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ARGENTINA | Automotive production. The Argentine federation of automobile producers (Adefa) has released a new report showing that production in the sector increased by 27% in March compared with the previous month and by 25.2% compared with March 2017. The Adefa report notes that, on the back of the March result, the sector’s production figures had increased by 20% in the first quarter of the year compared with the same quarter last year.

Meanwhile, automobile exports in March increased by 44% compared with February and by 58.2% compared with March 2017. Exports in the first quarter of 2018 increased by 42.7% compared with the first quarter of 2017.

The vast majority of automotive exports were sent to Brazil, which accounted for 70.2% of the total exports. The next largest export markets were Central America, accounting for 7.2% of all exports, and Peru (5.5%). Sales to dealers rose as well, increasing by 7.9% month-on-month and by 15.4% year-on-year. Total first quarter sales increased by 16.4% when compared with the first quarter of 2017.

URUGUAY | Inflation. The consumer price index (CPI) rose 0.28% in March compared with the previous month, the national statistics institute (INE) reported. Uruguay’s central bank (BCU) had previously predicted that the inflation rate for March would come in at 0.51%. With the March figures, the cumulated inflation rate for the year now stands at 3.9%, while the yearly inflation rate in March was 6.65%, just within the BCU’s target range of 3%-7%. The March inflation rate also marks a fall from February, when it measured 7.07% in annualised terms.

• Uruguay inflation

Fruit was the main driver of inflation in Uruguay at 1.75%, partially due to significant increases in the price of oranges (4.35%), bananas (7.34%), and apples (3.69%). Conversely, the price of vegetables and legumes exhibited the largest fall (3.77%), driven by lower prices for chard (8.30%), lettuce (6.31%), and tomatoes (16.44%). Other sectors that recorded an increase in prices include restaurants and hotels, up 0.77%, and education, up 0.58%.

BOLIVIA | Study reveals dangers of fake medicines. The results of a study released on 4 July show that up to 21% of pharmaceuticals sold in Bolivia are fake, posing a serious health risk as well as cutting the country’s GDP by 0.2% and allowing tax evasion amounting to around US$15m per year.

Some 76% of those interviewed for the study by economist Gonzalo Vidaurre were aware that they were buying contraband medicine, but 44% said they could not tell the difference between genuine products and fake ones.

Around 30 tonnes of contraband pharmaceuticals were seized by Bolivian customs in 2017 according to the study, which was supported by the Instituto Boliviano de Comercio Exterior (Ibce), a private organisation that advises the export sector, and the Confederación de Empresarios Privados de Bolivia (CEPB), an association of business leaders.

Fears that the newly-installed Mexican President Andrés Manuel López Obrador (AMLO) might seek to interfere in the financial sector appear to have been eased. In a speech at the Mexican Banking Association’s conference in Acapulco, AMLO confirmed that banking regulation would be conducted by the relevant authorities and that his government would not set banking fees.

The president’s tone seems to have moderated significantly from that of late 2018, when there was speculation that the new government might introduce tough new regulations on banks that forced them to cut banking fees. At the time, banks were concerned that this would hamper their own financial positions, since many rely on fee income for a significant share of their profits. The fact that AMLO seems to have abandoned these plans will be welcomed by many in the industry. 

The government is still likely to work towards cutting charges to the public, but AMLO has emphasised that this should be achieved through lifting financial inclusion (which has remained a cornerstone of his financial policy since taking office last December), rather than through draconian measures on banks. The logic is that if more people use traditional banking services, then banking profitability will rise as a result of greater returns on a larger deposit base. Some banks are likely to be required to offer zero-fee services, but only to low-income customers. This should have the desired effect of improving banking penetration, which is extremely low in Mexico, while at the same time protecting profit margins at financial services providers.

A fortnight after official figures revealed that Amazon deforestation increased by as much as 30% this year [WR-19-46], Brazil is expected to come under pressure at the 25^th Conference of the Parties international climate talks (COP25) which kicked off in the Spanish capital Madrid on 2 December.

President Jair Bolsonaro, who as president-elect is understood to have pressured the government led by Michel Temer (2016-2019) into pulling out of hosting the COP25 in Brazil [WR-18-48], has given countless indications that he cares little for the global sustainability agenda. Bolsonaro’s dismissal of global climate action, and indeed of efforts to meet domestic environmental commitments, has left Brazil’s reputation as a leader in international climate discussions severely discredited.

Despite the drastic shift in the government’s rhetoric on the environment under Bolsonaro, the country’s stance in the global negotiations surrounding the implementation of the 2015 Paris Agreement on climate change is understood to be, for the moment, broadly unchanged. For example, Brazil is expected to maintain its demands regarding the regulation of international carbon markets, a thorny matter in the Paris Agreement known as ‘Article 6’ and one of the main issues in discussion at this year’s COP. 

However, sources told Reuters news agency ahead of the start of the COP that Brazilian negotiators are in the dark as to what their government is seeking to achieve during the talks. This could lead to Brazilian climate negotiators reaching an agreement which would then be disavowed by the Bolsonaro government.

