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BRAZIL | Declared low BSE risk. On 28 May Brazil’s foreign ministry issued a statement stating that it had been notified by the International Office of Epizootics (OIE) that it had decided to maintain Brazil’s status as a country with an “insignificant risk” for Bovine Spongiform Encephalopathy (BSE), or ‘Mad Cow disease’.

    Brazil is the world’s largest beef producer and exporter and keeping its low BSE risk status is the only way that international export markets for Brazilian beef remain open. The OIE’s decision comes almost three years after the Brazilian government reported a case of “non-classic BSE” in the southern state of Paraná in 2010. This prompted the OIE to launch an official investigation into the incident so as to determine whether it was a case of BSE and the likelihood that it could lead to an outbreak of the disease in Brazil. After the OIE investigations determined that the case was indeed one of BSE in December last year, 17 countries including Japan, China, South Africa and Egypt decided to suspended Brazilian beef imports temporarily as a precautionary measure. This despite the fact that Brazil launched a global diplomatic campaign presenting all the relevant information regarding the case in all 139 of its diplomatic missions in a bid to avoid the mass closure of export markets.   

    According to the Brazilian government statement the OIE has now determined that while the deceased cow was found to have a BSE agent, the animal did not actually contract the disease and died of natural causes. Consequently, the OIE has found that the case “could not result in a public or animal health risk for Brazil or any of its commercial partners”. Thus the foreign ministry has pointed out that “The Brazilian government now expects that following all its efforts to clarify the situation and following the pronouncement of the OIE’s World Assembly, beef trade with all its commercial partners that imposed restrictions can be fully normalised”. Should this occur Brazil’s beef industry would have a good chance of emulating its performance last year when it exported 1.24m tonnes valued at US$5.76bn, representing a 13% increase in volume terms and a 7% increase in value terms compared to 2011. In addition it could help the sector fulfil Brazil’s agriculture ministry forecasts that by 2020 Brazil could supply 44.5% of global beef consumption.

ARGENTINA | Plummeting primary fiscal surplus. On 29 May Argentina’s economy ministry revealed that the country’s primary fiscal surplus for March was Arg$438.3m (US$83m at the official exchange rate), a 48.3% fall compared to the same month last year. The result brings the primary fiscal surplus figure for the first quarter of the year to just Arg$1.46bn, which suggests that meeting the Arg$65.9bn (equivalent to 1.7% of GDP) primary fiscal surplus target set in the official 2013 budget will be difficult. Given that President Cristina Fernández and her ruling Frente para la Victoria (FPV) faction of the Partido Justicialista (PJ, Peronists) face crucial mid-term congress elections in October it is difficult to see the Fernández administration increasing taxes in order to balance the financial books. In fact, Fernández has already shown that rather than doing this her government would look to provide even more generous subsidies and benefits to the population in what appears to be an attempt to shore up electoral support ahead of the vote.

    On 22 May Fernández announced that as of 1 June the government would be increasing the benefits and subsidies paid out to low-income sectors of the population, which include hand outs made to families with young and unborn children and subsidies given to people with disabilities, by as much as 35%.  According to Fernández all this would cost the government an additional Arg$41.07m even though the government “has not raised a single tax rate”.

URUGUAY | Strengthening ties with China. On 27 May Uruguay’s President José Mujica signed seven different cooperation agreements with his Chinese counterpart, Xi Jinping. The inking of the agreements, which cover a range of areas including education, banking and mining, came on the last day of Mujica’s official visit to China, part of a wider international tour that will include stops in Spain and Italy. Before embarking on the trip, Mujica said that it could very well be “the most important tour of (his) term” as it would provide him with opportunities to promote foreign investment in Uruguay. Mujica said that he was very interested in securing Chinese investment for the development of important projects in Uruguay such as the construction of a new deep water sea port in Rocha department and the extension of Uruguay’s railway network. While no such announcements have yet been made, the signing of the agreements can be seen as a first step towards this.

• Youth employment promotion

On 23 May Paraguay’s chamber of deputies approved the ‘youth employment insertion’ bill, which won approval in the senate days earlier. The bill, which is now ready for promulgation, establishes that all firms operating in the country must ensure that at least 5% of the people that they hire each year are young (aged between 18 and 29). It adds that in cases when more than one young person is hired, 50% of these must be women. In addition it stipulates that young people contracted through the modalities of work placement, work scholarship, or temporary training contracts will not be counted towards the determination of the number of young people being “employed” by the firms.     

BOLIVIA | Banca. La reciente reforma de las regulaciones bancarias de Bolivia es una amenaza para el sistema financiero del país, ha afirmado el think-tank local, Fundación Milenio, en un informe. El informe dice que las nuevas regulaciones intentan convertir los bancos locales en “entidades de bienestar social”, e introducir límites superiores en las tasas de interés de los préstamos “que podrían no reflejar los riesgos inherentes de un sector”.

Los limites, alega Milenio, crearán significativos desequilibrios en el sistema financiero. También critica el hecho de que los bancos serán requeridos a prestar a ciertos sectores, y que la designación de directores y miembros de las juntas están sujetas a la aprobación del regulador de servicios financieros, ASFI.

BOLIVIA | Orvana. Orvana Minerals Corp de Canadá sufrió una caída del 10% en el precio de sus acciones después de anunciar que había parado la producción de su planta de filtrado por precipitación-flotación, en la mina a cielo abierto de cobre-oro-plata, Don Mario, en la Alta Zona Mineralizada (AZM) de Bolivia. La compañía dijo que la decisión se debió a varios factores incluyendo los crecientes costos de la mano de obra, recuperaciones inconsistentes, y la caída de los precios de los metales. Aunque no lo mencionó, la mina también ha experimentado una serie de suspensiones de las tareas pues los sindicatos locales habían entrado en las negociaciones anuales de salarios.

COLOMBIA-PANAMÁ | Empuje del Grupo Aval en Panamá. El Grupo Aval de Colombia ha anunciado la adquisición de la subsidiaria Panameña del banco español, BBVA, por un total de US$646m (US$490m de los cuales será en dinero efectivo). La movida parece confirmar un gran empuje del grupo Aval en el sector financiero centroamericano. A fines de junio, el grupo Aval acordó la compra del Grupo Financiero Reformador de Guatemala por US$411m. El hombre más rico de Colombia, Luis Carlos Sarmiento Angulo, controla el grupo Aval.

Los analistas dicen que los bancos colombianos se sienten atraídos por las buenas perspectivas de crecimiento, pero particularmente por Panamá, que ha experimentado un acelerado crecimiento y que ellos creen que se fortalecerá en su rol como centro comercial regional.

A comienzos de este año, Bancolombia, un competidor del grupo Aval, acordó adquirir la sucursal de HSBC en Panamá por US$1,2mm. Estos acuerdos tomarán algunos meses para finalizar y están sujetos a la aprobación del ente regulador.

The (new) government of Trinidad & Tobago’s Budget for the September 2016 fiscal year envisages a reduction in the budget deficit from 4.2% of GDP to 1.8% of GDP. However, this assumes that successful implementation of new measures to boost government revenues, and one-off items (including asset sales), raise amounts equivalent to 3.2% of GDP and 8.2% of GDP respectively.

The title of the Budget Statement delivered on 5 October 2015 by Trinidad & Tobago’s Finance Minister Colm Imbert – Restoring confidence and rebuilding trust: Let us do this together – identifies one of the key challenges facing the new People’s National Movement (PNM) government. There is a widespread lack of faith in the country’s institutions. The World Economic Forum’s Global Competitiveness Report 2015-2016 assessed Trinidad & Tobago’s institutions as being the 108^th best of those of the140 countries considered. The country’s overall competitiveness ranking is 89.

Some of the underlying details are worrying. Aspects for which Trinidad & Tobago has particularly unfavourable rankings include: diversion of public funds (124); public trust in politicians (128); favouritism in decisions of government officials (137); wastefulness of public spending (112); business costs of crime and violence (136); organised crime (117); the reliability of the police service (116); and the ethical behaviour of firms (125).

The budget seeks to restore confidence and trust at a time when economic conditions have become more difficult. According to the Central Bank of Trinidad & Tobago (CBTT), the domestic economy shrank by nearly 2% in 1H15. The energy sector contracted by about 3.5% thanks mainly to continued shortfalls in the output of natural gas. The non-energy sector shrank by about 1%, thanks to weakness in construction, distribution and manufacturing. At the end of September 2015, when the CBTT announced the seventh consecutive 25 basis point hike in the repo rate (to 4.50%), the central bank noted that early indicators suggest that the economy remained sluggish through 3Q15. The Budget Statement noted that total energy exports in the year to September 2015 have been estimated at US$7.5bn, down from an annual average of US$12.7bn over the preceding four years [1].

