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The development of the El Niño weather phenomenon is set to reduce coffee yields across the region, with important knock-on effects for small producers and local economies.

El Niño is underway and forecast to bring lower rainfall, higher temperatures, and more intense drought than normal during the dry season, according to Rubén Gallozzi, director of the coffee programme at Maximizando Oportunidades en Café y Cacao en las Américas (MOCCA), an agricultural NGO based in El Salvador that is supported by the US Department of Agriculture (USDA). This means that coffee production will fall because the plants suffer stress when there are high temperatures and low rainfall, he added. These effects will be felt even more intensely in the Dry Corridor, which extends from Guatemala to Panama along the Pacific Coast of the region, Gallozzi told Salvadorean daily La Prensa Gráfica in an article published 23 July.

He recommends that farmers take precautions in order to maximise humidity and reduce soil temperatures, for example by constructing shades or covering the ground in leaves, and also recommends that governments invest in awareness campaigns to communicate with small producers. At the same time, international prices are low and falling due to easing worries over drought in Brazil, which is a huge producer. Gallozzi also believes that there are no guarantees that prices in Central America will rise due to the effects of El Niño, which will mean less income for small producers that rely on coffee.

The impacts of changing weather patterns can already be seen across the region. For example, in El Salvador producers are set to lose around 15,000 quintales (100lb bags) of coffee worth approximately US$8m due to variations in rainfall this year, according Sergio Ticas, president of the national coffee association Acafesal, in a report published by Venezuelan-headquartered news outlet Telesur on 30 August. Coffee plants are sensitive to water levels, with heavy rains in January and February encouraging plants to flower. However, a subsequent period of dry conditions meant that the fruit couldn’t form properly, and the crop was lost. In response, Acafesal and the United Nations Food and Agriculture Organisation (FAO) presented an investment plan on 29 August which aims to improve productivity and earnings in order to reduce hunger and food insecurity among small producers.

In Honduras, an intense drought at the start of the year means that the next harvest is likely to be less productive than the last. Rising temperatures due to climate change mean that diseases such as coffee leaf rust and pests such as coffee berry borer beetles are now present in more areas than before, and climate change is also reducing the amount of land where coffee can be grown, engineers Juan Lozano and Cristian Lizardo of the Honduran coffee institute (IHCafe) told Bloomberg Línea, in an article published 28 August. For example, rising temperatures mean that areas at lower altitudes no longer offer optimum conditions for growing coffee, and areas that were previously too cold or humid are now perfect for coffee plants. This presents deforestation risks due to “agricultural migration”.

In Costa Rica, the country’s coffee producers are facing a 6.8% year-on-year decrease in exports, Instituto del Café de Costa Rica (ICAFE) told the AFP news agency at the end of August, and President Rodrigo Chaves has said he is committed to helping the sector. During a visit from Colombian counterpart Gustavo Petro at the end of August the pair committed to working together to ensure higher coffee prices on the global market. The aim is to move away from selling raw beans and rather boost sales of specialised coffee using denomination of origin certifications.

Concerns over coffee production are widespread with good reason. In Honduras, coffee exports were worth US$1.41bn in 2022, equivalent to over 20% of total goods exports. The crop provided income for more than 1m people in 2021, according to a World Bank (WB) country climate change and development report (CCDR) published in May. Coffee producing regions in the Dry Corridor have already contributed disproportionately to the number of migrants travelling north to the US, and small producers are still attempting to recover from a number of recent shocks, including the coronavirus (Covid-19) pandemic and hurricanes Eta and Iota in 2020.

El Niño impacts

The impacts of El Niño this year could be the final straw for many, who could be forced to abandon their homes and move to regional population centres or the US. At a macro level, declining harvests and low prices will constitute a drag on economic performance for national economies, adding to budgetary pressures at an already difficult time, and there is also a risk of increased social unrest as food insecurity and poverty increases.

REGION | Chile, Argentina, Bolivia, and Peru team up on strategic minerals. On 28 August, the governments of Chile, Argentina, Bolivia, and Peru signed a joint declaration on strategic minerals. The statement was signed following a meeting in Santiago between Chile’s economy and mining minister, Daniel Mas; Argentina’s mining secretary, Luis Lucero; Bolivia’s deputy minister of mining policy, regulation, and oversight, Walter Landívar; and Peru’s energy and mining minister, Guillermo Shinno. In the joint statement, the ministers pledged to “promote sustainable development, technical cooperation, and responsible investment in strategic minerals”. Mas described the declaration as “the first firm step toward a lasting alliance”, stating the aim was to “position the Southern Cone as the most reliable, sustainable, and competitive supplier of strategic minerals”, highlighting the importance of strategic minerals “in an era where the energy transition and advances in artificial intelligence will demand between 400% and 600% more critical minerals over the next decade”. The ministers committed to exploring opportunities for cooperation among the mining agencies of each country and to seeking technical and financial support from multilateral organisations.

CHILE | IMF approves credit line for Chile. On 26 August the International Monetary Fund (IMF) approved a two-year arrangement for Chile, under its flexible credit line (FCL), providing US$11.8bn. According to an IMF statement, this is Chile’s fourth FCL arrangement since 2020 and access to the credit line has been gradually lowered. The statement cites the IMF’s deputy managing director and acting chair, Kenji Okamura, as praising Chilean authorities for implementing “very strong policies to maintain macroeconomic balance and enhance the economy’s resilience”. He added that the FCL will “continue to provide a valuable buffer against tail risks and a signal of Chile’s policy and institutional strengths”.

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

ECUADOR | Acuerdos petroleros. “La mayor inversión extranjera en la historia del sector petrolero ecuatoriano.” Así fue como el ministro de recursos naturales no-renovables, Wilson Pástor, describió un acuerdo concretado con la compañía EU-Francesa Schlumberger y la Argentina Tecpetrol para invertir aproximadamente US$1,7mm para elevar la producción combinada en los dos principales yacimientos de Ecuador –Shushufindi y Libertador– de 59.000 barriles por día (bpd) a entre 70.000 y 90.000 bpd durante los próximos dos años.

Schlumberger invertirá US$1,29mm en Shushufindi; Tecpetrol, US$384,5m en Libertador. Los yacimientos petroleros, los cuales Pástor llamó las “joyas de la corona” de Ecuador, están localizadas en la jungla amazónica al norte del país.

Pástor estaba interesado en celebrar la escala de la inversión como prueba de que la administración Correa aún puede atraer inversionistas extranjeros, aparte de China, pese al ‘default selectivo’ del 2008, y que las compañías privadas de energía no están preparadas para migrar a los contratos de servicios.

Pástor, quien firmó los acuerdos junto con el presidente de la compañía petrolera estatal, Petroecuador, dijo que se necesitaba la inversión extranjera para revertir la dramática declinación en la producción. Y agregó que en 1992 la producción solamente en Shushufindi llegaba a 110.000 bpd y que ahora estaba en sólo 43.600 bpd.

PERU | Diversificación de exportaciones. Perú promoverá las exportaciones a América Latina frente a una anticipada reducción en las exportaciones a países desarrollados en el 2012, el ministro de comercio exterior y turismo, José Luis Silva dijo esta semana. Las exportaciones de Perú se incrementaron un 28% en el 2011 comparado con el año anterior, llegando a un récord de US$45,73mm, pero Silva dijo que el país era vulnerable a la declinación en la Unión Europea. Actualmente, 40% de las exportaciones de Perú van a países latinoamericanos. Silva dijo que espera que las exportaciones a la región trepen a 16% este año (el doble de su proyección para el crecimiento de la exportación en general), pues Perú busca exportar más agresivamente a América Latina. La exportación de materias primas aún constituye el 78% de las exportaciones totales de Perú (y la minería sola el 60%).

