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MEXICO | Inflation edges up. On 9 April, Mexico’s national statistics institute (Inegi) released its consumer price index for March, showing that the monthly inflation rate stood at 0.29%, bringing the annual rate to 4.42%. This is up from monthly inflation of 0.09% in February, when the annual rate stood at 4.40%. Core inflation – which excludes items with highly volatile prices – stood at 4.55% in annual terms, down from 4.64% the previous month.

MEXICO | GFCF increases. On 3 April, Mexico’s national statistics institute (Inegi) released new figures which showed that gross fixed capital formation (GFCF) in Mexico increased by 13.8% in January 2024 in annual terms and 0.1% in monthly terms. Annual growth was driven by a 21.2% rise in investment in construction, while investment in machinery & equipment was up 6.0%. However, in monthly terms, while investment in construction was up 0.3%, it was down 0.2% in machinery & equipment.

MEXICO | Remittances rise. On 1 April, Mexico’s central bank (Banxico) released new figures which showed that remittances to Mexico totalled US$4.51bn in February 2024, up 3.8% in annual terms. In the first two months of 2024, remittances totalled US$9.09bn, up 3.4% on the same period in 2023.

MEXICO | Banxico cuts interest rates. On 21 March, Mexico’s central bank (Banxico) lowered interest rates by 25 basis points to 11%, the first modification since 30 March 2023. The decision was approved by Banxico’s governing board by four-to-one, with a single member voting for no change. The Banxico statement attributed the decision to slowing inflation which came in at 4.40% in February in annual terms, down from an annual rate of 4.88% in January. Core inflation – which excludes items with highly volatile prices – stood at 4.64% in annual terms, down from 4.76% the previous month.

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

Mexico: unemployment rate
Economically active population

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

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

Panama’s main opposition parties, Partido Panameñista (PPA) and Partido Revolucionario Democrático (PRD), appear to have put their historic differences aside for the time being. Along with the smaller Partido Popular (PP), the three parties launched a new alliance in June, named the Frente por la Democracia, against the ruling Cambio Democrático (CD) of President Ricardo Martinelli and his perceived anti-democratic tendencies.

The leaders of the PPA, PRD and PP - Vice-President Juan Carlos Varela, Mitchell Doens and Milton Henríquez respectively - unveiled the new Frente on 15 June. The show of unity is the latest attempt by the opposition to challenge Martinelli, efforts that have gathered pace since the CD-PPA ruling alliance came unstuck in August last [RC-11-10]. Civil society groups ranging from the Alianza Ciudadana Pro Justicia to private sector organisations such as the chamber of trade, industry and agriculture (CCIAP) have since backed the Frente.

The alliance was triggered by two different Martinelli-backed proposals. One was his appointment of justices to a new three-member chamber in the nine-member supreme court of justice (CSJ). He had floated this idea at the start of the year, but abandoned it under popular pressure amid suspicion that he was seeking to overturn the constitutional ban on consecutive presidential re-election and thereby run in 2014 [RC-12-02]. The other controversial initiative was proposed legislation allowing the State to sell 24% of its remaining 49% stake in the former state-owned telecoms company, Intel, now known as Cable & Wireless Panama, as well as reforms to a February 1997 law regulating the energy sector, which would enable the government to sell its remaining shares in joint ventures. Both the energy and telecoms sectors were partly privatised under the Ernesto Pérez Balladares government (PRD, 1994-1999). The opposition claimed that Martinelli’s motives for selling the government’s share were based on generating funds ahead of the 2014 election.

Less than a week since its launch, the alliance had a tangible result. After protests in Panama City organised by the new Frente spilled over into congress, resulting in 47 people arrested and a scuffle that took place between CD and opposition deputies on 18 June, forcing the suspension of the session, two days later Martinelli announced that he was backing down. He has since signed a resolution leaving without effect the designation of three justices and said that the proposed reforms to the energy and telecoms sectors would be subject to dialogue between the different stakeholders. While the new Frente might hail his U-turn as its first victory, Martinelli’s record of flip-flopping on contentious initiatives – most recently, his pledge not to open up the mining sector [RC-12-03] - suggests his critics are unlikely to remain complacent.

Yet while Martinelli’s disapproval rating remains at an all-time high (see sidebar), he is unlikely to lose much sleep in the immediate future. First, he controls the 71-member unicameral legislature, with 36 seats for his CD along with four belonging to an ally, Molirena. This compares with a total of 30 for the new alliance (17 for the PRD, 12 for the PPA and one for the PP). The strong performance of the economy, which Economy & Finance Minister Frank De Lima recently forecast would grow 10% this year, approaching the 10.6% registered in 2011 – the highest in the region - also bodes well for Martinelli. Similarly, while the launch of the Frente was endorsed by figures such as ex president Martín Torrijos (PRD, 2004-2009), it caused divisions within the PPA, raising doubts as to its durability – particularly given that manoeuvring within both parties ahead of the 2014 vote has already begun and the chance of an electoral agreement between the historic rivals is slim. While the ex president and PPA member Mireya Moscoso (1999-2004) declared her surprise at the pact, José Miguel Alemán, a former PPA presidential candidate (2004), outright rejected it, complaining that the PRD had not “apologised for its dictatorial past”.

• Record disapproval

According to a Unimer survey published at the end of May in the opposition daily Prensa, 55.5% of respondents rated Martinelli’s performance as “bad” or “very bad” – the first time that a majority disapproved of his leadership since he took office in July 2009. This has been attributed in part to the recent bribery allegations that emerged upon the arrest in April of Valter Lavitola, an unofficial aide to former Italian Prime Minister Silvio Berlusconi [RC-12-05]. In October 2009, three months after Martinelli took office, 13.2% of Unimer poll respondents rated his performance unfavourably, increasing to 28.8% in March 2011 and 48.6% in January 2012. In the latest poll, which interviewed 1,209 people on 17-20 May, just 43.2% rated his performance as ‘good’ or ‘very good’.

PARAGUAY | Outlook for growth solid this year. Paraguay is set to see solid economic growth this year, after narrowly avoiding a recession with just 0.1% GDP growth in 2022, according to central bank figures (BCP) released on 24 March. In March, the BCP’s monthly survey of experts forecast 4.5% growth this year, and 4% in 2024. This matches the projections of the International Monetary Fund (IMF) in its latest World Economic Outlook report, released on 11 April: the IMF also expects Paraguay’s economy to grow 4.5% in 2023, well above the global average of 2.8% and the average for Latin America and the Caribbean of 1.6%.

CHILE | Working week to be reduced. Chile’s lower house of congress on 11 April approved a bill to reduce the working week to 40 hours. The bill previously passed the senate in 2019. The changes will be gradually introduced over five years, to bring down the number of working hours in a week from 45 currently to 40, the amount recommended by the International Labour Organisation (ILO). The new law will legally allow for a four-day week and cap overtime to five hours per week, down from 12 currently. It also introduces new provisions for parents and caregivers, and considers special regimes for workers in the mining, transport, and agricultural industries, among others. Although the law currently caps the working week at 45 hours, ILO data collated by BBC Mundo shows that salaried Chileans on average only work 36.8 hours per week – among the lowest in Latin America, although more than their neighbours in Argentina (34.6 hours), where the law allows for a 48-hour working week.

URUGUAY | Poverty on a downward trend. A report by Uruguay’s national statistics institute (INE) released on 27 March put the country’s poverty rate at 9.9% in 2022, down from 10.2% in 2021. INE estimates that 6.9% of households lived below the poverty line last year, while 0.3% of the population was in extreme poverty.

Brazil & Southern Cone: inflation rate
Percentage variation (year-on-year)

Brazil & Southern Cone: GDP growth (%)
Quarterly figures are year-on-year growth

In early January President Martinelli gave his state of the nation address in which he outlined his government’s main achievements since taking office in July 2009. He noted that the country is on course to register the highest growth rate in all of Latin America in 2012 (10.5% on the latest figures from the UN Economic Commission on Latin America [Eclac]). Panama’s annual real GDP growth rate has averaged 8.4% in the last eight years, according to Economy Minister Frank de Lima.

  Martinelli was also pointed of new infrastructure investments, including an US$880m investment in Tocumen international airport (for a new terminal and a convention centre). A core plank of Martinelli’s plan to turn the Panama into the “Hub of the Americas", the upgrade aims to double Tocumen’s annual passenger capacity (currently 5.0ma year), allowing to rival to Miami as the region’s transport hub.

