All Categories

The Turks & Caicos Islands (TCI) have returned to self-government after three years of direct rule from the United Kingdom, but only after a messy general election that is still being challenged. In the meantime, another British Overseas Territory, the Cayman Islands, has been threatened with direct rule and has had to backtrack fast in a dispute with the mother country over good governance.

The Progressive National Party (PNP) looked to have been returned to power in the 9 November TCI general election. The suspension of home rule three years earlier had followed the completion of the Sir Robin Auld Commission of Inquiry, which found that there was “a high probability of systemic corruption in government and the legislature and among public officers in the Turks and Caicos Islands in recent years”. In the 2007 general election, the PNP easily beat the Progressive Democratic Movement (PDM) to win by 13 seats to 2. The 9 November contest was much closer, with the initial count giving the PNP a victory by 8-7.

Five of the 15 seats are decided by “At Large Votes”, with 10 being contested in traditional constituencies. The “At Large Votes” had to be recounted on the insistence of PDM leader Oswald Kippings. But when that failed to alter the results, a challenge was mounted by the PDM candidate Oral Isaac Selver in Electoral District Number 7, on the grounds that third-party candidate Edward Smith of the Peoples Progressive Party (PPP) had failed to declare his US citizenship. Smith had garnered just 58 votes, but these were important in a contest that was won by the PNP’s Amanda Missick by only 30 votes.

Attorney-General Huw Shepheard has agreed that a failure to declare US citizenship by one of the candidates could lead to the declaration of the election in that district as void and the holding of a by-election. However, he added: “The legal position is that a member of the House of Assembly continues to be a member until the petition has been heard and determined. The government therefore continues on its existing basis. If the petition is successful, the member will cease to be a member of the House of Assembly and there will be a by-election.”

A further challenge has been launched in Electoral District Number 4 by the PDM candidate, Ashwood Leon Forbes, alleging that the election supervisor failed to remove disqualified voters from the electoral register and to register some who were qualified. Allegations being bandied about include intentional malpractice. Local media have quoted “a former police officer” as saying: “There has been an all out move to control the results of this district’s elections.”

The challenges have brought reminders of the 2003 election which was initially won by the PDM by 7-6 in a 13-seat contest only for the result to be reversed by the PDM’s loss of two sets in by-elections. However, despite the possibility that the election result could be reversed, there is pressure on UDM leader Oswald Skippings to resign, having only taken over as party leader in June.

Skippings’ position is greatly weakened by his own failure to secure one of the seats allocated on the basis of “at large” votes. The fact that he then blamed the UDM for his personal failure has not endeared him to the party faithful. The feeling is that the UDM should have performed much better against a party that was ousted from power by the UK for mismanagement and corruption.

One of the issues on which the PNP campaigned was the cancellation of the introduction of value added tax (VAT), which is due on 1 April 2013. Simmonds confirmed to the UK parliament on 15 November that the introduction of VAT was “a decision for the Turks and Caicos Islands government”.

At the same time as TCI was making its rather wobbly return to home rule, another British Overseas Territory, the Cayman Islands (CI), was facing the threat of direct rule from the UK over governance issues. The row was over the so-called Framework for Fiscal Responsibility (FFR) that had been agreed between the UK government and the CI government led by Prime Minister McKeeva Bush but which Bush was proposing to present to the CI parliament in modified form.

In a spectacularly undiplomatic public exchange, the UK minister with responsibility for the CI, Mark Simmonds, wrote to Bush saying: “To transpose a version of the FFR which does not accord with that which you signed is not acceptable”. He said that should Bush continue with his proposed course of action, the UK government would have “no choice but to conclude that you are disregarding good governance and continue to be in breach of a series of commitments you have made”. The minister then warned that a “continued breach” of commitments to good governance would leave the UK with “no alternative but to give detailed consideration to alternatives”. This was widely – and no doubt correctly – interpreted as meaning that if Bush was not careful the Cayman Islands would suffer the same fate as the Turks and Caicos Islands.

In the event Bush capitulated, but the collateral damage included the sidelining of a deal between the CI and the China Harbour Engineering Company (CHEC) for a new cruise-ship terminal in Grand Cayman because of UK concerns that proper procedures had not been followed.

CHEC, while being careful to recognize the UK’s right “to require a specific type of process”, let it be known that it felt hard done by. The regional director, Zhongdong Tang, argued that CHEC’s involvement followed the failure of a previous tender process and that it was perfectly normal for direct negotiations to follow such a failure. Furthermore, he said, CHEC had spent a large sum of money on evaluation, design, and other preliminary matters and had handed over a lot of propriety data to the CI’s negotiating team which, he insisted, must not be made available to any future successful bidder on the project. Tang also warned that delays brought about by the termination of the negotiations would inevitably lead to extra costs for the CI.

In what has not been an easy month for the Bush government, forecast growth for this year has been revised down by the Economics and Statistics Office (ESO), in its Semi-annual Economic Report, from 1.8% to 0.8%. According to the ESO: “This downward revision of the country’s economic growth is due to lower-than-expected growth in air arrivals, continued lacklustre financial services indicators, slower than anticipated implementation of public-private partnership construction projects, and contraction of government expenditure coupled with higher fees.”

However, lower growth also means lower inflation, and the forecast has been revised down to 1.7% from 2.1%. Unemployment is forecast to reach 6.3%, marginally up from the earlier forecast of 6.2%.

There was rather better news in late October when Cayman Islands was voted, for the fourth year in a row, the top Specialized Finance Centre in The Banker magazine’s 2012 survey. The CI comfortably beat Guernsey, by a score of 42.59 to 34.48, and Cyprus in third place on 34.42. The CI’s dominance was attributed to a combination of “nimbleness” with “a solid regulatory framework”.

• “Attorney-General Huw Shepheard has agreed that a failure to declare US citizenship by one of the candidates could lead to the declaration of the election in that district as void and the holding of a by-election. However, he added: “The legal position is that a member of the House of Assembly continues to be a member until the petition has been heard and determined. The government therefore continues on its existing basis. If the petition is successful, the member will cease to be a member of the House of Assembly and there will be a by-election.”

• There was rather better news in late October when Cayman Islands was voted, for the fourth year in a row, the top Specialized Finance Centre in The Banker magazine’s 2012 survey. The CI comfortably beat Guernsey, by a score of 42.59 to 34.48, and Cyprus in third place on 34.42. The CI’s dominance was attributed to a combination of “nimbleness” with “a solid regulatory framework”.”

FDI up: According to figures released last month by Guatemala’s central bank (Banguat), foreign direct investment (FDI) into Guatemala reached US$1.3bn in 2013, up 5.1% on the US$1.2bn reported in 2012. According to Banguat, the agriculture & mining sector accounted for the biggest (37.3%) chunk of FDI, followed by trade (17%); and energy (14%). The main sources of FDI were Canada (heavily involved in the mining sector), which accounted for 21% of FDI inflows, followed by the US (16%), Russia (14%) and Colombia (13%).

Gas pipeline to Mexico: On 30 April Guatemala’s President Otto Pérez Molina and his Mexican counterpart, Enrique Peña Nieto, signed an agreement to construct a US$800m gas pipeline which will stretch some 600kms and supply gas to Southern Mexico and Guatemala. The agreement was inked on the side-lines of the VI Summit of the Association of Caribbean States (ACS), which took place in Mexico on 29-30 April. A press release by the Guatemalan presidency cited Guatemala’s energy & mining minister, Érick Archila, as stating that Guatemala would stump up some US$200m for the first phase of the project, which will begin in Tecún Umán in the Guatemalan department of San Marcos and continue to Escuintla, on the Mexican border. According to the same statement some of the funding for the project, which could be completed “by 2018 or 2019”, could come from a loan from the Inter-American Development Bank. In January Guatemala’s economy minister, Sergio de la Torre, said that the pipeline could cut energy costs by up to 75% and would provide local manufacturers with access to cheaper energy. The announcement of the plan follows a 13 January visit to Mexico by Guatemala’s foreign minister, Fernando Carrera, where he met his Mexican peer, José Antonio Meade Kuribreña, and the two agreed to promote bilateral trade and investment.

