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Nationalism and anti-American sentiments have traditionally run high in Latin America and the Caribbean, at least partly in response to the application of the Monroe Doctrine in its most imperialist forms. The response to the armed operation to extract Maduro gives some sense of how the faultlines in regional diplomacy currently lie. As might be expected the authoritarian left-wing governments of Cuba and Nicaragua rejected the incursion. Cuba’s President Miguel Diaz-Canel accused the US of a “criminal attack” and of practising a form of “state terrorism”. Nicaragua condemned the strike and called for Maduro’s immediate release. Broadly speaking the response of many of the other governments has been influenced by their sense of frustration with Maduro who consistently rejected their efforts to reach a political settlement to solve the Venezuelan conflict and whose disastrous policies forced millions of Venezuelans to emigrate, burdening the social programmes of neighbouring countries. In short many were happy to see Maduro’s back, even though they had mixed feelings over the method of his departure.

The response from the democratic left-wing governments of Brazil, Mexico, and Colombia was also to condemn the US action but to do so using more diplomatic language. On the other hand, a number of countries that have aligned themselves with the US under Trump praised it: these included Argentina, El Salvador, and Ecuador. Argentina’s President Javier Milei accused Maduro of clinging to power and of “rigging elections” saying his departure was “excellent news for the free world”. Ecuador’s right wing President Daniel Noboa posted on social media: “To all the narco-chavista criminals, your time is coming. Your structure will completely collapse across the entire continent.”

Mexico’s reaction was carefully worded. It did not mention the US by name, stating in general terms that “intervention has never brought democracy, never generated prosperity and never created lasting stability”. The Mexican foreign ministry did sign a joint rejection of the action, along with Brazil, Colombia, Uruguay, and Spain, but it did not post the document on its website. Brazil was more direct and upfront in its condemnation: the incident, it said was “yet another extremely dangerous precedent”. Brazil nevertheless acknowledged the need for a balanced relationship with Washington. Celso Amorim, the Brazilian president’s chief foreign policy advisor, told the New York Times “of course we want to have good relations with the United States. It is a very important country in every sense. But there is no way to avoid condemning this action.” President Petro of Colombia, who has had a volatile and adversarial relationship with Trump, much of which has played out on social media, said the US had “kidnapped” Maduro adding “no one in their right mind would bomb the homeland of Bolívar” [the nineteenth century hero of the wars of independence against Spain].

A poll conducted by mobile phone in Venezuela by The Economist and Premise in January (immediately after the military operation) found that the removal of Maduro was highly popular. A total of roughly 50% of respondents supported the operation, 35% were neutral, and 13% opposed it. More than half said their opinion of the United States had improved because of the operation. The results must be assessed with caution, of course, since things could yet change and potential conflicts may still emerge. For example, two-thirds believe new presidential elections should be held, and 91% of them want the polls to be held within a year. The US government may prove to be out of step with these sentiments since it has made no firm commitment on when elections will be held. And while 45% of respondents say they will vote for opposition leader María Corina Machado, only 10% express support for the US-appointed interim President Delcy Rodríguez. The post-Maduro honeymoon period may not last as long as Washington has been hoping.

In contrast to these short-term results for Venezuela, at regional level available polls show Donald Trump remains unpopular. US think tank Pew Research Centre measured confidence in Donald Trump as a world leader across 24 countries in 2025 and found that 62% were not confident of his ability “to do the right thing regarding world affairs” while 34% took the opposing view. Three Latin American countries were included in the survey. Those not confident in Trump were 61% in Brazil, 62% in Argentina (both close to the global average), and a large outlying 91% in Mexico. In general confidence in Trump is higher among men (43% to 27% in Brazil) and among those who identify as right-wing.

Confidence in Trump as a world leader

% who have confidence in U.S. President Donald Trump to do the right thing regarding world affairs

Note: Those who did not answer or said “Never heard of this person” are not shown

Source: Pew Research Center, Confidence in Trump in 24 Nations, Spring 2025 Global Attitudes Survey

Could there be a nationalist and anti-Yankee turn in public sentiment in the next few years? Such a reaction cannot be excluded, nor can its opposite. As we have suggested, domestic politics may be the key driver. As well as seeking economic security, voters have been looking for a reduction in crime, corruption, and immigration. A generation of populist politicians have promised to deliver quick results in these areas. With some variations, their agenda in their different countries is similar to Trump’s in the United States. It follows that if they are highly successful their popularity ratings will rise further and regional support for Trump will also increase.

But a much more problematic scenario is also possible. Turning round crime and corruption is a complex challenge that requires extra resources, new policies, and significant time. A militarised version of the War on Drugs has been underway for decades in various parts of the region – particularly in Colombia and Mexico – and is widely considered to have failed. At the moment, despite a relatively new president pushing hard line policies in Ecuador, levels of violence there also remain very high. Only El Salvador under Nayib Bukele’s authoritarian rule claims to have brought the homicide rate to near zero, but it has done so at the cost of undermining civil liberties and enforcing mass incarceration. It is also not clear whether the Salvadorean experience is exportable.

On a one-to-two-year time horizon, slow or insufficient progress improving security could be a blow to this new generation of right-leaning populist leaders, reducing their standing in the opinion polls. Some of Donald Trump’s high-profile interventions might also backfire. If there are future military interventions it is not guaranteed that they will all be as precise and accurate as the Caracas raid. It is not impossible for a US strike against cartel bases in Mexico or Colombia to go bad, for example by causing unintended civilian deaths which might turn opinion dramatically against Trump. It is worth noting that on a smaller scale Trump’s temporary punitive tariffs levied against Brazil, set at 50% and initially introduced in August 2025, were politically counterproductive for him and were eventually rolled back by Washington. Trump’s officials had been wrong-footed by a rally-round-the-flag effect. President Lula da Silva, seen as defending the national interest against arbitrary action by a meddling superpower, benefited from rising approval rates. The far right, led by Trump ally and former president Jair Bolsonaro (2019-2023), also lost ground because it was cast as being unpatriotic, supporting a foreign power that was actively causing economic difficulties for Brazilian companies.

El Salvador accumulated a trade deficit of US$4.37bn in the first 11 months of 2011, up 20.9% on the same period in 2010, the central bank announced. Total exports, which amounted to US$4.88bn, were dwarfed by imports of US$9.25bn. Non-traditional products accounted for US$3.22bn of this total. The maquila sector generated US$1.12bn of exports, while traditional products (coffee, sugar and shrimps) accounted for US$543m of exports. Remittances for the first 11 months came to US$3.29bn, up US$181m on last year, but a long way off covering the trade deficit.

INTELLIGENCE RESEARCH HIGHLIGHTS

TO: All Strategic Intelligence Forum members

DATE: 30 March 2007

The Strategic Intelligence Forum is part of the Intelligence Research group, and as a member of the Strategic Intelligence Forum I am very pleased to send you from time to time a selection of reports published recently by Intelligence Research Ltd that I consider to be of particular STRATEGIC significance. Please find below my latest selection of Intelligence Research articles:

1. INDONESIA WRANGLES OVER IRAN - AsiaInt Weekly Alert, 30 March 2007

SUMMARY: The government’s decision to support UN sanctions on Iran has created a political storm. Jakarta faces accusations of pandering to the West and abandoning a Muslim ally at a time when President Susilo Bambang Yudhoyono’s approval ratings are at a low...

Link to full article: http://www.asiaint.com/arl/arl13549.asp

2. ARGENTINA: KIRCHNER PICKS FIGHT WITH US AND ARGENTINAN JUDICIARY - Latin American Weekly Review - 29 March 2007

SUMMARY: It was an eventful week for President Néstor Kirchner and one that could potentially have a defining influence on October's presidential elections. Firstly, his government was involved in a diplomatic spat with the US for granting Venezuela's President Hugo Chávez permission to address a rally attacking George W Bush while the US President was in Uruguay. Kirchner's wife, Senator Cristina Fernández, meanwhile, was boosting her profile and cementing the government's foreign-policy priorities by visiting Ecuador and Venezuela. Secondly, Roberto Lavagna, the main threat to either Kirchner or Fernández winning the elections, at last sealed his alliance with one faction of the Unión Cívica Radical (UCR) and is now trying to unite dissident Peronists. Finally, Kirchner became embroiled in a power clash with the judiciary which, for once, stood its ground...

Link to full article: http://www.latinnews.com/lwr/LWR13535.asp?instance=2

NOTE: Links to these - and other - reports can also be found in the Strategic Intelligence Monitoring Centre, which you may access on a 24/7 basis by going to www.stratintforum.com, logging in as a member, and selecting the Strategic Intelligence Monitoring Centre option.

With best regards

JKC de Courcy
Chairman
Strategic Intelligence Forum

P.S. You may sign up for a free evaluation of any Intelligence Research Ltd services by visiting the following websites, or you may contact our Business Development Director: [email protected].

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The focus of this report is on China’s battle for market shares and technology in the electric vehicle (EV) segment, which could be described as a ‘downstream’ part of the automobile industry. But it is important to note the rising EV sales may also have transformative effects on parts of the ‘upstream’ – such as the mining of key Latin American metals like lithium and copper, which are essential components of modern EVs. In fact, the electric vehicle boom could trigger some significant changes in the Latin American mining industry.