Environment Minister Ricardo Salles has indeed given little indication on what to expect from him during the two-week talks, although he has said that he would be looking to secure Brazil’s fair share of the US$100bn pledged by wealthy nations. According to Salles, this is because “Brazil is, certainly, of the developing countries, the one that does the most for the preservation of the environment.” 

Many would take issue with this statement. The current government has presided over an increase in deforestation, a weakening of environmental law-enforcement, and a rise in attacks against environmental defenders. With no political will for fighting climate change in the upper echelons of government, it seems that it is international pressure which is helping contain the complete dismantling of environmental frameworks in Brazil.

At the same time, this provides Bolsonaro with material for his narrative on the environment, particularly the Amazon – accusing foreign powers of interfering out of self-interest and arguing for the development of the rainforest in the name of national sovereignty. This narrative often targets NGOs, many of which report being increasingly subject to intimidation.

• Alter do Chão

On 26 November four volunteer firefighters with links to local NGOs in the Alter do Chão conservation area in the northern state of Pará were arrested, suspected of lighting fires in September and taking pictures of them to then sell to international NGOs and collect funds. The arrests caused concerns over the politicisation of this investigation, which some denounced as aiming to intimidate NGOs and criminalise their work. A judge ordered the men’s release two days later, but false reports that the World Wildlife Fund (WWF) had bought pictures from them to secure a large donation from Hollywood actor Leonardo Di Caprio gained traction and were repeated by President Bolsonaro.

Opposition lawmakers are now adding to the chorus of NGOs and civil society on the international stage. On 2 December, federal deputy Marcelo Freixo confirmed that his Partido Socialismo e Liberdade (Psol) had denounced the Bolsonaro administration for its environmental negligence and destruction before the United Nations (UN), and had requested that a mission be sent to investigate it.

Pressure is piling up from the business sector too. This week, a group of over 80 global investors and corporations that buy or use Brazilian soy signed an open letter outlining the importance of the Amazon Soy Moratorium (ASM), a voluntary agreement reached in 2006 according to which signatories only buy soy produced on existing agricultural land in the Amazon, and which some Brazilian producers are reportedly trying to end with Bolsonaro’s support. “If the ASM is not maintained, this will risk our business with Brazilian soy,” the letter reads.

Mexico’s federal transport ministry (SCT) announced on 10 August that it would cap the rates charged by railway companies in an effort to curb the increase in inflation, particularly of basic foodstuffs that are distributed by train, such as corn and wheat. The government said the measure would reduce costs by setting maximum fees for users – rather than giving companies free rein over rates - in order to prevent them from passing those costs on to consumers, but doubts remain as to its efficacy.

Although there are seven freight companies operating in Mexico, the system is dominated by two: Ferromex (owned by mining giant Grupo México) and KCSM (a subsidiary of the US-owned Kansas City Southern). On average Ferromex and KCSM charge users’ rates of US$0.79 per tonne-km (tkm), which is more than double the average charged by companies in North America, at US$0.35 per tkm.

Industry specialists and academics have long argued for the need to reform the sector in order to make it more competitive – including reducing the rates charged by railway companies. However, the decision is only likely to have a very limited impact in reducing food inflation. Importantly, according to the Mexico’s railway association (AMF), the high costs of transporting grain is a result of the relatively small volumes carried, particularly compared to the amounts that are moved by road. The quantity of white corn used for tortillas that is transported by road, for example, is eight times larger than the volume moved by railway.

The decision to cap the rates was taken under the government’s anti-inflation plan (Pacic), which was launched in May to curb price increases for a set of 24 essential items, including many food items. Despite government efforts, however, food inflation has continued to rise. According to the national statistics institute (Inegi), the national consumer price index (INPC) increased by 8.62% year-on-year in the first fortnight of August. This was slightly above expectations and the highest increase since December 2000.

Fortnightly Consumer Price Index (CPI), food and agricultural components
Year-on-year increases January 2021 to August 2022

Source: INEGI

The main factor behind this rise in inflation was agricultural products, as this component of the index rose by 14.5% year-on-year, largely as a result of increases in the prices of inputs used by produce growers, such as fertilisers and energy, as well as poor weather conditions in Mexico and other regions. This means that food inflation is unlikely to fall within the short-term. Indeed, some analysts estimate that prices may continue to rise well until the end of the year.

For a long time Argentine mining executives looked enviously across the Andean cordillera to their western neighbour. Chile is the world’s leading copper producer and third-largest lithium supplier, making it a major player in the global energy transition. Argentina produces virtually none of the red metal and only a quarter of the white powder used in batteries, despite having the same potential.

But that may be changing. For one, there’s the market-friendly government under President Javier Milei, which has adopted generous tax incentives to attract investment. Then there is a surge in global interest for strategic metals. That and its considerable metal reserves are putting Argentina on the radar in boardrooms and government halls alike. “The country has vast resources of lithium and copper that remain untapped,” S&P Global said in a recent report.

