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The troops deployed in Tegucigalpa and San Pedro Sula next to the national police have already been joined by members of the new military police force, drawn from the army, and will soon have at their disposal a new rapid-response unit. More than a year of military involvement in policing does not seem to have made much of a difference to the level of violence across the country, which has kept Honduras at the top of the region’s homicide table, way above all others.

The first elements of the new, 5,000 strong Policía Militar de Orden Público (PMOP) began to be deployed in mid-October. They were sent to Tegucigalpa and San Pedro Sula, the same two hotspots where since last year 2,000 soldiers have been acting next to officers of the national police (PN). The members of the PMOP have been selected from among army personnel and drilled in policing skills. Training for the first to be deployed cannot have been longer than a few weeks. The PMOP reports to the defence ministry, which has attracted criticism from many quarters who see this as a return to the bad old days when the police were part of the military.

The first movements of the PMOP have provided a foretaste of the kind of operations envisaged for them. In Tegucigalpa the unit occupied the marginal Flor del Campo district, where violent gang members hold sway. They intend to stay for “some days” to “cleanse” the area, after which they will hand matters over to the PN. In San Pedro Sula they were sent to patrol a commercial district and to provide security to public transport.

The second new force created by the national assembly, the Tropa de Inteligencia y Grupos de Respuesta Especial de Seguridad (Tigres) is meant to be an élite rapid response unit. Despite its military-sounding name it will report to the security ministry, like the PN. The Tigres are scheduled for deployment in November, the month in which Honduras holds general elections.

The backdrop to these developments is the awareness that though there have been some improvements in the security situation over the past couple of years, these have been minimal. The Observatorio de la Violencia (of the Universidad Nacional Autónoma de Honduras, Unah) reports that there were 3,547 intentional homicides in the first half of the year, only 1.8% fewer than in the same period of 2012. This means that the daily average fell only slightly, from 19.8 to 19.6. Intentional homicides accounted for 71% of all violent deaths in January-June; all other categories registered greater declines. The total of violent deaths was down by 8.8%.

Slow march with the maras

When Adam Blackwell, the secretary of multidimensional security for the Organization of American States (OAS), turned up in mid-October to review progress in the dialogue with the two biggest street gangs, Mara Salvatrucha and Mara 18, he had to admit that it was moving very slowly. “It is a very complex problem. We are advancing very cautiously in order not to create expectations [...] These are groups that have been fighting each other for 40 years.” Blackwell represents the OAS in an effort guided locally by the Catholic bishop of San Pedro Sula, Rómulo Emiliani.

This initiative was set in motion last May when gang leaders apologised to society at large and said they were willing to curb the violence. Blackwell said he was optimistic that after the 24 November elections “we’ll be able to sit down to discuss with the new President [-elect] how we can move forward on this matter.” President Porfirio Lobo’s term runs until late January.

BRAZIL | Growth forecast plummets. On 7 July Brazil’s central bank (BCB) released the latest instalment of its weekly survey of local economists, which found that the consensus economic growth forecast for the year has been revised down from 1.10% the previous week to 1.07%, the sixth consecutive week that that it has been reduced. The analysts’ growth forecast is now well below the projections made by the BCB (2%) and the federal government (2.5%).

The accompanying BCB report explains that the downwards revision was primarily driven by the perceived negative prospects for the domestic manufacturing sector, which has seen its production levels gradually fall throughout the year despite the various stimulus measures targeting the sector adopted by the government led by President Dilma Rousseff.

At the start of the year, local economists predicted a slight 0.96% growth in manufacturing sector activity. However, now they are predicting the sector will actually contract by 0.67%. This after Brazil’s national association of automobile manufacturers (Anfavea) reported earlier this month that production in the country’s key auto sector had fallen by 16.8% to 1.57m units in the first six months of the year compared to the same period of 2013. Anfavea said that this was the result of weaker demand both abroad (exports were down 23.1%, driven by a sharp fall in sales to Argentina) and at home (down 7.6%) despite the fact that last month the federal government announced that it was extending the temporary reduction in the industrialised products tax (IPI) levied on new motor vehicles until the end of this year.

The temporary tax break was introduced in May 2012 for a three-month period in a bid to boost domestic automobile sales. It has been extended a number of times since then but has failed to deliver the expected results. Indeed, the poor half year results prompted Anfavea to revise down its own production forecasts from +1.04% to -10.0%. Anfavea also complained that the high number of national holidays decreed by the government in June to coincide with the games played by Brazil in the Fifa World Cup had negatively impacted production level (according to Anfavea in June there were only 13 full production days). All of this represents a serious problem for Rousseff and the ruling Partido dos Trabalhadores (PT). If negative economic trends continue, it is possible Brazil could tip into recession ahead of October’s general elections.

REGION | Pooling efforts to fight climate change, agricultural pests

On 21 April the agriculture ministers of Argentina, Bolivia, Brazil, Chile, Paraguay and Uruguay agreed to boost their cooperation in the area of agriculture in order to better face the problems derived from climate change and agricultural pests. The agreement was signed during the two-day meeting of the Southern agricultural council (CAS) held in Chile’s capital, Santiago.

Chile’s agriculture minister, Carlos Furche, said that the agreement answered to the fact that the challenges posed by global climate change and the spread of plant pests and animal diseases demanded joint and coordinated action by regional neighbours. “We need to coordinate joint action to control or eradicate the various animal diseases or plant pests,” he said. “The pressure from the flow of goods and people transported across the region means that help from all countries is needed. If we want to eliminate the fruit fly, for example, it is not enough to eradicate it from Chile, we also need to do so in neighbouring countries”.

Meanwhile, addressing the issue of climate change, Furche said that “in our case, we know that climate change is producing a very serious impact, in fact we currently have 194 communes under a state of agricultural emergency due to drought, and therefore this is a highly relevant issue”.

This was seconded by the head of Uruguay’s agriculture, livestock & fisheries (MGAP) ministry, Tabaré Aguerre, who said that climate change was something to which the entire region has to adapt. “We need to adapt to this and be more efficient in the use of water and better soil management, because this will allow us to have more sustainable and resilient production systems,” Aguerre said.

The ministers added that during the meeting, the CAS members also agreed to come up with a common position on climate change in order to present it at the next United Nations Climate Change Conference (COP21) to be held in Paris in November-December. At the end of the CAS meeting Chile transferred the pro-tempore presidency of the council to Uruguay, which will be in charge of organising the next CAS meeting.

URUGUAY | Warding off economic concerns

On 21 April Uruguay’s economy ministry, Danilo Astori and the head of the central bank (BCU), Mario Bergara, dismissed concerns that the rapid appreciation of the US dollar, which is stoking inflationary pressures in Uruguay, could tip the country into an economic crisis.

Uruguay’s inflation rate is currently running above the BCU’s top target range of 7% (cumulative inflation was running at 7.55% to in the 12-month rolling period to March) mainly due to a number of external factors including the appreciation of the US dollar and the lower imports of goods from Brazil and Argentina as a result of the contraction in production levels in those two countries.

