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Public sector salary increase: On 26 November, the national lower chamber of congress approved a 4.1% salary increase proposed by the Bachelet government for public sector workers, following its ratification the previous day by the senate. The government proposal of 4.1% was up from its initial offer of 3.5% but below the 5% increase demanded by Mesa del Sector Público (MSP), an organisation that comprises 15 leading unions, including the national association of public sector employees (Anef) and the umbrella trade union (CUT). The MSP – which went on strike on 24 and 25 November over its demands - had initially called for an 8% increase. The government pointed out that the increase was above the annual inflation rate which it expected to reach between 3.9% and 4% in November. On 7 December, Chile’s national statistics institute (INE) released a report which showed that the monthly inflation rate for November was 0.0%, bringing the accumulated rate for the year to 4.4% and the 12 month rate to 3.9%.

There is a saying that a country gets the government it deserves, but in the case of Honduras that surely can’t hold.  Of the young Central American democracies, few have endured such inadequate, self-serving administrations. Since the return to civilian rule in 1979, followed by general elections in 1981, Honduras has had eight (democratically elected) presidents, not one of which has managed to reduce the rate of poverty below 50% of the 8.0m-strong population. In 2011, poverty is still estimated at a shocking 60%-65%. The country also suffers the ignominy of having one of the world’s highest homicide rates, which on year-to-date figures may reach a new record of 86 per 100,000 in 2011, according to the National Commission for Human Rights (CONADEH). This grim scenario is rounded off by a patchy, highly US-dependent economic performance.

Honduras has struggled to shed its reputation as one of the last of the banana republics, closely ruled by a small and well-entrenched US-facing oligarchy. However the June 2009 coup d’état has left an indelible mark and one notable outcome is the fragmentation of the domestic political scene. Hondurans long used to alternating between two conservative traditional parties (with little to differentiate between them), may have the novelty of new options on the ballot paper in the scheduled November 2013 election.

President Porfirio Lobo is not quite halfway through his single four year-term but his ruling Partido Nacional (PL) recently split down the middle into two factions, led by rival aspirants to succeed him in 2014. The other main traditional group, the Partido Liberal (PL), has more or less fallen apart since the coup against its former president, Manuel Zelaya (2006-2009). Zelaya has since formed a new outfit with the remnants of his supporters from the PL, leaving his old party in tatters.

Lobo has allowed the polarizing Zelaya to pursue his political ambitions, ostensibly in support of national political reconciliation. Tactically though, Lobo also likely calculated that he could divide and rule a splintered opposition and thereby secure re-election for the PN in 2014. With the sudden cracks emerging in the PN, that no longer looks assured. Moreover, Lobo needs to watch out both on his Left and also on his (far) Right, where former coupsters and their supporters are also readying their ambitions - most notably these include the former head of the army, Romeo Vázquez Velázquez (see sidebar).

Following the surprise removal (early on 10 September) of his security and foreign ministers, Oscar Alvarez and Mario Canahauti respectively, both of the PN, Lobo formally gave his backing to the president of congress, Juan Orlando Hernández, as his preferred successor. Party primaries will take place in November 2012, a year ahead of the general election.

Although the (semi) official line was that Alvarez had gone behind Lobo’s back in his efforts to crack down on police corruption, it was also assumed that the high profile minister may have had ambitions for 2013 that clashed with those of Juan Orlando Hernández. As did the also-removed foreign minister.

Not everyone in the party was happy with Lobo’s actions. Ricardo Alvarez, the PN party president and mayor of Tegucigalpa, questioned the removals and voiced his respectful disagreement with Lobo. Alvarez is another potential aspirant for 2013. Along with Miguel Pastór, the minister for public works, transport and housing, Alvarez has now moved to form a 23-member PN faction in congress to rival Hernández and his supporters.  Known as the Alianza Parliamentaria, it includes several of the recently ousted ministers/officials and the influential PN deputy, Antonio Rivera Callejas, who admitted to the daily La Tribuna that the breakaway group is a pre-electoral alliance in support of Alvarez/Pastor.

In the November 2009 elections, the PN took 71 of the 128 seats in congress (and 17 of the country’s 18 departments), giving it a comfortable majority. Hernández still commands a group of 48 PN deputies, but he can no longer summon an automatic majority. That means that the government’s legislative agenda, such as it is, could stall moving forward.

Free to run

Manuel Zelaya has asked the national electoral court to register ‘Libertad y Refundación’ (or ‘Libre’) as the name of his 2013 electoral vehicle. Libre will be the political arm of Frente Nacional de Resistencia Popular (FNRP), the trade-union led radical left-wing social movement that formed in support of Zelaya after his ouster. Earlier this year the FNRP incorporated some former PL members to become the Frente Amplio Politico Electoral de Resistencia (FAPER).  Zelaya cannot run again and so will have to field a proxy in 2013, potentially his wife Xiomara Castro, who earned her political stripes at the helm of the efforts to return home her exiled husband.  Libre’s manifesto centres on Zelaya’s continued demand for a constituent assembly.

• Vázquez Velázquez

Early on 28 June 2009 Romeo Vázquez Velázquez, the head of the army, had his men remove the president Manuel Zelaya and spirit him out of the county. Vázquez Velázquez said he was following supreme court orders to detain Zelaya (though apparently he personally took the fateful decision to bundle Zelaya off to Costa Rica). In March 2010 he was shuffled out of the military ranks by President Lobo, who compensated him with a juicy retirement post at the helm of the state telecoms firm, Hondutel. He proposes running in 2013 under the banner of the Alianza Patriótica Hondureña (APH), which describes itself as a “military-civic” organisation.

FTA with US hits a snag. Recent hopes regarding the ratification of the US-Panama FTA [RC-11-05] are now proving premature following a new obstacle which has emerged as a result of domestic US politics. Democrats in congress are now conditioning their backing of the FTA (along with those with Colombia and South Korea) on the Republicans’ vote in favour of the Trade Adjustment Assistance (TAA) programme, which provides support for US workers affected by the implementation of FTAs. The Obama 2009 TAA expired in February. The Republicans, who assumed control of the lower house in January following the 2010 midterms, want to extend the 2002 TAA, which was drawn up by the George W. Bush administration. The Democrats, however, are pushing for the 2009 TAA, which was expanded to include service industry workers and those whose jobs have moved to countries that do not have FTAs with the US.  With the country in a pre-electoral year, and both sides likely to become more intransigent as a result, fresh doubts have emerged as to whether the FTAs will be ratified before the August 2011 deadline.

Inflation: In April inflation was 1.06%, pushing the annual rate to 6.3%, a level not seen for at least two years. The main reason for the increase was higher oil prices. Inflation in 2010 was 3.5%, up from 2.4% the previous year.

In December Costa Rica’s President Carlos Alvarado and Environment & Energy Minister Andrea Meza signed a decree which seeks to incentivise the use of hydrogen to boost the green economy. This comes amid other signs of Costa Rica continuing to shore up its green credentials.

