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The momentum to impeach President Dilma Rousseff has been halted, temporarily at least, by a supreme court ruling. Late in the evening of 8 December, Luis Edson Fachin announced that the entire process should be suspended until the full supreme court could rule on the legality of the proceedings thus far on 16 December. While the government will welcome the extra scrutiny the court will now apply to the rapid developments in the federal lower chamber of congress, it will also lament the fact that its hopes of seeing the issue resolved quickly, and in its favour, are fast receding.

On 3 December the secretary of the lower chamber of congress, Beto Mansur, from the Partido Republicano Brasileiro (PRB), took three-and-a-half hours to read the 300-page impeachment request to the full chamber. Thus started the official process to impeach President Rousseff. The next step was meant to be the formation of a special impeachment committee, in theory within 48 hours of the request being read. Over the weekend of 5-6 December, political parties of all stripes discussed which of their deputies should form part of the 65-member committee.

Though the voting for the committee was due to start on 7 December, it was subject to yet another delay by the house speaker, Eduardo Cunha, as part of his attempts to postpone the ethics committee investigation into his own conduct. When it finally did begin, the following day, the congressional session rapidly degenerated into chaos. Deputies were supposed to vote for one of two groups of candidates who would form the bulk of the committee. Slate One, the pro-government bloc, consisted of 49 deputies from 20 parties; Slate Two, the pro-impeachment bloc, consisted of 39 deputies from 13 parties. After the vote, the remaining members of the committee were meant to be decided in the congressional session on 9 December. That, however, did not (and will not) now happen.

Cunha decided that the voting should be secret. Jandira Feghali, the leader of the government-allied Partido Comunista do Brasil (PCdoB) asked the speaker why this should be so. Cunha ignored the question and ordered the voting to begin, prompting angry anti-impeachment deputies to attempt to physically stop the pro-impeachment lobby from voting. Cunha threatened to call security and promised to respond to Feghali’s request at a later date in writing. When the votes were tallied, 272 had voted in favour of the anti-government bloc, while only 199 had voted for the pro-government group.

In the end, however, the vote may now be moot. A few hours later, Fachin accepted an appeal by the PCdoB to examine the question of why the voting was conducted in secret as well as other procedural questions relating to the selection of the deputies in the groups. No further impeachment moves can now be made until the supreme court meets next week.

In some ways the government will be pleased that the court ruling gives it more time to prepare a defence; in others it will be irritated by yet another delay to proceedings. The ruling left-wing Partido dos Trabalhadores (PT) is desperate to get the process over with as quickly as possible, confident, at present, that it has the votes in the lower chamber of congress to block the request from succeeding. It fears that the longer the process goes on, the greater the likelihood of further economic deterioration, and possible social unrest. Amid such a scenario, support for Rousseff may weaken. To that end, the government is pushing for the cancellation of the congressional Christmas recess, but it is unclear as to whether it will succeed.

• Fifa scandal

On 3 December, the US Attorney General, Loretta Lynch, announced that another group of 19 executives of the Fédération Internationale de Football Association (Fifa) were being indicted, including the former president of the Brazilian football federation, Ricardo Teixeira, and its current head, Marco Polo del Nero. As both men are Brazilian nationals, they cannot be extradited. Brazilian lawyers are looking at whether they can prosecute the men for tax evasion offences.

REGION | Tax rates. Companies based in Colombia pay some of the highest corporate income tax compared to other countries in Latin America, according to a recent report released by the international law firm Baker & McKenzie on 18 July.

The report compared corporate tax rates in Argentina, Brazil, Chile, Colombia, Mexico, Peru and Venezuela. It highlights that, in 2016, Colombia’s final corporate tax rate was 40% (this final rate is composed of an income tax component of 25%, a 9% surcharge known as the ‘special contribution for equity’ [Cree], and an additional transitory tax of 6%). Moreover this is set to increase to 42% in 2017 and to 43% in 2018 under Colombia’s 2014 tax reform.

The report shows that this puts Colombia well ahead of the other countries studied with Argentina having the second highest corporate tax rate of 35%, followed by Venezuela (34%), Mexico (30%), Peru (28%), Chile (24%), and Brazil (15%). Despite the comparatively high tax burden placed on Colombia-based corporations, Colombia’s tax base is still low in comparison to that of members of the Organisation for Economic Co-operation and Development (OECD). In fact, the OECD – which Colombia is in the final stages of joining – has estimated that Colombia’s current tax system is unable to raise sufficient funds for necessary investment in infrastructure, education, and the social security net, which will be necessary following the signing of a full peace deal between the government and the Fuerzas Armadas Revolucionarias de Colombia (Farc). Indeed the Colombian government led by President Juan Manuel Santos has already mooted carrying out a new tax reform this year to address this issue.

Yet another tax that Colombia could look at increasing in order to boost tax revenues is its value added tax (VAT) rate. Another study by the economy and business development institute (Iedep) at the Lima chamber of commerce, released on 19 July, found that along with Mexico, Colombia has the lowest VAT rate of all the Pacific Alliance member countries. According to the Iedep report, Chile has the highest VAT rate in the Pacific alliance (19%) and third highest in the Latin America and Caribbean region (along with Brazil), followed by Peru (18%, fourth highest in the region along with Barbados and the Dominican Republic). Meanwhile the VAT rate in Colombia and Mexico is a lower 16%, which is close to the regional average of 15.2%. The VAT rate in Colombia and Mexico is still below the OECD average of 19.2%.

ECUADOR | Bond issue. On 25 July Ecuador’s finance ministry announced that it had successfully placed US$1bn worth of sovereign bonds in international markets. A ministerial statement said that the funds would help it to finance planned investments in this year’s national budget, as well as help Ecuador “to diversify sources of financing to allow for investment and the promotion of national development”.

The statement added that the bonds were placed in the US with a maturity date of March 2022 and at a yield of 10.75%. According to the finance ministry, the bonds were picked up by various international investors who “confirmed their confidence in the country”.

The issue comes as Ecuador finds itself in economic recession as a result of persistently low international oil prices, and the dollarised economy continues to struggle with the appreciation of the US dollar, as well as the effects of the devastating earthquake that struck Ecuador’s northern coastal regions last April, producing significant material damage in excess of US$3bn.

PERU | FTA with Honduras ratified. On 25 July Peru’s national congress ratified the free trade agreement (FTA) signed with Honduras in May 2015. Peru’s foreign trade & tourism minister, Magali Silva, hailed the ratification, saying that Honduras provides an attractive market for small and medium-sized Peruvian producers and will benefit products including asparagus, mandarins, artichokes, quinoa, and pineapples.

Silva noted that it will now be up to the new government of President-elect Pedro Pablo Kuczynski, who assumes the presidency on 28 July, to coordinate the date when the agreement takes full effect, after which 81% of Peruvian exports will immediately gain tariff-free entry to Honduras.

• Peru holds world’s largest silver and gold reserves

Peru’s future economic prospects were bolstered by the release of the ‘Mining Yearbook 2015’ by the energy & mines ministry (MEM) on 26 July. According to the report, Peru has the largest quantity of gold, silver, lead, and zinc reserves in Latin America, while it holds second place in terms of copper and molybdenum reserves. The report also notes that, based on a 2016 US Geological Survey Report, Peru’s silver reserves are the largest in the world, representing 24.5% of the global total. Similarly, Peru also had the world’s largest gold reserves, accounting for 4.6% of the global total.

MEXICO | Increase in unemployment rate. Mexico’s national statistics institute (Inegi) released new figures on 14 August showing that unemployment for the second quarter of 2019 (April-June) was 3.5%, with no change since the previous quarter. This represents a 0.2% annual increase, as unemployment in the second quarter of 2018 was 3.3%. Inegi’s figures also revealed an annual increase in the underemployment rate in April-June 2019 to 7.6% from 7% a year earlier.

The percentage of Mexico’s unemployed who have completed high school or university education stands at 47%. Héctor Magaña, professor at the higher education Instituto Tecnológico de Monterrey, argues that this shows that not enough skilled jobs are being created. “Most of the sources of employment that are being generated in the country do not require specialised knowledge or even work experience, causing difficulties for the population with higher education to find a job where they can use their knowledge,” Magaña explained. According to Magaña, this lack of skilled work, means that overqualified people are accepting low-skilled positions, which is fuelling the high underemployment rate: “people that already have a source of employment have to look for an additional source to live since they don’t have enough income to satisfy their needs”.

MEXICO | Central bank cuts benchmark interest rate. Mexico’s central bank (Banxico) announced a reduction in its overnight rate from 8.25% to 8% on 15 August. This represents the first cut in the benchmark interest rate for over five years. In a press release, Banxico cited as factors for the cut weakness in domestic aggregate demand, a deteriorating “balance of risks for global economic activity”, and the recent cut in interest rates by the US Federal Reserve and other central banks. Banxico noted that inflation is at “reduced levels”, with the annual inflation rate coming in at 3.78% in July and 3.95% in June. In a press conference on 16 August, President Andrés Manuel López Obrador said that the reduction in the interest rate was important for “stimulating growth” and will create a greater “incentive to invest”.

Local and international human rights groups have denounced a “surge in repression” by the government led by Nicaragua’s President Daniel Ortega in April. The claims were made against the backdrop of the second anniversary of the start of the protests against the Ortega administration which has left hundreds dead and tens of thousands of Nicaraguans in exile. These complaints come as the government has sparked fresh human rights fears over its handling of the coronavirus (Covid-19) pandemic.

In a statement released on 18 April, a group of human rights organisations including US-based think-tank Washington Office on Latin America (Wola) and Costa Rica-headquartered Center for Justice and International Law (Cejil), as well as local human rights groups such as Centro Nicaragüense de Derechos Humanos (Cenidh) warned of an “exacerbation of government repression as a strategy to inhibit the commemoration of the 2018 crisis”. According to the statement, between the night of 17 April and the early morning of 19 April, 65 incidents had been recorded. Of these, 32 were aggressions directed at women activists and their families, including insults and threats of a sexual nature.

