced rapid investment-led development, but which faces uncertainty amid the protectionist stance adopted by US President Donald Trump, who is trying to ensure that more jobs are generated on the US side of the border. ECLAC notes that after the global financial crisis of 2008, Mexico’s auto industry saw a rapid transformation, evolving from being a low-cost platform for the assembly of low-end vehicles to become “a more integrated and diversified productive chain in terms of products and technological sophistication.” The Mexican auto industry now accounts for 3% of the country’s total GDP, 18% of manufacturing GDP, has a US$52bn per annum trade surplus, and has accumulated FDI worth US$51.2bn since 1999. The sector is responsible for 900,000 direct jobs. Eighty per cent of output is exported, and 86% of those exports go to Canada and the US. Mexico has become the world’s seventh largest vehicles producer and the fourth-largest exporter.

While this can be read as an unqualified success story, it is also true that the industry faces big future challenges. The automotive industry faces unprecedented change with the move to electric and self-driving vehicles, the advent of tighter energy-use and environmental regulations, and the uncertainties around Trump’s policies and the future of NAFTA.

According to the 2018 edition of the World Bank Group’s annual Doing Business report, released on 31 October, Latin America and the Caribbean governments continue to make incremental improvements to the business operating environments for climate for small and medium sized companies

In a press release summarising the regional performance, the WB said that half of the region’s 32 economies had implemented reforms in the past year, for an accumulated total of 398 reforms enacted in the past 15 years.

The release singled out El Salvador for earning “a notable spot in this year’s global top improvers”, with four reforms adopted during the past year. These included improving the reliability of electricity, by introducing a better outage management and maintenance planning system, as well as making it easier for businesses to pay taxes, by implementing an online platform for filing and payment of taxes. Other reforms covered the ‘Doing Business’ areas of Dealing with Construction Permits and Trading Across Borders.

Joining El Salvador in implementing multiple reforms were Jamaica and the Dominican Republic, with three reforms each. Both economies reduced the time to start a business and improved the reliability of electricity supply, the WB noted.

Brazil managed to implemented just one reform in the past year, perhaps indicative of its continuing political crisis, and the difficulties in executive-congress relations. Its sole reform was to facilitate cross border trade by reducing the time for documentary compliance for both exporting and importing. In the past 15 years, the WB noted, Brazil has implemented a total of 18 reforms, above the regional average of 12 reforms.

Mexico also implemented just one reform in the past year. This reform, in the Doing Business area of Getting Electricity, is aimed at improving the reliability of electricity supply. Mexico has implemented a total of 26 reforms in the past 15 years.

Santiago Croci Downes, Program Manager of the Doing Business Unit, noted that “reforms implemented by economies in Latin America and the Caribbean continue to improve the business environment for entrepreneurs. As the impact of these reforms spreads, we are likely to see a more dynamic private sector, which will boost economic growth in the region”.

Latin American economies perform best in the areas of Getting Electricity and Getting Credit. For example, nine of the region’s 32 economies are among the top 20 in the area Getting Credit, thanks to well-developed public registries and credit bureaus, the WB noted. In addition, obtaining an electricity connection in the region takes 66 days on average, which is faster in than in the OECD high-income area, where the average is 79 days. However, the cost to connect to the electricity grid in the region remains significant, with an average of 927.4% of the income per capita, compared to 63% in OECD high-income economies.

One of the biggest challenges identified by the WB for the region is the time it takes to pay taxes. On average, this takes 332 hours per year in Latin America and the Caribbean, compared to the average of 161 hours per year in the OECD high-income economies. The region also underperforms in the areas of Registering Property and Starting a Business. It takes on average 63 days to transfer property in the region, which is significantly more than across OECD high-income economies where it takes 22.5 days.

The region’s top ranked economies in 2018 are Mexico (in 49th place out of 190 countries), Peru (58) and Colombia (59). While Mexico’s overall score increased to 72.27 points, up by 0.18 higher, it fell two places in the ranking, from 47 previously, came despite the fact that the country’s score. The report notes that Mexico improved its scores in areas like ease of opening firms and obtaining permits but suffered considerable setbacks in areas such as taxation and resolving insolvency.

