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ARGENTINA | Still turning to international markets for financing. On 12 January, the Argentine government announced that it had reached an agreement with six international banks to borrow a total of US$6bn, as part of its planned financing for the year. In a press conference, Finance Minister Luis Caputo explained that each of the six banks (Santander, BBVA, Citibank, Deutsche Bank, HSBC, and JP Morgan) have agreed to loan Argentina US$1bn and to take bonds for the same amount maturing in 2024 and offering a 3.8% annual yield as collateral in a repurchase (Repo) agreement. Caputo said that this was an alternative financing mechanism that would allow the government led by President Mauricio Macri to meet all its financial needs this year; and ensure the success of its latest planned bond issue scheduled to take place on 26 January.

The latest bond issue was announced soon after Macri announced changes to his economic team, appointing Caputo as the new head of the finance ministry and Nicolás Dujovne as the head of the treasury ministry [WR-17-01]. The government’s plan is to raise US$3bn-US$5bn by issuing bonds in international markets and a further US$1bn-US$2bn by issuing bonds in the domestic market to finance its 2017 budget.

The announcement raised questions among local analysts, as it came after Macri reportedly asked for the resignation of his previous finance minister, Alfonso Prat-Gay, because Argentina significantly tapped financial markets last year only for the government to fail to execute its budget fully even though the domestic economy was stagnating.

After meeting potential investors in the US on 17 January, Caputo said that there appeared to be a strong appetite for Argentine bonds among international investors and that the proposed issue could be oversubscribed by up to US$15bn. Local analysts noted that the new economic team may be keen on issuing new debt ahead of the expected increase in interest rates offered by US bonds following the inauguration of Donald Trump on 20 January. Funds raised in the bond issues will also help the Macri government service the sizable US$8bn of debt payments due in April.

BRAZIL | Petrobras profits. Brazil’s state-owned oil firm Petrobras has released its financial results for the third quarter of the year, which show that the firm posted a profit during the period.

A Petrobras statement said that the firm’s net income in the third quarter reached R$266m (US$80.6m), below the R$316m it reported in the previous quarter but a significant improvement on the R$16.4bn in losses it reported in the third quarter of 2016. With the new financial results, the heavily indebted firm has now registered profits in four consecutive quarters, with Petrobras noting that its accumulated net income for the year now stands at R$5bn.

The Petrobras statement described its third quarter financial results as “very positive” and driven by an increase in oil exports, improvements in the international price of oil, revenue raised via the sale of some of its assets, and a reduction in personnel costs, among other factors.

However, the level of third quarter profits reported by Petrobras was substantially lower than the R$3.21bn consensus forecast made by sector analysts, leading to some concern that the financial and administrative restructuring plan that the firm embarked upon in 2015, in the wake of the major internal corruption scandal uncovered in 2014, is not progressing as well as hoped.

The third quarter financial report shows that the firm’s liquid debt fell by 11% year-on-year in the third quarter from the US$100.3bn reported in 2016 to US$88.1bn as of September this year.

URUGUAY | Looking to update FTA with Mexico. Uruguay’s President Tabaré Vázquez arrived in Mexico on 14 November for an official three-day visit. A statement from Vázquez’s office said that the main objective of the visit by the official delegation, led by Vázquez but including Economy & Finance Minister Danilo Astori; Agriculture, Livestock, and Fishing Minister Tabaré Aguerre; and Foreign Minister Rodolfo Nin Novoa, is to deepen ties and discuss the possibility of updating the existing bilateral free trade agreement (FTA).

The Uruguay-Mexico FTA came into effect in 2004. Since then Uruguay’s exports to Mexico have increased from US$117m to US$170m in 2016, or from 1.6% of Uruguay’s total exports to 4.6%. However, the Vázquez administration believes that there are opportunities to increase this significantly given that Mexico is the world’s tenth most populated country with a market of 127m people. In particular, the statement from Vázquez’s office said that the government delegation led by Vázquez would seek to discuss the further liberalisation of bilateral trade in food.

The Vázquez administration is keen for Uruguay to increase its exports of products such as rice, meat, and dairy products to Mexico (which are currently subject to quotas). Finding alternative markets for Uruguay’s dairy products has become a priority following the fall in demand from crisis-stricken Venezuela and the recent suspension of Uruguayan dairy imports imposed by Brazil over dumping allegations levelled by Brazilian dairy producers against their Uruguayan counterparts. Mexico is likely to look favourably on deepening trade ties with Uruguay given the uncertainty surrounding the future of the North American Free Trade Agreement (Nafta).

• Chile and EU to update trade accord

The Chilean government and the European Union (EU) will hold an opening round of negotiations to modernise the existing bilateral economic association agreement from 16 November in Brussels, Belgium. An EU press release notes that the aim is to update the 14-year-old agreement to bring its “trade provisions in line with the EU’s modern agreements”. The EU is currently Chile’s second largest trade partner, accounting for 14.9% of the country’s total exports in 2016. While bilateral trade has remained stable in recent years, both parties hope it will increase after the updating of their bilateral trade agreement.

The scale of the victory achieved by President-elect Luis Arce and the Movimiento al Socialismo (MAS) in Bolivia’s 18 October general election [WR-20-42] had prompted cautious optimism that the widely predicted post-election unrest might not come to pass after all. Initial protests rejecting the election result had appeared half-hearted, lacking the support of either political leaders or electoral observers – but more than two weeks later, with Arce’s 8 November inauguration impending, sizeable crowds are taking to the streets in several major cities, and these protests seem to be gathering momentum as time goes on.

The MAS-controlled legislature’s decision last week to eliminate the need for a two-thirds majority (which it will no longer hold once the new legislature is installed) for certain actions [WR-20-43], such as ambassadorial appointments or police and military promotions, is increasingly looking like a strategic misstep. While of relatively little political significance in its own right, opposition to the measure has helped to mobilise those who have historically accused the party of authoritarianism, and has therefore added substantial fuel to the fire of protests.

A key consequence has been to bring a number of opposition political figures on board. While Arce’s rivals had little recourse to back claims of electoral fraud that had no evidence to back them up, some have now stated their support for demonstrations in relation to the legislative changes, while claiming to disavow protesters’ appeals for military intervention to overturn the election result. Presidential runner-up Carlos Mesa and the far-right third-placed candidate Luis Fernando Camacho have both done exactly that, while interim interior minister Arturo Murillo appealed for the police to “protect” protesters, and interim president Jeanine Áñez even spoke to the crowds in Santa Cruz, the epicentre of the unrest, on 2 November.

All have continued to criticise the violence and vandalism of far-right groups (brought to the forefront by the death of mining union leader Orlando Gutiérrez on 28 October, from injuries allegedly sustained at the hands of these groups the previous week), but the interim authorities’ reaction to these protests remains a far cry from its typical response to anti-government demonstrations during its term, which were routinely met with violent suppression and criminal charges. Arce highlighted this discrepancy on 1 November, condemning the interim administration’s inaction in the face of “seditious” protests.

With appeals for military intervention unlikely to be granted, and even the prospect of an electoral audit seemingly ruled out by electoral tribunal (TSE) president Salvador Romero on 3 November, as he emphasised the unquestionable validity of the results, there remains a growing risk that the situation will escalate rapidly once Arce comes to power. Protests are likely to intensify following his inauguration, and much will depend on whether he heeds the demands of those within the MAS who are calling for him to take decisive action against violent protesters, and indeed against his political opponents more broadly.

• MAS reactions

The MAS-aligned social movement Coordinadora Nacional en Defensa de la Democracia drew criticism on 4 November for asking Luis Arce to authorise “the creation of armed militias” to respond to the increasingly violent protests. Others within the party have been pushing for Arce to take legal action, both against the current protesters and against interim government officials – the legislature last week issued a recommendation that its successor, once installed, take legal action against Jeanine Áñez, in particular, for her alleged role in two massacres of protesters that had sought to reject her appointment in November 2019 [WR-19-49].

