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  • RASTREANDO TENDENCIAS

    LatinNews 14 January 2013 Hits: 1020

    MÉXICO | Priorizar la reforma fiscal. México necesita una reforma fiscal integral en el 2013, anunció el ministro de finanzas, Luis Videgaray a finales del año pasado. Videgaray dijo que era esencial una reforma consensual porque el presupuesto para el 2013 aprobado por el congreso, deja a México con menos de la toma fiscal de otros miembros de la Organización para la Cooperación y el Desarrollo Económico (OCDE). Él dijo que las “necesidades” de México no se podrán cubrir sin una reforma fiscal este año. Y agregó que el sistema fiscal necesita ser simplificado y generar más empleos.

    Videgaray agradeció a los legisladores por aprobar un “prudente, responsable, y equilibrado” presupuesto, pero dijo que tal como están las cosas, México no podría cubrir totalmente los costos de la educación (especialmente educación terciaria y superior), y tampoco los costos de salud y de infraestructura. La cámara de diputados aprobó un gasto público de M$3,95mm (US$312m) para el 2013, un 6,7% más sobre el presupuesto del 2012. El presupuesto predice un déficit fiscal del 2% si la inversión de la compañía estatal de energía Pemex es incluida; de otro modo, el déficit sería cero.

    MÉXICO | El costo de los subsidios a los combustibles. El costo de la gasolina y el diesel se elevaron por 11 centavos por litro (poco menos de un centavo de US$) el 5 de enero. El incremento está diseñado para reducir levemente la masiva carga sobre el gobierno de los subsidios a los combustibles. Los mismos totalizaron M$206mm (US$16,2mm) para noviembre del 2012. Un informe de desarrollo humano de la ONU en el 2011 sostenía que los subsidios a los combustibles llegaban a cuatro veces más el costo total de los programas del gobierno para combatir la pobreza. El ministerio de finanzas alega que un 43% del subsidio beneficia al 10% de los mexicanos más ricos, mientras que el 10% de los más pobres reciben solamente el 0,6% del mismo.

    Miguel Messmacher Linartas, el viceministro de finanzas, sostiene que el costo extra de los combustibles sólo produciría un 0,01% de incremento en la inflación. También alega que incluso después de estos incrementos, el costo de la gasolina y el diesel estarían entre el 10% y el 17% más elevados que en EU. Dijo que los incrementos eran esenciales para evitar un permanente deterioro de las finanzas públicas del país.

    El predecesor del Presidente Enrique Peña Nieto, Felipe Calderón carecía de la voluntad política para reducir los subsidios a los combustibles, a pesar de sus muy promocionadas credenciales ecológicas, pero Peña Nieto no puede permitirse subsidiar el combustible hasta ese punto si es que quiere implementar las variadas propuestas contenidas dentro del ‘Pacto por México’.

    • Libre comercio

    Un tratado de libre comercio (TLC) entre México y Honduras entró en vigencia el 1 de enero. Guatemala y Costa Rica tienen la esperanza de aprobar el acuerdo en la primera mitad de este año. El TLC entro en vigencia con El Salvador y Nicaragua el 1 de septiembre del año pasado. El comercio en las dos vías entre México y Honduras totalizó US$844m en el 2011, con México disfrutando de un superávit comercial de US$156m. El comercio entre México y las cinco naciones centroamericanas se elevó cerca del 200% entre el 2000 y el 2010, cuando alcanzó los US$6,55mm.

  • TRACKING TRENDS

    LatinNews 16 January 2014 Hits: 1947

    GUATEMALA | Remittances reach record high. Remittances sent back home by Guatemalan expatriates reached a new record of US$5.11bn in 2013, according to the central bank, and were up by 6.7% on the previous year. A total of 90% of the remittances came from the US, where 1.5m Guatemalan expatriates live, 60% of them illegally. The record figure came despite the deportation of a record number of 50,200 undocumented Guatemalans last year.
    Meanwhile, the labour minister, Carlos Contreras, confirmed a 5% increase in the minimum wage to Q2,096 (US$267) a month for workers in maquila manufacturing plants and the export sector and Q2,380 (US$304) for workers in agricultural and other sectors. President Otto Pérez Molina announced the increases after employers and employees failed to reach an agreement, with the former offering 3.3% and the latter demanding 30% increases. This is effectively no more than an inflationary increase: inflation for the first 11 months of 2013 stood at 4.63%. It also remains below the cost of the basic food basket (CBA) in Guatemala which, for an average family of five, is calculated at Q2,897 (US$369).

  • PARAGUAY: Cartes acusado de tratar de acabar con la Izquierda

    LatinNews 18 September 2015 Hits: 240

    La oposición de Izquierda de Paraguay, Frente Guasú (FG) está acusando al gobierno liderado por el Presidente Horacio Cartes de autoritarismo, alertando a las instituciones regionales de que él está tratando de suprimir al partido. La acusación se produce después de una supuesta diatriba de Cartes dirigida al diputado del FG, Ramón Duarte, en una fiesta privada la semana pasada. Duarte derramó lágrimas mientras dirigía unas palabras ante la cámara baja del congreso el 14 de septiembre, alegando que Cartes lo había acusado de ser “un asesino y secuestrador”, y que ayuda a “encubrir al [grupo de guerrilla] Ejército del Pueblo Paraguayo [EPP]”.

    Duarte fue invitado a una fiesta de cumpleaños privada del presidente de la cámara baja, Hugo Velázquez, de la gobernante Asociación Nacional Republicana- Partido Colorado (ANR-PC) junto con otros miembros de la oposición, que se celebró en la casa del Diputado Julio Javier Ríos (ANR-PC). En medio del festejo, un bilioso Cartes supuestamente ordenó que se apagara la música y se lanzó a una diatriba contra el ala disidente de su propio partido, señalando a varios senadores. Supuestamente, también acusó al FG de intentar desestabilizar a su gobierno, agregando que tenía que ‘desaparecer’ –una palabra muy emotiva en América Latina.

    El FG subsecuentemente emitió una declaración enumerando los repetidos ataques del gobierno, afirmando que Cartes había hablado de la necesidad de “eliminar” a miembros del partido, incluido el miembro fundador, el ex presidente Fernando Lugo (2008-2012). Algunos diputados de la ANR-PC han salido en defensa de Cartes, aunque sus críticas contra el ala disidente del partido de gobierno habrán servido para acrecentar la tensión interna.

    “La expresión lanzada por Horacio Cartes y su camarilla es una amenaza directa a la democracia, el pluralismo, la diversidad de la expresión política, los demócratas, un insulto para el público, y el más explícito signo de una profunda crisis de legitimidad”, Dice la declaración del FG. También alega que está siendo preparado “un fraude masivo” en las elecciones municipales de noviembre, con el FG “excluido sistemáticamente del proceso electoral, y la co-opción de todos los jueces del Tribunal Superior de Justicia Electoral [TSJE] por el sistema bipartidista [la ANR-PC y el Partido Liberal Radical Auténtico], y de esa manera despojar de las garantías para una elección democrática y transparente”.