How economies in Latin America and Caribbean (LAC) rank on the ease of doing business

Source: World Bank

Other report highlights

• With 34 reforms, Colombia has implemented the most reforms in Latin America and the Caribbean in the past 15 years. In Starting a Business, Colombia has reduced the number of days to register a new business to 11 days, from 44 days in 2003.
• Mexico and Jamaica come second and third in the region for the number of reforms implemented over time, with 26 and 25 reforms respectively. Fifteen years ago, it took 31.5 days to start a business in Mexico City, compared to 8.5 days today. While in Jamaica, which is in the top five ranked economies in Starting a Business, it takes just three days to register a business, compared to 31 days 15 years ago.
• Economies in the region have significantly reduced the time to start a business by introducing online systems, simplifying procedures and launching one stop shops for business registration. Now, on average, starting a business in the region takes 38 days, compared to 78 days 15 years ago. Nevertheless, the current average is still significantly above the global average of 20 days.

The following charts show Latin America’s performance relative to international averages in two of the Doing Business Areas – ‘Dealing with Construction Permits’ and ‘Paying Taxes’. We chose these two against the backdrop of the Odebrecht kickbacks-for contracts scandal in the region in 2016-2017, and the related ongoing concern, in the region and elsewhere, about the use (and abuse) of fiscal havens to evade (legally or otherwise) the payment of taxes.

Dealing with Construction Permits

This indicator tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required notifcations, requesting and receiving all necessary inspections, and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certification requirements. The most recent round of data collection was completed in June 2017.

Dealing with Construction Permits
Cost (% of warehouse value)

Source: World Bank

Paying Taxes

The Paying Taxes indicator records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, and also measures the administrative burden in paying taxes and contributions. The most recent round of data collection was completed on 30 June 30 2017, covering calendar year 2016.

How easy is it to pay taxes in economies in Latin America and Caribbean (LAC) - and what are the total tax rates
Payments (number per year)

Source: World Bank

Armoured cars – a Mexican growth sector. Concern over crime and insecurity in Mexico has at least one upside for the automobile industry – growing demand for armoured cars. Arturo Ávila, himself a victim of various attacks and thefts in Mexico City, told Reuters news agency that sales of these vehicles by his company Share y Asociados were growing well. “One of the crimes we are concerned about is kidnapping, it is what we fear most,” he said. “Driving an armoured vehicle in certain parts of the city gives me peace of mind so that I can concentrate on my work.” According to the country’s armoured vehicle association (Asociación Mexicana de Blindadores de Automóviles, AMBA) production this year will rise by 10% to exceed the record of 3,284 units registered in 2012. There also seems to be plenty of room to grow. Of around 1.5m passenger vehicles sold in the country in 2017 only 0.19% were armoured. Prices are not cheap – after buying the vehicle a Mexican customer can pay around US$35,000 to armour plate it against small arms fire: this is a lot more than would be paid by an equivalent customer in Brazil. Because of this AMBA is looking at lease or rental options. AMBA president Ernesto Mizrahi (who is also head of Blindajes Epel) says paying a monthly tax-deductible leasing fee is a lot more affordable than having to pay one million pesos (US$48,700) up front to buy the vehicle, followed by another 1m to have it armoured up to a high standard. While much of the sector is made up of small shops that armour commercially available four-wheel drives and SUVs, some big-name automobile manufacturers are also displaying interest. In 2017 Germany’s Audi began assembling an armoured version of its Q5 range in Mexico, from where some are exported to Brazil and Argentina. BMW, Jeep, and Mercedes-Benz are also offering armoured versions of some of their models.

