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BRAZIL | Fiscal reform paves way for new round of pandemic aid. Brazil’s federal congress promulgated a constitutional reform on 15 March known as the ‘PEC Emergencial’, after it was approved over the previous two weeks in fast-track votes, first by the senate and then by the chamber of deputies.

The original PEC Emergencial was one of three constitutional amendments presented to congress by Economy Minister Paulo Guedes in November 2019, a package of reforms aimed at cutting public spending. In its final, revised version, the PEC Emergencial combines cost-cutting initiatives from across those different proposed reforms with measures which allow the government to bypass fiscal rules to fund a new round of emergency handouts in the context of the coronavirus (Covid-19) pandemic [WR-21-06], the first iteration of which was known as the ‘auxílio emergencial’.

From the perspective of the government’s economic team, the approval of the PEC is a victory, a step forward in efforts to advance the structural economic reforms promised by President Jair Bolsonaro, but which have largely fallen by the wayside. In a statement on 12 March, one day after the PEC was approved, the economy ministry described the initiative as “the most important fiscal reform in the last 22 years” and proof of the government’s commitment to fiscal balance.

For most lawmakers, the approval of the PEC is vital in allowing the reinstatement of aid to vulnerable Brazilians, a necessary social safety net and economic stimulus given the severity of the Covid-19 crisis.

The PEC puts in place cost-saving instruments which will kick in when obligatory federal spending reaches 95% of its limit (similar rules will optionally apply to state and local governments); these notably relate to staffing costs, although pressure from certain public sector workers forced the government to exclude the possibility of freezing salaries and automatic promotions. Other cost-cutting measures include a review of tax subsidies or exemptions, with the presentation of an eight-year plan to bring their cost down to 2% of GDP (from 4% currently).

On the flip side, the PEC allows the government to bypass fiscal rules when a ‘state of calamity’ has been declared by congress. It specifically allows up to R$44bn (US$7.8bn) to be spent outside of the legally mandated spending cap for the immediate reinstatement of pandemic aid, although the exact format of this benefit must now be outlined in a separate bill.

Summarising his government’s achievements as he marked his first two years in power on 8 November, Bolivia’s President Luis Arce made no mention of the severe civil unrest that has gripped the eastern department of Santa Cruz since 22 October [WR-22-42]. However, the consequences of the opposition’s ‘indefinite strike’ are now beginning to be felt in the ruling left-wing Movimiento al Socialismo (MAS), with some deputies growing increasingly critical of Arce and Vice President David Choquehuanca.

President Arce was widely criticised for his speech, which centred around his government’s economic achievements. Highlighting the World Bank’s improved forecast for Bolivia in early October, which predicted GDP growth of 4.1% for 2022, Arce also emphasised how Bolivia has bucked global inflationary trends, with an annualised inflation rate of just 0.75% in October. There was no acknowledgement of any problems in Santa Cruz, the country’s main economic hub, which has been paralysed by strikes and protests for nearly three weeks.

Attacks from the opposition following the speech will have stung less than the criticism Arce received on 8 November from former president Evo Morales (2006-2019), who has grown increasingly critical of Arce [WR-22-42], in what is widely seen as the prelude to an announcement that he will run for the MAS nomination for the 2025 presidential election. In a video published on social media, Morales said that the protests “could have been avoided with timely and responsible management,” and he called on Arce and Choquehuanca to “respond to the trust that the MAS placed in them when it named them as candidates”.

Camacho warns that protests “will radicalise”

One of the main organisers of the protests, Santa Cruz governor Luis Fernando Camacho, warned on 8 November that protesters “will radicalise their measures” following the breakdown of another attempt at dialogue that day. Insisting that the protests will continue until the government agrees to carry out a postponed census immediately, Camacho said that “we’re on the 18^th day of the strike – it doesn’t matter to us that that number is rising”. He added that “these measures aren’t in vain” and urged President Arce to “stop acting like a mercenary of Evo Morales, seeking to remove Santa Cruz from the picture”.

In the past few weeks, Peru has seen an uptick of protests and social conflict. This is happening at a relatively low level; much of the unrest is connected to the mining industry. It could increase in intensity and geographic reach.

Early in the morning of 3 June there was a gunbattle between police and a criminal gang involved in illegal mining in Yalen, part of the northern province of Pataz in the region of La Libertad. Three people including a policeman were injured and seven were arrested.

The government has recently been trying to roll back illegal mining in the area; the police units involved are part of a task force deployment known as ‘Armageddon II’. A joint army-police operational command issued a statement saying that a patrol, designed to maintain order within mining areas and combat “armed criminal activity” had come under fire.

The incident was one of many clashes in recent months. Last year a state of emergency was declared in Pataz. In an earlier incident this year 13 informal mining workers were killed at the hands of a criminal gang dedicated to extracting and stealing gold in the area [WR-25-19].

The government has sought to respond to the upsurge in violence by persuading all small and medium-sized miners to register and operate legally, acquiring a document known as a Registro Integral de Formalización Minera (Reinfo). A total of 2,237 Reinfos have been issued over the last eight years, but they are frequently ignored or allowed to lapse.

• Reinfos

The ministry of mines and energy reports that there are over 82,000 Reinfos in the country, of which only a minority are active. Over 61,000 Reinfos, it says, are currently “suspended”.

Meanwhile, in the south of the country, the government has just rolled over another state of emergency for a further 60 days covering the Southern Road Corridor, a highway system which runs through the regions of Apurímac, Cusco, and Arequipa. The state of emergency applies to the road itself and a strip of land 500 metres on either side of it.

This has been done to give the police and army extra powers to dismantle roadblocks and if necessary to arrest roadside demonstrators. The area is dominated by large, legally registered mines such as Las Bambas (MMG), Constancia (HudBay), and Antapaccay (Glencore).

Here, the motive for protests is quite different. Many indigenous and local communities say they have not been properly consulted over mine development and have been adversely impacted by water shortages, toxic mine tailings, dust pollution, and other environmental problems.

A third 60-day state of emergency has also been applied in the Ayna, Santa Rosa de Anchichuay, and Río Magdalena districts in the southern province of La Mar in Ayacucho region. Here the main concern is criminal activity linked to drug cultivation and trafficking.

Fears over Nazca informal mining

Environmental activists have expressed anger over a government decision to cut by almost half the surface area of the protected archaeological park around the Nazca Lines, Peru’s second most visited tourist attraction after the Inca citadel Machu Picchu.  

The ministry of culture said it had decided to reduce the Nazca reserve from 5,600km² to 3,200km², based on years of research, and that the decision did not affect the dimensions of the UNESCO World Heritage Site or an immediately associated buffer zone.

However, critics said the decision would open the area to informal and illegal mining, at a time when global gold prices are booming. Jaime Luis Castillo, a former culture minister, said the protected area was already “infested with illegal mining and mineral processing plants”.

Dock workers on 22 March called off a national strike scheduled for next week after a successful round of talks with the government over its new reform plans for the sector, which includes a public-private plan to attract US$27.6bn in investment and the concession of some ports to private sector companies. The workers had particularly objected to plans under the new law to shift management responsibilities to the central government and away from the port authorities. Proposals would also allow new (privately-run) terminals to directly recruit workers, ending an obligation to source them through a central agency, Órgão Gestor de Mão de Obra (Ogmo).

The workers, grouped under Força Sindical, have now agreed to that provision in exchange for government promises to ban the use of temporary labour, set up a guaranteed minimum income scheme for dockers in times of low port activity and establish a new port guard specifically for Brazil’s ports, among other provisions. Shipments of soya and iron ore to China have been at risk because of the labour unrest in the ports sector.

