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***SURINAME AND NETHERLANDS IN SURPRISE RESTORATION OF DIPLOMATIC LINKS. In the last week of September, on the side-lines of the United Nations (UN) General Assembly, the foreign ministers of Suriname and the Netherlands (respectively Winston Lackin and Frans Timmermans) announced that the two countries were to restore full diplomatic relations.

This represents something of a volte face for the Netherlands. Diplomatic relations were severed after the Suriname National Assembly approved an amendment to its amnesty legislation in April 2012 that could see President Desi Bouterse and 24 accomplices pardoned for the 1982 murders of 15 citizens. The Netherlands also froze all development aid.

Bouterse headed a military dictatorship from 1980-87, but he returned to power as elected president in May 2010. He has also been convicted in the Netherlands of drug smuggling, and following his election, Holland’s then foreign minister, Maxime Verhagen, declared that the only terms under which Bouterse could visit Holland would be if he came to serve his 11 year prison sentence.

One of the motivations for the move by the Netherlands was hinted at by Timmermans when he met with Lackin in January 2013 at the meeting at the European Union (EU)-Latin America summit in Santiago de Chile. This was the first ministerial contact between the Netherlands and Suriname since 2010, and in explanation Timmermans said: “One-and-a-half million people in the Netherlands and Suriname share some kind of direct ties with each other. Our countries are inextricably linked through their people, culture, language and history. And since these things are more important than political differences, the Netherlands will continue to strive for good relations between our two countries.” The Suriname economy is also performing notably well, growing by 4.5% in 2013 with a further expansion of 4.4% expected for 2014.

There will be a general election in 2015 at which Bouterse will stand again having reversed his originally declared intention of serving only one term.

***ST KITTS’S DOUGLAS FACING DAY OF RECKONING. The prime minister of St Kitts & Nevis, Denzil Douglas of the ruling St Kitts & Nevis Labour Party (SKNLP) has been avoiding a parliamentary no confidence motion filed on 11 December 2012. He has managed this because he retains a majority in parliament by virtue of appointed senators, but as only elected members are entitled to vote in a no confidence motion, this tactic can only work to block the motion not to defeat it. It has been a controversial manoeuvre, but Douglas has justified it by arguing that as the SKNLP won 60% of the vote in the last election, it shouldn’t have its mandate overturned just because two members elected on the SKNLP ticket have crossed the floor.

But all this will soon be academic as an election must be called by January 2015, and the opposition is trying its best to make the most out of having failed to secure a no confidence motion. Speaking on 30 September at a Team Unity opposition alliance meeting, the deputy leader of the People’s Labour Party (PLP) Sam Condor proclaimed: “Look how we outmanoeuvred Douglas; outmanoeuvred him! The elections are any time now. He run out of time, and this is exactly what we wanted, we wanted time. We wanted time and he gave us time.”

• “In the last week of September, on the side-lines of the United Nations (UN) General Assembly, the foreign ministers of Suriname and the Netherlands (respectively Winston Lackin and Frans Timmermans) announced that the two countries were to restore full diplomatic relations.”

Over the past week, at least 23 of some of the wealthiest and most powerful businessmen in Brazil have been arrested. So far 85 arrest warrants have been issued over the course of ‘Operation Car Wash’, the investigation into a political bribery scheme at the State oil giant Petrobras, the largest company in both Brazil and Latin America. Speaking on the fringes of the G20 meeting in Australia, President Dilma Rousseff said the investigation has the capacity to “change Brazil forever”.

Friday afternoon was pretty grim for Petrobras, which is 54% controlled by the State. It released a statement saying it was unable to release its third-quarter earnings due to the investigation, described as “a unique moment in the history” of the company. Around the same time, 300 police officers were raiding the company’s Rio de Janeiro headquarters and those of several of its contractors, including some of Brazil’s largest construction firms, Odebrecht, Mendes Junior and Camargo Corrêa.

All of the companies being investigated were major donors to the election campaigns both of President Rousseff, and her main opponent, Aécio Neves of the Partido da Social Democracia Brasileira (PSDB). Over US$720m in assets, belonging to companies and individuals, have been frozen by the federal police. According to the head of the government’s court of accounts (TCU) the corruption scheme at Petrobras may have been worth as much as R$4bn (US$1.6bn). The court said that Petrobras spent R$30bn with no adequate bidding process. Eight of Brazil’s top 10 construction firms are being investigated as part of ‘Operation Car Wash’.

At the heart of the scheme are two men who were arrested earlier this year: Alberto Yousseff, a black market money dealer, and Paulo Roberto Costa, the former director of supply at Petrobras. According to their testimony, 3% of the value of the contracts agreed between Petrobras and its contractors was passed onto the ruling Partido dos Trabalhadores (PT), and its allies, the Partido Movimento Democrático Brasileiro (PMDB) and the Partido Progressista (PP).

With the arrest of some of the most powerful men in Brazil, the attorney-general, Rodrigo Janot, said he hoped their detention would encourage them to testify. Already, several have agreed to return millions of dollars to state coffers. The far-reaching nature of the investigation does have some innocent victims, however. On 18 November the federal police briefed the press that Yousseff and Costa had implicated Costa’s successor, José Carlos Cosenza. Immediately, government ministers began lobbying for his removal from the position, despite his claims of innocence. The next day, 19 November, the police admitted they had made a mistake and Cosenza was not implicated at all.

Regardless, former president Lula da Silva (2003-2011) has let it be known that he thinks the CEO of Petrobras, Maria das Graças Silva Foster, should quit. Lula claimed that Silva Foster, who was appointed by Rousseff in 2012, lacked the political nous to lead the company at such a sensitive time. His allies have also briefed that she is failing to do enough to protect the reputation of the PT. Jaques Wagner, a former governor of Bahia, has been named as Lula’s preferred choice.

If any positives can be drawn from the saga, it is just possible the scale of the corruption may, in the long term, play into Rousseff’s plans for political reform. Much of the corruption arose from the needs of Brazil’s political parties to pay for their expensive election campaigns. With the rot as widespread as it now appears, and Petrobras a shadow of the company it was in 2008, congress may find blocking political reform puts them on the wrong side of the debate.

• Corruption

Speaking on 19 November the lawyer for Fernando Soares, a lobbyist also known by the name Fernando Baiano, who allegedly facilitated the payments between Petrobras and the PMDB, defended his client by stating that “no public works in Brazil are completed without a ‘deal’”.

Given its land area, the fact that Guatemala ranks first among Latin American countries on the US Department of Agriculture (USDA) list of the world’s top palm oil exporters might come as a surprise. USDA figures released in February 2020 show that over the last three years, Guatemala shipped over 800,000 tonnes (t) of the oilseed ubiquitous in consumer goods in a trade worth over US$400m a year.

However, in Guatemala and Honduras competition for natural resources including for rich agricultural land apt for palm oil production has generated crime, corruption, and forced migration. These are unwelcome bi-products of a lucrative industry that is coming under increasing international scrutiny and were high on the agenda as the Latin American chapter of the main industry certification body the Roundtable for Sustainable Palm Oil (RSPO) met in Campeche, Mexico, from 3-5 March.

Guatemala

Bananas, coffee, and sugar still outrank palm oil as Guatemala’s top export. Yet the latter has become one of its fastest growing agricultural exports since it was first planted in the 1980s, initially replacing cotton. Expansion took on added impetus following the end of the 36-year civil war in 1996. While it currently accounts for 1.2% of national GDP, according to the national palm growers’ association, Gremial de Palmicultores de Guatemala (Grepalma), it represents as much as 20% of GDP for the northern department of Petén. Guatemala stands out among international palm producers for its land use efficiency, producing 6.3t per hectare compared to the global average of 4t, Grepalma claims. Guatemalan growers supply major international brands including Wilmar International, Nestlé, and Cargill.

The industry’s reputation has, however, been tarnished in recent years for various reasons. Palm oil companies have made headlines in relation to criminal investigations. For example in March 2018, three executives from one of the country’s biggest palm oil companies Reforestadora de Palmas del Petén (Repsa), owner Hugo Alberto Molina Botrán, Luis Alberto Paz Masek, and Carlos Enrique Arévalo García were arrested on charges of bribery and tax fraud in relation to a high profile corruption investigation although were subsequently released on bail.

Human rights groups like Ireland’s Front Line Defenders linked the 2015 murder of activist Rigoberto Lima Choc to his efforts to document alleged environmental damage which occurred due to Repsa’s activities in La Pasión river in northern Guatemala. No one has been convicted for masterminding the crime. Lima’s murder came soon after he successfully brought charges of ‘ecocide’ against Repsa following a toxic effluent spill although these were dismissed following his death. In late 2017 Cargill announced it was suspending sourcing palm oil from Repsa while Wilmar and Nestlé followed suit in early 2018.

