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*** More threats to polio vaccination.  Last week we alerted subscribers to a threat to a polio vaccination programme in Karachi, Pakistan.  The issue is important because of possible knock-on effects.  As we recalled last week, in 2003 the northern Nigerian state of Kano banned polio vaccination because of fears that it caused infertility and spread HIV.  Within 18 months the disease had reappeared in 12 African countries in which it had previously been eradicated.  On 28 January, it was reported that the resistance to polio vaccination in Pakistan had now spread to the Punjab.  Some fathers have been refusing to allow their children to be vaccinated on the grounds that the programme is part of an international conspiracy against Muslims.  They also claim that in previous years their children and wives were perfectly healthy without vaccinations.

*** Al-Qaeda targets Hezbollah.  Jabhat al-Nusra in Lebanon, a jihadist group with links to al-Qaeda, issued a warning on 26 January saying that in Lebanon “Hezbollah and all its bases and bastions are legitimate targets for us, wherever they are”.  The warning followed three days after a car bomb attack in Beirut’s southern suburbs, claimed by the group’s Syrian branch, killed four people.

Jabhat al-Nusra in Lebanon also warned Sunni Lebanese against “approaching or residing in or near [Hezbollah’s] bases, and avoiding gathering around its meeting points”.

*** Japan and China at each other again.  On 28 January, Japan’s education ministry said that it was revising teaching manuals for junior and senior high schools so that they show the Senkaku Islands (claimed by China as the Diaoyu Islands) and the Takeshima islets (currently under South Korean control and called the Dokdo) as being “integral parts of Japanese territory”.  Japan’s education minister, Hakubun Shimomura, said: “With the cooperation of our Foreign Ministry we will explain the country’s position to our neighbours.”

The manuals, it should be explained, have a big influence on teaching but are not legally binding.  However, revising the manuals at this time is an unusual move as they are usually revised only once every 20 years and the next revision was not due until 2016.

Beijing responded by calling on Japan to “stop provoking” China.  A foreign ministry spokesperson said: “The Diaoyu Islands and their affiliated isles have been an integral part of Chinese territory since ancient times.  We are greatly concerned about [the new guidelines] and have lodged a solemn representation to the Japanese side.”

Since taking up the position of economy minister last year, Axel Kicillof has defied critics who predicted left-wing heterodox measures with a series of increasingly orthodox policy decisions. But arguably the most significant shift in the government’s economic thinking has been forced upon them, via threat of expulsion, from the International Monetary Fund (IMF). After seven years of tinkering with official statistics, the national statistics institute (Indec) released a set of reliable inflation figures on 13 February. Though the number was alarmingly high, at 3.7% for the month of January alone, it did at least approximate the truth. As one banking analyst put it: “In this case, bad news is good news.”

In 2013, Indec calculated that inflation ran at just 10.9%. Private sector analysts said it was 28.3%. Nobody believed the government figures, not even supporters. Wage demands of government-affiliated unions used the private sector figure as a starting point for negotiations. Faced with this lack of credibility, and the possibility of expulsion from the IMF, Argentina finally decided to alter its methodology.

The new price index will take into account price variations of all the country’s provinces (except for the city of Buenos Aires, which will not contribute data). The index will be published monthly and will use a fixed basket of goods and services. Kicillof hailed the “national scope” of the new methodology. Indec’s statisticians will measure 200,000 prices in 13,000 locations in 246 cities, covering 86.7% of all urban areas in Argentina. According to the new index, the rise in prices was led by health care, transport, entertainment and food.

January’s figure means annualised inflation is running at a frightening 55%. Kicillof, however, downplayed the significance of the month’s statistics, pointing to a series of one-off factors, not least the sharp, government-mandated devaluation in the peso. Argentine investors argued that in this case, the honesty was more important than the figure. The Argentine bond market rallied the most in emerging markets. Yields on government dollar bonds due in 2017 fell 1.55%, the biggest drop in more than 11 months.

Salary negotiations

Still, inflation is close to running out of control. Collective salary negotiations are due to begin in March, and the jockeying has already begun. A few weeks ago, teachers from the government-allied section of the Confederación General del Trabajo (CGT), started talking about a 61% increase ahead of their negotiations. By comparison, the government’s stated enemies are more modest. Pablo Moyano, head of the powerful truckers’ union (and son of Hugo, the leader of the anti-government faction of the CGT) called for a 35% increase on 17 February. Teachers from Buenos Aires province are already threatening strike action if their demands for a 35% hike are not met.

Jorge Capitanich, the cabinet chief, has been swift to point out that, in theory at least, provincial governments are responsible for pay deals. “The State is not the employer,” he said on 19 February. “The State sets the initial salary not the basic salary. Salary composition varies depending on each jurisdiction.” A meeting of provincial governors on 10 February agreed on a ceiling of a 25% increase. But they also agreed they would struggle to persuade unions to accept this figure, and announced their plan to request assistance from the federal government. A meeting between the two sides is due to take place on 26 February, and Kicillof is due to attend.

Unemployment down

Unemployment in Argentina was down at the end of 2013. According to data released by Indec, 6.4% of the Argentine population was out of work in the last quarter, a 0.5 percentage point drop from figures recorded in the same period of 2012, when 6.9% of the population was officially counted as unemployed.

Four years after the arrest and extradition of gang leader Christopher ‘Dudus’ Coke, Jamaica is on the point of enacting The Criminal Justice (Suppression of Criminal Organizations) Bill.  Having been passed by the House of Representatives on 18 February, the bill was approved by the Senate on 7 March with three amendments.  It has been a two-year battle to get the bill approved, with opponents saying that it will serve mostly to criminalize vulnerable youths.

It was the Dudus Coke episode that brought to crisis point the issue of Jamaica’s gangs.  More than 70 people were killed in the battle to arrest Coke.  But it was a problem that long predated the battle to arrest the gang leader in 2010, and it was a problem that was intricately bound up with the politics of Jamaica.  The gangs emerged in post-independence Jamaica to control ghettoes which they then delivered at election time to their favoured political party.  The Jamaica Labour Party (JLP) and the People’s National Party (PNM) were both complicit in what became known as the system of “garrison politics”.  The gang leaders delivered votes, the politicians delivered money and projects.

Coke was leader of the ‘Shower Posse’ which controlled Tivoli Gardens in West Kingston, an area which regularly voted for the JLP as instructed.  This link between Coke and the JLP became embarrassingly obvious as then Prime Minister Bruce Golding (2007-2011) refused to comply with the US’s 2009 extradition request.  It was not until May 2010 that US and opposition pressure on Golding proved too much for him to resist.  But his compliance led to an outburst of violence from Coke supporters which in turn led to the imposition of a state of emergency and the deployment of the military.

Sceptics argue that the new legislation will have little effect unless this nexus between the gangs and politics is broken, but the passing of the new legislation and the crime figures both suggest progress is being made.  In 2009, for instance, there were 1,683 murders in Jamaica.  In 2011, the year after Coke’s arrest and extradition, the figure was down to 1,113, although this bounced back to some 1,200 in 2013.  Another positive is that no dominant criminal figure has appeared to take over from Coke.

The US endorses the progress made by Jamaica in its latest International Narcotics Control Strategy Report (INCSR), released in March 2014, stating that: “Through strong leadership, stable democratic institutions, and support from the United Sates and other international partners, Jamaica continued to make slow but steady progress in combating narcotics trafficking, corruption and organized crime in 2013.”

The report pointed to progress made by the Jamaica Constabulary Force (JCF) Anti-Corruption Branch “in eliminating corrupt and unethical police officers”, but it tempered this by added that “corruption remains entrenched, widespread, and compounded by a judicial system that has a poor record of successfully prosecuting corruption cases against high-level law enforcement and government officials”.