Formal employment creation dips sharply

The number of new formal (i.e. payroll registered and tax-paying) jobs created in February fell 18% year-on-year to 123,446, according to the latest data from the labour ministry. It was the weakest result for the month since 2009. However, there was an increase on a monthly basis over January, when just 28,900 new formal jobs were registered. The labour ministry said the latest results were “within the average” and expressed confidence that its annual target for 2013 of 2.0m jobs would be reached.

In 2012, the economy created 1.3m new formal jobs. Most new jobs are still being created in the services sector, followed by industry and civil construction. Jobs were lost in the retail and agriculture sectors in February. President Dilma Rousseff’s record high approval ratings (79% on latest polls) are directly linked to Brazil’s nigh-on full employment and steady wage growth, according to pollsters.

• Moody’s cuts Brazil banks

The ratings agency Moody’s Investors Service lowered its long-term issuer ratings on the Brazilian state banks, Banco Nacional de Desenvolvimiento (BNDES) and Caixa Econômica Federal, citing their eroding capital position after several years of rapid credit expansion. Moody’s cut its ratings on the two to "Baa2" from "A3," with a positive outlook, according to a statement. This lower rating is still within investment-grade ratings. Caixa Econômica Federal is Brazil’s largest mortgage lender. Likewise, Moody’s downgraded the foreign currency senior unsecured debt ratings of both banks to "Baa2" from "Baa1," with a positive outlook, "in line with the positive outlook on Brazil's government bond rating," ran the statement.

• Abav expects 30% fewer Argentine tourists

Brazil’s association of travel agencies (Abav) expects a drop of 30% in the numbers of Argentine tourists coming to Brazil because of the latest currency and credit card controls imposed by the Buenos Aires government. Argentina is the Brazilian tourist industry’s biggest source market, providing 1.6m of the total 5.7m tourists that visited the country in 2012, or almost 30%. Abav expects the states of São Paulo, Rio de Janeiro, Bahia, Rio Grande do Sul, Santa Catarina and Paraná to be worst affected. Rio’s state tourist secretariat estimates the potential total loss to Brazil at US$285m.

• Supreme court rules against ICMS on imports

On 20 March Brazil’s federal supreme court unanimously ruled unconstitutional the inclusion (by the federal government, or União) of the state–level valued added tax (ICMS) in the base of calculation for the PIS/Cofins social contribution taxes on imports. The ruling is a blow to the federal government, which earned an estimated R$34bn (US$17bn) between 2006 and 2010 by way of that methodology. The federal tax office said it would move for a temporary stay until it understands more about the ruling, which could force the União to reimburse affected companies.

Panama’s 71-member unicameral legislature recently approved a resolution calling for the supreme court of justice (CSJ) to remove Comptroller General Gioconda Torres de Bianchini, a close ally of former President Ricardo Martinelli (2009-2014). The move against Torres, whose four-year term is due to end in December 2014, follows her recent appearance before the legislature where she was called to testify in relation to various corruption concerns surrounding the previous administration. As well as illustrating that the legislative arrangement between President Juan Carlos Varela’s Partido Panameñista (PPA) and the opposition Partido Revolucionario Democrático (PRD) [WR-14-26] appears to be working, the move against Torres shows that Varela is intent on making good the now familiar pledge upon taking office in Panama – to tackle official corruption.

International concerns surrounding alleged corruption in relation to the previous Martinelli government had emerged in reports like the World Economic Forum (WEF)’s 2013-2014 Global Competitiveness Report, which, while otherwise positive on Panama, noted that the country faces important challenges in terms of “strengthening the functioning of its institutions, fighting corruption and crime […] and the independence of the judiciary system”. The latest (December 2013) report by the NGO Transparency International also noted that Panama registered the biggest decline of any of its Central American neighbours in 2013 in its corruption index, dropping 19 places, to finish 102nd, scoring 35 points, down from 83rd in 2012.

On 19 and 20 August Torres, who served as auditor for Martinelli’s company Importadora Ricamar for 15 years prior to taking up her current post, was called to testify before congress. One of the main cases on which she was questioned was that involving the contracts awarded in 2010 to Finmeccanica, the Italian state-run aerospace and defence conglomerate, for the purchase of radar installations, helicopters and digital mapping services. The case had caused major embarrassment for the Martinelli administration following the arrest in April 2012 of Valter Lavitola, a former aide to the disgraced former Italian prime minister, Silvio Berlusconi [WR-12-26].

Lavitola, who is currently on trial in Italy in relation to various charges, is accused of acting as a middleman for the delivery of bribes by an Italian company to governments in Latin America, including Panama. Both the Panamanian and Italian press suggest that the contracts were inflated and that Lavitola, who reportedly played a “fixer” role in the talks, received kickbacks, some of which went on bribes to local officials – including Martinelli. Five days before Torres’ first appearance before congress, a top anti-corruption prosecutor, Lorena Coronel, announced the investigation into the case would be reopened.

Following the move against Torres, whose resignation is also a demand of civil society groups like Alianza Ciudadana Pro Justicia, the case now goes before the CSJ justices, five of whom were Martinelli appointees. While it remains to be seen whether the court will comply with the legislature’s resolution, the potential clash between the different branches of government is likely to subject the independence of the various institutions to further scrutiny.

There have been other signs of President Varela’s intent to tackle alleged unlawful behaviour which took place under his predecessor. On 13 August, the electoral tribunal (TE) began investigating 47 public agencies (out of a total 82) for violating the laws against excessive electoral advertising ahead of the May 2014 general election. These institutions include the national assembly, the Panama City mayoralty, nine ministries, and the national police among others, although 11 of these agencies have since been exonerated.

Meanwhile on 14 August, Varela revoked all 355 presidential pardons issued by Martinelli to various officials in the final days of his term in June on the grounds that they had been issued by a “non-competent authority” (they had been hastily co-signed by Martinelli’s labour minister Alma Cortés, rather than by his interior minister Jorge Ricardo Fábrega). Varela also pointed out that the pardons had been issued for individuals who had not yet been convicted of any crime and called on the general prosecutor to investigate those responsible for issuing the pardons.

• National aid programme probed

As well as the investigation into the Finmeccanica case, anti-corruption prosecutor, Lorena Coronel has announced a probe into the Programa de Ayuda Nacional (PAN), a government fund used for various initiatives aimed at improving disaster mitigation, nutrition and housing among other things.

The investigation is in line with a complaint lodged before the attorney general’s office by PPA national legislator José Luis Varela (the President’s brother) involving alleged crimes relating to public administration against Rafael Guardia, who served as a head of the PAN under former president Martinelli.

According to local press reports, the investigation will cover various contracts awarded to companies for alleged misuse of public funds from the PAN. The contracts in question include companies linked to Heriberto Vega, a former legislative candidate for Martinelli’s Cambio Democrático (CD).

Critics have long suggested that State funds from the PAN have been used to attract turncoats.

• Key electoral pledge

On 24 August President Juan Carlos Varela cited figures from the economy & finance ministry (MEF) which showed that the price of the monthly basic food basket (Canasta Básica Familiar de Alimentos, CBFA) in July 2014 was US$318.48 – a fall of 7.7% on June 2014. In a press release the MEF claims this is the most significant decline in the last 10 years. President Varela’s first act upon taking office on 1 July was to announce temporary ‘emergency’ price controls on 22 basic goods in order to reduce inflation. While year-end inflation was 3.4% in 2013, down from 5.7% in 2012, high food prices were a major voter concern.