US accord

On 23 August the US and Argentina signed a Memorandum of Understanding (MoU) to strengthen cooperation on critical minerals that should pave the way for investment in mining of copper, lithium, nickel, and cobalt, as well as less known elements such as cerium and europium. The MoU is part of the broader Minerals Security Partnership (MSP), the global initiative launched by the US in 2022, to help reduce western economies’ reliance on China for these key resources.

As the US is looking to shift its supply chains away from China, it is also competing directly with Chinese firms for the same resources in Latin America.  Yongqing Technology Co Ltd, a subsidiary of Chinese mining company Tsingshan, is investing US$233m into a new lithium plant in Antofagasta in Chile, and BYD, the world’s largest EV maker, is building a US$290m lithium cathode factory in the same region.

Only weeks before the accord with the US, mining giant BHP and the Swedish-Canadian mining firm Lundin waded into the Argentine copper industry with a US$3.25bn buyout of Filo Corp that gives them access to the high-grade Aurora Zone at the Filo del Sol copper project in Atacama, on Chile’s border with Argentina, and creates synergies with Lundin’s Josemaria copper mine only 10km away, in the Argentine province of San Juan.  

Big league

The deal could turn out to be the tip of the iceberg in a stream of foreign investments that could convert Argentina’s copper industry into one of the world’s top 10 producers.

In total there are eight copper mining projects in the pipeline with total output capacity of around 1.2m tonnes, according to the industry group Cámara Argentina de Empresas Mineras (CAEM). Most of them are in the province of San Juan, two in Catamarca, and one in Mendoza. To get them off the drawing board, they would require a massive investment of US$22.3bn, which raises the question of whether investors have that sort of confidence in the country.

On paper Argentina is a relatively attractive destination for global mining companies with lower tax rates, better ownership rights, and fewer restrictions on foreign companies. In the so-called Lithium Triangle, its net smelter royalty of 3% is considerably lower than that in neighbouring countries Bolivia and Chile. 

Challenges

But one of the reasons that mining never really developed in the country is because of its extremely volatile economic and political situation, including nine defaults in its history and the most years of negative growth, except for Syria and Libya, in the past 74 years.

While the Milei administration has made significant strides in improving the country’s investment climate, it reached a bit of a plateau in terms of cutting inflation further and accumulating additional foreign reserves. That may delay the government’s objective of lifting foreign exchange restrictions, a precondition for foreign companies to freely take returns on their investments back out of the country.

Milei said that one of the conditions to do away with currency controls would be for inflation to fall to the same rate of the government-fixed depreciation of the peso. That would presumably indicate that the peso is fairly valued because prices on domestic goods and on imported goods would be losing value at the same rate. Even though monthly inflation at around 4% is nearly twice the 2% depreciation rate, some analysts believe that if all goes well, foreign exchange restrictions could be lifted by early next year.

If not, Milei’s hotly debated investment incentive plan (RIGI) and the prospects for the country’s copper mining industry could fall short of expectations. “The RIGI is a framework that begins to change the business environment, but the prospect of lifting the exchange rate restrictions is essential,” Natacha Izquierdo, director at the Buenos Aires-based consulting firm ABECEB, said at a mining industry event in August.

On 1 March a Venezuelan coastguard vessel entered Guyana’s exclusive economic zone (EEZ), approaching FPSO Prosperity, an oil rig operated by US firm ExxonMobil, and demanding information from its crew. This led to a new surge in diplomatic tension between the two countries over the oil-rich Essequibo region, which lies within Guyana’s internationally recognised waters but is claimed by Venezuela.

Guyana’s government reacted by condemning the incursion and mobilising the air force, while reiterating its commitment to find a peaceful settlement to the longstanding dispute over the Essequibo, a 160,000km² area that Venezuela has historically claimed as its own. The Caracas government denied that the Venezuelan vessel had entered Guyana’s EEZ, alleging that the encounter took place in a “maritime zone pending delimitation in accordance with international law”.

The incident has had various ramifications. Guyana’s President Irfaan Ali has briefed Caribbean Community (Caricom) members who have supported his country’s long-standing call for the Essequibo dispute to be adjudicated by the International Court of Justice (ICJ). In contrast, citing a 1966 agreement with the UK, which was then the colonial power in Guyana, Venezuela favours a renegotiation of the dispute.

In the last few years Venezuela has made various aggressive attempts to assert sovereignty in the disputed area. Backed by a December 2023 referendum it declared the creation of a new Venezuelan state named Guayana Esequiba in the disputed area. Venezuela’s national electoral council (CNE) has announced plans to elect a governor and local deputies for the ‘state’ in Venezuela’s 25 May regional and municipal elections, despite the Essequibo remaining under full Guyanese control.

President Ali says this is in direct contradiction to ICJ rulings asking the parties not to innovate. He also claims it violates the spirit of the Argyle Accords, reached in December 2023 between the two countries, in which they pledged to de-escalate tensions and avoid the use of force.