All of this has sparked concerns that the Uruguayan economy could be in for a difficult year with inflation higher than the 8.26% with which it closed 2014, coupled with lower growth as a result of lower global demand and less favourable terms of trade. However, in a forum with local economists organised by the BCU, Astori said that “The figures show that on the issue of growth Uruguay has managed to maintain a reasonable evolution of its economy in even tougher circumstances than those currently faced globally and by our region”.

Bergara said that the Uruguayan economic authorities had dealt with rapid appreciations of the dollar in the past and that they had built a platform to ensure that the depreciation of the national currency does not have major consequences. “The vulnerability to exchange rate risks has been mitigated,” Bergara said. He added that “The US will continue to strengthen its currency but we are calm and serene that… [although] Argentina and Brazil are currently stagnant, we will continue growing, even if at a lower rate”.

Uruguay’s GDP increased by 3.5% last year and the government is banking on a similar result this year. As for inflation, Bergara said that the authorities were working to bring it down but insisted that it was “not out of control”. “We are working with a target range of 5% with a tolerance of two percentage points… it is hardly dramatic that inflation is currently at 7.5%,” Bergara said.

• IMF praises “credible” Brazil plan

On 16 April the managing director of the International Monetary Fund (IMF), Christine Lagarde, said that a “credible” fiscal plan was being implemented in Brazil. While the IMF has slashed its economic growth forecast for Brazil this year, predicting a contraction of 1%, it expects the country to return to growth in 2016, and forecasts an expansion of 2.2% in 2017. In a press conference in Washington, where the Brazilian finance minister, Joaquim Levy, met Lagarde, the IMF managing director praised the measures the new minister has taken in support of Brazil’s domestic economy.

El gobierno chileno presentó al congreso su borrador del presupuesto para el 2016 la semana pasada y este no contenía buenas noticias: en medio de una debilidad económica global y deprimidos precios del cobre, el ministro de finanzas, Rodrigo Valdés, dijo que los gastos del gobierno tendrán que expandirse más lentamente el año próximo; que el pronóstico oficial del crecimiento del PIB para el 2016 también ha sido recortado una vez más (cayendo al 2,75%). Pero al mismo tiempo hay signos de que la larga caída de la Presidenta Michelle Bachelet en las encuestas de opinión, aunque no se han revertido, al menos parece haber tocado fondo.

Aún es muy pronto para hacer afirmaciones definitivas sobre el tema, pero la semana pasada hubo al menos una insinuación de que la política de la Presidenta Bachelet de ‘nuevo realismo’ podría estar teniendo algún efecto en las encuestas de opinión. Una encuesta de Adimark cubriendo las percepciones de los votantes en septiembre parece sugerir por primera vez que la permanente caída de Bachelet en las encuestas puede estar terminando.

Adimark ha estado rastreando los ratings de aprobación y desaprobación de Bachelet sobre una base mensual desde que ella asumió el poder. Ella comenzó fuertemente con un rating de aprobación del 54% y un rating de desaprobación del 20% en marzo del 2014, pero para septiembre-octubre de ese mismo año, ambos indicadores ya estaban en casi el mismo rango; a partir de entonces su tasa de desaprobación superó su tasa de aprobación por un margen cada vez más amplio, llegando en agosto del 2015 a aparentemente su punto más alto (72% de desaprobación contra 24% de aprobación). Varios son los factores que condujeron este incesante deterioro, pero el más importante ha sido el escándalo de corrupción de Caval (que involucraba a su hijo, Sebastián Dávalos, y su esposa) junto con un segundo escándalo sobre el financiamiento ilegal de campañas políticas, y un creciente grado de resistencia a sus reformas fiscales y de la educación.

Pero algo cambió en septiembre. La tasa de desaprobación de Bachelet cayó dos puntos porcentuales (al 70%), mientras que su tasa de aprobación subió un punto (a’ 25%). Adimark señala que ambos cifras están dentro de su margen de error (+/- 3%) y por lo tanto, estrictamente hablando no eran cambios estadísticamente significativos. Pero de todos modos, el cambio de dirección era sugestivo.

La encuestadora también señaló que septiembre fue un mes inusual, marcado por un terremoto y tsunami el 16 de septiembre que dejó 11 muertos, las celebraciones del día de la independencia el 18 de septiembre, y la decisión de la Corte Internacional de Justicia (CIJ), el 24 de septiembre, de continuar las audiencias sobre la disputa territorial entre Chile y Bolivia (que podría interpretarse como un revés para la posición de Chile [IL-15-39]).

Sin embargo, la implicación es que la opinión pública quedó impresionada por la respuesta del gobierno al terremoto. El rating de aprobación del gobierno subió tres puntos porcentuales durante ese mes (lo que es considerado como estadísticamente significativo), y aquellos entrevistados por Adimark evaluaron particularmente bien al gobierno por sobre su “capacidad para enfrentar situaciones de crisis”. El detalle fino del sondeo también reveló que la aprobación de Bachelet creció en su mayor parte entre grupos socio-económicos bajos, entre los hombres, y entre “aquellos que se identificaban con la Derecha”.

Presupuesto

Cómo jugará el presupuesto para el 2016 en todo esto no es claro, pero es evidente que Bachelet está actuando para el terreno medio. El ministro de finanzas Valdés presentó un presupuesto cauto, con los gastos del gobierno proyectados para crecer un 4,4% en el 2016, la tasa más baja en más en 10 años, y menos de la mitad del incremento del 9,8% de este año. Se han tenido en cuenta asunciones conservadoras acerca de los precios internacionales del cobre, y una más lenta reducción en el déficit fiscal.

En un discurso marcando el aniversario del voto ‘no’ en el referéndum de 1988, que allanó el camino para la restauración de la democracia en Chile, Bachelet insistió en ser  modesta. “Hemos cometido errores y los hemos reconocido”, ella dijo, “lamentamos no haber hecho mejor las cosas”, Bachelet describió el presupuesto como “prudente y responsable”.

Bachelet también ha dado instrucciones a sus ministros del gabinete para que viajen alrededor del país para “explicar el presupuesto en el terreno”. Su narrativa parece ser que contra un telón de fondo de austeridad el gobierno está haciendo todo lo que puede para priorizar los gastos en salud, aplicación de la ley, vivienda y educación.

Algunos periodistas habitualmente críticos de la centro-derecha han reconocido que lo que ellos ven es una decisión de Bachelet de no jugar la carta populista y de optar en cambio por lo que ellos describen como “cuasi-austeridad”. Mientras que cualquier significativo deterioro más en la economía interna será negativo, el gobierno claramente está esperando que esto pueda mejorar su imagen, administrando cuidadosamente la actual desaceleración económica y contando con factores externos para ayudar a conducir una gradual recuperación en el 2016 y en el 2017.

• Sistema electoral

La Presidenta Michelle Bachelet dijo que la gobernante coalición Nueva Mayoría había hecho “cambios de magnitud histórica” durante los primeros 18 meses de su segundo mandato en el poder, creando un sistema electoral proporcional e inclusivo para reemplazar el sistema binominal heredado del General Augusto Pinochet. Ella dijo que la coalición trabajaría con “más energía y disciplina” para completar la reforma de la educación, “la gran tarea de nuestro gobierno”.