BRAZIL | Mantega eliminates IOF tax in support of Real, inflation. Finance Minister Guido Mantega said the government would zero rate the 6.0% financial operations tax (IOF) levied on foreign portfolio inflows into fixed income investments, so as to precipitate the expected move by the US Federal Reserve to end its policy of quantitative easing.

Mantega’s announcement might also be aimed at propping up the Real against the US dollar and thereby reducing inflation pressures. With the Real now trading at a four-year low of just R$2.14/US$ and inflation of 6.5% hitting the top of the official target range, Mantega seems to want some of that ‘hot money’ back.

The background

El Salvador’s current constitution was drafted by a constituent assembly and first enacted in 1983; it was subsequently amended on numerous occasions. Its main features include setting a five-year presidential term; prohibiting consecutive re-election; recognising the right of the people to insurrection if constitutional order is violated; affirming the professionalism of the armed forces; and protecting private enterprise, property, and labour rights, including the right to strike.  

Since it came into force, political disputes over constitutional changes were closely affected by the ebb and flow of the country’s civil war, which continued for 12 years from late 1979 to early 1992. Two parties, Alianza Republicana Nacionalista (ARENA, on the right) and Frente Farabundo Martí para la Liberación Nacional (FMLN, on the left) emerged from the civil war to dominate the political scene for nearly three decades. They were initially popular but sharply polarised, feeding discontent over what many considered to be a deeply corrupt and dysfunctional political establishment.

The political duopoly in El Salvador was challenged and ultimately destroyed by the emergence of Nayib Bukele as a self-proclaimed “outsider” and populist political figure. Bukele, who worked for his father’s advertising company, served successful terms as mayor of Nuevo Cuscatlán and San Salvador. Initially a member of the FMLN, Bukele left the party to set up his own new and more conservative grouping, called Nuevas Ideas (NI). Bukele won the 2019 presidential election with just over 52% of the vote, against the ARENA candidate (31%) and the FMLN contender (14%). Initially, however, his own party remained in a minority within the legislature (Asamblea Legislativa – AL). That situation changed dramatically in the February 2021 AL elections when NI won a landslide victory capturing 56 out of the 84 seats in the chamber. In the 2024 legislative elections NI’s majority got even larger with the party now controlling 54 out of 60 seats (the AL had been downsized in the interregnum). This “supermajority” gave the government ample power to modify the constitution. In that same year, Bukele was re-elected to another five-year presidential term (despite the constitutional ban on consecutive elections).  

What happened?

Since taking office, and in particular since gaining a majority in the legislature in 2021, Bukele has frequently reformed the constitution or re-interpreted it to his short-term political advantage. The president’s authoritarianism was already on display as early as February 2020 when, accompanied by 40 soldiers, he interrupted a session of the legislature to demand (successfully) that it approve US$109m of funding for his anti-crime initiative (known as the Plan Territorial). Also, after the 2021 elections, in May of that year, Bukele’s new AL majority was used to replace the attorney general and all five judges on the constitutional chamber of the supreme court, a decision contrary to the separation of powers. At the time, the US-based NGO Human Rights Watch (HRW) described the appointments as an “assault on democracy” which broke the rule of law and sought to concentrate “all power” in Bukele’s hands.  

After a surge in street gang violence and in the national murder rate in March 2022, the president declared a wide-ranging state of emergency under which civil rights were suspended and over 80,000 suspects have been arrested and held without trial. The homicide rate fell sharply, with opinion polls showing Bukele was highly popular and was achieving one of Latin America’s highest presidential approval ratings. Human rights organisations however highlighted reports of maltreatment of detainees and the fact that the country now has one of the world’s highest incarceration rates (roughly 2% of the adult population).

An example of the “reinterpretation” of the constitution was the way Bukele and his government sought to get around the ban on consecutive election. Magistrates on the constitutional chamber of the supreme court (which as we have seen, had been appointed by Bukele) ruled that the ban would not apply if the president stepped down in the final six months of his first term, creating an artificial “break” between his two terms in office. Accordingly, the president took leave of absence on 1 December 2023, appointing his private secretary to replace him on a temporary basis. Despite formally being on leave during this period, Bukele continued making decisions and to run his election campaign. He consequently became the first Salvadoran politician to stand for consecutive re-election since the military dictatorship of Maximiliano Hernández Martínez in 1935.

Looking forward

One effect of the increased power of the presidency, coupled with its legislative super-majority, is that it has allowed Bukele to rush though major initiatives very rapidly, and often with minimum discussion or debate. One example was the decision to make bitcoin, a crypto currency, legal tender in El Salvador, a decision with far-reaching implications which was approved by the AL in around 72 hours in 2021. Accordingly, El Salvador became the world’s first country to use bitcoin as legal tender. However, take-up was slow and various financial institutions expressed concern over the volatility of bitcoin and its possible use for purposes of money laundering and corruption. In late 2024 the International Monetary Fund (IMF), which had been withholding a financial assistance package, said it was prepared to lend the country US$1.4bn as part of a financial stabilisation programme, in exchange for promises that the government would make trading in bitcoin voluntary rather than obligatory, together with other measures to reduce financial risks associated to the crypto currency.

More, and faster, constitutional changes are likely on the way. In a surprise move in late April 2024, the NI special majority in the legislature voted through a reform of Article 248 of the constitution, which lays down the procedure that must be followed to enact changes to the country’s charter. The old version of the text, described as “immutable” (“pétrea”), says that to be valid, a constitutional reform must be approved by one legislature and later ratified by another one. The new text ignores this requirement and establishes instead that the constitution can be modified by a three-fifths special majority (45 or more out of 60 votes), removing the requirement for ratification in a subsequent legislature.

Acción Ciudadana, a pro-democracy lobby group, said this change removed essential checks and balances in the constitution designed to protect the rights of minorities. Critics noted that it could be used to further extend Bukele’s presidential term. Indeed, Walter Araujo, a former member of the electoral tribunal and one of the president’s supporters, said the change “should allow the commencement of a new presidential cycle under which he could be re-elected one, two, three times, or however many times the people want”.

In February 2025 the legislative assembly decided by 57 out of 60 available votes to amend article 210 of the constitution, which allows for state funding of political parties. The government argued that it was better to spend these scarce funds on higher priority areas such as health and education, adding that “subsidising political parties is an inefficient use of public money and causes rejection of the political system and its institutions, weakening democracy”. The change may reflect the confidence the ruling party has that, unlike its rivals, it will be able to fundraise significant amounts from private donors. Claudia Ortiz of opposition party VAMOS said the real aim was the Bukele regime’s desire to “concentrate power and change the constitution on a whim”.

Constitutional Stability in Latin America

Source: Negretto, Gabriel L.. “The durability of constitutions in changing environments: Explaining constitutional replacements in Latin America.” (2008).

NICARAGUA-COSTA RICA | Costa Rica files a new claim. On 16 January, the Costa Rican government led by President Luis Guillermo Solís filed a new lawsuit against its Nicaraguan counterpart before the International Court of Justice (ICJ) at The Hague.

