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Las Fuerzas Armadas Revolucionarias de Colombia (Farc) volaron una sección de la vía férrea que unía a la mayor mina de carbón de Colombia, Cerrejón, con la costa, mientras estaba pasando un tren de cargo, descarrilando 17 vagones cargados con 1.870 toneladas de carbón, el 14 de marzo . Tan solo 24 horas antes, el gobierno había logrado llegar a un acuerdo con el sindicato de los mineros del carbón, Sintracarbón, para poner fin a la huelga en Cerrejón, localizada en el norteño departamento de La Guajira, que estaba costando a la economía unos estimados US$3m diarios.

Este fue el tercer ataque de las Farc a Cerrejón en el 2013. El ejército también frustró un cuarto ataque el 17 de marzo. La vía se arreglará y estará en funcionamiento de nuevo antes de finalizar esta semana, aunque las exportaciones están continuando con carbón almacenado.

La huelga en Cerrejón duró 32 días. Terminó después de que Sintracarbón aceptó una oferta de la compañía para firmar un acuerdo de tres años que incluye un bono único de Col$9,6m (US$7.000) para los mineros y un incremento de salarios del 5,1% para el primer año, e incrementos sobre el índice de inflación del 1,5% y el 1,7%, respectivamente, durante los próximos dos años. Los mineros también serán proveídos de mejor transporte hasta la mina, bonos de vivienda, mejores seguros de salud, y beneficios educacionales para sus hijos.

Poco después de concretarse el acuerdo, el gobierno logró poner fin a otra gran huelga en el país –la del sector cafetero. La huelga había durado 11 días. Bajo un acuerdo, el gobierno prometió proveer US$450m de apoyo para productores de café en la forma de un subsidio de Col$145.000 (US$80) por cada 'carga' de 125kgs de café, que será aplicado si los precios caen entre Col$480.000 (US$266) y Col$700.000 (US$388) por carga. Las medidas entrarán en vigencia el 18 de marzo.

ARGENTINA | Una joven tiene su oportunidad. Una economista de 26 años, María Delfina Rossi, ha sido designada directora del mayor banco de Argentina, el Banco de la Nación Argentina, conducido por el Estado. El decreto anunciando el nombramiento de Rossi, firmado por la Presidenta Cristina Fernández, el jefe de gabinete, Aníbal Fernández, y el ministro de economía, Axel Kicillof, fue publicado en la gaceta oficial el 12 de agosto.

El gobierno tiene forma de dar su oportunidad a los jóvenes cuando se trata de altas posiciones económicas: Martín Lousteau fue designado ministro de economía a la edad de 37 años en el 2007 (él se mantuvo apenas cuatro meses en el cargo) y Kicillof tenía solamente 42 años cuando asumió el cargo en el 2013. Pero ellos podrían ser considerados viejos comparados con Rossi, quien ni siquiera era una adolescente cuando Argentina sufrió su última traumática crisis financiera en el 2001/2002. Las calificaciones de Rossi para tan alta posición no parecen ir más allá de un postgrado en economía, obtenido de la Universitat de Barcelona en España, y un masters en economía de Florencia, Italia. Ella vivió en Barcelona por más de una década y el año pasado se presentó, pero sin éxito, para el parlamento europeo por una coalición catalana de izquierdistas y verdes, Iniciativa per Catalunya Verds-Esquerra Unida i Alternativa (ICV-EUiA). También ocurre que ella es la hija del ministro de defensa, Agustín Rossi.

BRASIL | Primer déficit primario enero-junio desde 1997. En junio el déficit primario para el gobierno central de Brasil fue de R$8,21mm (US$2,35mm), llevando el total para los primeros seis meses del 2015 a R$1,60mm. Este fue el primer déficit primario en los primeros seis meses del año desde 1997. En la primera mitad, los ingresos cayeron un 3,3% y los gastos se elevaron un 0,5%.

La revisada meta del superávit fiscal para el 2015 es ahora de R$8,75mm  (0,15% del PIB). Durante los 12 meses pasados, el gobierno ha acumulado un déficit de R$45,7mm (0,8% del PIB). El déficit primario “total” (gobierno central, gobiernos estatales y locales, más empresas del Estado) en junio, fue de R$9,3mm contra R$6,9mm en mayo. En la primera mitad del 2015, el superávit primario fue de R$16,2mm contra R$29,3mm en igual periodo del 2014.

CHILE | Precios más bajos del cobre ‘están acá para quedarse’. Alejandro Micco, el viceministro del tesoro de Chile, dice que la caída en el precio del cobre está “acá para quedarse”. Hasta ahora en este año, el cobre ha promediado alrededor de US$2,67 por libra. Hablando en una reunión con líderes en la industria del metal, Micco dijo que la caída en los precios del metal estaban teniendo un significativo impacto sobre la inversión en países mineros como Chile. El impacto ha sido exacerbado por una huelga en días recientes por trabajadores contratados en Codelco, la compañía minera estatal y una de las principales fuentes de ingresos fiscales de Chile, luego de que un trabajador muriera de un disparo en los choques con la policía [IL-15-30].

PARAGUAY | Inflación. El Banco Central del Paraguay (BCP) informó que la inflación en julio subió un 0,8%, debido a un leve incremento en el costo de bienes durables, alimentos, y combustibles. Los datos acumulados para este año, medido por el Índice de Precios al Consumidor (IPC) llegan al 2,2%, cayendo del 2,9% registrado durante el mismo periodo del 2014. La inflación anual ahora está en un 3,6%: el objetivo del BCP es mantener la inflación en un 4,5% con una banda de tolerancia del 2% en más o menos. En julio, uno de los principales conductores para el incremento en la inflación fueron los alimentos, con subidas registradas en el costo de los productos lácteos. El combustible también se volvió más caro debido al incremento en el valor del dólar de EU.

The major corruption scandal involving some senior members of the Dominican Republic (DR)’s national judiciary, which broke at the end of last year [RC-15-12], continues to dominate headlines in the DR ahead of the 15 May general elections. With the supreme court (SCJ) president, Mariano Germán Mejía, increasingly implicated, along with other officials, the government led by President Danilo Medina is reiterating calls for a major judicial reform to completely overhaul the sector.

The scandal, which involves the alleged existence of a corruption ring in the national judiciary which manipulated criminal judicial processes in exchange for cash, has remained the focus of public attention since the start of the year when, in December 2015, the suspended judge, Awilda Reyes Beltré, ratified the remarks she made that lifted the lid on it. Reyes had accused fellow magistrate, Francisco Arias Valera, of pressuring her on behalf of Justice Mejía into issuing a favourable ruling to benefit Erinson de los Santos Solís, a local councillor for Pedro Brand, a municipality in Santo Domingo city, accused of leading a group of local hitmen.

Reyes, who is now under investigation, has ratified her comments - originally made to local civil society organisation, Participación Ciudadana (PC) - that Arias and Germán had first threatened her and then offered her money (which she initially accepted but then returned) to release De los Santos on bail. She has also said that afterwards, Germán pressured her to assume full responsibility for De los Santos’ release, and to resign in order to draw a line over the case. Reyes’s revelations led the judicial council (CPJ) to strip Arias of his post in order that he could face investigation. But Arias, who was quizzed by investigators from the specialised anti-corruption prosecution office (Pepca) on 6 January, has refused to collaborate with the investigations, preferring to speak only before a judge once his case goes to trial.

That same day the attorney general’s office announced the arrest of the deputy prosecutor for the national district, Isidro Vásquez Peña, for prevarication, extortion and illicit association charges in relation to another case. These developments led the PC and other civil society groups to stage a protest outside the SCJ on 7 January to commemorate the national day of the judiciary. Forming a ‘human chain’ outside the SCJ building, protesters demanded Germán’s resignation so that he could face trial, as well as that of Attorney General Francisco Domínguez Brito for failing to combat effectively corruption within the public ministry.

Germán responded by dedicating an address on the national day of the judiciary, attended by President Medina and other officials, to ask people “not to blame the judiciary” for all of the justice system’s fallacies; and to call for a broad national dialogue between “all responsible actors” in order to find a way out of the current crisis. Domínguez echoed these calls during his speech, in which he insisted on the need for a “deep” judicial reform to combat entrenched corruption and impunity. Domínguez went on to express the government’s full backing for Germán, who shares “the government’s commitment to overcome” the judiciary’s crisis and promote a major reform that has “already begun and must continue”. Medina, who is standing for re-election in May, wisely chose to steer clear of the issue of how best to root out corruption in the judiciary. But he could soon be drawn into the subject, whether he likes it or not, after Luis Abinader, the presidential candidate of the opposition Partido Revolucionario Moderno (PRM), challenged Medina to hold a public debate on just “how honest” his administration has been and just how far his commitment to fight corruption goes.