• Fuel imports

According to figures from Guatemala’s energy & mining ministry cited in the local press on 5 May, Guatemala spent US$904.2m on fuel imports in the first three months of 2014, up 12.7% on the comparable period last year. Reducing energy costs is a major priority for the government led by President Otto Pérez Molina.

The unilateral US decision on 31 May to impose steel and aluminium tariffs on Mexico, Canada, and the European Union (EU) appears to have delivered a major blow to attempts to renegotiate the North American Free Trade Agreement (Nafta). It is now almost certain that there will be no Nafta deal before the Mexican presidential elections on 1 July.

Before the tariff announcements, the Nafta negotiations, which began in August last year, were already looking troubled. On 17 May US Trade Representative Robert Lighthizer said Nafta members Canada, Mexico, and the US were “not even close” to an agreement, remaining far apart on a range of issues including intellectual property, access to agricultural markets, labour, and energy. The parties were separately reported to be still at odds over vehicle content rules in the automobile industry. Significantly, 17 May was a missed deadline – the last date for an agreement to be registered for approval by the current, Republican party-dominated US Congress.

Despite that, on 24 May Mexican President Enrique Peña Nieto said he remained optimistic that a deal to renegotiate the 1994 Nafta treaty would eventually be done. The following day Mexican economy minister Idelfonso Guajardo, who has led his country’s negotiating team, said he believed there was a 40% chance of reaching an agreement before 1 July (the date of the Mexican presidential elections). If that deadline was missed, Guajardo claimed there was much better “80% chance” that a deal would be done before the US mid-term congressional elections in November.

Yet prospects for a deal worsened dramatically on 31 May when the US said that effective from midnight that day, it was imposing respectively 25% and 10% ad valorem tariffs on steel and aluminium imports from Canada, the European Union (EU) and Mexico. The US had also earlier announced a so-called Section 232 investigation into whether imports from around the world are harming its automobile industry. These decisions appear to have convinced the country’s Nafta partners that it is moving in a protectionist direction, fundamentally at odds with the concept of a free trade agreement. Both Canada and Mexico immediately announced retaliatory measures. Canada, the largest supplier of steel to the US market, said it would impose tariffs on US$12.8bn worth of imports from the US, including whisky, orange juice, steel, aluminium and other products.

Mexico announced what it described as “equivalent” measures on imports from the US of pork legs, apples, grapes, cheese, steel and other products. The products appear to have been carefully chosen, targeting exports from US states that supported Trump in the 2016 election. Guajardo said the Mexican response was “appropriate and proportional”. “It sends a clear message that this kind of thing does not benefit anybody,” he said, adding that “In the end the effect will fall on voters and citizens that live in districts where the people have a voice and vote in the US Congress.” Officially, however, Mexico said it would continue negotiating with the US on a new Nafta agreement, despite the “unjust and unilateral” measures announced by Washington. Uncertainty over the future of Nafta was increased further when US President Donald Trump suggested on 1 June that his country might seek to replace it with two separate trade agreements, one with Canada and another with Mexico.

The new president of Honduras, who takes office in January 2022, is poised to take over a country facing massive economic challenges.

One key measure of the situation is the percentage of households living in poverty, which rose to a shocking 73.6%, according to a report from the national statistics institute (INE) published on 8 November. The report was quickly changed, using what INE called an “alternative methodology” to reach a figure of 60% of households living in poverty, sparking criticism from commentators who took the original figures to be correct. According to the original figures, the poverty rate is higher in rural areas (76%) than urban areas (71.8%) and can be explained by the fact that household incomes are lower than the cost of a basic selection of everyday goods. Criticism rained down from various sectors, with Honduran economist Julio Raudales, of the Universidad Nacional Autónoma de Honduras (UNAH), pointing out that poverty rates have regressed 30 years.

Eduardo Facussé, president of the Cortés department chamber of commerce and industry (Ccic), called the report “devastating,” adding that Honduras is “destroyed” and calling public and economic policy by an “inept and incompetent government a “complete disaster”. Facussé said that “higher taxes and higher debt” have been “completely ineffective”.

Speaking to Radio Honduras on 31 October, Luis Guifarro, ex-president of the association of economists (CHE), said public policy and government programmes have not been consistent, and previous governments have not had a vision as to how to solve the country’s problems. “Reducing emigration and poverty has not been tackled, nor have crucial areas such as education and health been prioritised,” said Guifarro, who also highlighted a lack of job opportunities for the estimated 250,000 people who enter the labour market each year. Honduras does not offer the right conditions to attract investment, and corruption is entrenched, said Guifarro.

These are huge long-term issues that must be confronted by Xiomara Castro, who won a decisive victory in the 28 November general election for the leftist opposition Partido Libertad y Refundación, when she takes power on 27 January (see our sister publication, the Latin American Weekly Report, for further discussion of the election). In recent years Honduras has been battered by the coronavirus (Covid-19) pandemic and the effects of hurricanes Eta and Iota in November 2020. The economy contracted 9% in 2020 but will rebound to grow 8-9% in 2021, according to the central bank (BCH). However, the International Monetary Fund (IMF) predicts that GDP growth will be 4.4% in 2022, compared to 2.7% in 2019 and 4.8% in 2018. Institutional weakness and corruption was a problem before the Partido Nacional (PN) government of President Juan Orlando Hernández came to power in 2014, even if analysts agree that his rule has worsened the situation. Cleaning up government is perhaps the single most important thing for the new administration to do, but it’s not easy to do. It will be even harder when poverty rates are increasing, as voters will expect the government to prioritise immediate action to improve their daily lives, rather than technocratic efforts to improve governance in the long-term.

• Key policies

In her manifesto, Castro’s standout pledges include plans to repeal the law of the employment and economic development zones (Zedes), a contentious PN project [EB-21-08]; and to establish diplomatic and trade relations with mainland China (and sever ties with Taiwan) to address Honduras’ rising debt (which totalled 58.9% of GDP in 2020, up from 48.7% in 2019). END BOX

• FDI

According to an August 2021 report by the United Nations Economic Commission for Latin America and the Caribbean, Honduras attracted just US$224m of foreign direct investment (FDI) in 2020, a reduction of 76% on the previous year and barely one-fifth of the country’s average inflow of the last 10 years. The reduction is significantly more than the 34.7% average reduction in FDI to Latin America & the Caribbean as a result of the pandemic.

Bumper coffee harvest. El Salvador’s coffee exports for the 2010-2011 coffee harvest totalled US$458.2m. It was the best harvest for 11 years, according to the Consejo Salvadoreño del Café (CSC), and the industry was able to cash in as prices on the international market were also high. Total earnings from the coffee year, which extended from 1 October 2010 to 30 September 2011, were up 139.3% on the same period a year earlier. Total exports by volume amounted to 2.26m quintals (1 quintal = 46 kilos), up by 74% on the previous year. The average price per quintal was also up, from US$147.3 to US$202.7 over this period.

The main importers of Salvadorean coffee are the US (36.1%); Germany (29%); Japan (9.1%); and Canada (6.8%).

The remittance drug. El Salvador is becoming “addicted to remittances”, according to the deputy minister for Salvadoreans abroad, Juan José García. Remittances account for nearly 17% of El Salvador’s GDP, rising to as much as 70% of GDP in some areas, such as the Bahía de Jiquilisco on the Pacific coast, García pointed out at a recent event organised by the US thinktank the Brookings Institute and the Central American Bank for Economic Integration (Cabei).      

García claimed that the situation was unsustainable, and that the government of President Mauricio Funes was endeavouring to persuade Salvadorean businessmen living abroad to invest in infrastructure projects in the country instead. Like any drug, it will be difficult to break El Salvador’s dependence on remittances, which almost cover the country’s trade deficit, unless the government can encourage expatriates to return. This, however, would require an improvement in public security and economic growth prospects, neither of which looks imminent.

El Salvador received US$2.71bn of remittances in the first 10 months of 2011, up 5.3% on the same period last year, the central bank reported. This despite the high unemployment rate in the US where the majority of El Salvador’s 2.8m expatriates live. In 2010, remittances amounted to US$3.43bn, equivalent to 16.3% of GDP or 79.1% of total exports.