 Martinelli also claimed that the US$1.88bn metro project – his other flagship project, was 60% complete, with the first trials are due to begin in December 2013. The new metro, which has 13 stations, runs 14km through the capital and will be able to transport 15,000 people per hour in both directions, is due to begin operating in February 2014.

Jesús ‘Chuo’ Torrealba, a 56-year old journalist, teacher and neighbourhood political activist, is the new executive secretary of Venezuela’s main opposition umbrella coalition, Mesa de la Unidad Democrática (MUD).

The MUD is clearly banking on Torrealba’s left-wing background and his reputation as a social activist providing maximum appeal to disenchanted Chavista voters. In his first statement after his election on 24 September, Torrealba said he would stage an outdoor rally on 4 October to begin mobilising the public. “We’re going to build a better world and take on this regime. We’re building a new pact between the political leadership and the poor,” he declared.

Torrealba’s other immediate challenge is to forge unity inside the MUD, which is riven between a moderate wing focused on gradually building up electoral weight and a radical faction pushing for more direct action against the government led by President Nicolás Maduro. Local media suggested that the radical wing, led by the imprisoned Leopoldo López, had provided the sole vote against Torrealba.

The López wing, which earlier this year led the ‘La Salida’ movement seeking to force Maduro’s early resignation via peaceful street protests (with 43 eventual fatalities after a heavy crackdown by the security forces), engineered the removal of the MUD’s moderate former executive secretary, Ramón Guillermo Aveledo, who resigned in late July citing conspiracies against him. Aveledo had taken the MUD into dialogue with the government in an effort to resolve the country’s political crisis, but he eventually walked away (under pressure from the radicals), after the government refused to agree to its conditions for dialogue, chief among which was the release of political prisoners, including López.

Subsequent to Aveledo’s resignation, López and his chief political ally, the former independent deputy María Corina Machado, called for a change of direction in the MUD. López’s wife, Lilian Tintori, who travelled to the US to campaign for her husband’s release, was openly critical. “We need a more active opposition, including [being] more reactive to the abuses of power in this dictatorship,” she declared on 7 August. Yet it now appears that the pendulum has swung back the other way.

The MUD’s twice presidential candidate, Henrique Capriles Radonski, has remained on the sidelines all year, taking issue with street protests as counter-productive but not providing explicit support for the Aveledo-led dialogue with the government either. Capriles’s painstaking work in building up electoral support among disaffected government supporters and independents risks being undone if the MUD is radicalised. Judging by his initial comments, Torrealba seems aware of this.

Capriles and the MUD moderates say the focus should be on doing as well as possible in the congressional elections due late next year. The aim is to weaken the ruling Partido Socialista Unido de Venezuela (PSUV)’s grip on the national assembly, with a view to dislodging it from power in the presidential election in 2018. Quite where this leaves López is unclear. His view is that the main institutions of state, including the judiciary and the electoral authorities, are so in thrall to the PSUV government that it simply cannot be removed through elections.

Capriles tweeted support for Torrealba’s “new mission, to add and add, especially our most poor; to achieve the unity of all”. Capriles, governor of the populous state of Miranda, remains on a sort of permanent campaign, keeping up fierce criticism of the government for its economic and social failings. López et al, by contrast, are focused on securing a presidential recall referendum in 2016, to be followed thereafter by a constituent assembly. Capriles (and potentially Torrealba) is tacitly critical of this strategy as too politically remote from the severe everyday problems of Venezuelans.

• Torrealba – a complex background

Jesús Torrealba is a Caracas native. The son of a labour leader and a trade unionist, he joined the Partido Comunista de Venezuela aged 13, quitting in 1974. He later joined the Movimiento al Socialismo, to which he has family ties (until 1984). He trained as a teacher at the Instituto Pedagógico de Caracas and later studied journalism at the Universidad Central de Venezuela (UCV). In 1996 he founded the civil association, El Radar de los Barrios, which he describes as a “human network integrated by community activists of different ideological tendencies and political inclinations, united by the fight to improve living conditions in local neighbourhoods”. A TV and radio show of the same name sought to highlight problems all over the country.

Despite his left-wing credentials, Torrealba never allied himself with the Bolivarian Revolution and was critical from early on of its interventionism. He denounced the short-lived 2002 coup but went on to be spokesperson for the opposition coalition, Coordinadora Democrática, ahead of the failed 2004 presidential recall referendum. The pro-Chavista US journalist Eva Golinger in 2010 accused Torrealba of receiving money from the conservative US National Endowment for Democracy.

• Torrealba’s objectives

“We are going to construct more democracy, we are going to confront this totalitarian regime,” Jesús Torrealba said after assuming the position of MUD executive secretary. Promising to launch a national plan of mobilisations, Torrealba continued that “the MUD’s objective is to change the government by constitutional means. The strategy is to construct a big majority for political change with governability.”

• Maduro at the UN

In his address to the United Nations General Assembly on 24 September President Nicolás Maduro called upon the UN to dedicate its efforts to providing greater assistance in the fight against the spread of the Ebola outbreak in West Africa rather than supporting attacks against the citizens of the Middle East. Maduro, who pledged US$5m for the fight towards containing the spread of Ebola, praised Syria’s President Bashar al-Assad for its efforts in combating Islamic State militants.

BRAZIL | Jobs and wages

The statistics institute (Ibge) announced that Brazil’s unemployment rate reached 8.0% in the period February to April. This was the highest rate since the 7.98% posted in the first quarter of 2013. In the same period in 2014, the rate was 7.1%.  This result was lower than the 8.2% forecast by nine economists surveyed by Bloomberg News. Average wages were down to R$1,855 (US$594) for the quarter ending in April 2015, from R$1,862 (US$596) in the same period in 2014. 

BRAZIL | OECD membership

After refusing many invitations to join the Organisation for Economic Co-operation and Development (OECD), Brazil is moving closer to full membership. The foreign minister, Mauro Vieira, and the finance minister, Joaquim Levy, have signed a cooperation agreement with the OECD together with its secretary general Angel Gurría. In the past, Brazil kept a certain distance from the OECD due to its perceived attitude towards liberalising the Brazilian economy.

• Nike

Brazil’s relationship with Nike, the sports apparel company, is likely to come under scrutiny again. Following Brazil’s defeat to France in the 1998 football World Cup, the Brazilian congress launched an inquiry to determine whether Nike, the national team sponsors, had put undue pressure on Brazil to play Ronaldo, despite the fact he was clearly unfit. No smoking gun was ever found, but the US company’s relationship with the Brazilian football team, which has been extended to all Brazilian athletes (minus the volleyball team) competing at the Rio 2016 Olympic Games, will certainly be a subject of close interest to both Brazilian and US authorities.

The death of another high-profile female human rights activist in Honduras has prompted the use of the term ‘political femicide’ in a country where a woman is murdered every 13 hours, amounting to over 4,018 deaths in 2014-2015. In 99% of cases, there is impunity. The United Nations (UN) and others are speaking out. The US government is under congressional pressure to withhold official funding.

On 8 July, UN Women’s Executive Director Phumzile Mlambo-Ngcuka issued a statement on the killing of the Honduran activist Lesbia Yaneth and the British politician Jo Cox. The statement said UN Women “mourned the death” (a day earlier) of Yaneth, an environmental activist and a member of the Council of Indigenous Peoples of Honduras (Copinh). Noting that her murder closely followed that of her compatriot and colleague Berta Cáceres (killed in March), the statement added that Yaneth and Cáceres “join the growing list of women attacked for their political beliefs and public profile across the world”.

Emphasising that “globally there are more women in public office than at any previous point in history”, the UN agency continues: “Alarmingly, almost universally, increased women’s representation is accompanied by gender-based violence. It is visible in different forms – in the escalation of harassment and aggression in various media, intimidation and sexual and physical violence against public women; in forcing political women to resign…. In its most extreme form, women politicians have been imprisoned or assassinated for exercising their political rights and daring to stand up for what is right” (see sidebar). In a statement Copinh echoed this, calling Urquía’s death a “political femicide”. The organisation said it held the Honduran government, its institutions, and the security forces “directly responsible for this murder”.

According to the authorities, Urquía’s body was found in a rubbish dump in Marcala, La Paz department. Urquía disappeared on 6 July, having apparently gone out for a bike ride. She had suffered “a severe head injury”, and the authorities suggested that a possible motive for her murder was “the supposed robbery of her professional bicycle”. Copinh supporters rejected that as an attempted whitewash. (The authorities initially also suggested that Cáceres had been killed during a violent robbery attempt.)

