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Just weeks before The Bahamas was spared the worst attentions of Hurricane Irma, Moody’s ratings agency refrained from stigmatising the country with another downgrade. Both were near misses, and Moody’s has put The Bahamas on notice that any significant economic underperformance will have consequences. Luckily Irma does not appear to have caused any major damage to the country’s all-important tourism infrastructure.

The main problem for the newish Free National Movement (FNM) government led by Dr Hubert Minnis is the fiscal chaos it inherited from the Progressive Liberal Party (PLP) administration that it ousted on 10 May. In an address to the nation on 26 July, Prime Minister Minnis said that “five years of gross mismanagement and incompetence” by the PLP government had left the country struggling to ward off another downgrading by the international credit-rating agencies. The country’s sovereign credit rating had been downgraded by Moody’s in August 2016, from Baa2 to Baa3, with Standard & Poor’s marking it down to sub-investment-grade level in December 2016.

The prime minister backed up this warning by announcing that spending in certain ministries was to be cut by 10%, that he would institute a hiring freeze, and that no contracts exceeding US$100,000 would be renewed. A special committee to advise on state-owned enterprises would be appointed.

Finance Minister Peter Turnquest revealed that while the previous government had projected a fiscal deficit of US$100m the actual figure would be more than US$500m. He said that the government would have to borrow US$722m in order to cover the fiscal deficit and to finance the government’s commitments for the upcoming fiscal year.

Three weeks before the prime minister’s address to the nation, Moody’s had announced that it was putting The Bahamas’ Baa3 rating on review for a downgrade. Announcing the review, Moody’s said: “The decision to place the ratings on review was prompted by official statements that the Bahamas' fiscal position was weaker than previously estimated and that the government's debt ratios will continue to worsen over the coming years. This diverged from Moody's expectation that the government's debt ratios would stabilize in fiscal 2017, thus supporting the Bahamas' Baa3 rating and stable outlook.”

Topically, given the glancing blow from Hurricane Irma, Moody’s referred back to the damage done by Hurricane Matthew in October 2016 as a contributory reason for the review. It said that costs associated with rebuilding work was one of the reasons for additional fiscal slippage during the election year. It said: “The Bahamas' government debt/GDP ratio has risen to an estimated 72% of GDP in 2016/17 from 55% in 2012/13. This is higher than Moody's previous expectation that the debt ratio would stabilize below 70% of GDP, given a recovering, albeit still weak, economy.”

On 25 August, Moody’s announced that the result of the review was a reprieve, based on the fact that “The Bahamas' credit metrics remain in line with Baa3 peers, with GDP revisions supporting an improvement in quantitative metrics”.

The agency argued: “The authorities anticipate a substantial reduction in the deficit this year, compared to the deficit for FY 2016/17, which Moody's estimates was around 7% of GDP. Last year's deficit was elevated due in good part to one-offs related to reconstruction costs after Hurricane Matthew and election-related spending. For the current fiscal year, official projections place the deficit closer to 2% of GDP. Even though Moody's anticipates a more gradual deficit reduction, our projections indicate the deficit could be consistent with values we estimate would stem the upward trend in debt ratios during previous years.”

However, despite the reprieve, Moody’s maintained the negative outlook on the grounds of “potential downside risks to the fiscal consolidation process posed by weaker-than-expected growth, exposure to climate-related shocks in the form of hurricanes, and implementation risks associated with measures to rein in expenditure growth and enhance revenues”.

At the time, Moody’s wasn’t to know that Hurricane Irma was less than two weeks away from potentially fulfilling its gloomy warming about climate-change risks. Hurricane Irma raged into Bahamian waters as a Category 5 hurricane on 7 September and smashed into Ragged Island in the southeast. Ragged Island has a population of around 70 people, 50 of whom were evacuated before the storm hit. The other islands in the southeast affected were Mayaguana, Inagua, Crooked Island, Acklins, and Long Cay, but the damage to these seems to have been relatively light, and the rest of the archipelago, including the main population centres and tourist resorts, were not hit directly.

A policeman on Inagua reported that the island had been “very, very lucky”. There was “some roof damage” and about 20 utility poles were down, but there were no injuries or loss of life, and the airstrip was undamaged. Crooked Island residents reported much the same experience: some roofing and building damage, but the airport was undamaged.

Hurricane Irma

Hurricane Irma caused severe, and in places catastrophic, damage in the Caribbean as it transited Antigua & Barbuda, St Kitts & Nevis, Anguilla, Saint Martin/Sint Maarten, and the British and US Virgin Islands. It also caused damage to Puerto Rico, the Dominican Republic, and Haiti as it passed to the north of these islands. The Bahamas evacuated six of its southerly islands ahead of the hurricane. The German-based Centre for Disaster Management and Risk Reduction Technology (CEDIM) assessed the likely level of damages as follows: SKN, US$80m; St Barts, US$780M; Saint Martin/Maarten, US$2.5bn; Antigua & Barbuda US$215m; Anguilla, US$290m; US Virgin Islands, $2.4bn; British Virgin Islands, US$1.4bn; Puerto Rico, US$800m.

PLP continues to struggle

As The Bahamas’ FNM government struggles with the legacy bequeathed to it by the PLP, the PLP itself is struggling with the consequences of losing power and the damage done to its reputation by serious allegations of corruption against leading members of the party. In the 10 May general election, the PLP’s representation was reduced to just four seats. Arguably as serious as the loss of political power is the damage done to its reputation by the arrest of three former PLP members of parliament. Two former cabinet ministers, Shane Gibson (former labour minister) and Kenred Dorsett (former environment minister), have been charged with various bribery and extortion offences, along with Frank Smith, another former MP who was head of the Public Hospitals Authority.

The new leader of the PLP, Philip Brave Davis, maintains that the men are the victims of a witch hunt, but he cannot deny the seriousness of the crisis for the PLP. He has called a party convention for 22-25 October at which he is hoping to begin the fightback. Talking about the significance of the convention, Davis said: “It is to remove any doubts as to where the party wants to go and in determining leadership to assist in crafting the way forward.”

Back in November, the International Monetary Fund (IMF) concluded its latest Article IV Consultation with Suriname with some firm recommendations on the need for fiscal rectitude. In a speech broadcast nationally on New Year’s Eve, President Desi Bouterse made it clear that he had other priorities, with just over a year left until the next general election.

The IMF reported that Suriname’s public debt had more than doubled since 2014, reaching 77% of GDP by end-2017. Inter alia, the IMF recommended that Suriname, “significantly reduce the fiscal deficit, including by implementing the value-added tax, curtailing electricity subsidies, and improving public financial management”.

The president’s response in his New Year’s speech was to say: “Although the government keeps its expenditure under control, government subsidies are maintained for, among other things, electricity, water, gas, the collection of household waste, and social-medical facilities. These billions of subsidies contribute substantially to the maintenance of the general quality of life, to the promotion of our health situation, to our living and working satisfaction and to the safeguarding of social cohesion among our people.”

The president also added in a hint of even further government largesse: “The moment has…come to increase the radius of action even more as a government.”

The Association of Surinamese Economists (VES) was quick to express its unhappiness with this. In a letter to all 51 members of parliament over the 2019 budget, the association said: “If the budget deficit for 2019 is granted… government debt will increase from about SR$19bn [(US$2.5bn)] to approximately SR$28bn, corresponding to approximately 130% of the gross domestic product.”

The VES also pointed out that the budgeted expenses of SR$15.3bn are more than double the budgeted revenues of SR$6.5bn, which means that the proposed budget deficit is a record high of SR$8.8bn.

The letter went on to say: “Let us learn from recent history and prevent a further economic relapse through responsible policy adjustment. In 2014 [the pre-election year] the government…denied the downturn and continued with irresponsible expenses. Only after the election in 2015, the government acknowledged the downturn, and by a far-too-late and…completely-inadequate policy adjustment [it] landed the country in deep recession in 2016. It is up to all 51 members of our highest state body to actively prevent this from happening again in the period 2019-2021.”