The guest list for Arce’s inauguration is also a source of discontent. Former president Evo Morales (2006-2019) will not be there, having confirmed that he now plans to return to Bolivia on 11 November, allegedly to allow Arce, his former economy minister, to take centre stage on inauguration day. More controversial is the question of who will be invited from Venezuela: while the MAS recognises Nicolás Maduro’s presidency, Bolivia’s interim government has instead supported opposition leader Juan Guaidó’s claim to leadership. Interim foreign minister Karen Longaric had initially rejected Arce’s request to invite Maduro, but was forced to back down on 4 November.

When Brazil’s President Jair Bolsonaro visited Amapá on 21 November, most of this small northern state had been without a regular power supply for almost three weeks, after a fire in an electricity substation destroyed two generators on 3 November and caused a four-day blackout. The state’s electricity distributor, the Companhia de Electricidade de Amapá (CEA), and the federal mines & energy ministry (MME) finally announced that 100% of the power supply had been restored on 24 November. But many questions remain unanswered about the causes of the power failure and the weaknesses in Brazil’s electricity system as a whole.

The blackout and subsequent irregular energy supply upended daily life in Amapá, with locals rapidly taking to the streets earlier in November to denounce the authorities’ failure to resolve the problem. Unrest and looting in Macapá, the state capital, were behind a decision to postpone the municipal election in the city. Meanwhile locals accused the rest of the country of ignoring their plight; Amapá is Brazil’s second-smallest state with a population of under a million and is located on the northern border with French Guiana, thousands of kilometres away from the country’s political and economic heartlands. When President Bolsonaro finally visited Macapá on 21 November, he was heckled on the streets – even as he announced compensation measures for residents.

The situation is yet to be completely cleared up, but it appears that a combination of bad weather, bad maintenance, and bad oversight led to the failure of the generators in the Macapá substation – which connects the whole of Amapá to the national grid (SIN) – and contributed to the delay in fixing two of them (a third backup generator was already out-of-order at the time of the fire). The debacle involves a large number of private and public actors: not only Linhas de Macapá Transmissora de Energia (LMTE), the private company which holds the concession for the Macapá substation, but also, at a federal level, the MME, the national electricity regulator (Aneel), and the national electricity operator (ONS).

In an attempt to hold a responsible party to account, courts first turned to Isolux, the Spanish company that was thought to own LMTE, ordering it to restore the power supply by a given deadline or face a fine; but it soon emerged that Isolux, now bankrupt, had sold LMTE in 2019 to a Brazilian firm, Gemini Energy, owned by an asset management company specialised in restructuring, Starboard Asset. Eletronorte, a regional subsidiary of state-owned electricity company Eletrobras, had to be brought in to help with emergency electricity provision and the restoration of the power supply where LMTE could not.

A lack of oversight over the companies involved in the local transmission and distribution of electricity is believed to have weakened the federal actors’ capacity to take the steps necessary to restoring Amapá’s power supply swiftly. Poor coordination and communication appeared to have played a role too. Last week, a federal judge ordered that the board of directors of the Aneel and the ONS be suspended, citing “negligence” on their part (this decision was criticised, and then overturned).

The whole incident has shored up opposition to the mooted privatisation of Eletrobras. It has also raised concerns that other states might suffer similar problems, where local concession holders might not have been held to the necessary standards of equipment maintenance. Accompanying Bolsonaro in Macapá on 21 November, Energy Minister Bento Albuquerque said the MME was working on designing a new energy plan for Amapá as well as other regions with “similar characteristics” to avoid such power failures in the future. 

Eletrobras

The electricity blackout in Amapá, seemingly due to a private concession holder’s poor maintenance of transmission equipment and federal regulators’ failure to maintain effective oversight over the company, has given ammunition to those who oppose the privatisation of Eletrobras. One of these is the president of the senate, Davi Alcolumbre, who represents the state of Amapá and would now be expected to block a vote on the bill authorising the sale of Eletrobras. Privatising Eletrobras is part of the Bolsonaro government’s sweeping divestment programme, but to do so it requires approval in the federal congress.

Colombia’s President Iván Duque held meetings this week with US Secretary of State Antony Blinken and the regional director of the US National Security Council (NSC), as the governments of both countries sought to strengthen their cooperation in a range of areas. Two key issues on the table are the possible resumption of aerial coca eradication and the state of Colombia’s fragile peace agreement, and Duque may find himself under different pressures than those he experienced under President Joe Biden’s predecessor, Donald Trump.

As the main security partner of the US in South America, Colombia’s relationship with that country is one of contradictions. Critics of US foreign policy argue that successive administrations in the White House have intensely scrutinised Colombian cocaine production whilst turning a blind eye to chronic human rights abuses in the Andean nation. That was the case during the Trump presidency, which pressured Colombia to resume aerial coca spraying but failed to hold its government to account for impunity over the killing of demobilised members of the Fuerzas Armadas Revolucionarias de Colombia (Farc) guerrilla group, despite the risk of these killings eroding the fragile 2016 peace agreement. Trump underlined this point in March 2019 when he noted that “more drugs are coming out of Colombia than before [Duque] was president, so he has done nothing for us”.

Blinken quickly signalled that the Biden administration would be taking a much closer interest in Colombia’s internal affairs; in a 29 January phone call with Colombia’s foreign minister, Claudia Blum, Blinken pledged to “partner closely with the Colombian government as it extends the benefits of peace throughout the country, ensure the protection of human rights, and defeat the narcotraffickers and transnational criminal groups that threaten regional security”. Ramping up counter-narcotics operations, it seemed, would no longer be enough.

Whilst the tone of US diplomats may have changed, Biden’s Colombia policy is currently under scrutiny amid signs that his administration has inherited Trump’s attitude towards coca production. A March report by the State Department’s Bureau of International Narcotics and Law Enforcement Affairs praised moves by the Colombian government to resume aerial fumigation of coca crops as “a most welcome development”, describing the eradication technique as “an irreplaceable tool in the government’s arsenal”. A joint letter from 25 Colombian and US organisations subsequently urged Biden not to fund any aerial fumigation operations, arguing that these pose unacceptable risks to the environment and public health, and risk further destabilising Colombia’s security situation by increasing poverty and fomenting hostility to the government.

Despite these concerns, Colombia looks set to resume aerial coca spraying. On 12 April – the same day that Duque met Juan González, the NSC’s director for western hemisphere affairs – the government issued a decree to regulate the practice. This was a key step in meeting the demands of the constitutional court, which prohibited aerial fumigation in 2017 but permitted its resumption if the environmental and health risks could be mitigated. The decree forbids coca spraying over nature reserves, sensitive ecosystems, water systems, and populated areas. Fumigation will resume if these precautions are accepted by Colombia’s national drug control council (CNE) – a likely outcome, given that the CNE is comprised of government officials and chaired by the justice minister.

Colombia’s peace agreement – back on the agenda?

Aside from the eternal issue of drug production, the Colombian government is facing additional scrutiny over the worsening security situation in the country [WR-21-06]. A February report published by the Office of the United Nations High Commissioner for Human Rights (OHCHR) tallied 76 massacres (defined as the killing of more than three people at once) in 2020 – nearly twice the number recorded for 2019 and the highest recorded since 2014, when the government was still at war with the Farc. In addition to this, the report stated that 133 human rights defenders were murdered in 2020, a 23% increase on the previous year.

The increase in violence, particularly against human rights activists, is likely to be higher up Blinken’s list of priorities than under his predecessor Mike Pompeo. Pompeo’s diplomatic focus in Latin America largely centred around the drugs trade, illegal migration, and applying pressure on Nicolás Maduro’s government in Venezuela.

Biden’s former role as vice-president (2009-2017) in Barack Obama’s administration, which assisted in mediating the peace agreement with the Farc, may provide a personal motivation to avoid seeing that deal unravel. The Biden administration is also seen as a potential mediator in any truce between the Colombian government and the Ejército de Liberación Nacional (ELN) guerrilla group.