Copinh noted that Urquía, a mother of three, had been actively protesting the construction of the ‘Aurora I’ hydroelectric dam in the municipality of San José, (La Paz). It added that the dam “has a direct link with the president of the [ruling] Partido Nacional and vice-president of the national congress, Gladys Aurora López”. It accused López and her husband, Arnold Castro, of being “a permanent source of threats and conflicts” over the construction of hydroelectric projects in La Paz department.

This new case will put the government led by President Juan Orlando Hernández under renewed international scrutiny. In June, four US congressionals led by Rep. Hank Johnson (D-GA) introduced the ‘Berta Cáceres Human Rights in Honduras Act’ requesting the suspension of US security funding for Honduras over concerns about the safety of local activists. According to Johnson, the US has already allocated at least US$18m to Honduran police and military for 2016, while the 2017 budget request calls for an increase in this funding. In addition, he notes, the Inter-American Development Bank (IADB) has lent US$60m to the Honduran police, with US approval. The Honduran public ministry on 7 July announced a special investigatory commission into Yaneth’s death, but critics accuse the authorities of merely paying lip service to justice. According to an international NGO, Global Witness, over 100 environmental activists were murdered in Honduras between 2010 and 2015.

• UN Women on political violence against women

“This backlash to progress is a global phenomenon. Its existence is one of the most serious obstacles to the realization of women’s political rights today. It is a demonstration of attempts to hold women back and to prevent women from claiming their rights – and from protecting the rights of others. It prevents them from voting or holding public office, campaigning freely, or expressing a political opinion without fear of retaliation or being challenged in their own homes, communities, and in the public realm.” – UN Women’s Executive Director, Phumzile Mlambo-Ngcuka.

BRAZIL | Mineral exports for the energy transition. At an event in Vitória, the capital of the south-eastern state of Espírito Santo, on 27 July, Brazil’s vice president and minister for industry & commerce, Geraldo Alckmin, spoke of Brazil’s ambition to become a major player in the global green energy transition, seeking to boost exports of lithium and other minerals used in batteries for electric vehicles (EVs) and other renewable energy infrastructure.

The event celebrated the creation of an export processing zone in Espírito Santo as well as Brazil’s first-ever shipment of so-called ‘green lithium’, exported from the port of Vitória. Sigma Lithium, the Canadian company which extracted the mineral, has claimed that this batch was produced with zero carbon emissions, zero waste, and zero harmful chemicals.

On the same day as the lithium shipment, the Brazilian mining giant Vale announced that it had sold a 13% stake in Vale Base Metals (VBM) to Manara Minerals, a joint venture between Saudi Arabia’s Public Investment Fund and the Saudi Arabian state-owned mining company Ma’aden. VBM is the holdings entity which oversees Vale’s energy transition metals business. In its announcement, Vale expressed optimism that the Saudi Arabian investment and partnership would help boost production and exports of copper and nickel, key materials for batteries and other components.

PARAGUAY | Revisiting Itaipú deal. Paraguay’s president-elect Santiago Peña carried out a four-day visit to Brazil last week. One of his principal priorities was paving the way for a renegotiation of the financial terms of the binational hydroelectric dam Itaipú treaty. Peña raised the issue with Brazil’s President Luiz Inácio Lula da Silva at the conclusion of his visit on 28 July.

There are significant economic and political considerations at stake for Peña. Successive governments in Paraguay have been criticised for failing to push Brazil to offer better terms to Paraguay in relation to the sale of its surplus energy produced at Itaipú. Peña’s approval rating will suffer a big hit if he is unable to secure a better deal during the renegotiation of the Itaipú Treaty’s ‘Annex C’ on the dam’s financial arrangements, which will begin on 13 August, two days before his investiture.

Race is never far from the surface of Guyanese politics, as an incendiary speech in New York by former president Bharrat Jagdeo has once again demonstrated. Jagdeo, who headed up a People’s Progressive Party (PPP) government from 1999 to 2011, is a representative of Guyana’s East Indian community.

Speaking on 24 July at the Albion Reunion celebration, an annual event held by New York-based Guyanese of Indian descent, Jagdeo warned: “There is an assault on our democracy. There is an assault on people of Indian origin. There is an assault on supporters of the PPP.” He said that the coalition government led by President David Granger (leader of A Partnership for National Unity – APNU) was “snatching people’s land”, and that the situation was “even worse in some regards” than during the long political domination of Forbes Burnham and the People’s National Congress (PNC). Burnham first won power in 1964, two years before Guyana’s independence. He held the post of prime minister until 1980 and that of an upgraded executive presidency from 1980 until his death in 1985.

The mostly Afro-Guyanese supported PNC held onto power for a further seven years after Forbes Burnham’s death, and it was not finally ousted by the PPP until 1992, after 28 years in power. The PPP then had its own lengthy period of dominance, only finally relinquishing power in 2015 to the APNU (of which the PNC is the main component) and its junior partner the Alliance for Change (AFC).

This potted electoral history of Guyana demonstrates nothing if not the power of incumbency, which no doubt accounts in part for Jagdeo’s bitterness at the PPP’s return to the wilderness. The fear is that the PPP could be faced with an extended exile from power, and that fear can only have been increased by the latest census results.

The full details of the 2012 census were released in early July, and while the report did not make particularly comforting reading for either main party, it was worse for the Indian-supported PPP. According to the figures, the population of East Indian descent declined from 326,277 in 2002 to 297,493 in 2012, that is from 43.4% of the total population to 39.8%. Over the same period, the Afro-Guyanese population declined from 227,062 (30.2% of the total) to 218,483 (29.2%).

Where the PNC/APNU was able to draw more comfort than the PPP was in the increase in the mostly APNU-supporting mixed-race population from 125,727 (16.7%) to 148,532 (19.9%). This means that the combined share of the Afro-Guyanese and mixed-race population has increased from 46.9% to 49.1%. Then there are the Amerindians, who make up an interesting segment of the population with their ‘floating’ political allegiances. Between 2002 and 2013, the Amerindian population increased from 66,675 (9.1% of the total) to 78,492 (10.5%).

As one PPP-supporting observer noted after the publication of the census figures, APNU has the advantage of “an increasing mixed population and the perquisites of government to entice Amerindian support away from the PPP”. APNU is also favoured by the fact that the Indian population is declining more swiftly than the African, which is a trend that is likely to increase (through emigration) the longer the PPP is excluded from power.

The Albion Reunion, to whose supporters Jagdeo addressed his inflammatory remarks in New York, alludes to this latter point on its website, where it asks: “Why [have] Guyanese emigrated in large numbers from Guyana to the US and other countries?” The answer, it says, is “simple but disturbing”. It is that the mass exodus of Guyanese from Guyana started in the mid-seventies “during the brutal and repressive reign of the People’s National Congress, under the leadership of Mr Forbes Burnham, who lost his objectivity, exercised racial bigotry, banned staple foods, and executed a choke-hold on the Guyanese populace”. And, says the Albion Reunion, it victimised its “mostly Indo-Guyanese” detractors.

There is some truth in this, but it is nevertheless flawed as a catch-all explanation for the decline in Guyana’s Indian population. After all, the PNC cannot be blamed for the 5% decline between 1991 and 2002 and the further 4% decline between 2002 and 2012 – these declines were almost entirely on the PPP’s watch.

The government’s response to Jagdeo’s speech was to issue a formal statement accusing him of descending into a “racial cesspit” and “insulting the intelligence of Indo-Guyanese and all Guyanese who have repudiated him for the perverse corruption under this regime”.

The statement added: “The Coalition Government remains committed to stabilising the Guyanese economy after years of lawlessness, nepotism, corruption, cronyism, mismanagement, misrule, and the flagrant misuse of resources.”

The reference to resources is apposite as the economic stakes in Guyanese politics have just been raised to an altogether higher level. As we discussed in last month’s issue [RC-16-07], a second major oil discovery by Exxon-Mobil, which could add as many as 1.4bn barrels to the 700m barrel reservoir discovered in May 2015, has been described by Natural Resources Minister Raphael Trotman as “explosively transformative for the economic and social development of all Guyanese”.

The PPP’s fear, of course, is that if it does not get back to power in the next election, then it will not be “all Guyanese” who will benefit; it will be the mainly Afro-Guyanese and mixed-race supporters of the APNU government – and the Amerindian population, who could indeed be enticed away from the PPP by “the perquisites of government”.

The government has tried to reassure the international community that it is determined to play fair with its windfall. It has said that it intends to subscribe to the standards espoused by the Extractive Industries Transparency Initiative (EITI); and at an EITI conference on 29 June, the natural resources minister told participants that the government was convinced that “transparency, accountability, and good governance are the bedrock of strong economies and strong societies”.