Lithium is a key component of EV batteries. Bolivia is reported to hold the world’s largest lithium reserves at 23m tons, followed by Argentina (22m tons), and Chile (11m tons). Taken together these three counties are known as the lithium triangle. For their part Bolivian governments have sought to nationalise lithium and granted monopoly development rights to the state lithium company YLB. In early 2019 the government said it had reached an agreement with China’s Xinjiang TBEA group to extract lithium from two salt flats but a coup d'etat and change of government meant the plans came to nothing. In mid 2023 a new announcement was made, this time involving a US$1.4bn joint venture with CATL of China to develop lithium extraction from the Uyuni and Coipasa salt flats. Further lithium plans are unlikely to be announced until after Bolivian general elections due in August.

Source: Mining.com

Argentina has pursued business-friendly lithium mining policies. This has led to new investment and increased production, making the country the fourth largest lithium producer in the world (after Australia, Chile, and China). Mines in three provinces (Jujuy, Salta, and Catamarca) are responsible for around 5% of world lithium output. Existing laws allow companies to negotiate mining contracts directly with provincial authorities. Regional royalties are capped at not more than 3%. There are currently 49 new lithium mining projects under development, of which seven are led by Chinese companies.

Chile accounts for around one-third of global lithium production and is the second largest global producer. Eighty-nine per cent of China’s imports of lithium carbonate are sourced from Chile. A new National Lithium Strategy enables significant state control but also allows private companies to operate on a licensing basis. There are currently two companies mining lithium in Chile, locally owned SQM (in which China’s Tianqi Lithium has a 22% stake) and US-based Albermale. There have been reports of a project in which China’s BYD would invest US$290m combining lithium mining, refining, and cathode production. However, industry sources have recently suggested it is on hold. This too is an election year in Chile which means lithium policy could be reconsidered. However, governments of both the left and the right have a history of good economic relations with China.

Away from the lithium triangle there have also been developments in Mexico where lithium reserves are estimated at around 1.7m tons. In 2022 the government created a state-owned lithium company, known as LitioMx which was given exclusive responsibility for exploration, production, and refining. The move triggered a legal dispute since the state of Sonora had earlier given production rights to Bacanora Lithium, later purchased by Ganfeng. In June of last year Ganfeng initiated an arbitration case against Mexico, which is ongoing. Like her predecessor, Mexican President Claudia Sheinbaum is eager to see higher value-added activity in Mexico, ideally moving from mining and refining to full lithium-battery industrial production.

The copper content of EV production is much greater than in internal combustion vehicles since electric vehicles contain large amounts of copper both in the batteries and in internal cabling. Partly because of this, in 2023 the US government declared copper to be a critical mineral. Latin America produces around 40% of the world’s copper. The key copper mining countries are Chile, Peru, and Mexico. In 2022 Chile exported US$22.8bn worth of copper ore, of which US$15.6bn or 68% went to China. In the same year 71% of Peru’s copper shipments went to China. Chinese companies such as MMG, Guoxin, and Citic are active in Peruvian mining.

US-China geopolitical rivalry may also affect refining. The global processing of critical minerals is already concentrated within China with some experts claiming it refines 90% of the world’s rare earth minerals and 60-70% of lithium and cobalt. A Chinese decision in 2023 to introduce export controls on graphite, germanium and gallium has increased US concern that its national security could be affected by key mineral shortages. As we shall see below, the definition of what is local content in the composition of batteries and other EV components may be critical in determining access to the US and tariff levels.

While many Latin American governments aspire to attract lithium-ion battery production to their countries, few have succeeded, and Chinese EV companies do not seem eager to prioritise reshoring this activity. BYD has a plant in Manaus in the Brazilian Amazon which started production in 2022 and appears to be mainly focused on battery pack assembly, rather than manufacture, serving the company’s bus factory in Campinas, São Paulo state. Plans for full BYD battery production in 2025 are associated with a proposal to build a major BYD assembly plant in Camaçari, but as we shall see this project is delayed. Industry analysts say EV battery construction in Brazil will almost certainly be intended to meet domestic demand, since the US is boosting its own domestic battery production and seeking to shut out Chinese competition.

Other plans to start battery production in Latin America seem to be general declarations of intent rather than firm ready-to-go projects. In early 2023 Chinese EV manufacturer Chery announced a large project in Argentina, apparently to include battery manufacture. No further announcements were made, and it is assumed that the plan is not progressing. CATL, another Chinese EV maker, said in 2022 that it had plans for a battery plant in Mexico that could potentially serve a Tesla factory in Texas. The situation changed when the Joe Biden administration introduced the Inflation Reduction Act (IRA) with major incentives to encourage domestic battery production in the US. CATL has subsequently pivoted to sign a licensing agreement with Ford to manufacture ion phosphate batteries in Michigan.

On the night of 15/16 March this year, three aircraft landed at San Salvador airport. They arrived from the United States and were carrying onboard 238 Venezuelan deportees and 23 Salvadoran citizens for repatriation. Earlier that same day President Trump had announced he was invoking the Alien Enemies Act of 1798 to carry out these summary deportations. He said many of those on the flight were criminals. The controversial law, which has been on the statute books for over 200 years, has gathered some dust: it has not been used since the Second World War. In line with its terminology Trump said the United States was a victim of “irregular warfare” waged by a criminal network, the Tren de Aragua, which aimed to destabilise the country. Earlier, on 19 February, the State Department had designated the TdA as a foreign terrorist organisation (FTO), following an executive order to that effect signed by Trump on the day he took office in January.

In the face of a supposed invasion the law allows the executive to order mass summary deportations, without the need for court approvals and appeal procedures. Of the Venezuelans on that flight, 137 were deported under the terms of the 1798 Act. The move was rapidly challenged in the US courts, one of which issued an injunction not to proceed, which was ignored by the government. Legal debate about whether the law is applicable or not is continuing. Trump administration officials adopted a belligerent stance. US Border Czar Tom Homan said he did not “care what the judges think in the Alien enemies’ case”.

An important point is that if the 1798 law stands, foreigners in the United States may be subject to immediate deportation without any right to appeal whatsoever. This is because Trump and El Salvador President Nayib Bukele, who are close political allies, reached an agreement that on arrival the deportees would be held in Centro de Confinamiento del Terrorismo (Cecot), El Salvador’s new maximum-security jail. The US would pay El Salvador the custody costs of holding the deportees for at least a year. Critically, under the terms of El Salvador’s ongoing state of emergency, the government can hold anyone without charge or trial. That means a migrant can both be deported from the US and held in El Salvador without the right of legal appeal.

Trump clearly sought to extract maximum publicity value from the deportations, promoting his hard line against crime and immigration. At the airport the deportees were filmed for the TV cameras, flanked by prison guards, and forced to walk in a crouch, past a line of heavily armed police, before being transported by bus to CECOT. Migrant and human rights groups pointed out in the United States that there was no public confirmation of the identities and charges against the deportees. The government claimed many on the flight were members of the Tren de Aragua but gave no evidence to back up this claim.

US media reporters found cases in which the suspects had been arrested by ICE (Immigration and Customs Enforcement) because they sported tattoos, in the mistaken belief that was a sign of gang membership. In fact, Salvadoran gang members favour tattoos, but they are generally not used by Venezuelans affiliated with the Tren de Aragua. A statement by ICE acknowledged that “many” of the deportees were not accused of any crimes in the United States but had been “vetted” and found to be Tren de Aragua affiliates.

The current campaign against suspected dissidents and dual nationals by the Iranian authorities has echoes of the purges and hostage-taking that followed in the wake of the Islamic Revolution of 1979. In part, Tehran’s crackdown is a logical response to US calls for ‘regime change’, but recent events are raising fears that the Islamic Republic is about to launch a wide-ranging battle against reformers, human rights advocates, and even ordinary citizens who hold foreign passports or who have links with the West.

The latest developments should be seen in the context of the two imperatives driving Iranian foreign policy: Tehran’s ambitions to be the key regional power amid the continuing chaos in Iraq, and the insecurity of the ultra-hardliners grouped around President Mahmoud Ahmadinejad who fear – not without reason – that Washington is plotting to foment internal instability by using Iranian proxies funded through a murky network of international charities and non-governmental organisations (NGOs). In certain respects, there are noteworthy parallels to be drawn between the prevailing point of view in Tehran and in Vladimir Putin’s Kremlin.

There can be no doubt that the Ahmadinejad administration fears the rise of internal political dissent, although the moderate reformers who backed former president Mohammed Khatami pose little real challenge to the regime. Many of the reformers’ core supporters have become so disillusioned with the failure to achieve rapid, durable change that they have dropped out of politics altogether. Others have moved abroad convinced that reform is now impossible.