Three days later the Inter-American Human Rights Commission (IACHR) tweeted that it had received civil-society complaints regarding an intensification of repression in the previous seven days against government opponents on the eve of the anniversary of the protests. According to the IACHR there were 138 cases of surveillance or raids, ten raids without judicial orders, 11 direct threats, 16 acts of aggression, and 39 arbitrary detentions carried out by the national police and parapolice.

The anniversary also prompted the international community to express disappointment about the lack of progress regarding efforts to address democracy and human rights-related concerns relating to the social and political crisis. In a statement dated 23 April, the European Union (EU) said “no tangible advances have been made” in these areas while “repression by security forces and pro-government armed groups of political opponents, demonstrators, journalists, civil society organisations and members of the Catholic Church continues”.  The statement also notes that the three main areas highlighted by the EU Foreign Affairs Council in conclusions adopted in October 2019 where “tangible progress needs to be urgently made remain valid”. These are the reestablishment of political freedoms and the release of the remaining political prisoners; full cooperation with and the return of international human rights bodies to Nicaragua; and an agreement on electoral and institutional reforms between the government and the main opposition groups, aimed at guaranteeing fair and transparent elections.

Fresh human rights concerns

Against this backdrop, the government’s response to the pandemic has attracted condemnation from the IACHR, Amnesty International (AI) and Human Rights Watch (HRW) among other institutions, as further evidence of its failure to take human rights seriously. Unlike the rest of Central America, the Nicaraguan government has failed to impose strict measures to stop the spread of the virus such as a nationwide quarantine, curfews, closure of educational establishments and non-essential business. Rather, its apparent promotion of mass marches and gatherings that contravene recommendations for social distancing, have been a source of bafflement.

In a statement released on 16 April AI said it was “surprising that, after preventing and suppressing any form of social protest for the past two years, [the government] is now promoting mass marches and gatherings, exposing the population to the pandemic”. It cites as examples of these events which took place in April, the organisation of a public mass by state institutions; the promotion of a public event to choose the 2020 summer queen in Managua department and the Nicaraguan tourism institute’s organisation of the Summer Music Fest 2020 festival in several locations.

Human rights groups and medical associations are also complaining about the lack of reliable information regarding the pandemic. The latest bulletin from the Central American integration system (Sica) at the time of writing, based on official figures, showed that as of 29 April there were just 13 Covid-19 cases reported in Nicaragua. This compares with 6,200 in Panama, 738 in Honduras, 705 in Costa Rica, 557 in Guatemala, and 377 in El Salvador. However, Observatorio Ciudadano Covid-19, a collaborative civil-society group set up in March to monitor the outbreak in Nicaragua, reported 370 suspected cases in Nicaragua up to 27 April. These included 13 cases confirmed by the health ministry (Minsa), 15 suspected cases reported by Minsa and 342 suspected cases verified by the Observatorio which bases its reports on information from “civil-society, territorial networks, digital activists, and relatives of those affected by Covid-19” and stresses that it is not an official report.

• Repression

In a statement released on 18 April, Cenidh said it had been working with the opposition group Azul y Blanco to document complaints against sieges, threats, injuries, and detentions in the departments of Masaya, Granada, Chontales, Managua, Matagalpa, Madriz, Bluefields and Nueva Guinea, which, it claims, confirms an increase in governmental repression and “are intended to remind the population that only the government has power and they won’t permit another April of strikes”.

* Bolivia’s central bank (BCB) has announced that the country received US$724m in remittances during the first six months of this year, representing a 5.9% increase on the same period in 2021 and a record high for the period. According to the central bank, 30.8% of these remittances came from Spain, followed by Chile (23.3%), the US (19.9%), Brazil (5.5%), and Argentina (5.3%).

After weeks of intense negotiations and a great deal of speculation, the future cabinet of Brazil’s President-elect Luiz Inácio Lula da Silva of the leftist Partido dos Trabalhadores (PT) finally began to take shape with the appointment of key future cabinet ministers.

On 9 December, Lula chose former São Paulo mayor Fernando Haddad (2013-2016) of the PT to be his finance minister, an appointment long-awaited, but that did not please investors or the financial markets, who would have preferred an orthodox economist for this portfolio.

José Múcio, a former president (2018-2020) of Brazil’s federal court of accounts Tribunal de Contas da União (TCU), was selected to be the next defence minister; a former governor of Maranhão state (2015-2022), Flávio Dino of the Partido Socialista Brasileiro (PSB), will be the incoming justice minister; Bahia’s governor Rui Costa, a PT co-founder, will be Lula’s chief of staff; and career diplomat Mauro Vieira was chosen for the foreign affairs ministry for the second time, having led it in the last two years of Dilma Rousseff’s (PT) second administration (2015-2016).

The fact that all these five appointees are men and all but one are white (Dino declares as mixed-race) was criticised by social movements and activists linked to the PT. Still, in a press conference, the president-elect promised that his cabinet will be diverse. “We will have women, men, black people, [and] indigenous [representatives],” he said. “We are trying to put together a government that is the face of Brazilian society in all its dimensions. You should not worry about that.”

Four days later, on 13 December, the president-elect appointed black singer Margareth Menezes as culture minister. On the same day, Lula also named the left-wing PT economist Aloízio Mercadante as his pick to head Brazil’s development bank (Bndes), again rattling the financial markets, which caused the president-elect to respond: “We need to have someone thinking about how to develop and reindustrialise the country.” 

Lula is set to take office for his third term on 1 January, after narrowly defeating right-wing President Jair Bolsonaro (Partido Liberal, PL) in the 30 October election. On 12 December, Lula took part in Brasília in the so-called ceremony of ‘accreditation’ (diplomação in Portuguese), in which Brazil’s top electoral court (TSE) gave him and his vice president, Geraldo Alckmin, of the Partido Socialista Brasileiro (PSB), a certificate attesting that they won the election, and their campaign finances were approved.

The ceremony, a final step in the countdown to the power transfer, closed the window for possible challenges to the election results at the TSE, but just hours after Lula received his certificate, a protest by pro-Bolsonaro supporters turned violent in Brasília, illustrating the challenges that the leftist leader will have to face to unite a divided and deeply polarised country (see box below).

Lula’s future ministers will also have daunting challenges to tackle in each of their respective areas. Haddad, particularly, will assume the finance ministry with Brazil in a very difficult fiscal situation and amid expectations that the country’s economy will slow down to 1.2%-1.3% in 2023, after growing around 2.8% this year.

As next year’s budget is tight, leaving Lula’s incoming administration no room for manoeuvre to make investments or fulfil campaign promises, the new government’s team is trying to approve in congress a constitutional amendment (PEC) that would allow it to spend beyond the so-called constitutional spending ceiling – a cap created by a 2016 rule that only allows government spending to increase at the rate of inflation in Brazil. The PEC was approved by the senate on 6 December, but it must now receive the support of 308 out of 513 deputies in two rounds of voting.

Haddad has been involved in these negotiations with lawmakers as part of Lula’s transition team and, at the same time, has been trying to convince financial markets that the PEC is not a sign that the new administration will not be fiscally prudent. Soon after his nomination, for instance, commenting on the rumours that as finance minister he could favour an increase in public spending and national debt, Haddad mentioned that, when he was São Paulo’s mayor, the city managed to control its finances, achieving ‘investment grade’ level (a credit rating implying low default risk). 

A lawyer who holds a master’s degree in economics and a PhD in philosophy, Haddad has been a close ally of Lula for a long time and is one of the figures most trusted by Brazil’s president-elect. During Lula’s previous two-term presidency, from 2003 to 2011, he served as education minister. In 2018, as Lula was in prison and barred from running for the presidency having been arrested on corruption charges and sentenced (his conviction was later annulled), Haddad took over as the PT presidential candidate, losing the election in a run-off vote against Bolsonaro.

The local press has speculated that, if Haddad does a good job as head of the finance ministry, he could be the PT presidential candidate again in 2026, as Lula will be 81 years old by then and has already announced that he does not intend to seek re-election.

The finance ministry would certainly give Haddad plenty of exposure, ensuring him national prominence. Yet, if turning Haddad into Lula’s successor is the PT’s ultimate goal, the chosen strategy is not free of risks. Ensuring that the economy recovers will be no simple task – and this may also depend upon external (and therefore uncontrollable) factors.

Haddad has signalled that he intends to prioritise tax and budget reforms. He has also suggested that his administration may propose an alternative fiscal rule to replace the 2016 spending ceiling and that he will try to contribute to the advancement of international trade deals, such as the deal between the Southern Common Market (Mercosur) and the European Union (EU).

“Haddad has a time-bomb in his hands,” Juliana Inhasz, a professor at the business school Insper, said to BBC Brasil on 9 December. “The spending waiver [PEC] provides resources for [the welfare programme] Bolsa Família [currently Auxílio Brasil], for a [real] increase in the minimum wage, and for some other things. But the government’s social agenda is much more ambitious than that. So, we still need to understand how all these plans will be financed, considering that it is very likely that 2023 will not be a year of great economic growth,” Inhasz added.

Another area that will probably represent a challenge at the beginning of Lula’s administration is the relationship with the military. Bolsonaro drew members of the military into his support base, giving them power, resources, and positions in his government, so many have remained loyal to the outgoing president, and it has been a challenge for the PT to deal with the polarisation of the country’s armed forces. In November, the local press published that Brazil’s three top commanders (air force, navy, and army) had decided to bring their resignations forward to December, which forced Lula to rush to find replacements, although the decision was not formally confirmed by the military.