Signed on 15 December, the decree aims to promote and incentivise the use of hydrogen and boost the green economy. It seeks to establish guidelines to develop a regulatory framework for Costa Rica’s public services regulatory authority (Aresep) which would make it easier for distribution companies to take advantage of surpluses in the national electricity system (SEN). In particular, the objective is to end the transport sector’s dependence on oil derivatives.

According to a government press release, “sustainable hydrogen is considered an option to transform the transport sector” and “decarbonise electricity consumption in the industrial sector”. It notes that while Costa Rica generates over 99% of its electricity from renewable sources, electricity accounts for 26% of energy consumed in the country while the transport sector, which is heavily reliant on fossil fuels, represents 64.5%. Ending the transport sector’s significant dependence on petrol derivatives, which generate 69% of the country’s greenhouse gas emissions (GHG), is thus key for the energy transition, according to the Alvarado government.

Alvarado also highlighted a recent trip to the United Arab Emirates (UAE) where on 7 December he met Mohamed Jameel Al Ramahi, executive director of Masdar (Abu Dhabi Future Energy Company), one of the main developers of renewable energy projects in the Middle East, to discuss the development of green hydrogen. This is in line with a memorandum of understanding (MoU) signed in 2018 by Masdar and Costa Rica’s state electricity firm Instituto Costarricense de Electricidad (ICE) to promote renewable energy development.

During his trip to Abu Dhabi President Alvarado also signed a partnership with Francesco La Camera, the director general of the international renewable energy agency (Irena), to strengthen Costa Rica’s decarbonisation plan and boost the financing of renewable energy projects. According to an Irena press release, during the meeting the two discussed the creation of an investment roadmap to complement Costa Rica’s national decarbonisation plan for 2018-2050. The plan will utilise Irena’s upcoming Renewable Energy Roadmap for Central America to identify financing opportunities for major national projects, and support decision making around technology and regulatory frameworks.

• Energy matrix

According to preliminary figures from Costa Rica’s national electricity control centre (CENCE), part of the national electricity institute (ICE), 99.98% of the country’s energy came from renewable sources in 2021: hydroelectric production accounted for 74.12% of production, geothermal was 12.97%, wind power was 12.33%, and biomass and solar energy were 0.56%.

   A presidential press release dated 16 December cited ICE’s electricity manager Luis Roberto Rodríguez as saying: “The strength of our matrix enables us to, even during the [coronavirus] pandemic, achieve record numbers [in clean energy production], maintaining the quality and continuity of our services. Costa Rica is positioned as a world leader in the production of sustainable energy”. Costa Rica has obtained over 98% of its energy from renewable sources since 2015. END BOX

• ICI

The 16 December presidential press release highlighted that according to the 2021 International Competitiveness Index (ICI) report, released in September 2021 by Instituto Mexicano para la Competitividad (IMCO), a think-tank based in Mexico City, Costa Rica’s energy matrix has the highest amount of energy from renewable sources of the 43 economies measured, while overall it ranked as the 28^th most competitive economy.  

Despite both countries having left-of-centre governments, some unusual friction has developed in relations between Argentina and Chile. An open letter from the Puebla Group – an association of left-wing Latin American political leaders – was published on 15 February and has displeased the Chilean government. The letter was signed, among others, by Argentina’s President Alberto Fernández.

The letter from the Puebla Group seeks to defend Marco Enríquez-Ominami, a Chilean politician who stood as a candidate in the 2021 presidential election, coming sixth. Enríquez-Ominami has been accused in a long-running corruption scandal dating back to 2014 and involving illicit payments by Sociedad Química y Minera (SQM), a Chilean chemical company.

The letter claims that the Chilean politician is being accused “by prosecutors directly linked to former right-wing president Sebastián Piñera” and is being denied a fair trial. Charges have been outstanding for eight years and the date for a trial is constantly being delayed, Grupo de Puebla alleges, making Enríquez-Ominami a victim of ‘lawfare’, a form of judicial persecution, which President Fernández, a friend of Enríquez-Ominami, is constantly railing against in relation to Vice President Cristina Fernández in Argentina.

The Chilean government of President Gabriel Boric took the view that the letter was an unwarranted intervention in the country’s internal affairs as well as contrary to the independence of the Chilean courts. Justice Minister Luis Cordero said he would “never dare to give an opinion on the performance of Argentine judges”, adding that the letter was “ill-informed on the functioning of the Chilean criminal justice system”.

Nicaragua

Buenos Aires and Santiago have found themselves in agreement, however, on a separate matter. Chile has condemned a decision by Nicaragua’s President Daniel Ortega to expel a prominent group of opposition leaders and strip them of their nationality. Boric has been the only left-leaning head of state in the region to condemn the move by Ortega in keeping with his view that human rights violations outweigh ideological affiliations; he has also offered residence permits and Chilean passports to the group, which includes prominent writers Sergio Ramírez and Gioconda Belli.

On 22 February the Argentine government said it would make a similar offer. Presidential spokeswoman Gabriel Cerruti said her government was ready to offer citizenship to “all those who are suffering what is happening in Nicaragua”.   Left-wing governments in Colombia, Mexico, Brazil, and Argentina (despite its passport offer) have avoided unequivocally condemning Nicaragua’s action to expel its citizens.

Bilateral tensions

In January, Argentina and Chile also found themselves at odds with leaked audio conversations revealing the unmitigated displeasure of Chile’s foreign minister, Antonia Urrejola, at the complaints of Argentina’s ambassador in Santiago, Rafael Bielsa, over not being presented with advance warning of a Chilean decision to deny environmental permits for the Dominga iron and copper mine [WR-23-04].

*** CRACKS APPEAR IN BARBADOS GOVERNMENT. The Democratic Labour Party (DLP) was returned to power for a second term almost exactly a year ago. Its election platform was unequivocal: it promised “stability through austerity”. And this is what Prime Minister Freundel Stuart has sought to deliver, including through the lay-off of 3,000 civil servants. In early February, however, Agriculture Minister David Estwick broke ranks and publicly opposed what he called the “wrong medicine”. Estwick’s criticism has added weight because of his status as a former finance mnister.

Estwick said that the government’s strategy would not fix the country’s US$700m current account deficit. In an interview with Barbados Today, published on 4 February, he said: “You can’t cut and tax your way out of that, which is the old budgetary tool, which is a classic IMF way of delivering it.”

Estwick is arguing for more action on reducing debt-servicing costs and for a growth strategy. He said: “You cannot do it [cut jobs] if you don’t have a concomitant growth going along the same time, so that you can absorb any of the public sector contractions by loss of jobs. We don’t have a growth strategy going because the growth strategy is compromised by cost.”

The agricullture minister’s intervention came a week after the commencement of the plan to lay-off 3,000 civil servants. Finance and Economics Affairs Minister Chris Sinckler said that the cuts in public-sector jobs would help the government save US$70m. He added that the government intended to follow a “strict programme of attrition” with regard to public-sector jobs and that it would only reappoint to posts when unavoidable over the next five years.

