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Growth: On 20 December Panama’s economy & finance ministry (MEF) issued a press release citing an MEF adviser Horacio Estribí as forecasting 5.2% GDP growth for 2016. Estribí noted that foreign direct investment (FDI) inflows to the country were up 17.8% in the first nine months of 2016 on the same period in 2015 (albeit without providing absolute figures). He also claimed that incidents such as the US government’s May 2016 blacklisting of one of Panama’s most important business groupings, the Waked group, and the ‘Panama Papers’ – the biggest leak of secret information in history which made headlines in April 2016 [RC-16-05] – had not had an impact on the economy in the short term. He cited as evidence an increase in bank deposits, which he said exceeded US$84bn as of September 2016, US$1.01bn more in comparison with the total at the end of the year 2015. Estribí also highlighted that the Panama Canal expansion, which was completed last year, and other public investment projects would have a direct and positive impact on the Panamanian economy and improve the country’s competitive advantages. The most recent (December 2016) estimates from the United Nations (UN) Economic Commission for Latin America & the Caribbean (Eclac) forecast 5.2% growth for Panama for 2016, second only to the Dominican Republic (6.4%). The same report forecast 5.9% growth for 2017, again behind only the DR (6.2%).

President Evo Morales last week promulgated a controversial law (266) enabling the construction of the Villa Tunari-San Ignacio de Moxos highway (linking Cochabamba and Beni departments), to go ahead. Plans to build the highway, which passes through an indigenous territory (Tioc) and national park, Isiboro Sécure (Tipnis), have been fiercely contested in recent years, serving as a major bone of contention between the ruling Movimiento al Socialismo (MAS) and indigenous groups – traditionally a core Morales support base – who accuse the president of failing to protect indigenous and environmental rights.

Approved by the 130-member lower chamber on 3 August and the 36-member senate on 8 August, Law 266 repeals an October 2011 law (180) declaring the area “untouchable” and prohibiting any activity that would affect the communities who live there [WR-11-43]. The government had reluctantly approved the 2011 law following major unrest over its plans to develop the area and build the road which is split into three tranches: Villa Tunari-Isinuta, which is 47.3km in length and was completed in September 2016; Isinuta-Santo Domingo (177km) which crosses the Tipnis (and has been held up due to Law 180); and Monte Grande-San Ignacio de Moxos, which is under construction.

Less than a year after Law 180 was passed, however, the MAS government began carrying out a public consultation (consulta) asking local communities whether it should be repealed and the road should go ahead [WR-12-50]. While the results of the consulta pointed to backing for the road, various sectors – including Bolivia’s then-human rights ombudsman – questioned the electoral process (see sidebar). In 2015, following gubernatorial elections, Beni’s new governor Alex Ferrier (MAS) announced that he would promote the highway but little emerged regarding the issue until now.

Opposition

The law’s approval this month in congress, where the MAS has a majority in both chambers, has already prompted an outspoken response by indigenous leaders such as Fabián Gil, the president of the Tipnis Subcentral (the legal owner of the Tipnis) whose predecessor, Fernando Vargas, announced on 8 August that he plans to present a case against it before the Inter-American Commission on Human Rights (IACHR). According to state news agency Abi, Vargas, who ran in the 2014 general election as a presidential candidate for the environmentalist Partido Verde de Bolivia-Instrumento de la Ecología Política (PVB-IEP), intends to ask the IACHR to reinstate the rights of indigenous groups, and will seek preventative measures to stop anyone touching the territory. The fragmented political opposition is also seeking to capitalise on potential resistance to the initiative: on 14 August the opposition Unidad Demócrata (UD) coalition announced it would file an appeal against Law 266 before the constitutional court by the end of the month.

The new law has also met with a cautious response from international institutions like the United Nations (UN). On 9 August the UN resident coordinator in Bolivia, Mauricio Ramírez, called for dialogue. Three days later, the local UN office in Bolivia issued a statement in which, while recognising the validity of revising the state of intangibility of the Tipnis, called on all actors to increase efforts to “identify scenarios of protection; comprehensive and sustainable development of the Tipnis, favouring the promotion and protection of indigenous rights”. The UN also urged that adoption of Law 266 should represent an “opportunity to institutionalise the processes of free, informed and prior consultation” – in line with the UN Declaration on the Rights of Indigenous Peoples.

• Consulta

In the 2012 consultation process, 58 of 69 Tipnis communities participated while 11 boycotted the process. Of the 58 communities that took part, 55 backed the proposed road, while 57 backed the repeal of Law 180. However, some of the communities conditioned their support for the road on future environmental impact assessments and additional consultation over the route. Then human rights ombudsman Rolando Villena (2010-2016), in his annual human rights report presented in December 2012, described the consulta as “authoritarian, colonialist, and unilateral”.

At the end of October Panama’s 71-member unicameral national legislature approved a proposal by the Partido Revolucionario Democrático (PRD) government led by President Laurentino Cortizo that raises the legally established limits for the fiscal deficit included in the 2008 social and fiscal responsibility law (LRSF). This is the latest sign of the difficulties facing the government in dealing with increased spending as a result of the fallout from the coronavirus (Covid-19) pandemic.

Following the changes approved by the legislature, the ceiling for the fiscal deficit is now 9%-10.5% of GDP in 2020, 7%-7.5% next year, 4% in 2022, 3% in 2023, 2% in 2024, and 1.5% thereafter. In November 2019 the government already amended the LRSF to increase its fiscal deficit limits citing smaller revenues and a need to settle accumulated arrears inherited from the previous Partido Panameñista (PPA) government led by Juan Carlos Varela (2014-2019). Following the changes in November 2019, limits were set at 3.5% of GDP in 2019, 2.75% in 2020, 2.5% in 2021, and 2% thereafter, compared with the previous version of the LRSF, which set the ceiling on a gradual decline towards 1.5% of GDP by 2022.

The latest amendment to fiscal deficit ceilings comes off the back of an economic downturn due to the pandemic and stimulus spending by the PRD government. However, the repeated raising of the fiscal deficit limits have caused concern among international credit ratings agencies, including Fitch Ratings, which, in a 9 November briefing pointed out that its revision of Panama’s rating outlook in February to ‘negative’ from ‘stable’ (which stemmed from fiscal concerns) occurred before the pandemic struck. The agency underlined that Panama has been postponing fiscal deficit consolidation goals for a decade now, and the “development of credible consolidation plans” will be key to improving the outlook.

Repeated changes to the fiscal rule have “weighed on policy credibility,” Fitch says, but “improving fiscal policy credibility is particularly important to Panama’s rating in the absence of independent monetary policy”, a consequence of the country’s dollarized economy. Fitch believes the 2020 fiscal deficit will be almost 9.5% of GDP, as fiscal revenue takes a hit due to reduced economic activity during the pandemic. Revenue was 34% below the budget target in September, according to Fitch, while the government enacted a coronavirus stimulus package worth almost 3% of GDP.

Fitch predicts that fiscal consolidation will be possible thanks to recovery in tax collection from next year. It also says that prioritising economic growth now could see revenue recovery that makes consolidation easier down the line, as tax revenue relies heavily on consumption. It forecasts that GDP will contract by 9% this year but expects it to recover to grow by almost 4% in 2021, citing a full year of production at the Minera Panama copper mine in Colón province and government-led infrastructure projects as driving factors. However, Fitch also mentions the risk of a surge in unemployment, forecast to hit 25% by the end of the year, causing an extended retail sector slump that will affect tax revenue.