Fiat-Chrysler to invest US$3.7bn. At a time when global automobile companies are debating the pros and cons of off shoring versus re-shoring, Fiat-Chrysler’s Latin American division, based in Brazil, has announced plans to invest US$3.7bn in the region between now and 2022. Antonio Filosa, the chief executive of Fiat-Chrysler Latin America, said the money would go into producing new more profitable models for the company. The aim was to produce over 1m vehicles in Latin America by 2022, up from 700,000 now. Investment would go principally to the Fiat, Jeep and RAM marques. But Filosa said, “What we least need are new factories. We are going to invest in product, in improving the efficiency of existing factories by automating and digitising operations there.”

Volaris sees zero-tolerance opportunity. Whether companies should become involved in political issues is open to debate, but Mexican low-cost airline Volaris appears to have decided it is worth the risk. Following the uproar over the US “zero tolerance” immigration policy, which in certain circumstances led to the forcible separation of parents from their young children, Volaris offered to reunite families at no cost. In a statement the airline said, “Our hearts are heavy to see these youngsters separated from their parents and we believe it is our vocation to reunite them.” The airline added, “Volaris is ready to work with the authorities in the US, in Mexico, and in those countries in Central America where we operate, to reunite boys and girls with their families as may be required.” Some US airlines also took a public position on the issue. American, United, and Frontier asked the US government not to use them to transport any children separated from their parents against their will. ON 20 June US President Donald Trump indicated that the authorities would review the policy.

Walmart buy-out approved. Cade, Brazil’s competition watchdog, gave its approval for the sale of 80% of Walmart’s Brazilian operation to Advent International, a global investment fund. The sale came as the US retailer recognised that after 23 years in the country it had failed to make a success of the local business. The price paid for the 80% stake was not revealed but Walmart said it was taking a roughly US$4.5bn non-cash charge to partially exit its Brazilian operation. Advent plans a change of approach. It will seek to convert unprofitable hypermarkets into cash-and-carry wholesale stores, and to expand some subsidiary brands developed by Walmart in the country such as Maxxi and Todo Dia. Walmart has been wildly successful globally, but could not replicate that in Brazil. Retail analysts say this was for a number of reasons. Walmart Brazil stores had comparatively poor locations, they were inefficient, they suffered from labour disputes, and the company had no less than five chief executives in the years after 2008. But perhaps a key failing was that Walmart could not deliver its critical success factor in other markets: low prices. At its peak Walmart Brazil had 540 outlets, four times less than market leader Pão de Açucar (owned by Casino Guichard-Perrachon of France). This meant it lacked the negotiating power top secure big discounts from its suppliers.

President Sebastián Piñera is not just facing the prospect of renewed unrest in the education sector. In what spells further bad news for his government ahead of the November general elections, on 15 March Chile’s umbrella Federación de Trabajadores del Cobre (FTC), which groups 22 unions at the state-owned copper mining firm, Codelco, announced a national 24 hour strike “within 30 days” in protest at the “overbearing, arrogant and inefficient” attitude of Codelco’s management towards its staff.

The FTC’s announcement was made following a four-day extraordinary summit. In a statement, the FTC cited as cause for complaint the use of temporary contractors, which account for 45,000 of Codelco’s total estimated 60,000 work force, according to Raimundo Espinoza, the FTC’s head. Union leaders grumble that the increasing use of contractors makes it harder to implement certain labour guarantees, as provided by a 2008 framework agreement struck between Codelco and the FTC to end previous labour unrest. Other causes for complaint include Codelco’s failure to develop the potential of its mines, amid evidence of deteriorating ore grades, and alleged efforts to privatise health and pensions services.

If the FTC makes good on its threat, the 24-hour national strike would be the second since both Piñera took office in 2010 and the country returned to democracy in 1990. The previous strike, which was staged in July 2011 amid suspicions that the government was seeking to indebt Codelco in order to justify a future privatisation, cost US$14m in lost production [RBS-11-07]. According to Chile’s copper mining commission, Cochilco, Codelco accounted for 1.6m tonnes (t) of the 5.4mt of fine copper produced in 2012. This was down from 1.7mt produced in 2011 - a decline attributed to deteriorating ore grades. Meanwhile copper exports accounted for US$29.5m or 52% of Chile’s total exports in 2012, down from 54% in 2011 and 56% in 2010. According to Cochilco, copper accounted for 13.5% of GDP in 2012, down from 15% in 2011 and 16% in 2010.