Estwick’s criticisms echo last year’s election campaign by the Barbados Labour party (BLP), which promised a rejection of the “IMF-type model” and “a fundamental change in macro-economic policies”. The prime minister, however, can justifiably say that he did not hide his support for, and the need for, austerity measures during the February 2013 campaign.

In a response to Estwick, given in a speech to supporters on 9 February, Stuart emphasized the importance of maintaining course, saying: “You can’t be vacillating and changing today and changing tomorrow. That’s why you build a house according to a plan.” He did, however, urge the private sector to show less “analysis paralysis” when it comes to investments and to “take the ball and run with it”.

*** CHALLENGE FOR TRINIDAD OPPOSITION LEADER. People’s National Movement (PNM) leader Keith Rowley is to be challenged for the leadership of the party by Penelope Beckles-Robinson at an internal election to be held on 18 May. Announcing her challenge, Beckles-Robinson said: “The fundamental issue that confronts our nation is that of leadership: the people deserve decisive, compassionate, inclusive, and pragmatic leadership.” Beckles-Robinson is an attorney and a former member of parliament who has previously held government posts.

*** IMF CONCLUDES ASSESSMENT OF ST KITTS & NEVIS. An IMF team visited St Kitts & Nevis from 20-31 January to review a three-year stand-by arrangement. According to the IMF, GDP grew by 1.7% in 2013 on the back of a pick-up in tourism and construction. The IMF also noted: “The fiscal position has substantially improved, from a deficit of 7.8% of GDP in 2010 to a projected surplus of 8.6% in 2013.” For 2014, the IMF is projecting growth of 2.5%-3.0%. Over the medium-term, it says “the economy is expected to continue to recover and reach its potential growth rate of about 3%-3.5%”.

Six of the 12 stadia due to host World Cup matches missed Fifa’s deadline of 31 December. Sepp Blatter, the Fifa president, complained in an interview with the Swiss newspaper 24 Heure that Brazil’s preparations for the tournament were the most behind schedule of any host nation since he started at the organisation in 1975. President Dilma Rousseff, a recent convert to Twitter, posted a rebuttal stating Brazilians were confident all would be well and that her country would host “the Cup of Cups”.

So far this year four workers have died in accidents at stadium construction sites in Manaus and São Paulo, where the opening match, on 12 June, is due to be held. Natal, Manaus and Porto Alegre are expected to be completed at some point this month; Cuiabá’s Arena Pantanal is due to be ready in February and Curitiba’s Arena de Baixada in March. São Paulo’s Itaquerão will only be ready in mid-April. Though the Jornal do Brasil ran an editorial telling Brazilians not to listen to the ‘mediocre’ Blatter; an on-line poll in the tabloid O Dia found an overwhelming majority sympathised with his comments.

Separately, the government issued a thinly-veiled threat to the main domestic airlines, Gol and Tam to avoid ‘abusive’ prices during the competition. The cabinet chief, Gleisi Hoffman, due to step down shortly to run for office in her home state of Paraná (capital city, Curitiba), said the government would consider allowing foreign airlines to operate routes in the country if it deemed the fares excessive. Hoffman also warned the government would use its powers to prevent hotels charging outrageous prices. The government expects 600,000 foreigners and 3m Brazilians to travel during the tournament.

As for the question of opening Brazilian skies to foreign competition, aviation experts quoted in the local media expressed scepticism that such a complex procedure could be carried out at such short notice. “The logistics of it are complicated,” Carlos Ebner, the president of the International Air Transport Association in Brazil, said. “We’re not talking about buses here. The airlines would need at least three or four months in order to get organised.

Dilma takes charge

Stung by the latest Fifa complaints and concerned about potential lasting damage to Brazil’s reputation, President Dilma Rousseff on 8 January summoned nine ministers to a three-hour meeting to launch ‘operation fine [tooth] comb’ to deal with the variety of problems threatening the June-July 2014 World Cup football tournament.

Apart from the readiness of the stadiums, the president’s two main concerns are security for the tournament, and the strength of the local communications network - Rousseff does not want international visitors leaving with the impression that Brazil is a ‘sub-standard’ country because they couldn’t get wi-fi signals in the stadiums. Following an interrogation, the nine ministers were told to come up with responses in 24 hours. After that she was to meet the governors of the 12 host states - in two groups of six - better for the micro-managing president to get into the nitty gritty of the details.

Rousseff doesn’t suffer fools gladly and according to local reports Civil Aviation Secretary Moreira Franco bore the brunt of her sharp tongue, after he sought to downplay concerns about the ability of Brazil’s creaking international and regional airports to cope with the massive tourist influx. Along with Moreira Franco, the following ministers attended the meeting at the Planalto presidential palace: Defence Minister Celso Amorim, Mining & Energy Minister Edison Lobão, Ports Secretary Antônio Henrique da Silveira, Planning Minister Miriam Belchior, Sports Minister Aldo Rebelo, Cities Minister Aguinaldo Ribeiro and the minister of the presidency, Gleisi Hoffmann.

• And if they don’t win?

In his interview with the Swiss paper 24 Heure, Sepp Blatter said he expected there would be protests during the World Cup, although not on the scale seen during last year’s Confederations Cup. This tallies with the opinion of most newspaper columnists in Brazil, but as Rafael Alcadapani, an academic from the Fundação Getulio Vargas (FGV) points out, the great imponderable will be how Brazilians react if their team exits the tournament early, leaving the country to pick up the bill for a very expensive party at which they are no longer welcome.

***MONTSERRAT GETS NEW CONSTITUTION AND PM. On 25 September, Reuben Meade, 57, became the first Prime Minister of the British Overseas Territory of Montserrat. He was sworn in using the newly ratified constitution, approved earlier this year by seven votes in favor and two against in the nine-member Legislative Council. At his investiture, Meade said that the population had been given the opportunity to participate in the drafting of the new constitution since discussions to reform the 1989 Constitution had began in earnest in 2001.

Although Meade said the document was far from perfect and that “we must continue the work of improving the document over time”, Governor Adrian Davis said the UK government was not considering any amendments at this point. Donaldson Romero has become the first opposition leader and will be the head of the Public Accounts Committee. He will also participate in the selection of the Public Service Committee and the Electoral Commission as well as being a member of the National Advisory Council. The role of the governor has also changed under the new Magna Carta and he will now have to consult with the Premier on many matters, including the appointment of high-ranking government officials such as the Deputy Governor, the Financial Secretary and the Commissioner of the Police.

***BAHAMAS MURDER CONTINUES TO SURGE. With five people dying over the weekend of 17-18 September as a result of violent attacks, the 2011 murder count in The Bahamas reached triple digits to a staggering 100 for the year thus far. This is the highest number of murders ever recorded in a single year since records began and comes on the back of the highest number of murders recorded for a single month in July [RC-11-09]. To late September, the murder rate had increased by 47% year-on-year; at the same point in 2010 only 68 murders had been recorded.