ELN spokesman Israel Ramírez Pineda (‘Pablo Beltrán’) told Reuters in November 2020 that he thought Biden’s election would accelerate peace talks, which he said may begin this year. Pineda highlighted Washington’s influence over Colombia’s internal security policies, noting that “[Duque’s] fierce position against peace is in decline, and his strong support was Trump, but Trump is gone”. Pineda is not the only opponent of Duque seeking support from the US; in March, Rodrigo Londoño Echeverri (‘Timochenko’), the former Farc leader who now heads the Comunes political party, wrote to the US Congress urging it to pressure Duque to uphold the peace agreement. Whilst the letter raised a few eyebrows, given Londoño’s former leadership of a group listed as a terrorist organisation by the US, it seems that Duque is not the only Colombian actor assessing the changes that a new leadership in Washington will bring.

Timochenko’s letter

The US Congress received a letter on 23 March from Rodrigo Londoño, the former guerrilla leader turned politician. Londoño urged congressional representatives to pressure President Duque to uphold the 2016 peace agreement between the Farc and the Colombian government. Highlighting the impunity surrounding the murder of former Farc combatants and human rights defenders, Londoño warned that “each day that passes without deploying institutional efforts to implement the Peace Agreement pushes Colombia further into the tenuous conditions of violence that have marred generations”. Londoño also called for impartiality in the transitional justice system (JEP) and for increased state presence and economic opportunities in rural areas.

A rocky start

Joe Biden’s relationship with Colombia threatened to get off to an awkward start. In the run-up to the US presidential election in November 2020, the US ambassador to Colombia, Philip Goldberg, warned Colombian politicians to “avoid getting involved in US elections”, following claims that several conservative lawmakers in Colombia were acting as surrogates for Donald Trump’s campaign. Colombia’s ambassador to the US, Francisco Santos, was also accused by opposition politicians of meeting representatives of the Trump campaign. Colombia’s foreign minister, Claudia Blum, was summoned to testify to the Colombian senate over the allegations, and she denied any collusion between Trump and the Colombian government.

BRAZIL | Frosts affect coffee crops, send prices soaring. Brazil’s federal agricultural ministry (Mapa) announced on 23 July that it will provide support to the coffee producers whose crops have been affected by unusually cold weather. Agriculture Minister Tereza Cristina da Costa Dias travelled to meet coffee farmers last week after frosts hit the coffee-producing state of Minas Gerais on 20 July, with temperatures falling below zero degrees Celsius.

The Companhia Nacional de Abastecimento (Conab), the Mapa’s logistics branch, has calculated that some 860,000 hectares (ha) of coffee crops were affected by the cold weather in the south of Minas Gerais last week, with 200,000 ha destroyed during the cold snap on 20 July alone. Other crops affected by last week’s cold weather include maize and sugar cane.

The Empresa de Pesquisa Agropecuária de Minas Gerais (Epamig), a public agricultural research company, estimates that between 4m and 11m sacks (one sack = 60kg) of the 2022 harvest of Arabica coffee were lost to last week’s frosts.

Prior to the extreme weather, the 2022 coffee harvest was expected to yield 68m sacks in total, including 54m sacks of Arabica coffee, on an optimistic estimate. Epamig further warns that the impact of crop losses will likely be felt all the way through to the 2024 harvest.

Brazil is the world’s largest coffee exporter and these losses caused Arabica coffee prices to surge 20% last week and jump a further 10% on 26 July, to the highest level in seven years.

The national meteorology system (SNM) has since warned that a record cold front is expected to hit large parts of the country between 28 July and 1 August, with frosts expected in the southern states of Rio Grande do Sul, Santa Catarina, and Paraná; Mato Grosso do Sul and parts of Goiás in the centre-west region; and parts of the south-eastern states of São Paulo, Rio de Janeiro, and Minas Gerais.

The damage to the agricultural sector is expected to be significant, impacting food prices domestically, which would in turn increase pressure on inflation.

*** DOMINICAN OPPOSITION LEADER RESIGNS. On 10 October, Lennox Linton, the leader of Dominica’s opposition United Workers Party (UWP), publicly announced his resignation. Linton had been leader of the UWP since 2013, leading it in two losing election campaigns, in 2014 and 2019, against the Dominica Labour Party (DLP). In 2019, the UWP won just three out of 21 seats in the House of Assembly. Francesca Joseph has taken over as interim leader, hoping to be confirmed in the post at the upcoming party conference. Founded in 1988, the UWP has only held power for one term, from 1995-2000. It lost the 2000 election by 9-12 seats despite winning the popular vote. 

*** US TO FIGHT ILLEGAL ARMS FLOW. In interview with The Gleaner newspaper on 11 October, Jamaica’s national security minister, Horace Chang, said that the US had agreed to work harder at preventing the flow of illegal American to Jamaica and the wider region. Chang said: “The US offered to extend itself to work with these Caribbean countries…None of our countries manufacture firearms and yet the ill effects of their proliferation and the contribution to gang violence and transnational criminal activities permeate our respective territories and are responsible for more than 70% of homicides in Caricom [the Caribbean Community]. It is within this context that it is important to disrupt and prevent illegal firearms and ammunition from passing through our borders.” Chang said that the problem, which has been around for a long time, has been spreading into the Eastern Caribbean and “is generating significant levels of criminal violence across the region”. In Chang’s opinion, the spread of illegal weapons throughout the region has the potential to disrupt, or even prevent, the progress of Caricom’s Single Market and Economy (CSME) which enables the free movement of goods, labour, and services within the 15-member organisation. The renewed commitment from the US was given during a three-day meeting with US agencies including Homeland Security; the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF); and the Agency for Narcotics. Chang said: “They would like to increase their activity significantly in the region to begin the process of mitigating this really serious challenge in the Caribbean region”.

In a related development, on 3 October, the governor of the Turks & Caicos Islands (TCI), John Dakin, blamed deterioration in the territory’s security situation on Jamaican gangs. Speaking about the advances of a particular Jamaican gang, Dakin said: “Using military grade high velocity weaponry, the vast majority of the murders in September have been targeted and linked to this enlarged and now emboldened gang trying to remove who they believe are the local drug and arms smuggling competition. Those local criminals, already established here, are fighting back.” Dakin said “we are now engaged in fighting trans-national serious organised crime”, and to combat this an anti-gangs team of 24 detectives was being set up with UK support. He added: “Its forward elements arrive shortly. It will embed in our Force – not only delivering immediate effect – but building local capability. With all of this combined, we will have all-but replicated the UK's Counter-Terrorism Policing model. Through it, gangs will be brought to justice, not just suppressed.”

Lending by commercial banks increased 18.7% in 2011. The big increase was in personal lending (23%) but most of this new business was secured: mortgage lending went up by 27%, after a 24% increase in 2010.

Despite this increase, it is worth noting that credit is still low in Peru. According to the central bank, credit as a percentage of GDP is still (end third quarter 2011) under 24% of GDP. It started 2011 at 23.3%.

One of the changes is that the pace of bank lending to companies dropped sharply in 2011. In 2010 it had been rising at a 22% lick. In 2011 this pace slowed to 17%.

In cash terms, bank credit to the private sector increased from N$108.2bn in January 2011 to N$130.5bn (US$48.3bn) in December 2011.

The comparatively steady performance of the banking sector, coupled with the worries over the 2011 elections and businesses’ uncertainty over how President Ollanta Humala would act once he had taken office, helps to explain why GDP growth in 2011 slowed down from 2010’s hurtling rate.  In 2011 the GDP growth rate was probably around 7%.

This was substantially lower than the surge in export receipts. In 2011 export receipts were up 28% at US$45.73bn, according to figures provided by the trade and tourism minister, José Luis Silva. Of this figure, US$35.6bn came from exports of traditional products (principally metals) which was 27% up on 2010.

Encouragingly, exports of non-traditional products were up by 32% at US$10.15bn. Agro-industry exports, notably asparagus, were up by 29% to US$2.8bn. Besides asparagus, grapes and mangoes also did well. Fresh fish exports did even better, rising by 61%, thanks to booming Japanese demand for giant squid (known as pota in Peru) and scallops.

Silva said that the export target for 2012 is for an 8% increase in receipts to US$49.3bn.

Inflation: In January the Lima consumer prices index fell by 0.1%, bringing the 12 month rate down to 4.23%. The central bank was encouraged enough by this figure to hold base interest rates at 4.25%.