• Adocco’s opinion

On 11 January, Julio César de la Rosa Tiburcio, the coordinator of the Alianza Dominicana Contra la Corrupción (Adocco), a local anti-corruption organisation, said in the wake of the scandal affecting the Dominican Republic’s national judiciary system that “Dominican Justice is suffering the worst crisis in its history”. De la Rosa said that the latest scandal and the level of corruption and impunity exposed in the judiciary is “worrisome and alarming”. Remarking on the situation of supreme court (SCJ) president, Mariano Germán Mejía, De la Rosa declared it “inconceivable” for the SCJ president to be involved in such a case and not face investigation, and called for his impeachment by the national congress.

A gap is opening up between Brazilians’ economic expectations and current conditions, including the job market and family finances. That means they may be in for a reality check, particularly if President Jair Bolsonaro fails to deliver the reforms needed to boost the country’s anemic recovery.

Shortly after Bolsonaro’s election victory in October, consumer optimism jumped to a six-year high, according to an index from the Getulio Vargas Foundation. While consumer expectations are a traditional driver of growth, troubling signs for the recovery abound.

Unemployment stopped falling in the fourth quarter of 2018, after months of steady decline. Most of the new jobs being created are in the informal sector. Retail sales dropped 2.2 percent in December from the prior month, falling the most since January 2016. Car production in the first month of the year plunged 10 percent from the year before. Itau Unibanco SA cut its 2019 GDP forecast for Brazil by a half percentage point to two percent.

Even with the benchmark interest rate at an all-time low, Latin America’s largest economy is still held back by a stubbornly-high unemployment rate of 11.6 percent. Formal jobs in the construction sector, one of the country’s top employers, have fallen some 40 percent since 2014 to 2 million.

“There’s a certain wave of optimism that goes beyond economics and has a subjective component, disconnected from real life,’’ said Aloisio Campelo Jr., public statistics superintendent for FGV’s economics institute. “After such a big crisis there is perhaps some wishful thinking on the part of the consumer.’’

Infrastructure

On 7 February, Infrastructure Minister Tarcísio Freitas announced that the government plans to establish a new transportation infrastructure agency that would combine the current land transportation agency with the organisation responsible for ports and rivers. He said that this would result in simplification and integration.

As an example Freitas cited Santos, the largest port in Latin America, which is regulated by the port agency but has all of its cargo inspected by the land agency. The minister said that this model is working successfully in Canada and Italy. The new combined agency would be called ANT-National Transportation Agency. The National Agency for Civil Aviation would not be included.

This proposal would have to be approved by congress and the new ANT would have fewer staff with transfers of some to other government units. Many of the current directors of the current two regulatory agencies were nominated by leaders of some political parties. In theory, the director-general and directors of the new ANT would not be indicated by politicians but rather selected for their technical experience in the transportation sector and clean records

Eletrobras

Brazil’s government expects to privatise Electrobas in 2020, Deputy Energy Minister Marisete Pereira said in an interview with Folha de Sao Paulo. The administration is re-evaluating the capitalisation model to be used with Eletrobras, which is likely to prevent the transaction from happening this year.

While capitalisation is a priority for the ministry the model to be used is still being discussed, she said. The current thinking within the administration is to allow government to hold a so-called golden share in the utility, which would grant the state certain powers even as a minority stakeholder. Given the uncertainty over whether the transaction will take place in 2019, the economic team has decided to remove an estimated revenue of 12b reais from the federal budget this year, Folha reported.

• Embraer Jets

On 7 February, Embraer Defense announced that it had sold 12 Super Tucano A-29 jet prop fighter planes to Nigeria for US$ 250m. These planes will be produced at the Embraer installation in Jacksonville, Florida. Nigeria plans to use these planes against the Boko Haram Islamic rebels in Northern Nigeria.

As we went to press Haiti’s security situation had reached a new low amid a series of attacks coordinated by prominent gang leader Jimmy ‘Barbecue’ Chérizier, with the stated aim of bringing down the government. For more details on this rapidly developing story please consult our sister publications LatinNews Daily and Latin American Weekly Report. Major uncertainty surrounds the efforts to secure the deployment of the Kenya-led multinational security support (MSS) mission to Haiti, which the international community touts as a solution to the country’s ever worsening security crisis [SSR-24-01], following a January ruling by a Kenyan high court which found it to be unconstitutional. Here we consider some of the challenges that the MSS faces if it does go ahead

A report published in February by the Geneva-headquartered NGO Global Initiative Against Transnational Organised Crime (GITOC) highlights how urgent progress on security now is, and how the task faced by the MSS is much more complicated than the one that confronted the 2004-2017 United Nations (UN) Stabilisation Mission in Haiti (MINUSTAH). As the GITOC report points out, there has been “a substantial change in gangs’ power, structure and capacity for territorial governance since the MINUSTAH era”. The report adds that these entities “are nowadays far more economically autonomous and territorially powerful, making them less controllable”.

Gangs in Haiti are nothing new. Gang culture is a phenomenon that dates back to the formation of the Tonton Macoutes militia under former president François ‘Papa Doc’ Duvalier (1957-1971). But the nature of the gangs has changed. GITOC states that: “The framing of weak, disarticulated gangs is no longer accurate…the major ones – those which control substantial territory and are responsible for most current instability – are well-structured, well-armed, and operationally competent entities”.

There are thought to be around 200 gangs now operating in Haiti, mostly in the metropolitan area of Port-au-Prince, which includes the communes of Port-au-Prince, Delmas, Cité Soleil, Tabarre, Carrefour, and Pétion-Ville. The report adds: “Some gangs that had 50 or 100 active members during the MINUSTAH era now stretch to 1,500 to 2,500 members”. Collectively, the gangs exert “control or substantial influence” over 80% of the city.

However, gangs are now expanding their areas of influence to include rural and semi-rural areas, particularly in central Artibonite department where violence has developed along key roads, thus making travel between major Haitian towns increasingly risky.

The wider availability of weapons is another change between the situation that the MSS force will face and that which MINUSTAH had to deal with. The GITOC report warns that “over the past decade firearms have completely transformed the ecosystem of violence”. Ten years ago it was rare to find semi-automatic weapons, now “large gangs are readily able to acquire AK-47, AR-15 or IMI Galil assault rifles”. There is even evidence of gangs stockpiling these weapons. The training of gangs in weapons usage by ex-soldiers and policemen has also increased gangs’ capabilities.

As a result of their greater firepower and better training, gangs are increasingly willing to confront the police. “The armed gangs,” the GITOC report says, “can confront the police (and will be able to confront MSS forces) in a way that they did not during the MINUSTAH era.”

The report does say that “several sources close to gang leaders” have said that the gangs are not ready to go into battle against the MSS mission (if it is ever deployed), seeing it as too powerful. They would prefer to negotiate with it. However, warns GITOC, “while this evaluation is also fairly prevalent within international civil society, caution should abound, especially given the determination shown by gangs in their battles against the [Haitian national police]”.

Another challenge for the MSS is the way in which gangs now control territory, with hundreds of bosses acting “like local sovereigns”. Gangs have built trenches and high walls to protect their areas of influence against police operations and, potentially, MSS forces. The report warns: “The intensifying fragmentation of territory, proliferation of trenches and semi-permanent barriers, and the difficulty of moving freely in the metropolitan area represent clear operational constraints for the proposed international force to the point where it risks being unable to traverse the capital”.

Extreme violence has become the norm, and sexual violence against women and girls “works as a central practice of gang control”. Mass rapes, some conducted in public to intimidate further, have been used as an instrument of terror. All this, the report adds, underlines “the challenge that lies ahead for rebuilding social fabric, supporting victims and pacifying the city”. It warns that “all these aspects must feed into any appraisal of the prospective MSS mission’s capacity to operate meaningfully on the ground, in terms of its ability to provide effective security and protection to the population”.

The proposed MSS mission will be particularly carefully watched – not just because of the extreme difficulty of the mission, but also because it is ground-breaking in the sense that it is a non-UN mission the target of which is organised crime and the violence associated with it.