An ICJ press release notes that the Solís government is calling on the ICJ to determine the precise definition of the boundary separating the two countries in “the area of Los Portillos/Harbor Head Lagoon” and to rule on “the establishment of a new military camp by Nicaragua” on the beach of Isla Portillos – an area where both countries have a historic border dispute. According to a Costa Rican foreign ministry press release dated 16 January, the Solís government hopes to incorporate the latest complaint into another filed before the ICJ in 2014 regarding the delimitation of the two countries’ maritime borders in the Caribbean Sea and the Pacific Ocean, which followed Nicaragua’s decision to award off-shore oil exploration concessions in these disputed areas.

In a 2009 ruling, the ICJ found that the San Juan river dividing the two countries belongs in its entirety to Nicaragua. However, the following year, Costa Rica filed another complaint before the ICJ against Nicaragua, a month after it started dredging the San Juan to improve its navigability. This, after it emerged that the Ortega government had also carried out works in the northern part of Costa Rica’s Isla Portillos, which is located in the area. In December 2015, the ICJ issued its ruling in response to Costa Rica’s 2010 complaint which found that Nicaragua had “invaded and occupied Costa Rican territory”.

As well as the new suit, on 16 January the Solís government also requested the ICJ to determine the amount of compensation that Nicaragua should pay Costa Rica for the material damage caused in Isla Portillos – one of the conditions of the December 2015 ruling, which gave Nicaragua a year to pay an agreed figure. In December 2016, the Costa Rican government, which in June 2016 requested US$6.7m in compensation, had said that it would give Nicaragua more time to come up with a figure.

GUYANA-VENEZUELA | Border dispute could go to ICJ. A long-standing territorial dispute between Venezuela and Guyana has gained added importance since the discoveries in 2016 of large oil deposits in sections of Guyana’s territorial waters that are claimed by Caracas. In mid-December, UN Secretary-General Ban Ki-moon said that the dispute will go to the International Court of Justice (ICJ) at the end of 2017 if the ‘Good Offices’ process fails to produce any progress.

Guyana’s President David Granger welcomed this announcement by saying: “We have already waited 51 years too long. It is our territory and we will go to court to prove that it is our territory.”

The reference to “51 years” relates to the Geneva Agreement of 1966, officially entitled the “Agreement to Resolve the Controversy over the Frontier between Venezuela and British Guiana” and signed three months before Guyana’s independence from the UK. The “controversy” had arisen due to Venezuela’s contention that the “Arbitral Award of 1899”, ostensibly settling the border between Venezuela and British Guiana, was “null and void”. The Geneva Agreement was intended to produce a resolution within four years, and that having failed a “Good Offices” process was started in 1989.

BELIZE | Border referendum debate. On 13 January, Belize’s House of Representatives debated the government’s proposal to remove the requirement for a 60% minimum turnout in the Referendum Act. This relates to the proposed referendum on whether or not to refer the border dispute with Guatemala to the International Court of Justice (ICJ). Guatemala is to hold a similar referendum, and it has been calling for the removal of this provision in Belize’s enabling legislation.

The House of Representatives carried the proposal by 16-9. Opposing the amendment, opposition leader Johnny Briceño from the People’s United Party (PUP) said: “We all know why the UDP [United Democratic Party] government is proposing this amendment. They actually are under a lot of pressure from Guatemala so that both countries can hold their referendum over Guatemala’s unfounded claim over Belize, so that they can take it to the International Court of Justice.”

One opposition MP, Rodwell Ferguson, who represents one of the main disputed areas, said: “Going to the ICJ, Guatemala will come back with something.”

Prime Minister Dean Barrow told parliament that Belize will not hold a referendum until Guatemala holds theirs. He also said: “I don’t see that referendum happening any time soon.” And he added: “You don’t go to the ICJ [unless] the people of Belize agree. You can’t go [unless] the majority of Belizeans so determine in a referendum.”

BARBADOS-CHINA | Military aid deal signed. Just before Christmas, Barbados and China signed an agreement on equipment to be supplied by the People’s Liberation Army (PLA) to the Barbados Defence Force. Foreign Affairs Minister Maxine McClean said: “Although the Chinese government has donated military equipment to Barbados on previous occasions, military equipment which has been a tremendous benefit to the Barbados Defence Force in the execution of its duties, this is the largest such donation to date.” The grant is for US$3m.

This year is the 40^th anniversary of the establishment of diplomatic relations between the two countries and a number of celebrations are planned for later in the year.

The São Paulo Bovespa stock index is one of the best performing in the world in 2019. Shortly after the inauguration of Jair Bolsonaro it entered record territory and has risen around seven percent so far in January, while the real has strengthened around two percent since the start of the year. Investors are buying into the traditional optimism that characterises the start of a presidential term, as well as the promises that Bolsonaro has made to liberalise Brazil’s notoriously closed economy. But with congress yet to start work, can this optimism survive contact with Brazil’s fractious politics?

Brazil investors are betting Economy Minister Paulo Guedes will deliver on a slimmed-down state and tackle the fiscal woes of Latin America’s largest economy. But the new administration’s first days in office were rife with backtracking and miscommunication, reflecting a lack of experience with the colossal state apparatus as well as disagreement within the government.

In one of his first acts as cabinet chief, Onyx Lorenzoni fired over 300 staff, among them the civil servants charged with overseeing ministerial ethics and the ones who briefed the president. Paralysis and error followed. Bolsonaro gave a speech about tax hikes which had to be rapidly refuted by his own economic team. The president apologised soon after, repeating his refrain that he knows “nothing” about economics. Nevertheless, that doesn’t stop him from taking a leaf out of President Donald Trump’s book, by tweeting about every new stock market high.

Pension Reform

The key issue for the new government is pension reform. Without tackling the ballooning deficit of the social security system, Brazil’s public debt will rapidly become unsustainable. So far, the signs here are not so encouraging for markets. Bolsonaro raised the idea of a new minimum age for retirement which most still considered too young, angering the Guedes team.

What’s not clear at this stage is whether the government will try to pick up from where the administration of President Michel Temer left off, and work to revitalise that proposal. Doing so would save a significant amount of time, as the basic outline has already passed through the committee stages in congress. Bolsonaro, however, has been publicly dismissive of the bill.

The other key question for the government is whether it will include the military in the pension reform. Proportionally, the pension deficit for members of the armed forces is much bigger than that of the population at large. The generous perks enjoyed by the military and their family – until 2000 the daughters of military personnel were entitled to a full lifetime pension following the death of their fathers – appears unsustainable given the size of the deficit. To claim a full pension requires 30 years of active service, meaning that many retire before reaching the age of 50 (see our article below, ‘Pension reform ideas start to circulate’).

However, many senior members of the military have spoken out against a reform to their benefits, arguing the sacrifices and risks they face throughout their career justifies a generous return. With six of Bolsonaro’s 22-member cabinet ex-armed forces personnel, they also have the president’s ear. But unless Bolsonaro can persuade the military to make sacrifices, he may struggle to persuade other Brazilians, including the ones in congress responsible for passing any reform.

Political consultancy Eurasia says the government’s teething troubles probably aren’t enough to affect the odds that pension reform is approved. But, it says, those odds weren’t great to start with: the measure is widely unpopular. The legislation will test the radical new approach that Bolsonaro is taking with congress. Rather than negotiate with party leaders directly, he prefers to talk to congressional caucuses, but there is obviously no guarantee that the evangelical or farming caucus all think as one when it comes to pension reform.