    Ejército del Pueblo Paraguayo

    No es la primera vez que el FG ha sido vinculado con el EPP, el cual Cartes ha prometido derrotar cuando asumió el poder en el 2013. El mismo Velázquez afirmó el 11 de septiembre que el FG tiene vínculos con el EPP. El EPP permanece activo, aunque la Fuerza de Tareas Conjunta (FTC) militar y policial la semana pasada propinó algunos golpes a la Agrupación Campesina Armada (ACA), un pequeño grupo escindido del EPP, de acuerdo con el ministerio del interior.

    El 6 de septiembre la FTC arrestó a dos adolescentes, quienes se cree que son miembros de la ACA, mientras estaban circulando sobre una motocicleta en el distrito de Yby Yaú en el departamento de Concepción, en el nordeste. Aparentemente, ellos habían aparecido en videos y fotografías de supuestos miembros de la ACA.

    El día siguiente, la FTC halló uniformes de la ACA y del EPP en una camioneta Toyota en Horqueta, departamento de Concepción, lo que llevo a que las autoridades concluyeran que los dos grupos se habían reunificado después de que la ACA se escindiera en septiembre del 2014 (ver abajo). El supuesto jefe de logística de la ACA y presunto propietario de la camioneta, Daniel Rivarola Areco, fue arrestado un día más tarde.

    • ACA y EPP

    La ACA, formada por los hermanos Albino y Alfredo Jara Larrea, ha sido progresivamente debilitada; el primero fue muerto por la FTC el pasado enero. Se cree que ambos, la ACA y el EPP han estado reclutando nuevos miembros, aunque entre ambos se piensa que cuentan con solo 30 a 40 miembros dedicados. Varias organizaciones de derechos humanos en Paraguay han acusado a la administración Cartes de no hacer lo suficiente para evitar el reclutamiento de menores en áreas pobres del país para integrarse a la ACA. Ellos insisten en que estos menores deben ser reconocidos como víctimas, y que se deben poner en práctica programas especiales para protegerlos.

  • TRACKING TRENDS

    LatinNews 20 September 2018 Hits: 434

    COLOMBIA | Cutting red tape to boost jobs market. On 13 September Colombia’s President Iván Duque announced the implementation of a raft of measures designed to cut red tape and encourage entrepreneurialism. In his first year in office Duque, who assumed office last month, has promised to reduce by 50 the number of requirements needed to found and run a company in Colombia, a move which he hopes will inspire the creation of new businesses that will provide quality jobs.

    The changes are part of a drive to reinvigorate the Colombian economy through innovation, improved access to finance, and the promotion of the ‘orange economy’, which comprises the creative industries.

  • ECUADOR: Tax reform takes effect, dividing indigenous

    LatinNews 09 January 2020 Hits: 4025

    Ecuador’s new tax reform came into force on 1 January - but not without some eleventh-hour drama. Deputies in the national assembly approved the tax reform initiative on 9 December but they then had to vote on a partial veto by President Lenín Moreno eight days later before, on 30 December, approving the reform’s publication in the official gazette the following day. If it had not been published before the end of 2019 the treasury would not have been able to collect some of the taxes outlined in the reform in 2020. This all caused ructions between the country’s largest indigenous organisation, Confederación de Nacionalidades Indígenas (Conaie), and its political arm Pachakutik (PK) after PK deputies voted in favour of publishing it.

    The national assembly voted on 17 December to approve 11 of the objections raised by President Moreno to the version of the tax reform passed by legislators. But it was not until 61 of the 72 deputies present in the assembly voted for the reform to be published in the official gazette that it could take effect. Four of these deputies were members of PK.

    The Confederación de Nacionalidades Indígenas de la Amazonía (Confeniae), one of the three main constituent groups within Conaie, and Movimiento Indígena y Campesino de Cotopaxi (MICC), a grassroots movement, called for the four PK deputies to face sanctions. Marlon Vargas, the president of Confeniae, accused the deputies of “betraying October’s struggle”. Confeniae released a statement on 2 January decrying the vote by PK deputies as “inexplicable and surprising”; “eleven deaths, dozens injured, and thousands imprisoned has meant nothing to some deputies who are completely out of touch with the grassroots”.

    Leonidas Iza, president of the MICC, said the deputies were not even consulting the PK party let alone Conaie, adding that it would evaluate the actions of Jaime Olivo, the PK deputy representing the highland province of Cotopaxi. Marlon Santi, PK’s national coordinator, acknowledged that the differences between Conaie and the PK amounted to “a yawning chasm”. Santi argued that “Conaie is a social organisation; Pachakutik abides by the political guidelines of the democratic code…although Conaie grassroots participate in elections”.

    Over the coming four months, PK and Conaie will need to discuss candidates to compete in the general elections in 2021. This is likely to be a tense affair. Iza insisted that Conaie would be pushing its alternative economic proposal, which includes hitting the 270 largest economic groups in Ecuador with a 4% income tax [WR-19-43]. But Eddy Peñafiel, the PK deputy for the eastern province of Orellana, argued that “the functioning of the country’s institutions prevails over individual beliefs”. 

  • Risk pointers

    LatinNews 06 September 2011 Hits: 205

    *** Taleban Warning To Collaborators.  Following the assassination in Afghanistan on 12 July of Ahmad Wali Karzai, a brother of President Karzai, the Taleban issued a statement warning people who continue “working for the infidel occupants of Afghanistan”.

    The statement warns: "If they continue their jobs for which they are paid, in that case with the help of Almighty they will face the fate of Gen Daud Daud [killed in a suicide bomb attack] and Ahmad Wali Karzai...and they would be the loser in this world and the world after death as well."

    *** Russia reports increase in terrorism.  According to the Russian Interior Ministry, the number of terrorism-related crimes in the first six months of 2011 increased by almost one-third.  According to the ministry: “As many as 370 terrorism-related crimes were registered in January-June 2010, up 28.9% compared with the first six months of 2010.”

    *** Russia’s Mideast conundrum.  Moscow will not have endeared itself to many supporters of the Arab Spring with its strong opposition to international action (military in the former case, diplomatic in the latter) against Libya and Syria.  In the case of Libya, Russia says that UN Security Council resolution 1973 is being “grossly violated” by Nato.  On Syria, Moscow is arguing that putting pressure on President Bashir al-Assad only encourages extremists within the opposition to increase their violence in the hope of forcing a military intervention by Nato.  Russia believes the approach towards Yemen has been slightly more even-handed and should be the model.

