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REGION | Remittances recover. On 3 September Guatemala’s central bank (Banguat) released new figures which show that remittances to Guatemala continue to show signs of recovery, having slumped earlier this year due to the impact of the coronavirus (Covid-19) pandemic and the employment situation in the US - the source of most remittances to the country. According to Banguat, remittances totalled U$1.05bn for the month of August, slightly down on the US$1.07bn reported in July but up on the US$690.8m reported in April – the lowest amount registered this year. Remittances have since picked up – with US$836.76m registered in May and US$963.3m in June. Total remittances for the first eight months of 2020 were US$7bn, up from US$6.85bn in the same period last year. Meanwhile El Salvador’s central bank (BCR) released figures on 17 August which show remittances to El Salvador for July were US$553.1m, up 14.1% on July 2019. The BCR report also showed that remittances to El Salvador totalled US$3.08bn in the first seven months of 2020, a 4.7% drop on the same period in 2019. According to the BCR report, remittances to Honduras totalled US$2.98bn in the first seven months of 2020, down 3.3% on the same period in 2019. However, for the month of July, remittances to Honduras were up 1.2% (although absolute figures were not provided). A report by the US-based Pew Research Centre released on 31 August highlights the particular importance of remittances in these countries. In Honduras and El Salvador, for example, remittances accounted for over 20% of GDP in 2019 and 14% in Guatemala.

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

MEXICO | Cycle of interest rate hikes to continue. On 30 September, the governing board of Mexico’s central bank (Banxico) raised the benchmark interest rate by 25 basis points to 4.75% in a split 4-1 decision. This is the third consecutive rate hike enacted by Banxico and was widely expected by the financial markets. Banxico cited global inflationary pressures in its decision, noting that “although the shocks that have increased inflation are expected to be transitory”, they represent a risk to inflation expectations “due to their variety, magnitude, and the extended horizon over which they have affected [inflation]”. Annual headline inflation came in at 5.87% in the first fortnight of September, well outside of the 3% +/-1 target range, and Banxico has revised up its forecast for this year: it now expects inflation to close 2021 at 6.2%, up from a forecast of 5.7% at the end of August. Shortly after this latest rate hike, Banxico deputy governor Jonathan Heath said that one or two further increases were to be expected. “This is my personal opinion, that the cycle of hikes is not over yet, that perhaps we’re not too far from the end. Of course, this will depend much on the evolution of many different indicators”, Heath told newswire Reuters in an exclusive interview on 4 October.   

MEXICO | Government buys US dollar reserves. On 14 September, it emerged that the Mexican government led by President Andrés Manuel López Obrador had bought US$7bn from the central bank’s (Banxico) reserves. Banxico’s weekly accounts bulletin for the week ending 10 September showed that its foreign currency reserves fell by US$7.02bn to US$198.54bn that week. They had previously stood at a record US$205bn after an injection from the International Monetary Fund (IMF) in new Special Drawing Rights (SDRs). The finance ministry did not provide an explanation for the purchase of the US dollar reserves, believed to be its largest foreign currency purchase since 2008, but there has been speculation that it is destined to pay off part of state-owned oil company Pemex’s debt.   

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

Mexico: Unemployment Rate
Economically active population

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

Inflation figures for March published by Brazil’s national statistics institute (Ibge) showed a monthly inflation rate of 0.56%, down from 1.31% in February. However, it is uncertain if this overall slowdown in monthly inflation will bring much relief to the government of President Luiz Inácio Lula da Silva, whose approval ratings have suffered in recent months amid cost-of-living concerns, especially due to rising food prices. The monthly inflation rate for food and drinks had been decelerating for the preceding three months, but in March it rose to 1.17%, up from 0.70% in February.  

The Ibge released the latest figures for its official consumer price index (Ipca) on 11 April. This showed a slowdown in the monthly inflation rate but an increase in the annual rate. Accumulated inflation in the 12 months until March 2025 came to 5.48%, up from 5.06% registered for the 12 months until February. This is the highest level that the annual inflation rate has reached since February 2023.

The Ipca measures the price changes of nine categories of products and services, and all nine registered monthly rises in prices in March. The food and drinks category was the most significant driver of monthly inflation, with the Ibge highlighting major price increases for items such as tomatoes, eggs, and ground coffee. In a press release, the Ibge attributed the price increase for tomatoes to the higher temperatures of the summer months (December-February) which impacted tomato harvests, while the price rises for coffee come amid a wider reduction in global coffee supply, also partially driven by climactic factors.

Regarding egg prices, the Ibge mentioned the impact of a reduced supply of grains which are used to make chicken feed. In addition to supply-side concerns, the Ibge also cited seasonal factors which have driven up the demand for eggs in Brazil. The month of March saw the beginning of the Lent season, which began on Ash Wednesday (5 March). During this period many people give up meat and buy more eggs as an alternative protein source. The persistently high prices of eggs will likely continue to give political ammunition for right-wing opposition figures who have previously criticised Lula by reminding the public of his promises during the 2022 presidential election campaign to get more steak on the tables of Brazilian families, but he is now unable to provide even eggs.

Harvest forecast

There might be some cause for optimism on the horizon for Brazil’s food supplies, as the production of animal feed could benefit from a larger grain harvest. On 10 April the Ibge published its latest forecast for the 2025 harvest of grains, cereals, legumes, and oilseeds, projecting a total harvest of 327.6m tonnes (t), which would be up 11.9% from the 2024 harvest.

This updated projection is also 1.2% higher than the Ibge’s previous grain harvest forecast released in February. In terms of geographical distribution, the Ibge expects the southern state of Rio Grande do Sul to have a lower yield than last year, due to abnormally hot and dry weather, but the forecasts project strong harvests in central-western states, such as Mato Grosso and Goiás, to compensate for lower grain output there.

The latest forecast put soybean production at 164.3m t, which would be up 13.3% from 2024. The projections for maize, a common ingredient for chicken feed, are also optimistic, with the maize harvest expected to reach 127.3m t, which would be up 11.4% from last year and would mark the second highest maize harvest recorded by the Ibge.

Economic activity

On 11 April the central bank (BCB) released the latest figures for its IBC-Br economic activity index, which showed a 0.4% monthly rise in activity in February and a year-on-year increase of 4.1%. The accumulated activity in the 12 months until February this year was up 3.8% from the preceding 12-month period. Agriculture was the main driver of the monthly rise in economic activity in February, as the sector posted an increase of 5.6%. Services showed a slight monthly rise of 0.2%, while industry was down 0.8%. If the agricultural sector had been excluded from the IBC-Br calculations, Brazil’s economic activity in February would have shown a 0.2% decline.

ARGENTINA | Unemployment on the rise. On 20 May Argentina’s national statistics institute (Indec) revealed that the unemployment rate for the first quarter of the year stood at 7.9%, after the rate jumped up 0.8 percentage points on the same period the previous year. The result not only represents the highest  comparable quarterly rise since 2009, when Argentina was still suffering from the effects of the global economic crisis and posted a paltry GDP growth rate of 0.9%, but also seems to confirm a trend in rising unemployment in the country since last year. Indeed the 2013 first quarter unemployment rate was significantly higher than the final quarter of 2012 (6.9%) and surprised local analysts who were forecasting a much smaller increase, with the consensus rate being put at 7.1%.

   Equally problematically for the government of President Cristina Fernández, the rate of underemployment (those working less than eight hours a day) has also increased by a comparable 0.6 percentage points to 8%. Local analysts point out that this is the result of the government’s domestic economic policies, including the lack of investment and the imposition of strict currency controls, which have severely affected the levels of activity in the construction sector - an important source of employment. The hypothesis seems to be borne out by Indec’s data as it shows that in the first quarter of the year some 25,000 people lost their jobs, the majority (192,000) in the Greater Buenos Aires (GBA) area which comprises the capital and its adjoining municipalities in the eponymous province and has traditionally been the main focus of the country’s construction sector. Indeed, Indec’s figures for the GBA show that the unemployment figure at 9.4% is higher than the national rate, meaning that 561,000 people in the GBA alone are currently without a job.

    The situation appears to be even worse in some other cities such as Córdoba, Paraná, Salta and Ushuaia - all of which had unemployment rates of over 10%. All this will be cause for concern for Fernández, who in the past has been able to point to consistently rising employment levels as evidence that the economic policies pursued by her and her late husband and predecessor, Néstor Kirchner (2003-2007), were producing positive results.

CHILE |Slowing growth. On 20 May Chile’s central bank reported that GDP growth for the first quarter of the year in the country was 4.1%, lower than the 5.1% recorded in the same period last year. The figure is the lowest posted by the Chilean economy since the first quarter of 2011, when it was 3.2%. It is also lower than both the prediction of the bank’s monthly economic activity index measure (Imacec), of 4.4%, and the bank’s official target for the quarter (between 4.5% and 5.5%).