But the outgoing deputy chief of mission at the US embassy in Georgetown, Bryan Hunt, made the point a few days later that no country that has not previously been an oil producer “is ever well-prepared for a discovery of that magnitude”. He did add that he thought that Guyana “can be ready by the time the oil is ready to come out of the ocean floor”, but it is unlikely that the PPP is going to be much comforted by that thought. Even with the best intentions on corruption and transparency, it is the incumbent that is going to reap the electoral rewards.

ARGENTINA | Argentina launches tender for gas pipeline. The government led by President Mauricio Macri has launched a public tender to design and build the fourth gas pipeline for the Vaca Muerta shale deposit in Patagonia.

The first stages of construction are to be completed before the onset of the Southern hemisphere winter in 2021, which will allow for some imported liquefied natural gas (LNG) to be replaced by domestic gas production, saving approximately US$240m annually, according to estimates by the economy ministry.

The pipeline, which will have an initial capacity of 15m cubic metres of gas per day (mcm/d), which could increase in stages to up to 40 mcm/d, is expected to cost around US$2bn to construct.

In June, the country’s total gas production grew by 5.8% compared with the same month last year – the highest production rate recorded in the last 11 years. This increase saturated the natural gas transport capacity of the three other gas pipelines from the Neuquén basin.

• Vaca Muerta pipeline

Initially, the new pipeline from Vaca Muerta will extend for approximately 570km, from the Neuquén basin in northern Patagonia to the town of Salliqueló, in the province of Buenos Aires. The second stage will extend the pipeline for a further 470km, to the town of San Nicolás, also in the province of Buenos Aires.

BRAZIL | Vale and Petrobras report second quarter earnings. Brazilian mining giant Vale posted its second quarter results on 31 July, having suffered its worst first quarter on record due to the repercussions of the collapse of a tailings dam in Brumadinho, Minas Gerais state, in January.

Vale’s performance improved in Q2, but it nonetheless recorded a second consecutive quarter of losses, with a net loss of US$133m. This was mainly due to additional provisions related to the Brumadinho dam collapse (totalling US$1.5bn), the decommissioning of the Germano dam in Minas Gerais (US$257m), and funds destined to the Fundação Renova (US$383m), an entity responsible for reparations for the damages from the 2015 rupture of a dam co-owned by Vale in Mariana (also in Minas Gerais).

Overall, the company posted a total net loss of US$1.78bn for the first half of 2019.

In contrast, on 1 August the state-owned oil company Petrobras posted its best results on record for the second quarter of 2019. Petrobras saw its net income increase by 368% quarter-on-quarter, totalling R$18.9bn (US$4.77bn). This performance was largely due to the successful conclusion in June of the sale of 90% of Petrobras’s shares in the gas pipeline system Transportadora Associada de Gás SA (TAG) for R$33.5bn. Petrobras notes that its overall divestments reached US$15.1bn to July this year, as the company pursues an ambitious divestment programme and a strategy concentrating on higher return assets.

On the production side, oil, natural gas and natural gas liquids (NGL) production averaged 2.63m barrels of oil equivalent per day (boe/d) in the second quarter.

Although a 3.8% increase on first quarter results, these were lower than expected and Petrobras has accordingly revised its annual production target for 2019 down to 2.7m boe/d.

CHILE | Lithium project. Chile’s copper giant Codelco signed a non-binding agreement on 1 August with the private company Minera Salar Blanco (MSB) to carry out a “socially, environmentally and economically sustainable” lithium project in the Salar de Maricunga, in the northern region of Atacama.

According to a statement issued by Codelco, the purpose of this agreement is “to launch a third lithium operation in Chile, taking advantage of the current favourable market conditions for this mineral”.

The companies will now seek to negotiate the final terms of an association agreement to allow them to carry out this initiative, “combining their experience in the area”, located within the ‘Lithium Triangle’ salt flats in northern Chile. Upon reaching a definitive agreement, it is estimated that construction of the project could begin in 2020, or early 2021, once the relevant environmental authorisations are obtained and necessary financing is structured, benefitting the Atacama region and the country as a whole.

PERU | Economy in dire straits. Economic projections for Peru remain bleak, with the latest report from the United Nations Economic Commission for Latin America and the Caribbean (Eclac) forecasting that the country’s economy could decline by 13% in 2020 as a result of the coronavirus (Covid-19) pandemic, second only to Venezuela in the Western Hemisphere.

Revised down from the more moderate 4% decline projected in April, Eclac’s latest figures follow similarly pessimistic predictions from the World Bank (-12%) and International Monetary Fund (-14%) in recent months. These figures will be hard to take after President Martín Vizcarra’s government outspent many of its neighbours in responding to the pandemic, but the rampant spread of disease (attributed by many in the country to years of underinvestment in public health) has taken a clear toll.

Data from the national statistics institute (Inei) on economic activity has seemed to validate these bleak predictions; on the same day as the Eclac report, Inei revealed the economy had declined by 32.75% year-on-year in May. This represented an improvement on the 40.49% decline recorded in April, reflecting the launch of economic reactivation efforts in May, but this recovery looks set to be slow.

Mining export figures paint a similar picture; Erik Fischer, president of Peru’s association of exporters (Adex), noted optimistically that the very worst of the crisis may have passed, with the value of Peru’s exports increasing from US$1.8bn in April to US$1.93bn in May. Fischer recognised, however, that a 46.1% year-on-year decrease compared with May 2019 suggests there is little to celebrate. He noted that Adex had expected a more significant recovery in May, as mining production (significant for Peruvian exports) remained steady through the pandemic, but acknowledged that foreign demand will inevitably be affected by what is ultimately a global economic crisis.

Following the congressional and regional elections at the end of May the economy appears to be weakening again, prompting the government to crack down on black market US dollar transactions.

Apart from multiple official exchange rates, Venezuela has also had a long-standing black market for the US dollar. Economists say the larger the gap between the official and the black-market dollar rates, the lower the confidence in the country’s economy.

The immediate post-election period has seen an attempt to narrow the gap. On 2 June state television channel VTV said that a regulatory body, the Superintendencia Nacional para la Defensa de los Derechos Socioeconómicos (Sundde), was sending out inspectors across the country to ensure that “all retail outlets charge for their products in line with the official exchange rates published by the Banco Central de Venezuela – BCV”.

After years of hyperinflation (2017-2021) many Venezuelan companies still set their reference prices in US dollars or even euros, which are then converted to Bolivares at the point of sale, using prevailing daily exchange rates. At issue is whether that is done using the official or the black-market dollar rates. Sundde said its aim is to “strengthen consumer protection and enforce exchange rate regulations”.

The attorney general’s office, meanwhile, said it had arrested an individual (who it refrained from naming) responsible for Monitor dólar, an Instagram account which regularly publishes the ‘parallel’ or black-market dollar rate. The individual was accused of seeking to “destabilise” the economy. There were also reports that around 50 other people involved in black market currency dealing had been arrested.

Opposition parties criticised the crackdown on the parallel market. Arresting people for publicising the dollar exchange rate on digital platforms “will not solve the problem” said Primero Justicia (PJ), which described the gap between official and free market dollar rates as “a symptom of economic dysfunction”. It added that arresting individual currency dealers was also an attempt to duck the BCV’s responsibility to efficiently manage currency markets.

Another opposition party, Voluntad Popular (VP), said “the Venezuelan economy can’t be controlled by arresting people, it requires serious institutions, confidence, opening up, and freedom”. It added that the arrests will not close the gap between official and parallel dollar rates or conceal the fact that “the government’s economic model is unsustainable”.

Unión y Cambio, a minority opposition coalition led by Henrique Capriles Radonski, who unlike the majority group did not boycott last month’s elections, said the best response to the currency crisis would be to develop an externally funded economic programme. Capriles said this could “stabilise the currency, and bring down inflation in the context of a negotiated solution to the country’s political crisis”.

More elections down the road

Indirect indigenous community elections were held on 1 June, choosing three pro-government representatives for the national assembly. President Nicolás Maduro hailed the result as “massive”. It further strengthens the government’s control of the legislature, where the ruling coalition will now hold 253 out of 285 seats. Interior Minister Diosdado Cabello has called on government supporters to prepare for the next round of elections due on 27 July when voters will be asked to choose city mayors and councillors.  

Maduro claims Trinidad conspiracy

President Nicolás Maduro has often claimed that US-backed conspiracies are underway to overthrow his government or even to assassinate him. On 3 June he maintained that a “group of terrorists” had been arrested trying to enter the country from Trinidad and Tobago, of whom around half were Colombian mercenaries.