As the first civilian to lead the defence ministry since 2018, Múcio will play a key role in Lula’s task of convincing the military to return to barracks. A political veteran (having served as federal deputy for the state of Pernambuco from 1991-2007), he was chosen to smooth over the relations between the PT and the military because he is seen as a skilled negotiator and has cultivated good relationships with top military officers. Even Bolsonaro’s vice-president, General Hamilton Mourão (Republicanos), said that Múcio’s name had “good acceptance” among the military.

Soon after his appointment, on 9 December, Múcio announced the names of the new commanders of Brazil’s armed forces: Júlio César de Arruda (army), Marcelo Damasceno (air force), and Marcos Sampaio (navy). All these commanders were chosen among the officers who had served for the longest period of time in the armed forces, a tradition whose observance was apparently well-received by the military, according to the Brazilian press.

Military top brass

The outgoing head of Brazil’s air force (FAB), Carlos de Almeida Batista Júnior, praised and congratulated his successor on his appointment, in a message in which he called Marcelo Damasceno a “friend” and “born leader”, pledging to give him his full support.

Bolsonaro breaks his silence

Outgoing President Jair Bolsonaro broke his silence on 9 December after over a month in which he avoided speeches and almost disappeared from the public eye. In an ambiguous speech to supporters who gathered at the gates of the presidential residence, Bolsonaro said that the armed forces were “the last obstacle against socialism”. Bolsonaro also stated that “the people would define” his “destiny”. “You will decide my future, where I will be going. You will decide which way the armed forces will go,” he said, vaguely. “We are living through a crucial moment now, a crossroads.” Days later, on 11 and 12 December, Bolsonaro also prayed with supporters who were waiting for him in front of his residence. Many pro-Bolsonaro protesters are still camping outside army barracks in several Brazilian cities asking for a military coup to prevent Lula’s inauguration. Bolsonaro did not concede defeat after the election, although he authorised his subordinates to advance in a power transfer.

Federal Police

Another key appointment made by the new administration this week was that of the director-general of Brazil’s federal police (PF) – an entity that is carrying out several investigations that could hit Bolsonaro and his sons. In a joint press conference, on 9 December, Lula and his future justice minister, Flávio Dino, announced that the appointee for this position would be Andrei Rodrigues, who was responsible for Lula’s personal security during the electoral campaign. Rodrigues also worked on the personal security of former president Dilma Rousseff (2011-2016, PT) and was the person in charge of security during the 2014 World Cup, which took place in Brazil, and the 2016 Olympic games in Rio de Janeiro.

Pro-Bolsonaro protests turn violent

In what was probably Brazil’s closest episode so far to the 2021 assault on the US Capitol, supporters of Brazil’s President Jair Bolsonaro burned eight cars and five buses and tried to storm the federal police (PF) headquarters in Brasília on 12 December, after the police arrested pro-Bolsonaro indigenous leader and evangelical pastor José Acácio Serere Xavante.

The violent pro-Bolsonaro demonstrations happened just hours after Lula took part in the ceremony of ‘accreditation’ (diplomação) – where Brazil’s top electoral court (TSE) gave him a certificate attesting that he won the election – and spread to an area where Lula’s hotel was located. Security forces had to use tear gas and rubber bullets to disperse protesters. Lula’s personal security personnel received reinforcements and the police blocked access to congress and executive buildings.

The violence broke out after the TSE president, Alexandre de Moraes, issued a temporary arrest warrant against Serere Xavante, who had organised several anti-Lula protests recently – including one in Brasília’s airport, last week. Serere Xavante’s wife posted a video on social media saying that he was “brutally taken by the PF” in front of their children and the message spread like wildfire through pro-Bolsonaro networks, which summoned the protests.

The senate president, Rodrigo Pacheco (Partido Social Democrático, PSD), dubbed the protests “vandalism” and the current justice minister, Anderson Torres, said they would be “investigated”. At night, even Serere Xavante asked demonstrators to stop the clashes with the police.

At the time of writing, the protest seems to be an isolated incident and there is no sign that it could escalate into a nationwide movement. As the demonstration rapidly turned violent and was widely condemned by the media and the political class, moderate Bolsonaro supporters will probably want to distance themselves from it.  

In his speech during his accreditation ceremony, Lula portrayed his election as a victory for democracy. He also praised the “courage” of justices of the TSE and the supreme court (STF), who had to face “offences, threats, and aggressions” to defend the electoral process. “History will recognise that you were coherent and that you have abided by the constitution,” Lula said.

The electoral process was marked by the incisive action of Moraes against fake news and attacks on the country’s electronic voting system. In his speech during the ceremony, Moraes pledged to continue to identify and punish those responsible for these attacks.

“I assure you that they will be held accountable for their acts, so that this will not happen again in the next election,” said Moraes, who is overseeing an investigation into online networks that spread fake news during the electoral process.

Civil society organisations in Argentina launched a petition on 15 January which called for environmental legislation to be maintained, amid efforts by the government of President Javier Milei to pass sweeping plans for deregulation. Environmental campaigners warn that the proposed reforms could threaten protections such as the ‘Ley de Bosques’, an anti-deforestation law promulgated in 2007, and the ‘Ley de Glaciares’, a law promulgated in 2010.

Ahead of taking office on 10 December 2023, Milei had frequently expressed climate-denialist views, claiming in 2021 that global warming was “another of socialism’s lies”. During last year’s presidential race, rather than moderate his climate-sceptic rhetoric as the 22 October first-round vote drew closer, Milei sought to rile up his radical right-wing core voter base by continuing to question climate science. In a televised debate between candidates on 8 October, he said that “all those policies which blame human beings for climate change are false”, despite the plethora of peer-reviewed research on human-induced climate change on which there has long been scientific consensus.

Delivering on his campaign promise to cut public expenditure and downsize the state, Milei signed his first decree of necessity and urgency (DNU) on his inauguration day, which lowered the number of cabinet ministries from 18 to nine. The ministry of the environment and sustainable development was dissolved. Its functions were assumed by the environment sub-secretariat, part of the secretariat of tourism, environment, and sports – itself a body subordinate to the interior ministry.

On 20 December Milei signed another DNU containing 366 articles, which aimed to implement sweeping deregulation plans across a wide range of sectors. While some major business lobby groups welcomed the deregulation, environmentalist groups sounded the alarm. A statement released on 22 December by the Argentine branch of international environmental NGO Greenpeace expressed concern over the decree’s articles which sought to boost activity in the agricultural sector and in real estate. According to Greenpeace Argentina, the reduction of restrictions and controls on land use poses a risk to existing laws on deforestation and on the control of forest fires.

The Milei administration submitted its ‘omnibus’ package of reforms to congress on 27 December 2023. The first draft of the omnibus bill proposed even more reforms to the state and to economic regulations. It was significantly longer than the 20 December DNU, containing 664 articles. On 28 December Greenpeace Argentina released another statement which condemned the bill for seeking to loosen or repeal major environmental protection laws, such as ‘Ley 26.639’ to protect glacial and periglacial ecosystems and ‘Ley 26.331’ to protect forests.

• Forest protection law

According to the petition launched in mid-January by civil society groups, deforestation in Argentina decreased by 40% in the decade since the ‘Ley de Bosques’ (2007) was promulgated as compared to the preceding decade. The law makes it obligatory for companies to carry out environmental impact assessments before undertaking any activity that might entail deforestation. The law also bans deforestation in indigenous territories.

Greenpeace was one of more than 40 NGOs which launched the petition entitled ‘Save the environmental laws’, which had over 144,000 signatures as of 31 January. According to the petition, the glaciers law has been an effective guardrail against extractive industries, such as mining, operating in biodiverse periglacial environments. Greenpeace Argentina cited the case of the Veladero mining project in the western province of San Juan, which has leaked toxic waste substances on several occasions. The mine’s owner, Canadian mining firm Barrick Gold, tried to challenge the constitutionality of the law in 2011 but the supreme court (CSJN) ruled in favour of maintaining the glaciers law in 2019.

There aren’t many countries where a president would gloat over annual inflation of 276%, but Argentina is one of them. To be fair, President Javier Milei actually celebrated inflation of “only” 13.2% in February, the second monthly slowdown since the price surge he caused in December when he slashed subsidies and price caps on energy, transport, and basic goods.

“Nobody expected that we would achieve a disinflationary process of this nature,” Milei told local radio El Observador. “The confidence is so big that we are receiving deposits in dollars at zero percent interest,” Milei said in his customary jargon of an economist.

The episode is indicative of the broader picture of Latin America’s third-largest economy. Milei is scoring piecemeal economic victories, including a recent debt swap, and has the support of financial markets. But he lacks support in congress and from many people who are feeling the brunt of his belt-tightening measures. In fact, the real economy is sinking deeper into recession with consumer demand plummeting as inflation erodes wages and pensions. The International Monetary Fund (IMF) foresees a contraction of 2.8% this year.

Spending at small- and medium-sized businesses, which account for the bulk of Argentine jobs, plunged 25.5% in February from a year ago, the third straight month of double-digit losses, according to the confederation of mid-sized businesses, CAME.

Even the IMF, which for decades was seen as the free-market bogeyman in Latin America, is now calling on Argentina to strengthen welfare support to offset the impact of Milei’s austerity measures. “Concrete measures taken to meet the fiscal anchor must be calibrated to ensure that social assistance continues to be provided and that the burden does not fall entirely on the poorest groups,” said IMF Deputy Director Gita Gopinath.

Unlike his Peronist predecessor, Alberto Fernández (2019-2023), the libertarian economist Milei believes in market-driven solutions and has decided to facilitate the importation of food and other basic goods by providing tax benefits and preferential access to US dollars. The measures announced in mid-March triggered outrage from domestic producers who claimed unfair competition because domestic food prices are made up of up to 50% taxes, while foreign foods have a much lower tax burden.