    According to the bank’s figures, while domestic demand remains strong, with a growth rate of 6.8%, on the back of increased consumption and investment spending, it appears that export activity has been lagging behind, posting just a 1% increase during the period. This has been used to explain the fall in activity in productive sectors such as fishing (-9.4%), agriculture (-1.8%) and manufacturing (-0.6%), all of which are sectors geared towards exports.

   In its last monetary policy meeting on 16 May, the central bank voted to keep its benchmark interest rate at 5%, where it has remained since January 2012 despite facing some pressure to implement cuts due to concerns that the less-than-favourable international economic climate could negatively affect Chile’s resilient economic growth. Following the latest results the central bank might be persuaded to do so.  

BRAZIL | Cutting spending. On 22 May Brazil’s Finance Minister Guido Mantega announced spending cuts to the tune of R$28bn (US$13.7bn) in the 2013 federal budget in order to meet the government’s primary surplus target of R$155.9bn (US$76bn). Mantega said that the sections of the budget set aside for infrastructure investments; social programmes; and those related to the 2014 Football World Cup tournament would not be affected. Instead he said that the cuts would affect the general budgets of the ministries of cities, defence, and national integration.

   According to Mantega the “minimal” spending cut corresponds to the fact that the government had to adapt to the “reality” of lower-than-expected tax revenues resulting from the various tax breaks included in its economic stimulus packages. Despite all these measures the expectation is for Brazil’s economy to continue to post underwhelming growth figures this year. Mantega also announced that the government was projecting annual GDP growth of 3.5%, down from the 4.5% laid down in the 2013 budget law. Meanwhile inflation is expected to reach 5.2%, up from the initial projection of 4.9%.

• New Mercosur beef exporters order

On 20 May the economic studies institute of Argentina’s rural society (SRA), the local agriculture lobby, released a report compiling beef export data for the four founding Southern Common Market (Mercosur) member countries, showing that for the first time ever Argentina is at the bottom of the group. The report found that last year the main beef exporter in Mercosur was Brazil with 1.3m tonnes exported, followed by Uruguay with 350,000t, then Paraguay with 210,000t, while Argentina came last with 182,000t. As recently as 2005 Argentina was Mercosur’s top beef exporter (and third in the world) with 771,000t exported, while back then Brazil was a net beef importer. The report argues that this is the result of “poor and interventionist policies” pursued by the Argentine government which have led to sector’s decline.

Amid a continuing debate over the Argentine government’s ‘gradualist’ approach to fiscal reform and monetary stabilisation, Finance Minister Nicolás Dujovne set out his plans in February.

At a press conference on 22 February, Dujovne said the government would cut the fiscal deficit by one percentage point of GDP in both 2018 and 2019. The target is for the deficit to fall from 4.2% of GDP this year, to 3.2% in 2018 and to 2.2% in 2019. “It’s a considerable effort, one point per year, which leaves us in 2019 nearly stabilising the debt to output ratio” the minister said. Dujovne also confirmed that the government is working on tax reform proposals, with a view to submitting them for congressional approval next year.

He introduced another innovation – for the first time the government is announcing quarterly deficit targets. Given seasonal fluctuations in revenue and spending, this year’s quarterly deficit targets are 0.6% of GDP in Q117, 2.0% in Q217 and 3.2% in Q317. If the country meets these targets, the greater transparency in the pace of fiscal adjustment may impress credit ratings agencies and help cut interest rates. In January, the country raised US$7bn worth of five- and 10-year bonds, paying 5.625% and 7.00% respectively.

Dujovne may be making a good start: the central government reported a primary fiscal surplus of AR$3.6bn (US$231.7mn) in January, the first such surplus since January 2016. However, Fitch Ratings, while welcoming greater fiscal transparency, also warned that the interest burden was rising and that growing provincial level deficits would put pressure on the federal government’s attempts to narrow the deficit. Analysts also note that the fiscal squeeze, although extended over a number of years, will be challenging, not least because windfall tax revenues received in 2016 and 2017 as part of a partial amnesty on undeclared savings will dry out in 2018 and 2019.

Overvalued peso?

Dujovne and other government officials have sought to dismiss worries that the Argentine peso is overvalued. In February, the currency traded at AR$15.70 to the US dollar, the same rate as a year earlier, despite still significant-domestic inflation. Some analysts say the heavy inflow of foreign lending has kept the peso excessively strong, creating a phenomenon known as ‘atraso cambiario’, to the detriment of exporters. But Dujovne insisted that the exchange rate was “normal”. He argued that if the peso was truly overvalued then speculators, “who have a role to play in the economy”, would be buying dollars at a much greater rate as a hedge.

BRAZIL | Real struggles in face of strong dollar. On 26 November, Brazil’s central bank (BCB) intervened in an attempt to contain the devaluation of the Brazilian real, selling US dollars from its foreign reserves on the swap market twice after the real sank to R$4.28/US$1, an all-time low.

This appeared to have the desired effect temporarily, as the real closed the day at R$4.24/US$1 on 26 November, although it was trading again at R$4.27/US$1 the following day.

Buoyed by external factors, notably the repercussions from the US-China trade war, the US dollar has strengthened almost 6% against the real in November.

But internal factors, as well as the regional unrest in Latin America, are contributing to a weak real. Brazil’s benchmark interest rate, the Selic, currently stands at a historically low 5%, and is expected to fall to 4.5% by the end of the year, further discouraging foreign investors.      

Disappointments, such as the underperformance of a large oil tender earlier in November [WR-19-45] and uncertainty surrounding future economic reforms, are also contributing factors. Exports are for the moment showing no sign of benefiting from the weak real.

Chile was the first country to publish a comprehensive national hydrogen strategy, and to this day it is somewhat of a model for the rest of the region. It also has very ambitious goals – to produce and export the cheapest hydrogen in the world from renewable sources. Between the sun-drenched deserts in the north and the wind-swept regions of Magallanes and Antártica Chilena in the far south, Chile has the potential to produce 75 times the energy it consumes, according to the German development agency GIZ.

Noteworthy of the Chilean approach is that hydrogen from the outset was seen as part of a broader development plan, itself able to generate economic growth and create jobs. And one of the reasons Chile is considered part of the hydrogen vanguard of LAC governments is because of its strong policy incentives to attract key players.

The Atacama desert has the highest natural radiation on the planet, meaning solar panels generate more electricity and at a lower cost. Unlike some land-locked countries, Chile has access to numerous ports on the Pacific. The Atacama desert, in particular, is close to the sea port at Antofagasta, making international shipping particularly convenient and cheap.

By the same token, winds on Chile’s southern tip blow with such strength and consistency that they allow 120 metre-high wind turbines to operate with capacity factors of 60%. Those are capacity factors equivalent to many at off-shore wind farms, which are more expensive to install and maintain than those on land. By comparison UK offshore capacity factors are around 42%. Capacity factor is the average power generated by wind divided by its peak capacity. It indicates how often a turbine runs at maximum power.

Chile by 2030 is projected to have production costs of around US$1.3-US$1.4 per kg/H02, produced in the far north with solar energy and in the far south with wind energy, respectively, according to McKinsey & Company. In Australia costs would be around $1.7, while the Middle East comes in at $1.8 per kg/H02 and the United States at $2.1 per kg/H02.

Targets

Chile’s hydrogen strategy establishes very clear targets. By 2025 it wants to have 5 GW electrolysis capacity; by 2030 it wants to have the lowest production costs, and by 2040 the aim is to be among the world’s three leading exporters.

That will require a lot of renewable energy, but Chile is well under way. In the six years through 2020, Chile has quintupled its generation capacity of these sources and for part of that period its renewables as a share of the power sector grew faster than in any other country, and without any subsidies, according to the GIZ. By 2030 up to 70% of its electricity matrix is projected to be renewable and by 2050 it will have reached net zero.

Chile expects to be generating $5bn worth of hydrogen in 2030, $16bn in 2035, and $23bn in 2040, just over half of which will come from exports. Total accumulated investments required to make it all happen will jump from $45bn in 2030 to a staggering $220bn a decade later.

The GIZ estimated that by implementing the targets set out in the national hydrogen strategy, the sector could generate 20,000 new jobs by 2030, more than 80,000 by 2040, and more than 90,000 until 2050.

Southern winds

By far the biggest project in Chile and probably one of the biggest in the world is H2 Magallanes, a proposal by the French renewable energy firm Total Eren to build up to 10 gigawatt installed wind capacity in San Gregorio, a commune on the northern shores of the Strait of Magellan in the far south of the country. The region has some of the best onshore wind conditions and access to a sea port.