 *** BARROW WINS ELECTORAL GAMBLE IN BELIZE. On 7 March, Prime Minister Dean Barrow’s United Democratic Party (UDP) won the early general election by 17-14 seats, defeating the main opposition People’s United Party (PUP). The gamble of calling an early election paid off, but at the cost of reduced representation from 25 seats in the outgoing parliament. Fought largely on economic issues (see sidebar), the election also saw the UDP retain control of six of the nine municipalities - including the capital, Belmopan, and Belize City.

*** TRINIDAD RESHUFFLE EXPECTED. There is an expectation in Trinidad that Prime Minister Kamla Persad-Bissessar will reshuffle her cabinet in early May following ruling United National Congress (UNC) internal elections on 24 March. Among those thought likely to be reshuffled is Finance Minister Winston Dookeran. Works Minister Jack Warner overwhelmingly won the vote for the chairmanship of the UNC and, shortly after his victory, was asked to join the National Security Council to help develop national security policy. Warner is a controversial figure who was forced out of FIFA, the world football governing body, as a result of corruption allegations. Security is a key issue for the prime minister who has been criticized for introducing a state of emergency. Another serious challenge for the government is inflation, with food inflation topping 20% in February up from 14% in January.

*** FREE MOVEMENT FOR THE OECS. The director-general of the Organization of Eastern Caribbean States (OECS), Dr Len Ishmael, has said that by June, all the legislative amendments needed to provide for full free movement throughout the OECS will be in place. Dr Ishmael said: “It is important for us, now, within our space, to make full use of that single space not as a St Lucian businessman, but an OECS businessman with a right to establish pan-OECS businesses across the OECS and also to integrate production lines across the OECS so that different components can in fact be built across the OECS the way it is in different parts of the world.” The OECS members are Antigua & Barbuda, Dominica, Grenada, Montserrat, St Kitts & Nevis, St Lucia, and St Vincent & the Grenadines. Anguilla and the British Virgin Islands are associate members.

*** BAHAMAS ENHANCING FLEET. Prime Minister Hubert Ingraham has announced major new purchases for the Royal Bahamas Defence Force fleet. Speaking at the beginning of April, he said that the Defence Force needs to be “totally refitted”. He announced the upcoming purchase of 11 boats and two aircraft and an increase in manpower. The Defence Force has responsibility for 100,000 square nautical miles of ocean. At present, the Defence Force has 25 vessels and three aircraft. The package of 11 new vessels will comprise four 60-foot vessels, four 100-foot vessels, and two 140-foot vessels plus a landing craft.

*** GUYANA GOLD SECTOR BOOMING. Guyana’s mining and quarrying sector grew by 19.2% in 2011, with the gold sector recording an advance of 17.7%. Further growth is expected in 2012 following an investment of US$100m in the sector in the past year.

•  Belize debt

The election was dominated by economic issues, with voters ultimately undeterred by the uncertainty caused by Barrow’s decision to make renegotiating debt servicing on the government’s US$546.8m ‘superbond’ his main campaigning point; his announcement regarding the bond, equal to half of Belize’s public debt (which altogether hovers at 80% of GDP), had caused international jitters. Barrow has already said his new agenda will prioritise renegotiating Belize’s external debt.

The ruling Partido Liberación Nacional (PLN) of President Laura Chinchilla entered into an alliance with the Partido Accesibilidad sin Exclusión (Pase) just one week before the 1 May vote to elect the new national assembly (AL)’s directorate. The move ensured that: a) the government would avoid a second historic embarrassment [RC-11-05]; and b) the opposition coalition that controlled the directorate in the 2011-2012 period had to face up to the fact that it was an electorally motivated alliance and not a grouping that formed as a result of common policy goals.

The PLN has 24 deputies, while Pase and its Christian allies (Renovación Nacional [RN] and Renovación Costarricense [RC]) have six – four and two respectively. Thus the PLN-Pase alliance secured 30 votes, one more than necessary to seize control of the directorate. However, as part of the arrangement, the PLN ceded the most important posts to the other parties. On the day, Víctor Emilio Granados (Pase) became the new president of the AL. The rest of the directorate will include: Martín Monestel (Pase) as vice-president; Rita Chaves (Pase) as first secretary; Xinia Espinoza Espinoza (PLN) as second secretary; Carlos Luis Avendaño (RN) as first assistant secretary; and Justo Orozco Alvarez (RC) as second assistant secretary.

The PLN secured control over 19 of the 21 congressional committees, but the new arrangement in the AL will not necessarily translate into the end of legislative stalemate. While the new alliance will be able to pass regular laws, in order to pass special legislation or call a ‘vía rápida’ period, like the one used to discuss the (now defunct) government’s fiscal reform bill in March, the coalition would need 38 votes.

PLN still dominates at the municipal level

Elections were also held by the directorates of municipal councils on 1 May. Although for a second election running, the PLN saw its power decrease in municipal councils, losing the presidency in six of them, it is still the most powerful party at a local level. It maintained control over 43 councils, or 53% of all 80 municipalities. The elections for the presidency of the local councils take place every two years. The PLN has progressively lost power in each contest since 2008, when it controlled 78% (or 63) of all municipalities; in 2010 its share of power decreased to 60% (or 49 municipalities).

According to the national union of local governments (UNGL), some of these losses correspond to previously agreed power-sharing arrangements, whereby the PLN would abandon its bid for a renewed presidency in 2012 in exchange for another party’s support in the 2010 election. The other political outfits secured the presidency of: 13 municipalities for the Partido Acción Ciudadana (PAC); nine for the Partido Unidad Social Cristiana (PUSC); four for Movimiento Libertario (ML); two for Alianza Patriótica; two for RC; and one for Pase. Five municipal parties gained control of the council in their respective jurisdictions – Alajuela, Palmares, Abangares, Montes de Oro and Curridabat.

PLN won and lost in San José’s municipal council

It could be described as a ‘battle of the sexes’. The race for the directorate of the municipal council of the capital district found the PLN divided along political lines and the overall legislative body along gender lines.

In one corner of the ring stood Sonia Zamora, who left the PLN’s bloc four months ago and was backed by all female council members and one man – the libertarian Olger Lawson; in the other corner stood Luis Murillo, also from the PLN, who was backed by the male council members.

In the end, Zamora came out on top, securing seven votes when only six were needed. Lawson also secured the backing of the coalition (PLN, PAC, Pase and ML) to be elected vice-president of the council. Mayor Johnny Araya missed the session as he is out of the country on holiday. 

• Controversial AL leader

Víctor Emilio Granados (Pase) is an attorney who helped co-found Pase in 2004. In 1989, he was found guilty of fraud in a case involving Banco Nación, for which he served a jail sentence. His candidacy had been questioned by some members of the AL, but the party president, Oscar López, insisted that “Granados is a trustworthy man who reinvented himself 23 years after having made a mistake”.

The Frente Sandinista de Liberación Nacional (FSLN)-controlled 92- member unicameral legislature last month elected two new magistrates to the seven-member supreme electoral court (CSE) after their predecessors resigned. The appointments to the CSE – one of the country’s least credible institutions -  attracted particular attention ahead of the November 2016 general elections in which President Daniel Ortega is seeking a third consecutive re-election.

After Johnny Tórrez and José Luis Villavicencio quit in January (for undisclosed reasons), Norma Moreno Silva and Mayra Salinas Uriarte were sworn in on 18 February for five-year terms following their election by 64 votes. Like their predecessors, both Salinas and Moreno have strong ties to the ruling party. Moreno is the sister of Fidel Moreno, the FSLN political secretary for the Managua mayoralty. She was also a member of the youth branch of the FSLN, Juventud Sandinista, and the founder of the Asociación de Niños Sandinistas Luis Alfonso Velásquez, a Sandinista organization for children. Until she was proposed as a candidate for the CSE, Moreno acted as Nicaragua’s ambassador to Argentina and Paraguay, a post which she had held since 2013.