Other ratings agencies are also concerned about Panama’s outlook. Standard & Poor’s (S&P) revised its outlook to ‘negative’ in April, and on 20 October Moody’s Investors Service followed suit, citing “absent meaningful fiscal consolidation” and warning that “the sharp deterioration in fiscal and debt metrics will continue to undermine Panama’s credit profile in the coming years”.

Amid these concerns, on 29 October Panama’s legislators approved a 2021 budget worth US$24.19bn, up from US$23.3bn in 2020. The economy & finance ministry (MEF) announced that 33% of the total will be spent on “physical investments” such as the construction and rehabilitation of schools, strengthening of educational technologies and improvements in health infrastructure. It also contemplates investment for housing projects, maintenance and rehabilitation of roads and the construction of an electrical transmission line.

Some analysts such as Cristina Guevara of the US-based think tank Atlantic Council warn that the rise in public debt coupled with the lack of transparency surrounding the allocation of public funds and ongoing corruption scandals could lead to social unrest as economic deterioration continues. Brazilian construction company Odebrecht was found to have paid more than US$100m in bribes to government officials working under former presidents Martín Torrijos (2004-2009), Ricardo Martinelli (2009-2014) and Varela, and there have been further corruption scandals during the pandemic, including the acquisition of vastly overpriced ventilators. Unless they start to see concrete actions taken to improve their daily lives, Panamanians will surely start to wonder where all the money is going.

• Tallying the impact of the pandemic on the Canal

 On 5 October Ricaurte Vásquez Morales, the administrator of the Panama Canal authority (ACP), presented the results for the 2020 fiscal year (1 October 2019 to 30 September 2020) which revealed the coronavirus pandemic’s impact on the ACP. Vásquez revealed that in FY2020, 475.1m Panama Canal/Universal Measurement System tonnes (PC/UMSt) passed through the Canal, down 4% on what had been forecast. He said that the year began with the passage of tonnage above expectations, but that traffic was subsequently affected by impact of the pandemic. Effects were most pronounced between May and July when transit was 20% below forecasts, mainly in the passenger cruise sector (down 10%); vehicle carriers (down 21%); and liquid natural gas (down 15%). The ACP, which also noted that cargo volumes were affected by the US-China trade war, said that negative impacts were partially offset by increases in the sectors of liquefied petroleum gas and bulk carriers, which were 27% and 21% above forecasts respectively.

   In a report released ten days later, Vásquez cited estimates from the World Trade Organization (WTO), that global trade will fall by 9.2% in 2020, but is expected to rebound 7.2% in 2021. In line with these projections, the ACP expects a 10% reduction in traffic through the canal in FY2021, while the estimated tonnage for FY2021 is expected to decrease by approximately 9% compared with the previous fiscal year. International credit ratings agency Moody’s Investors Service echoed concerns over the impact of the pandemic in a report released on 21 October.

   Moody's estimates that “tonnage and transits will decrease by 3% and 8%, respectively, during 2020 (under fiscal year analysis)”, citing the global economic contraction and shifting supply chains. “We expect a slow recovery in 2021, but performance will still be below 2019 levels”, it said. Moody's notes that despite the “pandemic and US-China trade tensions, the ACP’s operational and financial performance has been strong, supported by the recent expansion and a new tariff scheme”, and highlights that the ACP’s credit quality “is also underpinned by the robust institutional framework, corporate governance, and international treaties that ensure its operation without interference”.

   The ACP’s own report also alludes to another challenge - water shortages as a result of drought. The Panama Canal watershed experienced its fifth driest year in 70 years in 2019, reducing water levels at Gatún and Alhajuela lakes, the main sources of water for the Canal. However, water levels need to remain high in order for bulk cargo ships - which is forecast to represent a higher proportion of overall traffic in 2021 and into the future - to safely pass through the Canal (see sidebar).

• Bigger vessels

In a report released in October the ACP notes that toward the end of FY2020, for the first time in 20 months, vessels with a 50-foot draught – the maximum draught offered by the neo-panamax locks- were able to transit as a result of “resource planning, efficient water usage and recent rains”.

The Cutter Stone, a US Coast Guard (USCG) national security cutter, docked at the port of Montevideo in Uruguay on 25 January. Arriving from Brazil, the Stone then continued on to Argentina as part of the USCG Operation Southern Cross, an initiative to help counter illegal, unreported, and unregulated (IUU) fishing in the South Atlantic.

IUU fishing can occur in both high seas and waters under national jurisdiction, and poses a number of multifaceted problems. The practice drives overfishing, thus depleting fish stocks, which carries both economic and environmental costs. According to the United Nations Food and Agricultural Organization (FAO), IUU fishing activities globally account for the loss of 11-26 million tonnes of fish each year, which is estimated to carry an economic cost of US$10-23bn. The depletion of fish stock threatens both food security and marine ecosystems. The practice is also linked to human rights violations and organised crime.   

IUU fishing is a problem across the Southwest Atlantic, and one that affects the Pacific waters of South America too. But in the region, Uruguay stands out as having a particularly poor track record where the practice is concerned. A number of ocean conservation NGOs, including Oceanossanos – a Uruguayan campaign for the conservation and sustainable use of oceans – cite the port of Montevideo as the second port in the world in terms of the volume of transshipment fishing it receives that is suspected of being IUU. Transshipment is the practice of unloading, refuelling, and changing crew on a boat at sea, and is often used by reefers to conceal IUU fishing activities, or even other crimes such as drugs and people trafficking.

• China flagged boats in the Pacific

A largely China-flagged fishing fleet, which worked its way down the Pacific coast of South America throughout much of last year, has attracted attention in some of the coastal countries concerned, amid worries that the boats were involved in IUU fishing. The fleet’s presence near Ecuador’s Galápagos Islands caused diplomatic tensions last August [SSR-20-09], while Peru and Chile [WR-20-50] had also monitored the fleet’s movements.

Uruguay’s scores in the IUU Fishing Index, a joint initiative by The Global Initiative Against Organized Crime (a Switzerland-based civil society organization) and Poseidon (a UK-based aquatic resources consultancy), highlight the country’s vulnerabilities. Although Uruguay actually ranks well overall in the IUU Fishing Index, which provides a measure of how exposed coastal states are to the practice and how effectively they tackle it in their exclusive economic zone (EEZ), on their flagged boats, in their ports, and in more general terms, Uruguay scores very poorly in categories such as port vulnerability, prevalence in ports, and general response.

A January 2019 report by Oceanosanos outlines how existing controls on statement of origin of the catch at the port of Montevideo were based on the declarations of the captains of foreign fishing vessels, with no way of confirming the information given. An incident in August 2020 further illustrates the Uruguayan authorities’ limitations. When a patrol airplane identified 19 vessels fishing illegally in Uruguayan waters, Defence Minister Javier García ordered the immediate deployment of a navy boat to intercept them. However, as reported by Uruguayan weekly magazine Búsqueda, it takes 12 hours to prepare one of the navy’s vessels – by which time, the guilty fishermen had escaped.

With Chinese boats playing a big role internationally in IUU fishing, the US has stepped up efforts to tackle the practice, and presented itself as a partner for other countries. The US is “a global leader in efforts to fight IUU fishing”, the US embassy in Uruguay claimed in a statement announcing the arrival of the Cutter Stone (the first visit of the USCG to Uruguay in over a decade). However, according to national daily El Observador the Uruguayan navy refused the US’s request for the Stone to carry out patrols and IUU fishing controls in Uruguayan waters (as it had done in Brazil), merely authorising the cutter to dock in the port of Montevideo.