The Guatemalan government has also attracted transparency concerns amid suspected efforts to protect powerful local companies. In September 2019, the previous Morales administration declared a state of siege in 22 municipalities in north-eastern Guatemala, restricting basic rights and placing them under military control. The move followed the deaths of three soldiers in Semuy II community, El Estor municipality, where local palm oil company Naturaceites owns considerable land. The government’s insistence the state of siege was necessary to tackle drug trafficking in the area was disputed by human rights groups such as Fundación Guillermo Torriello (FGT) and the Costa Rica-headquartered centre for justice and international law (Cejil) which note that social conflicts over natural resources - including palm oil - are rife in the area (see sidebar).

Honduras

First planted by the US firm, United Fruit Company, on the Atlantic coast in the 1950s, palm oil has long stimulated Honduras’ rural economy. Over 1,100 hectares were planted during the land reform process of the 1970s that shifted from traditional subsistence to market-orientated production. The land ‘modernisation’ drive carried out under former president, Rafael Leonardo Callejas (1990-1994), had largely faltered throughout the 1980s but with the later support of the World Bank (WB) the sector boomed following changes to the country’s agrarian law in 1992. Cooperative plots were broken up and sold. Palm oil production has risen 560% since its 1990s average, according to USDA figures cited by Mongabay, a non-profit conservation and environmental science news platform; and Honduras exported 570t of palm oil in 2019, accounting for 7.7% of the country’s exports.

One major benefactor of this boom has been Honduran firm Corporación Dinant, owned by prominent businessman Miguel Facussé, the uncle of former president Carlos Roberto Flores (1998-2002). Facussé, who died in 2015, received WB support despite conflicts with local communities at operations in the Bajo Aguán area in the north-eastern departments of Colón and Yoro, which became the centre of the palm oil industry - and of violence linked to land disputes.

Corporación Dinant made headlines in December 2013 after the WB’s internal watchdog, the Office of the Compliance Advisor/Ombudsman (CAO), published the findings of an investigation into a US$30m loan to Dinant by the WB private-sector lending arm, International Finance Corporation (IFC). This found that, among other things it “either failed to spot the serious social, political, and human rights context in which this company is operating or where it did, failed to act effectively on the information”. According to the  CAO report, “there were at least 102 killings of people affiliated with the peasant farmer movement in…Bajo Aguán between January 2010 and May 2013, with specific allegations…linking 40 of these to Dinant properties, Dinant security guards or its third party security contractor”. Dinant’s position is that the killings of peasant farmers reported were either unconnected to Dinant and its security personnel or involve acts of “legitimate self-defence on behalf of its security personnel”.

Today, Honduras has 190,000 hectares of palm oil plantations, which extend across the Atlantic coast from Colón department in the west to Cortés on the east, according to the agriculture and livestock ministry (SAG). Yet, regulation of the expansion into new areas remains weak, including in notionally protected areas (see sidebar).

Moving forward

Both Guatemala and Honduras have sought to turn a page on the darker side of this industry. Separately, both Honduran and Guatemalan palm oil producers last year (on 10 July and 3 October respectively) committed to boost the sustainability of palm oil production and zero deforestation. Grepalma has seen members’ signatures to its pledges double since then. The association told industry publication Food Navigator on 9 March that a market opting for oil produced with a “economic, environmental and social balance” is its best ally. Indeed, with consumer demands for greater transparency and sustainability growing, big producers increasingly have to demonstrate an ability to meet these demands.

• Dubious justification

In a statement dated 19 September FGT slammed the justification for the state of siege as “lies” to justify silencing local communities and restricting human rights.

• Deforestation

A report published in October 2019 by Mongabay cites satellite analysis by the University of Maryland which showed that Punta Izopo national park in the northern Caribbean department of Atlántida lost 8% of forest cover between 2001 and 2017 - linked to palm oil plantation expansion. According to the report, in the Jeanette Kawas national park, also in Atlántida and which is named after the anti-palm activist who was assassinated in 1995 – six square kilometres are destroyed per year.

URUGUAY| Moody’s upgrades credit rating, praises fiscal policy. Ratings agency Moody’s upgraded Uruguay’s long-term issuer and senior unsecured bonds ratings to Baa1 from Baa2 on 15 March. The agency also revised its outlook for the country from ‘stable’ to ‘positive’. “The key drivers of the upgrade include strong institutions that support the implementation of structural reforms and continued compliance with fiscal and monetary policy frameworks, which in turn point to higher sustained growth rates than in the past, supported by strong investment,” Moody’s said in a statement. The agency expects Uruguay’s GDP to grow 3.5% this year, echoing government forecasts, after the economy is expected to have expanded just 0.5% in 2023. Risks include Uruguay’s vulnerability to weather-related shocks and a return to sustained low-growth rates if investment remains muted, but these are balanced out by “sound fiscal policy implementation”, Moody’s said.  

BRAZIL | Government seeks to boost domestic fertilizer production. The Brazilian government led by President Luiz Inácio Lula da Silva inaugurated a new fertilizer production plant in the state of Minas Gerais on 13 March, the first such facility to start operation as part of the national fertilizer plan. Initially outlined in 2022, the plan aims to increase the share of domestically produced fertilizer to 45%-50% by 2050. Brazilian farmers currently rely on imports for nearly 90% of their fertilizer needs at a cost of US$25bn per year. Speaking at the inauguration, Lula said Brazil must reduce its dependence on imported fertiliser to become the “granary of the world”. The government estimates that the US$1bn Complexo Mineroindustrial plant, owned by Swiss-headquartered manufacturer EuroChem, will provide 1m tonnes (t) per year of phosphate fertilisers, manufactured exclusively for domestic use. “We want to stop being an importer,” Lula said, highlighting that domestic manufacturing will also bring jobs to Brazilians.

Brazil & Southern Cone: inflation rate
Percentage variation (year-on-year)

Brazil & Southern Cone: GDP growth (%)
Quarterly figures are year-on-year growth

A report released in July by the United Nations Development Programme (UNDP) says that if Jamaica adopts a “green economic model” it could create up to 8,000 new jobs and add 1% to its GDP.

The report compares a “business as usual” with a “green model” future for the country. In the green scenario it says thousands of new jobs will be created mainly in services, sales, and clerical support. There will be a J$11.7bn (US$73.8m) increase in investment linked to the country’s nationally determined contributions (NDCs – decarbonisation targets agreed with the UN). The country will also be able to reap major savings if it electrifies road transport, thereby decreasing demand for more expensive liquid transport fuels.

Commenting on the report, UNDP representative Kishan Khoday said “Pursuing a green economic model is not just a strategic choice for Jamaica as a Small Islands Developing State (SIDS) – it is an imperative for survival, resilience, and inclusive prosperity.”            

The report from the IMF’s latest Article IV consultation with the government of the Bahamas highlights problems on two fronts. In the tourism sector, it is not clear who will invest the US$1bn needed to make the Baha Mar mega-resort operational. In the financial sector, the erosion of correspondent banking relationships – a problem across much of the region – has resulted in an unemployment rate of about 30%, or around twice the national average.

The IMF released the conclusions from its regular Article IV consultation with the government on 10 June. The overall picture is one of persistent stagnation. Unemployment rose to nearly 15% at the end of 2015, thanks to massive lay-offs of workers hired to build the massive Baha Mar resort project. This has contributed to softness in domestic demand, which has more or less negated the impact of a small rise in air tourism arrivals. The weakness of the economy, persistent non-performing loans (NPLs) and caution on the part of local banks, had resulted in a small fall in credit to the private sector. (See chart)

Following its introduction at the beginning of 2015, collections of Value Added Tax (VAT) last year amounted to Bs$536m (US$536m), more than had been anticipated. This has contributed to a fall in the fiscal deficit, relative to GDP, which the IMF expects to continue. Nevertheless, the stagnation of the economy means that the overall burden of debt should continue to grow. The IMF anticipates that central government debt will rise from 64.4% of GDP in 2015 to 67.0% in 2017.

How, and when, the Baha Mar mega-resort contributes to the fortunes of the Bahamas’ tourism industry – one of the largest in the Caribbean – remains to be seen. The project is a 3,000 room resort and casino that is, to a certain extent, in competition with the nearby Atlantis Resort. Whereas Atlantis caters mainly to families, Baha Mar’s developers envisaged that it would cater mainly to an adult clientele. When work stopped on the nearly complete project in June last year, the estimated value of the investment was more or less equivalent to 40% of the country’s GDP. Construction ceased as a result of various legal disputes between China Construction of America (CCA), the main builder, China Development Bank, the Export Import Bank of China, investors and the government. The firm responsible for the development filed for bankruptcy.