Very few details or supporting evidence was given. The number of people involved was not released. Maduro claimed, “surname fascists” (one of the names he uses to describe the majority opposition group) had prepared “terrorist attacks” in the first four months of the year, but none had succeeded.

Separately, the interior minister and Bolivarian strongman, Diosdado Cabello, said that arrested opposition leader Juan Carlos Guanipa had been involved in a plan to carry out “terrorist acts” to disrupt the legislative and regional elections on 25 May and that his group had also been planning “attacks” on the Colombian, Spanish and French embassies in Caracas, as well as on local United Nations (UN) offices.

The immediate outlook for soybeans is of great importance to Argentina and Brazil, two of the world’s leading exporters. Both have strong reasons to need good export revenues this year. Argentina faces an economic crisis in an election year, while Brazil, where elections were held last year, is struggling to reduce its fiscal and current account deficits as a precondition for economic recovery.

The global commodities outlook offers a mixed picture for exporters like Argentina and Brazil. The commodities boom is a thing of the past: 2014 was the fourth consecutive year of poor performance by commodities in general. As far as agricultural commodities are concerned, bumper harvests and high stock levels are continuing to hold prices down. On the upside however, it is clear that an adjustment has taken place, and further steep falls in price levels are unlikely. Slower growth in China is now priced in to forecasts; European demand remains poor, but the US recovery is cause for some cautious optimism.

There may also be some upside from the strengthening US dollar, which has risen by around 17% on a trade-weighted basis since mid-2014. Since prices are set in US currency terms, a rising dollar increases profit margins for non-US commodity exporters (whose main costs are incurred in local currencies), and gives them the option to become more competitive, reducing prices while remaining profitable and therefore gaining market share. In Brazil, where depreciation of the Real against the dollar has also been significant, this has helped boost coffee exports. Brazilian soya exports should also benefit, and are expected to gain market share from US soya exports.

In the 2014/15-crop year, the overall picture, however, is one of plentiful global grain and oilseed supplies. Soybeans are set for a second consecutive record world harvest. Soybean prices fell 22% in calendar 2014 to an average of 1,019 US cents a bushel. Most forecasters are talking of a similar fall to around 800 US cents per bushel in calendar 2015, but they expect a price recovery to begin to make itself felt in 2016.

Brazil, now the world’s largest soya exporter, has been on track for a record harvest, but it is experiencing severe drought conditions. In the short term, a truckers’ strike in February has also disrupted export shipments. In the same month, the US Department of Agriculture  (USDA) cut back its estimate for the Brazilian harvest by 1m metric tonnes to 94.5m mt – lower, but still a record.

Citing ample moisture and mild temperatures, the USDA at the same time raised its estimate for the Argentine crop by 1m mt to 56m mt. The Rosario Grains Exchange is more bullish, forecasting a record harvest of 58m mt in 2014/15, up from its previous estimate of 54.5m mt. The USDA’s figures, which put the global harvest at 315.2m mt, imply that Argentina and Brazil will together account for almost half of that (47.7%). A research note from US investment bank Piper Jaffray, based on a recent visit to soya-growing areas in both countries, says its analysts left with “increased confidence in producing a record crop in the region and a higher level of appreciation for the region’s ongoing drive to adopt technology”.

The problem, however, is that if international soybean prices fall by around one-fifth this year, export volumes will need to grow by at least the same proportion to maintain the value of export earnings. That seems difficult to achieve, implying that soya export earnings in calendar 2015 will be lower than in 2014.

According to Finsoport, an Argentine consultancy, the soya harvest there this year is likely to grow by 3% to 55m mt, while soya oil exports will decline by 7.2% in value terms to US$3.24bn, while soya flour exports will drop by 6.8% in value terms to US$11.71bn. Overall, Finsoport believes that Argentina’s maize, soya and wheat exports will drop by 9% in value terms in 2015 to US$22bn. According to Brazil’s ministry of agriculture, despite last year’s fall in soya prices, the ‘soya complex’ was able to achieve a 1.4% increase in the overall value of its exports to US$31.4bn. It will be hard-pressed to remain in positive territory this year. The conclusion for both countries seems to be that soya will remain a vital export commodity, but one that will not deliver increased dollar earnings until 2016.

President Jimmy Morales last month sanctioned reforms to the electoral law and law on political parties (LEPP) following the initiative’s approval in April by the 158-member unicameral national legislature. President Morales, whose October 2015 electoral victory was largely due to his anti-corruption platform and perceived distance from a political establishment badly discredited as a result of various scandals, is pointing to other developments as evidence that he is making good his electoral pledge. The need for these efforts remains apparent as further evidence of official corruption comes to light – most significantly a new campaign finance scandal involving disgraced former President Otto Pérez Molina (Partido Patriota [PP], 2012-2015), who was forced to quit last year over corruption.

Aimed at cracking down on political corruption, the LEPP reforms took effect on 1 June and will be applied ahead of the 2019 general elections. They include: allowing ex-pats abroad to vote in the presidential election; strengthening transparency of political party financing; strengthening sanctions for the violation of electoral rules; regulating electoral surveys; and prohibiting officials from campaigning during official events, among other things. However, the new legislation left out key civil-society demands like increasing the budget for the supreme electoral court (TSE); limiting the re-election of legislators; introducing quotas for political representation of women, indigenous and young people; and modernising the electoral register.

The new law has received a mixed response. While hailed as a step forward of sorts by civil-society groups and think tanks like the Institute for National Problems (IPNUSAC) at the state Universidad San Carlos and Asociación de Investigación y Estudios Sociales (ASIES), high profile activists like Helen Mack, of the Myrna Mack foundation, dismissed it as a ‘joke’ given the omission of these civil-society demands. Antonio Malouf, the vice president of the private sector lobby, Comité Coordinador de Asociaciones Agrícolas, Comerciales, Industriales y Financieras (CACIF), acknowledged that the initiative could be improved, while President Morales himself has said that dialogue with different sectors will continue regarding those demands omitted in the new law.

Also trumpeted as evidence of anti-corruption moves, a new national dialogue initiative to promote judicial reform was launched on 25 April by the heads of the three branches of government – Morales; supreme justice court (CSJ) president, Ranulfo Rafael Rojas; and congress president, Mario Taracena of the opposition Unidad Nacional de la Esperanza (UNE). The initiative, which President Morales claims is an unprecedented sign of coordination between the three branches of government, will count on the technical assistance of the Attorney General’s office (AG); the United Nations (UN)-backed anti-impunity commission in Guatemala (Cicig); the human rights ombudsman, and the Office of the UN High Commissioner for Human Rights (OHCHR) in Guatemala among other organisations.

According to a government website launched to accompany the judicial reform initiative, regional working groups were set up in April in the departments of Quetzaltenango, Huehuetenango, Alta Verapaz, Zacapa, Petén, Jutiapa, and Sacatepéquez and in Guatemala City. Citizens will be able to participate in these working groups and will also have the opportunity to submit proposals through an online platform. The results of these workshops will then serve as the basis for the three branches of government to come up with a final proposal for constitutional reform that will be submitted to the legislature in August 2016.

A “macro-criminal structure”

In what was the latest example of the endemic corruption afflicting state institutions, on 2 June, the heads of the AG, Cicig and Interior Ministry – Thelma Aldana, Ivan Velásquez and Francisco Rivas Lara respectively – revealed the findings of an investigation into a “macro-criminal structure that had co-opted power”, allegedly headed up by Pérez Molina and his vice president Roxana Baldetti (2012-2015), who was also forced to quit last year over corruption. The two now face fresh accusations of illicit association, passive bribery, illegal association, money laundering, and other acts of illicit enrichment. Meanwhile, 25 individuals have been arrested with seven international arrest orders issued and a further 14 individuals under investigation.

The investigation into the case of illegal campaign finance is looking at 50 cases of illicit contracts involving bankers, officials, and business representatives as well as individuals who served as front men to hide the source of funds – amounting to “at least Q$500m (US$65m)”. The scandal once again highlights the need to strengthen transparency with regard to campaign financing – an issue highlighted in a July 2015 report by Cicig which found that, on data submitted by the electoral authorities (TE), in the 2011 general elections, over Q$300m (US$39m) of campaign financing was unaccounted for. Specifically, the Cicig report found that the PP exceeded the legal campaign spending limit by Q$101m (US$13m); the Libertad Democrática Renovada (Líder) by Q$68m (US$9m) and UNE – whose presidential candidate, former First Lady Sandra Torres, Morales defeated in the run-off – by Q$56m (US$7m).