One of the mission’s key objectives is to strengthen the capacity of the national police (PNd’H), and the GITOC report warns that “there needs to be a strategic approach to buttressing… and addressing high-level corruption within the police”. Without this, the mission “risks lacking a meaningful domestic security partner”. There is also the issue that efforts to strengthen the PNd’H won’t be effective without strengthening the whole criminal justice chain, that is to say the judiciary and the prison service.

Corruption within the MSS itself is a potential worry as well. This has been a problem with many UN peacekeeping missions, and there are concerns that the deployment of Kenyan police in this instance will bring with it an entrenched culture of bribe taking – a major worry given that Haitian criminal gangs have a long history of corrupting law enforcement officers. The GITOC report calls for “the deployment of an empowered internal affairs policing unit as part of the MSS mission with the capacity to initiate investigations of officers from any contributing country”.

A further risk is that the Haitian criminal gangs respond to the deployment of the MSS mission by further enhancing their arsenals and by uniting to form a common front against the intervention. This risk is exacerbated by the likelihood that the mission will be deployed with insufficient personnel. The UN is talking about a deployment of 2,500 while some experts argue that such an environment requires a deployment of between 3,500 and 4,500. 

Food insecurity

The GITOC report also notes an alarming effect of the expansion of gangs into rural areas on food security. It says that the expansion has “driven substantial rural displacement, and impacted agricultural production in Artibonite, with land under cultivation falling from 5,800 hectares in 2018 to 2,400 in 2022.” This is likely to have been a further deterioration in 2023.

Kenya high court ruling

In January, Kenyan High Court Judge Chacha Mwita ruled that the multinational security support (MSS) mission to Haiti, which had been greenlighted in October 2023 by the United Nations Security Council (UNSC), was unconstitutional. Among other things he cited the fact that under the national police act, Kenya’s police officers can only be deployed to host countries that have a reciprocal agreement, which is not the case with Haiti. However, on 1 March Kenya’s President William Ruto and Haiti’s Prime Minister Ariel Henry, announced a memorandum of understanding (MoU), seemingly clearing the path for its deployment.

CHILE | Huelga en Codelco. El 9 de abril todos los sindicatos de la firma minera de propiedad del estado de Chile, Codelco, la mayor productora de cobre del mundo, fueron a una huelga de 24 horas para exigir mejores condiciones de trabajo así como también por cambios en la manera que está operando Codelco. La huelga fue convocada por la Federación de Trabajadores del Cobre (FTC), una organización que agrupa a 22 sindicatos de Codelco, para protestar contra el uso de contratistas temporarios; los percibidos intentos de Codelco de privatizar los sistemas de salud y de pensiones; y el fracaso de la firma para desarrollar el potencial de sus minas, en medio de evidencias de deterioro de grado del mineral y la producción en algunas de las viejas y grandes minas de Codelco.

El presidente de la FTC, Raimundo Espinoza, dijo que la administración de Codelco de nuevo ha mostrado una actitud “autoritaria, arrogante, e ineficiente” hacia la compañía y su personal. Espinoza dijo que la FTC estaba pidiendo una reforma de la industria nacional del cobre de Chile, exigiendo su “re-nacionalización” para que así todos los beneficios de la minería del cobre en Chile, vayan al Estado chileno.

Según Espinoza, actualmente el 70% del cobre de Chile es extraído por firmas privadas, que aprovechan la mayoría de los ingresos resultantes de la rentable actividad. Espinoza dijo que si estos fueran obtenidos por el gobierno chileno, entonces “nosotros tendríamos un sistema más igualitario sin estudiantes en las calles” –una alusión a las protestas estudiantiles que han afectado a Chile desde el 2011.

Para preocupación del gobierno, Espinoza pidió a la Federación Minera de Chile (FMC) que se una a la huelga, una invitación que la FMC aceptó, señalando que “respaldaba por completo las demandas de la FTC”.

Esta es la segunda vez que los trabajadores de Codelco van a la huelga desde que asumió el poder el Presidente Sebastián Piñera en el 2010. La industria del cobre sostuvo pérdidas de US$41m como resultado de la primera huelga en julio del 2011.

El anuncio de la huelga en el sector minero vino justo cuando el gobierno Piñera logró apaciguar a los trabajadores de los puertos del país, quienes habían estado en huelga por las últimas dos semanas produciendo pérdidas estimadas de US$2010m.

Aunque la huelga fue observada por todos los miembros de la FTC, y fue descrita como “un éxito” por Espinoza, sólo fue cumplida parcialmente por los miembros de la FMC, lo que significó que las pérdidas fueron menores de los esperados US$35m. De todos modos, la FTC ha advertido que podría montar otra huelga si sus demandas no son atendidas. El jefe operativo (CEO) de Codelco, Thomas Keller, dijo que él estaba buscando establecer conversaciones con la FTC para escuchar sus reclamos.

Igualmente, el 10 de abril, Piñera se refirió a las dos recientes huelgas y pidió a todos los chilenos que “reaccionen y privilegien el diálogo y busquen un acuerdo [...] pues sólo de esta manera Chile podrá continuar creciendo, creando más empleos, mejorando los salarios y reduciendo la pobreza”.

CHILE | Codelco firma acuerdo con Colombia. La compañía minera del estado de Chile, Codelco, firmó el 9 de abril un memorándum de entendimiento con el gobierno de Colombia para promover el desarrollo de potenciales operaciones mineras en el país andino.

El acuerdo, que otorga a Codelco dos años para evaluar las oportunidades mineras en Colombia en el interés de establecer operaciones conjuntas, fue firmado por el vicepresidente de desarrollo de Codelco, Gerhard Von Borries, y la viceministra de minería de Colombia, Natalia Gutiérrez, durante una conferencia internacional del cobre, en Santiago, Chile.

Gutiérrez dijo que Colombia quiere expandir sus operaciones mineras de una forma sostenible y que un acuerdo con Codelco proveería esto como una posibilidad. Mientras tanto, Von Borries declaró que el acuerdo permitiría a Chile y Colombia compartir los beneficios de nuevas operaciones conjuntas. El acuerdo se concretó luego de un número de conversaciones preliminares conducidas por el ministerio de minería & energía de Colombia y Codelco.

PARAGUAY | Más gas de Bolivia. El 8 de abril, la firma petrolera estatal de Bolivia, YPFB, reveló que firmará un contrato de provisión de gas natural licuado (GNL) con tres firmas de energía de Paraguay la próxima semana. El presidente de YPFB, Carlos Villegas, dijo que el precio al cual el gas será exportado aún está siendo negociad pero que todo estaba preparado para que se pueda sellar el acuerdo la próxima semana, aunque no dio los nombres de las compañías interesadas o dónde tendrá lugar la firma de los contratos. Entre diciembre del 2012 y enero del 2013, Bolivia exportó 1 tonelada de GNL a Paraguay.

PERU | Poverty reduction. On 10 May, the head of Peru’s national statistics institute (Inei), Aníbal Sánchez, reported that the total number of people deemed to be poor (those that earn less than US$100 a month) in the country had fallen by 1.1% in 2016 compared to 2015. Sánchez said that last year 20.7% of Peru’s population, or 6.5m people, lived in poverty.

The reduction in the total number of poor last year means that this figure has fallen by 7.1% over the last five years, and by 28.4% since 2007, as 7.3m were lifted out of poverty in the last decade. However, the difference in poverty levels between rural and urban areas remains substantial. Poverty levels in rural areas reached 43.8% of the population in 2016, down by 1.4 percentage points on 2015; while in urban areas poverty levels reached 13.9%, down 0.6 percentage on the previous year.

Extreme poverty (those that earn less than US$53 a month) also saw a slight decrease of 0.3%, or 70,000 people, compared to 2015. Extreme poverty has fallen by just 2.5% since 2012, and over the last 10 years it has fallen by 10%. Inei’s report also showed that 28.7% of the poor population are of indigenous or Afro-Peruvian origin, higher than the national average. A majority (51.9%) of the poor that are over 15 years of age have none or only some years of primary education, and 93.4% of the poor work in the informal sector.

ECUADOR | EU trade agreement pays dividends. On 10 May, Ecuador’s trade minister, Juan Carlos Cassinelli, said that the country’s non-oil exports reached a total of US$11.3bn last year, with US$2.83bn worth of these exports going to the European Union (EU), which is the principal market for Ecuador’s non-oil exports.

