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El senado federal de Brasil votó esta semana por 52 a 27 a favor de la aprobación de Luiz Edson Fachin para el Supremo Tribunal Federal (STF). El resultado fue una victoria significativa para la Presidenta Dilma Rousseff, quien nominó a Fachin. Solamente cinco jueces del STF han sido hasta ahora rechazados por el senado en la historia de Brasil como república, pero el ejecutivo lucía tan débil que en cierto punto parecía que Fachin podría ser el sexto.

Está dentro de las facultades del Presidente nombrar a alguien, entre las edades de 35 a 65 años, con un notable conocimiento jurídico y una reputación intachable, a la posición de magistrado del STF. Ha habido una vacante en el tribunal desde junio del año pasado, cuando Joaquim Barbosa, quien presidió la mayor parte del juicio sobre el escándalo de dinero a cambio de votos en el congreso federal del mensalão, se retiró. Después de la reciente votación en el congreso federal elevando la edad de jubilación de los jueces federales, Fachin podría ser la última nominación que haga la Presidenta Rousseff para el STF.

Fachin enfrentó tres grandes obstáculos para ser nombrado. Primero, que el del presidente del senado federal, Renan Calheiros, del nominalmente aliado al gobierno Partido do Movimento Democrático Brasileiro (PMDB), había estado promoviendo el rechazo de Fachin entre bambalinas. Desde que el nombre de Calheiros apareció en la lista de políticos que son investigados por su presunta participación en el escándalo de corrupción en Petrobrás, sus relaciones con Rousseff se han deteriorado, con el primero pareciendo intentar hacerle la vida difícil a la última. En segundo lugar, algunos en el senado tenían una objeción técnica y legal contra el nombramiento de Fachin: el hecho que él aparentemente había violado la constitución del estado de Paraná al ejercer privadamente como abogado mientras era fiscal del estado. Y en tercer lugar, el principal opositor Partido da Social Democracia Brasileira (PSDB) estaba deseoso de infligir una derrota embarazosa a Rousseff, cualesquiera sean las calificaciones de Fachin.

El profesor de leyes superó el mayor obstáculo la semana pasada cuando, después de una agotadora audiencia de 12 horas, él fue aprobado por el comité constitucional y de justicia del senado (CCJ). Su fuerte desempeño frente al comité, y sus esfuerzos por distanciarse de algunos de los elementos más radicales de su reputación, parecen haber facilitado su paso al STF. Pocos habían cuestionado sus credenciales legales, pero los miembros más conservadores del senado objetaron su aparente identificación con causas progresistas. En el pasado, Fachin había defendido a miembros del Movimento Sem Terra (MST), el movimiento de los trabajadores rurales sin tierra, y había apoyado públicamente la elección de Rousseff en el 2010.

Después de la votación, los senadores quienes votaron contra el nombramiento de Fachin expresaron su decepción. Ronaldo Caiado, del partido Democratas (DEM), lamentó el nombramiento de un hombre con claras afinidades “políticas e ideológicas” con la Presidenta Rousseff, diciendo que Brasil realmente necesitaba de alguien que podría contribuir “más calmadamente” a las decisiones del STF, y cuestionó si Fachin podría ser capaz de actuar con imparcialidad. Por otro lado, Humberto Costa, líder del gobernante Partido dos Trabalhadores (PT) en el senado, dio la bienvenida al nombramiento de un hombre “con actitudes progresistas”.

Mientras que el éxito de Fachin representa una clara victoria para Rousseff, no hay garantías de que el PT no pueda arrepentirse en algún momento de su nombramiento. Barbosa, el juez a quien Fachin reemplazaría, fue designado por el ex presidente, Lula da Silva (2003-2011), pero luego se convirtió en una especie de pesadilla para el PT y el Presidente debido a su prominente rol en las audiencias del mensalão. De hecho, Fachin citó a Barbosa como un precedente para demostrar que a pesar de su pasado apoyo al PT, él puede ser invocado para emitir un juicio imparcial sobre cualquier político de cualquier partido político.

• El escándalo de Petrobrás

Aunque Luiz Edson Fachin no estará involucrado en los casos de diputados del congreso federal sospechados de estar implicados en el escándalo que rodea a la petrolera estatal, Petrobrás, si es que son llevados a juicio, el plenario del Supremo Tribunal Federal (STF), incluyendo Fachin, pasará juicio sobre Eduardo Cunha, el presidente (del Partido do Movimento Democrático Brasileiro [PMDB]) de la cámara baja del congreso, y Renan Calheiros, el presidente del senado (también del PMDB), en caso de ser acusados formalmente por su papel en el escándalo de corrupción en Petrobrás.

On 1 December 2015, the Government Development Bank (GDB) of Puerto Rico paid US$354m owing in principal and interest to its creditors. However, this involved the legal diversion of funds from five other government-backed entities. On 1 January 2016, it will be necessary for payment to be made on around US$900m of the government’s General Obligation (GO) bonds and bonds of other entities. Meanwhile the government is asking the US Congress to allow it to restructure its debts in an orderly fashion with bankruptcy protection.

At the beginning of December, the GDB made payment on US$354m that it owed. However, this was only possible by the diversion of money from the sinking funds of the Puerto Rico Infrastructure Finance Authority (PRIFA), the Puerto Rico Highways and Transportation Authority (PRHTA), the Metropolitan Bus Authority (MBA), the Integrated Transportation Authority (ITA), and the Convention District Authority (CDA). The appropriation of funds from these authorities was made legal on 1 December by the signature of Executive Order No OE 2015-46 by Puerto Rico’s Governor Alejandro García Padilla.

Another, even more challenging, deadline is looming. At the beginning of January 2016, the government and several of the entities that it backs are due to make payment of around US$900m. Six entities – PRIFA, PRHTA and CDA, as well as the Puerto Rico Electric Power Authority (PREPA), the Public Buildings Authority (PBA), and the Puerto Rico Aqueduct and Sewer Authority (PRASA) – account for a little over US$500m of this. These amounts are in the context of total outstanding debt of around US$73bn.

As of mid-December, García Padilla has led a delegation of Puerto Rican legislators and officials to Washington DC, in order to push influential members of the US Senate and House of Representatives to pass new laws that would provide the government of Puerto Rico with the protection of the US Bankruptcy Code while it negotiates with its creditors on behalf of itself and the other entities. Because Puerto Rico is an unincorporated territory of the US, the government cannot seek protection under Chapter 9 of the Bankruptcy Code in the way that cities and municipalities are able to do.

The early indications from Washington DC are positive. Orrin Hatch (R-Utah), the Chairman of the Senate Finance Committee, has introduced a bill in the US Senate that would provide for an orderly restructuring of the debts of the government of Puerto Rico and the various entities that it backs. Hatch’s bill provides for up to US$3bn in cash relief, a reduction in employee payroll taxes for five years and the establishment of an independent authority that can borrow on behalf of Puerto Rico’s government. Hatch has also written to US Treasury Jack Lew asking for details on how the US government is planning to respond to Puerto Rico’s fiscal problems. Hatch agrees with the administration of President Barack Obama that there should not be a bailout of the government of Puerto Rico (and the other entities) and that an orderly resolution of the debts is much better than the alternative.

In the meantime, the government of Puerto Rico has been meeting with hedge funds and investment companies whose municipal-bond funds hold Puerto Rican bonds. The objective, as described in a 19 November 2015 press release from the GDB, is “a comprehensive single transaction to be accomplished by a voluntary exchange offer”. Such an offer would include GOs and bonds issued by COFINA, the sales tax financing corporation. The bondholders consider that they should receive a better deal through direct negotiations with the government of Puerto Rico than they would if the government is able to find protection from its creditors through Chapter 9 of the US bankruptcy code.

Meanwhile, Puerto Rico’s fundamental problems – of economic stagnation and temporary lack of access to bond markets – persist. The GDB’s latest economic activity indicator (EAI) for October 2015 was 1.0% higher than it had been one year previously. Relative to October 2014, non-farm payroll employment in Puerto Rico was 910,200 or 0.5% higher. Domestic power generation was 1.4% lower, while gasoline consumption and cement sales were, respectively, 0.4% higher and 14.4% lower. On 11 December 2015, Fitch Ratings confirmed that it was retaining its Negative ratings watch on the CC rating for the GOs, as well as the PREPA, PRASA, COFINA, and PBA securities that it rates. Fitch “believes that the political environment and liquidity pressures leave all of [Puerto Rico’s] debt vulnerable to default until restructuring plans become clearer”.