One not insignificant factor in the rising tension is the presence of large oil and mineral resources in the Essequibo. However, a US think tank, the Center for Strategic and International Studies (CSIS), highlights other factors as well. One is that the claim to the Essequibo has cross-party support in Venezuela, and for an unpopular government helps create a “rally round the flag effect” among the armed forces and Maduro’s political base.

Another is that it might provide a bargaining chip in Venezuela’s evolving relationship with the US, at a time when President Donald Trump is increasing pressure on Maduro by ratcheting up sanctions, deporting Venezuelans, and threatening tariffs on Venezuela’s remaining oil buyers.

“We must decisively open the door to greater trade between our regions” said Caribbean Community (Caricom) Secretary-General Carla Barnett while attending the AfriCaribbean Trade and Investment Forum in Grenada at the end of July.

Despite powerful historic and cultural links, Africa and the Caribbean do little together in the way of trade and investment. The share of bilateral out of total exports has never surpassed 6% for either region according to a study by Pan-African multilateral financial institution Afreximbank and the International Trade Centre, the joint agency of the United Nations (UN) and World Trade Organization (WTO).

According to the same study, African exports to the Caribbean declined since 2014 and have hovered around 0.1% of the total since 2020. Caribbean exports to Africa have been volatile jumping from 0.8% of the total in 2020 to 2.3% in 2022. This comes as the Caribbean, with its smaller and import-dependent island economies, is particularly vulnerable to uncertain global trade: US President Donald Trump has slapped a 10% tariff on all Caribbean’s exports. The US takes around 40% of total Caribbean exports.

That said, Caricom sees an opportunity for diversification and improvement. According to the same study, it is feasible to target a near-tripling of bilateral trade over the next five years, from US$729m to US$2.1bn. This could be achieved by slashing trade barriers (Caribbean rum, for example, faces an 88% tariff in African markers) and investing in higher-value products such as minerals and metals, processed food, manufactures, travel and transport, and creative industries.

In Grenada, Barnett argued that stronger bilateral trade would be beneficial for the Caribbean countries, reducing reliance on the US and Europe. Caricom had already cooperated with African countries to seek slavery reparations from former colonial powers and compensation from climate change effects. The Grenada forum reportedly attracted 1,700 delegates while at its sessions, over US$290m worth of business and cooperation deals were signed.

US President Donald Trump signed an executive order (EO) on 1 May extending economic sanctions against Cuba. It covers activity in energy, defence, mining, financial services, and security. This was followed on 7 May by a first list of individuals and companies in those sectors that are being specifically targeted.

A significant departure in the new regulations is that foreign companies and individuals who trade with Cuba in these are now themselves at risk of attracting US sanctions. Among the domestic entities initially singled out under the US regulations are Grupo de Administración Empresarial SA (Gaesa), the state-owned military conglomerate, which controls much of Cuba’s economy, which reportedly represents 40% of GDP, and Ania Guillermina Lastres Morera, one of its directors. Announcing the measures US Secretary of State Marco Rubio said the company represented “the heart of Cuba’s kleptocratic communist system”. Another group on the US sanctions list is Moa Nickel (MNSA), a mining joint venture between Cuba and Canadian company Sherritt International.

Lee Schlenker, a research associate at the US think tank Quincy Institute for Responsible Statecraft, was cited by the Associated Press in an 8 May report as saying that foreign companies operating in the island now face the risk that their US assets may be frozen, as well as those of their shareholders, investors, or employees. “This is bound to have an extremely significant impact on the presence of foreign companies in Cuba,” he says.  

On 7 May, Sherritt, which has headquarters in Toronto, said it had taken the decision to halt participation in joint venture activities in Cuba because of the US sanctions announcement. It has operated in Cuba since 1991 and is regarded as one of the main foreign investors in the country with interests in nickel and cobalt mining, and in power generation.

Cuba’s response

The Havana administration reacted angrily to the latest round of sanctions applied by the US, with Cuba’s foreign minister, Bruno Rodríguez, decrying them as “unilateral”, “coercive”, and “collective punishment”.

BRAZIL | Fitch cuts 2012 forecast to just 1.5%. The rating agency Fitch has cut its real annual GDP forecast for Brazil in 2012 to just 1.5%, shaving a full percentage point off its previous forecast of 2.5%. It expects inflation to remain above 5%. Fitch notes that Brazil is the worst performing of the BRICS group  this year, well behind China (7.8%), India (6%) and Russia (3.5%), but it expects Brazilian growth to rebound to 4.2% in 2013 after “a cyclical trough”. That is still below its original forecast of 4.5%, however.

BRAZIL | Fiesp indicator downbeat on industrial activity. The indicator of manufacturing sector activity (INA) compiled by the São Paulo Confederation of Industries (Fiesp) fell 0.3% month-on-month and a sharp 7% year in August, the Fiesp reported. The rolling 12-month figure was -5.3%, while it fell 6.6% year-on-year in January-August 2012. Industrial capacity utilisation in  São Paulo was 81.1% in August, down from 82.4% a year earlier. Yet industrial sector confidence rose to 52.3 points in September, up from 50.5 in August (anything below 50 points indicates negative sentiment), suggesting that the government’s array of stimulus measures are feeding through. Overall, however, even the government now acknowledges that this year’s cyclical lull in Brazil went deeper than expected and is taking longer to recover.

