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El Presidente Sebastián Piñera pronunció su discurso sobre el estado de la nación ante el congreso el 21 de mayo, con un telón de fondo de protestas. Por segunda semana consecutiva, 40.000 manifestantes salieron a las calles de Santiago el viernes (el día antes de su discurso) para protestar contra la construcción del proyecto hidroeléctrico, HydroAysén, en la Patagonia Chilena [IL-11-19]. Piñera esperaba poder concentrarse sobre las impresionantes cifras de crecimiento difundidas días antes. En cambio, el discurso, que duró casi dos horas, fue interrumpido por abucheos e insultos, 17 personas tuvieron que ser escoltadas del edificio por la policía, y el presidente del senado, Guido Girardi, tuvo que llamar al orden a los legisladores.

El día después fueron arrestadas 53 personas en Santiago y 10 carabineros resultaron heridos, Piñera tuvo poca opción más que dedicar una parte considerable de su discurso a explicar la posición de su gobierno sobre HidroAysén, que es profundamente impopular: de acuerdo con el sondeo más reciente publicado por el diario La Tercera 74% de los chilenos se oponen al proyecto. Piñera dijo que la insuficiente capacidad de generar energía era el más grande obstáculo que enfrenta el país para cumplir con su objetivo de convertir a Chile en un país desarrollado para 2020. Tan pronto él avanzó sobre el tópico, un puñado de diputados del Partido Socialista (PS) desplegaron una pancarta denunciando el proyecto. El senador Antonio Horvath de Renovación Nacional (RN), parte de la coalición gobernante, también protestó, aunque como representante de la región sureña de Aysén, donde la represa será construida, no protestar, hubiese sido un suicidio político para él.

La respuesta de Piñera a la andanada fue enormemente significativa y podría fijar el tono para los restantes tres años de su mandato. El siguió en la ofensiva. Acusó a los gobiernos previos de la Concertación de construir plantas termoeléctricas sin las apropiadas salvaguardas medioambientales; de mal manejo del terremoto de 2010; y de presidir  sobre la torpe inauguración de la iniciativa de transporte metropolitano, Transantiago, en 2007. Hasta ahora, Piñera tendía a elogiar algunos de los logros de  los gobiernos previos de la Concertación, mientras alegaba que la Concertación había quedado sin fuerza ni iniciativa y necesitaba ser reemplazada. Sus generosos matices conformaban su declarado deseo de forjar un gobierno de unidad nacional. Sin embargo, ahora, él parece aceptar que eso podría ser una quimera –y que de ahora en más la política chilena es probable que se vuelva más estrechamente partidaria, en vez de basarse en la búsqueda de consenso sobre asuntos de interés nacional.

Vale señalar que Piñera no ha ofrecido él mismo un apoyo incondicional al proyecto HidroAysén, pese a su convicción que es necesario conducir el desarrollo de Chile. Hablando por la televisión él señaló que las cinco represas le preocupaban menos que los 2.500km de la línea de transmisión que se necesitará para cruzar siete regiones desde Aysén hasta Santiago. Dijo que designaría una comisión de expertos en energía para evaluar la mejor ruta para la línea.

Cuando Piñera no estaba hablando acerca de la energía anunciaba un crecimiento económico de 7,2% (sobrepasando el 6% prometido por él) desde que llegó al poder en marzo de 2010, la más rápida tasa en 15 años, y la creación de 480.000 empleos, el mayor en la historia del país en tan corto especio de tiempo. También reveló que expertos y representantes de varios sectores de la producción habían finalizado la elaboración de un plan de competitividad económica para el gobierno. Este incluye unas 50 iniciativas separadas, concentrándose sobre cuestiones como el desarrollo de pequeñas empresas; incrementar las inversiones; enmendar las leyes laborales; y promover desarrollos digitales. La mitad de esas medidas requerirán proyectos de ley que deben ser aprobadas por el congreso.

• Bolivia

El Presidente Piñera también tuvo duras palabras para su par boliviano Evo Morales, durante su discurso sobre el estado de la nación. Piñera dijo que la reciente amenaza de Morales de llevar al gobierno chileno ante La Haya sobre la demanda de un salida soberana de Bolivia al Pacífico crearía “un serio obstáculo” en las relaciones. El dijo que Chile continuaría la discusión sobre su agenda de 13 puntos con Bolivia, que incluye “todas las cuestiones interés bilateral”, pero sólo con la condición que Bolivia respete los tratados internacionales y la ley internacional. Dijo que pensaba que esa era una “condición lógica”.

ARGENTINA | Farming. The largest manufacturer of farm equipment, Deere & Co, will build a US$100m plant in the central farming province of Santa Fe to produce tractors and combine harvesters. Argentina currently imports the majority of its farm equipment. Deere representatives met President Cristina Fernández on 26 September and presented her with an investment plan to 2015 to enlarge its factory in Santa Fe, provide 300 direct and 1,000 indirect jobs, and produce four tractor models and four combines, all of which are currently imported. The agricultural sector has been in rude health in recent years but Argentina is highly vulnerable to a slowdown in demand and fall in prices. The Deere announcement is a fillip for the Fernández administration: although she looks assured of re-election, with less than one month until general elections, Fernández has been accused of failing to diversify; an over-reliance on exports; and a high import bill of capital goods and intermediate inputs.

ARGENTINA | Breaking new ground. The candidate for the ruling Frente para la Victoria (FPV), Carlos Soria, snapped the 28-year stranglehold of the Unión Cívica Radical (UCR) on the southern province of Río Negro on 25 September. It was a win-win situation for President Cristina Fernández. Soria comfortably defeated the UCR candidate, César Barbeito, who was the chosen candidate of the incumbent governor Miguel Saíz, an ally of Fernández. Soria was mayor of General Roca, a town in the north-west of Río Negro, a province of 633,000 inhabitants, two-thirds of whom are eligible to vote. Fernández won just over 60% of the vote in Río Negro during the open primary elections on 14 August.

Dominica’s Prime Minister Roosevelt Skerrit, of the ruling Dominica Labour Party (DLP), has accused the opposition United Workers Party (UWP), led by Lennox Linton, of attempting to orchestrate a coup. It seems an exaggerated claim.

Dominica has a history of awarding long periods in power to one party or another, and this may well account for some of the frustration. The DLP was in power for four consecutive terms from 1961 to 1980, after which it was kept out of power for four terms by a combination of the Dominica Freedom Party (DFP – which is no longer represented in parliament) and the UWP. The DLP returned to power in 2000, and it won again in 2005, 2009, and 2014. In the 2014 election, the DLP won by 15 seats to six (all held by the UWP).

Street protests in the capital Rouseau began on 2 February and then escalated badly on 7 February. The ostensible cause of the protests was the alleged corrupt mismanagement of the Citizenship by Investment (CBI) programme. The government says the programme is vital for rebuilding Dominica following Tropical Storm Erika in 2015 and that nearly 20% of the country’s employment, and 25% of government revenue, comes from the scheme. However, there are allegations of corruption, and there has been much criticism of the issuing of citizenship to Iranian national Alireza Monfared. The CBS News ‘60 Minutes’ programme alleged that the Dominica government had potentially breached sanctions against Iran.

As night fell on 7 February, police used tear gas to disperse thousands of protesters. The next day, Skerrit said that there had been an attempt to remove the government “without going through the ballots”. He said: “This action last night was planned, it was calculated, it was executed”. He said that the leadership of the UWP had orchestrated plans to storm the Financial Centre Building and “to occupy the building until their demands were met”.

According to the prime minister’s account, the UWP leadership had failed to follow police orders to end the demonstration, and “this was when and where the cue was given for persons to do whatever they deemed necessary to forcibly and unlawfully remove a democratically elected government from office”.

An opposition MP, Thomas Fontaine, was arrested and detained for a few hours on 12 February following his radio show, and the following day Linton said that he thought he was going to be arrested as well. In a Facebook post, Linton said that Fontaine had been arrested “under instructions from the Skerrit dictatorship…for speaking the truth and standing up for the good of Dominica”.

Linton also made a statement saying: “Let me be very clear, I know absolutely nothing about any coup or any attempt to overthrow the government apart from what I heard Roosevelt Skerrit say in his address to the nation.”

The government is continuing to try to reassure people over the CBI programme. The point they make is that the country suffered damage from Tropical Storm Erica amounting to 90% of GDP and that “the citizenship by investment programme was a lifeline”. Officials running the programme claim it is “the most transparent programme of its kind in the world”. The problem is that significant sections of the community remain unconvinced.