Worryingly for the government, the FTC shows every sign of backing up its words with action. As well as a one-day national strike, the union also threatened industrial action at different locations over several days – and these actions are already underway. On 16 March, some 300 workers belonging to the Muellaje SVTI union held a five-day strike at the port of Angamos, Antofagasta, which has delayed the company’s weekly shipments. The unrest attracted media attention after clashes between the protesters and Carabineros resulted in 14 arrests and obliged a union leader, Enrique Solar Lagos, to seek emergency medical attention. The repressive response by the security forces has set off alarm bells, given the prospect of further unrest.

Codelco unveils investment plan

The FTC’s threat of unrest came days after Codelco’s executive president, Thomas Keller, presented a US$5bn investment plan for 2013, up from the US$4.1bn assigned for 2012. This is part of the company’s overall US$27bn investment plan for 2012-2016.

Of the US$5bn, US$2.9bn will go on major projects. These include the US$2.3bn Ministro Hales mine, which will receive US$1.1bn. Located in the Calama commune, Antofagasta, the mine is scheduled to come on line at the end of this year and will produce 183,000t of fine copper by end 2014.

Other big projects include a new mining level at the El Teniente mine, located in the Machalí commune, in the VI Libertador Bernardo O’Higgins region, which is due for completion by 2017. The US$3.7bn project, which will receive US$716m this year, aims to eventually expand the mine’s production from the current 137,000t per day (tpd) to 180,000 tpd after 2020.

• Polls

The threat of unrest comes as the latest poll by Adimark, published on 5 March, gave President Piñera a 38% approval rating, up from 32% in September 2012. This was his highest rating since May 2011, when it was 36%. The improvement was attributed in part to his handling of Chile’s ongoing border disputes with Peru and Bolivia. Foreign policy was ranked his best area of government and Foreign Minister Alfredo Morena the most popular minister, with 75% approval. Education Minister Harald Beyer was the least popular minister, with 31% approval. The poll surveyed 1,421 people nationwide between 4-28 February with a 2.6% error margin.

COLOMBIA | Ecopetrol says Caño Sur Este block commercially viable. In a 5 December press release Colombia’s state oil company Ecopetrol announced the viability of its Caño Sur Este oil bloc, in the south-eastern province of Meta, which has estimated proven reserves of 22.4m barrels.

The announcement by Ecopetrol, which is the sole owner of the block, comes after six years of exploration. According to the release, Ecopetrol plans to drill 135 exploratory wells and invest US$656m in the block, with estimated production of 25,000 barrels by mid-2016.

Ecopetrol’s CEO Javier Gutiérrez Pemberthy said the find would “contribute to achieving Ecopetrol’s production target of 1.0 million clean barrels in 2015.”

PERU | Petroperú IPO. On 9 December Peru’s economy & finance minister Luis Miguel Castilla confirmed that the government led by President Ollanta Humala intends to float 49% of the state oil company Petroperú. The move caused a stir, forcing ministers to deny that the sale is tantamount to privatisation.

Though without a majority in congress, the ruling Gana Perú coalition has managed to round up sufficient support from smaller parties and the proposal is expected to pass. Castilla also confirmed that the government plans a US$3.5bn upgrade of the aging Talara refinery, in the northern Piura region, one of Peru’s two main refineries.

Presenting the bill to congress on 6 December, Prime Minister Cesar Villanueva declared the Petroperú offering and Talara refinery works “a national priority”. Energy Minister Jorge Merino denied that the local market initial public offering (IPO) would lead to Petroperú’s privatisation, pointing out that the state will retain a majority stake.