Ominously, the United Nations’ Economic Commission for Latin America and the Caribbean (ECLAC) questions whether there is enough demand to support two mega-resorts in the Bahamas[1]. Atlantis, too, has had problems. Burdened with debt, it was declared bankrupt, with the result that the owner, South Africa’s Kerzner International Holdings, had to transfer its interest to Canada’s Brookfield Asset Management. ECLAC notes that damage to Baha Mar since construction work ceased means that new investment of US$1bn is needed to make the mega-resort operational. However, neither Kerzner International Holdings, nor Fosun Group (a Chinese company with operations in the Bahamas) or other potential investors have emerged.

In relation to the financial sector, the IMF noted that the global trend by banks towards de-risking has been a challenge. In the Bahamas, the main problem has been the erosion of correspondent banking relationships [Latin American Economy & Business, April 2016]. In part because of the increased regulation in relation to anti-money laundering and counter-terrorism financing (AML/CFT) and in relation to customer due diligence and know your client (CDD/KYC) concerns, and in part because of the declining profitability of correspondent banking, major international banks have been cutting their ties with numerous banks across the Caribbean. This trend appears to have hit the Bahamas harder than other countries. At a speech in late February 2016, the Minister of Financial Services CV Hope Strachan noted that unemployment in the sector had risen to 30%.

[1] ECLAC, Foreign Direct Investment in Latin America and the Caribbean 2016, p64.

That Guyana is on the cusp of a transformation as a result of major oil discoveries has been confirmed by another find announced by the Exxon Mobil Corporation at the end of July. Given the transformation that is about to happen it would seem to be appropriate that the government is moving ahead with plans to update the constitution of the notoriously divided country.

On 25 July Exxon Mobil announced that it had discovered a further 500m oil-equivalent barrels in the Payara reservoir, bringing the total estimated recoverable reserves in the Stabroek Block to between 2.25bn and 2.75bn oil-equivalent barrels. The new find is 12 miles northwest of the Liza Phase-1 portion of the 6.6m acre Stabroek Block, which is around 130 miles offshore.

A spokesman for Exxon Mobil said: “Payara, Liza, and the adjacent satellite discoveries at Snoek and Liza Deep will provide the foundation for world class oil developments and deliver substantial benefits to Guyana.” The government responded to the new discovery by reiterating that it is in a “race against time” to build capacity ahead of the production target date for Liza-1 of 2020.

A major concern for outside observers is how Guyana’s political system will cope with the transformation, and temptations, ahead. One of the curiosities of the Guyanese political system is that it has a habit of awarding the two main parties with long periods of alternating power. The People’s National Congress (PNC), which is largely supported by the Afro-Guyanese community, held power for 28 years until ousted by the East Indian-supported People’s Progressive Party (PPP) in 1992. The PPP then held on to power for 23 years until the PNC returned to power in 2015 as the major component in the A Partnership for National Unity (APNU)-Alliance for Change (AFC) coalition government. The concern for the PPP must be that the inflow of oil money from 2020 could reinforce the power of incumbency, and hence the longevity of the APNU-AFC ascendancy.

In addition to this, the PPP has a demographic problem. The full details of the latest (2012) census were released in early July, and while the report did not make particularly comforting reading for either main party, it was worse for the Indian-supported PPP. According to the figures, the population of East Indian descent declined from 326,277 in 2002 to 297,493 in 2012, that is from 43.4% of the total population to 39.8%. Over the same period, the Afro-Guyanese population declined from 227,062 (30.2% of the total) to 218,483 (29.2%). However, the mostly APNU-supporting mixed-race population grew from 125,727 (16.7%) to 148,532 (19.9%), which means that the combined share of the Afro-Guyanese and mixed-race population has increased from 46.9% to 49.1%. Then there are the Amerindians, who make up an interesting segment of the population with their ‘floating’ political allegiances. Between 2002 and 2013, the Amerindian population increased from 66,675 (9.1% of the total) to 78,492 (10.5%).

With this as the background, it is not surprising that the United Nations (UN) has warned the APNU-AFC government not to rush the process of constitutional reform following a visit to the country in February by a UN Constitutional Reform Team. So far the government appears to be heeding this advice, but the process is now moving forward, with the Constitutional Reform Consultative Commission Bill presented to the National Assembly at the end of July. The bill envisages the appointment of a 15-member commission to assist the Parliamentary Standing Committee for Constitutional Reform in its preparation of a final set of recommendations for submission to the National Assembly.

Gold became Nicaragua’s most valuable export in 2020 thanks to production growth and rising prices, but experts worry about the effects on the economy when commodities enter a downward cycle.

Gold exports were worth US$666m in 2020, beating beef (US$551m) and coffee (US$437m) into first place, reports Nicaragua’s export agency Cetrex. This figure is up from US$500m in 2019, when beef was the most valuable export at US$531m. This is due to an increase in exports from 11,447kg in 2019 to 12,150 kg in 2020, combined with higher prices, which went from US$43,669/kg in 2019 to US$54,813/kg in 2020. Gold is a popular investment in times of crisis, and the coronavirus (Covid-19) pandemic has encouraged investors to seek stability.

The value of gold exports has continued to grow in 2021, with Cetrex reporting exports worth US$500m for the period 1 January to 31 July 2021, up from US$331m for the same period in 2020. This is largely attributable to a 37.2% increase in export volumes, but prices also rose 10.0%. Industry figures predict further growth in production in the coming years, with new mines such as UK miner Condor Gold’s La India project in north-west Nicaragua and Canadian miner Mako Mining’s San Albino open pit mine set to start operations in the north of the country. In addition, higher production is expected at Canadian firm Calibre Mining’s Limón and Libertad mines in western and central Nicaragua respectively, as well as from Colombian miner Mineros’ Hemco Nicaragua operations in the north-east. Business website BNAmericas projects an extra 300,000 ounces per year will be produced in Nicaragua in the next few years.

Further growth in the sector is possible, according to Sergio Javier Murillo, president of the Nicaraguan mining chamber (Caminic). “Nicaragua has enough potential to develop metallic and non-metallic mining projects,” Murillo told Central American business magazine Estrategia & Negocios (EN) in a report published on 10 August. “Current mining areas only cover less than 1% of national territory.” The target is to export 500,000 ounces (14,175kg) of gold by 2023, added Murillo, who also wants to formalise so-called artesanal mining operations, which he estimated are currently responsible for 25-30% of gold exports. This would make their gold traceable and ensure that the miners follow Nicaraguan legislation, said Murillo.

In a February 2021 report by Costa Rica-based business publication Revista Summa, general director of the Nicaraguan association of producers and exporters (Apen) Mario Arana, hailed the successful mining investments, which he said provide 25,000 direct and indirect jobs. These successes have seen mining consolidate its position as a growth area, he added. “Nicaragua’s mineral wealth still has a lot to offer and there are companies that are investing in developing those resources that have been identified as exploitable,” said Arana. However, Arana also recognised that mining companies need to do more to support community development, and he pointed out that political instability ahead of the November elections could be an issue.

President Daniel Ortega is running for a fourth term and has been widely criticised for increasingly authoritarian governance in recent years, including arresting a raft of opposition candidates in June. Darren Hall, executive president of Canadian firm Calibre Mining, spoke highly of his experience operating in Nicaragua to date in a BNAmericas report published in July but also acknowledged that “the next elections will be complicated”. Hall recounted how he had met Ortega several times and had been assured that a potential fourth term would not see mining interests nationalised.

However, mining could be affected if Ortega continues to rile foreign powers with authoritarian crackdowns in the lead up to the election. This could increase the risk of widening or tightening of sanctions, according to a 11 June statement from international credit ratings agency, Fitch Ratings. On 6 August the US Senate approved the Reinforcing Nicaragua’s Adherence to Conditions for Electoral Reform (Renacer) Act, which aims “to dramatically increase US diplomatic engagement in response to the government of Daniel Ortega’s continued use of repressive tactics to intimidate, inhibit or arrest every aspiring opposition candidate ahead of the scheduled elections in November”.

At the time of writing, the bill had yet to be approved by the US House of Representatives, but in its current form the bill: “Calls for the executive branch to review Nicaragua’s continued participation in the Central America Free Trade Agreement (CAFTA); Expands oversight of international financial institutions’ lending to Nicaragua and reaffirms the existing statutory waiver for humanitarian projects; Requires sanctions coordination with Canada and the European Union.”