These are the third set of allegations to be made against Pérez Molina after a case revealed in April 2016 involving the awarding of a 25-year contract to the local branch of Spanish company, Terminal de Contenedores Barcelona (TCB), to operate the container terminal at Puerto Quetzal (TCQ) in Escuintla department. According to Cicig and the AG, Pérez Molina and other senior government officials were paid some US$25m in bribes in 2013-2015 in exchange for the awarding of the contract. In the wake of the investigation, the Morales government has said that it will cancel the TCQ contract.

More signs of institutional problems

While President Morales may point to these various developments as signs of progress with regards to cracking down on impunity, challenges to these efforts persist. On 17 May, Guatemala’s prosecutor general, María Eugenia Villagrán, resigned after claiming to have received death threats linked to various corruption cases uncovered by the AG and Cicig currently under investigation – in particular the TCQ case.

Villagrán told local radio station Radio Sonora that she made the decision, which has been widely criticised by local civil-society organisations (see sidebar) and would now be forced to seek exile “because I received threats, not directly…but through my close advisors”.

She had been named to the post in December 2014 by Pérez Molina to replace Vladimir Aguilar (2013-2014), who stepped down in order to become a CSJ magistrate – a position which he was forced to relinquish on 13 May in order to face investigation for alleged influence trafficking in regard to the TCQ case. Also, last month another CSJ judge, Douglas René Charchal Ramos, was stripped of his immunity in order to face investigation for the same case.

On 30 May, President Morales named Anabella Morfín as Villagrán’s successor – a post she formally took up on 3 June. Morfín’s appointment has largely been well-received; she is perceived to be independent while in the presidential statement announcing her nomination, Morales claimed that she had Cicig’s endorsement. A lawyer by profession, Morfín has served as secretary general of the national agrarian institute (Inta) and the national agrarian transformation council (1979-1985) as well as administrative secretary of the constitutional court (CC) in 1986. A former labour minister under the government led by former president Ramiro de León Carpio (1993-1996), in 1992 she founded the centre for the defence of the constitution (Cedecon), a civil-society organisation.

• AG progress sheet

On 17 May, Guatemala’s attorney general (AG), Thelma Aldana, presented the AG’s balance sheet for May 2015-May 2016. She pointed to various signs of progress including the fact that 65 criminal structures had been dismantled, 4,736 searches had been carried out, and 12,399 arrest warrants issued. Aldana also told reporters that Q$5.5m (US$720,000) had been seized in relation to contraband and Q$6.86m was recovered from tax fraud. In addition, 10,860kgs of drugs were seized and US$4.2m was seized in drug trafficking-related activity.

• Civil-society concerns

The resignation of María Eugenia Villagrán was received with concern by local human rights activists like Manfredo Marroquín, of local NGO Acción Ciudadana (AC) who told reporters that while Villagrán’s resignation in itself would not affect existing investigations, it nevertheless sent a worrying signal “that the state continues fragmenting…she is a lawyer for the state …[and] should not have to resign for situations like these”.

As part of his promise to boost democratic rule in the country, another of López Obrador’s main campaign promises was that he would submit his continuation in office to a popular confirmation vote at the mid-point of his six-year term of office. If he were to lose a recall vote he promised he would cut his term short.

This was another issue that he highlighted as still pending in his first state of the nation address. Even though on 14 March the chamber of deputies voted to amend constitutional article 35 to include the recall vote for federal and state governments, which would be held during the mid-term legislative elections of 2021, it failed to gain approval in the senate because the opposition argued that it represented an attempt to undermine other parties, as López Obrador’s name on the ballot would influence voters to support Morena’s congressional candidates.

However, on 15 October, it was finally approved after opposition senators secured amendments to the original bill. Thus, the presidential recall vote is regulated by the same provisions that apply to public consultations in general, but it may only be called for by the citizenry, rather than by any authority or government official, to take place on the first Sunday of August, rather than alongside the mid-term elections.

Whether the government will abide by these rules remains to be seen, as the use of public consultations so far has made evident that López Obrador has an ambiguous relationship with the law, supporting it when it suits him, but otherwise claiming that it is immoral or unacceptable.

The government sent the 2012 budget to congress on 27 September.

The budget calls for a 5% increase in real spending. The economy minister, Pablo Longueira, said that the increase was in line with the GDP growth the government expects for 2012. For 2011 the government expects GDP growth of about 6.5%.

Longueira argued that the budget was balanced and yet provided for increased spending on education, health and social security. He said that of the extra US$3bn that the GDP growth in 2012 (and 2011) would produce, US$750m were earmarked for education.

Longueira is confident that the economy cannot be derailed by the international financial turbulence caused by the renewed slowing down of the US economy and the crisis in the European banking system. He added that the government’s economic priorities were to maintain the rate of growth and to create better jobs.

In the latest quarter June to August, the unemployment rate rose slightly from 7.5% in the previous three months to 7.6%.

The central bank is less bullish than the government about growth. In its most recent report on the economy, published on 7 September, it clipped 0.25 of a percentage point off its forecast for GDP growth in 2011. It now expects GDP growth of between 6.25% and 6.75%, down from a range of between 6% and 7%.

For 2012, the central bank is forecasting a rate of between 4.25% and 5.25%.

On 21 September, the finance minister, Felipe Larraín, said that the government was penciling in GDP growth of 4.9% in 2012 based on an average copper price of US$3.02 per pound, up from an average price of US$2.59 forecast for 2011.

The assumption among local economists is that the central bank has changed its stance on interest rates and will not now longer push them up. And it may indeed start to cut rates in the final quarter of 2011. Interest rates currently stand at 5.25% while inflation for the 12 months to August stood at 3.1% .

• A power cut in central Chile on 27 September may cost power companies US$9m in fines, the energy minister, Rodrigo Álvarez said. Around 10m people were affected and some households were without power for three hours.

ARGENTINA-BRASIL |  Se libera el comercio automotriz. El 1 julio el gobierno brasilero confirmó que el pacto de comercio bilateral con Argentina que cubre el sector automotriz había expirado oficialmente y que desde ahora el comercio bilateral en el sector sería liberalizado por completo.

Aunque tanto Argentina como Brasil son miembros de la unión aduanera del Mercado Común del Sur (Mercosur), el comercio bilateral en el sector clave automotriz fue parcialmente restringido en el 2006 después de que Argentina convenció a su principal socio comercial en el Mercosur de introducir limites temporales sobre el nivel de exportaciones automotores a fin de darle a Argentina tiempo para ‘alcanzar’ a su vecino y desarrollar una industria automotriz interna más competitiva. Originalmente fue acordado que las restricciones serían introducidas por dos años, pero el acuerdo fue extendido por cinco años más en junio del 2008.

El comercio automotor representa el 50% de todo el comercio entre las dos mayores economías de Sudamérica, y el económicamente acosado gobierno argentino liderado por la Presidenta Cristina Fernández estaba interesado no sólo a extender el acuerdo por otros cinco años más, sino también en asegurar mejores términos. Sin embargo, las negociaciones resultaron difíciles, con Brasil rehusando considerar la introducción de cambios en el pacto.

Bajo los términos originales del pacto por cada US$100 que Argentina exporta en autos y partes a Brasil, Brasil puede exportar US$195 libres de tarifas en la otra dirección. Todo dólar adicional de exportaciones de autos y partes brasileros deben pagar las tarifas de productos externos del Mercosur.

A inicios del año, los negociadores brasileros habían dicho que estaban dispuestos a extender el acuerdo bajo los términos actuales y que considerarían las propuestas para cambiar los términos del acuerdo presentadas por Argentina. Sin embargo, las tensiones entre la administración Fernández y el gobierno brasilero liderado por la Presidenta Dilma Rousseff han estado creciendo constantemente, particularmente cuando se trata de cuestiones económicas. No solamente las arbitrarias barreras generales al comercio impuestas por Argentina desde el 2011 han resultado en que las exportaciones generales de Brasil cayeran un 20% en el 2012, sino que en marzo el gigante minero de Brasil, Vale, anunció que cancelaba su proyecto minero de potasa de US$6mm en Argentina, debido al deteriorado clima económico en Argentina. Esto fue seguido por la decisión de junio del gobierno argentino de expropiar una concesión ferroviaria que estaba en poder de la firma brasilera, América Latina Logística (ALL).