The impeachment proceedings against some long-questioned members of Paraguay’s supreme court (CSJ) is finally coming to a head in the national congress. The trial of Justice Sindulfo Blanco began in the senate after making its way through the chamber of deputies and could now be completed before the end of April. Should Blanco, who stands accused of dereliction of duty, corruption and links with local criminal organisations, be impeached it is likely that other sitting CSJ justices will follow as congress seeks to purge the top court of unsuitable individuals. But this process is viewed with apprehension by those concerned that the main political parties could take advantage of the situation to fill the CSJ with allied justices.

Blanco’s impeachment trial in the senate began on 6 April. The motion to impeach the magistrate was approved by the requisite two-thirds majority in the chamber of deputies late last year. While Blanco is not the only magistrate in the nine-seat CSJ who currently faces impeachment proceedings in congress (see sidebar), the fact that he is aligned with the main opposition Partido Liberal Radical Auténtico (PLRA) ostensibly helped to expedite the impeachment proceedings against him in the legislature where the ruling Asociación Nacional Republicana-Partido Colorado (ANR-PC) party holds simple majorities. The ANR-PC has adopted a party line in favour of impeaching Blanco, and has ordered all its legislators to vote accordingly.

But the decisive move against Blanco has also been prompted by the mounting evidence against him. The CSJ magistrates have come under intense scrutiny since 2014 when the case of the murder of the journalist Pablo Medina exposed the links that many CSJ judges allegedly have with local criminal organisations and/or corruption rings. Blanco himself admitted that back in 2004 when he was sworn-in by congress, he lied when he promised to serve only a five-year term after which he was to step down – in the full knowledge that under Paraguay’s constitution CSJ justices can only be removed via impeachment by the legislature or upon retirement at age 75.

At the start of the impeachment trial in the senate, ANR-PC deputies Ramón Romero Roa and Miguel Angel del Puerto, who have been appointed to represent the plaintiffs, presented nine charges against Blanco and argued that his decisions and actions have shown that he is “not fit to be a magistrate”. Roa and Del Puerto said that the fact that Blanco was prepared to lie to secure a promotion and that with some of his controversial rulings he had shown a distinct bias towards certain groups (including multinational firms, dubious local bureau de change firms and local banks) and individuals showed that he had acted “against the constitution and the general interest”. The deputies even noted that in many of these controversial rulings, Blanco’s opinions were similar to those of former CSJ president Víctor Núñez, who resigned in 2014 ahead of his impending impeachment over links to the suspected mastermind in Medina’s murder.

Yet despite such accusations, Blanco’s defence, which began presenting its case before the senate on 26 April, have said that the magistrate will not resign and will clear his name in the trial. Blanco’s defence insists that the impeachment proceedings against him are politically motivated and the latest attempt by the political parties and ANR-PC in particular to fill the CSJ with pliant magistrates. With Blanco’s impeachment trial set to end before the end of the month, it is still unclear if the requisite two-thirds of the 45-seat senate will vote to impeach him. But what is clear is that his case could set a significant precedent.

• Other CSJ justices facing impeachment.

In addition to Justice Blanco, impeachment motions have been presented before the national congress against six other CSJ magistrates. These magistrates are: Oscar Bajac, César Garay Zucolillo, Antonio Fretes, Raúl Torres Kirmser, Gladys Bareiro de Módica and Alicia Pucheta de Correa, who in February was elected as CSJ president to replace Fretes, who completed Víctor Núñez’s term. While the motions of impeachment against Bajac (aligned with the PLRA) and Garay (ANR-PC) have been pending since 2014, the motions against Fretes (ANR-PC), Torres Kirmser (ANR-PC), Bareiro (PLRA) and Pucheta (ANR-PC) were presented by the leftist opposition parties Frente Guasú and Partido Democrático Progresista on 8 April.

Fahd Jamil Georges, a Brazilian criminal who was known as the ‘king of the border’ with Paraguay for his illicit business in the region, turned himself in to the authorities on 19 April. His surrender is evidence of the changed criminal dynamics in the Brazil-Paraguay border region, where the Primeiro Comando da Capital (PCC) international drug trafficking organisation (DTO) is now in control, supplanting individuals like Jamil.

Jamil was once described as the leader of the drug trade on Brazil’s porous border with Paraguay, where he has been active since the 1990s. In 2005, he was sentenced to over 20 years in prison for international drug trafficking, corruption, and fraud, but he fled to Paraguay (in 2009, a Brazilian court overturned the sentence). In Paraguay, Jamil presented himself as a wealthy businessman and land-owner, and is said to have had dealings with powerful names there, including former president Horacio Cartes (2013-2018).

Now 79, Jamil has been under arrest since turning himself in to Brazil’s federal police in Campo Grande, the state capital of Mato Grosso do Sul, in April, after 10 months on the run. He faces a long list of charges, including that of leading a criminal organisation involved in arms trafficking, corruption of public officials and homicides, and with links to armed militias. His son Flávio Correa Jamil Georges, wanted on similar charges, is still on the run.  

Jamil reportedly signed a letter before giving himself up, rejecting the charges levelled against him and saying he had always collaborated with the security forces. According to the Brazilian press, his lawyers say he turned himself in due to poor health and the hope of being granted house arrest, as well as following threats from the PCC. “The PCC is going after me in [the border city of] Ponta Porã,” Jamil said during a virtual court audience after turning himself in.

PCC in control

Jamil was no longer as notorious and formidable a criminal as he once was, but his surrender to the police serves as a further reminder of “how completely the Brazilian gang [PCC] has come to rule this frontier”, specialist website Insight Crime notes. In recent years, as the PCC has grown its presence and power in Paraguay, the DTO has come to take almost complete control of the illicit economy in the border region, in parallel with the retreat of a rival Brazilian DTO, the Comando Vermelho (CV).

In this section we will consider the provision of utilities such as water, sanitation, and electricity, as well as progress in the energy transition.

Latin America has made great progress in improving access to water and sanitation services in the last 20 years, but issues remain. While access to running water has improved, far fewer people receive piped water into their home, and access in general is far lower in rural areas. Access figures for sanitation services are lower than for running water, but notable success stories in recent decades include Chile moving from 21% waste access in 2000 to 100% in 2012, and Mexico improving from 23% to 63% for the period. However, the proportion of the region’s wastewater that is actually treated is lower even than waste access, at just 30-40%. This contributes to high levels of water pollution that affect the amount of usable resources that remain.

Persistent shortfalls in water and sanitation services contribute to high rates of inequality in the region, which remains the most unequal in the world. Some 36m people still lack piped water to their homes, and 15.9% of businesses report insufficient water supplies. In addition, 60m people only have limited access to sanitation services. To achieve the UN Sustainable Development Goal (SDG) number 6, which guarantees safe universal access to drinking water and sanitation services, by 2030, the region needs to build US$256bn in new infrastructure, according to the IDB.

Water stress is also an increasing concern. Despite possessing around 30% of the world’s freshwater resources, Latin America is suffering increased water insecurity due to factors including mismanagement and climate change. Sixteen of the largest 20 cities in the region are facing water stress, with notable examples including Lima, São Paulo, and Mexico City. Water-related issues have already sparked protests in various countries and been linked with increased emigration from Central America’s Dry Corridor, while a 13-year megadrought in Chile has seen entire lakes dry up. These issues are forecast to worsen due to climate change, meaning that governments need to build more infrastructure to make better use of the available resources.