CAYMAN ISLANDS | Gana la oposición. El opositor People's Progressive Movement (PPM), liderado por el abogado Alden McLaughlin, ganó las elecciones legislativas el 22 de mayo. El PPM tomó nueve de las 18 bancas, faltándole solamente una banca para tener la mayoría. El ex primer ministro, William McKeeva Bush (2009-2012), cuyo arresto en el 2012 bajo cargos de corrupción resultó en su remoción después de un voto de no-confianza, retuvo su banca legislativa en West Bay. Sin embargo, la división en el United Democratic Party (UDP) de Bush, después de su arresto, en la cual cinco miembros se fueron para formar una minoría de gobierno, fue reflejada en su mal desempeño: la UDP sólo obtuvo cuatro bancas, con los independientes quedándose con las otras cinco.

Después de su victoria, McLaughlin destacó como una de sus prioridades, la necesidad de recomponer las relaciones entre las Cayman Islands y el Reino Unido. Estas relaciones empeoraron en noviembre del 2012 después de que el último amenazó con imponer el gobierno directo en respuesta a la no implementación por parte de Bush del acordado marco para la responsabilidad fiscal (FFR, siglas en inglés).

In Washington DC in November, US Vice President Joe Biden met the three presidents of Central America’s ‘Northern Triangle’ – Guatemala’s Otto Pérez Molina, El Salvador’s Salvador Sánchez Cerén and Honduran leader Juan Orlando Hernández. The meeting was aimed at addressing the crisis surrounding the mass arrival at southern US borders of ‘unaccompanied alien children’ (UAC), which made international headlines earlier in the year [RC-14-08]. The plan was to unveil a new regional development plan aimed at addressing the root causes of the crisis. However, as was the case with a previous meeting between the three leaders and US President Barack Obama (in July), little of real substance emerged.

In the build-up to the meeting on 14 November there was a flurry of visits by top US officials to the sub-region. The US Counselor of the Department of State Thomas Shannon went on a mini-tour of the three countries on 3-5 November, where he met the three presidents as well as private sector representatives to discuss security, governance, and economic prosperity. Meanwhile the US Assistant Secretary of State for International Narcotics and Law Enforcement Affairs, William Brownfield, paid a two-day visit to Honduras on 3-4 November, where he met President Hernández to discuss security cooperation and measures to tackle official corruption. Underpinning these visits, as well as the conference itself, is the need to avoid a repeat of the child migrant crisis, which took place between March and June this year, by addressing the factors that drove these children to flee their home countries.

The meeting between the presidents and Biden took place at an event chaired by the president of the Inter-American Development Bank (IDB), Luis Alberto Moreno, entitled ‘Investing in Central America: Creating Opportunities for Growth’. According to an IDB press release, the three Central American leaders were going to give an overview of the problems and key areas that need to be addressed in order to “create economic and social opportunities to retain human capital and reduce migration in these countries. A special focus will be on attracting investment to the region to overcome infrastructure bottlenecks, creating better jobs, as well as improving transparency and institutions.”

At the event, the Central American leaders unveiled their ‘Plan of the Alliance for Prosperity (PAP)’, a proposal put together to address the lack of opportunity and insecurity in the Northern Triangle, which has among the highest homicide rates in the world. According to the latest [2014] report by the United Nations Office on Drugs and Crime [Unodc], Honduras registered 90.4 homicides per 100,000 inhabitants in 2012 – the highest in the world, while the figures for El Salvador and Guatemala were 41.2 and 39.9 respectively. A copy of the PAP dating September which was made available on the Honduran presidential website, estimates that each year over 100,000 people from “our region” migrate to the US, with almost 60% of (regional) migrants in the US living there illegally.

The PAP comprises four planks: “to dynamise the productive sector in order to create economic opportunities; to develop opportunities for human capital; to improve citizen security and access to justice; and to strengthen institutions to build public confidence in the State”. It includes lofty promises to improve education and human capital training so as to make investing in the region more attractive. This would be complemented with steps to reduce energy costs, by doubling the capacity of the shared Central American network of power grids known as Siepac (Sistema de Interconexión Eléctrica de los Países de América Central – see sidebar), and by importing natural gas from southern Mexico to Central America through a pipeline linking Mexico’s Pacific port city of Salina Cruz to Guatemala’s southern coastal department of Escuintla – a project first announced in April. The PAP also mentions nine major infrastructure projects aimed at improving connectivity and intraregional trade.

Yet it remains unclear how the cost of the plan is to be met. The document notes that the three countries in question will go some way towards meeting the costs. However, considerable doubts persist over this given the low tax take (see sidebar). While acknowledging that the “participation of allied countries, multilateral organisations and development associates will be indispensable”, the 2015-2019 ‘investment plan’ included in the document was left completely blank; and the meeting with Biden failed to provide any concrete financial offers.

Appearing before the US House of Representatives Subcommittee on Western Hemisphere Affairs on 18 November, the US Assistant Secretary of State Roberta Jacobson put the cost of implementing the strategy outlined in the PAP at US$5bn over five years. The US response has come in for criticism from organisations like the Washington Office on Latin America (Wola), which at the end of September claimed that the US had, on Wola’s estimates, spent “over US$9bn during the Central American conflicts of the 1980s”, while assistance in recent years for development, governance, and law enforcement amounted to “well under US$200m per year”.

Migration plan

However, the US has offered up a new migration plan that would offer refugee status to some child migrants. According to a US State Department press release, the programme, which Biden unveiled on 14 November “will allow certain parents who are lawfully present in the United States to request access to the U.S. Refugee Admissions Program for their children still in one of these three countries. Children who are found ineligible for refugee admission but still at risk of harm may be considered for parole on a case-by-case basis. The refugee/parole program will not be a pathway for undocumented parents to bring their children to the United States, but instead, the program will provide certain vulnerable, at-risk children an opportunity to be reunited with parents lawfully resident in the United States.”

It remains to be seen how much of an impact this will have. Many child migrants do not yet have a parent legally residing in the US. The US State Department press release itself notes that “a relatively small number of children from Central America will be admitted to the United States as refugees in FY 2015, given the anticipated December launch and the length of time it takes to be processed for U.S. refugee admission. Any child or parent admitted as a refugee will be included in the Latin America/Caribbean regional allocation of the U.S. Refugee Admissions Program, which is 4,000 for FY 2015.”

Migration reform

The three Central American presidents hailed President Obama’s latest immigration reform, announced on 20 November. The executive actions grant deportation protection and access to a three-year work permit to unauthorised immigrant parents of children who have lived in the US for at least five years and whose children were either born in the US or are legal permanent residents.

The measures also extend the protection afforded by the Deferred Action for Childhood Arrivals (DACA) programme. This was previously limited to those who were under 31 years old on 15 June 2012, who entered the US before 15 June 2007, and who were under 16 years old when they entered. Under the changes, DACA eligibility will be expanded to cover all undocumented immigrants who entered the US before the age of 16, and not just those born after 15 June 1981. The entry date is also adjusted from 15 June 2007 to 1 January 2010 while the relief (including work authorization) will now last for three years rather than two.

• Siepac complete

On 16 October Costa Rica became the final country to join the Central American electricity network, Siepac. The network – aimed at helping the six Central American countries (Panama, Costa Rica, Honduras, Nicaragua, El Salvador and Guatemala) reduce energy production costs, optimise resources and create a more competitive sub-regional energy market capable of attracting foreign investment – has been in the works since 1987, when the six governments agreed to work together to build a 1,790km network of 230kV transmission lines to connect up the respective national power grids. Originally, the project was due for completion by 2006, but over the years it has been affected by numerous delays. The IDB contributed US$272m in loans to the project, costed at US$550m.

• Tax take

A November report by the Guatemala City-based think-tank, Central American Institute of Fiscal Studies (Icefi), put the average tax take as a percentage of GDP for the six Central American countries (Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Panama) at 13.4% this year, slightly down from 13.5% in 2013. The individual forecasts for 2014 are as follows: Costa Rica, 12.8% (down from 13.3%); El Salvador, 15.1% (down from 15.8%); Guatemala, 10.9% (down from 11.0%); Honduras, 15.9% (up from 14.7%); Nicaragua, 14.5% (down from 14.6%) and Panama, 10.9% (down from 11.4%).