On 22 January, the opposition submitted a motion in the National Assembly calling for a reduction in the budget deficit. The motion was defeated by 26-10.

Another big question as the country moves closer to the May 2020 election is whether Bouterse will stand again. He is 74 and has been receiving medical treatment in Cuba, and it has been widely assumed that while he would spearhead the election campaign, he would not actually seek public office himself. Now he has hinted that he might be prepared to run again if that was what the public wanted. However, the x-factor remains the ongoing trial of those suspected of the 1982 ‘December murders’ of 15 opponents of the Bouterse-led military regime, a crime for which Bouterse himself is the prime suspect. The court martial is expected to conclude by mid-2019.

Two energy conferences in May gave Central American government officials a chance to discuss progress in the transition to more renewable energy use and its implications for poverty reduction.

The energy transition refers to the switch from fossil fuels such as coal, oil, and gas to renewables such as solar, wind, geothermal, and biomass. The transition is already underway but there is growing international pressure to speed things up in order to cut greenhouse gas emissions as part of global efforts to combat climate change. The coronavirus (Covid-19) pandemic has thrown many existing plans into disarray, but also provides opportunities to accelerate the transition following a massive drop in global oil demand in 2020.

On 12 May high-ranking government officials from the Central American Integration System (Sica) met for the first high-level dialogue and regional forum on renewable energy and energy efficiency (Sicreee). In a press release, Sica said participants emphasised the need for new energy systems to be resilient to the Central American climate s well as more financial innovation and coordination between public and private sectors to promote the transformation of the energy sector. The energy transition also needs to boost labour market participation of women and young people, said Sica, as well as bringing electricity to isolated areas that have never had a connection before.

Throughout the month of May thought leaders from across the Western Hemisphere met virtually at the XXX La Jolla Energy Conference, an annual event organised by the Institute of the Americas, a US-based NGO. On 21 May, Silvia Alvarado, president of the Guatemala based international consultancy firm Energy Intelligence Consulting, told attendees that Central America had made good progress towards cleaner energy use in the last 10 years. “Central America has been successful in incorporating renewables into the energy matrix of all countries. Costa Rica has been the leader; it has always had a strong commitment to the environment”, Alvarado said. “Steps behind, Panama and Guatemala have conducted electricity auctions in recent years. The region is in good shape. Prices are low and there is an abundance of electricity. A demand boost is needed”.

Salvador Handal, executive secretary of El Salvador’s national energy council (CNE), an autonomous state institution, also told attendees at the La Jolla Energy Conference that the country’s energy transition has accelerated, and it generated more than 90% of its energy needs from renewables between January and March 2021. By 2025 the country will use only natural gas and renewables, Handal said, adding that by 2050 it plans to be carbon neutral. Part of this plan involves a new regulatory framework which will update rules on battery storage and hydrogen power, according to Handal. Both El Salvador and Costa Rica are members of the Hydrogen Congress for Latin America and the Caribbean (H2LAC), a platform that works to promote green hydrogen in the region run by the German foreign cooperation and sustainable development agency (GIZ).

These events follow on from other initiatives which show serious interest in the energy transition in Central America. On 15 February Sica signed a Memorandum of Understanding with the International Energy Agency (IEA), a Paris-based autonomous intergovernmental organisation, which will see the two organisations work together “to expand their cooperation on energy data and statistics, energy efficiency, and climate resilience of power systems”.

Sica also worked with the United Nations (UN) Economic Commission for Latin America and the Caribbean (Eclac) on a report entitled ‘Sustainable Energy Strategy of the Sica nations 2030’, which was published in November 2020. As the report underlines, the countries of the region are net importers of hydrocarbons, with economies that depend on fossil fuels, which make them vulnerable to international oil price shocks which impact transport and other productive sectors and hit the whole population, particularly the poorest families. This makes reform imperative.

The report also emphasises the need for a demand boost, as mentioned by Alvarado of Energy Intelligence Consulting, for example through the electrification of transport networks. The report mentions passenger transport systems such as the metro in Panama’s capital, Panama City, and the electric trains in and around Costa Rica’s capital, San José, but underlines that the main challenge is to electrify goods transport, which is the largest energy consumer in the transport sector. The report’s authors recommend greater regional integration in order to develop an efficient regional transportation system. They also recognise the importance of developing battery storage capabilities in order to make better use of intermittent renewable energy sources such as wind and solar power.

At a country level, Costa Rica leads the Central American nations in terms of current energy system performance and readiness for the energy transition, ranking third out of all Latin American countries, according to the World Economic Forum Energy Transition Index 2020, published in May last year. In Central America it is followed by Panama, El Salvador, Guatemala, Honduras and Nicaragua in descending order. Attracting investment to finance energy transition projects, such as the introduction of electric buses, for example, is a huge barrier. Interestingly, research organisation BloombergNEF’s Climatescope Index 2020, which “evaluates the investment conditions for clean energy in emerging economies and evaluates their ability to attract capital for low-carbon energy sources while building a greener economy”, ranks Costa Rica bottom out of the Central American nations. Guatemala heads the ranking, followed by El Salvador, Panama, Honduras, Nicaragua. Despite its widely touted green credentials, Costa Rica’s energy market is “regulated and dominated by the vertically-integrated Instituto Costarricense de Electricidad (ICE), the country’s major generator and sole power purchaser”, according to Climatescope, reducing its attractiveness to investors.

As mentioned by Sicreee attendees, boosting investment in renewables will help to provide energy to isolated communities in Central America. This is in fact part of the UN Sustainable Development Goal (SDG) 7, under which signatories agreed to “ensure access to affordable, reliable, sustainable and modern energy” by 2030. Central American countries have been lagging behind their Latin American and Caribbean peers in this regard, with Guatemala, Honduras, and Nicaragua all flagged by the UN in a 2019 progress report as lagging furthest behind. Building small wind turbines or installing individual solar panels is much cheaper than running mains power cables to isolated areas, and could help reach full electrification in the region.

The energy transition has also received a boost from outside the region in the shape of US Vice President Kamala Harris, who launched a ‘Call to Action’ for businesses to support economic development in Central America on 27 May. One of the main areas of focus is climate adaptation and clean energy, which includes “commitments to support the region’s resilience to climate change through adaptation and mitigation efforts; support industries impacted by climate change; and transition to clean energy”. Among the 12 companies and organisations that initially signed up is Davivienda, a Colombian bank that has already part-financed the first wind farm in El Salvador, which will supply power to 80,000 homes. The stated aim of the ‘Call to Action’ is to address the root causes of migration from the region by promoting economic development but it appears that the energy transition will benefit as well, even if the initial announcements did not detail any commitments to clean energy investments.

• Benefits

Central America already has a small carbon footprint compared to other regions in the world, but the energy transition could bring major benefits in terms of energy access and efficiency. Regional and international cooperation will be important in order to scale projects for maximum impact, as well as attracting finance for projects that will likely cost too much for national budgets squeezed by the pandemic.

• New natural gas plant in Panama

On 1 June Panama’s President Laurentino Cortizo announced US$1bn investment in the construction of a new natural gas energy project, Generadora Gatún, to be located in Colón province, which will have an installed capacity of 670MW. The project will be constructed by Consorcio Group Energy Gas Panamá, which comprises US-based InterEnergy Group and AES Panamá, a local subsidiary of US energy company AES. InterEnergy Group will own a 51% stake; the Panamanian state 25%; and AES Corporation 24%. President Cortizo said the investment was in line with a newly unveiled plan for the comprehensive development of the electricity sector which seeks to make it more competitive in terms of price and quality and ability to generate cleaner energy.