In early May 2015, the CBTT publicly challenged the decision by Moody’s Investor Services to downgrade the sovereign rating of Trinidad & Tobago from Baa1 to Baa2 and to change the outlook from stable to negative. Moody’s decision had been driven by three considerations. One was ‘persistent fiscal deficits and challenging prospects for fiscal reforms’. The second was the slippage in oil prices and the limited diversification of Trinidad & Tobago’s economy outside the energy sector. The third was the allegedly ‘weak macroeconomic policy framework and inadequate provision of vital macro-economic data (given the deficiencies of the Central Statistical Office).

Several of the numbers included in the Budget Statement support Moody’s concerns. Largely because of the weakness in energy exports, the trade surplus contracted from US$4.6bn in 2014 to US$1.7bn in 2015. Thanks to capital outflows, overall foreign exchange reserves slipped over the year to the end of September 2015 by US$720mn. Government revenues from petroleum fell by TT$8.0bn (US$1.3bn) relative to original estimates. However, the previous government of the People’s Partnership (PP) coalition only cut its expenditures by TT$3.0bn. As a result of this, the fiscal deficit ballooned to TT$7.0bn (or 4.2% of GDP), rather than the TT$4.3bn (2.7% of GDP that had been budgeted.

Other details pointed to some shortcoming in governance by the previous government. The deficit figures cited above do not include the arrears of six state agencies – which the new administration were still trying to quantify at the time of the Budget Statement. Further, negotiations prior to the election between the previous government and the trade unions representing public sector workers resulted in a liability of the government for about TT$5bn in salary arrears. In spite of collections from oil companies being more than one third lower than the level budgeted, the previous government maintained spending on its social programmes.

Over the nine months to the end of June 2015, the previous government’s actual capital expenditure was behind the budgeted allocations, due to delays in implementation. However, by the end of September, total capital spending was ahead of budget by TT$225m. This meant that the September 2015 fiscal year was the first for several years in which the budgeted capital expenditure had actually been achieved. The implication is that, following the announcement in June of the date for the election, the previous government had accelerated public works for the sake of political expediency. One result of this was that the government’s overdraft with the CBTT rose to TT$8.5bn, or 98% of the legal limit at one point shortly after the election, which was held on 7 September 2015.

And the public sector debt ratios have been moving in the wrong direction. In September 2010, net public sector debt was equal to 32.2% of GDP. By September 2014, the ratio had increased to 40.2% of GDP. As of September 2015, it is estimated to be 46.3% of GDP.

With this background, the new government is emphasising fiscal discipline in its budget for the September 2016 fiscal year [2]. The aim is to reduce the budget deficit from the estimated 4.2% of GDP in 2015 to 1.8% of GDP – or from TT$7.0bn to TT$2.8bn. In part, this will be achieved by way of a reduction in capital expenditure through the Public Sector Investment Programme (ie spending out of current revenue as opposed to through the Infrastructure Development Fund) of around 14.2% to TT$7.0bn. The new government will continue with the public mass transit system which is due to be financed by the Inter-American Development Bank (IDB).

Overall spending in the current year is expected to be TT$63.0bn, or slightly more than the TT$61.8bn which is expected to be the final result for the September 2015 year. However, this amount includes the TT$5.0bn in back pay for public sector workers that was agreed as a result of the negotiations between the previous government and the relevant unions. Excluding that item, overall spending is being reduced by TT$3.8bn.

The new government anticipates that current revenues will be TT$41.6bn, which is a lot less than the latest estimates for the September 2015 fiscal year – of TT$49.8bn – let alone the original estimates for 2015 of TT$60.5bn. The government is looking to raise TT$18.6bn – which is equivalent to 11.4% of GDP – from one-off items.

Some TT$13.4bn is expected to come from a capital repayment from Trinidad Generation Unlimited; dividends from the National Gas Company; a partial repayment by insurance-based conglomerate CLICO in relation to the support provided by the government since that company found itself in difficulties following the global financial crisis; and proceeds from the Initial Public Offering (IPO) of Trinidad & Tobago NGL Limited.

Another TT$5.2bn is due to be derived from a number of modifications to the overall tax system. Some TT$1.2bn should come from changes which include: a new tax for the gaming industry; increases to the Green Fund and Business Levies; the introduction of a new property tax system; increased efficiency in the collection of tax; and a reduction of the fuel subsidy (which keeps the retail prices of gasoline and diesel at artificially low levels).

However, by far the most important change involves Trinidad & Tobago’s Value Added Tax (VAT) system. The new government proposes to broaden the base, and to make collection more rigorous but, at the same time, to lower the overall VAT rate from 15.0% to 12.5%. The new measures (which will also include an increase in the threshold for VAT registration from TT$360,000 to TT$500,000) will take place from the beginning of 2016. They are expected to boost overall VAT revenues by TT$4.0bn.

In part because of the political cycle, the previous government had not been able to adjust its budget to a deteriorating economic environment. This contributed to perceptions of increasing financial risk which, in turn, caused Moody’s to lower the sovereign rating and the outlook in the middle of the year. Execution of fiscal policy did not help perceptions of Trinidad & Tobago’s institutions.

With its budget for the year to September 2016, the new government is relying on a number of one-off measures to move towards fiscal balance. However, the simple arithmetic – involving measures equivalent to 11.4% of GDP to reduce the budget deficit from 4.2% of GDP to 1.8% of GDP – suggests that the deficit will likely blow out again in the September 2017 fiscal year unless there is a dramatic improvement in the overall performance of the economy.

Such an improvement appears to be very unlikely. Using what appear to be reasonable assumptions for energy prices, the government expects that Trinidad & Tobago’s economy will grow by no more than 1.0%-1.4% annually over the medium term.

Therefore, the government has not found a fiscal policy that is truly sustainable. It has, perhaps, bought itself some time in which to reach agreement with its supporters and other key stakeholders in relation to hard decisions that will need to be made. A key date will be the end of March 2016. By that time, it will be a lot clearer whether the projections of revenue from the various one-off measures are realistic.

Further, it should also be clearer what is the financial position of the National Insurance Board of Trinidad & Tobago (NIBTT – the central institution of the country’s social security system). Following the completed, but not yet published, Ninth Actuarial Review, the government will be looking to increase the maximum insurable income levels and to boost the contribution rates from 12% to 13.2%.

The budget identifies many of the problems that face the country and the government. However, the government will need to continue to work – as it suggests, in collaboration with labour and business interests – to rebuild trust and confidence in the economy and the institutions of Trinidad & Tobago.

Total stay-over tourist arrivals in the Caribbean rose by 14.3% or 4m visitors in 2023, to reach 32.2m, according to data collected by the Caribbean Tourism Organisation (CTO), with signs that growth is continuing in 2024.

CTO general secretary Dona Regis-Prosper said total arrivals have been growing on a month-on-month basis for the last 33 months. She attributed the recovery to US demand, improved tourism infrastructure, more effective strategic marketing, and better airlift (meaning increased passenger airline connections). In terms of source markets, only the US has fully recovered to surpass its pre-coronavirus (Covid-19) pandemic levels in 2019. Arrivals from Europe and Canada have grown to 88.2% and 88.1% of their 2019 levels respectively. Total arrivals from the US were up by 12.7% on the previous year to 16.3m. Arrivals from Canada were up 46.1% to 3m, while those from Europe were flat, totalling 5.2m. In terms of destinations, 11 countries are now well ahead of their pre-pandemic performance: Anguilla, Aruba, Curaçao, Dominican Republic, Grenada, Guyana, Jamaica, Puerto Rico, St Maarten, Turks & Caicos Islands, and US Virgin Islands.  

Hotel performance

According to the CTO, the hotel sector has been reaping some of the benefits of the tourism sector’s recovery, with the average occupancy rate rising to 65.6% in 2023 up from 61% in 2022, while the average daily spend is up 11.8% to US$330. Industry specialists say they expect further growth this year, of at least 5%-10% with more airline capacity coming onstream.

The Planning Institute of Jamaica (Pioj), a government office, says that quarter-on-quarter economic growth was strong in the second quarter of the year, with GDP expansion expected to be within a 0.5% to 1.5% range.

The Pioj says second-quarter activity was lifted by agriculture, tourism, and construction. Agriculture was recovering after the damage caused by Hurricane Beryl and Tropical Storm Rafael late last year. Tourism airport arrivals were up by 5.3% in April, lifted by Spring Break and Carnival, with construction led by residential housebuilding and a road network programme. Pioj director Wayne Henry said high levels of employment and consumer confidence were also in play. He argued that “All industries are forecast to record growth as the recovery from the weather-related shocks in 2024 will become more pronounced in the latter half of calendar 2025”.

Separately, on 27 June the International Monetary Fund (IMF) published the results of its regular Article IV consultation on the state of the Jamaican economy. It said the response to Hurricane Beryl and Tropical Storm Rafael had been “agile, prudent, and growth supportive”. Unemployment has fallen to an all-time low (3.7% in January), inflation has converged to the Bank of Jamaica (BOJ)’s target band of 4%-6%, and the current account has been in surplus for the last two years. There was a recession in fiscal year 2024/25 (GDP dropped 0.8% because of the extreme weather) but growth of 2.2% is predicted for 2025/26. The Fund’s executive board commented “Over more than a decade Jamaica has been implementing sound macroeconomic policies supported by strong policy frameworks. These efforts have allowed Jamaica to accumulate meaningful policy buffers, reduce public debt, anchor inflation and improve its external position.”

