The LatinNews Podcast

Dr. Diego von Vacano is the author of The Color of Citizenship: Race, Modernity and Latin American/Hispanic Political Thought (Oxford University Press, 2012) and The Art of Power: Machiavelli, Nietzsche and the Making of Aesthetic Political Theory (Lexington Books, 2006). He is Associate Professor of Political Science at Texas A&M University. He has been a Visiting Professor and Presidential Fellow at Yale University.

He received his doctorate in Politics from Princeton University in 2003, where he played for Princeton United FC. He received his master’s degree in public policy from Harvard University. He also studied in the College of Social Studies at Wesleyan University.

Intro: Welcome to The LatinNews Podcast, a fortnightly deep dive into key developments from across Latin America and the Caribbean. Here's your host from Bogotá, Colombia, journalist Richard McColl

Richard McColl: This is episode seven of The LatinNews Podcast. I'm Richard McColl, your host here in Bogotá, Colombia. My very special guest this week is Diego Von Vacano. He's a professor of political science at Texas A&M University in the United States, and we're talking lithium, Bolivia, instability, polarization, and just about anything else Bolivia related.

Can I just say welcome on The LatinNews Podcast.

Diego Von Vacano: Thank you very much. I really appreciate your time and invitation.

Richard McColl: No, the pleasure is ours because it's something very special to get someone on the podcast, on this episode, to discuss lithium, to discuss Bolivia trying to industrialize its vast lithium reserves.

And I just wanna get out there quickly, like I read in El País newspaper, you have been advising informally, the Arce government, the president's party on lithium. So who better to tell us what's going on? Let's start with the most basic here. How can Bolivia industrialize its lithium reserves to boost development?

This is a poor country.

Diego Von Vacano: Yeah, thanks for the question. It's Bolivia has the largest deposits in the world, so definitely not only for Bolivia would it be a major change, but also for the lithium industry generally. So the question that you asked, I think Bolivia doesn't have the technology, it doesn't have the capacity, the human development necessary for the industry.

So it has to work with foreign partners. That's definitely the only way. And of course, there's three major players in the industry. That's China the US, and to some extent Russia are interested in Bolivia. And theI think the best path forward is for Bolivia to work with all of them.

That's one solution. Some European companies could also be involved, but at this stage none of the finalists are European companies, in terms of direct lithium extraction. Bolivia has to find a way to change the constitution or to change some of the laws that would allow foreign investment and foreign technology to come into Bolivia.

So that's the general short answer to your question.

Richard McColl: Okay. But if we're changing laws, what kind of laws are we looking at that Bolivia needs to change?

Diego Von Vacano: So the Constitution doesn't allow foreign companies to extract the lithium. So only the state is allowed to extract because it's a national resource.

It's nationalized. People have been working on a lithium law in Bolivia to allow this type of partnership. And this should have happened about a year ago already, and it's been in the works really for more than almost a year and a half.

And so that's the major law that has to be changed to allow this intervention of or participation of foreign firms. Because again, Bolivia just doesn't have the capacity. The Bolivian National Lithium Company, YLB, is almost broke, basically. They don't have money even for salaries.

And so it's a very critical situation. And unless there's this change in the lithium law, there could be potential for less than transparent things to go on in terms of how YLB will get money, again, for salaries and even just basic operations. So again, that's the first step. This law has to be changed.

The other thing, I think, is that even though China dominates the lithium sector generally, Bolivia has to talk to more partners, and that's something a little bit surprising that it's been taking so long for Bolivia to even come to an agreement with the Russian company Uranium One which for a long time Uranium One is a state-owned company, a subsidiary of Rosatom. And Bolivia had, has had very good relations with Russia for a very long time even before the Ukraine war. It, in a sense it's logical for Russia to have a participation as well, but that's also taking a long time and it's unclear why that's the case.

And the third player is the US, and there's some firms that are still participating, hoping to get at least an agreement. Because so far the talks with the Chinese company, it's a consortium led by CATL, which is the largest battery maker in the world. So far that's just a an agreement.

It's not a contract. So even that itself is worrisome or problematic because it's not a contract. Nothing has been put into place. And obviously we need, Bolivia needs to have more contracts and for things to actually happen on the ground.

Richard McColl: Yeah, okay, so we've got these three big players, obviously.

The US looking to make its mark once again, obviously not the favorite for, Bolivian governments of late. China seems to be leading, I think, as you say, and then Russia. So Bolivia now is at the fore of another geopolitical puzzle that's taking place. How do you see this panning out?

Diego Von Vacano: Yeah, Bolivia, again, this, as you well know, Bolivia goes through these cycles of being at the center of these global storms, in a sense, from the gas war the water war.

And now it's possible they, if things are not resolved, there could be civil unrest in six months or a year that could be something like a lithium war because again if the government doesn't show that it's moving forward, then a lot of the social groups are gonna be there might be some types of uprisings again like in the past.

So I think China definitely has the upper hand. But that's something in, that's been happening in the industry for over 20 years. The US is really behind. The US doesn't really have much of a plan towards Bolivia especially. There's no ambassador in Bolivia.

There's no formal diplomatic relations. As you said, a lot of the Bolivian population is very wary and of course rightly so of the US of US firms, the government some declarations by some US military about lithium specifically. And as you may know some of the comments that even Elon Musk made about Bolivian lithium and also Evo Morales.

So all these things have created a sort of negative image of US, the US government, US companies. And of course, that's a little bit tragic because in essence some of the best technology comes from the US, and the US could be one of Bolivia's partners. I think that was one of the ideas that we had when I was advising Arce around 2019.

During the election we I arranged meetings with American universities some American entrepreneurs, et cetera interested in sharing the technology. And so Luis Arce was very open to working with US, Western, and European partners then, but it's in the last two years I think he's changed his strategy to be much less open to those type of partnerships.

Richard McColl: Do you think this strategy is somewhat due to the divisions, the internal and very public now divisions in the MAS party itself? Do you think he's had to roll back a little bit? Because I mean, you did mention the civil unrest and social unrest. It does happen a lot, more than in other places in Bolivia.

Yeah. People are very quick to, let's say, block the highway between Sucre and La Paz and so on, and the divide in the country between Santa Cruz de la Sierra and the Altiplano. It is a very polarized country, and the populist rhetoric, it's very powerful

Diego Von Vacano: Yeah, exactly. And I think in a sense the ultimate deciding factor in, for lithium in Bolivia is really the domestic politics, I think.

So I think, if the US or any other country wants to really, in a sense, get a hold of some of Bolivia's lithium or buy it or some other kind of partnership, they have to understand Bolivian domestic politics. And again, like I said, I was very surprised in the last three years when I talked to people from the US Embassy in Bolivia or especially American analysts or...

they really don't know anything about Bolivia And they don't really have much interest. That's another problem is some of the people that go to work in Bolivia in the embassy, et cetera, are not really there willingly. They get assigned there and they don't really want to even learn much about the culture or the history of Bolivia.

And so that causes a huge rift between the two countries, and it's almost impossible to explain to them why some of these protests exist, again, in Potosí, Santa Cruz. And of course the big powder keg right now would be in Potosí. That's where COMCIPO and other civic organizations that are generally against the MAS party, the ruling party, the Socialist Party they could rise up and protest against the lack of participation that they have.

They're very rare, infrequent meetings with the government so there's very few stakeholder meetings. That's something that I also suggested a long time ago, but it's very infrequent when the government meets with the stakeholders indigenous communities in Potosí. So again, especially COMCIPO as the civic committee of Potosí, and that they might very well block almost anything or call for mass protests and blockades.

And as you mentioned also, Santa Cruz, which is in the eastern part of Bolivia and it's basically the equivalent of Texas. Santa Cruz is like a very conservative cattle and oil state departamento much more right-wing conservative where a lot of the natural gas is located.

And they're also historically very anti-MAS. Even though during the Evo administration they did very well economically. But the political culture of Santa Cruz is very conservative and very much against La Paz. So there's a couple of different areas of Bolivia that could very well, at the very least, block things or create massive unrest if the government doesn't figure out this puzzle.