In the medium term the government hopes that the impact of one-off price increases will pass, and that increased fiscal discipline and rising currency reserves will slow inflation and allow interest rates to fall. The result, the argument goes, will prompt consumer demand and investment. 

An important link in creating that virtuous cycle of recovery came on 12 March when the government announced it had managed to swap Ar$42.6trn (US$50.4bn) worth of local bonds due this year for bonds with maturities in 2025-28. That gives it more breathing room and reduces the need for it to print money to service its debt, therefore reducing inflationary pressure. In the three months since Milei took office the amount of money in circulation has fallen by 17%. Financial markets rallied in response to the debt swap.

But uncertainty abounds. Milei already faces street protests, has no clear majority in congress, and may antagonise domestic businesses if they are exposed to foreign competition without getting the benefits of tax cuts and other liberalisation measures included in his legislative reform package.

Premature monetary easing?

In a sign of what may be a premature monetary easing cycle, the central bank on 11 March surprisingly cut its prime lending rate to 80% from 100%, citing a falling inflationary trend.

Peru’s unicameral congress rapidly approved a number of widely criticised bills in the final stretch of the last legislative period, which ended on 17 June. These included proposals to increase the government’s control over NGOs, to absolve political parties of legal responsibility for crimes committed by their members, to grant sweeping amnesties for crimes against humanity committed during Peru’s internal conflict, and to replace the judicial oversight body (JNJ). The US-based NGO Human Rights Watch (HRW) published a damning assessment of congress on 12 June, accusing it of “accelerating steps that undermine judicial independence, restrict civic space, and hinder investigations into organised crime and human rights violations”.

As of late June, President Dina Boluarte had only signed one of the bills into law – a piece of legislation submitted by the right-wing Fuerza Popular (FP) which shields political parties from legal responsibility for the crimes of their members. This prevents parties from being dissolved by court order in relation to corruption cases. The bill, which was approved by a sweeping margin of 89 votes in favour and 15 against, was a defensive move from FP, whose leader, Keiko Fujimori, went on trial for alleged money laundering offences in early July. Prosecutors said in the run-up to the trial that they will request FP’s dissolution if Fujimori is found guilty.

This was just one of several bills that FP and its allies appear to have submitted out of self-interest. Fujimori’s father, former president Alberto Fujimori (1990-2000), would be the highest-profile beneficiary of another bill submitted jointly by FP and the far-right Renovación Nacional (RN), which aims to grant amnesties for all crimes against humanity committed before 2002. This bill, approved on 5 June with 60 votes in favour, 36 against, and 11 abstentions, would wipe the slate clean for some of the most infamous crimes committed during the insurgency by the Maoist guerrilla group Sendero Luminoso (SL), which reached its peak in the 1980s and was ferociously crushed under Fujimori in the 1990s.

Fujimori was sentenced in 2007 to a 25-year prison sentence related to the formation of military death squads during his presidency, although he was controversially released on humanitarian grounds in December last year in spite of an injunction by the Inter-American Court of Human Rights (Corte-IDH) [SSR-24-02]. Promulgation of the bill would aid the political rehabilitation of Fujimori, who announced on 19 June that he had formally joined FP. Fujimori’s public profile has been rising since leaving prison, and his increasing interventions in politics are widely seen as a prelude to a fourth run at the presidency by his daughter Keiko.

The bill’s promulgation would also secure the release from prison of Alberto Fujimori’s former spymaster, Vladimiro Montesinos, who in January this year was sentenced to 19 years in prison for the La Cantuta and Pativilca massacres of 1992, in which a total of 16 people were killed. In the meantime, however, Peru’s judiciary has continued to push ahead with the prosecution of soldiers for crimes committed during the internal conflict.

• Soldiers sentenced for wartime rapes

On 20 June, 10 former Peruvian soldiers were sentenced to prison terms for the rape of nine women and teenage girls in the communities of Manta and Vilca, in the central region of Huancavelica, during the counterinsurgency campaign against the SL guerrilla group. The rapes were committed between 1984 and 1994 by soldiers stationed at a military base in the area. Judge René Martínez Castro said that sexual violence against women in Manta and Vilca was systematic and widespread, meeting the criteria for crimes against humanity. The soldiers were handed prison sentences of between six and 12 years.

The legislation sparked an intervention by the Corte-IDH, which on 13 June ordered the Peruvian government to “immediately suspend” the process of promulgating the bill. The court warned that the bill would obstruct justice for victims of massacres committed by the security forces during the counterinsurgency campaign. The government’s disregard of the Corte-IDH’s previous injunction ordering it to block Fujimori’s release from prison suggests that it will place little stock in the court’s views – particularly given that the Boluarte administration’s political survival depends on it retaining the support of FP.

There was also widespread international condemnation of another bill approved by congress’ foreign relations commission on 5 June. The bill, which will proceed to a plenary vote after the next legislative period begins in late July, aims to subject NGOs that receive international funding to more rigorous audits, in order to push back against alleged attempts to destabilise Peru from abroad. The bill was roundly criticised by the diplomatic community in Lima, with 16 foreign embassies issuing a joint statement on 10 June to warn that the legislation would “restrict the ability of civil society to operate independently”.

This led to an awkward moment at an event on 22 June to commemorate 80 years of diplomatic relations between Peru and Canada. Addressing Canada’s ambassador in Lima, Louis Marcotte, Foreign Minister Javier González-Olaechea used his speech to say that, whilst they were gathered “to talk about friendship,” he “can’t be friends with someone who is lecturing me in my own house”.       

State of emergency extended

Peru’s Prime Minister Gustavo Adrianzén announced on 5 June that the government will extend a state of emergency in four provinces in the northern regions of Loreto and La Libertad. The emergency measures, which target Trujillo and Pataz provinces in La Libertad, and Putumayo and Mariscal Ramón Castilla provinces in Loreto, have seen the military deployed to assist with policing, with a focus on illegal mining and drug trafficking. The measures have been extended by 30 days in Trujillo and by 60 days in the other provinces.

Boluarte accused in the ICC

On 25 June two human rights organisations submitted a request with the International Criminal Court (ICC) in The Hague, asking it to open an investigation into alleged crimes against humanity by President Dina Boluarte’s government and the security forces. The request, submitted by the Paris-headquartered International Federation for Human Rights (Fidh) and the Peruvian NGO Asociación pro Derechos Humanos (Aprodeh), accuses the authorities of “crimes against humanity involving murder and attempted murder” between December 2022 and February 2023, during a period of major unrest following the impeachment of Boluarte’s predecessor Pedro Castillo (2021-2022) [SSR-23-01]. At least 49 protesters were killed by the security forces during this period. Boluarte is also the subject of a genocide investigation by Peru’s attorney general’s office regarding the killings.

A joint statement from Fidh and Aprodeh states that the authorities carried out a “systematic attack” on protesters, and that “disproportionate and indiscriminate violence was used by military and police against mainly young, indigenous men.” Jimena Reyes, director of the Americas desk at Fidh, was also cited as denouncing the “evident racism in the murders that took place in Andahuaylas, Ayacucho, and Juliaca [in the regions of Apurímac, Ayacucho, and Puno, respectively] which predominantly affected the indigenous population”.

Prime Minister Gustavo Adrianzén announced on 26 June that the government will send a delegation to The Hague to contest the allegations. Adrianzén said that a “high-level commission” will meet with representatives from the ICC to “present the position of the Peruvian state regarding these events”. He said that “we’re confident that this information will be sufficient for the accusation to be rejected” and insisted that the allegations made by Fidh and Aprodeh do not amount to crimes against humanity. The Boluarte administration has previously argued that any abuses against protesters were carried out by individual members of the security forces, and were not the fault of the government.   

José Antonio Dias Toffoli, a justice on Brazil’s supreme court (STF), ruled on 21 May to annul legal decisions and cases against Marcelo Odebrecht, former CEO of construction firm Odebrecht, relating to the Lava Jato corruption investigation. However, on 4 June the STF received an appeal from the attorney general’s office (PGR) to challenge the annulment of the Odebrecht cases, suggesting that the complex legacy of the discredited corruption probe remains a contentious political and juridical issue.

In 2016, former federal judge and current senator Sergio Moro convicted Marcelo Odebrecht on charges such as active corruption, money laundering, and criminal association. Odebrecht and other executives of the construction company later agreed plea bargains with the Lava Jato investigators, confessing to have participated in bribery schemes and giving up the names of other participants and beneficiaries of the bribes, in exchange for reduced prison sentences. Dias Toffoli annulled Odebrecht’s Lava Jato cases on the grounds of a lack of impartiality on Moro’s part and of procedural breaches in the agreement of plea bargains. These abuses by Lava Jato judges and investigators provided the basis for overturning previous convictions, such as Moro’s 2017 conviction of then-former president (2003-2011) Luiz Inácio Lula da Silva, who returned to the presidency with his 2022 election victory, after the STF annulled the Lava Jato cases against him and restored his political rights in 2021.

In 2019, leaked messages revealed that Moro was colluding with prosecutors to build their cases against defendants. However, even before the leaks, supporters of Lula’s left-wing Partido dos Trabalhadores (PT) had suspected Moro’s lack of impartiality. One of Moro’s most controversial decisions was the removal of the court seal on Lava Jato case files which included an unauthorised interception of a phone call in 2016 between Lula and his protégée, former president Dilma Rousseff (PT, 2011-2016). The vague conversation, which was about the transfer of documents for Lula to sign, was used by opponents of the Rousseff administration to argue that she might have been trying to urgently appoint Lula as her chief of staff so that he could gain immunity from prosecution; the appointment was later blocked by a federal court. In 2018, shortly before the October presidential vote, the Brazilian left expressed more doubts over Moro’s impartiality when he made more Lava Jato case files public at politically inopportune moments for the PT. He released documents a week before the 2018 first-round vote that included testimony implicating PT members in corruption schemes. This further damaged public trust in the party and contributed to the second-round election defeat of its candidate, Fernando Haddad, by the far-right Jair Bolsonaro, who served as president from 2019-2023.  