BRASIL | Fuerte demanda interna. La porción de ventas comerciales en Brasil se han incrementado en Brasil en 0,6% en enero último, comparado con 0,4% de declinación en el previo diciembre, anunció el instituto nacional de estadísticas, Ibge. En comparación con enero del 2012, las ventas subieron en 5,9%, confirmando que el consumo interno permanece como el conductor clave de la economía brasileña, reduciendo los efectos desencadenados por la continuada recesión global, pues la demanda interna ha compensado la caída en las exportaciones debido a la menor demanda.

Siete de cada 10 clases de productos sondeados que se están vendiendo registran un monto de crecimiento positivo; por ejemplo, las ventas de equipamiento de oficinas, computadoras y comunicaciones crecieron en 18,5%; los productos farmacéuticos y médicos, cosméticos y artículos de tocados crecieron en 3,1%; y materiales de construcción creció en 1,3%.

En cambio, hubo un decrecimiento de 1,6% en ventas de vehículos y motocicletas, partes y accesorios, y un 2,6% de decrecimiento en muebles y accesorios y electrodomésticos. Aunque en comparación con enero del 2012, todos los 10 sectores registraron un incremento en las ventas, y los hipermercados, supermercados, productos alimenticios, bebidas y tabaco fueron considerados el sector con mayor incremento, con un crecimiento registrado de 3,4%.

En el 2012, las ventas en el mercado de productos de buena terminación creció en 8,4%, a pesar de la caída general en el crecimiento del PIB de ese mismo año, que fue de 0,9%, comparado con el crecimiento de 2,7% en el 2011, y el 7,5% de crecimiento en el 2010. El informe del Ibge establece que el incremento en las ventas de productos alimenticios estaba relacionado en gran medida con el incremento general de salarios en todo el país como también la continuada estabilidad del empleo.

De acuerdo con las estadísticas de empleo reunidas por el Ibge, la tasa de desempleo en Brasil en el 2012 fue de 5,5%, la tasa más baja vista desde el 2002. La tasa promedio de desempleo en enero del 2013 estaba en 5,4%.

PERU | Growth forecast cut. The central bank (BCRP) has revised down its economic growth forecast for the year from 5.5% to 4.4%. The new forecast is the lowest growth projection for the Peruvian economy since 2009, seemingly providing confirmation of a marked slowdown this year. In fact, this is the second time that the BCRP has cut its growth forecast for the year, having first done so back in May [WR-14-17].

In its report, the BCRP said that it had decided to revise down its forecast primarily due to a projected reduction in primary sector activity from 3.1% to 0.9%. The report explained that this was the result of an estimated fall in production in the fisheries sector in the second half of the year due to an expected increase in sea temperatures as a consequence of the El Niño climatic phenomenon. The BCRP report also pointed out that less favourable terms of trade and lower public sector investment led to lower-than-expected growth in the first months of the year. The less favourable terms of trade allude to both the sustained appreciation of the Sol since the start of the year (it has appreciated by 8.58% so far this year, trading at PEN2.866/US$1 in early July) and lower global demand for Peru’s key mineral exports (traditional exports fell by 30% in the first quarter of the year).

Given this adverse scenario, the BCRP also revised its trade balance projection for the year. It now believes that Peru’s trade deficit in 2014 will be 4.8% of GDP, higher than the 4.3% of GDP it had originally forecast. The BCRP’s latest outlook for the domestic economy helps explain why the government of President Ollanta Humala is now scrambling to introduce a series of measures such as eliminating red tape and introducing temporary tax breaks aimed at boosting investment and domestic consumption levels.

The government first sent an economic stimulus package containing some of these measures to the national congress on 11 June. The package is still being analysed by congress; however, just days prior to the release of the BCRP’s latest report, on 15 June, (the now former) prime minister, René Cornejo, revealed that Humala will unveil a new economic diversification plan, that is to include additional measures aimed at removing further bureaucratic restrictions on investment, in his third state-of-the-nation address to congress on 28 July.

President Juan Carlos Varela was recently forced to deny having received money from Odebrecht, the Brazilian engineering company which pleaded guilty in a US federal court to bribery in December 2016 and is the subject of major corruption investigations in Brazil, the US and other countries in the region. According to the US Department of Justice (DoJ), more than US$59m was paid in bribes in Panama to secure public works and infrastructure contracts valued at US$175m between 2010 and 2014. While this took place under the previous Cambio Democrático (CD) administration led by Ricardo Martinelli (2009-2014), incendiary remarks by a former Varela ally has left the unpopular President scrambling to provide reassurances regarding his commitment to transparency.

President Varela has been forced to respond to claims made on 9 February by Ramón Fonseca Mora, a partner at a local law company, Mossack Fonseca, who, along with another partner, Jürgen Mossack, was arrested the same day on money laundering allegations. A former member of Varela’s inner circle (see sidebar), Fonseca was cited by the local press as saying that “he [Varela] told me that he had accepted donations from Odebrecht because he could not fight with everyone”. The arrests came after the offices of the company – which made headlines in April 2016 over the ‘Panama Papers’ scandal, the biggest leak of secret information in history [RC-16-04] – were raided by local prosecutors as part of the ‘Operation Car Wash’ anti-corruption investigations under way in Brazil which are looking into corruption networks developed by Brazilian companies at home and abroad.

Varela – who on 24 January announced plans to sue Odebrecht – has responded by saying that any donations received during his electoral campaign were “political contributions not bribes” and publishing a list of his 2014 campaign donors. However, in a post on its Facebook page on 13 February, the CD claims that key figures who have been “identified as important financiers” of the campaign do not appear on the list. It cites as an example, Stanley Motta, the owner of Copa Airlines and one of the wealthiest men in Central America. Relations with the CD are set to further sour after the media reported on 13 February that the country’s special anti-corruption prosecutor, Tania Sterling, had asked Interpol to issue an international alert for the arrest of two of Martinelli’s sons, Ricardo and Luis Enrique, for allegedly having accepted bribes from Odebrecht. The two are widely expected to feature on the list of 17 people who, attorney general Kenia Porcell revealed on 24 January, have now been charged in relation to the case. While Porcell did not give names, she did say that those charged include three former government officials, 13 businessmen, and an official from a private bank – eight Panamanians and five foreigners.

Presence in the country

In 2015, Odebrecht, which has been active in the country since 2006, won the US$1.9bn contract for the second line of the Panama City metro, (as part of a consortium which also includes Spain’s FCC Construcciones). The same consortium built the first metro line, which was inaugurated in 2014. Also in 2015, Odebrecht won the US$500m urban renewal contract for Colón city, the capital of the eponymous province.

Earlier this month, Alvaro Alemán, minister for the presidency, said the government expected Odebrecht to meet its contractual obligations on the Metro Line 2 project; on the US$800m contract to build a new terminal at the Tocumen International airport (serving Panama City); and on the Colón city contract. However, the government has terminated a contact to build a US$1bn 213MW hydroelectric project in Bocas del Toro province and the company is dropping out from the bidding process to build the metro’s third line (valued at US$2.6bn) and the fourth Panama Canal bridge.

• Fonseca

A former ally of Varela, Fonseca had served as president of Varela’s Partido Panameñista (PPA) and as a minister without portfolio in his administration – a post he had held since July 2014. However, Fonseca stepped down from both posts in March 2016 to defend his company’s reputation after investigators said at the end of January 2016 that, as part of ‘Operation Car Wash’, they were looking into its suspected role in the corruption scheme. At the time, a Brazilian prosecutor, Carlos Fernando dos Santos Lima, cited evidence suggesting that “Mossack Fonseca is a big money launderer”.

Trouble at YPFB

On 28 June Bolivia’s state-owned oil company, Yacimientos Petrolíferos Fiscales Bolivianos (YPFB), said it was cancelling a US$2.2bn contract with Tecnimont of Italy and Técnicas Reunidas of Spain to build a polypropylene plant. In a statement, Energy Minister Luis Sánchez said that “administrative errors were found”. “That means we’ll draft a new contract. We’ll need to take some time”, he added.

Earlier, on 15 June, the YPFB president, Guillermo Achá, was sacked on suspicion of irregularities in a US$149m contract for drilling equipment awarded to Drillmec of Italy.

President Evo Morales appointed Javier Barriga the new YPFB president and said there would be a detailed investigation of tender procedures. Seven middle-ranking YPFB managers have been arrested, pending further investigations.

Electric taxis for Mexico City?

Giant Motors, a company set up by the Mexican telecoms billionaire Carlos Slim, said in June that it had been developing a prototype electric car that could potentially replace regular carbon-emitting taxis in Mexico City, the sprawling capital, which suffers from high pollution levels. Giant Motors CEO Elías Massri commented: “We are developing prototypes, and hope this year to find a viable solution, an electric vehicle, that genuinely replaces gasoline-using cars.”