On 15 May the International Monetary Fund (IMF) published one of its regular Article IV assessments of the Belize economy. Forecasting that in coming years the country will achieve modest economic growth with low inflation, the IMF notes progress made in reducing the public sector debt burden, and the need to continue further with this government policy priority.

An earlier IMF report released in February 2024 highlighted a significant fall in Belize’s public debt-to-GDP ratio from 103% of GDP in 2020 down to 66% in 2023. The background context for this improvement has been a series of debt rescheduling agreements achieved by the government of Prime Minister Johnny Briceño. One of these came in 2022 when there was agreement on a major discount on outstanding oil debts owed to Venezuela under the Petrocaribe programme, which represented a saving equivalent to 4.3% of GDP. The year before, in 2021, there had been an even larger saving (about 9% of GDP) resulting from a ‘blue loan’. Under that arrangement the government bought back all its sovereign US dollar bonds from investors, using funds supplied by environmental lobby group The Nature Conservancy (TNC), and in exchange for commitments to deliver a ‘blue’ or ‘ocean economy’ plan, to improve the productivity, sustainability, and resilience of the ocean eco-system by 2030.

In its report released mid-May, the IMF says GDP growth has been moderating, from 8.7% in 2022 (reflecting recovery following the Covid-19 pandemic) to 4.7% last year and to an expected 3.4% this year. Tourism (which accounts for around 40% of the economy), construction, retail and wholesale trade, transport, and business process outsourcing have been the leading sectors. Inflation fell from 6.3% in 2022 to 4.4% last year as a result of lower prices for transport and utilities, partly offset by higher food prices.  In 2024 the IMF expects inflation to dip to 3.1%. Looking at the medium term running to 2029, growth is likely to stabilise at 2.5%, with inflation coming down to 1.3%.

The IMF suggests that the big question facing the country is how to use the improved debt and fiscal position to make the economy more resilient, and to prepare for future natural disasters and climate change risks (Belize is seen as being particularly vulnerable on that front). The IMF executive board endorses the government’s aim to further reduce the debt-to-GDP ratio to 50% which will require aiming for a primary budget surplus equivalent to 2% of GDP from 2025 onwards (last year it was 1.2% of GDP).

The extra fiscal consolidation of 0.8% of GDP can be more than covered, it says by “Broadening the GST base [sales tax], raising excise taxes, rebalancing manufacturing taxes, and strengthening revenue administration.” It says extra revenues generated by these measures could also fund additional spending on enhancing roads, water, and sewer systems; expanding renewable energy generation and storage; subsidising childcare; and expanding women’s participation in the labour force. Spending can also be funded to reduce food insecurity and invest in climate-resilient infrastructure. The Fund also calls on the government to draft a disaster resilience strategy (DRS) which it sees as being key for increased medium-term growth.  

How far the Briceño administration goes down the IMF-suggested road of fiscal tightening remains to be seen. The government is wary about expanding the scope of the GST tax particularly if that boosts food prices. With the next elections expected in 2025 it may also be unwilling to impose too much fiscal austerity.

Action on corruption

As is the case affecting a number of Caribbean economies, the IMF calls for further action against corruption and money laundering in Belize. It says a strengthening of the AML/CFT (Anti-Money Laundering/Combating the Financing of Terrorism) framework is required, and that the central bank “must remain vigilant to financial stability risks, keeping vulnerable institutions under enhanced supervision and requesting recapitalisation when needed”.

In June Honduras’ leftist Partido Libertad y Refundación (Libre) government led by President Xiomara Castro announced 14 emergency measures to further tackle insecurity, following on from its declaration of a state of emergency back in November 2022 to crack down on extortion and gangs, which had already drawn concern [SSR-24-01]. One of these measures is proving particularly controversial – the proposal to move on the construction of a maximum-security penal facility on Islas del Cisne (Swan Islands), a chain of three islands located in the north-western Caribbean Sea, which would house 2,000 inmates. The initiative has sparked criticism over human rights and environmental concerns.

Having first announced the proposed prison in April 2023 following a series of deadly clashes in the country’s maximum security prisons [SSR-23-06], on 15 June, the government unveiled a series of new security measures which included the stipulation that the bidding process for its construction must begin in no later than two weeks. On 4 July Honduras’ natural resources & environment minister, Lucky Medina, then confirmed that the government had authorised the environmental licence to construct the prison on the islands, which in 1991 were declared a national marine park, and which are some 250km from the mainland and form part of the national system of protected areas (SINAPH).

Ahead of Medina’s announcement, Honduras’ human rights ombudsman’s office (Conadeh) issued an alert in June, warning of the potential risk of serious human rights violations facing future inmates of the proposed penal colony. It highlights the lack of accessibility to the facility, warning that this could prevent families from visiting their incarcerated relatives, as well as hindering access by judges and other judicial officials. This issue was also raised in an April meeting by the United Nations (UN) Committee Against Torture (CAT), which warned that “it would be impossible for public and private defenders to visit such a facility” and questions whether “the consequences of this plan [had] been assessed.”

The move has also provoked outcry from environmental groups which highlight the unique biodiversity of the islands which, due to their distance from the mainland, have yet to be extensively studied. A 12 July statement by Honduras’ national public university, Universidad Nacional Autónoma de Honduras (UNAH), for example, highlights that constructing a maximum-security prison is “a major intervention” with environmental impacts not just limited to construction, but issues of supplies and waste management, among other things. It notes that the islands are home to fragile ecosystems and unique biodiversity, underlining in particular, 29 species of coral, 65 species of bird, six species of reptile and 54 species of fish found on the islands.

Homicides

The Castro administration’s continued pursuit of repressive security measures comes as it has nonetheless claimed progress on reducing violence. At the start of the year, the government claimed that homicides in 2023 totalled 3,030, which it said was 631 less than in 2022. This translates into a rate of 31.09 homicides per 100,000 inhabitants, down from 38.14 per 100,000 in 2022. Nonetheless, the country has among the highest homicide rates in Latin America and the Caribbean, and the highest rate in the sub-region.

Other measures

The 14 emergency measures announced on 15 June include plans to construct a 20,000-capacity ‘mega prison’ between Olancho and Gracias a Dios departments, and calls for the ministries of security and defence, the armed forces (FFAA), and military police (PMOP) to plan and execute interventions in municipalities with the highest incidence of gang-related crimes. Other measures include calls for the legislature to amend the criminal code to classify gang members as terrorists, and reform the criminal procedural code to allow pretrial detention for those who commit such crimes. As with the state of emergency first declared in November 2022, the government’s pursuit of a more repressive security policy has met with alarm from the foreign community, most recently drawing criticism in July from Alice Shackelford, the UN representative in Honduras, and Isabel Albaladejo, the local representative of the Office of the UN High Commissioner for Human Rights (OHCHR). 

In an episode described by national media outlets as an embarrassment that undermined the seriousness of Paraguay’s declared commitments to addressing drug trafficking and organised crime, last month Jalil Rachid, the head of the national anti-drug agency (Senad), announced Senad would suspend cooperation with the US Drug Enforcement Administration (DEA), only to subsequently backtrack.