Richard McColl: And it is a complex puzzle, and I just keep coming back to the idea of foreign companies and their technology coming into Bolivia. Obviously, as you say, it seems incongruous that Bolivia has all this lithium and the state company is broke. But of course, the technology doesn't exist, so we require, the Bolivia requires the investment.

But, the Bolivian state takes the biggest share of revenue from oil and gas companies behind Mexico. Is this really conducive to attracting more investment in Bolivia?

Diego Von Vacano: Yeah the natural gas model that was used during the Evo administration, generally even after the nationalization, it worked.

It was the driving engine for the increasing GDP, reducing poverty by over 30%, so extreme poverty was reduced by 30%. So in general, the nationalization worked in which 51% of shares are held by the state and this is after some of these companies were kicked out and then they came back in because they knew Bolivia would still be a good market for the extraction of gas.

So in a sense you could try something similar with lithium because of the sheer amount of Bolivian lithium. That's something that would be a game changer for the global market. So I think it's possible to convince some of these companies, especially some of the larger ones, and I think that's why CATL, the consortium that they're leading, they're willing to do that because they're big enough that they could take the risk financially and also create the infrastructure that's necessary in Uyuni and Coipasa, Pastos Grandes, the other salars.

Richard McColl: Yes. So I think it's possible but I think there has to be some incentives and different frameworks developed I think for each country because if the US wanted to be involved or if Bolivia wanted to involve the US or Russia, they all have different objectives in a sense, and I think for that to work out the government would have to make it clear what those arrangements would be, those agreements.

Diego Von Vacano: But so far everything is stalled with the CATL agreement the consortium with China. A couple days ago Luis Arce announced a meeting with executives but that meeting itself doesn't say anything new. It just confirms that CATL is interested in developing Bolivia's lithium.

By now, by June, they should have shown the results of the pilot tests that purportedly they carried out in Uyuni. And so that hasn't been shown and that's also surprising. That should have been public, made public, and this raises again the question of why there's been such a lack of transparency in terms of the entire process from the beginning.

And so I think if the process had been more transparent people would have been more able to see why a certain company is included, some are excluded in what ways the stakeholders could have more involvement, et cetera. So I think that's also one of the major flaws, this lack of transparency especially given that the process is really led by very few people at YLB and the Ministry of Energy

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Richard McColl: This lack of transparency seems to be following a trend.

We know, and it's well reported, well covered, the economic difficulties that Bolivia suffers, the shortage of US dollars, which there's been no publishing of these figures by the central bank since February of 2023. And now you say that there's been no publication of, the tests in Uyuni.

This seems to be a government policy now. Yeah, unfortunately, I think it is. I think again, there's a big change in the first from the first year of the Luis Arce government administration, in which things were I think more technocratic, more open, more transparent, more in a sense, cosmopolitan in the sense that he was trying to work with almost anybody in the world.

Diego Von Vacano: And I think in large part because of the tensions with the internal tensions within the party perhaps with some of the Evo Morales group, there was a retrenchment and a kind of a fear of becoming of losing power. And so I think the fear of losing power has become the central dominating, in a sense, emotional sentiment in the administration.

And that's been the focus of almost everything, again, to maintain power and to keep it and to share as little information as possible so that it doesn't create problems for the government. I've seen that, over about two years. I think it's almost I would call it almost like a political paranoia because even very small things become, for them seem to be problematic and they're afraid that they...

it's gonna undermine the government. And so I think that has led a huge change in the culture within the administration. And so when Bolivia started to have this dollar deficit, by that time Bolivia hadn't really developed a lithium strategy. So that's another thing. Luis Arce never was able to develop a clear lithium strategy that could be shared with the people of Bolivia, the citizens.

And so again the whole process has been marred by this lack of transparency even for the criteria, again, for Western companies are included, some were excluded whether they actually had those test results at labs, whether it's in Uyuni. Because only one company actually had the pilot plant in Uyuni.

The other ones received the samples of brine, Bolivian brine back in their countries in China, et cetera. Again, purportedly because again, there's no evidence of them having received those samples, right? So again, even the technical elements are not visible to the public.

And so I think this has created a lot of uncertainty, skepticism, and I think the Evo Morales group or the wing of the party has realized that this is a major misstep by the Arce government and is really now in the last four or five months trying to in a sense exploit that weakness

Richard McColl: It's a fascinating situation.

Unfortunately, those who suffer most are the Bolivian people. The companies obviously investing or wishing to invest have a strong belief in the return on their investment, obviously, then. And I just think that, obviously the term you used, the political paranoia by the government of Luis Arce, it sort of heralds back to how Jeanine remind me of her surname, Áñez.

Jeanine Áñez gained power through, such tenuous links to being in government. So I guess that there's a real, very real fear. But I have to ask, then, we've got the Evo Morales side of the MAS party, the Evistas. Is he going to run again in 2025?

Diego Von Vacano: It's very likely.

It's very likely that he's gonna be running. Every day there's discussion about how that can happen or how even Luis Arce could be even excluded from the primary of the MAS party. So there's discussions about this pretty much every day in the last few weeks. But yeah, he, Arce, Evo Morales will very likely be a candidate. There'll be, He's still, I think as you mentioned before, this is a phenomenon all over Latin America, the caudillo, the one strong man leader, which has positive and negative elements. In Latin American history the wars against Spanish imperialism were led by caudillo.

So in a sense, that's a positive side of the caudillo tradition. But of course, it's a double-edged sword because in the end you also have elimination of opposition, and so you don't have as many people competing for power. It becomes less competitive, and power becomes more concentrated or centralized.

But it is true also that a lot of the achievements of the MAS party in, especially in the first 10 years between 2006, 2016, were really created by decisions made by Evo Morales. Especially the economy, but also transformation of the culture. And there was a lot of racism in Bolivia.

I would also almost call it almost like an apartheid state, apartheid culture in the 1970s and '80s, even in the '90s. And then that began to change when Morales came to power. So again, there's definitely a lot of positive things that Morales has done, and perhaps the MAS movement is indeed connected almost intimately with him.

If he disappears, then maybe the movement will disappear. So it's a little bit similar to situation maybe in Cuba with Fidel Castro and other caudillos in a sense that they're synonymous with the movement. But at this point, given some, you compare some with Jeanine Áñez and Arce, I think it's telling because a lot of people in Bolivia are making that comparison.

They're saying that Arce really power fell on his lap almost coincidentally and it got to his head. He became enamored with power. And I think in a way that Jeanine Áñez also that she experienced that, and she didn't do a good job in that one year.

So that's why a substantial number of people are calling for the return of Evo Morales because they remember the relative stability, relative growth of the first 10 years of his government. And but unfortunately, there's no other really major figure, especially indigenous figure.

Given that Bolivia is mostly indigenous there's not that many indigenous political leaders. And in part that's because Evo Morales was able to eliminate them, through political, strategies and stratagems to, get them out of the picture in...

He's a very able, very smart political actor, and so he was able to really become the only indigenous leader. And so there's some people like Andrónico, who's the head of the Senate, and he might, but he's very, still very young. And I think he's very smart, and I think he might be able to be a potential leader or president in the future.

But again the figure of Evo Morales really looms large over the country

Richard McColl: That's right. He's left an indelible mark and print on the country and I think, would he be held in higher regard had he stepped away when it was his time? Or are people forgetting that now?

Are people forgetting, that selective memory to think, "Oh, it was better under him"?

Diego Von Vacano: Yeah, that's a great question. I think a lot of people would say that his image would have been much better if he had stepped, he would not have run for election. He ignored a referendum and I think if, once he ignored the referendum, he lost a lot of political capital, especially in the cities, especially middle class people who voted for him in the cities, mestizos, people who are more, you know, mixed with Spanish or European descent who voted for him because of the need for economic transformation.

And so he had a lot of supporters back in the early or the mid 2000s. But he lost a lot of that because of that, ignoring the referendum. And I think that's still gonna be a problem for him if he runs in 2025. I think a lot of people will remember.

Richard McColl: Okay

Diego Von Vacano: That this is not, that was not a good decision, and they will think that he's still trying to consolidate power in himself."