It remains to be seen how the government of Puerto Rico deals with the 1 January 2016 deadline. However, all parties agree that an orderly resolution of the debt crisis is better than the alternative. In the coming weeks, it is reasonable to expect the enactment of new law in the US Congress which extends the protection of the Bankruptcy Code to Puerto Rico and/or a substantive agreement between the government and the hedge funds and investment funds.

The official campaigning period ahead of the Dominican Republic (DR)’s 15 May general elections began on 2 February. A presidential victory for the ruling Partido de la Liberación Dominican (PLD) would seem a foregone conclusion, with President Danilo Medina looking like a shoo-in to win re-election. However, the concurrent national legislative and municipal elections will likely provide the debutant opposition Partido Revolucionario Moderno (PRM) with the chance to make an impression.

The May elections will mark the first time that full municipal, national legislative and presidential elections will be held concurrently in the DR since 1998, when the authorities introduced mid-term legislative and municipal elections. But this was reverted in 2010. Thus over 4,000 posts are now up for grabs in the elections including the entire 222-seat national congress (190 deputies and 32 senators) and the country’s 150 municipalities, plus thousands of municipal council seats.

The informal campaign ahead of the elections arguably began already last year when the PLD promoted a constitutional reform to re-introduce consecutive presidential re-election to allow Medina to stand for election again this year. This became a reality after the PLD struck a political pact with its traditional rival, the Partido Revolucionario Dominicano (PRD) [RC-15-07]. While on 2 February the president of the national electoral council (JCE), Roberto Rosario, formally declared the start of the official campaign period that will run until 13 May, the unofficial launch of the campaigning took place two days earlier, on 31 January, when the PLD formally proclaimed Medina as its presidential candidate during a mass rally in Santo Domingo.

Flanked by PLD party president, former president Leonel Fernández (1996-2000; 2004-2008; 2008-2012), Vice-President Margarita Cedeño (Fernández’s wife), and other PLD party leaders, Medina delivered an eminently electoral speech. Unveiling the slogan of his campaign as ‘Vamos por más’ (‘going for more’) he said that in a second term he would seek to continue to reduce poverty by promoting investment and job creation in the country; and continue setting the foundations for the country’s development by promoting better education. “After four years the country is better because we have done what never before has been done. But we can do much more, barriers can always be broken and we are going for more”, Medina said launching the PLD’s bid to secure a fourth consecutive presidential term.

Medina added that if he won re-election he would also focus on promoting greater government transparency, and continuing the fight against official corruption and criminality. Yet these are precisely the areas in which the opposition says that Medina has been weak. In fact, the PRM presidential candidate, Luis Abinader, has accused Medina of demonstrably failing to address these issues, pointing to rising public insecurity and the continued emergence of major corruption scandals [RC-16-01].

These attacks have helped Abinader to secure 35%-40% of voting intentions in pre-electoral polls, to 49%-52% for Medina (50%+1 of the vote is required for a first round victory). While Abinader is still considered a long-shot to win the presidency, the PRM will be hoping that this support for him will translate into votes for its congressional and municipal candidates, and that it wins more congressional and municipal seats than the PRD, consolidating its position as the main opposition following its split from the PRD last year.

• Rosario

The president of the national electoral council (JCE), Roberto Rosario, said that the JCE would use all its resources to ensure that the elections are “the cleanest and most transparent in the country’s history”. Rosario added that the JCE would also ensure that the electoral candidates from the 26 political parties and eight political movements registered for the contest enjoy “equal opportunities and standing” so that the results “truly reflect” the will of the 6.7m electorate. Since its creation in 1923, the JCE has been in charge of organising all elections in the DR, which have been periodically held even during the Rafael Trujillo dictatorship (1930-1961), when confidence in the JCE was low. Confidence in the JCE has increased since then but some still harbour doubts about it.

On 26 August Jan Jarab, the United Nations High Commissioner for Human Rights, said Mexico was not doing enough to protect journalists and community activists. Only two days earlier the body of Nevith Condés Jaramillo, a journalist in Estado de Mexico (Edomex) had been discovered: he had been stabbed to death.

Condés Jaramillo worked for El Observatorio del Sur, a local news site, and had received death threats. According to the UN, 11 reporters and 13 human rights activists have been killed in Mexico so far this year. Jarab said a programme to protect journalists and activists was underfunded and unable to guarantee their safety.

Presenting a 410-page report on the situation in Mexico, Jarab said the government-run Protection Mechanism for Human Rights Defenders and Journalists currently covers 903 people, up from 48 when it was launched five years ago. But its resources have become increasingly stretched. “The mechanism needs strengthening; it needs to have sufficient staffing to protect the beneficiaries and take preventative actions,” Jarab added. 

Uruguay’s President Luis Alberto Lacalle Pou made an unexpected change at the top of the agriculture, livestock, and fisheries ministry this week. One of the plum cabinet ministries in Uruguay, it had been led by Carlos María Uriarte. But Lacalle Pou tweeted on 27 June that he had decided to replace Uriarte with the incumbent president of the Instituto Nacional de Carnes (Inac), Fernando Mattos. Uriarte expressed surprise over his replacement but he appears to have lost the confidence of both his president and his party. 

This was the fifth cabinet change President Lacalle Pou has carried out since he took office in March 2020 and, as with the previous four, he needed to preserve the delicate balance within his politically diverse five-party ruling coalition. Lacalle Pou said he had taken the decision after consultation with one of those five parties, the right-of-centre Partido Colorado (PC; Colorados), to which Uriarte and Mattos belong.

Uriarte thanked Lacalle Pou for his time in the cabinet, while adding that he was not aware of what he had done wrong to warrant his replacement. Lacalle Pou did not reveal his motives in public, praising Uriarte’s “human warmth and commitment”. But the local press was swift to seize upon reports that Uriarte did not get on well with his deputy minister, Ignacio Buffa, Lacalle Pou’s adviser on agricultural matters during his electoral campaign.

The Uruguayan media also speculated that Uriarte might have been lucky to survive a cull in April, when Lacalle Pou fired two senior figures in the agriculture ministry over China’s temporary suspension of processed meat imports due to products being mislabelled as beef. China had already ramped up testing of Uruguayan meat products after the discovery of traces of coronavirus (Covid-19) in shipments of frozen beef from the country in December 2020. China accounts for some 60% of Uruguay’s meat exports.

Uriarte had also lost the support of the PC party leadership, which had expressed disquiet about his predilection for meeting members of the left-wing opposition Frente Amplio (FA) coalition rather than PC legislators, and his hiring of personnel with other political affiliations. Lacalle Pou would have needed a strong reason to reject calls from within the PC to change one of the party’s own ministers, not least because he was irked by Uriarte’s failure to attend the last full cabinet meeting he convened on 19 June in the Plaza Independencia in Montevideo to mark the birth of the father of Uruguayan nationhood, José Gervasio Artigas.

Gaffe prone

Carlos María Uriarte came in for criticism for several infelicitous remarks during his tenure, none more so than a comment drawing a comparison between cattle theft and femicide. This earned him a rebuke from Vice-President Beatriz Argimón, who called on him on Twitter to apologise. Uriarte was swift to apologise, while stressing that he was merely trying to show that, as with femicides, there had been a worrying increase in cattle theft.

Back in March 2018 it was Chile that hosted the meeting where 11 countries ceremoniously agreed on a new Trans-Pacific trade deal. But oddly Chile is the last, alongside Brunei, to fully ratify the agreement.

Even after the senate approved the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) on 11 October with 27 to 10 votes, President Gabriel Boric refused to sign it into law until his administration renegotiates part of the deal with all other signatory members in so-called side letters.

Indeed, Chile’s rather incoherent approach to the trade deal reflects the same internal political divisions that have rocked the domestic political landscape as of late. Right-wing parties had favoured approving the business-friendly treaty, arguing that lower tariffs on as many as 3,000 export products would help economic growth. The TPP would cover 13% of the world’s economy and a population of 500m people.

On the other side, leftist politicians had argued that the deal primarily benefits large multinationals because they make up the bulk of exports and because the agreement gave them the upper hand on issues of dispute resolution that undermine the state’s sovereignty. “They talk about the Pymes, or small and mid-sized companies, but they export only 2% to TPP-11 countries, and there’s no reason to believe that this will change,” said Senator Juan Ignacio Latorre, head of the leftist Revolución Democrática party. 

