All Categories

El gobierno del Frente Sandinista de Liberación Nacional (FSLN) del Presidente Daniel Ortega fue el anfitrión esta semana del nuevo Presidente de Venezuela, Nicolás Maduro, cuya visita fue diseñada para disipar las dudas acerca del futuro de la cooperación venezolana después de la muerte del benefactor clave de Ortega, el ex presidente Hugo Chávez (1999-2013).

La visita de Maduro se produce a menos de una semana después de que el contralor general de Nicaragua anunció que una "exhaustiva auditoría" estaba en marcha en Albanisa, la compañía petrolera estatal binacional establecida en el 2007, de la cual la firma petrolera estatal de Venezuela, Pdvsa, posee el 51% y el restante 49% está en manos de Petronic de Nicaragua. Esto, junto con la manifiesta falta de progreso de la refinería petrolera de US$6,6mm, "El Supremo Sueño de Bolívar", un proyecto acordado por primera vez con Venezuela en el 2007, después de que Nicaragua se incorporó al movimiento regional de integración liderado por Chávez, la Alianza Bolivariana para los Pueblos de Nuestra América (Alba), ha incitado la especulación sobre preocupaciones venezolanas con relación a su cooperación, que controversialmente aún permanece fuera del presupuesto del Estado.

Ortega y Maduro firmaron cuatro acuerdos. Estos abarcan áreas que cubren la educación, salud, un acuerdo parcial entre los movimientos juveniles del FSLN y del Partido Socialista Unido de Venezuela (PSUV), y un memorando sobre cooperación policial. Maduro también declaró que su visita estaba diseñada para impulsar la cooperación bilateral que alcanzó US$765m en el 2012, representando el 57% de la cooperación extranjera total. Subiendo un 25% sobre el 2011, esta cifra, de la cual el US$550,7m es cooperación en petróleo vía Albanisa, llevó el total recibido desde el 2008, cuando Ortega asumió el poder por segunda vez, a US$2,8mm.

De todos modos, la visita de Maduro se concentró en la falta de progreso en una de las principales promesas de Venezuela –la construcción de la refinería llamada "El Supremo Sueño de Bolívar"– que aún debe materializarse, a pesar de la Inversión Extranjera Directa,
(IED), de parte de Venezuela de US$92m entre el 2008 y el 2011, según cifras del Banco Central de Nicaragua (la cifra para el 2012 no fue mencionada en el más reciente informe del banco central).

El anuncio del Contralor General, Guillermo Argüello Poessy, acerca de la auditoría de Albanisa, que está a cargo de desarrollar la nueva refinería, ha provocado especulación de que las preocupaciones con relación a la transparencia de la cooperación venezolana se han extendido más allá de la oposición local, que desde hace tiempo ha calificado esta cooperación como una herramienta usada para comprar apoyo popular para el gobierno de Ortega.

• Llamados para un TLC

La visita del Presidente Nicolás Maduro a Managua, por último no ha mitigado las preocupaciones relacionadas con el futuro de la cooperación venezolana. El 3 de junio, el día después de la reunión, el influyente lobby del sector privado de Nicaragua, Cosep, reiteró su pedido por un Tratado de Libre Comercio (TLC) formal entre los dos países. Venezuela representó US$1,25mm de los US$8,7mm del comercio exterior total de Nicaragua el año pasado, según las últimas cifras del Sistema de Integración Económica Centroamericana (Sieca). Esto convierte a Venezuela en el segundo mayor socio de Nicaragua detrás de EU, con el cual el comercio bilateral alcanzó los US$1,85mm. Cosep ha estado exigiendo un acuerdo formal desde el 2009, sin duda preocupado acerca del futuro de esta cooperación ante la ausencia del desaparecido presidente Hugo Chávez.

Brazil’s Vale SA, the world’s third-largest mining company, said in August that its second-quarter profits had slumped by 84% year-on-year to reach US$424m, significantly below market expectations. But executives remain relatively optimistic.

The profit slump was attributed to lower revenue from iron ore production, and to big currency losses, triggered by the depreciation of the Brazilian Real against the US dollar – a fall of around 10% during the quarter. The company said it lost almost US$2bn on its net financial liabilities, plus further ‘one-off’ losses of US$814m in forward and swap derivatives. The weaker Real has pushed up the cost of servicing dollar-debts.

While the short-term impact is certainly painful, in the medium to long term a weak Brazilian currency may actually be a good thing for Vale’s profit margins. Company officials have explained that most of its big new projects are located in Brazil, and the effect of a weakening Real is to reduce capital costs in dollar terms. The project to expand the Carajás iron-ore mine in the Amazon, code-named S11D, is estimated to cost around US$19.7bn to 2018, based on an exchange rate of BRL2.00/US$. To the extent that the Real has weakened beyond that level (the currency stood at BRL3.30/US$ in early September, its weakest level in four years) the dollar-denominated capital cost of S11D reduces relative to the first estimate. Vale said Real-denominated expenditure represented around 90% of S11D, and the savings were not yet reflected in its capital expenditure numbers. Apart from a US$6.5bn coal and infrastructure project in Mozambique, most of the company’s future capex is in Brazil.

Currency problems aside, company executives do not seem too worried over the effects of slower growth in China, which according to some analysts is bringing the commodities and metals boom to an end. Vale said lower iron ore revenue was in part caused by softer prices, but also reflected a fall in production because of bad weather in Carajás. Iron ore output fell 6.5% y-o-y to 140.8m metric tons in the first half of 2013. But José Carlos Martins, executive director of ferrous and strategy, pointed out “in this third quarter it is going very well, and we are confident that we are going to arrive at the number we have project of 306m tons of iron ore this year”. Executives said that despite slower growth in China, market factors such as that country’s continuing urbanisation and related housing and construction activity indicated “strong support for prices at around US$110 a metric ton”. Chief Executive Murilo Ferreira noted: “Two years ago China produced 683m tons of steel, and this year everything indicates it will produce 780m tons. So once again, China has proven pessimists wrong.”

The ‘recovery’ remains volatile

The index of industrial production fell 2.0% month-on-month in July over June and rose a lower-than-expected 2.0% year-on-year over July 2012, according to latest data from the national statistics institute (Ibge). The Ibge revised up June’s result to show a 2.1% rise over May, up from a previously reported 1.9%, with the annualised figure lifted to 3.2% from 3.1% previously.

Industrial output rose 2.0% year-on-year in the first seven months, but it has been very volatile throughout. The fear is that an tentative rebound has been knocked back by the weakening Real, which though supportive of export sectors also lifts production costs for many manufacturers dependent on imported inputs. Of the 27 industrial sectors surveyed by Ibge, 15 declined in July from June, led by the key automotive sector (accounting for a fifth of the industrial base), pharmaceutical goods and rubber and plastic products. In terms of industrial categories, consumer goods fell 2.6% month-on-month in July, with intermediate goods down 0.7% and capital goods down 3.3%. Capital goods output was up 15.2% year-on-year nonetheless, indicating some restocking.

Brazil’s overall GDP surprised on the upside in the second quarter, with real annual growth of 1.5%, prompting the government to say that its latest measures to promote private sector activity were having the desired effect, but local economists caution that the economy remains vulnerable to external shocks. Nonetheless private sector sentiment appears to be improving: the private sector consensus forecast for real annual GDP growth in 2013 rose to 2.4%, up from 2.21% a month ago, according to the latest (13 September) Focus report compiled by the central bank. The forecast for industrial production growth rose to 2.12% in 2013, but dipped to 2.65% from 3.0% in 2014 respectively.

Likewise GDP forecasts for 2014 dipped slightly to 2.22%, from 2.5% a month previously. The consensus was for the benchmark Selic interest rate to end the year at 9.75% and stay there until end 2014, with the Real at R$2.35/US$ and R$2.40 at end-year 2013 and 2014 respectively; that should support an recovery in the trade surplus to US$10bn in 2014, from just US$2.0bn this year.

Femsa-Spaipa deal

The Mexico-based Coca-Cola Femsa, the largest soft drinks bottler in Latin America, has agreed to buy Brazil’s Spaipa SA Industria Brasileira de Bebidas in a US$1.86bn cash-based deal. If approved by Brazil’s anti-trust authority, the deal will raise Femsa’s share of the Brazilian Coca-Cola market to around 39%.

Femsa has been on a buying spree in recent years, acquiring various regional bottlers in its Mexican home market, one in Miami, and one as far afield as the Philippines. It has been present in Brazil for ten years, and it sees South America’s largest economy and most populous country as a strategic market. In July, it acquired a Rio de Janeiro regional Coca-Cola bottler. In this deal it will buy Spaipa’s existing franchise, which operates in more than half of São Paulo state, and also in Paraná. Spaipa has four bottling facilities and seven distribution centres, serving an estimated 17m consumers. The Brazilian company achieved net revenues of US$929m in 2013. A statement issued by Femsa described the Spaipa footprint as “a perfect geographic fit”. Femsa said the cash acquisition was being financed through bank loans, most of which were already in place.