***ST LUCIA PREPARES FOR GENERAL ELECTION. Following the resignation of two members of his parliamentary group, Prime Minister Stephenson King had to face more political challenges in September triggered by the resignation of his housing minister, Richard Frederick. King, whose parliamentary group holds a one-seat majority, will ultimately see his power tested in the upcoming December general election (date is yet to be announced), in which all 17 seats of the House of Assembly will be contested.

***STRENGTHENING TIES WITH CHINA. Trinidad & Tobago last month hosted the third China-Caribbean Economic and Trade Cooperation Forum which not only yielded the promise of US$2bn in Chinese funds for regional use (comprising US$1bn in loans to support local economic development and a US$1bn donation to the Caricom Development Fund) but also saw a string of bilateral deals agreed on the sidelines. In the opening address, China’s vice-premier, Wang Qishan, who headed up the Chinese delegation, highlighted how cooperation had gathered pace since the first Forum in 2005. He cited figures showing that China-Caribbean trade had increased at an annual rate of 24% on average, to reach US$7.2bn in 2010 while the cumulative Chinese investment in the region now stands at US$400m.

• Chinese cooperation

The bilateral deals agreed on the sidelines of the third China-Caribbean Economic and Trade Cooperation Forum include a deal worth US$6.3m with Trinidad & Tobago to go on “mutually accepted projects”, up to US$5m for the Bahamas, US$8m for Barbados and US$8m for Jamaica, in economic and technical loan agreements.

ECUADOR | Counting the businesses lost to the pandemic. On 6 July Ecuador’s foreign trade, production & fishing minister, Julio José Prado, has said that as a result of the coronavirus (Covid-19) pandemic, over 22,000 formal companies have closed down while losses in sales from the productive sectors totalled over US$14.5bn. Prado gave the figures at a meeting chaired by President Guillermo Lasso to outline plans, projects and programmes aimed at reactivating economic production. Among other strategies, Prado said the government would work on reducing the country’s trade tariffs in order to lower production costs in Ecuador, a policy that should help more than 60 local industries. He also said that the government aims to launch a new national competitiveness and innovation council, the first such entity in the country, which would unite the public and private sectors. Sector-specific reactivation strategies are also to be applied through 20 industrial “clusters”. Meanwhile the agriculture & livestock minister, Tanlly Vera, also announced plans to promote new low interest and long-term loans through the national development bank.

COLOMBIA | Second metro line gets green light. The government led by President Iván Duque and the mayor of Bogotá, Claudia López, announced on 29 June the construction of a second metro line in an effort to address the serious congestion and pollution problems in Colombia’s capital. The new line, which is projected to cost Col$13trn (US$3.45bn), and create 5,000 direct jobs during the construction phase, will extend 15.8km with 11 stations (eight of them underground), and service an estimated 2.5m people. As things stand Bogotá’s first metro line has not made it off the drawing board, held up by the coronavirus (Covid-19) pandemic. The Empresa Metro de Bogotá (EMB) closed the tender process for the first line of the metro in October 2019, with the US$4.5bn concession awarded to a consortium including China Harbour Engineering Company Limited and Xi’An Metro Company Limited.

Andean Countries: Inflation
Monthly year-on-year figures

Starting in March 2020 the global Covid-19 pandemic hit Latin America hard, mainly impacting the following two years (although tail-end effects are likely to continue for some time). The pandemic has been called a ‘black swan’ - a high profile, high impact, and hard to predict event, often something that is experienced only once in a generation. As of May 2022 - just over two years after the original outbreak - Covid 19 was responsible for over 1.19m deaths in Latin America, of which 623,000 were in Brazil.

The pandemic forced Latin American governments of different political colours to take wide-ranging emergency measures. These included obligatory social distancing, stay-at-home rules and curfews, obligatory use of face masks, the locking down of non-essential businesses, and the interruption of passenger transport links. Public health services were put under immense strain. As vaccines were developed, governments scrambled to acquire the necessary number of doses, and to distribute them rapidly to the population.

Cumulative confirmed COVID-19 deaths

At one level the virus was ideologically blind. It attacked and infected populations under dictatorships and democracies, and equally those ruled by right-wing or left-wing political regimes. All governments were subject to intense pressures, and many mis-managed their response to the emergency, stoking up popular anger and fear. It can be argued that whoever was in power in nearly 2020 was, thanks to the pandemic, likely to experience a major subsequent erosion of popularity. In fact, sharp and sustained criticism was directed against the right-wing government of Jair Bolsonaro in Brazil and the left-wing governments of AMLO in Mexico and Alberto Fernández in Argentina. That said, responses to the pandemic varied. The Brazilian president's constant attempts to deny and minimise the threat to public health, and his promotion of unproven remedies and anti-vax conspiracy theories stands out as particularly irresponsible.

The pandemic had effects that both helped and hindered the emerging second wave of the pink tide. The economic impact was arguably a major negative. According to updated IMF estimates, Latin American GDP fell by 7% in 2020, recovering by 6.8% in 2021, with growth of 2.5% predicted for 2022. In other words, it would take two years or more to regain pre-pandemic levels of output. In addition, millions of jobs were lost, with predictions of an equally slow recovery in employment levels. Informal workers were particularly hard hit by the pandemic. What this means is that the region's emerging second wave of left-wing governments are likely to face significant economic obstacles. They are inheriting weakened economies with reduced future growth rates. In this context of economic constraints, it will be more difficult to reduce poverty or redistribute income.

On the other hand, the pandemic can also be seen as re-affirming some long-held views of the Latin America left. Right-wing politicians have long claimed the pursuit of market-based economic growth with minimal government intervention should be a higher priority than poverty reduction or income re-distribution. But the pandemic showed that the lack of universal health care, or the existence of crowded and insalubrious shantytowns, posed a direct risk of contagion to the entire population, regardless of income levels. The moral and practical argument for across-the-board free vaccine distribution was overwhelming.

It is not surprising therefore that during the pandemic a range of social and health ideas more closely aligned with the left gained credibility. Governments of both right and left launched emergency cash payments to the poor. In Colombia demands for the introduction of a universal basic income received a more sympathetic hearing than in the past. In Brazil the right-wing president took a cash transfer programme for the poor that had been originally designed during the first Lula presidency under the name ‘Bolsa Familia’ and rebranded and relaunched it under the name ‘Auxilio Brasil’. Likewise, the case for increased government spending on health - long resisted by politicians of the right who have favoured fiscal austerity - was powerfully reinforced. In short, although the outcome is still somewhat unclear, the impact of the pandemic may have weakened right wing, neoliberal thinking, the long-standing bete noire of left-wing movements.

Agenda Estado de Derecho, a Latin American online portal specialising in constitutional and legal matters, identified what it described as the ten major constitutional developments in Latin America in 2024. Two of them – the wide ranging and authoritarian re-drafting of the Nicaraguan constitution, and the Mexican experiment with the direct election of judges, are covered separately in this report. The remaining eight, however, give a useful snapshot of the diverse issues facing the region’s policy makers.