• Party membership

In a further sign of the less than ideological factors determining party membership, the exodus from the political parties defeated in the May 2014 election, continues. According to the most recent electoral tribunal (TE) report, membership of the Cambio Democrático (CD) dropped to 422,617 in July 2014, down from 458,502 in April, the month before the election while the Partido Revolucionario Democrático (PRD)’s membership dropped to 452,677 from 458,282 in April. Varela’s Partido Panameñista (PPA), however, saw its membership rise – to 221,386 up from 216,338 in April. 

A new paper from the International Monetary Fund (IMF) argues that the fall in energy prices provides an opportunity for governments in the region to reduce fuel and electricity subsidies.

A February 2015 paper* published by researchers at the International Monetary Fund (IMF) found that across Latin America and the Caribbean, government fuel and electricity subsidies (to reduce costs for consumers) amounted to 1.8% of GDP, on average, over the three years to the end of 2013. Fuel subsidies were equivalent to 1.0% of GDP, while electricity subsidies were slightly lower, at 0.8% (see chart).

A separate study by the IMF in 2013 entitled 'Energy Subsidy Reform: Lessons and Implications’, found that, globally, energy subsidies typically ranged between 0.7% and 2.5% of GDP.

The latest paper found that, by this metric, subsidies varied very widely across the region. At one extreme, the governments of Uruguay, Costa Rica, Chile and St Vincent & the Grenadines provided essentially no subsidies. At the other, subsidies amounted to 8.9% of GDP in Venezuela. The country’s massive subsidy for fuel, which is effectively free at the petrol pump, accounted for the vast majority of this, representing 7.1% of GDP.

The IMF researchers classified the countries in four groups. The first group comprises oil producers with weak business operating and legal environments, as ranked by independent research institutes and non-government organisations (which consider institutional aspects like budget transparency, the rule of law, general competitiveness and the ease of doing business).

The second group included oil-importing countries with weak business operating and legal environments. The third group comprised oil exporters with strong operating environments, while the final group comprised oil importers also ranked highly for their institutional aspects.

As a general rule, fuel subsidies tend to be higher in countries that are oil producers. In this respect, the region is no different from other parts of the world. Globally, fuel subsidies are larger as a percentage of GDP in Saudi Arabia and Iraq than they are in Venezuela, with Algeria not far behind. The IMF paper also found that fuel subsidies tend to be higher in countries that are rated poorly for their institutional aspects. In the region’s oil producing countries, subsidies normally take the form of administered pump prices. In theory, this is a mechanism to spread the benefits of mineral wealth across society: in practice, it is usually the richer households (who consume the most fuel) that benefit disproportionately.

In oil importing countries, subsidies often arise from price stabilisation mechanisms: at times of high and volatile prices, these mechanisms involve substantial costs to governments.

Electricity subsidies, on the other hand, tend to be largest in low-income countries - and especially those in the Caribbean and Central America. In these countries, it is not uncommon for tariffs to be lower than generation and distribution costs. Moreover, fraud and non-payment for power by consumers is often also a problem.

The IMF identified a number of challenges arising from energy subsidies. Across the region as a whole, governments generally ran fiscal deficits of about 3% of GDP in the three years to end-2013. In a number of countries, there were higher energy subsidies and a worse-than-average budget deficit. Venezuela, where the government was running an estimated fiscal deficit of nearly 15% of GDP, is an extreme example. However, other countries in which energy subsidies were exacerbating relatively large fiscal deficits included Haiti, Mexico, Dominica, Honduras, Guatemala, Argentina and El Salvador. Subsidies represented a sizeable portion of tax revenues in many countries that were rated poorly for institutional aspects and/or were low-income countries. Over the three-year period, examples included Argentina (14%), Bolivia (20%), Haiti (23%), Ecuador (55%) and Venezuela (85%).

Sometimes, fuel subsidies are not accounted for in a transparent way: however, the IMF noted that stabilisation funds, whose balances adjust in response to changes in energy prices, normally provide a clear picture of what is happening. Sometimes governments are exposed to substantial contingent liabilities arising from the need to provide support power companies or state oil companies that are making low (or no) profits as a result of subsidies.

Energy subsidies are normally damaging for state-owned oil companies. In Venezuela, the woes of Petróleos de Venezuela (Pdvsa) have been exacerbated by the requirement that it sell refined products on the domestic market at extremely low prices and supply fuel on concessional terms to regional members of the left-wing Venezuelan government’s discount oil scheme, Petrocaribe.

In Brazil, Petrobras has suffered losses from its domestic refining and marketing operations in recent years, as it has been required by the government to sell refined products at below international prices. However, Petrobras has also enjoyed access to low cost funding through the state owned development bank, Banco Nacional de Desenvolvimento Econômico e Social (BNDES). In Trinidad & Tobago, the government’s arrears, in respect of subsidies, to the state-owned oil company Petrotrin amounted to 5% of GDP in 2013. However, most of the arrears were paid in 2014.

Electricity companies have also suffered as a result of subsidies. Typically, the requirement that utilities provide power at below-cost results in underinvestment over the long-term. In Argentina's case, electricity companies have been unable to meet peak demand for power, with the result that blackouts have been common. The IMF also noted: “Haiti appears to be in a circle of high generation costs, low investment, poor service, and high levels of theft and de facto subsidy”.

Resources allocated to subsidies are resources that are unavailable for other social purposes. The IMF paper observed that, across the region as a whole, energy subsidies were equivalent to around 45% of expenditures on health and education. For low-income countries, the equivalent figure was about 80%. It was 110% or so for oil exporting countries with weak institutions. Electricity shortages tend to have the greatest impact on low-income households, because they have no means to hedge against energy rationing (for instance through the purchase of their own generators).

Finally, another IMF report, 'Getting Energy Prices Right: From Principle to Practice', published in 2014, notes that energy prices in much of the region are too low, even when there are low or no subsidies. In essence, the rates paid by consumers for power or fuel are too low given the externalities associated with energy use - such as environmental damage, traffic congestion and health problems. That study found that gasoline prices were too low in those countries with subsidies, as well as in the Dominican Republic, El Salvador and Panama. Countries in which the price of diesel did not include the costs of externalities included Chile, Colombia and, to a lesser extent, Brazil and Peru.

The IMF argues that the current environment is generally ‘benign’ for the reduction of subsidies. This is partly because of the progress in poverty reduction in Latin America and Caribbean in recent years. It is also because some countries have already embarked on reforms. Furthermore, the fall in energy prices since mid 2014 has served to reduce the cost of many of the subsidies.

The paper acknowledges that a reduction in or removal of subsidies often results in lower growth and higher unemployment in the short term, with the benefits often only achieved in the long-term. Also, reform is often opposed by vested interests. For this reason, a reduction in subsidies needs to be backed by an effective communications program to emphasise to the public that citizens will benefit over the long-term. Finally, reforms need to take into account political cycles. The paper suggests that reforms be undertaken gradually (and with measures to mitigate their impact on low income groups) and be accompanied by a strengthening of governance structures in state-owned enterprises.

[*IMF Working Paper WP/15/30 - ‘Energy Subsidies in Latin America and the Caribbean: Stocktaking and Policy Challenges’, February 2015]

The finance minister Vice-President Helio Fallas celebrated progress made in reducing the fiscal deficit so far this year as evidence that the government is delivering on its twin promise to cut spending and boost revenue. By claiming that he had met his side of the bargain Fallas directly challenged an intractable legislative assembly to approve the government’s proposed tax increases.