Caught between a rock and a hard place, Boric tried to satisfy both sides of the divide. Faced with a slumping economy and a dismal approval rating, the president couldn’t afford to block the treaty and further sour an already tense business climate, particularly after his devastating loss in the referendum on a new constitution back in September. He had already ruffled some feathers in the all-important mining sector when his administration pushed to increase royalties.

When Boric was a deputy he voted against the CPTPP. In the run-up to the vote he said he would neither support nor oppose the accord. That brought him harsh criticism from his own ranks.

The mayor of Recoleta (Santiago province), Daniel Jadue of the Partido Comunista de Chile (PCCh), blasted the Boric administration for not having the vote on the CPTPP taken off the Senate agenda, a failure he called an “unpardonable omission”.

To help appease his own rank and file, Boric said that he would seek to renegotiate parts of the agreement dealing with the compulsory Investor State Dispute Settlement (ISDS) chapter through ‘side letters’ with other signatories. “My duty, as president of the republic, is to ensure respect for Chilean sovereignty and that we have the right to a development strategy,” said Boric.

But the opposition was up in arms, accusing Boric of dragging his feet and ignoring the majority voice in congress. The right-wing Chile Vamos coalition even threatened to boycott further talks on revising the country’s constitution. A round of mutual posturing and politicking ensued on both sides of the political aisle, forcing the president to make a public statement in which he sought to tone down the rhetoric a notch by reiterating the need to tweak the accord without abandoning it altogether. 

Side letters

Side letters are already signed with Mexico and New Zealand and negotiations are in advanced stages with Peru. Meanwhile talks have begun with Australia and Vietnam, Boric said in a radio address. Still, much uncertainty remains regarding Chile’s approval of the trade deal and Boric’s foreign minister, Antonia Urrejola, summed it up nicely.  “I hope, and I may be wrong, that we’re talking about months not years”, she said.

A cargo ferry between the Puerto La Unión port in El Salvador’s La Unión department and the Puerto Caldera port in Costa Rica’s Puntarenas province made its maiden voyage on 10 August.

The ferry, which can carry 100 trucks and 200 passengers, will make two return trips per week, providing an alternative route for cargo which previously had to pass through Honduras and Nicaragua overland. In six months, the operator, Panamanian firm Blue Wave Corporation, plans to add another trip each week, as well as offering berths to passengers, with 73 cabins and a restaurant onboard. Blue Wave Corporation is represented by local firms Transmares and Consorcio Maritimo Centroamericano (CMC) in Costa Rica and El Salvador respectively. The pair are responsible for handling customs procedures and ticket sales.

From port to port the voyage will take around 22 hours, compared to the 96 hours it takes to make the same journey by road, which involves four border crossings in Honduras and Nicaragua. Luis Amador, Costa Rica’s minister of transport and public works, said that the ferry will cut journey times, reduce costs, and improve competitiveness for both countries.

Industry bodies in El Salvador, such as the Corporación de Exportadores (COEXPORT) and the Asociación Salvadoreña de Industriales (ASI), encourage members to use the new ferry. COEXPORT president Silvia Cuellar told the Associated Press (AP) that the ferry reduces bureaucracy and time spent waiting to cross borders, as well as the risk of robberies, blockades, and traffic problems.

However, Raúl Alfaro, president of the Salvadorean association of international freight carriers (ASTIC), questioned how much time the ferry would save given the fact that trucks have to arrive at port the day before each sailing. In a blog posted on 31 July by the Central America Group (CAG), a conglomerate of firms with operations located throughout the region, Alfaro also raised the possibility of delays in disembarking at Puerto Caldera, which is already saturated, and estimated that the journey from San Salvador, El Salvador, to San José, Costa Rica, would take three days via ferry, compared to four by road.

The CAG blog also cites Alfaro as questioning whether there would be any financial benefit to the ferry. Shippers sending products from capital to capital will still have to pay US$800 for the drive from San Salvador to La Unión and Puerto Caldera to San José. This means that the journey would cost US$2,160 with the ferry ticket (maritime plus land), compared to US$1,400-US$1,500 currently, he said.

For Ricardo Castaneda, economist at the Guatemala-based think tank Instituto Centroamericano de Estudios Fiscales (Icefi), the Salvadorean and Costa Rican governments may have different expectations for the ferry. Salvadorean officials are “much more motivated” by these kinds of projects, Castaneda told the BBC in an article published on 10 August, whereas even just a few months ago their Costa Rican counterparts were sceptical that there would be any benefits to the ferry as Puerto Caldera is already working at capacity. Castaneda also said that “the impact it will have on trade will not be significant”.

However, Salvadorean officials may be hoping to use the ferry to drive investment and activity at La Unión. The port, located 210km east of San Salvador, was renovated by former president Tony Saca (2004-2009), but it has not attracted as much investment as hoped since then.

If the ferry can attract enough customers to maintain services during the first few months of operations, then it will be well placed to benefit if there are problems crossing Nicaragua or Honduras by road in future. In the meantime, many shippers are likely to see how the service performs under real-world conditions, including any delays in unloading at Puerto Caldera, before committing to changing their routes.

Bypassing Nicaragua?

Beyond reducing costs and journey times, others say that another benefit of the ferry is to avoid passing through Nicaragua. President Daniel Ortega has closed the borders on multiple occasions in recent years, in response to the coronavirus (Covid-19) pandemic as well as civil unrest, incurring huge costs for business. Nicaraguan economist Enrique Sáenz was cited by local news outlet 100% Noticias as saying that he believes that the ferry will help to stop Ortega from “blackmailing” other Central American nations with the threat of border closures. However, as Salvadorean presidential adviser Cristian Flores points out in an AP article, the ferry will only be able to handle 3%-5% of total freight traffic, meaning that the vast majority will still have to travel by road through Nicaragua.

Career diplomat André Corrêa do Lago was confirmed as the president for the United Nations climate change conference (COP30) to be held in Brazil this November. His appointment on 21 January was welcomed by environmental NGOs as well as business associations, but despite his years of experience in climate diplomacy, Corrêa do Lago faces several challenges, such as the withdrawal of the US from the Paris Agreement on climate change. 

Corrêa do Lago began his diplomatic career in 1982, working in embassies in Madrid, Prague, Washington DC, Buenos Aires, and Brazil’s mission to the European Union in Brussels. From 2008-2011 he ran the energy department of Brazil’s foreign ministry, before moving on to run the environment department from 2011-2013. He later served as Brazil’s ambassador to Japan (2013-2018) and India (2018-2023). In a press release, Brazil’s sugarcane and bioenergy association (Unica) praised Corrêa do Lago and highlighted that he was responsible for leading talks with Indian authorities during his stint as ambassador to boost the adoption of biofuels in the automotive sector. Another industry group, Brazil’s agribusiness association (Abag), also welcomed the news that Corrêa do Lago would be leading this year’s COP.

In addition to the approval of the farming sector, civil society groups such as the NGO Instituto de Pesquisa Ambiental da Amazônia (Ipam) and the national network of environmental groups Observatório do Clima, joined in the widespread praise of Corrêa do Lago, releasing statements on 21 January that emphasised his technical expertise and experience in representing Brazil at many international climate diplomacy events. Observatório do Clima stated that President Luiz Inácio Lula da Silva chose the ideal person for the job, but also warned that the new COP30 president will face a challenging task ahead.

The NGO network described the COP29 conference in Azerbaijan last year as a “failure”, with wealthy countries failing to pledge enough financing for developing economies heavily impacted by the climate crisis. This year’s event is similarly expected to see less engagement from developed countries, especially after President Donald Trump signed the order to pull the US out of the Paris Agreement during his inauguration on 20 January. There is no expectation that Trump will attend the conference in Brazil this year or support the COP process, but Corrêa do Lago told journalists at a press conference on 21 January that there are still “paths of dialogue” with the US. Trump withdrew the US from the Paris Agreement during his first term in office (2017-2021), but this prompted the formation in 2017 of the ‘We Are Still In’ coalition of US mayors, governors, and business leaders dedicated to upholding the country’s climate commitments. The coalition has since expanded and rebranded itself as ‘America is All In’ and will likely continue to engage in global climate discussions.