• Viva Air

On 9 May, Peru’s first low cost airline, Viva Air Perú, formally began operations. The company is owned by Irish holding firm Irelandia Aviation, the parent company of Ryanair, and will operate nine different domestic routes in Peru, with two more added next year. Peru’s tourism ministry estimates that internal tourism will increase by 10% in 2017, creating an ideal environment for Viva Air Perú to start its operations. The company aims to service 700,000 travellers in its first year. The venture is the latest in Irelandia Aviation’s expansion into Latin America following the launch of Viva Colombia in 2012. Viva Colombia’s CEO, William Shaw, estimates that Viva Air Perú’s arrival will result in a 50%-70% price reduction in flight costs in Peru.

Tourism is a major contributor to Central American economies and regional governments are scrambling to rebuild the industry amid continued disruption caused by the coronavirus (Covid-19) pandemic.

Visitor numbers crashed dramatically as the pandemic took hold in the second quarter of 2020, and the situation is far from returning to normal. The economic impact in Central America cannot be understated, given the region’s reliance on income from tourism. One way to illustrate this is by using the Inter-American Development Bank (IDB) Tourism Dependency Index (TDI) which gives each country a score out of 100, with higher numbers showing greater dependency on the industry. The most recent TDI, published in July 2020, gives Belize the highest score in Central America on 38.4, followed by Panama (16.8), Costa Rica (14.7), Honduras (12.7), El Salvador (12.5), Nicaragua (10.6), and Guatemala (9.3). By way of comparison, these numbers are higher than every South American nation bar Uruguay (11.1).

Belize finds itself in the most perilous situation as tourism accounts for almost 40% of GDP, compounding the already difficult economic outlook faced by Prime Minister Johnny Briceño, who took office in November 2020. The new government said it had ambitious plans to boost tourism, including building a new airport in the tourist town of Placencia, Stann Creek district; investing in other infrastructure; trying to revive cruise tourism; and rebuilding confidence after the pandemic. However, it is not clear how the government plans to pay for these plans while its finances remain in a parlous state: on 24 November 2020 credit ratings agency, Moody’s Investors Service, downgraded Belize’s rating to ‘Caa3’ from ‘Caa1’ warning that this “reflects the structural deterioration in government finances that is likely to push debt ratios to very high levels of over 130% of GDP”. Yet Tourism Minister Anthony Mahler recognised the need for action. “Our priority is to support the tourism business and jobs, and restore traveller confidence”, Mahler said. In January, the Belize Tourism Board implemented sanitary protocols to position the country as a safe destination for travellers.

Tourism is also a crucial industry in Panama, which earned 13.6% of its GDP from the sector in 2019, according to figures from the World Travel and Tourism Council, which also show that travel and tourism contributed 14.7% of total employment and US$5.7bn in revenue, or 21.7% of total exports. In July 2020, the president of the national tourism board (Camtur), Ernesto Orillac, estimated the impact of the pandemic meant the tourism sector was losing US$12m a day, and in December 2020 national daily La Prensa cited estimates from the International Air Transport Association that the tourism and aviation sectors lost a combined total of just over US$4bn in 2020. In January 2021, Panama’s official tourism authority (ATP) released its plans for this year, including a focus on conservation and domestic tourism. The ATP said it would fund improvements in infrastructure and urban planning as part of its integrated urban growth plan for tourist cities, as well as developing a system of hiking trails and a ‘coffee circuit’. Other key points include training programmes for industry staff and the scheduled opening of the Amador convention centre, a new venue for international fairs and exhibitions which will be the largest facility of its kind in Latin America. However, the ATP will have a budget of US$42m, compared to the US$83m it asked for, and the Panama tourism promotion fund (Promtur), a grouping of tourism businesses which works closely with the ATP, has also complained about budget cuts.

Costa Rica received just 1.01m visitors in 2020, a third of the number of visitors in 2019, according to statistics from the country’s tourism institute (ICT), a government body. Tourism Minister Gustavo Segura stressed that the country performed well compared to some other nations, which saw tourism plummet to just 5% of previous levels. The ICT also highlighted that 71,000 people arrived in the country in December 2020, double that registered the previous month as restrictions were lifted and 20 airlines resumed flights. Tourism authorities are working with a national network of private health clinics to make coronavirus testing easier for travellers, and they are also working to make beaches more accessible with a specially equipped truck that will tour different parts of the country. Authorities are also targeting couples travel, releasing eight different suggested travel plans for how to enjoy Costa Rica with your partner.

On 2 February Honduras’s deputy tourism minister, Selvin Barralaga, said the sector lost over US$1.3bn and some 100,000 jobs in 2020 due to the pandemic and the damages caused by the hurricanes ‘Eta’ and ‘Iota’, which struck the country in November 2020. However, Barralaga is optimistic about recovery in 2021. He said hopes were high for 2020 before the pandemic and the hurricanes, with international flights up 28% in January and February 2020. Recovery is a huge challenge but Barralaga underlined that the sector is a priority for President Juan Orlando Hernández. On 22 January, the Hernández government promised L7bn (US$290m) in funding for tourism, among other sectors, to help the recovery. In terms of travel initiatives, Tourism Minister Nicole Marrder said authorities will promote the Trujillo area on the country’s northern coast.

In August El Salvador’s tourism minister, Morena Valdez, estimated the industry had lost US$1.145bn due to the impact of the pandemic, with 30%-40% of jobs in the sector lost. President Nayib Bukele has bet big on tourism, with a focus on the country’s surfing beaches. Under the ‘Surf City’ project the government is investing approximately US$12.4m in roads and improving infrastructure to link surf spots such as the departments of Ahuachapán, Sonsonate, La Libertad, La Paz, San Miguel, Usulután, and La Unión. The project started before the pandemic, but it remains a key part of the tourism strategy for 2021. On 7 December 2020, Valdez swore in the first regional committee for tourism development for the Surf City area, designed to develop sustainable growth plans. And on 16 January Valdez announced non-refundable grants to microbusinesses in the Surf City area. A total of US$1.3m in funds from the Inter-American Development Bank will be handed out. Other efforts include certifying over 200 tourist guides and businesses to operate according to biosecurity measures that will allow a safe reopening of the sector.

As for Nicaragua, in August, Lucy Valenti, the director of the national tourism chamber (Canatur), said that due to the domestic political crisis (stemming from the crackdown by the government led by President Daniel Ortega on its opponents, which began in April 2018) and now the pandemic, employment in the tourism sector had fallen “dramatically with just some 20,000 to 24,000 jobs in the sector active, down from 120,000 in 2017”. Valenti said that prior to the pandemic, the sector was expecting revenue of some US$460m in 2020, already less than the US$840.5m in 2017 but that as a result of the pandemic, it now expected to generate just a quarter of this forecast. In early January Nicaragua’s tourism institute (Intur), the official tourism agency, released its plans for 2021 with a focus on domestic and regional tourism (see sidebar).

In Guatemala, at the beginning of December 2020, national daily Prensa Libre cited figures from the national tourism institute (Inguat) which forecast that the country would receive a total of 547,000 visitors in 2020, down from 2.56m in 2019. Authorities will run a campaign to attract international visitors marking the bicentenary of independence, hot on the heels of a domestic tourism campaign at the end of 2020. Inguat has also issued biosecurity certification to more than 100 businesses to encourage visitors.

Ruta Maya

There are also interesting plans to promote the so-called ‘Ruta Maya’, a circuit linking key sites from the ancient Maya civilisation which runs through Mexico, Guatemala, El Salvador, Belize, and Honduras. Each of these countries is part of the Organización Mundo Maya, a regional body that aims to promote multi-stop trips focused on the area’s Mayan history. Another regional organisation, the Central American integration system (Sica), has recognised the importance of tourism but is yet to reveal any detailed plans to rebuild the sector in 2021.

• Nicaragua’s plans

According to the Intur plan, other key areas on which it plans to focus include improving the quality of staff training and the promotion of inclusive tourism that is accessible to everyone. Intur will release updated digital packages each month showing what visitors can do in each region of the country, as well as visiting international fairs to promote Nicaragua as a destination. Businesses will also benefit from digitalised registration and payment systems, said Intur.

Argentina’s President Alberto Fernández declared a “war on inflation” on 15 March after the national statistics institute (Indec) revealed that the annualised figure had pushed up to well beyond 50% in February. The Indec figure laid bare the improbability of the inflation target for 2022 contained within the debt restructuring agreement signed with the International Monetary Fund (IMF), which is working its way through congress, especially as the rolling back of energy subsidies will create more inflationary pressure.

Inflation for the month of February raced to 4.7% compared with January, the highest monthly increase for 11 months, driving annualised inflation up by 1.6 percentage points to 52.3%, Indec reported. President Fernández said that his government would wage a “war on inflation”, beginning by targeting “speculators”, and “put things in order”. He provided no further detail.