Costa Rica’s fiscal deficit in the first four months of 2016 fell back to 1.6% of GDP from 1.9% in the same period of last year. In absolute terms, the fiscal deficit was ¢$495bn (US$914m) in the first four months. Government revenue stood at US$2.61bn between January and April, up 7.3% year-on-year; expenditure still increased but at a slower rate, 3.1%, to reach US$3.52bn. “While we are demonstrating that with responsible administrative actions we are getting the finances in order, it is indispensable that a legal framework is enacted so that this order stands the test of time,” Fallas said.

The government’s fiscal reform package includes the replacement of a 13% sales tax (from which services are currently exempted) with a value added tax (VAT) of 14% in the first year and 15% thereafter, as well as broadening the number of goods on which tax would be payable, including services, and creating legislation to crack down on tax fraud and evasion. The Organisation for Economic Co-operation and Development (OECD) applauded the government’s tax reform proposals in a report entitled ‘Making growth more inclusive in Costa Rica’, published on 26 May, and a separate report outlining its economic forecast on 1 June. But the OECD warned that these would do no more than stabilise the debt-to-GDP ratio at the current level, and called for additional measures “to eliminate existing exemptions across the tax system” and to reform public employment to prevent “excessive automatic increases in current outlays”.

In its economic forecasts, the OECD said that “public debt has continued to increase and reached 42.4% of GDP in 2015”, arguing that with credit rating agencies having a negative outlook and bond investors needing high risk spreads “measures to restore fiscal sustainability have become urgent”. It advocated “additional fiscal adjustment of 1% of GDP…to put debt on a firm downward path”. The fiscal deficit in 2015 was 5.9% of GDP. The central bank is predicting that it will widen to 6.2% in 2016 and 7% in 2017 unless the government’s tax reforms are introduced.

Fallas told the congressional commission for the control of public spending in mid-June that it was essential to approve the government’s proposed VAT reform in order for the government to receive two external credits for a total of US$1bn. This did not play well to the seven-party opposition bloc which insists that contracting more debt instead of confronting spending as the main option to reduce the fiscal deficit simply finances it.

The opposition bloc has reached an agreement with the ruling Partido Acción Ciudadana (PAC) to discuss plans relating to the containment of public spending on pensions, combating tax fraud and economic reactivation, according to Maureen Clarke, the head of the opposition Partido Liberación Nacional (PLN) bloc, the largest in the legislative assembly. But this is still likely to be painstakingly slow, not least because in mid-May Deputy Rosibel Ramos, a member of the opposition Partido Unidad Social Cristiana (PUSC), was re-elected as president of the legislative commission of financial affairs, where the tax reforms are being discussed. Ramos is a fierce opponent of tax increases.

• Growth

The Organisation for Economic Co-operation and Development (OECD) raised its projection for Costa Rican growth in 2016 to 4% from an estimate of 3.5% made last November thanks largely to strengthening domestic demand and the recovery of exports as world markets “regain momentum”. But the OECD said this would not be sufficient to bring unemployment down from its current level of over 9%. The OECD also focused on “disappointing labour productivity growth” which it said needed to be addressed by promoting “innovation, competition and transport infrastructure”.

President Lenín Moreno received 60 representatives of the umbrella indigenous organisation Confederación de Nacionalidades Indígenas (Conaie) in the presidential palace on 4 July. Moreno is making a concerted effort to heal a serious rift with Conaie which persisted throughout the decade-long administration of his predecessor Rafael Correa (2007-2017). The president of Conaie, Jorge Herrera, thanked Moreno for the invite and said the group would participate in his recently announced ‘national dialogue initiative’[WR-17-24].

The Conaie representatives called for reforms to the land law, which they argued tramples on their ancestral rights, and water law, which they contend makes it easier for large industries, such as agribusiness or mining companies, to have priority access to water sources to the detriment of small farmers. They also urged Moreno to comply with their petition for the 20 pardons and 177 amnesties for activists charged with violent protests over the course of recent years.

Moreno, who has so far granted five of the pardons sought by Conaie, made a significant gesture by offering to grant Conaie their headquarters in northern Quito on a free-use contract for a century, as well as another building in the south-west of the capital. Correa had threatened in 2015 to evict Conaie from its headquarters of more than two decades to make way for a drug rehabilitation centre for adolescents because the indigenous group’s leadership had been making “political use” of the building, which was loaned to Conaie in 1991 by the ministry of social well-being.

Another major decision taken by López Obrador before he was sworn into office was the future of the Mexico City’s New International Airport (NAIM), which was under construction in Texcoco (Mexico state). He campaigned against it, arguing that it was extremely expensive and plagued by corruption, and said that instead the military facility in Santa Lucia, alongside the Toluca Airport (both in Mexico state) could be used with the existing airport in Mexico City to increase capacity, despite specialists’ views that having several airports is not feasible.

At the same time, however, his advisor Alfonso Romo, the agroindustry businessman who was in charge of López Obrador’s relations with business groups and investors during the campaign, had reiterated that it would be a mistake to scrap the NAIM. Moreover, although the NAIM had been controversial due to its complexity, its environmental impact, and its cost, public opinion surveys showed that most of the population were in favour of continuing the project. The issue was resolved through a public consultation that was carried out from 25-28 October 2018 across the country.

Crucially, the process failed to comply with existing regulation on public consultations: it was undertaken by Morena supporters and volunteers, who set up polling stations in only 500 carefully selected municipalities out of the more than 2,400 in the country. There was no involvement from the electoral authority, the National Electoral Institute (INE), and only around 1% of registered voters participated in the exercise. Thus, although it was a legally invalid exercise, it was nevertheless considered binding. The consultation for the administration’s Tren Maya, an ambitious railway project in the Yucatán Peninsula that was also one of López Obrador’s campaign promises, was carried out in similar conditions from 24-25 November 2018.

During his first year in office López Obrador has resorted to public consultations in other cases involving controversial decisions over projects that were not part of his campaign manifesto, such as the Huexca thermoelectric plant project, which was submitted to a public consultation on 24 February. The construction of the state-owned Federal Electricity Commission’s (CFE) power plant in Morelos state was opposed by several local organisations over concerns of its environmental impact in that state and in Puebla and Tlaxcala. However, López Obrador said that he was not prepared to waste resources already invested in this project. In this case the consultation also delivered the administration’s desired result.

The use of direct democracy mechanisms has allowed López Obrador to avoid the responsibility of taking any controversial decisions, thus undermining accountability. To make matters worse, other levels of government have also adopted this mechanism. The most controversial example is the consultation carried out by the Morena-dominated state congress of Baja California on 13 October to extend the term of office of the Governor-elect Bonilla to five years, although he was elected for a period of two years on 2 June and is due to take office on 1 November. The consultation again failed to comply with the legislation on the matter, prompting criticism even from federal legislators of Morena (and yet, no formal appeals against it have been submitted).

Indeed, this case was a key factor behind the most recent reform to limit its use. On 15 October, the senate approved changes to article 35 of the constitution that specify that no consultation may be carried out regarding infrastructure projects already under construction – such as the NAIM – or on electoral matters, financial issues, budget income and spending decisions, or national security. It was also specified that popularly elected officials may not submit remaining in their position to a consultation, and that the supreme court would have to rule on the legality of a consultation prior to holding it. In addition, it was approved that only the INE would carry out the consultation provided that at least 2% of the electoral register called for it. These provisions are undoubtedly positive. However, appropriate legislation was also in place when López Obrador called for the NAIM and other consultations mentioned above.

In around two months Argentina must make a US$3.58bn capital repayment to the International Monetary Fund (IMF), part of a total of US$19.1bn that falls due this year. The government has admitted it does not have the money. Talks on rescheduling the IMF debt (around US$44bn) and agreeing an economic stabilisation programme seem to be deadlocked. A new default cannot be ruled out.