Rise in forest fires 

National urgency to address the climate crisis and protect ecosystems in Brazil intensified in 2024 amid severe heatwaves and droughts, which contributed to a significant rise in forest fires. On 22 January Mapbiomas, an environmental monitoring platform run by civil society and private companies, released its annual forest figures for last year, registering a total 30.87m hectares (ha) of land in Brazil affected by fires. This was up 79% from the previous year and is the highest annual figure in the past five years.

Climate contradictions

This week, Brazil’s mining and energy minister, Alexandre Silveira, travelled to the World Economic Forum (WEF) summit in Davos, Switzerland, where he was seeking to attract more investment for renewable energy projects in Brazil. However, on 22 January national broadcaster CNN Brasil cited Silveira as defending the need to expand Brazil’s oil processing capacity. When Silveira attended the Davos summit in January 2024, he argued that oil wealth can help fund the clean energy transition. This year he has so far toned down the pro-oil rhetoric but is likely to continue trying to make the case that there is no contradiction in Brazil’s energy and climate goals.

BOLIVIA | Enmienda al presupuesto. El 6 de setiembre, el pleno del senado boliviano aprobó una enmienda al presupuesto de 2011 (PGE), ratificando anteriores cambios hechos por la cámara de diputados. La votación agregó Bol$3,27bn (US$457,21m) a los gastos del presupuesto, un cuarto de los cuales irán a obras públicas, incluido US$40m para la administración de carreteras (ABC) para el mantenimiento de la llamada red de vínculo vital de carreteras (RVF).

COLOMBIA | Escándalo en el DAS. En su edición del 17 de setiembre, la revista de interés general Semana reveló que toda la base de datos  de los servicios de inteligencia de Colombia (DAS) está disponible para su compra en el mercado negro. Semana afirmó que pudo adquirir decenas de miles de documentos clasificados y secretos del DAS. Lo sensible de la información es tal que podría resultar en la muerte de numerosos agentes y sus informantes, tanto en Colombia como en países vecinos. Una base de datos disponible contiene detalles de los 6.022 empleados del DAS.

COLOMBIA | Nuevos ministros. Esta semana, el Presidente Juan Manuel Santos designó a Frank Pearl como el nuevo ministro del medioambiente y desarrollo sustentable. La designación de Pearl, que previamente sirvió como alto comisionado de paz bajo la administración de Alvaro Uribe (2002-2010) fue criticada por el gobernante Partido de la U, que dijo que Pearl había “fracasado” cuando estuvo a cargo del programa de reintegración del país. El senador Armando Benedetti dijo que la designación fue “muy sorpresiva” puesto que Pearl “no tiene idea acerca del medioambiente”. Citando los periodos previos de Pearl en el sector privado, Benedetti sugirió que él podía actuar sesgado “hacia los intereses de los empresarios”. Pearl deberá frenar la minería ilegal y abordar el cambio climático, como dos de sus principales responsabilidades en el recientemente creado ministerio. El Presidente Santos también nombró a Mauricio Cárdenas como su nuevo ministro de minas y energía, reemplazando al saliente Carlos Rodado.

COLOMBIA | Tungsteno. La armada de Colombia incautó un cargamento ilegal de 12 toneladas de tungsteno que estaban siendo transportadas en dos barcazas en el Río Guaviare. Las autoridades sospechan que el cargamento era ilegalmente extraído de una selva nacional en el departamento de Guanía y estaba en ruta al departamento de Vichada para su venta a grupos armados ilegales. El metal es utilizado en la fabricación de munición, blindajes, baterías, equipos electrónicos y maquinaria de perforación. Ya hubo dos previas incautaciones de tungsteno en Colombia, en junio de 2010 (4 toneladas) y agosto de 2011 (1,5 toneladas).

ECUADOR | Corte de apelaciones de EU, se pone de lado del Estado. Una corte federal de apelaciones de Nueva York removió una orden judicial preliminar sobre una demanda ecuatoriana que perseguía los activos de la firma petrolera de EU, Chevron, fuera de Ecuador. La decisión no indica el fin  de esa compleja batalla de litigación, pero es un inesperado revés para Chevron en su esfuerzo para impedir que la demanda ecuatoriana, que está enjuiciando a la compañía por daños medioambientales en Ecuador, ataque sus activos fuera de Ecuador. Chevron ya no tiene activos en Ecuador. El 9 de febrero de 2011, un juez ecuatoriano había ordenado a Chevron que pague US$18,2bn en costos de limpieza por daños medioambientales en la región amazónica, donde Texaco, comprada en 2001 por Chevron, usaba para operaciones. Chevron está en el proceso de apelar la decisión en Ecuador.

VENEZUELA-GUYANA | Expansión de la plataforma continental. La ministra de relaciones exteriores de Guyana, Carolyn Rodrigues Birkett, formalizó una petición inicialmente sometida a las Naciones Unidas en 2009, requiriendo la extensión  de la plataforma continental del país de las 2000 millas náuticas al máximo permitido de 350 millas náuticas. La Comisión sobre Límites de la Plataforma Continental de la ONU discutirá el requerimiento en su próxima reunión en abril de 2012. Guyana Esequiba es el nombre dado por Venezuela a la región Occidental de Guyana que reclama como propia. Venezuela aún debe responder a la petición guyanesa, pero si fracasa en oponerse a ella. Una extensión guyanesa de la plataforma continental efectivamente pondría fin al reclamo venezolano sobre el territorio.

PERU | El Vaticano manda refuerzos a Perú. La oficina del Arzobispo de Lima, Cardenal Juan Luis Cipriani, reveló que el Vaticano mandará a un enviado especial de Roma para ayudar a mediar en el impasse entre él mismo y la Pontificia Universidad Católica del Perú (PUCP), la universidad ubicada en segundo lugar en Perú. La riña es sobre los estatutos de la universidad –la universidad está afiliada a, pero no gobernada por, la Iglesia Católica. La universidad afirma que Cipriani está socavando su autonomía explotando ambiguas provisiones en los estatutos, a fin de darle a él mismo más participación en los asuntos de la universidad. La llegada de un enviado especial es un golpe para el Cardenal Cipriani.

In September consumer prices rose by 0.5% bringing the 12 month rate to 7.8%, up on the 7.6% annual rate recorded in August.

The September figure was marginally higher than the central bank forecast of 0.4%. The main reason (over half of the rise in the overall consumer price index) was due to a 0.6% rise in the index of non-tradeable goods. Indeed over the past 12 months this sub-index (non-tradeables) has risen by 10%. This suggests that domestic demand remains strong and consumer confidence high.

The prices of some tradeables also rose significantly in September: new car prices jumped between 2% and 3%, thanks to the weakening of the peso against the dollar. International flight prices also rose, by about 5%. Hotel prices, which in Uruguay are treated as tradeables given the important of the tourism industry, rose 2%.

What is significant is that the steam appears to have gone out of food price inflation. In June food prices had jumped by over 13% in the past 12 months. By September, the annual figure was down to 10%.

For the rest of the year the path inflation will take will probably reflect what happens to the dollar. If the dollar weakens again against the Brazilian Real (and Uruguayan peso) the prices of tradeables will fall, rather than rise.

The consensus, however, is that inflation in 2011 will hit 8%.

President Sebastián Piñera was just starting to regain the initiative. His government had pushed through one meaningful political reform - making the vote voluntary and introducing automatic registration - and he was holding serious talks with his predecessors over the possible overhaul of the binomial political system, one of the relics of the Pinochet-era (1974-1990). And then his government announced that the word “dictatorship” would be replaced by “military regime” in school history textbooks to describe this era. This put Piñera’s new education minister, Harald Beyer, on the back foot, and gave fresh momentum to student protesters. To compound matters further the government then announced a tepid reform agenda for 2012 and 2013, suggesting Piñera’s presidential chats were more show than substance.

The semantic distinctions between “dictatorship” and “military regime” might not be great, but it is the appearance that counts - and the textbook change enabled the opposition Concertación to claim that the Piñera administration was trying to rewrite history and rehabilitate General Augusto Pinochet.

It initially seemed like the change might constitute a gesture to the Unión Demócrata Independiente (UDI), the ultra-conservative senior partner in Piñera’s ruling coalition, to try and win support for the reform of one of the most significant vestiges of Pinochetismo – the binomial electoral system. The UDI opposes any such reform.

