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On 5 September the government of President Rafael Correa issued a decree (872) to allow it to keep the judicial system running while simultaneously reforming it. The government’s ambitious judicial reform proposal is the first time, at least in the past 50 years, that a Latin American government has tried to overhaul a national judicial system from top to bottom. Bolivia’s judicial reform, which is also underway, covers just the top courts.

The opposition in congress is muttering about trying to get the decree overturned by congress, but this is unlikely because the opposition does not command a majority. As the decree involves some significant government spending, congress will have to be involved at some stage. Under the decree the government is now budgeting US$600m for the reform. The current ministry of justice budget for the whole of the current year is US$22m. The government, which had initially expected the reform to take just 18 months, now expects the process to be completed by 2015.  Ecuadoreans gave their approval for such a reform in the 7 May referendum, even though Correa’s opponents claim that he is aiming to politicise the legal system.

Under decree 872 the government has also confirmed the mandate of the Consejo de la Judicatura de Transición (transitional council of the judiciary, CJT), which is due to expire in February 2013. The CJT is responsible for implementing the reforms.

The state of emergency (technically, exception) will run for 60 days and covers everyone working in the judicial system. The decree will give the government the power to move judges and other personnel around the system in order to cover gaps created by resignations and sackings. The government justified the state of emergency by saying that without it, the judicial system was in imminent danger of collapse.

The president of the three-person CJT, Paulo Rodríguez, asked the government to issue the decree after finding the chaos in the current judicial system which he claimed had lost 215,000 cases. There is, he reported, a backlog of 1.2m cases in the court system. The CJT reported that the number of cases coming to court increased by 40% between 2002 and 2008.

The core change within the reform will be the creation of a new Corte Nacional de Justicia (national court of justice, CNJ). By the deadline of midnight on 4 September, 666 people had applied for the 21 full and 21 assistant judge seats. Besides several prominent opponents of the Correa government, the current court president, Carlos Ramírez, and Benjamín Cevallos, a former head of the national judges’ council, have also applied for seats. The CJT will review the CVs of all applicants and rule whether they are eligible to stand in the next 10 days.  All the candidates will be chosen on merit and marked out of 100: of this, 30 marks will be given for academic and psychological qualifications. The other 70 will be awarded in three categories: theory (30); a practical test (30); and for performance at a public hearing (10). All candidates will have the right to challenge their marks.

Carrión: On 6 September a court in Quito threw out an appeal by the government against the court’s decision, made in May, to acquit Colonel César Carrión of trying to kill President Rafael Correa in the September 2010 police mutiny. Carrión commanded the hospital where the mutiny broke out. Confusingly, the court reversed its original decision to acquit three other police officers. They were sentenced to two years in jail.

• Cely

The foreign ministry confirmed on 5 September that it had asked the US to approve Nathalie Cely, the minister-coordinator of production, as ambassador to the US. Ecuador has not had an ambassador in Washington since April this year after it expelled the US ambassador in Quito on 5 April. On 6 September Ecuador’s foreign minister, Ricardo Patiño, said that the government had accepted the US government’s nomination of Adam Namm, the acting director of the Bureau of Overseas Buildings Operations at the State Department, as the new US ambassador to Quito.

Nicaragua’s relationship with Colombia has come under increasing scrutiny in recent weeks for various reasons. Against the backdrop of the International Court of Justice (ICJ) at The Hague preparing to issue a ruling on Colombia’s maritime and territorial dispute with Nicaragua later this year, last month a Colombian journalist, Luis Felipe Ríos Castaño, became the first foreigner ever to be convicted of spying in Nicaragua.

On 12 July Ríos was sentenced to 16 years for spying on behalf of the Colombian armed forces. Ríos, who was charged on 14 June, pleaded guilty to seeking “restricted and reserved information” about Nicaragua’s “national defence” and “national security”, on orders from the “Colombian intelligence forces”. The commander-in-chief of Nicaragua's national army, General Julio César Aviles, told reporters that Castaño entered Nicaragua in late 2010, posing as a Spanish journalist working for a military and defence magazine. He made contact with a Nicaraguan army lieutenant, Amaru Vicente Álvarez Granera, and a captain, Leonidas Rubén Castillo Ruiz, from whom he gathered information that he sent to Colombia. Both Nicaraguan army officials were sentenced by a military tribunal on 20 June to 16-and-a-half year prison sentences for espionage and revealing military secrets.

With the Colombian government of President Juan Manuel Santos keeping a measured distance from the case, bilateral tensions were further heightened last month by Colombia’s decision to send the military to San Andrés, for a parade on 20 July to mark Colombia’s Independence Day. Along with Providencia and Santa Catalina, San Andrés is one of the islands located in waters which are being disputed before the ICJ: while the international court ruled in December 2007 that the three islands Nicaragua claimed as its own were Colombian under a 1928 treaty, according to the ICJ verdict, the maritime boundary set by that treaty (the 82nd meridian) referred only to the archipelago and was not, as claimed by Colombia, an overall maritime boundary. The court also said that it would continue to study the case in order to set a definitive boundary. Hearings took place between 23 April and 4 May and a final ruling is expected in coming months.

PERÚ | Humala refuerza los lazos económicos con Canadá. Durante su primera visita oficial a Canadá el 10 de abril, el Presidente del Perú, Ollanta Humala, dijo a un grupo de empresarios canadienses en Toronto que su país es un “confiable” socio de negocios al urgir a los empresarios canadienses a continuar invirtiendo en Perú. En años recientes, Canadá se ha convertido en el cuarto mayor mercado para las exportaciones peruanas gracias en gran medida al significativo aumento de minerales que las compañías mineras de propiedad canadiense que operan en Perú embarcan hacia a su país natal.

Como un signo de los crecientes lazos económicos entre las dos naciones, el año pasado el Primer Ministro de Canadá, Stephen Harper, se convirtió en el primer jefe de estado canadiense en visitar Perú. Humala ahora ha reciprocado embarcándose en una visita oficial de tres días al país de América del Norte el 8 de abril.