• Femsa

According to Femsa CEO Carlos Salazar Lomelín, “we are privileged to serve as many consumers in Brazil as we do in Mexico, and our company will benefit from the talented and experienced employees of the Spaipa franchise.” He added that “building on our operating capabilities and solid financial position, we are confident that our company will be able to deleverage our balance sheet in a short period of time”.

La enormidad del desafío que confronta la nueva ministra de justicia de Bolivia, Elizabeth Gutiérrez, quien fue designada a fines de enero para frenar la crisis en el poder judicial, se está volviendo cada vez más evidente. Las renuncias de los presidentes del Tribunal Constitucional (TC) y de la Corte Suprema de Justicia (CSJ) en menos de un mes, han hecho que el gobernante Movimiento al Socialismo (MAS) del Presidente Evo Morales, se vea forzado a reconocer que las elecciones populares, sin precedentes, celebradas en el 2011 para elegir a 56 altos funcionarios judiciales, han en gran medida fracasado en producir un gran cambio. Los alegatos de funcionarios judiciales acerca de la “interferencia” del ejecutivo que subsecuentemente han emergido –una antigua queja de la oposición– podrían plantear incómodos cuestionamientos para Morales antes de las elecciones generales de octubre del 2014.

Menos de dos semanas después de que Gutiérrez haya asumido su cargo – el único cambio en el gabinete hecho por el Presidente Morales en su anual reorganización, junto con la creación del ministerio del deporte [IL-14-04]– el presidente de la CSJ, Gonzalo Hurtado, anunció su renuncia el 4 de febrero, citando “razones personales”, lo que los medios locales atribuyeron al estrés. Su partida fue seguida 15 días más tarde por el anuncio del presidente del TC, Ruddy Flores, de que él también tenía la intención de renunciar. Inicialmente, Flores había afirmado que fue objeto de grabaciones ilegales de sus conversaciones telefónicas por la “inteligencia del Estado”, sólo para retractarse días más tarde, insistiendo en que sus comentarios habían sido tomados fuera de contexto.

Tanto Hurtado como Flores –que ya han sido reemplazados– fueron electos en la contienda para elegir a nueve jueces de la CSJ, siete jueces del TC, siete jueces para el recientemente creado Tribunal Agro-ambiental (TA); y cinco para el Consejo de la Magistratura –el comité supervisor de la justicia. En esta ocasión, Morales había saludado la elección como un intento innovador para revisar el sistema judicial y hacerlo más representativo [IL-11-20], dado el hecho de que las designaciones previas fueron hechas por la legislatura, lo que permitió que varios grupos políticos impongan a jueces simpatizantes con sus causas. Sin embargo, el gobierno del MAS desde entonces se ha visto forzado a admitir que en última instancia poco ha cambiado.

Con cuatro de los magistrados del TA también clamando por la renuncia de su presidente, Bernardo Huarachi, por supuesta ineficiencia, la crisis en la justicia podría terminar siendo un punto de coincidencia para la oposición antes de la elección de octubre (en la que Morales es el firme favorito –ver más abajo). Las afirmaciones de Flores relacionadas con la presión del ejecutivo ya han sido tomadas por otros colegas del TC como, Gualberto Cusi, así como también por disidentes del MAS como la Diputada Rebeca Delgado, quien está solicitando una investigación sobre el tema. Una ex presidenta de la cámara baja, Delgado (2012-2013), rompió con el MAS el año pasado, después de varios altercados con prominentes figuras del MAS como el Vicepresidente Álvaro García Linera, a quien ella acusó de autoritarismo. Mientras tanto, líderes de la oposición como Samuel Doria Medina, de Unidad Nacional (UN) y Juan del Granado, del Movimiento Sin Miedo (MSM), han estado pidiendo la renuncia de todos los funcionarios judiciales electos.

Aún falta que el gobierno del MAS provea una respuesta a la crisis. Después de la renuncia de Flores, Gutiérrez dijo a la prensa local que la justicia debe mostrar “signos de cambio para finales de año, o el gobierno tomará duras medidas”, aunque estos comentarios de nuevo fueron tomados por la oposición política como evidencia de la “interferencia” del ejecutivo. Por otro lado, el 21 de febrero, Héctor Arce, el presidente de la comisión de asuntos constitucionales, legislación y el sistema electoral, de la cámara de diputados, anunció que la legislatura promoverá una reforma para la completa revisión del sistema judicial, aunque es improbable que esto tenga algún impacto antes de las elecciones.

• Popularidad

El Presidente Morales tiene el 45,7% de las intenciones de voto en la elección presidencial de octubre del 2014, de acuerdo con la última encuesta de Tal Cual Comunicación Estratégica, publicada en los medios locales el 23 de febrero. En segundo lugar, con el 13,4%, esta Samuel Doria Medina (Unidad Nacional), seguido por Rubén Costas, del Movimiento Demócrata Social (MDS), con el 9,1%, y Juan Del Granado, del Movimiento Sin miedo (MSM), con el 4,4%. La encuesta, que entrevistó a 2.250 personas en las principales ciudades de Bolivia y tiene un margen de error del 2,04%, probablemente subestime el apoyo que tiene Morales, considerando que su apoyo tradicionalmente permanece más fuerte en las áreas rurales.

Jorge Roig, the president of Venezuela’s main business chamber Fedecámaras, has called on the government led by President Nicolás Maduro to sit down with the private sector and “take decisions” in the face of the “very grave crisis” in the country. Fedecámaras suggests the economy could be looking at a contraction of 4%-5% this year.

Roig complained that the government has not met the private sector in over two months – despite Fedecámaras agreeing to an official invitation to sit down with the administration “in the national interest” back in January. “We ask the government to resume these working tables,” Roig stated, noting that the private sector was newly owed some US$9.0bn in foreign currency debt by the government. Roig strongly rejected the new fingerprint ID scanners coming shortly to Venezuelan supermarkets as part of efforts to prevent hoarding and the smuggling of food and other consumer goods. “In the name of the entire business sector and all the retailers in the country, please accept our excuses for forcing upon them a humiliating process of marking their finger to buy their food,” he said.

President Maduro, however, remained defiant in a fiery speech at the weekend, denying government responsibility for the crisis and blaming it all on the economic war being waged against the country from inside and out. He compared Venezuela to Chile under Allende, Yugoslavia under Tito and Cuba under the Castros, saying it was the subject of a vast conspiracy by right-wing extremists to destroy the Bolivarian Revolution. Expressly denying that there would be any liberalisation of price or currency controls, he seemed to directly contradict his own economic czar, Rafael Ramírez, which begs the question as to whether the all-powerful Ramírez, also president of the state oil company Pdvsa and oil minister, will remain in his post in the imminent cabinet reshuffle.

• Venezuela to import crude?

Pdvsa is considering importing Algerian light crude as a blender in order to boost sales of its own heavy crude, principally to China, but also with other Asian customers like India in mind, the newswire Reuters reports.

Venezuela has in fact been importing - at high cost - increasing volumes of refined products since around 2010, principally heavy naphtha from the US, to mix with its domestic heavy crude. Reuters makes the point that this blend of crude and naphtha, known as diluted crude oil (DCO), “lacks buyers and is mainly sent to its U.S. unit Citgo” (which reportedly is for sale). The problem lies in the fact that long-planned upgrades to extend domestic refining capacity have yet to materialise. The much vaunted Abreu e Lima refinery in northern Brazil – originally a joint venture between Pdvsa and its Brazilian counterpart Petrobras - was meant to be a heavy crude processor but after the deal fell apart Petrobras is now building a light oil refinery to process its own sweet crude. Meanwhile, Venezuela’s largest Amuay refinery is still not back to full capacity two years after a major fire.

The Reuters report (based on internal Pdvsa documents), suggests the strategy now is to use the firm’s brand new supertankers to cut freight costs and expand sales by bringing over the Algerian oil and then re-shipping the lighter blend out to Asia, where demand is high and prices better. Venezuelan sales to its main customer, the US, have been in decline as it diverts sales to China; and US demand for oil imports is in any case falling as its domestic shale oil supplies boom. Pdvsa reportedly told its local partners that it was in talks with Algeria’s state-run Sonatrach for a sweet crude purchase contract. To transport crude from Algeria - which has plentiful inventories - to Venezuela would take some 20 days and Pdvsa could save around US$3m per shipment using its own fleet, according to the cited internal document. From that point of view, the Pdvsa strategy is not illogical. Reuters makes the point that Mexico’s Pemex is also set to import oil, again mainly condensates and light crudes.