Moro’s lack of impartiality was a key justification for the STF to annul decisions against two of the most high-profile convictions of Lava Jato, Lula and Marcelo Odebrecht. However, the attorney general, Paulo Gonet, has highlighted that Odebrecht had confessed to committing crimes and appealed Dias Toffoli’s recent decision. Although all Lava Jato decisions and proceedings against the former CEO were annulled, Dias Toffoli did not annul the 2016 plea bargain that Odebrecht agreed with Lava Jato investigators. On 4 June the PGR filed an appeal before the STF requesting that Dias Toffoli’s decision be reviewed, arguing that if the plea bargain that reduced Odebrecht’s sentence remains valid, then all the legal cases and decisions which were launched based on his confession should also remain valid. In addition to the PGR, anti-corruption NGO Transparency International has also criticised Dias Toffoli’s decision, stating on social media that the “destruction of the fight against corruption” in Brazil is “relentless”.

Alleged improper fund management

On 7 June the national judicial watchdog, Conselho Nacional da Justiça (CNJ), opened investigations into the alleged misconduct of four judges involved in Lava Jato cases. The CNJ released a report last year which suggested possible procedural breaches regarding funds from the payments of fines on companies implicated in Lava Jato. One of the four judges which the CNJ is investigating is Gabriela Hardt, who replaced Moro after he stepped down as a federal judge and joined Bolsonaro’s cabinet in 2019.

Dead seaweed is accumulating on Caribbean beaches at a faster rate than ever before. It could pose a serious problem for the environment, fishing, and for tourism.

The authorities in Barbados, Mexico, and the Dominican Republic were cited by the international media as saying that hotel bookings are down this year by 30%-40% during the peak sargassum period (which typically runs between May and August). Beaches in Puerto Rico and Cuba are also among those affected. In Mexico, the Yucatán tourism business council (Cetur) says stopover hotel bookings are down as reports from the beaches speak of piles of brown seaweed, dead fish, and the smell of rotting algae. In June some schools near the coastline in Martinique were forced to close to protect children from increases in hydrogen sulphide and ammonia fumes coming from the seaweed. 

Speaking at the United Nations Ocean Conference in June, the Dominican Republic’s President Luis Abinader called for recognition of the environmental crisis posed by sargassum in the Caribbean, which he said could deliver “a significant blow to the GDP of island nations”.  

Sargassum is a type of seaweed found in the Sargasso Sea. Farah Nibbs, a marine science expert at the University of Maryland in the US, says that in normal times it is a “good thing” playing a positive role in the ocean eco-system. However, times are not normal. Since 2011 the seaweed blooms have been expanding dramatically. Brian Barnes, a research associate from the University of South Florida (USF) in the US was cited by British newspaper The Guardian as saying that “the peaks just seem to be getting bigger and bigger, year after year”. This is thought to be connected to global warming and increased nutrients from fertiliser run-off into the Atlantic carried by major rivers such as the Amazon and Mississippi.

A 31 July bulletin by the USF’s Optical Oceanography Lab calculates that in July there was 38m tonnes of the seaweed floating in the Caribbean and neighbouring parts of the Atlantic.

The economic impact is significant. A report published in May 2024 by the US National Oceanic and Atmospheric Administration (Noaa)’s National Centers for Coastal Ocean Science (NCCOS), a US government office, estimated that in Quintana Roo, Mexico, for example, sargassum cleanup efforts are estimated to cost as much as US$1.1m per km per year. Tourism is the number one industry and source of foreign exchange in many Caribbean countries (in the Dominican Republic it accounts for 16% of GDP). There are also important negative impacts on fishing and on the leisure boats sector (the seaweed clogs up propellers and moorings).

Governments and businesses are looking at ways of responding and cutting their losses. Yucatán’s state tourism board is promoting seven non-beach destinations in the state to try and retain visitors. UK-based aquaculture company Seafields, says it has developed a satellite-based system which can track the seaweed before it arrives onshore, allowing it to be captured and held in open-water paddocks, for potential use in biofuels and livestock feed. Meanwhile BioPlaster, a Mexican company, says it has developed a way of using sargassum as an alternative to cling-film and plastic bags. It is not yet clear whether such approaches will prove commercially viable, but pressure for solutions to the Caribbean’s “seaweed problem” is likely to increase.   

COLOMBIA | Interest rate held as inflation persists. On 31 October Colombia’s central bank (Banrep) maintained its benchmark interest rate at 9.25% in its fourth consecutive decision to keep the rate unchanged, following a 25 basis-point cut in April. In a statement, Banrep noted that annual inflation increased for the third consecutive month in September to 5.2%, above the bank’s target of 3%, and said that inflation is likely to stay higher than this target for the next two years. However, Banrep did also note that economic activity data shows a good level of dynamism in internal demand, driven by both private and public consumption and increased investment in machinery, equipment, and public works.

PERU | Strong growth in exports. Peru’s ministry of foreign trade and tourism (Mincetur) announced on 4 November that exports totalled US$62.86bn between January and September, an increase of 17.3% on the same period in 2024. This was the result of a 9.4% increase in export volume and a 7.3% increase in prices. Mining exports rose by 19.3% year-on-year to US$40.92bn, with gold exports hitting a record US$13.93bn. Agricultural exports increased by 21.4% to total US$9.81bn, with Mincetur highlighting record exports of avocados (US$1.45bn) and cocoa beans (US$821m). China remained the top export destination over the first nine months of the year, accounting for US$22.91bn (+23.0% year-on-year), followed by the European Union (US$7.24bn, +23.6%) and the US (US$6.71bn, +8.2%).

Andean countries: inflation rate
Percentage variation (year-on-year)

Andean countries: GDP growth (%)
Quarterly figures are year-on-year growth

ARGENTINA | Tourism rises in February. A total of 852,000 international tourists visited Argentina in February this year, which marks an 11.7% increase compared with February 2025, according to figures released by the national statistics institute (Indec) on 25 March. Of this total, 534,200 visitors were tourists and 317,800 only entered Argentina from a neighbouring country for a day trip. Over a fifth (21.1%) of international visitors in February 2026 came from Chile, 19.5% came from European countries, 13.8% came from the US and Canada, and 13.0% came from Brazil.

BRAZIL | Tax take. The Receita Federal do Brasil, the government’s tax authority, reported on 24 March that the federal government’s tax revenue in February totalled R$222.1bn, which is the highest value on record for the month of February. It also marks a 5.68% increase in real terms compared with February 2025.

REGION | EU-Mercosur deal to enter into force. The European Commission, the supranational executive branch of the European Union (EU), announced on 23 March that the free trade agreement between the EU and the Mercosur regional trade bloc will be implemented provisionally from 1 May. The deal was signed in January this year and it has since been ratified by the national legislatures of all four founding members of Mercosur.

The provisional application of the trade deal comes despite an ongoing legal review of the agreement, with the European Parliament petitioning the European Court of Justice (ECJ) in January to assess whether the Mercosur deal conforms with existing EU treaties.

Increased support

On 24 March President Luiz Inácio Lula da Silva signed a type of decree known as a ‘medida provisória’ (provisional measure) to open a credit line of R$15bn (US$2.9bn) for companies affected by international supply chain shocks. The MP authorises loans through the government’s Brasil Soberano plan, which was launched last year to help shield Brazilian companies from the impact of US tariffs. Now the Lula government is using the same programme to support Brazilian firms which are most heavily impacted by the ongoing conflict in the Middle East. Sectors that are expected to benefit from Lula’s latest measure include vehicle manufacturing and pharmaceuticals, as well as sectors that are affected by disruptions to fertiliser supplies.

Nicaragua’s private sector is once again on the alert. Last month, Antenor Rosales, the central bank (BCN) president, quit for “health reasons”.  Considered key to the perceived independence of the BCN – one of the country’s few credible institutions - Rosales’s departure was later attributed to his resistance to President Daniel Ortega’s call to move some of Nicaragua’s international reserves to a regional bank proposed by the Venezuela-led regional initiative, Alba, of his close ally, President Hugo Chávez. Serving as the latest example of Ortega’s disregard for institutional procedure and unwillingness to tolerate dissent, Rosales’ removal left the private sector jittery. It also coincides with renewed focus on another major private sector gripe with the government – respect for property rights.

The confirmation of Rosales’ departure on 14 February, after five years in the job, followed his insistence that only the BCN could make decisions about the use of international reserves, which were not to be used at the “whim” of just anyone. This came in response to Ortega’s announcement that Nicaragua would assign US$17m (or 1%) of its international reserves to help finance the start-up of a proposed Alba bank. As well as his perceived distance from Ortega, despite his Frente Sandinista de Liberación Nacional (FSLN) roots, (having previously served as a colonel in the Sandinista army), Rosales was considered key to the government’s successful management of the economy. The economy grew by 4.7% in 2011, second only to Panama in the region, while exports reached a record US$2.3bn in 2011, up 22% from 2010. Rosales also played an important part in the continued good relations with the IMF, with which plans to seek a new agreement had been announced [WR-12-01].

Rosales has since been replaced by Finance Minister Alberto Guevara Obregón, a loyal Ortega ally who was a lieutenant and part of the state security apparatus (DGSE) under the first FSLN government (1979-1990), while Guevara has been substituted by his deputy, Iván Acosta. Government assurances of continuity regarding the changes, however, have failed to assuage the concerns of the private sector, with which positive relations were a clear priority under Ortega’s previous mandate (2007-2012); while Avil Ramírez, the head of the American Chamber of Commerce in Nicaragua (Amcham), said that as long as the BCN maintained its independence from the executive (unlikely given Guevara’s loyalty to the presidential couple), his appointment was not a problem, José Adán Aguerri, the president of the influential private sector lobby, Cosep, complained that the change had not come at the “best moment”.