Electrification is another key area, and one in which LAC has made strong progress in recent decades compared with peer developing regions. Most countries in the region now have electricity access rates of more than 90%, with Peru, Nicaragua, Honduras, and Bolivia making particularly impressive gains in the last 20 years. However there is still work to be done in rural areas, which also tend to have lower quality access through decentralised solutions, such as small solar arrays, that can only power a few appliances and do not provide power around the clock.

Another concern is the robustness of electrical grids, which suffer more interruptions than in developed nations, leading to significant disruption for households and businesses. More than 30% of businesses said that blackouts are a “prime difficulty”, causing annual estimated losses of 2.3% of total sales. Central America is an interesting case study in this regard, with energy distribution governed by a 1996 framework treaty integrating systems throughout the subregion. However transmission systems aren’t strong enough to deal with faults in the 1,800km Central American electrical interconnection system (Siepac), leading to frequent blackouts. Fixing the issues would require huge infrastructure investment, and such is the dissatisfaction with the system that Guatemala triggered a 10-year notification period to leave the regional electricity market in July 2021.

For the region as a whole, the IDB estimates that US$577.1bn in investment is needed to guarantee universal and sustainable access to electricity as stipulated by SDG 7 by 2030.

LAC countries are also working to shift their energy matrix towards renewables as part of commitments to reduce greenhouse gas emissions under the Paris Agreement. The region has the potential to be a renewables powerhouse, with abundant solar and wind resources, and its renewable energy markets are among the most dynamic in the world.

As things stand many countries in the region are highly dependent on hydropower, with Brazil, Chile, Colombia, and Peru particularly standouts. This reliance causes issues when conditions are dry. For example, Brazil experienced one of its worst droughts on record in 2021, reducing electricity generation at hydropower plants and necessitating the use of expensive and environmentally-damaging thermal power plants to ensure electricity supplies. Colombia currently generates almost 70% of its electricity from hydropower, and is working to diversify its energy matrix.

Countries throughout the region are attempting to do so, and much of the forecast capacity growth will be generated by renewables. Chile is a shining light, aiming to generate 70% of its electricity from clean sources by 2030 and be carbon neutral by 2050. Last year thermal plants contributed 55% of energy generation as severe drought affected hydroelectric plants, but 4GW of non-conventional renewable capacity was added to the system and a further 4.5GW is expected in 2022-2023. This will help the country achieve plans to shut down eight of 28 existing coal plants in the next five years.

Chile is also positioning itself as a regional leader in developing green hydrogen technology, publishing its national green hydrogen strategy in November 2020. Paraguay is another nation betting on the technology, with a pilot project expected to produce 450kg of green hydrogen per day from April 2023. In Colombia, Ecopetrol, the largest energy company in the country, is working with Promigas and the national government on a pilot project. Argentina, Brazil, and Uruguay are also working on green hydrogen projects. The International Energy Agency (IEA) believes that the fuel has the potential to reduce emissions; decarbonise transport, in particular heavy-duty and public transport; and eventually bring in revenue through exports. The agency has called for regional cooperation to maximise opportunities.

One notable exception to the regional trend towards clean energy is Mexico, where President Andrés Manuel López Obrador has doubled down on fossil fuels. Since coming to power in December 2018, López Obrador has pushed through the construction of the Dos Bocas/Olmeca oil refinery in Tabasco state, which will reportedly start operating in 2023, and moved to shore up ailing state-owned oil company Pemex. He has also prioritised the state-owned utility Comisión Federal de Electricidad (CFE), which has low renewables penetration despite abundant natural resources, disincentivising private investment in renewables projects. Despite this, renewables share of total electricity generation increased from 18% in 2019 to 20% in 2020 and 24% in 2021, and more renewables capacity is expected to come online through private companies over the next couple of years.

Panama’s plans to solve water scarcity

Panama may receive the second-highest amount of rainfall of any country in the Western Hemisphere, and boast freshwater resources of almost five times the global average, but the country remains at risk of water insecurity. 

One issue is that many people live in homes without access to running water, relying on deliveries from tanker trucks to meet their daily needs, and another is that the country has been affected by droughts since 2019, which was the fifth-driest year in seven decades. In fact, a January 2020 press release from the Panama Canal Authority (ACP), the government agency that administers the canal, noted that rainfall in 2019 was 20% less than the country’s historic average, while water evaporation levels increased by 10% due to a 0.5- to 1.5-degree Celsius rise in temperature. This poses problems for the continued operation of the Panama Canal, a hugely important contributor to the national economy, as falling water levels in the lakes that fill the canal’s system of locks affect navigability, as well as affecting agricultural production.

The response to such a complex issue is multifaceted. In 2016, the government published its national water security plan 2015-2050, which aims to provide running water to every Panamanian; restore and maintain river basins; maintain functioning water and sewerage infrastructure; and develop a culture of responsible water use. The document mentions that only around a quarter of Panama’s freshwater supply is used, and therefore problems arise due to mismanagement of resources. Then in 2021 the government published a national drought plan, which promotes better monitoring of hydrological resources; the development of new and alternative sources of water; water conservation programmes; and legislation and planning around land use. In addition, the government has embarked on a well-digging programme on agricultural lands, and moved to improve water supplies in urban areas under a US$225m plan financed by the Inter-American Development Bank (IDB). And in June 2021, President Laurentino Cortizo sanctioned a law establishing Panama’s meteorological and hydrological institute (IMHP), an autonomous entity which he said would enable Panama to begin a “new path towards climate resilience”.

The ACP is also incredibly important in terms of water supplies. Not only does it manage the passage of ships through the canal, the agency controls dams and water-treatment plants that supply freshwater. In September, the ACP announced that work to enlarge the Mendoza water-treatment plant would start in Q3 2023, increasing its production capacity from 40m to 60m gallons per day. Increasing water stress has seen the ACP introduce a number of water-saving measures, including the suspension of energy generation at the Gatún hydroelectric plant; the elimination of hydraulic assistance at the Panamax Locks, which use high levels of water to ease vessel passage; the use of water-saving basins at the Neopanamax Locks; and the use of tandem lockages, which allow two vessels to pass the canal at the same time. Other measures include a freshwater surcharge on vessels over 125 feet, adjustments to the booking system for all shipments, and a vessel handling fee.

Panama now has plans in place to save water where possible while making better use of its existing resources. The issue is of primordial importance to the country’s economy, given the huge contribution of the Panama Canal to the national budget, with forecasts predicting direct contributions to state coffers of a record US$2.5bn in fiscal year 2023. With that in mind, it should come as no surprise that authorities are being proactive in searching for solutions to water insecurity.

The process of replacing the president of the three-member electoral tribunal (TE), Gerardo Solís, whose term expires in November, has captured media attention given the presidential and legislative elections in 2014. The longtime politicization of the TE (along with the rest of the judiciary) also made headlines amid public tensions with President Ricardo Martinelli over an electoral reform package, which was recently approved by the 71-member national assembly.