In early October the United Nations (UN) Committee on Economic, Social and Cultural Rights (CESCR), a panel of experts, concluded its consideration of the fourth periodic report of Guatemala. Among other things, experts questioned claims of progress by the government led by President Alejandro Giammattei to address malnutrition - a declared priority by the Giammattei administration which took office in January 2020 given Guatemala has one of the worst malnutrition rates in the region. The issue has long been attributed to structural inequalities and since made worse by the impacts of Hurricanes Eta and Iota in late 2020, the coronavirus (Covid-19) pandemic, and more recently increasing prices of energy, fertiliser, and agricultural inports stemming from the Ukraine war.

According to a UN press release dated 4 October outlining the CESCR’s questions and responses by the Guatemalan delegation, which was headed up by Ramiro Contreras, the executive director of the presidential commission for peace and human rights (Copadeh), 45% of children under the age of five suffered from malnutrition in Guatemala, as did 61% of indigenous children. When asked what policies were in place to support the right to food for the most vulnerable groups, Contreras cited among other things, the government’s implementation of Gran Cruzada por la Nutrición (GCNN) - a platform which seeks to unite all of the country’s sectors with the aims of improving access to health service networks and promoting good nutrition, access to food, safe water, and sanitation.

In response to questions from committee experts, the Guatemalan delegation said that to combat malnutrition, the government was strengthening prenatal care for mothers and care for new-borns. It claimed that over 200,000 children had benefited from nutritional support programmes in 2021, with 35 pilot “health brigades” established in areas where chronic malnutrition was highest. The delegation claimed the State had reduced child mortality through those actions from 21% in 2000 to 14% in 2020, a figure expected to fall to 11.6% in 2022.

However, these claims of progress were repeatedly called into question by the experts who said strategies for addressing food security had seemingly not done enough to support the most vulnerable groups. This was also suggested the previous month by Guillermo Castillo, the director of local business conglomerate Castillo Hermanos, who announced a US$15m investment in a five-year social initiative, ‘Guatemaltecos por la Nutrición’, to address malnutrition in the country. He cited concerns that, despite investment, indicators in Guatemala have not changed. The initiative’s executive director, José Silva, told reporters that the new initiative, which was unveiled on 6 September, would include mobile clinics supplied by Spanish company ARPA, and is based on five components: attention to primary health, nutritional support, water and environmental sanitation, strengthening the family economy, and access to food. He said that the initiative would be rolled out in Quiché and Huehuetenango, two departments where food scarcity is particularly rife.

Sofi report

The latest State of Food Security and Nutrition in the World (SOFI) report, which was published in early July by various UN agencies, revealed that Guatemala topped the list of Central American countries in terms of the highest prevalence of moderate or severe food insecurity (55.9% of the population in 2019-2021, up from 42.7% in 2014-2016), although figures were not available for Nicaragua or Panama. In second place was Honduras (49.9%, up from 41.6%) followed by El Salvador (46.5%, up from 42.2%).

Cases of acute malnutrition

According to health ministry (MSPAS) figures, released during epidemiological week 39 (25 September-1 October), the government reported a cumulative total of 16,611 cases of acute malnutrition in children aged under five years and 46 deaths so far this year. Malnutrition sharply increased in 2020 owing to the economic shock of the Covid-19 pandemic and the hurricanes Eta and Lota. In 2021, Guatemala reported a total of 61 deaths in children under five from acute malnutrition, up from 50 in 2020.

In the last two months bad news for Cuba has come in twos. The island has been battered by two hurricanes, Oscar (Category 1) on 21 October and Rafael (Category 3) on 6 November. Cuba was also hit by two earthquakes off the southeast coast on 10 November causing damage to buildings and infrastructure. The nation’s ageing power grid collapsed not once but twice (by late November only about 50% of households had electricity).

One short term conclusion is that the economy will plunge downwards again this year, after contracting by 1.9% in 2023. In fact, economic activity has been essentially stagnant for the last four years, unable to return to the levels of 2019, before the coronavirus (Covid-19) pandemic. Critics of the government emphasise the poor quality of economic policy decisions and the government’s fear of economic reforms seen as potentially weakening its political control.

Economy and planning minister Joaquín Alonso Vázquez says energy shortages are one of the core problems, admitting “we have had power cuts all year; we have a petrol deficit and diesel deficit”. Apart from the pandemic the economy has also suffered from tighter US sanctions, introduced in 2019 during Donald Trump’s first presidency (2017-2021). The second Trump presidency which begins in January 2025 could also conceivably bring negative impacts to the island.

In some developing countries a burst of reconstruction activity after a natural disaster can help kick off an economic recovery. This does not seem likely in today’s Cuba, since the rebuilding process is extremely slow. The latest double hurricane and earthquake is estimated to have damaged at least 46,400 buildings across six provinces. Repairing them will be a slow process as will the replacement of 200km of damaged high power transmission lines. Hopes for a turnaround in the tourism business are so far failing to materialise. In the first nine months of this year 1.7m tourists visited Cuba, down by 5.2% on year-earlier levels and still well beneath pre-pandemic levels.

The economy minister tried to put a positive spin on the situation, but this was somewhat contradictory and ultimately unconvincing. “We have experienced negative and positive effects that allow us to see how the Cuban economy is starting to breathe again” he said without any specifics. Vázquez however cited a reduction in the fiscal deficit saying, “certain macroeconomic indicators are beginning to react, suggesting that we are making progress”.

The longer-term impact of the economic crisis, marked by rolling shortages of fuel, food, power, and medicines is up for discussion. There is an underlying possibility that popular anger will spark further and wider demonstrations than have been seen so far, and thereby threaten the Partido Comunista de Cuba (PCC)’s tight grip on power.

• Protests

According to opposition lobby group Justicia 11J, there had been 70 protests and at least 25 arrests in Cuba in the period between the point at which the national power grid first collapsed in October and 12 November.

Taking a longer-term economic view, Joseph J González, an associate professor at the US’s Appalachian State University, points out that historically Cuba has frequently been in a patron-client relationship. In a piece published on 5 November in The Conversation, a news website which publishes articles by academics and researchers, González writes that in 1898-1959, the patron was the US offering economic subsidies and market access in exchange for geopolitical benefits. In 1959-1991 the patron was the Soviet Union seeking its own geopolitical advantage while buying sugar and selling oil on terms favourable to Cuba. In 1999-2015 a third patron was Venezuela, offering heavily subsidised oil supplies. But that relationship broke down when Venezuela entered its own devastating crisis. In each case the ‘patron’ has subsidised the island by somewhere around US$4bn a year.

But in the 2020s Cuba has been struggling to survive as a “patron-less” state and has been forced to allow mass emigration as a way of reducing social tensions (an estimated 10% of the population has left the country since 2022). González concludes that the government is facing an ultimatum: find a new patron or initiate deep and painful economic reforms.                        

The Planning Institute of Jamaica (Pioj), a government office, says that quarter-on-quarter economic growth was strong in the second quarter of the year, with GDP expansion expected to be within a 0.5% to 1.5% range.

The Pioj says second-quarter activity was lifted by agriculture, tourism, and construction. Agriculture was recovering after the damage caused by Hurricane Beryl and Tropical Storm Rafael late last year. Tourism airport arrivals were up by 5.3% in April, lifted by Spring Break and Carnival, with construction led by residential housebuilding and a road network programme. Pioj director Wayne Henry said high levels of employment and consumer confidence were also in play. He argued that “All industries are forecast to record growth as the recovery from the weather-related shocks in 2024 will become more pronounced in the latter half of calendar 2025”.