• Importing oil

Whatever the cost savings, the notion that the country with the largest land-based oil reserves on the planet may no longer have oil self-sufficiency will grate with critics of the Bolivarian Revolution, who say that it has run Pdvsa into the ground over the course of the past 14 years. Venezuela exported 2.43m barrels of oil and derivatives last year, on Pdvsa figures, down 11% year-on-year and the lowest level since 2007. And while production stagnates, the Venezuelan oil barrel has averaged US$96.4/b to date this year, down from US$99.5/b in 2013 and roughly US$102/b in 2012/2011.

The senate voted by 52 to 27 this week in favour of approving Luiz Edson Fachin to the federal supreme court (STF). The vote was a significant victory for President Dilma Rousseff, who nominated Fachin. Only five supreme court judges have ever been rejected by the senate in the history of Brazil as a republic, but the executive had looked so weak that at one point it appeared Fachin could have become the sixth.

It is within the President’s power to appoint anyone, between the ages of 35 to 65, with notable juridical knowledge and an unblemished reputation, to the position of supreme court judge. A vacancy had arisen since June last year when Joaquim Barbosa, who presided over much of the mensalão cash-for-votes scandal, stood down. Following the recent congressional vote raising the retirement age of federal judges, Fachin may prove to be the last appointment President Rousseff makes to the STF.

Fachin faced three major obstacles to his appointment. First, the president of the senate, Renan Calheiros, from the nominally government-allied Partido do Movimento Democrático Brasileiro (PMDB), had been agitating behind the scenes for Fachin’s rejection. Since his name appeared on the list of politicians to be investigated over the corruption scandal at Petrobras, the relationship between Calheiros and Rousseff has soured, with the former seemingly intent on making life difficult for the latter. Secondly, some within the senate had a technical, legal objection to Fachin’s appointment: the fact that he apparently violated Paraná’s constitution by practicing law privately while a state prosecutor. Thirdly, the opposition Partido da Social Democracia Brasileira (PSDB) was keen to inflict an embarrassing defeat on Rousseff, regardless of Fachin’s qualifications.

The law professor passed a major hurdle last week when, after a gruelling 12-hour hearing, he was approved by the senate’s constitution and justice committee (CCJ). His strong performance in front of the committee, and his efforts to distance himself from some of the more radical elements of his reputation appear to have smoothed his passage to the STF. Few had questioned his legal credentials, but the more conservative members of the senate objected to his apparent identification with progressive causes. In the past, Fachin had defended members of the Movimento Sem Terra (MST), the landless rural workers’ movement, and he publicly supported Rousseff’s election in 2010.

After the vote, senators who voted against Fachin’s appointment expressed their disappointment. Ronaldo Caiado, from the Democratas (DEM) party, lamented the appointment of a man with clear “political and ideological” affinities with Rousseff, saying that Brazil really needed someone who could contribute “more calmly” to the STF’s decisions and questioned whether Fachin would be able to act with impartiality. On the other side, Humberto Costa, leader of the ruling Partido dos Trabalhadores (PT) in the senate, welcomed the appointment of a man “with progressive attitudes”.

While Fachin’s success represents a clear victory for Rousseff, there is no guarantee the party may not live to regret his appointment. Barbosa, the judge Fachin is replacing, was appointed by former president Lula da Silva (2003-2011), but he went on to become something of a bête noire for the PT and the President due to his prominent role in the mensalão hearings. In fact, Fachin cited Barbosa as precedent to show that, despite his past support of the PT, he could be relied upon to pass impartial judgement on any politician from any political party.

• Petrobras scandal

Though Luiz Edson Fachin will not be involved in the cases involving congressional deputies suspected of involvement in the scandal surrounding the state oil company Petrobras should they be brought to trial, the entire federal supreme court (STF), including Fachin, will pass judgement over Eduardo Cunha, the PMDB speaker of the lower chamber of congress, and Renan Calheiros, the senate president, should they be formally charged over their role in the corruption at Petrobras.

The ongoing formal disarmament and demobilisation process of the Fuerzas Armadas Revolucionarias de Colombia (Farc), suffered a major setback this week. The Farc leadership threatened to suspend the process over what it perceived to be a failure by the government led by President Juan Manuel Santos to uphold some of the commitments undertaken as part of the historic peace deal it signed with the guerrilla group last year.

The Farc leadership issued its threat to suspend the disarmament process in the wake of the 4 June arrest of a Farc member by the Colombian police. ‘Yimmy Ríos’ was detained by the police in Colombia’s capital, Bogotá, after he was stopped at a routine road check point. Police officers asked Ríos to identify himself and when they ran his name through their computer system they found that there were various outstanding arrest warrants against his name. Ríos told the police that he formed part of the group of Farc members authorised by the guerrilla leadership and the government to help with the implementation of the peace process and that consequently all arrest warrants against him should have been suspended. But the police ignored Ríos’s explanations and brought him into custody.

Within hours, the Farc’s maximum leader, ‘Timochenko’ (Rodrigo Londoño Echeverri), took to Twitter to demand Ríos’s immediate release. Confirming that Ríos had been designated to assist with the implementation of the peace deal and had travelled to Bogotá to this effect, Timochenko said that Ríos’s arrest went counter to the pledges made by the government as part of the peace deal. And after complaining that two other Farc members had reportedly also been arrested by the police in Guaviare and Huila departments, Timochenko said that the Farc was considering suspending the current disarmament process until the government fulfils all the commitments it made in the peace deal. He added that “in the face of the government’s continued failure to comply with the peace deal, the Farc demands international monitoring”.

The threats elicited a quick response from the Santos government. The office of the high commissioner for peace confirmed in a statement that Ríos had been accredited as a Farc representative aiding in the implementation of the peace deal and that all arrest warrants against him should have been suspended. It went on to say that the arrest could have taken place due to “an identity issue”, noting that the orders suspending the arrest warrants against Ríos were made in his real name and not his guerrilla alias, which he may have provided to police. The office of the high commissioner added that it would now intervene and provide all the necessary documentation to the police to secure Ríos’s release. Santos said that the Ríos arrest had been an honest mistake that would soon be resolved by the authorities and that Ríos would be released soon (Ríos was duly released on 5 June).

However, the Ríos case produced questions about how effective the Santos government has been in implementing the peace deal. This is not only a problem for the peace process with the Farc but also with the separate but linked peace process with the Ejército de Liberación Nacional (ELN), the country’s second largest guerrilla group.

The government hopes to expedite peace negotiations with the ELN by showing that the deal it reached with the Farc can be successful. But the questions about the government’s ability to uphold the commitments it undertook in the Farc peace accord could make the already distrustful ELN leadership even more apprehensive about its negotiations with the government.

• Restrepo calls for firm hand against the ELN

In the wake of the persistent armed attacks carried out by the Ejército de Liberación Nacional (ELN) against the Colombian security forces in recent weeks despite ongoing peace negotiations between the government and the ELN, the head of the government’s peace negotiation team, Juan Camilo Restrepo, has called for a step-up in military action against the guerrilla group. “We need to be much tougher and less trusting [with the ELN]…military action against that group must be intensified in the coming months if it continues to fail to uphold the peace negotiation conditions,” Restrepo said in a 6 June interview with Colombian media.

“Let’s change history. Let’s change the way we do things. Let’s not stop hope that leads us to a better life.” With these words, President Juan Manuel Santos appealed for unity in support of the peace process that his government has been advancing with Colombia’s leftist insurgent guerrillas. His appeal came during a speech marking the start of the last of his eight years in office, and shows that he is very much aware that a lot still needs to be done to secure the future of the peace process.

There has been a steady polarisation in Colombia between those that support the peace process being advanced by the Santos administration and those that have opposed it ever since the government signed a peace deal with the Fuerzas Armadas Revolucionarias de Colombia (Farc) in November last year. Opponents of the peace process, which include the right-wing opposition Centro Democrático (CD), led by former president and incumbent senator Alvaro Uribe (2002-2010), are critical of the peace deal reached with the Farc, believing that it offers far too many political concessions to the guerrilla group and that its implementation will thus not lead to a long-lasting peace.

Opposition to the peace deal with the Farc has resulted in the delay of the approval of all the supporting legislation linked to the accord in congress, as opponents have lodged various legal challenges to some of these initiatives. President Santos is keen to have the entire legal framework required to implement the peace deal fully in place before the end of the year, aware that the passage of secondary legislation through congress will become increasingly difficult in 2018, an electoral year. Hence, during his 7 August speech marking the anniversary of the start of Colombia’s independence struggle in 1819, Santos decided to make one final impassioned call for the country, and in particular all political parties, to unite behind the peace process.

“Today from the Boyacá bridge, in front of a strengthened and vigorous army, I want to invite all Colombians to fight the battles that face us together: the battles to continue reducing poverty, to continue improving healthcare and education, to continue building homes, to continue creating formal jobs,” Santos said. He went on to urge all political actors not to “waste time in bickering that leads to nothing”, and to row behind the peace process.