    However, Moscow will have in some degree compensated for its lack of enthusiasm for overturning the dictatorships in Libya and Syria by its performance at the 11 July Middle East Quartet meeting (comprising the US, EU, Russia, and the UN) aimed at restarting negotiations between Israel and the Palestinians.  The Palestinians were looking for a Quartet statement calling for negotiations to begin using the 1967 lines, with mutually agreed swaps, as a baseline and for the ending of Israeli construction in east Jerusalem and the settlements.  Israel wanted any statement to include a reference to Israel as the nation state of the Jewish people, and for language ensuring that any agreement would signify an end to the conflict.

    According to a senior Israeli official, Russia’s Foreign Minister Sergey Lavrov took pro-Palestinian positions throughout the talks and would not allow a reference to the Jewish and democratic state to be included in the concluding statement of the meeting and so no statement was issued.

    Palestinian president Mahmoud Abbas said on 12 July that if the Quartet cannot agree on acceptable guidelines for Israel-Palestinian negotiations, he will continue with his plan to go to the United Nations in September to seek full membership for a Palestinian state.

  • Risk pointers

    LatinNews 02 November 2011 Hits: 247

    *** New source of tension for Turkey and Israel.  Turkey is to launch a new military intelligence satellite next year, called Gogturk, which will enable it to gather high-resolution images of Europe, the Caucasus, and the Middle East, including Israel.  Israel has been lobbying France and Italy to stop helping with the project.  Israel is concerned that Turkey might sell sensitive images to hostile states and the Palestinians.  Turkey has said it is up to it how it uses images from its own satellite.

    An official from Turkey’s Defence Ministry said on 1 November: “For years Israel has obtained images of our territory.  For the first time we will have a satellite for intelligence.  Reciprocity is essential in international relations.  If they observe Turkish soil, Turkey has the same right.”

     *** Pakistan and Iran.  Former Pakistani foreign secretary Tanvir Ahmad Khan (1989-90) has been arguing for a much closer relationship between Pakistan and Iran based on spheres of influence in Afghanistan and energy supplies.  Khan’s view is that provided Iran does not seek the dominance of Afghanistan by non-Pashtun factions, and Pakistan does not seek the supremacy of the Taleban, then a deal can be done.  Writing in The Express Tribune on 31 October, he argued: “Iran may be a dangerous country in the Western perception, but for Pakistan it can only be a source of strength.”

    In Khan’s view, Pakistan should stop dithering, and reject American pressure, over a proposed gas pipeline project with Iran.  He concluded: “It is time that instead of dithering because of exaggerated fears of international displeasure, Islamabad becomes more proactive in arriving at a new strategic understanding with Tehran.”

    *** Philippines rejects China’s ‘sounds of cannons’ threat.  Last week we highlighted a threat issued by China through the Communist Party-run Global Times that China might seek a military solution to territorial disputes in the South China Sea.  An editorial in the paper warned: “If these countries don’t want to change their ways with China, they will need to mentally prepare for the sounds of cannons.”  It added: “If a situation turns ugly, some form of military action is necessary.”

    In comments published on 28 October, Lt General Juancho Sabban, chief of the Philippines Armed Forces Western Command, said: “Any threat, any intrusion, or any violation in the code of conduct of claimant countries, we are determined to protect our territory and sovereignty...Mere deployment of missiles or ‘the sound of cannons’ will not scare us from protecting our own territory.”

    It is perhaps significant that Sabban made his comments during the course of a joint Philippines-US amphibious landing exercise.

  • AGRIBUSINESS: Drought hits Brazilian harvest

    LatinNews 23 February 2012 Hits: 3349

    The drought in the south of Brazil has ended the prospect of a record harvest for the country this year. The official forecast is now for a marginally smaller (0.7%) crop of grains and oilseeds in 2012.

    The official forecast from the Instituto Brasileiro de Geografía e Estadísticas (IBGE) is now for a crop of 158.7m t, down from the record 159.9m t harvested in 2011.

    The new forecast follows a field trip by IBGE analysts in January and represents a reduction of 1% on the official forecast for a crop of 160.3m t, published in January. The IBGE officials say that they have had to cut their estimate because of the severe drought which has afflicted the south of the country in December 2011 and January 2012.

    The IBGE officials said that the area sown was down by 4% on the last crop year at 50.6m hectares. The big falls will be in the rice and soya crops. The soya crop is likely to be down by 6% at 70m t. Brazil is the world’s second biggest soya producer. The rice crop will be 15% down on 2011’s crop at 11.4m t.

    The maize crop, on the other hand, is likely to be up 11% at 62.5m t.

    These three crops, maize, rice and soya, represent 91% of the country’s total production of grains and oil seeds and are grown on 83% of the arable land.

    The IBGE said that of the 26 crops grown in the country, 18 will see lower production and only eight an increase. The other big falls are in: oats (down 11%); cocoa (down 6%); onions (down 4%), barley (down 13%); beans (9%) mandioca (down 2%); sorghum  (down 8%); and wheat (down 11%).

    The crops with increases are: cotton (1.5%) ; arabica coffee (14%); sugarcane (9%) and castor oil (34%).

  • Risk pointers

    LatinNews 07 November 2012 Hits: 456

    *** China’s overseas acquisitions race ahead in 2012.  Figures released by the ChinaVenture Group on 5 November show the number of overseas mergers and acquisitions in the first nine months of 2012 at 208, valued at US$93.09bn.  In 2007, the number was 107 valued at US$13.58bn.  According to Wan Ge of ChinaVenture, the European debt crisis has, in particular, enabled Chinese enterprises to acquire undervalued European assets.  Although energy and mining were at the top of the list, there are also signs that China is diversifying its buying strategy, with agriculture now a strong feature.  An Ernst & Young report indicates that 82% of China’s overseas direct investment (ODI) in 2009 was energy oriented.  In the first half of 2012, it was only 60%.

    *** Pakistan power struggle.  On 5 November, Pakistan’s Chief of Army Staff General Ashfaq Pervez Kayani made a statement that has been interpreted as criticizing a court move against a retired army chief, General Aslam Beg, and a former head of the Inter-Services Intelligence (ISI), Lt-Gen Asad Durrani.  The allegation is that they bankrolled politicians to stop the current ruling Pakistan People’s Party (PPP) from winning the 1990 election.

    Kayani said: “No individual or institution has the monopoly to decide what is right or wrong in defining the ultimate national interest...Weakening the institutions and trying to assume more than one’s appropriate role will set us back...The fundamental principle, that one is innocent until proven guilty, should not be forgotten.  Let us not pre-judge anyone, be it a civilian or a military person, and extend it, unnecessarily, to undermine respective institutions.”