Durante una reunión con Harper en Ottawa, los dos hombres firmaron un nuevo memorándum de entendimiento para promover el comercio bilateral y la inversión. Humala luego viajó a Toronto, para asistir a una conferencia empresarial organizada por el Consejo Canadiense para las Américas (CCA), que aprovechó la visita de Humala para otorgarle su premio de ‘Estadista del año 2013’. Al presentar la condecoración, el presidente del CCA, Kenneth Frankel, dijo que “Humala ha demostrado un fuerte liderazgo económico interno con una administración financiera basada en una robusta política económica mientras fortalece las reformas financieras iniciadas en Perú”.

Al recibir el premio, Humala reafirmó el compromiso de su gobierno en luchar contra la pobreza y reducir la desigualdad. Después Humala se tomó tiempo para explicar los principales objetivos de las reformas del sector minero que su gobierno está impulsando, incluyendo una propuesta para cambiar la manera en la cual los royalties mineros del país (el canon minero) son distribuidos entre las regiones de Perú. Humala dijo que el objetivo de las reformas es “superar la visión rentista y construir un nuevo [sector] minero”. Sin embargo, en un esfuerzo por reasegurar a los inversionistas del sector minero de que la reforma no produciría cambios en el ambiente operativo del sector, Humala agregó: “Somos el gobierno de un país serio, que honra sus promesas y cumple con lo que firma”.

Pension system reform unveiled: On 15 June President Bachelet unveiled an initiative to create a state-run pension fund to compete with the privatised Administradores de Fondos de Pensiones (AFPs) established under the military dictatorship led by Augusto Pinochet (1973-1990) (see sidebar).

Bachelet told reporters that the creation of the state-run administrator would make the market more competitive and guarantee coverage for those not considered attractive clientele for the AFPs; such as independent workers, those on lower incomes, or people that work in isolated areas of the country. She also told reporters that of a total of 9.6m workers eligible to save money with the private pensions, only 5m do so periodically.

Yet the initiative met with scepticism – not least from within Bachelet’s own Nueva Mayoría. The senate vice-president, Eugenio Tuma of the Partido por la PPD, complained that the reform was insufficient, while the president of the umbrella trade union organisation Central Unitaria de Trabajadores (CUT), Bárbara Figueroa, called for a complete transformation of the pensions system.

• Pension system

Pinochet’s 1980 pension reform replaced the pay-as-you-go state-run system with a system in which each worker’s savings were deposited and invested in pension fund managers (AFPs). Until 2008, there were two types of basic State help available for the most impoverished – a minimum pension guarantee for those who had made contributions for at least 20 years but had failed to accumulate the minimum amount necessary to retire (which covered 23% of the most impoverished), and a small non-contributory means-tested benefit worth half the minimum pension. In March 2008, under her first government (2006-2010), Bachelet replaced these two forms of State assistance with new ‘solidarity pensions’ (Pensiones Solidarias) for the poorest 60% of the population not covered by private pensions, while those who received low pensions from AFPs received a monthly top-up (Aporte Previsional Solidario).

The international rating agency Fitch downgraded Brazil’s sovereign credit rating from BBB to BBB- with a negative outlook on 15 October, one notch above junk. With the decision already priced in by many analysts, the stock market and the Real barely registered the change. Standard & Poor’s has already stripped Brazil of its hard-earned investment grade: if either Moody’s or Fitch follow suit, the country faces a severe risk of capital flight as many international funds will be under a legal obligation to ditch Brazilian investments. In early October, Moody’s indicated that it did not plan an imminent downgrade of Brazil. But the government is worried by the fact all of Brazil’s economic indicators are at the same level of other countries rated as junk by Moody’s.

In its note accompanying the decision, Fitch cited Brazil’s rising levels of public debt, increased challenges to fiscal consolidation and impact of the recession on government finances (see sidebar). The day after the Fitch decision, Standard & Poor’s published a report stating that Brazil has more companies at risk of a credit downgrade than any other emerging market. Of the 134 potential downgrades for emerging market firms, 28 are Brazilian.

In early October the International Monetary Fund (IMF) predicted that Brazil’s economy would shrink by 3% this year. The budget deficit reached 9.2% of GDP in August, up from 8.8% in July. Shelly Shetty, director of Latin American sovereign ratings at Fitch, said in an interview that she expected Brazil’s public debt to rise to 70% of GDP, well above the average of other countries with ‘BBB’ ratings. Inflation, at 9.77% over the past 12 months, is three times the average of other ‘BBB’ countries.

Brazil’s economy shrank even further than anticipated in August: the economic activity seasonally adjusted index (IBC-BR), a proxy for GDP, fell 0.76% in comparison with July, when most economists expected a fall of just 0.6%. According to this index, Brazil’s 12-month decline is now at -4.47% which may mean that the -3% fall in GDP forecast this year by the IMF and the World Bank could even prove optimistic. The pace of decline is accelerating: in the January to August 2015 period, the IBC-BR fell by -2.99%.

• The glass half-full view

Some argue that the gloom surrounding Brazil’s economy is overdone. Jerome Booth, the chairman of New Sparta Asset Management, who made a fortune betting in favour of Brazil in 2002, when many investors were spooked by the left-wing Partido dos Trabalhadores (PT) coming to power, argues that Brazil’s problems are exaggerated. In an interview with Bloomberg, Booth argued, “You’ve got the classic ‘everything is as bad as it can possibly be’ situation,” he said. “But it is all priced in now.”

Booth argued that there is no chance that the government is going to default and that its politicians will eventually find the will to push through measures designed to shore up the budget and restore growth. He said that the panic among investors was excessive and reminded him of the collapse in bond prices 13 years ago when many feared the new PT government would repudiate Brazil’s debt. In fact investors were rewarded. From Lula da Silva’s inauguration at the start of 2003 until he left office at the end of 2010, Brazil’s dollar-denominated bonds returned 256%, more than double the emerging-market average. Real-denominated notes advanced 520% in US dollar terms, almost three times the average for peers. The currency more than doubled in value against the dollar, and stocks surged 500%.