In the same month that the IMF has been emphasising the importance of the Citizenship-by-Investment (CBI) programme to the St Kitts & Nevis (SKN) economy, a row with China has highlighted some of its pitfalls.

An IMF mission visited SKN at the end of April through to the first week of May for Article IV consultations. On 12 May, the mission issued its Concluding Statement in which it noted that the SKN’s “strong macroeconomic performance owes much to the robust Citizenship-by-Investment (CBI) inflows and their spillovers to the economy.”

• Projections for future CBI inflows form a key part of the IMF’s forecasts for the SKN economy. On the one hand, it sees a possible sharp drop in CBI inflows “due to more acute competition and global security concerns”, which it says would be strongly negative for the economy. On the other hand, CBI inflows could be boosted by reforms to the programme (to address security fears) and “tougher immigration policies in the United States and other countries”. But whatever happens to the CBI inflows, the IMF is in no doubt about their importance to the economy. This is highlighted by the fact that SKN’s debt-to-GDP ratio looks set to fall to the regional target of 60% by 2018, ahead of the rest of its Eastern Caribbean peers.

The row with China relates to a Chinese national who was granted SKN citizenship under the CBI programme in 2013 and is the subject of an Interpol Red Notice as he is wanted in China for alleged fraud offences. Ren Biao is accused of stealing US$100m from Chinese state enterprises, and China further alleges that he has been paying protection money in St Kitts to ensure he is not sent back to China.

According to Beijing, Ren Biao used more than 20 companies to swindle “hundreds of millions of loans from several banks and furthermore hundreds of millions of money from his friends and relatives…on the excuse of business operations”.

China is well aware that its allegations of harbouring a major fraudster play to one of the main vulnerabilities of the CBI programme, namely the historic weakness of the due diligence process. Beijing has warned that if SKN does not return Ren Biao to China, then SKN could come to be seen as “the first choice of criminals to elude legal judgement”.

Beijing contends that after Ren had squandered most of his criminals gains he fled to SKN with his family to avoid “Chinese law and legal and just judgement”. Accordingly, the SKN government should work with Beijing “to seize and repatriate the criminal suspect to China as soon as possible in order to prevent being a safe haven for criminals”.

St Kitts is not the only country that is being pressured by Beijing to return suspected fraudsters to China as part of its anti-corruption drive. Other wanted fugitives from China’s justice system are said to be living, inter alia, in the US, Canada, New Zealand, the UK, and Australia. However, what makes the SKN case different and interesting is that St Kitts is one of the few remaining countries that retains diplomatic relations with Taiwan rather than Beijing. This gives Beijing an added incentive for piling the pressure on SKN’s Prime Minister Timothy Harris.

So far, however, Harris has remained firm in his argument that due process must be followed. He is not about to put Ren and his family on a plane to Beijing, as he made clear in a national address on 9 May, although he was also keen to reassure that he would not allow St Kitts & Nevis to become a safe haven for criminals.

Of course there was politics in his statement, with Harris keen to emphasise that Ren Biao had been granted citizenship under the previous Labour Party government led by Denzil Douglas. However, having got that off his chest, Harris made it equally clear that he would not bow to Chinese pressure to expedite the return of the fugitives.

He made the following points:

• St Kitts and Nevis is a nation of laws and the government “adheres to and respects at all times the rule of law”.
• There is no extradition agreement between SKN and China and therefore “the extradition assistance that was being informally sought cannot be provided within the confines of St Kitts Nevis law…the clear legal position is that there is no basis for extraditing St Kitts and Nevis citizens in this way”.
• “The government cannot and will not simply allow the country’s sovereignty and laws to be trampled upon by permitting any nation to attempt to engage in forced rendition of any citizen of St Kitts and Nevis. Each and every citizen of St Kitts and Nevis is entitled to the full protection of the laws of St Kitts and Nevis. They are entitled to that protection not some of the time or at the whim of any government. They are entitled to that protection all of the time.”

And finally, for good measure, the prime minister added that he could not see the US, UK, Canada, New Zealand, and Australia acting any differently. “This then,” he said, “is not unique to St Kitts and Nevis. It is a feature of all mature democracies rooted in the rule of law.”

These are all good points, and Harris appears to be on solid ground both domestically (given that it was the Labour Party administration which gave Ren his citizenship) and with regard to international law. However, China is being driven by two powerful motives to put maximum pressure on SKN. The first is that it wants Ren to face Chinese justice; the second is that it has a long-term strategic interest in bringing SKN to heel. So how it responds to this rebuff will be interesting to watch.

On a wider front, further clues about China’s strategic intentions in the Caribbean are likely to be provided by a conference that China is sponsoring in Jamaica on 30 May on the subject of “China in the Caribbean: History, Politics, Diplomacy, and Enterprise”. The purpose of the conference appears to be to counter some of the negative images of China’s engagement with the region. According to Dr Lloyd Waller, whose Department of Government at the University of the West Indies is to host the conference, this will be an opportunity for China to explain its intentions and motivations for increased engagement in the region.

Waller says there have been “too many speculations and uncertainties about China’s intention with their expansion in the region, and this summit will definitely provide an avenue for deeper fact finding and a more refined understanding of the issues.”

PERU | Service exports. Peru exported US$6.26bn worth of services (including tourism, banking, transport, and information technology services) in 2016, on central bank (BCRP) data, the foreign trade & tourism minister, Eduardo Ferreyros, revealed on 2 October. The figure is slightly lower than the US$6.28bn worth of services exported by the country in 2015, when they grew by 7% year-on-year. However, Ferreyros said that following the promulgation of the new ‘foreign exports promotion law’ by President Pedro Pablo Kuczynski in August this year, the government expects that exports of services will increase by 8% to US$6.76bn this year.

Speaking at the ‘Perú Service Summit’ sector conference held in Peru’s capital, Lima, Ferreyros said that the new law, which exempts service exporters from having to pay the general sales tax (IGV), has set a solid legal framework for these exports to grow at a faster rate. Indeed, the minister said that the government hopes that, thanks to the new legal framework, Peru’s service exports will reach US$13bn by 2021 and turn Peru into a services sector hub for Latin America.

Ferreyros’s remarks came after the coordinator for service exports at Peru’s official export promotion agency (Promperú), David Edery, noted that 70% of Peru’s service exports are currently destined for other Latin American countries such as Colombia, Ecuador, Chile, Bolivia, Argentina, Mexico, and Brazil.

VENEZUELA | Opec accord. Venezuela’s oil minister Eulogio del Pino said that up to 12 more oil-producing countries (from Latin America and Africa) would be invited to sign up to the global output agreement between the Organisation of Petroleum Exporting Countries (Opec) and around 11 non-Opec producers, including Russia.

With the recent bounce in international crude oil prices towards US$60/barrel (/b) having lasted no more than a week – the price dipped back to US$55/b on rising US exports – Venezuela has been leading the push to extend the global output quotas for a third time to March 2018. Saudi Arabia appears to support extension of the quotas, but notably Russia – itself very cash-strapped and always quite a reluctant signatory to the deal – seems more tepid.

Russia’s energy minister, Alexander Novak, noted that oil prices were stabilising at a “suitable” level (of between US$50 and $60 a barrel). For Venezuela, however, oil at US$55/b is not even close to what it needs – private economists have calculated its fiscal breakeven point at over US$200/b, the highest of all the Opec members.

The Brazilian government has finally set a date for a long-delayed auction of fifth generation (5G) mobile spectrum, after the Agência Nacional de Telecomunicações (Anatel), the federal telecoms regulator, approved the rules for the auction on 24 September.

The 5G spectrum auction is set to be held on 4 November. Communications Minister Fábio Faria announced this on 24 September, and it was confirmed when Anatel published the rules for the auction three days later. Four frequencies will be auctioned, with the government expecting to raise R$10.6bn (US$1.96bn) in minimum payments, with a further R$39.1bn expected to be invested by the winning bidders to comply with the auction’s obligations.