The criminal justice system is also noticeably ineffective when it comes to gaining convictions for murder.  The INCSR describes it as being “underfunded, overburdened, and sluggish”, but given a conviction rate for murder of only 5%, this would seem to be an understatement.

• “The US endorses the progress made by Jamaica in its latest International Narcotics Control Strategy Report (INCSR), released in March 2014, stating that: ‘Through strong leadership, stable democratic institutions, and support from the United Sates and other international partners, Jamaica continued to make slow but steady progress in combating narcotics trafficking, corruption and organized crime in 2013.’”

Attracting more investment into Brazil could be integral to reviving the country’s domestic economy. With this in mind, the government led by President Michel Temer has forged ahead with a privatisation plan targeted at foreign companies.

On 27 September, the Temer government raised R$12.13bn (US$3.83bn) in revenue from selling off four hydroelectric power plants in Minas Gerais state owned by state-owned energy company, Cemig. This was almost 10% better than the R$11bn (US$3.47bn) the government had expected to get, suggesting that interest in investing in Brazil is starting to pick up. The winning bids came from Pacific Hydro, a firm owned by China’s State Power Investment Corp (for the São Simão plant), France’s Engie (for the Jaguara and Miranda plants) and Italy’s Enel (for Volta Grande plant).

Also on 27 September, Brazil held an oil and gas auction which attracted a record R$3.8bn (US$1.2bn) in bids from energy companies. This is well above the R$500m (US$157m) projection that the industry regulator, Agência Nacional do Petróleo (ANP), had expected. However, results from the auction were mixed. Of the 287 blocks on offer, the ANP was only able to allocate 37 (13%), perhaps due to low international oil prices, which remain at around US$55 per barrel. However, this was offset by a record-breaking R$3.6bn (US$1.3bn) bid for two offshore blocks in the Campos basin, located of the coast of Rio de Janeiro state, which led to them being awarded to a consortium comprising the US’s Exxon Mobil and Brazil’s state-owned oil firm, Petrobras.

The high bids offered for the Campos Basin concession, as well as some of the others on which bids were made, signal that investor confidence is returning to Brazil’s oil and gas industry. “We hope we have turned the page,” stated the mines & energy minister, Fernando Coelho Filho. The minister added that, “We want to promote a competitive exploration and production market in Brazil.”

The next two oil and gas tenders for ‘pre-salt’ deep-water offshore blocks are now scheduled to take place on 27 October. These include the lucrative ‘polygon’ offshore reserves (located of the shores of Rio de Janeiro and São Paulo states) which together account for nearly half of Brazil’s oil production, according to the ANP. The level of interest that these auctions generate, and the size of the bids placed, will be closely watched by the government and economists to try to gauge if there is now substantially more appetite for investing in Brazil.

IMF improves Brazil’s growth forecast

The International Monetary Fund (IMF) revised up its GDP growth forecast for the Brazilian economy this year to 0.7% from 0.3% in July in its most recent World Economic Outlook (WEO) report published on 10 October. The improvement is due to strong export performance and higher domestic consumption levels. The IMF noted that the increase in consumption levels was driven by a record agricultural crop and a windfall from the release of mandatory workers savings (FGTS). However, Brazil’s economic growth is still below the IMF’s projected regional average of 1.2%. Indeed, Brazil’s is the fifth-worst growth forecast of all the 26 Latin American countries surveyed by the IMF, after Venezuela (-12%), Trinidad & Tobago (-3.2%), Suriname (-1.2%), and Ecuador (0.2%). Ongoing political uncertainty in Brazil coupled with weakening investment threatens to drag its economy down again, which could weigh on next year’s growth. The IMF revised its forecast for Brazil for 2018 to 1.5%, up from July’s estimate of 1.3%. But this is lower than April’s projection of 1.7%.

• Labour market begins to recover

Brazil’s labour market is beginning to pick up again following the country’s economic recession, in another sign that the economy is recovering. Unemployment in Brazil fell to 12.6% between June and August, according to data from Brazil’s national statistics institute (IGBE) published on 29 September. This is down 0.7 percentage points from the 13.3% unemployment rate recorded during the previous three months. However, the latest unemployment rate still means that 13.1m people are currently out of work in Brazil.

Brazil-based ECB Group has announced a further postponement of its ambitious US$800m Omega Green bio-refinery project in Villeta, Paraguay. The delay is attributed to coronavirus (Covid-19) disruption, but the company says construction work will start in the second half of this year.

Omega Green’s plant will transform a range of waste products into different biofuels, which are highly attractive because their production and use is either zero or very low in carbon emissions. Underlining international interest, 90% of Omega Green’s future output has already been sold. In January ECB signed a contract to sell 1bn litres of advanced biofuels to oil firm BP in 2024-2029, representing 40% of the plant’s capacity. This was followed by a contract to sell 2.5bn litres of a different product mix to Royal Dutch Shell, over the same period, representing 50% of capacity. The intention is to sell the remaining 10% on global spot markets for renewables.

• Omega Green project

The basic proposition of the Omega Green project is that the plant will use technology from the US company Honeywell UOP to take in a range of waste products – such as used cooking oils (UCOs), animal fats, and soyabean oil – and through a hydrogen-based refining process, produce hydrotreated vegetable oil (HVO), otherwise known as green diesel or biodiesel, along with bio-jet fuel (synthetic paraffinic kerosene, SPK) and green naphtha (used in the production of sustainable plastics).

In an interview with Paraguayan daily, La Nación, in March, ECB chief executive, Erasmo Battistella, explained why Latin America’s first bio-refinery will be built in Paraguay, rather than in its Brazilian home market. The Brazilian government is dragging its feet on introducing regulations for advanced biofuels in the country. By contrast Battistella listed a favourable tax regime in Paraguay (the government granted ECB 60-year free trade zone tax incentives) and the fact that the country, the world’s fifth largest soya producer with an important livestock herd, already has plentiful bio-waste supplies. Also mentioned was the availability of good logistics (the biodiesel will be shipped down the Paraguay River to the Uruguayan port of Montevideo for onward destinations in Europe and elsewhere). Finally, Paraguay has plentiful and competitively priced electricity supplies from its hydroelectric facilities.

The proposition also looks attractive from the government’s point of view. Ministers have described the US$800m project as the largest single foreign investment in Paraguay’s history. It is estimated that 3,000 direct jobs will be created during the construction phase (2021-2024), with 2,400 direct and indirect jobs created when the refinery starts operating in 2024. It is also estimated that some 20,000 family farms will benefit from selling bio-waste to the refinery.  The project also places Paraguay in the vanguard of Latin America’s exploration of sustainable green technologies.

A year after Uruguay’s national congress approved the Ley de Urgente Consideración (LUC) [WR-20-27], an omnibus reform presented by President Luis Alberto Lacalle Pou shortly after he took office in March 2020, opponents of the LUC succeeded in gathering enough signatures to stage a referendum on whether to repeal parts of the law. Although it is yet to be confirmed by the electoral court, the looming referendum is already putting strain on the cohesion of the ruling five-party coalition.

The LUC, a wide-ranging reform proposal comprising over 400 articles on a vast array of issues, was President Lacalle Pou’s flagship project; its approval within months of his taking office was hailed as a success for the young centre-right government. However, the law was fiercely criticised by the left-wing opposition Frente Amplio (FA) coalition and parts of civil society, notably the Plenario Intersindical de Trabajadores-Convención Nacional de Trabajadores (PIT-CNT) umbrella trade union, and in December last year they began collecting signatures to demand the staging of a referendum on the repeal of 135 of the LUC’s articles.