With the impact of the changes yet to become apparent, a more pressing concern for the private sector is the apparent disregard for private property evinced by the re-elected Ortega government, which was sworn in at the start of the year. The high-profile confiscation mid February, of 20 manzanas (33.6 acres) of land, belonging to Walter Bühler, a Swiss-Nicaraguan dual citizen, to reportedly gift it to Edén Pastora, the controversial former Sandinista leader (see sidebar), inevitably raised the spectre of the confiscations for which the first Ortega government became notorious, prompting criticism from Cosep and the national tourism institute (Intur), anxious about the impact on Nicaragua’s image. 

While the government has since been in talks with the Bühler family over the land (the site of ecological hotel resort, Punta Teonoste) and looks to be reaching a deal, the dispute brings to the fore more general concerns regarding the lack of legal security surrounding land ownership which the private sector think-tank, Funides singled out in a December report as a “fundamental obstacle preventing the promotion of investment in the country”. In the report, Funides highlights that 36% of ranches in the country, or some 76,000 productive units, of which 85% are less than 50 manzanas (or 84 acres), are in “legal limbo” due to different land reform efforts undertaken in the 1960s, 1980s and 1990s. The think-tank also cites the latest World Bank Ease of Doing Business report for 2012, which ranks Nicaragua as the worst country in all of Central America for the ease of registering property – at 122 of 183 countries (down from the regional average of 50 for Latin America and the Caribbean).

• Another land dispute brewing

The government’s swift response to the Bühler dispute is in marked contrast to its inaction regarding a different dispute over territorial claims. This week, the local media reported that leaders from 22 indigenous territories in the impoverished North Atlantic Autonomous Region (Raan) on the Caribbean coast are planning to send a request to the government demanding concrete action with regard to land regulation. This follows mounting tension in the region amid the alleged invasion of indigenous territory by mestizos (people of mixed indigenous and European descent). Earlier this month, 18 mestizos were kidnapped by indigenous groups, demanding the eviction of 120 families who they claim have invaded their land. Warning that the Miskito indigenous groups themselves would take action if the authorities did not intervene, Simon McDavis, the president of the territorial government Twi Waupasa, the area in question, told reporters that of the 156,000 hectares comprising the Twi Waupasa, 50,000 are occupied by the 120 families.

   Local leaders are concerned that racial tensions could escalate if the government fails to respond, but the unrest is also significant given that the region has previously seen secessionist threats from the indigenous Miskito Council of Elders in Bilwi, the Raan’s capital, which ultimately failed to materialise [WR-09-19]. Brooklyn Rivera, an indigenous deputy for the Yatama party, a long time FSLN ally, who heads up the congressional indigenous affairs committee, said only property titles issued prior to 1987, in line with a law on indigenous autonomy, would be recognised. While Yatama is allied with the FSLN on certain issues, land is reportedly one on which it will not budge and this could have implications ahead of the November 2012 municipal elections. 

• Finland takes action

Finland has announced that it is officially cutting bilateral aid to Nicaragua. The minister for international development, Heidi Hautala, told Finnish national TV in mid February that the decision was based on the fact that “the government in Nicaragua is quite authoritarian and the budget isn’t transparent”. The move comes on the heels of a similar decision by Germany, announced in January, also in relation to concerns regarding democracy following the controversial 6 November general election [WR-12-05]. The most recent report on foreign cooperation by Nicaragua’s central bank published in October 2011, showed bilateral aid from Finland reached US$6.2m in the first half of 2011, out of a total of US$79.7m in bilateral aid. In 2010 Finnish cooperation reached US$11.1m. 

•  Comandante Cero

A former Sandinista guerrilla, known as Comandante Cero, Edén Pastora broke with the first Ortega government (of 1979-1990) in 1982, following differences with the leadership, to become a Contra. Having run as presidential candidate for the Christian Democrat Alternativa por el Cambio (AC) in the 2006 election (winning 0.29% of the vote), Pastora has since made up with Ortega. He is currently in charge of the controversial project to dredge the San Juan River, which, in October 2010, triggered the revival of the territorial dispute with Costa Rica. Attorney General Hernán Estrada explained the recent decision to hand over the 20 manzanas to Pastora as part of government’s efforts to regularise land ownership, which benefited some 172,000 people during the last Ortega administration (2007-2012).

GUATEMALA | Continua declinando la tasa de homicidios. La semana pasada, Mario Polanco, el presidente de la ONG de derechos humanos, Grupo de Apoyo Mutuo (GAM), dijo a los periodistas que la tasa de asesinatos de Guatemala decreció en 9,9%, a 1.440 en el primer trimestre del 2012, cuando se compara con igual periodo del 2011. Polanco atribuyó la caída a la política de seguridad del Presidente Otto Pérez Molina, que hasta ahora involucra poner a los militares de vuelta en las calles y crear fuerzas de tareas inter-institucionales. Aunque vale señalar que la tasa de asesinato ya estaba declinando bajo el predecesor de Pérez Molina, de centro izquierda, Alvaro Colom (2008-2012). En el 2011, la tasa de asesinatos de Guatemala estuvo en 39 por cada 100.000 habitantes –alta para cualquier estándar, pero el más bajo en Guatemala en siete años.

The release of fairly grim inflation figures prompted a crisis meeting at the Planalto presidential palace this week. The consensus among private economists is that the central bank’s monetary policy committee (Copom) has no choice but to lift the benchmark Selic interest rate from its current historic low of 7.25%, where it has been since October 2012. The concern in government circles is that an interest-rate rise will kill off a very fragile industrial recovery and dampen consumer sentiment ahead of the 2014 elections. It’s a classic policy dilemma for President Dilma Rousseff.

The broad national consumer prices index (IPCA) hit 6.6% year-on-year in March, breaching the upper limit of the inflation target band set by the central bank (4.5% +/- 2.0%).

While the general inflationary trend continued downwards month-on-month in March, as earlier-year seasonal factors like education begin to drop out and the latest government efforts to reduce the overall cost of the basic inflation basket feed in, a fundamental part of the problem is that wages in Brazil are rising faster than productivity in a full labour market, stymieing growth and creating entrenched inflationary pressures. The fact that these pressures can be seen in the services sector means that, on paper, it’s time to cool excess consumer demand by lifting interest rates, even though this may be politically unpopular. The Copom next meets next week (16-17 April) and it tends to act pre-emptively rather than wait around, although some analysts think it might try to hold off until May.

Rousseff, herself an economist, on 10 April summoned to the Planalto presidential palace a group of economists dubbed the “pesos-pesados” (heavyweights) by the conservative daily O Estado for a crisis meeting about Brazil’s slow growth and sticky inflation. These included Finance Minister Guido Mantega and Treasury Secretary Arno Augustin; Delfim Netto, the former finance minister who oversaw Brazil’s ‘economic miracle’ back in the late 60s and early 70s and has been long-involved in official policy efforts to rout Brazil’s historical inflation problem; Luiz Gonzaga Beluzzo, the former economic policy secretary under the administration led by José Sarney (1985-1990); and Yoshiaki Nakano, a professor at the respected Getulio Vargas Foundation (FGV)’s school of economics and a former adviser at the World Bank.

Reacting to the latest figure on 10 April Mantega said that the government was “attentive” to the problem and would not scrimp on efforts to combat inflation. The narrow national index of consumer prices (INPC), which looks at retail prices paid by lower income sectors (those earning between one and five times the minimum wage), rose faster than the headline index in March, hitting 0.6% month-on-month and 7.22% year-on-year. Meanwhile, the FGV’s IGP-DI, a composite index of consumer, wholesale and civil construction prices, was 0.31% month-on-month and a whopping 7.97% year-on-year in March.

Rousseff and her economic policy team led by Mantega and her Planning Minister Miriam Belchior have tried to pull out all the stops in a bid to stimulate growth. Mantega said that total tax breaks would equate to just over 1.5% of GDP this year, amounting in nominal terms to R$70bn (US$34.4bn) and rising to R$88bn (US$44.4bn) in 2014. 

The government has also moved since early in the year to concentrate much more on the infamous ‘Custo Brasil’. Most notably, it has redoubled its efforts to overcome the country’s infrastructure bottlenecks, and is trying to cut operating costs for businesses, by driving down electricity costs and tinkering around the edges on tax reforms, for instance. The micro-managing team led by Rousseff has also taken steps to mend fences with international investors in a bid to attract more private investment into key economic sectors. The government has recently rolled back some of its financial and capital market restrictions, while also making clear that its interventions in support of the domestic manufacturing sector  - like non-tariff import restrictions and stricter local content rules - have a fixed expiry date. Roberto Messemberg, the coordinator of the analysis group at the federal institute for applied economic research (Ipea), warned in early July 2012 that the growth model based on consumption is “exhausted”. He called upon the government to become “the investment protagonist” in key areas like infrastructure and energy in order to breathe fresh life into the stagnant domestic productive sector. Lower interest rates are essential, but not enough, he added.

Sergio Werlang, also from the FGV and considered the ‘father’ of Brazil’s inflation targeting regime, advocates an incremental 1.5% increase in the Selic, beginning in April, to steady inflation. Importantly, he argues that higher interest rates at this time will not damage the labour market - or real GDP growth -  ahead of Rousseff’s bid for re-election in October 2014. He suggests that the Copom should work towards an inflation target of 5.5%-6.0% this year, with a real annual GDP growth target of 3.0%. This is in line with the consensus forecast of private economists compiled by the central bank and published weekly in its Focus Report. In the last (5 April) report, the consensus was for GDP growth of 3.0% and inflation of 5.7% in 2013, with growth of 3.5% and the same inflation in 2014. The consensus on the year-end Selic rate was 8.5% both this year and next.