Por otro lado la firma petrolera de propiedad del estado de Brasil, Petrobrás, ha confirmado recientemente sus planes de retirarse de Argentina y se dice que actualmente está considerando las ofertas por sus activos en Argentina. Considerando este difícil escenario, las conversaciones bilaterales aparentemente se atascaron por completo, sin ningún acuerdo habiendo sido alcanzado antes de la fecha límite del 30 de junio. Consecuentemente, el gobierno brasilero ha dicho que después de la expiración del pacto bilateral, el comercio automotriz debería ser “liberado automáticamente”.

El gobierno de Argentina hasta ahora no ha hecho comentarios sobre la cuestión, pero se espera que Fernández busque abordar la cuestión con Rousseff durante la próxima cumbre de jefes de estado del Mercosur programada para el 12 de julio.

CHILE-PARAGUAY | Levantan restricciones a la importación de carne. El 30 de junio el titular del Servicio Nacional de Calidad y de la Salud Animal de Paraguay (Senacsa), Hugo Idoyaga, reveló que había sido informado por el Servicio Agrícola y Ganadero (SAG) de Chile que todas las restricciones a las importaciones de carne paraguaya a Chile ahora habían sido levantadas. Chile, uno de los principales mercados de exportación para la carne paraguaya, introdujo un número de restricciones a las importaciones de carne de Paraguay después de un brote de fiebre aftosa (FMD) en enero del año pasado. Desde entonces, Senacsa ha estado trabajando con el SAG a fin de asegurar la reapertura total del mercado chileno [IL-13-15].

Idoyaga explicó que la decisión es el resultado de la segunda auditoría del servicio de control del SAG (Senasa) a la industria de la carne de Paraguay en la cual determinó que habían sido adoptadas suficientes medidas para asegurarse de que el brote había sido controlado y de que la enfermedad no se había extendido. De acuerdo con Idoyaga, la apertura total del mercado chileno permitiría a las exportaciones de carne de Paraguay a Chile quintuplicarse, lo que representa unos US$250m adicionales, que podrán ayudar al sector llegar a unos US$1,3mm en exportaciones este año.

Antes del brote del año pasado, Chile era el destino principal para la carne paraguaya, representando hasta el 45% de todas las exportaciones. Sin embargo, Idoyaga señaló que las figuras proyectadas para final de año podrían ser aún más elevadas si la Unión Europea (UE) también decide levantar todas las restricciones a la importación. Idoyaga explicó que la UE también ha concluido su auditoría de la industria de carne local y que las autoridades paraguayas esperan recibir los resultados de la misma en los próximos días.

• “Trabajen un día gratis si es necesario”

El 2 de julio el Presidente de Uruguay, José Mujica, urgió a los trabajadores de la recientemente restablecida firma de cerámicas, Metzen y Sena, para que “trabajen un día gratis si es necesario” a fin de mantener a flote la compañía. Metzen y Sena fue forzada a cerrar en el 2009 después de caer en dificultades financieras que provocaron que 753 trabajadores perdieran sus empleos. Un número de estos ex empleados decidieron entonces formar la Cooperativa de Trabajadores Cerámicos (CTC) y buscaron la asistencia del gobierno para revivir la firma. CTC recibió US$10,8m del fondo nacional de desarrollo (Fondes) para reparar las instalaciones industriales de la firma en Empalme Olmos, en el departamento de Canelones. Hablando en su reinauguración, Mujica dijo que mantener vivo el proyecto, que ha creado 340 empleos, “no será fácil”. Y urgió a todos aquellos involucrados a que hagan lo mejor que puedan para convertirlo en un éxito.

BRASIL | Buen año para el Banco do Brasil. A pesar de un flojo trimestre final, el estatal Banco do Brasil, el más grande proveedor de créditos del país, informó que en el 2013 ha tenido un récord de ganancia neta de R$15,75mm (US$6,5mm), un 29,5% más que el registrado en el 2012 (y por encima de las ganancias del Banco Itaú, de R$15,69mm en el mismo año). Los resultados del banco significan que sus ganancias para el año pasado son las más altas jamás registradas por un banco brasileño.

En diciembre del 2013, el volumen de activos del Banco do Brasil llegaron a R$1,30mm (US$536m); una tasa de crecimiento anual de 13,5% y de 3,5% sobre el trimestre previo, gracias principalmente a la expansión de su cartera de préstamos.

La cartera de préstamos del banco alcanzó R$692m a fines de diciembre, un incremento anual de 19,3%. El área de más fuerte crecimiento fue en la propiedad. La tasa de morosidad del banco, que mide el porcentaje de deudas por pagar con más de tres meses de atraso, cayó de 2,06% a fines del 2012, a 1,98% en diciembre.

El Banco do Brasil está controlado por el gobierno, pero algunas de sus acciones son comercializadas en la bolsa de valores de São Paulo.

REGIÓN | ‘Diferentes velocidades’ para miembros del Mercosur. Como un signo de la creciente impaciencia con el Mercado Común del Sur (Mercosur), el presidente de la Confederação Nacional da Indústria (CNI) de Brasil, Carlos Abijaodi, pidió una revisión de las normas del Mercosur, “particularmente aquellas que obligan a todos los miembros a negociar acuerdos comerciales conjuntamente con terceros países”. Los comentarios de Abijaodi deben haber sonado a música en los estrategas económicos y de comercio de Uruguay, quienes desde hace tiempo presionan en vano para lograr esa flexibilidad.

Hablando antes de una cumbre Brasil-Paraguay en Asunción, Abijaodi dijo que la industria brasileña desea negociar acuerdos comerciales con otros países a diferente velocidad del resto de los miembros del Mercosur. En particular, el presidente de la CNI expresó su preocupación acerca del dolorosamente lento progreso en la negociación de un acuerdo entre Mercosur y la Unión Europea (UE).

“En la CNI, nosotros alegamos que Brasil debería firmar un acuerdo incluso si el resto del Mercosur no está listo,” dijo Abijaodi. “Esta podría ser la última oportunidad para avanzar sobre el acuerdo, pues en mayo, la Comisión Europea celebrará elecciones para un nuevo presidente, y no sabemos si el próximo presidente estará tan involucrado,” agregó.

Por otro lado, Argentina reaccionó airadamente ante la noticia que un diplomático brasileño había dicho al parlamento de la UE que la causa del retraso en asegurar un acuerdo lo tenía Argentina. La reacción de Argentina no se hizo esperar y exigió una retractación pública de Brasil y amenazó con retirar su delegación. Brasil rehusó hacer una retractación pública pero difundió una breve declaración en la embajada brasileña en Argentina, afirmando que los comentarios del diplomático brasileño no “correspondían” con la “evaluación positiva” de Brasil sobre las propuestas conjuntas de Mercosur.

URUGUAY | La inflación: un dolor de cabeza. El Presidente José Mujica ha admitido que es probable que la inflación permanezca entre 7% y 9% en lo que resta de su mandato, que termina en marzo del 2015. La inflación fue de 8,5% en el 2013, y la cifra de enero del 2014 llevó la tasa de inflación de 12 meses a 9,10%.

A fin de mantener la inflación dentro de la banda de 7% - 9%, Mujica sugiere que él estaría dispuesto a recortar las tasas de servicio público. Como muchos servicios en Uruguay, la electricidad es proveída por el Estado, a través de la Administración Nacional de Usinas y Transmisiones Eléctricas (UTE), y sus pérdidas son absorbidas por el tesoro. La mitad de la producción de electricidad de Uruguay es hidroeléctrica y, por tanto, depende de las lluvias. Cuando ésta es insuficiente, UTE depende de la generación térmica, que es extremadamente cara, debido a que el país debe importar el petróleo y el gas que necesita.

El gobierno también administra las tasas de combustibles, agua potable, y servicios sanitarios. Estas son usualmente “ajustadas” en enero y febrero, a fin de registrar una caída en la tendencia anual de crecimiento de la inflación y ayudar a mantener la inflación controlada antes de las negociaciones salariales con los sindicatos.

En el 2013, UTE tuvo un déficit de US$102m, cayendo de US$206m el año previo. Otras compañías públicas, tales como la estatal Administración Nacional de Telecomunicaciones (Antel); la compañía Obras Sanitarias del Estado (OSE; y el monopolio del combustible, la Administración Nacional de Combustibles, Alcoholes y Portland (Ancap), todas han tenido déficits el año pasado.

A pesar de una década de sostenido crecimiento el déficit fiscal de Uruguay llegó a 2,3% del PIB en el 2013. Aunque esto es un mejoramiento sobre el 2012, cuando llegó a 2,8%, y aún está por encima de la meta del gobierno de 2,1%. En términos reales, el déficit está en US$1,15mm, incluyendo US$350m de pérdidas de las compañías del estado.