And so I don't think people are gonna forget. But again, just the lack of options is really a factor. And again, the opposition, like with Carlos Mesa is very weak. The Camacho is in jail. Áñez is in jail. And so people have said that this is a result of a political persecution by the Arce government in my opinion, that's not really the case given that they supported the, what I think was basically a coup d'état in my view because the military were involved in asking, quote, unquote, "asking Evo to step down."

But there's been a lot of political time spent on this debate of whether there was a coup or whether there was a fraud in Bolivia in 2019 and that's, to me, that's really a waste of time because we're losing energy and time on something that already happened and Bolivia should be focused on trying to develop the lithium resources, which are...

if that happened, that would really completely transform the country into something that would be much more modern.

Richard McColl: It seems like these are effective digressions for the Arce government while it, flounders in this situation. I wanted to go more into the accusations of the Evistas, the Morales supporters. Obviously we keep coming back to the fact that Bolivia does not have the technology, Bolivia doesn't have the know-how, and so Arce is, being pragmatic, we'd say, looking for approval for loans from the IDB, the World Bank, the CAF, and so on. But the Evistas are obviously saying that he's, subjugating Bolivia to the evil empire.

I don't know how you play off this

Diego Von Vacano: Yeah. I think it is a step back by Arce to seek help from multilateral organizations, et cetera, because that's not really within the culture of the MAS party. So the MAS, obviously, it's a socialist party. It was elected on a platform to remain, at the very least critical of these mostly Western-based organizations or banks, the IMF, the World Bank, et cetera.

When Evo cut ties with the US, with the DEA in the end, I think generally they tended to be the decisions that actually helped Bolivian sovereignty. I think that actually was... there were good decisions. But so when Arce is trying this rapprochement with some of these US or Western organizations that's going to, it's gonna, it's gonna be seen as negative by a lot of the base, a lot of the rank and file of the MAS and just the average Bolivian who is still veryIs poor and Indigenous, right? And especially given that Luis Arce himself is not Indigenous, they see him almost as somebody who is benefiting from the MAS movement and the Evo Morales legacy, and he should have just been a sort of interim president to smooth things out.

So I think yeah, a lot of the base is very critical of this move to work with Western banks, et cetera, and that's something that under undercuts some of the steps that were made by Morales during his administration. So that's why some people are saying that this is...

it's a turn to the right. It's veering right and ideologically doesn't have much consistency with the MAS party platform.

Richard McColl: Certainly a difficult situation to be leading the MAS and, yes, of course, not being an Indigenous figure, a character larger than life, of course, like Evo Morales.

And we're winding this down, I'm gonna throw a question out there as well. There's always the question, say that we get to 2025, Morales or maybe... no, Morales runs, wins, and starts putting in or, backing unconditionally Chinese, Russian investment and turning his back on maybe the US a bit more.

It's wont to happen. Can we see some sort of, I don't know, political or economic, some sort of silent intervention from the United States in Bolivia?

Diego Von Vacano: Yeah, that's a great question. I think it'd be naive to think that the US is beyond this type of intervention.

The US has intervened in Latin America many times sometimes openly, sometimes covertly. And again, I think that for the lithium resources to be available to the West, there has to be a huge transformation in the way that the US looks at Bolivia, and Latin America generally, of course, but Bolivia specifically.

It has to stop seeing it as its backyard. That would make a big difference for a lot of Bolivians if they actually saw this change in the rhetoric and the practice of the US towards Bolivia. Even just things like creating scholarships for students to study lithium related industry and lithium related industries.

In general, again, a move to try to have a more equal partnerships, seeing each other eye to eye and not looking down at, on Bolivia, which has been historically the case. So yeah, I think the US, unless that happens, the US is gonna be excluded from these riches.

And if Morales comes back, I think Morales actually is much more, in a sense, more pragmatic. Again, the economy grew very fast. There were a lot of French and Spanish companies and gas. He worked very well with entrepreneurs from Santa Cruz. He used to meet with entrepreneurs all the time.

Arce hasn't done that. even though that he's an economist and he was educated in Britain for his master's degree he's not shown much openness to or willingness to talk to entrepreneurs and capitalists in the way that Evo actually did. And so I think it might be possible to convince Evo that even if you might prefer to work with Chinese companies, which again, even beyond the political aspect, China dominates the sector, lithium.

So it's almost inevitable, right? That they would have to work with China, with Chinese companies, et cetera. It might be possible to convince him to work with some US companies which have good technology, which may help him create better ties with universities in the US educational scholarships, et cetera.

So I think I've seen a much more pragmatic approach by Evo. If you look back the last 10, 15 years It's not impossible. I think at the same time, there's more and more cases of corruption in the Arce government. Even ministers have resigned from their positions.

Even the son of the president is involved in many serious accusations within the national oil company, and his involvement in the lithium sector as well. And Arce is not talking about that. I think Arce should be very open about it and say, "Look, yeah, let's deal with this issue. Bolivia is much bigger than my...

these personal family issues," and he should deal with that with problems of nepotism directly, but he doesn't do that. He's completely ignoring those issues of corruption. Just today or yesterday I saw him talk about setting up anti-corruption mechanisms, but this is very superficial.

So again, to the extent that he doesn't really deal with them seriously, Evo has a bigger chance and, yes, he will probably go with the Chinese, but again, I think there's still a window of opportunity for Americans and Europeans. Again, it's a little bit surprising why very few European companies have been interested or involved, maybe because the political risk is so high in Bolivia.

But very few British, French, Germans have actually tried to get involved in the Bolivian lithium sector. I think that would be really good if there was a second round for like DLE or extraction. It would be really good to have a couple of European partners because then that would open the European market much more for Bolivia.

And there's different ways to do this. But maybe Bolivia can actually either sell the lithium or there's maybe even lease it. There's some precious minerals that are being leased, and that maybe that's a mechanism that Bolivia could retain the property rights over the lithium but still be able to get money from them.

I think, again, Evo or whoever comes next has to be much more creative and open-minded. Yeah, and again, but I think Bolivia has enough of the resource globally that Bolivia could be the one deciding how to do this. So that's the major opportunity that I think is being missed right now by Arce.

Richard McColl: Yeah. Fantastic and so very interesting. There is a way forwards and it obviously requires transparency and coherency. That's what I'm getting from this. And it seems to me, with this extractive industries in Bolivia no longer crossed off the map. Bolivia is very much a player for this market.

So let me take this moment to say thank you so much to Professor Diego Von Vacano, Professor of Political Science at Texas A&M University. It has been enlightening discussing this with you. And here's hoping for the best for Bolivia in, some very pivotal decisions coming up.

Diego Von Vacano: Yeah. Thanks so much.

Yeah, a lot of things are happening in Bolivia, and I think there'll be an impact on the world because of the industries. It requires much more lithium, and I think Bolivia, if it gets its act together, they can really change the industry.

So thank you very much.

Richard McColl: You're most welcome. I've been Richard McColl here in Bogotá, Colombia, and this has been episode seven of The LatinNews Podcast. Thank you so much for listening, and bye-bye.

Outro: You've been listening to The LatinNews Podcast. For more news and analysis on Latin America and the Caribbean, visit www.latinnews.com

Pamela Starr is a professor of the practice of international relations and public diplomacy, a senior advisor at Monarch Global Strategies, and a global fellow at the Mexico Institute of the Woodrow Wilson International Center for Scholars.

Prior to USC, Starr was the senior analyst responsible for Mexico at the Eurasia Group, one of the world's leading global political risk advisory and consulting firms, and a professor at the Instituto Tecnológico Autónomo de México (ITAM) in Mexico City.

Starr has briefed American and Mexican officials on the bilateral relationship, including former U.S. Secretary of State Hillary Clinton, former Mexican Foreign Minister Jose Antonio Meade, as well as ambassadors, diplomats, intelligence officials, legislators, and staffers from both countries. She has testified before the U.S. Congress and is an active speaker and author.

Starr has been quoted in over 50 newspapers, news magazines, and wire services in the United States, Mexico, Canada, Europe, and Asia including The New York Times, Wall Street Journal, Washington Post, and the Financial Times. She has opinion articles in over a dozen outlets.