Under Panama’s constitution, one of the TE judges is selected by the executive, one by the legislature and one by supreme justice court (CSJ). Solís, who was picked by the CSJ, which is also tasked with naming his replacement, has been linked to the opposition Partido Revolucionario Democrático [PRD] while the other two justices - Eduardo Valdés Escoffery and Erasmo Pinilla - are opposition aligned. Despite his roots in the Movimiento Liberal Republicano Nacionalista (Molirena), Escoffery was appointed by former President Martín Torrijos (2004-2009, PRD) while Pinilla was the choice of the previous PRD-dominated legislature

Martinelli, who is constitutionally barred from seeking re-election in 2014, will no doubt be keen to ensure that the nine-member CSJ chooses an ally to take over from Solís. Following the unraveling of the alliance between Martinelli’s Cambio Democrático (CD) and opposition Partido Panameñista (PPA) in August 2011, Martinelli’s influence over the CSJ is less assured: four of the CSJ magistrates are Martinelli appointees, one of whom (Alejandro Moncada Luna) is serving a two-year term as CSJ president. While even with a Martinelli ally the TE would still appear to be weighted toward the opposition, the media is reporting maneuvering afoot to eject Pinilla, who is currently the target of various investigations and would be replaced by the legislature, which is now dominated by the CD. On 13 September, Javier Bosso Campbell, a former TE employee, filed a complaint before the prosecutor’s office attached to the court of auditors, accusing Pinilla of nepotism and using the court’s resources for personal benefit. Pinilla maintains that the claims were orchestrated by Luis Eduardo Camacho, the state’s communications secretary, and a CD lawyer, Hugo Polo.

Electoral reform package approved

A recent bone of contention between the TE and executive was an electoral reform package, approved by the legislature on 14 September, by 40 votes to 22, with 36 from the CD and four from Molirena.

  The reform already triggered objections from the PPA and PRD, who challenged the elimination of the party-list proportional representation (PR) system for the legislature, known locally as ‘voto plancha’. (In the legislature, 26 members are elected through a plurality vote in single-member constituencies and 45 members are elected through a party-list PR system). Critics warned that the change would encourage transfuguismo (floor-crossing) – a practice from which Martinelli’s CD has benefitted in particular: its legislative presence has swelled from 15, following the 2009 election, to 36. The opposition also challenged the omission of reforms aimed at strengthening democracy and electoral transparency, such as tighter regulations on private financing.

  The TE then riled the President (who earlier in the year sought to bring legal action against all three magistrates – see sidebar) after it urged him to veto the reform on the grounds that some sections were unconstitutional or “unsuitable”. Among other complaints, the TE said that, under the new law (which Martinelli has since promulgated), political parties would be able to run the same candidates for more than one post, warning that this could violate the separation of powers and criticised a provision to limit the TE’s capacity to act when presented with requests for the suspension of electoral propaganda.

• Threat to remove TE magistrates.

In June President Ricardo Martinelli attracted considerable criticism after he called for the removal of all three TE magistrates for refusing to certify Nidia Cureña, the Cambio Democrático and Molirena candidate, as the winner of a by-election held in El Bebedero, a precinct in the Tonosí district of Los Santos province. The election was challenged by the opposition Partido Revolucionario Democrático who alleged vote-buying. Martinelli has since apologised to the magistrates of the TE, which has called fresh elections for the precinct for this December.

PARAGUAY | Protests delay budget debate. Paraguay’s lower chamber of congress approved the draft budget for 2020 on 14 November after a tense two-day debate that was briefly suspended due to protests by teachers. Deputies increased the size of the budget to G$86.2tn (US$13.3bn), up 7.6% on the 2019 budget. The finance ministry presented a draft budget for G$85.5tn to congress in September, saying it was “austere” but in line with the “complex and volatile economic environment” facing Paraguay and the region.

Deputies discussed cuts in different areas of the budget in order to introduce new measures, such as a 16% increase from next April in the salary of teachers, thousands of whom gathered outside congress on 13 November to demand higher wages and an increase in the education budget to 7% of GDP as recommended by the United Nations Educational, Scientific and Cultural Organization (Unesco). Deputies also voted to reduce the budget for Parlasur, the parliament of the Southern Common Market (Mercosur) by G$4.7bn (US$726,000).

The budget now goes to the senate for consideration.

The massacre of 27 rural labourers in Guatemala (see pgs 5-6), believed to have been carried out by the Mexican drug gang Los Zetas, has once again brought concerns over the penetration of large drug trafficking organisations in Central America to the fore. The traditional transportistas, as those transporting drugs produced by Colombian gangs to their Mexican ‘distributors’ are locally known, have now also become local distributors and in some cases, they have even become suppliers of primary inputs for the production of synthetic drugs. This shift in the Central American gangs’ involvement in the trade, in conjunction with the move by Mexican drug gangs to increase their involvement in the shipment of cargo from South America to Mexico, has increased the risk of intra-gang confrontation, meaning that, with the benefit of hindsight, this massacre may well in the future be considered a turning point in the escalation of violence.

Presence and penetration
The steady increase in the size of drug shipments seized by authorities in Central America serves as an indication that larger narco-trafficking groups use the region to store and move drugs. As the shipments become larger, the stakes are also higher and the gangs require greater control over infrastructure and logistics to ensure the safe delivery of their ‘goods’. This has resulted in the need to increase the physical presence of gang members, especially from Mexico, in the region. To varying degrees, Mexican drug gangs are present in all Central American countries with the so-called northern triangle of Honduras, Guatemala and El Salvador being the area of highest penetration.

The Mexican drug gang Los Zetas is present in Guatemala, Honduras and Nicaragua, and apparently it has been engaged in ‘probing’ movements in El Salvador (in collusion with the Mara Salvatrucha gang). The Gulf cartel has been reported as operating in Belize and, through the Guatemalan gang known as Los Lorenzana, in Nicaragua. The Sinaloa cartel has been operating in Costa Rica, Honduras, Nicaragua, Panama and Guatemala. Only in Guatemala has the breakaway Beltrán Leyva organisation been positively identified; Honduras and Costa Rica have detected the presence of La Família Michoacana. Among the Colombian groups, those who succeeded the Norte del Valle cartel have been reported as active in Costa Rica, El Salvador and Nicaragua; one of them, Los Rastrojos, is also active in Panama. The Oficina de Envigado is present in Panama, where the most significant Colombian organisation is the Fuerzas Armadas Revolucionarias de Colombia (Farc).

Gang profiles
Most drug gangs in Central America consist of individuals with a past criminal career, mainly as thieves or contrabandists, which has taught them how to carry out their illicit activities undetected. Unlike Colombia where some of the narco-trafficking groups also claim to have a specific political ideology or affiliation, the relationship between Central American transportistas and their Mexican and Colombian employers tends to be rather fluid and the local gang’s allegiance to a specific foreign group may only be determined by the amount of payment offered.

Major local co-operators

Source: Drug trafficking Organizations in Central America: Transportistas, Mexican cartels and Maras, the Mexico institute at the Woodrow Wilson Center and the Trans-Border institute at the University of San Diego, May 2010.