Like Messemberg, Werlang also makes the point that lower interest rates on their own are never going to be enough to promote sustained stronger growth in Brazil and that the country still needs to broach deeper structural reforms (principally of the tax system but also of the labour market) to unleash its full growth potential and kill off its ‘chicken flight’ syndrome. Like its predecessors, the Rousseff administration has failed to broach this with a terminally recalcitrant congress.

Alves throws in the towel over Feliciano

Henrique Eduardo Alves, the beleaguered president of the federal lower chamber of congress, said on 9 April that nothing more could be done to pressure the controversial new head of the congressional committee for human rights and minorities, the evangelical deputy Marco Feliciano, to step aside. Alves said he had reached the limits of his power and could not act like “a dictator” over the chamber. Alves did, however, overturn Feliciano’s move to prevent the public from sitting in on the committee’s meetings, which he had requested last week after the committee’s first meeting under its new president was disturbed by members of the public protesting against Feliciano’s election. The parliamentary Evangelical bloc and its allies have defied a major public campaign for Feliciano’s removal on the grounds of his alleged racist, sexist and homophobic comments. After the second committee meeting this week Feliciano said it had “the wind in its sails” (‘de vento em popa’).

Corruption crackdown nets 92 suspects

On 9 April Brazilian authorities launched a coordinated operation to dismantle public corruption schemes spanning 12 states, according to an official statement by the Grupo Nacional de Combate às Organizações Criminosas (Gncoc). A reported 92 suspects, including civil servants, police officers and business people, have been arrested on suspicion of participation in a network that deviated at least US$577m in funds from public works concessions linked to 131 bodies in 12 states. The operation is armed with 311 arrest warrants, 86 prison orders, 65 asset freeze orders and 20 orders for the removal of public servants from their posts. The Gncoc president, Héverton Alves de Aguiar, the attorney general in the state of Rondônia, said that the operation showed “in a very clear manner that it is possible for the state forces to work in an organised way against this illness that lays waste to our society”.

Retail sales still down

Retail sales volumes unexpectedly fell in February, contracting 0.4% month-on-month and 0.2% year-on-year, according to the national statistics agency (Ibge).

Real edges back under R$2

The Real was trading at R$1.97/US$ on 10 April.

Así carraspeó Ileana Ros-Lehtinen, la franca y directa representante Republicana del sur de Florida y ex presidente (2011-2013) de la comisión de asuntos exteriores de la cámara de representantes de EU, en respuesta a la visita de tres días a Cuba, está semana, del presidente de la cámara de comercio EU, Thomas Donohue. La gira del titular del que efectivamente es el lobby comercial más poderoso del mundo, vino después de que la semana pasada de unas cuatro docenas de ex funcionarios del gobierno de EU, oficiales militares retirados, y líderes empresariales, incluyendo influyente magnate Cubano-Americano del azúcar, Andrés Fanjul, enviaron al Presidente Barack Obama una carta abierta pidiendo cambios en la política EU-Cuba.

Ros-Lehtinen podrá quejarse, pero el impulso en EU ante las elecciones de mitad de periodo de noviembre, no menos en Miami, está firmemente a favor de relajar el embargo comercial a Cuba y promover la interacción. Esta es una pequeña ventana de oportunidad –y las relaciones EU-Cuba han estado ahí antes, pero quizá nunca antes con tal dinamismo. Mientras tanto, la blogger disidente de alto perfil, Yoani Sánchez, logró mantener una larga entrevista con el Vicepresidente de EU, Joe Biden, para marcar el lanzamiento –en Cuba– de su nuevo periódico digital, 14ymedio. El lanzamiento no fue sin problemas. Tan pronto salió a la vida, el sitio web se cayó. Sánchez dijo que había sido hackeado, pero aún permanece disponible fuera del país.

Donohue, desde hace tiempo un promotor de la remoción del embargo de medio siglo, jovialmente descartó la aguda crítica de Ros-Lehtinen y del senador Bob Menendez (D, NJ) diciendo a los periodistas, “Estuve libre de ir adonde yo quería. Y he hablado con personas del sector público y del privado”. Donohue, quien tenía programado reunirse con algunas de las nuevas cooperativas del sector privado, y dar un discurso en la Universidad de La Habana, dijo “Nos hemos reunido con pequeños empresarios. Nos reunimos con personas de otros países que están operando ahí. Pienso que tendremos una visión justa, y nos hemos divertido”.

Menendez, el poderoso presidente del comité de relaciones internacionales del senado de EU, había advertido a Donohue que su gira era un regalo de relaciones públicas para un gobierno que “encarcela a líderes de empresas extranjeras sin justificación, viola los estándares de las normas de trabajo, y niega a sus ciudadanos sus derechos básicos. Tales condiciones difícilmente parecen una atractiva oportunidad para cualquier líder empresarial responsable”. Donohue respondió diciendo que “Lo grande acerca de Estados Unidos es que todos tienen derecho a su opinión incluidos los miembros del congreso y el senado. Ocurre que tenemos una visión diferente. Nosotros pensamos que esta es una oportunidad muy positiva”.

Aparte de Menendez, Biden le dijo a Sánchez en términos claros que el mayor obstáculo para la tentativa de la administración Obama de acercarse a Cuba permanece el caso del encarcelado subcontratista del gobierno de EU, Alan Gross. “No puedo enfatizar lo suficiente que la detención en Cuba de Alan Gross es un impedimento mayor para mejorar las relaciones entre EU y Cuba. Podemos ser todo lo creativos que queramos con nuestra política, pero el caso de Alan permanece en lo alto de nuestra lista de resoluciones”, enfatizó Biden.

• Tecnología

Al preguntarle al Vicepresidente de EU, Joe Biden, acerca de la apertura de la tecnología y las avenidas de la información en Cuba, Yoani Sánchez con mucho tacto no planteó la cuestión de ‘ZunZuneo’ (el ‘Twitter Cubano’ apoyado por el gobierno de EU), pero Biden fue muy claro en que el gobierno de EU “seguirá buscando vías prácticas para apoyar una mayor conectividad y para ayudar a remover los obstáculos que estén en el camino de la apertura de la comunicación y la libre expresión […] Nosotros queremos que los ciudadanos cubanos puedan comunicarse más fácilmente uno con otro y con el mundo exterior”. Curiosamente, ha sido informado por algunos observadores en Cuba, que ‘ZunZuneo’ está efectivamente vivo y coleando ahora bajo otro nombre, ‘Despierta Cuba’.

MÉXICO | Tasa de inflación llega a punto más bajo en ocho años. México registró su más baja tasa de inflación desde mayo del 2006 el pasado febrero. De acuerdo con el Instituto Nacional de Estadísticas (Inegi), la inflación año en año en febrero fue del 3%, mucho más baja que el 4,23% registrado en febrero del 2014. La tasa de inflación en enero fue del 3,07%, y la de Febrero es exactamente igual a la meta oficial del banco central (Banxico).

En su informe mensual, Inegi dijo que el índice de precios al consumidor se había elevado un 0,19% en febrero, debido en primer lugar al alza en los precios relacionados con los teléfonos móviles y varios productos alimenticios, tales como la carne y las papas. Inegi estima que la tasa de inflación subyacente, que no toma en cuenta el precio de bienes altamente volátiles, actualmente es de solamente el 0,34%. El incremento en la tasa de inflación subyacente fue conducido en febrero por un un salto del 0,59% en los precios de productos no-alimenticios, lo que refleja las presiones inflacionarias resultantes de la depreciación del Peso.

Hasta ahora, el Peso se ha depreciado en 4,8% contra el dólar de EU este año, pero esto aún no se ha traducido en un alto riesgo inflacionario. De hecho, los resultados del Inegi muestran que la tasa anual inflación subyacente fue del 2,40% en febrero, subiendo ligeramente mes en mes, pero aún menor que el 2,98% registrado en febrero del 2014.

MÉXICO | Inversión extranjera. El 10 de marzo la cervecera holandesa, Heineken International, anunció planes para invertir US$474m en una nueva planta en el estado Mexicano de Chihuahua. La planta, que tiene programado producir 5m hectolitros de cerveza por año, será la séptima planta de Heineken en México. La construcción de la planta creará 2.000 empleos temporales y, una vez completada, ésta proveerá 500 empleos permanentes.

El anuncio de Heineken vino detrás de otro de una gran inversión por parte de otra firma multinacional. El 6 de marzo el fabricante de automóviles alemán, Volkswagen, anunció una inversión de US$1mm, para actualizar y modernizar su planta de fabricación de vehículos en el estado de Puebla. La modernización le permitirá a la planta comenzar a producir el nuevo vehículo deportivo utilitario de Volkswagen, el Tiguan. La inversión creará 19.000 nuevos empleos.

“Más y más compañías globales están decidiendo invertir en nuestro país”, dijo el Presidente Enrique Peña Nieto en un evento en la residencia presidencial de Los Pinos. “Queremos que inversiones como esta nos siga sucediendo en México”.

• Profepa aplica multa al Grupo México

El 2 de marzo la agencia federal del medioambiente de México (Profepa) anunció que la firma minera local, Buenavista del Cobre, deberá pagar M$23m (US$1,5m) en multas por el daño ambiental que produjo el derrame de residuos mineros de la mina de cobre ubicada cerca de Cananea, en el estado de Sonora, en los ríos Sonora y Bacanuchi en agosto del año pasado. El derrame de residuos en la mina Buenavista del Cobre, propiedad del conglomerado Grupo México, contaminó las provisiones locales de agua potable, poniendo en riesgo a miles de personas en Sonora, y fue declarado como el peor accidente medioambiental en el sector minero en México en décadas. En una declaración, Profeco dijo que había encontrado 55 irregularidades en la mina y que las multas son independientes del fondo fiduciario de M$2mm que la firma ha establecido para pagar los costos de limpieza.