Calling for no one to “try to turn back the clock and return to the conflict”, Santos insisted that the “differences of opinion [should] not impede us from working in harmony…for a better Colombia”. Santos concluded his speech by shouting “the country [patria] over [political] parties! Colombia over egos!” It looks like a long shot, especially with the proximity of presidential elections, but Santos also said, in an interview with the Spanish news agency Efe this week, that he would strive to “leave the country much less polarised than it is” by seeking to “effect a reconciliation with my predecessor former president Uribe”.

Cabinet reshuffle

The speech by President Santos marking the start of his final year in office was preceded by a cabinet reshuffle. The changes were largely influenced by electoral considerations as Colombia’s political parties gear up for next year’s general elections. However, Santos was careful not to make any major changes and maintain the cabinet’s delicate political balance. He is keen not to upset any of the parties that make up the ruling coalition Unidad Nacional so that he still enjoys sufficient support to push all the peace process secondary legislation through congress before the end of his term.

Santos announced only four ministerial-level changes in the 15-minister cabinet. Those leaving are the transport minister, Jorge Rojas; the trade, industry & tourism minister, María Claudia Lacouture; the housing minister, Elsa Noguera; and the agriculture minister, Aurelio Irragorri. Rojas, Lacouture, and Noguera have been replaced by Germán Cardona, María Lorena Gutiérrez and Jaime Pumarejo respectively. The replacements are all members of the same parties as their predecessors in order to maintain the same balance (with Cardona and Gutiérrez having already previously served in the Santos cabinet).

Meanwhile, although Santos had announced that Irragorri, the newly elected president of the Partido de la U (PU), would be leaving the agriculture ministry to lead the PU into next year’s general elections, the president said that Irragorri had asked him to stay on as minister until the recent outbreak of foot-and-mouth (FMD) disease in the country comes under control, so as not to leave the task half-completed. Irragorri is a political heavyweight who will not be easily replaced in the cabinet. Pointedly Santos has yet to name his potential replacement.

• De la Calle throws his hat into the ring

On 9 August Humberto de la Calle, Colombia’s former vice-president (1994-1996) and the government’s chief negotiator in the successful peace negotiations with the Farc, announced his intention to run for the presidency next year. De la Calle, a member of the Partido Liberal (PL), part of the Unidad Nacional ruling coalition, has not confirmed if he will seek the PL nomination or that of another party. But De la Calle did say that he remains loyal to President Santos and the peace deal signed with the Farc, which he said he would fully implement if elected. De la Calle is the fifth former Santos government official to declare his intention to bid for the presidency.

Venezuela’s national assembly (AN), controlled by the political opposition, has passed a resolution refusing to recognise a new presidential term for President Nicolás Maduro, scheduled to begin on 10 January, after elections last May. The elections were boycotted by most of the opposition parties and declared fraudulent by domestic and international observers.

According to the resolution the only way out of the political crisis is for new elections to be held with the involvement and scrutiny of the international community and independent observers. The AN also called for action to resolve the economic crisis, and for the national constituent assembly (ANC), which is controlled by government supporters and has effectively usurped the functions of the AN, to be disbanded.

However, little, if anything, is likely to change as a result of the AN declaration. The executive, the judiciary, and the ANC, all tightly controlled by pro-government chavistas, have successfully isolated and ignored the AN, which has become a powerless talking shop. The ANC has arrogated to itself the right to pass laws and the supreme court regularly pronounces AN initiatives anti-constitutional.

• Opposition demands

The latest demands by the Venezuelan opposition are essentially the same as those that were presented a year ago as part of a short-lived national dialogue process with the government which took place in the Dominican Republic.

Brazil’s public security authorities were able to claim a victory in April with the capture of one of the criminals on the justice & public security ministry’s (MJSP) 2020 ‘most wanted’ list. On the run for two decades, Gilberto Aparecido dos Santos, known as ‘Fuminho’, was understood to be closely linked to the leadership of the Primeiro Comando da Capital (PCC), Brazil’s largest drug trafficking organisation (DTO).

Dos Santos was arrested on 13 April in a luxury hotel in Maputo, the capital of Mozambique, in a joint operation involving Brazil’s federal police (PF), the US Drug Enforcement Administration (DEA) and Ministry of Justice, and the Mozambican police. He was extradited to Brazil on 19 April. Dos Santos had been on the run since he escaped from prison in Brazil in 1999, fleeing the country to settle in Bolivia, although he is also believed to have spent time in Paraguay. He is understood to be one of the PCC’s top providers of cocaine. The MJSP notes that Dos Santos is wanted for drug trafficking, crimes against property, and financing the escape of criminal leaders.

• Fuminho and Marcola

Dos Santos is believed to be a personal friend of suspected PCC leader Marco Willians Herbas Camacho ‘Marcola’ (who is behind bars in Brasília), and to have helped finance and organise the multiple attempts to break Camacho out of prison. Dos Santos is also suspected of having ordered the 2018 execution of two PCC leaders, Rogério Jeremias de Simone ‘Gegê do Mangue’ and Fabiano Alves de Souza ‘Paca’, a settling of accounts within the DTO.

At the time of his capture, Dos Santos was believed to be working with local organisations in several African countries to set up drug trafficking and money laundering schemes on behalf of the PCC – a sign of the transnational DTO’s growing international reach. Nevertheless, Dos Santos’ arrest is not expected to upset the PCC’s activities. Of more pressing concern to the DTO is the impact of the coronavirus (Covid-19) pandemic on its business – the price of cocaine has soared in Brazil as the supply chain from producing countries has been disrupted by the pandemic.        

Another controversial reform bill that is due to be debated by Mexico’s congress in the new period of ordinary sessions that began on 1 February is that affecting the central bank (Banxico). The initiative, approved by the senate in December 2020, would force Banxico to purchase surplus foreign currency that cannot be repatriated to its country of origin by commercial banks. The argument presented by Senator Ricardo Monreal of the ruling Movimiento Regeneración Nacional (Morena) party, who presented the bill, is that the reform would benefit people that receive remittances in cash, as well as those that depend on tourism and trade in border areas.

However, members of Banxico’s governing board and others -including Mexico’s association of banks Mexico (ABM) and even the federal finance ministry (SHCP)- warned that the bill threatens Banxico’s autonomy and could undermine its reputation. Banxico Governor Alejandro Díaz de León warned legislators that forcing the bank to buy foreign currency that the private sector cannot repatriate could potentially devaluate the peso, which would undermine the purchasing power of the population, thus having an adverse effect on those it is meant to support. The Banxico governor added that adopting such a measure would also make the international community consider Banxico as being at a higher risk of being used for money laundering, potentially to its overseas accounts being frozen.

Díaz de León stated that the potential benefits of the reform are too low relative to its risks, as only 0.6% of remittances are received in cash (mostly US dollars), while the rest is sent electronically. He added that while in 2007 Mexico’s financial institutions received US$24.67bn in US dollars in cash, by 2020 the total amount had fallen to only US$6.27bn. According to Moody’s Investors Service, the credit ratings agency, approval of the Banxico reform bill would lead it to downgrade Mexico’s sovereign issuer rating due to the risk that it could undermine Banxico’s autonomy, which is central to maintaining Mexico’s macroeconomic stability. Moody’s also highlighted that approval of the bill could result in Mexico falling afoul of international anti-money laundering regulations.

These concerns have prompted allegations from Mexico’s political opposition that Morena’s proposal seeks to directly benefit businessman Ricardo Salinas Pliego, who is close to President Andrés Manuel López Obrador. Salinas Pliego owns Banco Azteca, the only commercial bank in Mexico that is currently having problems with repatriating excess US dollars. The López Obrador government and Morena reject these allegations. The controversy comes at a time when remittances have grown at record rates, contrary to initial expectations that the coronavirus (Covid-19) pandemic would see them decline. In 2020 Mexico received US$40.6bn in remittances (mostly from the US), 1.4% more than in 2019 and equivalent to 3.8% of GDP. Indeed, it appears that precisely for this reason the fate of the reform bill is uncertain.

The local press reported on 8 February, that the federal chamber of deputies may end up shelving the reform following the emergence of an alternative initiative. The SHCP, Banxico, and the ABM have tabled a proposal designed to resolve the issue of excess US dollars without compromising Banxico, while at the same time increase banking penetration levels among Mexican migrants and their families. The plan is for the Banco del Bienestar, the recently created state-run bank, to provide banking and remittance services for Mexican migrants living abroad. Mexican migrants and their families will be allowed to open accounts at the Banco del Bienestar, which would allow them to send, receive, and deposit cash dollars. This would make Banco del Binestar act as the buyer of last resort for US dollars in Mexico rather than Banxico, as proposed by Morena.

The plan was jointly presented by Díaz de León, Finance Minister Arturo Herrera, ABM chairman Luis Niño de Rivera, and Banco del Bienestar director Diana Álvarez. The four said that they were committed to working to together to ensure to ensure that quality of the services provided under the scheme. The proposal has been broadly welcome as it would make the need for Banxico reform redundant, while also addressing the urgent need to increase banking penetration among a significant sector of the population in order to provide them with access to banking. Critically, according to BBVA México, a commercial bank, the four Mexican states with lowest banking penetration levels are Zacatecas, Guerrero, Oaxaca, and Chiapas, which also happen to be the four states that receive the highest amounts of remittances.