Vice President Hamilton Mourão, who heads the Brazilian government’s Amazon Council, has said that President Jair Bolsonaro has given the green light for the army to be redeployed to the Amazon as part of efforts to fight deforestation, despite its poor results last time around.

The ‘Operação Brasil Verde II’, which involved the deployment of troops to the Amazon between May 2020 and April 2021, was the Bolsonaro administration’s most ostensive effort to combat deforestation and environmental crime in the Amazon last year. It was also widely criticised by environmentalists and members of the government’s environmental agencies, Ibama and ICMBio, as ineffective and even counter-productive.

Despite – or, many argue, because of – the presence of the military, deforestation soared last year; reports now abound of how the armed forces hindered the work of environmental law enforcement officers, for example giving advance warning of their operations or preventing Ibama officers from burning the expensive equipment of illegal miners or loggers, a standard practice in environmental law enforcement.

Having frequently spoken of extending the military operation through to 2022, Mourão ended up announcing in February this year that the troops would be pulled out by 30 April; the operation was duly brought to an end then. But then last week, on 11 June, Mourão told journalists that President Bolsonaro had authorised a new military operation to fight environmental crimes in the Amazon.

Mourão spoke of a two-month long operation at a cost of R$50m (US$9.9m). “I spoke with the president yesterday. […] We’re closing the details of the plan,” he said, indicating that the operation could be launched as soon as this week. A Garantia da Lei e da Ordem (GLO) decree signed by the president would need to be issued to authorise the army’s deployment.

The month of June marks the start of the dry season in the Amazon, and therefore of widespread forest fires. With government data from the first months of the year showing that deforestation has continued to rise after record destruction levels last year, the expectation is that this fire season will be another particularly destructive one.

Data from the government’s national space agency (Inpe), released on 4 June, showed preliminary deforestation alerts had surged 41% year-on-year in May, to a new record 1,180km²; this followed a 43% year-on-year increase in forest loss alerts in April.

Pressure to bring this level of deforestation under control is growing; much was made of talks between Brazil and the US on the issue prior to the Leaders Summit on Climate hosted by US President Joe Biden in April [WR-21-17], but no progress appears to have been made, as the Brazilian government insists on upfront compensation for its future conservation efforts. If carried through, the decision to redeploy the army to the Amazon in the same way it was last year will be yet another sign that the Bolsonaro government is not listening to calls, from both within and outside of Brazil, to revise its environmental policies and seriously address deforestation.

The national guard in the Amazon         

The government has separately authorised the deployment for 90 days of the national guard (FNSP), a federal security force, to support the government indigenous agency (Funai) on the Yanomami indigenous territory in the Amazon, which spans the states of Amazonas and Roraima.

This decision, announced on 14 June, follows months of attacks suffered by the Yanomami people at the hands of wildcat miners who have invaded their lands (see our sister publication Security & Strategic Review [SSR-21-06]). Local indigenous leaders consider the government’s move to be tardy, but also worry that it may not resolve the violence. 

Not just the Amazon

A report by MapBiomas Alerta, a project run by a consortium of NGOs, universities, and technology companies, found that the rate of deforestation in 2020 was equivalent to 24 trees being cut down every second in Brazil. The report, published on 11 June, found that deforestation across Brazil’s six biomes (the Amazon, the Pantanal, the Cerrado, the Pampa, the Atlantic Forest, and the Caatinga) increased by 13.6% last year, to 13,853km². By cross-checking data from different satellite monitoring systems, MapBiomas concluded that 99.8% of deforestation activity was illegal (carried out without authorisation, in violation of the country’s Forest Code, or in protected areas), while just 2% prompted a response from Ibama.

HAITI-DOMINICAN REPUBLIC | Firming up ties. Haiti’s President Michel Martelly recently travelled to Santa Domingo where he met President Leonel Fernández, his first official visit to the Dominican Republic since taking office in May 2011. The two leaders participated in a meeting of the joint bilateral commission which was set up in 1996 as the only official forum for promoting relations via various sub-committees covering health, the environment, security, tourism and agriculture among other areas. The agreement signed during Martelly’s visit which attracted the most attention was that establishing a so-called “Bolivarian Fund of Solidarity with Haiti”, to be financed indirectly by Venezuela, through President Hugo Chávez’s subsidised oil scheme, Petrocaribe. According to press reports, the fund, which will be financed by the interest generated on the Dominican Republic’s debt to Venezuela through Petrocaribe (set at 1%), will be used to promote the use of natural gas in Haiti through providing some two million free gas tanks and cooking stoves to the population.

As well as pointing to stronger ties with the Dominican Republic, the proposed fund, which will be set up in an account at the Dominican Central Bank, is the latest show of cooperation from Venezuela, which remains the biggest single donor to Haiti: Venezuela pledged US$2.4bn in reconstruction and relief aid (out of a total of US$9.3bn) according to figures to end December 2011 from the UN Office of the Special Envoy for Haiti.

BRAZIL | Record trade deficit. Brazil posted a trade deficit of US$1.89bn in July, the trade ministry said on 1 August. The result was well below expectations for a US$480m surplus. Monthly exports were down 5.2% from July of 2012, at US$20.8bn, but July imports rose 4.8% against the same month a year ago, to US$22.7bn. For the period January through July, Brazil rolled up a trade deficit of US$5bn. The country had posted a trade surplus of US$9.9bn for the same period of 2012.

China’s relations with Latin America tend to fall into two categories. First, the essentially clientelist relationship Beijing has with the continent’s smaller, more heterodox economies, such as Cuba and Venezuela. Secondly, the China-dominant, but still reciprocal, trade relations it enjoys with the region’s powerhouses, Brazil and Mexico. Chinese President Xi Jinping’s visit to Latin America this past week confirmed Argentina’s position among the former group of nations.

In Brazil

After the Brics summit in Fortaleza, Xi stayed in Brazil to sign 54 bilateral agreements with President Dilma Rousseff. Among the most significant of these deals were a number of memoranda of understanding, committing China to invest in the development of a railway network and other infrastructure projects in Brazil. “I reiterated to President Xi Jinping my expectation that Chinese firms will participate in our infrastructure and logistics projects,” Rousseff said after the meeting.

Arguably these latest projects will benefit China just as much as Brazil, by cutting the cost of transporting raw materials to Brazil’s ports. A common complaint about the nature of the bilateral trade between the two countries is that Brazil’s exports are still dominated by commodities, whereas China’s are mainly finished goods. Per tonne, Brazilian exports to China are worth around US$200; Chinese exports to Brazil are worth US$3,000 per tonne. Still, the traffic is not all one-way. During Xi’s visit Tianjin Airlines agreed to buy 40 planes from the Brazilian aerospace company, Embraer.

In Argentina

Argentina, by contrast, had no such items to offer China. China is now Argentina’s third-largest trade partner, but Buenos Aires’ offering is limited to investment opportunities and the export of commodities, principally soya. Xi signed 20 agreements during his visit: deals in the marine, hydropower and transport sector were worth around US$7bn.

The Chinese government will provide US$4.4bn for the building of two new hydroelectric dams in Santa Cruz province and also part-finance for the construction of Argentina’s fourth nuclear plant. Other deals include a US$2.1bn investment in rail infrastructure and US$423m for the construction of 11 new ships.

Of even greater significance, Xi also agreed a US$11bn currency swap that will allow Argentina to pay for Chinese goods and services in renminbi, which should alleviate pressure on Argentina’s declining foreign reserves. This funding is extremely timely, as Argentina is approaching a technical debt default on 30 July (see page 13).

Should the default go ahead, Argentina’s tentative efforts to repair its international financial standing will be severely undermined, reducing its ability to raise financing through other means. Support from China is likely to become increasingly important, with Chinese firms looking to capitalise on this by bidding for concessions in some of the new infrastructure projects going ahead. China National Offshore Oil Cooperation (CNOOC) is the second-largest oil company now operating in Argentina, after the state-owned Yacimientos Petrolíferos Fiscales (YPF). CNOOC is now in partnership with YPF working at the massive Vaca Muerta shale oil and gas field in Patagonia.

• Argentina’s trade surplus up

According to Indec, the official statistics agency, Argentina’s trade surplus rose 13% in June to US$1.38bn dollars. Exports, worth US$7.387bn, were up 3%, while imports, of US$6.01bn fell 6%.