• Commonly used routes

While most gangs use well-established overland transport routes, the most cost-effective way of shipping illicit drugs is to send them via sea in go-fast vessels. According to Salvadorean, Honduran and Guatemalan authorities the vast majority of drugs crossing their territory enter their borders by sea. Drugs generally leave Ecuador’s Pacific coast and Colombia’s Pacific and Caribbean seashores in go-fast vessels: some go straight to their country of destination for overland onward shipment (Honduras is roughly six hours by boat); others meet other traffickers and transfer the cargo to other vessels along the way or leave the drugs in temporary storage points. The Corn, Blue and San Andrés Islands off Nicaragua and the Roatan Islands off the coast of Honduras are believed to be hotspots for the aforementioned practice.

BRAZIL | Agricultural production expected to bounce back. On 5 June Brazil’s national statistics institute, Ibge, revealed that it expects that the total 2012 harvest of grains, legumes and oilseeds will be 160.3m tonnes, a 0.1% increase on last year’s record harvest of 160.1m tonnes. At the beginning of the year some of Brazil’s most productive agricultural regions in the south of the country suffered the effects of a severe drought which translated into substantial crop losses; and there was concern that this would seriously hamper Brazil’s economic performance. Indeed according to Ibge, Brazil’s lowly 0.2% growth rate registered in the first quarter of 2012 can be partly attributed to the poor performance in the agricultural sector.

    Agricultural production in the first quarter was 7.3% lower than in the last quarter of 2011 and 8.5% lower than in the first quarter of 2011. However, after gathering data from the field throughout the month of May, Ibge now forecasts that there will be an overall increase in production despite the fact that soya production will be 12.4% lower than last year and rice production will also be 13.5% lower with respect to last year. Soya and rice in that order are the two top commercial crops produced in the country. Yet, this will be offset by an increase in production in some 13 other crops such as cotton, oats, coffee and sugar cane.

    More importantly, Ibge also found that production of maize, the country’s third most important commercial crop, will drive the increase in harvest yields by posting a 21.7% increase in production compared with the previous year. This as maize producers expect a harvest of 68.5m tonnes after successfully increasing their planted area by 12.4% in the last year. Also encouraging for the government is the fact that total plantation area has also increased to 49.9m hectares, 2.5% more than in 2011.

ARGENTINA | YPF presents its investment plan. Argentina’s recently re-nationalised oil company, YPF, presented its investment plans for the 2013-2017 period on 5 June. The plan presented by the newly appointed YPF CEO, Miguel Galuccio, calls for annual investments of US$7bn during the period in order to increase the company’s levels of proven reserves and fuel production.

    Galuccio, who described the investment plan as “aggressive but realistic”, said that it had been designed to reverse the current trend of a 6% yearly decline in hydrocarbons production and turn it into a 6% annual increase. Moreover, he said that the company will now operate under a “new paradigm” based on rejuvenating its mature wells, intensive exploitation of non-conventional hydrocarbons and the expansion of the refining and fuel commercialisation activities.

    Galuccio said the strategy is to increase investment dramatically in the exploration and exploitation of non-conventional hydrocarbon sources given that, in his opinion, Argentina has the capacity to go from being a net fuel importer to a net exporter - and that YPF is to become Latin America’s leading non-conventional hydrocarbons producer. In order to achieve this, the company expects to drill some 1,345 new wells by 2017 which would allow it produce 55m barrels equivalent of non-conventional oil. Galuccio said this strategy would create some 10,000 jobs in the next five years. Pointing out that investment for this year will be in the order of US$3.5bn as the company expects to drill 746 wells, Galuccio said that the company intends to finance future investments with its own cash, seeking associations with local and foreign companies and by tapping domestic and international financial markets. YPF’s ability to raise funds on international markets, however, is a moot point.

CHILE | Not ready to push panic button. On 31 May Chile’s finance minister, Felipe Larraín, said that despite the fact that there is a lot of uncertainty about the state of the international economy “it is not yet time to activate the anti-crisis plan”. According to Larraín although the global economic situation is “complex” as the situation in Europe continues to deteriorate, Chile’s economy has continued to grow at a comfortable pace. Moreover, he pointed out that as Chile’s economy remains solid it continues to attract foreign investment even in this time of crisis. As a result, Larraín said that the government’s anti-crisis committee, which was created last year and is tasked with taking decisions to avoid possible negative effects on Chile from the European crisis, will continue to monitor the situation but will not be adopting any measures yet.

•  Paraguay

On 6 June Paraguay’s foreign ministry announced that Argentina had agreed to lift part of the temporary trade restrictions it had imposed by eliminating 131 non-automatic licenses currently imposed on Paraguayan textile and plastic exports. The Paraguayan government, currently engaged in difficult negotiations with Argentina over the issue, has come under severe pressure from Paraguay’s industrial union (UIP) to demand the normalisation of bilateral trade or else adopt similar retaliatory measures against Argentina. The UIP claims that the current restrictions have cost its members US$15m so far this year. Following the announcement the UIP said that this was “insufficient” and that the government should apply more pressure on Argentina or look for alternative markets for Paraguayan products.

*** Russian Jews tell Israel not to compromise.  The Russian Jewish Congress (RJC) has sought to counter a letter sent to Israeli Prime Minister Binyamin Netanyahu by 100 influential American Jews.  The letter from the American Jews urged Netanyahu to make territorial concessions to the Palestinians to secure peace. 

In a move timed to coincide with US Secretary of State John Kerry’s visit to Israel, the counter-letter from 100 Russian Jews, initiated by the RJC, said:

"We believe that the head of the Israeli government should only take decisions in this most important matter on the basis of his own understanding of the situation and in the interests of his country's citizens, rather than under external pressure, whoever it comes from: the global public opinion, the US leadership or American Jews, even influential ones.”

The signatories to the Russian letter include RJC president Yuriy Kanner, Alfa-Grupp co-owner Mikhail Fridman, head of the Federation of Jewish Communities of Russia Aleksandr Boroda, chief rabbi of Moscow and president of the Conference of European Rabbis Pinkhas Goldshmidt, the poet Vladimir Vishnevskiy, and people's artist of the Russian Federation Tamara Gverdtsiteli.

*** India’s defence secretary shows anger with UK.  On 8 April, India called off bilateral defence talks with the UK, due to start the next day.  The reason given was that Defence Secretary Shashikant Sharma was too busy with parliamentary work.  However, diplomatic sources are in little doubt that the real reason for the late cancellation was Indian anger with the UK over the Arms Trade Treaty (ATT) adopted last week. 

India, which is the world’s largest importer of arms, wanted the UK to support its demands for safeguards for importing nations.  India also wanted tight provisions on the supply of weapons to insurgent groups.

*** Russia continues to take a cautiously relaxed attitude to Korean crisis.  The Russian Defence Ministry is said to be “carefully watching the development of the situation” on the Korean Peninsula and to be ready to respond to any escalation, but Russian military sources say that troops in its Eastern Military District have not been put on heightened alert as a result of the crisis. 

Speaking in London on 10 April, Russia’s Foreign Minister Sergey Lavrov said "there is a chance that everything will calm down".  He also said: "There are no disagreements with the USA on North Korea”, but he added: "One just should not frighten anyone with military manoeuvres.” 