In Ecuador euthanasia was de-penalised by a February 2024 ruling by the constitutional court. The case was submitted by a terminally ill woman, Paola Roldán, who later died in March 2024, and led to the court allowing the ending of life when the subject or their representative shows “unequivocal, free and informed consent”. To qualify for “active euthanasia” a subject must be experiencing intense suffering as a result of serious and irreversible corporal trauma, or a serious and irreversible disease.

Agenda Estado de Derecho also chose to highlight the November 2024 general elections in Uruguay. It described elections in any country as a key opportunity to measure citizen participation, electoral effectiveness and government policy on democracy and the rule of law. Moderate centre-left candidate Yamandú Orsi emerged as the victor. Agenda Estado de Derecho said the outcome and management of the elections showed the strength of Uruguay’s institutions and the country’s “tolerance” for the alternation of power. It noted both the defeated centre-right candidate and the incumbent president, Luis Alberto Lacalle Pou, were quick to congratulate Orsi and acknowledge his victory. Voter turnout in the first and second rounds of the polls was close to 90%.

An issue with far reaching implications arose in Colombia in early 2024. Juan Manuel Padilla, a judge in the city of Cartagena, used artificial intelligence (AI) to help him reach a ruling in a case. Papers released by the judge showed he had asked ChatGPT the question “Is an autistic minor exonerated from paying fees for their therapies?”, and received a response: “according to the regulations in Colombia, minors diagnosed with autism are exempt”.  Although the judge consulted many other sources in making his ruling, the use of AI in this case was seen as setting an important precedent. Constitutional court sentence T-323 of August in the same year stated that AI can be used if it is “necessary, pertinent, reasoned and pondered in a context which prioritises fundamental rights and ethics.” The ruling also states that tasks which require logical and human reasoning in the assessment of evidence and the interpretation of motivation are irreplaceable.

In a controversial constitutional reform in Peru, congress decided to return to a bicameral system, with a legislature consisting of two houses, a chamber of deputies and a senate. The move has been led by the conservative majority in the existing legislature and includes introducing unlimited re-election for members of congress. All in all, it implies 50 amendments and the re-writing of 25% of the text of the 1993 constitution. Such a change would normally require the final text to be submitted to a national referendum, but the congressional majority avoided that scenario by allowing key votes to be “reconsidered” to achieve the number needed to avoid a public referendum.  

Peru’s congress, which along with the executive and judiciary, enjoys very low levels of public esteem and approval and is accused of corruption, has insisted on pushing the reform through, even though the last attempt to introduce a bicameral legislature was massively defeated, with over 80% of the vote, in a referendum in 2018. Peruvian voters have also rejected the unlimited re-election for members of congress, but this too is being ignored. Agenda Estado de Derecho points out that the debate over the relative benefits of unicameral and bicameral legislatures remains open. What is evident however is that in the Peruvian case, moving to a bicameral system will not be a “magic bullet” and will not address the fundamental problem which is the precarious and fragmented nature of the country’s political parties.

Although as we have seen, Chile’s recent constitutional drafting experience has been largely unsuccessful, in January 2024 there was something of a breakthrough in the constitutional tribunal (Tribunal Constitucional de Chile – TCC) when it was announced that for the first time since it was formed, there was now a female majority: six women and four men. Agenda Estado de Derecho notes that this female majority was achieved without the use of affirmative action-style quotas. As recently as 2022 only three female judges had sat on the TCC. Looking forward, Agenda described the TCC’s new composition as a desirable balance between meritocracy, equality, and political will.

Among the ‘top ten’ constitutional developments of 2024, Agenda Estado de Derecho also listed decision 0083/2024 ECA issued in November by the plurinational constitutional tribunal (Tribunal Constitucional Plurinacional – TCP) of Bolivia, reaffirming an earlier resolution in 2023 which states that re-election is not a human right, and can therefore be subject to limitation. In view of that, the resolution says that the president and members of congress cannot serve more than two terms in office, whether continuously or discontinuously.  The clear implication is that former president Evo Morales (who held multiple successive terms of office from 2006 to 2019) cannot run in the 2025 elections. Morales had tried to argue that because he did not run in the 2020 elections, he was somehow unconstrained by term limits, but the TCP ruling makes it clear that they do apply.

Agenda Estado de Derecho also highlights a series of constitutional amendments approved in the Dominican Republic in October 2024. Pushing ahead with constitutional reform had been one of the election promises made by centre-left leader Luis Abinader, who won re-election last year and was sworn in in August 2024. The reforms establish that the president can only serve two consecutive terms in office; they reduce the number of deputies (from 190 to 170), strengthen the autonomy of the public prosecutor, and unify elections. A significant feature is a “poison pill” provision making it more difficult to remove term limits. As now drafted, Article 268 states that Article 4, which defines the system of government as civil, republican, democratic and representative, and which includes presidential term limits, is immutable and cannot be modified. Agenda Estado de Derecho says there are aspects of the reform which may prove difficult to manage but describes it as a “pro-democracy” rather than an “anti-democracy” initiative.

On Sunday 20 January President Jair Bolsonaro took a flight to Davos for the annual meeting of the World Economic Forum. His aim is to present to investors a new Brazil that has turned the page on years of corruption and statism. With the absence of Donald Trump, as well as other regional presidents, such as Maurici Macri or Andres Manuel Lopez Obrador, Bolsonaro is likely to be one of the big stars. He has even been invited to address a lunchtime audience by the World Economic Forum (WEF) chairman, Klaus Schwab, a rare honour for a Latin American leader.

Investors are like to be all ears, given the possibility that the world’s ninth-largest economy may finally become more business-friendly after more than a decade of interventionist policies from previous governments. Even after a 20 percent rally over the past four months, the main index of the Sao Paulo stock exchange is still 40 percent below its all-time high in dollar terms.

Yet, so far, the president has little more to offer than words. His political acumen has yet to be tested in congress, and Bolsonaro does not have much of a track record as a legislator. In 30 years in the lower house, only two of the bills he sponsored were approved. It hardly helps his case that less than three weeks into his administration he is already dogged by a swirl of corruption allegations involving his eldest son, Flavio, a senator-elect and a close adviser to the president. Jair Bolsonaro has cancelled his planned press conference in Davos to avoid awkward questions from the travelling press. Not the start he would have liked.

Still, Brazil is a hot topic among investors who are perhaps unlikely to be deterred due to the country’s huge potential. Latin America’s largest economy not only sits on large energy reserves, but it also has a massive consumer market with pent-up demand for all sorts of quality goods and services, from premier health care to cheaper cars and better roads. And in a taste of the kind of deals that may flourish under a Bolsonaro administration, the former paratrooper this month signed off on the merger that will give Boeing control over Brazil’s Embraer, the world’s third-largest plane maker.

Options are not limited to the aviation industry, where caps on foreign ownership were lifted last year. Up for sale are as many as 200 state-owned companies, including energy giant Eletrobras. As a result, the head of Brazil’s anti-trust agency, Cade, expects a 30 percent increase in M&A activity this year.