• Fitch

The negative outlook “reflects Fitch’s view that economic and fiscal underperformance is likely to persist while political uncertainty could continue weighing on broader confidence, delay a turnaround in investment and growth and increase risks for the medium term fiscal consolidation needed for debt stabilisation”.

At least 29 trucks used for transporting timber were destroyed in an arson attack in the early hours of 28 August in the Region of Los Ríos in the province of Araucanía in southern Chile. Responsibility for the attack was unclear, but it came in an area where radical Mapuche indigenous communities have been protesting for decades over the use of what they regard as their ancestral lands for commercial farming and logging. The incident has fanned controversy in the presidential election campaign.

President Michelle Bachelet condemned the attack, on a compound operated by Sotraser, a private company serving a local sawmill and a Celulosa Arauco pulp plant. She said she would not allow violence to overcome attempts to promote development and overcome exclusion among the country’s southern communities. Police said they were investigating, but that witnesses had seen hooded and armed men intimidate a watchman and set the vehicles alight. The damage was estimated at US$6m; the company says 70 employees have been left without work.

A number of Mapuches have been prosecuted for arson attacks against farms, trucks, and agricultural and logging equipment in recent years (see sidebar). The government said those responsible for the latest attack would be prosecuted under anti-terrorist legislation. In an earlier incident in August 18 trucks had also been destroyed.

A leaflet was reportedly found at the site in which a group calling itself Weichan Auka Mapu claimed responsibility. The name means ‘Fight of the Rebel Territory’ in the local Mapudungun language. The Mapuche community in Chile numbers around 600,000 and is mainly concentrated in the provinces of Araucanía and Bio Bio.

The incident rapidly triggered a political debate between presidential candidates. Former president Sebastián Piñera (2010-2014), who is currently the frontrunner in the opinion polls at the head of the right wing Chile Vamos coalition, used it to attack one of his rivals, Alejandro Guillier, who is standing with the support of Bachelet’s centre-left Nueva Mayoría coalition. Guillier had described the arson attacks as “acute violence”, but Piñera insisted it should be called terrorism. Piñera says there should be an economic development plan and constitutional recognition of the Mapuche, but that anti-terrorism laws should be applied in full.

All candidates from the centre to the right support tough action against what they describe as acts of terrorism. José Antonio Kast, an independent right-winger is one of the more extreme, calling for the “militarisation” of the south of the country.

Guillier in contrast says it would be wrong to describe the Mapuche as terrorists, or as a community that harbours terrorists, or to refer to Chile as an insecure country that suffers from terrorism. Beatriz Sánchez of the Frente Amplio (FA) left-wing coalition says the area should be “demilitarised” and Chile should grant autonomy to the Mapuche. Broadly speaking from the centre to the left the emphasis is on seeking dialogue while allowing the police and the courts to prosecute those responsible for violence. There is also a disposition to consider granting some kind of constitutional recognition of Mapuche land rights.

• Mapuche trials

In Temuco, capital of Araucanía, a trial of 11 local residents accused of setting fire to a homestead in early 2013 and killing an elderly couple, is still in progress (this is known as the Luchsinger Mackay case).

President Jovenel Moïse named his environment and interim economy & finance minister, Joseph Jouthe, as his new prime minister, filling a post which has been vacant for a year, after Jean Henry Céant was forced to quit following a no-confidence vote [WR-19-11].

President Moïse’s previous two choices to replace Céant (Jean-Michel Lapin and Fritz William Michel) had not been approved by the legislature – a constitutional requirement. However, the lapse of legislators’ terms in January 2020, following the failure to hold elections in October 2019, meant that the deeply unpopular Moïse, who is now effectively ruling by decree [WR-20-02], was able to sidestep this hurdle. With no sign of breaking the impasse with the political opposition, as on previous occasions, Moïse’s insistence that the new government will be one of “transparency and consensus” continues to ring hollow.

Moïse was quick to maintain that his choice of Jouthe followed “consultations with different sectors”. However, this was swiftly debunked by the Mache Kontre grouping (which includes leading opposition parties such as Organisation du peuple en lute and Fusion des sociaux-démocrates haïtiens). Mache Kontre is one of various opposition platforms that were set up last October and signed the so-called Marriott Accord aimed at finding a way out of the crisis.

Other signatories of the same agreement such as Emmanuel Ménard, a member of the Parti Force Louverturienne, also complained that Jouthe had been unilaterally imposed. Doubts over this “consultation” process similarly emerged in a briefing which took place on 20 February, less than two weeks before Jouthe was sworn in, by United Nations (UN) Special Representative Helen La Lime, the head of the UN Integrated Office in Haiti (Binuh).

Addressing the UN Security Council, La Lime said that talks which she, along with the Organization of American States (OAS) and Holy See, had brokered in previous months, had “failed to yield progress on the formation of a new government” and the designation of a “consensual” prime minister.

One reason behind Moïse’s efforts to form a new government is to reassure the international community and secure the return of financial aid suspended by donors due to the political crisis. However, Jouthe’s appointment has yet to achieve this aim.

New cabinet

Police concessions

While there is little sign of a breakthrough with the opposition, Jouthe did take a decisive step in resolving another priority - police unrest. This began last November in demand of better working conditions and increased labour rights, including the ability to unionise, and made headlines in recent weeks following the deployment of the armed forces to quell the protests [WR-20-08].

On 10 March, less than a week after taking office, Jouthe revealed that the government had decided to pass legislation allowing police (PNd’H) members to form a union. He added that the government had agreed to review the cases of the five PNd’H officers dismissed for their involvement in recent protests - another source of complaint.