• Alternative plan

Díaz de León said that Banxico would develop applications to allow individuals in Mexico with no nearby banks to find the closest facilities where they could receive US dollar remittances. Niño de Rivera said that the ABM will offer a financial education programme for migrants and their families and work with the Mexican and US authorities to help these open bank accounts remotely. Álvarez said that Banco del Bienestar’s 443 branches and associated saving cooperatives would put their services at the disposal of migrants. Meanwhile Minister Herrera said that he would work with legislators to come up with any legislation necessary to enact the plan.

However, implementing the programme will take time, and crucially, the devil will be in the detail as some experts have pointed out that it could become a white elephant and lead to corrupt practices if its objectives are not clear, costs become excessive, and implementation is not undertaken carefully and transparently.

The impeachment of President Sebastián Piñera and the migration crisis in the north of the country featured in the second television debate among six out of Chile’s seven presidential candidates. Claims of illicit campaign financing are also playing a role. The government-endorsed right-wing candidate, Sebastián Sichel, meanwhile, is losing ground.

The second television debate among presidential candidates, organised by state-owned TVN and private channels Tele13 and Mega, was held on 11 October amid rapidly moving political developments. Just under a week earlier the ‘Pandora Papers’ revelations had implicated President Piñera in potential wrongdoing in the sale of shares in the Minera Dominga iron ore and copper mine through a tax haven. As the sale was conditional on the project benefiting from government environmental approvals, there was also a suggestion of conflict of interest [WR-21-40].

Piñera denies any impropriety, but on 8 October a prosecutor re-opened an investigation into the case. Two days after the debate on 13 October, opposition deputies formally launched impeachment proceedings. Immediately after the debate, media allegations emerged that Sichel, the candidate of the ruling Chile Vamos coalition, may have been implicated in illicit campaign financing, involving fishing companies, dating back to 2009 – provoking the resignation of his campaign coordinator, Cristóbal Acevedo.

• Minera Dominga

President Piñera insists he is not guilty of any wrongdoing. He says his business activities were placed in a blind trust in 2009, before he served his first term in office (2010-2014), and that a public prosecutor investigated the Minera Dominga case in 2017 and absolved him of any wrongdoing, citing a lack of evidence.

Impeachment

In the debate itself the left-wing frontrunner Gabriel Boric of the Apruebo Dignidad coalition said he would support “all institutional pathways” which might lead to the impeachment of Piñera. The opposition maybe within reach of the simple majority needed in the lower chamber of congress to impeach Piñera, but it lacks the two-thirds majority needed in the senate.

Centrist presidential contender Yasna Provoste of the Democracia Cristiana- Nuevo Pacto Social said she felt “deeply ashamed” by what she described as Piñera’s “dark” business deals. Marco Enríquez-Ominami, the candidate for the centre-left Partido Progresista, added that Piñera should have resigned “some time ago”.

Facing a combined attack on his mentor, Sichel sought to take some distance, saying the matter should be investigated whatever the consequences, while questioning the desirability of impeachment proceedings so close to the elections, which will take place on 21 November.

Migration

On the migration issue (the influx of undocumented Venezuelan and Haitian migrants through Chile’s northern border) most of the panel criticised José Antonio Kast, the candidate of the far-right Partido Republicano who, channelling the former US president Donald Trump, has proposed building a border fence and three-metre-deep ditch to keep immigrants out, which he claimed is both “feasible and economical”.

One way of reading the latest developments is that the Pandora Papers revelations and the impeachment proceedings are seriously impacting Sichel’s campaign. The latest opinion polls show him slipping from second to third or even fourth position in the race, being overtaken by Kast, who has now moved firmly into contention.

A poll by Tú Influyes puts Boric in first place on 26% support, with Kast now up to second place on 16%. The latest Cadem poll puts Boric ahead with 21% (down four percentage points on a month earlier), again followed by Kast on 18% (up by as much as eight points), Provoste on 13% (up by one point), and Sichel on 10% (down by seven points). A simple conclusion might be that Sichel is haemorrhaging votes which are re-aligning behind Kast.

Left-wing candidates like Boric might be encouraged by the split dividing his right-wing opponents. But if no candidate wins more than 50% of the vote - a prospect that looks increasingly likely - there will be a second-round run-off, which could end up being between Boric and Kast. Boric might have the upper hand in that scenario, but Kast could pick up more of Sichel’s voters. Although he has extreme right-wing views, Kast has been running an effective social media campaign on platforms like TikTok, designed to appeal to floating voters and young Chileans, to present himself as amiable and accessible. 

A Kast victory is not inconceivable and could impose serious strains on the Chilean political system. Uniquely among the seven candidates, Kast opposes redrafting the 1980 constitution approved and promulgated under the dictatorship of General Augusto Pinochet (1973-1990), a process which is already underway. This could put him on a potential collision course with the constituent convention (CC), which was elected earlier this year, and potentially with congress as well. 

State of emergency

President Piñera declared a state of emergency in the southern provinces of Biobío and Arauco (in Biobío region) and Malleco and Cautín (in La Araucanía region) on 12 October in response to ongoing violent protests by groups within the Mapuche indigenous community. The state of emergency will be in place for 15 days after which it could be extended but only with congressional approval. Piñera said it was necessary “to confront terrorism, drug trafficking, and organised crime which has taken root in those regions”. Elisa Loncón, the Mapuche president of the constituent convention (CC), said there was a risk that the state of emergency could distract from efforts to find a political solution to Mapuche demands for recognition of their ancestral rights to land and self-determination.

*** GUYANA SIGNS BRIDGE DEAL WITH CHINA. On 25 May, Guyana and China signed a US$260m agreement for the construction of a new bridge over the Demerara River. The agreement has been 10 years in gestation. The new 2.65km four-lane, high-span bridge will replace the current 50-year-old floating structure and will allow the passage of large vessels. The Chinese joint venture that won the tender includes China Railway Construction Corporation (International) Ltd, China Railway Construction (Caribbean) Co Ltd, and China Railway Construction Bridge Engineering Bureau Group Co Ltd (China & Trinidad and Tobago).

*** SURINAME ASKS FOR BORDER HELP. Suriname has asked the Netherlands for help in policing the border with French Guiana for drugs and weapons smuggling. The request marks a renewal of cooperation between Suriname and the Netherlands following the change of government in 2020 when President Chandrikapersad Santokhi replaced former president Desi Bouterse, under whose 2010-2020 regime the relationship with the Netherlands had been cool. Santokhi paid a fence-mending visit to the Netherlands in September 2021 during which he said that the relationship had been “fully restored” and that Suriname was looking for “intensive cooperation” with the Netherlands.

“A meaningful step forward”. This was the response by The Netherlands’ ambassador to Central America, Christine Pirenne, to the announcement last month that two suspects had been arrested and a third might be extradited from the US in relation to the murder of four Dutch journalists in El Salvador during the 1980-1992 civil war. The breakthrough contrasts with more stops and starts in relation to efforts to seek justice for the El Mozote massacre, the worst atrocity to take place under the civil war.

Pirenne was responding to the announcement in mid-October that former defence minister José Guillermo García (1979-1982) and Colonel Francisco Antonio Morán, former head of the now defunct treasury police (Policia de Hacienda, PH), had been taken into custody. They are wanted in relation to the case which involves the murders of four Dutch journalists, Koos Koster, Jan Kuiper, Joop Willemsen and Hans ter Laag, who, as outlined in the 1993 report of the United Nations (UN) Truth Commission on El Salvador, went to El Salvador in 1982 to produce a televised report on the civil war for Dutch TV company IKON. When they tried to enter guerrilla-controlled territory on 17 March 1982, accompanied by five or six members of left-wing guerrilla Frente Farabundo Martí para la Liberación Nacional (FMLN), the journalists were ambushed and shot dead by government troops while only one FMLN member survived. According to a 27 October press release by the Dutch government, El Salvador will also ask the US to extradite another suspect, Colonel Mario Adalberto Reyes Mena, who commanded the unit that shot and killed the Dutch nationals.

Despite the murders occurring four decades ago, steps towards prosecution have only made significant ground within the last eight years. The Dutch government statement cites Pirenne as remarking that “until 2016, any kind of prosecution was practically impossible”. This is because “after the murder [sic] was characterised, in a 1993 UN report as a crime against humanity, the government declared a general amnesty. That meant that the perpetrators could not be prosecuted. In 2016, however, the amnesty was revoked.” This enabled local human rights groups, Fundación Comunicándonos and Asociación Salvadoreña de los Derechos Humanos (ASDEHU), to file a criminal suit on behalf of the victims and on 13 October María Mercedes Arguello, a judge in Chalatenango department ordered the arrest of García (who is also wanted in relation to the El Mozote case), Morán and Reyes.