Internal ethnic tensions

However, the real domestic challenge to Tehran is likely to come from the Islamic Republic’s ‘Achilles’ heel’ – the country’s substantial ethnic minority communities which together make up an estimated 40 percent of Iran’s 69 million population. These ethnic groups include Arabs and Kurds, as well as smaller numbers of Ahwazis and Baluchis. Ahmadinejad and his security chiefs are now certain that some armed separatist movements are being funded covertly by foreign donors, including the US Central Intelligence Agency (CIA), although Washington has always maintained that it does not support terrorist activity in Iran.

Amid the growing conviction among Iranian hardliners that the US and its allies, including Britain, are intent on destablising the Islamic Republic in pursuit of eventual ‘regime change’, the recent arrests of dual nationals should hardly come as a surprise. Since May, several high profile academics and journalists have been detained while visiting Iran, including Haleh Esfandiari, director of the US-based Woodrow Wilson International Centre for Scholars’ Middle East programme, Parnaz Azima, a journalist with US-funded Radio Farda and social scientist Kian Tajbakhsh. All three hold dual US-Iranian citizenship, although Tehran does not recognise them as US nationals.

With a wider probe of other Iranians with foreign links or passports underway, further arrests and possible trials of detainees on charges which could include espionage or what Tehran is terming "anti-revolutionary activities" cannot be ruled out. To the outside world, the detention of internationally known dual-nationals appears akin to hostage taking. However, parallels are also being drawn to the arrest of five Iranian citizens – including senior Iranian Revolutionary Guard Corps (IRGC) officials – by US forces in neighbouring Iraq in January.

Pressure to rehabilitate the MEK

As relations between the US and its allies on one side and Iran on the other continue to deteriorate over a range of issues – including Tehran’s nuclear programme and its alleged support for militant Shia groups in Iraq – stepping up internal pressure on the Iranian regime is increasingly high on Washington’s agenda. One school of thought among US policy makers is that the Bush administration should consider lifting the terrorist designation imposed on the Mujahedin-e Khalq (MEK) organisation. This group, which is also known in English as the People’s Mujahedin of Iran (PMOI), is believed to have several thousand armed guerrillas based in Iraq and a long history dating back to the era of the late Shah of Iran.

One of the key problems with the MEK is that it enjoyed close relations with, and funding from, Saddam Hussein’s regime in Iraq until 2003. Although MEK guerrillas agreed a ceasefire with US forces after the invasion, the group remains listed as a Foreign Terrorist Organisation (FTO) by the US State Department, as well as by the European Union (EU). Pressure to remove the MEK from this list has recently been stepped up, and a recent demonstration in London organised by the National Council of Resistance of Iran (NCRI) – a political group of exiles opposed to the Islamic Republic – called on the British government to rethink its ban.

Whether such groups are capable of posing a serious threat to Ahmadinejad’s regime is doubtful. Support for the MEK in Iraq has been falling and although some sources close to the movement claim that it can call on a force up to 50,000 strong, recent intelligence estimates suggest that the guerrillas’ real strength is now less than 5,000, with some analysts suggesting that the group may actually be even smaller. However, the very existence of the MEK is useful to Tehran in that it provides a conveniently shadowy entity which can be blamed for internal incidents, as well as being easy to label as consisting of ‘traitors’ and the agents of foreign powers.

Call for ‘détente’

Other leading analysts are calling for a more fundamental assessment of US policy towards the Islamic Republic. For example, in the March-April issue of Foreign Affairs, Ray Takeyh, Senior Fellow at the Council on Foreign Relations suggested that the long-standing US policy of ‘containment’ has failed. Instead, Takeyh proposes an alternative strategy: "Acknowledging that Iran is a rising power, the United States should open talks with a view to creating a framework to regulate Iran’s influence, displaying a willingness to coexist with Iran while limiting its excesses. In other words, Washington should embrace a policy of détente."

According to Takeyh "despite his deep religious convictions, Ahmadinejad is not a messianist seeking to usher in a new world order; he is a canny manipulator trying to rouse public indignation in a chaotic neighbourhood". He also points out that "by offering the pragmatists in Tehran a chance to resume diplomatic and economic relations with the United States, it could help them sideline the radicals and tip Iran’s internal balance of power in their favour".

This point of view appears diametrically opposed to the current view in Washington which seems to favour using covert measures to undermine Ahmadinejad. However, given that there seems to be no realistic prospect of triggering a widespread anti-clerical uprising against the hardline leadership of the Islamic Republic, there are serious risks inherent in channelling – directly or via proxies – funds originating in the US to Iranian opposition groups, particularly those regarded by most of Washington’s own allies as terrorist organisations. An alternative model could be to encourage and widen existing divisions between the pragmatic conservatives grouped around former president Ali Akbar Hashemi Rafsanjani and the hardline Islamist radicals loyal to Ahmadinejad whose excesses are causing mounting concern among the country’s most senior leaders, including the Supreme Leader Ayatollah Ali Khamenei.

‘Brain drain’ from Iran

Another major problem for Tehran is that the recent arrests of dual nationals risks fuelling the already serious ‘brain drain’ of talent from the country. This is not a new problem. Many wealthy or well educated Iranians fled Iran following the 1979 revolution and this trend has continued with one source estimating that as many as half of the Islamic Republic’s best young scientists leave the country, with around 75% of those who leave heading to the US. A report last year for the International Monetary Fund (IMF) revealed that Iran had the highest rate of ‘brain drain’ of any of the 90 countries assessed during the study – a cost in terms of human capital that may be losing the Islamic Republic as much as $40 billion annually according to the Iranian government’s own estimates.

Moreover, some long-term émigrés have returned home for regular visits in recent years and there has also been an upsurge in Iranians participating in programmes run by international organisations. All this could now be in doubt owing to the current detentions in Tehran.

With the Iranian authorities seemingly set on launching a widespread purge of dual nationals – and potentially any Iranians with foreign contacts – the country may face an accelerating loss of intellectual capital. Inward investment, particularly by Iranians who are resident abroad, is also likely to decline as dual passport holders stay away for fear of being detained on suspicion of spying or treason. SIR.

After registering virtually no growth in 2017, there are signs that the economy is picking up pace. Preliminary data from the Planning Institute of Jamaica (PIOJ) revealed that real GDP grew by 1.2% in the first quarter, compared with the fourth quarter of 2017.

According to the PIOJ, the firm GDP result was driven by a number of factors, including strong demand from Jamaica’s main trading partners. Goods-producing sectors registered quarter-on-quarter growth of 3%, with all main industries registering improvements. The mining & quarrying sector registered particularly rapid growth of 25.5%, reflecting higher bauxite and alumina production after activity at the Alpart refinery restarted. Firm overseas demand for bauxite exports also stimulated production. No results were given in the press release about other goods-producing sectors, but a reference to improved weather conditions indicates that agricultural production rose. Services-producing sectors registered weaker but positive growth of 0.7% quarter on quarter, with financial services posting growth of 1% and hotels & restaurants of 1.6%. This latter result comes as little surprise given that the tourism sector has been faring well, with continued increases in tourist arrivals – both stopover (which contribute more to the local economy) and cruise arrivals.

Falling inflation prompts further cuts to interest rates

Meanwhile, there have been other supportive developments, including a fall in unemployment. Although still comparatively high, the Statistical Institute of Jamaica (Statin) revealed that unemployment fell to 9.6% in January, which marked the lowest figure recorded in over a decade. It is likely that this is supporting somewhat stronger domestic demand, which in turn will lift underlying GDP growth. Despite firmer demand, inflation dynamics have also been supportive, with the consumer price index falling for the third consecutive month in April. In annual terms, inflation has declined from 4.8% in January to 3.2% in April, bringing inflation just below the Central Bank’s target range of 3.5%-6.5%.

This has facilitated a further easing of monetary policy, which the authorities hope will create a virtuous cycle whereby lower borrowing costs stimulate demand, in turn lifting GDP growth. In mid-May, the Central Bank announced another 25 basis points cut to the benchmark interest rate, taking it to just 2.5%. The Bank has now eased monetary policy by a cumulative 150 basis points in just over a year. Given that inflation is continuing to fall, it is possible that there may be scope for further interest rate cuts, although the fact that rates remain very low in nominal terms reduces the likelihood of a continued and sustained period of monetary easing. This is particularly true given that rising interest rates in the US are increasing rate-differentials, which may lead to pressure on the local currency. As in many other countries in the region, the Jamaican dollar has weakened in recent weeks, from J$124:US$ in early May to over J$127:US$ in early June.

It is clear that as a group, the three Northern Triangle countries face an extremely difficult situation over the next few years. There has been little progress to resolve the five main problems we have listed, which remain deep-rooted and tightly intertwined.

We have taken the position that building stronger and more inclusive democracies is a necessary condition to begin to come up with solutions. In theory therefore the pathway is clear: citizens should be looking to the next scheduled elections in each of the three countries as an opportunity to freely debate the problems, and support and vote for the parties and candidates with the best policies to tackle them. However, to put it bluntly, elections don’t always solve problems. In current times the electorate is disenchanted with democracy, and deeply distrusts most institutions. There is also a global political climate which has seen the return of populism, and a rejection of globalism in favour of narrow nationalism. There are also serious doubts over the integrity of elections with the rise of ‘fake news’, the manipulation of social media, and the rejection of expert opinion in favour of simplified sound bites.