Merino said that the Talara upgrade would increase its crude-oil processing capacity to 95,000 barrels a day (bpd), from 65,000bpd currently, and allow a reduction in sulphur content to 50 parts per million from the current 2,000 parts per million. Of the total US$3.49bn investment required for the Talara overhaul, 78% will be financed by Petroperú and the rest (22%) from private companies through structured loans, bonds or other instruments, Merino added.

According to the US Energy Information Administration (EIA), Peru's liquid fuels production averaged 160,000 bpd in 2012. Petroleum consumption in Peru averaged 172,000 bpd in 2012. Fuel import costs have soared, hitting US$3.6bn in 2012.

Back in April, President Humala controversially suggested that Petroperú might acquire shares in Peru’s other main oil refinery, La Pampilla, held by the Spanish energy company Repsol. Humala was forced to backtrack after a major outcry by the political opposition and the private sector, led by the Confederación Nacional de Instituciones Empresariales Privadas (Confiep), about increased state intervention. The incident damaged investor sentiment in Peru at a delicate time, with economic growth slowing on the back of the weak external sector. Repsol has since said La Pampilla is not for sale.

VENEZUELA-PARAGUAY | Mercosur backing at last. On 10 December Paraguay’s senate approved by 29 votes to 10 Venezuela’s full adhesion to the Southern Common Market (Mercosur). The adhesion protocol, sent down by President Horacio Cartes late last week, will now go to the lower chamber of congress, where it is also expected to pass. President Cartes said his decision to send the instrument to congress was necessary to prevent Paraguay’s “isolation” from its neighbours.

Paraguay’s congress had steadfastly refused to recognise Venezuela as a formal member of the bloc under former president Fernando Lugo (2008-2012) and further objected to the manner in which Venezuela was drafted into Mercosur shortly after Paraguay was suspended from the bloc over Lugo’s impeachment in June 2012. Cartes, however, enjoys far more support in congress than Lugo was able to muster.

Cartes had said that Paraguay would not move until all the issues that resulted from its political suspension were resolved, in particular Venezuela’s “irregular” entry. The move came a day after Argentina’s new cabinet chief Jorge Capitanich paid a visit to Asunción, where reportedly he met Cartes to discuss the issue. Paraguay’s foreign minister Eladio Loizaga publicly denied that Argentina had put pressure on Paraguay to accept Venezuela’s adhesion.

• EU talks

The secretary general of Brazil’s foreign ministry, Eduardo Dos Santos, said the vote in Paraguay’s senate was positive for Mercosur’s association agreement talks with the European Union (EU). Paraguay will represent Mercosur in the next round of talks with the EU. Venezuela is not part of the EU-Mercosur negotiations.

ARGENTINA-BRAZIL | Trade slumps. Trade between Argentina and Brazil was just US$2.25bn in February, the lowest monthly figure in four years. Total exports reached US$1.094bn, a fall of 23.4% year-on-year, while imports reached US$1.165bn after a 9.7% fall on February 2013. Lower sales of vehicles, oil and auto-parts were cited as the main reason for the decline. After the first two months of 2014, Brazil is running a US$297m deficit with Argentina.

Argentina’s exports represented 6% of the total imported goods to Brazil, putting it behind China and the US as Brazil’s main trading partners. After the steep devaluation of the peso in January, Argentina expects exports to Brazil will increase in the upcoming months. Meanwhile, just 7.3% of Brazil’s exports went to Argentina. A Brazilian delegation is due to visit Buenos Aires later this week to pressure the government to lift some of the restrictions on imports that are frustrating Brazilian businesses.

The Brazilian team will consist of the development, industry and commerce minister, Mauro Borges, and the presidential foreign policy adviser, Marco Aurélio Garcia. They are due to meet Argentina’s economy minister, Axel Kicillof. Among other issues, they are likely to raise the issue of customs barriers imposed by Buenos Aires on Brazilian products which often cause a delay in imports. The Brazilian officials are also due to negotiate with the government a line of credit with a state bank that would be applied to all areas of trade between the two countries.

• YPF finds new oil reserves

On 11 March Argentina’s state oil company YPF announced the discovery of an oil field in the province of Río Negro expected to yield 15m barrels of crude. The exploration block had been inactive since 1999.