Each of these provisions should worry Ortega and mining companies. For starters, the US is Nicaragua’s biggest trade partner and expulsion from the Cafta trade deal would obliterate the export sector. From January to July Nicaragua exported goods to 105 countries, but 47% of total exports, worth US$1.04bn, went to the US. El Salvador was the second largest trade partner, with 9.8% of exports (US$211.8m), and Costa Rica was third with 4.2% (90.7m). Given the importance of trade with the US even the threat of a review could make mining companies reconsider investments in new projects, which can take years to develop.

This would have massive implications for the Nicaragua economy, but some say there is cause for concern even if the exporters are able to continue operating as normal. Exports have fallen in volume but risen in value thanks to high global prices for primary materials. Guillermo Jacoby, president of Apen, told local media that while he expects commodity prices to keep rising in 2021 and into the first half of 2022, he is worried about the prospects for late 2022 and 2023 because prices are cyclical. Jacoby believes that Nicaragua needs to change the type of products that it exports, moving away from commodities and into products with greater added value. This is particularly important for Nicaragua as exports have fallen in volume but increased in value thanks to high international prices.

As Jacoby points out, this won’t last forever. The Ortega government might be riding a wave of high commodity prices now, but in its June statement Fitch Ratings said “growth projections for 2022 and 2023 are capped by credit contraction, political uncertainty stemming from the upcoming elections and the expected fiscal consolidation after the election”. Some argue that Ortega is playing with fire in angering the US by arresting opponents when he needs to be considering solutions to economic issues, particularly as other major export sectors such as coffee and beef are susceptible to problems linked to climate change, such as hurricanes Eta and Iota, which impacted production in 2020. For example, coffee production fell 5.0% from 2019 to 2020, peanut production fell 10.4%, and sugar production fell 19.3% for the same period, according to Cetrex.

Nicaragua’s need to move up the global value chain is shared by its Central American neighbours, but it’s not easy to do. Many experts concur that investing in technology and skills in order to be able to produce and export value-added products is the way forward for developing economies, but attracting the necessary investment is tough. Ortega’s apparent desire to hold onto power by any means possible (as maintained by his critics) makes it even harder.

VENEZUELA | El gobierno presenta un presupuesto “irreal”. El 22 de octubre el gobierno liderado por el Presidente Nicolás Maduro presentó su borrador de presupuesto para el 2014 a la Asamblea Nacional, el cual fue inmediatamente descrito como “irreal” e “infundado” por la oposición política. El plan de BF551mm (US$87mm) es un 39,4% más alto en términos de moneda local nominal que el presupuesto del 2013, pero los economistas del sector privado calculan que es alrededor de US$5,0mm menos en términos reales (ajustado a la inflación).

El presupuesto asume un crecimiento real anual del PIB de entre el 4% y el 6% en el 2014, y una tasa anual de inflación de entre el 26% y el 28%, alrededor de la mitad de la tasa actual del 50%. Como siempre, esto está basado en un precio deliberadamente bajo del petróleo de US$60 por barril, solamente US$5 más alto que el pronóstico del último año, a pesar del hecho de que los precios del petróleo crudo venezolano han promediado US$102,5 por barril hasta la fecha en el 2013, según cifras del ministerio de energía.

Esta subestimación del precio del petróleo permite al gobierno gastar los ingresos ‘excepcionales’ del petróleo a su entera discreción y sin ninguna transparencia. Notablemente, el presupuesto también mantiene la tasa de cambio oficial del gobierno en BF6,3/US$1, a pesar del hecho de que la tasa de cambio en el mercado paralelo ahora ha llegado a BF49,26/US$1. El ministro de finanzas, Nelson Merentes, dijo que el presupuesto era el resultado de “cuidadosa consideración”. “Tenemos que ser muy prudentes cuando estimamos [el precio] de este recurso [petróleo], debido a que si hay un importante impacto externo los precios podrían caer [...] entonces no hay manera de equilibrar el presupuesto”, alegó.

Merentes admitió que la galopante inflación era una “terrible preocupación” pero prometió que el gobierno adoptaría medidas adicionales para frenarla, y también prometió aliviar la escasez crónica de bienes básicos, particularmente los alimentos. En respuesta, la principal coalición opositora, Mesa de la Unidad Democrática (MUD), emitió una declaración quejándose de que el presupuesto anual se ha convertido en algo “sin base y ya no representa un punto válido de referencia para el desarrollo y la implementación de políticas públicas”. Dijo que el pronóstico de crecimiento del 4%-6% “no solamente luce irreal sino también irresponsable”.

El presupuesto del 2013, también pronosticaba una tasa de crecimiento simiar, pero el crecimiento real del PIB en la primera mitad del año fue un débil 1,6% año en año. La MUD cuestionó porqué el país estaba soportando “una profunda crisis económica caracterizada por alta inflación, escasez, y una significativa caída en las reservas internacionales del banco central” cuando que el crudo venezolano ha permanecido en alrededor de la marca de US$100 en el 2013. El gobierno de Maduro responderá que todo esto es debido a la campaña de sabotaje económico promovida por la oposición.

BOLIVIA | Nueva organización de solución de  disputas. La cámara de hidrocarburos y energía de Bolivia (CBHE), que agrupa a firmas privadas del sector que operan en el país, anunció el 21 de octubre la creación de un nuevo cuerpo para la solución de controversias para el sector de hidrocarburos nacionalizado del país. La constitución boliviana del 2009 no reconoce la jurisdicción de ningún tribunal o cuerpo de resolución de disputas foráneo.

La CBHE ha estado trabajando con la firma petrolera estatal de Bolivia, Yacimientos Petrolíferos Fiscales Boliviano (YPFB), para establecer el nuevo cuerpo (hasta ahora sin nombre). Iver von Borries, del comité ejecutivo de la CBHE, ha sido nombrado presidente de la nueva institución. Él dijo que su creación se debe no solamente al hecho de que las firmas de energía que operan en Bolivia no tienen el recurso de mecanismos externos de solución de disputas, sino también al hecho de que “no hay tal cuerpo especializado de resolución de disputas a nivel regional”. Según van Borries el objetivo es que el nuevo centro eventualmente pueda ofrecer sus servicios a otros países y compañías en la región.

• Visas para la Unión Europea

El 21 de octubre el comité de libertades civiles del Parlamento Europeo (PE) dio luz verde a una propuesta para eliminar el requerimiento de visa para cortas estadías de ciudadanos colombianos y peruanos que busquen ingresar a la Unión Europea (UE). El 3 de octubre, España propuso la inclusión de los dos países andinos que firmaron un Tratado de Libre Comercio (TLC) con la UE el año pasado, en una lista de países para los cuales la UE considerara suprimir la exigencia de visas. El anuncio fue celebrado por el Presidente de Colombia, Juan Manuel Santos, quien dijo que era “una noticia muy importante y positiva” denotando el reconocimiento de los “avances en seguridad, desarrollo económico, y estabilidad política en nuestros países”. La lista podría recibir aprobación final para el 2014.

Date: 6 June.

Type: Midterm federal legislative elections, all 500 seats in the chamber of deputies to be renewed; state and municipal elections, 20,311 elected posts up for grabs including 15 states governorships.

Main contenders: Movimiento Regeneración Nacional (Morena), Partido Acción Nacional (PAN), Partido Revolucionario Institucional (PRI), Partido de la Revolución Democrática (PRD), Movimiento Ciudadano (MC).

A mid-term test for AMLO

The elections will mark the midpoint of the six-year term (sexenio) to which President Andrés Manuel López Obrador (AMLO) was elected in 2018 for Morena. Although López Obrador is not competing, the election is being dressed as a referendum on his presidency so far. In 2018 Morena won majorities in both chambers of the federal congress. This has allowed López Obrador to advance his legislative agenda. Morena and López Obrador will be hoping to retain the majority in the chamber of deputies and capture more state governorships. But this will be no mean task given that the political opposition has complained that Morena’s majority means that congress is unable to provide the necessary counterweight to López Obrador, to the detriment of Mexico’s democracy.

Having a congressional majority means that the López Obrador executive has been able to fully implement its preferred policies to date. It also means that the López Obrador administration can be held responsible for Mexico’s poor performance in practically every area in the past two years. The López Obrador administration has not only failed to deliver on the president’s promise to pacify the country with over 60,000 homicides reported between 2019 and 2020; it has also presided over one of the longest and deepest economic recessions in Mexico’s history. The economy contracted (by 0.1%) in 2019 for the first time in a decade and GDP is estimated to have fallen by a further 9% last year. Moreover, the government’s handling of the coronavirus (Covid-19) pandemic is also seen as deficient, with Mexico having the world’s fourth highest Covid-19 death toll.