    This comment sparked a retaliation form Supreme Court Chief Justice Iftikhar Muhammad Chaudhry, who said: “Gone are the days when stability and security of the country was defined in terms of number of missiles and tanks as a manifestation of hard power available at the disposal of the state.”

    There was also some fairly hysterical media reaction to Kayani's statement, with many talk show hosts lashing out at the army chief for what he had said.  However, there has been some evidence of a conscious effort by the military leadership to play down the significance of Kayani's statement, and the PPP has also preferred to play it down.

    Nevertheless, there is clearly tension between the judiciary and the military.  The day after Kayani's statement, the Chief Justice was hearing a petition seeking to ban the media from criticizing the armed forces, intelligence agencies, and other defence and security institutions in the wake of the US operation to kill Osama bin Laden on 2 May 2011.  When the lawyer said that the army respected the court, the chief justice remarked: "Yes, we witnessed that yesterday".

  • PERU: Unions try to ratchet up pressure on Humala

    LatinNews 16 July 2015 Hits: 1266

    The umbrella trade union Confederación General de Trabajadores del Perú (CGTP) mobilised thousands of members in a day of protest against the economic policies of the government led by President Ollanta Humala on 9 July. The president of the CGTP, Carmela Sifuentes, claimed that 25,000 workers demonstrated nationwide (4,000 marched to congress in Lima), staging marches and erecting roadblocks to demand, inter alia, that the minimum wage be doubled from NS$750 (US$235) to NS$1,500; greater respect for labour rights and collective bargaining; and that the government take significant steps to combat corruption and impunity.

    The CGTP protests took place as far afield as Cuzco, the capital of the eponymous region in the southern highlands, and Iquitos, the capital of the northern Amazon region of Loreto. It was largely a peaceful day, although the police had to break up some roadblocks on the interoceanic highway to Brazil and they used tear gas to disperse protesters in Huancayo, the capital of the central highland region of Junín.

    The timing of the protests looked designed to apply some pressure to Humala in advance of his last state-of-the-nation address on 28 July, when his final year in office will commence. Humala is widely expected to use his address to present economic measures to provide incentives for private investment drawn up under the extraordinary legislative powers recently conferred on his administration by congress.

  • ECONOMIC OVERVIEW: COSTA RICA

    LatinNews 05 August 2015 Hits: 2547

    Solís warns of need for higher tax revenue: While President Luis Guillermo Solís has indefinitely postponed discussion of public sector salary reform (see related article) on 31 July he argued that new sources of government income were urgent. The country could not cope “one year more” without the legislative assembly approving new taxes. Solís made his appeal ahead of a series of extraordinary sessions of congress in which the executive will have the authority to determine the agenda of legislative bills up for discussion.

    President Solís argued that the country can no longer bear the burden of the growing fiscal deficit and that immediate action was required to increase tax revenue. “The economy cannot handle another year, like this one, in which it records a deficit of 6.4% of GDP or more,” Solís said. Among the government’s plans to raise revenue is to switch from a sales tax of 13% to a value-added tax of 15%, but the executive may struggle to pass the bill through an opposition-dominated congress.

    Government opponents questioned why the executive wishes to raise taxes but is unwilling to cut spending. Many pointed out that the government increased the budget for 2015 by 19% compared with 2014. Antonio Alvarez, from the opposition Partido Liberación Nacional (PLN) said that his party had repeatedly expressed its willingness to discuss tax hikes with the government if it took action to rein in public pensions, wages and bonuses. Meanwhile, the left-leaning party, Frente Amplio, said the government should focus on tax evasion before tax increases.

    • Costa Rica growth

    On 31 July Costa Rica’s central bank increased its forecast for the government’s fiscal deficit for this year to 5.9% of GDP, up from its 5.7% forecast in January, and forecast next year’s deficit at 6.6% of GDP.

  • Region: Corporate Radar

    LatinNews 20 May 2016 Hits: 714

    Chile big on multilatinas

    A study published in May by Deloitte has found that Chile is a particularly good base for multilatinas, the name given to Latin American companies serving the regional market. The study distinguished between multilatinas, described as indigenous companies operating across regional borders, on the one hand, and what it calls ‘Latinas Globales’ on the other, the latter being companies that, having originated in Latin America, have gone on to become truly global in their operations.

    According to Omar Aguilar, head of Americas regional operations and strategy for Deloitte Consulting, no less than 50% of the regionally focused companies are based in Chile, while the globally focused companies tend to be based primarily in Brazil and Mexico. Multilatinas include companies like Grupo México (mining), Latam (airlines), Localiza (car rental) and Alicorp (consumer goods). Multilatinas are particularly strong in retailing and transport. Roughly 50% of them have head offices based in Chile, followed by 14% in Brazil, 11% in Mexico, 10% in Colombia, 8% in Peru and 4% in Argentina.

    Aguilar said that Chile was a particularly good launch pad for these companies because it has an open economy, high levels of investment, low interest rates and good access to capital, with one of the continent’s most dynamic stock markets. Other potentially promising home bases for multilatinas were Colombia and Peru in the short term, and Argentina in the medium term, Aguilar said.

    The report suggests that global Latin American companies are a different breed to the multilatinas, and rely on different factors to be successful. The Latinas Globales include Vale (mining), Embraer (aircraft manufacture), Grupo Argos (cement and energy) and Petrobras (oil and gas). It notes that 80% of these global companies are based in either Mexico or Brazil. Their success is attributed to their access to well trained and highly qualified staff, as well as central government support and – particularly in the case of Brazil – credit at subsidised interest rates.

    Grupo Alfa mis-steps?

    One of the beneficial side-effects of Mexico’s landmark energy reform in 2013/2014 was expected to be a big move by the domestic private sector into the oil and gas sector, having been excluded by over seven decades of monopoly rights exercised by the state-owned oil giant Pemex. While a number of Mexican companies have made successful bids for the first round of oil and gas production licences offered last year, Grupo Alfa’s story has been less encouraging. Considered one of the country’s top industrial conglomerates (with diversified interests including petrochemicals and auto-parts), Grupo Alfa’s long running takeover bid for Colombia and Canada-based Pacific Exploration and Production – hailed by many as a key step to creating an indigenous Pan-Latin American oil company – was abandoned in April. Although Alfa had spent US$1bn acquiring a 19% stake in Pacific, its latest offer to acquire majority control was rejected. Alfa’s only bid for a Mexican exploration and production licence last year was also unsuccessful.

    And the group’s US subsidiary, Newpek, reported a small Q1 2016 loss, and announced that it would halt drilling in the Eagle Ford shale formation, in southern Texas, until oil prices recover. This is not how the script was supposed to unfold. Many expected Alfa to take advantage of low oil and gas prices to acquire strategic assets in the sector and position itself for the eventual up-turn. “This should be the perfect time to be calculating in their approach, to find the right company or assets, and acquire now,” said David Neuhauser, an analyst at Livermore Partners. Jean-Baptiste Bruny at BBVA commented, “Their strategy to participate in the sector is not well-defined or public at this point, so we are waiting to see what could happen. Could that justify the poor performance the shares have had this year? Yes, surely.” To mid-May, Alfa shares slipped 5.7%, while the overall Mexican equities index grew by 5.5% during the same period.