Brazil’s Vale SA, the world’s third-largest mining company, said in August that its second-quarter profits had slumped by 84% year-on-year to reach US$424m, significantly below market expectations. But executives remain relatively optimistic.

The profit slump was attributed to lower revenue from iron ore production, and to big currency losses, triggered by the depreciation of the Brazilian Real against the US dollar – a fall of around 10% during the quarter.  The company said it lost almost US$2bn on its net financial liabilities, plus further ‘one-off’ losses of US$814m in forward and swap derivatives. The weaker Real has pushed up the cost of servicing dollar-debts.

While the short-term impact is certainly painful, in the medium to long term a weak Brazilian currency may actually be a good thing for Vale’s profit margins. Company officials have explained that most of its big new projects are located in Brazil, and the effect of a weakening Real is to reduce capital costs in dollar terms. The project to expand the Carajás iron-ore mine in the Amazon, code-named S11D, is estimated to cost around US$19.7bn to 2018, based on an exchange rate of BRL2.00/US$. To the extent that the Real has weakened beyond that level (the currency stood at BRL3.30/US$ in early September, its weakest level in four years) the dollar-denominated capital cost of S11D reduces relative to the first estimate. Vale said Real-denominated expenditure represented around 90% of S11D, and the savings were not yet reflected in its capital expenditure numbers. Apart from a US$6.5bn coal and infrastructure project in Mozambique, most of the company’s future capex is in Brazil.

Currency problems aside, company executives do not seem too worried over the effects of slower growth in China, which according to some analysts is bringing the commodities and metals boom to an end. Vale said lower iron ore revenue was in part caused by softer prices, but also reflected a fall in production because of bad weather in Carajás. Iron ore output fell 6.5% y-o-y to 140.8m metric tons in the first half of 2013. But José Carlos Martins, executive director of ferrous and strategy, pointed out “in this third quarter it is going very well, and we are confident that we are going to arrive at the number we have project of 306m tons of iron ore this year”. Executives said that despite slower growth in China, market factors such as that country’s continuing urbanisation and related housing and construction activity indicated “strong support for prices at around US$110 a metric ton”. Chief Executive Murilo Ferreira noted: “Two years ago China produced 683m tons of steel, and this year everything indicates it will produce 780m tons. So once again, China has proven pessimists wrong.”

ARGENTINA-CHILE | Historic fishing fine. On 12 April Argentina’s agriculture, fisheries and agro-industry ministry issued a statement denouncing the fishing by Chilean firm Empresa de Desarollo Pesquero de Chile S.A (Emdepes) in waters near the Falkland Islands (Malvinas), which Argentina claims as its territory, without permission.

The ministry said that it was alerted to the infraction by Juan Banegas, a former head of operations at the Argentina-based Empresa Pesquera de La Patagonia y Antártida S.A. (Pesantar), which is owned by Japanese holding firm Nissui, which also owns Emdepes and has been operating in Argentina and Chile for over 20 years.

According to the ministry, back in 2014 Banegas accidentally received an email from Empedes, which included details of the Chilean fishing boat Unión Sur’s license to operate in Falkland waters granted by the British government. Argentine legislation does not recognise licenses issued by the British government to fish in these waters and it also bans the simultaneous use of Argentine and British fishing licenses to operate in South Atlantic waters. The ministerial statement noting that this carried a fine pursuant to Argentine federal law of up to Ar$10m (US$690,000).

After corroborating the information provided by Banegas with the naval prefecture, the ministry decided to apply the maximum fine on Emdepes, which has agreed to pay. This is the first fine of its kind issued by Argentina, setting an ominous precedent for all other fishing firms operating in the area.

This threat has been further accentuated after, on 11 March, the United Nations Commission on the Limits of the Continental Shelf (CLCS) granted Argentina ‘coastal state’ status, meaning that it can claim extended maritime sovereignty beyond the 200-mile coastal limit. The decision expands Argentina’s territorial waters in the South Atlantic by 1.7km², or 35%.

URUGUAY | Stagnant growth. Fresh from the publication of the most disappointing economic growth figures in the last 13 years, Uruguay’s embattled President Tabaré Vázquez is now wrestling with natural disasters.

The economy grew by a mere 1% in 2015 on the previous year, and contracted by 0.1% year-on-year in the final quarter, according to Uruguay’s central bank (BCU). To compound the government’s problems, flooding in the River Plate basin has affected the sowing of soya, and a poor harvest is expected this year, which would shave a few more percentage points from GDP growth.

On top of this a tornado struck the city of Dolores in the western department of Soriano on 17 April killing four people. Vázquez visited the area, and the government later announced the creation of a national disaster-response body.