Separately, on 27 June the International Monetary Fund (IMF) published the results of its regular Article IV consultation on the state of the Jamaican economy. It said the response to Hurricane Beryl and Tropical Storm Rafael had been “agile, prudent, and growth supportive”. Unemployment has fallen to an all-time low (3.7% in January), inflation has converged to the Bank of Jamaica (BOJ)’s target band of 4%-6%, and the current account has been in surplus for the last two years. There was a recession in fiscal year 2024/25 (GDP dropped 0.8% because of the extreme weather) but growth of 2.2% is predicted for 2025/26. The Fund’s executive board commented “Over more than a decade Jamaica has been implementing sound macroeconomic policies supported by strong policy frameworks. These efforts have allowed Jamaica to accumulate meaningful policy buffers, reduce public debt, anchor inflation and improve its external position.”

BOLIVIA | Más cambios en el gabinete. El Presidente Evo Morales fue forzado a hacer dos cambios clave en el gabinete la semana pasada, luego que su ministro de la presidencia y su antiguo aliado, Oscar Coca, renunció por razones de salud. Esto no parece eufemístico –se ha informado que Coca sufre de una aguda diabetes. Morales lo ha reemplazado con el ministro de autonomía Carlos Romero, otro miembro clave de su círculo íntimo. Habiendo ganado la confianza de Morales como delegado a la asamblea constituyente por el gobernante MAS en 2006, Romero sirvió como ministro de desarrollo rural antes que se le confiara la cartera de autonomía, que fue creada siguiendo a la implementación de la nueva constitución en febrero de 2009 para supervisar uno de sus principios básicos: el proceso de descentralización. Romero también jugó un rol crucial en las negociaciones entre el MAS y el opositor Podemos sobre el texto final de la nueva constitución, ilustrando que las habilidades conciliadoras podían ser de utilidad en su nuevo rol como enlace entre el ejecutivo y la legislatura.
Romero ha sido reemplazado por su adjunta, Claudia Peña Claros, una experta en comunicación social que había estado en ese puesto desde febrero de 2010. Con la designación de Peña Claros, cuya inmediata prioridad es continuar el proceso de elaborar los estatutos de autonomía para las nueve regiones del país, Morales, inadvertidamente, cumplió con su compromiso de introducir una completa paridad de género en su gabinete, con 10 mujeres y 10 hombres ministros. La última reorganización también lleva el número total de cambios en el gabinete realizados por Morales en los 17 meses de su mandato a 11, un número alto que lo ha dejado expuesto a críticas y acusaciones de debilidad e improvisación. Eso fue particularmente pronunciado con relación a su fallido intento de retirar los subsidios a los combustibles, que provocó varios cambios [IL-11-04], el más importante de ellos fue en la crucial cartera de energía: Morales está actualmente con su sexto ministro de energía desde 2006. Solamente los ministros de relaciones exteriores y de economía, David Choquehuanca y Luis Arce Catacora, respectivamente, han mantenido sus cargos desde que Morales asumió el poder por primera vez en 2006.

PERU-COLOMBIA | FTA with EU now in sight. On 11 December the European Parliament (EP) ratified a free trade agreement (FTA) with Peru and Colombia, one of the final steps before the agreement can go into effect.

The negotiation of an FTA between the European Union (EU) and the two Andean countries, which calls for the immediate elimination of all tariffs on non-agricultural products, the gradual elimination of tariffs on agricultural products and the liberalisation of the service markets and of public tender processes, was concluded in 2010. However, the treaty needs to be ratified by the congress of Colombia as well as the EP and the European Council before it can take effect.

Ratification in the EP appeared to be the most difficult hurdle facing the treaty, as various European politicians had expressed reservations about the negative impact that the agreement could have on European farmers, and questioned the environmental, labour, and human rights situations in the Andean countries. In particular, despite the fact that the agreement includes a clause that it may be partially or totally suspended in the case of grievous violations of human rights in any of the countries, the current human rights situation in Colombia was a major sticking point.

Nevertheless, proponents of the agreement which included the EU’s trade commissioner, Karel de Gucht, and the EP’s president, Martin Schulz defended the FTA pointing out that any commercial agreement concluded by the EU will help to bring about an economic recovery in Europe by securing access to foreign markets on favourable terms.

In the end the agreement received overwhelming support and was easily ratified. It will now be analysed by the European Council which must provide final approval. After the ratification Schulz stated that “For too long the EU has underestimated an association with Latin America. These agreements are decisive steps towards an alliance with important countries that are growing very quickly”.

Ratification of the agreement is eagerly awaited in Peru and Colombia as both countries are keen on taking full advantage of increased access to the European market. The EP’s ratification was hailed by Colombia’s President Juan Manuel Santos who said that it would “bring prosperity and create more jobs for Colombians”. Meanwhile, Peru’s foreign trade & tourism minister, Luis Silva, said that the EP’s approval of the FTA provides “certainty” that Peru will deepen its relations with its main economic partner.

According to estimates by the European Commission, the FTA could help Peru increase its GDP by 0.7%, while Colombia’s could increase by 1.3%. Encouraged by the EP’s ratification, Peru’s congress decided to bring forward its ratification vote (initially scheduled for 15 December) to 12 December, when it was quickly ratified in a unanimous vote.

COLOMBIA | IMF boost. On 10 December the managing director of the International Monetary Fund (IMF), Christine Lagarde, said that Colombia has optimal economic conditions to “lend and offer services” to the IMF. Lagarde made the comments after holding a meeting with President Juan Manuel Santos in Bogotá as part of her first official visit to Colombia.

According to Lagarde, Colombia’s current economic situation is “magnificent” thanks to the fact that it has adopted sound macroeconomic policies which have brought stability to the country. Lagarde added that currently Colombia has “a small deficit and a very balanced debt, giving it a very promising outlook”.

As a result Lagarde said that she viewed Colombia as an IMF partner with the potential of playing an increasingly important role in the multilateral. This proposal was welcomed by Santos who said that Colombia would be ready “with whatever is needed to make the IMF work more effectively…. because if everything works at the heart of that organisation, the world economy prospers”.

Nonetheless, Santos also commented that Colombia’s main challenge for the moment remains maintaining a positive economic scenario given the travails of the global economy. Currently, Colombia has a US$6bn flexible credit line with the IMF. The government has said that it does not contemplate resorting to this credit line.

• Environmental tax

On 12 December Ecuador’s non-renewable natural resources minister, Wilson Pástor, revealed that the government has floated the idea of introducing an environmental tax on oil exports, which will help countries mitigate some of the effect of burning fossil fuels, at the current meeting of the Organization of the Petroleum Exporting Countries (Opec) in Vienna. According to Pástor, the innovative proposal, which “has taken many by surprise”, is a novel idea that was recently developed by President Rafael Correa. Pástor added that Ecuador has not yet submitted a formal proposal to Opec because even though the idea has “a clear reasoning, the mechanism of how to implement it must still be developed”. He said this would be forthcoming at Opec’s May 2013 meeting.

POLITICS | Stage set for Lima recall referendum. On 14 March the camps for and against the recall of Lima Mayor Susana Villarán closed their respective campaigns with rallies in Lima. The 17 March recall referendum is the first ever faced by a Lima mayor and could mark an important watershed in the country’s democracy. The referendum has divided public opinion, with some arguing it strengthens democracy by making elected officials more accountable, while others maintain that it undermines democracy by promoting political instability. Peru’s main political parties are divided on the issue, but most have opted to join one camp or the other based on their own vested interests. The latest polls, released on 10 March by Ipsos Perú, GFK, and CPI, suggested that the ‘Yes’ campaign (i.e.in favour of recalling Villarán) was ahead by as much as 10 percentage points (backed by 49.6% -55% of respondents), while the ‘No’ campaign had the backing of  39%-43% of respondents. According to the local electoral authority (JNE), some 6m Limeños are registered to vote.