The centre-left government of President Alberto Fernández is internally divided over its relationship with the IMF, and also disagrees with the centre-right opposition. A negotiating breakthrough it still possible before March but remains elusive. Part of the problem is that in December 2021 the chamber of deputies voted 132-121 (with one abstention) to reject the 2022 budget bill, drafted by Economy Minister Martin Guzmán in parallel with the IMF negotiations. Without a budget for this year, the government is having to roll over authorised spending for 2021 and must also delay capital projects pending any new enabling vote.

Opposition deputies said they rejected the budget because it was unrealistically optimistic, assuming 4% GDP growth and 33% inflation, and targeting a fiscal deficit equivalent to 3.5% of GDP. The inflation projection was strongly resisted since consumer prices have remained stubbornly above 50% (new data has since shown that annual inflation for 2021 came in at 50.9%). The government for its part suggested that the budget assumptions might be revisited but sought to avoid discussing the issue in congress, taking it instead to a meeting of provincial governors.

With procedural disputes over who should discuss what with whom, the process appears to be getting bogged down. Since the IMF rescheduling agreement will span a number of years (10, according to a number of accounts) and the current government has only two years left in office, the IMF wants to see a long term, cross-party agreement on an economic programme. That piece of the negotiating puzzle remains missing. There is also a deep divide within the ruling coalition, with politicians loyal to Vice President Cristina Fernández unwilling to accept the fiscal tightening likely to be required as a key component of a new economic plan.

Economy Minister Guzmán has frequently described an agreement with the IMF as “imminent” but despite public statements the logjam has remained. In early January he said Argentina was ready to sign a deal with the Fund but that “the necessary international agreements” supporting it were not yet forthcoming. This was interpreted as reference to the national governments that are the IMF’s shareholders, and in particular to the US (the largest shareholder with veto powers). Guzmán also admitted that negotiating teams were at odds over the extent and timing of fiscal tightening. President Fernández meanwhile has insisted that he will not sign any agreement that involves a sharp fiscal tightening or that puts the economic recovery at risk.

A Nicaraguan delegation headed up by Laureano Ortega Murillo, a son of authoritarian co-presidents Daniel Ortega and Rosario Murillo and a presidential adviser on investment, paid a recent visit to Russia where various bilateral cooperation agreements were signed. The visit is the latest sign of burgeoning ties between Moscow and Managua, which, in the wake of Washington’s military incursion in Venezuela in January, and amid pressure on Nicaragua’s other key regional ally, Cuba, appears increasingly out on a limb.

The Nicaraguan delegation visited Russia to attend the 3-6 June St Petersburg International Economic Forum. According to both governments, they inked various agreements, spanning areas such as health, biotechnology, nuclear medicine, trade, investment, science, education, communications, and technology, as well as a memorandum of understanding on biological security, an extradition treaty, and a treaty on the transfer of convicted prisoners. The previous month, on 2 May, Russia’s state news agency Tass announced that President Vladimir Putin had signed a comprehensive military cooperation agreement with Nicaragua, formalising an initial deal inked on 22 September 2025 at a meeting in Moscow between Russia’s Defence Minister Andrei Belousov and Nicaragua’s army commander, General Julio César Avilés. According to Tass, the agreement provides for “the joint training of troops; exchange of experience and information in countering the ideology of extremism and international terrorism; cooperation between military educational institutions; and cooperation in research on military issues.”

A Tass report released on 22 October 2025 provided more details. It said that “in particular, the parties agreed to share experiences in implementing national military doctrines, building, reforming and manning their armed forces, and combating international terrorism and piracy”. It added that they would “also cooperate in the field of radiological, chemical and biological protection” while “joint work will be carried out in the field of cybersecurity and mutual assistance in dealing with the aftermath of natural and man-made disasters [while] the two counties’ relevant agencies will establish a working group in order to implement the agreement”. It added that “a military cooperation program will be developed annually.”

The prospect of closer military cooperation between Russia and Nicaragua continues to attract attention, particularly following the March 2024 decision by Nicaragua’s legislature to authorise Russia to finance and build a police training centre in Managua. While a Russia-Nicaragua anti-narcotics training centre had already been inaugurated in Managua in 2017, in line with a bilateral agreement inked in February 2012 to combat drug trafficking and organised crime, the training centre inaugurated in 2024 proved controversial. A March 2024 report by Costa Rica-based Nicaraguan investigative outlet Confidencial cites experts as warning that its scope was much broader. They questioned the fact that it would carry out its activity under the “general direction of the head of the diplomatic representation of the Russian Federation in Nicaragua” – seemingly ceding authority to the Russian government [SSR-24-06].

Costa Rican concerns

Addressing the 56^th General Assembly of the Organization of American States (OAS) which Panama hosted from 22-24 June, Costa Rica’s foreign minister, Manuel Tovar, was cited by the media as saying that “Costa Rica views with great concern the persistent and recent presence of Russian military forces in Nicaragua”. This prompted a response on 24 June from Russia’s embassy in Costa Rica which said that it believes his words “do not fully reflect the reality of the facts….and the concerns expressed are unfounded”.

• Russian response to Costa Rica’s concerns

In its statement in response to Tovar’s claims, the Russian embassy cited “reliable information” as indicating that “there is currently a group of Russian military advisers and specialists in Nicaragua whose activities are related to the exchange of experience, personnel training, and assistance in carrying out humanitarian tasks, as well as search-and-rescue operations in cases of emergencies and natural disasters”. It adds that “a Russian military contingent may be invited to… Nicaragua on the same legal basis as military contingents from the US, Mexico, Cuba, and Central American countries…. As is well known, the corresponding authorisation is issued twice a year by presidential decree and approved by Nicaragua’s national assembly”. It said that, as with the other aforementioned countries, the authorisation is aimed at facilitating “international cooperation programmes of a humanitarian, educational, rescue, and other nature.”

El Presidente electo Horacio Cartes ha tomado una hoja del libro del Presidente de México, Enrique Peña Nieto, firmando un amplio acuerdo con cuatro partidos de oposición para obtener la aprobación en el congreso de una serie de reformas. Cartes, quien asumirá el poder el 15 de agosto, elogió el pacto como “un claro signo de la madurez que ahora nos ofrece la clase política de Paraguay”. Sin embargo, a diferencia del ‘Pacto por México’ de Peña Nieto, la agenda de reforma de Cartes no está pormenorizada en detalles meticulosos. En cambio, la misma incluye vagas promesas de combatir la pobreza y la corrupción, los objetivos declarados por la mayoría de los presidentes paraguayos, alimentando la especulación de que la agenda fue armada apresuradamente con otros objetivos en mente.

El amplio pacto concretado por Cartes incluye a su partido, la Asociación Nacional Republicana-Partido Colorado (ANR-PC); el saliente Partido Liberal Radical Auténtico (PLRA); la Unión Nacional de Ciudadanos Éticos (Unace); y los partidos de izquierda Avanza País; y el Partido Encuentro Nacional (PEN). El único partido que no entró en el pacto fue la coalición del Frente Guasú (FG) del ex presidente, Fernando Lugo (2008-2012), quien asumió su banca en el senado para el inicio de la sesión de la nueva legislatura el 1 de julio. Cartes dijo que continuaría las discusiones con Lugo para tratar de agregar al FG al pacto. Él había hallado un terreno común con Lugo durante una reunión en mayo, especialmente en relación a su propuesta para combatir la pobreza y de llevar a Paraguay de regreso al Mercado Común del Sur (Mercosur) [IL-13-20] (ver más abajo).