Intro: Welcome to The LatinNews Podcast, a fortnightly deep dive into key developments from across Latin America and the Caribbean. Here's your host from Bogotá, Colombia, journalist Richard McColl

Richard McColl: This is the LatinNews Podcast, episode six. I'm your host, Richard McColl, here based in Bogotá, Colombia. Our very special guest this week is no less than Pamela K. Starr. She is a professor of international relations at the University of Southern California, Los Angeles, and we're going to be talking about Mexico because it's very much in the news right now.

And of course, as in a previous life you were the director of the U.S.-Mexico Network. That's right. So Pamela, thank you so much for coming on the LatinNews Podcast.
Pamela K. Starr: It's a pleasure to be here. Thank you for the invitation.
Richard McColl: No, it's a great honor to have you here because I know your prodigious knowledge on the subject will actually keep our listeners enthralled.

We need to talk about López Obrador. We need to talk about his legacy. We need to talk about the Fourth Transformation and of course, these elections that have taken place or will be taking place on June the 4th in Mexico. So perhaps where should we start Pamela? shall we talk about the legacy first, López Obrador?

Pamela K. Starr: Sure. That sounds great. Let me start by saying, actually I'm going to flip a little bit and talk a little bit about the Fourth Transformation because the legacy of López Obrador is the Fourth Transformation. Very good. So his idea is that he wants to change Mexico profoundly. And it is this Fourth Transformation where the first was Mexico's war for independence, the second was its War of the Reform and eliminating the conservative powers in Mexico.

The third was the revolution, and this is the fourth. And all of these have been battles against what he calls the conservatives. And so what he wants to do is, frankly, is reverse most of the reforms that Mexico has instituted over the last 30 years. And to do so in a way that brings back the role of the state in the economy, that brings back the role of the presidency dominating politics in Mexico, that brings back some of Mexico's nationalist prickliness when he deals with the United States.

And all of this is about the fact that the governments over the last 30 years, and one could say even longer than that, have pretty much ignored half of Mexico. You've got half of Mexico that was largely excluded from the economy that was modernizing and doing well for those who were participating in the modern part of the economy.

But for the rest, they weren't getting on at all, and the politicians didn't pay any attention to them at all. They just felt completely ignored. And so López Obrador appealed to them. He's done so in a very populist way where he's creating an emotional connection between this half of Mexico that feels excluded and him as the first politician who understands them, who stands up for their concerns, who may not be achieving a lot right now, but at least has their interests at heart.

Richard McColl: And without that, nobody can ever achieve anything. So with that foundation, the question is what's happened? And can it be sustained? And so we're looking at the, sorry, the 50%. Okay. The 50% that he is emotionally recognizing or emotionally recognize him. You suggested that, not a lot is happening, so is he going to get a few wins in this final year?

Pamela K. Starr: I don't think so. I think now he is very focused on simply 2024. He's focused on the elections on Sunday, particularly in the state of Mexico because it is the most important state in Mexico economically and demographically and in terms of its state budget, which we'll talk about more in a minute.

But it's also he's focused on the presidential election. He understands that in Mexico the last year of a president, the presidency's power begins to seep away because we're in this process of transferring power to whoever his successor will be. So he has said publicly that he cannot complete the Fourth Transformation.

His successor is going to have to do it. There are things he's gonna try to get through, but I don't really imagine something really big is gonna happen between now and 2024. Again, his focus is on the election itself. That being said, the fact that he hasn't achieved a lot doesn't hurt him.

If you look at the polling in Mexico, it's very interesting. Mexicans are very dissatisfied with the security situation, but they think he inherited it. It's not his fault. They're very unhappy with how the economy's working nationally. They recognize that he hasn't fulfilled his promises. But if you ask them about your family circumstance, the majority says, "I'm better off, and it's thanks to López Obrador."

Richard McColl: That's an interesting situation. So he inherited, we can suggest, a poor situation, but his popularity continues. Is that really an indictment of previous presidents? Exactly. And most previous presidents have seen their popularity decline a little bit in the last year of their presidency.

Pamela K. Starr: I don't expect that to happen with López Obrador. Because the support for him is not about what have you done for me lately. It's that emotional tie that I trust you and you're my guy. And so then had he anointed a successor? Not exactly. Everyone knows who his preferred successor is.

And it's Claudia Sheinbaum, the mayor of Mexico City. She is his creation. She became a politician under his wing, and he has backed her and helped her all along the way. He completely trusts her to be able to implement or continue the Fourth Transformation. Which is extraordinarily important in Mexico for two reasons.

One, when the president leaves office, the president loses most of his power. Now, López Obrador will sustain some because he still controls the movement. The Morena party is not really a political party, it's a movement that belongs to López Obrador, so he'll still control that, but he will no longer have any power over his successor.

She will control all the levers of government, and so he has to trust her to do what he thinks is right. But more importantly, not a small number of presidents have been attacked by their successors and blamed for all the failings of the successor, and basically run out of the country. Nobody's been thrown in jail, but they've been run out of the country. He really doesn't want that to happen to him, so he trusts her. There are two other possible candidates that are really in the running. One is a second individual that he also completely trusts, who's the former governor of his home state of Tabasco.

They have a lifelong relationship. Unfortunately, he's not picking up in the polls. So he doesn't seem that he's likely to be the next president. The third is the foreign minister, Marcelo Ebrard, who has done everything he can to demonstrate his loyalty to López Obrador. But he's an independent politician with an independent political base, and brought that base to support López Obrador.

As a result, López Obrador will never fully trust him to not turn against López Obrador if he sees it in his interest to do so. So he's a long shot because López Obrador really doesn't want him. He's there in case a crisis happens, particularly an economic crisis, because the business sector trusts him, and I think that's the only circumstance under which he's apt to become the next president.

Richard McColl: And all three of these so far are clean of scandals or clean of any heavy baggage?
Pamela K. Starr: No. Absolutely not. Marcelo Ebrard has, as they say in Mexico, he has a very long tail that you can step on. Okay Which means he's got a lot of ugliness in his background that López Obrador could use against him to keep him in line.

And theoretically, the opposition could use against him as well. Claudia Sheinbaum is cleaner. I doubt she's perfectly clean. There is no Mexican politician who is, but she is seen as somebody who is much more much less, willing to do what is necessary to get ahead. She has more scruples than other politicians.

And some people say that's a good thing because you need that kind of a politician in Mexico. Some are concerned about it because if she has scruples, she may not be able to do what is necessary to govern the country Yeah, I can understand that and the issues of, yeah, as we would say here, tragando unos sapos.

Richard McColl: You have to get it moving on, you're gonna have to do some things that you perhaps don't want to do. So you were mentioning though previously that this again, this state of Mexico, Estado de México, this, the elections and this budget. Tell us a little bit about that.

Pamela K. Starr: Sure. Mexico State is the most populous and most diverse state in Mexico. It's a mini Mexico. In that it's got some of the most advanced production in the country, some of the wealthiest people in the country live there. But it also has indigenous communities that are amongst the poorest.

It runs the gamut. It's physically large, not the largest physically, but it also is has an enormous state budget. And that budget is the largest in Mexico, and that's important because state budgets traditionally are used by the party in power to help finance presidential campaigns. The woman who looks like she will become governor of Mexico governor-elect on Sunday is from the Morena Party and she is very close to Claudia Sheinbaum as well as being close to López Obrador, so that should help Claudia Sheinbaum's candidacy for the presidency. It seems like it's lining up.

Richard McColl: It does seem like it's lining up. There's still a long way to go, obviously, until elections, but this seems like it's lining up. And that puts us into this conversation about, the Morena Party is vanquishing the PRI. They really have been this dominance over however many decades does appear to be vanishing over time.

Pamela K. Starr: Yeah, and I would argue that's, there's a couple of reasons for that. One is that the people felt betrayed by the PRI. They felt betrayed by the PRI at first because it was a party that was supposed to be for the poor for the people, but it actually saw inequality grow in Mexico under the PRI.