The Entourage

The president’s entourage will include his anti-corruption tsar, former judge and now Justice Minister Sergio Moro, as well as the head of his economic team, Paulo Guedes. The University of Chicago-trained Guedes is expected to outline plans to downsize government, cut pension benefits, and slash import tariffs. Both men are likely to receive a warm reception among the Davos crowd.

But one man who is less likely to charm investors is Ernesto Araujo, the new foreign minister, who is an unabashed critic of globalisation. Among one of the theses published by Aruajo is a suggestion that Brazil should form a “Christian pact” with the US and Russia. The new foreign minister argues for a conservative, Christian values-based policy, which regards China with deep scepticism. Such scepticism is likely to run counter to Brazil’s commercial interests given that China is Brazil’s biggest trading partner by far.

Araujo’s presence highlights some of the inconsistencies within the Bolsonaro administration and it is too early to say whether the moralists, the ‘Chicago Oldies’ – as Guedes describes his team – or the military will ultimately triumph in shaping he government’s agenda. But for the time-being, investors are excited.

“It’s a unique moment that you have a government that is unabashedly liberal,” Alberto Ramos, chief Latin America economist at Goldman Sachs, told Bloomberg. “We’ve never seen that in Brazil.”

• CNN Brasil

CNN is establishing a news channel in Brazil. One of the main organisers comes from TV Record, Vice-President Douglas Tavolaro (who will be the CEO of CNN International Brazil), and the other is the founder of the MRV construction firm, Rubens Menin. Tavolaro is the author of a biography of TV Record owner Bishop Edir Macedo.

BOLIVIA | Combating nepotism. Less than one month after taking office, President Luis Arce has lost his first cabinet minister. Arce, who took office on 8 November, dismissed Wilson Cáceres as the rural development and land minister on 1 December, appointing Edwin Characayo in his stead.

Arce jettisoned Cáceres after it was made public that he had appointed his wife as his cabinet chief. Cáceres had initially sought to deny the media allegations but subsequently acknowledged that they were true. “It is essential that revolutionary values and principles take primacy,” Arce said upon announcing the change. “The best moral influence we have as leaders is the example we set,” he added.

COLOMBIA | Exports slump. Exports fell by 21% year-on-year to US$2.63bn in October, according to the national statistics institute (Dane). The fall in the export total owes principally to a 42.7% decline in exports of oil and other products of extractive industries, Dane explained, as a result of the impact on production and external demand caused by the coronavirus (Covid-19) pandemic.

Exports should begin to recover as the economic reactivation picks up pace, and they will also receive a boost from the end of Colombia’s longest-running coal strike. Cerrejón, the country’s second-largest coal producer, resumed coal production on 1 December after the company struck an accord with the Sintracarbón union over pay and benefits to end a strike that lasted for more than three months, preventing the export of some 5.1m tonnes of coal. The company agreed to pay a bonus of Col$10.75m (US$3,000) to employees, tie salaries to inflation for the next three years, and to pay productivity bonuses in advance.

BRAZIL | Government revises employment figures. Brazil closed 2020 with negative formal job creation, according to revised figures made public on 30 November. The national employment registry (Novo Caged) had initially indicated that 142,960 formal jobs were created in Brazil in 2020, despite the impact of the coronavirus (Covid-19) pandemic which drove up the unemployment rate. This number had already been cut by half following updates in September; further revisions to the Caged, which now falls under the responsibility of the labour ministry, found that Brazil actually lost jobs in the formal sector last year, with the disappearance of 191,502 posts. The total stock of formal jobs stood at 38.56m in 2020.   

CHILE | Congress approves national budget. On 22 November, Chile’s congress gave final approval to the 2022 national budget, after the bill was returned to the chamber of deputies for approval of changes introduced by the senate. The approved legislation plans for a Cl$60.7trn (US$82.1bn) budget next year; this is a 3.7% increase on the budget approved for 2021, but in reality it represents a 22.5% decrease in real spending, due to extraordinary funds executed this year in response to the coronavirus (Covid-19) pandemic. Chile’s finance minister, Rodrigo Cerda, has said that the approved budget will allow the country to pursue fiscal sustainability, while also re-activating the economy. “The withdrawal of fiscal stimulus and the sustainability of the public finances are central. The budget contemplates the normalisation of fiscal accounts”, Cristina Torres, head of the government’s budget directorate (Dipres), said. Amongst the areas cited as a priority in the 2022 budget are health (with an 11.6% budget increase); children and the elderly (with a 12% increase in the budget of the ministry for social development and family, and a 4% increase in expenses on the elderly, spread across the social development and labour ministries); public investment; and regional development.

Brazil & Southern Cone: Inflation Rate
Percentage variation (year-on-year)

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

The Sistema de Integración de Centroamérica (Sica) concluded that a  basket of basic foods and household products for a family of four cost more in Honduras than anywhere else in Central America. The price of the Sica basket is L$6,678 a month, equivalent to US$350. In the rest of the Central America the same assembly of products costs between US$200 and US$300 a month.

The Sica report, entitled, “Datos de seguridad alimentaria nutricional y agricultura familiar”, contrasted the price of the official baskets of basic products. The finding is affected by the number of products in the basket. One reason why the basic basket costs only US$200 in El Salvador is that this basket contains only 22 products. In Honduras the basket contains 30 products while in Nicaragua and Costa Rica the basket has between 23 and 26. In Nicaragua the basket costs between US$270 and US$280. In Costa Rica the price is US$250.

Hondurans are complaining that prices and the minimum wage are rising in lockstep. The minimum wage went up at the beginning of the year and is now between L$ 4,617 and L$7,144. Some households admit that they are cutting back on food to pay the electricity bill.

The government and the private sector are floating the idea of developing Banasupros. These are mobile supermarkets which will do most of their business in poor areas.

Inflation: In 2011 the inflation rate was officially 5.6% (though the price of the basic shopping basket rose 6.8%) . The official rate was an improvement on the 6.5% rate of 2010.

Moody’s upgrade: The government led by President Juan Carlos Varela is hailing the recent decision by the international credit ratings agency Moody’s Investor Service to change its outlook on Panama to positive from stable. In a statement released on 29 September, Moody’s “affirmed the Government of Panama’s issuer rating and senior unsecured bonds at Baa2 and senior unsecured shelf at (P)Baa2”. It cited two key drivers: “1) Moody’s expectation that the debt trend will improve over the coming years supported by fiscal consolidation and compliance with the fiscal rule; 2) Panama’s GDP growth rate continues to outperform peers, supporting its economic strength.”

The Moody’s statement points out that the Varela government has reduced the non-financial public sector deficit to 1.9% in 2016 from 3.2% in 2014. It also notes that despite strong economic growth and favourable financing conditions, the debt/GDP ratio rose to 39.1% in 2016 from 35.0% in 2013 although the credit ratings agency expects that, “as authorities deepen their fiscal consolidation efforts, the central government deficit will narrow over the coming years supporting a decline in the government debt ratio. Part of the deficit reduction will be driven by the higher transfers from the Panama Canal Authority (ACP) that we expect will average 2.5% of GDP in 2017-20 compared with 1.8% in 2016.”