Auction winners will be responsible for investing in infrastructure to deliver 5G to municipalities with more than 30,000 inhabitants; they must also bring high-speed internet to public schools and build 4G infrastructure in poorly served areas such as remote villages and alongside roads. The government has said that Brazil’s state capitals will all have 5G networks up and running by 30 June 2022.

The confirmation of a date for the tender process has been well-received in Brazil; public consultations on the issue were first launched in 2018, and a date for the auction has been repeatedly pushed back since early 2020. The effects of the coronavirus (Covid-19) pandemic can only partly explain these delays. In August Faria had confidently maintained that the auction would take place in October, a prediction which was upset after Anatel put off making a final decision on the rules on 13 September, with some board members requesting more time for analysis.

The upcoming 5G auction, the largest spectrum auction ever to be managed by Anatel, has seen some controversy over the possible role – or exclusion – of Chinese telecoms giant Huawei in the process. The US government has repeatedly put pressure on its Brazilian counterpart to exclude Huawei from its 5G market; however, such calls were not heeded, despite President Jair Bolsonaro’s personal anti-China stance, and Huawei could end up providing the necessary infrastructure for the implementation of 5G networks across Brazil. 

5G oversell?

Aliel Machado, a federal lawmaker and the president of the science and technology committee in Brazil’s chamber of deputies, has welcomed the confirmation of the 5G spectrum auction, but criticised the government for using the 5G rollout as “political propaganda”. Machado told independent news site Congresso em Foco that the 5G networks due to be working in state capitals by next year will have “an almost insignificant coverage” and that the government is making a lot of noise “for something that will take a bit longer”. According to the rules approved by Anatel, concession holders will have to deliver 5G to cities with over 500,000 inhabitants by June 2025. This deadline is set for June 2026 for cities with a population of 200,000-500,000, and June 2027 for smaller cities with 100,000-200,000 inhabitants.

MEXICO | Lobby warns on food self-sufficiency. On 15 October Mexico’s Consejo Nacional Agropecuario (CNA), the country’s main agricultural lobby, warned that increasing dependence on imports is taking Mexico further away from food self-sufficiency. The CNA stated that imports account for over 20% of the total consumption of a wide range of products, including poultry, milk, pork, maize, wheat, and rice. The CNA highlighted increases in imports for a wide range of food staples from 2006-2020, with rice imports increasing from 70% to 83% of the domestic market over this period; wheat imports increasing from 55% to 65%; pork imports from 34% to 39%; and maize imports from 26% to 37%. Emphasising the importance of increasing domestic food production capacity, the CNA warned that these figures “starkly reflect our vulnerability, particularly when faced with challenges such as the reduced availability of natural resources such as [high quality] soil and water, climate change and its foreseeable impacts, and more generally, a future global food crisis.”

MEXICO | Mexico’s trade deficit edges down. On 27 October Mexico’s national statistics institute (Inegi) released new figures showing that the country recorded a US$2.4bn trade deficit in September. This is down from a deficit of US$3.9bn in August and US$4bn in July but compares with a US$4.4bn surplus in September 2020. Overall, Mexico’s trade flows expanded: exports grew 8.2% year-on-year in September to US$41.68bn while the country’s imports jumped 29.1% to US$44bn. The latest figures bring the trade deficit for the first nine months of 2021 to US$9.27bn, with exports totalling US$359bn (up 22.2% on the same period in 2020) and imports totalling US$368bn (up 33.8%).

MEXICO | Remittances surge. On 1 November Mexico’s central bank (Banxico) released a report which shows remittances to Mexico totalled US$4.4bn in September, up 23.3% on the same month in 2020. This brings the total for the first nine months of 2021 to US$37.33bn, up 24.6% on the same period in 2020.

Mexico: GDP Growth
Percentage variation (year-on-year)

Mexico: Unemployment Rate
Economically active population

Mexico: Inflation Rate
Percentage variation (year-on-year)

An execution took place in broad daylight in Polanco, one of the most upmarket areas of Mexico City (CDMX), on 6 December, sending shockwaves through the capital. The victim was a music promoter, Jesús Pérez Alvear, who allegedly had ties to the Cártel de Jalisco Nueva Generación (CJNG), a major Mexican drug trafficking organisation (DTO). The murder is a reminder of organised crime’s increasing overlap with legal business models and its penetration into all areas of Mexico.

Pérez was eating at a restaurant in the Plaza Miyana shopping centre when two armed men entered and shot him dead. The victim was a successful concert promoter who had worked with popular regional Mexican singers such as Gerardo Ortiz and Julión Álvarez. However, Pérez also dealt with a different kind of business partner, having previously been linked to the CJNG and its armed wing Los Cuinis.

In April 2018, the US Department of the Treasury’s Office of Foreign Assets Control (Ofac) designated Pérez for his role in laundering money on behalf of the CJNG and Los Cuinis. Ofac said that Pérez, known as ‘Chucho’, used Gallística Diamante (also known as Ticket Premier), an events management company founded in the north-central state of Aguascalientes, in order to launder money from both criminal groups and help them finance the “opulent lifestyle” of their leaders.

“Chucho Pérez has close ties to the family of [Los Cuinis leader Abigael] González Valencia, and focuses primarily on promoting concerts staged during large Mexican fairs, such as those held in Aguascalientes and Metepec [Estado de México],” the statement read. Ofac added that Pérez often promoted musical acts known for singing ‘narcocorridos’, or ballads that glorify drug traffickers and their illicit activities.

Pérez Alvear

In June 2022 the US Federal Bureau of Investigation (FBI) arrested the CEO of record label Del Records and its subsidiary talent agency Del Entertainment, as well as the CFO of Del Entertainment for doing business with Jesús Pérez Alvear, whom it described as a “concert promoter with ties to Mexican drug cartels”. In May 2023, Pérez reportedly reached a deal with US authorities.

Costa Rican coffee producers are set to suffer crop losses due to unseasonably heavy rains and labour shortages which have limited harvesting capacity, adding to long-term issues in the sector.

Attracting workers to harvest coffee has been an issue for producers for years. The vast majority of the work is carried out by migrants, typically seasonal labourers from neighbouring Nicaragua. However, a recent reform introduced by Nicaragua’s President Daniel Ortega and approved by lawmakers on 28 November has made it less attractive for people to cross the border for temporary work, with a new migration law imposing a fine of US$1,000 and up to six years in jail for people who enter or leave Nicaraguan territory irregularly. This affects the many seasonal labourers who use informal border crossings between the two nations.

While the two countries have an agreement allowing the temporary formal entry of workers, less than 50 Nicaraguans had entered Costa Rica using the scheme so far during this harvest season, which runs from October to March depending on the region, according to Víctor Carvajal, Costa Rica’s agriculture minister. Labour shortages are also exacerbated by changing migration patterns: whereas there was previously a significant flow of Nicaraguan migrants south to Costa Rica, many have instead chosen to migrate north to the US more recently, according to a May 2024 report by the US Department of Agriculture (USDA)’s Foreign Agriculture Service (FAS).

Labour shortages mean that coffee goes unharvested and producers have less to sell, affecting their income. In response, Costa Rica’s coffee institute (Icafe) has launched a campaign urging students and other informal workers to consider temporary work in the sector. Farmers are offering higher rates of pay than normal due to labour shortages, but attitudes towards agricultural work have changed in recent decades.

Although coffee prices have risen to record levels this year, Costa Rica’s coffee sector is facing long-term structural issues. Production has fallen in recent decades and producers are also struggling with the effects of climate change, such as unpredictable weather patterns and the increasing incidence of diseases such as coffee rust. 

Other issues include the increased cost of agricultural inputs such as fertiliser, and volatile prices on the international market and a worsening exchange rate. The Costa Rican colón has weakened against the US dollar, reducing spending power and making imported products such as equipment and fertiliser, which are bought in dollars, even more expensive.

In an effort to address this issue, Icafe and Costa Rican leading commercial bank Banco Nacional announced on 20 January that an agreement had been reached to offer an improved exchange rate for coffee producers. In an article published 21 January, Gustavo Jiménez, executive director of Icafe, told local media outlet Delfino that the deal would allow coffee producers to exchange their income into dollars at a better exchange rate than the bank normally offers. “This means better prices for producers and a positive impact on the whole coffee value chain,” said Jiménez.