• Argentine fishing dispute

In mid March Argentina’s coast guard sank a Chinese fishing boat that it claimed was fishing illegally within Argentina’s exclusive economic zone near Puerto Madryn on the coast of northern Patagonia.

President Nicolás Maduro’s government made two further attempts to repair its relations with regional neighbours this week, announcing a prisoner exchange with the US and hosting a meeting between the Colombian government and the Ejército de Liberación Nacional (ELN) guerrilla group. The Venezuelan actions delivered political dividends to US President Joe Biden, who was able to announce the release of seven prisoners widely viewed as hostages, and to Colombia’s President Gustavo Petro, who moved one step closer to his objective of “total peace” with the announcement that formal peace talks with the ELN would restart. Yet the ultimate reward for Maduro – a lifting of international sanctions on Venezuela – remains a long way off.

The prisoner exchange, announced on 1 October, saw seven US citizens released in exchange for the return to Venezuela of two nephews of First Lady Cilia Flores – Efraín Antonio Campo Flores and Franqui Francisco Flores de Freitas, who in 2017 were both sentenced to 18 years in prison for drug trafficking. The released US prisoners included the five remaining ‘Citgo 6’ detainees – executives of Citgo, the US subsidiary of Venezuela’s oil company Pdvsa, who since 2017 have been held in Venezuela on corruption charges.

Those five – Jorge Toledo, Tomeu Vadell, Alirio Zambrano, Jose Luis Zambrano, and Jose Pereira – were widely viewed as pawns in the standoff between the Maduro administration and the US, with their detention conditions reportedly deteriorating at moments of particularly high bilateral tensions. The other two US citizens released were Matthew Heath, a former Marine detained since 2020 on terrorism charges, and Osman Khan, who was arrested in January this year for illegally crossing the border from Colombia.

A statement from the Venezuelan government said that the prisoner exchange was “the result of different conversations held since 5 March with representatives from the US government”. US and Venezuelan officials have held at least two secretive meetings this year – the first of which was widely interpreted as a possible move towards lifting sanctions on Venezuela’s oil sector [WR-22-10], and the second of which resulted in the release of another Citgo executive, Gustavo Adolfo Cárdenas [WR-22-26].

The apparent shift in these discussions from energy policy to prisoner releases suggests that the Biden administration decided it was not politically expedient to loosen sanctions on Venezuela while US citizens were held in allegedly unlawful detention there. The release of a further seven US detainees may therefore remove one obstacle to discussions regarding a lifting of sanctions.

Leyva meeting

President Maduro met Colombia’s Foreign Minister Álvaro Leyva in Caracas on 4 October, in what was Maduro’s first meeting with a high-ranking member of the Petro administration. No specific details on Leyva’s visit were made public other than a tweet by Venezuela’s foreign minister, Carlos Faría, who said that he was working with Leyva “to advance the agenda designed by our presidents”.

ELN peace talks to resume in November

Three days later the Maduro administration’s diplomatic offensive swung back to Colombia, with which relations have rapidly thawed since the inauguration of President Petro in August [WR-22-39]. The Venezuelan government hosted a meeting in Caracas between Colombian officials and the ELN leadership, which resulted in both sides pledging to resume formal peace negotiations in early November. Talks will pick up where they left off at the time of their suspension in 2019 by Petro’s predecessor, Iván Duque (2018-2022).

Venezuela, already signed up as a guarantor country in the talks alongside Cuba and Norway, also looks likely to host some of the negotiations, with delegates from the ELN saying that talks would rotate between the guarantors.

PANAMA | S&P reaffirms investment grade. On 22 September international credit rating agency Standard & Poor’s (S&P) reaffirmed its ‘BBB-’ long-term and ‘A-3’ short-term foreign and local currency sovereign credit ratings on Panama. S&P forecasts growth of 4.5% in 2026, “one of the fastest rates among Latin American peers”, which alongside a proactive fiscal policy is helping to reduce the country’s fiscal deficit and “stabilising public finances”. However, S&P says that net general government debt, which it expects to stabilise at about 55% of GDP, and external debt remain at record-high levels.

In November 2025 another credit-ratings agency Moody’s affirmed Panama’s long-term rating at Baa3, also within investment grade, but with a negative outlook, while another credit-ratings agency, Fitch, stripped Panama of its investment grade in March 2024 in response to the shuttering of the country’s biggest mine, Cobre Panamá, in 2023.

VENEZUELA | Acumulando deuda. La asamblea nacional ha aprobado una ley que casi llega a doblar la deuda pública que puede emitirse este año. El Presidente Chávez ratificó la ley, bajo la cual el gobierno podrá emitir un adicional BF45bn (US$10,4bn) de deuda, para agregar a los BF52bn ya aprobados este año. El gobierno afirma que unos US$2,33bn serán usados serán usados para cancelar la deuda y el servicio de la deuda, mientras que lo restante financiará su ambicioso programa de vivienda, creación de empleo y la nueva Misión AgroVenezuela, que provee asistencia a los agricultores para estimular la producción agrícola.
El Vicepresidente Elías Jaua dijo que el gobierno podía emitir este nivel de deuda porque había confianza en la economía. La coalición opositora Mesa de la Unidad Democrática (MUD) denunció la emisión de deuda como peligrosamente despilfarrador. Y afirmó que los altos precios del petróleo deberían ser suficiente para cubrir el gasto del gobierno: el presupuesto está basado en un precio del barril de US$40; y está actualmente alrededor de los US$100 por barril. La MUD se queja que el gobierno está perdiendo el control de la realidad, y eleva el gasto público en un esfuerzo por comprar su reelección en diciembre de 2012.