Moody’s also notes that GDP expanded at an average annual rate of 7.3% from 2007-2016 and it expects that the Panamanian economy will continue to report strong economic growth over the medium term, averaging 5.7% from 2017-2021.

Fourth bridge: On 4 October Panama’s public works ministry (MOP) officially received four proposals for the design and construction of a fourth bridge over the Panama Canal, the biggest infrastructure project since the US$5.2bn Panama Canal expansion was completed in 2016. The proposals came from: Dragados Sucursal Panamá, SA, part of Spain’s ACS Group; Consorcio Panamá Cuarto (comprising China Communications Construction Company Ltd and China Harbour Engineering Company Ltd); Consorcio Astaldi – DAELIM (comprising Italy’s Astaldi SPA and South Korea’s DAELIM Industrial Co., Ltd); and Consorcio Cuarto Puente CSCEC – CREC (comprising China State Construction Engineering Corporation Ltd / China Railway Group Limited).

Competitiveness Report: The most recent World Economic Forum (WEF)’s Global Competitiveness Report 2017-2018, published on 29 September and which assesses the competitiveness of 137 economies, showed Panama dropping eight places in its position since the previous year, to rank 50. This is behind Costa Rica (47, up from 50) but ahead of Guatemala (84, down from 78 the previous year), Nicaragua (93 up from 103), Honduras (96, down from 88), and El Salvador (109, down from 105). Regarding the most problematic factors for doing business in Panama, the WEF report cites “inefficient government bureaucracy” followed by “corruption” and then “inadequately educated workforce”.

FDI up: According to the most recent (August 2017) report by the United Nations Economic Commission for Latin America & the Caribbean (Eclac), foreign direct investment (FDI) to Panama rose 15.9% to US$5.21bn in 2016, a record after four consecutive years of increases, following the upward trend that began in the mid-2000s. While noting that no sectoral data are available for 2016, the Eclac report states that based on past performance, investment in Panama is clearly concentrated in the services sector, which received 91% of inflows on average between 2013 and 2015, primarily in the areas of commerce, financial services, telecommunications and media, and transport. According to the same report, in 2015, the most recent year for which data by origin are available, the US and Colombia were the main sources of investment in Panama, accounting for 23% and 19% respectively, followed by the European Union, with 13%, and South Africa, with 7%.

• GDP up

Panama’s Economy & Finance Minister Dulcidio De La Guardia has reported that Panama’s GDP grew by 5.8% in the first half of the year – an improvement on the same period last year, when GDP growth was 5.2%. The most recent forecast (August 2017) from the United Nations Economic Commission for Latin America and the Caribbean (Eclac) predicts GDP growth of 5.6% for Panama in 2017 – the highest in Latin America and up from the 4.9% registered in 2016.

Some might argue that the concerns that followed Bolsonaro’s election over his authoritarian tendencies and inflammatory language were overblown. Brazil’s democratic institutions have so far contained the president’s most extreme inclinations, blocking his more radical initiatives and calling him and his allies to order when they overstep the mark.

However, there are tangible effects of Bolsonaro’s and his followers’ discourse, wherein anything they oppose or criticise is branded as left-wing, as illustrated by the socio-environmental situation in the Amazon. Bolsonaro speaks repeatedly of exploiting the Amazon’s economic potential, of opening up protected indigenous territories to agricultural and mining activities, and of integrating Brazil’s indigenous peoples into the modern world. He has frequently attacked NGOs and spread lies about environmental activists. He has received illegal wildcat miners in Brasília and promised them he will seek to legalise their activities.

At the same time, his first year in office has seen violence against Brazil’s indigenous peoples rising, with at least 11 indigenous leaders killed in areas of land conflict in 2019 (up from two in 2018). Closely linked to this, in the Amazon illegal activities have been expanding. Deforestation increased by 29.5% in the year to July 2019 and wildfires, largely man-made, surged by 30% over the course of last year. Environmentalists, indigenous activists, and scientists say this is all a clear consequence of Bolsonaro’s narrative.

Journalists are another group which has been the target of repeated attacks from the president. Responding to reports criticising his government and his family, or simply lashing out during press conferences, Bolsonaro has personally attacked individual journalists, attempted to discredit their work, and railed against media outlets in general. He has threatened to revoke the licence of the country’s largest TV network, TV Globo, and failed to renew the government’s subscriptions to all print publications. Brazilian press associations such as the Federação Nacional dos Jornalistas (Fenaj) have raised concerns about the impact this has on the freedom of expression and on democracy – concerns which have been echoed in other quarters every time Bolsonaro tests the limits of the country’s democratic institutions.      

The environment and the international gaze

Brazil suffered three major environmental disasters in 2019: the collapse of a tailings dam in Brumadinho, Minas Gerais state in January, which killed over 250 people, destroyed 112 hectares of primary forest and contaminated 300km of river; a surge in man-made wildfires in the Amazon in August, destroying an estimated 30,000km² of rainforest; and a mysterious oil spill which began washing up oil sludge on Brazilian shores in September, steadily spreading to pollute over 2,000km of coastline.

The Bolsonaro government cannot be held directly responsible for all these events, but its response, especially on the latter two, has been deemed slow and lacking. While environmental concerns and efforts to contain climate change are gathering importance internationally, Brazil has gone the other way, with Bolsonaro appointing an environment minister, Ricardo Salles, who is overtly anti-conservation.

The Amazon fires in particular drew the attention of international leaders and civil society, prompting worldwide demonstrations against Bolsonaro’s environmental policies (or lack thereof) and campaigns for consumer boycott of Brazilian products linked to deforestation. Neither Bolsonaro nor Salles show any sign of having heeded these warnings. The only scenario in which a shift in their environmental policy is likely is if Brazilian agribusiness begin to feel seriously threatened and exercise their influence over the government.  

CHILE | Positive economic indicators despite pandemic. Despite having one of the most efficient vaccine rollouts in the world, Chile has also suffered a surge in coronavirus (Covid-19) cases this year which forced the government to reinstate lockdowns and cast doubt over the domestic economy’s incipient recovery [EB-21-06]. However, a series of economic indicators for the month of May point towards a solid performance despite the ever-present virus. On 1 July, Chile’s central bank (BCCh) released the latest figures for the index of economic activity (Imacec), which exhibited 2.6% growth month-on-month and a strong 18.1% expansion year-on-year in May. The previous day, data released by the national statistics institute (INE) showed that the unemployment rate is improving, falling to 10% in the March-May rolling quarter, down from 11.2% a year earlier and 10.2% in the December 2020-February 2021 rolling quarter. Meanwhile, other data released by INE show a strong year-on-year performance in the industrial sector, with industrial production growing 3.5% in May, and in the retail sector, with the index for commercial activity growing 47.6% year-on-year that month. This strong year-on-year performance across different sectors and indicators is in part due to the low basis of comparison, resulting from the economic shutdown in place in May 2020 as a result of the Covid-19 pandemic, as well as the better adaptation of households and businesses to the effects of the public health crisis.