However, while this measure may provide some small benefit to coffee producers, it will not help to deal with the wider issues at play. According to FAS, coffee production in the 2024/2025 market year will remain around record low levels as a result of labour shortages and weather-related challenges. The FAS forecasts production of 1.185m 60-kilo bags, around the same as 2023/2024.

There is also a question of changing political priorities affecting the sector. For decades, Costa Rica relied on agricultural products such as coffee and bananas to drive economic growth, but successive governments have been working to build out high-tech manufacturing capabilities. The country has succeeded in developing a large and growing medical devices industry, and it is looking to become a regional hub in the semiconductors supply chain. As a result, supporting coffee producers is less of a national priority than it was in the 20th century.

The coffee sector has been adapting to this changing reality, focusing on high quality beans rather than mass production. It has also developed a focus on sustainability, as well as the European market, which now accounts for almost 40% of coffee exports, according to Icafe. 

Efforts to improve sustainability, such as better data collection and traceability, mean that Costa Rican producers are better prepared for proposed European Union (EU) rules banning products linked to deforestation than its regional peers. In fact, Costa Rica exported its first batch of deforestation-free coffee to the EU in March 2024, an achievement hailed by José Vicente Troya, the United Nations Development Programme (UNDP) representative in the country.

Icafe president Guillermo Trejos Soto believes that these early efforts to ensure compliance with the new EU rules will favour the country’s exports. “I believe Costa Rica is one of the pioneer countries worldwide,” he told international non-profit Preferred by Nature, which is headquartered in Denmark, in an article published January 2024.

On the other hand, the FAS has said that “it does not appear that the majority of growers supplying beans to the EU in any given year could be compliant with the requirements.” Increasing the number of producers that are able to comply with the proposed EU rules would help to maintain market access, but doing so will not be easy as many may not have the technical capacity to use, or the capital necessary to invest in, the kind of technology needed to satisfy the regulations.

As a result, the outlook for the coffee sector is bleak. Even if a solution to labour shortages can be found, which appears unlikely in the short term, producers are being squeezed by high prices of inputs and the cost of complying with new EU regulations. This will likely push up coffee prices, meaning only premium, speciality products remain viable and leaving the majority of coffee producers out of work.

Deforestation-free coffee

“Costa Rica is ahead of its time, ensuring the preservation of a crucial commercial avenue for coffee,” said José Vicente Troya, the United Nations Development Programme (UNDP) representative in the country in response to Costa Rica exporting its first batch of deforestation-free coffee to the European Union in March 2024. In a UNDP statement at the time, Troya said “this accomplishment underscores the nation's institutional structure and productive capability, rooted in a tradition of sustainability that encompasses economic, social, and environmental dimensions.”

President Bernardo Arévalo met with Mexican counterpart Claudia Sheinbaum in Guatemala’s Petén department on 15 August, with the pair agreeing to work together on development, security, energy, and railway projects, as well as migration.

Key discussions between the two presidents include building a new railway line that would connect Guatemala to Mexico’s recently inaugurated Tren Maya line, which runs around the Yucatán peninsula in the southeast of the country, with the aim of boosting trade, tourism, and regional integration. However, Arévalo has said that any connection with Guatemala would have to avoid protected areas in the north of Petén department and would have to abide by strict environmental regulations in order to avoid the kind of controversies that have plagued the project in Mexico. One solution could be a potential connection that passes through Belize, although this would likely present its own issues in terms of local opposition.

Another railway connection connecting Tecún Umán in Guatemala’s San Marcos department to Mexico’s Tren Interoceánico project, via the border town of Ciudad Hidalgo in Mexico’s Chiapas state, is also under discussion. The Tren Interoceánico links Mexico’s Pacific and Atlantic coasts, running from the port of Salina Cruz in Oaxaca state to the port of Coatzacoalcos in Veracruz state.

Connecting Guatemala with this major infrastructure project “has great potential for trade but also for the wider region,” said Arévalo. This is part of ongoing discussions, with Mexico agreeing to donate 400km of rails to Guatemala in July 2024, and Guatemalan officials are carrying out feasibility studies in conjunction with the US Army Corps of Engineers.

Other commitments include plans to cooperate on ‘Polos de Desarrollo para el Bienestar’, development zones that aim to attract investment and improve productive capacity along the border between the two countries, and projects to improve connections between their electricity grids in order to boost energy security, according to a statement from the Mexican government published 15 August. “Our history has taught us that important changes are not brought about in isolation, but rather as a result of unity and cooperation,” said Sheinbaum in the statement, adding that the meeting showed Mexico and Guatemala’s commitment to work together to achieve “a more dignified, equitable and freer future.”

Later on 15 August, Arévalo and Sheinbaum met with Belize’s Prime Minister Johnny Briceño in Calakmul, Campeche state, for trilateral discussions on a potential railway connection, as well as plans for a joint protected area known as the Great Mayan Jungle Biocultural Corridor, which will cover 5.7m hectares. “We have committed to cooperating on boosting the conservation and sustainable use of the rainforest, protecting the human and cultural rights of the indigenous communities in this area, and working together on a joint response to common threats,” said Arévalo at a press conference on 19 August.

While these meetings mark a significant advance in regional cooperation, squaring a stated desire for greater conservation with efforts to boost economic development and trade will not be easy. Infrastructure projects such as new roads and railways have been found to facilitate deforestation by improving access to isolated areas, opening them up to licit and illicit economic activities such as logging and ranching. At the same time, there will be significant technical, financial and social challenges in connecting Guatemala to the Tren Maya, meaning that such a connection will likely take years to come to fruition if it is possible at all. 

Tren Interoceánico

There are also likely to be significant technical, financial and social challenges regarding linking Guatemala to Mexico’s Tren Interoceánico via Tecún Uman, but a potential route running south to Guatemala City would offer the opportunity of improving connections to global markets via Mexican ports, bringing economic benefits without as much potential for environmental degradation.

The Frente Sandinista de Liberación Nacional (FSLN) government of President Daniel Ortega is trumpeting a recently released report on gender equality by the Geneva-based World Economic Forum (WEF) which places Nicaragua within the top ten countries globally in terms of efforts to close the gender gap. The government’s commitment to women’s rights has, however, been recently called into question by civil society groups following amendments passed by congress weakening a law against gender violence.

The WEF’s annual Global Gender Gap Index (GGGI), released on 25 October, ranks countries’ efforts to close the gender gap in relation to economic, political, education and health-based criteria. Nicaragua ranked 10^th out of 136 countries, the only country from Latin America and the Caribbean to feature in the top ten and a significant improvement on its rank of 90^th registered in 2007, the year the FSLN government took office for a second time.

While one place down from 2012, Nicaragua still registered an improved score overall and is well ahead of its Central American neighbours. According to the GGGI ranking, Costa Rica came in at 31st; Panama, 37th; Honduras, 82nd; El Salvador, 96^th; while Guatemala performed worst, ranking 114th. Nicaragua scored best in the category of ‘political empowerment’, where it ranked 5th, with women accounting for 40% of legislators and 46% of ministers. At the other end of the spectrum, however, it scored 91st for ‘economic participation & opportunity’ (including 109th for ‘labour force participation’ and 103rd for ‘estimated earned income’), with women earning on average just 46% as much as men.

Steps backward

The release of the WEF report came exactly a month after Nicaragua’s FSLN-controlled national assembly approved reforms weakening a comprehensive law (779) against violence against women. Passed in June 2012, law 779 was considered an important step forward in improving women’s rights [RC-12-08], although even then international human rights NGO Amnesty International (AI) noted that “while the law represented a positive step, lack of resources assigned to ensure its implementation remained a concern”.

The main change to the law was an amendment to a provision which prohibited mediation as a way of responding to any cases of violence; under the law, those accused of crimes with sentences of less than five years (this includes crimes like serious bodily harm; the abduction of children and threats) can be dealt with through mediation instead of through the criminal justice system. This provoked outrage from women’s rights groups as well as AI which described the prohibition of mediation as a “crucial component” of law 779, a provision that had been developed on the basis of studies that “showed that mediation had repeatedly put women at risk”.