Piñera met former president Eduardo Frei on 5 January in the last of his tête-à-tête meetings with his four post-Pinochet predecessors, and heard a now-familiar refrain: reform the binomial system. Frei, who lost the last elections to Piñera, warned that social peace in Chile would be jeopardised without “a long-term vision”, including political, tax and energy reform.

However, if Piñera had been buttering up the UDI it did not appear to work. Piñera held a dinner meeting with ministers and party leaders on 9 January after which the government spokesman, Andrés Chadwick, revealed that the priorities between now and March 2014, when Piñera leaves power, would be a tax reform and then education, health, labour and public security reforms.

A reform of the binomial system, Chadwick said, would only go ahead if there were consensus between political parties. This is true, but Chadwick, a member of the UDI, will know better than most that it is his own party which is least likely to provide this consensus.

The opposition immediately interpreted his words as a sign that the government was not prepared to put pressure on the UDI over the issue. The leader of the Partido Socialista (PS), Osvaldo Andrade, said the UDI was calling the shots and that “Renovación Nacional (RN, the junior partner in the ruling coalition) doesn’t exist and the president is a hostage of the UDI.” He derided the tax reform initiative as a ploy to make the rich richer. The president of Partido por la Democracia (PPD), Carolina Tohá, concurred. She said Piñera would clearly prefer to keep falling in the polls and has “opted to keep the UDI happy”.

Irked at the criticism of his lack of commitment to reform the binomial system Piñera insisted that “neither of the big coalitions has the strength to make the changes alone: they must reach a consensus or there will be no change.” But disillusionment with his failure to confront the UDI was not confined to the Concertación: RN vice-president, Manuel Ossandón, the mayor of the Santiago municipality of Puente Alto, said, “it seems we have learnt nothing from the year of (student) protests.” The RN was also critical of any attempt to airbrush the Pinochet dictatorship.

• Mapuche tension

Seven firemen died on 5 January trying to put out fires in the southern regions of Biobío and Araucanía. The interior minister, Rodrigo Hinzpeter, insinuated during a press conference that the radical Mapuche group Coordinadora Arauco Malleco (CAM) could be behind the fires. The CAM issued a vehement denial, arguing that the Mapuche would never burn ancestral lands. The opposition joined Mapuche communities in accusing the government of “racist” insinuations. The social development minister, Joaquín Lavín, was hastily dispatched to Araucanía on 9 January to hold meetings to mollify moderate Mapuches.

The political opposition has gone on the offensive after President José Mujica played a starring role in the ‘inauguration’ of Venezuela’s President Hugo Chávez in Caracas on 10 January. The opposition accused Mujica of essentially attending a “political rally” as President Chávez was unable to leave his hospital bed in Havana to attend his inauguration. It has summoned the foreign minister, Luis Almagro, to appear before the permanent commission of congress to explain Mujica’s actions. Senior politicians in the ruling Frente Amplio (FA) batted away the opposition’s criticism, arguing that Mujica was expressing solidarity with the Venezuelan people, while Almagro suggested he was motivated by a lucrative new trade deal.

“I respect above all a man who is battling for life and he is in the heart of all of you; that makes sense,” President Mujica said, speaking to a large crowd in front of the Miraflores presidential palace, alongside senior Chavistas and the presidents of Bolivia and Nicaragua, Evo Morales and Daniel Ortega. “This afternoon there is an excess of words and when feelings are overwhelming, words are incapable of conveying them, so I beg you let me shut my mouth because I carry the burden of many years on my back and I have seen many demonstrations like this one, and it fills my soul with memories and names of people who are no longer among us,” he added.

In an exclusive interview with Telesur, Mujica called for Venezuelans to show “serenity”, saying that he had seen the country “convulsed with uncertainty”. “Life teaches us a simple thing, there is always a place to get up and start again, and I think that great causes go beyond common men,” Mujica said. “Chávez has made a deep footprint and I hope that he overcomes the illness from which he is suffering, but if he does not overcome it, life will go on,” he added. “You don’t live from either nostalgia or memories.” Mujica said he fully trusted in Venezuelan institutions to take the appropriate decisions, adding that Venezuela under Chávez has staged “14 or 15 elections in recent years”.

The opposition was singularly unimpressed with Mujica’s actions in Venezuela. Senator Sergio Abreu of the opposition Partido Nacional (PN, Blancos) said that obtaining official permission to make the trip was one thing but that defending the interpretation of the constitution made by Venezuela’s politicised institutions (arguing that Chávez need not appear before congress to start his new term) was tantamount to endorsing a coup.

Abreu called for foreign minister Almagro to appear before the permanent commission of congress (the full congress is in recess until 1 March) to explain the import of Mujica’s visit. Senator José Amorín Batlle of the opposition Partido Colorado (PC, Colorados) supported Abreu, saying that Mujica had taken part in “a Chavista event”, which effectively left Uruguay aligned with only the most radical left-wing countries in Latin America, Bolivia and Nicaragua, whose heads of state attended.

Mujica’s wife, Senator Lucía Topolansky, dismissed the criticism as a flagrant attempt by the opposition to get into the media. She said Mujica had travelled to Venezuela not only as head of state of Uruguay but also in his capacity as pro tempore president of Mercosur to deliver a message of solidarity to a people who are “suffering”. She said that Mujica had not intended to speak at the event in Caracas but had been importuned by his hosts.

Almagro pursued a different tack, and one to which he is likely to stick when he appears before the permanent commission of congress on 4 February. He suggested that the trip was about more than just an expression of solidarity, and had a trade dimension. Indeed, he implied that Mujica’s decision to show up for the event was decisive in securing an important accord with Venezuela for the export of powdered milk, and, in future, the sale of other food products.

Almagro said that under the new accord Uruguay would export 4,500 tonnes a month of powdered milk to Venezuela, netting US$16m per month. He said that Venezuela was paying 25% more for the product than any of the other countries to which Uruguay exports. In a sign of the significance of the lucrative new accord, Almagro pointed out that last December Uruguay’s total exports of powdered milk worldwide came to 9,292 tonnes. This will now increase by nearly 50% a month.

Almagro said the visit had not only opened the door for exports of powdered milk to Venezuela but also the sale of other foodstuffs, with an increase in exports of chicken top of the list. In 2012 Venezuela was the fourth biggest market for Uruguayan exports, receiving US$406m of products, up a massive 25% on 2011. Venezuela accounted for 4.6% of Uruguay’s total exports in 2012.

• Medical approval

The opposition questioned the sense of President Mujica’s decision to fly to attend the event in Caracas on 10 January given that he has been advised by his medical team not to take long flights. Mujica pulled out of the Ibero-American summit in Cádiz, Spain last November at the eleventh-hour, citing medical reasons.

BOLIVIA | Traffickers moving south? According to an account distributed by the official news agency ABI, on 6 March, Felipe Cáceres, deputy minister for social defence & controlled substances (meaning the antidrugs effort) announced, ‘There are already few [drug traffickers] who are operating in the northern zone: they have moved to the south of the country.’ He said that as a result of the destruction of clandestine drug-processing labs in the eastern department of Santa Cruz ‘all the drug traffickers had moved to the north of La Paz.’

Recent operations there, he said, had led to the seizure of more than four light aircraft that were transporting drugs. In the last few months, despite inclement weather conditions, ‘élite units, principally Umopar [the mobile rural patrol unit] have made incursions into the north of La Paz, and we have of course had successful operations.’ He excused himself from providing further details because the antidrugs units were still operating. The north of La Paz department is a frequent destination of drug-carrying flights from Peru.

Cáceres said that according to intelligence reports, ‘drug trafficking in the country is at the level of family clans, and there are also links with foreign elements: there are mainly Colombians, there are Brazilians, Paraguayans and even Europeans.’ He dismissed the notion that foreign drug trafficking organisations (DTOs) were present in Bolivia.

Information from other official sources indicate that there is still much drug processing activity in Santa Cruz:

▪ On 1 March Umopar announced that in 15 operations in the province of Guarayos it had seized 440 kilos of cocaine (HCL).

▪ On 21 March the special force for the fight against drug trafficking, Felcn, announced that it had located and destroyed a ‘large-scale’ cocaine processing lab in the Yotaú sector of Guarayos.

▪ On 28 March Interior Minister Carlos Romero said an Umopar base would be established in Ichilo province, because ‘this is still a red zone because that is where there is drug production in our country; in the rest of the territory it is mostly transit [while here] there is a presence of the drug and organisations of drug traffickers which we must sweep away.’