URUGUAY| Exports perform strongly. On 1 July, the union of Uruguayan exporters (UEU) released figures showing that the export sector has seen a solid performance this year so far. Applications for the export of goods in June totalled US$944m (without accounting for the customs free zones), up 34.6% on the same month a year earlier, while applications for exports over the first six months of the year grew 33.4% compared with January-June 2020, to total US$4.39bn. Sales to China and Brazil, the two top destinations for Uruguayan exports, helped drive this trend, with June exports increasing 160.5% year-on-year for the former, and 49.3% for the latter.   

Brazil & Southern Cone: Inflation
Monthly year-on-year figures

According to the UN’s Economic Commission for Latin America and The Caribbean (ECLAC), the region will experience modest growth of 1.3% in 2017, aafter two consecutive years of economic contraction

In its Preliminary Overview of the Economies of Latin America and Caribbean 2016, released on 16 December, the Commission again reiterated a call for revived public-private investment in order to resume short- and long-term growth and to “confront the risks and growing uncertainties posed by the international scenario”.

“We are at a turning point. Latin America and the Caribbean will resume growth but moderately and without clear engines driving it. Its recovery will be fragile as long as the uncertainties of the economic context continue, particularly the recently observed protectionist trends. For this reason, resuming the path of regional growth requires much caution and a reversal of the investment process dynamic, which will demand a significant mobilization of financial resources,” stated Alicia Bárcena, ECLAC executive secretary since 2008

On ECLAC’s preliminary calculations, the region will post an average contraction of 1.1% in 2016. South America will again be the worst affected sub-region, with a decline of -2.4% year on year, while the Caribbean will contract by 1.7%. Central America and Mexico, by contrast, will register positive growth of 2.4%.

The report makes the point that urban unemployment rate has been rising and could end 2016 at 9% – much higher than the 7.4% recorded in 2015. This is due to a decline in the employment rate, as well as to an increase in the labour force participation rate; meaning that more people are looking for work, and more young people are entering the labour force.

Inflation, meanwhile, continues to vary between the sub-regions but overall the trend is upwards as regional currencies depreciate against the strengthening US dollar. In South America, inflation was 10.9% in September 2016, up from 9.2% in September 2015. Accumulated inflation (over 12 months) in Central America and Mexico was 3.4% in September 2016, from 2.5% in September 2015.

Looking ahead, ECLAC says that stronger external demand will benefit the region in general next year, in addition to a recovery in intra-regional trade thanks to an improved performance in the economies of South America (namely Argentina and Brazil). Nevertheless, the Commission notes that the uncertainties of the international context will have differentiated effects on the individual countries and sub-regions, “which will accentuate sub-regional differences based on the productive and trade orientation of their economies”. And furthermore, while the ECLAC continued expansive monetary policy by the European Central Bank and the Bank of Japan through the end of 2017, it warns that the normalisation of US interest rates “could entail a readjustment in financial asset prices, financial volatility and increased financing costs for the region”.

In terms of growth forecasts, the report notes that improved commodities prices will benefit the terms of trade for South America, helping the sub region to a moderate GDP rebound of 0.9% in 2017, while tourism will support growth of 1.7% in the Caribbean. Central America, meanwhile, is forecast to expand by 3.7%. By contrast, ECLAC expects Mexico to post growth of just 1.9% in 2017, down a little from 2% this year, amid continuing uncertainty over the evolution of the US-Mexico relationship under the incoming US president, Donald Trump.

In terms of the shifting global winds towards protectionism, the report notes that “recent protectionist trends, amid complex financial and economic growth dynamics, have raised new uncertainties and risks regarding the future of the global economy. These trends reflect the mounting tensions and difficulties in reconciling and coordinating national policy emphases and aims with the institutional arrangements governing international movements of goods and services, finance and capital, technology and migration in a globalized world.”

“In this context”, it continues, “global trade —following the questioning of free trade agreements such as the Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA)— is not the only area of tension. The value chain dynamics of global manufacturing, as well as technology mobility, will also be affected. Multilateralism could well be weakened by a stronger tendency towards bilateral agreements on trade and investment”. Mexico and Central America, it noted, would be “singularly affected” by the possible renegotiation of NAFTA and other US trade agreements.

EXTERNAL SECTOR 2016 – ECLAC SUMMARY

• In 2016, the terms of trade fell by much less than in 2015, although hydrocarbon exporters are still facing substantially lower export prices

• The balance-of-payments current account deficit narrowed sharply (from 3.4% to 2.2% of GDP, or US$104.8bn), mainly owing to a reduction in the deficit on the goods account (to US$9.8bn, from US$52.9bn in 2015), although all components of the current account contributed.

• The reduction in goods imports has generated a significant improvement in the goods balance in 2016.

• Net financial flows received by Latin America in 2016 were 17% smaller than in 2015; but they were more than sufficient to cover the current account deficit, so the region as a whole accumulated international reserves. FDI was broadly stable at about US$134bn.

• International reserves increased slightly (by 2.1%) in the first 11 months of 2016 relative to the end of 2015. However, they remained below their 2014 level. Reserves increased in 22 of the region’s economies, with the largest rises occurring in Ecuador (61.6%), Argentina (46.9%), Saint Kitts and Nevis (22.3%), Dominica (25.0%) and El Salvador (25.0%). Meanwhile, reserves contracted in 10 countries, most notably Venezuela (28.2%), Bolivia (20.3%), Belize (-14.7%) and Uruguay (11.7%). Among those countries with the highest levels of international reserves, Brazil and Chile posted increases of 2.6% and 2.1%, respectively. As such, the region’s ratio of reserves to GDP rose for a fourth consecutive year to 17.7%.

• External bond issues by Latin American and Caribbean countries in the first 10 months of 2016 were up by 55% on the year-earlier period. The region’s sovereign risk, which peaked at 677 basis points in January 2016, had fallen to below 500 basis points by late October.

• The real effective extra regional exchange rate of 18 countries in Latin America and the Caribbean depreciated by an average of 1.9% in the first 10 months of 2016, relative to the same period of 2015. The economies of South America experienced an effective depreciation against the rest of the world of 1.5%, while there was a 2.2% aggregate depreciation in the other sub regions (Central America, the Dominican Republic, Mexico and the Caribbean), heavily influenced by an effective depreciation of 14.7% in Mexico.

Given the still uncertain global scenario for 2017, ECLAC recommends that regional governments continue fostering investment through countercyclical economic policies, with productivity gains in addition to “active fiscal measures and smart adjustments”. It also calls for reducing tax evasion and avoidance (which totals 6.7% of regional GDP), safeguarding public spending, revising subsidy structures (especially for fuel) and incentives, and reorienting measures to promote investment and essential social spending. “The challenge of the big environmental push proposed by ECLAC lays the strategic framework for investment opportunities and innovation,” Barcena stressed.

Latin America and the Caribbean: annual growth in gross domestic product, 2011-2017