Giant, which is controlled by Inbursa, Slim’s financial conglomerate, in February first revealed this electric taxi project, which is a joint venture with the electric vehicle maker Moldex, a subsidiary of Grupo Bimbo, one of the world’s largest bread-making companies. At that stage, Massri said Giant Motors would seek government funding and cooperation to help promote this new ‘designed-and made-in-Mexico’ taxi as an environmentally-sound alternative. Massri stresses that the viability of electric taxis will depend crucially on fast-charging and long-lasting batteries.

There are 130,000 taxis in Mexico City, of an estimated 5.4m vehicles in circulation. In May, city authorities declared a five-day “environmental emergency” because of extremely high levels of ozone and nitrogen oxide in the atmosphere. As a result, factory production levels were cut, traffic reduction measures came into effect and schoolchildren were banned from eating lunch outdoors.

The US$1.5bn Agua Negra tunnel

Argentina and Chile have finalised details for construction of Latin America’s biggest-ever road tunnel. The proposed 14-km ‘Agua Negra’ tunnel cuts through the Andes mountains and joins Chile’s northern region of Coquimbo and Argentina’s northern province of San Juan. Completing such an ambitious infrastructure project, slated to begin in 2019, should take between eight to ten years.

The estimate construction cost is US$1.5bn. The project is to be financed by the Argentine and Chilean governments and the Inter-American Development Bank (IDB). The latter has already pledged US$40m towards the project. Argentina will pay most of the outstanding sum, since 72% of the tunnel runs through its territory, while Chile will pay for the remainder.

Ten consortiums, including Chinese, European, and US groups, have expressed an early interest in the project. The tender will take place in September or October, according to Chile’s public works minister, Alberto Undurraga. If successful, government officials hope the tunnel could be a way to convince international companies to invest in other major infrastructure projects in the region. “We are not just constructing a tunnel but also building our future. The tender will pave the way for other projects across Latin America”, said San Juan Governor Sergio Uñac during a public works conference in Chile held on 31 May.

The Agua Negra tunnel will form part of the wider bi-oceanic corridor running all the way from Chile’s Pacific port city of Coquimbo (located in the eponymous region) to the Brazilian city of Porto Alegre, Rio Grande do Sul state, which lies on the Atlantic coast. Better transport links between Brazil, Argentina, and Chile should pave the way for increased trade within the Southern Common Market (Mercosur) regional bloc. The proposed tunnel should also allow Mercosur countries better access to Asian markets via the port of Coquimbo.

However, the project is still in its initial phases and some are sceptical about whether it will ever be completed. Another road tunnel to be approved by the Argentine and Chilean governments back in 2007 was the Corredor Bioceánico Aconcagua, which never reached fruition. It was also billed as Latin America’s biggest tunnel at an ambitious 52km long, but “in ten years, the project did not advance a single step”, José Octavio Bordón, Argentina’s ambassador to Chile, said in an interview with BBC Mundo. Another factor which threatens to derail the Agua Negra project is the perceived risk of corruption after recent scandals linked to major construction companies such as Brazil’s Odebrecht gave the industry a bad name. However, in an interview with Argentine daily La Nación, Argentina’s President Mauricio Macri insisted that the new project would help restore public confidence in the infrastructure sector. These public works “are a synonym of hope not corruption”, Macri said.

Chile tops innovation index for Latin America

Chile was named the most innovative Latin American country in the 2017 Global Innovation Index compiled by the World Intellectual Property Organization (WIPO) and released on 15 June. Overall, Chile was rated as the 45^th most innovative country out of 130 nations evaluated. The second and third most innovative countries in Latin America were Costa Rica and Mexico, which came 53^rd and 58^th in the global rankings. The results are based on each country’s capacity to drive social and economic growth using criteria such as the quality of local institutions and potential for business development.

FMD outbreak in Colombia

On 24 June Colombia’s agricultural institute (ICA) reported that it had detected an outbreak of foot-and-mouth disease (FMD) in a herd of bovine cattle in a ranch in the north-eastern department of Arauca, on the border with Venezuela. Colombia was declared FMD free in 2009, so the ICA’s report forced the agriculture ministry to notify the World Organization for Animal Health (OIE) immediately of the outbreak of the disease, which could lead to a review of Colombia’s status. The loss of the FMD free status would lead to the imposition of restrictions on Colombian beef exports in international markets.

Agriculture Minister Aurelio Iragorri said that seven cows of a 136-head herd had tested positive for FMD and that the entire herd would now have to be sacrificed. But Iragorri emphasised that the outbreak was localised and that the authorities did not believe that there was a risk of the virus spreading to other areas, which he said may have been introduced from Venezuela, which does not have FMD-free status.

Iragorri lamented the fact that the outbreak comes at a time when Colombia has been seeking to secure increased international market access for its beef, with the opening of eight new markets last year alone, and said that this would be a setback. Pointedly, after news of the outbreak spread the animal health authorities in Peru, Ecuador, Panama, and Chile all announced the imposition of temporary bans on the import of Colombian beef and cow’s milk dairy products until the Colombian authorities can certify that the FMD outbreak in Arauca has been contained.

Meanwhile the OIE has also suspended Colombia’s FMD free certification until it sends a technical mission to the country to certify that the outbreak has been dealt with properly (which could take up to four months). In response to all of this Colombia’s trade, industry & tourism minister, María Claudia Lacouture, said that Colombia’s beef exports this year, which were estimated to reach US$206.5m after the country exported US$93.4m of beef in 2016, would suffer.

At the beginning of August, the Panamanian government led by President Laurentino Cortizo pushed through a controversial change to the country’s labour code. The government claimed the move was aimed at protecting jobs in the face of the coronavirus (Covid-19) pandemic, but critics say it undermines workers’ rights. It comes as the government (as is the case elsewhere) is more generally grappling with job losses stemming from the pandemic.

Labour Minister Doris Zapata insisted that the new legislation, which was approved by the national assembly on 31 July and sanctioned into law on 3 August, is designed to “preserve” jobs in companies affected by the pandemic. It applies to some 20,000 firms that have reported having had to suspend contracts or cut working hours, allowing them to maintain flexible working hours until the end of the year in a temporary relaxation of the labour code. The other 70,000 firms registered with the trade & business ministry that have not reported labour issues will continue to operate under the previous legislation. 

The new legislation took effect after Zapata warned that Panama could end 2020 with an unemployment rate of between 20%-25%, up from 7.1%. She also warned that the percentage of those working in the informal sector could rise from 45% to 55%, telling a virtual forum, Panama Forum 2020, last month that it was necessary to organise a “social dialogue” to deal with the challenge, with Panama’s GDP forecast to shrink by 9% in 2020.

However, trade unions led by the powerful Sindicato Único de Trabajadores de la Construcción y Similares (Suntracs) grumble that they were not consulted and suspect an underhand attempt to introduce permanent modifications to the labour code to the detriment of workers’ rights. Suntracs secretary general, Saúl Méndez, said it would “condemn the majority of the Panamanian population to hunger, poverty, and abandonment”. Among other things, the initiative allows companies to extend the suspension of contracts until 31 December (over 260,000 employment contracts have been suspended due to the pandemic) and amend rules regarding payment and working hours. Unions have staged various protests since July and on 27 August filed a claim of unconstitutionality against the changes before the supreme court.

Meanwhile the Cortizo government hopes that the phased reopening of the economy will improve the worrying jobs situation although is clear that this remains contingent on various conditions (see sidebar), given that Panama has highest number of reported Covid-19 infections in Central America. The first phase of reopening was announced on 13 May with an updated plan presented on 25 August and taking effect on 7 September. The construction industry and related activities reopened that day along with the Panama Pacific Special Economic Area, the Colón Free Trade Zone, and other free trade zones. Restaurants will be allowed to reopen with face-to-face service from 28 September - as will retail trade (in-store) and administrative and professional services yet to open. International aviation, tourism activities, and non-essential transport (recreation and tourism) will be permitted from 12 October.

• Another complaint of unionists

Unions also complain that the ‘Panama solidarity plan’ which the government put together to address the impact of the pandemic, does not go far enough. The scheme, which the government claims has benefitted over 1.4m people, provides vouchers for basic necessities, as well as food bags for informal workers, the unemployed, and those whose jobs have been affected by the pandemic. However, unions say the assistance has failed to reach all who need it; and that the US$100 monthly handout is insufficient to cover basic costs. They have called for payments to be increased, which Cortizo has ruled out.

• Conditions

The government has said that among the conditions for the economic reopening to continue, the rate of transmission of the virus (the ‘R’ rate, the average number of people each person infects) must not exceed 1. As of 25 August (when the government announced the latest framework for economic reopening), the Pan American Health Organization (PAHO) put Panama’s R rate at 0.94.