“El país siempre está primero y, en este sentido, la guerra a la pobreza será la prioridad”, Cartes dijo. “Debemos superar los desacuerdos que sólo han generado inestabilidad y retrasos, y comenzar una nueva etapa de concordia y entendimiento”. Él prometió un gobierno “transparente, honorable, y eficiente”. Por supuesto, Lugo prometió lo mismo en el 2008, y su victoria parecía el inicio de una nueva era después de poner fin a la larga hegemonía de la ANR-PC. Pero este no fue el caso. A inicios de su mandato su credibilidad fue dañada por persistentes escándalos de paternidad (en el ropero de Cartes hay otra clase de esqueletos). Sin embargo, la gran diferencia es que incluso antes de haber acordado su pacto, Cartes ya disfrutaba de una presencia mucho más fuerte en ambas cámaras del congreso a través de la ANR-PC, de la que Lugo tenía a través del FG y una tensa alianza con el PLRA, viendo muchos de sus intentos de reforma impedidos por el congreso.

Cartes plantea al Mercosur una opción difícil

El Presidente electo Cartes ha cambiado levemente de tono con relación al Mercosur. Él está pidiendo ahora que la presidencia pro-témpore del bloque sea otorgada a Paraguay, “como un gesto de buena voluntad” en la próxima reunión del grupo en Montevideo, Uruguay, el 12 de julio en vez de otorgarla a Venezuela, a cuyo ingreso al Mercosur el congreso de Paraguay se ha opuesto consistentemente desde hace tiempo.

El anuncio de Cartes está claramente calculado para atraer apoyo político interno, especialmente dentro de su propia ANR-PC. Si los estados miembros del Mercosur aceptan su demanda, el honor habrá sido satisfecho y él estará en una fuerte posición para persuadir al congreso para que apruebe el retorno de Paraguay al Mercosur; si ellos se rehúsan, Cartes habrá ganado capital político por asumir una posición firme y debería disfrutar del apoyo político de los partidos para sus reformas internas, así como también darle a Paraguay la chance de solicitar para convertirse en miembro pleno de la Alianza del Pacífico sin estar abrumado por las restricciones internas del Mercosur. Él podría entonces buscar el retorno al Mercosur después de terminar los seis meses de presidencia rotativa de Venezuela cuando ya habría fortalecido su posición política.

El Presidente Federico Franco pronunció su discurso sobre el estado de la nación de 25 minutos ante el congreso esta semana, durante la cual él dedicó varios minutos a la resistencia de su gobierno a la “implacable persecución [...] de gobiernos de países vecinos” motivados más por la determinación de “defender su club ideológico en vez de una genuina convicción democrática”.

• La nueva imagen del congreso

Los partidos de oposición obtuvieron posiciones de liderazgo en el congreso bajo el amplio pacto. Juan Bartolomé ‘Ancho’ Ramírez (PLRA) fue electo presidente de la cámara baja, mientras Karina Rodríguez (Avanza País) ocupa la vicepresidencia segunda, junto con Mario Soto Estigarribia de la gobernante ANR-PC, quien ocupa la vicepresidencia primera. En el senado, Julio César Velázquez (ANR-PC) fue elegido presidente, y el partido también tomó una de las vicepresidencias junto con el PLRA. No está claro si el presidente electo Cartes haya ofrecido posiciones de gabinete a los partidos de oposición para endulzar aún más el acuerdo.

El Grupo Clarín, la organización de medios más influyente en Argentina, se dividirá en seis empresas separadas a fin de cumplir con lo que establece la ley de medios del 2009. El 17 de febrero, Martín Sabatella, el titular de la Autoridad Federal de Servicios de Comunicación Audiovisual (AFSCA), el ente regulador de los medios de comunicación de Argentina, aprobó el plan elaborado por la compañía a fin de evitar un forzado desmantelamiento. Durante sus cuatro años de batalla con el gobierno que terminó en la corte suprema, el Grupo Clarín ha alegado que la ley había sido elaborada como una represalia al grupo por su crítica cobertura sobre la administración de la Presidenta Cristina Fernández. El Grupo Clarín es propietario del diario Clarín, el diario de mayor venta en el país y ofrece servicios de cable TV e Internet a más 1m de hogares y empresas en 10 provincias.

El plan

Siguiendo a la decisión de la corte suprema en octubre pasado de aprobar la ley de medios, que restringe la propiedad a no más de 35% del mercado, el grupo Clarín propuso dividir su rentable negocio de televisión por cable en tres compañías, dos de ellas estarían compuestas de emisoras de TV y radio. La tercera de estas compañías operará 19 licencias de TV por cable. Las otras tres compañías de las seis que propuso el grupo Clarín, ofrecería una mezcla de transmisiones, cable TV y estaciones de radio alrededor del país. Bajo los términos de la aprobación de AFSCA, el grupo ahora tiene 30 días para definir la estructura  corporativa de las nuevas empresas, y luego seis meses más para implementar los cambios.

Sabatella, un aliado de la Presidenta Fernández, no pudo resistir un tono de triunfalismo en sus comentarios sobre la propuesta. “Todos los grupos de medios de comunicación, incluso el más poderoso y dañino para la democracia, han tenido que ceder ante la ley”, dijo. “El Grupo Clarín finalmente ha tenido que ceder, porque ningún gigante puede seguir pisando siempre las cabezas del resto, afectando a la sociedad, el Estado y la democracia.” Por su parte, el grupo Clarín respondió acusando al gobierno de intolerancia hacia los medios de comunicación que no controla.

Sin embargo, el gobierno no las tiene todas consigo. El jefe de gabinete, Jorge Capitanich, reaccionó airadamente ante una decisión de la Corte Suprema de justicia la semana pasada que dictaminó que el gobierno debe publicitar los anuncios oficiales también en Canal 13, una estación privada de TV de propiedad del grupo Clarín. Capitanich acusó a la corte de “proteger los intereses privados” y de “intento de violar la división de poderes”, forzando al ejecutivo sobre esa cuestión. Pero de lo que se trata es que, en un esfuerzo por castigar a Clarín financieramente, desde el 2009, el gobierno ha rehusado a ubicar avisos publicitarios oficiales en los varios medios del grupo Clarín.

Otro importante grupo de medios de comunicación, el Grupo Uno, y otros grupos más pequeños, también obtuvieron que sus propuestas sean aprobadas el 17 de febrero, y deberán ponerlas en práctica bajo similares términos. AFSCA aún falta que apruebe los planes presentados por Telefé/Telefónica, Telecentro, y Prisa-Radio Continental.

• El modelo uruguayo

El ministro de seguridad de Argentina, Sergio Berni, dijo el 17 de febrero que él apoya el enfoque de Uruguay para despenalizar la marihuana. Hablando personalmente, Berni dijo que la producción de marihuana, como también su consumo, debían ser legalizados. Los comentarios de Berni siguen a una reciente declaración controversial hecha por el ministro de defensa, Agustín Rossi, quien dijo que Argentina se ha convertido en una “nación productora de drogas”.

Apelación ante la Corte Suprema de EU

Aunque las negociaciones privadas aún están en marcha, el gobierno de Argentina presentó el 18 de febrero una segunda apelación ante la corte suprema de EU sobre el caso de los llamados ‘fondos buitres’. Argentina está apelando sobre una decisión de una corte menor que ordena al estado pagar a los tenedores de bonos (hold-out) US$1,3mm. Su primera apelación fue rechazada por la corte de apelaciones del 2^do circuito de EU en Nueva York, en noviembre, lo que lo que permitió que el país pr4esente su apelación ante la más alta autoridad. Es probable que la corte suprema no decida si escuchar el caso o no hasta más adelante en este año.