ARGENTINA | Sube el salario mínimo

El consejo del salario de Argentina incrementó el salario mínimo en 28,5% el 21 de julio, llevándolo de Ar$4.716 a Ar$5.588 (de US$515 a US$610, a la tasa de cambio oficial). El incremento está en línea con lo que la mayoría de los sindicatos estaban esperando. Eso significa que Argentina ahora tiene un salario mínimo más elevado que Uruguay, Chile y Brasil. Alrededor de 113.000 trabajadores son pagados con el salario mínimo cada mes, de acuerdo con la agencia nacional de estadísticas (Indec).

BRASIL | El gobierno recorta la meta del superávit fiscal

El gobierno brasileño redujo el 22 de julio su meta de superávit fiscal primario para el 2015, de 1,2% del PIB a 0,15%. Hasta recientemente, Brasil mantuvo los superávits primarios por encima del 3% del PIB, pero con los ingresos fiscales cayendo agudamente, el objetivo del gobierno para este año es ahora de solamente R$8,7mm (US$2,7mm) cayendo de R$66,3mm. Los ingresos fiscales en el 2015 se espera que sean de R$46,7mm cayendo en los originalmente pronosticados. El gasto, mientras tanto, es de R$11,4mm más de lo anticipado.

Sonora has become the last state to adopt Mexico’s new judicial reform after its new governor, Claudia Pavlovich Arellano, in September signed a declaration calling for its implementation. This is a critical step towards full implementation of a constitutional reform dating to 2008 that all 32 of Mexico’s federal entities (31 states plus the Mexico City federal district) must have in place by a June 2016 deadline.

As explained by Shannon K. O’ Neill, senior fellow for Latin America Studies at the Council on Foreign Relations, the 2008 reform "moves Mexico’s courts from a system of written evidence to one of oral trials, and bolsters due process rights for the defendant by ensuring the presumption of innocence and better access to an adequate defence. Law enforcement agencies will also see changes, as the reforms give police a larger role in criminal investigations and stronger tools to take on organized crime such as the arraigo, which allows authorities to hold suspects for up to eighty days."

In a May 2010 paper for the Justice in Mexico Project (based at the Trans-Border Institute at the University of San Diego), David A. Shirk identified the main reforms as follows: changes to criminal procedure through the introduction of new oral, adversarial procedures, alternative sentencing, and alternative dispute resolution (ADR) mechanisms; a greater emphasis on the due process rights of the accused (i.e., the presumption of innocence and an adequate legal defence); 3) modifications to police agencies and their role in criminal investigations; and 4) tougher measures for combating organized crime.

The federal government led by President Enrique Peña Nieto, as well as international organisations, believe that the reform is key to improving the country’s archaic and deficient system. Given that Sonora is the last state to take this step, there is now renewed optimism that the reform will be fully in place by the deadline.

Sonora was the state in which implementation of the reform, which also includes things like the standardisation of state penal codes into a single federal code, had been delayed the most. The previous state government, controlled by the right-wing national opposition Partido Acción Nacional (PAN), was accused of foot-dragging. Some critics laid responsibility directly at the feet of the former governor, Guillermo Padrés Elías (2009-September 2015), who was involved in a number of controversies with the federal government during his term.

By contrast, Governor Pavlovich, who won election in the 7 June state elections for the federally-ruling Partido Revolucionario Institucional (PRI), made implementation of the reform an immediate priority. Less than a month after assuming office on 13 September, Pavlovich signed a declaration implementing the reform in a ceremony in Sonora’s state capital, Hermosillo. The ceremony was attended by María de los Angeles Fromow Rangel, the head of the federal government’s Technical Secretariat for Justice Sector Reform (Setec).

“Sonora assumes the challenge of improving the functioning of its various public security, law enforcement and judicial institutions”, Governor Pavlovich declared. Fromow noted that while Sonora had lagged other states, this “historic boost” by the new government would now ensure that the state met the reform deadline. In support of this, the state and federal governments will jointly invest M$256m (US$15.5m) to purchase necessary new equipment and train Sonora judicial staff so that they can begin adopting the new oral trial system from 15 December next.

• In a first stage in Sonora, extending to March 2016, the new judicial system will be used only for common crimes such as fraud, breach of trust, tort cases and domestic violence. High impact crimes such as homicide, rape, and violent robbery will continue to be processed under the existing system so as to give authorities time to adjust. By May 2016 all crimes must be processed under the new system, so that Sonora meets the June deadline.

The president of the Dominican Republic (DR)’s electoral authority (JCE), Roberto Rosario, has had his diplomatic and personal US visas revoked by the US government. With the US refusing to provide a full explanation, Rosario and the JCE have taken it as a slight against the Dominican state. The issue is threatening to strain DR-US relations.

The scandal broke on 8 September, when Rosario publicly announced that he had been notified of the cancellation of his US visas by the US Consul General in the DR, Sylvia Johnson. Rosario said that Johnson notified him during a meeting that he held with her that same day. He added that Johnson did not provide an explanation but only told him that his diplomatic visa (valid until 2017) and his personal visa (valid until 2024) were no longer valid. This was confirmed by a US Embassy statement released hours later. “The US State Department has the full authority and reserves the right… to revoke US visas based on information that may come to light at any time and may influence whether an individual is eligible to receive a visa to travel to the US”, the statement said. It added that “decisions on individual visas should not affect the strong bilateral relations between the US government and the government of the Dominican Republic, nor the excellent relations between our peoples”.

However, Rosario attributed the decision to an attempt by the US and his political enemies at home to tarnish his reputation ahead of this year’s JCE member election process. Rosario added that the US’s failure to offer a full explanation was also a slight against the government led by President Danilo Medina as it was a sign of disrespect against a sitting government official. Rosario also recalled having had a series of public confrontations with US Ambassador James ‘Wally’ Brewster over issues such as the JCE’s refusal to issue national identification cards for the children of Haitian nationals born in the DR even before the 2013 ruling by the DR’s constitutional court (TC) denying these individuals the automatic right to claim Dominican nationality [RC-14-10]. Another bone of contention was the JCE’s refusal to accept a request by the political opposition for a full manual recount of the votes cast in the May general elections [RC-16-06]. Back in April, Rosario publicly denounced being “pressured” to accept the opposition’s request for a manual recount, with Brewster allegedly threatening to revoke his visas if he refused.

Back then, Rosario’s claims about US attempts to interfere in the DR’s internal affairs earned him the full support of the ruling Partido de la Liberación Dominicana (PLD) party and the general public. Rosario is clearly appealing for such support once again – which he appears to have. On 12 September, the JCE issued a statement calling for the US government to provide a full explanation for the revocation of Rosario’s visas, arguing that “the US State Department is obligated to explain what are the causes behind this affront against the president of this institution, as this sensibly affects the image of this [State] institution”. The JCE also complained that the issue was not handled via established diplomatic channels and called for the foreign ministry to press for a full explanation from the US.

Meanwhile, on 15 September, a local civil-society group, Ateneo Dominicano, nominated Rosario for the JCE presidency before the national senate commission tasked with coming up with a short-list of candidates to present to the senate plenary. Rosario’s nomination was backed by the PLD and allied parties. However, it was lambasted by the opposition, which argued that Rosario was biased towards the PLD and the revocation of his US visas showed that he was unfit to lead the JCE. President Medina must now find a way to appease the opposition and prevent a spat with the US, while keeping Rosario’s supporters happy.

• Spared by ‘Matthew’

Although the Dominican Republic (DR) was hit by hurricane ‘Matthew’, the worst hurricane to make landfall in the Caribbean in decades, the level of destruction there proved to be minimal. On 5 October, the DR’s emergency operations centre (COE) lifted the red alert issued across most of the country’s southern and western regions and reported that the passing of the hurricane had led to the evacuation of 37,809 people, while 54 communities were left completely isolated due to flash floods. Yet, despite the hurricane damaging 3,715 homes and six major bridges, the COE noted that only four people (three minors and one adult) were killed during the storm compared to the hundreds killed in neighbouring Haiti.

The gloves are off between the government led by President Pedro Pablo Kuczynski and the opposition Fujimorista-controlled legislature. A week after congress threatened to censure the transport & communications minister Martín Vizcarra, forcing his resignation, Prime Minister Fernando Zavala accused congress of “abuse of power” and “obstruction”. This simmering political brinkmanship does nothing for the efforts to get reconstruction efforts underway after the devastating five-month flooding crisis in the country, which in turn puts at risk Peru’s economic recovery. The row surrounding Vizcarra’s departure from the transport ministry also threatens to undermine investor sentiment in the country.