Total Eren signed an agreement in November 2021 with the University of Magallanes to cooperate on research and development for the project, elaborate its environmental impact study, and propose a citizens’ participation plan. With an installed hydrolysis capacity of 8 gigawatts, the plant is to begin producing 800,000 tonnes of hydrogen and 4.4m tonnes of green ammonia per year for domestic and international clients in 2027.

Across the strait, at Bahia Gente Grande on Tierra del Fuego, Transitional Energy Group (TEG) is proposing to invest $8bm to produce 1.3m-1.5m tonnes per year of green ammonium. The environmental impact study is to be presented by 2024 and production is to begin in 2028.

The Magallanes region is becoming one of the hydrogen hotspots not only in Chile but the world. Austria Energy is developing a project that will produce 850,000 tonnes of hydrogen per year and 150,000 t/y of ammonium from 2025. Plans to make efuels from green hydrogen are under way at HIF’s Haru Oni, a site near Cabo Negro on the northern tip of Tierra del Fuego. Like the other projects in the region, wind energy will fuel electrolysers to make green hydrogen. Then CO2 is captured from the atmosphere and combined with the hydrogen in a process of synthesis to produce carbon neutral eFuels, such as eGasoline and eLG, or Liquefied Gas.

Yet indicative of some of the challenges investors are facing even in relatively business-friendly countries such as Chile, HIF Chile and Enel Green Power Chile (EGP Chile) fell out with local authorities over environmental protection criteria to be applied. The two companies in October 2022 withdrew their application for an environmental permit for the Faro del Sur Wind Park saying that government agencies were making demands that exceeded usual standard and legal requirements.

“Considering these exceptional requirements, it is necessary to understand which requirements can be incorporated and which make this kind of project unfeasible in the region,” the companies said. The Faro del Sur Wind Park project foresees the installation of 65 wind turbines with a capacity of 325 MW at a cost of US$ 500m.

There is plenty of current domestic demand for hydrogen, primarily from the chemical industry. Enaex, a chemical company that produces Ammonium Nitrate for industrial explosives used in the mining industry and for exports, used ammonia grey hydrogen as its main raw material. That represents about 90% of its carbon footprint. As part of its HyEx project, Enaex wants to begin constructing a solar farm in the Atacama desert in 2023 to begin production in 2025. By 2030 a 2,800 MW hydrolysis plant should allow the company to produce 700,000 tonnes/year of green ammonia.

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.

On 7 May work began on a major new gold mine in Nicaragua, marking the latest stage in the expansion of an industry which has seen an explosion in the number of concessions granted in recent years despite US sanctions targeting the sector.

UK-headquartered mining company Metals Exploration has started construction on its La India mine, which is located close to the town of Santa Rosa del Peñón in León department. Metals Exploration acquired La India from UK company Condor Gold in January 2025, and the company estimates that it holds reserves of approximately 2.2m ounces of gold. Production is forecast to begin in December 2026 with an initial annual production target of 145,000 ounces of gold, equivalent to almost a third of current national gold production, according to the Nicaraguan government.

Metals Exploration is one of a number of international firms, most notably from Canada and China, which have driven a boom in gold mining in Nicaragua in recent years as the price of the precious metal has soared on global markets. The government, now led by co-presidents Daniel Ortega and First Lady Rosario Murillo following a recent constitutional reform package, has facilitated the expansion of the industry by granting dozens of mining concessions.

In December 2024, land-use observatory Land Matrix Latinoamérica y Caribe revealed that there were a total 144 active concessions for metallic mining in Nicaragua, spanning 1.72m hectares (ha) or almost 15% of national territory. Of the total, 37 new concessions covering an area of 651,184 ha were authorised from 1 January 2022 to 15 November 2024, meaning that 38% of the area covered by active metallic mining concessions has been authorised in the last three years.

This has come despite sanctions imposed by the US Department of the Treasury’s Office of Foreign Assets Control (Ofac) on the mining sector. For example, Nicaragua’s state-owned mining company (Eniminas) was sanctioned in June 2022 while Nicaragua’s mining authority (DGM) was blacklisted in October 2022 [EB-22-11]. Then former US president Joe Biden (2021-2025) also signed an executive order expanding the US sanctions regime on Nicaragua to target the gold sector, which “gives the Treasury the authority to target certain persons that operate or have operated” in the sector. US officials also imposed further sanctions on Nicaraguan government-affiliated gold mining companies, Compañia Minera Internacional SA (Comintsa) and Capital Mining Investment Nicaragua SA (Capital Mining) in May 2024.

Sanctions have done little to slow growth in Nicaragua’s gold sector as the metal has overtaken traditional products such as coffee and beef to become Nicaragua’s most valuable export. Further growth looks likely due to the rapid pace at which new concessions have been awarded in recent years, concessions have been awarded to Chinese companies, as the Ortega-Murillo government has deepened cooperation with Beijing since the two countries restarted diplomatic relations in 2021.

• Exports

Gold accounted for US$1.35bn of Nicaragua’s US$4.19bn total goods exports in 2024, up 20% compared to 2023 and far surpassing overall growth of 3.9% for all goods exports. 

According to an investigation by Central American regional media outlet Divergentes published in January 2025, Chinese firms secured 17 concessions covering more than 236,000ha of Nicaraguan territory from 2022-2024. The investigation also found that concessions had been transferred to Chinese firms to evade US sanctions. For example, a 6,000ha concession in El Rama municipality, in the South Atlantic Autonomous Region (Raas), was assigned to Comintsa in 2022, but transferred to a Chinese company named Zhong Fu Development in April 2024 under the exact same conditions. “The allocation of concessions to Chinese companies aims to secure political allies outside the reach of US sanctions and expand markets into regions not tied to Western economies, reducing dependency on them,” said a member of the research team who spoke to Divergentes on condition of anonymity.

While Canadian firms remain the largest players in Nicaraguan mining, through Calibre Mining Nicaragua SA and its subsidiary Desarrollo Minero de Nicaragua SA (Desminic SA), which has been granted 65% of all mining concessions granted since 1994 according to Divergentes, the Ortega-Murillo government is attempting to decouple from Western markets. “The Ortega-Murillo government’s new policy is to sever ties with Western markets, including the US, Canada, and several European countries. Instead, they are aligning with countries that share similar governance models - those without democracy, separation of powers, or respect for human rights,” added the source.

There has also been a marked reduction in processing times for applications for new concessions, with environmental impact assessments completed in just one day in some cases, sources told Divergentes. This adds to concerns among local environmental organisations like Fundación del Río and indigenous groups, which have opposed concessions granted in indigenous protected territory. However, they have not managed to slow the pace of mining developments as Ortega and Murillo have strengthened their grip on power in recent years.

The Ortega-Murillo government now looks set to further expand mining, with lawmakers approving a new law that would change the rules governing protected areas at the end of April. According to the law, officials will be able to redraw the map of these areas, and they will no longer be preserved but rather sustainably developed. This means that economic activity such as mining, hunting and fishing will be permitted, as will infrastructure projects. Previous systems of shared management with indigenous and afro-descendant populations have been ended, and the ministry of environment and natural resources (Marena) will be the sole authority in charge of monitoring environmental crimes in these areas. According to Fundación del Rio, the new law will allow for the further expansion of extractive activities, increasing environmental degradation for the benefit of economic interests linked to the current government. A week after the law was passed, a presidential decree eliminated the requirement for public consultation in natural resource projects, further eroding systems of shared governance in indigenous protected areas and autonomous regions.

With Ortega and Murillo now with complete control of the government and the country’s institutions, years of experience in tamping down dissent and growing skills in evading sanctions with the help of new allies, there is little to suggest that the mining boom will slow down. US sanctions have thus far proven ineffective, and US President Donald Trump appears distracted by other policy priorities. As long as gold prices remain high, it is hard to foresee anything other than the continued exploitation of a vast and growing area of Nicaraguan territory to feed the global appetite for the precious metal, at the expense of the environment and local communities who are largely powerless in the face of an increasingly entrenched dictatorship.

Chinese concessions

The Nicaraguan government has continued to award Chinese firms mining concessions this year. On 2 June, for instance, it awarded Chinese firm Brother Metal the right to exploit metallic and non-metallic resources in a lot named San Leonardo, which covers 25,692 hectares (ha) in the Siuna, Rosita, and Prinzapolka municipalities in the North Atlantic Autonomous Region (Raan). That same day it also authorised a new concession for Chinese firm Thomas Metal to explore metallic and non-metallic resources in a lot named El Deseo, which spans 3,921ha in Siuna and Bonanza municipalities in the same region.