On 7 December government ministers gathered for a press conference to discuss a report published by the Washington Post that day which revealed Senad had sent a letter to the DEA saying it would halt its cooperation with the US anti-drug agency. Rachid confirmed the report, saying that Senad was seeking to “reoptimise” its limited resources. At the press conference, Paraguay’s interior minister, Enrique Riera, insisted that the DEA was not being expelled from Paraguay; rather it would continue its cooperation with the national police (PN) instead of with Senad.

However, on 9 December the commander of the PN, Carlos Benítez, was cited by national daily ABC Color as saying that it was only through the press that he learned that his police force would be taking over the Paraguay’s cooperation with the DEA. This undermined the messaging from the press conference. While the controversy was brewing, President Santiago Peña was not even in Paraguay, as he was meeting with international allies in Uruguay, France, and Israel from 6-14 December. Rachid claimed on 7 December that Peña had approved the decision to transfer responsibility for DEA cooperation from Senad to the PN, but the president’s absence from the country added to a sense that there was a lack of coordination in the Paraguayan government, especially among its officials in charge of security matters.

The DEA reportedly responded to Senad on 17 December, saying that it would need to retrieve all of the equipment and assets it had given to Senad and Paraguayan authorities and that it would have to withdraw from Paraguay in 90 days, as per the terms of a cooperation agreement signed with Paraguayan authorities in 2022. On 18 December the head of Paraguay’s national defence council (Codena), Cíbar Benítez, held a press conference in which he said that the initial letter Rachid sent to halt cooperation with the DEA had been rescinded. The reason given was that, when Rachid sought to suspend the DEA cooperation, he was not aware of the 2022 agreement, as it was not listed in Senad’s records. Benítez reiterated that the latest cooperation agreement was still active, effectively announcing a U-turn from Rachid’s press conference on 7 December.

The mixed messages regarding Senad-DEA cooperation has sparked calls from opposition lawmakers for Rachid to be sacked. The whole episode raised questions over who was in charge regarding such a decision, as well as prompting speculation that a potential break with the DEA would have benefitted allegedly corrupt politicians with suspected ties to organised crime and drug trafficking groups, such as allies of former president Horacio Cartes (2013-2018), Peña’s political mentor, who has been designated by the US government for involvement in “significant corruption”. Despite this controversy, Peña defended Rachid on 24 December, saying he would not dismiss the Senad head. Peña also said that the future of Paraguay-US cooperation on tackling drug trafficking could be discussed with US President-elect Donald Trump, who takes office on 20 January.

DEA in Paraguay

Paraguay’s anti-drug agency (Senad) has 15 agents who work with the DEA, forming part of a joint task force known as the sensitive investigative unit (SIU). On 7 December the Washington Post highlighted that the DEA has been involved in major operations against organised crime in Paraguay, such as Operation ‘A Ultranza Py’ launched in 2022.

*** Israel prepares for another kidnapping.  Swapping 1,000 Palestinian prisoners for one Israeli soldier, as Israel recently did, is certain to encourage further kidnappings.  If you reward people for kidnapping, they will kidnap.  It was therefore not surprising to see Israel holding a large-scale exercise this week for dealing with another abduction.  The exercise in the Jordan Valley was overseen by the chief of the general staff, Lt-General Benny Gantz.  The scenario included a soldier being kidnapped by Palestinians and moved around the Jordan Valley area. 

An army spokesman confirmed that the drill, the first such drill at the General Staff level for many years, was in response to a number of warnings and alerts about plans to kidnap Israeli soldiers.

*** Warnings on Gaza, West Bank, and Egypt.  Israel’s chief of general staff General Benny Gantz told the Knesset Foreign Affairs and Defence Committee on 15 November that Israel may have to take the offensive in the south.  He said that it would be better to initiate an operation than to be dragged into one.  He also warned, in regard to the West Bank, that as more time passes and Palestinian disappointment builds, the chance of a violent conflict remains.

Parliamentarian Binyamin Ben-Eliezer, who is described as having been a close friend of former Egyptian president Hosni Mubarak, told the same committee that the post-Mubarak developments in Egypt indicate that “over time, Israel will find itself in a head-on confrontation” with Egypt.  He said: “We are in the midst of an earthquake, and I still can’t see it subsidising, definitely not in the near future when elections are on the horizon [in Egypt].  Today it is clear that for the first time in history the Muslim Brotherhood will win at least a third [of the seats in parliament].  Islamization is taking the place of nationalism.”

*** Rise in East German extremism.  The arrest of four members of a neo-Nazi group in Germany, accused of killing eight Turkish immigrants, a Greek, and a policewoman over 11 years, comes at a time when right-wing violence is increasing in East Germany. 

According to the latest figures there was a 4.8% rise last year in rightwing extremist violence in the five East Germany laender although there was a fall overall of 14.5%.  Of a countrywide total of 762 rightwing extremist acts of violence, 306 were committed in these laender, that is 40%.  Only 15% of the German population lives in these regions.

ARGENTINA | El Reino Unido prohíbe todas las exportaciones militares. El 27 de abril el secretario de negocios del Reino Unido (RU), Vincent Cable, anunció que el país dejará de emitir licencias a compañías para la exportación de equipamiento militar a Argentina. El RU había prohibido las exportaciones de material militar que podría ser usado para reforzar a las fuerzas armadas de Argentina en 1998. Sin embargo, fueron permitidas las exportaciones de equipamiento y materiales usados para propósitos de mantenimiento.

De acuerdo con Cable, el gobierno del RU ahora ha decidido que con vigencia inmediata “no serán otorgadas licencias para cualquier uso militar o dual de bienes y tecnología que están siendo proveídos a los militares como usuarios finales en Argentina, excepto en circunstancias excepcionales”. Explicando la decisión, Cable dijo que el gobierno ha revisado su política “a la luz de las recientes acciones del gobierno argentino que apuntan a dañar los intereses económicos de los isleños de las Falklands”.

En este contexto Cable agregó que el gobierno del RU deseaba asegurar que ningún bien exportable tendrá el potencial de ser usado por Argentina para imponer un bloqueo económico de las Falklands o de inhibir el legítimo derecho de los isleños a desarrollar su economía. En los últimos cinco años el RU ha otorgado 67 licencias de exportación a compañías que proveían equipamiento militar de mantenimiento, como partes para aviones y motores de buques valuados en £3,3m (US$5,35m).

CHILE | Nuevo fondo para las regiones del norte. Como parte de sus intentos de abordar los varios conflictos sociales que actualmente afectan al país, el gobierno propuso el 30 de abril crear un nuevo fondo de desarrollo de US$200m para las regiones mineras del norte. El ministro del interior, Rodrigo Hinzpeter, explicó que el Fondenor buscará distribuir estos fondos entre las varias comunidades mineras en el norte del país de acuerdo al tamaño de su población.

Desde el inicio del año, hubo numerosas protestas en la ciudad minera de Calama, Región de Antofagasta, donde los manifestantes exigían que una mayor porción de los ingresos mineros se invierta en el desarrollo de infraestructura y servicios de la remota región, en vez de que sean distribuidos alrededor del país. Antofagasta es el corazón de la industria minera de Chile, la principal fuente de ingresos por exportación de Chile, produciendo 53% de la producción minera anualmente.

Hinzpeter explicó que el fondo proveerá a las comunidades mineras con una fuente adicional de fondos, proveída por el tesoro nacional, a aquellos que ellos mismos recaudan: “es una fuente de fondos a las que estas comunidades nunca han tenido acceso antes”, dijo. Describiendo la propuesta como “un proyecto muy importante, que ayudará a construir institucionalidad que nos ayudará a demonstrar a las comunidades mineras que el país reconoce su contribución económica,” Hinzpeter urgió al congreso que apruebe el proyecto tan pronto como sea posible.