Vizcarra, also Peru’s elected vice president, resigned his ministerial post on 22 May, after announcing the cancellation of the public-private contract for the (long-awaited) new Chinchero international airport in Cusco. Vizcarra, a close ally of President Kuczynski, who helped steer his 2016 election campaign, had been looking unsafe in his ministerial post for months. The Fuerza Popular (FP, Fujimoristas), which dominates congress, argued that the transport ministry’s decision to sign a contract addendum allowing the government to put up the initial funding to get the US$500m airport underway, amid financial difficulties in the Kuntur Wasi private consortium awarded the concession (back in 2014), was detrimental to the state. In January, congress asked the comptroller general’s office to review the contract addendum. Congress appoints the comptroller general.

The comptroller general’s report, released last week, was negative about the addendum; however, it did not formally accuse Vizcarra of any irregularity (perhaps in deference to his elected position as vice-president). The deputy transport minister, by contrast, was denounced. She has also resigned and may face punitive action (Peruvian civil servants can be held personally liable for public contract irregularities). Nonetheless, following his congressional testimony (on 18 May), congress threatened to censure Vizcarra (which would have forced Kuczynski to dismiss him).

In his resignation announcement, Vizcarra defended his work and apologised to the people of Cusco. The leader of the left-wing opposition Frente Amplio (FA), Verónika Mendoza, blamed Kuczynski, accusing him of being beholden to business lobby interests. “Mr Kuczynski, govern for the people, not for lobbies. Investments should be planned and executed for the public interest,” Mendoza tweeted. “Enough of give-away addendums. Enough of playing with the people of Cusco”.

Yet the incident did not end there, as FP then went on to demand that Vizcarra also resign his elected post as vice president. The Kuczynski administration could barely contain its fury, as it had been ‘understood’ that the matter would go no further. Kuczynski defended Vizcarra, while deputies for the ruling Peruanos por el Kambio (PPK) condemned FP and accused it of wanting to destabilise the government. The PPK’s bench leader, Carlos Bruce, called on FP to “read the constitution”, noting that “Vizcarra’s management as minister of state has nothing to do with the fact that he was democratically elected as first vice-president”. Bruce also emphasised that Vizcarra had not been found to have committed any irregularity in the Chinchero contract addendum. 

With concern that the suspension of the Chinchero contract will contaminate the investment environment in Peru, and that FP’s behaviour in congress will hobble the government’s reconstruction plans, the normally carefully-spoken Zavala appeared to lose his patience in a television interview, accusing congress (essentially FP) of overstepping the mark.

“We [the executive] will always be ready to explain our progress, recognise our errors and take on all possible suggestions, but we will never distort functions or lose perspective,” Zavala declared. “One thing is political control, but another is the abuse of power. One is to audit, another is to obstruct,” he continued (see sidebar).

Congress, along with the comptroller general’s office, Zavala noted, needs to act “responsibly”. By turns scolding and pleading, he urged congress “not to send a bad message to Peruvians wanting to contribute their part to the reconstruction”. “We cannot lose time, things cannot wait,” he stressed. “Generating a good climate for our economy to recover quickly, so that people can feel it, day by day, this should be our focus…don’t let Peru lose another opportunity to advance”. The prime minister ended with a call for “a return to respect”.

The minority Kuczynski government can cajole, plead and scold all it likes, but at the end of the day the Fujimoristas are dictating the pace. They will operate exclusively according to their own political ambition, which has one name – ‘2021’ (date of the next general election). Their support for Kuczynski will be strictly measured and doled out according to that ambition – and Kuczynski, who barely even has a political party to call his own, can do little about it.

As the chief liaison between the executive and congress, Zavala’s frustration is palpable, but it is no more than that endured by those before him. The Fujimoristas managed to see off seven prime ministers in the last government led by Ollanta Humala (2011-2016).

• Giuffra mooted as replacement

Bruno Giuffra will be the new transport minister, the daily El Comercio reports. Giuffra, currently the minister for production, has been quite high-profile, recently unveiling new schemes to help the thousands of small and micro companies that form the backbone of Peru’s domestic economy. The newspaper said that Cayetana Aljovín, the minister for development and social inclusion, had been invited to take up the production ministry, but had declined.

“We have shown, on repeated occasions, that we are open to dialogue, that we look for consensus. We have gone to congress innumerable times, and over many hours, to give account, to take suggestions, and we will continue to do so. [But] we have seen in recent weeks how things have gone from discrepancy to calumny, from criticism to lack of respect.”

Prime Minister Fernando Zavala

Mexico’s ministry environment & natural resources ministry (Semarnat) on 1 October published the ‘preliminary bases of the emissions trading system (ETS)’s pilot programme’ in the official gazette (Diario Oficial de la Federacion). The programme is a central element of Mexico’s commitment to lower its carbon output, as specified in its 2012 general law on climate change (LGCC) , which was amended in July 2018 to include the creation of the ETS that begins with the pilot programme. As a signatory of the 2015 Paris Agreement , Mexico opted to adopt significant measures to decarbonise its economy, a commitment that was ratified by the senate in 2016.

The LGCC requires Mexico to adopt renewable sources of energy, increase its sustainability, and reduce carbon emissions. It commits the country to reducing greenhouse gas emissions by 30% by 2020 (from 2000 levels) and by 50% by 2050. The law also establishes that by 2024, 35% of Mexico’s energy must be generated from clean energy sources. This goal is also established in the law on energy transition (LTE) of 2015.

The ETS pilot programme will last for 36 months beginning on 1 January 2020. It will be split in two parts – a two-year pilot phase that will end on 31 December 2021 and a one-year transition phase that will follow from 1 January to 31 December 2022.

The aim of the programme, which focuses only on carbon dioxide (CO2), is to test the design and the rules of the system, generate information, develop capacity among participants, and assess the performance of the ETS mechanism before it becomes fully operational in 2022. The key objective is to have an ETS that allows reducing emissions without undermining the competitiveness of the participants vis-à-vis international markets.

The pilot programme will cover 40% of the national inventory of greenhouse gas and compounds emissions. Participants include energy-producing and manufacturing facilities that have reported emissions levels of 100,000 tons of CO2 or more in 2016, 2017, 2018, or 2019, which total around 300. These

include the main state-owned companies Petróleos Mexicanos (Pemex) and the federal electricity commission (CFE), which account for much of the country’s hydrocarbons and electricity production, transmission, and distribution.

Manufacturing industries that will also participate include automotive, cement, iron and steel, chemical, food and drink, glass, metallurgy, mining, petrochemical, and paper. Each participant will have to create a monitoring plan according to guidelines that Semarnat has yet to publish, a provision that seeks to make the system transparent and fair.

Mexico’s ETS programme will operate under the ‘cap and trade’ principle. Thirty days before the pilot phase starts, Semarnat will publish the cap on the number of emissions allowances that it will issue, together with the emission allocations for each participant, which will be based on their historical emissions. Granted free of charge, these allowances may be traded by the regulated entities if their emissions are reduced, creating an allowance market.

The allowance for each participant will also be published 30 days before the start of every compliance year. At the end of each yearly compliance period, participants will have to file with Semarnat the same number of allowances as units of emissions they have produced, which will be verified by independent third parties. This will start in 2021 relative to the emissions made in 2020.

Semarnat may also implement an auction scheme with additional allowances equivalent to 5% of the overall cap after the first year of the pilot programme. This would allow participants to gain experience in the use of the auction mechanism.

Under the programme, economic sanctions will not be levied for missing allowances. However, some will be deducted at the end of the transition phase, prior to the launch of the operational phase in 2022 – when Mexico’s carbon market programme will be formally established – in order to encourage companies to comply but without having a significant impact on their competitiveness level. By capping the global amount of emissions through the total number of allowances granted, the programme ensures a reduction of greenhouse gases, which in turn is expected to contribute to the improvement of the environment.

The publication of the preliminary bases of the ETS pilot programme represents continuity with the measures adopted in Mexico under the previous Enrique Peña Nieto administration (2012-2018) to fulfil the country’s environmental commitments. Importantly, the pilot programme reporting obligations do not allow participants to avoid the greenhouse gas emissions monitoring, reporting and verification obligations under other laws.