• Visas

The Minister for Tourism, Marcelo Álvaro Antônio, has proposed allowing citizens from Canada, US, Australia, and Japan to visit Brazil without the need for a visa. Traditionally, Itamaraty has followed a reciprocal policy for the elimination of visas. Whether the Foreign Office will accept this proposal from the Ministry of Tourism is an open question. The answer is probably ‘yes’ because of the policy directives of the new Foreign Minister.

President Lenín Moreno’s economic reform agenda may have won the support of international financial institutions and foreign creditors [WR-20-31], but these plans have been less well-received by much of the Ecuadorean public. Moreno announced on 30 November that a new package of labour reforms is “almost ready” to be presented to the legislature – but with workers increasingly speaking out against some of the government’s recent policies, these further changes are likely to face similar opposition.

Labour Minister Andrés Isch claimed that the new proposals will be centred on protecting workers’ rights, strengthening the social security system, and creating new jobs. President Moreno struck a more cautious tone, offering few concrete details, but warning that “bombastic” policy plans will not help the country’s economy, and hitting back at critics of his ‘humanitarian support law’ – an emergency law passed back in June, which workers say violates labour rights by allowing employers to renegotiate contracts. Moreno claimed that it had saved jobs that would otherwise have been lost due to the coronavirus (Covid-19) pandemic.

That same day, protesters in Quito filed a legal complaint against the labour ministry, seeking the repeal of the offending articles of the humanitarian support law. Many of those present were healthcare workers, angry that salaries had been reduced and jobs lost in the midst of the pandemic. Protesters called for Moreno to reverse these labour measures by 22 December, or else face a further wave of demonstrations, right across the country.

This was not the only legal action taken by workers this week against Moreno’s economic policies; on 1 December, two workers’ unions – the Central Unitaria de Trabajadores (CUT) and the Federación Nacional de Trabajadores Públicos y Privados (FTPP) – both announced plans to file unconstitutionality actions against the labour ministry’s decision to freeze the national minimum wage (SBU) for 2021, the first time since its implementation that the SBU has not been increased year-on-year. FTPP lawyer Cristóbal Buendía condemned this as a “constitutional violation of workers’ rights”.

In announcing his labour reform plans the previous day, Moreno had evaded a question regarding the 2021 minimum wage, after talks between representatives of workers and employers on this matter had broken down. Hours later, the labour ministry broke the news of the salary freeze, citing the deflation of the national economy (predicted to end the year at -1.01%), and concerns that increasing the rate would drive further unemployment. The labour ministry pledged to fill this gap with a one-off payment of US$60 to all 380,000 workers affected, but unions highlighted that the knock-on effects of this wage freeze could be felt for years to come.

Local governments

The association of Ecuadorean municipalities (AME) – representing local governments across the country – also took to the streets this week, stating their opposition to planned budget cuts in 2021. AME president Raúl Delgado noted that central government debt to municipalities stands at some US$1.2bn, racked up since 2015, and he claimed that plans to reduce the local government budget for 2021 from US$3.1bn to US$2.4bn would force authorities to make substantial cuts to public spending at a time when investment in healthcare and social protection is urgently needed.

As the international lithium boom continues, more companies, including Russian and Chinese players, are seeking to invest in northern Argentina.

Two initiatives announced in November are particularly interesting. Uranium One, a subsidiary of Russian state-owned nuclear company Rosatom, said it was paying US$30m to acquire a 15% stake in Canadian-owned Alpha Lithium, a company that holds the rights to develop the 27,500-hectare Tolillar lithium deposits in Argentina’s northern province of Salta. Under the terms of the agreement, after the completion of a feasibility study, and for a further US$185m, Uranium One will have the option to increase its stake in the project to 50% and to secure all future production. In a statement Uranium One said lithium was an essential material for “the green economy of the future”.  

At the end of November YPF, Argentina’s state-owned energy company, said it had discussed plans for forging a “strategic alliance” with Chinese battery manufacturer CATL. CATL is the world’s largest electric vehicle (EV) battery manufacturer but does not itself produce any of the lithium contained in its batteries. It was recently frustrated in an attempt to acquire Millennial Lithium, a company with significant Argentine lithium mining rights (the company was snapped up instead by Canada-based Lithium Americas for US$400m).

YPF, essentially an oil and gas producer with a focus on the Vaca Muerta shale deposits, has nevertheless created a dedicated lithium mining unit and is surveying deposits in the provinces of Jujuy, Salta, and Catamarca. In October Zijin Mining, another Chinese company, paid US$770m to acquire a Canadian company with lithium mining rights in Tres Quebradas in Catamarca province.

*** TURKS & CAICOS PARTY REJECTS DRAFT CONSTITUTION.  The People’s Democratic Movement (PDM), which ruled the British dependency from its first general election in 1976 until defeated in the 1982 election by the Progressive National Party (PNP), has rejected a new draft constitution for the territory.  The PNP won the most recent elections, in February 2007, with a landslide, taking 13 of 15 seats.  However, following alleged corruption by the government of former Prime Minister Michael Misick, the UK assumed direct rule in August 2009.

Now, in an article published on 18 May, PDM leader Douglas Parnell has rejected the draft constitution drawn up by the UK’s Foreign and Commonwealth Office (FCO).

Parnell’s main objection is the granting of additional powers to the governor, including the power to reject decisions made by the cabinet, the power to make decisions against the cabinet’s will, and the power to make appointments to public bodies.  Parnell argues that the draft constitution makes the governor “a complete and total constitutional dictator”.

He also argues that the FCO is acting contrary to the UN Charter, in particular Chapter XI of Article 73 which, inter alia, says that countries that rule over territories that have not yet achieved full self-government, must “recognize the principle that the interests of the inhabitants of these territories are paramount”.  The colonial power is obliged “to develop self-government, to take due account of the political aspirations of the peoples, and to assist them in the progressive development of their free political institutions, according to the particular circumstances of each territory and its people and their varying stages of advancement”.

Strong opposition to the proposed changes was also expressed during public meetings with FCO officials in mid-May.  In addition to the extra powers for the governor, there are local objections to changing the way of obtaining ‘Belongership’ and altering the method of electing members to the House of Assembly.

The Privy Council is scheduled to approve the new constitution in July, and the UK government has said that the new constitution has to be in place before there is a return to local rule.

*** ST KITTS & NEVIS REVEALS DEPTH OF RECESSION.  Dr Timothy Harris, temporary governor for St Kitts & Nevis on the Caribbean Development Bank (CDB) board of governors said on 27 May that the St Kitts-Nevis economy contracted by 4.2% in 2010 after a 4.4% contraction in 2009.  The construction sector was down 28% and manufacturing declined 15%.  However, 2010 did see a recovery in the agriculture sector, which rebounded by 6.3%.  On 15 May, Prime Minister Denzil Douglas told a ruling Labour Party conference that there were now signs of recovery.  He said the economy is expected to grow by 1.5% in 2011.

• Trinidad premier supports minister

Trinidad & Tobago’s Prime Minister Kamla Persad-Bissessar issued a statement at the end of May that “until there is evidence to the contrary” she will stand by transport and works minister Jack Warner.  Warner is vice-president of FIFA, football’s governing body, and he has been accused of accepting bribes.  The prime minister said: “A son of our soil who served this nation faithfully at that very football organization and who was instrumental in leading Trinidad & Tobago to its very first World Cup qualification just a few years ago must be allowed to present his case against the allegations made against him.”