Yeah. They also had multiple financial crises, which wasn't endearing to the people. But that last financial crisis in 1994-95 was under President Carlos Salinas, who had promised the people that this enormous economic reform we're doing is going to generate wellbeing for everybody forever. And instead it brought an economic crisis, which really undermined people, which is very important in understanding how Mexico finally elected an opposition candidate as president in 2000 in Vicente Fox.

Fox and the PAN kind of governed Mexico okay, but they didn't do really well. And as a result, the PRI came back promising that, "We will do better. We are the solution. Come back to us. Trust us." And what you got was a president who was one of the more corrupt presidents in modern Mexican history.

And that soured the people on the PRI, like this is the final shot. It also, within the PRI there's this recognition of, "We're not doing so well." So a lot of PRI politicians have abandoned the party. Most of them have gone to Morena. There's the fear that's what's gonna happen after Sunday.

Because the Mexico State has never been governed by any party after the revolution except the PRI. Since 1929 it's been under the PRI. Almost 100 years. So to lose that state means that the PRI has basically lost its foundation stone in Mexican politics, and I think a lot of Priistas will take that as the sign that, "My future's not in the PRI.

My future's someplace else." And I think part of this is the fact that the PRI was never an ideological party. It was always a practical, pragmatic party. It was a party designed to govern, and people participated in it in order to become wealthier and more powerful. And so there's nothing holding people in the party because there isn't an ideological foundation to it.

Richard McColl: That makes it a, incredibly susceptible to change. And where can they go from here, the PRI, if you, we're looking towards the elections. Where can they go from here?
Pamela K. Starr: They're stuck. The president of the PRI is in a position where he's trying to maintain a alliance he has with two other opposition parties, the National Action Party, which is the conservative Catholic party in Mexico, and the Democratic Revolutionary Party, which was López Obrador's original party.

At first he was in the PRI, and then he moved to the Democratic Revolutionary Party. It was the long-term party of the left in Mexico. It's now just a shadow of what it once was. It's tiny and really not relevant anymore. And that opposition alliance was supposed to be the tool with which the opposition would defeat López Obrador in the state of Mexico in the presidential election.

They haven't had success in the state of Mexico. It looks like they'll win in the state of Coahuila on Sunday. Okay. But that's a much less important state. It's significant, but much less important. So the PRI has that, but at the same time, the president of the PRI and the party has been making side deals with López Obrador.

A lot of PRI governors, it appears including the governor of Mexico State, have agreed to not campaign for their candidate to succeed them and let Morena win in exchange for good treatment from the government. Most of them have become ambassadors. But the bait thing is they don't want thrown in jail for the corruption that's behind them.

There's a party that is playing a two-level game. They're playing with the opposition, and they're playing with López Obrador, and it's unclear which way they're gonna go. They say they're gonna stay in the opposition alliance. We'll see. It strikes me that it's, these are total relationships of convenience almost for the individual.

Richard McColl: So what we're looking at when you talk about these different parties, the PAN, the PRI, and the PRD, isn't it? Those are the three. And their coalition is the Va por México? Yes. All right. And but again, we are waiting to see how this all pans out. It's not clear right now.

This doesn't, again, does not bode well for them whatsoever, but again, a year is a long time. You talked about López Obrador remaining as the what would you say? He's the ideologue of the Fourth Transformation. This is his thing. So he is not going to retire to his ranch when he leaves power.

We can expect him to be very much involved.
Pamela K. Starr: I'm not convinced of that. I think he honestly wants to retire to his ranch. But he will only do that if he trusts who succeeds him. Okay. And he will have to come back from the ranch from time to help Claudia Sheinbaum, 'cause she'll need the movement.

Without him in front of it, the movement will just divide into multiple parts. There are a bunch of warring factions within Morena. And only López Obrador holds them together. So she will need his assistance holding that movement together, and that is the power he has over her beyond her basic loyalty to him, which is profound.

She's extraordinarily loyal to him. The other thing he has over his successor is this little piece of legislation, or change in the constitution, that got approved a couple years ago. That's called the revocación de mandato. Which means that at the end of a president's third year, if the population wants it, they can sign petitions to call for a vote to revoke their mandate.

In other words, to remove them from the presidency. If he's not happy with how his successor is behaving in the first three years, he has the power to get Morena to revoke their mandate. So whoever is next president of Mexico, it's gonna be very hard for them to veer away from the Fourth Transformation line during the first three years of their presidency.

After that, they have much more free rein, but in the first three years, they're gonna be limited in how much free rein they have.

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Richard McColl: But this sounds so much stronger than a vote of no confidence. It sounds like, a death knell if it comes around. It's sort of that self-destruct button to get rid of someone. But if we talk about that, we'll go onto legacy again for López Obrador because there's many different points to raise.

But I was just reading in the last couple of days this statement coming out because of course being where we are in the world we cannot avoid this conversation about migration. Of course, Mexico being right there and the final step before the United States and those of us in South America, we see the first steps, let's say, in this hemisphere.

But I did read about the White House Homeland Security Advisor Elizabeth Sherwood-Randall talking and making an announcement about legal migration that López Obrador applauded. Perhaps you could explain a little about this, please. Sure. The United States and Mexico came to an agreement in terms of how to manage transmigration through Mexico and particularly those who are seeking asylum in the United States.

Pamela K. Starr: And I believe I remember correctly, it only applies to individuals from five countries. So it applies to Haiti, Cuba, Nicaragua, Venezuela, and I'm missing one. Okay. Anyway, there's I believe there's a fifth country there. And those individuals cannot apply for asylum in the United States.

They must apply for asylum in the first country where they arrive. And there's agreement with both Colombia and Guatemala that they will be the place where the United States can review applications for asylum. If they cross the Mexico-Guatemala border, they're not considered legal asylum seekers, and if they make it to the United States will send them back to Mexico.

Mexico's agreed to all of that. And what he likes about it is the United States has said that they will take 30,000 new asylum seekers a month as long as they come through Guatemala or Colombia. And for López Obrador, this is a humanitarian initiative. It's not popular in the United States, and he therefore is applauding Biden for doing this.

For his part, he is agreeing to try to limit who comes across the Guatemalan-Mexican border. And if they do cross to enter the United States, he'll take back 30,000 a month. With the caveat they will only take as many as we can handle, and there is absolutely no definition of what that means.

And as a result, Elizabeth Sherwood-Randall has had to visit Mexico twice. We had to arrange a special phone call between López Obrador and Joe Biden two days before Title 42 expired to make sure that Mexico is on board. There is nothing more important to Joe Biden than Mexico making sure that this migration agreement works so you don't have a flood of migrants across the U.S.-Mexico border in the midst of a presidential campaign.

Richard McColl: That said, it's his campaign, and of course then, of course the midterms as well and the issues of migration. It's such a hot topic. But I, so that nebulous statement of however many we can handle, that just leaves it so open. I would be very concerned about that if I was in the White House.

Pamela K. Starr: And that's exactly López Obrador's purpose. Because he knows that he has Biden over a barrel. Yeah. Biden needs his cooperation on this and on fentanyl. Those are the two things that Biden says, has said, "You must cooperate on these two things." And I don't know if it has been said clearly or it's just implicit but the understanding clearly is that if López Obrador does these two things, Biden will not push him on clean energy and he won't push him on democracy while the United States is screaming about the erosion of democratic practices in many other Latin American countries, we are saying nothing about the erosion of democratic practices in Mexico.

Richard McColl: Okay. So this is also, this very much nicely feeds into the legacy side of things. Because there has been an assault on autonomous institutions, mainly the electoral authority, and of course threats to journalists. Can you go on the other issues that have arisen that obviously now Joe Biden is not going to talk about?

Pamela K. Starr: Yeah, let me take a step back 'cause you asked about his legacy. In terms of the other things Biden's not gonna talk about, I think you basically covered it. The United States is gonna talk about journalists. Yeah. We'll talk about that, but López Obrador his response is, "Not my fault."

I'm not doing anything. This is not me. I allow for free speech. This is not me." And so you, they're talking past each other as a result. But I think the United States will clear its throat from time to time on the issue of security for journalists in Mexico, particularly foreign journalists.