Salinas also has close links to the FSLN, serving as co-director of the Institute of Culture since August 2015, when she was dismissed from her position as president of Nicaragua’s tourism office (Intur), a post that she had held since 2013. According to Nicaraguan opposition daily, La Prensa, Salinas’ dismissal from Intur was related to differences with powerful First Lady and official government spokesperson Rosario Murillo. La Prensa also notes that the tourism portfolio had suffered under Salinas’ watch with the average daily spending of foreigners in Nicaragua in mid-2015 put at US$40.7 compared with US$42.4 during the same period of 2014. During the first half of 2015, new investment projects for the tourism sector totalled US$22m, a significant decrease on the more than US$60m invested in the sector in the first half of 2014.

Concerns regarding the electoral process

In its report on the last (November 2011) elections, in which the FSLN won 62 legislative seats, up from 38 in 2006, while the Partido Liberal Independiente (PLI) won 26 and the Partido Liberal Constitucionalista (PLC) of disgraced former president Arnoldo Alemán (1997-2002) took just two, the European Union electoral observer mission (EU EOM) raised serious concerns which have yet to be addressed.

These mainly centred on the “lack of transparency and neutrality” of the CSE whose president Roberto Rivas has been in the post since 2000, overseeing three elections in which the FSLN has secured clear victories (notwithstanding widespread allegations of fraud).

In its report, the EU EOM notes that “while the CSE is composed along the principle of political representation, the loss of neutrality came about as a result of a progressive abandonment of pluralism in the appointment of its magistrates, who leaned ever more clearly towards the ruling party. This virtually one‐party composition was reflected in the composition of the electoral administration’s representations at lower levels, in the regional, departmental and municipal electoral councils (CERs, CEDs and CEMs), as well as among the polling station staff, as in all of these opposition representatives were systematically excluded or sidelined.”

The EU EOM cites as examples of this lack of neutrality, the CSE’s refusal to accredit observers from two established organisations, Instituto para el Desarrollo y la Democracia (Ipade) and Hagamos Democracia in the 2011 elections as well as “a widespread and systematic use of public resources for campaign purposes”, which is prohibited by article 107 of the electoral law.

• Ortega’s approval down

The most recent poll by Cid Gallup, published in investigative publication, Confidencial on 27 January, gave President Daniel Ortega just 57% approval, down from 77% in 2014. A respected local political commentator, Manuel Ortega Hegg, attributed the decline in part to disillusionment with the US$50bn ‘Gran Canal’ initiative that is to link the country’s Caribbean and Pacific coasts, which has generated widespread protests. The Cid Gallup poll, which interviewed 1,029 people across the country, showed the Frente Sandinista de Liberación Nacional (FSLN) with 57% approval, the Partido Liberal Constitucionalista (PLC) with 4% and the Partido Liberal Independiente (PLI) with 2%, while 35% refused to align themselves with any party.

After a decade at the helm, Rafael Correa stood down from the presidency in late May, when his elected successor Lenín Moreno was inaugurated. Moreno, also of the ruling left-wing Alianza Pais (AP), has indicated a likely change in style under his leadership, but questions remain about the extent to which official policy will shift under a new administration. Moreno’s cabinet appointments have fuelled this speculation, with a mixture of new faces and party stalwarts.

The inauguration ceremony took place on 24 May at the national assembly, in which the AP retains a majority, with 74 of 137 seats. Immediately, the new president was at pains to gently emphasise that his governing style would be rather different to that of his predecessor, the charismatic but highly combative Rafael Correa (who critics also accused of having an autocratic bent).

Moreno immediately scrapped the president’s weekly ‘Enlace Ciudadano’ broadcasts on state media, which Correa regularly used to broadcast pro-government propaganda. Moreno simultaneously extended an olive branch to the media, which had suffered from an erosion of press freedom under Correa. Notably, the new president has announced plans to reform the 2013 communications law, which gave huge powers to a state-run watchdog to clamp down media coverage critical of the government.

The newly-appointed cabinet seeks to strike a balance between asserting Moreno’s independence – through the appointment of a variety of new faces – while also respecting the Correa legacy, retaining a number of AP loyalists who remain close to Correa. This latter group includes the vice president, Jorge Glas, as well as María Fernanda Espinosa (foreign minister), Paola Pabón (head of political management), Fánder Falconí (education minister), Verónica Espinosa (health minister), Medardo Cadena (electricity minister), and Javier Córdova (mining minister).

Technocrats give renewed hope of change

However, the new faces include several industry professionals, including Carlos Pérez – a former international oil executive who served as Ecuador’s country manager for US oil firm Halliburton – who Moreno invited to lead the energy ministry. Meanwhile, Pablo Campana, the new foreign trade minister, hails from a career in the private sector, as the president of real estate company, Millenium Partner Corporation. Other appointees to economy-related portfolios have significant private-sector experience as well, including Eva García Fabre (the new industry minister), an economist and Ecuador’s former representative before the World Trade Organisation (WTO) and Enrique Ponce de León (the tourism minister), who was previously the head of Decameron Ecuador, a hotel chain with investments in tourism projects.

However, there is significant uncertainty over the extent to which economic policy orientation will actually shift under the Moreno team. The election campaign was relatively short on specific details, with Moreno talking loosely about plans to increase social spending, cut poverty and ‘engage’ the private sector in negotiations. Given the weak economic backdrop, with GDP stagnating in 2015 and contracting in 2016, realising these objectives might be difficult, particularly given that oil prices remain fairly low. Moreno has reportedly already held discussions with World Bank officials about how to finance his social spending plans and has also announced some downsizing in terms of the public sector, in an effort to trim administration costs.

With the fiscal deficit already large (running at over 5% of GDP for the past few years) and large-scale borrowing under Correa lifting the public debt burden, there is little scope for Moreno to engineer a State-led recovery. As a result, boosting growth may require a significant increase in foreign investment, but in turn this will require structural improvements to the business environment, potentially including tax and labour reforms, a better competition policy, a scaling back of State dominance in key sectors and a better track record in terms of public-public partnerships (PPPs).

While Moreno seems more willing to talk to foreign investors, there is little sign of much political will in the AP for a fundamental shift in the underlying policy approach. According to the World Bank, foreign direct investment (FDI) as a share of GDP is very low, at just 1.1% in 2015 according to the latest data – below the Latin America average of 3.8% (and significantly below Ecuador’s Andean neighbours Peru and Colombia). Unless the newly-appointed technocratic ministers can persuade the AP of the logic of pursuing market-oriented reforms, there appears little likelihood that this percentage will rise significantly under Moreno.

Continued appetite for bond issuance

Meanwhile, Moreno and his finance minister have signalled plans to refinance at least part of the existing external debt, given a relatively heavy repayments schedule this year, when a reported US$6bn falls due, both in scheduled bond repayments and through the country’s oil-for-loans agreement with China.

Moreno has said that he will seek to push back maturities in order to ease the short-term fiscal burden of repayments, which would free up more resources for social spending. However, at the same time there is little sign of any easing up in the pace of new debt accumulation, with the brand-new administration issuing US$2bn in new bonds on 30 May, just days after taking office. This new issue comprised a US$1bn six-year bond yielding 8.75%, and a US$1bn 10-year bond yielding 9.63%. This was the latest in a string of issuances over the past year, with proceeds again likely to be used for deficit finance during 2017.

Just as there are questions over the government’s policy stance, there are also uncertainties over whether the authorities will put in place any kind of fiscal adjustment. Debt and deficit levels imply the need for an adjustment, but the fresh bond issuance suggests that the authorities would rather continue accumulating debt, rather than adjust public expenditure downwards.

The spending cuts announced so far by Moreno, including a reduction in the number of ministries, are primarily symbolic, since the fiscal savings from this account for a very small share of total expenditure. All eyes will be on the 2018 budget, which will be drafted later in the year, to see if the new government’s approach will be fundamentally different to that of its predecessor.

Jamaica’s outgoing prime minister, Bruce Golding, presided over his final cabinet meeting on 18 October before formally tendering his resignation to the governor-general on 23 October.  His replacement as leader of the ruling Jamaica Labour Party (JLP) and thus as prime minister is Andrew Holness, Golding’s education minister.  At the age of 39, Holness is the youngest person to become prime minister of Jamaica.