  • TRACKING TRENDS

    LatinNews 17 December 2020 Hits: 3351

    BRAZIL | Budget advances. Brazil’s federal congress approved the draft law for the budgetary guidelines (LDO) on 16 December, a necessary step to then approving the draft budget (LOA) for next year. Congress usually votes on the LDO before the July recess, but it failed to do so this year amid constraints linked to the coronavirus (Covid-19) pandemic, with politicking then causing further delays in recent months [WR-20-44].

    The 2021 LDO was finally approved by first the chamber of deputies and then the senate in a rapid vote this week, with some modifications to the original bill after the economy ministry submitted some revisions on 15 December. The law plans for a primary deficit in the central government of R$247.1bn (US$48.76bn) – worse than the R$149.61bn initially projected in April – and sets the minimum wage at R$1,088, a R$21 increase on the minimum wage proposed in the draft budget submitted in August, which reflects the recent rise in inflation. Other parameters in the LDO include expected GDP growth of 3.2% next year, inflation of 3.2%, and an exchange rate of R$5.30/US$1.

    The yet-to-be-approved draft budget submitted on 31 August plans for R$1.5trn in spending next year, although government spending will be constrained in the first months of 2021 if the budget is not approved before the end of 2020.

  • MEXICO: Tren Maya goes full steam ahead

    Abbi Dicker 23 February 2024 Hits: 3285

    If all goes as planned, the controversial Tren Maya tourist railway project championed by Mexico’s President Andrés Manuel López Obrador will be completed by the end of February, after the first section was inaugurated on 15 December, and a second stretch on 31 December.

    Five years after one of the largest infrastructure projects currently underway in the Americas began, López Obrador has hailed the “historic” importance of the 1,554km railway, which runs in a loop around Mexico’s Yucatán peninsula, with Palenque in the southwest and Cancún in the northeast marking its most distant points. Mexico’s president claims it will boost economic development and reduce poverty and inequality in the poor southeastern region of the country, creating opportunities in the states that it runs through – Tabasco, Chiapas, Campeche, Yucatán, and Quintana Roo.

    The inauguration of the Tren Maya comes as López Obrador is rushing to complete his flagship infrastructure projects and burnish his legacy before the end of his six-year term on 30 September 2024. On 16 December, he unveiled El Cuchillo II, an aqueduct that will serve the 5.4m people living in the metropolitan area of Nuevo León state capital Monterrey, which has been beset by water shortages in recent years. On 1 December, an airport was opened in Tulum, a popular holiday destination in Quintana Roo state. The new public airline, Mexicana de Aviación, run by the defence ministry (Sedena), will operate out of the airport.

    As well as forming part of a series of mega projects designed to reassert the state’s role in the economy – which also include Mexico City’s new airport, an oil refinery in Tabasco state, and an interoceanic rail corridor across Mexico’s narrowest point on the Isthmus of Tehuantepec – the Tren Maya is an example of the Mexican government’s attempt to build up passenger train services to promote tourism. Currently, Mexico has very limited passenger services, especially since the privatisation of the country’s railways in 1995.

    However, the Tren Maya has proved to be highly controversial due to soaring costs, a lack of transparency, and its fast-track completion. Its environmental impact has also caused an uproar, with at least 3m trees felled to enable its construction, while there are concerns that the line will contaminate water in thousands of cenote limestone sinkholes that are characteristic of the Yucatán peninsula. Scrutiny of the railway will remain high, particularly from the political opposition.

    Local think tank Instituto Mexicano para la Competitividad (Imco) projected costs reaching about US$29bn, amounting to a 228% increase over the initial budget. The online ticket for the entire journey costs M$1,166 (US$67.65), or about M$100 (US$5) more than the bus travel option, despite promises that tickets for the train would cost less than buses on the equivalent route for Mexican passengers. If purchased at the station, a partial ticket from Cancún to Mérida costs M$735.

    Track

    The Tren Maya’s track was built in sections by a range of companies and the Mexican army. Constructors include Mexican companies such as billionaire Carlos Slim’s Grupo Carso, and Portuguese group Mota-Engil in a consortium with the China Communications Construction Company (CCCC). French trainmaker Alstom and Canada’s Bombardier won a US$1bn contract to provide the hybrid diesel-electric passenger trains that will be used.

  • TRACKING TRENDS

    Abbi Dicker 04 April 2024 Hits: 2765

    MEXICO | Unemployment down. On 27 March, Mexico’s national statistics institute (Inegi) released its latest national employment survey (Enoe) which shows that the unemployment rate in February 2024 stood at 2.5% of the economically active population – people over the age of 15 who are employed or seeking employment – equivalent to 1.5m people. This represents a year-on-year decrease of 137,000 people. In monthly terms, the unemployment rate decreased by 0.2 percentage points. The Enoe also shows that the number of people in Mexico’s economically active population who were employed in February 2024 numbered 60.9m

  • ECUADOR: Los Choneros leader captured

    Abbi Dicker 18 June 2026 Hits: 547

    Ecuador’s interior minister John Reimberg announced the capture of Ronald Javier Macías Villamar (‘Javi’) in Colombia on 17 June. The brother and presumptive heir of José Adolfo Macías Villamar (‘Fito’), the leader of the organised criminal group Los Choneros who was captured in June 2025, Javi was sentenced in absentia in late May last year with asset laundering in a case involving six of Fito’s closest relatives, who were handed down prison terms of between seven and ten years.

    “The circle is closing,” Reimberg wrote on social media after the operation to capture Javi, who he said was living in Colombia under a false identity. He allegedly crossed into Colombia when an overnight curfew was in effect in Ecuador, further straining bilateral relations amid a trade war between the two countries from February to early June.

    President Daniel Noboa criticised the government of his Colombian counterpart Gustavo Petro in March for allowing criminal groups “to infiltrate our country due to neglect of its border”. But Ecuador’s defence minister, Pedro Suárez, said the operation to capture Javi, in Bogotá, was the result of bilateral cooperation between security forces and intelligence agencies.

    Javi’s capture coincided with Noboa declaring a new 60-day state of exception on 16 June in 10 provinces - Pichincha, Guayas, Manabí, Santa Elena, Los Ríos, El Oro, Esmeraldas, Santo Domingo de los Tsáchilas, Sucumbíos, and Azuay - and three municipalities - La Maná, in Cotopaxi; Las Naves, in Bolívar; and La Troncal, in Cañar, citing serious internal unrest. This followed scarcely two weeks after the end of the previous state of exception, which Noboa said would not be extended. This suggests his government could be preparing for a possible escalation in inter-gang violence or high-intensity retaliation as a result of Javi’s capture.