The governing coalition led by the left-wing Partido dos Trabalhadores (PT) scored a significant political victory on 1 October when the lower chamber of congress approved a government-backed bill aiming to decrease the tax burden on lower earners while increasing income tax (IR) for the country’s wealthiest citizens. The bill is one of the top legislative priorities in 2025 for President Luiz Inácio Lula da Silva, who will likely hope that the senate can approve the legislation in the coming months so that the tax breaks can take effect in 2026 and boost public morale ahead of the general elections.

The IR bill proposes revising the income thresholds for IR rates. The main provision of the legislation is to grant a full exemption for taxpayers with a monthly income of up to R$5,000 (US$938) and reduced tax rates for individuals who earn up to R$7,350 per month.

The bill also proposes increasing the IR rates for the wealthiest people in the country – taxpayers who earn more than R$600,000 per year. According to government estimates, the lost revenue resulting from these exemptions and reductions granted to lower-middle-class taxpayers could be compensated for by passing on more of the tax burden to the country’s 141,400 richest citizens, who currently pay an effective IR rate of 2.5%. The bill aims to raise this to at least 10%. 

The government first announced in November last year that it planned to offer tax exemptions to lower earners. Indeed, making the tax system fairer and more equal was one of Lula’s campaign promises when he was running for president in 2022. With the 2026 election just a year away, it is likely that Lula would want to deliver more of what he promised, and this IR bill appears to be the main measure that he could try to highlight if he runs for re-election next year.

The calls for tax justice have mainly been associated with the Brazilian left. It is at left-wing political demonstrations that rallying cries to ‘tax the super-rich’ can be heard, but on 1 October the IR bill received widespread support from lawmakers across the political spectrum. The centre-right president of the lower chamber, Hugo Motta (Republicanos), said: “It is a direct relief to the pockets of millions of workers and retirees from around the country. It is money being put back into the economy, for consumption, which will guarantee food on the table for families.”

Motta also said that, by approving the bill, the lower chamber “is showing once again that it is a friend of the people”. The efforts by Motta to improve the popularity of congress come after large protests around the country on 21 September [WR-25-38], when demonstrators took to the streets to criticise controversial legislation that was approved or is being reviewed by the lower chamber, including a bill to grant amnesty to the far-right rioters who stormed the seats of government on 8 January 2023 and a constitutional amendment proposal (PEC) that aimed to hinder criminal prosecution against legislators. The lower chamber passed the legislator immunity PEC on 17 September, but after the protests on 21 September the senate rejected the legislation days later.  

Lawmakers were reportedly surprised at how fierce the public opposition was to the immunity PEC and the 8 January amnesty bill, so Motta appears to be making a great effort to pass legislation that he believes is more aligned with public priorities. On 27 September news website G1 reported that the lower chamber is also seeking to improve its image by boosting dialogue and engagement with civil society.

Income inequality

The government’s efforts to increase income tax rates on the country’s wealthiest citizens is likely to impact less than 1% of the population. The income tax bill in its current form proposes raising the rates for taxpayers who earn more than R$600,000 per year, or R$50,000 per month. According to data from the national statistics institute (Ibge), the wealthiest 1% of the country had an average monthly income of R$21,767 in 2024. The average monthly income for the poorest 40% of the country last year was R$601.

Deficit

The nominal deficit of the public sector, which includes the primary result and debt interest payments, was R$91.5bn in August this year, bringing the annual nominal deficit to R$969.6bn (7.81% of GDP), down from the annual deficit of R$968.5bn (7.85% of GDP) in the 12 months until July.

The UN Economic Commission for Latin America and the Caribbean (Cepal) recently warned that South America needs to double its energy capacity by 2030 in order to avoid blackouts. Cepal estimates that the region needs to add about 200 gigawatts (GW) to its overall generation capacity in order to cope with forecast demand. It puts the total required investment, inclusive of transmission lines, at over US$500bn, which should fuel continued investment – foreign and local – in this fast-growing region.

Latin America is uniquely dependent on hydro electricity, which provides 50% of the total installed capacity of 278,000 megawatts (MW). In Brazil, hydro power accounted for 71% of the total installed capacity of 114,354 MW in May 2011, according to the ministry of mines and energy.

Regional energy demand rose 40% between 2001 and 2010.  Brazil endured a politically costly power crisis in 2001, prompting the authorities to redouble efforts to add capacity. Brazil imports natural gas from Bolivia and is gradually building up its own domestic liquefied natural gas (LNG) industry. However, the main focus is on major hydro generation projects in the Amazon region, including a complex of four dams on the Madeira River in the state of Rondônia, and the massive US$11bn Belo Monte dam project on the Xingu River in the state of Pará. Two of the plants on the Madeira River, the Santo Antonio and Jirau dams, are due for completion in the next few years. A third, Tabajara (350MW), is slated for construction under the latest (2011-2014) growth acceleration program (PAC, in the Portuguese acronym). A fourth 800MW plant, Cachoeira Esperanza, will be sited on the Madeira River in northern Bolivia, just over the Rondônia state border.

Brazil also wants to construct a whole series of dams in up to seven countries in South America, including Argentina, Bolivia, Guyana, Peru, Suriname and French Guyana. In total, these planned hydro plants would add 12,000 MW to South America’s total generating capacity. The cornerstone of this strategy is the Brazil–Bolivia–Peru energy hub, under the Initiative for the Regional Integration of South American Infrastructure (IIRSA), which is supported by the Inter-American Development Bank (IDB), the Andean Development Corporation (CAF), the Río de la Plata Development Fund (Fonplata) and Brazil’s National Economic and Social Development Bank (Bndes).

Some 7,000MW are slated to come from a planned six dams in Peru. In 2010, presidents Lula da Silva (2003-2010) and Alan García (1985-1990 & 2006-2011) inked a US$15bn build-operate deal, in conjunction with the Brazilian state electricity company, Eletrobrás. Under the deal Peru would have first dibs on the electricity produced, with Brazil committing to take the excess. Two proposed plants on the Uruguay River would provide another 2,000MW, to be shared between Argentina and Brazil, while over in Guyana, Eletrobrás is looking at a 1,500MW plant.

It’s been far from smooth sailing for these ambitious new schemes. There is particular resistance in the locally-affected Amazon states in Brazil and Peru. Communities have loudly protested a lack of proper consultation and there are also very real concerns about the welfare of indigenous tribes, including uncontacted tribes, in these remote Amazon regions.

In June, amid major protests in the Puno region, the Peruvian government temporarily cancelled (along with other concessions) a provisional licence awarded to a Brazilian consortium,  Empresa de Generación Eléctrica Amazonas Sur (Egasur), for the construction of the first of the proposed dams, a 1,500MW plant on the River Inambari. Brazil’s Bndes was to provide the bulk of the US$4.9bn in financing. The Inambari dam is sited at the juncture of the Puno, Cusco and Madre de Dios regions in south-eastern Peru. According to Egasur’s feasibility study, the dam and reservoir would cover 37,800 hectares, requiring the relocation of some 70 communities. It would also flood 410km²of forest, encompassing part of the buffer zone around the Bahujan Sonene National Park. The inter-oceanic highway, also being financed by Brazil (to secure a Pacific trade outlet), could also be affected.

The second proposed dam, Pakitzapango (Junín), to be constructed by the Brazilian giant Odebrecht, was halted in 2010 via an administrative action by a local indigenous organization, Central Ashaninka del Río Ene. Another, Mainique (Cusco), has reverted back to the planners amid legal and environmental hurdles.

The new Peruvian government led by President Ollanta Humala will have to decide the fate of these projects. Humala has acknowledged that Peru is facing an imminent energy shortage in the north of the country and needs to invest in additional capacity. Peruvian environmental and indigenous activists suggested that Brazil’s tacit support of Humala in the 2011 election was for self interested commercial motives. A recent report by a Spanish bank, BBVA, notes that Brazilian foreign direct investment (FDI) in Peru has risen by over 30% on average annually since 2005, to reach an estimated US$3.5bn in 2011.

The government led by President Dilma Rousseff is undeterred. A recent presidential provisional measure (MP), officially published on 15 August, alters the demarcation of three Amazon national parks designated as natural protected areas (Unidades de Conservção [UCs]), so as to permit the Madeira River hydro complex. The measure compensates for the loss of protected lands in some areas with the extension of the park in others, which is also aimed at deterring illegal deforestation by loggers and commercial agri producers.  Curiously, the measure also allows for mineral exploration around two of the parks.