Chile’s national football team won the Copa América tournament for the first time in the country’s history on 4 July. Chile was hosting the South American football event and President Michelle Bachelet desperately sought to capitalise on the ‘feel good factor’ that the team’s progress, and eventual triumph, generated. But an opinion survey published by the local pollster Adimark the day after the final in Santiago showed Bachelet sinking to an approval rating of just 27% in June and a disapproval rating of 68%, two percentage points more than May and the same figure that her predecessor, Sebastián Piñera (2010-2014), reached at his lowest ebb in August 2011 when the student demonstrations of that year reached their climax.

President Bachelet posed for selfies with players, attended matches wearing the Chilean football scarf and received the champions in the La Moneda presidential palace, clutching the trophy. The victory was all the more sweet as it came against Argentina, a rival with a far more impressive pedigree than Chile, after a nerve-wracking penalty shootout.

But while the tournament provided a welcome distraction for Bachelet from her all-consuming political travails, it is unlikely to provide a surge in public support. The Adimark poll was conducted before the national team’s victory but after its successful start to the tournament, and the only sign that Bachelet might gain from a more benevolent public, according to the pollster’s president, Roberto Méndez, was that without the Copa América her fall would have been sharper.

Sport and politics
Much has been written about the relationship between sport and politics but precedent suggests that while sporting triumphs do tend to make popular governments more popular, they do not make unpopular governments more popular, the prime example of this being the military junta in Argentina which had hoped in vain to benefit from the national team’s triumph on home soil in the 1978 Fifa World Cup. And if Bachelet is to make a recovery in the polls it will be by dint of a concerted effort to refine her governance through greater political aptitude.

A protracted closed-door cabinet reshuffle in May was followed less than a month later by the resignation on 7 June of Jorge Insunza, the secretary general of the presidency, over conflict of interest allegations. The Adimark poll, meanwhile, showed that evaluation of Bachelet’s ‘credibility’ and ‘ability to generate confidence’ both deteriorated.

Campaign finance scandal
The campaign finance scandal which precipitated the long downwards trajectory of Bachelet’s approval rating, even though it primarily involves politicians from the ultra-conservative opposition Unión Demócrata Independiente (UDI), will just run and run as much as Bachelet would love to be able to put it to bed. Just this week Jovino Novoa, one of the party’s founders and ideological leaders (see sidebar), was placed under house arrest in connection with the illegal channelling of campaign funds from the financial holding firm Penta and the mining giant SQM to numerous candidates over the last decade.

The ruling Nueva Mayoría coalition is in no position to revel in the UDI’s travails, however, because the prevailing public perception is that the entire political class was involved in such irregularities. As such its popularity has suffered equally.

• UDI politicians

Jovino Novoa had to be taken out of the courtroom two weeks earlier when the judge in the irregular campaign finance case ordered the (UDI) former mayor of Santiago, Pablo Zalaquett, to be placed under partial house arrest. Two other prominent UDI politicians, Iván Moreira and Felipe de Mussy, accused of similar wrongdoing, are sitting deputies, and enjoy congressional immunity, but they could be stripped of this in due course by the supreme court.

Carlos Slim drives a Chinese auto: Carlos Slim, Mexico’s telecoms billionaire, in launching an intriguing new venture with a Chinese automobile company. Giant Motors, a company 50% controlled by Inbursa, Slim’s financial holding, has signed an agreement with JAC Motors of China to begin to assemble vehicles in Mexico. Chori Group of Japan is also involved in the project. Two Chinese designed and manufactured sports utility vehicles (models SE12 and SE13) are being launched. Giant Motors will focus on domestic sales and exports to South America. The venture, worth an initial US$230m, is not focusing on the US market, the destination for most of Mexico’s car exports.

“We don’t depend on NAFTA at all, not for exports, or for supplies. For us, this is where the opportunity lies” said Elías Massri, CEO of Giant Motors. He described the new models as being designed for young Mexican consumers interested in “connectivity, security, and financing” who were contemplating buying their first car. The SE12 is expected to sell for MX$259,000 (US$14,000) with the SE13 costing a little more at MX$299,000 (US$16,5000). Speaking of his Chinese partners, Massri said, “They have a clear intention to go global, in contrast to what we see in globalised countries that want to go backwards”. Analysts said that Chinese car exports to Brazil, Russia and the Middle East have dropped recently, meaning companies are interested in Mexico in its own right, and as a gateway to other South American markets. Domestic Mexican car sales remain strong, rising by 6.5% year-on-year in February. Giant already assembles trucks and vans under agreement with another Chinese company, FAW, at a plant in the state of Hidalgo. The same plant will be used to assemble the JAC Motors SUVs.

Separately, Elías Massri, Giant Motors’ CEO for Latin America, told Forbes Mexico that the company is hoping to roll out a made-in-Mexico electric vehicle by 2018. According to a 6 February Forbes report, it will be manufactured in a joint venture with Moldex, a subsidiary of Grupo Bimbo, the world’s largest bread maker. “We are developing a new Mexican electric vehicle that will not only be assembled in Mexico, but also designed and modelled to meet the needs of Mexican consumers,” Massri stated, suggesting that the new cars would be introduced in 2018 as electric taxis as in Mexico City.

New CEO at Escondida: Global mining group BHP Billiton has appointed Brazilian engineer Mauro Neves as the new chief executive at Escondida, the world’s largest copper mine. BHP has a 57.5% controlling stake in the mine, which accounts for around 5% of global copper output. Neves, who worked for nine years as global head of coal for Vale, will face a difficult task. His appointment was announced shortly after an inconclusive end to a 43-day strike at Escondida, considered the longest of its kind in the history of Chilean private sector mining (albeit it was shorter than a 74-day strike at state-owned Codelco’s El Teniente mine in 1973). The Escondida strike ended with management and unions unable to agree a wage settlement. The main union, representing 2,500 workers, said they were returning to work after invoking Article 369 of the labour code, which allows them to extend the existing collective labour agreement for 18 months. In effect, this means that the dispute has been kicked forward in time. It is estimated that Escondida lost around 120,000 tonnes of copper production during the stoppage; the company has warned it made losses of at least US$712m during the strike and will have to reduce planned production levels for 2017.

JBS Accused: JBS – Brazil and the world’s largest meat-packing and exporting company – has had a bad press recently, having to face two separate allegations of misconduct. The first was when the company was named in a federal police investigation into allegations that health inspectors had been bribed to approve the sale of meat past its sell-by date or otherwise adulterated. The second was an allegation that JBS has for years been processing meat from livestock reared on illegally de-forested lands. IBAMA, Brazil’s environmental agency, ordered the closure of two JBS meat processing plants, along with a further 13 owned by other companies, in the state of Pará. They stand accused of using livestock reared on land cleared by the burning of forests. IBAMA has also imposed a BRL24m (US$7.7m) fine on JBS. The company has rejected both accusations of wrong-doing and said it will appeal against the IBAMA ruling.

PARAGUAY | Downwards growth revision. Paraguay’s central bank (BCP) announced on 6 December that it was revising down its 2018 year-end GDP growth forecast from 4.2% to 4%. In a statement, the BCP explained that its decision answered to the fact that there has been a slowdown in commercial activity in recent months as a result of lower-than-expected demand for Paraguayan exports, particularly in the agricultural sector. The BCP attributed this fall in demand for exports to the economic slowdown in the region driven by the low or negative growth in Brazil and Argentina.