    Noboa first declared a state of exception in January 2024 since when it has been repeatedly extended, but without delivering tangible improvements on the security front. In 2025 there were a record 9,300 homicides, according to the interior ministry.

    US cooperation

    Ecuador and the US conducted joint riverine operations and training exercises, specifically in the province of Esmeraldas, bordering Colombia, the ministry of defence reported on 15 June. Personnel from Ecuador’s 11th San Lorenzo marine infantry battalion, together with the Special Boat Team 22 (SBT-22) of the US armed forces, carried out river reconnaissance manoeuvres, tactical navigation and response procedures to critical risk scenarios. On the same day President Noboa met US Secretary of Defence Pete Hegseth in the Pentagon to discuss bilateral security cooperation. Hegseth described Noboa as “a model partner with us to counter these networks that threaten your homeland, that threaten our homeland and [that threaten] the security of our shared hemisphere”.

  • GUYANA: Spat with US rooted in domestic politics

    LatinNews 28 July 2014 Hits: 1956

    On 4 July Guyana’s acting Foreign Minister Priya Manickchand delivered a sharp critique of US foreign policy while harshly rebuking outgoing US Ambassador Brent Hardt for ‘meddling’ in Guyana’s internal affairs and, she suggested, seeking to incite an ‘insurrection’ in the country. Manickchand was speaking at the 238th US Independence Anniversary observance at Hardt’s residence, Cummings Lodge, in an event that also functioned as the ambassador’s farewell.

    Manickchand was reprimanding Hardt for a speech he delivered a few days earlier to a newly formed NGO in which he strongly criticised the Guyanese government and president for failing to hold local government elections (LGE). Hardt, apparently eager to utilise his latitude as an outgoing diplomat, arguably had ample cause to make such a public stand in the first instance. Guyana has not, to the benefit of the ruling People’s Progressive Party (PPP), held LGE for over 20 years and Hardt’s views form part of a growing chorus of international (or at least Western) pressure for the Guyanese government to adhere to the constitutional requirement that such elections be held every three years. Ultimately, the bizarre episode of diplomatic mud-slinging underscores the economically damaging paralysis of Guyanese politics at the national level, as well as the PPP’s apparent intent on denying democracy at the local level.

    Guyana’s race politics

    Guyana’s politics are largely defined along the country’s racial divisions and colonial past. For almost four decades government was held by the People’s National Congress (PNC) party that has traditionally attracted support from the Afro-Guyanese minority, which, as of 2002, accounted for roughly a third of the country’s population. The PNC managed to sustain its power largely by rigging elections and also, particularly during 1950-65 and in the context of the Cold War, receiving some British and US support. The PPP, which draws its support generally from Guyana’s more numerous (around 40%) ethnic Indian majority, came to power in 1992 after the PNC conceded to holding legitimate elections.

    At the most recent general elections in November 2011 the PPP won its fifth consecutive poll and its leader, Ronald Ramotar, became president. However, the party/president attracted only a plurality of the national vote (48.6%) and, having won 32 out of 65 seats, the PPP lost the parliamentary majority it had held for the previous 19 years. Moreover, leading a coalition with several other parties under the ‘A Partnership for National Unity’ (APNU) ticket, the PNC took 41% of the vote. Combined with the third placed Alliance For Change’s (AFC) 10% of votes, these two opposition blocs collectively represent a majority in Guyana’s parliament with their 33 seats. The hung parliament has caused political gridlock and the country’s fragile economy has suffered as a result.

    Perhaps most prominently in this respect has been Guyana’s failure to pass legislation required by the IMF-backed Financial Action Task Force (FATF)—specifically, the so-called Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) Bill—that has resulted in the country’s regional blacklisting by the Caribbean financial watchdog and the possibility, depending on the outcomes of a current FATF inquiry, that the blacklisting be extended internationally. The opposition bloc is refusing to cooperate with the government on this matter until the president provides his assent to a host of bills (the most important of which relates to LGE) that the two parties have pushed through parliament since 2011.

    What Hardt said

    On 30 June ambassador Hardt, while speaking at a function for a newly formed youth NGO, the ‘Blue Caps’, took the Guyanese government and President Ramotar to task on the “seemingly expanding array of excuses” they have provided for not holding LGE in spite of the 20 year delay, Guyana’s constitution, recent law, and even the PPP’s own policy manifesto for the 2011 election. Here is a sample of what he had to say.

    “One of the more creative excuses came from the PPP General Secretary, who suggested that the people of Guyana are not in the mood for LGE…[But] elections are constitutionally and legislatively mandated. They are not dependent on a mood…The President also recently indicated he would have called elections if his ‘government had the majority in parliament’. But, again, the constitution does not say: elections every three years, except when the executive does not have a majority. It says every three years.”

    In what Manickchand and the government would later describe as a veiled call for a popular revolt, the ambassador also remarked: “And let me be clear, you will need to continue doing so [pushing for LGE] and doing so with persistence. It appears unfortunately that local government elections will not be called unless the people of Guyana demand them – demand their constitutional right – and raise their voices in ever greater numbers.”

    Speaking at the US independence anniversary and his farewell a couple of days later Hardt reiterated his views on the LGE issue—while also, seemingly as if to draw parallels to the current situation in Guyana, describing the illiberal ruling style of King George that spurred America’s independence movement—before handing the podium over to Manickchand.

    What Manickchand said

    After briefly acknowledging the occasion, Manickchand launched into an eight-minute censuring of the US in general and its outgoing ambassador specifically. Referring to the US’s Foreign Account Tax Compliance Act (FATCA), Manickchand wryly explained, “of course, we don’t have the strength or the power your people had in those days to fight against King George, so we have to comply with what big brother wants…lest the big stick is used against us”. On the US ambassador himself, Manickchand described how over his three years he had “contributed to a tension-filled relationship with the government of Guyana.” The Blue Caps speech was described as his “most recent assault on the president and government of Guyana” which went “beyond the boundaries of professionalism and diplomacy” and made the “situation…intolerable.”