These poor results would make it difficult for any political party to fight an election. However, Mexico’s political opposition was so soundly defeated in 2018 that it remains weak. But the sense that Mexico is regressing and the fear that López Obrador’s authoritarian streak is weakening Mexico’s democracy has led the opposition to unite against Morena. Three of the four main opposition parties - PAN, PRI, and PRD - have agreed to back a common list of candidates in the federal legislative election and some, but not all, in the state elections.

This unprecedented ‘Va por México’ (‘Let’s go for Mexico’) electoral alliance should mount a stiff challenge. Morena is defending a 252 majority in the federal chamber of deputies. But the centre-right PAN and the centrist PRI are Mexico’s most traditional and established parties, they each have a broad electoral base and well-established party structures. The PAN is currently the second largest party in the chamber of deputies, with the 77 seats. The PRI has 48 seats, and the PRD has 12. Under the alliance, the Va por México members have agreed to present a consensus list of candidates for federal deputies in 190 of the 300 federal electoral districts. The idea is to back the strongest set of candidates in these contested districts to defeat Morena candidates, the remaining districts are considered safe for one of the alliance’s members.

The potential downside for the Va por México parties is that the unnatural alliance could alienate their respective support bases. The PAN and the leftist PRD forged a ‘Stop the PRI’ alliance in the 2015 midterm elections in a bid to prevent the-then ruling PRI from gaining full political control of the country. The PAN-PRD alliance was relatively successful, and the two parties have maintained a working relationship since then. But traditional rivals PAN and PRI rarely see eye to eye and have a long history of confrontation. Notably, the Va por México alliance has been derided by López Obrador and Morena as confirming that the three parties are politically conservative and economically neoliberal; inherently hostile to Morena’s left-wing progressive politics; and that their main objective is to thwart its administration at all costs.

The remaining leading opposition party, the MC, decided against joining Va por México. The leftist MC did engage in negotiations with the PAN, PRI, and PRD but its party leadership ultimately decided against taking part in the alliance, arguing that it could cost it votes. The MC currently has 27 seats in the chamber of deputies after capitalising on the PRD’s shift to the centre since 2015. The MC won more legislative seats than the PRD for the first time in the 2018 election. The MC believes that it can attract an even larger proportion of the leftist vote by distancing itself from Va por México. This could allow MC to make gains, but it would also likely play into Morena’s hands by dividing the anti-Morena vote.

However, the PAN, PRI, and PRD have concluded that only by joining forces can they defeat Morena and hope to get a congressional majority. The three parties believe that this is critical for defending Mexico’s pluralist democracy and stopping the entrenchment of an autocratic government by offsetting the near total power currently enjoyed by the López Obrador executive.  

More to lose

Morena has also struck its own electoral alliances. But these are with much smaller parties, most of which had joined the winning coalition set up to contest the 2018 election. Any gains in electoral support deriving from the alliances struck by Morena will be marginal, and the ruling party has more to lose than what it can gain. Morena’s aim is to maintain its strong majority and, if possible, reach a qualified two-thirds majority in its own right (Morena can currently muster a two-thirds majority with its allies). The charismatic López Obrador remains popular, with an approval rating of over 60%. The challenge for Morena is to translate López Obrador’s personal approval into support for Morena candidates, who by and large lack the president’s charisma and for the most part are not well known.

• Questionable candidates

Being a young political party (registered only in 2014), Morena’s pool of affiliates with experience of holding public office is limited. This has resulted in many politically inexperienced figures, whose main merits seem to be that they are close to President López Obrador, seeking the party’s nomination in some key contests. The most egregious example of this is Paloma Aguilar Correa, López Obrador’s former bodyguard, who is hoping to become Morena’s gubernatorial candidate in San Luis Potosí state. Meanwhile Senator Félix Salgado Macedonio has been selected as the party’s gubernatorial candidate in Guerrero state, even though he faces multiple rape accusations. Salgado’s nomination produced internal party divisions, but his candidacy has received López Obrador’s blessing.

It is worth noting that while López Obrador’s personal approval remains high, the approval of his government is significantly lower at around 30%. This helps explain why Morena gets just 32% support in voting intention polls for the federal legislative election. The voting intention polls give the PAN 17% support, the PRI 16%, and the PRD 4%. This suggest that the combined level of support for the Va por México alliance is comparable to Morena’s. The alliance is potentially in a strong position to wrest control of the chamber of deputies from the ruling party and provide a counterbalance to President López Obrador for the remainder of his term ending in 2024.

Roles reversed in gubernatorial races

In contrast to the legislative elections, it is the opposition that holds power in virtually all the 15 states that will be holding gubernatorial elections (Baja California state being the sole exception). The incumbent opposition parties are focused on retaining control of the states that they hold but particularly on stopping Morena from concentrating even more political power. That the Va por México parties have sealed electoral alliances in some state elections underlines this. Notably, this is the case in Baja California where the goal is to unseat Morena from one of the few states it governs. Meanwhile Morena’s objective is to retain Baja California and take a few gubernatorial seats from its opponents to consolidate and increase its presence at state level.  

Hoping to remain in congress

According to the official records of Mexico’s chamber of deputies the vast majority of incumbent deputies have announced their intention to seek re-election. The records show that 444 deputies (90%) have officially expressed their interest in standing for re-election. Notifying the chamber about this is a legal requirement. According to the chamber’s records, 232 of the 252 Morena deputies have said they will seek re-election; 64 of the 77 PAN deputies; 44 of the 48 PRI deputies; and seven of the 12 PRD deputies. This suggests that voters could be presented with choices very similar to those they faced in the 2018 legislative election. Yet a recent opinion poll found that 22% of respondents wanted to change their congressional representatives. 

Stung by criticism of its migration policy, the Panamanian government claimed this week that it was motivated first and foremost by humanitarian impulses, which were complemented by national security considerations. It was responding to a report from the US-based lobby group Human Rights Watch (HRW) calling on the Panamanian and Colombian governments to do much more to protect and assist the hundreds of thousands of migrants and asylum seekers endeavouring to traverse the inhospitable and roadless Darién Gap, that acts as the natural border between the two countries.

The surge in attempted crossings of the Darién is well documented. According to the HRW’s 110-page report ‘Neglected in the Jungle’, published on 3 April, more than 500,000 people undertook the journey in 2023, including 113,000 children. A total of 73,167 migrants crossed the Darién in the first two months of 2024, according to Panama’s Servicio Nacional de Migración (SNM), up 48% compared with the same period last year. The HRW report claims that neither the Panamanian nor the Colombian government is doing enough to provide protection and assistance for migrants, such as food, water, and basic healthcare services, or to investigate exploitation by criminal groups, including sexual violence. HRW said that 245 migrants “disappeared” in the jungle between 2021 and March 2023, although it says “the real figure is likely to be much higher”.

HRW researchers maintain that the Colombian government lacks a clear strategy to safeguard migrants, leaving them vulnerable to abuse and exploitation by the Clan del Golfo drug trafficking organisation (DTO), which is making vast amounts of money from people-trafficking fees. In a November 2023 report, the NGO said the Colombian military estimated that the DTO collects, on average, US$125 per person crossing the Darién Gap, which, if accurate, could mean it is making more than US$60m a year from its control of the migration route.

Panama, on the other hand, has a strategy that HRW describes as “controlled flow” or “humanitarian flow”, which restricts the free movements of migrants and seeks to move them on as quickly as possible to its northern neighbour, Costa Rica. The report recommends that both governments should appoint special advisers or other senior officials to coordinate bilateral responses to the increasing numbers of migrants now crossing the Darién.

Panama’s public security minister, Juan Manuel Pino, led the response to the HRW report, saying that migrants received food and health assistance on the border with Colombia. Panama’s foreign minister, Janaina Tewaney, said she would appreciate it if HRW acknowledged the efforts being made by both countries facing “a challenge of huge proportions”, after a meeting with her Colombian peer Luis Gilberto Murillo, who called for more solidarity from the international community and the reactivation of a trilateral mechanism with the US to discuss joint efforts on border security and migratory challenges. 

On the defensive
The director of Panama’s Servicio Nacional de Migración (SNM), Samira Gozaine, criticised the HRW report, which she said “does not reflect the reality of what is happening in the Darién”. She said that there were “more than 17 institutions, NGOs in the Darién and we have never heard accounts [like this]”, accusing HRW of producing “an ideological report”. The director of Panama’s national border police force Servicio Nacional de Fronteras (Senafront), Jorge Gobea, said 321 Panamanian nationals and foreigners involved in crimes against migrants were arrested between 2021 and 2024.