BRASIL | UN crecientemente atractivo sector de seguridad. El 26 de abril, un estudio conducido por la Security Industry Association (SIA) de EU, pronosticó que se espera que el mercado de servicios y productos de seguridad de Brasil se triplique en tamaño para el 2017. De acuerdo con el estudio de SIA, debido a las inversiones esperadas en seguridad antes de la Copa Mundial del 2014 y los Juegos Olímpicos del 2016, el mercado de seguridad de Brasil, que actualmente tiene un valor de R$1,2mm (US$636,9m), se espera que crezca a R$3,7mm (US$1,96bn) para el 2017.

El director de SIA, Frans Kemper, dijo que la industria de la seguridad de Brasil “está creciendo” y es completamente capaz de manejar “eventos de esta magnitud”, pero continuará necesitando importar productos de seguridad y vigilancia.

Aunque Brasil tiene actualmente 100.000 firmas de seguridad que producen y venden sistemas de seguridad, 55,6% de los productos usados en los sistemas de seguridad de Brasil son importados.

BRASIL | Petrobrás obtendrá compensación. El ministro de recursos no-renovables de Ecuador, Wilson Pástor reveló el 30 de abril que el Estado ecuatoriano había acordado pagar US$217m en compensación a la petrolera estatal de Brasil, Petrobrás, después de haber rescindido unilateralmente su contrato para operar en el país. Desde noviembre del 2010, Ecuador y Petrobrás han estado negociando cuánto dinero debía recibir como compensación la firma brasileña después de que esta se negara a aceptar los nuevos términos propuestos por el gobierno ecuatoriano para que las compañías petroleras operen en el país. Según Pástor la compañía ha acordado que una vez que la compensación sea pagada en su totalidad, desistirá de someter cualquier queja a nivel internacional.

• Presión sobre los bancos

El 1 de mayo, la Presidenta de Brasil, Dilma Rousseff, advirtió a los bancos privados de Brasil que ella continuaría exigiendo “firmemente” que reduzcan sus tasas de interés. A pesar del hecho de que el banco central de Brasil finalmente redujo su tasa de interés de referencia Selic por debajo de las dos cifras en abril, Brasil aún tiene uno de los márgenes más elevados en las tasas de interés entre lo que ofrecen los bancos a los ahorristas y lo que ofrecen a los prestatarios. El gobierno acusa a los bancos privados de no transferir sus bajos costos de préstamos a las empresas e individuos. Aludiendo a esto, Rousseff dijo en un discurso que “Es inadmisible que Brasil, que tiene uno de los más sólidos y lucrativos sistemas financieros, continúe teniendo unas de las más altas tasas de intereses en el mundo”.

CAYMAN ISLANDS | Opposition wins. The opposition People’s Progressive Movement (PPM), led by attorney Alden McLaughlin, won the legislative elections on 22 May. The PPM took nine out of 18 seats, leaving it just one short of a majority. Former prime minister McKeeva Bush (2009-2012), whose arrest in December 2012 on corruption charges resulted in his removal following a no confidence vote, retained his legislative seat in West Bay. However, the split of Bush’s United Democratic Party (UDP) after his arrest, in which five members left to form a minority government, was reflected in its poor performance: the UDP took just four seats, with independents taking the other five.

    Following his victory, McLaughlin highlighted as one of his priorities the need to rebuild relations between the Cayman Islands government and the United Kingdom. These took a turn for the worse in November 2012 after the latter threatened to impose direct rule in response to Bush’s backsliding on the implementation of an agreed Framework for Fiscal Responsibility (FFR).

Retail sales fell in December for the first time in nine months, resulting in a full year result of 4.3%, the weakest in a decade (in 2003 the sector rose 3.67%) according to latest data from the national statistics institute (Ibge). Sales unexpectedly fell 0.2% month-on-month (in volume terms) ahead of the Christmas season, though they were still up 4.0% in volume terms over the previous December. The IBC-Br economic activity index compiled by the central bank also fell sharply in December, raising the possibility that Brazil was in recession in late 2013.

Brazilians have lost their lust for shopping amid slowing job growth, rising interest rates and the impact of higher inflation on their take-home pay. Consumer confidence in January fell to its weakest level since mid-2009, according to the main ICC index compiled by the Fundação Getulio Vargas (FGV). The FGV polls 2,000 families in the seven main cities for the ICC, which measures the willingness of families to make purchases of a basket of consumer goods and gauges expectations about employment, income and economic opportunities. The index ranges from 1-200, with 100 considered an indicator of neutral sentiment. It ended January 2014 at 108.9 points, down from 112.5 in December. That was the lowest since June 2009, when it dipped to 108.7 points in the midst of the global economic crisis. A wider Ibge retail sales index including the automotive and construction sectors fell 1.5% month-on-month in December after car sales dropped sharply (3.4%). That index rose 3.6% overall in 2013.

Critics of the government of President Dilma Rousseff say that its policy focus on tax breaks aimed at stimulating consumption have run out of mileage. The government argues that these polices were only ever intended as temporary measures to prop up growth during the crisis and that its new focus is on investment-promotion polices so as to facilitate private sector-led domestic economic output over the medium term.

The IBC-Br economic activity index fell 1.35% in December over November, in seasonally adjusted terms. The IBC-Br, a GDP proxy, rose 2.57% in calendar 2013 as a whole, however, it fell for two straight quarters in the third and fourth quarters (-0.21% and -0.17% respectively), which amounts to a technical recession. The broader official GDP data compiled by the national statistics institute (Ibge) is due out on 27 February. Real GDP contracted 0.5% in the third quarter of 2013, on the Ibge measure.

Primary surplus target cut to measure

On 20 February Brazil’s treasury, led by the externally-discredited finance minister Guido Mantega, announced a cut in the official primary surplus target to 1.9% of GDP for 2014, from 2.3% previously. The government said it would freeze R$44bn (US$18.44bn) in public spending to meet the primary surplus target, up from R$38bn last year. “Our projections are attainable and realistic and conservative, so we should deliver this result in December," Mantega stated at a press conference. The latest projection is based on real GDP growth of 2.5% year-on-year in 2014 (down from a previous forecast of 3.8%), with inflation of 5.3% (down from 5.8% previously).

Markets welcomed the ‘reality check’ and the Real rose 1% in response to close the day at R$2.37/US$, its strongest level since 21 January. Yet fiscal analysts remain slightly sceptical as to whether the government will be able to deliver on its promise ahead of President Dilma Rousseff’s bid for re-election in October. Steadily shrinking primary surpluses mean that the overall budget deficit hit a three-year high of 3.2% of GDP in 2013, up from 2.48% in 2012.

• Forecasts deteriorate

The consensus forecast on real annual GDP growth in 2014 fell to 1.67% in the 21 February Focus Report compiled by the central bank, down from 1.91% four weeks previously. The end-year benchmark Selic rate was forecast at 11.25%, with year-end inflation of 6.0%. The current account deficit was forecast US$75bn.

June was a month of big changes for Peru’s business community. Amid ongoing worries over sluggish economic growth, the opposition Fujimorista-dominated congress passed a vote of no-confidence in Economy and Finance minister, Alfredo Thorne, forcing his resignation. President Pedro Pablo Kuczynski then asked Prime Minister Fernando Zavala to double-up and look after the economy portfolio, in addition to his existing responsibilities, apparently as an interim measure until a more permanent replacement is found. Despite a giant workload, Zavala has indicated he wants to tweak existing policies to try and inject some more stimuli into the economy.

