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Following the unexpected resignation from Uruguay’s cabinet of Ernesto Talvi [WR-20-27], one of the leaders of the Partido Colorado (PC), the right-of-centre party has reiterated its support for the government led by President Luis Alberto Lacalle Pou. This is a vote of confidence in Lacalle Pou’s leadership by one of the main parties in the ‘multi-colour coalition’ that props up his government, dispelling concerns that the young Lacalle Pou administration could start facing governability problems.

Talvi was not only the PC’s presidential candidate in last year’s elections but also considered to be one of the party’s young rising stars. His decision to quit the post of foreign minister amid rumours of differences with the president sparked speculation that Talvi could turn on Lacalle Pou and seek to undermine the PC’s support for his administration. But weeks after stepping down, on 26 July, Talvi, an elected senator, released a letter in which he announced his decision to retire from politics altogether. Meanwhile, on 27 July, the PC’s executive committee issued a statement underscoring its support for the Lacalle Pou government.

Emphasising that Talvi’s decision to quit the government was “very personal”, the statement calls for the party to unite behind the government and ensure the stability of the multi-colour coalition. “It is undeniable that [Talvi’s] departure forces all Colorados to redouble efforts to affirm party unity to continue upholding the government coalition… and promote the values of social justice, political freedom, and republican secularity that are synonymous with the Partido Colorado,” reads the statement by the PC party leadership. The statement is clearly intended to offer assurances to the Lacalle Pou administration but also to send a message to those in Talvi’s Ciudadanos party faction to avoid sowing divisions.

Notably, the statement was issued even though Lacalle Pou chose a career diplomat as Talvi’s replacement and not another PC figure, which some feared could upset the party. However, senator and former president, Julio María Sanguinetti (1985-1990; 1995-2000), who following Talvi’s decision to abandon political life has resurfaced as the PC figurehead, publicly expressed satisfaction with the way in which the government and the ruling coalition has been performing since the start of the presidential term.

• Sanguinetti

Former president Sanguinetti’s leadership within the PC was challenged by the up-and-coming Talvi, who succeeded in attracting younger voters to the PC with his promise of party renewal. This helped Talvi beat Sanguinetti and a host of other candidates in the PC presidential primaries last year. Sanguinetti rowed behind Talvi during the presidential campaign, and supported his decision to endorse Lacalle Pou in a second round and join the multi-colour coalition. But frictions between the two emerged in recent weeks after Talvi refused to appoint Sanguinetti’s son to a government post. With Talvi out of the picture, Sanguinetti is once again seen as the most influential figure in the PC and will now play a key role in the party’s relations with the government.

“The coalition is undoubtedly working efficiently and effectively…in these five months it has successfully dealt with the [coronavirus] pandemic…and has approved the Ley de Urgente Consideración,” Sanguinetti said in allusion to the wide-ranging reform initiative tabled by the Lacalle Pou administration and approved by congress at the start of the month [WR-20-27]. Sanguinetti added that, in his view, the coalition is “based on commitments made in the representation of parties”, as opposed to commitments made by individual political figures.

“I don’t base myself on any survey. [Public opinion] is what you see on the streets. It’s us here with the people,” President Jair Bolsonaro said upon arriving in Aracaju, the capital of the north-eastern state of Sergipe, on 17 August. On his way to inaugurate a privately owned thermoelectric plant, Bolsonaro was greeted by a cheering crowd at Aracaju airport. This warm welcome reinforced the findings of a public opinion survey carried out last week by Datafolha, one of Brazil’s main pollsters. Bolsonaro may be dismissive of surveys, but Datafolha’s opinion poll found that his support was at its highest level since he took office in January 2019.

Surveying 2,065 people by phone on 11 and 12 August, with a two percentage point margin of error, Datafolha found that 37% of Brazilians have a positive opinion of President Bolsonaro – branding his government ‘good’ or ‘very good’; 27% consider his government to be ‘regular’, while 34% have a negative opinion (‘bad’ or ‘very bad’). This is the first time since April 2019, three months into his four-year term, that Bolsonaro’s approval levels have risen above his disapproval levels.

Throughout Bolsonaro’s first year in office, public opinion on the president was largely split equally between positive, indifferent, and negative (bar a spike in rejection and a concomitant dip in support following the uproar over his response to fires in the Amazon last August). Since the emergence of the coronavirus (Covid-19) pandemic, frequent Datafolha polls had shown that disapproval of Bolsonaro had been growing, reaching 44% in late June, while approval ratings remained stable at 32% and ‘regular’ opinions had fallen to 23%. The four-percentage point climb in support and ten-percentage point drop in rejection in the seven weeks to early August therefore represent a sharp reversal in the trend of growing dissatisfaction with the president. 

That Bolsonaro is growing in popularity may seem counterintuitive, particularly from an international perspective, given his government’s mismanagement of the pandemic, his disinterest with surging fires in the Amazon, and the rumours of military intervention underpinning the institutional tensions that dominated the country’s politics in May and June. But Datafolha’s findings have been echoed by other public opinion surveys and show that Bolsonaro has been successful in his recent attempts to regain some public ground, distancing himself from the death and devastation caused by Covid-19 and toning down his more radical and inflammatory rhetoric.

‘Jairzinho Paz e Amor’

The newly subdued Bolsonaro, who refrains from belligerent altercations with representatives from the other branches of government and largely contains his dismissive comments on the coronavirus to his weekly Facebook Live addresses, has been dubbed ‘Jairzinho Paz e Amor’. The change appeared to have been prompted by the arrest of Fabrício Queiroz in late June [WR-20-25] – a Bolsonaro family friend, Queiroz is a key figure in a suspected corruption racket implicating the president’s eldest son, Senator Flávio Bolsonaro, and his arrest was understood to have shaken the president and his family.

One aspect of ‘Jairzinho Paz e Amor’ has been the executive’s overt rapprochement with the ‘centrão’ bloc in congress, a loose group of parties with flexible ideology which has traditionally propped up successive governments in the legislature (and which recently fragmented, with the departure of the Movimento Democrático Brasileiro [MDB] and the Democratas [DEM] earlier in July [WR-20-30]). The latest sign of the government’s increased ties with the centrão came on 12 August, when Ricardo Barros, a deputy for Progressistas (PP – a key centrão party), announced that he had accepted Bolsonaro’s invitation to be the new government leader in the chamber of deputies. He replaces ‘Major Vitor Hugo’ de Araújo Almeida, a long-standing Bolsonaro ally and member of the Partido Social Liberal (PSL, with whom Bolsonaro won election but has since left), in this role.

This alliance with the centrão is understood to be driving Bolsonaro’s current criss-crossing of the country, as he emulates his predecessors by travelling to different states to inaugurate completed infrastructure projects in a bid to shore up support – as he was doing in Sergipe earlier this week. According to national daily Folha de São Paulo, Bolsonaro has taken 16 official domestic trips in 2020 up until 18 August, the majority of which were in July and August alone. Many of these visits have been to states in the Nordeste region which traditionally supports the left-wing Partido dos Trabalhadores (PT) and where support for Bolsonaro has tended to be lower.

The consensus is that, despite the still distant 2022 presidential elections and his own assurances to the contrary, Bolsonaro is focused on his re-election prospects and doing what is necessary to consolidate them – currently, this means speaking to an audience beyond his radical support base and striking political alliances with parties he had once sworn to steer clear of. Having recently said that his prospective party in the making, Aliança pelo Brasil, would be ready in time for 2022 [WR-20-29], Bolsonaro backtracked last week. “It’s difficult to form a party. […] I can’t invest myself 100% in the Aliança…I need to look at other parties,” he said on 13 August. He added that he had already received invitations to join three different parties, including one from the Partido Trabalhista Brasileiro (PTB), a member of the centrão.