The main cause for the increase in inflation in February was the cost of food and drink, which soared by 7.5% on January, its highest monthly increase since 2016. This despite the government’s ‘Precios Cuidados’ price control programme, including over 1,300 products of basic necessity, mainly food and non-alcoholic beverages, which the economy minister, Martín Guzmán, presented to the IMF in its latest incarnation in mid-January, describing it as “an important element to attack Argentina’s inflationary phenomenon”.

The problem with the use of the word ‘phenomenon’ is that it denotes something extraordinary or unusual; high inflation in Argentina, by contrast, is now unremarkable and standard. Even higher inflation is possible in the coming months with fuel prices climbing and food prices impacted by Russia’s invasion of Ukraine. The IMF accord to restructure the country’s outstanding debt of US$45bn recognises inflation as a serious problem and vaguely outlines a “deflationary strategy” on various fronts, but the targets (starting with a range of 38%-48% in 2022 and then falling by five percentage points per year) already look dated – and the accord has not even been approved yet.

Congressional approval

The bill approving the accord made it through the lower chamber of congress in the early hours of 11 March. The bald figures suggest it was comfortable: the bill was approved by 202 votes to 37 with 13 abstentions. But the debate was heated and the more radical La Cámpora wing of the ruling left-of-centre Frente de Todos (FdT) coalition led by Máximo Kirchner, the son of Vice President Cristina Fernández, rejected the accord. The ease of passage was secured by the support of the right-of-centre opposition Juntos por el Cambio (JxC) coalition, but only after the government abandoned an attempt to append to the accord an economic plan with which the opposition was determined not to be associated.

The accord is being debated in the senate as we go to press on 17 March. Guzmán and the cabinet chief, Juan Manzur, appeared before a senate committee on 14 March to defend the accord in the face of internal division within the FdT. The Kirchnerista La Cámpora faction has a stronger presence in the senate, albeit not large enough to block the passage of the bill if the JxC joins the rump of the FdT in voting for it. The JxC is expected to do so in order to avert a default ahead of the imminent deadline of 22 March to make a debt repayment of US$2.8bn to the IMF. The JxC is expected to express its disquiet, however, at the government’s decision to suspend exports of soybean meal and soybean oil on 13 March amid speculation it is preparing to raise export taxes to cash in on higher global prices as a result of the war in Ukraine.

Violent protests
The debate of the IMF accord in the lower chamber of congress took place amid violent street protests outside the building. The hard-left Partido de los Trabajadores Socialistas Unificado (PTSU) led a protest march to congress, setting fire to tyres on the surrounding streets and even a rubbish bin right outside the main entrance to congress, while hurling stones at the building and Molotov cocktails at the police. The police fired rubber bullets to disperse the protesters.

MEXICO | Unemployment rate ticks down. The unemployment rate in Mexico stood at 2.7% of the economically active population in June 2025, compared with 2.8% in the same month last year, with the number of unemployed people decreasing by 21,000 people, according to a report released by Mexico’s national statistics institute (Inegi) on 28 July. In the report, Inegi put the number of people employed in June 2025 at 60.2m.

The underemployment rate – the percentage of the employed population seeking more working hours – also fell slightly, from 7.5% to 7.4%. However, the informal employment rate rose from 53.8% in June 2024 to 54.8% in June 2025, accounting for 33m people.

By sector, the service sector accounted for 45.1% of the total employment, followed by trade at 19.7% and manufacturing at 15.5%.

MEXICO | Trade surplus grows in first half of 2025. Mexico’s national statistics institute (Inegi) reported on 28 July that from January to June 2025, Mexico recorded a trade surplus of US$1.43bn, compared with a trade deficit of US$10.92bn registered during the same period of 2024.

Total exports rose 4.4% year-on-year to US$312.73bn, supported by a 5.9% increase in non-oil exports – driven in large part by extractive industries – to US$301.54bn. By contrast, oil exports declined by 24.8% to US$11.19bn. Total imports grew 0.2% annually to US$311.30bn, with non-oil imports up 1% to US$287.92bn and oil imports down by 8.5% to US$23.38bn. In June alone, Mexico posted a monthly trade surplus of US$514m. Exports totalled US$54bn, representing a 10.6% annual increase. Imports for the month grew 4.4% year-on-year to US$53.49bn.

In the first 10 months of 2011, exports were up by 34% at US$37.9bn. The main reason for this is the strong performance of traditional exports, particularly metals.

In the first 10 months of 2011, traditional exports came to US$29.4bn. Mining exports were strong in October. Tin exports in October rose 550% year-on-year while iron ore exports were up by 84% and silver exports were up by 71%. Lead exports were up 59% and gold exports up 36%. 

In October China was country’s biggest export market buying US$5.87bn worth of goods in the first 10 months.

Imports in the first 10 months were up 28%, year-on-year at US$31.4bn.

The central bank has cut its GDP forecasts for both 2011 and 2012. It has pencilled in 6.3% for 2011 and 5.7% for 2012. 

As the economy grew by 8.8%, this is quite a slowdown.  Part of the reason for the pause-for–breath is the private sector’s wariness about President Ollanta Humala elected on 5 June. The surprise cabinet reshuffle on 10 December, which saw Humala drop his prime minister, Salomón Lerner, and replace him with a former colonel, Oscar Valdés,  who taught Humala at a military college, is unlikely to encourage the private sector to accelerate their projects. Humala had appointed Valdés interior minister on taking office.

What seems clear is that in 2012, a lot more of the economic impetus in the country will come from the domestic economy. There are clear signs that this part of the economy is in decent shape.

Employment: The number of people working in the formal private sector in Lima was 5.7% higher in September 2011 than in the same month of 2010, according to the labour and employment ministry, (MTPE). The figure covers companies which have more than 10 employees.

Camisea: The consortium which is handling the sales of natural gas from the Camisea gas field paid US$1.14bn in royalties in the first 11 months of 2011. Half of the money (US$568m) paid by the consortium which comprises Repsol, Pluspetrol and Hunt Oil goes to the regional government in Cuzco. Since the project began shipping gas in 2004, it has paid a total of US$3.6bn in royalties.

Peru has probable gas reserves of 15.9trillion cubic feet of which 11.2 trillion cubic feet are proven.

HAITI | Cabinet reshuffle. Less than three months after taking office mid May, Prime Minister Laurent Lamothe has carried out a cabinet reshuffle. The changes - in which he replaced three of his ministers, including Interior Minister Thierry Mayard Paul - appeared to take the media by surprise and were justified as necessary for “greater efficiency”, with no further explanation offered. Mayard Paul, a close ally of President Michel Martelly and his former campaign chief, has been replaced by Ronsard Saint Cyr, the former minister for social affairs and labour. Lamothe will swap the additional portfolio he held – foreign affairs – for the planning ministry to replace Josefa Gauthier who, in turn, will take over from Saint Cyr. The new head of foreign affairs is Pierre Richard Casimir, who was serving as secretary of state for that portfolio. Aside from Mayard Paul, the other two ministers to be replaced are Joseph Ronald Toussaint (environment) and Réginald Paul (education). A former member of the main opposition Inité party of Martelly’s predecessor, René Préval (2006-2011) which has since fractured [WR-12-25], Toussaint has been replaced by environmentalist Jean Vilmont Hilaire; Paul has been replaced by Vanneur Pierre, who was director general of the ministry.

It took the Brazilian congress a full year since the approval of an historic tax reform before passing the first of several necessary regulations. At stake was nothing less than the monumental task of deciding what industries are to be taxed at what rates, which can become a question of survival for a business.

There was hardly an industry group that wasn’t involved in intense lobbying in Brasília over the past year to impress on legislators the importance of one activity or another. There were countless iterations of the new regulations, including one that saw guns as harmless, and therefore tax exempt, but essential medicines as potentially harmful and therefore taxable. In the end, the chamber of deputies cut back on many of the tributary distortions granted in the senate, although many granting unfair benefits remained.

The tax reform, as approved by constitutional amendment in December 2023, aims to simplify Brazil’s byzantine tax system, streamlining five levies into two value-added taxes (VATs): the contribution on goods and services (CBS), levied at a federal level, and the tax on goods and services (IBS), levied by states and municipalities.