New government

In an interview with the Miami Herald, the European Union’s ambassador to Haiti, Sylvie Tabesse, described the formation of a new government as “a positive and necessary step”. Tabesse noted, however, that “One cannot disburse millions of dollars — in our specific case we are talking about more or less $30 million this year, out of a total of $120 million — if the country is one, unstable politically; second, if its economy is destabilized; and third, if its public finance system is not improving and its fight against corruption is not progressing.”

Argentina’s state-owned oil company, YPF, is struggling with operating losses, a difficult transition to shale oil, a disputed debt restructuring, and a change in leadership.

These are hard times for YPF, Argentina’s 51% government-controlled oil company. The coronavirus (Covid-19) pandemic pushed down demand, prices, and production last year. The company announced a record US$1.3bn loss in Q2 of 2020 and was a further US$468m in the red in Q3. YPF is struggling to fund a shift of focus away from declining output at its mature conventional oil and gas fields and towards new shale oil and gas operations at the ‘Vaca Muerta’ depoist in Patagonia. Company executives have said its overall output fell by around 10% in 2020 but are promising a turn-around this year as international oil prices are expected to stabilise. They seek to increase Vaca Muerta’s share of total output from 20% at the end of last year to 25% this year, and then to 45% or 50% in 2022 or 2023. To do this the company says it is seeking to boost investment by 73% this year.

These plans come up against some unpleasant financial realities. Cash flow is tight. To help fund shale oil capital expenditure, YPF is looking to sell its high-rise headquarters in Buenos Aires, which might bring in US$400m. Throughout January YPF made successive offers to its creditors to reschedule US$6.2bn in corporate debt. The company did gain some respite on 8 February after successfully negotiating the rollover of US$413m bond debt payments due in March. But markets had been rattled because amid the restructuring process the government announced the departure of YPF president Guillermo Nielsen – a familiar figure in financial markets – and the appointment of Pablo González, a former deputy governor of Santa Cruz province, to replace him.

New leadership, rattled markets

New YPF president González is linked to the energy nationalist wing of the ruling Partido Justicialista (PJ, Peronists) loyal to Vice President Cristina Fernández. Following his appointment there were rumours – quickly denied by Economy Minister Martín Guzmán – that the government might seek to “renationalise” the remaining 49% privately held stake in the company.

HONDURAS | Trade deficit. Honduras posted a trade deficit of US$4.7bn in 2020, 23.3% lower than in 2019, according to figures released by the central bank (BCH). A BCH report attributed the improvement in the trade balance to the impact of the coronavirus (Covid-19) pandemic and the damage produced by hurricanes ‘Eta’ and ‘Iota’, which hit the Central American country in November 2020.

The BCH notes that the restrictions on movement introduced to contain the spread of Covid-19 and the destruction produced by the hurricanes have reduced domestic demand for imports as household incomes have been impacted.

The BCH figures show that imports fell by 13.5% year-on-year in 2020 to US$8.96bn. This contrasts with the resilience shown by the country’s exports, which, despite falling global demand due to the pandemic, increased by a marginal 0.6% last year to reach US$4.26bn.  

In the wake of yet another deadly prison riot in Ecuador, on 18 August the country’s prisons authority (SNAI) announced a major initiative to reduce overcrowding and improve conditions in penitentiaries. The government has pledged US$75m over the next four years to address what SNAI director Fausto Cobo described as the “precarious, chaotic, dangerous and anarchic” state of the prison system. There is little doubt that the investment is needed – in the latest prison riot on 12 August, six inmates were killed at the Quevedo prison in Los Ríos province. This followed the massacre of 27 prisoners in simultaneous riots at two penitentiaries in late July, bringing the total number of violent deaths in Ecuador’s prisons this year to 130.

Ecuador is seeing its prisons explode into violence with alarming and unprecedented frequency. The 130 murders that have taken place behind prison walls so far this year already eclipse the 51 violent prison deaths recorded in 2020, driven by a spate of massacres that shows little sign of abating. A coordinated uprising at four prisons saw 79 inmates murdered by rival gangs in February, making global headlines. Whilst that atrocity sparked widespread calls for reform, it was followed on 22 July by simultaneous riots at the Penitenciaría del Litoral (Guayas province) and the Cárcel de Latacunga (Cotopaxi) that saw a further 27 prisoners murdered and a female police officer raped.

Those riots led President Guillermo Lasso to declare a state of emergency across the country’s penal system on 23 July, which established military perimeters around prisons and deployed police to assist prison guards within detention facilities. That failed to prevent yet another massacre of six inmates in Quevedo on 12 August, which the local media attributed to a dispute over money lending between prisoners.

This latest outbreak of violence appears to have driven Lasso to make good on his manifesto pledge to reform “a model of giant, overcrowded prisons, where inmates detained for every sort of crime mix together under the control of guards that are… poorly paid and corruptible.” According to a July briefing by the SNAI, Ecuador’s prisons are currently filled 29% over capacity, holding 39,150 inmates in facilities built to contain 30,000. That, combined with a burgeoning gang culture on the streets of Ecuador’s cities [SSR-03-21], creates the conditions for prison disputes to erupt into serious violence.

The plan set out by the SNAI, which will be overseen by the interior ministry, pledges US$75m in funding over the next four years. This will be spent on overhauling prison infrastructure to ensure “dignified living conditions” for inmates, including the modernising of maximum-security facilities and the building of new cell blocks where possible. This will be accompanied by immediate action to reduce overcrowding by granting early release to those inmates deemed suitable. These measures follow an announcement by Cobo on 24 July that 3,532 foreign inmates would be repatriated to their home countries.  

Whilst they are urgently needed, the proposals exclude Lasso’s campaign pledge to secure private investment to increase occupational training, rehabilitation, and mental health support for prisoners. On 5 August, Cobo said that the SNAI was exploring the possibility of contracting private security companies to bolster security around prison perimeters and limit the inflow of contraband. However, he said that there were no plans to have private security personnel working inside prisons, and did not mention a possible role for them in rehabilitation strategies.