The Paraguayan economy has been growing at a strong average rate of around 6% from 2013-2017. The Central Bank is forecasting 4.5% expansion this year, based on strong soya and beef exports (Paraguay is the world’s fourth-largest soya exporter). Initial indications are that the victory of conservative Mario Abdo Benítez in the presidential elections held on 22 April will signal continuity in both economic policies and results (he is due to take office on 15 August)

The presidential race was closer than expected, raising some doubts over Abdo Benítez’ chances of having a working majority in congress for his five-year term in office. With 99% of the votes counted the candidate of the traditional and conservative Partido Colorado won with 46.44% of the valid votes, against 42.74% for Efraín Alegre of the Liberal party-supported centre-left Alianza Ganar coalition. The margin of victory, at 3.7 percentage points, was narrower than the opinion polls had suggested. Definitive results in the gubernatorial and congressional elections have yet to be released. However the first assessment that the ruling party would be weak in congress was subsequently revised. It now looks as if the Colorados will have 17 of 45 seats in the senate (down two – a smaller reduction than predicted) leaving the door open for the next government to make alliances with smaller parties. “The traditional parties are maintaining their hegemony,” political analyst Sebastián Acha told Reuters news agency, adding, “We can’t talk of a turn to the left as some predicted. Abdo’s Partido Colorado will have an important block in the senate and looks like getting a big majority in the chamber of deputies.”

The president-elect may also have side-stepped a long-standing political dispute which could distract attention from economic policy: the vexed issue of presidential re-election, currently prohibited by the constitution. The Colorados, the party that supported the long-dictatorship of General Alfredo Stroessner (1953-1989) are frequently suspected of wanting to stay in office, and not always by fair means. Last year when supporters of incumbent President Horacio Cartes tried to push through a reform law that would allow him to stand again, there were violent demonstrations and part of congress in Asunción was burn down by protestors. Abdo Benítez is from a rival faction of the Colorados, and although his father was General Stroessner’s right hand man, he can claim his own democratic credentials are good. After the election he suggested there might be a constitutional reform referendum in 2019 on the re-election question, but that an affirmative result would apply to future presidents, not to himself. By insisting he will only serve one term, he may have defused the issue.

The president-elect’s core economic policy seems to be to keep the export-fuelled growth going, while maintaining a low tax environment and seeking to encourage inward investment. During the campaign he also spoke of fighting corruption and reforming the judiciary. The big question is whether his macroeconomic policies will be enough to reduce still-high levels of poverty and social exclusion. Over one in four Paraguayans lives below the poverty line. About one-third of the country’s 15 to 19 year-olds do not receive proper schooling. On all key social indicators Paraguay lags behind its fellow Mercosur trade bloc members, Argentina, Brazil, and Uruguay. Political scientist José María Costa told Spanish newspaper El País “The election result shows the fundamental need for a political dialogue, particularly since we face big challenges such as reducing poverty, increasing social spending, and strengthening our institutions.”

Last year the Paraguayan congress approved a bill that would have imposed a 10% soya export tax. However, Cartes used his presidential veto to stop it becoming law, a move which was also supported by Abdo Benítez. Had the centre-left Alegre won the election, many expected higher taxes would be back on the agenda, but that now looks unlikely.

Ratings agency Fitch kept a positive outlook on Paraguay after the election, arguing that it expects Abdo Benítez to maintain the fiscal discipline that characterised the Cartes administration. Moody’s took a similar line, noting that Paraguay has a long history of fiscal conservatism that “supports our view that the country will maintain a low debt burden”. The country began accessing global debt markets in 2013 and since then has placed around US$3.5bn in bonds. According to Bloomberg these have paid an average yield of 4.97%, more competitive than the 5.92% yield achieved on average in all emerging markets.

Unlike some neighbouring countries where there is an ageing population, Paraguay’s demographics are still young. The total population is 6.9m. In the next five years it is calculated that around 500,000 people, mainly millennials, will arrive in the country’s urban areas, requiring jobs, education, and housing. Daniel Correa, an economic adviser to Abdo Benítez (and former deputy finance minister) points out that roughly half the population is aged 24 or younger. He told Bloomberg, “Paraguay needs democratic leadership that can meet the demands of these millennials. That demographic bonus could be an asset or could turn into a liability.”

For all the market optimism that met Bolsonaro’s election in late 2018, there were those who sounded cautionary notes. Political polarisation and disorganisation do not lay solid groundwork for lasting reform. While these concerns proved at times to be founded – and had the markets on edge more than once over the course of the year – 2019 has largely closed on victory for Bolsonaro where the economy is concerned.

The success of the pension reform, the promises of further reforms and the results of the government’s measures to reduce spending have borne some fruit. Economic recovery, although still sluggish, is confirmed. After signs that the economy might see a technical recession at the beginning of the year, growth picked up, principally thanks to internal consumption and the agricultural sector. GDP is now projected to grow 1.2% in 2019, and expand 2.2% in 2020. Public debt remained largely stable this year, standing at 77.7% of GDP in November. The fiscal deficit had fallen to 6.36% of GDP in the 12 months to November. The business sector has been responsive; the São Paulo stock exchange (Bovespa) hit several record highs, surging 31.58% over the course of 2019.

Challenges remain with a slow labour market (unemployment, although falling, remains high at 11.2% and the employment market is sustained by the informal sector), a struggling industrial sector, and an unfavourable international scenario, which can help explain a 7.5% decrease in annual exports and the sharp devaluation that the real suffered in November.

Evolution of 2019 GDP growth forecast  

Source: Focus bulletin, Brazilian central bank (BCB).

Mercosur

In its early days, the Bolsonaro administration had suggested that the Southern Common Market (Mercosur) regional trade bloc, which includes Argentina, Paraguay, and Uruguay as well as Brazil, would be neither an economic nor foreign policy priority. This shifted following the signing of a historic free-trade agreement (FTA) between Mercosur and the European Union (EU) on 28 June 2019. Although the deal’s ratification by European countries remains in doubt, in large part due to Brazil’s failure to reassure the EU about its environmental commitments, it has been hailed as a diplomatic and commercial victory by Bolsonaro. Mercosur went on to sign an FTA with the European Free Trade Association (Efta) in August. Despite uncertainty hanging over Brazil’s relationship with Argentina under the latter’s new Peronist President Alberto Fernández, Bolsonaro has indicated that Brazil remains committed to the bloc as part of efforts to open up Brazil’s closed economy. These include endeavours to reduce Mercosur’s high common external tariff (CET) as well as talk of separately pursuing bilateral trade deals with other countries, notably the US and China.

Selic

From July 2019, Brazil’s central bank (BCB) successively lowered the benchmark interest rate (Selic) from a record low 6.5% to 4.5% by the end of the year. André Rebelo, strategic affairs advisor at the Federação das Indústrias do Estado de São Paulo (Fiesp) private sector lobby, is upbeat about the opportunities this represents for domestic business. However, the low Selic, expected to be maintained at 4.5% throughout most of 2020, makes the country less attractive to foreign investors.

At the end of December, El Salvador’s 84-member unicameral legislature approved a new water law. The new legislation was hotly anticipated; the issue has been debated for years amid growing fears about water scarcity in El Salvador due to factors such as climate change, deforestation, and pollution. However, the approved initiative has met with criticism from organisations like Alianza Nacional contra la Privatización del Agua (Anpa) which includes environmental NGOs, the Catholic Church, and universities, as well as from two United Nations Special Rapporteurs, Pedro Arrojo-Agudo (water & sanitation) and David Boyd (human rights and the environment).