The supplementary bill PLP 68/24 approved on 17 December deals with the rules and regulations for the CBS and IBS taxes, including the classification of goods and services into various tax brackets. A second bylaw, PLP 108/24, is to regulate the transition period and the operation of the IBS management committee, which is made up of representatives from state, municipal, and federal authorities to collect, oversee, and distribute the new IBS tax.

New tax rules

In the final version of the new bylaws, deputies reintroduced a selective tax (IS) on soft drinks, rejecting a senate proposal to exempt them. The so-called ‘imposto do pecado’, or sin tax, is applied to goods deemed unhealthy or environmentally harmful. This will include alcoholic beverages, cigarettes, and polluting vehicles. Salmon and tuna fish will also be subject to the sin tax, but not beef – in other words, sushi will get more expensive while churrasco stays cheap!

Other changes introduced by the chamber of deputies included removing cookies, crackers, and mineral water from the basket of basic foods that enjoy a tax reduction; removing basic sanitation, such as wastewater treatment, from the preferential tax bracket (deputies argued that there already existed a tax benefit on water bills through a cashback mechanism granted to low-income earners); and re-establishing an 8.5% tax rate on SAFs, football clubs that are run as companies under a 2021 law. Senators had proposed a 5% rate. The chamber of deputies stuck to its original plan for a full tax exemption on a list of 383 essential drugs.

Other peculiarities include tax exemptions for certain professions such as accountants, economists, and business managers, and a ‘tax-free’ shopping plan for foreign tourists, who will be exempt from paying CBS and IBS. A cashback mechanism will give low-income earners an automatic refund of at least 20% on the CBS and IBS; that raises the question of how abuse will be prevented if, for example, a qualifying person buys a car for a consumer who doesn’t qualify.

Meanwhile accounting departments throughout the country are beginning to fret. If they are to have enough time to implement the first stages of the tax reform by January 2026, when the first invoices for IBS and CBS must be issued, legislators must vote on all the remaining laws and regulations – to establish how the system actually operates – early this year.

Manaus Zona Franca

The approved version of the bylaw extends benefits of the tax-free zone of Manaus to the Refinaria da Amazônia (Ream), the only oil refinery in the northern part of the country. The proposal was hashed out by two senators from the region to help prevent the refinery from shutting down. But the industry lobby, the Instituto Brasileiro de Petróleo e Gás (IBP), argues the move will create market distortions and called on President Luiz Inácio Lula da Silva to veto that part of the bill.

The Panama Canal Authority (ACP) has started the process of selecting a partner to build a planned interoceanic gas pipeline, which is a key part of a newly published 10-year plan to secure future revenue growth.

President José Raúl Mulino announced the start of the process to build the pipeline during a visit to Japan on 3 September, calling the project “a strategic bet by Panama to remain a key country in the global economy, generating development for Panamanians and ensuring the sustainability and competitiveness of the Panama Canal”.  Then on 18 September the ACP officially launched the concessionaire selection process at an event attended by representatives of more than 20 global energy companies including US firms, ExxonMobil and Shell and Japan’s Mitsubishi. The ACP said that the pre-qualification of interested parties will begin this year, while the final concessionaire selection stage is scheduled to close in the fourth quarter of 2026.

The 76km pipeline will link Panama’s Pacific and Atlantic coasts and constitute “a cornerstone of a new interoceanic energy corridor” which will also boast two sea terminals, said the ACP. It will provide an estimated 45,000 jobs during the construction phase and 11,000 when it comes online, with capacity to transport up to 2.5m barrels of fuel products per day, facilitating the movement of propane, butane, and ethane between the Gulf of Mexico and Northeast Asia. It will thereby increase the canal’s capacity without requiring additional water supplies, which have come under increasing pressure due to changing weather patterns as a result of climate change.

The energy corridor is one of the most significant infrastructure projects for the canal since the expansion of the third set of locks, which was completed in 2016, and forms part of a new revenue diversification strategy. The 10-year roadmap has two main pillars: improving water security by increasing storage capacity and achieving sustained growth for the canal through diversification. 

It envisages a total investment of over US$8bn in strategic projects such as a new reservoir on the Río Indio, which will provide drinking water for more than a million Panamanians while improving the canal’s resilience in times of drought. Other projects include container transshipment terminals, storage areas, and a new road running between the Centennial Bridge and the Atlantic Bridge along the west bank of the canal

The canal plan is “designed to reinforce its strategic role in global trade, safeguard long-term sustainability, and deliver tangible benefits to the nation,” the ACP said in a statement dated 16 September. “With this vision, the Panama Canal will evolve beyond an interoceanic passage and become a logistics hub, strengthening Panama’s competitive edge in world commerce,” it added.

These ambitious plans are a response to falling revenues at the canal, which has been affected by drought and global trade uncertainty leading to a drop in the number of vessel transits. For example, the canal’s budget for fiscal year (FY) 2026, which runs from October 2025-September 2026, forecasts revenue of US$5.21bn, down from US$5.62bn in FY 2025. According to the ACP, the 2026 budget “marks the beginning of a new period focused on strengthening the canal’s business model and protecting the long-term value of the waterway”.

It also comes at a time of increased geopolitical wrangling, with US President Donald Trump threatening to “take back” the canal earlier this year after criticising the decision by former US president Jimmy Carter (1977-1981) to cede control of the waterway to Panama as part of the 1977 Carter-Torrijos treaty. Trump has pushed Panama to roll back its recent deepening of relations with China due to concerns about the extent of Beijing’s influence over the canal, which is vital to the US economy.

One key example is pressure to force the sale of ports at either end of the canal, currently owned by Hong-Kong based firm CK Hutchison, to a US consortium led by hedge fund Blackrock, although the deal has been held up amid opposition from Beijing. This demonstrates how Panama is caught in the middle of great power competition at a time of shifting geopolitical dynamics. Some argue that this could benefit the country if it can manage to turn this competition into a wave of investments from global powers keen to exert influence over the waterway, but it also constitutes a headache for the government. 

Mulino is not only having to dedicate considerable time and energy to managing relations with the US and China, but he also having to balance their interests with domestic political concerns. For example, concerns that a new bilateral security agreement would lead to an expanded US military presence [SSR-25-05] sparked widespread protests and raised memories of the 1989 US invasion for many Panamanians. Despite these sensitivities, Mulino has so far thrown in his lot with Trump, despite China’s significant investments in the country in recent years. Chinese firms were notably absent from the roll call of companies that attended the gas pipeline tender launch. 

Capitalising on the current interest in the canal to secure investment in the pipeline and the other strategic infrastructure projects laid out in the 10-year plan seems a sensible way to build new revenue streams and secure the future of the canal in the face of a changing climate, in turn ensuring that it can continue to make hugely significant contributions to the public purse. However, Mulino’s political future will more likely depend on what Trump asks for in return, and whether these decisions are perceived to be in the interest of the majority of the Panamanian population, many of whom will be quick to protest controversial developments due to the unmet demands of the recent protests.

New slot allocation programme

On 29 September the Panama Canal Authority (ACP) announced the launch of a new slot allocation programme which allows companies to commit in six-month blocks rather than 12 months, offering more flexibility. It says that the ACP has “refined the model by adjusting the average daily slots from 4 to 3 to offer a more balanced allocation and by introducing new service attributes to attract and retain customers”. Under the changes customers can reserve their transit date and provide their vessel name up to 15 days before the transit date, among other benefits. The first six-month cycle will begin on 4 January 2026.

Slowing GDP growth

According to the latest figures from Panama’s national statistics institute (Inec) Panama’s GDP grew 3.4% in the second quarter of 2025 compared with the same quarter in 2024. This compares with growth of 5.2% in the first quarter of 2025 year-on-year, 4.8% in the fourth quarter of 2024, 2.0% in the third quarter of 2024, and 2.2% in the second. While Panama Canal operations posted a 24.1% increase in revenue from tolls, notable declines were posted in sectors such as banana exports which were down 69.1% in the second quarter year-on-year – indicative of the impact of strike action earlier this year by banana workers, as part of a general strike [EB-25-05].

“Today we look back and we find [ourselves] with the pleasant surprise of a process that, despite not having been the one we dreamt of, is the one we knew how to undertake”, declared President Fernando Lugo of Paraguay during his 15 August State of the Nation address, which marked his third anniversary in power. Despite his lofty rhetoric, Lugo is living not a dream but something of a nightmare, for while the economy is booming, the president’s political future remains very unclear and his governing alliance has all but formally collapsed, two years ahead of the next  scheduled general election in 2013.