    Manickchand’s remarks were defended by the government, mostly condemned by the opposition parties, and varyingly depicted by different local media outlets. However, if Hardt’s intention had been to motivate the government into action and draw attention to the LGE issue, there were signs the outgoing ambassador had made some ground. Manickchand and the government argue that Hardt’s criticisms are misguided because the ambassador does not properly understand the Guyanese Electoral Commission’s (GECOM) position on the matter. GECOM consists of a chairman and six commissioners, three from the PPP and three from the opposition parties. The permanent body, as the ambassador made reference to in his Blue Caps address, has repeatedly said that it is ready for LGE and is simply awaiting the government green light. The three PPP-appointed GECOM commissioners, however, say this is not the case and that there are in fact a series of unspecified issues to be addressed before elections can be held. In the wake of the Hardt-Manickchand episode, the PPP’s three commissioners finally issued a statement outlining what exactly the issues were and why they meant GECOM was not ready for LGE. These range from administrative issues to be resolved, such as “some constituencies do not have adequate registrants to effectively field adequate lists of candidates” to other apparent problems such as “there needs to be a vigorous education programme to inform and educate the populace on the new local government elections system”.

    In response, however, GECOM’s chairman Dr Steve Surujbally has come out publicly to challenge the validity of each of the arguments presented by the PPP-commissioners while reiterating GECOM’s position that it is “fully prepared and committed to move formally into an election mode with immediacy, if and when the Commission is mandated to conduct Local Government Elections.”

    The takeaway points

    US-Guyana relations had been under strain for some time leading up to this affair. The FATCA issue remains ongoing and earlier this year the PPP government initially refused a leadership and democracy (LEAD) program on the grounds that there had been insufficient consultation with Guyana. Yet the relationship is hardly beyond repair (indeed, the government recently agreed to allow the establishment of a US Drug Enforcement Administration [DEA] office in Guyana) and, relative to the political paralysis that is currently besetting the small country’s economy, it is not what is important here.

    With its political stocks apparently on the decline, the ostensible logic behind the PPP’s refusal to allow LGE is that it fears (or perhaps knows) it would lose the Afro-Guyanese stronghold of Georgetown to the PNC and thus further have its power eroded. Likewise, given its unimpressive performance at the last national poll, calling an early general election to resolve the stalemate is not an attractive strategy for the PPP either, as they would risk losing entirely their already slim grip on power. It is in this context, Stabroek News argued, that “the government intends to use the period before it is required to call new general elections to prospect for better electoral vantage points and propaganda gains.”

    In the meantime, Guyana is likely to remain economically stagnant as the combined opposition continues to make its support for key pieces of legislation such as the AML/CFT Bill contingent on the government allowing LGE to take place. Thus, unless either side becomes willing to budge—with Hardt and other Western diplomats suggesting the onus rests squarely on the government—there appears little prospect of the political impasse being resolved.

  • CUBA: García-Margallo pushes for faster progress

    LatinNews 04 December 2014 Hits: 518

    The two day visit to Cuba by Spain's foreign minister, José Manuel García-Margallo, in late November was the first by a minister from the conservative government led by Prime Minister Mariano Rajoy, of the right-wing Partido Popular (PP), which has long been very critical of the Communist Cuban government.

    Following a meeting on 25 November with Cuba’s Foreign Minister Bruno Rodríguez and Vice President Miguel Díaz-Canel, García-Margallo called for an acceleration of the tentative economic ‘updating’ launched by President Raúl Castro in 2010 in a bid to overhaul the bloated, inefficient and increasingly cash-strapped state. The process, which included limited liberalisation to allow a small domestic private sector to begin to operate, has been very stop-start, however, with mixed results to date and a sense of mounting frustration at the government’s reluctance to go a bit deeper, a bit faster. The Cuban government argues that it needs to keep control over the process so as to guarantee the social achievements of the Revolution and to protect citizens from the vagaries of a ‘market’ economy. Cubans themselves are chomping at the bit for a bit more market and a bit less state.

    Foreign investors, meanwhile, just want clear and stable operating rules. "Spain would like to see a more rapid pace to the economic reforms that give more space for private initiative and foreign investment ... which advance monetary unification and allow for decentralization," García-Margallo stated. Spain is Cuba's third largest trading partner and the largest European investor in the country. Cuba is currently in talks with the European Union (EU) on a bilateral agreement on Political Dialogue and Cooperation. Under the PP government led by José Maria Aznar (1996-2004), Spain was the architect of the EU Common Position on Cuba (1996), which, in response to the Cuban shoot-down of two planes linked to a Miami-based Cuban-American exile group, conditioned political and economic relations on democracy in Cuba, a position the Havana government has vehemently rejected ever since. The expectation is that the Political Dialogue and Cooperation agreement, due to be inked in 2015, will effectively supercede, finally, the Common Position, which some European countries argue is counterproductive to the efforts to support Cuba in its reform push.

    On the political front, García-Margallo told reporters that he had asked the Castro government to grant travel rights to Cuban dissidents freed from prison in 2010 and 2011. In 2010, following hunger strikes and some unrest, the former Socialist government in Spain mediated talks between the Cuban Catholic Church and the Cuban government to secure the release of 75 political opponents arrested in the ‘Black Spring’ of 2003 and sentenced to jail terms of 6-28 years. Of the 75, 63 agreed to permanent exile; 12 refused that condition. Under the conditions of their eventual release, they are not allowed to leave the country. Cuba since then has relaxed its travel and migration rules to give much more flexibility to ordinary Cubans wanting to go in and out of the country on a temporary basis. García-Margallo said he had requested that the exiles (many of them in Spain) be allowed to return and the local dissidents be allowed to travel if they wished.

    Finally, García-Margallo said that he had urged President Castro to attend the upcoming Ibero-American Summit, to be held in Veracruz, Mexico, on 8-9 December. In recent years, the summit, meant to act as bridge between Spain and Portugal and their former colonies, has lost weight, with the likes of Brazil staying away in favour of newer regional talking shops like the Community of Latin American and Caribbean States, which groups all countries in the Western Hemisphere bar the US and Canada.

    • Latest economic forecasts

    Cuba’s economy minister Marino Murillo has cut the official GDP forecast for this year to 1.3%, from 2.2% set a year ago, but said he expected a rebound to 4% in 2015, on stronger growth in the manufacturing, construction, agricultural and forestry sectors. He made no mention of the economic crisis in Venezuela, which supplies Cuba with oil, but stressed that energy supplies would be “adequate”. Cuba will spend US$2.2bn on food imports next year, up US$137m over this year, he added.

  • Peru: The battle of the centre right

    LatinNews 22 April 2016 Hits: 2055

    The battle for the presidency of Peru is now a two-way affair between Keiko Fujimori of Fuerza Popular (FP) and Pedro Pablo Kuczysnki of Peruanos Por el Kambio (PPK). In the first round on 10 April, Fujimori took 39.8% of the vote against 21.0% for Kuczynski, but in the second round due on 5 June the contest is still open: much will depend on how the supporters of other defeated first round candidates re-assign their votes. Both candidates are seen as market-friendly centre-right candidates. Here we look at their main economic policy promises.