The Comisión Nacional Pro Referéndum, the group collecting the signatures, had until 8 July to reach the minimum threshold of 672,000 signatures. This figure was comfortably surpassed, with 797,261 signatures presented to the electoral court on that date. The court must now certify the signatures, but the assumption is that a referendum on repealing parts of the LUC will be held at some point in the first six months of 2022.

The articles that the pro-referendum camp is seeking to repeal cover issues as varied as public security, regulations for the oil market, education, adoption rules, and mobile number portability, amongst others. A vote in favour of a repeal would be a huge blow to the Lacalle Pou government and an indictment of its political programme, weakening its authority – a setback it will keenly seek to avoid. And yet, the parties of the multi-colour coalition are divided over how to respond to this looming threat.

The government had remained silent while the FA and PIT-CNT carried out their signature-gathering campaign this year, and Lacalle Pou, who belongs to the Partido Nacional (PN, Blancos), is reportedly an advocate of maintaining this line and waiting until the referendum is confirmed before taking action. In contrast, members of the Partido Colorado (PC, Colorados) and Cabildo Abierto (CA), the PN’s most important partners in the coalition, are arguing for an immediate offensive against the referendum. The coalition members do agree that they will need to put on a united front to defend the LUC and what they see as the necessary changes it has introduced, but there is for now no consensus as to what this strategy will look like. Coming up with one may prove to be something of a test for the fragile coalition.

These cracks come amid other signs of frustration from parts of the coalition. On 19 July Environment Minister Adrián Peña, the leader of the Ciudadanos faction within the PC, called a meeting with the secretary to the presidency, Álvaro Delgado (PN), to discuss how the coalition might be more effectively managed. One of Ciudadanos’ demands is that a coordinating body be set up to allow for “more assiduous” meetings between the coalition’s political leaders (as well as the PN, PC, and CA, Lacalle Pou’s multi-colour coalition includes the Partido Independiente and the Partido de la Gente, which is not represented in government). “We believe that [the coalition] has worked well so far, but nothing prevents it from working better,” Peña said in a press conference after the meeting.

Frustrations

Keeping his coalition partners happy is one of President Lacalle Pou’s main challenges, and stresses regularly emerge. These have most recently come from the PC. Some ‘Colorado’ members did not appreciate Foreign Minister Francisco Bustillo referring to the government as a ‘Blanco’ administration in a recent interview, a faux pas that was remedied by Bustillo apologising. Then, the dismissal earlier in July of Jaime Miller as director of Uruguay XXI, the exports promotion agency, generated some discontent amongst the PC’s Ciudadanos faction, to which Miller belongs and which was reportedly not forewarned of his departure (Miller and Bustillo reportedly did not get on)

Venezuela’s main opposition parties, grouped under the Mesa de la Unidad Democrática (MUD) coalition, announced on 31 August that they will participate in the November regional and municipal elections rather than repeat the boycott of the December 2020 legislative election. The announcement reflects diminished faith in opposition leader Juan Guaidó’s maximum pressure strategy to force President Nicolás Maduro out of office through a mix of international sanctions and domestic public pressure. However, it also signals the opposition’s hope that it can secure some degree of democratic reform from the government in the ongoing dialogue process in Mexico [WR-21-33].

The MUD’s statement confirming its intention to run in the regional and municipal elections on 21 November reflected the deep divisions in the opposition regarding the best strategy to remove Maduro from power. The “extensive and difficult process of internal deliberation” alluded to by the MUD has been ongoing since 2017, when the opposition boycotted the 2017 constituent assembly election.

Since then, successive boycotts of the 2017 municipal elections, the 2018 presidential election, and, most recently, the December 2020 legislative election, have only succeeded in strengthening Maduro’s position. Meanwhile, Guaidó has come under fire for continuing to follow a strategy that has left all of Venezuela’s institutions under the control of the ruling Partido Socialista Unido de Venezuela (PSUV).

Nor will the MUD have filled with confidence those who doubt the wisdom of participating in an election that many expect to be rigged: the statement acknowledged that “these will neither be fair nor conventional elections”. The MUD, nonetheless, insisted that electoral participation would “complement” negotiations in Mexico by re-mobilising opposition voters. Large-scale anti-government protests have been the missing plank in Guaidó’s maximum pressure strategy since he last succeeded in mustering them in late 2019; a resurgence of mass demonstrations could force concessions in Mexico.

Following the MUD’s announcement, Guaidó reaffirmed his belief that the Maduro administration is solely seeking a veneer of legitimacy from November’s elections. “You don’t have, nor will you have, recognition,” he told Maduro in a tweet, warning that “we all know that conditions and guarantees are not currently in place for a free and fair election”.

Other leading opposition figures offered a more pragmatic assessment of a political reality in which Maduro currently holds all the cards. Henry Ramos Allup, the secretary general of Acción Democrática (AD), insisted that Venezuelans opposed to Maduro “want representation, want a presence, they don’t want us to leave another hole so that the government can make another clean sweep without any resistance, leaving us without any representation whatsoever”.

Ramos Allup’s view encapsulated a growing belief among many in Venezuela’s opposition that Guaidó has led his supporters down a dead end with his conviction that Maduro could be forced from office rather than defeated at the polls. The focus can now be expected to shift to extracting concessions from the government at the next round of negotiations in Mexico, which are scheduled for 3-6 September.

Freddy Guevara, the national coordinator for Voluntad Popular (VP), acknowledged the opposition’s diminished stature and instead called for both sides to learn “to live with each other…in a democratic framework,” rather than “thinking they can displace and eliminate the other”. Guevara insisted that this is achievable via the dialogue process, but that progress “will not be as quick as we would like”.

Floods

The Maduro administration is facing criticism over its handling of severe and ongoing flooding in the western state of Mérida, which resulted in a landslide in Tovar municipality that killed at least 20 people in Tovar municipality on 23 August. The Venezuelan Episcopal Conference (CEV) said on 30 August that the national guard (GNB) “has prevented the arrival of much of the aid” sent by NGOs and private companies. The CEV called on the national and local government, as well as the armed forces, “not to act according to political interests”. Meanwhile, Venezuela’s national press union, the Sindicato Nacional de Trabajadores de la Prensa (SNTP), has denounced the Mérida state protector’s office for accusing journalists of lying about the extent of the floods. 

There has been a change of plan at Mexico’s central bank, the Banco de México (Banxico). After months of waiting for senate hearings to confirm his appointment as governor of Banxico, former finance minister Arturo Herrera suddenly discovered he no longer had the backing of President Andrés Manuel López Obrador. Instead, López Obrador has announced that Victoria Rodríguez Ceja, a finance ministry official, is to get the job. Financial markets have been taken aback by the abrupt change.

Financial markets and investors had got used to the idea that Herrera, former finance minister under President López Obrador (2019-2021) and someone they saw as a safe pair of hands, would become the new Banxico governor, so they were caught off balance by the change.

The change came at a sensitive time since Mexico’s inflation rate has been pushing up (it is projected to reach 7.3% by year-end, a 20-year high) and Banxico has been tightening its interest rates. There are also concerns that López Obrador might seek to reduce Banxico’s independence, although he has denied that this is his intention.

Speaking at a press conference, López Obrador confirmed he had withdrawn his support for Herrera but gave no reason for the change. He praised Rodríguez Ceja’s work as deputy finance minister in charge of government expenditure since 2018 and said she had helped deliver fiscal stability, adding that it was important to have females in key jobs (she will become the first female governor of Banxico).