Tensions in remote border zone
The deaths in late July of two Brazilian nationals employed by a Brazilian firm, Leme Engenharia, which is conducting feasibility studies for a hydro plant, raised eyebrows. Initial reports suggested that the pair, a 57-year old engineer and a 61-year old geologist, whose bodies were found 1km apart near the Maranon River, in the region of Jaén, might have been killed by locals in protest at the planned Vera Cruz plant, but the Brazilian embassy and the Peruvian police said that they appeared to have died of natural causes. The results of autopsies pointed to cerebral and pulmonary edemas, often caused by high altitude, though the corpses were discovered at 800m. The fact that the pair were rumoured to have been killed is testament to the sensitivity surrounding both the hydro-plants and Brazil’s expanding role in Latin America.

There has also been trouble on the Brazilian side of the border with Peru. In early August the justice ministry dispatched 16 national security force officers to Acre to provide security to employees of the National Indigenous Foundation (Funai) on the Xinane base, 20km from the border. Funai has raised the alarm about the fate of an uncontacted Amazon tribe, which it fears has been disturbed (or even killed) by Peruvian drug traffickers. In late July Brazilian police had arrested, for a second time, a Portuguese national and known drug trafficker, Joaquim Antônio Custódio Fadista. He had been arrested in the same area in March and extradited to Peru. Funai workers found a tribal arrow at a camp site used by the traffickers.

Brazil’s remote tribes (estimated at 77, with 30 identified) are under threat from drug traffickers, logging, oil companies and, activists note, the planned new Amazon dams. On 5 April the Inter-American Commission on Human Rights requested that the Brazilian government suspend the Belo Monte dam, citing its potential harm to the rights of traditional communities living within the Xingu river basin. The ruling appears to have been ignored. A statement by Amnesty International to mark the International Day of the World’s Indigenous People on 9 August was critical of Brazil and suggested the Funai doesn’t have sufficient resources to fulfil its role.

• Changes to Brazil’s natural protected areas (UCs)
  Rômulo Mello, president of the Chico Mendes Institute, insists that demarcation changes to protected areas in Rondônia amount to a win-win for the government and environmentalists. Like the government, the Institute is in favour of controlled economic development in the Amazon in order to provide the local population with sustainable livelihoods. Another two UCs in Pará will also be amended to facilitate the planned Tapajós River hydro complex. On 11 December the state of Pará will hold a referendum on the division of its territory into three (Pará, Tapajós and Carajás). It’s unclear what this will mean for the UCs in Pará, as currently constituted. Brazil has committed at the UN to assigning protected biodiversity status to 17% of its national territory, up from 15%-16% now. Agri producers complain the country is being turned into a national park.

• Rio Tapajós
  The Rio Tapajós hydro complex envisages five plants with an installed capacity of 10.6GW. The projects include São Luiz do Tapajós (6.1GW), Jatobá (2.3GW), Cachoeira dos Patos (528MW), Jamanxin (881MW) and Cachoeriro do Caí (802MW).

On 30 May a Chilean energy company, Colbún, recommended the indefinite suspension of the environmental impact assessment (EIA) study for the construction of the transmission lines to take energy produced in southern Chile to the country’s central energy grid.

Colbún has a 49% stake in the highly-controversial HidroAysén project, which the government of President Sebastián Piñera considers essential to providing a much needed reliable source of energy. Its decision to call for the indefinite suspension of such a crucial part of the HidroAysén project, just one month after it received the green light from Chile’s supreme court, which dismissed the various legal challenges raised by environmental and civil society groups, was badly received by the government. On the other hand, Colbún’s decision has been praised by civil society groups for recognising that while Chile faces serious energy problems, their solution must be reached through a broad discussion that includes all sectors of society.

In a statement sent to Chile’s securities superintendence, Colbún recommended that the HidroAysén board suspend the transmission line’s EIA. The company said,“As long as there is no national [energy] policy that enjoys ample support and provides the guidelines that the country’s energy matrix needs, Colbún deems that conditions are not in place to develop energy projects of this complexity and magnitude”. The statement also laid the responsibility for obtaining such a consensus on the government: “It is the mission of the executive and legislative powers to agree on the institutional and regulatory changes necessary to make viable the generation and transmission projects that Chile’s social and economic development needs”. It concludes that the company is open to adapting the HidroAysén project so as to make it feasible.

Following Colbún’s statement, Chile’s newly appointed energy minister, Jorge Bunster, made his own, rejecting that assertion there was no clear energy policy. Bunster said that by adopting a national energy strategy for the 2012-2030 period, the government was promoting “a clear energy policy that will allow the country, in the long term, to have sufficient energy to reach its goal of becoming a developed country”. In an attempt to dispel any concerns about the government’s ability to ensure that important energy sector projects are completed, Bunster said that Chile’s energy sector is highly institutionalised and has allowed several companies to complete projects that meet all the relevant environmental requirements. Bunster stressed that Colbún’s position represented a private company’s opinion. President Piñera ordered Bunster  upon appointing him to concentrate exclusively on the implementation of this new strategy, which, according to Bunster, has the full support of various energy sector experts.

Colbún’s president, Bernardo Larraín Matte, justified the company’s decision by pointing out that Chile has changed a lot since the HidroAysén project was first floated in 2006. According to Larraín Matte, the company decided that “it was an opportune moment to stop and analyse the project once again within the framework of a wider national energy policy”. He stressed that such important initiatives as HidroAysén require a national consensus and that the company was looking to “do things the right way”.

Unsurprisingly, environmental and civil society groups welcomed Colbún’s decision. The president of the Patagonia Sin Represas (PSR) movement, Patricio Rodrigo, said: “we are happy with the Matte family’s decision although it has come a little late”. PSR has strongly opposed the HidroAysén project from the beginning, staging recurring demonstrations and even taking part in last year’s widespread protests in the Aysén region. Similarly, the director of Greenpeace Chile, Matías Asún, said Colbún’s decision shows that “we were right and more clarity is needed regarding the country’s energy policy when it comes to energy generation, distribution and consumption”.

More problematically for the Piñera administration was that even government-aligned politicians have hailed Colbún’s decision, pointing out that it identifies important aspects that have not been considered until now. In particular, a Renovación Nacional senator, Antonio Horvath, pointed out that the construction of the hydroelectric dams implies a number of “economic risks” that have been overlooked. According to Horvath, in order to avoid these risks, Chile must develop a new energy strategy that incorporates non-conventional renewable energies that “nowadays are more economical”.

PSR has also pointed out that if Colbún were to walk away from the HidroAysén project altogether, it would be very hard for the other partner in the project, Endesa Chile, the local subsidiary of Spain’s Endesa, to find a replacement investor. Endesa Chile owns a 51% stake in the U$3bn project. Endesa and the HidroAysén board have yet to comment on Colbún’s recommendation.

Solar energy investment

On 15 May the Spanish firm Eosol Energy announced a plan to build a US$615.9m photovoltaic energy producing plant in Tocopilla, northern Chile. The plant, which is expected to produce 196.6 megawatts of electricity, would be connected to the Norte Grande grid that provides electricity to the vast Atacama area, one of the country’s main mining areas. The announcement came a day after a US energy expert, Patrick McCully, declared in an energy conference in Santiago that northern Chile has full access to the world’s largest source of energy, the sun, which nonetheless has not been exploited by the government. McCully said that given that the cost of producing solar energy had decreased all over the world, and that the north of Chile was a prime location to establish solar energy plants, the current level of installed solar energy capacity in the country was “ridiculous”. McCully also pointed out that hydroelectric plants tend to produce more environmental costs than benefits when compared to solar energy and as a result have been found to be less economically profitable in the long run. In this context, McCully argued that the Chilean government should not have allowed the continuation of the controversial Hidroaysén hydroelectric project in Chile’s Patagonia before looking for other alternatives. “Chile needs political will to solve its energy problems because there is a handful of [energy] companies that control the sector and the government does nothing to direct it,” McCully concluded.

• “Chile needs political will to solve its energy problems because there is a handful of [energy] companies that control the sector and the government does nothing to direct it.”

BOLIVIA | Emisión de bonos. El gobierno boliviano ha colocado exitosamente US$500m en bonos a 10 años en mercados internacionales. Esta es la segunda emisión de bonos conducida por el país desde su primera aparición en los mercados internacionales en octubre del año pasado, la primera vez después de 100 años. De acuerdo con una declaración del ministerio de economía y finanzas, los bonos alcanzaron un rendimiento del 5,95% y fueron adquiridos por inversionistas en EU, Europa, América Latina, y Asia.

     Incluso aunque el rendimiento de los últimos bonos fue más alto de los obtenidos el año pasado, cuando los bonos obtuvieron un rendimiento del 4,75%, el ministerio agregó que los términos de la última emisión habían sido “favorables para la economía nacional, tomando en cuenta la alta volatilidad en los mercados financieros internacionales en el último par de meses”. También afirmó que la emisión permite a Bolivia consolidarse a sí misma como una “sólida y exitosa economía que puede atraer capital extranjero”, y que esto ratifica sus “políticas de buscar nuevas fuentes de financiamiento para financiar sus proyectos de inversión del Estado”.