*** IMF HAPPY WITH ST KITTS. An International Monetary Fund (IMF) team visited St Kitts & Nevis from 12-21 May for the fifth and final review under the country’s three-year Stand-By Arrangement (SBA). At the conclusion of the visit, team leader Judith Gold said:

“The economic recovery in St Kitts and Nevis has gathered momentum, with real GDP growth at an estimated 3.8% in 2013 reflecting a pickup in tourism, a strong expansion in construction activity related to large Citizenship-by-Investment (CBI) inflows, a substantial increase in public sector investment, and impetus from the People Employment Program (PEP)”.

The purpose of the mission was to assess SKN’s performance under the IMF programme as at the end of March 2014, and the report card was relatively clean. The IMF noted that “the fiscal out turn for March 2014 was in line with program targets” and that fiscal targets for 2014 “are achievable”. However, it added the caveat that this would require “continued policy efforts to contain government employment, and consequently the public sector wage bill, as well as spending, while continue to strengthen revenue collections”.

SKN’s public debt, which stood at 164% of GDP in 2010, was now down to 104% of GDP as at end-2013 and “is on the path to reach” the 2020 target of 60% of GDP. The fiscal balance went from a deficit of 7.8% of GDP to a surplus of 12.2% in 2013.

*** JACK WARNER DROPS OUT OF LEADERSHIP RACE. Perhaps not surprisingly given the renewed focus on the bidding for the World Cup in Qatar, in which the role of West Indian football chief and Trinidadian politician Jack Warner has attracted particular attention, Warner has decided not to seek re-election as leader of the party he founded, the Independent Liberal Party (ILP). He founded the ILP in 2013 after having been ousted from the People’s Partnership government over the long-standing corruption allegations, and he subsequently won the Chaguanas West by-election. The ILP will now elect a new executive to lead the party into next year’s general election.

*** ANTIGUA VOTE-BUYING ALLEGATIONS. The run-up to the 12 June general election in Antigua & Barbuda has been marred by allegations of vote-buying by the ruling United Progressive Party (UPP) led by Prime Minister Baldwin Spencer.

In particular, the UPP, which is in search of a third five-year term, is said to have been bribing voters in Spencer’s constituency after being told by pollsters that the prime minister was within two percentage points of losing his seat. The UPP is thought to have spent US$3m on its election campaign, and there have been some questions as to where this money is coming from – and its purpose given that there are only 50,000 voters in the twin island state. The opposition Antigua and Barbuda Labour Party (ABLP) says that much of the money has come from companies to which the UPP government has done favours.

The economic background is not favourable to the UPP – and would be a headache to the ABLP should it win the election. The economy contracted by 10.7% in 2009 and by a further 8.6% in 2010. In 2011 the contraction was a less severe 2.1%, and this was followed by growth of 2.8% in 2012. However, 2013 was again slow, with just 0.5% growth. For 2014, the International Monetary Fund (IMF) is expecting growth of 1.6%, but on 3 May, the IMF reported that “risks to this outlook are high” due to the country’s “unsustainable fiscal situation” and the large amounts of nonperforming loans in the banking sector.

BRASIL | Empleos y salarios. El instituto de estadísticas de Brasil (Ibge) anunció que la tasa del desempleo del país llegó al 8,0% en el periodo desde febrero hasta abril. Esta es tasa más alta desde el 7,98% registrado en el primer trimestre del 2013. En el mismo periodo del 2014, la tasa fue del 7,1%. Este resultado fue menor que el 8,2% pronosticado por nueve economistas sondeados por Bloomberg News. El promedio de los salarios cayó a R$1.855 (US$594) para el trimestre que finalizó en abril del 2015, de R$1.862 (US$596) en el mismo periodo del 2014.

BRASIL | ¿Miembro de la OCDE? Después de rehusar varias invitaciones para unirse a la Organización para la Cooperación y el Desarrollo Económico (OCDE), Brasil se acerca cada vez más a la condiciones para poder de miembro pleno. El canciller de Brasil, Mauro Vieira, y el ministro de finanzas, Joaquim Levy, han firmado un acuerdo de cooperación con la OCDE, junto con el secretario general de la organización, Angel Gurría. En el pasado Brasil mantenía una cierta distancia de la OCDE debido a su percibida actitud hacia la liberalización de la economía brasilera.

• Nike

Es probable que la relación de Brasil con Nike, la compañía de atuendos deportivos de EU, que quede bajo escrutinio de nuevo. Después de la derrota de la selección nacional de Brasil ante Francia en la Copa Mundial de fútbol de 1998, el congreso brasilero lanzó una investigación para determinar si Nike, el sponsor del equipo nacional, había presionado a Brasil para que juegue a Ronaldo Luís Nazário de Lima, pese al hecho de que él claramente no estaba en condiciones de hacerlo. Nunca se encontró ninguna prueba tangible, pero la relación de la compañía de EU con la selección nacional de Brasil, que ha sido extendida a todos los atletas brasileros (menos el equipo de voleibol) que competirán en los Juegos Olímpicos de Verano en Rio de Janeiro el 2016, ciertamente será sujeta a un cercano escrutinio de parte de las autoridades brasileras y las de EU.

Josefina Vidal, director general for US relations at Cuba’s foreign ministry, was critical of a 12-13 September conference on the Internet in Cuba as yet another act of interference by the US. “The illegal use of radio and television against Cuba is not enough for them, they insist on the use of the Internet as a weapon of subversion”, Vidal tweeted. Since his first moves towards US re-engagement with Cuba back in 2009, President Barack Obama has posited improved access for Cubans to the Internet and telecommunications as key to White House policy ambitions to promote ‘people-to-people’ contacts.

In April 2009, Obama announced changes under which US telecommunications providers would be able to establish fibre-optic cable and satellite facilities linking the US and Cuba, as well as request licences to enter into and operate under roaming service agreements with Cuban providers. Restrictions were lifted on exports to Cuba of certain communications hardware and software, such as mobile phone systems, computers, software and satellite receivers, as well as articles and services to establish and upgrade communications systems.

Additionally, US satellite radio and satellite television service providers could get a licence to provide services to customers in Cuba. Persons under US jurisdiction would be allowed to activate and pay US or third-country service providers for telecommunications, satellite radio, or satellite TV services provided to individuals in Cuba, except for certain senior Communist Party and Cuban government officials.

Obama’s predecessor, President George Bush (2001-2009), in 2008 amended US regulations in order to allow Cuban-Americans to send mobile phones to family members in Cuba. He also permitted faith-based organisations and non-profit groups working with Cuba to provide computers and Internet access to the Cuban people. That move was in response to President Raúl Castro’s decision the same year to lift the ban on the use of mobile phones by Cuban citizens, as part of his plans to ‘update’ the Cuban economy.

In January 2015, the US Treasury Department effectively formalised and allowed to take practical working effect the Obama government’s April 2009 changes, legally authorising US telecoms companies to do business with Cuba.

Since then, there has been something of a race by US and other international telecoms firms to do deals with Cuba’s state telecoms (and Internet) provider, Empresa De Telecomunicaciones de Cuba (Etecesa). IDT Corp of New Jersey (US) was quick off the mark. In February 2015, it signed a deal with the state provider for direct mobile calls between the US and Cuba. In the past year, the US firms Sprint and Verizon, plus the German operator T-Mobile, have followed suit, signing agreements with Etecesa for voice, text and data roaming. In late August, the US giant AT&T also announced a deal with Etecesa on voice, text and data-roaming. AT&T customers thus will be able to text and call Cuba directly. Data roaming will also be available on the island, according to the company, meaning that AT&T customers visiting Cuba will have access to voice, text and data roaming without having to change a SIM card. AT&T said it would specify available wireless roaming areas and pricing on the island at a later date. And most recently, in mid-September, Claro Puerto Rico (owned by the Mexican giant América Movil) also announced a new voice, text and data roaming agreement with Etecesa.

In terms of the Obama administration’s policy objectives, these deals by US and other providers will facilitate people-to-people exchanges simply by virtue of allowing Cuban Americans visiting the island to have access to ‘regular’ high-speed Internet, while Cubans lucky enough to have family members in the US will also be able to avail of (faster) mobile Internet (on the smart phones sent to them from Miami). And more general (licensed) US tourism to Cuba will also benefit. Finally, the deals will also help to facilitate increased business and commercial relations between the two neighbours. While the economic benefits may not be considerable initially, having these agreements in place now is also an advance play by the providers ahead of the anticipated removal of the US economic embargo on Cuba, upon which they would be in a strong position to invest big time on the island.

What these and other latest developments (such as the re-start of commercial US flights to Cuba) demonstrate is that US corporate interests are committed to the 11m strong Cuban market, in anticipation of its full or partial liberalisation and the removal of the embargo, which they envisage within a 5-10 year horizon. Any efforts by either US Republicans or Democrats on Capitol Hill to pull back on the Obama reforms would be likely to face steep opposition. Even Donald Trump, the Republican presidential nominee this year, has hinted that he would not block the changes to date, albeit he has mentioned toughening up US conditions. At the same time, Trump has also suggested a ‘Trump Tower’ for Havana.