Rodríguez Ceja has also had roles relating to debt and financial management, but critics note she has less specific monetary policy experience. Alberto Ramos, of the investment bank Goldman Sachs, responded to the announcement by saying that “the risk is that the new nominee is either not sufficiently independent from the government, or not sufficiently experienced for what is ultimately a highly technical job, or both”.

Financial analysts remain wary of what they see as López Obrador’s plans to align Banxico more closely with his political project, known as the ‘fourth transformation’ (or 4T for short). He has said the Banxico governor needs to be an economist with a social and moral dimension. More importantly he has talked of giving Banxico a dual function, not only to control inflation, but also to stimulate economic growth.

Most mainstream economists argue that central banks should be independent and exclusively focused on controlling inflation. Herrera also took that view. He is on record as saying that economic stimulus can cause bottlenecks and inflation and that the bank should not have potentially conflicting policy aims.   

Peso drops, bonds dip

Reflecting the worries of financial markets and investors about the appointment of Victoria Rodríguez Ceja as governor of Banxico, on 24 November the peso dropped 1.8% against the US dollar, while the price of 10-year Mexican bonds also dipped.

Chile’s two presidential candidates were holding events to close their respective campaigns in the capital Santiago as we went to press on 16 December, with just three days to go before the second-round presidential run-off. Gabriel Boric, representing the left-wing Apruebo Dignidad coalition, appears to have a slight advantage over his far-right opponent, José Antonio Kast from the Partido Republicano (PLR), who came two points ahead in the first round. But the race remains wide open, with much hinging upon which candidate will have been most successful in appealing to the undecided voters in the centre.

Boric and Kast offer radically different visions for Chile, and the presidential run-off has been painted in the media as a polarising contest between two extremes. Kast rejects being labelled as far-right, but he holds ultra-conservative social views, has campaigned on a discourse of law-and-order, and in the past expressed a favourable opinion of Augusto Pinochet’s dictatorship (1973-1990). He is often seen as being of the same mould as Brazil’s President Jair Bolsonaro or former US president Donald Trump.

Representing a new generation of progressive left-wing politics, Boric is far from being a radical, but his past as a leader in student protests, his support for the 2019 social uprising (which many on the right consider to have been a vandalism spree led by thugs), and his alliance with the more radical Partido Comunista de Chile (PCCh), have often led to him being depicted as representing the ideals of the far-left. He has more recently ascribed himself the label of social democrat.   

The second-round campaign has indeed seen both candidates adopt a more moderate discourse, in a bid to attract the votes of the 3.3m voters who were disappointed in the first round (between them, Boric and Kast collected 3.8m votes; some 88,000 people cast blank or spoilt ballots, and turnout was just 47%). Whoever wins the run-off on 19 December will also have to work with a legislature dominated by the traditional centre-left and centre-right parties which fared so poorly at a presidential level [WR-21-47].

These parties have all re-aligned themselves behind one of the two candidates. The parties that make up the current governing coalition, which ran in the elections as Chile Podemos Más, are all backing Kast. The defeated Chile Podemos Más candidate, Sebastián Sichel, was more reluctant to come out in favour of Kast, but eventually announced his conditional support, after a request for moderating certain elements of the far-right candidate’s programme was accepted.

Boric, meanwhile, received the unconditional support of the Partido Socialista (PS) and Democracia Cristiana (DC). The defeated centre-left candidates who between them got 19.2% of the vote, the DC’s Yasna Provoste and Marco Enríquez-Ominami, a former PS member, were quick to announce that they will be backing Boric.

More recently, the left-wing candidate received a public declaration of support from former president Michelle Bachelet (2006-2010; 2014-2018). Bachelet, who is now the United Nations High Commissioner for Human Rights, held a brief meeting with Boric on 12 December upon arriving in Chile; she formalised her support for him two days later, describing the upcoming election as “fundamental”.

Final debate inconclusive

The two candidates’ attempts to woo the centre were on display during the last presidential debate, organised by the national television association (Anatel) on 13 December. Perceived as the last opportunity to change the minds of undecided voters, the debate was a somewhat lukewarm affair.

The two candidates did clash, for example, over civil rights issues and Kast’s controversial views on sexual diversity, or when the far-right candidate evoked the allegations of sexual harassment that Boric has faced (and denies). But, overall, both candidates sought to push their more popular proposals and drive home their ‘moderate’ image.

“I don’t want to be a president with a raised fist, I want to be a president who talks and embraces,” Kast said. For his part, Boric insisted that he wants Chile to become a welfare state. “I’m not concerned by what label it is given. If it’s social democrat, then so be it,” he said. The debate covered, amongst other things, the candidates’ views on governability, drug trafficking, and pensions.

“I don’t think either of the two tripped up [in the debate],” Axel Callís, a sociologist and director of pollster Tú Influyes, said on the television news programme T13 in the wake of the debate. “Gabriel Boric showed that he is the man who is reading the moment and who will reach agreements, even with a hung parliament,” Callís maintained, while “José Antonio Kast showed himself to be a coherent person, holding the same line […] and who is therefore trustworthy”.

Public opinion polls cannot be published in the two weeks running up to a vote in Chile, but polls conducted privately continue to confirm Boric’s narrow lead over Kast. But his lead falls within most polls’ margin of error and the race is expected to be a close one.

The ‘kingmaker’

Francisco Parisi, the outsider candidate who successfully captured the protest vote to come third place in the first round with 12.8% of the vote, has been described as the ‘kingmaker’ for the second round. The US-based businessman, who is embroiled in allegations of various wrongdoing, and ran his entire campaign without setting foot in Chile, has not explicitly endorsed either candidate, although he seems to favour Kast. He hosted Kast for a cordial discussion on his ‘Bad Boys’ YouTube channel on 5 December. Boric declined an invitation to appear on the same channel a few days later, and Parisi instead recorded an episode criticising Boric’s government programme.

The CC

Whoever wins the presidential run-off will be in office when the constituent convention (CC), elected earlier this year to draft a new constitution for Chile, will present its proposal for the new magna carta (which will be voted upon in a referendum). Kast was opposed to the constituent process from the outset, whereas Boric – unlike his PCCh allies – supported it. The CC president Elisa Loncón, an indigenous academic, expressed her veiled support for Boric when she said, during a Mapuche meeting on 12 December: “Let us defend what we have achieved and opt for the proposal that is defending the new constitution, parity, the rights of nature, diverse sexual rights, the rights of women”.

In a major ruling on 23 July, a Colombian court sentenced seven former employees of the Colombian subsidiary of multinational banana firm Chiquita Brands to 11 years in prison for financing paramilitary groups in the 1990s and 2000s. The sentence comes as Chiquita’s Colombian subsidiary, Banadex (now Banacol), has faced mounting scrutiny in recent years over its links with the paramilitary group Autodefensas Unidas de Colombia (AUC), which demobilised in 2006.

A judge in Antioquia department, Diana García Monsalves, handed an 11-year prison sentence to seven former high-ranking employees at Banadex. These were Reinaldo Elías Escobar, a former legal adviser; John Paul Olivo, a former auditor at Banadex (1996-2001); Banadex’s former general manager Álvaro Acevedo (2001-2004); his predecessor Charles Keiser (1989-2000); José Luis Valverde, a former lawyer for Banadex (2000-2002); Víctor Julio Buitrago, Banadex’s former head of security for the Santa Marta and Urabá regions (1999-2004); and Fuad Giacoman, Banadex’s auditor from 2002-2004.

According to court documents cited by national daily El Espectador, these seven men were the bridge between Banadex and the AUC, which they were found guilty of funding from the late 1990s to the early 2000s. The payments were initially channelled through private security organisations known as Convivir, which were authorised in 1994 under former president César Gaviria (1990-1994) to help push back against guerrilla groups, but were disbanded three years later as it grew clear they had become a front for paramilitary activity.