In 2011 the country’s trade deficit increased by 20.3% to US$4.8bn, thanks to an 18% increase in exports and a 19% increase in imports.

Export receipts came to US$5.3bn compared with US$4.49bn in 2010. The main reason for the jump was the decent performance of traditional (commodity) exports which are dominated by coffee (US$464m out of US$597m). Non-traditional exports were up by 16% at US$3.5bn in 2011.

The most promising development was the increase in non-traditional exports to Central America which were up 20% at US$1.9bn.

Imports in 2011 rose to US$10.1bn, up from US$8.5bn in 2010. One big reason for the increase was a 26% jump in the oil import bill to US$1.7bn.

Remittances: The inflow of remittances in 2011 was up 6.4% year-on-year at US$3.65bn.

Power consumption: Demand for energy rose 2% in 2011 demonstrating the weak state of the economy which officially grew just 1.4% in 2011. Domestic consumption dropped, according to AES El Salvador, but industrial demand increased by 4%. In 2010, domestic energy consumption fell by 2.5% and in 2011 the drop was 1%, AES reported. AES, which owns four electricity distribution companies, reckons that it controls about 80% of the electricity market. Its only competitor, DelSur, reported that its electricity sales in 2011 were up 4.2% in the first 11 months of 2011. AES said that the drop in consumer demand was probably due to higher prices and a change in the subsidy scheme which focused subsidies on smaller users. Currently, only those who use less than 200Kilowatt hours (kwh) a month and other fuel subsidies are linked to this index of consumption.

*** Further blow to Egypt’s tourism sector as economy languishes.  One indisputable victim of the Egyptian revolution has been its tourism industry.  At its peak, the tourism industry brought 15m visitors a year to Egypt.  This is now down to about 3m.  The latest blow has been the announcement by the Muslim Brotherhood-dominated government that licenses to sell alcohol in Cairo, Alexandria, and other large cities will not be renewed as they fall due.  For the moment, tourist centres such as Sharm al-Sheikh will not be directly affected, but the whole tourism industry is suffering not just from falling visitors but also from lack of confidence.  No one is investing in the industry because of the uncertainties.

The ruling Muslim Brotherhood seems to believe that it can weather the economic storm, mostly with the help of subventions from Qatar, one of the main backers of the post-Arab Spring rise of the Muslim Brotherhood.  But moves that further damage the tourism sector are far from helpful, and talks with the IMF to conclude a $4.8bn loan agreement remain frozen.  An agreement with the IMF could lead to a further $12bn in funding from the World Bank, the European Union, the US, and the Gulf.

The problem with the IMF talks is that any agreement will require the government to implement cuts in subsidies and other austerity measures, but the government cannot contemplate these ahead of new elections due in April or May.  Nevertheless, it does accept the eventual need for them, according to national security adviser Essam Haddad.  Haddad says: “It is very well known by the IMF that nobody would do such an action just before the elections.  However, our message is very clear.  These reforms are essential for the economic recovery.  There is no other choice.”

In the meantime, Iran senses an opportunity in Egypt’s economic distress.  In its 20 February edition, the hard-line Keyhan daily argued that Egypt will be “passing through a transitional phase that will last for at least 2 to 3 years”.  During this phase, the paper says, Egypt will not be able “to make definite decisions regarding its relations with Iran”.   However, the hardline paper adds, “Egypt needs help in trade and economy and at the same time has an important market.  The US, Europe and Saudi Arabia are not helping.  Iran can penetrate this market in a subtle way.  If we manage to link the economies of the two countries, it would be possible to gradually take steps in the political arena as well."

*** Al-Qaeda “training recruits in Tunisia”.  Algerian sources say that Al-Qaeda in the Lands of the Islamic Maghreb (AQLIM) is training as many as 5,000 recruits in southern Tunisia.