Back in June 2021 President Nayib Bukele announced he was sending down a proposed initiative on water resource management and establishing an ad-hoc commission to study it and discuss it with various groups. The need for such legislation has long been highlighted by environmental groups: in 2016 the human rights ombudsman’s office published a report warning that El Salvador could be uninhabitable in 80 years unless radical action was taken. Also in 2016, the then Frente Farabundo Martí para la Liberación Nacional (FMLN) government led by Salvador Sánchez Cerén (2014-2019) was forced to declare a water shortage emergency for the first time in the country’s history. While deadlock in previous legislatures held up approval of earlier bills addressing the issue, the ruling Nuevas Ideas (NI) has a two-thirds majority in congress following its February 2021 election victory, thereby removing this obstacle.

The approved bill, which was passed by the legislature on 21 December, states three basic tenets: that “water is a fundamental right for all; the State will guarantee the good use of this resource; and it will not be privatised under any context or form”. It also establishes that water rights will be administered by a government board with representatives from different ministries as well as one from the national university and one from civil society (appointed by the president). 

The decision to enshrine the right to water as fundamental was welcomed by groups such as environmental NGO Unidad Ecológica Salvadoreña (UNES). However they complain that the new legislation does not provide the conditions or elements for this right to be satisfied. Meanwhile two separate statements released on 22 December by various NGOs including Anpa, UNES, El Foro del Agua and civil-society group Fundación de Estudios para la Aplicación del Derecho (Fespad), among others, outline a string of further objections to the new law. These include the fact that it does not rule out the possibility of water being exploited through economic agents via concessions or public-private partnerships. Other objections include the fact that the timeframes of contracts for water exploitation by the private sector (of up to 15 years and renewable) are excessive and do not allow for timely evaluation to take into account water availability.

NGOs also point out that the new law fails to incorporate recommendations made by Arrojo-Aguo and Boyd in a letter to President Bukele dated 1 November. Among other things the UN Rapporteurs highlighted that the law recognises the right to “water and sanitation” which, while closely related, are in fact two different rights and should be treated differently. It warns that the new law fails to address the right to sanitation and recommends the creation of a specific section to address its regulation which should include the treatment of sewage, among other things.

• Other objections

In their letter to President Bukele, Arrojo-Aguo and Boyd highlighted other concerns such as the fact that private companies are not “exhaustively required” to request environmental permits based on corresponding technical studies from the relevant authority.

BRAZIL | Beef exports to China paused over BSE case. Brazil has temporarily suspended beef exports to China, by far its largest market, after laboratory tests ordered by the agriculture and livestock ministry confirmed a case of bovine spongiform encephalopathy (BSE), or ‘mad cow disease’, on a cattle ranch in the northern state of Pará.

China takes nearly 60% of Brazil’s total beef exports by weight, worth some US$8bn in 2022, so any suspension of exports will have a significant impact on cattle ranchers and meat-packing plants. Chinese authorities will announce the duration of the suspension in due course. The confirmation of two BSE cases in 2021 led to a four-month suspension of the country’s beef exports to China. The issue is likely to feature prominently on the bilateral agenda for talks when President Luiz Inácio Lula da Silva meets Chinese leader Xi Jinping in Beijing next month.  

A temporary interruption of Brazilian beef exports to China would also have a knock-on effect on beef exports by its immediate neighbours. Argentina and Uruguay might benefit, boosting their sales to China, although in Argentina’s case beef exports are restricted as part of the government’s attempts to control domestic inflation. Paraguay would only benefit indirectly, since it maintains diplomatic relations with Taiwan, rather than China. 

A large outbreak of BSE in Europe in the 1990s, led to the widespread adoption of prevention measures. In 2001 the European Union banned the use of meat and bone meal in cattle feedstock, which had been identified as a major risk factor in the spread of the disease.

Earlier this month two US senators introduced a bipartisan bill which would see Brazilian beef imports into the US suspended “until experts can conduct a systemic review of the commodity’s impacts on food safety and animal health”.

The United Nations Economic Commission for Latin America and the Caribbean (Eclac) said on 20 April that the Dominican Republic will be the fourth-fastest growing economy in the region this year.

According to Eclac’s forecasts, the Dominican Republic’s GDP will grow 4.6% this year, placing it in joint fourth place with Panama. For the region as a whole, growth will average only 1.2% due to “growing external uncertainties and internal restrictions” including higher interest rates and nervousness over the bank failures in the US and Europe in March.

Broadly in line with Eclac, the economy ministry is predicting 4.0%-4.5% growth this year. It acknowledges however that there has been something of a slowdown in the first quarter with growth of only 1.1% in January and February, attributed to lower construction activity and a dip in public sector investment. Despite this, the ministry expects the pace to pick up as public investment recovers, tourism continues to grow, and lower inflation leads to an easing of interest rates. The economy ministry notes that in March, year-on-year inflation was 5.90%, the lowest rate of the last 27 months. Also reflecting positive fundamentals, the peso remains strong and foreign currency reserves stand at US$16bn or 13.3% of GDP.

ECUADOR | GDP shrinks in Q2. Ecuador’s central bank (BCE) announced on 30 September that the country’s GDP contracted by 2.2% in the second quarter of this year, compared with the same period in 2023. The BCE attributed the contraction to an 8.2% decrease in gross fixed capital formation (GFCF), a 2.2% decrease in household spending, and a 0.6% decrease in government spending. However, exports were up by 1.9% in yearly terms and imports were up by 0.2%. In quarterly terms, GDP contracted by 1.9% in the second quarter. Imports were up by 6.4% compared with the previous quarter, while GFCF fell by 0.6%, exports fell by 0.3%, and household spending fell by 0.05%. Government spending increased by 0.03% compared with Q1.

COLOMBIA | Bogotá drought worsens despite water rationing. The municipal government of Colombia’s capital city, Bogotá, warned on 8 October that rationing measures are failing to prevent water loss from the Chingaza water system, which includes the Chuza reservoir and from where most of the city’s water supply is drawn. Under the current water rationing system, which began in April amid a severe drought, neighbourhoods have their water supply cut off on a rotating basis for 24 hours once every nine days. A statement from the Bogotá mayor’s office said that water levels at the Chingaza system fell by a further 0.35% over the most recent nine-day cycle, with the system at 43.36% of capacity. The municipal government has warned that the rationing measures will be tightened if water levels fall to 36%.

PERU | Exports perform well. Peru’s minister for foreign trade & tourism, Úrsula Desilú León, announced on 4 October that the country’s exports in August totalled US$6.72bn, representing an increase of 26.4% on August 2023. Over the first eight months of the year exports totalled US$46.80bn, up 13.8% year-on-year. Fishing exports were up 27.3% over this period, partly due to a rebound in the capture of anchovies which are used for the production of fish oil and fishmeal. Agricultural exports were up 18.9%, with the value of cacao exports rising by 328% due to surging international prices. Mining exports were up by 14.5% over the same period, with gold exports up by 56.2% and copper exports up by 1.6%.

Andean countries: inflation rate
Percentage variation (year-on-year)

Andean countries: GDP growth (%)
Quarterly figures are year-on-year growth