The AUC’s former deputy commander Salvatore Mancuso, who in November last year was sentenced to 40 years in prison for war crimes [SSR-25-01], claimed in June 2024 that Chiquita paid the AUC three cents on every crate of bananas it exported, and denied that the company made the payments under duress. “They didn’t do it with a gun to their head,” Mancuso said, claiming that the company had previously paid protection money to left-wing guerrilla groups, the Fuerzas Armadas Revolucionarias de Colombia (Farc) and the Ejército Popular de Liberación (EPL).

This is not the first time that Chiquita has found itself in hot water over its paramilitary connections. In June 2024 a US court in Florida ordered Chiquita to pay US$38.3m in compensation to eight families whose relatives were killed by the AUC between 1997 and 2004. Court documents stated that Chiquita had “provided substantial assistance…in the form of cash payments” to the AUC. Previously, in 2007, Chiquita pleaded guilty in the US to making secret payments of some US$1.7m to the AUC in exchange for protection for its workers, and paid a US$25m fine as part of a settlement with the Department of Justice.

Meanwhile, a separate possible link between international companies and the AUC made headlines on 8 July when prosecutors impounded the Bogotá office of Anglo-French oil company Perenco as part of its investigation into its alleged connections to the paramilitary group. According to local media, prosecutors suspect Perenco of supplying money, fuel, food, and transport to the AUC from 1997-2005 in return for security services. In a statement reported by Colombian media the following day, Perenco denied having any connection to illegal armed groups and said that it should not be required to pay any financial penalty without a trial.

ELN armed strike

The Ejército de Liberación Nacional (ELN) guerrilla group announced a 48-hour “armed strike” on 23 July covering the whole of the western department of Chocó, where people were advised to stay off the roads or risk violence. A statement by the ELN’s western war front said that the armed strike was in response to alleged “collusion between paramilitaries, soldiers, and local leaders”. It also accused the military of carrying out “state terrorism” in Chocó. It said that on 20 July an army patrol landed in the village of Alto Atrato, in Lloró municipality, and “kidnapped 12 non-combatants” including an 18-month-old baby. This group was allegedly “forced to patrol alongside the soldiers in search of ELN camps, putting at risk their lives and safety”.

For months the Cuban government has been involved in behind-the-scenes negotiations with the US administration led by President Donald Trump over political and economic reform, up to and including the possibility of ‘regime change’. A key issue in the talks is Washington’s demand that Russian and Chinese electronic espionage facilities be shut down.

Over the years Washington’s adversaries have invested significantly in building signals intelligence (SIGINT) listening posts in Cuba, located some 90-100 miles from Florida. During the Cold War Russia used the Lourdes SIGINT station south of Havana to monitor US communications. It was closed down in 2002 as Havana-Moscow relations took a turn for the worse. More recently, however, there are signs of resumed cooperation, with the Russians monitoring US military activity in the region. The real growth area however has been in Cuban cooperation with China. According to a variety of sources, China has been operating listening posts in Cuba since 2019. It is now said to be running monitoring sites in Bejucal municipality (Mayabeque province), Calabazar and Wajay (both wards in Boyeros municipality, Havana province), and El Salao in Santiago de Cuba municipality, in the eponymous province. In December 2024 US think tank Center for Strategic and International Studies (CSIS) identified four possible sites being used by China for SIGINT, out of nearly a dozen that were rumoured to be used for this purpose.

Exactly what these stations are doing on a day-to-day basis is not clear, and both China and Cuba deny taking part in any espionage. But they are likely seeking to intercept US military, commercial, and government communications through electronic eavesdropping. They are close to intelligence-rich US targets: US Southern Command (near Miami) and Central Command (in Tampa), as well as the space launch facilities at Cape Canaveral and Kennedy Space Center (KSC), located on Florida’s east coast, and the US naval base in Guantánamo on the island itself. Reportedly, the equipment used typically includes large satellite dishes and so called ‘elephant cages’ – circularly disposed antenna arrays (CDAAs) which can be used for the triangulation and interception of radio signals.

In April this year US Secretary of State Marco Rubio accused Cuba of hosting Russian and Chinese espionage operations and warned “Washington will not allow any foreign military, intelligence, or security apparatus to operate with impunity just 90 miles from the shores of the United States.” In May, the Wall Street Journal cited US intelligence sources who said Russia and China have tripled their intelligence personnel presence in Cuba since 2023 and incorporated more modern equipment. In the same month, news website Axios, also citing US intelligence sources, reported that Cuba had acquired more than 300 drones which could potentially be used against the US base in Guantánamo.  

An important question is how US and Cuban negotiators will deal with the electronic espionage issue in coming months. Other items on the agenda include economic reform, where in June Cuba made some initial pro-foreign investment announcements; the future of the trade embargo; and political reform including the release of political prisoners.

On many of these – such as ending the one-party state – Cuba has ‘red lines’ it does not want to cross. That raises the possibility that Havana might use a promise to close down the electronic surveillance stations as a bargaining chip to gain other concessions from the US.  But for the Cuban government there are no easy choices: closing the listening posts would offend China, which is one of Cuba’s key economic and strategic partners.

Raúl Castro’s grandson speaks

Raúl Guillermo Rodríguez Castro, the grandson of former president Raúl Castro (2008-2018), gave an unusual interview to United Arab Emirates (UAE)-based newspaper The National on 19 June, insisting that his country “does not represent the smallest threat to the interests and the national security of the United States.” Raúl has no official position in either the government or PCC but has nevertheless played an important role in negotiating with the US. In the interview, the younger Castro called for a “cordial, respectful, and civilised” dialogue between the two countries while “respecting our differences”. In an indirect reference to the US trade embargo, he said it was difficult to have a conversation “in a hostile environment marked by coercion, threats and imposition.”

Argentina está extrayendo dólares de cualquier fuente posible en un intento por mantener el valor del ‘verde’ bajo contra el peso argentino. En las primeras tres semanas de setiembre, el banco central (BCRA), el Banco Nación, de propiedad estatal y la agencia de seguridad social (Anses) han vendido dólares en el mercado local, permitiendo solamente una leve depreciación de la moneda local (de 1,2%). Eso, sin embargo, ha costado al BCRA US$1,13bn, un incremento mes en mes de 96,5%. El 19 de setiembre, el BCRA vendió US$270m, llevando sus reservas por debajo de US$50bn (a US$49,22bn), la meta ideal de reservas del gobierno. Hasta ahora en este año, Argentina es el único país en América Latina que ha visto contraerse sus reservas (en 4,7%). En el mismo periodo, Brasil ha crecido en 15%, México en 20%, y Uruguay en 35%. Perú pronto podría superar a Argentina como el país con la tercera reserva más grande en la región.

La incertidumbre acerca del futuro de la economía, en el casi cierto segundo mandato de la Presidenta Cristina Fernández, tiene a los inversionista (de todos las magnitudes) y a los ahorristas locales extremadamente preocupados, hasta el punto que la huida de capital se ha acelerado a extraordinarias nuevas alturas , que algunas estimaciones ubican la cifra de fin de año en US$20bn a US$24bn. Si este panorama resulta cierto, la huida de capital podría como menos doblar el esperado superávit comercial, que se predice que llegará a US$9bn.