In an optimistic scenario, over the next four to five years new, democratically elected administrations will come to office able to articulate and execute policies that will begin to roll back some of the Northern Triangle’s main problems. It would be unrealistic to expect all problems to be turned around. A more realistic positive expectation would be to achieve progress in one or two areas, which might have a positive ‘demonstration effect’ across the sub-region. How likely is this? We will next turn our attention to the outlook for the next national elections in each of the three republics.

Honduras: electoral disappointment

The November 2017 elections in Honduras, rather than an example of democratic choice, proved to be a case study in polarisation and dysfunctional outcomes. A central theme in Honduras has been the ongoing desire of leading politicians to remove term limits and perpetuate themselves in power. Conservative forces supported an army-led coup d’etat in 2009, alleging that the elected left wing incumbent, José Manuel ‘Mel’ Zelaya (2006-2009), had been planning to change the constitution so as to be able to run for consecutive re-election. Juan Orlando Hernández of the right-wing Partido Nacional, who had supported the coup, was subsequently the victor in the general elections of July 2013, campaigning among other things on promises of a militarised response to the spread of criminal gangs. Despite his previous support for term limits, once in office Hernández sought to enable his own re-election. Although consecutive re-election is explicitly banned (Article 239 of the Constitution) Hernández secured a controversial 2015 decision from the Supreme Court, packed with government supporters, which voided that article.

The elections were essentially a three-way contest, between Hernández, for the Partido Nacional, Salvador Nasralla for the Alianza de Oposición Contra la Dictadura (a centre-left coalition that included former President Mel Zelaya’s Partido Libertad y Refundación – LIBRE), and Luis Orlando Zelaya of the Partido Liberal (PL). Initial results showed Nasralla well ahead but after a suspicious interruption of the vote count, Hernández was proclaimed the victor. The Supreme Electoral Tribunal (dominated by government appointees) eventually claimed Hernández had received 42.95% of the vote to Nasralla’s 41.42%. The Organization of American States said the poll “was characterised by irregularities and deficiencies, with very low technical quality and lacking integrity” – it called for new polls to be held. The government refused to call new elections while the opposition refused to accept the results. Security forces violently repressed a wave of anti-government demonstrations in which over 30 people were killed. The UN intervened in an attempt to promote a dialogue to resolve the political impasse. This in turn was hampered during the course of 2018 when the opposition coalition split apart. While Mel Zelaya and LIBRE argued for a hard-line policy of anti-government insurrection, Nasralla agreed to take part in the ‘dialogue’. The government meanwhile dragged its feet: it took almost a year for the political dialogue to commence.

The outlook for Honduras over the next three to four years, running up to the general elections due in November 2021, is therefore problematic. The current government lacks democratic legitimacy; deep divisions in the opposition mean that the political dialogue is unlikely to succeed. Meanwhile the country’s self-perpetuating problems continue. Investigations carried out by the OAS-backed Honduran Mission of Support Against Corruption and Impunity (MACCIH) have uncovered the so-called ‘Pandora case’ in which 38 public figures are accused of diverting over US$11m of government money into the campaign funds of the ruling Partido Nacional (PN) and other parties. The judiciary’s ability to prosecute is limited: the head of the attorney general’s office (Ministerio Público – MP) has just been re-appointed for another five years, after a flawed attempt to elect a successor collapsed in Congress. Anti-corruption campaigners say that the Supreme Court has been dragging its feet on the Pandora case, failing to convene initial hearings. In other respects the country continues to struggle: opposition and human rights activists continue to be persecuted; although the homicide rate has fallen, Honduras is still one of the most violent countries in the world; economic growth remains skewed against the poor.

An optimist would argue that last year’s flawed elections will have heightened awareness of the need for authentic democracy; that despite its difficulties MACCIH and some Honduran prosecutors are working to enforce the rule of law; and that the work of civil society organisations, together with some international pressure, is also having a positive impact. It is possible that popular mobilisations will force the government to allow more genuine democracy: but this will be difficult as long as the opposition is divided.

Guatemala: one step forward, two back?

On first examination it would appear that Guatemala has progressed much further towards democracy and the rule of law than Honduras. The investigation of the La Línea corruption scandal, led by an effective partnership between the UN-backed International Commission Against Impunity in Guatemala (Cicig), the Ministerio Público (MP – attorney general’s office), and popular protests and mobilisations, achieved unprecedented results: the removal and imprisonment of both President Otto Pérez Molina and Vice President Roxana Baldetti who were subsequently put on trial facing multiple corruption charges. It is hard to imagine a more dramatic and decisive blow against impunity or a more public affirmation that all citizens, no matter how powerful, are subject to the rule of law.

Yet, despite this encouraging achievement in many ways the country has subsequently slipped back. In October 2015 Jimmy Morales was elected as the next president, after campaigning on the slogan that he was ni corrupto ni ladrón (neither corrupt nor a thief). Yet once in office Morales has been troubled by multiple allegations of impropriety, including illicit campaign financing, tax evasion by members of his family, receipt of improper salary bonuses, and various other issues. The president has reacted by attacking Cicig and seeking to weaken its anti-corruption work. In August 2017 he unsuccessfully tried to deport the head of the Cicig, Iván Velásquez, a Colombian citizen (a Guatemalan court voided the deportation order). Also unsuccessfully, he has tried to get the UN leadership to replace Velásquez. On other fronts – for example campaign promises to reduce poverty and child under-nourishment – there has been little progress. And despite the ‘demonstration effect’ of the La Línea case, there is considerable evidence that corruption remains deeply embedded in the country’s politics and business practices.

The comparison between Honduras and Guatemala raises a question (which, as we will see shortly, is also relevant in El Salvador) concerning the role of political parties. Honduras has traditionally had a two-party system (liberals and conservatives, the latter now represented by the Partido Nacional) that has now begun to fragment. In some ways the fragmentation process has had negative effects, such as the current weakness and division of the opposition. In Guatemala political parties are much more fragmented, and this too can be seen as a negative. In the 2015 congressional elections 17 parties took part and 12 of them secured at least one seat. The president’s party, Frente de Convergencia Nacional (known as FCN-Nación), is small and lacks a congressional majority. To govern, the president must therefore put together a coalition in Congress. Critics say a proliferation of small, opportunist parties with little political conviction or principle can create a situation where corruption and nepotism is used as the ‘glue’ to hold alliances together. From this perspective, Guatemala is in danger of replicating the ‘presidential coalitionism’ seen in Brazil, which has also been cited as a contributing factor to that country’s corruption problem.

Entrenched two-party systems on the other hand can also be negative if they exclude new or independent forces. From this perspective, multi-party systems have their benefits. This may be relevant in Guatemala where the next elections are due in June 2019. It is widely expected that Thelma Aldana, the former attorney general (she was in office in 2014-2018), may run for the presidency, and that she would be a strong contender because of her anti-corruption credentials. A range of civil society organisations and new political parties (including Encuentro por Guatemala, Semilla, and Libre) have discussed forming a coalition with her as a candidate. Should this potential coalition develop, it will be important to look at the contrast between the policies it adopts, and those of its main rivals. Unlike Honduras, Guatemala has a good record for holding fair and free elections in recent years. There is therefore the possibility that as a result of next year’s elections a new administration with a fresh approach to the country’s problems may take office in January 2020.

El Salvador: breaking the old mould?

Since the end of the civil war in the1990s El Salvador has effectively had a two-party system, formed by the right wing Alianza Republicana Nacionalista (Arena) and the leftist Frente Farabundo Martí de Liberación Nacional (FMLN). The two have been characterised by strong ideological right-left polarisation and a tendency to block and obstruct each others’ policies (particularly when the party in government lacks a majority in the legislature). But they have also resembled each other in some respects. Presidents of both parties have been linked to corruption and the misuse of public funds. Both parties have supported a hard-line crackdown on street gangs, but with mixed results.

The current FMLN government of President Salvador Sánchez Ceren reaches the end of its term in June 2019 and is suffering from low popularity ratings. Presidential elections are due in February 2019 and the conventional wisdom has been that Carlos Calleja, a businessman-representing Arena, is likely to win as the party, together with other smaller allies, took nearly 58% of the congressional vote in March 2018. However, there is also likely to be a major challenge to the two-party system mounted by Nayib Bukele. Bukele is a dissident former FMLN member who has broken away and will stand for the centre-right Gran Alianza por la Unidad Nacional (Gana) party. Bukele built his political reputation as a pragmatic, non-ideological mayor of San Salvador, the capital. His popularity was built on a series local initiatives including provision of street lighting and urban regeneration projects. He therefore represents a new, less-ideological approach.

The optimistic argument in El Salvador is that the political system will change, as key leaders become aware that voters are disenchanted with the old rigid and ideological two-party system. Bukele’s challenge may drive changes in attitude as the candidates seek to try to assess and respond to the popular mood. Hugo Martínez, presidential candidate for the FMLN, has already said that if his party wins he will appoint a cabinet “90% composed of new faces”. Recent opinion polls have placed Bukele ahead in the race with 44%-50% support, with Carlos Calleja second on 15%-22%.