Andean countries (mainly Colombia, Peru, and Bolivia) have long held a global monopoly over coca cultivation. This may be ending. A new report reveals that climate and soil conditions in nearly half of northern Central America are highly suitable for local cultivation.

A research team led by academics at Ohio State University in the US and Colombia’s Universidad de Tolima revealed their findings in an article in Environmental Research Letters, a quarterly peer-reviewed scientific journal, published on 17 September. The team analysed coca eradication reports from around Central America, collected data on climate, soil, and topography at each site, and used computer models to compare that with known coca cultivation locations in Colombia. Their main conclusion is that 47% of Honduras, Guatemala, and Belize have the right climate and soil for commercial coca growing.

Professor Kendra McSweeney of Ohio State University said: “South America’s long monopoly on coca production for the international cocaine market is over; that’s a very significant development in the dynamics of the cocaine trade”. The full implications may take some time to emerge. Crop eradication and government action against trafficking in the Andean region appears to have increased interest on the part of drug trafficking organisations (DTOs) in alternative sources of supply: recent years have seen the appearance of “experimental” clandestine crops in Honduras, Guatemala, Mexico, and Costa Rica. Crops have also been detected in Venezuela along the border with Colombia.

While Central America is unlikely to rival the Andean countries in terms of volume, it is closer to the main consumer markets in the US and Europe. That could lead rival DTOs to increase their presence and compete, possibly violently, for market share. The report suggests that for Central American governments, launching immediate eradication campaigns might not be the best policy response, and could be counterproductive. It says eradication efforts in the Andes, by forcing cultivation to move to new areas, have often had the unintended consequence of increasing, rather than reducing, the total cultivated area. Eradication is also less effective and sustainable when it is not complemented with other initiatives such as crop substitution, strengthening the rule of law, provision of basic services, formalisation of land ownership, and anti-poverty efforts.

McSweeney was cited by US human rights lobby group Washington Office on Latin America (Wola) as issuing a rather stark warning, commenting that “if we have learnt anything from supply-side drug control in South America, it’s that eradicating coca crops and trying to shut down trafficking operations, trying to shut down the cartels, and trying to go after the Pablo Escobars and their successors – it generates a lot of Netflix content, but it doesn’t do anything to reduce the amount of drugs that make it into the US and other countries.”

Central America’s role in cocaine supply chain

The article published on 17 September in Environmental Research Letters notes that since the 1980s, Central America’s role in the global cocaine supply chain has largely been to facilitate bulk transhipments from Colombian suppliers to Mexican distributors. However, in the mid-2010s some Honduran trafficking groups began refining coca paste imported from Colombia into powder cocaine. Around the same time, authorities began to report their discovery of well-capitalised and reportedly ‘experimental’ coca-growing operations north of South America: in Mexico in 2014, in Honduras in 2017, and in Guatemala and Costa Rica in 2018.

Representatives of the Buenos Aires provincial government failed to reach an agreement with the striking teachers’ unions in the province on 26 March. Miguel Díaz, the leader of the provincial teachers’ union (UDOCBA), told reporters that the administration of Governor Daniel Scioli had not presented a new proposal, adding that “they only promised us they would continue discussing and negotiate again in September”.  The unions are demanding a 35% pay increase; so far the government has only offered 30.9% spread over two instalments.

Speaking after the break-up of another round of talks, Díaz said: “They have to give us 6,400 pesos [US$800] which is what we demand. The government has the resources to match the salary offers in Santa Fe, Capital and Córdoba.” In response, Scioli's education minister, Nora de Lucía, urged teachers to return to their classrooms and follow the injunction passed by provincial judge Francisco Terrier on 23 March.

The judge confirmed that the government’s offer consisted of a 30.9% raise in two instalments, with the possibility of opening up negotiations towards August. “We teach all our students how to exercise their rights and that is why we should set the example,” De Lucía said, having failed to convince teachers to end industrial action.

The leader of the Sindicato Unificado de Trabajadores de la Educación de Buenos Aires (SUTEBA), Roberto Baradel, on the other hand, also confirmed the continuation of strike action and underlined: “We came to this negotiation with a proposal of 35% and we have received a repetition of the previous offer.” The unionist called for a “dignified proposal” from provincial authorities, maintaining that teachers were willing to find a solution. “We know all about the inconveniences this creates, but in order for schools to open dignified salaries should be guaranteed,” he stated.

Buenos Aires is Argentina’s most populous region, and around 3.5m pupils are being affected by the strike, which started on the scheduled start of the school year on 5 March. Despite a court injunction ordering the teachers back to work, the walkout continues. The start of the 2013 school year was also delayed by a teachers’ strike over pay levels.

PERU | ‘Lot 192’ tender process. The tender process for the exploitation rights for the ‘Lot 192’ oilfield, located in Peru’s northern Amazonian region of Loreto, takes place on 23 July. ‘Lot 192’ is Peru’s largest active oilfield producing 12,000 barrels of oil per day (bpd), equivalent to a fifth of Peru’s national oil production. For the past 15 years it has been operated by Argentine firm Pluspetrol, but its 15-year exploitation contract is coming to an end and the government led by President Ollanta Humala launched a public tender process earlier in the year, looking to award a new 30-year exploitation contract.

But in recent months local indigenous communities that live close to ‘Lot 192’ have staged protests complaining that the extraction of oil at the site has produced contaminated local water sources and produced severe environmental damage to the surrounding areas, and have called for oil exploitation at the site to be terminated. Thus although three firms (Pluspetrol, Canada’s Pacific Rubiales and the Anglo-French Perenco) have expressed interest in submitting bids to secure a new exploitation contract, last month the Humala government announced that a new contract will only be awarded if a deal can be reached with the close to 40 indigenous communities that claim to have been affected by oil extraction at ‘Lot 192’. The government has been trying to reach a deal with the indigenous communities since then. But this has proved difficult.

According to the culture ministry (Minem), the indigenous communities are demanding the establishment of a US$1bn trust fund that is to be used to finance environmental and social development projects in the area in order to approve the continued exploitation of the site. However, the government has said that it does not believe that it will be able to raise these funds from the firms interested in exploiting ‘Lot 192’. The impasse is problematic for the Humala government which is keen on increasing national oil production, which has fallen from a peak of 120,000 bpd in the 1970s to 60,000 bpd today, as part of its efforts to stimulate the domestic economy.

According to the latest economic growth figures released by Peru’s national statistics institute (Inei) on 15 July, GDP grew by a moderate 2.14% in the first five months of the year. This was lower than market predictions, which hovered around 2.5%, and suggests that economic recovery is still tentative.

Meanwhile, in a bid to advance its case to secure the new oil exploitation contract, on 13 July Pluspetrol said that its oil extraction activities in Loreto had left US$118.5m in royalties to the Peruvian State in the first six months of the year. The company added that since it started operations in Loreto, it has generated some US$1bn in royalties to the State.

BOLIVIA | Fitch rating upgrade. The international ratings agency Fitch announced on 15 July that it was upgrading its rating of Bolivia’s sovereign debt one notch from ‘BB-’ to ‘BB’ with a ‘stable’ outlook. A Fitch statement said that the decision was a result of an improvement in the sustainability of Bolivia’s “hydrocarbons production, the largest source of exports, fiscal revenue and domestic investment”. It said that Bolivia’s “robust external buffers and ample fiscal policy space render its economy better-placed to absorb adverse shocks and adopt counter-cyclical policies than other commodity exporters in the ‘BB’ category”.

Fitch also noted that “five-year average economic growth rose to 5.4% in 2014, exceeding the ‘BB’ median of 4.1%... [and] Fitch forecasts that economic activity would keep pace at an average 4.4% in 2015-2017, driven by robust public investment in diversification and industrialization projects and eased domestic liquidity conditions”.

Following the upgrade, Bolivia’s finance minister, Luis Arce, said that he would issue up to US$1bn in international bonds this year to boost public spending further. Bolivia only returned to international debt markets in October 2012 when it placed bonds valued at US$500m on international markets for the first time in over a century. This was followed by another similar issue for US$500m in bonds made by Bolivia in August 2013.

• Silk & Co. lands in Colombia

On 15 July Ireland-registered investment bank Silk & Co. announced that it had formally begun operations in Colombia, marking its entry into Latin America. In a statement Silk & Co. CEO Roy Ellis said that the firm’s business in Latin America will concentrate on financial advice, offering financing for infrastructure development projects and managing foreign investment. Explaining the firm’s selection of Colombia as its centre of operations in Latin America, Ellis said that this was due to the perception of security and stable economic conditions that international investors currently have of the Andean country.