It is also worth pointing out that women’s rights groups remain deeply suspicious of Ortega’s professed commitment to women’s rights on two counts; the claims of sexual abuse made in 1998 by Ortega’s stepdaughter, Zoilamérica Narváez, and the intransigence of the FSLN government vis-à-vis a blanket ban on abortion. The ban, which prohibits abortion even when continuing pregnancy risks the life or health of the mother or when the pregnancy is the result of rape, was introduced in 2006 under the Enrique Bolaños administration (2002-2007) with the support of the FSLN, which backed the measure as part of efforts to win over the support of the Roman Catholic Church in the run-up to the 2006 election.

• Figures

According to an 11 October report by leading Nicaraguan daily El Nuevo Diario 76 women were killed in 2012 according to police figures, while women’s rights organisations put this figure at 85. So far this year at least 64 women have been killed. Since law 779 took effect, 33,535 complaints have been registered against men by women before the national police’s women’s commissariat.

The surprise 3 March decision by Paraguay’s attorney general (AG), Javier Díaz Verón, to replace his chief anti-corruption prosecutor, Carlos Arregui, has led to intense speculation that it was a politically-motivated decision designed to shield various members of congress currently being investigated on corruption allegations. The issue has become the main political talking point in Asunción, with the government led by President Horacio Cartes under growing pressure to show that this was not the case; and that its commitment to fighting corruption is strong even when it involves going after influential figures in the ruling Asociación Nacional Republicana- Partido Colorado (ANR-PC).

As the head of the AG’s economic crimes and anti-corruption unit, Arregui was in charge of investigations into a series of corruption scandals (at least six) affecting legislators from the country’s three main political forces: the ANR-PC, the centre-right opposition Partido Liberal Radical Auténtico (PLRA) and the Frente Guasú (FG) leftist opposition coalition. These allegations were first levelled in the media in November 2013.

Official corruption has a long history in Paraguay, where it became deeply entrenched under the long military dictatorship led by General Alfredo Stroessner (1954-1989). But since the return to democracy in 1990 and the historic election defeat of the ANR-PC in 2008, things have been changing gradually and Paraguayans have grown increasingly intolerant of graft by their elected political representatives. The public reaction to the latest allegations was one of outrage; and that outrage was only exacerbated by the nonchalant way in which the allegations were first treated by congress.

After the senate narrowly voted against stripping ANR-PC Senator Víctor Bogado of his immunity so that could face investigation (as the first politician hit by the press allegations), there was public uproar. Social organisations staged mass demonstrations calling for Bogado’s impeachment, while local businesses launched a ‘civic campaign’ in which they refused to provide services to Bogado, his family and all of his 23 colleagues in the senate who had voted against removing his immunity.

This campaign against the ‘senaratas’ (‘rat senators’) was a success. After senators were booed and chased out of shops by members of the public, the senate held an extraordinary session and did an about-turn, voting on 28 November in favour of removing Bogado’s immunity. Both houses of congress also agreed to consider stripping the immunity of any other members facing formal corruption accusations after the long Christmas/summer recess (sessions resumed on 1st March).

Since then, more corruption allegations have emerged, primarily affecting ANR-PC legislators and former government officials, leading a group of ANR-PC congressmen led by Senator Enrique Bacchetta to accuse the local media of a ‘witch hunt’ against the ANR-PC. Bacchetta and his colleagues have also been highly critical of the anti-corruption prosecutors, accusing them of taking on cases to “please the press”. Bacchetta even suggested that the official anti-corruption unit itself should be investigated by congress for “poor performance of its duties”.

Suspicious changes

It was against this backdrop that soon after congress returned from recess  - and with the immunity of a growing number of legislators up for consideration - that AG Díaz ordered a reorganisation at the public ministry, as part of which Arregui was named the new district attorney for Central department. He was replaced by the district attorney for the Chaco region, Federico Espinoza. Arregui’s transfer raised immediate suspicions, after he told the press that he hadn’t expected to be moved just as he was working on a large number of important cases. He said that he would consider resigning in protest at this “demotion”.

In an official communiqué, Díaz said the changes were part of an administrative shakeup aimed at “improving the functioning of the public ministry and optimising results”. This failed to wash. Nine of Arregui’s 11 deputies signed a statement rejecting the decision on the grounds that it would “weaken the work being done by the unit and create uncertainty about the state of current investigations, especially those affecting members of the legislature”. They called on Díaz to reconsider. Díaz met with Arregui and his colleagues on 6 March to explain the changes, but afterwards declared that the decision was final.

Díaz’s refusal to reconsider prompted the Coordinadora de Abogados de Paraguay (CAP), the main association of lawyers, to issue its own public statement denouncing the decision as the clear result of “pressure exerted by certain political groups”. This was echoed by Arregui himself in tendering his resignation on 7 March. Stating that he respected Díaz’s power as AG to order his transfer, Arregui said that nonetheless he did not agree with the decision, “because I am convinced that it was influenced by political reasons… last year we opened a series of investigations that everyone knows implicates people with a lot of political influence…  I think that the Attorney General has come under pressure [from these people], that is my conclusion”.

Cue political firestorm

While Arregui and the CAP were careful not to point to any specific political group as responsible for pressuring Díaz, suspicions immediately turned to the ANR-PC. The press, along with some local social activists, have accused Senator Bacchetta of forcing the decision. Both Bacchetta and Díaz have strenuously denied the accusations (see sidebar), but a public campaign in repudiation of Bacchetta and calling for Díaz’s resignation has been launched, with a march on congress scheduled for 21 March.

All of this has been seized upon by the opposition to attack the Cartes government. PLRA Senator Carlos Amarilla declared that he was “absolutely convinced” that President Cartes himself had ordered Arregui’s removal in a bid to shield corrupt ANR-PC legislators from prosecution. Amarilla has said that he will promote Díaz’s impeachment by congress. It is unlikely that any motion to impeach Díaz would prosper, as the ANR-PC has comfortable majorities in both chambers. However, such remarks increase the pressure on President Cartes, who has made a conscious effort not to get involved in the scandal, to say something.

It also provides the PLRA and the rest of the opposition with another excuse to refuse the president’s invitation to join with him in a national political dialogue aimed at building broad-based consensus behind his proposed reform plans, amid growing signs of social discontent (see sidebar). Upon his arrival back from Chile, where he attended the inauguration of President Michelle Bachelet, Cartes said he would like meetings with the opposition parties to present the finer details of his government plan. He recently met the ANR-PC leadership [RBS-14-02] to consolidate support for his plan. But the invitation was immediately rejected by the PLRA and the FG, who said that they were not interested in listening to Cartes’ ‘monologue’, but wanted to discuss a broader agenda. Cartes may not technically need the opposition’s political support in congress, but he may need their backing should the current public discontent continue to spread.

• General strike called - On 26 February peasant farmer associations, labour unions and student unions grouped in the Coordinadora Democrática (CD) called for a national strike on 26 March in repudiation of the government’s economic policies. A statement urged other social organisations to adhere to the strike in “condemnation of the deterioration of the quality of life and the threat to the livelihoods of poor families, for the benefit of multinational corporations”. The CD wants a 25% general salary increase, a reduction in public transport fares to G$2,000 (US$0.46), and the repeal of the recently approved public-private-partnership law. Unions representing teachers, public health workers and airport workers unions have said they will join the strike.

• Díaz, Bacchetta deny accusations - At a 6 March meeting with the local Catholic Church’s Episcopal conference, Attorney General Díaz strenuously denied that he had ordered the replacement of the chief anti-corruption prosecutor, Carlos Arregui, because of political pressure. Díaz, who agreed to meet the Episcopal Conference to personally answer questions about this controversial decision, admitted that the timing may have been “inappropriate”, but he insisted that “political pressure did not play any part”. Senator Enrique Bacchetta also denied any role in Díaz’s decision, noting that Díaz himself had explained that it was an “administrative decision”. Bacchetta accused “certain sectors in the press of trying to harm me”.