PERU | ‘Mafias have become powerful.’ In a television interview which received widespread media coverage on 5 March, Peru’s interior minister, Walter Albán, called for a broad agreement between ‘people of different ideological options’ to face the reality of ‘mafias that have grown and become very powerful’.

An example was that a mafia linked to illegal mining had managed to appropriate, thanks to a court order, half a tonne of gold that had been seized by Sunat (the customs and tax authority). Some mafias, he said, hire police officers through security firms.

‘In the Peruvian state, and the national police is no exception,’ he said, corrupt practices have been embedded for a long time [...] We are going to do everything necessary to eradicate it, but if we want to eradicate it completely we need a medium-term plan with a great scope.’

VENEZUELA | Another aircraft ‘immobilised.’ General Vladimiro Padrino López, chief of the armed forces strategic operational command, announced via Twitter on 3 March that a King 90 aircraft had been ‘immobilised’ after landing on a clandestine airstrip in the southwestern state of Apure, which borders on Colombia. He did not provide any other details.

Argentine newspapers broadly hostile to the government’s agenda ran another advert from the American Task Force Argentina (ATFA), the lobbying organisation representing Argentina’s holdout bondholders, on 16 July. “Time is running out for Argentina,” the advert read. “It is time for Argentina to demand that its leaders behave in a serious and responsible manner to save this country from default.” Argentina has until the end of July to reach a deal with the holdouts, the investors who rejected the government’s debt restructings following its default in 2002, but so far Argentine officials have ruled out face-to-face talks with mediator Daniel Pollack.

Jorge Capitanich, the cabinet chief, denied that Argentina was about to enter into default. He also refuted claims in earlier adverts that Argentina was already in “technical default”. That term, he said, “is a euphenism used by ratings agencies. It doesn’t actually exist, outside of the literature of these international agencies.” Capitanich said there was no possibility of entering default as Argentina continued to pay its creditors in a regular and continuous fashion.

Speaking at the Brics-Unasur (Union of South American Nations) meeting in Brasília, President Cristina Fernández echoed this view. Argentina, she said, “is going to keep on paying and honouring its debt. Argentina will not default its debt. To be in default is to cease payment, and Argentina is able to pay.”

Unfortunately for the government, that is not strictly true. Under the terms of the US court rulings, unless Argentina reaches a deal with the holdouts, US-based financial institutions will block the payments it makes to the creditors who have accepted the write-down, meaning it could go into default following a 30 July deadline for an interest payment.

On her visit to Brazil on 16 July, Fernández said that Argentina was willing “to negotiate within the law”, but there are no signs of any Argentine officials actually following this up with concrete actions. Instead the government demanding a further stay in the execution of the court order to buy more time.

Argentina is hoping that pressure from Eurobondholders, who did accept the terms of the government’s restructuring, on Thomas Griesa, the US judge responsible for the court rulings, may buy the country more time. Lawyers representing this group argue that the judge is overstepping his jurisdiction by preventing the Bank of New York, and US-based clearing houses, from processing payments to their clients. Still, such a tactic relies on events entirely outside of Argentina’s control. Griesa is due to hold a hearing with those financial institutions to explain the remit of his order on 22 July.

Although the media war between the government and investors has reached a new pitch of intensity, investors remain sanguine. A rally in Argentine bond prices indicate the markets think a deal will be reached. In an interview with Bloomberg on 14 July, Mario Blejer, a former governor of Argentina’s central bank said that he was “absolutely convinced” a deal would be reached before the 30 July deadline. “The government has been quite determined to try to normalize the situation with the international capital markets,” he said.

• Inflation continues to slow

Indec, the official statistics agency, published its latest inflation figures on 15 July. The consumer price index (CPI) rose just 1.3% in May, the lowest month-on-month rise since the new index was launched at the start of the year. Over the first six months of the year, the CPI rose 15%; annualised data is not available. Argentina’s congressional index, compiled by opposition legislators surveying private consultants, claimed consumer prices had actually risen 2.2% in the month, and 39.9% in the first half of the year.

• Ticket touts

The vice-chairman of the Argentine Football Association (AFA), Luis Segura, has admitted selling some of his allocation of Fifa World Cup tickets, but denied scalping. “What I did from my modest position was sell (at face value) to people who were traveling to Brazil without tickets and we tried to solve this problem for people,” he said. Brazilian police are currently investigating an alleged Fifa-linked scalping network that earned millions of dollars selling match tickets during World Cups.

The first round of the tripartite Canada-Mexico-US talks to renegotiate the North American Free Trade Agreement (NAFTA) were held in Washington from 16-20 August. Many questions about the overall renegotiation process remained unanswered. Robert Lighthizer, the US Special Trade Representative (USTR), took a tough line, claiming in his opening speech that in its 23-year history NAFTA had “fundamentally failed” and caused the loss of around 700,000 US jobs. Lighthizer said one of his government’s priorities was to increase the requirement for both North American and specific US local content in motor vehicles. Vehicle production and trade is one of the biggest value-added activities within NAFTA. At present, to qualify for free trade, vehicles must have 62.5% “North American content” – there are no requirements for specifically Canadian, Mexican, or US local content, and both Canada and Mexico would like to keep it that way. The US however is reported to be demanding its own local, US-made content rule to ensure that high-paid auto industry jobs remain in the country – a top political priority for the Trump administration. The US had an auto and auto-parts trade deficit of US$74bn with Mexico and US$5.6bn with Canada last year. Trump also wants to reduce his country’s overall trade deficit with Mexico.

Officials from all three countries were fairly tight-lipped about what was discussed in Washington. A joint statement said more than two dozen topics had been covered and “detailed conceptual presentations” had been made, but gave no further information; there was no news conference or briefing and most delegations left without further comment. The US would not say exactly what local content proportion it had in mind for the automobile industry.

There was even some doubt over whether the Trump administration really wanted a renegotiation of the treaty. Speaking at a political rally in Phoenix, Arizona on 22 August, just after the first round of talks had concluded, the US president said “I think we’ll end up probably terminating NAFTA at some point”. His narrative – at least for the benefit of his loyal constituency – was that the original NAFTA was fundamentally too favourable to both Mexico and Canada to allow for renegotiation and “I personally don’t think you can make a deal without termination.” On the other hand, Mexico and Canada are now somewhat used to Trump’s negotiating tactics, and had been expecting the threat of termination to be forthcoming at some point. Mexican foreign minister Luis Videgaray was quick to say the threat to scrap NAFTA entirely was no more than a negotiating tactic aimed at the US president’s political base that should neither scare nor surprise Mexico.

NAFTA: The Background.

The original NAFTA agreement was negotiated by Canada, the United States, and Mexico in the early 1990s, and officially came into force at the beginning of January 1994 (it has therefore been in force for 23 years). The treaty’s provisions were phased in gradually over a number of years. Most tariffs imposed on goods traded between the three countries were reduced and then eliminated. A high priority was placed on liberalising trade in agriculture, textiles and automobiles. The treaty also protected intellectual property (IP), set up tri-national dispute resolution mechanisms, and provided environmental and labour safeguards. In all three countries the NAFTA deal enjoyed a significant degree of cross-party support (although there was also some vocal opposition). In the US it was negotiated during the Republican presidency of George H.W. Bush (1989-1993) but approved in Congress and implemented during the Democratic Party presidency of Bill Clinton (1993-2001). Despite this bi-partisan pedigree, President Trump has consistently argued that NAFTA shifted manufacturing production and jobs to Mexico at the expense of the US.

Many of the early debates about NAFTA revolved around the fear that income differentials (Mexico’s GDP per capita was then around only 30% of the US GDP per capita) would indeed lead to a loss of jobs in Canada and the US, the two richer economies. In 1992 US presidential candidate Ross Perot talked of “a giant sucking sound” as US jobs would, he warned, be moving across the border. Supporters of the agreement, on the other hand, insisted that all signatories would benefit: both Bush and Clinton said the agreement would actually create hundreds of thousands of new jobs. Mexican President Carlos Salinas de Gortari (1988-1994) said it would help modernise the Mexican economy so that the country would “export goods, not people”.

The debate over NAFTA’s real impact on the three economies is ongoing. However, a majority of economists argue that it has been positive. Regional trade more than tripled during NAFTA’s first two decades, from around US$290bn in 1993 to US$1.1tn in 2016. This rate of increase was faster than the growth in US or Mexican trade with the rest of the world. Cross border investment also surged. It is of course difficult to distinguish which changes in the three economies are directly due to NAFTA membership and which are due to other factors such as technological change and realignments in the global economy.