Economic considerations

With 47% of Brazilians believing that Bolsonaro is not responsible in any way for the country’s now more than 111,000 Covid-19 victims, the president’s attempts to absolve himself of any responsibility for the pandemic’s impact appear to have borne fruit [WR-20-32] and helped shore up support, along with his more subdued political stance. But an important element in explaining his newfound popularity is the government’s distribution of an emergency basic income to help economically vulnerable Brazilians during the pandemic, and which has reached roughly a third of the population.

The drop in Bolsonaro’s rejection rates was most significantly observed amongst respondents from the Nordeste, those who earn up to two minimum wages, and those who completed only primary education – all segments of the population which will have benefited from the R$600 (US$112) monthly handout implemented in April. This emergency income has reportedly saved 23.5m Brazilians from falling into poverty, and there are now discussions to extend it beyond September, or even make it permanent, possibly by incorporating it into a wider social benefit programme.

While key to boosting Bolsonaro’s support, the government’s largesse is proving a contentious point in political circles. With the executive due to present the 2021 budget to congress by the end of the month, there are reports that some government ministers are requesting more resources, and suggesting that a constitutional spending cap, which has been bypassed for pandemic-related costs but otherwise prevents the government from increasing expenses from one year to the next, could be disregarded. Such a suggestion causes discomfort in the financial markets and is strongly opposed by Economy Minister Paulo Guedes – whose adherence to fiscal rigour is not wholeheartedly shared by Bolsonaro, and whose influence in government has been brought into question amid a recent spate of resignations of key officials in the economy ministry. 

Support for institutions

As negative opinions of President Bolsonaro have fallen, so too negative views of the institutions he often clashes with have risen. According to Datafolha, those with a negative view of the performance of members of congress have risen from 32% in May to 37% in August (positive opinion fell by one percentage point to 17%). Magistrates from the supreme court (STF) are viewed positively by 27% (down from 30% in May) and negatively by 29% (up from 26%).

‘Operação Alem Mar’

Brazil’s federal police (PF) launched ‘Operation beyond the sea’ on 18 August, part of a large-scale investigation into several transnational drug-trafficking networks that worked together to smuggle cocaine to Europe from Brazilian ports, notably from the port of Natal in the state of Rio Grande do Norte. Sealed investigations had been taking place since 2018, the PF says, the result of collaboration with the United Kingdom’s National Crime Agency (NCA). The government notes that 12 people were arrested, including a wanted drug trafficker, and 11 tonnes of cocaine were seized in Brazil and Europe during the sealed investigations. The 18 August operation involved 630 police officers carrying out 139 search warrants and 50 arrest warrants across 13 states.

ARGENTINA | Debt deal. President Alberto Fernández concluded his four-day European tour on 13 May after holding a meeting with the managing director of the International Monetary Fund (IMF), Kristalina Georgieva, in Rome. During his tour Fernández received the support of the leaders of Portugal, Spain, France, and Italy for Argentina’s efforts to renegotiate its debt with the IMF. This generated expectation that progress could be made during Fernández’s first in-person meeting with Georgieva. Fernández said that his tour had been “very productive” and talks with Georgieva “constructive”. However, he gave no indication of whether an agreement could be reached this month, which would allow Argentina to restructure its debt with the Paris Club which it must repay US$2.4bn before the end of May or face default.

CHILE | Economic recovery. Chile’s economy grew by 0.3% year-on-year in the first quarter of 2021, the central bank reported this week. The central bank report provided a crumb of comfort for the government led by President Sebastián Piñera after a difficult week in which it suffered a historic electoral setback.

Chile’s GDP growth was driven by domestic demand, which expanded by 6.7% year-on-year. Exports, however, were down by 5.1% compared with a year earlier. This owed primarily to the 2.1% decline in copper production, which provides 10% of Chile’s GDP.

Colombia’s former president Álvaro Uribe (2002-2010), a champion of the right, has benefitted from a court ruling throwing out an earlier conviction and associated 12-year house arrest sentence for bribery, fraud and witness tampering. If the decision stands (one further appeal is still possible), Uribe will almost certainly play a critical role in the 2026 presidential elections.

The three-judge Bogotá supreme tribunal overruled the original conviction, citing “structural deficiencies”. It added that the evidence presented to the original judge had not been sufficiently strong or legally valid to merit the conviction. The original case was initiated 13 years ago, alleging that Uribe had bribed imprisoned paramilitaries to discredit claims that he had ties to their organisations. The paramilitaries have been accused of responsibility for up to half the 450,000 people killed in Colombia’s long-running internal conflict in the three decades to 2018. 

Uribe is often seen as a powerful but divisive figure. His supporters on the right credit him with strengthening democratic institutions and using the military to roll back territorial gains made by left-wing rebels during his term. They also believe he has been the victim of legal persecution by radical judges. For them, the appeals court decision vindicates Uribe’s conduct and makes him a likely star player in the upcoming 2026 elections. His opponents, usually on the left of the political spectrum, tend to focus on the darker side of his political record, accusing him of condoning human rights violations and of involvement in the ‘false positives’ scandal (the killing of civilians to pass them off as dead guerrillas).

Senator Iván Cepeda, who filed the original court case against Uribe (and who is a possible presidential candidate for the ruling left-wing coalition next year), said he would appeal to the supreme court. President Gustavo Petro also weighed in, saying the tribunal’s decision had been intended to “cover up the history of paramilitary governance in Colombia”. He also accused US President Donald Trump of “seeking sanctions” against him with the help of those who once “aided paramilitarism” in Colombia. US Secretary of State Marco Rubio claimed that in the original verdict Uribe had been a victim of the “weaponisation” of Colombian judges. Now, however, “justice has prevailed … after years of the political witch hunt against him and his family”.

• Cepeda to appeal

“We will continue to work so the truth comes out in this case as well as others in which Álvaro Uribe is responsible for very serious acts. We will persevere,” Senator Iván Cepeda said, while promising to file an appeal at the supreme court.

The court decision means that Uribe’s ban on seeking election to public office has been lifted. He cannot run for the presidency because of constitutional term limits, but he is believed to be looking at two possible alternatives. One is to run for the senate for his right-wing party Centro Democrático (CD). If he does so using a closed candidate list, a coattail effect could boost CD’s overall representation, nearly doubling its current 13 senators in the 108-seat upper house. The other option is to run as vice president on the CD ticket, where his strong name recognition would also bring in the votes.

President Petro for his part, seems to have sensed that Colombian politics is picking up pace: he has called on his supporters to rally in Bogotá on 24 October to gather signatures to back elections for a constituent assembly. Petro has been pushing for constitutional reform but lacks the necessary two-thirds support in congress. Seeking reform through a constituent assembly route, with doubts over its legality, only seven months left until the elections, and an energised and hostile opposition, is a risky strategy, but may be Petro’s preferred way of rallying his supporters.

MEXICO | Private sector reduces growth forecast. On 1 June, Mexico’s central bank (Banxico) published its monthly survey of private sector economists, which showed a decrease in growth and inflation forecasts for 2026. The median GDP growth forecast for 2026 was 1.10%, down from 1.38% in the previous survey in April. The median GDP forecast for 2027 was also down slightly at 1.80%, from 1.88% the previous month. Regarding inflation, the median forecast for 2026 was 4.35%, down from a forecast of 4.38% the previous month. The median inflation forecast for 2027 saw a slight increase from 3.80% in April’s survey to 3.84% in the latest survey.

MEXICO | CDMX airport undergoes renovation. President Claudia Sheinbaum announced the completion of the first phase of the renovation of Benito Juárez International Airport (AICM) in Mexico City (CDMX) on 30 May, which involved an investment of M$6.5bn (US$375.3m). Sheinbaum stated that no public funds were allocated to the airport for the renovation works, with the improvements funded by the airport’s own profits. She added that a second and third renovation phase were still in development “but the main part is already done”. The total funding available for the renovation works is M$10bn.