Bolivia/Brazil | Bilateral tensions. On 29 April Bolivia’s deputy foreign minister, Carlos Alurralde, announced a meeting for 2 May with Brazil’s ambassador to La Paz, Marcelo Biato, to discuss alleged acts of aggression committed by Bolivian soldiers against Brazilian peasants living in the border area of Acre-Pando. According to Brazilian reports, the Bolivian military has occupied houses, killed livestock and mistreated Brazilians. The Bolivian media is reporting that the build-up of tension has led the Brazilian government of President Dilma Rousseff to send additional troops to the area until the situation returns to normality. Under a bilateral agreement, the Brazilian peasants are due to be relocated to different areas by the end of 2012 but according to the Brazilian press, the Bolivian government has given them until 25 May to leave their lands.

 *** POLITICAL TURMOIL IN CURAÇAO. The former Dutch colony, Curaçao, (pop. 145,619), is experiencing considerable turmoil ahead of parliamentary elections scheduled for 19 October. The problems escalated when Prime Minister Gerrit Schotte resigned and dissolved the 21-member unicameral legislature on 3 August after the ruling coalition, comprising the Movementu Futuro Kòrsou (MFK), Pueblo Soberano (PS) and Partido Movishon Antia Nobo (MAN) lost its majority. Subsequently, Schotte faced allegations from the majority in parliament that he was continuing to start new projects and misuse public funds. The majority called for Governor Frits Goedgedrag to appoint an interim government.

On 29 September, acting governor Adeel van der Pluijm-Vrede duly swore in a new administration to replace Schotte’s under the interim leadership of Stanley Betrian. Schotte responded by calling the move a “coup”, adding that “there is some hidden agenda to stop the election or manipulate the election”. Schotte is planning to run in the election as leader of the MFK.

The background to the turmoil is Curaçao’s budget deficit, which is set to triple from NAf.130m (US$73m) in 2012 to NAf.420m (US$235m) in 2014. The Dutch Kingdom Council of Ministers (Landsadvocaat - the executive council of the Kingdom of the Netherlands, which comprises representatives from Aruba, Curaçao, the Netherlands, and St Maarten) and the financial supervision agency (CFT) warned that Curaçao is heading for bankruptcy by 2013 if no measures are taken”. Curaçao became an autonomous county within the Kingdom of the Netherlands in October 2010 following a referendum [RC-10-10].

*** GRENADA’S NDC CONTINUES TO STRUGGLE. Grenada’s ruling National Democratic Congress (NDC) confirmed the dire state of the party by expelling its general secretary and a number of other senior members on 30 September during its postponed annual party convention.

Peter David, the outgoing general secretary, has been at odds with the NDC leadership for some time, resigning as tourism minister in April and announcing at the beginning of September that he would not be seeking re-election to the party’s executive. Others expelled included four other former cabinet ministers.

Prime Minister Tillman Thomas has faced two no-confidence motions in parliament in three months, with the latest one tabled by former NDC cabinet minister, Karl Hood. This led Thomas to ask the governor-general to prorogue parliament in order to avoid the vote. Three days later, on 20 September, Thomas then lost another cabinet minister with the resignation of Environment Minister Glynis Roberts.

The NDC came to power in 2008, with a landslide 11-4 seats victory over the New National Party (NNP), which had ruled Grenada for 13 years. An election must be held next year, but once a new session of parliament is called, a no-confidence motion may again be tabled, leading to an early election.

• IMF positive about Suriname

On 7 September, the International Monetary Fund (IMF) completed an Article IV consultation with Suriname, concluding that economic activity remains strong and inflation pressures have abated. GDP growth in 2011 is said to have been 4.5%, up from 4% in 2010. The main driver has been “robust activity” in the oil and gold sectors along with public investment. Inflation has been driven by a 20% devaluation in January 2011 and increases in domestic fuel taxes. This led to a spike in annual inflation at 22.6% in April 2011. Inflation is now down to 4.5% after falling to 3.6% in May 2012. The fiscal balance has also improved, going from a deficit of 3% of GDP in 2010 to an estimated surplus of just under 1%.

Two leading critics of Venezuela’s ruling Chavista movement were acquitted on 2 October, in the latest sign that dissent is being repressed less fiercely under President Delcy Rodríguez. Rocío San Miguel, the Spanish-Venezuelan leader of the civil society organisation Control Ciudadana, announced that she had been found not guilty of charges including terrorism and treason. On the same day, Rory Branker, editor of Venezuelan news outlet La Patilla, was also acquitted of terrorism charges.

San Miguel was one of the more high-profile political prisoners detained during the escalating repression that characterised the final two years in office of former president Nicolás Maduro (2013-2026). Arrested in February 2024, five months before the presidential election, she was charged with crimes including terrorism, treason, conspiracy, and criminal association. She remained in pre-trial detention until January this year, when she was conditionally released following Maduro’s capture and his replacement with Rodríguez. After five months in Spain, San Miguel returned to Venezuela in May to cooperate with the ongoing legal proceedings against her [WR-26-21].

San Miguel wrote on social media that a terrorism court had “issued an acquittal ruling, declaring me free of criminal liability regarding the charges brought against me”. She vowed to “continue working with the same transparency and conviction for respect for human rights, the strengthening of the rule of law, and for a democratic Venezuela”.

That same day, a separate terrorism court found Branker, the La Patilla editor, not guilty. The decision was announced by Venezuela’s press workers’ union (SNTP), which said that he had been arrested in February 2025 after he posted on social media about US rewards for the capture of Maduro, Interior Minister Diosdado Cabello, and Vladimir Padrino López, who was defence minister from 2014-2026 and is now agriculture minister. Branker had been conditionally released from prison in February but was barred from leaving the country until the outcome of his trial. La Patilla remains blocked in Venezuela despite the Rodríguez administration’s promises to lift censorship during the latest round of dialogue with the opposition in September [WR-26-39].

Whilst some of the more repressive state apparatus is undoubtedly being rolled back under Rodríguez, with a planned reform of the hate speech law set to continue this trend, there are doubts as to how far she is willing to go. Currently, dissidents living abroad have been given no guarantees under the amnesty law that has seen hundreds of political prisoners released since Maduro’s downfall. This means that exiles face the risk of continued legal jeopardy upon their return, as was the case with San Miguel prior to her acquittal. A similar situation could await opposition leader María Corina Machado, although she appears increasingly determined to return from exile despite resistance from the Rodríguez administration, and also seemingly from Washington.

• Ex-magistrate describes pressure to disqualify Machado

Bárbara César Siero, a magistrate on Venezuela’s supreme court (TSJ) from 2014-2024, released a video on social media on 6 October stating that she was coerced into signing political disqualification orders for María Corina Machado and other opposition figures ahead of the 2024 presidential election. She said that two of her brothers and her sister-in-law were detained until she approved the disqualifications and that she “feared for their lives, the lives of other relatives, and my own”. As well as Machado, César said that she was also pressured to disqualify Henrique Capriles Radonski, who is now the opposition’s leading figure in the national assembly, and former Zulia state governor Pablo Pérez Álvarez (2008-2012).

The opposition will at least take some comfort from the United Nations Human Rights Council’s extension on 6 October of its Independent International Fact-Finding Mission on Venezuela. Although the mission is in itself toothless, its findings encourage ongoing diplomatic pressure on Rodríguez. The last update from mission Chair Sofía Macher, on 18 September, stated that “despite the substantial release of detainees during the past eight months, hundreds of individuals remain arbitrarily deprived of their liberty and continue to endure harsh conditions in facilities where torture and ill-treatment remain endemic.”