In October 2014, Mexico’s national emission registry (Rene) was set up which established that emitters in several sectors, including energy, industry, commercial, and services, among others, were obliged to report both their direct and indirect greenhouse gas emissions from facilities with emissions above 25,5000t CO2. However, according to Jones Day, a US-based law firm, there is still lack of clarify regarding how to comply with these reporting requirements.

While the publication of the ETS pilot programme is undoubtedly positive, it has come at a time when there are doubts on whether the country will reach its clean energy targets. Crucially, the current government of President Andrés Manuel López Obrador has maintained Mexico’s clean energy target of 35% for 2024. However, some of his policy decisions suggest it is unlikely it will be achieved.

These include the suspension of a planned fourth clean-energy auction that was due to take place in December 2018 and the cancellation of tenders for several power transmission projects that would have helped deliver renewable electricity around the country. The most-affected sector by these decisions has been the wind power market because of the cancellation of plans for long-distance transmission lines that would have brought power from the high-wind-resource Oaxaca state to the rest of the country. The solar energy market has been affected to a lesser degree because it is more widely dispersed.

Having said that, Energy Minister Rocío Nahle on 18 September stated that the auction might go ahead. However, she added that it will depend on the advances that the CFE makes regarding power generation and transmission.

Brian Gaylord, an analyst at Wood Mackenzie Power and Renewables, maintains that the López Obrador government’s focus in the electricity sector

is to concentrate power generation in the CFE. Indeed, according to local industry experts, the fate of the auction remains uncertain as there does not appear to be any sense of urgency in the government. López Obrador has repeatedly stated that his administration’s focus on reactivating the CFE’s hydropower plants demonstrates his commitment to clean energy. His apparent lack of interest in further developing the country’s renewable wind and solar power sectors suggests his government does not count environmental and climate change policy among its key priorities.

On 7 July Honduras and Nicaragua suffered a total blackout, the latest in a series of serious problems that have affected regional electricity distribution.

The operating body (EOR) for the regional electricity market (MER) said it declared a “state of emergency” following the fault, which occurred at 1pm local time and also affected parts of Guatemala and El Salvador. The fault was traced to the Amarateca-Toncontin transmission line in Honduras and service was resumed three hours later, the EOR said in a press release. The economic cost of the blackout was estimated at US$18.2m. The incident followed another fault on 9 June which saw a complete blackout in Nicaragua and affected service in other Central American nations.

These blackouts are hugely disruptive and have led to criticisms of the MER and its continued viability. In fact on 12 July Guatemala announced that it would leave the MER, triggering a ten year notification period. Commenting on the government’s decision, Edgar Navarro, president of the national electricity operator (AMM), cited regular blackouts due to faults in systems and infrastructure in other member states. Navarro also complained that other countries have tried to blame Guatemala for these faults, despite the fact that the nation has invested in infrastructure and equipment. Another issue is that Guatemala wants to be able to sell its surplus electricity to other countries freely, whereas the MER regulator (Crie) has repeatedly ruled that it sell excess electricity only after regional demand has been met (see sidebar).

These are not new complaints. Energy distribution in Central America is governed by a 1996 framework treaty, which integrated distribution systems in Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, and Panama using a 1,800km transmission line that runs from Guatemala to Panama. Known as the Central American electrical interconnection system (Siepac), it cost US$500m to build and came online in 2014. However, transmission systems in the region aren’t strong enough to deal with a fault in the line, which as a result cause overloads and the collapse of local systems, resulting in a kind of domino effect in which a fault knocks out one part of the line, flooding other areas with huge amounts of electricity that the local systems cannot handle all at once.

These power outages are incredibly damaging but stopping them from happening will require lots of investment, both in the integrated system and national distribution systems. This is a longstanding issue due to stretched public budgets in the region, which has only been exacerbated by the coronavirus (Covid-19) pandemic and its effects on public finances. In addition, the EOR has failed to make countries work together on a truly regional project, and they are pursuing individual strategies. Deeper integration was one solution proposed by analysts, including developing a standardised regulatory framework across national energy markets. The idea was to iron out these political aspects in order to enable regional solutions to the serious infrastructure shortfall, but Guatemala’s recent announcement means that is even more complicated than before.

In the face of these issues the EOR put out a statement on 27 July in which it assured the public that it was taking steps to “safeguard the integrity of the regional electricity network”. The objective is to maintain operationality and ensure that electricity supplies are guaranteed both in normal conditions and in emergencies, added the EOR, which said that the development of electricity infrastructure is the responsibility of each individual nation.

•  EOR on Guatemala

The EOR also defended the restrictions it has imposed on Guatemala’s electricity market by saying that it acts “with equity, impartiality and transparency” in the interests of the whole Central American community rather than one particular entity.

The first round of Colombia’s presidential election is due in a little over six months, on 29 May, after congressional polls on 13 March. It is estimated that around 55 presidential hopefuls are looking to win the support of different combinations of political parties and alliances. But so far the competition is strangely flat, and the electorate appears deeply unenthusiastic.

An opinion poll conducted by Dugon/T&SE in late October suggests that Colombian voters have not quite entered into the electoral spirit. It found that almost two-thirds (58.7% of respondents) have yet to make up their minds over who to support. The second largest group, 14.4% of the voters, say they are likely to cast blank ballots – in effect, a protest vote against the political system. The third largest group, 11.5%, is supporting Gustavo Petro, the left-wing former mayor of Bogotá who has been leading the field for months but seems unable to significantly increase his share of the vote.

Remarkably, none of the other candidates, mainly of the centre and the right, manage to get more than 3% support each. These include a former independent mayor of Medellín, Federico Gutiérrez (2.65%); another former Medellín mayor and former governor of Antioquia, Sergio Fajardo, who is leader of the centre-left Compromiso Ciudadano movement and came third in the 2018 presidential elections (2.54%); the right wing Uribista senator María Fernanda Cabal (2.33%); the former president of Universidad de los Andes, Alejandro Gaviria (2.31%); and the former mayor of Bucaramanga, Rodolfo Hernández (2.06%). Many other candidates, once considered big hitters, find themselves getting less than one-percentage-point support.

These are still comparatively early days, and other polls have given the candidates significantly higher support levels, but there is certainly a sense of malaise in the early stages of the campaign. Some analysts suggest that the sheer number of candidates is confusing voters. Others say that the politicians are at fault, by failing to differentiate themselves, uttering platitudes, focusing on their own coalition-building politics, and failing to connect meaningfully with the voters.

The absence of detailed proposals to deal with key issues - economic growth, inequality, and crime and violence - is also significant. Writing for Spanish newspaper El País, Diana Calderón says Petro has been trying to break through an apparent ceiling on his support numbers; the political centre has failed to unite because of personal rivalries; and the traditional right is weakened because of the deep unpopularity of the current government led by President Iván Duque and the decision by former president Alvaro Uribe (2002-2010) not to run again as a candidate to the senate.

Despite Petro’s long stay in pole position, the race is still open. A survey by Datexco has suggested that Petro could be defeated in a second-round run-off ballot either by Senator Juan Manuel Galán (33% to 30%) of the centre-left Partido Liberal (PL) or by Fajardo (34%-30%).

One of the emerging mysteries of the campaign is what will happen in the political centre. There are clear reasons why the centre ground might be particularly attractive to Colombia’s voters. The polarisation offered by the right-wing Duque administration has become deeply unpopular. At the same time many voters fear Petro, on the left, will be too radical and equally polarising. The idea of a centrist government is therefore potentially persuasive. An opinion poll in September revealed that 71% of respondents describe themselves as identifying with the political centre.

The problem, however, is that the centre ground is also occupied by a very large number of very quarrelsome presidential candidates. Rather than unify, they could fragment. It initially looked as if one of the centre-left coalitions, the Coalición de la Esperanza, would provide an agreed selection process in March next year, from which a consensus candidate could emerge. That could enable a choice between candidates like Fajardo and Gaviria.

Gaviria, who in August announced his decision to run for the presidency as an independent, indicated he would be ready to join the coalition and submit to its selection process. But talks broke down after Gaviria insisted on maintaining his links with the PL, rejected by Fajardo. Some speculate that Gaviria will now try and split the coalition to create a new one around himself.

The divisions are epitomised by the centre-left Alianza Verde (AV), which spearheaded the Coalición de la Esperanza in February this year but has succumbed to bitter infighting, torn over whether this coalition should be seeking to forge an overarching alliance with Petro’s Colombia Humana coalition.