Admiral Juan José Padilla Olmos, the CEO of the AICM, stated that work was carried out in Terminals 1 and 2, including the final departure lounges, immigration, customs, baggage claim areas, and walkways. As of 1 June, the airport has the capacity to handle up to 46 flights per hour. The improvement works come as the AICM is expected to face significant pressure as Mexico prepares to host the Fifa World Cup this month.

The only gubernatorial election remaining this year is for the western state of Michoacán on 13 November. The election is interesting and important for two reasons. The first is that it is one of the rare threeway  races in the country. Although the Partido de la Revolución Democrática (PRD) has held the state since 1998, currently the experienced candidate from the Partido Revolucionario Institucional (PRI) is leading in the opinion polls. The second reason why the election is important is that President Felipe Calderón Hinojosa’s elder sister, Luisa María ‘Cocoa’ Calderón Hinojosa is running for the third party in contention, the Partido Acción Nacional (PAN) who is running with the endorsement of the Partido Nueva Alianza, which is controlled by the leader of the teachers’ union, Elba Esther Gordillo.

The latest opinion poll published on 19 September, for Reforma, a Mexico City daily newspaper had Fausto Vallejo, a four time former PRI mayor of the state capital Morelia on 37%, just ahead of Silvano Aureoles, the PRD candidate (who is also backed by the Partido del Trabajo and Convergencia) on 34%. Cocoa is on 29%.

Vallejo is doing well in urban areas, which is not good news for ‘Cocoa’. The PAN is known throughout Mexico as the “streetlight party” because of its strength in urban areas. Aureoles is well ahead of the other two candidates in rural areas. There is still a huge amount to play for, however, as 20% of the voters either won’t say, don’t know, or say that they will vote blank. It is also worth noting only just over a quarter of those polled, knew when the election was and almost half of those polled had no idea that an election was imminent.

Voters were also asked in the poll which candidate they thought would win. The result was fascinating: 28% said Aureoles; 26% said Vallejo and 21% said ‘Cocoa.’ More encouraging for ‘Cocoa’ is the fact that voters had grasped her two main policy pitches: reducing insecurity and improving education. She is well ahead of her rivals on these two issues. Aureoles and Vallejo’s main policies are creating jobs and reducing poverty and they are running neck-and- neck on both.

‘Cocoa’ is running a strong, if bizarre campaign. At one point she claimed that because she knew Cuauhtémoc Cárdenas, the founder of the PRD and the son of Mexico’s greatest 20th Century president (and native of Michoacán) Lázaro Cárdenas (1934 to 1940), Cárdenas wanted her to win. This seems most unlikely.

Luisa María Calderón Hinojosa is 55. She has been in politics longer than her brother and appears to know her stuff. She points out that 92% of what the state government in Michoacán spends is the result of transfers from the federal government. She argues that the current state government’s failure to sign up for the Acuerdo por la Calidad Educativa, has cost the state M$3bn (US$230m) and prevented every school having lavatories, a games area, and being able to offer music tuition. She claimed that any child learning a musical instrument would not pick up a gun. In Michoacán, 241 people have been killed by gangsters so far this year (from 1 January to 16 September, according to Reforma’s Ejecutómetro). In the whole of 2010, 259 people were killed by gangsters but this was a major improvement on the 543 killed in 2006, before Felipe Calderón took office.

The cost of the 2012 elections: The Tribunal Electoral del Poder Judicial de la Federación (Trife), which will run the 2012 elections, reckons that they will cost M$18.45bn (US$1.4bn). This is 42% up on what was spent in 2006, the last presidential year.
The Instituto Federal Electoral, which hands public money over to political parties, has seen its budget jump from M$10.5bn to M$15.95bn. The Fiscalía Especializada en Delitos Electorales (Fepade, which investigates electoral crimes), has a budget of M$129m up from M$106m in 2011.

The elite’s origins: Immediately after the Mexican Revolution all Mexican presidents were revolutionary generals. That changed in 1946 when Miguel Alemán Valdés, the son of a general, became modern Mexico’s first civilian president. From him until President Carlos Salinas (who took office in 1988), all Mexican presidents were law graduates from the Universidad Nacional Autónoma de México (Unam). Salinas was an Unam economics graduate.  Salinas’s successor, Ernesto Zedillo (1994 to 2000), was a graduate from the Politécnico, while the first Partido Acción Nacional (PAN) president, Vicente Fox (2000 to 2006) was a mature graduate in marketing from the Universidad Iberoamericana. The current president, Felipe Calderón Hinojosa, is a graduate from the Escuela Libre de Derecho. The two PAN presidents illustrate that party’s non-metropolitan base. Fox was governor of Guanajuato before becoming president (after the constitution was changed to allow him to run because his mother was Spanish). Calderón’s base is in Michoacán.
What is interesting is that Calderón has made a habit of appointing economics graduates from the Instituto Tecnológico Autónomo de México (Itam), most of whom also have second degrees from US universities, to his cabinet. Both of his new cabinet appointees, Meade and Chertorivski, are Itam economics graduates. So is the governor of the Banco de México, Agustín Carstens. The Itam has long specialised in public policy. Rival economics schools such as the Instituto Tecnológico de Monterrey which focuses on training businessmen, and the Unam, which is still more than slightly Marxist, are now less influential politically.

• The PAN has held the presidency since 2000 but is currently floundering in the opinion polls. According to Mitofsky’s most recent poll (at the end of August) the PAN’s national support is down to 19%, only just ahead of the Broad Left’s 17%.
• ‘Cocoa’s’ promise to improve education comes despite the fact that she is backed by Elba Esther Gordillo, the powerful leader of the teachers’ union, who has blocked any radical reform of education for the past 20 years.
• The supreme court is studying whether it should rule on two PAN states (Baja California Norte and San Luis Potosí’s) changes to their state constitutions (in 2008 and 2009 respectively) which now state that life begins at conception. Pro-choice activists argue that the changes to the states’ constitutions infringe the federal constitution. Currently abortion laws are settled at the state level. Mexico City, a state-in-all-but name, currently has the most liberal abortion laws in the country.

Development: On 4 March the commander of the Fuerzas Armadas Revolucionarias de Colombia (Farc), ‘Timochenko’ (Rodrigo Londoño Echeverri), published a letter (dated a day earlier) in which he alleged that the recent increase in (purported) Farc attacks near civilian populations were in fact carried out by military intelligence.

Significance: It’s fairly clear that recent Farc communiqués are intended to prepare the ground for possible talks with the government led by President Juan Manuel Santos. What the Farc wants to accomplish via any formal dialogue is open to debate. The consensus among experts on the Colombian conflict is that the Farc is on the back foot. However it is unclear if this means that it is genuinely seeking a truce or whether it would use any such talks as a means to rest and regroup – as it did previously during 1998-2002 peace talks in a demilitarised zone (Caguán).The Farc’s credibility is in tatters. Pointing the finger at the security forces for recent human rights violations in the department of Cauca will do little to assuage the fears that its latest calls for dialogue are merely a ruse to buy it some time.

Key points:

• ‘Timochenko’’s missive was addressed to Marleny Orjuela, the head of an NGO, the Colombian association of relatives and members of the security forces retained and freed by guerrilla groups (Asfamipaz), who was chosen by the Farc last week to make the logistical arrangements necessary for the liberation of 10 military and police hostages still being held in captivity. He warns her not to be “taken advantage of” by “the worst enemies of peace”, whom he identifies as the “acid commentators of the great media” and the “financial, industrial and land-owning elites”.

• In the letter ‘Timochenko’ lists three particularly barbaric acts of violence carried out last week, including one in which a peasant had his mouth stitched up with wire for allegedly refusing to take a donkey loaded with explosives by the Farc into a town. He underlines that “such acts of barbarism are the creation of military intelligence”; adding that the Farc would not “resist...a substantiating investigation”.

• ‘Timochenko’ argued that the figures relating to civilian kidnap victims are also false.