Firearms bust

On 22 August the SNAI announced that yet another prisoner had been killed at the Penitenciaría del Litoral prison in Guayas province. The SNAI reported that the man died in a “confrontation between gangs”, and that further violence was prevented that same day when a joint operation between the police and the prisons authority uncovered a plan to smuggle firearms into the prison. The SNAI statement said that weapons had subsequently been seized and that “criminal groups will not defeat us.”

The national electoral council (CNE) confirmed the final results this week of the congressional and municipal elections held on 28 November. The incoming left-wing Partido Libertad y Refundación (Libre) of President-elect Xiomara Castro will have 50 seats in the 128-seat national congress, according to the final legislative results published by the CNE. Libre is moving to shore up its alliance with the Partido Salvador de Honduras (PSH) of Castro’s running mate Salvador Nasralla, which won 10 seats, by backing the candidacy of one of its deputies for president of the legislature, but it will still require further consensus-building to muster a simple majority of 65.

The outgoing right-wing Partido Nacional (PN) will have 44 seats in the incoming legislature, the CNE confirmed, and the Partido Liberal (PL), 22; the minows, Democracia Cristiana (DC) and Partido Anticorrupción (PAC), will have one seat apiece. Libre cannot reach the magic number of 65 required for a simple majority without the support of either the PN or the PL.

The PN will go into opposition, leaving the PL with significant influence when the newly elected deputies take their seats on 25 January. A two-thirds majority of 86, which will be required to elect the new supreme court and attorney general in 2023, and, crucially, would be necessary to enact constitutional reforms, will be out of reach for Libre without the support of the PN, which is unlikely to provide it.

In the wake of the elections, Yani Rosenthal, who finished third on 9.5% for the PL in the presidential race, said that his party would help provide governance but would not consider an alliance with Libre [WR-21-48]. Tensions between the PL and Libre run deep. Libre is essentially an offshoot of PL, having been formed by Castro’s husband, former president Manuel Zelaya (2006-2009), who had come to power for the PL, shortly after he was ejected from power in a civil-military coup.

Rosenthal said that the PL would back Libre’s choice of president of the legislature as that was the will of the people, but that the PL’s backing would not extend beyond this. “Libre’s legislative and political agenda is extremely aggressive,” Rosenthal said. President-elect Castro is backing the candidacy of Luis Redondo, a deputy representing the PSH, the party of Nasralla, the vice-president-elect, as president of the legislature. There have been some dissenting voices among Libre deputies, who feel that the party has earned this position itself, having won more seats than any of its rivals, but the majority have sided with Castro.

Priorities

Castro succeeds President Juan Orlando Hernández on 27 January. Her priorities during her first 100 days in power will be improving transparency and combating corruption, one of the members of her transition team, Jari Dixon, told the Spanish news agency Efe on 11 January.

Dixon said that Castro was inheriting “a bankrupt and plundered country…because a huge amount of public contracts have been signed [by the Hernández administration]”, and these would need to be revised. Dixon also said that the new government would move swiftly to provide a report of the present state of the country “because once we are in government, excuses will no longer be valid”.

Municipal results

Libre might have won the presidency, and the largest representation in congress, but the party won far fewer of the municipal elections contested last November than the country’s traditional parties, the CNE reported. Libre won 50 of the 298 municipalities up for grabs. By contrast, the PN won nearly half of the municipal elections, finishing with 142 mayors, while the PL won 90. Six of the remaining 16 municipal elections were won by candidates standing on a joint PL-Libre ticket.

The growing divisions in Bolivia’s ruling left-wing Movimiento al Socialismo (MAS) are increasingly crystalising around security issues. Former president Evo Morales (2006-2019), who also holds the presidency of the party, has moved against two of President Luis Arce’s top security officials in recent months. But there are signs that these acts of friendly fire by the Morales faction are not driven by disagreements over policy or a desire to stamp out corruption, but instead to discredit Arce and Vice President David Choquehuanca in order to clear the field for a Morales presidential run in 2025.

When Morales released audio recordings in February that appeared to show the then director of Bolivia’s counter-narcotics agency (FELCN), José María Velasco, ordering agents to ignore a cocaine laboratory, he professed to be playing his part in stamping out corruption [SSR-22-05]. Morales also alleged that under Velasco, the FELCN was working to plant evidence against his Seis Federaciones del Trópico de Cochabamba (SFTC) coca growers’ union, in order to implicate him and other union leaders in drug trafficking.

In that instance, Morales’ claims were backed by the government. The publication of the audio recordings left the Arce administration little option but to fire Velasco, and he was subsequently placed under investigation by the attorney general’s office. Interior Minister Eduardo Del Castillo swiftly announced that a sweeping investigation would be carried out at the FELCN, even stating that all of its agents would be subjected to a polygraph test.

On the surface, Morales’ outing of Velasco’s alleged collusion with drug traffickers was a sign of his cooperation with the Arce administration’s stated goal of stamping out corruption, even if the public leaking of the recordings caused significant embarrassment for the government. But shortly afterwards, Del Castillo himself was in Morales’ crosshairs, on far more tenuous grounds.

On 31 May, Del Castillo was summoned in front of congress by a faction of Morales loyalists within the MAS. Ostensibly he was there to face a grilling on high crime rates in the city of El Alto (La Paz department). However, over the course of his five-hour questioning, Del Castillo was repeatedly questioned on his assertion in March that some legislators were “filling their pockets” with profits from the coca trade. This claim had set Del Castillo on a collision course with Bolivia’s major coca unions, including Morales’ SFTC.

Del Castillo’s critics within the MAS then presented a motion seeking to call a confidence vote against him, which he avoided thanks to the abstention of opposition parties. The decision by the right-wing opposition to support the interior minister in the face of attacks from his own party led Morales to launch a barrage of attacks on Del Castillo, and the government at large. “How can our interior minister be supported by the right?” Maduro asked on 3 June, insisting that Arce “will need to explain” the opposition’s abstention.