The deficit that Donald Trump dislikes
US trade with Mexico (US$bn)

Source: US Congressional Research Service

A report written by M Angeles Villareal and Ian F. Fergusson for the US Congressional Research Service points out that US exports to Mexico grew by 455% from US$41.6bn to US$231bn in 1993-2016, while imports from Mexico grew 637% from US$39.3bn to US$294.2bn over the same period. The US trade balance with Mexico went from a US$1.7bn surplus in 1993 to a deficit of US$74.8bn in 2007, narrowing to US$63.2bn in 2016. This over-US$60bn deficit in US bilateral trade with Mexico is one of the numbers that has been highlighted by President Trump. The report notes that separate from the deficit in merchandise trade, the US also had a 2016 surplus of US$9.6bn in bilateral trade with Mexico in services.

The report makes the point that the overall net effect of NAFTA on the US economy will be relatively small, simply because total trade with Canada and the US was less than 5% of US GDP back in 1994. Two-way trade with Mexico was an even smaller 1.4% of US GDP. However, the other side of that coin is that two-way trade is much more important to the smaller Mexican economy (representing around 50.0% of GDP in 2016). Villareal and Ferguson cite a 2003 report by the Congressional Budget Office (CBO), which estimated that NAFTA is likely to have increased US GDP, but by a small amount “probably no more than a few billion dollars, or a few hundredths of a percent”. A study by the US International Trade Commission (USITC) in 2016 concluded that NAFTA led to “a substantial increase in trade volumes for all three countries; a small increase in US welfare; and little to no change in US aggregate employment”. The USITC said some studies show trade with Mexico depressed wages in some industries and states, while wages in other industries increased.

After 17 months of intense negotiations, the Uruguayan government led by President Tabaré Vázquez has signed a framework agreement with UPM, setting out the terms under which the Finnish firm will build a new US$4bn pulp mill. Described by Uruguayan government officials as the “the biggest fish that we have ever landed”, the deal means that the country’s largest-ever foreign investment project is close to becoming a reality. The Vázquez administration hopes that this will provide a big fillip for the domestic economy in the run-up to the 2019 general election. However, there are still questions over whether the terms of the deal agreed by the government with UPM are in Uruguay’s best interests.

Since July 2016, the Vázquez government has been trying to convince UPM, which already has one major pulp mill in Uruguay, to build an even bigger mill (with the capacity to produce 2m tonnes of cellulose a year) somewhere on the banks of the Río Negro. Uruguay currently has two major pulp mills, but the Vázquez government believes that the country can further develop a sector that has generated high levels of investment, employment, and tax revenue. Indeed, securing a commitment from UPM for the project became an economic policy priority for the Vázquez government. But while UPM did express interest in the project it set a series of pre-conditions, including being granted tax breaks and a commitment by the government to improve transport links between the site of the proposed mill in central Uruguay and Montevideo, the country’s main port.

Following numerous rounds of secret negotiations, on 20 October the government and UPM announced that they had reached an agreement in principle and that a final deal would be made public by the end of the month. On 29 October, Uruguay’s transport & public works minister, Víctor Rossi, announced plans to launch an international public tender for the building of a new 273km freight railway line linking Montevideo with Paso de los Toros, in the central Tacuarembó department. Rossi said the government would present the details of the US$1bn public-private partnership infrastructure development project to interested parties this month, with a view to concluding the tender process by April 2018 and for the works to begin in July that year.

This was taken as the Vázquez government sending a strong signal to UPM that it was committed to advancing with the new pulp mill project. Following Rossi’s announcement, UPM asked the government for a 10-day extension on the 31 October deadline for signing off on the framework investment contract agreement. This sparked concerns in Uruguay that the firm was having second thoughts. However, on 7 November the Vázquez government and UPM announced the signing of the agreement during a public event in Montevideo. The new agreement outlines all the commitments and deadlines for developing the project (including a February 2020 deadline for making a final decision on whether to go ahead with the project or not), which is to be located in the central department of Durazno, on the opposite bank of the Río Negro from Paso de los Toros.

The statement adds that as part of the agreement the plant will be given free trade zone (FTZ) status. Alvaro García, the head of Uruguay’s planning & budget office (OPP), outlined some of the economic benefits that the project could bring to Uruguay, including a two-percentage-point increase in GDP per year; boosting cellulose exports by US$1bn a year; increasing tax revenues by around US$120m a year; and creating 4,000 permanent jobs. However, members of the political opposition have criticised the fact that what the government has agreed with UPM has not been made public. “It’s deplorable that they are signing agreements and people don’t know what the government is committing to,” Senator Carol Aviaga of the centre-right opposition Partido Nacional (PN) said, noting that the government has yet to disclose what it has agreed to congress, depriving legislators of the opportunity to debate whether the deal is in the national interest.

• Royalties

OPP head García said that UPM’s new prospective mill will be given FTZ status to ensure that its exports “remain competitive in international markets”. But García noted that in exchange for this UPM agreed to pay an additional annual royalty of US$3.5m during the mill’s first 20 years of production, and another US$3.5m in annual royalties during the mill’s useful life. Significantly, García said that the government rejected UPM’s demand for its new mill to be exempt from the property tax on forest plantations – a benefit offered to the mill owned by rival Finnish firm Stora Enso by the previous government led by José Mujica (2010-2015). García said the Vázquez government rejected this for being unconstitutional.

The 2021 World Investment Report from the United Nations Conference on Trade and Development (Unctad) makes bleak reading for the Caribbean and most particularly for Trinidad & Tobago.

Overall, foreign direct investment (FDI) flows to Latin America and the Caribbean (LAC) were down 45% in 2020, to US$88bn. No other developing region suffered such a large decline. The decline for the Caribbean was slightly below the overall average, at 36%, bringing the sub-region’s FDI total down to US$2.5bn.

The biggest decline in sub-regional FDI was felt in the Dominican Republic, where FDI contracted by 15%. Haiti was another casualty as civil unrest added to the constraints related to the coronavirus (Covid-19) pandemic. In Trinidad & Tobago, FDI turned negative, to -US$439m, with the severest impact in the energy industry which accounts for around half of the country’s FDI. Another country with negative FDI was Suriname, which saw an outflow of US$27m.

Trinidad & Tobago’s woes were highlighted in late July when BPTT, a local subsidiary of British multinational oil and gas company, told the government to expect a shortfall in natural gas production of 15% in 2021 and over 10% a year until 2024. The confidential forecasts were revealed by locally based, Guardian Media.

On 27 July international credit ratings agency Standard & Poor’s (S&P) changed its outlook for Trinidad & Tobago from ‘stable’ to ‘negative’ while reaffirming its rating at ‘BBB-’. The government tried to put a positive spin on this, with Finance Minister Colm Imbert saying maintaining the rating “validates” the government management of the economy. Imbert said: “[S&P] has kept the view that conservative and competent policy management, including large fiscal buffers, attested to the high shock absorption capacity of the country. The rating agency highlighted that unlike many commodity exporters, during the boom years Trinidad & Tobago saved excess fiscal revenues”.

In its 27 July statement, S&P said: “The negative outlook incorporates the risks that poor economic performance and only modest GDP growth prospects prevent Trinidad & Tobago from recovering the economic resilience lost in recent years, as measured by GDP per capita”.

It went on to say: “The negative outlook reflects our view that there is at least a one-in-three chance we would lower the ratings over the next 12-to-24 months”.

Interestingly, however, given the BPTT report, it added: “We expect the decline in energy production to reverse of the next two years, and the economy to return to growth by next year. This uptick should significantly reduce the government fiscal deficit and eventually stabilise its net debt-to-GDP figures. However, it remains uncertain whether this improvement will be sufficient to bring per capita income back toward earlier levels, following five years of negative real GDP per capita growth, on a sustained basis”.

Asked to comment by Guardian Media on the leaked production forecasts, BPTT said: “We do not comment on long-term forecasts because they include assumptions on exploration and appraisal activity, unsanctioned projects, and volumes from developments operated by others. These all carry a degree of uncertainty and are subject to change. Our goal remains to efficiently find and develop resources to satisfy our contractual obligations”.