The manner of Thorne’s departure was indicative of the rather toxic relations that have developed between President Kuczynski and the Fuerza Popular (FP) majority in congress, led by the narrowly-defeated 2016 presidential run-off candidate, Keiko Fujimori. FP deputies said that a secretly taped and subsequently-leaked recording of a meeting between Thorne and the comptroller-general, Edgar Alarcón, evidenced undue pressure by Thorne, who was interpreted by the FP as suggesting that funding for the comptroller-general’s office would be increased if Alarcón “accelerated” the approval of various public investment projects (some under audit)

These projects notably included the controversial US$520m Chinchero international airport project in Cusco, awarded under the previous government in 2014 but later stalled, and which Kuczynski had promised to get underway in his election campaign. Thorne denied any impropriety and said the audio had been maliciously edited to take his words out of context. But the FP congressional bench was unmoved and voted by 88-11 to express no confidence in the minister. Thorne had no choice but to resign. Those who believe that the FP is simply flexing its muscles (this is the fourth Kuczynski minister it has forced out) point to the fact that Alarcón, appointed by the previous, also FP-dominated congress, himself faces corruption charges.

The loss of Thorne, a long-standing and close confidant of Kuczynski, with similar international financial experience (including a role at JP Morgan etc) is clearly a big blow. But Kuczynski’s approach so far has been to replace ministers as they fall victim to an apparent Fujimorista onslaught, trying to maintain policy continuity. This seems to be the current plan for the economy & finance ministry (Ministerio de Economía y Finanzas, MEF), traditionally regarded as a kind of super-ministry at the heart of government. That said, Zavala has indicated that there are going to be some tweaks.

The problem is after nearly a year in office, the Kuczynski administration has a relatively poor economic situation on its hands, certainly when compared to Peru’s prior years of strong growth. To some extent, this is due to factors beyond the new government’s control. It inherited the Odebrecht corruption scandal, which has obliged a delay in the country’s largest infrastructure project, the US$7bn Gasoducto del Sur Peruano (GSP). And it is also dealing with the economic losses caused by an extreme coastal El Niño, starting in late December and lasting until April, which resulted in months of torrential rains, severe flooding and mudslides, devastating northern regions in particular but also reaching down as far as the economically-dominant capital province of Lima.

The latest data is indeed disappointing. Real annual GDP growth slowed to 2.1% in the first quarter, down from 3.0% in Q416. The weakness continued into the second quarter. The monthly economic activity indicator compiled by the national statistics institute (INEI) came in at just +0.2% y-o-y in April, a deceleration on the +0.7% rate registered in March. In the three months to May, according to the INEI, 55,400 jobs were lost in metropolitan Lima. Activity levels looked particularly weak in the construction and manufacturing sectors, but most sectors looked to suffering from the ongoing after-effects of the floods. Before Thorne’s departure, the government had already announced extra spending on reconstruction. The central bank (BCRP) cut interest rates by 25bps to 4.0% in May. While it held rates steady in June, it is widely expected to ease monetary policy a little further in coming months.

The business community remains impatient. In an interview with the daily El Comercio, Gianfranco Castagnola of Apoyo Consultoría said the economy had worsened over the last year, with GDP growth decelerating to around 2%. Retail sales had contracted by 1%, he noted, while employment and real wages had also dropped. “Attributing 100% of this to Thorne would be excessive, but there have been mistakes”, he said. His main criticism was that Thorne had cut back public investment by a “brutal” 30% in the last quarter 2016. A rebound had failed to materialise in 2017. In fact, there had been a further 9% contraction in investment, on Apoyo estimates. Castagnola insisted that in the second half of 2017 public sector investment needed to grow by “10%, 15% or 20%”. He was also worried that congressional populism would overrule the MEF’s longstanding fiscal responsibility, pointing among other things to draft legislation to bring army and police pensions up to the salary levels of those in active service.

Kuczynski's economic problem
Year-on-year % changes in quarterly GDP, real terms

Source: INEI

Zavala, who was head of the MEF in 2005-2006, during the presidency of Alejandro Toledo, has said that his objectives while in office will be economic recovery, employment and public sector investment. Pablo Nano, an economist at Scotiabank Perú, says that Zavala’s key challenge will be to unlock stalled investment projects (a problem that also faced Thorne). Zavala seems ready to take that on. He told the Panorama TV programme, “I will make some adjustments, there are things we can do, private investment has not grown in 14 quarters, that is three and a half years, the problem goes back to before this government, but we have to turn it around quickly.”

In his first media interviews as head of the MEF, Zavala also said that the national investment agency Proinversión had projects on its books which required spending of US$4bn in the second half of this year, targeted on waterways, roads, sanitation and other disaster reconstruction work. The potential project total for the year as a whole was put at US$9bn, excluding the stalled GSP pipeline.

Zavala also noted June new legislation took effect in June allowing for more flexible environmental standards on extractive projects. The Kuczynski government and business lobbies had argued that previous permits and processes had been too restrictive and onerous (a problem known as ‘permisolgía’) and were holding back investment projects.

Zavala was also keen to highlight the potential of rising inward tourism to help revive demand. He said he expected the number of foreign visitors to Peru to push past the 4m mark this year.

Elsewhere, a new housing subsidy programme, Bono del Buen Pagador (BBP), will be targeted on low income groups. The government is seeking the construction of 100,000 housing units in an attempt to stimulate the construction sector. Other plans include expanding the Obras por Impuestos scheme, which encourages companies to make tax-deductible infrastructure investments in local communities. Coordination with local and regional governments, in the past patchy, is to be stepped up, an important move, since a lot of the public-sector investment spend has been decentralised.

Latest poverty data

In the 12 years between 2004 and 2016, the proportion of the Peruvian population living in poverty fell from 58% to 20.7%, according to data published by the ministry of development and social inclusion (Midis). Deputy Midis Minister María Eugenia Mujica reported that malnutrition in children under the age of five had also fallen, while 75% of the population now have form of insurance cover. Officials acknowledge, however, that the pace of poverty reduction has slowed down as the commodities-driven economic boom has subsided. In 2014-2016, poverty levels fell by only two percentage points. Mujica said there was still a lot of work to be done. She noted that 17% of Peruvian young people aged 15-24 are ‘ni-nis’ (‘neither-nors’), meaning that they are neither in work nor education. And strikingly, a full 46% of the population is still living in makeshift settlements, underling the country’s major problem with inadequate housing.

CHILE | GDP growth up. Chile posted GDP growth of 4.2% year-on-year in the first quarter of 2018 driven by mining activity, which expanded by 19.3%, the central bank announced. The mining expansion owed principally to a low base of comparison due to a strike at Chile’s Escondida mine, the world’s largest copper producer, a year earlier.

Total exports increased by 7.2% year-on-year, principally because of a greater volume of copper exports, while overall imports were up by 6.1%.

The mining minister, Baldo Prokurica, said last week that reactivating the sector as Chile’s motor of growth and job creation between 2018 and 2022 was a “key part of the country’s development”, with the focus on “mining innovation, productivity, and social legitimacy”.