At the beginning of November, Peru’s new economy minister, Alonso Segura, had both bad news and good news for congress. The bad news was that he was again trimming back expectations of growth for this year. After real annual GDP growth of 5.8% in 2013, the economy ministry was now expecting growth of “a little under 3%” in 2014 (a reduction on the previous official forecast of 3.0%-3.5% for the year). The good news was that the minister was announcing the fourth stimulus package of the year, designed to “reactivate the economy in the short term, but also, and fundamentally, to improve competitiveness and productivity in the medium term”.

The stimulus measures announced on 6 November will inject an estimated PEN1.6bn (US$550m) into the domestic economy through increased public spending. Segura said that taken together the measures should boost GDP by a third of a percentage point. These include streamlining the process of environmental approvals for mining projects; a reduction in import duties on capital inputs; and new incentives for employers to hire young people under the age of 24. Perhaps with an eye on the government’s volatile popularity ratings, the package also included a PEN300 (US$102) per-recipient boost to the Christmas bonus for public sector employees and pensioners (taking the total bonus per recipient to PEN500, or US$172), further spending on social programmes in public schools, and additional investment in school renovation works.

The streamlining of environmental approvals is considered central to boosting Peru’s important mining sector. Peru is the world’s third largest copper producer and the fifth largest gold producer. There are some US$57bn worth of mining investment projects in the pipeline, but many are stuck or progressing very slowly. Officials said that as a result of the changes the duration of the approvals process will be shortened by three and a half years. Earlier, Prime Minister Ana Jara had described the process as ‘interminable” for investors. Under the new approach, the environmental regulator, Servicio Nacional de Certificación Ambiental (Senace), will be required to decide whether to authorise projects no more than 150 days after submission of environmental impact assessments (EIAs). The scope of the process is also being widened from mining and hydrocarbons to include water and forestry projects.

Import duties on around 1,800 raw materials used by local industries are being slashed to zero, brining them into line with the current zero-rating on capital goods imports. Tax incentives are being offered to employers who hire young workers in the 18-24-age range. When the employers are small and medium sized enterprises (SMEs), the government will pay the employees’ social security contributions for the first year. ‘These measures have teeth and they are going to have a real impact” Segura said, adding “but we’re not going to stop there. More measures are going to come.”

Analysts welcomed the measures. However, given continuing signs of economic deceleration, they suggest the central bank (BCRP) may make at least one more downward move in interest rates. In the three months to August, indicators suggested economic growth had been only 0.9% year-on-year. The BCRP left its key interest rate untouched at 3.5% in its November meeting, but another 25bps cut may be in prospect. Although headline inflation at 3.1% in the 12 months to October was just outside the 1%-3% target range, the core rate has been falling, so the BRCP is unlikely to be too worried on the prices front. A greater obstacle to further monetary easing may be concern over the current account deficit, which in the second quarter stood at 5.4% of GDP. Too much monetary easing might therefore put pressure on the Peruvian Sol. On the whole, however, most analysts believe a recovery will begin to make traction in 2015, with GDP growth rising to around 4%.

• The latest measures to facilitate environmental permits have come under fire from environmentalists - especially as Lima is hosting the United Nations Climate Change Conference from 1 to 12 December.

The Mexican gold and silver mining entrepreneur, Alberto Bailleres, has launched one of the first ‘post-reform’ private sector energy companies in the country. The new firm, Petrobal, will form part of Bailleres conglomerate, which also includes mining companies Peñoles and Fresnillo, department stores Palacio de Hierro, and insurance company Grupo Nacional Provincial (GNP). According to the US magazine Forbes, Bailleres is Mexico’s second-richest man, with assets totalling US$18.2bn.

Petrobal’s first chief executive is Carlos Morales Gil, previously an E&P director at the state-owned oil company Pemex, who resigned in February 2014 after a 30-year career at the company. Morales Gil was closely involved in developing the Ku Maloob Zaap field in the Gulf of Mexico, as well as in the first drillings in the Chicontepec basin.