President Jovenel Moïse is facing renewed pressure to address the parlous state of Haiti’s prison system after two damning reports issued last month – one by a leading local human rights group, National Human Rights Defense Network (RNDDH), and the other by the United Nations (UN) Secretary General. The reports criticise his government for failing to act on what has already been admitted is a major human rights priority – in one of his first moves upon taking office in February, Moïse had announced a special nine-member commission to look into the issue.

In its report issued on 7 July, RNDDH claims that at least 60 deaths of prisoners had been registered between 1 January and 16 April in three prisons located in Ouest Department alone. Meanwhile the report by UN Secretary General António Guterres, which was issued on 12 July, puts the number of total deaths in detention at 115 as at 30 May, compared with the 113 reported for the whole of 2016.

Both reports urge the government to address the problem of overcrowding which is attributed to high numbers of arbitrary arrests and overuse of pre-trial detention. The most recent (2017) country report by the NGO Human Rights Watch (HRW), published in January, cites former UN Secretary General Ban Ki-moon (2007-2016) as saying that more than 70% of suspects are held pending trial. In his report, Guterres claims that on 19 May, Haitian prisons counted 10,512 detainees, including 349 women and 240 male and 15 female juveniles; 71% were awaiting trial, “reflecting no decrease since the issuance of the previous report (in April)”.

The UN Secretary General’s report also highlights that the first report by the special presidential commission on prison conditions, established in February, had yet to be published. However, he cites as positives the fact that on 25 April the draft criminal code and the draft criminal procedure code were submitted to parliament by the executive branch. Some progress was also noted in curbing prolonged pre-trial detention through the establishment of a real-time case file management process in the court of first instance in the capital, Port-au-Prince, resulting in 126 cases being closed.

Relaunching the military

Last month Haiti’s defence ministry launched a recruitment campaign for the armed forces (FAd’H), which had been disbanded in 1994 by former president Jean-Bertrand Aristide (1991, 1994-1996, 2001-2004).

The recruitment campaign ran between 11 and 25 July and was open to both men and women between the ages of 18 and 25, who have passed their secondary education exams. According to the local press, over 2,200 people have signed up.

This is in line with President Moïse’s declared pledge to re-establish the military, an initiative for which his predecessor and political mentor Michel Martelly (2011-2016) had been pushing on the grounds that it would create the conditions for the withdrawal of the UN Stabilization Mission in Haiti (Minustah) which is scheduled to be completed by October 2017.

Speculation regarding the re-launch of the new military had gathered pace since March when Prime Minister Jack Guy Lafontant handed over a series of “roadmaps” to his new ministerial cabinet, outlining the actions they would be expected to take during their mandates. At the time, the local media reported that the tasks facing Defence Minister Hervé Denis included drafting and securing parliamentary approval for legislation on the reorganisation and functioning of the FAd’H, and establishing a central directorate of military intelligence (DCRM).

• Fad’H

Back in October 2015, then-president Michel Martelly (2011-2016) signed a decree officially re-establishing the armed forces (FAd’H), which created a number of new services and directorates. Little has since been made public regarding the outcome of this initiative, although on 17 July the US-based Miami Herald reported that several dozen Haitians had been sent to Ecuador for training and there are currently about 150 trained individuals.

Peru has a new President: Martín Vizcarra, who was sworn in on 23 March after Pedro Pablo Kuczynski was forced to resign amid a storm of corruption allegations and congressional hostility. The country also has a new minister of economy and finance (MEF), David Tuesta, sworn in as part of a new cabinet on 2 April. It looks as if the broad outlines of economic policy will not change: the new government – which is due to serve for just over three years in office until mid-2021 – will focus on rebuilding private sector confidence and investment.

President Vizcarra has signalled he will continue following the pro-market, broadly centre-right policies of his disgraced predecessor. Whether he will be able to build a working majority in the politically divided congress remains to be seen, but for the moment a political truce appears to have broken out amid the exhausted combatants. Fuerza Popular (FP), the right wing populist party led by the Fujimori family that brought repeated no confidence motions against Kuczynski’s ministers, has been weakened by internal disagreements and lost its outright congressional majority. FP leaders have signalled that they will, initially at least, give the new government the benefit of the doubt. FP deputy Milagros Salazar said, “This is not the moment to criticise. Let’s hope the ministers get to work to rebuild the country.”

Vizcarra’s new ministerial team is largely technocratic. The president has favoured people with specialised knowledge, experience in administration, and in a number of cases with a background in regional government. The new prime minister is César Villanueva, from a small centrist party, who has held the job once before during the presidency of Ollanta Humala (2011-2016). Tuesta, the new supremo at MEF (the third in less than a year) is an economist who worked for Spanish Bank BBVA and for CAF, the Andean Development Corporation. Also important for the economy are Francisco Ísmodes at energy and mining and Daniel Córdova at the ministry of production – both have private sector backgrounds. Edmer Trujillo is the new minister for transport and communications (an important area of investment).

The new team has mapped out some general economic policy priorities. In his inauguration speech Vizcarra promised to combat corruption. He has also committed his administration to accelerating the reconstruction programme in the north of the country, following the disastrous floods and mudslides experienced in early 2017. Vizcarra said that only 10% of the US$7.745bn reconstruction budget had actually been spent in the first year, which was far too slow. Minister for production Daniel Córdova says he will re-invigorate a plan to diversify the economy away from excessive reliance on extractive industries such as mining and oil and gas. A programme to do this, known as the Plan Nacional de Diversificación Productiva (PNDP), which was downplayed during Kuczynski’s 20 months in office, is to be dusted off. The PNDP seeks to provide support for a range of different productive ‘clusters’ around the country.

For his part, Tuesta has indicated that one of his priorities will be to tackle the fiscal accounts. He has argued that political chaos, uncertainty and “decisions taken with good intentions but poor results” have eroded tax collection, while the government was trying to boost spending to kick-start a recovery. The resulting squeeze had led to a fall in public sector investment. Tuesta told the El Peruano newspaper, “This situation, for a developing country, is a crime. So we have to create the fiscal room based on a rapid restructuring of public spending.”

According to César Peñaranda of the Instituto de Economía y Desarrollo Empresarial (IEDEP), part of the Lima Chamber of Commerce, the extended political crisis has brought current economic growth rates down to around 3%, or one percentage point below the IMF’s growth forecast for the country in 2018. In his view the main negative effect of the crisis has been to reduce and postpone the hoped-for recovery in private investment levels. Peñaranda was also highly critical of one of Kuczynski’s last decisions as president, a 9.4% increase in the minimum wage, which he said would only contribute to expanding the informal, non-tax paying sector of the economy. The positive reaction to the new government and ministerial team allowed for “moderate optimism” about the future, but growth was still likely to be one percentage point lower this year.

Peñaranda stressed that growth is still about half what it was during the best years of the commodity boom. Three percent growth, he added, is insufficient to reduce poverty, create sufficient new jobs, and raise living standards in Peru. To begin to achieve some of those things the head of IEDP said it is essential for Peru to achieve annual growth of 4% or more.

DOMINICAN REPUBLIC | Straining to resurrect tourism sector. David Collado, the tourism minister for the Dominican Republic (DR), has warned the country’s tourism sector is in a “critical” state. Collado made his comments while outlining a government scheme to incentivise domestic tourism. The initiative, which among other things offers discounted stays in hotels to DR residents, was announced by President Luis Abinader on 24 September. During his briefing, Collado specified that 19 hotels from eight international chains will offer discounts to DR residents of 20%-50%. Figures released last month by the DR’s central bank (BCRD) show 1.6m tourists (foreign nationals and non-resident Dominicans) visited the DR via air travel in the first eight months of 2020, down 64.8% on the same period in 2019. In August the number of tourists totalled 110,284, a 77.8% drop on August 2019. The BCRD attributes the slump to the coronavirus (Covid-19) pandemic, particularly in the second quarter of 2020, when borders were closed, and non-essential travel limited in the DR as well as its main source countries for tourists. The DR’s tourism sector, which reopened as of 15 September, accounts for around 8% of GDP.