Political manoeuvres

There are three main theories explaining Morales’ escalating attacks on Del Castillo, none of which directly relate to the interior minister’s security policies.

The first argument is that Morales fears Del Castillo is facilitating a campaign to discredit, and possibly bring criminal charges, against him. In recent months, Morales has repeatedly suggested without evidence that Del Castillo is working with the US Drug Enforcement Agency (DEA) and the US Agency for International Development (USAID). As president, Morales expelled both of these agencies from Bolivia, accusing them of interfering in domestic affairs.

Morales’ accusations that Del Castillo is working with the US government may have stemmed from the US’s submission in February of an extradition request for Maximiliano Dávila, who headed the FELCN in the final months of the Morales administration [SSR-22-05]. At the time, Morales framed the extradition request as the latest in a long list of alleged US attempts to destabilise the MAS and its affiliated coca unions, arguing that accepting the US request would represent a “submission to imperialism”. The Bolivian authorities have yet to announce their response to the extradition request.

The second main theory to explain Morales’ moves against Del Castillo and Velasco is that he is seeking to discredit the Arce administration and clear the field for a presidential run as the MAS candidate in 2025. That would also explain the increasingly hostile briefings by Morales loyalists against Vice President Choquehuanca, who is widely seen as the other likely candidate for the MAS nomination alongside Arce and Morales. On 14 June, the MAS’s vice president, Gerardo García, accused Choquehuanca of “creating his own political structure for the next elections.” MAS Senator Leonardo Loza has also alleged that Choquehuanca was present at meetings where it was agreed upon that Bolivia should “never again” have a president from Morales’ SFTC.

Alternatively, Morales may be trying to topple Del Castillo in the hope of securing a new interior minister who is more amenable to requests to increase Bolivia’s legal coca production quota. Yet the campaign against Del Castillo has rarely focussed on actual security policies, and has instead been dominated by the conspiratorial accusations that he is in the pocket of the DEA. Furthermore, Morales’ presidency of the SFTC means that he would be unlikely to shy away from explicitly calling for a change in coca policy; early jostling ahead of the MAS primaries for 2025 remains the most likely cause of the party’s internal strife.       

Del Castillo facing another congressional summons

Del Castillo was issued another congressional summons on 8 June, this time by a group of right-of centre deputies led by Marcelo Pedrazas (Comunidad Ciudadana). At the next grilling, scheduled for 7 July, Del Castillo will be questioned on the alleged trafficking of stolen cars by Bolivian police and border agents. The commander of Bolivia’s police, Jhonny Aguilera, admitted on 7 June that there had been “negligence” in the police’s response to the trade in stolen vehicles, which were allegedly smuggled from Chile by security officials.

VENEZUELA | Maduro reaches out to investors. President Nicolás Maduro urged foreign investors, particularly from Argentina, Brazil, Uruguay, and Colombia, to come to Venezuela to develop the land and ramp up food production for export. “We are looking to the horizon: Venezuela as food producer and exporter,” Maduro said during a visit to an estate owned by a Brazilian businessman in the eastern state of Monagas on 31 August.

Encouraging foreign investment rather than expropriation is now de rigueur in Venezuela, although after year upon year of domestic shortages of regulated food staples and basic necessities, ordinary Venezuelans may question the vision of Venezuela becoming a major food exporter.

Mexico’s senate approved amendments to the federal labour law (LFT) on 14 December to increase the number of paid holidays that workers are entitled to per year. The new allowances came into effect from 1^st January and apply to new employees as well as existing ones.

The changes specify that formal workers may have 12 days of paid leave during their first year of working for an employer. The holiday allowance will increase by two working days every additional year of employment with the same company or business up to a total of 20 days. Following that, employees may have two days per every additional five years worked.

Prior to the reform, workers in Mexico had only six days of paid holidays following their first year of employment, which increased by two days per additional year worked until reaching 12 days by the fourth year. Subsequently, employees could have two additional days per five years worked. This scheme, which was in place since 1970, was far from the minimum of 18 days of annual paid leave recommended by the International Labour Organisation (ILO).

With the new amendments, Mexico has reduced the size of the gap with other countries and is on a par with the Latin American average regarding paid annual leave. Despite this, many other countries in the region still have more generous allowances, such as Colombia, Chile, and Guatemala with 15, Uruguay with 20, and Panama and Peru with 30 days. Similarly, Mexico remains far from the Organisation for Economic Cooperation and Development (OECD) bloc, whose members average around 30 days of paid annual leave.

Supporters of the reform argue that the new holiday allowance was long overdue as a majority of employees in Mexico have poor working conditions and are overworked. According to Máximo Ernesto Jaramillo-Molina, co-founder of the institute of inequality studies (INDESIG), a local advocacy group, while the burden of annual worked hours has recorded significant reductions since 1950 worldwide – in Germany by more than 40% - in Mexico this has been only 7%, well below the 16% decline recorded in other major economies in Latin America such as Argentina and Brazil.

Therefore, supporters claim that the increase in paid holiday will benefit both workers and employers as the increase in paid leave will improve employees’ physical and mental health, enable better engagement with the organisation as well as a better labour experience, and increase productivity. In turn, detractors argue that it will be costly, particularly for small- and medium-sized companies, which could lead to inflation and failing businesses, as well as to higher informality.

• Informality

The rise in inflation will affect operating costs, particularly for micro and small businesses. As a result, working formally will become more expensive, which could fuel further informality. This would cause even more workers to miss out on benefits such as paid holiday leave and minimum wage stipulations.

Indeed, regardless of the impact on employers, the changes will benefit less than half of the country’s workers due to the size of the informal economy. According to the national statistic institute’s most recent national employment and occupation survey (ENOE), released on 28 December 2022, 32.5m people work in the informal sector in Mexico, equivalent to 55.2% of the country’s employed population. Those who work informally lack access to labour benefits including annual paid leave. Furthermore, some states such as Oaxaca, Guerrero, and Chiapas have significantly higher informality levels, reaching around 80%, meaning that the vast majority of workers in these states will not benefit from the change.