COLOMBIA | Economic deceleration. This week the president of the national business association of Colombia (Andi), Luis Carlos Villegas, said that the organisation’s June poll indicated that both industrial production and sales registered a significant slowdown in May. Industrial production grew 2.2% in May, compared with 6.3% during the same month of 2011. Similarly, sales increased 6.8% year-on-year in May, increasing the Andi’s worries that low-investment levels in infrastructure could worsen both indicators further before year-end. Nonetheless, Colombia has registered the second-highest industrial production growth rate for the region in May after Chile, which posted a 3.4% expansion.

    The head of Colombia’s central bank (BCR), José Darío Uribe, said this week that the BCR is likely to lower the country’s growth forecast during its next monetary policy meeting on 27 July. In 2011, Colombia posted GDP growth of 5.9% and the BCR had an original top forecast figure of 6% for 2012. Uribe said that top forecast will be revised down next week, but he did not mention by how much. The revision is in part due to the lower-than-expected industrial production figures.

    Separately, President Juan Manuel Santos announced that the government will invest Col$40.7tn (US$22.5bn) during 2013. Seventy percent of that will go on social investment programmes. The government’s investment plan grew 11% when compared with 2012, thanks in large part to a 23% expansion in the tax take since 2010.

BOLIVIA | Petrochemical plant. On 12 September Bolivia’s President Evo Morales inaugurated the construction of Bolivia’s first petrochemical plant in the Bulo Bulo municipality of the central region of Cochabamba. 

    According to a press release by Bolivia’s hydrocarbons & energy ministry, the US$843.9m project is being developed by South Korean conglomerate Samsung, and is being financed by the state owned oil firm Yacimientos Petrolíferos Fiscales Bolivianos (YPFB). 

    The ministry adds that once the plant is completed by 2015 it will produce 2,100 tonnes of urea and 1,200 tonnes of ammonia a day and, on average, require 1.4m cubic metres of natural gas a day to function. 

    In inaugurating the project, Morales said that construction of the plant would create 4,000 temporary jobs and that once completed 800 people would be permanently employed there.

    Morales also said that construction of the plant would be instrumental to the construction of a railway line connecting Bulo Bulo with the eastern region of Santa Cruz. He explained that the idea is to build a “corridor” so as to export the plant’s production to both Brazil and Argentina. 

    Urea and ammonia are widely used in commercial fertilisers and there is a large demand for them in international markets, particularly in countries with large agricultural sectors such as Brazil and Argentina, which could be particularly useful if, as widely touted, Bolivia becomes the next full member of the Southern Common Market (Mercosur).

COLOMBIA | New meat markets. On 17 September Colombia’s agriculture ministry announced that it had received notification from the Russian sanitary authorities that Colombian beef and poultry products are now certified to enter the customs union comprised of Russia, Belarus and Kazakhstan. 

    A ministry statement said that from now on Colombian producers could “export raw meat and meat derivative products processed at Colombian plants and abattoirs that have been certified authorities of the buyer countries”. 

    In addition, the ministry announced that Angola has now also approved the import of Colombian pork meat after the sanitary authorities from the African country conducted a review of Colombia’s sanitary protocols. The ministry concluded that “these achievements translate into a great opportunity for Colombian businesses... to enter new international markets”.  

PERU | Mining investment. In a bid to promote private investment, government officials, including Energy & Mining Minister Jorge Merino Tafur and central bank (BCRP) president Julio Velarde, made an appearance at the 31st Perumin mining convention in the southern city of Arequipa on 17 September. 

    Merino told attendees that “this is the right time to invest in Peru”, pointing out that the country now offers a series of advantages such as cheaper energy and improved legislation that should help the key mining sector increase its production by 10% next year. 

    Mining accounts for 30% of Peru’s economic activity and it is one of the main drivers of economic growth and development. Merino said that the administration of President Ollanta Humala recognises this and that is why it is determined to continue promoting investment in, and development of, the sector. In fact Merino said that due to the policies adopted by the Humala government the sector has continued to enjoy a sustained increase in investment, which was US$8.5bn in the 2006-2012 period and is expected to surpass the US$10bn mark this year. 

    Merino went further and said that the government now expects that an additional US$57bn will be invested in the sector over the course of the next 10 years, which could help to make “the average Peruvian 10% richer”. 

    For his part, Velarde said that while the Peruvian economy grew by 5.2% in the first half of the year, growth for the second half was expected to be 6%, closer to the average of recent years.     

• Peru-Ecuador border development

Peru and Ecuador have so far invested US$7bn in border development projects, the foreign ministers of both countries, Eda Rivas and Ricardo Patiño respectively, announced during a seven-hour meeting of the Comisión de Vecindad Peruano-Ecuatoriana this week. Patiño said the border area had for decades been “the most deplorable part of our countries - the abandoned area” but that it had now been completely transformed with first rate roads and significant economic development. Rivas said that both countries would now focus on the promotion of small and medium sized enterprises (SMEs) in the area among other things.

 

José Mariano Beltrame, el secretario de seguridad pública en el estado de Río de Janeiro, dijo a los periodistas, el 17 de septiembre, que él se sentía “confortable” con los jefes de la policía del estado, a pesar de la revelación de un gran esquema de extorsión entre los oficiales en el suburbio de Bangu en el oeste de Rio. Han sido arrestados 24 oficiales, entre ellos el tercero en el comando de la policía militar de la ciudad, el Coronel Alexandre Fontenelle Ribeiro, por exigir pagos a dueños de comercios, moto-taxis, y compañías privadas de camionetas y autobuses a fin de no cobrarles multas por cometer infracciones.

De acuerdo con el ministerio público, la banda, conocida como ‘Amigos Inc’, cobraba entre R$30 (US$12) y R$2.600 (US$1.100). Cuando los investigadores de la policía allanaron la casa de uno de los oficiales acusados, hallaron R$287.000 (US$121.000) en dinero en efectivo. Rio tiene una larga historia de bandas de policías dedicadas a extorsionar; una investigación en el 2006 derivo en el arresto de 75 oficiales de policía en actividad. En el 2008, el ex jefe de la policía civil de la ciudad de Rio de Janeiro fue encarcelado por pertenecer al esquema.

Sin embargo, Beltrame insiste en que él aún tiene confianza en la policía. “Si usted analiza los incidentes de criminalidad, verá que los números son buenos, estamos en la senda correcta. Las investigaciones contra los oficiales de la policía están en marcha; si recibimos nueva información, haremos lo que sea necesario”, dijo. El comandante general de la policía militar en Rio, el Coronel Luís Claudio Castro, insistió en que él no se sintió “traicionado” por Fontenelle, y que teniendo en cuenta su récord sin tacha, él debería continuar siendo considerado inocente hasta que se pruebe lo contrario.

• Operación ‘Lava Jato’

Alberto Yousseff, el financista quien ayudó a blanquear alrededor de R$10mm (US$4,24mm) en sobornos pagados a la compañía petrolera estatal, Petrobrás, y que luego fueran distribuidos entre aliados políticos del gobierno, fue encarcelado por 4 años y 4 meses el 17 de septiembre. Mientras tanto, Paulo Roberto Costa, el alto ejecutivo de Petrobrás quien ha informado a la policía los nombres de algunos de los políticos involucrados en el esquema, optó por apelar a su derecho al silencio el 17 de septiembre cuando fue llamado a testificar ante la comisión investigadora del congreso sobre la corrupción en la firma petrolera estatal.

HONDURAS | FTA with Peru ratified

On 23 September the unicameral national congress ratified the free trade agreement (FTA) that the government led by President Juan Orlando Hernández signed with Peru in May. Ratification of the FTA paves the way for Honduras to join the Pacific Alliance trade bloc. One of the conditions for joining the Pacific Alliance - currently comprised of Peru, Colombia, Chile and Mexico - is for a potential partner to have FTAs in place with all of its member states.

Honduras, a Pacific alliance observer country, expressed an interest in joining as a full member shortly after Hernández assumed office in January 2014. Given that Honduras already has FTAs with all the other Pacific Alliance members, this condition has now been met and Honduras could join Costa Rica in formally submitting an application to become a new member of the bloc.