EL SALVADOR | Warning of job losses. El Salvador’s industrial association, Asociación Salvadoreña de Industriales (ASI), revealed that the sector registered a reduction of 24,116 jobs between January and June due to the impact of the coronavirus (Covid-19) pandemic. According to the report by ASI, the textiles and clothing sub-sector was the most impacted, with a reduction of 13,425 jobs. The report shows that up to June the industrial sector generated 21% of formal employment and 95.1% of exports in El Salvador.

Central America & Caribbean:​ Inflation
Monthly year-on-year figures

The manner of the murder of Marcelo Pecci and the motive behind it are fuelling concern in Paraguay and the wider region. Pecci, Paraguay’s special prosecutor against organised crime, was gunned down by hitmen on a beach while on honeymoon in Colombia on 10 May. He was leading some major criminal cases in Paraguay, above all in relation to the country’s biggest-ever counter-narcotics operation ‘A Ultranza Py’, launched in February, which has delivered blows against drug-trafficking groups and their assets. One of these groups was most likely behind the contract killing. His murder shows the broad reach and interconnected nature of organised crime. It also sends a powerful signal: Pecci had a reputation for incorruptibility, by no means shared by all officials in Paraguay and beyond, who, seeing his fate, may feel even less inclined to emulate him.

Pecci was lying on a hotel beach in Isla Barú, off the tip of a peninsula south of the port city of Cartagena, the capital of the Caribbean department of Bolívar, on the final day of a six-day honeymoon with his wife, Claudia Aguilera, a journalist for Noticiero Central, when two men came to shore on a jet ski. They strode up the beach and, according to Aguilera, fired two shots into her husband’s face and back, before running back to their jet ski and speeding off. Attempts to revive Pecci by fellow tourists were to no avail.

The murder was swiftly condemned by Paraguay’s President Mario Abdo Benítez and his Colombian peer Iván Duque, who promised full cooperation to apprehend those responsible. The director of Colombia’s national police, General Jorge Luis Vargas Valencia, offered a reward of Col$500m (US$12,000) for any information about the two hitmen. He said five criminal investigators had been assigned to the case and would work with Paraguayan authorities and the US Drug Enforcement Administration (DEA).

Abdo Benítez gave a firm response, insisting that “we will redouble our commitment to fight against organised crime”. Pecci’s murder is, paradoxically, a sign of the success of ‘A Ultranza Py’, which has seen the arrest of some prominent figures in a drug-trafficking ring smuggling large quantities of cocaine into Europe, and the confiscation of significant assets. But it also serves to show the difficulty of keeping up the pressure, especially when not all officials share Pecci’s zeal and ‘A Ultranza Py’ has exposed the extent of narcopolitics in Paraguay.

US support

US government officials responded by offering Paraguayan authorities their government’s full support in the fight against organised crime. The US Assistant Secretary of State for Western Hemisphere Affairs, Brian Nichols, and the US ambassador to Paraguay, Marc Ostfield, shortly after his first meeting with the new foreign minister, Julio César Arriola, took to Twitter to condemn Pecci’s murder.

Data released in early November by Costa Rica’s health ministry put the number of cases of dengue, a mosquito-borne viral disease, at 18,194 in Costa Rica as of Epidemiological Week (EW) 42 this year, more than twice the total of 7,485 registered in the whole of 2022. This is in line with warnings from the Pan American Health Organization (PAHO) of a surge in dengue cases in Central America. An earlier report from the World Health Organization (WHO) noted in July that while dengue is endemic in most Central American countries, during the current season, a rise in dengue cases has been observed at levels above the average number of cases recorded in the last five years and beyond historical areas of transmission. Scientists have previously attributed outbreaks to warming temperatures and changing weather conditions, including more extreme weather.

According to PAHO data released on 15 September, the latest comprehensive update for the sub-region as a whole, between EW 1 and EW 35 there were 226,183 dengue cases reported in the Central American isthmus and Mexico, with a cumulative incidence rate of 123.6 cases per 100,000 people.

According to the PAHO, the highest cumulative incidence rates were reported in Nicaragua, with 1,346.7 cases per 100,000 population, Belize (1,009 per 100,000), Panama (162.2 per 100,000), and Honduras (114.6 per 100,000). This year, of the 226,183 reported dengue cases, 26,017 (11.5%) were laboratory confirmed and 577 (0.26%) were classified as severe dengue. The highest number of dengue cases were reported in Nicaragua with 90,258 cases, followed by Mexico (86,397) and Guatemala (14,299). As regards severe dengue cases reported in 2023, the highest number were reported in Mexico (443), Honduras (73), Guatemala (36), Panama (12), and Nicaragua (10).

In response to the rapid increase in cases, governments have taken measures. In the case of Nicaragua, which has registered the highest number of cases, the health ministry issued a series of recommendations at the end of July. These included house-to-house visits to raise awareness of the epidemic, as well as ensuring larvicide application in household water tanks and regular fumigations. Elsewhere, in Costa Rica, the health ministry declared a nationwide preventive health alert for dengue on 6 September while a report published on 20 October by the International Committee of the Red Cross (ICRC) notes that as well as actively seeking the support of the entire population and calling for a nationwide alliance to combat dengue, the ministry has implemented a series of strategies to prevent the spread of the disease-carrying mosquito. These strategies include the fumigation of residential properties and vacant lots, the treatment of water tanks, and the initiation of control and mitigation measures.

Meanwhile on 31 August Guatemala’s public health ministry declared a national health emergency after over 10,000 cases of dengue were reported in the country over the previous three months. Health Minister Francisco Coma said the measure would be in effect for three months and entails implementing fumigations to eradicate mosquitoes. It also provides for increased care in hospitals, among other actions involving various public and private institutions. In Honduras, international NGO Médecins Sans Frontières (MSF) announced it was partnering with the Honduran health ministry among others to implement innovative public health strategies that have proven effective in other countries with high levels of dengue. This includes releasing Aedes aegypti mosquitoes carrying the natural Wolbachia bacteria, which reduces mosquitoes’ ability to transmit arboviruses.

Criticism of measures taken in Nicaragua

A report published on 18 September by Nicaraguan investigative outlet Confidencial cites epidemiologists as criticising the measures taken by the Nicaraguan government in response to the surge in dengue cases. They blame the sustained increase in contagion on the health ministry’s failure to prevent and control the epidemic, and highlight a lack of collaboration with the Nicaraguan population, which is crucial to preventing transmission. They also highlight the need to education the public regarding the epidemic and criticise the lack of transparency regarding data – an accusation previously levied at President Daniel Ortega’s government in relation to the coronavirus (Covid-19) pandemic which struck in March 2020.

MEXICO | Inflation continues upward trend. On 9 July Mexico’s national statistics institute (Inegi) reported that the consumer price index (INPC) increased by 0.38% in June compared to the previous month. This brought the annual inflation rate to 4.98%, up from 4.69% in May, when inflation decreased by 0.19% in monthly terms, and marking the fourth consecutive month of annual increases. Annual inflation is now at its highest level this year, above January’s rate of 4.88%. The core inflation rate, which excludes volatile items, rose by 0.22% in monthly terms and 4.13% in yearly terms.

MEXICO | GFCF on the rise. On 2 July Mexico’s national statistics institute (Inegi) reported that gross fixed capital formation (GFCF) in the country grew by 10.5% in April 2024 in annual terms and 0.9% in monthly terms. Annual growth was driven by a 13.5% increase in investment in construction and a 5.3% increase in investment in machinery and equipment. In monthly terms, investment in construction increased by 1.6%, however investment in machinery and equipment decreased by 0.8%. In March 2024, GFCF increased by 10.9% in annual terms, with a 12.9% increase in construction and a 9.5% increase in machinery and equipment, while GFCF increased by 0.8% at a monthly rate.