That said, I think the legacy of López Obrador is going to be a problematic one. And it has several facets to it. Let me start with the fact that I think part of the legacy is that the Fourth Transformation is here to stay. Okay. I would be dumbfounded. It's not impossible, but I would be dumbfounded if the opposition wins in 2024.

They are in total disarray. They have no candidate. They have no platform. They have no rules by which they will select a candidate, and there will be at least two opposition candidates because the small party, Movimiento Ciudadano, has said, it got into a huge fight with the PRI last week, and the two of them basically said, "We will never, ever form an alliance together."

So there will be a Movimiento candidate, and there will be a PRI candidate, and the PAN is to decide which way it's going. So that almost, the opposition is weak to start with. That almost guarantees that López Obrador's candidate will win. So the Fourth Transformation will continue.

So what does that then mean for Mexico? I see it in two ways. There's a positive outcome and a more negative potential outcome. Let me start with the positive first. And it's because it's something that a lot of people don't, particularly opposition to López Obrador, doesn't recognize.

And that is the fact that you've got half of Mexico that's happy for the first time in a very long time. And there was no way modernization of Mexico was going to work if it ignored half the country. So to a certain extent and in the best case scenario, the Fourth Transformation could provide us a pause in the modernization effort to find a way to bring in this other half of the country.

It's not unlike what happened with Lázaro Cárdenas when he was president of Mexico in the 1930s, one of López Obrador's heroes, is that he was able to bring in the peasants, unionized workers in and government workers into the PRI coalition, and use that coalition as a foundation for economic modernization in Mexico.

This might be an opportunity to do the same thing. Does López Obrador want to do that? No. But will his successors? Maybe. So there's that one positive potential scenario. The more negative scenario is that's not what his successors want to do. What they do want to do is simply to slow the modernization process, really pay no attention to it.

Just let the private sector do the modernization process in the economy while they focus on southern Mexico, poor Mexico. That's not necessarily horrid, but the problem is they're doing this in a way that undermines democratic practices in Mexico and does nothing about the security situation in Mexico.

Both of those things I don't think will get better in Mexico under the Fourth Transformation unless the population really forces the government to do so the security situation will continue to be a great talking point. There's no fixed recipe how to deal with this.

Richard McColl: And as you see, you say you see this as a negative from the Fourth Transformation. It's just going to continue in this, ah, what would you say, this fluid situation of violence ebb and flow. Yeah, because the Fourth Transformation, one of the things it is, it's nationalist. And one of the things that López Obrador has insisted upon is that in the battle against organized crime, Mexicans do it in Mexico, Americans do it in United States.

Pamela K. Starr: And part of this is because he truly despises the Drug Enforcement Administration. And it's not hard to despise them. They have been arrogant. They have been inefficient. They have been ineffective. But it's the institution the United States has.

Richard McColl: Yeah. The Drug Enforcement Administration just isn't as good as they need to be at their job, and they have the tendency to ride roughshod over their foreign counterparts, and that's what rubbed López Obrador the wrong way to the point that he has really hamstrung what they can and cannot do in Mexico.

Pamela K. Starr: And they're very frustrated by that. Will a successor to López Obrador be more willing to allow them to operate more freely? I'm hesitant to say yes. Because that nationalist nerve runs deep within Morena, within the Fourth Transformation. There's a possibility that it might work, but I'm just not convinced of it.

And it won't work if the United States doesn't look like they're doing their part. Much more aggressively trying to deal with the flow of arms into Mexico, and much more aggressively addressing the addiction problem in the United States, which is creating the demand for the drugs. And then just add to it the fact that this is an incredibly difficult problem to solve.

Richard McColl: Yeah. Even if we were cooperating and effective at it. I don't see a lot of upside on the security front. Do you get the inkling, do you get the feeling that López Obrador enjoys to needle the DEA in this? Does he enjoy making life difficult for them? I wouldn't use the word enjoy.

Pamela K. Starr: I would rather say that he feels that they're a threat to Mexican national sovereignty. They're a threat to Mexico's policy autonomy, and he simply won't broker that. Okay. That's fair on that one. And one thing that came up a lot in his last intervention was the issue of nationalism, and I think that comes back to his resource nationalism has been a major issue in Mexico.

Richard McColl: And we can talk about that too, but also the increase in the role of the military. Perhaps you could address these two items. Sure. Let me start with natural resources and basically we're talking about energy here and lithium. López Obrador is anachronistic in this sense. He firmly believes, as a good 20th century, child of the 20th century, that governments should control the energy sector, particularly governments in Mexico.

Pamela K. Starr: And he believes that clean energy is a promise of the future, it's not a reality of today. And therefore, there's still a need for petroleum in the world economy. And those two attitudes have created an energy policy in Mexico that has undermined the production of petroleum and undermined the generation of electricity in Mexico.

Whoever is the next president of Mexico, very likely they are going to face an electricity crisis in northern Mexico. There simply isn't enough electricity to go around. That being said, I think whoever is the next president, if they encounter a crisis, they can use the crisis to potentially change Mexico's energy policy.

And either Claudia Sheinbaum or Marcelo Ebrard are much more open to the idea of clean energy than López Obrador is. So my suspicion is that we'll see Mexico move away from energy nationalism on the electricity front, on the clean electricity front but not on petroleum. No, I think we'll square the circle that way. But it's a huge issue, obviously, in the bilateral relationship. There's a huge dispute under the USMCA that we're currently consulting one another, trying to find a solution without going to a formal dispute resolution panel. And so the can is just getting kicked down the road. So I think that it won't get resolved bilaterally. It's only gonna get resolved when Mexico hits a crisis. Okay. Okay. But, sorry, quickly, and when we look at the sort of a clean energy, a new energy and López Obrador being anachronistic on this one.

Richard McColl: But if his successors move on it, is it a move away from the Fourth Transformation then? I don't think so. Okay. Because the core of the Fourth Transformation is Mexican energy sovereignty, which they're never going to achieve, but governmental control over the energy sector. And what López Obrador has been able to arrange is a federal electricity commission that now controls the majority of electricity generation in Mexico. And López Obrador has in effect said, "My work is done here." Okay. And so if there were a move toward increased clean energy production by the private sector, there's room for that to take place and still have government dominance in the sector.

So it's not a reversal of the Fourth Transformation. Okay. Okay. Sorry, and I interrupted you. Let's move on to the military. The military, yes. The 400-pound gorilla in the room. One of the ways in which democracy is being rolled back in Mexico is the dramatic increase of the role of military in government.

Pamela K. Starr: They control not only federal policing, they control customs, they control railroads, they control ports, they control airports. They're going to control an airline, and they also control... Wait a minute. I think that's it. I think I've forgotten one, but you get the gist.

Richard McColl: It's enough. Yeah. But more importantly than what they control, because what they control can be rolled back by a future president theoretically. There are two huge problems here. One is that by controlling all of these things, and particularly customs, which is profoundly lucrative they have a source of revenue independent of their budget from the federal government.

Pamela K. Starr: If this were to develop, they would no longer be dependent on the civilians for their budget. 'Cause technically the civilians can cut their budget. They don't do it, but technically they could, and that leads to some civilian control over the military even though the Mexican Secretary of Defense has always been from the military.

So civilian control has always been a little tenuous in Mexico. The core of it has been the control over the budget. And my concern is that's weakening. And the other huge concern I have is that the leaders of the military in Mexico aren't just pro-López Obrador, pro-Fourth Transformation.

They have bought into the idea of Obradorismo. And so the concern I have is that at a point in the future should an opposition president come to power, will the military support them? It's a question that Mexico had to deal with in its original democratization process. It's now resurged.

Richard McColl: It's resurgent. This is a very present, I would say, threat, and continues upon the line of, again, of this rolling back of the democratic process in Mexico. So again, you've expressed fears. We don't know obviously how things are going to pan out. There does seem to be everything in place for a Claudia Sheinbaum presidency.