Of course, the emergence of a new presidential challenger who can capture the support of a majority of voters does not of itself guarantee an ability to adopt successful policies and to see them through to the execution stage. But the case of El Salvador highlights the importance of fresh thinking across all of the Northern Triangle to tackle the sub-region’s deeply embedded problems.

Venezuela, which has the largest hydrocarbons reserves in the world, could potentially be one of the biggest losers from the energy transition in Latin America. The danger, in a nutshell, is that the country, already having endured years of economic crisis, will remain locked into fossil fuel dependence at a time when the value of these assets may be beginning to decline. The country’s vast reserves, including those in the Orinoco tar sands, could potentially end up as stranded assets and never be developed.

In some ways Venezuela faces energy transition problems like those of Iraq. Iraqi finance minister Ali Allawi has said he faced a crisis last year when, as a result of the Covid-19 pandemic, oil demand and prices tumbled sharply. The Baghdad government receives 90% of its revenues from oil sales and spends 45% of its budget on state sector salaries and pensions. The net result was that it ran out of cash and was forced to borrow heavily from international banks. GDP shrank by 11% and poverty increased. The crisis raised awareness of the need for sweeping economic reforms – but the political appetite for those reforms faded quickly once international oil prices began to recover. Allawi says that if his country remains oil-dependent at a time when the rest of the world is accelerating the energy transition, the results could be “catastrophic”.

Today’s Venezuela has several similarities with Iraq. Both can be described as ‘petro states’ with high dependency on oil (in Venezuela’s case oil represents over 90% of exports and most government revenue). In both, political institutions are weak and there is widespread corruption. Venezuelan oil production peaked in the 1990s and has been falling since then. There has been little or no meaningful effort to diversify the economy. Venezuela’s access to international credit is more restricted than Iraq’s. Since 2014 Venezuelan GDP has contracted by more than two-thirds. Poverty and net migration have soared. The IMF estimates that the economy contracted by 30% in 2020 and will fall by a further 10% this year.

Research by the World Bank into what it calls fossil fuel dependent countries (FFDCs) groups both Iraq and Venezuela together among countries that are highly exposed to hydrocarbons (measured by the share of fossil fuels in total exports) and at the same time experience low resilience (meaning management of fossil fuel revenues has been poor). The other LAC country in this high exposure/low resilience quadrant is Guyana. Other big LAC producers such as Brazil, Mexico, and Colombia fall into the low exposure/low resilience quadrant. Tellingly, there are no LAC countries in the low exposure/high resilience quadrant, which is best situated for the energy transition (however on this analysis Chile is close to this group).

Preparedness for a low carbon transition

Source: World Bank Group (2020). Diversification and Cooperation in a Decarbonizing World

Analysts have been discussing how Venezuela might emerge from its current economic crisis. Some pose the question in the context of a political change, such as a return to democracy and a removal of the current authoritarian regime led by President Nicolás Maduro. These discussions all tend to assume that for the short term at least the oil and gas sector will need to provide the main route to recovery, simply because a radical and near-instantaneous re-invention of the country’s economic model and energy mix is not viable.

Turning around the shattered fossil fuels sector in the country will be extremely difficult. In 1994 Venezuela produced 3m barrels per day and state oil company PDVSA was the second largest oil company in the world. In the following quarter of a century, in a context of relentless mismanagement and corruption, production dropped to average only 400,000 bpd last year. Analysts have calculated that if production could be increased to 1.5m bpd, and if oil prices average US$64 a barrel, then government revenue could rise to US$100m a month – enough to reduce the worst pockets of poverty and begin to kick start a small economic recovery. A report by the Baker Institute at Rice University in Houston says it might be feasible for Venezuela to boost oil production to 1m bpd in the short term and back to 2.5m-3.0m bpd within a decade.

Francisco Monaldi, a specialist at the Baker Institute, says enough infrastructure is still in place to take production up to 1m bpd, but to get to 3m bpd will require investment of up to US$110bn over 7-10 years. There is of course uncertainty over what oil prices will be within a decade, and therefore over the likely rate of return on fossil fuel investment, and how this might compare with renewables.

Monaldi sees three big obstacles to an oil and gas sector recovery: first, a negative local investment climate in which PDVSA requires a majority share in all exploration and production; second, international oil companies’ lack of confidence in the current Venezuelan government; and, third, the continuing presence of US led-international sanctions against Venezuela.

There is nothing to prevent a future Venezuelan government from pursuing a twin-track policy of fossil fuel recovery coupled with action to diversify the economy and develop cleaner and greener energy sources. But what the preceding discussion shows is that Venezuela is at least 10 years behind other regional countries on the energy transition timeline. In addition, the country is starting out from a more difficult point characterised by high exposure and low resilience. Innovative solutions to this deep dilemma may yet be found, but progress will require time and a supportive political environment.  

Crude oil reserves in billion barrels (Gbbl)

Source: howmuch.net, CIA

The outlook for the Latin American middle class is uncertain. What can be said with certainty is that it is now much larger than it was: about three out of ten Latin Americans are now middle class, according to the World Bank classification, and when asked, just over four out of ten Latin Americans say they consider themselves to be middle class. There are different ways of counting but anywhere between 190m and 285m people can be said to form the Latin American middle class. That group will continue to play a central role in the region’s social, economic, and political development. It currently represents almost 10% of the global middle class. We also know with some certainty that the age composition of the regional middle class is shifting: over the next few decades it will gradually become older. The ageing process will also have far-reaching social, economic, and political implications. There are some indications that in coming years some members of the middle class may begin to move out of the region’s mega-cities into a second tier of intermediate cities, where there is less congestion, pollution and crime, and the prospect of a better quality of life.

There is a lot we don’t know. Critically, we don’t know how strongly the middle class will continue to grow. We do know that the new middle class is precarious and prone to slipping back into vulnerable status and informality. In some countries there have been signs of regression and talk of a ‘submerging’ middle class. Having experienced the commodities super-cycle and a subsequent recession, much depends on how strong and sustainable the Latin American recovery will prove to be over the next few years, and on whether governments can successfully use tax and social programmes to create more socially inclusive societies. The tipping point at which Latin America’s middle classes become the numerically largest group in society is still some way ahead. We also don’t know how the spread of new digital technologies (including industrial automation, driverless vehicles and the Internet of Things) will revolutionise employment in both the world’s developed and emerging economies. Nor, amid all this, do we have clear idea of how middle class political affiliations are changing, apart from understanding that we appear to be entering a period of increased volatility.

One way of dealing with an uncertain future is to consider a range of likely scenarios. This is exactly what was done in a joint report for the IDB and the Atlantic Council (a US-based think tank) published in mid-2017. The report envisages four major scenarios for the future. The first is called “muddling through” and is a kind of base case, envisaging a continuation of existing trends. It looks at the quality of governance, regional integration, and adaptation to climate change. In this scenario the share of people defined as middle class in Latin America is expected to increase by 57m from 288m in 2016 to 345m by 2030.

The second scenario consists of two paired alternatives. The more positive of the two is called “Governance on the Rise” and imagines that the middle classes push Latin America’s democratic governments to successfully tackle a range of difficult but necessary reforms. As a result there are social and economic benefits from greater government transparency, stronger institutions, and increased accountability. The regional economy is expected to grow by an additional 7%-10% on top of the “muddling through” scenario. The negative version of “Governance on the Rise”, however, is called “Illicit World Afloat” and imagines a failure of the political system to deliver. Corruption is pervasive, a weakened rule of law reduces state capacity, and global crime syndicates gain more traction. As a result there is a brain drain and foreign direct investment into the region shrinks by more than 50% relative to the “muddling through” scenario.

The third option is another set of paired possibilities that looks at how Latin America countries cooperate and trade between themselves. Its positive version is called “Toward Integration” and imagines that closer cooperation leads to better trade, increased investment in infrastructure and human capital, and better financial collaboration and energy integration. It assumes that infrastructure investment will rise to nearly 5% of GDP. The negative version of this scenario is called “Fragmentation Prevails” and envisages that Latin America’s countries are pulled in different economic, political, ands social directions. As a result the level of regional exports falls by an annual amount of around US$200bn.

The fourth scenario looks at climate change and assesses the negative impact it has on the regional economies, although it also imagines a more positive scenario, where Latin America becomes the world’s bread basked and its “global green leader”. These scenarios may not exhaust the possible futures for Latin America’s middle classes. But it is possible to conclude that continued middle class growth will depend on better governance at a time of unprecedented economic change: political decisions taken by Latin American voters in the next few years will be crucially important.

Although official full-year GDP data for 2017 is not available from the central bank until late March, the authorities have given preliminary indications of the results, suggesting a slight acceleration from 2016, but with the overall pace of growth remaining weak. The minister of finance, Macarena Lobos, stated in late February that fourth-quarter GDP growth came in at 2.9% year-on-year, representing an acceleration from 0.1% in the first quarter, 1% in the second quarter, and 2.2% in the third quarter. This would imply full-year growth of just under 1.6% year-on-year, marginally higher than the 1.5% in 2016.