• Alianza Verde divisions

Some senior members of the Alianza Verde are adamant that Gustavo Petro is too radical and object to his persistent criticism of the AV mayor of Bogotá, Claudia López. But other senior figures within the AV are insistent that an alliance with Petro is necessary to defeat the right-wing.

Juanita Goebertus, an AV deputy in the lower chamber of congress, supports Gaviria; Inti Asprilla, another AV deputy, backs Petro; while others support AV pre-candidates Carlos Amaya and Camilo Romero. The AV party leadership is meeting on 11 November to decide whether to present congressional lists as a party or as part of the Coalición de la Esperanza.

Divisions in the political centre could ultimately exclude a centrist presidential candidate, from the second-round ballot, creating a re-run of the 2018 elections which pitted the right-wing Duque against the left-wing Petro, pushing Fajardo off into the side-lines.

Oil theft on the rise

The theft of oil from Colombia’s pipeline system is booming, according to a Reuters report on 8 November, which said most was being stolen from the Caño Limón-Coveñas pipeline near the border with Venezuela.

Up to June some 3,299 barrels a day were being stolen, an increase of a fifth on year-earlier levels. The crude is being processed in clandestine refineries into a low-grade green coloured petrol known as pategrillo, which is used by drug trafficking organisations in the production of cocaine paste.

The improvised fuel is also sent to Venezuela where it is used to run machinery at illicit mining sites. Traditionally, cheap Venezuelan petrol has been smuggled into Colombia, but the direction of flow has now changed, with Colombian pategrillo flowing into Venezuela because of acute fuel shortages there.

Acute foreign currency shortages are driving the Cuban government to open “dollar only” retail stores, despite fears of growing economic inequality.

A sign of the times is the opening of a new Cuban supermarket in January. Known as the Supermercado de 3ra y 70, it is located in the relatively well-off Havana suburb of Miramar, close to a new hotel complex. At a time of national scarcity, it is well stocked with sausages, beer, various meats, personal hygiene products, and petrol. However, its prices are high, and it will only accept payment in US dollars, either in cash or through foreign credit cards. Anyone with Cuban pesos (CUP) is turned away.

Reactions have been mixed. A 19 January report by Spanish newspaper El País cites Cuban citizen Iker Rafaeli Ruiz as saying that the new supermarkets would not solve the problem of food shortages because “not all the population has relatives in exile who can send them dollars”.  One customer, Yuliani González, told Reuters in a 24 January report that “this supermarket is quite good…but not everyone has the possibility to buy here”. Another, housewife Osdibel Saavedra Hernández, was cited by Reuters as saying that she receives dollars from her husband who works abroad, meaning she can use them in the store to buy food for their children in Cuba.

Cuba has been here before. Since the collapse in 1991 of its key economic backer, the Soviet Union, and the economic meltdown after2014 of another source of subsidy, Venezuela, the government has experimented with various convertible and non-convertible currencies and dollar-only stores.

This time round it is a similar story.  Prime Minister Manuel Marrero Cruz said “partial dollarisation” will be used “to improve the management, control and allocation of foreign currency”. Officials say dollar payments will be gradually allowed in various parts of the economy including wholesale and retail sales, foreign trade, tariffs, sectors not manged by the state, and those linked to tourism.

Economists are sceptical. Ricardo Torres, a Cuban economist at the American University in Washington DC, was cited by El País as saying “Cuba is an economy that suffers from a chronic shortage of foreign currency. When there are fiscal and monetary imbalances the national currency loses relevance because it’s more unstable and therefore, less reliable.” He and others believe the new dollar stores will increase inequalities between those who receive remittances from abroad and those who don’t. Pavel Vidal, an economist who used to work at Cuba’s central bank (BCC), told the Spanish daily that dollarisation won’t guarantee a general recovery since it leaves behind all industries and markets that aren’t dollarised and is negative for families that can’t access hard currency remittances. He sees the process as no more than a short-term measure, allowing the cash-strapped government to guarantee the operation of some stores, hotels, and industries.

But in the longer term he thinks it is less viable “because they are not going to extend dollarisation to the entire economy, due to the fact that the dollar is the currency of the country that sanctions Cuba and would generate an unadvisable financial vulnerability”.  In the end, Vidal argues that there is no alternative to a macroeconomic stabilisation programme with deep structural reforms to transform “the failed model of a centrally planned economy”.

US retightens existing sanctions

On 1 February US Secretary of State Marco Rubio said that among other measures he was re-introducing the “Cuba Restricted List” which prohibits transactions with companies under the control of “repressive” Cuban military, intelligence or security services”. The move could affect Orbit SA, a Cuban company that works with US money transfer firm Western Union to manage remittances to the island. While the flow of remittances is expected to continue, short term disruption could have a significant impact. 

“We must decisively open the door to greater trade between our regions” said Caribbean Community (Caricom) Secretary-General Carla Barnett while attending the AfriCaribbean Trade and Investment Forum in Grenada at the end of July.

Despite powerful historic and cultural links, Africa and the Caribbean do little together in the way of trade and investment. The share of bilateral out of total exports has never surpassed 6% for either region according to a study by Pan-African multilateral financial institution Afreximbank and the International Trade Centre, the joint agency of the United Nations (UN) and World Trade Organization (WTO).

According to the same study, African exports to the Caribbean declined since 2014 and have hovered around 0.1% of the total since 2020. Caribbean exports to Africa have been volatile jumping from 0.8% of the total in 2020 to 2.3% in 2022. This comes as the Caribbean, with its smaller and import-dependent island economies, is particularly vulnerable to uncertain global trade: US President Donald Trump has slapped a 10% tariff on all Caribbean’s exports. The US takes around 40% of total Caribbean exports.

That said, Caricom sees an opportunity for diversification and improvement. According to the same study, it is feasible to target a near-tripling of bilateral trade over the next five years, from US$729m to US$2.1bn. This could be achieved by slashing trade barriers (Caribbean rum, for example, faces an 88% tariff in African markers) and investing in higher-value products such as minerals and metals, processed food, manufactures, travel and transport, and creative industries.

In Grenada, Barnett argued that stronger bilateral trade would be beneficial for the Caribbean countries, reducing reliance on the US and Europe. Caricom had already cooperated with African countries to seek slavery reparations from former colonial powers and compensation from climate change effects. The Grenada forum reportedly attracted 1,700 delegates while at its sessions, over US$290m worth of business and cooperation deals were signed.

Brazil’s President Luiz Inácio Lula da Silva held his first phone call with US President Donald Trump on 6 October after months of bilateral tensions. In July and August, the US imposed sanctions on Brazilian officials and raised tariff rates to 50% for many products. In response, Lula signalled a defiant stance against US tariffs and pressure, contributing to a boost in popularity. But it now appears that Lula and Trump are willing to meet and discuss tariff rates and other issues.

According to a statement by Brazil’s presidential office, Presidents Lula and Trump spoke over the phone for around 30 minutes on 6 October and recalled the “good chemistry” they had when they briefly met at the United Nations General Assembly (UNGA) in New York on 23 September. Lula requested a reduction from the high tariff rate of 50% on many Brazilian exports and the removal of restrictions applied to Brazilian officials. Both leaders also agreed to meet in person soon.

On social media, Trump said that he discussed the economy and trade with Lula. Most notably, the leaders did not discuss the situation of Brazil’s former president Jair Bolsonaro (2019-2023), who was convicted by the supreme court (STF) on 11 September for plotting a coup to stay in power after losing the 2022 presidential race. Throughout July, August, and the first half of September, Trump and other US government officials argued that the coup plot trial against Bolsonaro was a politically motivated “witch hunt”. The tariffs and sanctions on Brazil were explicitly framed as displays of solidarity for Bolsonaro. In late July, the US government sanctioned Brazilian STF justice Alexandre de Moraes, the presiding judge in the Bolsonaro coup case, accusing him of being a human rights violator.

But now, in October, the rhetoric from the Trump administration has shifted. Some political pundits have suggested that Trump’s support for Bolsonaro has clearly not yielded results. Bolsonaro has been sentenced to prison and Lula gained a temporary boost in public approval for criticising attempts by a foreign government to intimidate Brazilian authorities with sanctions and tariffs. From Lula’s perspective, it could also be argued that the ‘rally-round-the-flag’ effect of criticising Trump’s tariffs from July-August will not prop up his popularity indefinitely. It is likely that Lula could register more political gains by negotiating a deal to lower US tariffs.