Josefina Vidal is not the first to accuse the US of using communications technology to ‘subvert’ the Revolution. Cuba has long complained about surreptitious efforts by the US – ranging from the Miami-based Radio Martí broadcasts to the ill-fated smuggling of computer equipment and satellite phones by the US government sub contractor Alan Gross (detained in 2009 and held for five years) and the invariably-comical revelations of covert operations masterminded – to little success – by a succession of apparently-hapless US government agencies.

• Eric Schmidt – an early Cuba adopter

Following his widely publicised trip to Cuba in 2014, which took place months before the official US-Cuba diplomatic rapprochement in December that year, Google’s CEO Eric Schmidt stated: “The ‘blockade’ makes absolutely no sense to US interests: if you wish the country to modernise, the best way to do this is to empower the citizens with smart phones…encourage freedom of expression and put information tools into the hands of Cubans directly”.

Date: 2 June 2024

Type: Presidential, federal legislative, gubernatorial, state legislative, and municipal.

Main presidential contenders: Claudia Sheinbaum of the ruling Movimiento Regeneración Nacional (Morena), Xóchitl Gálvez of opposition coalition Fuerza y Corazón por México (comprising the Partido Revolucionario Institucional [PRI], Partido Acción Nacional [PAN], and Partido de la Revolución Democrática [PRD]), and Jorge Álvarez Máynez of the leftist opposition Movimiento Ciudadano (MC).

Mexico is embarking on its biggest-ever electoral year in 2024. At the federal level, a new president and both chambers of congress (500 deputies and 128 senators) will be elected. Concurrently, all the country’s 32 states will hold elections for local seats including eight governorships and the head of Mexico City (CDMX) government, state legislators, and municipal positions. Together, 20,263 posts will be up for grabs – over five times the 3,416 positions elected in 2018’s elections. In another first, Mexicans will likely elect their first-ever female president, given the two frontrunners are women.

The elections are also the first real indicator of how Morena may live on beyond its founder, President Andrés Manuel López Obrador, who is constitutionally limited to a single six-year term. The vote will mark the tenth anniversary since Morena was registered as a political party. Its rise since then has been spectacular, due in large part to the enduring popularity of López Obrador, who swept the party to power with a landslide victory in 2018. The party now holds a simple majority in both chambers of congress with the help of allied parties, 21 state governorships (with two more in allied hands), and a majority of seats in 21 state congresses. Meanwhile, López Obrador’s approval rating has hovered around 60% for almost all his presidency.   

Although López Obrador will not appear on the ballot box, his influence and presence will be felt throughout the electoral period – and beyond. He is pushing to finish his flagship infrastructure projects such as the Tren Maya tourist railway and Dos Bocas oil refinery before the end of his term as tangible testament of his presidency. He also intends to present constitutional reforms in relation to the judiciary, public security, minimum wage, and pensions, among other things. Such reforms need approval from a two-thirds majority in both chambers of congress to pass. Obtaining such a majority - something which Morena is yet to achieve – will be another major aim of this electoral period.

The favourite

Morena’s presidential candidate is former CDMX mayor Claudia Sheinbaum (2018-2023). Sheinbaum’s clear campaign as a continuity candidate for the ever-popular López Obrador makes the race hers to lose, with most early polls putting her far ahead of the competition. Sheinbaum has been by López Obrador’s side since the start of her political career, cutting her teeth as CDMX environment minister when he was mayor of the city (2000-2006) and later as spokesperson for his failed 2006 presidential campaign, when he ran for the PRD. When López Obrador split from the PRD and founded Morena, Sheinbaum joined him.

• Polls

A survey published by national daily El Financiero on 4 January showed Sheinbaum had increased her lead over Gálvez. The poll showed that 52% of respondents would vote for Sheinbaum, against 30% for Gálvez. This gave Sheinbaum a 22-point lead, up from a 19-point lead in the previous (November) survey published by the newspaper.

Nevertheless, there are indications that Sheinbaum will not be a carbon copy of López Obrador. For one thing, she has already shown herself to be far less socially conservative, supporting legislation to improve reproductive rights and attending LGBTQI+ rallies while mayor of CDMX. She has also made it clear that furthering women’s rights and tackling gender violence will be high on her agenda if elected.

Another significant difference is in Sheinbaum’s environmental credentials. A climate scientist by training – she has a PhD in energy engineering from Mexico’s national university (Unam) - as CDMX mayor Sheinbaum promoted solar power and cycle and public transport infrastructure. She has also stressed the importance of developing renewable energy generation. This suggests that, if elected, Sheinbaum is likely to tap into Mexico’s potential for generating electricity using solar and wind power, rather than continuing López Obrador’s reliance on fossil fuels, a key tenet of his nationalist energy policies.

However, proximity to López Obrador will only take Sheinbaum so far. López Obrador’s popularity is predicated on a largely personalistic style of politics and his ability to control the national narrative. Through his daily morning press conferences, he has successfully portrayed himself as a man of the people, blaming any faults of his government on ‘neoliberal’ governments of the past. Sheinbaum lacks López Obrador’s populist charisma and may well struggle to dominate the narrative to such an extent.

The contender

Strangely, the opposition coalition’s candidate, Gálvez, is in many ways more similar to López Obrador in style and temperament than Sheinbaum. Like López Obrador, Gálvez understands the importance of controlling the narrative. She launched her presidential candidacy amid a wave of media frenzy following a stunt in which she obtained a judge’s order to allow her to respond in person to criticisms from López Obrador. When she arrived at the national palace to do so, she was denied entry. Gálvez capitalised on this to posit herself as the perfect outsider candidate and antidote to López Obrador.

Gálvez is also similar in her humble origin story. Of indigenous Hñähñu (Otomi) descent, Gálvez grew up in a small town in Hidalgo state and famously sold sweets on the street as a child to help make ends meet. She later gained a degree in computer science and founded two tech firms before entering politics as head of the national institute for indigenous people under Vicente Fox (2000-2006).

Like Fox, Gálvez is affiliated with the right-wing opposition Partido Acción Nacional (PAN), for which she served as a federal senator from 2018-2023. However, she has never officially joined a political party. This is a strength and a weakness. It allows Gálvez to distance herself from the politics of the past and present herself as a vote for change. However, it also leaves her without a unified political identity, with much of her campaign focusing on criticising the current government rather than presenting new ideas. Gálvez must ensure the wave of momentum generated early in her candidacy does not peter out with over four months left in the race.

A third option

On 12 November, Samuel García, the young governor (36) of Mexico’s northern state of Nuevo León, announced his intention to run for the presidency for the left-of-centre Movimiento Ciudadano (MC) opposition party.

García presented himself as the candidate for the future and appeared to gain traction, particularly among younger voters. However, chaos descended in Nuevo León with a dispute over who would serve as interim governor while he campaigned. With the threat of MC losing the governorship, García withdrew from the race and returned to his role as governor.

On 9 January, the MC named Jorge Álvarez Máynez, its leader in the lower chamber, as its presidential candidate. At 38 years old, Álvarez Máynez is also much younger than the competition. This, and his closeness to García, will be used to try and attract the vote of young people disillusioned with the status quo.

The local races

Significant contests will also play out at state level, as new governors are set to be elected in Chiapas, Guanajuato, Jalisco, Morelos, Puebla, Tabasco, Veracruz, and Yucatán, as well as the all-important head of CDMX government. With both Sheinbaum and López Obrador having previously served as CDMX mayor, the seat is of large symbolic importance to Morena, as well as carrying heft in terms of size of budget, electorate, and potential campaigning power.

Control of the capital is also key given CDMX was one of the few areas where Morena performed badly in the 2021 mid-terms, losing control of four of the 11 boroughs it won in 2018 while the opposition took control of nine. This split the capital in two with Morena controlling the poorer eastern half and the opposition the wealthier western half of the city.

Morena’s candidate in CDMX is Clara Brugada, the municipal leader for Iztapalapa, a collection of low-income neighbourhoods on the eastern side of the city. Due to gender balance rules, Morena passed over the most popular candidate for CDMX in internal party polling, former police chief Omar García Harfuch, who saw much success serving as the city’s public security minister under Sheinbaum. The opposition is fielding PAN’s Santiago Taboada, the current mayor of CDMX’s Benito Juárez neighbourhood. Chosen without internal surveys, the selection prompted the PRI’s Adrián Rubalcava, who was also vying for candidacy in the capital, to renounce his party membership, adding to an ever-growing list of people to have abandoned the PRI.

Other key races are in Yucatán, Guanajuato, and Jalisco, where Morena is looking to unseat opposition parties. The PAN currently governs in the first two states whereas Jalisco is governed by the independent Enrique Alfaro, who won the governorship for the MC but left the party in August amid differences with national leader Dante Delgado. Morena will also look to retain governorships in Chiapas, Morelos, Puebla, Tabasco, and Veracruz. If Morena achieves “the complete kayak” - López Obrador’s variation on the ‘carro completo’ (literally ‘complete car’, a phrase used to describe the PRI’s sweeping victories in the past at all levels of government) - it would take its governorship tally to 26, meaning over 80% of states would be in the hands of Morena and its allies.