Although the preliminary annual growth rate is disappointing, the trajectory of growth gives significant cause for optimism. The acceleration over the course of 2017 is likely to be explained by rising mining output: the monthly economic activity index, which is a broad proxy for GDP growth, shows that mining activity was posting double-digit falls in the first quarter of 2017, but by the end of the year was growing by around 5% year-on-year. Non-mining activity shows a similar, if less marked trend, with output picking up from 1.5% early in the year to over 3% by the end of the year. The full break-down of non-mining results is not yet available, but other leading retail and manufacturing indicators point to an improving picture in these areas, reflecting both firmer domestic demand (affecting retail) and external demand (lifting manufacturing). The fact that the monthly economic index has continued to improve in early 2018 is also a positive sign: overall activity rose by 3.7% year-on-year in January, representing the firmest growth since late 2013.

Copper prices set to lift growth in 2018

This sense of optimism is one that is shared by the international community, with the Organisation for Economic Co-operation and Development (OECD) stating that in late February that they expect GDP growth to rebound to 2.9% in 2018. The IMF is slightly more circumspect, but its projection of 2.5% is still relatively robust. A rise in international copper prices is a key factor behind Chile’s improved fortunes. After standing at around US$2.50/lb at the start of 2017, copper prices rose to well over US$3/lb in the fourth quarter of the year, where they have remained so far during 2018. This is likely to incentivise exploration, lifting export volumes and fixed investment, but higher prices will also feed through indirectly into stronger government and private consumption.

Greater business confidence following the victory of Sebastian Pinera in last December’s presidential election is also likely to support stronger growth. A central bank survey conducted in early February indicated that the government’s business-friendly policy approach – which includes pledges to cut the rate of corporation tax – would engender an increase in private investment by firms already operating in Chile. A monthly business confidence index compiled by ICARE and the Universidad Adolfo Ibanez substantiates this trend, with confidence rising sharply in both January and February. The index establishes a level of 50 as a neutral line, with readings above this indicating an improvement in confidence levels and readings below indicating a fall in confidence. Index results oscillated within a range of 42 to 49 over the course of 2017, ending the year at 44, but rose to 53.8 in January and 57.4 in February.

Monetary policy is set to remain on hold

The improving GDP picture indicates that further monetary policy easing will not be necessary in order to bolster the rate of growth. The central bank cut the benchmark interest rate by a total of 100 basis points in the first half of 2017, but has kept the rate on hold at 2.5% since then. In its most recent meeting in mid-February, the bank’s monetary policy committee stated that it had considered another 25 basis point cut, but that committee members voted unanimously to keep rates on hold. As well as improvements in the local capital market and an appreciating peso, the bank cited a pick-up “in every sector”, with risks to the outlook fading amid stronger domestic and external conditions. The fact that inflation remains towards the lower end of the official 2%-4% target range – coming in at 2.2% year-on-year in January, according to the latest data – also gives the bank significant scope for manoeuvre. Although most forecasters expect annual inflation to increase over the course of 2018, reflecting firmer domestic demand and the pass-through from higher global commodity prices (which affect import costs), the increase is nonetheless expected to be mild.

With the campaign ahead of the 2014 general elections by all intents and purposes under way, President Ricardo Martinelli is struggling with a pledge that was key to his own electoral victory in 2009: the promise to end the public transport chaos, particularly in the capital, Panama City.

On 5 April Panama City mayor and a member of Martinelli’s Cambio Democrático (CD), Roxana Méndez, announced an emergency plan, which included the provision of 50 buses initially for a ten-day period, to deal with the transport chaos in the capital. These problems have intensified since 15 March as a result of the withdrawal of the so-called ‘red devil’ (Diablo Rojo) buses – the second-hand decrepit US school buses which Martinelli pledged to get rid of - and problems with the Colombian operated replacement metro bus system, ‘Mi Bus’.

Complaints regarding both Mi Bus and the system of pre-paid transport cards administered by Chilean company, Sociedad Nacional de Procesamiento de Datos, S.A. (Sonda) come from various sectors. On 25 March, Panama’s main private sector lobby, Consejo Nacional de la Empresa Privada (Conep), issued a statement complaining that the “necessary” process of modernising public transport had become “a problem”, which was having “a negative impact” on the country’s economic development and causing problems for the estimated 750,00 users in Panama City. Irvin Halman, the president of another private sector lobby, Cámara de Comercio, Industrias y Agricultura de Panamá, told reporters that each hour of delay caused by the transport problems cost local businesses US$180,000. There have also been public protests outside the Mi Bus headquarters while in one capital district, San Miguelito, efforts are underway to collect signatures to present a formal complaint against the company.

Given the electoral importance of the issue, Martinelli is keen to be seen to be taking it seriously. On 19 March senior officials led by the minister for the presidency, Roberto Henríquez, met representatives of Mi Bus to discuss the problems. A week later, Panama’s transport authority (ATTT) announced that it would begin levying a US$1,148 daily fine on Mi Bus for poor services. Roberto Moreno, the ATTT head, told reporters at the time that the fines were for two offences: the infrequency of buses and the poor quality of the service. With Mi Bus officials since summoned to congress for questioning, Henríquez has been forced to admit more generally that the process of modernising Panama City’s public transport system was only 40% complete. Aside from the new Metrobus system, the other major public transport project is the US$1.6bn Panama City metro, being built by a Spanish-led consortium which is due for completion this year.

There are three obvious conclusions. The first is that Guyana is on the cusp of a significant oil-driven boom. The second is that there is a very strong awareness, both within the country and amongst the country’s international partners, of the dangers of the resource curse and the measures required to avoid the pitfalls. But, thirdly, Guyana’s highly contested and divided politics greatly complicates the pursuit and implementation of best practice.

The Green Paper concludes that “there is an urgent need for strengthened institutions and systems to support strong governance and oversight”. It acknowledges that “effective monitoring and evaluation are critical to ensuring transparency and accountability”, and it asserts that this needs to be “complemented by stronger enforcement of anti-corruption measures across all sectors”.

And it exhorts: “As a nation, an historical opportunity is before its people. Maximising this to the benefit of every Guyanese woman, man and child is Government’s responsibility, and doing so – while taking pre-emptive actions to avoid the presource curse, Dutch Disease and resource curse – is what will make Guyana stand out as a people and, to the world, as a model government and nation worthy of emulation.”

If awareness and goodwill were enough, the future would indeed seem to be as bright as the arithmetic suggests it should be. But the political turmoil of 2019 points to the possibility of a less happy outcome. Much will depend on whether the general election, when it is finally held on 2 March 2020, can return the country to political stability – and if the winners of that election can resist a winner-takes-all approach to the country’s newfound wealth.

To conclude this report, three main points need to born in mind. The first is that the transport revolution is going to have an inescapable impact on Latin America and the Caribbean. While aspects of the looming disruption to existing transport systems may be over-sold, exaggerated, or presented as more benign than will actually turn out to be the case, there is enough evidence to insist that a real shake-up is on the way. The region will have to adapt.

The second rather frustrating conclusion is that it is still very hard to predict what will happen with any degree of accuracy. There is still not enough hard evidence to forecast with a reasonable degree of certainty, how autonomous vehicles will be used. The changes in transport will be part of the wider upheaval caused by the ‘fourth industrial revolution’ – the global move to increasingly sophisticated digital technologies, robotics and artificial intelligence. The full implications of this wider upheaval are uncertain. It offers major advances in efficiency and competitiveness but also brings the threat of job losses and exclusion of social groups that get ‘left behind’. For Latin America and the Caribbean in particular the transport revolution will come on top of existing problems such as an inadequate transport infrastructure, high levels of informal employment, and skills shortages in some key areas. That said, the upheaval does offer the possibility of improving the quality of life and improving social, economic, and environmental conditions in the region’s urban areas, where the mass of the population lives.

The third point is that, despite the uncertainties, the best policy for LAC governments is to engage with the implications of the transport revolution sooner rather than later. Not preparing for the new vehicles and technologies increases the chances of losing out and being relegated to the slow lane. Investing and developing new policies now is the best way to increase the chances of capturing some of the benefits from the new world that is on its way.

On 7 October this year militants from Hamas crossed the border between the Gaza Strip and southern Israel, unleashing a savage spree of killing and hostage-taking. Israel, taken off guard, responded by bombarding densely populated Gazan cities, as well as by cutting off water, power, and other essential supplies. An Israeli invasion of Gaza and a wider-ranging Middle East war both looked like serious possibilities. Across the world governments and foreign ministries found themselves having to take a position on the renewed conflict. For many this meant finding a way to condemn acts of terrorism by Hamas while appealing to Israel to observe international humanitarian law and avoid civilian casualties. The reaction of one country, Colombia, was noteworthy.