MEXICO | Remittances decline in May. On 1 July Mexico’s central bank (Banxico) released new figures which showed that Mexico received US$5.62bn in remittances in May, marking a 0.9% annual decline. This decline follows a yearly fall of 3.1% in remittances in March, making May the second month to see an annual drop in remittances this year. The cumulative total of remittances from January to May 2024 reached US$25.13bn, a 1.9% increase from the same period in 2023. Analysts attribute the annual decline in remittances to a high base of comparison and moderating economic activity in the US, the primary source of these funds.

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

Mexico: unemployment rate
Economically active population

Mexico: inflation rate
Percentage variation (year-on-year)

Source (all graphs): National Statistics Institute (Inegi)

There is never really a good time for a big landowner to describe subsistence farmers as lazy and to suggest that they should be whipped into line like an uncooperative woman. For Tranquilo Favero, the largest individual soya producer in Paraguay, the timing could scarcely have been worse. The government had declared a food emergency in the face of a serious drought in Paraguay when Favero, a Brazilian-Paraguayan, told Brazil’s Folha de São Paulo that Paraguayan landless farmers were uncooperative and lazy; “you have to treat them like a bad woman, with a stick”.

Leaving aside the offence to women, Favero’s remark was less-than-tactful given visceral resentment towards so-called Brasiguayos who are widely perceived to be buying up huge tracts of Paraguay while locals struggle to make ends meet. The agriculture ministry stressed that harvests of soya, corn and cotton could fall by 40% this year as a result of the lack of rains since November, seriously damaging the livelihoods of some 250,000 small producers. The Federación Nacional Campesina (FNC) issued a statement claiming that the cotton harvest was averaging just 300-400 kilograms, well short of the target of 1,800kgs. The private sector calculates that losses to Paraguay’s most important exports could amount to some US$1.5bn, and have a big impact on the country’s GDP growth this year.

Some 200 protesters burnt an effigy of Favero outside his offices near the international airport in Asunción on 17 February. The Asunciόn city council declared Favero persona non grata and presented a petition to the interior ministry calling for him to be stripped of his Paraguayan citizenship. The interior minister, Carlos Filizzola, expressed his support for the petition.

A contrite Favero, 77, decided to publish a statement in the Paraguayan news media on 19 February to seek forgiveness. He explained that he became a naturalised Paraguayan by choice 40 years ago. He said that as a father and a grandfather of women he held them in the highest possible regard. He said that he heartily repented of his ill-chosen words and never intended to cause offence.

He added that he had not meant to give the impression in his interview with Folha de São Paulo that he supported the dictatorship of Alfredo Stroessner (1954-1989). He explained that during the Stroessner era he could live with greater security and that he was not questioned like now, but that did not mean that he preferred dictatorship to democracy.

Hundreds of self-proclaimed landless farmers (‘Carperos’) led by Victoriano Lόpez are demanding that the government of President Fernando Lugo expropriate nearly 168,000 hectares of holdings of the Favero Group for redistribution (see sidebar). Favero defended his entitlement to the land, in Ñacunday in the eastern department of Alto Paraná, which he said he had legally purchased at a market rate and which he claimed had been worked on for the last 15 years. He said the Paraguayan judiciary was the only institution with the constitutional right to rule on the matter and that any action by any other state entity would be totally illegitimate in a democratic country.

• Land

The government has distanced itself from the demands of Carpero leader Victoriano Lόpez, even if Tranquilo Favero might not exactly be flavour of the month. The cabinet chief, Miguel López Perito said that he suspected that Victoriano Lόpez wanted the government “to stain its hands with blood”. He said López should accept the 30,000 hectares in Alto Paraná the government had offered the farmers he represents and drop the claim to Favero’s land, some of which has been occupied by them. López has rejected the government’s offer of the 30,000 hectares, which the state rural and land development institute (Indert) claims are available elsewhere in the department.

El Presidente Sebastián Piñera ha promulgado una nueva ley requiriendo que las empresas de servicios públicos eleven al doble su utilización de la Energía Renovable No Convencional (ERNC), del 10% al 20% para el 2025. Piñera dijo que la ley diversificaría la matriz energética de Chile, reduciendo las barreras para esta clase de tecnología, lo que ayudaría a reducir el riesgo de falta de provisión energética, bajar los costos de la electricidad y reducir la dependencia de los combustibles fósiles importados. Pero, ¿es suficiente ambiciosa esta meta?

El Presidente Piñera dijo que el “tremendo potencial” de Chile para la ERNC estaba siendo “transformado en realidad” a través de múltiples proyectos que habían sido autorizados y promovidos durante su gobierno. Acompañado por el ministro de minería, Hernán de Solminihac, y el ministro de energía, Jorge Bunster, Piñera estaba hablando durante la inauguración una granja eólica de 90MW, en Valle de los Vientos, cerca de Calama (Región II) en el norte de Chile.

Duplicar el uso de la ERNC suena como una ambición adecuada, pero el objetivo del 20% no es tan impresionante como parece. En el 2008, la Universidad Santa María y la Universidad de Chile llevaron a cabo un estudio técnico en el cual predijeron que la energía eólica, la energía marea-motriz, la energía solar y la energía geo-termal podrían proveer hasta el 40% de la matriz energética de Chile para el 2025. Chile tiene una posición única  para aprovechar la ventaja de fenómenos meteorológicos para satisfacer sus necesidades de energía: energía geo-termal del espinazo volcánico en el sur; energía solar del hiper-árido desierto del Atacama en el norte, donde el sol brilla todo el año; y la energía eólica y de las mareas en la inmensa línea costera del país.

Chile está haciendo progresos. Está en segundo lugar, detrás de Brasil, en el ‘Climascope 2013’, que clasifica a 26 naciones según su relativa capacidad de fomentar el crecimiento de la energía baja en carbono. Difundido esta semana por el Fondo Multilateral de Inversión del Banco Interamericano de Desarrollo (BID) y Bloomberg New Energy Finance, el ‘Climascope 2013’ dice que la inversión de Chile en ERNC se ha más que cuadruplicado, de US$500m en el 2011, a US$2,1mm en el 2012.

A pesar de la importancia de que Chile diversifique su matriz energética para asegurar una provisión suficiente y para conducir el desarrollo, la cuestión apenas ha sido discutida en la actual campaña electoral. La ex presidenta, Michelle Bachelet (2006-2010), no ha proveído ningún detalle sobre sus planes de energía en una recientemente divulgada lista de 50 promesas para sus primeros 100 días en el gobierno [IL-13-40]. Su principal rival, Evelyn Matthei, proveyó más detalles en su manifiesto electoral, aunque ella solamente dedicó tres de las 140 páginas a la energía y el medioambiente, e incluso estas estaban dentro de una amplia sección centrada sobre las maneras de estimular la competitividad y el crecimiento económico.

Matthei propuso un “completo y detallado paquete de medidas” para “desencadenar” la inversión en nuevos proyectos de generación de electricidad y para promover nuevas fuentes de energía renovable, convencionales (tales como los complejos hidroeléctricos de gran escala), y no-convencionales (tales como solar o geo-termal), para “aprovechar al máximo nuestras naturales y abundantes fuentes de energía”. Ella también dijo que Chile no podía descartar la aprobación de nuevas plantas de generación usando cualquier forma de energía, toda vez que “cumplan las duras regulaciones sobre las emisiones que puedan producir”, allanando aparentemente el camino para la aprobación de más plantas de energía termoeléctricas, basadas en el carbón o el gas natural, casi todos los cuales deben ser importados.