In early April Honduras’ military (FFAA) announced that in the first quarter of 2024, authorities had destroyed over 2.9m coca bushes and nearly 1.4 tonnes (t) of cocaine. Coca production has been on the rise in Honduras since 2017, when the first coca plantation was discovered in the department of Olancho, a mountainous area in the east of Honduras near the border with Nicaragua. Coca cultivation in Honduras remains minimal compared with South American countries like Colombia, Peru, and Bolivia. Nonetheless the latest seizures will fuel fears that Honduras could be continuing to evolve from its traditional role as a transportation corridor. The claims of progress vis-à-vis coca eradication come amid reports of a dramatic reduction in cocaine seizures last year.

According to the 2 April FFAA statement, as well as the seizure and destruction of coca bushes, some 418,900 marijuana plants that were being cultivated on 77 hectares (ha) of land were seized during the first quarter of 2024, as well as a further 3,765 pounds of processed marijuana. At least 68 firearms and 1,877 projectile weapons were also seized during antinarcotics raids.

The FFAA statement adds that the seizures are part of the strategy of the leftist Partido Libertad y Refundación (Libre) government led by President Xiomara Castro for combating narcotrafficking, which includes “the eradication of illicit crops, the destruction of basic drug production structures, and the interdiction and neutralisation of related criminal structures.” It also notes that Honduran authorities have been targeting narcotics-related crime using a combination of “land, air and sea” operations, which so far have yielded “positive results”. Having previously identified the fight against drug trafficking as one of its top priorities for 2024, the FFAA indicated in a previous (27 March) statement that it has strengthened its capacity for ground, maritime and aerial mobility to more effectively target areas of drug cultivation and production.

While the authorities highlight the latest seizures as evidence of progress in the war against narcotics, the latest figures on cocaine seizures for 2023 tallied by specialist website Insight Crime on 20 March reveal that Honduras saw a “dramatic” 93% drop in cocaine seizures from 2022 to 2023. Insight Crime cites police (PN) data which shows that the country confiscated only 470kg of cocaine in 2023 compared to 7.1t the previous year. It adds that these figures “suggest that the country is losing predominance as a transit point,” but points out that “the government’s efforts to eradicate coca crops indicate coca cultivation has taken root in the country.” According to the same outlet, Honduran authorities eradicated 4.7m coca bushes in 2023, which, while down from the record 6.5m registered in 2022, is still “massively higher than 2021’s half a million plants”.

Coca in Guatemala

In its round-up, Insight Crime highlights the increase in coca cultivation in Guatemala – a situation also highlighted by other recent reports such as ‘Narcofiles: The New Criminal Order’, published in November 2023 by the Organized Crime and Corruption Reporting Project (OCCRP), a global consortium of investigative media. According to the OCCRP report, data obtained from Guatemala’s interior ministry shows coca cultivation has “skyrocketed since the country reported finding its first coca plantation in May 2018.” According to the Insight Crime round-up, last year the authorities nearly doubled the amount of coca bushes destroyed in Guatemala, reaching 7.9m, compared to around 4m in 2022.

Cocaine seizures elsewhere

According to Insight Crime, Costa Rican authorities seized 21.4t of cocaine in 2023. It adds that this figure is 13.4% less than the previous year but highlights the key role played by drug trafficking in the country’s security crisis: Costa Rica registered a record 907 homicides in 2023, up from 654 in 2022 which itself was a record year [SSR-24-01].

Insight Crime also highlights a drop in cocaine seizures in Guatemala, where 5t of cocaine was seized in 2023, down from 5.9t in 2022. It attributes the drop to a shift in routes from Central America to Caribbean nations, like Jamaica.

Also singled out in the round-up is Panama, which confiscated 95.67t of cocaine in 2023. While down 12% on 2022, Insight Crime points out that the 2023 figure means Panama still seized more cocaine than any country besides Colombia and Ecuador in Latin America and the Caribbean.

ECUADOR | Tax reform boosts state coffers. The tax reform submitted by President Daniel Noboa’s government, which was approved by Ecuador’s national assembly in December 2023, has strengthened the government’s finances in the first half of this year. Figures released by the tax authority (SRI) show that the tax take from January-June was up by 7% year-on-year, totalling US$10.28bn.

A new ‘temporary security contribution’, to fund emergency security measures aimed at cracking down on criminal gangs, generated an additional US$331m over the first six months of the year. A new tax on banks generated an additional US$184m, while measures aimed at incentivising the payment of overdue taxes provided US$307m. Value-added tax (VAT), which was raised from 13% to 15% in March, generated US$4.50bn over this period, up by 6.8% year-on-year.

Brazil’s lower chamber of congress has approved a motion to suspend legal proceedings against federal deputy Alexandre Ramagem, of the right-wing Partido Liberal (PL). Ramagem stands accused of participating in an alleged plot to launch a coup in 2022 to reverse the election defeat that year of former president Jair Bolsonaro (2019-2023). In late March the supreme court (STF) officially declared Bolsonaro, Ramagem, and several other alleged conspirators as defendants in the high-profile coup plot case [WR-25-12], but now congress has complicated the process by exercising its constitutional powers that allow it to reverse some judicial decisions, which could reignite tensions between congress and the STF.

Before running for congress in the 2022 general election, Ramagem served as the director of the national intelligence agency (Abin) from 2019-2022. He is known to be a close ally of Bolsonaro, and the STF has classified him as part of the core group of alleged conspirators in the plot to keep Bolsonaro in power. During his time as Abin director, Ramagem allegedly facilitated efforts by Bolsonaro to spread misinformation about the integrity of Brazil’s electoral authorities and voting system ahead of the 2022 presidential race.