More stops and starts over El Mozote

On 1 November a local court began hearing testimony from witnesses in the case of the El Mozote massacre, in which over 1,000 villagers suspected of sympathy with the FMLN were murdered by El Salvador’s armed forces in 1981. The hearing was the first in over a year. The delay was due to the controversial removal of Judge Jorge Guzmán from the case, which he opened in 2016, after the legislature, which is controlled by President Nayib Bukele’s Nuevas Ideas party, in September 2021, approved reforms to the judicial-career law which forced judges and prosecutors over the age of 60 into retirement [SSR-21-11]. Guzmán was 61 at the time. He had also repeatedly complained that Bukele had rejected his requests to access army documents regarding the El Mozote operation. After a long delay, the hearing finally got underway again with five witnesses a day giving testimony until 4 November. It was meant to recommence on 31 October but was briefly held up after the defence team of García, one of the 15 retired members of the military accused of committing crimes against humanity, appealed that he should be present for the case. García is in hospital under police guard in relation to the Dutch journalists’ case. The new presiding judge, Mirtala Portillo de Cruz, threw out the appeal.

Morales’ warning

Salvadorean lawyer David Morales, the lead prosecuting lawyer representing the victims of El Mozote, recently warned that the ongoing crackdown on gangs by the Bukele government [SSR-22-07] is “opening the door for human rights violations similar to those documented during the worst years of the Salvadorean war”. Morales’ comments were reported on 16 September by US human rights lobby group Washington Office on Latin America (Wola), which honoured him with its WOLA Human Rights Award, an annual award to honour organisations or individuals who work to protect human rights, democracy, and justice in Latin America. Morales was one of the first to condemn Bukele’s rejection of the request to access the army documents in relation to the El Mozote case.

HAITI | FAA extends flight ban. On 5 September the US Federal Aviation Administration (FAA) extended its ban on civil aviation flights into Haiti until 7 March 2026 in specified portions of Haiti’s airspace, citing “security forces’ continued inability to prevent attacks against aircraft in Port-au-Prince and the surrounding regions”.

The FAA first announced the ban on 12 November 2024 for 30 days following gang attacks targeting aircraft from US-based airlines JetBlue, Spirit Airlines, and American Airlines [WR-24-45], and has since extended it on various occasions.

According to the FAA, since the issuance of its last Notam (Notice to Airmen) publication in March 2025, there has been “at least one instance of likely Haitian foreign terrorist organizations’ (FTOs) directing small arms fire at low-flying aircraft” within the Notam prohibited area. Yet it notes that FTOs continue to have a limited presence in the rest of the country - specifically at Cap-Haïtien International Airport in Cap-Haïtien (Nord department) and at Antoine Simon International Airport in Les Cayes (Sud) - and no history of targeting aviation or airports in those regions. According to the same notice, within the last six months, Haitian FTOs “expanded their area of operations to control nearly 90% of Port-au-Prince and the immediately surrounding strategic routes and border areas”.

DOMINICAN REPUBLIC | Economic cooperation agreement with China. The Dominican government led by President Luis Abinader announced it had signed an economic cooperation agreement with China on 8 September to finance development projects in the country. According to the Dominican presidency, the economic accord is a US$40m non-reimbursable cooperation agreement to be invested in projects focused on emergency assistance and disaster response.

The presidency also announced the signing of a memorandum of understanding for granting scholarships to train Dominican public officials whereby the Chinese government will provide 450 scholarships for Dominican public officials to strengthen their technical and institutional capacity in areas such as agriculture, construction, transport, renewable energy, and healthcare.

This is the latest sign of strengthening ties since the two countries established diplomatic relations in 2018 after the Dominican Republic severed ties with Taiwan.

Mexico’s central bank (Banxico) has signalled that a prolonged pause in interest rate movements lies ahead after leaving rates on hold at 6.50% at its 25 June meeting, as forecast by markets. This appears to put a firm end to a two-year easing cycle, which has been interspersed with pauses, amid concerns over mixed inflation trends and a cooling economy.

After cutting rates by 25 basis points at its previous meeting in May, Banxico argued that it was appropriate to “conclude the cycle” that began in March 2024 when interest rates stood at a high of 11.25% – with rates having stayed put for a full year previously to combat inflation triggered by the pandemic – leaving no room for surprise when the board voted unanimously to hold rates at their lowest level since 2022.

The fall in headline inflation to 3.55% year-on-year in the first half of June placed it squarely within Banxico’s tolerance band of 2-4%, while the central bank underlined that “significant downside risks to economic activity persist”. “It will be appropriate to maintain the reference rate at its current level,” Banxico said in a statement, as it shifts into wait-and-see mode, with only minor changes to Banxico’s headline and core inflation forecasts through 2027.

“There is no predefined duration,” the Banxico governor, Victoria Rodríguez Ceja, said of the pause in lowering interest rates in an interview with Bloomberg on 29 June. “This stance is appropriate for addressing the challenges of the macroeconomic environment and also allows us to assess the implications of recent inflation trends for our forecasts,” she added, as Banxico weighs the impact of factors including the conflict in the Middle East on global energy prices.

Despite the US Federal Reserve signalling that it is shifting towards a more hawkish monetary policy stance after intermittently lowering interest rates for over two years until December 2025, and continued underlying price pressures in Mexico, analysts expect Banxico to wait until the close of 2026 or possibly early 2027 before starting to raise rates again.

Analysts at London-based consultancy Capital Economics wrote in a note to clients: “We expect interest rates to remain on hold at 6.50% over the coming meetings. That said, we think the balance of risks will tilt towards renewed tightening towards the end of the year, reflecting persistent inflation pressures and the prospect of Fed rate hikes.”

Similarly, Alberto Ramos, an economist at Goldman Sachs, argued that there is “no room for near-term additional rate cuts”, while cautioning that headline inflation expectations remain significantly above the 3.0% target, as well as the central bank’s “very optimistic” forecasts of 3.5% for end-2026, and 3.0% for end-2027. Core inflation expectations are also well above the central bank’s forecasts, he added. 

Ramos explained in a note to clients: “A combination of still unanchored inflation expectations, lingering domestic and external risks and uncertainty, cost-push pressures (large double-digit minimum wage increase), tight Mexico-US interest rate differential, uncertain outlook for the [US] rate path, and the fact that the policy rate is already well in the neutral range requires a very cautious calibration of monetary policy.”

UK-based oil major Shell and Trinidad’s state-owned National Gas Company (NGC) have failed to reach agreement on the development of the Aphrodite offshore gas concession.

Shell had taken a positive final investment decision (FID) on Aphrodite last year, but according to a 24 August report by Reuters, the two parties were unable to agree a price for the project’s expected output of 100m cubic feet per day.

NGC acts as the country’s gas aggregator, buying upstream natural gas to supply downstream users such as the giant Atlantic LNG (liquefied natural gas) plant or various petrochemical operators. In this case Shell would be both an upstream producer and a downstream user (it holds a 45% stake in Atlantic LNG). But sources in the company told Reuters it had released a jack-up rig that would have been required to drill the first Aphrodite wells. “Shell is in ongoing negotiations and confirms the initial rig slot for Aphrodite has been released,” the company said in a statement to Reuters.

Trinidad is the largest LNG exporter in Latin America, but it has been struggling to respond to falling gas production from its mature fields. Current strategy is to boost domestic output and pursue joint development with Venezuela. The most important current development is Shell’s Manatee field, the Trinidadian portion of the cross-border Loran-Manatee gas accumulation that extends into Venezuela. On the Trinidadian side alone, it has reserves of 2.7 trillion cubic feet (tcf) and first gas is expected to flow next year. Other fields would also allow Venezuelan gas to be pumped by pipeline to Trinidad for processing there. Shell also intends to develop the Dragon field in Venezuela with estimated reserves of 4.5tcf and in June signed a deal to develop phase 1 of the offshore Loran gas field in Venezuela, reportedly containing around 1.7tcf. In August a consortium led by BP was awarded a licence to develop phase 2 of the Loran field. Phase 2 reportedly contains up to 4.0tcf. Also last month in Trinidad, NGC bought a 20% stake in the Manakin portion of the cross-border Manakin-Cocuina field. This field is estimated to hold 1tcf and its output will be divided, with 70% going to Atlantic LNG as feedstock and 30% to petrochemical producers.

Trinidad’s strategy includes bringing in more cross-border Venezuelan gas; preserving Atlantic LNG as a centre for the gas economy; and giving NGC a bigger upstream role. Perhaps most importantly, this involves moving away from a purely export-focused LNG operation towards developing Trinidad as a gas and petrochemicals hub serving the domestic economy. Some analysts argue that the failure to agree a commercial gas price for Aphrodite raises questions over pricing throughout Trinidad’s gas chain. Upstream producers will want higher prices, while downstream producers will seek to keep them low. The presence of companies operating in both upstream and downstream segments will complicate negotiations.