     Recientemente, el presidente del Banco Interamericano de Desarrollo (BID), Luis Alberto Moreno, elogió el hecho de que en años recientes Bolivia ha logrado incrementar cuatro veces el tamaño de su economía interna, llevando su PIB de US$8mm a US$32mm.

COLOMBIA | Impulso masivo al transporte. El gobierno ha aprobado la mayor inversión en la infraestructura del transporte en la historia de Colombia. El ministro de finanzas, Mauricio Cárdenas, anunció 47 concesiones de carreteras de ‘cuarta generación’ con una inversión de Col$47 trillones (US$24,5mm) en 23 departamentos diferentes. Cárdenas dijo que los proyectos de construcción generarían 450.000 empleos durante el curso de los próximos ocho años. Él afirmó que simplemente construyendo las carreteras estimularía el crecimiento del PIB un 1,5% por cada año que duren los proyectos de construcción, y que, luego de estar completadas, la economía deberá crecer un 1% adicional cada año.

     La ministra de transporte, Cecilia Álvarez, dijo que el proceso de ofertas para nueve proyectos de infraestructura tendría lugar en septiembre y de otros 11 para finales del año. Los primeros cuatro proyectos son una autopista de 152kms uniendo las ciudades de la costa caribeña de Barranquilla y Cartagena, de US$444m; la autopista de 30kms Mulaló-Lobo Guerrero, de US$556m, uniendo la zona industrial de Yumbo, al norte de Cali en el departamento de Valle del Cauca en el oeste, hasta el puerto de Buenaventura sobre el Pacífico (incluido un largo túnel); una autopista de 169kms uniendo las municipalidades de Cáqueza y La Calera en el central departamento de Cundinamarca, de US$361m; y una autopista de US$556m vinculando la municipalidades de Girardot y Puerto Salgar ambas en Cundinamarca, la extensión de una ruta que conecta el centro del país con Ecuador.

     El presidente de la Agencia Nacional de Infraestructuras (ANI), Luis Fernando Andrade Moreno, fue bastante sincero al decir que Colombia había fracasado consistentemente  en invertir lo suficiente en la infraestructura. Andrade dijo que el gobierno se había comprometido incrementar la inversión en infraestructura del 1% al 3% del PIB, o de US$3mm a US$10m al año. Y que apunta a obtener el retorno de la inversión principalmente por medio de peajes.

     Incluso esta enorme inversión no es suficiente, de acuerdo con un estudio presentado en Bogotá la semana pasada por la Corporación Andina de Fomento (CAF) sobre infraestructura y equidad. El mismo afirma que Colombia necesitaría invertir al menos el 7,4% de su PIB en infraestructura anualmente para reducir la pobreza a niveles similares a los de los países del sudeste asiático, y tanto como el 14,9% del PIB por año a fin de avanzar aún más y proveer servicios básicos universales y cumplir con los objetivos de desarrollo de milenio de la ONU.

VENEZUELA | No hay estanflación. El presidente del banco central de Venezuela (BCV), Eudomar Tovar, negó esta semana que Venezuela estuviera sufriendo de estanflación, y acusó a la oposición de tratar de “crear expectativas negativas” con fines políticos. “Nosotros ya estamos viendo una desaceleración en el índice precios al consumidor, porque fue del 6,1% en mayo; del 4,7% en junio; y del 3,2% en julio. No es nada para celebrar, pero la tendencia es hacia la estabilidad”, Tovar dijo.

     La inflación acumulada de Venezuela del 29% en los primeros siete meses del año, es más del doble del enormemente ambicioso pronóstico de entre el 14% y el 16% para todo el año. Por otro lado, la economía creció solamente un 1,6% en la primera mitad del año, aunque Tovar de nuevo alegó que la tendencia era positiva. La economía creció en un ínfimo 0,5% en el primer trimestre, pero rebotó con un crecimiento del 2,6% en el segundo trimestre. La manufactura se expandió un 5,7% en el segundo trimestre después de contraerse un 4,9% en el primer trimestre, aunque la construcción se contrajo un 6% año en año en el segundo trimestre después de contraerse un 0,8% en el primer trimestre, informó el BCV.

• Infraestructura colombiana

Colombia está ubicada en el 126^to lugar entre 144 países por su infraestructura de carreteras en el último índice de competitividad global producido por el Foro Económico Mundial (WEF, siglas en inglés). Tiene igualmente un comportamiento muy pobre en la infraestructura de ferrocarriles y puertos.

CHILE | Nueva ley de promoción de la inversión. El 13 de enero la Presidenta de Chile, Michelle Bachelet, anunció que su gobierno sometería pronto al congreso nacional un proyecto de ley que buscará mejorar y promover la inversión extranjera en el país.

Bachelet hizo el anuncio durante un foro de inversión extranjera, organizado por el Comité de Inversión Extranjera (CIE) de Chile y al que asistieron 60 ejecutivos de 40 compañías extranjeras interesadas en invertir en Chile. El CIE es una agencia del gobierno que trata con inversionistas extranjeros y ayuda a posicionar al país como un destino atrayente  para la inversión extranjera y las empresas internacionales.

Bachelet explicó que el nuevo proyecto de ley buscará establecer “las capacidades institucionales y el marco legal que nos permita mantener una posición líder en términos de inversión extranjera”. Si es aprobado, el nuevo proyecto de ley reemplazará desde el 2016 en adelante a la ‘Ley 600’, que hasta ahora ha gobernado las inversiones extranjeras en Chile y determina el régimen fiscal bajo el cual caen los diferentes proyectos.

Bachelet dijo que está incluida en la iniciativa la creación de una nueva agencia del Estado para atraer la inversión extranjera en una medida de acuerdo con las necesidades del país. Jorge Pizarro, el vicepresidente ejecutivo del CIE, dijo que la nueva agencia buscaría “avanzar de una política pasiva de recibir inversión a una política activa de atracción de la inversión extranjera”. Por otra parte, el ministro de economía, Luis Felipe Céspedes, señaló que el objetivo de la iniciativa es atraer la inversión a los sectores económicos que actualmente carecen de la misma, a fin de impulsarse hacia delante en un proceso que “es clave para nuestro país, para diversificar y agregar conocimiento y valor a los bienes que nosotros producimos”. El desafío es generar una economía más productiva, y “en términos de innovación, trabajaremos para sacar todo nuestro potencial”, dijo Céspedes.

De acuerdo con cifras del banco central de Chile (BCCh), entre enero y octubre del 2014 la inversión extranjera directa (IED) creció un 7% año en año a US$17,45mm, mientras que en el 2009 y el 2013 el total de las IED llegó a US$100,86mm. Durante ese periodo (2009-2013) el sector de la minería recibió el 44,9% de los recursos (US$45,28mm), seguido por el sector servicios con 17,6% (US$17,75mm), y el sector de la electricidad, gas & agua con el 10,4% (US$10,3mm). Sin embargo, Pizarro ha señalado que, más allá de los números, lo que importa es que Chile es un fuerte mercado para la inversión extranjera y  de las oportunidades de negocios que ofrece seguridades a los inversionistas extranjeros.

URUGUAY | Se incrementa la tarifa de la electricidad. El 14 de enero el gobierno uruguayo decidió incrementar las tarifas de la electricidad un 6,9%, una tasa significativamente más alta que el incremento del 3,9% propuesto por la compañía de electricidad estatal, la Administración Nacional de Usinas y Transmisiones Eléctricas (UTE).

El Presidente saliente, José Mujica, no ha comentado sobre la controversial decisión que ha sido cuestionada por algunos en la oposición dado que llega en momentos en que los precios del petróleo están cayendo, lo que debería reducir los costos de producción de UTE. Pero Gabriel Frugoni, el director de la oficina de planeamiento & presupuesto dijo que “un incremento del 6,9% está siendo propuesto cuando la inflación es del 8,3%. Dejemos contextualizar esto y considerar otros incrementos que se han hecho, como las pensiones en un 12% […] Este es el contexto de políticas exhaustivas”.

El viceministro de economía, Jorge Polgar, también ha justificado la decisión, señalando que entidades públicas tales como UTE han aplicado en años recientes incremento de precios restringidos como una manera de ayudar a mantener una “inflación moderada”.