While the Lugo administration still has another 15 months to go before the pieces of the 2013 electoral puzzle fall into place, tensions between the more left-wing members of his own Alianza Patriótica para el Cambio (APC) and the Partido Liberal Radical Auténtico (PLRA), the main coalition partner, have come to dominate national politics [RBS-11-07]. Most recently, a debate over a possible constitutional reform to allow for presidential re-election got nowhere and indeed resulted in a criminal investigation into the alleged forgery of signatures in documents related to the process. All of which cost Lugo politically [WR-11-29].

This has taken away from the crucial political discussions that need to take place if Lugo is to deliver on some of the monumental campaign promises he made in 2008. Of these, land reform is possibly the most important, especially since illegal land seizures and occupations across the country have increased significantly in the past few months. But the president also has yet to address other pressing issues like a proposed institutional reform bill that has not even got as far as the national assembly. A bill to introduce a personal income tax has been discussed several times in both chambers of congress, but it has never received enough support, and at this stage it will probably be left to the next administration to take up.

Lugo, like his Chilean counterpart Sebastián Piñera, is suffering his lowest approval ratings to date since taking office. In the latest Ati Snead opinion poll, published by the local daily La Nación, 52.1% of respondents disapproved of Lugo’s administration, while 44.3% considered it “good” or “very good”. According to the survey, the main reason for dissatisfaction was the government’s inability to reduce poverty, unemployment or insecurity during its first three years in power.

Reasons to celebrate
Nonetheless, President Lugo has several achievements to celebrate, not least the country’s 14.5% real annual GDP growth rate in 2010 and his administration’s successful negotiations with Brazil to secure favourable changes to the founding treaty of the bi-national Itaipú hydro-electric dam [WR-11-20]. However, Lugo gave no details as to the discussions with Argentina to obtain permission to export Paraguayan electricity through the neighbouring country to Uruguay. The 15 August deadline set by Paraguayan authorities to receive a definitive answer from the Argentine government led by President Cristina Fernández came and went without any developments.

Lugo said that his government had extended state assistance to the number of extremely poor families to 120,000, up from 14,000 previously. He congratulated public hospital workers for the care they provide to the poorest Paraguayans. “We must concentrate on a single objective: uniting the country in social development. We will have time to confront each other at the ballot box”, he concluded.

• Soya tax
  Paraguay is the third largest exporter of soya in South America after Brazil and Argentina and President Lugo wants his government to benefit more from the sector’s economic boom. On 8 August he sent a bill to congress proposing an export tax of 6% on all soya shipments sent overseas. In his State of the Nation address, he celebrated agricultural producers saying: “To those who sow a quarter of a hectare with maize as well as those who sow hundreds of hectares of soya, and those who sell refreshing herbal remedies and the industrialists, to all, my most sincere gratitude”.

*** Gaza looks to Turkey to restore Ottoman legacy.  In a highly symbolic move, the Hamas administration in the Gaza Strip has reportedly asked Turkey to construct 15 Ottoman-style mosques in the Gaza Strip and to restore or rebuild 162 mosques damaged in the conflict with Israel.  Gaza was a part of the Ottoman Empire from 1516 until 1917.

*** Israel prepares for CBRN attacks.  Israel is to hold a series of exercises in the coming months to prepare the population for a possible attack using chemical, biological, radiological, or nuclear weapons (CBRN). 

This week there is the annual Orange Flame exercise for a biological attack, which will be held in Tiberias, Afula, and Nazareth.  Part of the exercise will entail doctors trying to identify the agent used from the symptoms presented by casualties.  Another exercise, to be held in January, will simulate a ‘dirty bomb’ attack in Haifa.  Concerns about a terrorist attack using chemical weapons have increased as a result of the unrest in Syria, which is thought to have an arsenal of chemical weapons including mustard gas, sarin, and VX gas.

*** Russian popular opinion split on Nato.  Russia’s ruling elite (see today’s second briefing) is deeply suspicious of Nato.  However, public opinion seems to be more or less evenly divided, according to an opinion poll carried out by the All-Russia Centre for the Study of Public Opinion (VTsIOM). 

Thirty-four per cent of respondents to a recent survey said that Nato represents a threat to Russia, down from 41% in 2009.  This is the same percentage of people who do not see Nato as a real danger.  On the other hand, only 8% of Russians view Nato as a partner for Russia.

*** Indian allegations fuel Pakistani suspicions after Nato attack.  The Nato attack just after midnight on 26 November on two border posts in north-west Pakistan killed 24 soldiers and has sparked a major breach between Pakistan and Nato.  Interestingly, there is an Indian angle to the controversy.  On the same day as the attack, India issued a statement accusing Pakistan of violating the ceasefire along the Kashmir Line of Control by firing at three Indian border posts.  Also on the same day, India’s External Affairs Minister SM Krishna called for Pakistan to bring the perpetrators of the Mumbai terror attack to justice swiftly.  Some in Pakistan have seen this as evidence of a “synchronized” move by Nato and India to put pressure on Pakistan.  An editorial in the pro-military Pakistan Observer said: “Both the Indian statements synchronize with the Nato air attacks which reflect a bigger Indo-US design to weaken and destabilize Pakistan which they consider as the main hurdle for imposing hegemony in the region.”  It added that the statements “clearly indicate that [India] is in league with the US in acts against Pakistan”.

COLOMBIA | Santos’ ‘Pipe’ proves to be a hit. On 24 April ratings agency, Standard & Poor’s (S&P), announced that it was raising its credit rating for Colombia from BBB- to BBB, the highest rating ever awarded to the country. S&P’s decision came just two days after Colombia’s finance minister, Mauricio Cárdenas, held a meeting in Washington D.C. with international economic analysts, including representatives of the main ratings agencies, S&P, Moody’s and Fitch, to present them with the details of the Plan de Impulso a la Productividad y el Empleo (Pipe), the economic stimulus package recently launched by the government of President Juan Manuel Santos [WR-13-16].

    In unveiling the Pipe, Santos proclaimed that the plan, which includes C$5bn (US$2.73bn) of government investment, would boost economic growth while at the same time maintaining fiscal discipline and even “balance out” the current high level of the peso. To Santos’ critics all this not only sounded overly ambitious but also “too good to be true”, with some arguing that it would be difficult to achieve and, in all probability, only represented empty pre-electoral campaign promises by Santos. However, despite such reservations, the Pipe has been positively received by international analysts. After their meeting with Cárdenas, they all expressed approval of the measures in particular those designed to boost the construction of new housing, one of the main areas targeted by the plan, which analysts said would benefit the local banking sector as there would be increased demand for mortgages. This led Cárdenas to express confidence that the meeting could lead to the improvement of Colombia’s risk-rating, confidence that has proved to be well judged.

    Speaking to the Colombian media to explain the decision to increase Colombia’s rating, Joydeep Mukherji, Standard & Poor (S&P)’s chief analyst for Colombia, said that the agency had decided to do this after considering Colombia’s “improved capacity to face external shocks and to maintain long-term economic growth”. Mukherji explained that in his opinion in recent years there has been a “noticeable strengthening of Colombia’s domestic economy” particularly when it comes to promoting growth and maintaining a healthy fiscal balance. Moreover in a nod to the Pipe, Mukherji pointed out that Colombia’s investment level, of approximately 30% of GDP, is “one of the highest in Latin America”, which should lead to even more economic development in the future.

    Under Santos Colombia has posted an average economic growth rate of 4.6% since 2010, which has allowed the country to challenge Argentina’s position as the third largest economy in the Latin America. By obtaining a BBB rating Colombia is now better placed to continue this challenge as its S&P rating now matches that of the region’s top two economies, Brazil and Mexico.

VENEZUELA | Yamaha sets up shop. On 30 April Venezuela’s industry minister, Ricardo Menéndez, announced that the government had signed an agreement with Japanese business conglomerate, Yamaha Corporation, to embark on a joint venture to set up a motorcycle assembly plant in the state of Miranda. According to Menéndez the first stage of the project, in which the Venezuelan government will have 51% participation and Yamaha 49%, will involve a BF310m (US$49m) to set up a plant that is slated to turn out some 30,000 motorcycles a year. Menéndez said that initially the goal is to supply the local market, but that there are also plans to export motorcycles to Venezuela’s new Southern Common Market (Mercosur) partners eventually. More importantly he pointed out that in the medium term the plan is for the plant not just to assembly motorcycles but also to produce engine and other motorcycle parts, as well as outboard motors and farming equipment. “We don’t just want to be assemblers... but to be able to supply other plants all over the world,” Menéndez said. The new plant is slated to come on stream by the end of this year, the government said.