Shared natural gas fields

Venezuela and Trinidad and Tobago share three cross-border natural gas fields – Loran/Manatee, Dragon/Hibiscus, and Manakin/Cocuina.

The Venezuela factor

Two developments are creating a window of opportunity for Trinidad and Tobago. In January US-orchestrated regime change in Venezuela removed former president Nicolás Maduro (2013-2026), bringing in Delcy Rodríguez, who is committed to more market-friendly policies to attract new oil and gas investment. Then, in August, the US administration led by President Donald Trump announced a controversial deal giving his government control of some 65bn barrels of proven reserves across 17 fields (see our sister publication, the Latin American Weekly Report for more details on this).

President Dilma Rousseff this week toasted her ministers and coalition allies at a cocktail reception held at the Alvorada presidential palace to mark six months in office for the new government. Rousseff moved to soothe over the recent rows in the coalition, hoping to put her supporters at ease before they head off for their two-week congressional recess.

Opinion in Brazil seems very divided over the novice president’s performance to date. The leading conservative press media openly adores this former radical left-wing-guerrilla, praising her technocratic and firmly businesslike approach to the running of the country (in stark contrast to their regular scathing attacks on her predecessor and mentor Lula da Silva [2002-2010]), yet the political mood in Brasília is most unsettled, and even sour in some cases.

While these past six months have been a steep learning curve for the president - beginning with major floods in Rio and ending with the second ministerial crisis in as many months with costly battles over the Belo Monte dam, the forestry code and the official secrecy of state documents in between - it is also the case that Rousseff has won the important battles that mattered the most to the executive, notably a compromise deal on the minimum wage and a US$30bn budget cut. Her administration seems to need a few PR lessons though. Most of Rousseff’s social policy announcements - and there have been several, including selected free medications, improvements to women’s health care, a pledge to eradicate extreme poverty and further changes to the national education plan - have been completely overshadowed by the political shenanigans in congress. And unlike Lula, who managed to take credit for everything and blame for nothing, Rousseff’s hands-on style puts her at the centre of every crisis.

Arguably, most of Rousseff’s troubles to date have been a direct legacy of the way Lula ran his eight-year administration. In keeping with his lengthy trade union experience, he dealt with coalition politics by wheeling and dealing behind the scenes, which further entrenched an already cosy, clientelistic system. Rousseff wants to sweep this system away, which has angered politicians long used to the practice. The unhappy coalition, stung by the president’s ‘top down’ management style, has yet to bed down.

The president is taking advantage of each ministerial crisis to spring clean, in a brave effort to drag Brasília’s cosy backroom politics into the 21^st Century. One fawning commentator in the daily O Estado de São Paulo praised her concern “with the State, she has values of nationalism and democracy that differ to her allies… Dilma will run her government centred on the idea of ‘Brazil the State’ and not ‘Brazil an opportunity for politicians’.

Some political scientists suggest that Rousseff may be borrowing from neighbouring Chile, where in the 20 years of the centre-left Concertación alliance, the government was staffed by serious minded, well-educated and largely apolitical technocrats intent on modernising the Chilean State. This proved fairly successful but at the end of the day politics came back to bite, as the electorate began to feel disconnected from a rather detached government apparatus and demanded more political representation and accountability, and a more equitable share of Chile’s economic miracle.

Equally, Rousseff’s efforts (in the vastly more complex Brazil) are politically costly, and risk seriously handicapping her government agenda, with some key proposals, including a business-oriented tax reform, stuck in congress. Despite its enviable legislative majority, the government is having to work to shepherd its draft 2012 budget law through congress before the coming recess (18 July-1 August) and Rousseff will likely have to bow to further demands for the release of frozen slush funds in return. Rousseff, who has recently hinted at second term ambitions, thus needs to choose her battles carefully. If she is serious about re-election in 2014 and the economy slows down, she may have to back down and revert to the old order again, simply to keep her government projects moving.

MÉXICO | Boom en el sector de las telecomunicaciones. La comisión federal de las telecomunicaciones de México (Cofetel) reveló el 25 de febrero que el sector había crecido un 13,6% en el 2012, comparado con el año anterior, lo que fue “el más alto crecimiento del sector en los últimos cuatro años”.

El sector de las telecomunicaciones de México, que actualmente está dominado por sólo un puñado de grandes empresas, ha sido identificado desde hace mucho tiempo como un potencialmente importante motor del crecimiento económico toda vez que las autoridades puedan exitosamente introducir mayor competencia en el sector. El Presidente Enrique Peña Nieto ha dicho que su gobierno buscará promover una reforma en el sector de las telecomunicaciones como parte de sus ambiciosos planes de reformas estructurales para promover el desarrollo económico de México. Las cifras presentadas por Cofetel proveen más incentivos para lograr este cometido.

En una declaración, la Cofetel señalo que el crecimiento en el sector, que fue liderado por los servicios de TV satelitales (que se incrementaron un 22,8%, con 6,8m de suscripciones nuevas), fue mucho más alto que el de la economía en general que, de acuerdo con cifras oficiales, tuvo un crecimiento del 3,9% el año pasado.

Concentrándose en la expansión de los servicios de teléfonos móviles, Cofetel destaca que el número de suscriptores llegó a los 100,6m en el trimestre final del año pasado, lo que significa que ahora hay una tasa de penetración de este servicio del 85,7% por cada 100 habitantes. Significativamente, Cofetel apunta que mientras este sub-sector experimentó una caída en sus ganancias del 19,7% como resultado de la orden dada por la Cofetel al principal proveedor de telefonía móvil de México, América Móvil, de reducir sus tasas de conexión –después de que la comisión federal de la competencia (CFC) hallara el año pasado que estas tasas eran muy altas– estas pérdidas fueron compensadas por un aumento en los ingresos como resultado de un mayor uso de los servicios de texto y de internet móvil de parte de los clientes.

MÉXICO | De receptor de IED a proveedor de IED. Firmas mexicanas han invertido casi US$25,6mm para adquirir firmas extranjeras en el 2012, casi el doble de los US$12,66mm de inversión extranjera directa (IED) que recibió el país el año pasado, reveló el 24 de febrero el banco central de México (Banxico). La difusión de cifras oficiales, que mostraron que las IED hacia México habían caído un 34,9% en el 2012, habían causado cierta preocupación de que, a pesar del sólido desempeño económico del país en años recientes y las positivas perspectivas futuras, los inversionistas extranjeros no están tan atraídos por el país como se esperaba que debía ser. Sin embargo, analizando las cifras del flujo de salida de capital, los analistas locales han hallado que esto podría ser parte de un cambio más sistemático que, por primera vez ha llevado a México de ser un receptor neto de IED a ser un importante proveedor de IED a otros países.

Aún con todo lo positivo que esto podría parecer, sólo ha profundizado las preocupaciones de los analistas locales. Como señala Ernesto Piedras de Competitive Intelligence Unit: “el capital financiero es un recurso escaso en México [...] y México no está en posición de convertirse en un exportador neto de capital”. Piedras explicó que México aún necesita altos niveles de inversión a fin de desarrollar su infraestructura y pasar de ser un país en desarrollo, a un país desarrollado. Piedras dijo que es “lamentable que salga más dinero del país del que ingresa”.

Sin Embargo, parece que existe una tendencia creciente en las grandes y exitosas firmas mexicanas tales como aquellas lideradas por Carlos Slim, el hombre más rico del mundo, de buscar oportunidades de inversión en el exterior, adquiriendo más y más firmas extranjeras, e invirtiendo grandes montos de capital en el proceso. El economista mexicano Ramiro Tovar, ha señalado que mientras la expansión extranjera de firmas mexicanas es “un signo positivo”, también sería importante que algunos de estos grandes inversionistas mexicanos tengan una “mirada más hacia adentro” y que busquen oportunidades de inversión en el país, que pueden ser tan atractivas como en otras partes.

Quizá un claro ejemplo de esto provino el 20 de febrero, cuando Solartec, una firma mexicana fabricante de paneles solares, anunció que había adquirido la firma Photovoltech de Bélgica por US$63m, el primer acuerdo internacional del año de una firma mexicana. El vocero de Solartec, Gustavo Tomé, dijo que el objetivo de la compra es convertir a Solartec en uno de los “actores clave” en el mercado global de la energía solar permitiéndole a la empresa exportar productos a EU y a China. Sin embargo, un día más tarde el 21 de febrero, expertos reunidos en un foro de energía renovable de la Iniciativa Mexicana para las Energías Renovables (Imere) dijeron que invirtiendo en el desarrollo de su capacidad de producción de energía renovable, que sólo llega al 17% de todo el consumo, México podría estimular el crecimiento del PIB un 2% al año hasta el 2018.