At the time of writing, it has not been announced when or where Lula and Trump will hold their first proper meeting. It is also uncertain how successful the meeting might be. The phone call between the two heads of state on 6 October was just a first step towards opening negotiations over tariffs. However, for Lula to secure a deal for lower tariff rates, media commentators argue that he will need to give Trump a concession that he can boast about. Potential points of negotiation suggested in the Brazilian press include US access to critical minerals on Brazilian soil as well as favourable regulations in Brazil for US-based ‘big tech’ companies. 

Allies of Bolsonaro have expressed hope that the US will be tough in its negotiations, with some far-right figures in Brazil celebrating the possibility that US Secretary of State Marco Rubio will come to Brazil and put pressure on the Lula administration. Bolsonaro’s third son, federal deputy Eduardo Bolsonaro, who has been residing in the US since February this year, said on 6 October that Rubio was a fierce opponent of “left-wing totalitarian regimes in the region” and reiterated the Bolsonarista narrative which claims that Bolsonaro is being persecuted by supposedly tyrannical authorities and officials such as De Moraes.

However, according to news website G1, this hope by Bolsonaristas that Rubio will lead the negotiations might be frustrated, given that there now seems to be an open line of dialogue between the White House and Brazil’s Planalto presidential palace, so it is likely that Trump could lead the talks rather than delegate the matter to the State Department.

G1 has also suggested that Brazil’s foreign minister Mauro Vieira is very familiar with US authorities and officials, given that he served as Brazil’s ambassador in Washington from 2010-2015. If Brazil’s foreign ministry and the US State Department play a role in negotiating tariffs, Vieira is expected to leverage his knowledge and contacts in the US. When Vieira was Brazil’s ambassador in the US, he reportedly knew Rubio, who at the time was a senator (2011-2025) heavily involved in legislation relating to foreign affairs.

According to the Brazilian government, a possible chance for Lula and Turmp to meet could be the summit of the Association of Southeast Asian Nations (Asean) to be held in Malaysia on 26 October, which Lula has said he will attend. Lula also extended an invitation to Trump to come to Brazil for the United Nations climate change conference (COP30), which will be held in the Brazilian city of Belém in November.

Government approval ratings

A poll by Genial/Quaest released on 8 October showed that the Lula administration’s popularity has reached its highest point in 2025 so far, with 48% of survey respondents expressing approval for the government. This marks an increase from 46% in September. The disapproval rating for the government stood at 49% in October, which is the lowest level since January this year. In terms of regional variation, it is notable that the left-of-centre government’s approval in the more conservative south of the country also showed a slight increase, from 39% in September to 41% in October.

Honda boosts investment in Brazil operations

Japanese car manufacturer Honda announced on 2 October that it would invest R$1.6bn (US$299m) in its motorcycle production operations in Brazil from 2025-2029. The company highlighted plans to boost the production capacity of its factory in the city of Manaus, the capital of Amazonas state, and increase its output to 1.6m units per year.

Public opinion on Lula and Trump

On 8 October the national pollster Genial/Quaest released the results of a survey which showed that 51% of respondents believed Presidents Lula and Trump will “get on well” after their possible meeting, while only 36% do not believe so.

After Lula and Trump’s brief encounter in New York on 23 September, 49% of survey respondents said that Lula had come out stronger politically, while only 27% believed that Trump’s apparent warmth towards Lula that day would hurt Lula politically.

A bill passed by the Rio de Janeiro state legislative assembly (Alerj) in September, which proposed offering a bonus to policemen for the ‘neutralisation’ of criminals, has sparked human rights concerns. Although the state governor, Cláudio Castro, ultimately vetoed key sections of the bill, the fact that the bill managed to pass the state legislature raised alarm bells among legal experts who were concerned over the possible return of the policy from the 1990s which gave Rio’s police economic incentives to suppress crime by force. 

The bill, officially registered as PL 6027/2025, was approved on 23 September. The primary aim of the legislation was to update the roles and staffing structure of Rio de Janeiro’s state law enforcement bodies. However, during its passage through Alerj, a controversial amendment was added: a new provision to offer police officers a bonus for neutralising suspected criminals. This additional payment could have ranged from 10%-150% of a policeman’s salary.

The amendment was tabled by state legislators who are part of the governor’s political base. Castro is a member of the right-wing Partido Liberal (PL), the party of Brazil’s former president Jair Bolsonaro (2019-2023). The proposal for the so-called Wild West bonus was put forward by three right-wing state deputies – Alan Lopes and Alexandre Knoploch, both affiliated with the PL, and Marcelo Dino, a member of the conservative União Brasil party, which is allied with the PL in Alerj.

The Brazilian branch of international NGO Human Rights Watch (HRW) released a statement on 2 October to criticise the passage of the bill. HRW and other human rights groups refer to the proposed bonus as a ‘gratificação faroeste’ (Wild West reward). The NGO highlighted that a policy like this was in place in Rio de Janeiro from 1995-1998. However, Alerj ended the neutralisation bonus for state police in 1998 after a report released that year showed that 65% of roughly 1,200 autopsies conducted from 1995-1998 showed signs of victims being shot in the back, possibly while trying to flee from police. HRW also warned that a bill that incentivises the killing of suspected criminals would have “exacerbated the disproportional impact” of police violence on black Brazilians living in lower-income communities.

• Disproportionate racial impact

In its 2 October statement in which it criticised the Wild West bonus, Human Rights Watch Brasil highlighted that the military and civil police forces of Rio de Janeiro state killed 703 people in 2024, 86% of whom were black. This proportion of black people killed by police is significantly higher than the total proportion of people in the state of Rio who identify as black, which is 58%.

The federal public defender’s office (DPU) sent an official letter to the office of the Rio governor on 29 September which argued that PL 6027/2025 was unconstitutional and recommended that Castro veto the legislation. Shortly before he retired on 18 October, now-former supreme court (STF) justice Luís Roberto Barroso (2013-2025) also requested more information from the Rio state government about the bill, given the risk that the legislation could have contradicted an STF ruling from April this year which ordered the state of Rio de Janeiro to implement a plan to reduce the risk of police brutality in favelas [SSR-25-05].

It is unclear how much the pressure from human rights groups and judicial authorities influenced Castro’s decision, but on 23 October the Rio state government announced that the governor had vetoed the amendment of the bill that proposed the Wild West bonus. The announcement of the veto in the state government’s official gazette did not focus on the potential human rights or legal concerns regarding the bonus. Instead, it highlighted that the proposed plan to pay police officers a bonus could have strained public finances, possibly threatening the state government’s compliance with fiscal rules.

“Growth with social inclusion is not a cliché but a state policy.” This was the message from Peru’s economy and finance minister, Luis Miguel Castilla, this week after he presented details of a draft budget proposal which calls for a substantial increase in spending on social programmes, as well as the education and health sectors, while preserving a rainy day fund should the global economic slowdown impact the country. The ratings agency Standard & Poor’s gave Castilla, and the administration of President Ollanta Humala, the thumbs up this week by lifting Peru’s credit rating by one notch.

Castilla’s 2012 budget of NS$95.54bn (US$34.99bn), which is yet to be officially presented to congress, is 8% bigger than this year’s budget (5% in real terms). He emphasised the fact that 25% of the budget will be devoted to health and education: NS$15.25bn (US$5.59bn) to education, a 16% increase on the 2011 budget, and NS$8.66bn (US$3.17bn) for health, an 11.5% increase. Humala boasted that the scale of the increase in funding for education had not been seen “in the last 30 or 40 years”.

Castilla said social spending in the 2012 budget would amount to a total of NS$13bn (US$4.77bn), with NS$1.43bn (US$523m) being allocated to the five main government social welfare programmes: poverty relief, pensions for over 65s (see sidebar), child support subsidies and student grants. Humala stressed the importance of combating corruption, claiming that 40% of resources for social programmes are lost along the way.

Castilla said that the concept of “growth with social inclusion” would be imposed radically but coherently, rather than timidly and piecemeal. He said the government would shortly produce “combos” – investment packages including, for instance, improving rural transport infrastructure, extending the electrical network, enhancing sanitation and medical clinics, in all of which private investors could partake. He made it clear, however, that the government had kept enough in reserve in the event of the external environment turning particularly adverse. He said the budget set aside NS$8.49bn (US$3.12bn) as a contingency fund for stimulus measures should the global economic crisis impact Peru significantly.