BOLIVIA | Celebrates hydrocarbon sector nationalisation. On 28 April  Bolivia’s state-owned oil firm, YPFB, announced that in the first quarter of the year its natural gas exports to Brazil and Argentina had been worth US$1.5m, 29.5% more than in the same period last year. The announcement came just ahead of the seventh anniversary of the nationalisation of the country’s hydrocarbons sector, ordered by President Evo Morales on 1 May 2006. This ensured that the celebrations led by Morales himself, in La Paz and El Alto, were fervent, with Morales boasting that since nationalisation annual revenues from the sector had increased from US$300m in 2005 to US$4.2bn last year. The hydrocarbons sector is now the main source of Bolivian exports, accounting for 53% of the total. 

• Ecuador lures back émigrés                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

On 25 April the Ecuadorean government announced that it was offering 20,000 new jobs to Ecuadorean migrants currently residing in Spain that want to return to their country with “dignity”. The head of the national migrant secretariat (Senami), Lorena Escudero, said that as part of the ‘Plan Bienvenidos a Casa’ the government has now launched the ‘Red socio empleo’ programme under which job openings in Ecuador are advertised at the Ecuadorean consulates in Madrid, Barcelona and Murcia, from where Ecuadorean nationals can apply for them. “We are making it easier for them to apply and go through the job selection process abroad so that they may return to the country with an employment contract already secured,” Escudero explained.

Russia’s President Vladimir Putin ended his four-stop tour of Latin America in Argentina and Brazil. Russia is hosting the 2018 Fifa World Cup and Putin accompanied Brazil’s President Dilma Rousseff to the final of this year’s event. The following day the two leaders signed a number of bilateral agreements before heading to the north-eastern city of Fortaleza to participate in the Brics summit.

Speaking in Cuba on the first stop of his tour, President Putin said that cooperation with a “strong” and “politically independent” Latin America was “fundamental” to Russia’s foreign policy, particularly given Russian isolation over the Ukraine crisis.

In an interview granted to Cuba’s Prensa Latina ahead of his visit, Putin expressed a desire to increase Russia’s economic and commercial relations with the region. At present, trade is limited. The lion’s share of Russian trade with the region is with Brazil (US$5.5bn), while with Argentina it amounts to US$1.5bn. But whereas China’s interest in the region is almost exclusively economic, Putin was clear that he saw Latin America as part of “the developing, multipolar world”.

Given Russia’s willingness to flout international opinion, Argentina, with its disdain for the US Supreme Court’s ruling on its debts, appears a natural partner. In Buenos Aires, Putin praised Argentina’s “sovereign opinions, something very rare in today’s world.” President Cristina Fernández in turn thanked Russia for its support over the Falklands/Malvinas dispute and pointed out that both countries were against “double standards” in international diplomacy. Business between the two could benefit both substantially. Russia’s expertise in energy means that it is naturally interested in the Vaca Muerta shale and oil gas deposits.

There is a limit to their mutual interest, however. While Argentina is very keen to join the Brics, Putin made it clear before his visit that expanding the club’s membership was, for now, “out of the question”. Though Argentina’s current debt wrangling may make it just as much of an outsider as Russia, Putin will also want reassurance that any deals he strikes with the South American country will be honoured.

After the World Cup finished, the two presidents signed a number of bilateral agreements relating to defence, technology, energy and the production of vaccines, with the aim of boosting two-way trade to around US$10bn per year.

“Since President Putin’s first visit to Brazil in 2004, bilateral trade has almost doubled,” Rousseff said. In a nod to the continued anger felt by Brazil over the US National Security Agency (NSA) revelations, Rousseff added, “Our countries are some of the largest in the world. In the 21st century you cannot be dependent on a particular partner. Recent events have shown how essential it is to look for scientific and technological autonomy.”

Clearly, the brief visit of US Vice-President Joe Biden, ahead of the USA-Ghana World Cup match in Brazil, has not completely restored US-Brazil relations. While omitting any mention of Ukraine, Rousseff also spoke warmly about her Russia counterpart’s handling of the situation in Syria.

• Brics bank gets the go-ahead

On 15 July the leaders of the Brics met in Fortaleza to agree to create a New Development Bank (NDB). With US$50bn in initial capital, which is expected to double in the next five years, the NDB will be financed equally by each of the Brics. One of the main purposes of the fund is to help with infrastructure projects in developing nations.

Alongside the bank, the Brics agreed to set up a US$100bn emergency reserve fund to help countries deal with short-term liquidity pressures. A press release described the initiatives as part of efforts by the Brics to “improve global economic governance”, criticising the fact that the Brics’s 2010 proposal to reform IMF members’ voting rights in order to increase the representation of emerging economies has yet to be implemented.

• Glonass agreement

One of the agreements signed between Presidents Putin and Rousseff relates to the installation of the Glonass tracking station, the Russian satellite navigation system that rivals the US’s GPS. The new tracking station, the second in Latin America, will be based at the universities in the southern state of Santa Catarina and the north-eastern state of Pernambuco. The US has refused to allow base stations for Glonass on its territory; Russia has banned the use of GPS for military purposes.

BRASIL | La deuda pública podría registrar niveles récord. La deuda pública de Brasil parece que llegará a un nuevo record este año, incluso si el gobierno logra alcanzar su meta de un superávit fiscal primario de R$66,3mm (US$21,1mm), o el 1,1% del PIB.

De acuerdo con las proyecciones publicadas el 30 de junio por el banco central, la deuda pública avanza hacia llegar al 62,7% del PIB para fines del 2015, subiendo del 58,9% a finales del 2014. Si, como se espera, el gobierno no logra alcanzar su meta, el escenario será incluso peor. Muchos analistas esperan un superávit fiscal primario del 0,7%, lo que significa que la deuda pública será del 63,1% del PIB.

Mansueto Almeida, un especialista en cuentas públicas, le dijo al diario financiero, Valor, que es probable que dentro de unos pocos años Brasil sobrepase a la India como la más endeudada de las grandes economías emergentes. “En tales adversas circunstancias, si el gobierno llega a un superávit del 0,6% o el 0,8%, no será el fin del mundo” dijo Almeida. “Pero sin un masivo incremento en los ingresos fiscales, no puedo ver cómo esto sea posible”. Mientras que la mayoría de los analistas financieros  han elogiado el paquete de austeridad que está siendo implantado por el gobierno, el crecimiento de la deuda pública del país podría conducir a una rebaja en el rating de crédito del país en un futuro cercano.

Separadamente, la compañía petrolera estatal, Petrobrás, anunció el 29 de junio planes para recortar las inversiones un 37% durante los próximos cinco años, en un esfuerzo por reducir la deuda y recobrar la confianza de los inversionistas, en medio del escándalo de corrupción que la aflige. La compañía dice que espera que el gasto de capital durante el periodo 2015-2019 llegue a US$130,3mm; en el plan anterior a cinco años, hasta el 2018, Petrobrás preveía un gasto de US$206,8mm. La reducción en la inversión tendrá un significativo impacto sobre la economía de Brasil en su conjunto: Petrobrás es la mayor fuente individual de inversión de la nación, lo que sostiene a una enorme red de proveedores y constructores.

BRASIL | Cambia la meta de la inflación. El 25 de junio el consejo monetario nacional (CMN) del banco central de Brasil anunció que la ‘banda de tolerancia’ en la meta de la tasa de inflación nacional sería del 1,5% desde el 2017. Desde el 2004, la meta de inflación del banco central ha sido del 4,5% más o menos el 2%. En la actualidad la inflación ha llegado cerca del 9%.

Las tasas de interés probablemente continuarán elevándose a fin de frenar la inflación. La mayoría de los analistas esperan que se eleven otros 50 puntos básicos en julio. La tasa de interés de referencia del banco central, el Selic, actualmente está en un 13,73%.

PERU | Joining the OECD. Peru’s new deputy economy minister, Claudia Cooper, says that the government led by President Pedro Pablo Kuczynski will seek to implement all of the recent recommendations made by the Organisation for Economic Co-operation and Development (OECD) aimed at helping improve the country’s internal regulations and energise its economic growth. The OECD’s recommendations are based on best international practices in regulatory policy, which are expected to help combat corruption. The Kuczynski administration’s commitment to implementing these recommendations will reaffirm Peru’s stated aim of joining the OECD by 2021, joining its fellow Pacific Alliance members Mexico and Chile, with Colombia expected to complete its OECD incorporation process by next year.