It is a precociousness that Holness has shown throughout his political career.  When first elected to parliament in 1997 he became the country’s youngest MP at the age of 25.  After the return to power of the JLP in 2007, Holness became the youngest member of Golding’s cabinet.  During the years in opposition, from 1999-2007, he was opposition spokesperson on land and development, housing, and education.  In the lead-up to the next general election, which must be held by December 2012, this youthfulness will undoubtedly be presented by the JLP as a positive attribute compared with the 66-year-old leader of the opposition People’s National Party (PNP), Portia Simpson Miller.

Holness’s inheritance of the premiership comes at a time of reasonable economic expectations.  Data released in early October showed the Jamaican economy growing by 2.1% in the second quarter, above the government’s projection of 1.5%.  Finance Minister Audley Shaw has said that he expects annual GDP growth in 2011 to exceed the 2.5% target.

However, the country is under the strict supervision of the IMF, and as Golding noted cautiously when greeting the second quarter growth figures: “While the performance for this fiscal year is broadly on track, there are challenges that must be addressed in order to achieve our medium term targets through 2015/16.  Principal among these is the provision that must be made for payment of the 7% increase granted to public sector workers inclusive of arrears covering the period 2009-2011.”

Supported by surging oil revenues, Guyana is the world’s fastest-growing economy. That poses some unique challenges for management of the 2024 budget, which was approved by the national assembly on 2 February.

Offshore oil was first discovered in 2015 and production has gone from zero to 645,000 barrels per day (bpd) in less than a decade. Output is now expected to double to 1.2m bpd per day by 2028. Last year government revenue from oil was US$1.6bn; this year that number will go up to around US$2.4bn. With a population of just over 800,000, Guyana is on its way to overtake Kuwait as the world’s highest per capita crude oil producer. GDP expanded by an estimated 38.4% in 2023, with the government predicting a further 34.3% for 2024. The United Nations Economic Commission for Latin America and the Caribbean (Eclac) predicts growth in 2024 at a slightly lower 28.9%.  

At first sight the budget problem might be seen as simple – finding a way to spend this bonanza and to spread the benefits. This year’s spending budget is indeed set at GY$1,146tn (US$5.496bn), a massive increase of 46% on 2023. These plans imply a proposed public sector budget deficit equivalent to 8.5% of GDP. A Chinese company is building a new bridge across the Demerara River. A four-lane highway is being built from the airport into Georgetown. A new oil and gas training institute is being developed for around 4,500 students. Seven hotels are under construction, alongside a new hospitality institute. There are plans for a water-treatment plant, a major gas-to-energy project, a refinery and a university, more housing, and a golf course.

Finance minister Ashni Singh said that the aim of the budget was to benefit all Guyanese. It includes plans to boost health, pension, and housing provision, as well as investing in clean energy projects. Apart from the big increase in spending, Singh outlined an increase in the income tax threshold, tax breaks for life and medical insurance, and VAT exemptions for sports and mobile equipment. There were also measures to support small businesses, reduce freight charges, and promote employment.

If the question is “what could possibly go wrong”, Guyanese and outside experts have a number of answers. One is simply that without careful planning, the surge in spending will rapidly create supply-side bottlenecks and lift inflation. Back in 2016 retail inflation was 0.8%; last year it was an estimated 6.6%. Over-reliance on oil could lead to corruption, wasteful spending, stagnation in the non-oil economy and an over-valued currency. There is concern that the country’s ethnic composition, with an Indo-Guyanese elite and lower-earning Afro and mixed-race groups, could come under strain.

There is also a focus on the operation of country’s natural resources fund (NRF). This sovereign wealth fund was set up to create a buffer against oil price fluctuations and to invest in diversification. Last year the fund received US$1.6bn of oil revenues and spent around US$1bn, ending the year with a balance of US$1.97bn. Much of the money went to fund infrastructure projects. Opposition legislator Khemraj Ramjattan said “these monies should have been spread across rather than being given largely to what I regard as 1,000 contractor crony capitalists”. Government plans to change NRF disbursement rules, allowing a greater annual spend, are viewed with suspicion by the opposition.

With less than a year until the May 2014 election, President Ricardo Martinelli’s Cambio Democrático (CD) has picked former housing minister, José Domingo Arias, as its presidential candidate. Arias’s nomination has already boosted his standing in the polls which previously showed the two main opposition candidates: former Panama City mayor, Juan Carlos Navarro, of the country’s main Partido Revolucionario Democrático (PRD), and Vice-President Juan Carlos Varela, of the Partido Panameñista (PPA), well ahead.

In the 12 May party primaries, Arias convincingly beat his main rival, former foreign minister Rómulo Roux, by 67.7% to 27.4% in a nine-way race. Arias had the support of Martinelli (who is constitutionally barred from running) as well as the CD’s 31 national assembly legislators and other party heavyweights like Economy & Finance Minister Frank De Lima, and Social Development Minister Guillermo Ferrufino. This has already had an impact in the polls. The latest Dichter & Neira survey, published on 20 May, gives Arias 29% of voting intentions, up from just 3% the previous month. This now gives him the lead over the previous frontrunner, Navarro (on 28%) – albeit within the 2.9% margin of error. Varela is in third place with 25%. The survey polled 1,200 people across the country on 17-19 May. While another survey by Ipsos published on 28 May challenged these findings, showing Navarro ahead with 36% to 24% for Arias, with Varela again in third place with 16%, it suggests the CD’s chances are not as bleak as were previously thought to be the case. The Ipsos poll similarly surveyed 1,200 people nationwide between 17-20 May and had a 2.8% margin of error.

The CD has yet to announce its candidate for the second most important post in the country – the Panama City mayoralty which has been in the hands of the CD’s Roxana Méndez since January 2012 after the PPA’s Bosco Vallarino was forced out [WR-12-04]. However, the picture has since become clearer after the PRD picked a national deputy, José Luis Fábrega, as its candidate in the 2 June party primaries. Fábrega’s victory was promptly recognised by his only rival, Balbina Herrera, after preliminary reports showed that with more than half of votes counted, Fábrega received 60% of the vote to Herrera’s 38%. The contest, however, was marked by controversy after Roberto ‘Bobby’ Velásquez, who was favourite both overall and in the PRD contest, was forced to drop out on 28 May after the media leaked recordings of him allegedly threatening to cut off Fábrega’s tongue and break his legs. The 20 May Dichter & Neira poll on the full mayoral race had shown Velásquez – who dismisses the recording as a smear campaign - with 23% of voting intentions, ahead of Fábrega on 19% and the likely CD candidate, Ferrufino, on 8%.

• A time honoured practice

President Ricardo Martinelli’s recent establishment of new ‘autonomous’ agencies like a national public revenue authority (ANIP), and a national anti-corruption agency, created on 9 April and 25 April respectively, has left him open to accusations of seeking to extend his influence beyond his five-year mandate. The heads of both new entities are appointed by the President for seven-year terms. While the new ‘decentralised’ national anti-corruption agency replaces the national transparency council against corruption (a consultative agency and advisor to the executive), the ANIP, which will have “administrative, functional and financial autonomy”, substitutes the general tax directorate (which sat under the economy & finance ministry). On 25 May Martinelli also re-appointed Zelmar Rodríguez Crespo as head of Panama’s public services regulator, the Autoridad Nacional de los Servicios Públicos (Asep), for a seven- year term. The appointment was met with scorn given the country’s recent energy problems [RC-13-05]. Local commentators point out that with these new appointments, Martinelli is following in the footsteps of his predecessors. For example former president, Martín Torrijos (PRD, 2004-2009), created the Aesp and appointed Víctor Urrutia as its head for a seven-year term, although Urrutia was ejected after Martinelli took office.

• Party membership

According to the latest figures from the national electoral tribunal, the opposition Partido Revolucionario Democrático (PRD) had 559,451 registered members as of February 2013, representing 39% of all those affiliated to a political party. In second place, with 470,897 members (33% of the total), is President Ricardo Martinelli’s Cambio Democrático (CD) while the Partido Panameñista (PPA) has 241,126 members (17% of the total).