Castilla also expressed his delight that Standard & Poor’s had recognised the government’s efforts. S&P raised Peru to BBB, the second-lowest investment grade, from BBB- and rated Peru with a stable outlook. “We expect that broad fiscal and monetary policy continuity under Peruvian President Ollanta Humala’s new government will support stronger economic policy flexibility and growth,” the agency said in a statement this week.

Congress backs Humala
Days earlier, on 25 August, Peru’s prime minister, Salomón Lerner Ghitis, presented his plan of governance to congress. A conciliatory and measured address, packed with figures, goals and enthusiasm, won the support of 90 legislators, with 33, from the Fujimorista Fuerza 2011, opting to abstain. “The country needed a shock of confidence and today, in general terms, contributed to (this),” Juan Carlos Eguren, a deputy for the right-of-centre Alianza por el Gran Cambio, said. This was a notable plaudit, as the party’s once-presidential candidate, Pedro Pablo Kuczynski, a former economy minister, had portrayed Humala as a dangerous liability during the electoral campaign. The fact that it is cautiously backing Humala now is a testament to his efforts to preserve stability in order to preside over radical, but gradual, social change.

Lerner made a real point of emphasising the government’s commitment to preserving macroeconomic stability in order to deliver on its mantra of growth with social inclusion. He set the ambitious, but not unrealistic, target of Peru growing faster over the next five years than any other country in the region. He said it was “vital” to maintain growth of at least 6% a year in order to continue overcoming poverty. The economy grew by 6.6% in the second quarter and 7.6% in the first half. The Humala administration is hoping to reduce poverty from its current level of 31% to 20% over the next five years and indigence from 9.8% to 5%, the production minister, Kurt Burneo, spelt out in an interview with the national daily El Comercio last week. In absolute figures 9.2m Peruvians live in poverty and 2.9m in extreme poverty, the national statistics institute (Inei) reported. Burneo said the standout achievement of the government of President Alan García was “leaving macroeconomic policy on automatic pilot”.

Hitting the ground running
Lerner was also able to provide some details of the government’s deal with mining companies operating in Peru, an important achievement as it removed any uncertainty over the issue right at the start of Humala’s mandate. Lerner said both sides had agreed a new royalty would raise an additional US$1.1bn annually for five years. This figure is not as firm as it was presented. It can only really be a projection as the royalty will be based upon operating profits. The exact details of the royalty are still being negotiated, with mining companies proposing that projects without tax stability agreements pay rates between 2% and 14% percent of their operating profits while those with agreements would pay between 1% and 7%.

• Details
  

Prime Minister Lerner revealed details of the government’s flagship social programmes. He said that ‘Pension 65’ would extended to the whole of Huancavelica, Ayacucho, Apurímac and Puno (all departments where President Humala has strong backing) and part of Lima and Callao by the end of the year. Cusco, Huánuco and the rest of Lima and Callao, would benefit from it in 2012; and the rest of the regions in 2013. He said that NS$250 (US$92) a month would be provided “per home” for indigent people over the age of 65 without a pension.

• Drugs
  

Prime Minister Lerner said Peru would host a presidential summit in the first half of 2012 to discuss combating drug-trafficking “based on the joint responsibility of producers and consumer countries.” He said the government was designing a new counternarcotics programme, which would strengthen police intelligence and build mobile inspection stations to crack down on precursor chemicals. “We will be inflexible in the control of precursor chemicals and combating drug-trafficking gangs,” Lerner said. “We will not legalise any drugs or illicit crops and we will eradicate and not permit the extension of illegal cultivation,” he added.

If 2011 proved yet another successful year for the Paraguayan economy, 2012 is shaping up to be disastrous, amid major problems in the key agricultural sector.

The problems began in September 2011 when a Foot and Mouth Disease (FMD) outbreak was detected in the department of San Pedro. Up to that point, Paraguay was ranked a FMD-free country with a vaccination scheme, a status that opened up many international markets for Paraguayan beef, the country’s second most important source of revenue. Upon the outbreak, several customers suspended Paraguayan beef imports, leading to an estimated US$300m in losses for Paraguay in the last quarter of 2011. The authorities’ quick action in officially informing the pertinent international organisations of the outbreak and in providing detailed plans to deal with the situation meant that some of the import restrictions were eased relatively quickly.

However the situation took another turn for the worse on 3 January, when the local authorities confirmed a second FMD outbreak in San Pedro. Key importers like Russia then suspended trade indefinitely. Domestically, there are questions to be answered about the second outbreak, including whether it was the result of negligence on the part of farmers or whether the national animal health service (Senacsa) might have provided bad vaccines or failed to adequately control the vaccination scheme. In fact, criticism of Senacsa forced the government to remove its head, Daniel Rojas, replacing him with Félix Otazú on 17 January.

To make matters worse, the Southern Cone summer, which began in December, has included a severe drought, which has affected the country’s most important source of revenue, soya. The situation now appears critical. Soya producers in Itapúa and Alto Paraná, two of the most productive departments, estimate that the inclement weather has decimated between 70% and 80% of their first harvest.

Moreover, they say that if rain does not come soon they will also have problems planting the next harvest, which could lead to severe shortages. Producers called on the government to declare a state of emergency in order to provide them with some sort of assistance with their incalculable financial losses. On 17 January President Fernando Lugo declared a national state of food emergency, the first ever in the country, in order to deal with the crisis.

The ministry of agriculture and livestock (MAG) is already conducting studies to try to determine the level of losses for farmers. According to the deputy minister, Andrés Werlhe, the MAG estimates that up to 40% of the county’s entire agricultural production has been affected by the drought. Along with soya, this also includes corn, cotton, sesame and peanuts. Werlhe noted that the hot and dry conditions have also caused wildfires in pastures around the country which will also negatively affect beef production.

The drought has also resulted in a severe fall in water levels in the Paraguay River, the landlocked country’s main trading route. A four metre decline in the water level in December forced the national hydrology, navigation and ports authority (ANNP) to temporarily close the port of Asunción, as the river at that point was rendered non-navigable. Up to 60% of Paraguay’s trade passes through the river and while the port of Pilar, downstream from Asunción, is still operating, Víctor Morínigo, the ANNP spokesman, declared that a further decline in the water level could have “disastrous” economic effects, as exporters stand to lose up to US$15bn. Guillermo Ehreke, a representative of the local river shipping transportation centre, which groups freight companies, estimates that that its members have already lost some US$400m. Moreover, crucial imports are not entering the country. In Ehreke’s opinion, this has the potential to affect all sectors in the economy, meaning that “the country could lose hundreds of millions of dollars every month”.

The government has recognised the extent and severity of the problems; and is now starting to react. On 11 January Finance Minister Dionisio Borda announced that President Lugo’s economic team would hold an emergency meeting to discuss the more pressing issues. After the meeting, Borda urged congress to release some US$300 in loans and donations in order to fund things like dredging the Paraguay River. The industrial and trade federation (Feprinco) reached an agreement with the government to share the costs of dredging critical parts of the river in order to ensure that it remains navigable in the future. Feprinco’s president, Eduardo Felippo, said that a formal agreement would be signed on 18 January so that work could begin immediately.

The presidential decree establishing the 90 day national state of food emergency stipulates that all the administrative and financial efforts are to be coordinated by the MAG, but it does not provide any exact details. While the measure is mainly intended to provide assistance to very vulnerable small- and medium-sized farmers, it is unclear whether the assistance will also extend to large scale producers. The decree acknowledges that the government is obligated “to adopt measures to mitigate damages caused by natural phenomena or any other which escapes human control”.

Most of the damage has already been done and the worry is that the government is too late in acting. Moreover, as with the FMD outbreak, the scale of the problems could have been diminished had the government exercised a little more foresight.  It’s not as if it had no money – Paraguay has enjoyed an unprecedented economic boom in recent years on the back of its agriculture sector.

• Selling Energy

On 12 January in Asunción, President Lugo met Argentina’s planning minister, Julio de Vido, in which he put an offer on the table to purchase Paraguay’s excess energy from the Acaray dam at market prices. However on 17 January, Paraguay’s deputy energy minister, Mercedes Canese, said that as tempting as the offer was, Paraguay’s priority is to sell energy to Uruguay, adding that it is “good to diversify customers”. Paraguay has been trying to sell energy to Uruguay via Argentina since May 2011; but negotiations with the Argentine government over the transfer price to the Uruguayan grid have been tricky.