A statement by the Honduran legislature said that the agreement was ratified following two debates. Noting that the agreement will immediately eliminate tariffs on 99% of all Honduran products exported to Peru and on 81% of all Peruvian products exported to Honduras (with all tariffs being eliminated over the next 10 years), the statement adds that “This agreement represents a tool to promote bilateral trade between Peru and Honduras… [which] seeks to benefit small and medium-sized enterprises [SMEs], which are constantly looking for new markets for their value added products”.

Last year bilateral trade reached US$47m, with Honduras shipping US$8m of goods to Peru.

COSTA RICA | Economy going well

Costa Rica’s economy grew by 3.5% in the second half of 2015, according to a report released by the central bank (BCCR) this week. The BCCR said that the economic growth could be attributed to a strong performance by the construction and transport and communications sectors.

The BCCR reported that the construction sector expanded by 17.2% year-on-year; the transport and communications sector grew by 5.3% over the same period; and financial services and insurance were up by 7.1%.

On the downside, the agricultural sector contracted by -1.3% year-on-year in the second half and manufacturing by -1%.

On 30 July, the BCCR cut its annual GDP growth forecast for Costa Rica from 3.4% to 2.8% for 2015.

Development: On 14 December Chile’s national civil aviation authority (DGAC) workers’ union called for a 48-hour strike from 17 December in demand of better retirement benefits.

Significance: Potentially causing airport chaos ahead of the Christmas holiday period, the announcement is bad news for the centre-left Nueva Mayoría coalition government led by President Michelle Bachelet. It is the second strike this year by the DGAC workers following a 24-hour strike in September by air traffic controllers (who have yet to confirm whether they will adhere to the new strike action), ground support staff and other airport staff, which at the time government spokesperson Marcelo Díaz described as the biggest in the sector in Chile’s history.

• DGAC workers called the strike after two months of negotiations with the government failed to produce an agreement.

• In September DGAC officials put the strike turnout at “higher than 90%”, with 324 flights cancelled, affecting some 50,000 passengers.

• Chile's flagship airline, LAN – part of Latam Airlines, Latin America’s largest commercial airline holding group – has said that it is awaiting more information from the Bachelet government in order to determine possible measures to take to mitigate the impact of the strike. LAN’s general manager, Gonzalo Undurraga, has described the new strike as “more complicated” than in September due to the fact that it is peak season. Undurraga told reporters that some 500 national and international flights and some 74,000 passengers would be affected.

Looking Ahead: As well as the threat of strike from the DGAC, the Bachelet government is also facing the prospect of more protests from the Colegio de Profesores teachers’ union. The Colegio has called a “national march” to the capital, Santiago, on 17 December over the government’s so-called ‘historic debt’ with the sector, which dates back to 1981 when the central government transferred authority over local schools to municipalities and a special salary readjustment made prior to the transfer was not recognised. The Colegio’s president, Jaime Gajardo, told reporters that the strike had been called following the failure of the education ministry to come up with a concrete proposal for how to address this debt.

Senior members of the Partido da Social Democracia Brasileira (PSDB) Brazil’s second-largest party, told reporters earlier this week that Geraldo Alckmin, the governor of São Paulo state, would be chosen as the party’s president at its convention in Brasília on 9 December. That move is the first stage towards confirming Alckmin as the party’s presidential candidate, finally putting an end to months of speculation over who would get the nod. Though the decision has put to bed one of the issues dividing the notoriously fractious party, it remains split over whether to support the government’s key pension reform legislation.

Alckmin’s decision to take up the presidency of the party was confirmed at a dinner with former president Fernando Henrique Cardoso (1995-2003) on 27 November. Both of his main rivals within the party have slipped in recent months, with Senator Aécio Neves, the losing presidential candidate from 2014, facing serious corruption allegations, and São Paulo Mayor João Doria haemorrhaging popularity. Arthur Virgílio, the mayor of Manaus, is still interested in running, which may mean that the party holds a primary contest. Still, barring a dramatic turn of events, Alckmin will be confirmed as the PSDB’s presidential pick early next year.

Though he currently fares poorly in opinion polls for 2018, Alckmin has a number of considerable advantages. First, the support of the PSDB which controls municipalities across the country and also has access to a big slice of the free-to-air radio and television advertising allocated to political parties in the run-up to elections. Secondly, the field is wide open. The current frontrunner, former president Lula da Silva (2003-2011), may be barred from running if an appeals court upholds his conviction on corruption charges. Jair Bolsonaro, the far-right congressman currently polling second, may simply prove too extreme for many, and third-placed candidate Marina Silva has a track record of fading fast in aggressive presidential campaigns.

While many analysts have warned of the likely success of outsider candidates, some of those names are starting to fall by the wayside. Luciano Huck, a well-known TV presenter, long tipped as a 2018 hopeful, ruled himself out of the running earlier this week. So too did Sérgio Moro, the lead judge in the sprawling corruption investigation ‘Operation Carwash’. There is still time for a wildcard to emerge, and former supreme court judge Joaquim Barbosa is reportedly toying with the idea. Still, it appears that despite the convulsions that have shaken Brazilian politics in recent years, and led to record levels of distrust in the country’s politicians, the 2018 race may end up being a more conventional affair than many anticipated.

Best of Frenemies

Less than 18 months after the traumatic impeachment of President Dilma Rousseff (2011-2016), her Partido dos Trabalhadores (PT) is already in talks to form electoral alliances with the party that overthrew her. Despite repeatedly condemning the impeachment as a “coup” and the now-ruling Partido do Movimento Democrático Brasileiro (PMDB) as “coup-mongers”, PT leaders in at least seven states are in talks with their PMDB counterparts to shore up deals for gubernatorial and senate elections. Even Gleisi Hoffmann, the PT’s national president, needs PMDB support to retain her senate seat in Paraná. Notably both former presidents Lula da Silva and Rousseff herself have toned down their criticism of the PMDB in recent weeks, conscious of the necessity of alliances in Brazil’s fragmented political system.

• Unemployment

Unemployment stands at 12.2% for the three months ending in October, according to data released by the government statistics agency (Ibge) on 30 November. That translates into 12.7m people without a job. The rate marks an improvement on the three months from May to July this year, when unemployment stood at 12.8%.

An 11-day strike by truck drivers, followed by a short stoppage by petroleum workers, has led to the resignation of Pedro Parente, chief executive of Petrobras (the state-owned oil company), weakened the government, had a negative impact across the economy, and increased investor worries ahead of the October presidential elections.

There are about 2m truck drivers operating across Brazil. Around 60% of the country’s cargo is carried by road, so the 11-day stoppage had a significant negative multiplier effect across the economy. At the peak of the strike the truckers had blocked highways in over 1,000 different locations on the national highway network. Activity at many of the country’s main ports, including key commodity export terminals such as Santos and Paranaguá, ground to a standstill. Widespread fuel shortages forced businesses and airports to close. There were also shortages of food and consumer goods. Soya, coffee and other exports were held up. Speaking on 30 May as the strike was beginning to draw to a close, Lucas Trindade of exporting lobby Anec, said, “A week, maybe 10 days will be needed for grain shipments to resume at the ports.”

Although there were sharp political overtones, the strike was principally about fuel prices in general, and about the high cost of diesel in particular. Since 2016 the government has been phasing out fuel subsidies, allowing petrol stations to adjust their charges at more frequent intervals in line with market forces. Diesel prices grew by 9.2% in the month to early May. Rising global oil prices and a depreciating Brazilian currency mean that diesel prices have increased by roughly 50% over the last year. The government showed itself to be a weak negotiator in its response to the truck drivers, who were strongly supported by public opinion (according to one poll, 87% of the population expressed support for the truck drivers). It made various concessions, including a promise to freeze diesel prices for 60 days at 12% below their recent peak.