BRAZIL | Forging closer ties with Mexico. Uneasy relations between the two largest economies in Latin America, Brazil and Mexico, could be set to improve. Brazil’s foreign minister José Serra visited Mexico City on 25 July less than three months after assuming his position, and spoke of the need for a new “modern and balanced” bilateral trade accord.

Notwithstanding Serra’s clanger to his Mexican peer Claudia Ruiz Massieu about male politicians in Brazil seeing Mexico as “a threat” because “nearly half the senators here are female”, the meeting was seen as giving fresh momentum to efforts to deepen a bilateral complementary economic accord known as ACE 53 in the short-term, and the more long-term objective of striving towards a convergence of the two main trade blocs in Latin America - the Southern Common Market (Mercosur) led by Brazil, and the Pacific Alliance led by Mexico.

The source of greatest friction between Brazil and Mexico has been the automobile industry, a source of patriotic pride in both countries. Mexico displaced Brazil as the main exporter of cars in Latin America in recent years due to lower labour costs and less protectionist trade policies, causing some friction. But a visit to Mexico in May 2014 by now-suspended president Dilma Rousseff gave a spur to languishing relations, which have seen bilateral trade increase by a mere US$1.71bn in the last 10 years to US$8.42bn in 2015 despite the signing of the ACE 53 in 2002.

During her visit, Rousseff agreed to expand the number of products enjoying tariff free access under the accord from 800 to 6,000, including chemicals, transportation equipment, electronic goods, shoes, textiles and agricultural products. Since then talks have focused on issues such as market access, rules of origin, investment, sanitary and phytosanitary measures, technical barriers to trade, government procurement and intellectual property.

During Serra’s visit, Mexico’s economy minister, Ildefenso Guajardo, said that “very significant” progress had been made over the last 14 months towards revamping the ACE 53. In a symbol of the entrenchment of what Rousseff dubbed the ‘Caipirinha-Tequila axis’, Guajardo and Serra signed a declaration granting mutual recognition of the national spirits, tequila and cachaça (the latter used to make the Brazilian cocktail Caipirinha), as two distinct and genuine products.

• Brazil-Mexico trade

The next round of negotiations to expand the ACE 53 will take place in September this year. The concrete objective is to double bilateral trade between Mexico and Brazil, which stood at US$8.42bn in 2015, within the next 10 years. But the other, even more ambitious, goal is to pave the way for a convergence of the traditionally inward-looking and protectionist Mercosur with the outward-looking and pro-free-trade Pacific Alliance, taking advantage of the fact that the incumbent presidents in both Argentina and Brazil favour opening up their countries’ economies.

DOMINICAN REPUBLIC | Cutting interest rates. On 31 May the Dominican Republic’s central bank (BCRD) reduced interest rates by 50 basis points from 8.50% to 8.00%, citing progress in reducing inflation. In a statement the BCRD said that the reduction in inflation owed to the programme of monetary tightening initiated in November 2021 by the government led by President Luis Abinader and the implementation of government subsidies. The BCRD said that this had contributed to reducing pressures on domestic demand as well as moderating international prices of raw materials and transport costs. It notes that monthly inflation in April was 0.24%, bringing the annual rate to 4.9%, and cites prognostic models which suggest that year-on-year inflation could drop to 4.5% in May, further within the target rate of 4% +/-1.

SURINAME | Staff level agreement approved with IMF. On 18 May the International Monetary Fund (IMF) announced a staff-level agreement (SLA) with Suriname’s government, subject to approval by the IMF’s executive board, on the second review of Suriname’s economic reform programme supported by the 36-month extended fund facility (EFF). According to an IMF statement, upon completion of this review, Suriname will have access to some US$53m, bringing total programme disbursements to date to US$159m. The announcement follows a virtual and in-person mission with the Surinamese authorities which took place from 8-16 May. In its statement the IMF highlights the recent agreement-in-principle with bondholders on 4 May, a condition of which is that Suriname and the IMF reach an SLA by 15 June. In December 2021 President Chandrikapersad Santokhi had concluded negotiations on a US$688m EFF agreement with the IMF but this stalled last year. 

Central America & Caribbean: inflation rate
Percentage variation (year-on-year)

Central America & Caribbean: GDP growth (%)
Quarterly figures are year-on-year growth

Having agreed to a plea bargain on 9 September, Mauro Cid, a close ally of the right-wing former president Jair Bolsonaro (2019-2023), has reportedly confessed potentially incriminating information to federal police (PF). On 21 September journalists from the national daily O Globo and the news website UOL reported leaked details from Cid’s confession, which included claims that Bolsonaro had met military leaders allegedly to discuss plans to overturn his defeat in last October’s presidential election.

According to UOL, Cid told the PF that he witnessed Bolsonaro receiving a draft decree from an adviser, Filipe Martins, which would have called for new elections. Cid also claimed to have witnessed Bolsonaro meeting the commanders of Brazil’s armed forces to discuss the decree and alleged that the former admiral of the navy, Almir Garnier, reacted “favourably” towards the possibility of military involvement in an anti-democratic plot. But the former head of the military high command reportedly did not back the plan. 

Bolsonaro’s legal counsel released a statement on 21 September insisting that the former president never discussed such a plot with the heads of the armed forces. The lawyers reiterated that they would “adopt the necessary legal means” against any “slander”. They also highlighted that the supposed contents of Cid’s confession were under court seal and Bolsonaro’s legal team have still not been given access to any potential accusations. 

The claims reportedly made by Cid not only further tarnish the reputation of his former boss but also that of the armed forces. In response to the reports of a former admiral allegedly being favourable to the idea of a coup, the Brazilian navy also released a statement on 21 September insisting that any alleged “acts or opinions” on the part of individual members of the navy “do not represent the official position of the Force”. The navy also reiterated that it was “at the disposal of the justice system to fully contribute to investigations” into any suspected anti-democratic plots.

On 25 September the defence minister, José Múcio Monteiro, met the commanders of the army and air force. After the meeting, Múcio said at a press conference that “all of Brazil” wants “the guilty [individuals] to be punished” and “for innocent [military personnel] to stop being suspects” so that “we can move on”.

TSE removes military as election overseer

On 26 September Brazil’s top electoral court (TSE) updated the list of organisations registered as official oversight bodies which can access electoral data. The TSE removed the armed forces, as well as the supreme court (STF), from the list of oversight entities. During Jair Bolsonaro’s presidency, military personnel were given more political influence and were even allowed to monitor the electoral process – in contrast with the current government led by President Lula, which has called for the armed forces to stay out of politics and purged the military and security forces of personnel suspected of putschist intent.

While in November 2025, Guatemalan lawmakers approved a budget for 2026 which dedicates more resources to infrastructure projects such as road building and schools, its implementation was suspended by the country’s constitutional court (CC) in a decision published on 30 December.

The budget approved by legislators on 26 November is worth a total Q163.5bn (US$21.33bn), up Q8.7bn compared to the 2025 budget, with more spending dedicated to social development, such as a new police hospital in Guatemala City, as well as the construction of a new prison designed to alleviate overcrowding following an embarrassing prison break in late 2025. It also assigns Q900m to electricity subsidies and Q107m to reparations for communities affected by the construction of the Chixoy hydroelectric dam in Baja Verapaz department as well as programmes such as a development fund for indigenous communities (Fodigua), reflecting President Bernardo Arévalo’s leftist-reformist tendencies. 

Finance Minister Jonathan Menkos hailed the decision to approve the budget in a statement published 28 November, underlining that the final document was “very similar” to the draft sent to congress by Arévalo and that it had been analysed in a “transparent” process. 

However, a month later, the CC suspended its implementation after receiving legal challenges citing alleged procedural issues. Following the CC’s decision, the government announced that it would revert to the 2025 budget. This process has happened before – most recently in 2023 - and the 2025 budget itself had been amended by various modifications last year, bringing spending up from Q148.5bn [EB-25-01] to Q154.8bn.

• Other CC interventions

The CC has previously moved against other budgets – most recently in December 2023 when it vetoed the state budget for 2024 under the previous government led by former president Alejandro Giammattei (2020-2024). This followed multiple concerns from various sectors, including then president-elect Arévalo, ranging from doubts over transparency to the failure to meet basic norms.

Looking ahead, the suspension of the 2026 budget will not affect the day-to-day running of government, but it will prevent President Arévalo from moving ahead with significant development projects that would further his agenda. For example, it limits the creation or expansion of social programmes and investment projects.