Petrobal will not be able to bid for the first group of 14 offshore licences offered by Mexico’s regulator, Comisión Nacional de Hidrocarburos (CNH). This is because the rules state that bidders must have at least four years experience and three major completed exploration projects. However, it could join a consortium, as long as it can demonstrate a minimum capital of US$600m.

On 16 February, Jaime Lomelín Guillén announced his resignation as an independent director on the board of Pemex. A well-respected chemical engineer, Lomelín Guillén also sat on the board at Peñoles (Mexico’s second largest mining company) and served as head of the chemistry faculty at the National Autonomous University of Mexico (UNAM).  He said he was resigning given that the Bailleres holding group, which controls Peñoles, is now moving into the oil and gas industry through Petrobal, where it may be in direct competition with Pemex.

Cuando se analizan los resultados de las primarias abiertas, simultáneas y obligatorias (Paso) en la ciudad de Buenos Aires, vale señalar que la metrópolis en sí misma ha sido desde hace mucho tiempo una isla de la oposición en medio del bastión Peronista de la provincia de Buenos Aires. Aún así, el centro-derechista Propuesta Republicana (PRO), el partido del alcalde de la ciudad, Mauricio Macri, se apuntó una impresionante victoria el 26 de abril. Colectivamente, el PRO obtuvo el 47,3% de los votos, con la social-demócrata Energía Ciudadana Organizada (ECO) quedando en segundo lugar con el 22,3%, y el Frente para la Victoria (FPV, Kirchneristas), la facción nacionalmente gobernante del Partido Justicialista (PJ, Peronistas) en un lejano tercer lugar con solamente el 18,7%.

La victoria fue significativa para Macri en dos sentidos. Primero, sigue a los éxitos para candidatos del PRO en las Paso de las provincias de Mendoza y Santa Fe. Segundo, el candidato preferido de Macri dentro de la interna del PRO, Horacio Rodríguez Larreta, venció a la Senadora Gabriela Michetti con el 28,4% frente al 18,9%. Algunos analistas políticos creen que esta victoria se debe a la intervención de Macri. Michetti es una poderosa política por derecho propio, y su decisión de competir contra Rodríguez Larreta causó una escisión con Macri; hace unos pocos meses atrás, no parecía probable que Rodríguez Larreta derrotaría a Michetti. Ahora Michetti ha aceptado el resultado, y prometió apoyar a “Mauricio” en la carrera por la presidencia; por lo tanto, Macri ha fortalecido su posición dentro del partido y en el país en general.

Quizá levemente embriagado con esta sugestión, Macri dio una conferencia de prensa en la cual él afirmó que el PRO podría ganar la elección presidencial “en la primera ronda”. De acuerdo con las tendencias actuales, esto parece improbable. La mayoría de las encuestas de opinión ubican a Daniel Scioli, el gobernador de la provincia de Buenos Aires y el más probable candidato del FPV para la presidencia, como favorito, aunque por un margen estrecho, seguido por Macri; con Sergio Massa, el ex Kirchnerista convertido en líder de la oposición dentro del Peronismo, Frente Renovador, comenzando a deslizarse a un más distante tercer lugar.

En una conferencia de prensa del 27 de abril, Macri descartó específicamente cualquier clase de alianza con Massa para derrotar al candidato del gobierno, describiendo a Massa como “parte del Peronismo, aunque sea una faceta alternativa del gobierno”. Los dos mantuvieron una breve alianza electoral en el 2013. Macri también dijo que ya había decidido sobre quien será su compañero de fórmula para vicepresidente, pero se rehusó revelar de quien se trataba. En cuanto a la exitosa venta de bonos por el gobierno la semana pasada, Macri afirmó que estaba basada sobre el hecho de que los inversionistas ahora anticipan un cambio en octubre. “Mucha gente está comenzando a prestarle dinero a Argentina, debido a que acá habrá un cambio. Los flujos de dólares han comenzado a subir, debido a las expectativas que nuestras victorias en estas PASO han generado”, dijo Macri.