Una razón que alimenta la demanda argentina por dólares tiene fundamentos históricos y culturales: durante un año electoral los residentes locales desean ‘blindar’ sus ahorros contra potenciales cambios drásticos en la economía después del día de votación. En segundo lugar, a la luz de la crisis global y su incapacidad de financiar sus operaciones con fuentes locales baratas, las multinacionales se han convertido en compañías subsidiarias generando ganancias para financiar operaciones en el país, agregando una presión extra sobre el mercado de cambio. Finalmente, nadie espera que Fernández, o el ministro de economía Amado Boudou, aborde las preocupaciones del mercado hasta después de las elecciones del 23 de octubre, en cuyo punto la depreciación del Real de Brasil (de 14% desde julio) pudo haber apreciado los productos argentinos fuera de su principal mercado exportador regional. Eso, a su vez, ha iniciado un debate interno, no acerca de si Argentina debería devaluar o no, sino más bien sobre cómo le irá si lo hace.

Economistas cercanos a La Cámpora, el movimiento juvenil Kirchnerista, abogan por una devaluación gradual de 14% a 15% por año. El problema con eso es que el Real ya ha devaluado en una tasa similar en sólo tres meses y con la inflación interna de Argentina de entre 20% y 25% por año (en base a estimaciones privadas, que la semana pasada el Fondo Monetario Internacional  anunció que era el que consideraba más cercano a la verdad que la tasa de inflación de un solo dígito informada por la oficina nacional de estadísticas, Indec), una devaluación del 15% aún no podría mantener competitivos los productos argentinos. Además, algunos economistas K creen que una devaluación gradual podría tener un efecto inflacionario debido a que las expectativas del pueblo que el dólar se volvería crecientemente costoso podría disparar corridas sobre los bancos como aquellas que tuvieron lugar a principio de setiembre, cuando en cuatro días, la mitad de las reservas usadas en agosto para mantener el peso estable tuvieron que ser liberadas por el BCRA.

Otros economistas pro-gobierno proponen medidas más drásticas, llevando el peso a Arg$4,5/US$ para fin de año y a Arg$4,75/US$ para fin de 2012. Vale señalar que el mercado de cambio a futuro tiene el peso en Arg$5,1 contra el dólar para fines de setiembre de 2012. Sin considerar cuál opción elige, es probable que el gobierno haga coincidir una gradual devaluación con menores aumentos de salarios (de alrededor de 17%), porque si los salarios continúan creciendo en términos de dólar, las importaciones subirán y por tanto elevarán la presión sobre la tasa de cambio. Miembros de la Asociación Económica para el Desarrollo, un grupo de economistas jóvenes pro-gobierno, también plantea una devaluación de 20%, pero creen que eso debe coincidir con una similar reducción en los gastos en subsidios y un retorno a los mercados internacionales para evitar la merma en las reservas del BCRA.

• Presupuesto 2012

La semana pasada, algunos detalles del proyecto de ley del presupuesto 2012 fueron filtrados a los medios locales. El congreso comenzará a debatir la propuesta la semana próxima. De acuerdo con la prensa, el presupuesto propone incrementar el gasto primario en 18,3%, con el crecimiento estimado en 5,1%, un dólar estable en Arg$4,40/US$ y una inflación de 9,4%. El proyecto de ley no propone un retorno a los mercados de capital, y en cambio estipula el pago de US$8,57bn del servicio de la deuda externa con reservas del BCRA.

The private sector is pretty confident about the economy. The country’s biggest private sector bank, Banco de Crédito del Perú (BCP), increased its GDP forecast at the end of October from 6.3% to 6.5% for 2011.

The bank said that its view was changed by the strong (7.5%) year-on-year growth in August and the decent (6.6%) performance from the construction industry. Probably as encouraging was the 21% jump in output from the non-primary (i.e. consumer goods) manufacturing sector. The 83% year-on-year jump in fishing production just illustrates how volatile the fishing index is.

The government’s own forecasts for 2011 are for growth of between 6% and 6.5%. Indeed for the period 2011 to 2014 it expects growth to continue at around 6% a year and inflation to be around 3% a year.

Luis Miguel Castilla, the economy & finance minister, pointed out that domestic demand is strong. Credit is currently growing by 20% a year and imports were up by 24%, year-on-year. Castilla admitted that Peru was still vulnerable t a world economic slowdown: he said that a 1% drop in the global growth rate would cut Peru’s annual growth rate by 1% as well.

Castilla argued that the key to maintaining the country’s GDP growth rate was private sector investment. He said that the government would do its bit by maintaining a balanced budget, with an anti-cyclical bias (so spending would increase if the rate of growth fell off). He expected public sector debt to continue to fall over the next three years and end 2014 at 17.7% of GDP. In 2012 the government is budgeting on a fiscal surplus of 1% of GDP.

Castilla calculates that if the government hits its 6% a year growth target by 2014 fiscal revenues will be NS$40bn (US$14.5bn) higher than they were in 2010.

The minister said that 28% of the 2012 public investment budget of NS$13.6bn will be targeted at the seven poorest regions of the country. Puno and Cajamarca will each get 7% of the public investment budget, followed by Ayacucho will get 5% and Amazonas 4%, Huánuco with 3% and Huancavelica and Apurímac with 1% each.

As for projects, 45% of the public investment budget will go on transport infrastructure, followed by 20% on education; 9% on health; 8% of agricultural development; 5% on health and 2.5% on energy. The remaining 10% will be spread across other areas. The government pointed out that it is not tearing up projects started by the previous government because 76% of the projects included in the 2012 budget were started by the previous government. Castilla also pointed out that 97% of the projects now in the works met the government’s new viability measure for public sector projects.

Tourism: The tourism industry is likely to put on a spurt at the end of this year as the world celebrates the 100^th anniversary of the rediscovery of Machu Picchu.

Carlos Canales, president of the Cámara Nacional de Turismo (Canatur), expects that the number of foreign visitors will hit 2.7m in 2011, well above the forecast of 2.5m. He said that over 700,000 tourists would visit Cusco this year.

Inflation: Inflation in September was 0.33%. This brought the accumulated rate to 3.68% and the rate for the past 12 months to 3.73%.

The big problem is the labour market. Unemployment, despite the respectable GDP growth, is still at 14.6% or half a percentage point higher than a year before (the most recent figures, however, are for April this year). What is also worrying is the quality of jobs: 57% of people who say that they are employed, work in the informal sector up from 49% a decade ago.

Remittances have also been strong this year. According to the central bank, inflows are up by 7% year-on-year in the first half of 2011. Foreign direct investment is also strong and on course to hit the government’s target of US$2bn for 2011.

The government of President Sebastián Piñera is locked in a damaging institutional clash with the supreme court. The conflict is the result of outspoken remarks by a cabinet minister criticising a supreme court ruling against the construction of a major thermoelectric plant in northern Chile. The institutional friction is overshadowing the real issue at stake: Chile’s future development. Unless Chile increases its energy supply, and reduces its dependence on unreliable sources of energy, its rate of growth in the medium-term will be stunted and Piñera’s ambition of reaching developed nation status by 2020 will remain unfulfilled.

The supreme court ruled unanimously on 28 August against the construction of a US$5bn coal-fired thermoelectric plant Central Castilla, and a port linked to the project, both located in the northern region of Antofagasta, on environmental grounds. It insisted that a new environmental impact assessment covering the impact of both the plant and the port together should be carried out. By upholding an earlier ruling by a local court in favour of plaintiffs from the remote village of Totoral and local fishermen against the plant and the port, the supreme court put the Piñera administration into a serious bind.

The energy and mining ministers, Jorge Bunster and Hernán de Solminihac respectively, said that the ruling against Castilla cast doubt over whether the mining projects Chile needed to drive development would go ahead. But, it was the environment minister, María Ignacia Benítez, who made the incendiary remark which caused serious friction between the government and the supreme court. In an interview with the national daily El Mercurio on 10 September Benítez criticised the ruling, saying the supreme court “lacked the technical competency” to decide what was contaminating and what was not. In a terse statement the following day, the court accused Benítez of being “ignorant” of its powers and argued that her comments constituted “undue interference in the judiciary’s powers as conferred by the constitution.”