With the latest revision, the BCP has lowered its GDP growth projection from 4.7% at the start of the year to match that of the International Monetary Fund (IMF). Nevertheless, the BCP noted that the projected 4% growth remains one of the highest in South America, highlighting the resilience of Paraguay’s economy to external shocks.

BRAZIL | Senate approves Campos Neto for central bank. On 26 February, Brazil’s federal senate approved Roberto Campos Neto as the new president of the country’s central bank (BCB) by 55 votes to six, a necessary formality after he was nominated by the government.

Addressing the senate’s economic issues committee (CAE), Campos Neto noted the challenges that lie ahead to continue the recovery of Brazil’s economy, which began timidly in 2017. He committed to maintaining continuity with the monetary policy of his predecessor, Ilan Goldfajn, and defended making the BCB autonomous from government. He also said he would implement measures to increase transparency, innovation, and financial education, and help ease access to markets for national and foreign investors.

Despite gradually becoming a political lame duck, President Sebastián Piñera announced on 22 February that he would be seeking a ‘national accord’ to prevent spreading violence in the southern region of Araucanía.

Mapuche indigenous groups in Araucanía have been campaigning for years for the return of ancestral lands currently owned by logging and agricultural companies and by settlers. There have been intermittent reports of violence, police brutality, and some deaths. President Piñera’s latest intervention seems to have been motivated by increased arson attacks in the region over the previous weekend. Homes had been set on fire in a number of localities, including Lautaro, Padre de las Casas, Curacautín, and Provinicia de Arauco. Piñera said that in view of “serious violence and terrorist attacks” he was calling on political parties and civil society to work together to try and find a solution.

Piñera’s own approach to the conflict has been primarily from a law-and-order perspective, a position that does not seem to have changed. The president says he wants a series of “necessary and urgent” measures to be approved in congress, including changes to the anti-terrorism law, new legal protections for key infrastructure, and legislation to combat property seizures and the theft of timber.

Opposition parties of the centre and left, who have tended to place a higher priority on political negotiations with Mapuche groups, did not immediately respond to Piñera’s call. There is in any case some doubt about the viability of a joint approach to the problem at a time when Piñera is drawing near to the end of his four-year term. Elections to the constituent assembly are due in April, with general elections to follow in November.

Piñera’s approval rating edges up

President Piñera’s approval rating, which endured a long and painful slump as a result of the riots and street protests of 2019-20, and was also affected by the poor initial handling of the Covid-19 pandemic, has now begun a modest improvement. According to a survey by Cadem, this month his approval rating rose to 24%, the highest since last October, while his disapproval rating came down to 65%, the lowest since July last year. Piñera’s net approval rating therefore remains negative, but it is better than it was. A major factor in this change appears to be the rapid roll-out of coronavirus vaccines. Eight out of 10 respondents described the vaccination campaign, which started in early February, as ‘good or very good’. Approval ratings for the deputy health minister, Paula Daza, and the health minister, Enrique Paris, soared to 72% and 70%, respectively.

The scandal that erupted following the leaking of messages suggesting illegal financing in President Gustavo Petro’s election campaign now seems to be making itself felt in the legislature, where Petro is losing control of his unwieldly alliance. On 20 June Petro suffered two serious blows in congress, acknowledging that his labour reform bill may have been ‘sunk’ on the same day that the senate rejected a government-supported bill to legalise the sale of marijuana for recreational use.

The twin blows in congress came on the same day that thousands of people took to the streets in cities across Colombia in order to protest against President Petro’s socioeconomic reform agenda. The protests, which were dubbed the ‘march of the majority’, saw right-wing opposition politicians rail against the government’s health, labour, and pension reform bills, its recently announced bilateral ceasefire with the Ejército de Liberación Nacional (ELN) guerrilla group [WR-23-22], and its possible breach of campaign-financing regulations [WR-23-23].

Of more immediate concern to Petro was the possibly fatal blow dealt to his flagship labour reform bill in congress. The government urgently needed the bill to be approved by the senate’s constitutional commission before congress closed for a month-long recess on 20 June, in order for it to be carried over into the next legislative period for a plenary debate. However, the bill was not discussed by the commission due to a lack of the necessary quorum, meaning that its process through the legislature will need to start all over again in the next legislative period (beginning 20 July) unless the commission agrees to hold extraordinary sessions.

• Petro acknowledges “sinking” of labour reform

After the senate commission’s failure to discuss the labour reform bill, President Petro tweeted that the “sinking” of the legislation demonstrates that “owners of capital and the media managed to co-opt congress to the detriment of working people’s dignity”.

On the same day, Petro’s weakening influence over congress was evidenced by the senate’s rejection of the marijuana bill submitted by the ruling left-wing Pacto Histórico coalition. The bill, which would have permitted the regulated sale of marijuana for recreational use, was expected to gain the requisite support of an absolute majority of 54 senators. However, it fell short of this threshold due to absenteeism among government-allied parties, including the left-of-centre Colombia Humana and Alianza Verde (AV), with 47 senators supporting the bill and 43 opposing it.

Chile’s government led by President Gabriel Boric has been dealt another blow in the form of controversy surrounding Susana Herrera, which resulted in her replacement this week as ambassador to the UK. The polemic centres on an initiative that Herrera presented to the governor of Chile’s southern Biobío region and for which she sought funding of US$5m. Although the foreign ministry accepted Herrera’s resignation on 22 August, the incident is damaging for Boric’s government, not least given it comes in the midst of the ongoing ‘Caso Convenios’ scandal, which concerns the improper awarding of government contracts to private entities [WR-23-31].

In a brief statement, the foreign ministry announced it had accepted the “voluntary resignation” of Herrera, who had been in the role since the end of last year. This came after opposition politicians, as well as some from within President Boric’s ruling alliance, had called for Herrera’s dismissal following revelations made in the national daily La Tercera on 20 August. The newspaper published a letter that Herrera had sent to Biobío Governor Rodrigo Díaz on 13 June asking for help raising US$5m in public and private funds for a bioeconomy project with which she was personally involved.

• Herrera’s project

In her letter, Susana Herrera says she is working on the project in collaboration with the Circular Bioeconomy Alliance, an organisation founded by the UK’s King Charles III and the architect Zaha Hadid. The project, called Living Lab Biobío, aims to restore land destroyed in the region by the wildfires that raged through Chile in February and promote sustainable development through the construction of wooden infrastructure.

The news caused a stir given that Herrera presented the project without going through the official channels or notifying the foreign ministry, which issued her with a warning and instructed her to end involvement with the project. However, for the opposition, this was not going far enough. Deputies from the right-wing Unión Demócrata Independiente (UDI), one of the two main parties within the opposition Chile Vamos coalition, called for Herrera’s immediate resignation, stating she had violated her official functions, used her position to favour herself personally, and put Chile’s reputation abroad at risk. On 22 August, UDI Senator Iván Moreira announced that he and fellow opposition politicians would submit a complaint to the public prosecutor’s office against Herrera, accusing her of influence trafficking. 

The incident comes at a particularly sensitive juncture given the ongoing Caso Convenios scandal, which has seen government ministries accused of making questionable payments to lobby groups and NGOs, and over which Boric has conducted yet another cabinet reshuffle. This sensitivity has been heightened by the fact that contracts awarded by the government of Biobío are under scrutiny as part of the case. In a social media post following Herrera’s resignation, Senator Rojo Edwards of the right-wing Partido Republicano (PR) stated that the ministries of housing, social development, and the interior needed to follow suit and cleanse their ranks of “corrupt officials” involved in Caso Convenios, indicating that Herrera’s resignation has done nothing to alleviate the pressure on Boric.