It is clear that the strike will have dented Brazil’s economic recovery in May and June. An optimistic interpretation, however, suggests that there could be a rebound in July. This is if Brazil follows the same pattern seen during a truck drivers’ strike in neighbouring Colombia in July 2016, which caused activity levels to slump, after which they then strengthened notably in the following month of August. While this means the economic damage may prove less than feared this year, it is nevertheless undeniable that the strike was an important setback. The extra diesel price subsidy the government will have to pay is estimated at BRL9.6bn (US$2.55bn). Because of the fiscal responsibility law – which freezes real term government spending – the government has said it will have to make offsetting spending cuts across various departments (ironically the ministry of transportation will have to bear a big proportion of the cuts). There were also reductions in export subsidies and cuts to support for beverage producers.

The main oil workers’ union (Federação Única dos Petroleiros, FUP) announced a 72-hour stoppage to support the truck drivers and also demand an end to market-based pricing for fuels. In addition FUP also sought employment guarantees and expressed its opposition to privatisation in the oil and gas sector. This strike was called off early after a labour court declared it illegal as it was judged to have been called to pursue “politico-ideological aims”. Although short-lived, it did achieve what was potentially its key demand, the removal of Petrobras CEO Pedro Parente. The chief executive announced his resignation on 1 June. His departure worried the markets, which saw it as another sign of retreat from pro-market policies.

Parente had in fact been relatively successful in turning around the scandal-ridden Petrobras. Under his leadership the company followed a four-year restructuring programme, sold off various assets, and cut costs. Total debt was reduced from BRL369.5bn (just under US$100bn) to BRL260bn (US$71.7bn). Among the assets being sold is the Pasadena refinery in the US, a disastrous earlier investment in which the Brazilian company incurred major losses. Total asset sales in 2015-2016 were US$13bn. In Q118 Petrobras announced a BRL6.9bn (US$1.83bn) profit, the first since 2014. According to Adriano Pires of CBIE, the Brazilian infrastructure centre, “Parente leaves a very positive legacy. During his tenure Petrobras market value increased three times over. He brought a different mindset to the company, one based on meritocracy, efficiency, and respect for investors.”

Although President Michel Temer moved quickly to appoint chief financial and investor relations director Ivan Monteiro as the new chief executive, promising a degree of continuity, the suspicion is that a lame duck government may be moving away from the principle of market-based energy pricing (Temer suggested the policy might be reviewed). The mood in the country has changed. Analysts note the current weakness of centre-left or centre-right pro market candidates in the election campaign. Pro-market policies are simply not very popular with Brazilian voters right now, as for a variety of reasons they are perceived to have failed.

Parente, for example, was frequently criticised by presidential candidates of both the right and of the left. The greatest political beneficiary of the truckers’ strike appears to be far-right populist candidate Jair Bolsonaro. He made a point of applauding them for fighting “extortionist” taxes levied by a “corrupt” government. Some of the strikers expressed support for Bolsonaro and called for a military coup. According to Rafael Cortez of Tendencias consultancy, “The truckers’ strike knocked down the last pillar of hope Temer’s government had of electing a successor that will continue its policies. This climate of radicalisation benefits the extremes.” One sign of the changing mood is that the government is less likely to secure congressional approval for the privatisation of state-owned power utility Eletrobras. “That was already a tough sell. Now it becomes almost impossible,” said Lucas de Aragão of consultancy Arko Advice.

Following hot on the heels of a planned cash injection in the 2020 budget, the state oil firm Pemex has issued new bonds, using the proceeds to buy back shorter-term and more expensive debt. This forms part of a broader government effort to avoid a potentially-costly downgrade by the international credit ratings agencies.

On 11 September, Pemex announced a series of measures that were designed to bolster its underlying finances. These included the issuance of US$7.5bn in new 7-year, 10-year, and 30-year bonds and the repurchase of shorter-term notes, also using some of the proceeds from a US$5bn capital injection from the federal government. The bond issuance comprised US$1.25bn in 7-year bonds (yielding 6.5%), US$3.25bn in 10-year bonds (yielding 6.85%), and US$3bn in 30-year bonds (yielding 7.7%). 

The government did not provide details of how much Pemex is likely to save in terms of amortisations by improving the profile of its large debt stock. It is likely that repayments in the next few years will have fallen as a result of the operation, improving Pemex’s cash flow, but scheduled repayments are still likely to be high given overall elevated debt levels. As such, the liability operation will have eased concerns only slightly among the international credit ratings agencies about the firm’s financial position. Fitch Ratings downgraded Pemex’s bonds to junk status earlier this year, while the other ratings agencies have Mexico at risk of a downgrade.

Additional downgrades could force some investors (for example, those who are either required to hold investment-grade paper, or those who simply prefer less-risky debt) to sell Pemex’s bonds, which in turn would further complicate the firm’s position. These concerns help explain why the most recent liability operation was fairly costly (yields were elevated given that Pemex is a state-owned firm), and also why take-up by investors was high (the issues were several times over-subscribed). 

After remaining closed for about two months due to the coronavirus (Covid-19) pandemic, Mexico’s car and auto parts manufacturers restarted operations in the last week of May. As a result, some 22,119 units were assembled in May. This production data was better than expected, as it was initially unlikely that production would start before June given that the federal government measures introduced to stop the spread of Covid-19 had put a stop to all non-essential activities until then. But the units produced in May is still a fraction of the pre-pandemic production levels and the industry is going to have to operate on overdrive if it is to make up for the time it has had to remain idle this year.    

Car production in May was 93.7% below that of May 2019, when the 12 manufacturers that operate in Mexico put together more than 350,000 vehicles. Meanwhile exports fell by 95% on the month compared with May 2019, when more than 304,800 units were sent abroad. Looking at the first five months of 2020, Mexico assembled 934,234 vehicles, a fall of 43% compared with January-May 2019.

Car plants restarted operations with between 30% and 40% of their workforce, while auto parts plants started operating with only between 15% and 30% of their employees in order to comply with social distancing regulations designed to reduce the spread of coronavirus in assembly plants and factories. However, with the reduction of global demand during the first four months of the year, production levels in the country will likely remain lower than previously projected. Even in the US, the principal destination of Mexican cars, it is estimated that demand will contract by 25%-30% this year. Domestic demand is expected to have a similar contraction.

Thus, Mexican car production is likely to fall to some 2.6m units, while exports are expected to fall by 33% compared to the total exported in 2019 to only 2.3m. Car parts manufacturers are also expecting a similar 32% contraction of their production this year. In addition, the industry is facing challenges derived from the imminent coming into force of the US-Mexico-Canada Agreement (USMCA) on regional trade that will replace the North American Free Trade Agreement (Nafta) on 1 July.

The guidelines to comply with the USMCA provisions were published by Mexico’s economy ministry (SE) on 3 June. However, Eduardo Solís, a director at the Mexican confederation of industrial chambers (Concamin), one of the country’s main business organisations, said that less than 30 days is not enough to make the necessary adjustments to comply with the new rules. The USMCA rules for the auto sector stipulate that a car manufactured in the region may be exported to the other USMCA countries without tariffs if 75% of its inputs are considered to come from North America (up from 62.5% in Nafta); and if between 40% and 45% of essential components are produced by workers earning at least US$16 per hour.

The USMCA also establishes that 70% of steel and aluminium used in auto manufacture should be from North America, while essential components such as engines and bodywork must have 75% of regional content. Except for the steel contents, compliance with most of the regional content rules is gradual. In the first instance manufacturers must reach 66% of regional contents in core parts, which will increase to 69% in 2021, 72% in 2022, and 75% in 2024. However, even these increases may be difficult to achieve in the wake of the pandemic.

Car manufacturers had estimated they would need around six months to adjust procedures with their supply networks but following the disruption caused by the pandemic, only 30% of car makers in Mexico are considered to be able to comply with the new requirements by 1 July. This means that most manufacturers will have to either pay a 2.5% tariff or request an alternative transition regime.