Juvenile crime is rapidly becoming a major political issue in Uruguay. The opposition Partido Colorado (Colorados) is collecting signatures for a plebiscite on whether to lower the age of sentencing to 16 from 18. Both the leader of the less right-wing opposition Partido Nacional (Blancos), Jorge Larrañaga, and the ruling Frente Amplio (FA) have criticised the proposal. They are accusing the Colorados of politicising juvenile crime - the Colorados want the plebiscite to be held together with the next general elections in 2014 and appear to have chosen this issue as their flagship campaign policy.

The Colorados dismissed Larrañaga, unfairly, as a government stooge because of his opposition to the proposed plebiscite. The Blancos were split over the issue in the 2009 elections when Larrañaga’s rival for the presidential candidacy, former president Luis Alberto Lacalle (1990-1995), proposed much tougher sentences for young people aged between 16 and 18. Lacalle also advocated the creation of a national rehabilitation institute, to supplement the existing juvenile detention centres, which he said were overcrowded, with staff unable to manage the inmates.

The Blancos are determined to be seen to be tough on crime, however, with party senator, Francisco Gallinal, presenting a bill in congress in early August to exempt shop owners from punishment if they defended their shops, with arms, from criminals. A number of shop keepers have been killed recently by armed criminals.

Mujica wades into debate

President José Mujica conceded that Uruguay had lost the enviable public security reputation it enjoyed in the past, largely because of an upsurge in juvenile crime, but noted that it remains the most secure country in Latin America. He took aim at the Uruguayan media for sensationalising the issue and exacerbating the problem by making it self-perpetuating. He called on the media to demonstrate greater “social responsibility” and less desire for profit.

Mujica described freedom of expression as “the dorsal spine of human freedoms”. He said it should “never be separated from social responsibility… which is not a product of the market, not something you can buy over the counter in a pharmacy”. He said that “when the bounds of this freedom of expression are stretched by nothing more than profit, the freedom has in reality become enslaved to the market and fallen into sensationalism.”

Mujica’s words came in the same week that Ecuador’s President Rafael Correa lambasted his country’s media throughout his state-of-the-nation address on 10 August for perverting the freedom of expression with profit-motivated comment: Correa insisted the media had ceased to be a source of information and become a political actor.

Mujica, who said the press should be contributing to the debate with “useful commentary” on how to help address juvenile crime, also insinuated that the government could deny ‘offending’ press outlets revenue from official advertising in future. The president of the association of Uruguayan broadcasters, Rafael Inchausti, told the weekly magazine Búsqueda that this threat was “unfortunate”.

The press struck back at Mujica by pointing out that misinformation was by no means the preserve of the press. It said that Senator and First Lady Lucía Topolansky, for instance, last June erroneously claimed that Radio El Espectador, one of the most important broadcasters in the country, had been sold to Argentina’s media giant Clarín .

Uruguay enjoys a moment in the sun
There was some relief from the acrimonious congressional political debate over public security in the form of the national football team’s victory in the Copa América, an achievement made all the sweeter by the defeat of Argentina on the way to the trophy.

Members of all the main political parties sought to portray the Uruguayan footballers as models for misguided youth. “In a world where many people pursue violence, drugs and war, our players run after the ball on all the pitches in the country and build a passion that feeds triumphs, which are the fruit of dedication and sacrifice,” a deputy for the Colorados, Gustavo Espinosa, commented. The manager, Sebastián Coates, was awarded a plaque to honour the triumph.

Coates responded with all the normal platitudes, before concluding that the team faced the difficult task of coming down to earth to prepare to compete in the qualifying group for the World Cup in Brazil in 2014.

Uruguay has won the World Cup on two occasions. Indeed the last time the World Cup was held in Brazil, in 1950, it was won by Uruguay, who defeated the host nation. Uruguay also won the first edition in 1930, beginning a national obsession with the game which prompted the doyen of Uruguayan journalists, Eduardo Galeano, to comment that “All Uruguayan babies are born crying, ‘goooooooal’”.

• Verbose senators
  The leader of the opposition Colorados, Senator Pedro Bordaberry, has called for a style manual to be produced for use in the drafting of congressional legislation. Bordaberry took the floor in the senate to complain about a phrase containing 127 words in a law on the electoral court. He said that its prolixity was in danger of making it unintelligible, and was costing the state money as time was lost trying to understand it. He argued that studies showed sentences should not contain more than 15 words: “Descartes, in the 17th century, used an average of 74 words in a sentence; Proust in the 19th century used 39; and Flaubert only 18. We approved a law last week containing a sentence with more than 100 words.”

The headline story for Latin America over the last 15 years is that, against the background of the global commodities boom (the decade running up to 2012-2013), there was significant growth and redistribution of income in some of the major economies, enhancing the size of the middle class, reducing poverty, and reducing inequalities (although Latin America still remains the region of the world with the most unequal distribution of income). For the region as a whole the end of the commodities boom has raised concern that significant socio-economic gains made in the noughties may begin to slip back. Indeed, there are some signs that poverty rates began to rise once more from around 2015-2016.

The story in the Northern Triangle is that the move to reduce poverty and inequality has been less pronounced than elsewhere in the region. Although there have been advances, in general these three countries experience both greater poverty and greater inequality than many of their peers. Using the World Bank’s definition of poverty as the proportion of the population living on less than US$4 per day (expressed at 2015 prices and on the basis of PPP or purchasing power parity), 60.3% of Guatemalans, 58.2% of Hondurans, and 28.4% of Salvadorians are poor. This contrasts with a much better situation in neighbouring Central American countries. A lower total of 27.5% of Mexicans, 16.9% of Panamanians and 11.4% of Costa Ricans are poor, using the same basis of measurement.

Along with the rest of Latin America the Northern Triangle countries have made some moves towards greater equality of income, but progress has been agonisingly slow. The World Bank compiles data series for the Gini coefficient, a measure of equality in the distribution of income. It presents the coefficient on a scale of zero (perfect equality) to 100 (maximum inequality). Reducing the score is therefore a sign of a move towards greater equality. The chart below shows the trend in the three countries and in Peru (chosen as proxy for the regional trend). El Salvador has managed to get its Gini score down furthest, to 40.0 in 2016, a 12.5% reduction in ten years. Peru had brought its coefficient down to 43.8 (less equal than El Salvador) but it achieved a faster rate of reduction, of 13.3%. Despite also reducing the rate quite strongly, both Honduras and Guatemala remained more unequal in the distribution of income, with Gini scores of 49.6 and 48.3 respectively.

Becoming more equal - but very slowly
Gini coefficient for Honduras, Guatemala, El Salvador, and Peru

Gini coefficient presented on a scale of 0-100, where 0 is "perfect equality" and 100 is "maximum inequality".

Source: World Bank

One further way to understand how unequal the Northern Triangle countries remain is to look at income shares by quintiles of the population. According to data compiled by the UN’s Economic Commission for Latin America and the Caribbean (Eclac) in the region as a whole the richest 20% of the population takes 45% of the available income. However in Guatemala they take more: 51% of the income. In Honduras they also take more, 47%; in El Salvador on the other hand they take a little less than the regional average, 41%. The opposite side of that coin is that the poorest 20% of the Latin American population takes 6% of the available income; in Guatemala and Honduras they take even less, 5%, while in El Salvador they take a tiny bit more, 7%.

A sobering thought is that the structure and working of Brazil’s political system may be at least in part the reason why problems like corruption, crime, and economic dysfunction have not been resolved. Some argue that the essential problem is the system that has been described as “imperial presidentialism” or “coalition presidentialism”. According to this view the federal executive is excessively powerful. It has the ability to rule through what are known as provisional presidential decrees, (‘medidas provisorias’ or MPs) which have immediate effect and go to the top of the queue for congress to debate and approve. It also has wide powers to directly appoint officials to jobs, not just in central government but across the wider public sector. On the other hand, the political parties are deeply fragmented: in the latest elections no fewer than 30 won seats in congress. Of those, 16 have fewer than ten members of congress each. President-elect Bolsonaro’s party won less than 11% of the total seats in congress. According to Rogério Schmitt, a political scientist, “such a level of fragmentation is unseen in the world”.