Panama has recently experienced some short-term negatives. The ‘Panama Papers’ scandal in April brought attention to the use of its offshore financial centre for tax evasion and money laundering purposes. Also bad for the country’s image was the announcement of US sanctions against the prominent Waked family and its network of 68 companies, suspected of involvement in money laundering. But both events should be more than offset by the boost to the country’s long-term outlook signalled by the opening of the newly enlarged Panama Canal on 26 June.

The massive leak of documents from the local law firm Mossack Fonseca in April (which became known as ‘the Panama Papers’) and the US decision to identify members of Panama’s Waked family as “specially designated narcotics traffickers” (SDNTs) have put the government of President Juan Carlos Varela on the back foot. The leaks from Mossack Fonseca have forced Panama to do more to bring its financial transparency regulations into line with international standards set by the OECD (at present it is promising to achieve that by 2018). President Varela has had to insist that, as he put it, his country’s economic success has not depended on “irregular flows of money into our financial system” but on “the hard work of the Panamanian people”.

Varela has also had to scramble to try and protect the 5,000-6,000 jobs in companies affiliated to Grupo WISA, the holding controlled by the Wakeds. Under US regulations, when a foreign citizen or company is listed as an SDNT or money-laundering organisation (MLO), all US citizens and corporates must cease doing business with it. So the future of many listed Panamanian companies is at risk. To protect employment, Panama’s bank superintendency took over The Balboa Bank & Trust. The future of two newspapers, La Estrella and El Siglo, remains uncertain. The Felix B. Maduro department store has been transferred to a trust administered by the state-owned Banco Nacional, pending its potential sale to new owners. A similar move is being planned for Soho Mall, a brand new multi-million dollar shopping centre. And the Waked’s retail beauty and duty-free chain La Riviera is experiencing some shop closures and staff reductions in both Panama and Colombia.

While these difficulties should not be underestimated, in the grand order of things they do not take away from Panama’s key advantage: that it has a diversified and resilient economy, a fact that was underlined by the opening of the enlarged Panama Canal on 26 June. The US$5.25bn project, although completed behind schedule (the original in-service date had been August 2014) has involved the opening of two larger sets of locks on the Atlantic and Pacific sides, new access channels, and dredging and improved water flow along the length of the 80kms waterway. As a result longer, wider and heavier ships, known as ‘neo Panamax’ vessels, will be able to use the Canal, boosting traffic and revenue. Container ships with the capacity to carry up to 14,000 TEUs (twenty-foot equivalent units) can now use the canal. Demand may also increase from liquid natural gas (LNG) tankers; the enlarged Canal has triggered port expansion along the US east coast.

According to Jorge Quijano, head of the Panama Canal Authority (known as the ACP – its Spanish language acronym), “Our new transit route will have an impact on the international economy, delivering transport cost savings and enabling more profitable routes for ships which can carry three more times the volume of cargo.” The ACP calculates that in the first fiscal year after enlargement revenues will grow by 40% to US$1.4bn. By 2021, it is estimated that revenues will have grown to US$2.1bn or 2.8% of GDP.

Because of the Canal expansion and other developments, Panama has a different and more diversified profile than that its more commodity-export dependent Latin American neighbours. According to the World Bank, “Panama continues to be an attractive country for foreign direct investment. The prospects of sustained high growth are also supported by emerging opportunities in transport and logistics, mining, financial services, and tourism.” The Panama Pacífico new city project (currently being built on the site of the former US Clark Air Force base) has attracted a total of 140 companies, including 3M, Caterpillar, Dell, Grainger, Cable & Wireless, Avon and BASF.

Comparatively low taxes and permissive immigration laws have been used to attract innovation and new company start-ups. According to David Lewis, an investment consultant with Washington-based Manchester Trade, “Companies are realising that Panama is a very attractive location to set up America hubs, because of its multiple free-trade agreements… and with its dollarized economy, they don’t have to worry about foreign exchange risk.”

A favourable assessment from the IMF

The IMF’s latest Article IV consultation with Panama, released on 10 June, highlighted that the economy is likely to remain one of the strongest in the region in terms of real GDP growth in 2016 and 2017. Inflation is expected to remain low, while overall macroeconomic and financial metrics are favourable. Adverse headlines surrounding the Panama Papers affair in April, and the seizure by the banking regulator of the Waked family’s Balboa Bank & Trust in May, have overshadowed positive developments in Panama’s financial sector.

Panama was of the largest recipients of Foreign Direct Investment (FDI) inflows in Latin America in 2015, both in absolute terms and relative to GDP. The IMF’s latest forecasts (see chart) are encouraging. “The economy will be supported by the expected opening of the expanded Canal and lower fuel prices, which will counterbalance the effects of slowing global growth and U.S. dollar appreciation. Over the medium term, the increase in canal transit, a dynamic service sector, and investments in the energy, mining, and logistics sectors should help maintain vibrant growth”, it noted.

Panama’s debt burden and external accounts are also expected to move in the right direction. The IMF expects non-financial public sector debt to slip from 39% of GDP in 2015 to below 35% in the medium term. Over the same timeframe, the current account deficit is expected to drop from 6.5% to 3% of GDP, which should easily be covered by FDI inflows.

In spite of the Panama Papers’ scandal and the SBPs seizure in May of Balboa Bank & Trust following the Waked family designation, recent developments in Panama’s financial sector have generally been positive.

In February, the Financial Action Task Force (FATF) removed Panama from its ‘Grey List’ of countries with strategic deficiencies in terms of its framework for Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT). Following the Panama Papers episode, the government created a panel of independent experts to assess practices within Panama’s financial centre and propose measures to improve transparency. The government has also committed to the automatic exchange of information relating to tax matters, according to the OECD’s Common Reporting Standards (CRS), by 2018.

The IMF noted that Panama’s open economy is a source of vulnerability. A sharp global economic slowdown would constrain the growth of revenues from the widened Canal and probably have an impact on capital inflows. However, the banking system is well capitalised, and the government has the room to ease fiscal policy if necessary.

The indigenous Mapuche may have begun their struggle to reclaim what they consider to be ancestral lands in southern Chile many decades ago, but rarely has the conflict become such a key election campaign issue. The flare-up in violence linked to the Mapuche conflict in recent weeks has led the leading presidential candidates ahead of the 19 November general election to weigh in on the issue. None more so than Sebastián Piñera, the former president (2010-2014) who is seeking re-election for the centre-right opposition Chile Vamos coalition and currently leads all voting intention polls. By heavily criticising the government’s response to rising violence, Piñera has set himself apart from some of his main presidential rivals on the centre-left.

In the wake of the decision by the leftist Nueva Mayoría coalition government to prosecute four Mapuche activists accused of carrying out an arson attack on an evangelical church, not under Chile’s anti-terrorism legislation but under common law [WR-17-39], Piñera accused the administration led by President Michelle Bachelet of being “weak” and unable to stand up to “radical and criminal” Mapuche groups. Although Piñera savaged the government’s U-turn, his government took a similar decision when he was in power (see sidebar).

In a 7 October interview with local media, Piñera insisted that the acts for which the Mapuche activists were being prosecuted were clearly acts of terrorism and should be treated as such. He argued that failure to do so would only lead to more such attacks by other radical Mapuche activists encouraged by the fact that they would receive lenient treatment from the authorities.

Piñera was careful to point out that trying Mapuche activists suspected of carrying out terrorist attacks under anti-terrorism legislation does not mean “equating Mapuche with terrorists”. But he insisted that there are a number of radical Mapuche groups that “are financed from abroad, and which have links to many terrorist organisations around the world”.

Piñera’s remarks came after Chile’s militarised police (Carabineros) announced the arrest of eight Mapuche community leaders – including the leader of the Coordinadora Arauco Malleco (CAM) radical Mapuche organisation, Héctor Llaitul – on 23 September. All of those arrested are suspected of being implicated in some of the recent arson attacks in the southern Araucanía area. The arrests came during a series of raids in Araucanía as part of an intelligence-led operation codenamed ‘Operación Huracán’.

The Carabineros said that they had information that those arrested formed part of a criminal ring not only dedicated to launching arson attacks but also to smuggling firearms from Argentina illegally, ostensibly to arm the likes of the CAM. These revelations have strengthened Piñera’s stance as opposed to that adopted by his main presidential rivals.

Both Alejandro Guillier, the candidate supported by the majority of the Nueva Mayoría parties, who currently sits second in the voting intention polls, and Beatriz Sánchez, the candidate of the leftist opposition Frente Amplio coalition, who is currently third, have been reluctant to describe the violence in the Araucanía area as terrorism. Guillier and Sánchez also criticised the application of anti-terrorism legislation to deal with the Mapuche conflict, stating that they would instead seek to engage with the Mapuche community to try to find a negotiated solution if they win election.

Pro-Mapuche march

While the wave of violence in the Araucanía has received widespread public condemnation, the application of the draconian anti-terrorist legislation and repressive tactics against the Mapuche to try and combat the violence divides opinion. The latest sign of this was the large turnout observed for the annual protest march in Chile’s capital, Santiago, organised by Mapuche groups in support of their cause.

Tens of thousands of people took part in the ‘Día de la Raza’ protest march on 9 October, in one of the largest such demonstrations in years. The marchers protested against the “colonialisation” of the Araucanía by the Chilean state, and the recent arrest of the Mapuche community leaders, which they described as a “political show”.

• Piñera’s short memory

Back in 2010 after a group of 38 Mapuche activists (including Coordinadora Arauco Malleco leader, Héctor Llaitul) accused of carrying out arson attacks remained on hunger strike for 82 days in protest at being prosecuted under the anti-terrorism legislation, the Piñera administration caved in and allowed the activists to be tried under common law. The Mapuche were subsequently given suspended prison sentences, which they would not have been able to get if tried under anti-terrorism legislation.