A loaded legacy

The fact that a large proportion of Mexicans currently receive some form of cash handout from the government has contributed in no small part to López Obrador’s popularity. Any successor will likely struggle to keep this up as inflated spending plans for the year look to saddle them with the highest fiscal deficit in decades.

Eduardo Verástegui

The candidacy of far-right Mexican actor Eduardo Verástegui was over before it started. Verástegui failed to collect the signatures needed to run as an independent in the presidential race, which must equate to 1% of the electoral roll (some 960,000 signatures) from supporters in 17 of Mexico’s 32 states. Verástegui, who has aligned himself with right-wing figures including former US president Donald Trump (2017-2021) and former Brazilian president Jair Bolsonaro (2019-2023), requested an extension for the period in which to collect the signatures. This was denied.

Risks

Political violence remains a big risk ahead of Mexico’s mammoth electoral year. According to local political risk consulting firm, Etellekt, 102 politicians including 36 candidates were killed in the run-up to the mid-term elections in June 2021. Given that 2024’s elections are significantly larger, with many more local contests, where candidates are most vulnerable, there is reason to believe this year’s electoral period will be even deadlier. Indeed, three opposition candidates competing for local seats were killed from 4-5 January in an indication of the violence that may lie ahead.

Another risk concerns the democratic process itself. Although the actual threat to a peaceful transfer of power is relatively low, López Obrador has consistently worked to undermine the country’s main electoral bodies – the national electoral institute (INE) and federal electoral tribunal (TEPJF) – through budget cuts, proposed reforms, and verbal attacks. This has raised concerns of democratic backsliding, with the Economist Intelligence Unit downgrading Mexico from a “flawed democracy” to a “hybrid regime” under López Obrador.

A related risk is the flaunting of electoral rules, which López Obrador and other prominent Morena figures have repeatedly done. Violations include campaigning outside of designated periods, spreading government propaganda during the electoral period, and exceeding campaign donation limits. Such rules are designed to ensure a balanced contest. Given the wealth of public resources and influence that López Obrador and Morena have at their fingertips, such rule breaking could tip the balance ever more in their favour.

Although a last-minute deal was still a remote possibility, the balance of probabilities this week was that as a result of its dispute with largely US-based holdout creditors Argentina would enter its second foreign payments default in 12 years on 30 July. This could alter political calculations around the 2015 presidential elections.

At one level, default will be something of a non-event. As Argentina has been largely excluded from international capital markets for years, there will be no sudden change. Analysts broadly agree that ‘contagion’ effects will be limited, and the main risk for Argentina will be a deepening of the current recession and – perhaps some months ahead – an increased danger of renewed foreign currency shortages and peso weakness. What will change are the political calculations being made around the October 2015 presidential elections.

Among the current frontrunners (still a preliminary list) pro-government Daniel Scioli (the governor of Buenos Aires) and two opposition leaders, Sergio Massa (from dissident Peronist faction Frente Renovador) and Mauricio Macri (the centre-right mayor of the federal capital) have all had broadly the same game plan. Put crudely, they have all been relying on President Cristina Fernández to tidy up all remaining foreign debt issues, allowing them to plan a future government with a clean slate, one that will be able to attract new foreign investment and funding, and hopefully begin 2016 by ushering in a new cycle of economic growth.

Much now depends on how long the default lasts, and on how it is managed. A short default with a settlement in early 2015 would not fundamentally alter the game plan. But a longer default – and one in which even the debt restructurings with the Paris Club or the 2005 and 2010 bond swaps might begin to unravel – would have three major political consequences. The first is that Argentina could tip from recession into deeper financial troubles, including labour militancy and social protests destabilising the democratic transition process. The second is that candidates close to the government, such as Scioli, would be tainted by association. The third is that in the worst case scenario the would-be Presidents may inherit a live and ongoing foreign debt dispute, rather than one that has been conveniently resolved, for better or for worse, by an outgoing administration. That in itself could be seen as changing the job description for the next Argentine President.

• Default looms

On 22 July New York District Judge Thomas Griesa turned down Argentina’s third formal request for an extension to the 30 July deadline to reach an agreement with its holdout bondholders. Ordered to meet with the court-appointed negotiator, Daniel Pollack, on 23 July, Argentina’s lawyers failed to make the appointment. The holdouts, Argentina’s lawyers and Pollack are due to try again on 24 July.

Colombia’s GDP grew by 2.0% year-on-year in the third quarter, according to the national statistics agency (DANE). Although this was below government expectations, Finance Minister Mauricio Cárdenas nevertheless welcomed it as part of a first phase of economic recovery.

The economic team expects growth to pick up to 2.5% in the fourth quarter, which would imply that growth for calendar 2017 as a whole will come in at 1.8%, a little below the earlier official target of 2.0%. The government continues to project 3.0% GDP growth for 2018. A range of analysts say there are questions about the pace of recovery.

Mauricio Hernández of BBVA Research notes that the Q317 results are mixed, with agriculture leading the field, partly because of a good coffee harvest. Manufacturing, on the other hand, has been weak. Stripping out agriculture’s contribution, growth would have been a lower 1.6%. However, Hernández adds that the beginnings of a positive turn-around in housing and construction are evident. While he believes that the economy is now turning onto a growth path, he warns that recovery will be slow and market sentiment volatile. The Central Bank, meanwhile, has warned that the recovery is subject to ongoing risks over the availability of foreign finance, possible export commodity price falls, and any downside movements in consumer or business confidence.

Trade with EU

The European Commission (EC) report on 9 November released a report which found that its free trade agreements (FTAs) signed with Peru and Colombia have helped stabilise two-way trade.

According to the report, since the FTAs with Peru and Colombia came into full effect in 2013, bilateral trade between the EU and Peru has fallen by 11% and bilateral trade between the EU and Colombia has fallen by 23.5%.

However, the report attributes this to the “economic slowdown in Latin America and the fall in commodity prices on the global market, which has affected exports of both countries”, and it notes that the FTAs with Colombia and Peru had a stabilising effect on international trade in these two countries, as their trade with the rest of the world has fallen by 36% and 18% respectively since 2013. In both cases, the fall in trade with the rest of the world was higher than the fall in trade with the EU.

The report goes on to suggest that without the FTAs Colombia and Peru’s fall in trade with the EU between 2013 and 2016 is likely to have been even greater. The FTAs with the EU were resisted by some quarters in both Peru and Colombia, which argued that they would prove to be detrimental for some local economic sectors and more beneficial to the EU.

Significantly, the EC report provides some evidence in support of that view, noting that EU exports to Colombia increased by 18% during the first two years of the FTA coming into force and declined by 17% in 2016. Meanwhile, EU imports from Colombia fell by 37.5% since the implementation of the FTA. Similarly, EU exports to Peru increased by 4% since the FTA came into effect, whereas imports from Peru fell by 4% over this period.

PERU | Downgraded by Fitch. On 15 October the international credit ratings agency Fitch Ratings downgraded Peru’s long-term foreign currency issuer default rating (IDR) to ‘BBB’ from ‘BBB+’, maintaining its outlook as ‘stable’. Fitch explained that the downgrade “reflects the steady erosion over time of Peru’s sovereign balance sheet and other key rating metrics, as a result of a series of shocks”. Fitch also highlighted the current volatile political situation, noting that President Pedro Castillo’s government has advocated policies that “appear in conflict with the investment-driven and market-oriented, open economic model”. However, Fitch noted that a moderating cabinet reshuffle on 6 October had calmed the waters, “pivoting away from more radical positions on macro policy orientation and the rule of law, and could improve relations with congress”.

COLOMBIA | Covid and inequality. The World Bank (WB) released a report on 27 October detailing the impact of the coronavirus (Covid-19) pandemic on inequality in Colombia, warning that wealth disparities have been both deepened and entrenched since March 2020. The report notes that Colombia’s Gini coefficient (a measure of inequality in which 0 indicates perfect equality and 1 equals maximal inequality) rose from 0.53 in 2019 to 0.54 in 2020, equating to a further 3.6m people living in poverty. Over the same period, the WB states that extreme poverty increased by 5.5 percentage points, with an additional 2.8m people unable to meet their basic needs compared with the pre-pandemic era.

The WB offered several recommendations for Colombia to reduce its widening inequality, which it noted is the highest of all member states in the Organisation for Economic Cooperation and Development (OECD). These include improvements in early education, labour reforms to improve access to training and ensure equal opportunities for women, the installation of a more progressive tax system, improvements to transport infrastructure in rural areas, and measures to reduce the country’s vulnerability to climate change.

Andean Countries: Inflation Rate
Percentage variation (year-on-year)

Andean Countries: GDP Growth (%)
Quarterly figures are year-on-year growth

Andrés Manuel López Obrador (AMLO) took office as Mexico’s new left wing and nationalist president in December 2018. During the first four of his six-year term in office he came across as an unreconstructed enthusiast for state-owned, fossil fuel-burning energy companies, such as Petróleos Mexicanos (Pemex – oil and gas) and Comisión Federal de Eletricidad (CFE – electric power generation and distribution). Mexico, the second most populous country in Latin America, appeared not to be interested in any major energy transition.