The ExpoCannaBiz business conference that took place in the northern city of Cartagena (Bolívar department) on 16 September was the first major event for the medicinal cannabis industry to take place in Colombia since new regulations targeting the sector were introduced on 23 July. On that date, President Iván Duque signed Decree 811, which will modify Decree 613, introduced in 2017 to regulate the medicinal cannabis industry in Colombia. It comes after two years of consultation with industry experts. The main impact of the legislation will be to legalise the export of dried cannabis flowers, which was prohibited by the 2017 decree. The health ministry announced this September that it hoped the legislation would be ready for implementation on 23 October, following a public consultation beginning 21 September.

The aim of this new legislation is both to give a boost to the pharmaceutical industry and to increase access to medicinal cannabis. The government is keen to stress that the focus will remain on cannabis production for medical and scientific purposes, with no intention as yet of legalising production for recreational use.

In addition to relaxing export rules, the legislation will allow most pharmacies to sell cannabis-based medicinal products, attempt to promote the hemp industry, and make it easier for small producers to sell non-psychoactive cannabinoids, for example through a domestic cannabis-infused food and drink market. Sales and production licences will also be extended, being valid for ten years, rather than five. The decision to widen the productive sector for medicinal cannabis within Colombia comes after a decision was made in December 2020 to allow patients to receive THC (the main psychoactive ingredient in cannabis) and CBD (a non-psychoactive ingredient) prescriptions under their health insurance policies.

Speaking at the conference, Efraín Armando López, a consultant on legal matters relating to medicinal cannabis, claimed that the new legislation would generate income on a short- and medium-term basis, as well as allowing Colombia to play a significant role in the international market for medicinal cannabis. Dried cannabis flowers are the most prescribed and most sold form of medicinal cannabis in the US, Canada, and Germany, accounting for more than 50% of sales.

The Duque administration is looking to follow in the footsteps of Uruguay – where, unlike in Colombia, recreational cannabis use is legal – in tapping into key emerging markets. However, some remain sceptical, claiming that even if the Latin American products are cheaper due to significantly reduced production costs, they are unlikely to squeeze out domestic production in Europe, particularly given high trade barriers imposed by countries like the Netherlands and Switzerland.

This regulatory change follows the severe economic damage inflicted by the coronavirus (Covid-19) pandemic, with the government keen to promote almost any industry in a good position to rapidly recover and grow. The pharmaceutical cannabis industry offers a clear option for economic diversification, particularly as the government seeks to decrease dependence on traditional sectors of the economy.

Colombia has an ideal climate for cannabis production, with its climate allowing producers to obtain up to five harvests a year. This means that the price of Colombian cannabis flowers will significantly undercut global competition. The US cultivation cost of medicinal cannabis is estimated to be between US$0.5-1 per gram, whereas in Colombia the cost could be as low as US$0.05 per gram once production is expanded, according to a February 2019 report by the Bogotá Chamber of Commerce.

Some within the cannabis industry have, however, complained that the Colombian government has still not realised the full potential of the crop, with claims that the stigma and resultant legal framework surrounding recreational cannabis use are outdated. Possession of cannabis for personal recreational use was declared legal by the Constitutional Court of Colombia in 1994, with possession of up to 20 grams of cannabis officially decriminalised in 2012, whilst cultivation of up to 20 cannabis plants was permitted in 2015 by the Colombian Supreme Court.

According to some observers, the bloodshed resulting from clashes between mostly cocaine trafficking drug trafficking organisations (DTOs) since the late 1970s has resulted in a long-running stigma towards recreational drug use. Even when the new legislation comes into force, it is likely to continue to exclude many smaller producers, as only around a dozen Colombian companies are able to meet the requirement to produce international pharmaceutical-grade extracts for export to medically regulated markets.

In December last year, the Colombian Association of Cannabis Industries (Asocolcanna) estimated that the export of cannabis-derived products from Colombia in the first nine months of 2020 was worth just US$4.5m. This has partly been blamed on the fact that although regulation has allowed for the production and commercialisation of products derived from cannabis, the process of gaining export approval is long and complex. The new legislation is expected to streamline this process, potentially with massive economic rewards.

Growth potential

Procolombia, the government agency responsible for promoting foreign investment and non-traditional exports, announced in August that it expects annual Colombian cannabis exports to be worth US$1.7bn by 2030. Procolombia notes that, under the most optimistic scenario of prices exceeding US$3,000 per kilogram of cannabis extract, this would exceed the value of exports from Colombia’s coffee sector – its most valuable non-mineral or oil export. The government agency added that 44,000 jobs could be generated in the cannabis industry by 2030.

The US company One World Pharma announced in September that it has started construction on an extraction plant in Funza municipality (Cundinamarca) which will be able to process cannabis flowers to extract high quality CBD and THC oils. This will make it one of the first companies in Colombia with both the licences and capacity to do this. The company, which is partnered with US-headquartered United Sciences to manufacture the equipment required for the extraction process, expects its Colombian plant to be operational within six months, and to hold European Union Good Manufacturing Practice (GMP) certification by mid-2022. The company then hopes to export pharmaceutical and cosmetic cannabinoid products from Colombia to the US, Europe, Israel, Australia, and the rest of Latin America.

For Colombian companies already working on the production of pharmaceutical-grade cannabis, the hope is that this legislation may ultimately lead to a simplification of the process of acquiring GMP certification and thus being able to export the finished pharmaceutical product. A key concern moving forwards will be striking a balance between volumes of export and carrying out as much processing and extraction as possible domestically, to ensure that the country does not simply become a commodity exporter.

On 13 October Panama’s President Laurentino Cortizo sanctioned a law approved at the end of August by the 71-member unicameral legislature, regulating the use of medicinal cannabis. Panama has thus become the first country in Central America to take the step, following in the footsteps of at least seven other countries in Latin America (Argentina, Chile, Colombia, Mexico, Paraguay, Peru, and Uruguay).

The initiative, which had been in congress for the past five years, was approved by 44 of the 71 votes with none against. It was championed by president of the national assembly Crispiano Adames and legislator Marcos Castillero (both of the ruling centre-left Partido Revolucionario Democrático (PRD) as a way of providing relief to individuals who suffer from a number of medical conditions, including epilepsy, multiple sclerosis, nausea caused by chemotherapy, and chronic pain.

The new law prohibits commercial use of homegrown cannabis and requires officials to import cannabis in pill or liquid drop form. It also stipulates that the health ministry (Minsa) will be responsible for distributing the medication to licensed pharmacies, which will have to apply for a permit and pass a site inspection in order to receive their licenses. Only pharmaceutical companies or those specialising in therapeutic services will be allowed to buy and sell cannabis. It also calls for the establishment of a technical council on cannabis and authorises Minsa to create a national programme for the study and medicinal use of cannabis and its derivatives, to promote research and educational initiatives with regard to the proper use of the drug.

The bill was borne out of increasing demand for access to medicinal cannabis across the country amid reports of its benefits for a growing number of conditions. Marie Millard, executive director of the NGO Luces Panamá, which supports people with epilepsy, said that the passing of the bill would improve the quality of life of patients, in particular those currently taking medication which does not work for them. She believes it will also help children with refractory epilepsy and their carers. Many legislators were swayed by the initiative’s motto, “for a day without pain”.

• Costa Rica to follow suit?

On 19 October Costa Rica’s 57-member unicameral legislature approved the legalisation of cannabis for medicinal purposes and the production of hemp in a first debate. However, it awaits a second debate and on 22 October was sent by a group of ten national legislators to the constitutional chamber (SC) of the supreme court for legal review.

  Meanwhile the health ministry and President Carlos Alvarado have expressed concerns about the initiative, which is promoted by independent legislator Zoila Rosa Volio, an agronomist.