Pero esa visión fue criticada por el senador Pablo Mieres, del Partido Independiente (PI), quien la describió como una “mala práctica”. Mieres y otros políticos de la oposición ven el incremento en las tarifas de la electricidad como inconsistentes con el hecho de que los precios internos del combustible han caído por alrededor del 3,8%, como resultado de los declinantes precios internacionales del petróleo. Ellos alegan que la decisión de elevar las tarifas de electricidad en este momento representa un intento de implementar un “ajuste fiscal” encubierto para apuntalar las finanzas públicas.

El ministro de industria, Roberto Kreimerman, declaró en una conferencia de prensa que el incremento también response a los esfuerzos del gobierno para promover el uso eficiente de la energía. De todos modos, Kreimerman agregó que se espera que las tarifas eléctricas se reduzcan un 20% para fines del 2015. Un incremento en las tarifas del agua también será anunciado pronto.

• Argentina suspende licencia de Pesantar

El 8 de enero el gobierno de la provincia argentina de Tierra del Fuego formalmente suspendió la licencia de operación de la compañía de pesca Japonesa, Pesantar. La decisión fue anunciada por el ministerio de agricultura, ganadería & pesca de Argentina, que dijo que el barco ‘Unidos del Sur’ de Pesantar está acusado de operar en aguas del Atlántico Sur que rodean a las islas Falklands/Malvinas. De acuerdo con fuentes del ministerio, la decisión surge de una queja formal presentada por los empleados de Pesantar el año pasado, quienes dicen que mientras que la firma tiene permiso del gobierno británico para operar en las Falklands, no ha buscado permiso del gobierno provincial de Tierra del Fuego. Una declaración ministerial explicó que la medida temporal fue adoptada mientras el caso es investigado.

COLOMBIA | Creando una compañía holding del Estado. Como parte de su esfuerzo por ingresar en la Organización para la Cooperación y el Desarrollo Económico (OCDE), Colombia creará una compañía holding para las empresas de propiedad del Estado. Bajo el plan, anunciado por el Presidente Juan Manuel Santos, todas las 111 compañías estatales eventualmente entrarán en la compañía holding, que será conducida por una junta independiente de directores y será autónoma del ministerio de finanzas.

En su primera fase, los ministros del gabinete abandonarán sus sitios en las juntas de la compañía petrolera estatal, Ecopetrol y las dos compañías eléctricas estatales, Isagen, e ISA. Santos dijo que el plan permitiría a las compañías estatales ser conducidas más eficiente y transparentemente.

PERÚ | La inquieta región de Madre de Dios va a la huelga. Encabezada por el presidente regional y antiguo líder de los mineros informales locales, Luis Otsuka Salazar, la región peruana de Madre de Dios ha declarado una “huelga por tiempo indefinido” para exigir el rechazo de las nuevas regulaciones que buscan poner fin a la explotación forestal ilegal, la minería ilegal de oro y para formalizar a los mineros de pequeña escala en el área.

El Presidente Ollanta Humala insiste en que las regulaciones deben permanecer. Los delegados de los manifestantes, agrupados bajo la Alianza de Federaciones de Madre de Dios, tienen fijado estar en Lima el 26 de noviembre para reunirse con miembros del congreso en un intento de buscar una mediación.

By a number of metrics, the Dominican Republic is one of the strongest economies in Latin America and the Caribbean. In the meantime, the business environment remains challenging and, relative to other countries, may be deteriorating.

On 30 November, the Banco Central de la República Dominicana (BCRD – the central bank) announced that it would maintain its key policy interest rate at 5.00%. The BCRD highlighted that the economy is growing strongly, with real GDP expected to rise by 6.5%-7.0% this year and with local currency credit to the private sector rising at an annual rate of about 11% as of November. In October, headline and core year-on-year inflation were running at 1.23% and 1.91% respectively; the BCRD thinks that inflation will rise to around 3% (ie the lower end of its target band of 4% ± 1%) over the coming months.

The good…

The BCRD noted: “The current account balance should close the year with the lowest deficit in the last ten years, around 2.0% of GDP, due to lower oil prices and a favourable performance of tourism revenues, remittances, and exports from the industrial free zones. With regard to fiscal policy, a primary surplus is projected for the current year, while for 2016 it is [expected that there will be] a primary surplus of around 0.7% of GDP. These positive results in the external and fiscal accounts should facilitate the accumulation of reserves and the relative stability of the exchange market.”

The latest data from the IMF [1], and comments from the IMF’s Aliona Cebotari on 23 November, following the regular Article IV consultations with the government of the Dominican Republic, also indicate that there are no serious imbalances in the economy. Thanks to the benefits of lower fuel costs and higher export revenues, household disposable incomes have been rising, boosting domestic demand. The unemployment rate is expected to fall from 6.4% in 2014 to 5.7% this year and to 5.4% in 2016. The net debt of the central government should remain steady at about 35% of GDP. However, Cebotari noted that the consolidated public sector deficit (including the electricity sector and the BCRD) has been running at around 5% of GDP. In the absence of a further tightening of fiscal policy, the IMF believes that total public sector debt will trend upwards from the current level of about 50% of GDP to 54% in 2020. Cebotari added that the real exchange rate is broadly in line with the Dominican Republic’s economic fundamentals¹.

…and the not so good

That the Dominican Republic’s economy is performing so well is in spite of the fact that the country is not an easy one in which to do business. According to the World Economic Forum (WEF) in its latest (2015-16) Global Competitiveness Report, the Dominican Republic’s ranking for Global Competitiveness has risen from 105/144 in 2012-13 to 105/148 in 2013-14, to 101/144 in 2014-15 to 98/140 currently. Unsurprisingly, the country is reasonably highly rated (at 57/140) for its macroeconomic environment. However, its competitive position is held by institutional factors such as diversion of public funds (134/140), favouritism in decisions by government officials (126/140), the ethical behaviour of firms (130/140), and the reliability of police services (130/140). No one factor really stands out as something that is a problem for businesses operating in the country. Tax rates, corruption, and an inadequately trained workforce are seen as problems of similar importance.

Like the WEF, the World Bank – in its Doing Business report for 2015-16 – found that there had been a small improvement in the business environment over the previous year. However, the World Bank’s research suggested that other countries had made greater progress. This year, the Dominican Republic was ranked 93/189 – a middling position that represented slippage of three places relative to 2014-15. The country’s ranking for trading across borders (already an area of relative strength) improved, while its ranking for protection of minority investors was unchanged. However, the rankings for all other aspects considered by the World Bank worsened.

Within Latin America and the Caribbean, the only countries that are assessed by the WEF as being less competitive than the Dominican Republic are either a lot poorer in terms of per capita income or have well publicised economic imbalances. This group included Argentina (ranked at 106/140), Bolivia (117), Paraguay (118), Guyana (121), Venezuela (132), and Haiti (134). The Dominican Republic’s strong macro-economic situation gives policymakers good scope to undertake structural reforms over the coming years. The IMF’s Cebotari noted that the government has been improving social safety nets, reforming the education sector, and promoting financial inclusion.

¹ The BCRD runs a sliding peg regime, allowing the currency to devalue by an amount that reflects the differential between inflation in the Dominican Republic and its main trading partners. As of mid-December 2015, the exchange rate is US$1: DOP45.6.

Chilean residents with privately managed pension funds are likely to be authorised – for the fourth time running – to withdraw part of their pension savings.

Chile’s privatised national pension system is in meltdown. Inadequate defined contribution pensions, based on obligatory employee contributions and run by private pension fund administrators (AFPs), were an important factor in the street protests that broke out in October 2019 and triggered major political upheaval. As a result, in July 2020, and in what was described as a “one time only” measure, contributors were allowed to withdraw up to 10% of their pension funds held by AFPs.

Supporters of the measure said it was essential to avoid financial hardship in the context of the coronavirus (Covid-19) pandemic. Opponents, including the government, said it would reduce the value of future pensions even further. It was certainly not a one-time only event. Congress subsequently approved a second 10% withdrawal (December 2020) and a third (March 2021). There are currently seven rival bills in the legislature proposing a fourth withdrawal – one of which proposes that individuals be allowed to empty their pension pots completely. With politicians desperate to boost their popularity ahead of the general election in November, it is likely that a fourth pension raid will be approved at speed.

A reduction in total pension funds of up to 40% in little over a year is clearly not sustainable. Analysts say the problem has been worsened by the pandemic. Although the government has introduced emergency hardship payments, it is thought that delays in their distribution may have encouraged more people to cash in part of their pensions. In any case, a major rethink of the pension system appears unavoidable. Marco Kremerman, an economist at Fundación Sol, a non-profit research centre, says that half of Chile’s pensioners receive less than US$280 a month, less than the minimum wage. “This system has failed”, Kremerman says.