The main economic goal of the new government of President Otto Pérez Molina, which took office on 14 January, is to make the economy more attractive to foreign investors. If this happens, the economy will create the jobs that may take the rate of violence down. The economy needs to create about 200,000 jobs each year for young people entering the labour force.

To show that he was serious, Pérez Molina cited foreign investors’ uncertainty about how the courts would rule in disputes with local companies or organisations. He said that he wants the judicial system to become more predictable.

The UN’s Economic Commission for Latin America (Eclac/Cepal) reported that between 2005 and 2010 the country received US$3.68bn in foreign direct investment (FDI). The central bank reckons that the FDI figure for 2011 was US$789m.

The country’s official unemployment rate is 3.5% and 51% of the population still lives below the poverty line.

 The government is also determined to reduce tax evasion which officials reckon comes to Q$15bn (US$1.9bn) a year. In 2011 the tax take came to 11.2% of GDP, up 0.7 of a percentage point on 2010 but still below the peak of 12.1% hit in 2007.

The fiscal deficit in 2011 was 2.9% of GDP. The Superintendencia de Administración Tributaria (SAT), said that tax revenues came to Q$40.26bn (US$5.15bn). This was a bit above the government target of Q$38.79bn. In 2010 tax revenues came to Q$34.77bn.

Tourism: In 2011 the tourism industry receipts contracted by 2.81 year-on-year to US$1.35bn, according to the Instituto Guatemalteco de Turismo (Inguat). The number of tourist arrivals dropped by 53,114 (or 2.8%) to 1.769m. Inguat said that the industry was badly affected by the killing of an Argentine singer, Facundo Cabral, in July 2011. The government hopes for a pick-up in 2012 largely because of the end of the Mayan “Long Count” which popularly is supposed to herald the end of the world.

Inflation: In 2011 the inflation rate was 6.22%. The monthly rate in December was 0.22%, unchanged from November, but the final months of 2011 kept the rate just outside the central bank’s target for 2011 for a rate of between 4% and 6%.

On 18 July, Manuel Eduardo Arita took over as Guatemala’s minister of energy & mining (MEM), replacing Alberto Pimentel, who resigned just weeks after the country was forced to declare an energy emergency due to a lack of rain.

Pimentel and economy minister Janio Rosales Alegría both resigned for “personal reasons,” said presidential spokesman Kevin López Oliva on 12 July, without providing further details. Pimentel had been in post since January 2020, but left the government after the MEM declared an emergency on 26 June. As a result of the state of emergency, electricity exports will be limited and domestic supply will be prioritised.

This follows reports by the national institute of seismology, volcanology, meteorology, and hydrology (Insivumeh) that shortages of rain could continue in departments including Huehuetenango, Quiché, Alta Verapaz, and Izabal. Insivumeh forecasts cited by local media expect rainfall to be 10%-20% lower than normal due to the El Niño weather phenomenon. This is directly affecting electricity generation at hydroelectric plants due to lower water levels in reservoirs. Similar issues are also affecting Honduras, which has seen rolling blackouts blamed on insufficient energy generation at hydroelectric dams.

In Guatemala, demand for electricity has increased due to population growth, industrial development, and the increased availability of electric devices. The combination of reduced generating capacity and more demand has led to higher prices, with knock on effects on households and businesses that rely on electricity to operate. New generating capacity must be added to the system in order to deal with the situation, which has exposed the vulnerability of Guatemala’s energy matrix, said the Corporación de Electricidad Centroamericana (CEC), an electricity trader headquartered in Guatemala City, in an article published 20 June. The CEC recommends diversifying the country’s sources of electricity in order to better face future challenges.

The MEM recognized a number of challenges in its national energy efficiency policy 2023-2050, published by the ministry on 23 June. It predicts that if climate change increases average temperatures by 0.5-2 degrees Celsius by 2050, Guatemala will lose its rainforests and gain more dry forests. This will place more pressure on water resources, it says, including for the generation of electricity. Other issues acknowledged by the plan include inefficient use of resources due to significant losses from the electricity distribution system, as well as poor energy efficiency. 

As outlined above, the drought has exposed weaknesses in Guatemala’s electricity system, which has had something of a rocky history. In the 1990s the country experienced a serious energy crisis which disrupted the economy due to scheduled power cuts. The publishing of the electricity law (Ley General de Electricidad) in March 1997 allowed private companies to enter the energy market, and capacity increased from 1,209MW in 2003 to 3,284MW in 2023, according to Electronova, a Guatemala-based energy consultancy. Investment in transmission lines lagged behind, but the 2009 Plan de Expansion del Transporte, which set out plans to strengthen the transmission network, brought more lines and substations. Then came the interconnection with Mexico in 2010 and another connection with Honduras and El Salvador came online in 2014 as part of the regional electricity market (MER) set out in a 1996 framework treaty.

The problem is that the Central American electrical interconnection system (Siepac), a US$500m transmission line that runs from Guatemala to Panama, frequently suffers faults. Transmission systems in the region aren’t strong enough to deal with faults in the line, which as a result cause overloads and the collapse of local systems. This means there is a kind of domino effect in which a fault knocks out one part of the line, flooding other areas with huge amounts of electricity that the local systems cannot handle all at once. These blackouts are hugely disruptive and have led to criticisms of the MER and its continued viability. In July 2021 Guatemalan officials announced that they would leave the MER due to these continued issues, but there is a notification period of 10 years. 

The issues have continued since Guatemalan’s announcement. For example, on 8 June this year, a fault in Nicaragua knocked out power in Costa Rica and Panama, and in February a fault at a substation in northern Guatemala took out supplies to 30% of the country for over an hour. This goes to show that while the existence of the MER arguably makes it harder for Guatemala to secure its own electricity network, the country has plenty of work to do at home too.

To that end, the Comisión Nacional de Energía Eléctrica (CNEE), the state power regulator, announced a public tender process for 235MW of new generating capacity in September 2022. By 22 July, the CNEE announced that around 50 companies had submitted proposals for a total 1,500MW in capacity which were under evaluation. According to CNEE president Luis Ortiz, hydroelectric and solar projects feature heavily in the offerings. This could be cause for concern given the recent drought, but Ortiz told national daily Prensa Libre in an article published on 22 July that the priority is to ensure that demand can be met rather than focusing on diversifying the energy matrix. 

While strong interest in boosting generating capacity is positive, there also needs to be significant investment in transmission. According to Electronova, there needs to be regulatory reform in order to raise standards in electricity distribution, as the current rules (Normas Técnicas del Servicio de Distribución – NTSD) were designed to encourage rapid electrification around the country rather than guaranteeing quality service. Now that more than 90% of the country has an electricity connection, according to MEM figures, priorities can shift. Updating these regulations will be key to bringing Guatemala’s electricity system up to date, according to Electronova, as will installing more solar or wind farms instead of hydroelectric dams. Ernesto Solares, president of the Asociación de Comercializadores de Energía Eléctrica (ASCEE), a grouping of energy trading companies, also recommends regulatory changes to ensure a dynamic energy market that allows for the use of new technologies. This will not solve the issues caused by faults elsewhere in the regional system, but it will mean that the country is better prepared for its eventual exit in 2031.