• Robot pescador

El 26 de febrero, el Instituto Nacional de Pesca (Inapesca) de México reveló que comenzaría a utilizar un robot sumergible equipado con una cámara de video, para realizar un sondeo de los recursos marinos de pesca en el Golfo de México. Una declaración de Inapesca expresa que el proyecto, que será lanzado por primera vez fuera de las costas de Campeche en marzo, “permitirá a nuestros especialistas evaluar con más precisión  la abundancia y la biomasa de especies como pulpos, camarones y equinodermos [...] para poder determinar mejores estrategias sustentables”. La declaración agrega que la compra del ‘robot cámara’ de US$78.125 fue posible gracias al apoyo de la Fundación Produce, una organización de promoción agrícola. Campeche produce unas 43.000 toneladas de pescados y mariscos al año.

In recent weeks there have been clashes in the eastern department of Santa Cruz between supporters of President Evo Morales and those aligned with his long-time opponent, departmental governor, Rubén Costas. The familiar scenes in what was previously a bastion of opposition to Morales were triggered by a traditional cause of tensions – efforts to approve the region’s autonomy statute, a core requirement of the 2009 plurinational constitution.

Three incidents of violence have taken place over the last two weeks in the municipalities of Warnes, Montero and Portachuelo, amid efforts by local government officials to present the department’s autonomy statute to local inhabitants. The 2010 autonomy law, which fleshes out the system of decentralisation as envisaged by the new constitution, states that statutes must be approved by a two-thirds vote of the departmental assemblies of each of the nine regions and then submitted to the plurinational constitutional court (TCP). So far only Pando and La Paz have submitted their statutes to the TCP for consideration – in October 2012 and last month, respectively.

Santa Cruz, where tensions between “cambas” (mestizo Cruceños) and “collas” (the Andean indigenous) were particularly pronounced in the past, notably led an autonomy drive in the eastern opposition ‘Media Luna’ area (which also includes Tarija, Pando and Beni) in 2008, ahead of the new constitution. The document currently up for discussion is the statute approved in a vote which took place in May 2008, in defiance of an electoral court ruling [WR-08-18] – a clear attempt at the time by the Cruceño lobby led by Costas to pre-empt the government’s efforts to pass the constitution.

Since winning re-election in December 2009, Morales has made gestures towards Costas and the Cruceño agricultural elite, no doubt motivated by the region’s economic clout, which at times have proven controversial among his left-wing supporters. Recent examples include a January 2013 law (337) to support food production and forest restitution [WR-13-13] and a June 2011 agricultural development law allowing for the extended use of Genetically Modified (GM) seeds in the country. However, with the Morales government quick to hold Costas responsible for the latest violence, the revival of these familiar tensions is casting doubt on this recent rapprochement. Morales’ supporters reiterate concerns made at the time of the May autonomy vote - that the statute, which among other things would give Santa Cruz the ability to create its own police force and negotiate its own royalty agreements with energy companies in order to retain a higher proportion of the region’s natural gas revenues, is separatist. Meanwhile a further source of potential tension between regional and national institutions is the fact that a study carried out by a consultant for the departmental assembly, completed in November 2012, found that 46 of the 168 articles of the autonomy statute were unconstitutional.

•  Opposition alliance rejected

Rubén Costas received a further setback when, on 1 August, Bolivia’s supreme electoral court (TSE) refused to register Movimiento Demócrata Social (MDS), the opposition’s latest attempt at forming an alliance ahead of the 2014 presidential election. First launched last April, the MDS comprises Costas’ political party Verdad y Democracia Social (Verdes) and two other self-defined citizen groupings, Libertad y Democracia Renovadora (Líder), a Chuquisaca-based organisation, and Consenso Popular, headed up by a former senate president, Oscar Ortiz (2008-2010), also based in Santa Cruz. While opposition leaders like Costas slammed the ruling as the latest evidence of the court’s lack of independence - a longstanding opposition complaint - TSE president, Wilma Velazco Aguilar, insisted it was in line with the 1999 Law of Political Parties which does not permit the “fusion” of citizen groups.

• Census

On 31 July Planning & Development Minister Viviana Caro Hinojosa and the director of the national statistics institute (INE), Ricardo Laruta, presented the final results of the 2012 census, which are proving controversial. The latest figures contradict the preliminary findings, unveiled at the start of the year, which showed Santa Cruz had overtaken La Paz in terms of population size: the final results show La Paz has 2.71m inhabitants (of the total national population of 10.03m) while Santa Cruz has 2.66m. The final results, which have since been endorsed by international institutions like the World Bank and UN, also raised controversy by revealing that only 41% of the population of adults (over 15) identify as indigenous, down from 62% in the last (2001) census. This has since triggered a debate as to the reasons for the difference.

Rafael Ramírez, el ministro de energía de largo servicio y presidente de la compañía estatal Petróleos de Venezuela (Pdvsa), y desde el año pasado también vicepresidente para asuntos económicos, anunció esta semana otra nueva ‘reforma’ del oficialmente controlado régimen de cambio de divisas. Aunque no ha dicho mucho, el gobierno busca avanzar hacia más de un régimen formalizado de tasa de cambio dual, con una tasa para las importaciones de bienes designados como esenciales, y otra para todas las demás importaciones.

Ramírez anunció que las aerolíneas, venezolanos que viajan al exterior, y extranjeros enviando remesas a su país deberán desde ahora en adelante usar la agencia de cambio de divisas secundaria, el Sistema Complementario de Divisas (Sicad). Aunque el banco central no publica la tasa promedio ofrecida por Sicad en su subasta semanal de dólares, generalmente se calcula que es de alrededor de BF11/US$1. Ramírez confirmó más o menos esto al revelar que la tasa promedio en la última subasta fue de BF11,36/US$1.

El ministro parecía indicar que a las aerolíneas, los turistas venezolanos que se dirigen al exterior, y remitentes de remesas ahora se les ofrecería esta tasa específicamente, pero él no fue del todo claro si esta sería ahora la tasa fijada para todos los otros importadores que toman parte en las subastas semanales del Sicad, o si la tasa continuaría siendo dictada por la demanda. Sin embargo, Ramírez sí dijo que el banco central elevaría al doble la magnitud de las subastas semanales del Sicad hasta US$200m.

Mientras tanto, la tasa preferencial (oficial) de BF6,3/US$1 está ahora efectivamente reservada para bienes prioritarios como medicinas y alimentos esenciales, que en muchos casos son importados por el gobierno mismo y/o agencias del Estado. Los inversionistas extranjeros (también los del sector petrolero) incluso ahora deberán utilizar la tasa del Sicad  (permitiendo a las compañías extranjeras cargar los gastos a la tasa menor de Sicad lo que reducirá el costo de invertir en Venezuela). La principal agencia de cambio de divisas, la Comisión de Administración de Divisas (Cadivi), está siendo abolida, con el nuevo centro nacional para el comercio exterior, liderado por el ministro de comercio, Alejandro Fleming, ahora administrando estas importaciones esenciales.

En otras palabras, el gobierno (y funcionarios del gobierno y/o asociados) tendrán acceso preferencial a la tasa preferencial. Por supuesto, no hay nada que pueda frenar a funcionarios inescrupulosos de vender los bienes esenciales que ellos adquieren a la tasa preferencial por una lucrativa ganancia en el mercado negro, donde los bienes escasos ahora están siendo comercializados en hasta BF75,85/US$1 en la frontera colombiana, de acuerdo con sitios web que publican la (ilegal) tasa del mercado negro.

Más notablemente, Ramírez dijo que el gobierno “revisaría” las tasas de sus deudas con las compañías del sector privado. Esto hará sonar las campanas de alarma. De acuerdo con la asociación internacional de transporte aéreo (IATA, siglas en inglés), las aerolíneas extranjeras tienen el equivalente de unos US$3,3mm atrapados  en Venezuela (medidos a la tasa oficial) debido a los controles de cambio. Ramírez sugirió que el gobierno podría ofrecerles combustible (petróleo/gas) o bonos como forma de pago.

La línea área ecuatoriana, Tame, suspendió esta semana por tiempo indefinido sus siete vuelos semanales desde Caracas debido a los retrasos en los pagos del banco central de Venezuela, un vocero de la compañía dijo a la agencia de noticias Bloomberg que también notaron que los retrasos en los pagos habían forzado  la aerolínea española, Air Europa, a suspender las ventas en enero. En otros lados Empresas Polar, la mayor compañía de alimentos de Venezuela, se ha quejado de que no puede importar suficiente materia prima debido a los retrasos de las autoridades en liberar los dólares asignados para sus proveedores. Las reservas extranjeras eran de US$21,5mm el 21 de enero, según datos del banco central, cayendo de US$28,5mm hace un año.

• Llamando pato al pato

El consenso general es que lo que está teniendo lugar es una devaluación sigilosa. “Se parece a una devaluación, grazna como una devaluación, lastima como una devaluación: es una devaluación”, fue un mensaje en Twitter en respuesta al anuncio de Ramírez, citado por las agencia de noticias Reuters.