ARGENTINA | China and Japan. The Chinese government has opened the country’s market completely to Argentine beef exports after more than 15 years of negotiations. Shipments of frozen beef with bone and chilled beef with and without bone will now be welcomed by China from Argentina. Argentina had previously been restricted to exporting boneless frozen beef to China. In 2012 just 1% of Argentina’s exports of this product went to China but this reached 35% in 2016 and as much as 46% last year. Argentina will also start exporting fresh beef to Japan for the first time ever in July (at present Japan only accepts imports of processed Argentine beef).

Another one of López Obrador’s main campaign promises in this area was to improve Mexico’s human rights record. With this objective, he proposed to give an amnesty to jailed individuals, typically from deprived backgrounds, whose circumstances led them to commit a crime or made them unable to obtain legal support. The proposal was controversial as its detractors feared that it would lead to impunity and to manipulating crime incidence figures.

On 15 September, López Obrador sent his amnesty law bill to congress, which specifies that it is designed for people that committed minor crimes, which include acting as drug ‘mules’, abortion, non-violent theft, and sedition. Most of the beneficiaries would be women, the young, and indigenous people, groups that are considered to be particularly vulnerable to abuses and discrimination that may have had an impact on their legal situation. The law also seeks to free those considered political prisoners, who are often accused of sedition. Those who have committed a serious crime or used a firearm would not be eligible to benefit from the proposed amnesty. According to the proposal, the beneficiaries’ crimes would not be scrapped, only the sanctions, so crime figures would not be altered. Some legal experts have claimed that the proposal would only benefit a small number of people because it covers federal crimes, whereas abortion and transport of drugs – which account for most cases that would be covered by the law – are typically prosecuted at the local level.

López Obrador also vowed to end ‘state repression’, which was also why he had repeatedly criticised the presence of the military on the streets under his predecessors. However, as a result of ordering the armed forces to refrain from engaging in confrontations with civilians that are not obviously criminals, there have been several cases of attacks against security forces, including his own GN. Local press reports claim that although a dozen incidents of this type were confirmed between January and September, more than 100 cases have actually taken place across the country. Most of these cases have taken place in rural areas, where drug-trafficking organisations are known to operate (such as Michoacan state), but there have also been situations where locals behave in an opportunistic manner (stealing merchandise from derailed trains, for instance).

Following an incident in the locality of Acajete (Puebla) on 9 September where locals attacked a group of soldiers guarding a warehouse that contained stolen merchandise, Sedena announced that soldiers would act in self-defence and repel any such attacks according to the National Law on the Use of Force. Approved in May, the law establishes clear protocols for both civilian and military forces to deal with potential criminals, specifically that any response must be gradual and proportional to the aggressions faced. Nevertheless, on the same day López Obrador insisted that the military wold not be used as an instrument of repression.

While the government must undoubtedly address the issue of human rights abuses, such apparent lack of support for its own security forces is only likely to undermine their authority, weakening their ability to be effective in their fight against crime as they continue to be attacked by emboldened and opportunistic criminals and locals. Within this context, López Obrador will also struggle to deliver on his promise to pacify the country.

In March Guatemala’s new President Bernardo Arévalo inked a development agreement with authorities from three indigenous Ixil Mayan municipalities in Quiché department. The communities were a key target of genocide perpetuated by state forces during the 1960-1996 civil war, in which some 250,000 civilians were killed or disappeared, some 80% of which were indigenous. Arévalo hailed the new accord as “historic” and a sign of his government’s commitment to the long marginalised indigenous sector which, at some 44% of the population, is the biggest in Central America. Having no doubt identified a prospective government led by anti-corruption outsider Arévalo as its best prospect for addressing the rampant inequality which it faces, the indigenous sector played a key role in the huge protests against efforts by the corrupt establishment aimed at reversing his electoral victory [SSR-24-01]. The new government, which took office in January, is now under pressure to address the sector’s demands.

The agreement was signed on 13 March by President Arévalo and representatives from the Mayan-Ixil communities of San Juan Cotzal, Santa Maria Nebaj, and San Gaspar Chajul. It commits the government to recognising and promoting the legitimacy of local ancestral authorities, as well as collaborating to address short and long-term issues afflicting indigenous communities in the department which, comprising 21 municipalities and some 1.62m inhabitants, is one of the most neglected in the country. Priority will be given to governance, education, public health, migration, nutrition, climate change, employment, and poverty.

The agreement regarding the so-called Ixil Triangle follows government efforts to address demands of the wider indigenous sector which includes other Mayan groups as well as the Garifuna, Xinka and Creole or Afro-descendant peoples. On 25 February, the national day of dignity for victims of the civil war, the government announced a national plan for the dignification of war victims. Vice President Karin Herrera outlined as its main purposes, reclaiming the memory of the victims, and strengthening the work to recover the archives of the extinct Programa Nacional de Resarcimiento (National Reparations Programme), closed down under the previous government led by former president Alejandro Giammattei (2020-2024). Indeed, a December 2021 report by US-based rights lobby group Washington Office on Latin America (Wola) described as “unprecedented” the dismantling of peace institutions under the first two years of Giammattei’s administration [SSR-22-02]. Also under Giammattei, efforts to redress past impunity regarding civil war crimes suffered a major setback with high-profile independent judges such as Miguel Ángel Gálvez, known for their efforts in this sphere, forced into exile [SSR-23-01].

Areas of improvement

While these gestures by the government to the indigenous sector have been well received, President Arévalo has faced complaints over the lack of inclusion in his new 14-member ministerial cabinet which includes just one indigenous member, Miriam Roquel (labour). He himself recognised in response to this that “we have not reached the pluriculturalism we would have wanted”.

OHCHR report

A report published on 26 February by the Office of the United Nations High Commissioner for Human Rights (OHCHR) in Guatemala highlights the parlous human rights situation for indigenous peoples in Guatemala. The report cites official statistics which show that the percentage of households experiencing deprivation in relation to housing, education, and employment is 82.3% for the Maya people and 86.1% for the Xinka people, while the country-wide average is only 63.2%. It also highlights the prevalence of agrarian conflicts, a major issue facing indigenous groups whose rights to ancestral land have long been violated, with 75 recorded incidences in 2023. Five forced evictions were documented, affecting 503 mainly indigenous families and representing a 101% increase compared with 2022. These forced evictions take place outside the standard of international human rights law according to the OHCHR. 

On 4 October Spain’s foreign minister, José Manuel Albares, confirmed that Spain had offered nationality to 135 Nicaraguan political prisoners taken from a prison in Managua the previous month and flown to Guatemala where they were welcomed by Guatemala’s President Bernardo Arévalo and Eric Jacobstein (a top US State Department Western Hemisphere Affairs diplomat). As with political prisoners previously expelled from Nicaragua, they have all been stripped of their citizenship.

The group of Nicaraguans flown to Guatemala City on 5 September included Catholics and students, among others. Five days later they were stripped of their nationality and their property was confiscated, after being accused of “inciting and promoting violence, hatred, terrorism, and economic destabilisation, and conspiring against peace, security, and the constitutional order”. This was the second such mass release from Nicaragua negotiated by the US. In February 2023, a total of 222 political prisoners were released and deported to the US and were similarly stripped of their nationality and assets [SSR-23-04].

While the release of the 135 political prisoners was welcomed, the decision to deprive them of their nationality has drawn condemnation. A joint communique dated 13 September by Ecuador, Costa Rica, and the Dominican Republic for instance slammed the decision as “arbitrary and illegal”. In response to the citizenship-stripping of the first group of prisoners in February 2023, the United Nations Refugee Agency (UNHCR) underlined that “international law prohibits the arbitrary deprivation of nationality including on racial, ethnic, religious or political grounds”. It underlined that “the exercise of fundamental rights, including freedom of expression, freedom of assembly, or other rights associated with a person’s political views, can never justify the deprivation of nationality”. According to a 1 October update by Netherlands-based NGO Institute on Statelessness and Inclusion (ISI), in total over 450 political opponents of President Daniel Ortega’s government have now had their Nicaraguan nationality revoked since 2023, in contravention of human rights law.