En la sección del medioambiente, Matthei prometió fortalecer el servicio de evaluación medioambiental (SEA) de Chile, y convencer a los inversionistas de su autonomía del gobierno central. Ella culpó la “debilidad” de los arreglos existentes del bloqueo de varios nuevos proyectos de energía que previamente habían cumplido con todos los requerimientos medioambientales.

• Potencial hidroeléctrico

Debido a su topografía, Chile cuenta con un potencial hidroeléctrico considerable, aunque ha habido serias resistencias domesticas e internacionales a el pleno aprovechamiento de este potencial, notablemente en respuesta al proyecto HidroAysén. Esto incluye la construcción de cinco represas en Aysén (Región XI); tres de ellas en el Río Baker y dos en el Río Pascua. Las represas alimentarían las plantas con una capacidad de generación de 2.750MW. Durante una reciente visita en Coyhaique, la capital de Aysén, la candidata presidencial favorita, Michelle Bachelet, dijo que “tal como está HidroAysén no es viable”.

BOLIVIA | Gran Chaco LPG plant opened. On 24 August Bolivia’s President Evo Morales played host to Paraguay’s president Horacio Cartes at the inauguration of the ‘Carlos Villegas’ hydrocarbon processing plant [WR-15-27]. The plant, located in Yacuiba, Tarija department, is in the Gran Chaco geographical region that stretches across southern Bolivia, western Paraguay and northern Argentina. It was built by Bolivia’s state-owned hydrocarbons firm, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), to help boost Bolivia’s natural gas exporting capacity, especially liquefied petroleum gas (LPG) to neighbouring Paraguay, Peru and further afield to Uruguay. The US$600m plant is billed as being one of the largest of its kind in South America; capable of processing 32.2m cubic metres of natural gas a day and produce 3.14 metric tonnes (t) of ethane a day, 2.24 t LPG a day and 1,650 barrels of petrol a day.

President Morales has said that all of this will allow Bolivia to become the main energy pole in South America and supply LPG and other hydrocarbon derivatives to the sub-region for decades to come. Morales invited Cartes to the plant’s opening because he has said that one of his government’s immediate goals is to supply 100% of Paraguay’s LPG demand of 8t-10t a year. In fact, during the event Morales and Cartes signed a new deal under which Bolivia is to sell LPG processed at the ‘Carlos Villegas’ plant to Paraguay at a discount price of US$12 per every 10 litre cylinder , lower than the US$17 per cylinder currently paid by Paraguay. This deal has to be ratified by Paraguay’s congress, but Rómulo Campos Krauer, the president of Paraguay’s state-owned oil firm Petropar, who accompanied Cartes, has said that once the agreement is ratified, Petropar could start buying Bolivian LPG immediately. Meanwhile Bolivia’s energy & hydrocarbons minister, Luis Alberto Sánchez, said that once the ‘Carlos Villegas’ plant is fully operational it would generate approximately US$500m LPG export revenue a year. In addition, Sánchez said that the plans to build a new US$1.8m petrochemical plant at Yacuiba that will allow for the production of propane and ethane-derivative plastics will help to industrialise Bolivia and provide the country with more revenue and jobs than those generated by “just selling natural gas”.

CHILE | Piñera unveils 2020 draft budget. Chile’s president Sebastian Piñera presented his government’s draft budget of US$74.17bn before the national congress on 26 September. The proposal prioritises public spending, strengthening public security and financing over 2,000 regional investment projects in various sectors for the development of infrastructure such as airports, roads, train networks, and ports.

The finance minister, Felipe Larraín, claimed that the draft budget would “give a strong impetus to economic reactivation” and was “responsible from a fiscal perspective.” President Piñera stressed the proposal’s goal of strengthening public security in Chile, highlighting the budget’s aim of creating a more peaceful environment and safe public spaces for Chilean citizens, aided by the continuation of the Plan Calle Segura (Safe Street Plan). He additionally informed congress that US$34.35bn would be assigned to the national agreement for public security to fund the improvement of infrastructure, technology, and equipment for Chile’s law enforcement authorities.

On 27 September Larraín and Rodrigo Cerda, the director of Chile’s budget office (Dipres), presented a more detailed analysis of the draft budget, confirming the prioritisation of social objectives and stating, “We want public investment to come up to the level of private investment”, while reiterating the budget’s 3% increase in public spending, equivalent to US$2.14bn.

Jair Bolsonaro completed a year as president of Brazil on 1 January. He marked the occasion in a subdued way, merely calling for 2020 to be “a year as victorious for the Brazilian people as 2019 has been” in a tweet and promising to work “night and day, to change our nation’s destiny”. An objective observer would argue that Bolsonaro’s first year in office has delivered mixed results, with the question now being what areas the government will choose to focus on to achieve this promised change.

There are high hopes for the country on the economic front. “Brazil is the one major economically promising country in the [Latin American] region for 2020,” the Eurasia group, a political consultancy, declares in its ‘Top Risks for 2020’ report published on 6 January. The first ‘Focus’ bulletin of the year from the Brazilian central bank (BCB), based on market projections, puts 2019 GDP growth at 1.17% and forecasts for 2020 at 2.3%. This is well above the South American average calculated by the Economic Commission on Latin America and the Caribbean (Eclac) in December, which projects a regional contraction of 0.1% in 2019, and growth of just 1.2% in 2020. 

Amid a gloomy global outlook such optimism is driven by the success of the Bolsonaro government’s economic agenda (notably in passing a pension reform last October) and its fiscal austerity measures. However, the optimism could prove to be misplaced. The last year has shown that the implementation of future reforms will depend in large part on congress, on its general push for reform and on lawmakers’ support (or not) of the projects at hand.

Bolsonaro, who is not currently affiliated with a political party, has in any case given scant indication on what exactly he plans to do next. When a reporter asked him on 6 January which of the mooted public administration reform or tax reform would be a priority, Bolsonaro responded by declaring that journalists are a “race in danger of extinction” and that the media spreads misinformation and lies. 

It is these kinds of outbursts, along with misguided policy in areas such as education and the environment, which have mitigated the success that his administration can legitimately claim on the economy in its first year. But Bolsonaro has shown no sign that he intends to change his ways. On the contrary, it seems that unyielding ideological bias, provocation and controversy will continue to dominate during his second year as president, particularly on questions of human rights, environmental protection, and foreign policy.

In his first Facebook Live address of the year, on 2 January, Bolsonaro took a swipe at his French peer Emmanuel Macron and the Swedish environmental activist Greta Thunberg over their supposed lack of response to the bush fires currently devastating Australia. This is not the first time that Macron and Thunberg have received insults from Bolsonaro. They are vocal critics of his environmental policy, notably his response to fires and deforestation in the Amazon and rising violence against Brazil’s indigenous peoples.

Bolsonaro has also re-affirmed his pro-US foreign policy stance, with the foreign ministry (Itamaraty) expressing its support for “the fight against the scourge of terrorism” in the wake of a US airstrike in Iraq ordered by President Donald Trump which killed Iranian general Qasem Soleimani on 3 January. Brazil’s chargé d’affaires in Tehran was subsequently summoned by Iran’s foreign ministry, reportedly to explain this pro-US statement, and Bolsonaro’s critics have condemned what they deem to be his government’s lack of caution on the issue.

Disagreement over solar tax

On 7 January President Bolsonaro met Brazil’s national electricity agency (Aneel) to discuss the taxation of solar energy. The Aneel is in favour of phasing out subsidies implemented in 2012 to encourage consumers to produce their own solar energy. Bolsonaro has publicly spoken out against any form of taxation on solar energy in recent days, although he has said that the final decision lies with the Aneel, an independent body. Bolsonaro’s position is shared by congress as well as at least one of the Aneel’s directors, but a decision on the issue has yet to be reached. More than 120,000 small-scale photovoltaic systems have been installed in Brazil since 2012, with a total generation capacity of 1.6m KW (representing just 1% of the country’s energy matrix).