Again, we don't know. But were it to come to if, perhaps, we say, the sticky situation where the voting is too close to call, then the military could, very possibly get involved. That's a real concern. But I think it is a misplaced concern right Yeah

Pamela K. Starr: because I don't expect a close election. I would be surprised, very surprised if there were a close election. I think the, Morena's gonna win the presidency in a runaway. The question is, do they get what López Obrador wants, which is what they call a carro completo, which means they win not only the presidency but all the governorships and a two-thirds majority in both houses of the federal Congress.

That's what he's shooting for, not just the presidency. So it's gonna make for an interesting next 18 months because he's gonna pull out all the stops to be able to ensure that Morena has full control of everything. Certainly an interesting time. You've got a lot on your plate for the next 18 months, I think.

Richard McColl: Never a dull moment. I think we should wind this down now and I just say thank you so much to Pamela K. Starr, who's a professor of international relations at the University of Southern California in Los Angeles. It has been really a revelation to listen to some of these points of view and of course the facts which all lead, at this moment in time as we talk here in June 2023, to a most probable Morena presidency in 2024.

Agreed. So thank you very much for being on the LatinNews Podcast. This has been episode six. We've been talking to Pamela K. Starr. And also, if you want to follow us, if you want to tune in, just check out TheLatinNewsPodcast.com and all the links to where you can find this podcast are there available for free of course.

And you can tune in and subscribe. I've been Richard McColl here in Bogotá, Colombia talking to Pamela K. Starr. Thank you so much again and goodbye.

Outro: You've been listening to The LatinNews Podcast. For more news and analysis on Latin America and the Caribbean, visit www.latinnews.com

Dr Emily Morris is a Research Fellow at University College London’s Institute of the Americas (UCLIA). For 13 years she worked for the Economist Intelligence Unit, where she was a Senior Editor/Economist covering the economies of Latin America, and in 2011 she completed her doctoral thesis on Cuban economic policy and outcomes since 1990. As well as lecturing Masters level students, she is now doing consultancy work on Cuban and Latin American economics.

Dr Morris's current research includes studies of Cuban macroeconomic management and performance, climate change mitigation and transport strategies, and emerging currents in Latin American Political Economy. She is lead researcher for a collaboration project between UCL and the Cuban ministry of transport, helping to formulate an environmentally, economically and socially sustainable transport strategy for the city of Havana.

Dr Morris lectures in the Political Economy of Development in Latin America, Latin American Economics, and Economic and Social Transformation in Cuba.

Ten years ago she wrote an article for LatinNews, covering Cuba's dual-currency system. On the latest episode of The LatinNews Podcast she joins Richard McColl to discuss current developments in Cuba.

Intro: Welcome to The LatinNews Podcast, a fortnightly deep dive into key developments from across Latin America and the Caribbean. Here's your host from Bogotá, Colombia, journalist Richard McColl.

Richard McColl: This is the LatinNews Podcast, episode five. I'm Richard McColl, your host here in Bogotá, Colombia. My very special guest this week is Dr Emily Morris. She's the research fellow at UCL Institute of the Americas. She's an expert on Cuba and economic policy and so much more when it comes to that island in the Caribbean, and that's what we'll be discussing today.

Because there's been all sorts of goings on and we need to go over them to clarify for our listeners and all of you out there, of course, what is next for Cuba? So Emily, thank you so much for your time coming on The LatinNews Podcast.

Dr Emily Morris: Thank you very much for inviting me. It's really interesting to come back here after 10 years after the article I wrote on the exchange rate and rereading it and thinking about what's happened in the last decade.

So yeah, I'm very pleased to be here. Thanks.

Richard McColl: It's a fascinating article. It's a fascinating article that you wrote all those years ago on the dual currency system in Cuba and why it needed to change. And when I was reading back through it, I found it remarkably prescient as what happened.

You really did predict the future over those 10 years. So perhaps we could start with the very basics and say what was this dual currency system?

Dr Emily Morris: Okay. Yeah. The dual currency system emerged in the 1990s. There was always a dual currency in that there was always a black market rate, but the black market rate before the collapse of the Soviet Union was something like seven to one.

So the official rate was one Cuban peso to one US dollar, which was equal then under the Soviet system to one ruble, whatever. It was fixed. And then and then it was around seven to one when the Soviet Union collapsed or when the Soviet bloc collapsed. And during the economic crisis that ensued, the, because of the shortages that occurred, huge amounts of shortages and a very large fiscal deficit, so the exchange rate collapsed to around 120 to one.

That was on the black market. And so this was effectively runaway inflation as well because, of course, what people had to pay to get goods outside of what was available in the state rations became enormous in peso terms. Completely unaffordable and so on. So in the middle of the 1990s they had a stabilization strategy, which they never called a stabilization strategy, but it was a stabilization, and they cut the fiscal deficit enormously, and they created these two exchange rates.

There was the market rate, and then there was the official rate, which was still used for state enterprises. Now this is the strange thing. So state enterprises were using one to one, whereas people for their personal transactions could use a rate that was floating and market determined. The market settled down around 24 to 1 on what they call the CADECA rate. So it was legal, it was market determined, but it was a secondary rate. There were some changes between then and when I was writing, but broadly that's how the system remained. Initially the convertible peso was circulating alongside the US dollar, then they withdrew the US dollar from circulation, so you had this kind of proxy US dollar.

So it was complicated, but that was what people got used to: 24 to 1. It had first gone from seven to 120, and then with the stabilization improved.

Richard McColl: Okay.

Dr Emily Morris: That was actually quite unusual among post-Soviet economies, to actually get an appreciation after the depreciation.

And that's partly because so many of the prices in the economy were fixed, and so you had a kind of an anchor that brought it back down again. So that's what happened before I wrote the article. So there were two exchange rates and there was a lot of discussion about what had caused... what this dual exchange rate system was doing to the economy.

It was enormously damaging. It meant that people who had access to US dollars through the growing tourism market were much, much richer than other people. It distorted every, every aspect of economic life. So in the public sector it meant that state enterprises were underestimating the cost of imports relative to what they'd earned from exports.

And therefore it was creating all sorts of inefficiencies. Right the way through distortions. And in the private sector it meant that a lot of people in the private sector were being paid minuscule wages in dollars terms, which got magnified when you did the exchange rate. And so they could actually buy things which are in controlled prices at 24 to 1, and then they didn't have to earn very much in order to be richer than somebody who was on the state salary.

So that also meant that people who were working for the state in whatever capacity, in manufacturing or teaching or whatever, would be leaving those professions in droves. So they had a real internal brain drain. Qualified people would be moving into unqualified or unskilled work in the dollar-earning sector, which is mainly linked to tourism.

So the economy was extremely distorted. The continual efforts to increase exports and increase import substitution would always fail under those circumstances. It could not lift the economy into an externally stimulated, export-driven economy when you've got that degree of distortion.

And so that's why at the time I said, "Why this must change." Because the longer this went on, the more entrenched... every day that passed there'd be another Cuban making a decision about how they made their living, leaving the state sector. All of that training that they had through the universal free education system was just squandered.

They just lost it. Yeah, and the new private sector which was growing rapidly even then, was growing in a very distorted way. It was growing at very low productivity which was not a good thing in the long term because once you move to a more market driven prices, which you needed to have, a lot of that new private sector wouldn't be viable.

So that's why I was saying it's really urgent to be done at that time, and that was 10 years ago. And so then the question is, what did they do between, after that why didn't they do anything? They had stated in public policy that the unification of the exchange rate was one of the 300 priorities.

They have a bit of a habit of doing official documents that say, "These are our priorities." But the priorities aren't ranked in any order, so everything is a priority. And there was a major document produced in 2011 called the Lineamientos, Guidelines for Economic Policy, and this was, I remember, Lineamiento number 56 was exchange rate unification.

And so it just sat there and, everybody on the street was saying, "What the hell's going on? This should be happening." And I looked at the date that I wrote that report, and I realize now that there were things happening that people didn't know about at the time. So there were various commissions, people exploring how they're gonna move from their existing system to the new system.

And what I did say in the article, and thanks for saying it was prescient, but, it would be destabilizing, whatever you did. However you did it. If you change prices and exchange rates throughout the economy, it is destabilizing, and there would be winners and losers. So they, aware of that, they had all these people in the ministries trying to work out what to do.