Regulatory changes

One such change would include rules governing small-scale renewables projects, as well as the sale of excess energy generated from such projects to the national grid, said Solares.

Arita

Minister Arita will not have long to start on this extensive to-do list as he is expected to leave his post when a new president is sworn in on 14 January 2024 following recent elections. However the country is currently embroiled in a protracted political crisis as the judiciary debates whether or not to disqualify the anti-corruption Semilla party from the 20 August second-round presidential run-off. This means that the situation could deteriorate significantly as social unrest is likely if the democratic process is not respected.

COSTA RICA | FDI up. On 2 October Costa Rica’s official export promotion agency (Procomer) released new figures showing that Costa Rica received a total of US$2.11bn in foreign direct investment (FDI) in the first half of 2024, which it describes as a “record”, and up 3% on the same period in 2023. According to a Procomer statement, this represents 67% of the target FDI for this year. The same figures show that 59% of FDI in the first half of 2024 went to manufacturing, 14.1% to tourism, 8.5% to the services sector, and 7.2% to the financial sector. The general director of Procomer, Laura López, said that diversification had been key to maintaining this growth. The same Procomer statement notes that last year the agency announced 59 new foreign investment projects in Costa Rica, of which 13 were installed outside of the Greater Metropolitan Area (GAM). According to a July report by Procomer total FDI to Costa Rica in 2023 totalled US$3.79bn.

DOMINICAN REPUBLIC | Rise in tourism. On 25 September the Dominican Republic’s tourism minister, David Collado, said that 7.78m tourists visited the country in the first eight months of 2024, up 10% on 2023, 38% on 2022 and 44% in 2019 – the year prior to the coronavirus (Covid-19) pandemic. Collado also said that August registered 812,949 visitors, up 2% on 2023, 14% on 2022, and 45% on 2019. Collado projects that the Dominican Republic will receive some 11.5m tourists this year, surpassing last year’s record of 10.3m visitors which in January he described as “the best year for tourism in the country’s history”. 

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DOMINICAN REPUBLIC | New critical mineral and rare earth deal with the US. On 10 September the Dominican Republic and the US announced the signing of a cooperation framework to strengthen “the security and resilience of critical mineral and rare earth supply chains, as well as to promote new investment and development opportunities linked to the extraction and processing of these strategic resources”, according to an official statement released by both governments. The agreement was signed by the Dominican Republic’s new foreign minister, Víctor Bisonó, and the US ambassador to the Dominican Republic, Leah Campos. According to the official statement, the US has signed similar cooperation framework agreements with 27 countries as it seeks to reduce its heavy reliance on China for such materials. The previous day, the Dominican government announced the start of talks with the Office of the US Trade Representative (USTR) on tariffs and other issues, aimed at “further strengthening economic and trade relations between both countries and advancing topics of common interest”. Like much of the region, the Dominican Republic is facing US tariffs, including tariffs of 10%-12.5% under a package announced by the US in July. The tariffs, which the Dominican government led by President Luis Abinader is seeking to address, come despite the Dominican Republic-Central America-US Free Trade Agreement (Cafta-DR) which remains in place. 

HONDURAS | Remittances down in monthly terms. On 27 August Honduras’s central bank (BCH) released new figures showing that remittances to the country totalled US$1.18bn in July, down from US$1.22bn in June. This brings total remittances in the first seven months of the year to US$7.69bn, up from US$6.91bn in the same period in 2025.

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The Organization of American States (OAS) has confirmed that it will be sending a mission to “observe/accompany” the 5 November municipal election in Nicaragua. Headed up by Wilfredo Penco, the deputy president of Uruguay’s electoral court, the mission will comprise 60 specialists. The announcement has been met with a mixed response however. Local opposition groups and US legislators (who are closely following the electoral process in Nicaragua), point out that Penco has acted as an observer to Nicaraguan elections on previous occasions (2008, 2011 and 2016) and has endorsed victories won by President Daniel Ortega’s Frente Sandinista de Liberación Nacional (FSLN) which have been slammed for lacking transparency.

That the OAS would send a mission to “accompany/observe” the election is in line with an agreement struck between the hemispheric body and the Ortega government earlier this year. The deal was aimed at addressing democracy-related fears which have gathered pace since the November 2016 general election (which gave Ortega a landslide victory, albeit in a highly questioned process and from which credible international observers were barred).

Speculation as to whether the OAS would make good on the deal mounted after an OAS delegation paid a visit to Managua in May to discuss a three-year plan with the FSLN government, but left prematurely, cancelling meetings scheduled with opposition political groups and civil-society organisations. At the time, local investigative newspaper Confidencial attributed the early departure to a disagreement with the Ortega administration over whom the OAS mission was permitted to meet.

The response to the announcement regarding the OAS mission has been mixed. Complaining that efforts instead should be directed at strengthening the country’s electoral system, the national coordinator for one of the main opposition groups, Frente Amplio por la Democracia (FAD), Violeta Granera, dismissed the OAS mission as “irrelevant” and a “protocol visit”. However, Mauricio Díaz, the Managua mayoral candidate for another opposition group, Ciudadanos por la Libertad (CxL), welcomed the OAS announcement (although it is worth pointing out that Díaz himself was forced to step in after CxL’s initial choice of candidate quit, citing transparency concerns [see box]).

This scepticism regarding the OAS mission has also come from afar. On 21 September US Representative Ileana Ros-Lehtinen (R-FL), along with US Senator Ted Cruz (R-TX), issued a statement complaining about the “lack of transparency in the observation’s process and mission”. The statement flags up the “selection of Wilfredo Penco – a well-known rubber stamp for Daniel Ortega’s electoral manipulation” and warns that this, along with “the widespread, systemic corruption within the Nicaraguan Supreme Electoral Council, all point to a predetermined and favourable outcome for the Ortega regime”. The statement concludes that “by sending down this flawed observer mission rather than take any real and meaningful action, the OAS is legitimising this corrupt and illegitimate process”.

Less than two weeks later, on 3 October, the US House of Representatives then approved the Nicaraguan Investment Conditionality Act (NICA Act) of 2017 which prevents the Nicaraguan government from accessing international financing until reforms are implemented that “promote democracy, strengthen the rule of law, respect human rights…until Nicaragua holds free, fair, and transparent elections overseen by electoral observers”. Authored by Ros-Lehtinen and Rep. Albio Sires (D-NJ), the act was passed unanimously in the House Foreign Affairs Committee on 27 July and passed the Western Hemisphere subcommittee on 24 May. It is the latest version of an initiative first introduced in 2016 in response to the transparency concerns surrounding the November 2016 general elections.

Changes to electoral law

Further exacerbating transparency related concerns ahead of the vote, the FSLN-controlled 92-member national assembly approved changes to the electoral law on 31 August which allow those not included on the electoral register to vote by presenting their identity card on election day. The move was considered part of efforts to reduce abstention (which, in the 2016 general elections, the electoral authorities [CSE] officially put at 31.8%, although CxL suggested it was more like 76.2%). However, figures like the former president of the national assembly’s legal affairs committee, José Pallais (Partido Liberal Constitucionalista, PLC), have signaled concerns that the amendments will make it more difficult to keep tabs on turnout and could allow people to vote twice.

Managua contest

Díaz agreed to run this month for the hotly contested Managua seat after CxL’s initial choice of candidate, Mauricio Mendieta, resigned on 8 September. Among the reasons for his decision, Mendieta cited the OAS’s “complacent silence…with regard to the dictatorship of Ortega” as well as the recent changes to the electoral law.