What it means is that a president with power and resources has to find a way to pull together an effective congressional majority. Out of extreme fragmentation and centrifugal tendencies a multi-party governing coalition therefore needs to be built. Experience to date shows that this has been done by both legal methods (offering ministerial positions, a share in policy-making, and influence) and by illegal methods (outright clientilism, nepotism, and corruption). In this model corruption risks becoming the essential ‘glue’ that holds governments together, a vital component of governability.

According to one academic study, by the University of Gothenburg in Sweden, Brazil has the highest proportion of ‘effective’ political parties in the world. An ‘effective’ party is defined as one that holds enough seats in congress to have a meaningful impact on legislative votes. The Brazilian military regime (1964-1985) allowed only two parties to exist (a pro-government and an opposition party), and these remained fairly central to the political system in the first years of democracy. But the number of effective parties soon increased: from 2.65 in 1985 to 8.53 in 1995, 9.28 in 2005, and 14.06 in 2014.

On top of the problem of fragmentation is the fact that Brazilian voters tend to favour individual politicians more than specific policies. Schmitt says “Brazilians, in general, don’t vote for parties, but for individuals. That is why the same person can vote for a leftist presidential candidate, a rightist gubernatorial candidate, and a centrist candidate for the legislature.” In the senate a first-past-the-post electoral system is used. In the lower house the system is more complicated. A form of proportional representation is used. Parties must achieve the minimum threshold of valid votes (the number of valid votes divided by the number of seats) which varies from one election to the next. Parties can also form coalitions to which the same rules apply. This does lead to some anomalies. In 2014 in Pernambuco both conservatives and communists were members of the same coalition.

One approach to the problem of endemic corruption operated by opportunist coalitions might be to seek reforms to reduce the number of parties in play. Some moves have already been made in that direction. In 1995 the rules for creating new political parties were toughened up (for example a new party must now gather around 500,000 signatures before it can be officially registered). Since corporate funding of political parties was banned (2017) they have received public funding for their activities, distributed according to their share of congressional representation. Parties that do not achieve a minimum share of the vote lose their funding support. In the 2018 elections 14 of the 34 parties that took part failed to achieve the minimum and therefore lost their right to state funding for the next four years. Separately, to qualify for free television and radio party political ‘spots’, parties must have gained at least 1.5% of the congressional vote, distributed across a minimum of nine of Brazil’s 26 states (together with a minimum of 1% of the valid votes in each of those nine states). The threshold will rise progressively to 3% by 2030. It is possible therefore that the very large number of Brazilian political parties may begin to reduce in subsequent elections.

Political scientist Felipe Krause has commented, “As in much of Latin America, parties in Brazil are often mere vehicles for patronage. They are a device for facilitating negotiations between regional and economic interests and the government, all in the guise of democracy.” He argues that the PT, originally an ‘outsider’ party, came into the mainstream and ended up reproducing the shortcomings of the wider system. Another analyst, Eduardo Mello, agrees: “Presidents in Brazil control the government machine that makes corrupt deals possible, and for decades have used them to manipulate congress by strategically distributing opportunities for corruption to gain political support. The result is that government policies have been designed not to provide effective public services but to facilitate rent-seeking and corruption opportunities for politicians and well-connected groups.”

Although there is a widespread understanding that Brazil’s political system is failing, there is no real consensus on the type of reforms needed to try to make it more effective. Stronger anti-corruption laws and enforcement, on the one hand, and legislation to encourage a reduction in the number of political parties on the other, can be seen as important steps in the right direction. However, there is also a danger that regulations to reduce the number of political parties might strengthen incumbents and make it more difficult for new movements and ideas to emerge – an essential requirement for political renewal.

The International Chamber of Shipping (ICS), along with Ecuador, Chile and Japan, are among those to have raised complaints about a proposal approved by the Panama Canal Authority (ACP) to increase Canal tolls by up to 15%.

The proposed changes, which also include the introduction of three new vessel type segments, are due to be implemented in two stages, the first of which could take effect as soon as 1 July 2012. The ACP first announced the changes on 18 and then opened a consultation period of 30 days, which culminated in a public hearing on 23 May.

Describing the new changes as “simply unacceptable”, the ICS complained that the shipping industry had been assured of only one small toll adjustment before the completion of the Canal expansion project in 2014. The ACP described the changes as necessary to “reflect the value provided by the Canal to its users”. It also said that the main changes would affect tankers, chemical vessels and general cargo. For example tolls for tankers will increase from US$4.46 per PC/UMS Ton (Panama Canal Universal Measurement System) for the first 10,000 tonnes to US$4.68 as of July 2012, and to US$4.92 as of July 2013.

According to the ACP, in fiscal year 2011, traffic through the Canal posted a total of 14,684 transits and 322.1 million PC/UMS tonnes. This figure is close to the current Canal’s maximum capacity of 330-340 million PC/UMS tonnes.

Exports down: According to the national statistics institute (Inec), Panama’s exports were valued at US$55m in February 2012, down 2.2% year-on-year. The main exports were gold (US$7.7m); bananas (US$6.0m); iron and steel waste (US$4.3m) pineapples (US$2.7m) and watermelons (US$1.9m). According to the Inec, exports to the US – Panama’s main export market - dropped 2.3% to US$9.9m. In contrast, exports to Italy, the fifth biggest export market, increased 235.9% to US$2.62m. Sales to Canada, Panama’s second biggest market, reached US$8.2m (+9.7%) followed by the Netherlands (US$3.9m (+59 %), China US$3.6m (+34.3%) and Costa Rica US$3.3m (-17.4 %).

Sovereign fund

On 31 May the 71-member unicameral assembly approved by 41 votes to 19 the government’s proposal to create a sovereign wealth fund, with revenues from the expansion of the Panama Canal. The administration of President Ricardo Martinelli said that the fund would be created with an initial US$300m in funds after the Canal expansion project is completed (expected in 2014). According to official estimates, the fund would then expand by US$1.5bn per year and would only be tapped during a recession or to respond to natural disasters.

In 2011, the canal revenues reached US$3bn, a figure that is expected to double by 2025. The political opposition argues that Martinelli has used the fund as an excuse to increase government spending, noting that the same bill that created the fund also increased the government’s 2012 debt ceiling to 2.9% of GDP, up from 2% previously.

• FDI up in the region

Inflows of foreign direct investment (FDI) into Central America increased 36% in 2011 to total US$8.246bn, according to the UN Economic Commission on Latin America and the Caribbean (Eclac). Of this, Panama was the biggest recipient, attracting US$2.790bn (+19% on 2010), followed by Costa Rica (US$2.104bn, +44%); Honduras (US$1.014bn, +27%); Guatemala (US$985m, +22%); Nicaragua (US$968, +91%) and El Salvador (US$386, +231%).

• Tax evasion in Nicaragua

According to a report by a local think tank, Instituto de Estudios Estratégicos y Políticas Públicas (Ieepp), Nicaragua lost 10% of its 2011 GDP (put at US$7.14bn) to tax evasion. Adelmo Sandino, an IEEPP researcher, attributed the losses to illegal economic activities by the business sector; a passive tax regime and a general lack of public awareness about the need to pay taxes.

*** JAMAICA: BETTER NEWS ON CRIME. Jamaica’s National Security Minister Peter Bunting revealed figures on 28 April which showed a 30% reduction in the country’s murder rate since the beginning of the year. The number of murders on a per day basis has dropped from 3.1 to 2.0 since January.

Bunting emphasized the economic significance of any sustained downturn in crime, saying that without the “extraordinary high levels of crime” per capita earnings in Jamaica would be “somewhere between three times and 10 times current levels”.