The outgoing government of centre-right President Sebastián Piñera has considered increasing contribution rates or increased state funding as a way to fix the system. While responsibility for rebuilding a viable pension system is likely to rest primarily with the next government, Piñera is looking for a political agreement with the opposition to pass a pension reform law before he steps down. Details are not yet clear, but various options are under discussion. One is to increase from 60% to 80% the proportion of the population covered by the ‘solidarity pillar’ (a state funded pension component). Another is to create a universal basic pension, to run alongside the privatised system, an idea which is supported by the AFPs. Alejandra Cox, head of the AFP association, says a state funded universal basic pension might cost US$7.5bn a year.

The Chinese mining company MMG has announced its intention to invest US$2bn over the next five years to expand the Las Bambas copper mine, which is located in Peru’s southern Apurímac region and accounts for around 1% of the country’s GDP and 2% of global copper supply. Speaking at the September 2022 PERUMIN mining conference in Arequipa, Edgardo Orderique, director general of Las Bambas, announced that MMG hopes to double copper production at the mine by 2025, and again by 2030. Those goals are optimistic given the severe civil unrest that has forced repeated and lengthy shutdowns over the past year, and which has intensified dramatically under President Pedro Castillo.

The announcement of increased investment by MMG comes as something of a surprise given the numerous shutdowns that have been forced by protestors at Las Bambas. Production ceased entirely between April and June this year when six local communities – some of which had formerly lived on the land where the mine now stands and claim to have been the victims of a land grab – accused MMG of failing to meet its commitments to compensate and support those people who were relocated or are affected by the mine’s environmental impact. According to MMG, 528 production days at Las Bambas have been lost or disrupted by protests since 2016, mostly due to blockades of the mining corridor, or the ‘Corredor Minero Sur’, which provides access to Las Bambas and other mines in the area.

Despite the signing in September of a number of accords between those communities, the government and MMG, and the formation of a working group to ensure these agreements are upheld, the shutdown meant that the projected copper production for the year from the mine was lowered from 320,000 tonnes to 240,000 tonnes. MMG also reported drastically decreased post-tax profits for 2022, down to US$80m for the first six months of the year, both because of decreased production and falling copper prices. By comparison, MMG’s profits for the same period in 2021 were US$584m.

An expansion of the Las Bambas mine was approved by the Peruvian government in March 2022, but MMG is yet to announce a time frame for opening a second pit site, despite original plans that it would be operational by the end of 2022. The Huancuire community, near which the new ‘Chalcobamba’ pit is to be constructed, joined the Las Bambas protests earlier this year over concerns that the wealth generated by MMG through the operation of the mine has not translated into improved living conditions for local communities.

The dispute over Las Bambas shows no sign of dissipating, and the results of the 2 October regional and municipal elections could ensure that the issue will remain close to the centre of national politics. The far-left Perú Libre (PL) party – to which President Castillo belonged when elected in 2021 – won five out of the six districts closest to Las Bambas, despite a poorer showing elsewhere in the country. This will be of concern to the mining companies operating in the region, as PL is well known for its anti-mining stance and retains a strong influence over the Castillo administration.

Peru’s main extractive lobby, the Sociedad Nacional de Minería, Petróleo y Energía (SNMPE), has directly blamed Castillo and PL for the intensification of mining protests over the past year, and accused them of putting the national economy at risk by failing to support the mining sector – one of its crucial pillars.

ARGENTINA | Government intervenes in Edesur. Argentina’s government announced a 180-day intervention in the management of the electricity utility company Edesur on 20 March after two weeks of power cuts caused by soaring summer temperatures. Justifying the intervention, Economy Minister Sergio Massa said that the power cuts “cannot be tolerated any longer”, and that Edesur would be fined a total of Ar$2.7bn (US$13.2m) because of them. He stressed that the intervention was administrative and would not affect the operational management of the company or shareholder rights.

Energy regulator ENRE is also investigating Edesur for alleged chronic under-investment. ENRE is reported to have concluded that as a concession holder Edesur has failed to carry out the necessary levels of investment to meet peaks in electricity demand. ENRE has also been commissioned to write a report on the company for discussion in a congressional committee that monitors public sector concessions.

The company has sought to downplay the gravity of the power cuts, pointing out that 60,000 customers have been affected – around 3% of its total customer base. Its aim, it has said, is to restore reliable supplies for the 3% and to improve the quality of service for the 97%. Critics of the government, such as former energy secretary Emilio Apud, accuse it of a largely cosmetic intervention, and of simply hoping that the situation will improve in two months’ time when the summer heat recedes. 

Edesur supplies electricity to around 2m customers in southern areas of the city and province of Buenos Aires. It runs a transmission network of around 32,500 km and accounts for around 20% of national electricity supply. Edesur first came into being in 1992, when Argentina privatised power generation and distribution offering long-term power concessions.    

BRAZIL-PARAGUAY | Itaipú and ‘bi-oceanic corridor’. Brazil’s President Luiz Inácio Lula da Silva hosted his Paraguayan peer Mario Abdo Benítez on 16 March in the border city of Foz do Iguaçu. They discussed the ever-thorny subject of renegotiating the treaty governing the jointly owned Itaipú hydroelectric project, as well as developing the ‘bi-oceanic corridor’, a highway route aiming to connect the Brazilian Atlantic port of Santos, through Paraguay and northern Argentina, to Chile’s Pacific ports of Antofagasta and Iquique. A new ‘integration bridge’ linking Foz do Iguaçu with Presidente Franco in Paraguay is due to be opened in July as part of the route.

The two heads of state attended the swearing-in of Enio Verri, the newly appointed Brazilian director at Itaipú. Verri said he would continue the hydroelectric project’s “mission to produce clean and renewable energy” at “fair prices” for the inhabitants of both countries. Verri highlighted the fact that Itaipú Binacional has now completely paid off the loans incurred to build the complex, meaning there is increased scope to deliver benefits to consumers either by reducing electricity prices or by investing in upgrading infrastructure.

Paraguay would like to renegotiate Annex C of the treaty, which establishes that each country owns 50% of the power generated by Itaipú and can sell the balance back to the other at preferential prices. Paraguay has been selling part of its share back to Brazil for decades, but successive governments in Asunción bemoan the fact that they are forced to do so at wholesale electricity prices, well below international levels.            

As the presidents met, a group of Paraguayan construction workers demonstrated outside the complex, claiming they are owed US$940m in unpaid social benefits first promised when the project was launched four decades ago, but never delivered. In August last year Paraguay’s congress approved a law authorising payment of these longstanding debts to around 16,000 construction workers and contractors. However, Abdo Benítez vetoed the law, saying the terms of Paraguay’s Itaipú international treaty with Brazil should take precedence.

Development: On 15 November Bolivia’s vice-president, Alvaro García Linera, said that there was still no date set for the publication of the European Union-funded study on coca consumption.

Significance: García Linera is responding to European Union (EU) pressure expressed during a 13 November high-level meeting in Brussels as part of President Evo Morales’s efforts to shore up support for his government’s  “coca sí, cocaína no” policy, which distinguishes between the raw coca leaf, an important symbol of indigenous culture, and the illegal narcotic. Specifically, Bolivia is seeking to shore up support for its attempt to re-join the Unite Nations (UN) 1961 Vienna Single Convention on Narcotic Drugs with a reservation to legalise coca-chewing. Last year Bolivia approved a law withdrawing the country from the UN convention in protest at the ban on coca leaf chewing (Art.49).

Key points:

• Since January, the EU has been calling for the results of the study, which began in 2009, to be published.

• The Morales government was recently able to point to its success vis-à-vis coca reduction efforts with the release of a report (in September) by the UN’s Office on Drugs and Crime (UNODC), which revealed a 12% year-on-year drop in coca cultivation in Bolivia in 2011 to 27,200 hectares (ha) from 31,000ha in 2010 – the first such reduction since Morales took office for the first time in 2006. However, the UNODC representative in Bolivia, César Guedes, told the local press that just over a third (37%) of the coca grown went to the two largest legal coca markets in the country, Villa Fátima in La Paz and Sacaba in Cochabamba, and that he believed that “most of the rest” was destined for narco trafficking. This upped the pressure on the government to publish the study and quantify the size of the legal market for coca.

• Also drugs related, yesterday, following a trilateral meeting that took in Lima, Peru to discuss anti-drug trafficking efforts between Bolivia’s interior minister, Carlos Romero, and his Peruvian and Brazilian counterparts, Wilfredo Pedraza and José Eduardo Cardozo respectively, the three announced plans to create a fund to fight illegal narcotics using money obtained from legislation on confiscation and asset recovery. While the necessary legislation is already in place in Brazil and Peru, Bolivia is currently trying to approve a law, a process that is proving difficult for the Morales government.