On 5 September the FSLN presented as its mayoral candidate for the capital Reyna Rueda Alvarado, the current secretary of Managua’s mayoral council.

In the 2012 elections, the FSLN’s Daysi Torres won the Managua mayoralty convincingly (with 83% of the vote). Her defeated opponent in 2012, Alfredo Gutiérrez of the Partido Liberal Independiente (PLI), announced plans in August to stand again, although this time for the PLC. The PLC emerged as the biggest opposition party following the November 2016 general election, with 14 national deputies to 71 for the FSLN and ahead of the PLI which has just two.

• Polls

The most recent poll by Cid-Gallup published in the local press on 21 September showed that 41% of respondents would vote for the Frente Sandinista de Liberación Nacional (FSLN) in the upcoming municipal elections, 3% for the Partido Liberal Constitucionalista (PLC), 2% for the Partido Liberal Independiente (PLI), while 53% said that they would not vote for anyone. The survey, which interviewed 1,200 households across national territory, showed that 31% of respondents had “much interest” in voting while 34% said they had “some interest”. Meanwhile 50% of respondents said that the participation of the Organisation of American States (OAS) in overseeing the electoral process is “very important” while 16% said it was “quite” important.

Until recently, Uruguay had no unicorns (tech-based start-ups which grow to be valued at US$1bn or more). Then along came dLocal, a fintech specialising in international payments. Founded in 2016, it reached unicorn status in September last year, when it was valued at US$1.2bn. In June this year, after raising US$617m in an initial public offering  (IPO) on Nasdaq in New York, the company’s valuation soared again to over US$15bn, more than 25% of Uruguay’s GDP.

Tech companies that experience explosive growth usually start out with a good and simple idea. At the IPO, dLocal’s chief executive, Sebastián Kanovich, said he and his fellow Uruguayan entrepreneurs started the company when they realised how difficult it is for merchants in emerging markets to process payments, and that consumers in those markets want the same level of service as is available in the US or Europe. As Kanovich put it, “We are building a simple bridge, with no cracks, between global merchants and emerging markets, opening doors and opportunities to access difficult-to-reach but promising markets”. The firm’s website says the company is “40% cross-border payments facilitator, 40% technology company, and 40% emerging markets localisation experts. That means we are 120% dedicated to delivering a flexible, all-encompassing payments solution”. 

DLocal’s tech platform now allows over 330 global merchants to make and receive payments in 29 countries through over 600 different payment processes. Customers include Amazon, Microsoft, Spotify, Booking.com, Dropbox, TripAdvisor, Uber, and Zara. Since launching in 2016 the company has been doubling its revenue every year. Last year’s revenue was US$104.1m. The company employs around 300 people, mainly based in Montevideo but also distributed in offices in San Francisco, São Paulo, London, Tel Aviv, and Shenzhen. According to chief operating officer, Jacobo Singer, there will be further international expansion. “At the end of the day, if you want to be a global emerging markets payment company, you need to be in most emerging markets”, Singer says.  

While Uruguay now has its first, and as yet only, unicorn, compared with 54 in the much larger Brazil, 18 in Mexico, and five in Argentina, it remains a highly attractive location for innovative fintech companies. According to the 2021 Global Fintech Ranking Report (GFRR), Uruguay is the 17^th most attractive country in the world for fintech start-ups. In Latin America only Brazil is higher up (ranked 14^th), with Uruguay placed ahead of other contenders such as Mexico (32^nd) and Colombia (45^th). The GFRR highlights dLocal as a success story but adds that behind it lies “a prosperous ecosystem in Montevideo linked to banks and payments systems”.

• Banking ecosystem favours fintech

In the 1990s a Uruguayan company called Scanntech developed retail and payments software. Other start-ups in the sector in Uruguay include Bantotal and Bankingly. Outside of the financial sector GeneXus was one of the first to develop a coronavirus (Covid-19) advice and tracking app. The roots of these successes run quite deep. In the 1960s Uruguay became the first country in the region to introduce university-level computer studies. In 2007 the government launched the ambitious Plan Ceibal, which sought to provide a laptop computer for every child in school. Legislation in 2014 mandated salaries and pensions to be paid into bank accounts, accelerating the digitalisation of local payments. 

Political and economic stability have also played a part. Ironically, Marcos Galperín, the chief executive of Argentine unicorn MercadoLibre, which competes, at least partially, with dLocal through its Mercado Pago service, has relocated to Montevideo, reportedly attracted by its more stable business environment and relaxed lifestyle relative to Buenos Aires. DLocal recently poached two senior MercadoLibre executives to strengthen its management team. Franciso Alvarez-Demalde, of Riverwood Capital, a US Silicon Valley private equity company, told the Financial Times that small countries like Uruguay should concentrate on “developing attractive talent and entrepreneurs, and being a relevant part of the global tech ecosystem”, adding, “The reality is that the companies that are most successful in tech are operating in a parallel universe without geographical borders”.

ARGENTINA | New infrastructure investment plan. As part of its efforts to stimulate the domestic economy, the Argentine government announced an Ar$100bn (US$6.69bn) public works investment plan on 23 June for the next four years.

Paralysis in public works is one of the major factors in the current domestic economic slowdown, with economists close to the government suggesting that up to 50,000 jobs might have been lost as a result. But the government has now presented its concrete proposal to build new roads, railways, the development of a Metrobús bus-rapid transit system in provincial cities and the overhaul of the national drinking water distribution and sewage infrastructure network, all of which it intends to begin next year.

In addition the central bank (BCRA) has also been pursuing looser monetary policy in support of the domestic economy. On 28 June the BCRA decided to cut its benchmark Lebac interest rate by 75 basis points for a second consecutive week to 30.75%.

BRAZIL | Bolsa Família, judiciary receive a boost. Starting from July, the value of the basic 'Bolsa Família' conditional-cash transfer to the poorest Brazilians will increase by 12.5%. In the announcement on 29 June, the interim president, Michel Temer, said that the line of extreme poverty would be shifted from R$77 (US$24) to R$85, and the poverty threshold, from R$154 to R$170. The total cost to government coffers will be R$2.5bn per month.

The same day the federal senate approved a pay rise of approximately 41% for members of the judiciary and the public ministry, the body of independent prosecutors.

The measures will cost at least R$25bn from now until 2019; in 2016 alone, the pay increase will add another R$1.69bn to the fiscal deficit. The increase will be scaled across eight stages from June 2016 to June 2019.

Relative to GDP, the Brazilian judiciary is four times as expensive as that of Germany. Brazil’s judicial system is also massively overloaded: every judge has to cope with an average of 1,700 cases per year, according to a recent study by academics from the Universidade do Rio Grande do Sul (UFRGS). In comparison, Italian judges deal with 876; French ones, with 455. Every legal ruling costs, on average, R$2,200, compared with around R$2,000 in Portugal or R$1,600 in Italy.

The author of the study, however, claimed that the legacy of the period of military rule, the long period of legal uncertainty that followed, and Brazil’s continuing stark socio-economic inequality were some of the drivers for the high cost of justice in the country.

• Temer

In his speech announcing an increase in the Bolsa Família, the interim president, Michel Temer, praised the conditional cash transfer programme, calling it “successful” but also expressing the hope that it would eventually no longer be necessary. “The first social right of the citizen is employment,” Temer said.