The government spokesman, Andrés Chadwick, defended Benítez. He said that it surprised him that in a democratic country the right to express an opinion was being constrained. A politician is not an ordinary member of the public in this regard, of course, but Chadwick insisted that the verdict had already been issued when Benítez expressed her opinion and therefore, as a corollary, she had made no attempt to influence it and had not violated the separation of powers. Chadwick ducked a question about whether the supreme court had strayed into realms far beyond its remit. The leftist opposition Concertaciόn is trying to take advantage of the government’s travails by arguing that Benítez would not have spoken so frankly without President Piñera’s express approval, and is pushing for ministers to be summoned before congress.

All of this focus on the ruling and the government’s reaction is distracting attention from the very real problem Chile faces as a result of the ruling, which is how it is going to resolve its energy problems. The Brazilian tycoon Eike Batista, who owns MPX, which has a 75% stake in the project, tweeted that investing in Chile was “becoming impossible”, adding that “if they don’t want us, we’ll go”.

Energy is already expensive in Chile and if demand exceeds supply, the country will become less competitive. The Castilla plant would have been the second most important in Chile with a capacity of 2,100MW. This is more than 25% of the 8,000MW the government had hoped to add to the current capacity of 17,000MW by 2020. Without Castilla, some US$30bn of mining investment projects in Antofagasta could be affected.

•  Alternatives

Shortly after the ruling, on 30 August, President Piñera presented a bill to congress to build a transmission line to link Chile’s southern power grid (SIC) with its northern counterpart (SING) for the first time. Piñera said this would reassure investors in Chile’s proposed new energy projects and ensure that “a shortage of energy does not become an obstacle to development”. The problem for the government, however, is that the huge energy project in southern Chile, the US$3.5bn 2,750MW HidroAysén dam, has also been stalled, despite approval from the supreme court: Colbún, the Chilean partner with a 49% stake in Hidroaysén, has got cold feet over what it describes as the government’s lack of an energy strategy enjoying widespread support: it has held up an environmental impact assessment into the 2,300km transmission line from the dam to Santiago.

On 11 December the European Parliament (EP) ratified a free trade agreement (FTA) with Peru and Colombia, one of the final steps before the agreement can go into effect.

The negotiation of an FTA between the European Union (EU) and the two Andean countries, which calls for the immediate elimination of all tariffs on non-agricultural products, the gradual elimination of tariffs on agricultural products and the liberalisation of the service markets and of public tender processes, was concluded in 2010. However, the treaty needs to be ratified by the congress of Colombia as well as the European Parliament (EP) and the European Council before it can take effect.

Ratification in the EP appeared to be the most difficult hurdle facing the treaty, as various European politicians had expressed reservations about the negative impact of the agreement on European farmers. They also questioned the environmental, labour and human rights situations in the Andean countries. The current human rights situation in Colombia was a major sticking point, despite the fact that the agreement includes a clause that it may be partially or totally suspended in the case of grievous violations of human rights in any of the countries,

Nevertheless, proponents of the agreement, which included the EU’s trade commissioner, Karel de Gucht, and the EP’s president, Martin Schulz, defended the FTA, pointing out that any commercial agreement concluded by the EU will help to bring about an economic recovery in Europe by securing access to foreign markets on favourable terms.

In the end the agreement received overwhelming support and was easily ratified. It will now be analysed by the European Council, which must provide final approval. After the ratification, Schulz stated that “For too long the EU has underestimated an association with Latin America. These agreements are decisive steps towards an alliance with important countries that are growing very quickly”.

Ratification of the agreement is eagerly awaited in Peru and Colombia as both countries are keen on taking full advantage of increased access to the European market. The EP’s ratification was hailed by Colombia’s President Juan Manuel Santos, who said that it would “bring prosperity and create more jobs for Colombians”. Meanwhile, Peru’s foreign trade & tourism minister, Luis Silva, said that the EP’s approval of the FTA provides “certainty” that Peru will deepen its relations with its main economic partner.

According to estimates by the European Commission, the FTA could help Peru increase its GDP by 0.7%, while Colombia’s could increase by 1.3%. Encouraged by the EP’s ratification, Peru’s congress decided to bring forward its ratification vote (initially scheduled for 15 December) to 12 December, when it was quickly ratified in a unanimous vote.

On 7 February a Brazilian government source told Reuters that Brazil’s mining giant, Vale, was still awaiting an official response from the Argentine government to its request for additional fiscal incentives in order to go ahead with its planned US$6bn potassium mine project in the Argentine province of Mendoza.

Argentina’s President Cristina Fernández said the Río Colorado mining project was of “strategic importance” when it was first announced in July last year. Vale estimates that the Río Colorado mine has 430m tonnes (t) of potassium and could produce some 4.35m t a year. With production scheduled to begin by 2014, Argentina could become the fifth largest potash producer in the world overnight. (Potash is potassium derivative widely used in fertilizers).

In December 2012 Vale announced that it was revising its investment plans for 2013, given a “shift in the international markets towards lower prices for some minerals. Vale’s net profits fell 66.2% year-on-year in 2012. In January Vale notified the Argentine government that it was indefinitely suspending the Río Colorado project while evaluated the “variations in the economic fundamentals” in Argentina.

In particular, Vale expressed concerns about higher production costs in Argentina on the back of high inflation (according to local economists, Argentina’s ‘true inflation’ is running at around 25%); and of the comparatively high value of the peso, which is artificially propped up by the central bank.

According to Reuters, Vale asked Argentina for value added tax (VAT) exemptions and for some leeway in the country’s exchange rate controls as pre-conditions for re-starting the project. Reuters was unable to get confirmation on this from Vale, but an unnamed source in Brazilian government confirmed this, adding that Vale would wait until 28 February for a response.

Vale’s operations in Argentina are of interest to the Brazilian government led by President Dilma Rousseff as Brazil currently imports 90% of all the fertilizers used in the county and is keen on sourcing cheap potash from its main partner in the Southern Common Market (Mercosur).

The government source told Reuters that Vale had already invested more than it initially foresaw in the project, with US$1.8bn spent on the initial physical infrastructure and so is not prepared to go over budget. The 28 February deadline could be extended on the assumption that President Rousseff might discuss the matter with President Fernández at their next bilateral meeting, which had been scheduled for early March in Argentina, but was cancelled following the death on 5 March of Venezuela’s President Hugo Chávez (1999-2013).

Teachers’ strike leaves 7m students without class

Teachers in Argentina began a 48-hour strike on 25 February, delaying the start of the academic year for an estimated 7m students, the majority in the heavily populated province of Buenos Aires. Teachers grouped under the following unions are on strike in demand of a 30% wage increase and a increase in federal government education expenditure to 8% of GDP, from an estimated 6.5% currently: Confederación de Trabajadores de la Educación de la República Argentina, Unión de Docentes Argentinos, la Asociación de Magisterio de Enseñanza Técnica, la Confederación de Educadores Argentinos and Sindicato de Docentes Privados.

The government led by President Cristina Fernández has offered a 22% increase - in line with private inflation estimates – which would put teachers’ basic salaries at A$3,248/month (US$681). Teachers are also demanding better career paths and working conditions as well as improved facilities for schools.

COLOMBIA | Amid violence land restitution moves ahead. On 10 April, President Juan Manuel Santos attended the restitution to 60 families of 272 hectares of land in the northern department of Córdoba that had been wrested from them by the brothers Carlos, Fidel and Vicente Castaño, leaders of the Autdefensas Unidas de Colombia (AUC), the now demobilised umbrella body of the paramilitary organisations.