• Riña Argentina-Uruguay

El nuevo ministro de economía y finanzas de Uruguay, Mario Bergara, pasó dificultades la semana pasada cuando expresó la frustración con la impredecible naturaleza de la estrategia económica en Argentina. Bergara dijo que mientras que “no debe ser Argentina quien guíe las decisiones macro[económicas] de Uruguay,” El hábito de Argentina de “anunciar una medida un día [y] desmontándola el día siguiente”, y el hecho que “no está claro quién está a cargo”, hacen que las cosas sean muy difíciles. El jefe de gabinete de Argentina, Jorge Capitanich, contestó bruscamente que los comentarios de Bergara eran “inadmisibles”. “Consideramos que sus comentarios son desafortunados y una interferencia injustificada en nuestros asuntos soberanos,” agregó Capitanich.

Venezuela’s local currency, the Bolívar Fuerte, appears to be at the point of total collapse. There are some calls for dollarisation as part of an eventual orthodox economic adjustment in the country, but conditions in Venezuela may not be appropriate.

In its latest (March) Venezuela country survey, the private regional market research firm Datincorp found that almost two thirds of Venezuelans (62%) would support dollarisation of the country, replacing the current national legal tender, the Bolívar Fuerte, with the US currency.

Notably, among those respondents most supportive of dollarisation were the C, D and E social classes (corresponding to middle-low to low earners), where support was at 45%-46%. These are those sectors most battered by the high double digit monthly inflation in the country. These low-income sectors are also, supposedly, the main support base of the left-wing Bolivarian Revolution, which is dogmatically opposed to dollarisation, arguing that it serves as a tool of control for the ‘imperial’ US.

In the higher-income A-B Venezuelan classes, by contrast, support for dollarisation was just 9%. These sectors already have US dollar accounts abroad, and travel frequently to havens like Miami. As such, they may feel the need for dollarisation. And with access to dollars in Venezuela, their lives are not particularly affected by inflation. By age group meanwhile, 29% of 18-30 year olds, 44% of 31-50 year olds and 28% of those aged over 51 backed dollarisation, while the gender split was 50%-49% for men and women.

The national assembly’s finance commission put inflation at 42.5% in the first two months of the year alone, the highest recorded price increases for the period since inflation data began to be compiled in 1945. On that basis, the commission projects inflation of 679.7% by year-end 2017. The main cause of inflation, soaring money supply, shows no sign of diminishing, as the central bank (BCV) prints local currency hand over foot to finance the cash-strapped Maduro government.

The BCV, which appeared to stop releasing money supply data earlier in the year, has now put up some fresh data on its website, according to which the total amount of local currency in circulation – M2 – was 13.3 trillion bolivars as of 24 March, up a startling 202.9% year on year. That is the fastest rise in money supply since records began in 1940, according to local media. Money supply in the US in the same period rose by 6.4%, as newswire Reuters pointed out.

Given this situation, it is little wonder that the poorest Venezuelans see dollarisation as a solution. The US currency, long seen as a safe haven at times of economic crises in Latin American countries, is desperately sought in Venezuela as a means of survival, and has long been used hand-in-hand with the local currency. According to websites that publish the nominally illegal but widely used black market exchange rate, it was trading at BF4,201.6/US$ as of 6 April, whereas the secondary (officially floating) Dipro (or Simadi) rate, was priced at BF710.6/US$. In other words, the parallel rate was trading at six times the official market rate.

The main advantage of dollarising a country in economic crisis it that it razes inflation and restores stability almost immediately, allowing the local economy to get back on its feet, and the government, consumers and investors to plan ahead. In a column for the daily El Nacional, however, the local economist Pedro Palma uses Ecuador as a reason to suggest that dollarisation is not a panacea. He identifies several reasons for this.

Venezuela, like Ecuador, is heavily reliant on oil exports (albeit Ecuador is less so than Venezuela). The country dollarised in 2000, in response to a systemic banking crisis. It restored stability to the economy, and since then has had broad popular support.

The fall in global oil prices since mid 2014 has seriously hurt the Ecuadorean economy, with a steep decline in dollar earnings, creating a severe liquidity problem. The response of the left-wing government led by President Rafael Correa was to attempt to maintain (and even increase) its high public spending levels and continue with planned capital investment schemes, so as to cushion the economy. To do this, however, it was obliged to contract expensive, short-term debt (following a default in 2008, Ecuador finally returned to international capital markets in June 2014, but at a price). Yet despite these efforts, private consumption, the mainstay of the economy, gradually fell away. And without liquidity, or much domestic demand, private sector activity ground to a halt. As the global oil price shock continued into 2015-2016, the country tipped into a technical recession, which it has since struggled to climb out of.

Another important downside of dollarisation for Ecuador is that it has made its non-oil exports very uncompetitive in global markets (including in its main traditional markets in neighbouring Peru and Colombia), thereby preventing the country from diversifying its economic base, and entrenching its reliance on oil.

And with US dollar appreciation in the past few years encouraging imports, domestic production has also suffered. To address this and more importantly to safeguard liquidity, the Correa government in early 2015 imposed temporary import safeguards (which ultimately further weighed down the domestic economy).

Finally, with interest rates effectively set externally (by the US Federal Reserve), the Quito government is unable to use monetary policy to stimulate (or cool) the domestic economy as needed. It therefore has to rely almost exclusively on fiscal policy as its main policy lever to guide the economy, which, as is now evident in Ecuador, can be very costly. The new government due to take over in May from the outgoing 10-year old Correa administration faces a very difficult scenario, with a fiscal ‘reckoning’ in the form of a public spending adjustment inevitably on the cards, even as the oil sector remains in the doldrums, making for a very complicated situation.

No dollars for anyone

According to the respected Venezuelan consultancy Ecoanalítca, less and less currency is being made available to local importers, evidencing the Caracas government’s efforts to hoard dollars for upcoming external debt payment obligations. (The state oil company, Pdvsa, owes US$2.2bn in bond payments in April alone.)

Ecoanalítca estimates that just US$6.9m in foreign currency was made available to private sector for imports in March, down by 38% from the US$11.2m processed in February. The central bank of Venezuela allocates US dollars using the two official exchange rates. The Dipro rate, set at B$10/US$, is used exclusively for essential imports of food and medicines, and the complementary Dicom market rate, trading at over B$70/US$ in early April, which is used for all other imports. Ecoanalítca calculates that just US$4.2m was allocated to the private sector at the Dicom rate in March, with US$2.7m allocated for essential goods at the Dipro rate (the State now effectively monopolises essential goods imports). Currency allocation is at its lowest level since 2009, Ecoanalítca’s Asdrúbal Oliveros says, noting the fact that in June 2014, before the oil price shock, allocations for the private sector were running at US$160m per day. Ecoanalítca calculates that Venezuela’s total imports fell by 29% in the first two months of 2017 (with public sector imports down 16% and private sector purchases down 10%).

ARGENTINA | Primary fiscal surplus. Argentina posted a primary fiscal surplus of Ar$24.07bn (US$255.4m) in January, the economy ministry reported on 22 February. The January surplus is in stark contract with the Ar$3.76bn primary deficit recorded in January 2020 and has been hailed by the economy ministry as evidence that Argentina’s longstanding fiscal deficit is being dealt with by the administration led by President Alberto Fernández. Once the repayment of debts is included, this becomes a Ar$3.03bn fiscal deficit, but this is the lowest deficit since 2016.

Last year Argentina posted a fiscal deficit of Ar$1.75trn, equivalent to 8.5% of GDP and the highest deficit since 1975. The Fernández government hopes to reduce this deficit to 5.7% this year, and the economy ministry says the January primary surplus is a sign that this objective is achievable. A ministerial statement attributed the surplus to “an improvement in tax revenues thanks to the progressive economic recovery, the restructuring of the foreign currency public debt, and the normalisation of the domestic debt market”.

More specifically, the statement notes that the tax take increased by a strong 79.7% annually, driven by an increase in national exports, which rose by 228% year-on-year in January to Ar$53.6bn. The increase in exports was largely explained by the fact that some exports (mostly agricultural commodities) which could not be shipped in December last year due to strikes at some maritime ports, went in January instead. However, the statement emphasises that “even if this were removed from the calculations, the tax take would still be higher”.

Yet the figures presented by the ministry also show that the government’s current expenditure continues to increase, rising by 21.2% in January compared with the same month in 2020. Noting that Argentina’s public spending as a percentage of GDP has been increasing almost constantly since 1980, economists have long argued that unless there is a reduction in government spending that accompanies an increase in revenues, the country will continue to remain in deficit.