MEXICO | Central bank cuts interest rates as inflation slows. On 7 May Mexico’s central bank (Banxico) lowered its benchmark interest rate by 25 basis points, bringing the rate to 6.50%. Banxico’s decision came the same day as the national statistics institute (Inegi) released the consumer price index for April, showing that inflation stood at 0.20% in monthly terms and at 4.45% in annual terms. This is down from monthly inflation of 0.86% in March when annual inflation stood at 4.59%. This marks the first deceleration in annual inflation since December. Core inflation stood at 0.31% in monthly terms and 4.26% in annual terms, down from 0.38% and 4.45% respectively in March.

MEXICO | GFCF continues to fall. On 6 May Mexico’s national statistics institute (Inegi) announced that gross fixed capital formation (GFCF) in February 2026 was down by 0.8% in monthly terms and by 3.6% in annual terms, according to seasonally adjusted figures. This follows a monthly fall of 1.2% in January according to the latest figures, while monthly increases of 0.4% were registered in both November and December. The annual decline in February was the result of a 9.1% drop in investment in machinery and equipment while investment in construction was up 1.5%. The monthly result was driven by a 2.3% decline in investment in machinery and equipment while investment in construction was up 0.1%.

MEXICO | Remittances up. On 4 May Mexico’s central bank (Banxico) released remittance figures for March 2026, announcing that remittances to the country totalled US$5.39bn. This represents a 4.9% increase year-on-year and is up from remittances of US$4.47bn in February. March represents the second consecutive month of annual increases in the remittance total, following an increase of 0.4% in February. In the first quarter of 2026, remittances totalled US$14.46bn, up 1.4% on the US$14.25bn received in Q1 2025.

Mexico: GDP growth
Percentage variation (year-on-year)

Mexico: unemployment rate
Economically active population

Mexico: inflation rate
Percentage variation (year-on-year)

Development: On 11 July the incumbent Nevis Reformation Party (NRP) won the Nevis Island Assembly elections.

Significance: Although the opposition Concerned Citizens Movement (CCM) is refusing to accept the results, citing objections to voter lists, all the new ministers have officially been sworn in. The two island federation of Nevis and the larger St Kitts comes under the sphere of influence of Venezuela’s President Hugo Chávez through the regional discount oil scheme, Petrocaribe.

Key points:

• The NRP won three of the five elected seats on the Nevis Island Administration, with Premier Hon. Joseph Parry easily taking the St. Thomas seat; Hon. Robelto Hector winning for St. Paul’s; and Hon. Hensley Daniel winning for St. John. All new ministers were officially sworn in at a ceremony on 12 July.

• The Organization of American States (OAS) which, for the first time sent an observer mission to monitor a local election in the Caribbean, praised Nevis for the peaceful ballot. It did however note a number of shortcomings related to voter registration, noting multiple complaints about the preparation of the voter registry and High Court procedural issues in settling objections and claims over the registry.

SECURITY | Morales re-elected head of coca growers’ association. On 8 July President Evo Morales of Bolivia was re-elected head of the main coca growers’ association, Seis Federaciones del Trópico de Cochabamba, a post he has held since 1996. He responded by calling on coca producers to intensify efforts to eradicate illegal coca. On 2 July the government announced that 5,098 hectares (ha) of illegal coca have been eradicated to date this year – meaning that it has already met its 5,000 ha annual eradication  target. In 2011, 10,509ha were eradicated, up from 8,200ha in 2010. The official limit for legal coca plantation is 12,000 ha, but the government tolerates 20,000 ha.

The bilateral Cuba-US commission set up to negotiate the legal niceties of the gradual normalisation of political and commercial relations between the two neighbours held another meeting in Havana on 16 May, where they agreed a route-map for the rest of this year. The aim is to copperfasten as much progress as possible before the US election on 8 November next, after which President Barack Obama will leave office.

Josefina Vidal, the Director General of US Affairs at the Cuban foreign ministry, had only positive things to say about President Obama’s historic trip to Havana in March, saying that President Raúl Castro was of the view that the trip, and his meeting with Obama, had delivered "positive results”, including momentum for additional cooperation in agriculture, medicine and law enforcement, Vidal stated. Her positive verdict on the Obama trip rather contrasted with the stance of senior Cuban officials in the period immediately after the trip, who sought to downplay its importance and took a chilly and rather defensive attitude to the US president’s calls for change on the island. Indeed, Vidal’s direct superior, Foreign Minister Bruno Rodríguez, described Obama's trip as “an attack” on Cuba's traditions and values, while Fidel Castro was moved to put pen to paper against Obama and later showed up in person at the Communist Party congress in April to remind the leadership to defend the Revolution and not be rushed into change that would “fail”.

Vidal, by contrast, told journalists: "We believe the visit was an additional step forward in the process of moving toward an improvement in relations, and that it can serve to add momentum to advance in this process, which is in both nations' interest”. “That's the opinion that President Castro shared during his address to the press during Obama's visit”, she emphasised. By way of the progress to date, Vidal cited new bilateral agreements on environmental cooperation, and the resumption both of direct mail service and commercial flights, albeit she noted, as Cuban officials always do, that the US trade embargo on Cuba complicated the restoration of trade and commercial relations. Vidal said that the agreed bilateral agenda for the rest of the year, which she noted was “quite ambitious”, would include visits to Cuba by senior US agriculture, health and, notably, security officials. Talks on intellectual property rights are also tentatively on the agenda.

With time of the essence, the US Deputy Homeland Security Secretary, Alejandro Mayorkas, himself Cuban born, was due to meet Cuban interior ministry officials in Havana on 17 May for talks on cooperation against drug trafficking, illegal migration and transnational crime. While Cuba and the US have in fact cooperated well for many years against drug trafficking and some transational crime, illegal migration remains a sticking point, with the Obama administration refusing to amend the controversial US ‘exception’ that gives illegal Cuban migrants arriving on US soil special leave to permanently remain.

In its comment on the latest bilateral meeting, the US State Department said: "Both governments recognised [the] significant steps made toward greater cooperation in environmental protection, civil aviation, direct mail, maritime and port security, health, agriculture, educational and cultural exchanges."

It added that the two sides also discussed future meetings on human rights and claims for compensation by American citizens and firms whose property was confiscated in Cuba's 1959 revolution. On the property claims issue – a key point for the thousands of Cuban-Americans in Miami who fled the island after the revolution – the two sides last year already set out their respective stakes with the US estimating property claims at US$10bn and Cuba demanding US$121bn in total reparations for the effect of the US embargo.

• Continued rapprochement

Vidal expressed hope that the next US government would continue with the current rapprochement, noting that US polls show a strong majority, both of US citizens and Cuban Americans, in favour of the process."So I expect their opinion will be taken into account”, she observed. Unlike some party hardliners, the presumptive Republican Party presidential candidate, Donald Trump, is not against the restoration of ties with Cuba, albeit he argues for tighter conditions. The favourite for the Democrat Party nomination, Hillary Clinton, formerly hawkish on Cuba, is now fully supportive of the Obama administration’s policy stance.