*** TRINIDAD TO ADOPT CCJ. On 25 April, Trinidad & Tobago’s Prime Minister Kamla Persad-Bissessar told parliament that the government would abolish appeals to the UK’s Privy Council in criminal cases this year. The move is strongly supported by the opposition, but her own ruling United National Congress has traditionally been less committed to any move towards the Caribbean Court of Justice (CCJ). However, the prime minister emphasized that the move would only be for criminal cases. She said that the country “would be slow to cut off all ties”, noting that the Privy Council “has an international reputation as being one of the finest commercial and civil law courts in the world”.

This caveat means that Trinidad is not moving as far as Barbados, Belize, and Guyana in embracing the CCJ for all legal appeals, and the reason seems to be concern about frightening off international investors. This has led to some criticism, not least because it is thought that a full move to the CCJ would have encouraged other laggards to make the same move, particularly Jamaica. There also seemed to be some equivocation in the government’s commitment. The prime minister said: “We will continue to monitor the developments taking place in both the [Privy Council] and CCJ including the quality of their decisions in deciding the future course of our judicial system”.

*** BOUTERSE SECURES AMNESTY. On 4 April Suriname’s President Desi Bouterse secured an amendment to the 1992 amnesty law that will ensure that he escapes investigation for alleged human rights violations committed under his 1980-91 military rule. The amendment extends the period of immunity from the years 1985-1991 to cover the years 1980-1992, thereby now excluding the further investigation of extrajudicial executions of 15 opponents of the military regime allegedly committed by Bouterse and 24 accomplices in December 1982.

The move sparked protests in the capital, Paramaribo, where more than 5,000 people took to the streets on 10 April. It also attracted strong criticism from international organisations as well as from the Netherlands, which convicted Bouterse in 1999 for trafficking cocaine from Suriname to Holland. Following the approval of the amendment to the amnesty law, the Dutch government recalled its ambassador indefinitely, suspended development, and has begun lobbying for sanctions to be imposed on Suriname.

Under international law, amnesties are not permissible if they prevent the prosecution of individuals who may be criminally responsible for international crimes, including war crimes, crimes against humanity, genocide, and gross violations of human rights.

• UN response

The United Nations High Commissioner for Human Rights, Navi Pillay, responded to the amendment to Suriname’s amnesty law on 13 April with the following statement: “The high commissioner sincerely hopes that steps are taken to reverse this legislation as soon as possible, since it clearly conflicts with Suriname’s international obligations and very much runs against the positive trend in many other Latin American countries of prosecuting and, in many cases convicting, individuals responsible for serious crimes that took place during military dictatorships.”

Albemarle completes second lithium plant

The US-owned Albemarle has completed La Negra II, its second lithium carbonate plant in Chile. Construction took three years, with total investment of US$450m. The company has reached an agreement with Corfo, Chile’s economic development agency, to build a third plant, which could come on-stream in 2020, requiring around US$600m in additional investment. Corfo has announced a call for Chilean and international companies to express interest in manufacturing lithium products, such as battery cathodes and electrolytes. The companies selected will be guaranteed up to 25% of Albemarle’s locally mined lithium output at the lowest costs available in the market.

Albemarle is now one of only two lithium miners operating in Chile (the other is Sociedad Química y Minera de Chile (SQM). Chile is the world leader in lithium, with around 40% of global production. Last year, Chile exported 80,000 tonnes of lithium carbonate equivalent (LCE) worth US$589m. Exports are projected to increase to 300,000LCE a year by 2035. Lithium in the Salar de Atacama slat flats is believed to be the world’s easiest and cheapest to extract. The company expects lithium demand to grow strongly, driven by increasing use of electric vehicles.

Citibanamex seeks upgrade

Jane Fraser, head of Citigroup Latin America, told the Reuters news agency that the company is overhauling Citibanamex, its Mexican unit, with a view to improving customer service. The 133-year old bank was reported to be lagging behind its competitors in terms of technology, profitability, market share and customer satisfaction. The bank reportedly is reorganising its branches and adding 2,500 ATMs to its existing network of 7,600. It is also looking for a range of partnerships to improve customer experience.

One initiative has been the launch of Saldazo, a deposit and money transfers card distributed through the OXXO chain of convenience stores. Executives recognise that Citibanamex was slow to modernise, but note that this may not be an entirely bad thing. “Most banks in Mexico updated their core technology platforms seven, eight, nine years ago. We’re doing it now, but the technology now available is very different” noted Edgardo Rincón, general manager for consumer banking, which may give the bank a competitive advantage. Although Citibanamex in many ways has lost its competitive edge, it is still estimated to deliver nearly 10% of Citigroup’s global profits and a 15% return on equity (roe), better than the group average. The bank is also seeking to restore its corporate reputation after its 2014 involvement in a US$500m loan fraud, a money-laundering investigation, and bad loans to housing companies.

New hostilities break out in pisco war

Chile and Peru are again battling over the exclusive rights to use of the ‘pisco’ denomination. ‘Pisco’ is a type of spirit made by distilling fermented grape juices. It was originally produced by Spanish settlers in the 16^th century, as a local alternative to Spanish brandy, and ever since has been celebrated and enjoyed in both Chile and Peru. The current dispute was triggered in the run up to the Concours Mondial de Bruxelles (CMB), an international wine and spirits competition due to be held in Chile on 22-24 August. The CMB organisers have accepted Chile’s contention that only its entries can properly be described as ‘pisco’, while Peru’s equivalents are to be described instead as “Peruvian grape-distilled drink, or aguardiente”.

In response, the association of Peruvian exporters (Adex) has suggested that the country should consider boycotting the competition. “I suggest that Peru should not participate” said Adex president Juan Varillas, complaining, “this contest will enable the Chilean drink to take all the pisco category medals.” The Peruvian pisco camp has noted that British singer Ed Sheeran recently described Peruvian pisco as one of his top drinks. Peru’s competition and intellectual property agency, Indecopi, has supported the idea of a CMB boycott.

Industry sources note that Chilean legislation recognises only locally-distilled drinks as ‘pisco’. Despite this, around 35% of Peru’s pisco exports are shipped to Chile; to comply with Chilean law, when they cross the border they are re-labelled as Peruvian ‘aguardiente’.

Kuntur Wasi loses Chinchero airport deal

The Peruvian government and the Kuntur Wasi private consortium (whose members include Argentina’s Corporación América and Peru’s Andino Investment Holding) have agreed by mutual consent to cancel a troubled US$520m contract to build a new airport at Chinchero in Cusco, one of Peru’s top tourist destinations.

Allegations of improprieties in the 2014 public-private partnership (PPP) agreement, which was modified earlier this year to provide additional government guarantees, have dogged the administration of President Pedro Pablo Kuczynski and forced the transport minister, Martín Vizcarra, to quit his post (he remains as elected first vice president). It was left to his ministerial successor, Bruno Giuffra, to announce that the two parties would hold talks about the level compensation due to the consortium for the preparatory work done to date. Giuffra said that the government on its own would continue with the first phase of the works, clearing and levelling the airport site, which is expected to take 18 to 24 months. During this period, it will consider the best contractual model for building and operating the new terminal (officials have hinted that one option might be to go ahead with a 100% publicly-owned project). Meanwhile, the political repercussions continued, with the finance minister, Alfredo Thorne, denying allegations that he had improperly pressured the comptroller general office to green-light the Chinchero contract.

Low cost air travel takes off in Peru

On 9 May, Peru’s first low cost airline, Viva Air Perú, formally began operations. The company is owned by Irish holding firm Irelandia Aviation, the parent company of Ryanair, and will operate nine different domestic routes in Peru, with two more added next year.

The company aims to carry 700,000 passengers in its first year. Peru’s tourism ministry expects internal tourism to increase by 10% in 2017, creating an ideal environment for Viva Air Perú to grow its business. The transport ministry has already reported a 5% year on year increase in domestic air passengers in the first quarter of this year. Between 2009 and 2016, the number of domestic passengers more than doubled, going from 4.3m to 10.9m.

Viva Air Perú is the latest in Irelandia Aviation’s expansion into Latin America following the launch of Viva Colombia in 2012. Viva Colombia’s CEO, William Shaw, estimates that the airline’s lauch in Peru arrival will result in a 50%-70% price reduction in airfare costs.