    The main dividing line between Fujimori and Kuczynski may be more political than economic. The key polarising factor is the legacy of Keiko Fujimori’s father Alberto, who was president in 1990-2000. Although credited with helping stabilise a chaotic economy, Alberto is also remembered for his authoritarian rule (in April 2002 he closed congress and took control of the judiciary), for human rights violations, and for corruption. He is currently serving a 25-year prison sentence on charges of kidnapping and murder. His daughter has taken distance from her father’s past, but the issue remains a live one. Peru’s Nobel prize-winning novelist Mario Vargas Llosa weighed in after the first round, saying that if Keiko Fujimori won the second round, “the dictatorship will be legitimised”. This elicited a quick response from the candidate herself who said it was regrettable that the writer had “indirectly discredited the vote of 40% of Peruvians”.

    Economic policies

    The US educated, 40 year-old Keiko Fujimori has promised to maintain the current market-friendly economic model. In the face of Peru’s economic slowdown, she says she will use the country’s stabilisation fund to promote recovery, and will borrow to fund infrastructure programmes. Public sector investment will be increased, and there will be a specific focus on boosting agri-exports and small-scale farming.

    “We know we have to step on the growth accelerator so that the benefits reach the most isolated communities”, she has said. The FP supports Peru’s free trade agreements and says that if elected it will deepen the country’s participation in the Pacific Alliance (the trade grouping with Chile, Mexico and Colombia) and the Asia-Pacific Economic forum (APEC). Other policy proposals include offering a two-year tax exemption for small- and medium-sized enterprises (SMEs). An FP government would allow a temporary increase in the fiscal deficit to stimulate the economy. It would also seek to give local communities a shareholding interest in big mining projects in their area.

    Pedro Pablo Kuczynski is 77 and has worked for the World Bank and the IMF as well as being a former mining minister, economy minister and prime minister. He is regarded as the favourite of the financial markets. He says he will attract foreign investment to stimulate big extractive projects that have been delayed because of local opposition on environmental and other grounds. In the later stages of his campaign he said he would renegotiate Peru’s gas export contracts (forged in 2001-2005, during which time he was in government), despite having opposed this idea initially and branding a journalist who questioned him on the subject as being “ignorant”.

    Under a PPK government, says VAT would be reduced over three years from 18% to 15%. There would also be reduction in petrol prices; with tax breaks for SMEs, less red tape, and a new unemployment insurance scheme. “To grow we have to invest, and we will promote investment. The first thing we will do it to reduce bureaucratic red tape” Kuczynski has declared. One of his campaign promises is to ensure that all Peruvians have access to drinking water and sanitation services. He has also promised that if elected, in its first 120 days his government will reactivate the economy and fight crime, in order to improve security for all Peruvian families. Another promise is to allow elderly convicts to exchange prison for house arrest – a subtle move that would benefit his opponent’s father and is seen as an attempt to make it easier for fujimoristas to change sides and vote for PPK.

    Commenting on the first round, US ratings agency Moody’s Investors Service said the outcome was positive. Analyst Jaime Rausche said “Beyond the short-term impact, we expect business sentiment will improve through the end of the year, a key development given the importance of investment in Peru’s economic performance”. Gross fixed capital investment had slowed in 2013 and contracted in 2015 and 2015. The agency said, “We expect a new government by either candidate will have a strong mandate to resolve several social conflicts that have halted large-scale mining projects in Peru”.

  • EL SALVADOR: Mayoral links to maras exposed

    LatinNews 12 July 2017 Hits: 872

    El Salvador’s attorney general’s office (FGR) has uncovered new evidence of the active complicity between municipal authorities and the country’s mara street gangs. A local mayor in El Salvador was arrested on 20 June for allegedly using public funds to finance terrorism. The FGR reported that the mayor of the country’s fifth largest city of Usulután, Miguel Ángel Jaime, had transferred US$39,000 to Mara Salvatrucha (MS13) in exchange for electoral favours. The arrest raises disturbing questions about the infiltration of state institutions.

    Jaime was arrested after the authorities captured local MS13 leader Raúl Armando Bonilla, alias ‘Snow’, upon whose mobile phone was a video containing compromising conversations linking Jaime to members of the street gang. Jaime can be seen explicitly offering municipal financial support to Bonilla in exchange for mara backing for his 2015 electoral campaign. Jaime, then a councillor, went on to become mayor of Usulután, the capital of the eponymous south-eastern department.

    Shortly before his capture Jaime had warned that the municipality of Usulután was in “a financial stranglehold”, lacking the funds to pay a US$1.6m public lighting contract with the Colombian company AGM, meaning blackouts could be imminent. At the same he was siphoning off public funds from a tax on retailers in the municipality to make fortnightly payments of between US$1,000 and US$2,000 to MS13.

    Jaime belongs to the right-of-centre opposition Gran Alianza por la Unidad Nacional (Gana), whose president of the legislative assembly, Guillermo Gallegos, somewhat ironically advocated the creation of self-defence groups back in May to combat the mara gangs in various municipalities across the country. Gallegos excited controversy by urging deputies to pass legislation permitting local communities to arm themselves.

    Jaime is not the first mayor to be arrested for illegal political and financial collaboration with mara gangs. In June 2016 the mayor of the municipality of Apopa in the department of San Salvador, José Elías Hernández, a member of the main right-wing opposition Alianza Republicana Nacionalista (Arena), was arrested. Hernández offered mobile phones, vehicles and fuel, and even employment to mara members, paid for out of public funds, and extorted local businesses in return for their promise to reduce violence and to win votes for his re-election bid in March 2015.

    Homicides surge

    June was the most violent month of 2017 in El Salvador, according to the director of the national police force (PNC), Howard Cotto, with over 320 murders, up 18% on the same month last year. Cotto, and his predecessor Mauricio Ramírez Landaverde, the security minister, attributed the increase in homicides to a “purge” within MS13. Cotto said that despite the increase in homicides in June, the figure for the first six months of this year was down by 42% on the 3,038 registered in the same period last year.

    The director of the national prison system, Rodil Hernández, claimed in May that MS13 had been divided over financial differences between the national leadership and local leaders, leading to the creation of a dissident movement known as MS503. Hernández maintained that these differences dated back to July 2016 when the PNC and the attorney general’s office carried out ‘Operation Jaque’ targeting the finances of MS13 for the first time and revealing that the top leadership lived a comparative life of luxury. El Salvador’s other main Mara gang, Barrio 18, split into two factions, Revolucionarios and Sureños, in the middle of the last decade.

    • Municipal corruption

    The FGR began investigating municipal authorities after the online investigative publication El Faro revealed earlier last year that a senior legislator for the main right-wing opposition Alianza Republicana Nacionalista (Arena), Ernesto Muyshondt, had held secret talks with leaders of all of the mara gangs in February 2014, during the last presidential election campaign, offering a series of inducements in exchange for them using their influence to persuade voters to back his party.