Violent opposition to this, which involved the murder of two land-restitution activists in the previous two weeks, had forced the authorities to hold the necessary court proceedings in Medellín, in the neighbouring department of Antioquia. At the handover ceremony President Santos declared that all those ‘threatening or murdering’ families reclaiming lands and restitution activists would henceforth be considered ‘high-value objectives’ by the security forces.

On 11 April the national police announced the arrest of four members of a gang calling themselves Cazadespojadores de Tierras (‘Hunters of Landgrabbers’). Arrest warrants have been issued against another eight identified members. These include a sister of Fidel Castaño who ran Funpazcor, the foundation created by the Castaño brothers to seize thousands of hectares of land in Córdoba. The director of the national police, General José Roberto León Riaño, said that this gang includes former members of both the AUC and of their once arch-enemies, the Fuerzas Armadas Revolucionarias de Colombia (Farc).

The following day a church-based NGO announced that a third land claimant had been murdered in Galapa, in the northern Atlántico department, where 130 displaced families have occupied a 120ha estate.

PERU | Sendero ‘back on the offensive’ in Vraem. On 5 April personnel of a counter-terrorist brigade stationed in the province of Convención, Cusco, came under sniper fire. An army sergeant was killed and another was injured. Interior Minister Wilfredo Pedraza said, ‘Terrorism is back on the offensive, most probably because of the actions the government has been taking.’

A week later, at a congressional hearing on public security policies, Prime Minister Juan Jiménez announced that this year the government will be launching coca eradication drives in the region of the Apurímac, Ene and Mantaro (Vraem), as well as a reorganisation of the interior ministry, and will be increasing the pay levels of the national police.

VENEZUELA | Major drug seizure. On 25 April the national guard, acting on information received, seized a cargo of 2.7 tonnes of cocaine in the port of Maracaibo, Zulia. Interior minister Miguel Rodríguez said that it was ‘assumed’ that the cargo was being shipped to Central America — specifically Honduras’.

Néstor Reverol, head of the national antidrugs office, ONA, said that two Venezuelan nationals had been arrested: the head of the customs agency handling the paperwork and the operations manager of the shipping company, Global Service Maritime.

ECUADOR | Taromenane seek protection abroad. Members of a Taromenane community in the Amazonian region have turned to the Inter-American Human Rights Commission demanding a ruling that would oblige the Ecuadorean government to protect them against attacks from the neighbouring Huaorani people such as the killing of five of its members in early April — the third such multiple killing since 2003. The episode was revealed on 4 April by the newspaper La Hora, in an article accompanied by photographs. The initial reaction of the government was to cast doubt on the veracity of the report and censure the newspaper for publishing the pictures.

En el mes de julio, la inflación tuvo un agudo descenso, de acuerdo con las cifras difundidas el 7 de agosto por el instituto nacional de estadísticas (Ibge). Los precios, tal como son medidos por el índice de referencia de precios al consumidor, Ipca, se incrementaron un 0,03% en julio, cayendo de un incremento del 0,26% de mayo a junio. Sobre una base de 12 meses, la inflación descendió del 6,70% al 6,27%, poniéndose en línea con la meta del banco central de una banda del 4,5% con más o menos dos puntos porcentuales. La Presidente Dilma Rousseff, teniendo en mente la elección del próximo año, dio una entusiasta bienvenida a la noticia; su ministro de finanzas, Guido Mantega, fue de alguna manera más cauteloso.

Parte de este descenso podría atribuirse a un decreto del gobierno. Después de las protestas en todo el país en junio, los costos del transporte han sido reducidos; a comienzos del año el gobierno decretó recortes en las tarifas de la electricidad y del agua. Algunos analistas se quejan de que en algunos lugares donde el mercado es el que continúa estableciendo los precios, la inflación ha continuado elevándose. El temor es que en algún punto el gobierno deberá incrementar los subsidios o permitir que los precios al consumidor suban, atizando de nuevo la inflación. Sin embargo, no toda la caída de julio puede atribuirse a la intervención del Estado. Los precios de los alimentos cayeron por primera vez en dos años; los de la vestimenta también cayeron.

Rousseff declaró que la inflación estaba “bajo control”. En una entrevista radial el 7 de agosto ella dijo: “En mayo ha caído, en junio ha caído, en julio es del 0,03%. Por lo tanto, estoy muy contenta de decir que, con referencia a la inflación, el compromiso de este gobierno con la estabilidad está siendo demostrado en la práctica. Las amas de casa quienes van al mercado hoy, verán una reducción en la canasta básica de productos”.

Mantega se mostró más circunspecto, dando la bienvenida a la caída, pero advirtiendo que los precios podrían subir en los próximos meses por factores estacionales. Preguntado si la inflación anual terminaría el año por debajo del 5,8% registrado en el 2012, él no parecía tan seguro. “No lo sé,” dijo, “Probablemente así será.” Pocos días después de conocerse las cifras de la inflación, el presidente del banco central, Alexandre Tombini, pronunció un discurso ante ejecutivos de empresas esbozando su objetivo de llevar la inflación por debajo del resultado del 2012. El banco central ha elevado sus tasas de interés en sus tres últimas reuniones para fijar las tasas, y su tasa clave ahora es de un 8,5%. Al menos uno o dos aumentos más en la tasa son ampliamente esperados.

El Real continúa cayendo

A pesar de la considerable intervención en los mercados de parte del banco central, el Real ha perdido cerca del 11% de su valor contra el dólar de EU en los últimos tres meses, más que cualquier otra moneda de los mercados emergentes. El 6 de agosto, Tombini insistió en que un manejo apropiado de la política monetaria limitará el impacto sobre la inflación de un Real más barato. Algunos analistas han interpretado esto como una señal de que el banco central avanza hacia un largo ciclo de incrementos en las tasas de interés.

La debilitada moneda ha llevado al gobierno a recortar las tarifas sobre más de 100 productos importados, incluyendo materiales básicos como el acero. La depreciación también ha cobrado su tributo en algunas de las grandes empresas de Brasil, tales como Gol, la compañía aérea de bajo costo, y el gigante minero, Vale. La compañía Vale con base en Rìo dijo que sus ganancias habían caído un 84% desde hace un año a US$424m, pues un Real débil, así como también los precios más bajos de las materias primeas, cobraron su tributo. La compañía dijo que los movimientos actuales de la moneda afectaron sus resultados en torno a los US$1,96mm, debido al fortalecimiento del dólar contra el Real durante el trimestre. Si embargo, Vale alegó que en el largo plazo un Real débil podría ser bueno para los negocios. La mayor parte de los proyectos en desarrollo de Vale, están localizados en Brasil. Un Real débil generará ahorros en gastos de capital, toda vez que más de la mitad de los costos de los proyectos estén denominados en la moneda brasilera.

Las alentadoras cifras de la inflación, publicadas el 6 de agosto, no lograron impulsar el Real. La demanda de dólares de EU permanece alta, ante los signos de que la Reserva Federal de EU podría comenzar a reducir poco a poco su programa de estímulos monetarios, posiblemente tan pronto como el próximo mes.

• Indicador positivo

La expectativa de vida en Brasil se ha elevado por 11,24 años desde 1980 (62,52 años) al 2010 (73,76 años). El resultado fue incluido en las cifras de mortalidad de las grandes regiones y las unidades federales 2010 de Brasil, publicado por Ibge. Esto ubica a Brasil en el lugar 91^ro en el ranking de la ONU sobre expectativas de vida.