POLITICS | Opposition complains again about Guyana oil exploration. Venezuela’s opposition Mesa de la Unidad Democrática (MUD) on 30 September reiterated its long-running complaint that the Caracas government is turning a blind eye for political-ideological reasons to neighbouring Guyana’s land and sea oil exploration in the disputed border region of Essequibo. The latest complaint follows a 28 September statement by Guyana’s minister of natural resources and the environment, Robert Persaud, who in a press briefing told local media that the oil companies Anadarko and Esso, both of which have exploration concessions in Guyana, are “actively engaged” in offshore exploration activities. Persaud said that the activities of one of those companies (he didn’t say which) is sufficiently advanced that it is about to make a decision on mobilising a rig to begin drilling. He also said that the ‘Polarcus Asima’ a state-of-the art vessel recently deployed by Spain’s Repsol in the eastern Guyana offshore Kanuku Bloc, is now taking seismic 2D and 3D surveys in the area. Persaud added that other companies are similarly engaged in the area. “So at any one time we will have three or four of those companies carrying out various forms of exploration work, all in our quest to tap into and realise the hydro-carbon potential of our offshore areas”, he stated. In June 2012 the MUD issued a formal note of protest rejecting fresh concessions awarded by the Guyanese government off the coast of Essequibo, where Exxon Mobil and Shell have long been present. Guyana has also awarded mining concessions in Essequibo, which is rich in minerals like gold, diamonds and bauxite. Venezuela’s late president Hugo Chávez (1999-2013) took a conciliatory stance on this historical territorial dispute, including bringing the energy-import dependent Guyana into his regional discount oil scheme Petrocaribe. His successor Nicolás Maduro has continued with this approach.

Last week a local court found an activist of the indigenous Mapuche guilty of the murder of a retired couple in January 2013, in the southern Araucanía region, where the Mapuche lays claim to ancestral lands. The attack had sparked violent unrest [WR-13- 01]. While stopping short of finding the attack a terrorist act - as requested by the government of President Sebastián Piñera - the court ruling has focused attention back onto the Mapuche issue and renewed calls from civil society groups, like Centro de Investigación y Defensa Sur, for President-elect Michelle Bachelet, who takes office on 11 March, to revoke the anti-terrorism legislation altogether.

On 20 February, the court in Temuco, Araucanía’s capital, found Celestino Córdova guilty of the murders of Werner Luchsinger, a landowner and wealthy forestry businessman, and his wife Vivianne McKay [WR-13- 01]. With Córdova due to be sentenced on 28 February, the court’s decision not to find him guilty of terrorism, which, as per a law dating back to the dictatorship of General Augusto Pinochet (1973-1990) would have resulted in higher penalties, was nonetheless a setback to the Piñera government.

The Chilean government came in for criticism from the UN last year vis-à-vis the Mapuche issue as well as the anti-terrorism law (see sidebar). The latest case has again focused attention on Bachelet’s pledges regarding both issues, neither of which receive much coverage in her manifesto. As regards the anti-terrorism law, Bachelet pledges to both refrain from applying it to indigenous groups lobbying for “social demands” and to modify it to bring it into line with “international standards”. Her pick for the interior portfolio, Rodrigo Peñailillo, has already indicated the future government’s intention of sticking to this line – a position which has met with criticism from President Piñera. On 24 February, following his first meeting with current Interior Minister Andrés Chadwick as part of the transition of power, Peñailillo told reporters that “we believe that the anti-terrorist law is not there to resolve the country’s social conflicts”, adding that “the law as it stands in Chile has the necessary force to resolve, investigate and sanction” in relation to the indigenous conflict.

Bachelet is promising to establish a commission of representatives from “Chilean society and the indigenous sector” tasked with investigating complaints of violence and police abuse against indigenous communities, particularly those affected by tension in Araucanía. Her manifesto states that within six months of its establishment, the commission will present recommendations to the government to address these complaints.

New row with Peru

The first meeting of technical delegations from Peru and Chile took place on 17 February in the Chilean town of Valparaíso to implement the accord struck by both countries 11 days earlier to establish the exact coordinates of the new maritime boundary set by the International Court of Justice (ICJ) [WR-14-04]. Headed up by Chile’s ambassador to Peru, Patricio Pozo Ruiz, and Peru’s border director, Manuel de Cossío Kluver, the two sides agreed on key points necessary for the process of determining the new boundary: technical details; logistics; methodology; and flights to carry out aerial surveys. Those present also scheduled three further follow-up meetings – one in Arica, Chile on 12 March, one in Ilo, Peru on 19 March and a final one scheduled to take place in Lima on 24 March.

These signs of cooperation, however, come amid a diplomatic row after the Peruvian government published a map showing a small 3.7 hectare triangle of land, upon which a border marker sits, as Peruvian territory, prompting Chile’s foreign minister Alfredo Moreno to announce on 12 February that his government would send an official protest note.

• UN criticism

Last year United Nations (UN) Special Rapporteur on Human Rights and Counter-Terrorism, Ben Emmerson, paid a 14-day visit to Chile where he criticised the State for its handling of the Mapuche issue. He singled out the use of the anti-terrorism legislation, which he said had “been used in a manner that discriminates against the Mapuche […] it has been applied in a confused and arbitrary fashion that has resulted in real injustice, has undermined the right to a fair trial, and has been perceived as stigmatising and de-legitimising the Mapuche land claims and protests”. Emmerson also attributed the “extremely volatile” situation in the regions of Biobío and Araucanía, which he visited, to “the misuse of the counter-terrorism legislation” in the context of what he described as “an inexcusably slow process of ancestral land repatriation”.