During the government of AMLO’s centre-right predecessor, Enrique Peña Nieto (2012-2018), a wide-ranging energy reform had been initiated, breaking the Pemex-CFE monopoly and positioning them as players in a wider energy market where the private sector, including international oil majors and renewable energy companies, was invited to take part. Oil and gas licensing rounds were held, and private sector renewable energy companies bid for PPAs (power purchase agreements) to deliver electricity to the national grid. Peña Nieto’s aim was to enlist private capital and entrepreneurship, stimulate the country’s nationalised energy giants to become more competitive, and to begin to reverse a two-decade long decline in Mexican oil production. There was, however, little opportunity to judge how successful he had been: in an industry where investments can take 10 years to materialise, the new more liberalised energy sector was only able to operate for around three years before AMLO was elected, committing the country to move in an entirely different direction.

Like Peña Nieto before him the new president was equally committed to reversing the fall in oil output but saw this as an objective to be achieved through decisive state action, not by the private sector. AMLO quickly began to tinker with the energy regulations he inherited, effectively freezing renewable energy contracts signed during the previous government. New rules – subsequently challenged by Mexican courts and partly rejected by congress – required CFE to give priority to output from fossil fuel burning generators in despatches to the national electricity grid. They also established a dominant market share for public sector generators. Part of the president’s thinking appeared to be to try and reverse financial losses at both Pemex and CFE building them up into national champions.

His focus on building energy self-sufficiency also led him to order the construction of a major new refinery at Dos Bocas in his home state of Tabasco. Some industry experts question whether the refinery is really needed suggesting it may be no more than a very expensive prestige project. The cost of building the refinery has ballooned to an estimated US$15.4bn, up from the initial US$8bn. Much of AMLO’s rhetoric is in line with the resource nationalism typical of developing countries in the global south in the 1970s when major hydrocarbon projects were seen as key to development and industrialisation.

And yet, by late 2022 there were some intriguing signs that AMLO might be finally turning a little greener in his approach. Part of this may be due to the influence and persuasion of the US, a fellow member of the North American Free Trade Agreement (now known as USMCA). The US has filed a complaint with USMCA over what it described as Mexico’s discriminatory energy policies. At the same time however John Kerry, the US Special Presidential Envoy for Climate Change, travelled to Mexico on a more diplomatic tack, frequently lobbying in favour of energy transition. At the COP27 climate summit in Egypt in November 2022, the US and Mexico presented a joint plan under which Mexico pledged to double its solar, wind, hydroelectric, and thermal energy capacity to 30GW by 2030, as well as taking a number of other steps including reducing gas flaring by Pemex, reducing greenhouse gas emissions by 35% (up from Mexico’s previous unambitious goal of 22%) by 2035, and committing to ensure that 50% of all vehicles sold by 2050 will be electric. The US said it would contribute up to US$48bn worth of long-term public and private investment under the plan, targeted on Sonora state.

The Sonora plan has focused on developing an energy hub in the northern state of Sonora, where five large solar plants are due to be built at a cost of US$1.6bn. Officials suggest that some of these projects might be awarded to renewable energy companies from the US and Canada, including those that previously lost business when AMLO froze their contracts. There is also a suggestion that the AMLO government now wants to focus its energy development plans geographically, with fossil fuel-burning generators leading in the south and renewables at the forefront in in the north. “My perception is that Sonora is outside the central-southern section of the country that the president wants to benefit and have control over with the expansion of Pemex and CFE” said Susana Cazorla, a partner at Mexico City consultancy SICEnergy, speaking in November 2022. She also noted that there is a comparative lack of transmission lines capacity in the north, suggesting that some may be built to enable the new generators to be connected to the US grid.

The Sonora plan is also designed to attract electric vehicle (EV) manufacturers. In February 2023 the government unveiled construction of a 2,000-hectare solar park in Puerto Peñasco in Sonora. The plant will be owned by CFE and is not expected to start operating until after 2027. Sonora governor Alfonso Durazo said that when completed it would be the largest solar farm in Latin America and the seventh largest in world. US ambassador to Mexico Ken Salazar attended the inauguration and commented that “North America is prepared to become a global leader in the generation of clean energy and the fight against climate change”.  Mexico’s Foreign Minister Marcelo Ebrard, also present, emphasized long term government plans to build EV manufacturing hubs to attract global car makers to northern Mexico. Ebrard said the government was in talks with car makers such as Audi VW, BMW, General Motors, Fiat Chrysler, and Tesla, all of which were said to have expressed interest.

On 1 March, Tesla announced that it was to build a huge ‘gigafactory’ in Mexico, in the state of Nuevo Leon, on the outskirts of Monterrey. BMW meanwhile has announced it is going ahead with plans to build a US$866m plant in the central state of San Luis Potosi. The plant would produce high-voltage batteries and fully electric Neue Klasse vehicles. Globally, BMW is committed to convert half its sales into EVs by 2030. The head of the new plant, Harald Gottsche, said: “We will start building, constructing the extensions and the new battery assembly in the beginning of 2024, and we will start (to ramp up) production at the beginning of 2027."  

Where does Mexico stand on the energy transition?

While the “greening” of López Obrador and the development of renewable projects like the Sonora plan are positive indications that the Mexico government is beginning to take action on climate change, many analysts and lobby groups remain sceptical saying it is a case of too little, too late. Climate lobby group EMBER’s headline for the country is “Mexico stalls on moving past oil and gas reliance”. It notes that wind and solar generation has more than tripled since 2015 to provide nearly 12% of its electricity by 2021. But at the same time 70% of the country’s oil and gas is still generated by fossil fuels. It also adds that “despite earlier climate legislation, Mexico has not meaningfully increased ambitions on emissions reduction in recent years”. Also of concern is that AMLO’s electricity industry reforms, which have been paused in congress, “look to be moving away from urgency on power sector decarbonisation”.

Another lobby group, Climate Action Tracker, gives the country an overall rating of “critically insufficient” adding that climate policies “continue to go backwards…as fossil fuel use is prioritised, and climate related policies and institutions are dismantled”. Although (as mentioned above) Mexico announced higher nationally determined contributions (NDCs) in the November 2022 COP-27 summit, Climate Action says the updated NDC “lacks transparency and disguises its lack of ambition by counting forests differently in the base and in the target year”. It adds that Mexico’s greenhouse gas emissions continue to rise despite the brief dip caused by the Covid-19 pandemic. Also of concern is that the government continues to subsidise the use of fossil fuels in the transport sector to contain a surge in the cost of living caused by the energy crisis and the Ukraine war. It also notes that if all countries were to follow Mexico’s approach, global warning would exceed 4 degrees C.  

Total energy supply by source (TES), Mexico 1900 – 2021

Source: IEA

MEXICO | Banxico raises growth forecast. On 29 November, Mexico’s central bank (Banxico) released its quarterly report for the third quarter of the year raising its 2023 GDP growth forecast to 3.3%, up from 3% in its previous quarterly report. It also revised up its 2024 economic growth forecast to 3% up from 2.1%. Banxico said Mexico’s economy was benefiting from “resilient external demand and dynamism of domestic spending”. Mexico’s GDP expanded 1.1% in the third quarter of 2023 compared with the previous quarter. In its latest quarterly report, Banxico also forecast that headline inflation would close 2023 at 4.4%, down from 4.6% in its previous quarterly report.

MEXICO | Trade deficit down in October. On 27 November, Mexico’s national statistics institute (Inegi) released new figures which showed that in October the country registered a trade deficit of US$252m, a significant decrease on the deficit of US$2.09bn recorded in the same month in 2022. It was also down from a deficit of US$1.48bn in September, US$1.38bn in August, and US$881m in July. According to Inegi, in the first ten months of 2023, the trade deficit was US$10.34bn, less than half the US$27.74bn recorded in the same period of 2022.

MEXICO | Inflation ticks up. On 23 November, Mexico’s national statistics institute (Inegi) released consumer price index figures for the first half of November, which showed inflation was 0.63% as compared to the previous two-week period. With this result, annual inflation stands at 4.32% This is up from the 0.24% two-week inflation rate recorded in the first two weeks of October when annual inflation stood at 4.27%, figures which represented a slowdown on September. Banxico opted to maintain its benchmark interest rate at 11.25% earlier in November, where it has been held since March.

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

Mexico: unemployment rate
Economically active population

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

Source (all graphs): National Statistics Institute (Inegi

BRAZIL | Monthly rise in industrial production. Industrial production increased by 0.5% month-on-month in November, the national statistics institute (Ibge) reported on 5 January. Production levels have been stagnant for most of 2023, as March and April were the only months of the year to register an increase or decrease of more than 0.5%. However, since August, production figures have seen slight increases every month. Out of the 25 product categories measured, 13 registered monthly increases in production in November. The categories with the greatest increase were extractive industries (+3.4%), food products (+2.8%), and drinks (+2.8%). Just as in October, the category of printing & recording equipment saw the greatest monthly fall, decreasing by 11.2% in November.