On 7 May the lower chamber approved a motion by 315-143 to suspend the legal action against Ramagem for the rest of his term as a legislator. Article 53 of the constitution allows a certain degree of immunity for lawmakers, granting congress the power to hold votes on whether to uphold or overturn some judicial decisions filed against members of congress. The vote on the motion on 7 May sparked fierce debate, with left-wing lawmakers slamming the suspension as conferring impunity for attacks against democracy.

Following the approval of the motion, STF justice Cristiano Zanin filed an official notice to congress stating that the suspension will only be valid in relation to crimes allegedly committed after Ramagem took office, but he could still face legal action in relation to any alleged crime he carried out before he was a member of congress. Right-wing lawmakers then criticised the STF for not fully respecting the motion passed by the lower chamber.

Slowdown in rate hikes

On 7 May the monetary policy committee (Copom) of Brazil’s central bank (BCB) decided to raise the country’s benchmark interest rate (Selic) from 14.25% to 14.75%. This latest rise comes after three consecutive 100-basis-point rate hikes. The Copom also updated its inflation forecast, projecting an annual rate of 4.8% for 2025, down from its previous forecast of 5.1% in March.

In a 6 July interview with Italian newspaper Corriere della Sera, President Daniel Noboa said he intends to call a referendum before the end of this year on whether to allow the return of foreign military bases.

The US military had an airbase in Manta province for a decade, from 1999 through to 2009. Left-wing former president Rafael Correa (2007-2017) campaigned successfully to get it closed under the new constitution that came into force in 2008. Article 5 of the constitution defines Ecuador as a “territory of peace” and bans any foreign military bases. However, since last year President Noboa has called for the return of foreign troops. At the beginning of June, the legislature voted to repeal the ban [WR-25-22]. The next step is for the constitutional court to rule on the proposed reform. If it is approved, the national electoral council (CNE) will have 45 days to convene the referendum.

Given the pivot in US foreign policy since President Donald Trump took office in January, it has not been confirmed whether Washington will resume a permanent presence in Manta. In Noboa’s interview he said bringing US troops back to the base would be “quite useful” in confronting organised crime. He added that a European military presence in Ecuador would also be welcome to exert “maritime control of drug trafficking and combat illegal mining”. He said it would be wrong to think of insecurity and crime as a local problem when “40% of the drugs leaving Ecuador go to the United States and 40% to the European Union.”

In March a senior Ecuadorean official involved in planning the restored Manta base, who wanted to remain anonymous, told US news network CNN that a new naval facility would be built at Manta with barracks-style housing and administration offices destined to support sustained operations and the presence of US military personnel. Noboa said the government was “already in talks” to receive foreign military support in various parts of the country. US National Security Council spokesperson James Hewitt said at the time that “President Trump is firmly committed to strengthening bilateral security cooperation with Ecuador, including through the recent agreement in Manta, and is considering expanding our combined efforts against transnational criminal organisations”. Ecuador’s left-wing opposition parties argue that security cooperation is desirable but should not require the establishment of foreign military bases on Ecuadorean soil, which they regard as an affront to sovereignty.

Homicide rate falls

The new commander of the national police, General Pablo Dávila Maldonado, said on 7 July that there had been a 15% reduction in the homicide rate last year relative to 2023. Measured on a per capita basis, Dávila said that the homicide rate fell from 46.30 per 100,000 inhabitants, down to 39.16 per 100,000.  Despite the reduction, these numbers show Ecuador remains one of the most violent countries in Latin America.

Dávila said the data shows that in 2024, the first full year in which the government-declared “state of internal conflict” has been in force, most homicides were concentrated in five coastal areas where criminal gangs are fighting most intensely for control of drug trafficking routes. No less than 83% of total homicides took place in the provinces of Guayas (home to port city Guayaquil), Manabí, Los Ríos, El Oro, and Esmeraldas. In Guayaquil, considered the epicentre of criminal violence in the country, the number of homicides fell by 383 year-on-year. Dávila said that 18 of the country’s 24 police ‘sub-zones’ saw a reduction in murders.  

Mining tax

On 9 July the Ecuadorean mining lobby Cámara de Minería del Ecuador (CME) filed a legal challenge in the constitutional court against a new tax on the holders of mining concessions, which came into force on 20 June. Proceeds from the tax, which the government says will raise around US$229m per year, will go towards monitoring and enforcement efforts to ensure that the mining sector is complying with regulations and environmental laws. The tax will apply to mineral concessions of all sizes, and the amount charged will vary depending on the size of the concession and the income of its holder. The CME yesterday issued a statement arguing that the tax is unconstitutional, will have a “disproportionate impact on the mineral exploration phase”, and could disincentivise mining investment.

Development: On 14 February the Dominican Republic’s (DR) economy minister, Temístocles Montás, announced that the country’s ‘stand-by’ agreement with the International Monetary Fund (IMF) will officially conclude at the end of the month.

Significance: The agreement with the IMF was considered crucial for the DR last year given that the country faces chronic problems in its energy sector. In an electoral year, the decision may badly affect the ruling Partido de la Liberación Dominicana (PLD), which insists that it is the only alternative that can ensure the country’s future economic stability.

Key points:

• Montás said that negotiations with the IMF had collapsed and there was no time to conclude the seventh and eighth revisions of the agreement. As a result, Montás said that both parties had decided to terminate it. According to Montás, the DR disagreed with the IMF’s requirement that electricity rates be raised - a measure which the Fund insisted was the only way to address the problems in the sector. The government however, which is facing a presidential election in May, refused, on the grounds that it was “inopportune at this time”.

• Montás also said that since the DR had been allowed to use more than 100% of its fund allocation, the IMF would now launch a post agreement monitoring mission although he was clear that programs do not imply any more disbursements of funds for the country.

• As for the use of the ‘Stand-by’ funds (which total more US$1.7bn), Montás said that they had been used to improve the country’s balance of payments and lately some had been used to balance the budget.