While following the CC’s decision, the Arévalo government said that it would present a new initiative before congress, modifying the current budget to adapt it to “economic, social and institutional challenges” relevant to 2026 and government targets, it nonetheless reflects the latest challenge to Arévalo’s reformist efforts. These have also been held back by a legislative majority committed to curtailing public spending and opposing his agenda, as well as continued conflict with Attorney General María Consuelo Porras and the so-called ‘pacto de corruptos’ network of institutional corruption.

Other criticisms

In a 26 November statement, regional think tank Instituto Centroamericano de Estudios Fiscales (Icefi) flagged familiar concerns around the budget and its methodology, particularly in designating Q6.3bn to regional development funds known as Codedes. Icefi alleges that the distribution of these funds has no technical basis and “could follow party political interests”.

Icefi also highlighted among other concerns, the lack of transparency regarding funds assigned to NGOs. It notes that the 2026 budget includes contributions amounting to Q2.5bn for 158 entities, most of which were NGOs, which it describes as a mixture of “well-known prestigious organisations and others whose origins and capacities are unknown”.  

Minimum wage to increase by up to 7.5% in 2026

On 18 December President Arévalo ordered that the minimum wage increase by as much as 7.5% in 2026. Non-agricultural workers will receive the largest rise, taking their monthly wage to Q4,252, while agricultural workers stand to earn 5.5% more, equivalent to a minimum of Q4,041 per month. Those that work in textile factories known as maquilas will receive 4% more pay, with a new minimum monthly wage of Q3,659.

This follows an increase of as much as 10% last year, which the government said “generated positive effects on employment” and led to a 4.7% increase in social security membership. This means that Guatemala’s high rate of labour informality, which stands at around 70%, is decreasing as the minimum wage increases. “I have taken this decision with our priority in mind: to guarantee better pay for dignified work,” said President Arévalo.

The wage rise is significantly above the country’s inflation rate which closed 2025 at 1.65%, down from 1.70% in December 2024. 

This time last year the reputation of British Overseas Territories in the Caribbean was taking a fearful hammering, with the Turks & Caicos Islands making a very wobbly return to self-rule after three years of direct rule from London, and the Cayman Islands also being threatened with direct rule from London before giving in over its refusal to implement a previously agreed reform package.  By contrast, Bermuda’s year-old One Bermuda Alliance (OBA) government has commissioned, and now just received, an impressive blueprint for reform, albeit one that warns about Bermuda facing a “grim reality” after four straight years of economic contraction.

The OBA is the successor party to the now defunct United Bermuda Party (UBP) which ruled the British territory for 30 continuous years from 1968 to 1998.  The UBP imploded after losing the 2007 general election by 14 seats to 22 to the Progressive Labour Party (PLP).  On 17 December 2012, the OBA squeaked home against the PLP by a margin of just 19-17.  Craig Cannonier became premier, replacing Paula Cox who lost her seat.

The report from the Spending and Government Efficiency (Sage) Commission, which was commissioned by Finance Minister Bob Richards in April, pulls no punches.  The introduction to the report warned that Bermuda is facing challenges that “a few decades ago would have seemed unfathomable”.

This is undoubtedly the case, with the government expecting 2013 to record the fifth straight year of economic decline, albeit with a return to growth in 2014.  Net public debt increased in FY2012/13 by US$240.9m to reach US$1.477bn, a 19.6% increase over 2011/12.  Reflecting this deterioration, in June the ratings agency Fitch joined Moody’s (in May) in downgrading Bermuda.  Fitch Ratings cited the continuing recession, sustained high fiscal deficits, and the increasing government debt burden as the reasons for downgrading the government’s bond rating to AA- and changing the rating outlook from stable to negative.  It warned that public debt could reach 40% of GDP by 2014/15, up from 28.5% in 2012 and just 6% in 2007.  The agency warned that “multiple changes in the debt ceiling have undermined the credibility of this fiscal policy anchor”.

It is this credibility gap that the government is seeking to close with the Sage Commission report.

The Sage report noted: “Bermuda is labouring under a cost of government that continues to increase an already substantial debt and threatens to destabilize the financial foundation of the country.  Its population is declining.  Its two principal industries, tourism and international business, are facing increasing competitiveness.  Where once its citizens had a choice of jobs, rampant unemployment hovers like a spectre over a country in profound transition.”

It then identified two problems in particular: a too expensive and cumbersome government structure and a less than effective civil service.  The Sage Commission says that the government and legislature are too big for the size of the country, and it declares that “the lack of effective leadership is compounded by a lack of fiscal discipline by both civil servants and politicians”.

The report demands expense reductions of US$65m, US$75m, US$80m, and US$90m a year for the next four years, which it accepts will be “a mammoth task”.  Among the cost savings suggested is a 15% reduction in the cost of running parliament, with the number of House of Assembly seats being reduced from 36 to 30.  The size of the cabinet, the report says, should be reduced to eight, including the premier.  Salaries for ministers and MPs should also be reduced, in line with reductions suggested for the civil service.

“However”, warns the report, “these cost savings do not equal the targeted 15%.  We therefore recommend that the remaining areas of the Legislature’s budget be reduced to make up the difference and/or further reductions in the salary of Ministers and Members of the Legislature.”

Not surprisingly, pensions is another target area, and the Sage Commission warns frankly: “The stark reality is that promises made regarding pensions will have to be broken.”  Among the proposed remedies is a graduated increase in the retirement age to 68 and, in all probability, eventually to 70.

The government’s response to the report has been positive.  Finance Minister Richards told parliament: “I would like to formally congratulate…the Sage Commission…for the excellent quality of this report, a report which stands as testament to what out invisible resource, ie our intellectual capital, can accomplish when it is generally accepted that something has to be done.”

*** BAHAMAS ON MONEY-LAUNDERING WATCH LIST. In late October, the UK added The Bahamas to its list of jurisdictions required to take more actions to strengthen their anti-money laundering regimes. The UK, which has 11 countries on its watch list, was responding to the advice of the Financial Action Task Force (FATF). The Bahamas, in response, said it was addressing the concerns of the FATF. Finance Minister Peter Turnquest said: “We have a very robust regulatory regime and we will continue to make enhancements necessary to make sure to demonstrate this to the international community.” The FATF has said that it considers The Bahamas to be committed to implementing its action plan for improvement.

*** GUYANA PRESSING VENEZUELA CASE IN ICJ. On 19 November, Guyana called on the International Court of Justice (ICJ) to confirm its jurisdiction in the territorial dispute between Guyana and Venezuela and to confirm the validity arbitral award that followed the 1897 treaty between Venezuela and the UK and that set out the boundary between Venezuela and what became Guyana.

In its latest submission, Guyana states: “Venezuela accepted this unanimous award, which was rendered by five eminent jurists on 3 October 1899, celebrated its outcome, participated in a joint commission to demarcate the boundary on the ground, and insisted on the award’s strict implementation. Only decades later did Venezuela, in anticipation of Guyana’s independence, cease recognizing the award’s validity and binding nature, using that pretext to lay claim to more than two-thirds of Guyana’s territory.”

The United Nations (UN)’s Secretary-General António Guterres referred the dispute to the ICJ in January, but Venezuela is disputing the court’s jurisdiction. It is unlikely that Venezuela genuinely believes it will recover the disputed territory; its main goal seems to be to avoid any definitive adverse ruling.

*** JAMAICA POLICE SEEK MORE POWERS. In mid-November, the Jamaica Constabulary Force (JCF) submitted a request for more powers to a Joint Select Committee of parliament that is reviewing the 2014 Criminal Justice (Suppression of Criminal Organisations) Act. The JCF is saying that it has faced a number of difficulties in enforcing the act since it was passed by parliament. In particular, they are asking for the right to access mobile phones and other electronic devices without first obtaining a court order.

There seems to be some caution among lawmakers for accepting the JCF’s request. Notable Attorney General Marlene Malahoo Forte urged caution. She said: “We are grappling with a larger issue; where the international jurisprudence within the Commonwealth is moving in a direction set largely by the jurisdictions, including the UK, where there is no written Constitution, and a lot of the tools that are being developed are tools which go in a different direction than some of the rights that are fundamentally guaranteed in our Constitution.”

She added: “What is emerging is a tension between what is required to combat the level of criminality and realities without our own laws; you can't go too far in one direction. If you guarantee rights, those rights have to be upheld and respected.”

The other main point of those opposed to an increase in police powers is that the provisions of the Cybercrimes, Telecommunications, and Interception of Communication Acts are probably sufficient already. The AG concluded: “In respect of allowing for access outside of a court-driven process, we would have to proceed with utmost caution.”