In Latin America, Brazil used its rotating presidency of the UN Security Council to call an emergency meeting in an attempt to de-escalate the situation. Brazil condemned the attacks on Israel, expressed its condolences with the Israeli people, and reiterated its support for a two-state solution to the underlying territorial conflict, to be achieved within mutually agreed borders. Argentina, a country with the largest Jewish community in Latin America, condemned “the brutal terrorist attacks” against Israel. Chile, which hosts the largest Palestinian community in the region, also condemned the Hamas attacks while calling for “direct good-faith negotiations” between Israel and Palestine on a two-state solution to achieve a “fair, full, and definitive” peace agreement.

Like many of the other countries, Colombia’s initial response released by the foreign ministry, sought to strike a measured and balanced tone. It called for an urgent resumption of dialogue “between Israel and Palestine to begin a peace process that leads to peaceful coexistence, within mutually agreed-upon secure borders … with full support for the territorial integrity of the parties.” However, it did not explicitly condemn Hamas and the message was almost immediately superseded by a stream of angry posts placed on X by President Gustavo Petro, in which he highlighted the mounting number of civilian deaths in the Israeli bombing campaign in Gaza and criticised Israel’s defence minister, Yoav Galant, for ordering a “complete siege” of the strip, and for saying “we are fighting against human animals”. “This is what the Nazis said about the Jews”, Petro retorted, “we cannot allow Nazism to be re-established in international politics”. The Israeli foreign ministry described Petro’s posts as “hostile and antisemitic” adding that Israel would immediately halt all defence exports to Colombia. Deborah Lipstadt, US Special Envoy to Monitor and Combat Anti-Semitism said the US “strongly condemns President Petro’s statements and calls on him to condemn Hamas”. The Colombian president remained unapologetic, stating “if we have to suspend relations with Israel we will suspend them. We do not support genocide.”

In terms of information management, Petro has in fact taken a leaf out of the Donald Trump playbook despite being on the left, in that he has maintained a constant stream of social media posts and controversies since early October, placing himself at the centre of attention and stirring up his political base of support. The benefit of such a communications strategy is that it enhances a sense of protagonism, allowing the leader to appeal to public opinion directly, jumping over the heads of other institutions such as congress or the judiciary. In this case the president’s statements undermined his own foreign ministry, which had to revise its first public statements to make them align with his subsequent social media comments.

The background is that, like many of his counterparts, Petro has a deeply hostile relationship with traditional media and sees the new social media platforms as a way of delivering his message directly without any filters or layers of critical scrutiny. In fact, according to a report by Paris-based Reporters Without Borders (RSF), in only 52 countries around the world does the press operate without significant restrictions. Only a handful of Latin American countries fall into that category: Costa Rica, Argentina, Belize, Uruguay, and the Dominican Republic. Colombia does not. Elsewhere in the continent journalists are treated almost like enemies of state. In 2022, 93 Nicaraguan and 16 Guatemalan journalists were forced into exile. Journalists have also had to flee El Salvador, and in 2022, 13 Mexican and seven Haitian journalists were murdered.

Colombia is mid-way along this spectrum. Particularly in the larger cities, the press is respected and operates freely. “Here the press is strong, we have very good journalists in all media. The press imposes its agenda”, Daniel Pacheco of La Silla Vacía told the Los Angeles Times in October 2023. However, in regional areas journalists are much more likely to be threatened. According to Bogotá-based lobby group Fundación Para La Libertad de Prensa (FLIP), in 2022 there were 218 threats, eight journalists forced into exile, 20 physical attacks, and two murders. The environment has also been affected by media-led investigations into claims that the president’s son was involved in money laundering and illicit use of narco-funding to support his father’s campaign during the 2022 elections.

Petro senior responded angrily, once more resorting to social media. He accused respected veteran journalist Ricardo Calderón of mounting a “slanderous” investigation and of publishing “false information” over his son’s case. Analysts pointed out that the president has repeatedly singled out mainstream media for hostile comment. In January 2023, for example, he used X to post 34 messages criticising nine different media outlets. Pedro Viveros, a columnist for newspaper El Espectador, commented: “When a politician is populist, the first thing he does is mess with the media, that is the way they guarantee an audience. If the president fights with the media his political group, his mass of followers, will end up following him, which is almost half of the country.”

There is even some suggestion that pro-Petro activists may be using online disinformation techniques not unlike those deployed by Russia. In a week in mid-August this year, hashtags such as #CaracolMiente, #SemanaMiente, #ElColombianoMiente, #RCNMiente, and #ElTiempoMiente appeared on X, TikTok, Instagram, and VK (the Russian version of Facebook). Caracol, Semana, El Colombiano, RCN, and El Tiempo are among the country’s major media groups, described by the hashtag as “liars”. Tracking report suggested the tags had been mentioned about 3.1m times during that week.

The latest opinion polls compiled as Milei approached the end of his first 100 days in office in late March, show that Argentine society remains politically polarised. According to polling agency D’Alessio IROL Berensztein, the Milei administration had a 43% approval rate, but a 52% disapproval rate. Meanwhile another pollster, Giacobbe & Asociados, found that 53.6% of respondents had a positive image of the new president, against 42.1% with a negative image. Opina Argentina found Milei had a positive image for 52% of those surveyed (up by two points on the previous month) but it also noted that its margin of error was +/- 2.6%. This agency found that support for the president was significantly higher among men (65%) than among women (49%). Facundo Nejamkis, director of Opina Argentina, argues that Milei comes across as an “attractive and disruptive” person to many voters. If he can steer the economy back to a growth path, it is likely that his hard core of supporters will consolidate. Failure to deliver on the economy, however, will weaken and begin to dismantle the pro-government coalition.

In terms of other key figures in the government both Vice President Victoria Villaruel and Patricia Bullrich, the security minister, were hovering around a 50% positive image rating. However the economy minister, Luis Caputo, who is obliged to be a bearer of frequently bad news, had a significantly lower positive image of 37% versus a negative image of 60%. Key opposition personalities also performed relatively poorly. Peronist leader and Buenos Aires province governor Axel Kicillof had a 38% positive image, way below his 60% negative image. Martín Llaryora, the governor of Córdoba province who played a prominent role in the skirmishes with Milei over provincial funding, also emerged as unpopular. Both former presidents Cristina Fernández de Kirchner (2007-2015), on the Peronist left, and Mauricio Macri (2015-2019) on the traditional right, had high negative image scores.

An interesting aspect of the Opina Argentina poll is that it asked whether the new president should “impose his ideas and agenda for government”, or, on the contrary, whether he should “negotiate and seek agreements with the opposition”. A total of 37% of respondents said he should follow his own course, but a larger group of 58% - a clear majority - favoured reaching a consensus. The pollster also asked a similar question over what respondents believed that the opposition should do. The biggest group – 58% - said it should “collaborate with the new president and allow him to apply his economic programme”. A smaller group – 39% - believed the opposition should “oppose and block” his programme.

Reflecting on the results of various polls, Jorge Arias, a specialist at consultancy Polilat, says Argentina is another example of a spreading “global dissatisfaction with democracy”. He says, referring to Milei’s favourite electoral prop: “That weariness, that boredom or dissatisfaction, people have sought to express it with an 'outsider' who came to place the political caste on the cutting edge of a chainsaw.” As he put it, the problem now is that while many voters see themselves holding the chainsaw by the handle, many are in reality finding themselves at the other end of it, as victims of the cuts.   

The new President’s image

Key: (top to bottom) Presidential image: very positive; somewhat positive; somewhat negative; very negative; don’t know/won’t say

Source: Opina Argentina

Go it alone or negotiate an agreement with the opposition?

Key: (top to bottom) He should impose his ideas and agenda for government; he should negotiate and reach agreements with the opposition; don’t know/won’t say

Source: Opina Argentina

Perhaps more than at any other time in recent decades, the purpose and role of the armed forces is up for debate. Most Latin American constitutions describe the role of the armed forces as being to protect the nation in cases of external war. The reality, fortunately, is that there have been very few conventional conflicts between rival states in the region during the last century. The list is comparatively short and includes the Ecuador-Peru border skirmishes (1995), the South Atlantic or Falklands/Malvinas war (Argentina and Britain, 1982), the so-called ‘Football War’ (El Salvador and Honduras, 1969) and the Chaco War (Bolivia and Paraguay, 1932-35).

Responding to internal conflict and unrest has been a much bigger issue. As we have seen, the 1910-1917 Mexican Revolution was a major and cataclysmic internal conflict which left more than a million dead. There was a civil war in Paraguay in 1911-1912. Colombia experienced la violencia, a ten-year civil war (1948-1958) which from the 1960s onwards morphed into an ongoing conflict between conservative governments and left-wing rebel groups which, despite a partial peace agreement signed in 2016, is continuing today. Almost all countries in the region experienced urban and rural guerrilla movements from the 1960s onwards.  In the last four decades the economic and military power of transnational organised crime groups has increased sharply. A number of governments have turned to the armed forces to fight an ongoing ‘war on drugs’ with at best mixed results. Military units have overall lacked the training, resources, and skills needed to fight the cartels while simultaneously upholding human rights and supporting an often-overstretched criminal justice system.