BRITISH VIRGIN ISLANDS | No direct rule. The British government decided last week not to impose direct rule on the British Virgin Islands (BVI), after the premier of the overseas territory, Andrew Fahie, was arrested in the US on 28 April, charged with conspiracy to import a controlled substance and money laundering. A Commission of Inquiry (COI) report focused on corruption and abuse of authority in the BVI, which was published a day later on 29 April, had recommended direct rule, denouncing “appalling” failures in the BVI’s governance, “serious impropriety”, and a “high likelihood” that serious corruption had occurred [WR-22-18].

But serious remonstrations by the Organisation of Eastern Caribbean States (OECS), a seven-nation sub-regional grouping, which denounced direct rule as “a retrograde step in the evolution of the democratic process”, a sentiment echoed by the 15-nation Caribbean Community (Caricom), appear to have persuaded British foreign secretary Liz Truss to stay her hand. On 8 June Truss said that a government of national unity under a new premier, the minister of finance Natalio Wheatley, should be given two years in which to push through reforms to root out corruption.

JAMAICA | Free zones. Jamaica’s prime minister Andrew Holness addressed the opening day of the first annual Global Alliance of Special Economic Zones (GASEZ) Conference in Montego Bay, the capital of the parish of St James, on 13 June. “There is a natural thrust toward free zones [which] are critical to the future growth of the world economy,” Holness said, adding that “Jamaica is actively positioning itself to take advantage of this new wave of investment projected for the region”.

Jamaica has established over 160 SEZs since 2018, across eight of the country’s 14 parishes, as it seeks to boost job creation and increase productivity, and Holness said his government had subscribed to the declaration of SEZ as a powerful economic tool by the United Nations Conference on Trade and Development (Unctad) to help with economic recovery from the coronavirus (Covid-19) pandemic.

On 6 October Trinidad & Tobago’s Prime Minister Keith Rowley presented the government’s 2023/2024 budget, which, according to finance minister Colm Imbert, will ensure that “the economic recovery is anchored on sound and stable economic conditions”. Opposition leader Kamla Persad-Bissessar retorted that it was a “painful” document that perpetuated the country’s over-reliance on the energy sector.

The new budget totals TT$59.2bn (US$8.7bn) and is built on the assumptions that international oil and gas prices (the country’s key exports) will average respectively US$85/barrel and US$5 per million Btu (British thermal units), assumptions which seem reasonable given current market conditions, influenced by the global repercussions of the Israel-Gaza crisis that broke out in early October. The government is projecting a fiscal deficit of TT$5.19bn, equivalent to 2.7% of GDP. Annual inflation currently stands at 4% while GDP growth in Q1 2023 year-on-year eased down to 3% (from 3.6% in Q4 2022).

By government departments, the top three budget lines have been proposed for education and training; health; and national security, with social development spending coming in fourth position. Imbert sought to highlight good news items, such as a recent fall in unemployment (down to 3.7% in the quarter to June, from 4.9% in the quarter to March). He also noted that public service workers will be receiving promised back-pay, and that plans are underway to increase the minimum wage by 17%.  Less popular may be the government’s proposal to raise the age of retirement to 65 years from 60 years currently. Work is also in progress to introduce a 3% annual property tax. Given widespread concern over crime, the police service is to triple its annual recruitment drive and receive extra funds for vehicles, equipment, and new container scanners for the country’s main port.

Reactions were mixed. Persad-Bissessar said the budget failed to fully address the surge in crime and that the fiscal statistics were being manipulated to create a false sense of security. The Tobago House of Assembly (THA) said its regional budget was insufficient. On the other hand, the Trinidad and Tobago Manufacturers’ Association (TTMA) was upbeat, welcoming the introduction of e-payments and promises of expanded access to foreign exchange through the Exim Bank and for small and medium-sized enterprises.

TTMA response

TTMA head Roger Roach said he welcomed a government push for growth led by the non-energy manufacturing sector and supported by an environment favouring increased business competitiveness.

The dollar problem

Some analysts accuse the government of failing to resolve a long-running problem: the scarcity of US dollars. Barbados-based economist Marla Dukharan says the problem exists because the government subsidises its dollar sales, pricing them at below the black-market rate, something which boosts demand and causes scarcity at the official rate. In her view this creates speculation and economic distortion. Subsidised dollars have artificially boosted imports and created a “perverse and harmful incentive to hold or transfer US dollars overseas”, she wrote in an October report.

Dukharan has likened Trinidad and Tobago’s split exchange rate system to the multiple rates used in Argentina which have also exacerbated dollar shortages. She argues that the government could fix the problem by moving to open-market dollar auctions and a single free-market rate. But in his budget speech Imbert said the government intended to “move aggressively to develop strategies to increase the repatriation of foreign exchange earned overseas by local and foreign businesses operating in T&T”. Dukharan described this as “gun talk” warning that “preferential access creates perverse incentives and corruption opportunities”.

A fleet of four Russian ships recently paid a visit to Cuba in what is the latest sign of strengthening relations between Havana and Moscow. The visit, which took place from 12-17 June, did not go unnoticed in Washington, given deeply strained relations with Russia over its invasion of Ukraine. While both Cuba and the US appeared to downplay the fleet’s visit, media reports that the US had mooted cancelling plans to deploy a nuclear submarine to its naval base in Guantánamo Bay, Cuba, in what was a routine activity, suggest the current sensitivities in diplomatic relations between the three countries.

Announcing the ships’ planned arrival on 6 June, the Cuban government claimed that it was in line with Russia and Cuba’s “historic relations of friendship”, stressing that none of the ships would “carry any nuclear weapons and their presence does not represent any threat to the region”. According to Cuba’s foreign ministry (Minrex), the ships were the frigate Gorshkov, nuclear submarine Kazan, tanker ship Pashin, and rescue tug Nikolay Chiker. During their stay, Russian sailors were due to follow a programme of activities including courtesy visits to the Cuban navy’s commander and the governor of Havana, according to Minrex.

On 5 June, a US official, speaking anonymously, was widely cited by newswires such as Reuters as saying that “Russia plans to send combat vessels into the Caribbean region this summer as part of naval exercises”, adding that while Washington does not see the move as “threatening”, the US Navy will monitor the exercises. On 13 June the US Southern Command (Southcom) then announced that fast-attack submarine USS Helena was in Guantánamo Bay “as part of a routine port visit as it transits the [Southcom] geographic area of responsibility while conducting its global maritime security and national defence mission”.

Southcom added that the vessel’s location and transit were previously planned. Two officials familiar with the matter, however, told the Miami Herald in a piece published on 14 June, that “there was a discussion over whether to proceed” following the discovery that Russia intended to send the vessels to Cuba – indicative of fears that tensions could escalate.

While the routine visit by the US submarine ultimately went ahead, the stir caused by the military manoeuvres evokes the Cold War period of geopolitical tension between the US, the Soviet Union, and their allies, during which the Soviet Union and later Russia operated the Lourdes intelligence facility near Havana from 1962 until its reported closure in 2002. This comes as US-Cuba relations remain tense under the administration led by President Joe Biden, despite cooperation on issues such as migration and law enforcement. The US government’s decision, most recently updated in November 2023, to retain Cuba on its list of countries that sponsor terrorism (to which it was added in 2021) remains a major gripe of Cuba [WR-24-21], which has continued efforts to pursue cooperation with allies like Russia and China.

Economic sectors

In March, Russia’s deputy prime minister, Dmitry Chernyshenko, said that over the past year more than 100 Russian companies have started to work in Cuba from different economic sectors, such as “heavy industry, energy, banking, agriculture, information technology, and tourism”. As regards tourism for instance, Cristina León, a tourism official at the Cuban embassy in Russia, said in April that Cuba had received 66,887 Russian tourists in the first quarter of 2024, more than double the 32,224 registered during the same period last year. León added that the rise was due to a greater number of flights between Moscow and Cuba.

Closer ties

The visit by Russian vessels is the latest sign of burgeoning relations between Cuba and Russia, whose presidents, Miguel Díaz-Canel and Vladimir Putin, most recently met on 9 May in Moscow during a working visit by the Cuban leader. Vladimir Rouvinski, an assistant professor at Colombia’s Icesi university, told Southcom’s Diálogo website in a report posted on 12 June that in the case of Cuba, “I see quite worrying new dynamics, understanding that the island has an important position for Moscow due to its proximity to the US”. He added that “As a consequence of the war in Ukraine, Russian companies that were in other places are looking for where to invest — that place may be Cuba.”