Aún así, la Presidenta Cristina Fernández, cuyo rating de apreciación ronda un respetable 40% aún debe intervenir en la carrera presidencial. En una reciente visita a Rusia, ella declinó, una vez más, elaborar acerca de un posible sucesor. Esto está haciendo incómoda la vida para  Scioli quien parece estar manteniendo un perfil tan bajo como sea posible, a fin de no decir nada que pudiera contradecir a la Presidenta, lo que puede poner en riesgo su futuro apoyo. Esperando entre bastidores están otros posibles candidatos de la continuidad, tal como Florencio Randazzo, el actual ministro del interior & de transporte.

Política exterior

Curiosamente, mientras que Fernández ha tratado evitar convertirse en una presidenta cuyo poder se debilita con el tiempo que pasa, participando en la diplomacia energética con Rusia, China e incluso Irán y Venezuela; sus tres potenciales reemplazantes han indicado que planean restablecer ciertas prioridades en las relaciones exteriores de Argentina en caso de ganar la presidencia en octubre. No es nada sorprendente de un candidato orientado hacia las empresas y los negocios como Macri, que sus asesores ya han indicado que quiere mejorar las relaciones con la Unión Europea (UE) y EU.

Lo mismo pasa con Massa, hasta el punto de que ambos candidatos han firmado un documento comprometiéndose a sí mismos a un cambio radical en la política exterior si ganaran el poder. Por otro lado, un asesor de Scioli le ha dicho a El País de España, que aunque Scioli no buscaría tal ruptura radical con la política exterior Kirchnerista, él trataría de restaurar las relaciones con la UE y con EU.

• Timerman se aleja de la Amia

El 28 de abril, el canciller de Argentina, Héctor Timerman, sometió su renuncia a la Asociación Mutual Judía Argentina (Amia). El canciller acusó a la Amia de “acciones obstructivas” que apuntan a obstaculizar las investigaciones sobre el atentado contra el centro de la Amia en Buenos Aires en 1994. Timerman, quien es judío, fue uno de los acusados, junto con la Presidenta Cristina Fernández, de “encubrir” la participación iraní en el ataque, por el finado fiscal especial, Alberto Nisman.

The US government has announced the lifting of restrictions in place since the 1990s requiring the Nicaraguan government to seek an annual waiver to access international credit and bilateral assistance. This waiver in turn was dependent on Nicaragua resolving a number of ownership claims by US citizens relating to property seized by the Frente Sandinista de Liberación Nacional (FSLN) government in the 1980s. The Sandinista government led by President Daniel Ortega is hailing the move as an important step forward in efforts to improve the country’s image abroad.

According to a 6 August US embassy press release, between July 2014 and July 2015, a total of 30 property ownership claims were resolved while a total of 3,166 had been registered at the embassy in total. The decision by the US government to lift the restrictions (which instruct the US to oppose assistance from international financial institutions for governments that confiscate the property of US citizens) was hailed by various figures. As well as President Ortega’s economic adviser, Bayardo Arce (see sidebar), Attorney General Hernán Estrada, the president of Nicaragua’s central bank, Ovidio Reyes, and José Adán Aguerri, the head of the influential private sector lobby, Consejo Superior de la Empresa Privada (Cosep), all underlined the positive impact this would likely have on the government’s image abroad.

At the same time, Aguerri told reporters that the next challenge is the “fiscal transparency waiver” which, worth some US$3m a year, the US government cancelled in July 2012 following the controversial general elections of November 2011 [WR-12-21]. Of the two, however, the property waiver was by far the most significant in terms of the amount of funds at stake.

• Impact on foreign investment

President Ortega’s economic adviser, Bayardo Arce, told reporters that while last year, Nicaragua received US$1.3bn in foreign investment, this year, with the suspension of the ‘waiver’, he was expecting US$1.5bn in investment as a result of increased confidence on the part of investors.