In fact, one of the biggest headlines of any report on the military’s role in contemporary Latin America must be the enormous mismatch between the current size and structure of these forces and the increasingly wide and diverse range of tasks they are expected to perform, and threats which they are expected to contain. German political scientist Wolf Grabendorff has underlined the sheer range of the roles that the armed forces are being asked to assume in different countries, often to fill gaps and deficiencies left by failed civilian institutions. They have for example been pulled into the war on drugs, a role for which they have been neither trained or equipped, to try and replace corrupt police and weak criminal justice institutions such as prosecutors and courts.

His list includes responding to the big upsurge in street protests over the last two years in Andean countries like Chile, Ecuador, and Colombia; border and migration control; conservation of water resources; protection of the environment; Covid-19 pandemic response; control of air traffic systems; management of prisons; operation of emergency hospitals; protection of key officials; operation of intelligence-gathering networks; firearm and military equipment production; police support work; mapping services, customs management, major civil engineering and infrastructure projects; and food distribution. Willingly or not, the military have responded to these calls, to the extent that there are now more than 6,000 military officers working in the Brazilian government, more than there were during military rule in the 1970s.

The sense that the US retains a commanding lead in the AI race suffered a significant blow in early 2025 when DeepSeek, a small Chinese computer lab using open sources, released its R1 LLM model. Unlike its US rivals, DeepSeek made its research approach to LLM-building public; it also revealed it was able to use Nvidia GPU chips more effectively than its rivals. Most significantly. DeepSeek claimed it used only 2,048 Nvidia H800 chips and an investment of US$5.6m to train a model with 671bn parameters.

Industry specialists say this is only a fraction of the chips and investment the OpenAI would require training similar-sized models. The breakthrough, announced in January, led to an immediate reaction on the US stock exchange, where Nvidia shares dropped by a record 17% in a single day, 27 January. Although they subsequently recovered, the development suggests the superpower AI technology race remains wide open. There has been recent news of Chinese advances in other technology fields, with electric vehicle companies such as BYD and CATL developing batteries that can be charged in five minutes, also ahead of US/European standards.

The leader of DeepSeek, Liang Wenfeng, is a hedge fund manager with a long-standing interest in trade-focused algorithms. One of his business partners, talking about their first meeting, described him as “This very nerdy guy with a terrible hairstyle talking about building a 10,000 chip cluster to train his own models. We didn’t take him seriously.” But the DeepSeek R1 release has underlined the scope for innovation and more efficient use of chips. Ritwik Gupta, a policy researcher at the University of California, pointed out to the Financial Times that “The first person to train models has to expend lots of resources to get there. But the second mover can get there cheaper and more quickly.”

From Latin America’s point of view AI-focused technological rivalry between the US and China can be seen as a double-edged sword. On the one hand it may lower the cost of entry into the industry and provide scope to shop around for competitive alliances; on the other, however, it could lead to increased dependence on either China or US-developed models. There are different versions of the AI future, and no-one is entirely sure about the probability of various scenarios. One is a straight win-lose, or zero-sum game between the US and China. In that vision Latin American countries will have to choose which technology to follow. Some go as far as saying that DeepSeek’s R1 model is a geopolitical gambit to embed it in the infrastructure of developing nations, strengthening digital ties beyond Western control.

In a rival scenario, however, LAC countries may find they can build a more decentralised AI ecosystem where competition and regulation create more development pathways. A significant point is that DeepSeek can be adapted to work with Spanish or Portuguese LLMs, reducing reliance on English. In this scenario both US and Chinese companies may co-exist in the AI space in LAC.

Some assumptions about how AI will develop in Latin America may prove to be wrong. One is that only countries with low-cost energy sources, such as those of hydroelectric-rich Brazil or oil-and-gas focused Argentina, will be able to build a sustainable AI eco-system. The counter view is that countries with moderate energy costs but larger investment in digital infrastructure, such as Colomba and Mexico, may lead the way.    

That said, the US-led drive towards increased protectionism and punitive tariffs for silicon chips and other key technology products could cancel out those gains.

Date: To be called by November 2025 and held within three months

Election type: General election for 31-seat House of Representatives. The leader of the party controlling a majority will be asked by the governor-general to form a government and become prime minister.

Main contenders: Centre-left People’s United Party (PUP) and centre-right United Democratic Party (UDP).

The 2020 election was won by the PUP under leader John Briceño who became prime minister. After three terms in power, the UDP under then-prime minister Dean Barrow (now led by Moses ‘Shyne’ Barrow), was soundly beaten by 26-5 seats. The PUP could hardly have returned to power at a more difficult time. The economy contracted by 13.7% in 2020, and the debt-to-GDP ratio was 103%. However, growth did return, with an average annual rate of 8% over the years 2021-2024, although a much lower estimated 3.4% in 2024. One of the PUP’s key manifesto pledges was to create jobs, and it has brought unemployment down from 13.7% to 3.4%.

Security has also been a challenge, with two 90-day states of emergency being imposed in short order, the most recent in late June 2024 in response to a 45% increase in the murder rate since the previous year, with 58 murders from January to June 2024 compared with 40 in the same period in 2023. The upsurge was attributed to gangs fighting for control of marijuana markets.

The PUP comfortably won a parliamentary by-election in October 2024, with 70% of the votes cast, following up on an equally impressive win in the March municipal elections.

From 5-6 September Barbados played host to two Caribbean Community (CARICOM) meetings. In a briefing to the press afterwards, chairman of CARICOM and prime minister of Jamaica Andrew Holness and chairman of the Council on Finance and Planning (Cofap), Antigua’s Prime Minister Gaston Browne said that there was a “renewed energy and passion” in the Community.

The meetings in Barbados were of two CARICOM sub-committees: Cofap; and the prime ministerial sub-committee on the Caribbean Single Market and Economy (CSME), the proposed initiative currently being explored by CARICOM that would integrate all of its member states into a single economic unit.

The next important event for the Community falls in December, in the form of a special meeting of CARICOM Heads of Government which will take place in Trinidad and Tobago. Both the CSME and Cofap meetings came up with recommendations to send to the December special meeting which, if adopted, could have far-reaching consequences for CARICOM members.

Outlining the recommendations to come out of the CSME meeting, Barbados’s Prime Minister Mia Mottley drew attention in particular to the threats faced by the region from climatic events and natural disasters, and highlighted proposals to help mitigate them in the future, among which would be an expansion of the categories of workers who can move and work across the region on the CARICOM Skills Certificate.

“Right now there are 10 categories [of workers] and we have agreed to recommend an eleventh category of agricultural workers, primarily because we recognise the importance of being able to obtain food security across the region, particularly in these difficult and turbulent times.

“And…after the realisation of what the climate can do and hurricanes can do and now we see earthquakes disrupt the whole production and distribution cycle, we are conscious and sensitive to the fact that we have to be able to move the region closer to a level of food security in ways that we were not perhaps as assiduous about doing in recent times,” Mottley said.

In addition to the new worker category, the CSME sub-committee is recommending that CARICOM establish a single registration mechanism for companies, through the principle of mutual recognition, so that in the future businesses would be able to operate within a single, pan-CARICOM jurisdiction. The measure is designed to boost cross-Caribbean investment, reduce companies’ operating costs, and remove regulatory impediments.

The sub-committee has also recognised the capacity constraints on law makers and their institutions at a national level, which limits their ability to draft and pass legislation that would boost economies and living standards, and assist with further CARICOM integration. To counter this, the sub-committee is recommending the establishment of a regional law reform centre able to develop ‘model laws’ for social and economic sectors.

Prime Minister Browne set out the Cofap recommendations, saying that leaders had agreed to the establishment of a regional deposit insurance system to help to establish a higher level of protection for depositors against losses due to the failure of financial institutions.

He added that the need for the system was clear given the precedent set by the past failure of financial institutions within the region, and was required as a matter of urgency to enhance the financial safety-net for depositors and even for investors in the CSME.

“We also took follow up action on the mandate from the CARICOM Heads of Government calling for the finalisation of some of the relevant instruments before the Inter-sessional meeting in February of 2019, and others by next July. These include the Community Investment Policy; an investment code; an incentives régime; and an integrated capital market; starting with the adoption of model securities market legislation,” he added.

Prime Minister Browne said that agreement was also reached on expediting the finalisation of the CARICOM Financial Services Agreement, and approval was given in principle for the objectives of the CARICOM Credit Reporting policy. He explained that the policy would promote financial inclusion for nationals across CARICOM by providing for the regulation of the operations of credit bureaux and cross-border exchange of credit information within the Community.

In the past, criticism of CARICOM has focussed on it’s becoming stagnant. In 2017, Guyana’s President David Granger, then-Chairman of CARICOM, said that the Community, in particular the CSME, “must not be allowed to become a victim of equivocation and procrastination”. The outcomes of the two meetings demonstrate a growing awareness among the region’s political leadership that unless CARICOM nationals and businesses can see firm outcomes from the CSME the integration process will stagnate, and eventually fizzle out.

The indications are that all of the recommendations brought to December’s special meeting will be approved by heads of government, paving the way for further integration. CARICOM Secretary-General Ambassador Irwin LaRocque said that he expects the recommendations to lead to important agreements.