  The centre-left Partido Acción Ciudadana (PAC) government has said it supports hemp production, but has expressed reservations with cannabis; Health Minister Daniel Salas has acknowledged there is “a growing body” of research that proves the benefits of medicinal cannabis. However, he was also cited by the local press as saying that its production can only occur “when the country has all the conditions to guarantee that there will be no vulnerability in security,” in reference to recreational use. END BOX

• Controversy

Amid the discussions regarding the new legislative bill in Panama, the national authority for transparency and access to information (Antai), a government office, announced in August that it had launched an investigation into a possible conflict of interest with regard to the sector. This followed reports that Canna Med Panama SA, a firm which began operations in 2019 (incorporated in 2020) with the intent of becoming a vertically integrated medical cannabis company headquartered in Panama, had sponsored a June trip to the US by Minsa’s director of pharmacology and drugs, Elvia Lau, and four other health ministry officials.

Brazil’s public sector has posted a primary surplus for the first time in eight years, figures released on 31 January by the central bank (BCB) show. The government has hailed this performance as a return to “fiscal normality” after the unusual expenditures incurred as a result of the coronavirus (Covid-19) pandemic, but analysts remain wary about the future of Brazil’s fiscal health this year.

Brazil’s public sector posted an overall primary surplus of R$64.7bn (US$12.2bn) in 2021, a result underpinned by a strong R$97.7bn surplus in regional governments (states and municipalities) and a R$2.9bn surplus in state-owned companies. The federal central government, meanwhile, posted a R$35.5bn deficit. Last year’s primary surplus, equivalent to 0.75% of GDP, compares with a R$703bn deficit in 2020 (9.41% of GDP), when the government embraced fiscal stimulus in response to the pandemic. In 2021, the government rolled back Covid-19 support and also benefited from higher-than-expected revenue. The tax take rose 17.6% to a record R$1.88trn last year, boosted by an extraordinary collection in corporate income tax and increased income from oil royalties thanks to high commodity prices and a weak real.

Brazil’s nominal deficit, which includes the primary result and debt interest payments, fell to R$383.7bn last year, or 4.42% of GDP, down from over R$1trn, or 13.6% of GDP, in 2020.

The secretariat of political economy (SPE) in Brazil’s economy ministry has hailed the 2021 fiscal results as “proving that the policy of fiscal consolidation and efforts to fight the pandemic were balanced”. In an information note released on 1 February, the SPE claims that Brazil’s fiscal performance is one of the best amongst the world’s 50 largest economies, citing data from the International Monetary Fund (IMF) to make the comparison. The SPE concludes that Brazil has an “extremely positive” fiscal framework given the challenges caused by the pandemic and that “there are no objective elements which justify fears of fiscal imbalance and forecasts anchored in deteriorated fiscal scenarios”.

This upbeat assessment is not shared by all. Guilherme Tinoco, a public accounts specialist consulted by national business daily Valor Econômico, expressed concern with the government’s tinkering of the fiscal framework in an electoral year (Brazil holds a general election in October). He cited the reform approved last year which raises the spending cap and postponed payments of some government debt [WR-21-43]. Tinoco also noted that inflation will make it harder to rein in spending, while Brazil’s public debt remains high, at 80.3% of GDP in 2021 (although it fell from 88.6% in 2020).

International ratings agency Fitch Ratings shares these misgivings. In a wire dated 31 January, Fitch says “we think deficit and debt reduction will be temporary in the face of tightening fiscal conditions and higher spending made possible by changes to the calculations of the spending ceiling, Brazil’s main fiscal anchor”. Fitch expects the deficit in the general government balance to widen to 8% of GDP in 2022 and for public debt to rise to 83% of GDP.

The ratings agency cites a number of risks to Brazil’s fiscal outlook, including lower-than-expected growth (growth is already expected to be almost stagnant this year), higher-than-expected borrowing costs, the possible impact of mooted measures to reduce fuel taxes, as well as the general uncertainty of the election year.  

Fuel prices

High international oil prices contributed to driving up consumer inflation in Brazil last year, and the government led by President Jair Bolsonaro is considering measures to try and mitigate their impact on consumers. To this end, the government has mooted a constitutional reform (PEC), dubbed the ‘fuel PEC’, which would reduce both federal and state taxes on fuel. On 1 February, Economy Minister Paulo Guedes said that the government is considering a small tax reduction on diesel, but perhaps not for petrol. 

Nicaragua’s recent decision to grant asylum to Panama’s former president Ricardo Martinelli (2009-2014), days after Panama’s top court (CSJ) upheld a conviction against him, has raised eyebrows. It follows other asylum requests granted by President Daniel Ortega’s government to figures who have fled their countries to evade corruption charges who have since been granted Nicaraguan citizenship. The move comes on the anniversary of the deportation to the US of 222 political prisoners who were subsequently stripped of their Nicaraguan citizenship – a measure since applied to other opposition figures [SSR-23-04].

On 7 February the Ortega government confirmed that it had granted asylum to Martinelli, citing “political persecution” and the “imminent risk to his life”. It came five days after the CSJ rejected appeals filed by Martinelli in response to his July 2023 conviction over the so-called ‘New Business’ case for which he received a prison sentence of over 10 years. Martinelli is just the latest former president accused of corruption in his native country to be granted asylum by the Ortega government. In 2019 Nicaragua granted political asylum to El Salvador’s former president Salvador Sánchez Cerén (2014-2019), who was facing corruption charges. Prior to that, in 2016 Nicaragua granted asylum to Sánchez Cerén’s predecessor, Mauricio Funes (2009-2014), who fled El Salvador to avoid a corruption trial. Both have since been granted Nicaraguan citizenship.

More recently, the Nicaraguan government has granted asylum and citizenship to other dubious figures. These include two close allies of former Honduran president Juan Orlando Hernández (2014-2022), who is currently in the US where he faces drug and weapons related charges: Ebal Díaz (his former minister of the presidency) and Ricardo Cardona (his private secretary) who received asylum and citizenship in 2023. In 2021 Nicaragua granted citizenship to Gustavo Herrera, a Guatemalan businessman and political operator, having granted him asylum in 2018. Herrera appears on the US ‘Corrupt and Undemocratic Actors’ list for using his authority to “inappropriately influence and manipulate the appointment” of justices. He had fled charges of defrauding Guatemala’s social security institute (IGSS) by the now-defunct United Nations-backed International Commission against Impunity in Guatemala (Cicig).

According to a report published on 9 February by local investigative news outlet Confidencial, the Ortega government has given Nicaraguan citizenship to “130 political allies and fugitives from justice” in the last two years. It notes that “several naturalisation processes were carried out in breach of Nicaraguan immigration laws... much like 317 Nicaraguans were stripped of their citizenship and made stateless” – a reference to the February 2023 decision to strip the 222 prisoners (and later other opposition figures) of their nationality on charges such as treason and conspiracy which was widely condemned at the time.

In a piece published on 12 February, one of the 222 political prisoners deported to the US, exiled opposition leader Félix Maradiaga, told Spanish daily El País that Ortega has undermined the true purpose of political asylum. “It should protect people who have been genuinely persecuted for their ideals, not serve as a safe haven for corrupt convicts seeking to evade justice,” he said. The dissident went on to say that: “Nicaragua as a sanctuary for accused individuals [like Funes, Sánchez Cerén, and Martinelli] contradicts international law and undermines the integrity of legitimate asylum. This irony perpetuates impunity, erodes justice, and dishonours national dignity by welcoming criminals while stripping patriots of their nationality”.

Others given protection

Italian terrorist Alessio Casimirri, a former member of the Red Brigades, a now defunct far-left guerrilla and terrorist group based in Italy, has been living in Managua since 1983 under the protection of the Nicaraguan government. In Italy he has been sentenced to six life terms for his role in the 1978 kidnapping and assassination of Italy’s former prime minister Aldo Moro (1974-1976). In 2008 Ortega granted political asylum to Doris Torres, Martha Pérez, and Lucía Morett, who were guerrillas from the now demobilised Colombian guerrilla group Fuerzas Armadas Revolucionarias de Colombia (Farc).