They were now at that time starting these negotiations in secret with the Obama administration. So they were hoping for an opening up. They were also... And Fidel Castro, no, sorry, Raúl Castro had been saying for a while that they needed to sort out their outstanding debt issues, so they were preparing for that.

So when in 2014, at the end of 2014, they announced the reestablishment of diplomatic relations Within a year, they also had an agreement with the Paris Club. And so they, so that was all going on, and I had seen an inkling of that, 'cause you could see that what was happening, actually since 2009, was the balance between the level of import spending, or the spending of, on the current account of foreign exchange, was less than what they were bringing in.

And so they were beginning to build reserves. They were beginning to get ready for repaying debt. So that was going on. The Cubans don't ever publish their level of international reserves for years I've been following, what are the inflows, what are the outflows? Are they increasing? Are they decreasing?

And that was a strange thing that was happening in those years. It was very clear that was going on. During the Obama opening, that initially that process was continuing strongly. So the official GDP growth rate was very low, even though there seemed to be, the economy seemed to be picking up.

And the, particularly the private sector. And people were feeling it. They were feeling it in their pockets. They were feeling it in terms of the possibilities for life and all the rest of it. So why didn't they make the move at that moment, see? So just, a year or so after I wrote that report That was possibly their best opportunity during the Obama opening.

But they were also trying to, continuing to try to rebuild reserves, trying to pay the debt, and cautious. They didn't know how long this was going to last and so on. And they were still working on what to do. How to do it, how to manage this thing. So that sluggishness, I think, is probably the only opportunity that they had because then that opening only lasted for two years, 2015 to '17, and then the situation in the US changed.

So it would've been very surprising if they'd have gone ahead with it during the Trump administration because the Trump administration was introducing a series, one after the other, of measures to try to limit Cuba's foreign exchange and to make things more difficult economically. So in a way it's not surprising they didn't do it then, but they kept working on it, and they were still thinking about it.

And then when they finally did it, and again, this is not a coincidence, they finally did it in November 2020. That was a very interesting year, as we know, because the sanctions had been tightening since 2019. Their oil deliveries had been interrupted by one of the measures taken by the Trump administration.

And they'd had COVID. So they'd had a difficult year. They'd had a severe lockdown. They'd had cases of COVID but they had actually managed the COVID very well compared to all the countries in the region. They were doing extraordinarily well. So I suppose they felt, they were in a good position, and I suppose, and I'm guessing completely now, like the rest of the world, they thought that Biden meant it when he said he was going to revert to the Obama position on Cuba.

And so instead of that, what happened is, so in December they increased wages in anticipation of the inflation that would inevitably follow. There would have to be price adjustments. So wages were increased by three, fourfold. Huge. And people felt quite, quite happy about that. And, in the immediate very short term they felt better off.

And then came January, and nine days before he stepped down, before Trump stepped down, they introduced their final measure, which was adding Cuba back onto the list of state sponsors of terrorism. What and the impact of that wasn't immediate, but was probably more severe than anything else that they'd introduced.

And so that happened, and then Omicron happened, because the Cubans then opened up a little bit, feeling a bit more confident about COVID. And then the Omicron variant happened. The Cubans were working on their vaccine, but it was a race against time that they lost. And so you see the takeoff of COVID during that period. So you had a sudden reduction. There was also an increase in... yeah, the deliveries didn't arrive because contracts would be canceled, because suppliers wouldn't want to deal with Cuba, because it was included on the state sponsors of terrorism list. So there were non-deliveries.

There was the outbreak of COVID. Inflation took off like anything because it, they always expected there would be inflation. But with supply shock as well at the same time, the inflation was stronger than they had anticipated. The exchange rate, the black market exchange rate reemerged. So the unification was on January the 1st, 2021, and it was at 24 to 1.

Which was the same existing rate that there was already on the CADECA, the informal rate. But it meant that all state enterprises had to adjust their prices. So all of those prices went up, and then all the black market prices, and all the informal economy prices, and on the market economy prices also went up.

So by July, the Cubans who'd hardly experienced any inflation in their lifetime in terms of those state prices and so on, suddenly found they didn't know when this was going to stop. So the feeling of insecurity, the feeling of shock, the frustration built up of COVID lockdowns and all the rest of it, and food shortages and queues, everybody's wits, everybody was at their wits' end.

The degree of say irritation, frustration, anger, even at their neighbors, let alone at the government. Everybody was in a very highly strung state by July. So that's when the explosion happened, the biggest riots that they'd ever had, the bigger demonstrations and so on.

And so inflation... So yeah, so that's where they came to that. That was really the low point politically

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Dr Emily Morris: Just about at that moment, they were starting to roll out the vaccine. By October, COVID had been, had receded. There were some more calls for demonstrations in November, but they came to nothing. So it was, a beginning of a kind of sense of maybe things will stabilize. So since that time, now that's two years ago now You've continued to have inflation.

You've had in the last year, in 2022, wages rose 10%, prices... It's very difficult to measure inflation in Cuba, but there's an official rate which bears very little responsibility to anybody's experience. And then you've got just the cost of living and the perceived increase in prices, which is seems to be often done on the price of pork.

So before New Year it spikes. But they're still experiencing inflation. They're still experiencing very little change in US sanctions. And all of this comes after that moment of optimism and improvement and expectation under Obama, and then you had the four years of Trump, and now with Biden, no change.

So it's really, I think, absolutely no surprise that people are leaving. And they're leaving in droves now.

Richard McColl: Yes.

Dr Emily Morris: The situation hasn't got any better. The rationed goods arrive enough to keep people alive, but they're spending their lives in queues. And now they've also got difficulties with the power system and blackouts and so on.

So it's very tough at the moment.

Richard McColl: So I wanted to jump in there on that. If we go back, it's economy, cost of living, obviously tourism hasn't fully recovered. The July 2021 protest, which seemed immense in size really for Cuba, obviously the pandemic, food shortages, the ordinary Cuban suffering.

But at the same time, these blackouts, can we relate it to the fuel shortages coming through from Venezuela?

Dr Emily Morris: Yeah, you can see in the import figures that there's been, to some extent, a switch away from Venezuela. Venezuela hasn't been supplying as much of Cuba's oil as before. They've been finding other sources.

But there are restrictions, there are huge problems because one of the many sanctions says that any tanker that's insured by a US insurer is not permitted to take oil to Cuba. So that's one thing. That's a direct one, but then there's another one if any kind of payment is paid in US dollars, and oil is usually paid in US dollars.

Anybody who receives that payments from Cuba for that is also frightened of US sanctions. Even if they wouldn't apply, even if it's a third country, what they call over-compliance is a huge issue. So the Cubans... And I did an interview with somebody from the Ministry of the Economy last November, and she was just quite low down in the ministry, but she was just describing how, they have less money because they have less foreign exchange.

The oil price has gone up. And then they manage to get somebody to do the supply, and then they cancel at the last minute. And so you have not only less money to buy oil, but you also have the unpredictability of deliveries. And then, of course, within Cuba, you had the problems with distribution because of them not having vehicles or whatever to distribute the oil within the country because everything's broken.

That's what happens if you have several years of no foreign exchange. You don't have spare tires. You don't, you don't fix things. So this kind of unpredictability, I think, is an important factor in a way is like they have... The Cuban state assumes a responsibility for making sure that everybody's got enough food But they're unable to deliver because they can't actually plan properly.

They can't actually plan ahead. And so they're living hand to mouth, emergency all the time trying to get things into the right place. The fuel one is another one. So it's fuel. They haven't got enough fuel. They haven't got enough fuel at the right time in the right place. Their power stations are regularly breaking down because they're in a sorry state.

And so you've got the combination of all of those things. And then, of course, they had an enormous fire in one of their fuel storage places, just adding to the general sort of litany of disasters. They've had that happening as well.

Richard McColl: This is, you reflect on how positive things were going in that Obama administration and the Cubans seeing perhaps a more positive future, and then being completely tipped off a precipice.

And it ran and it continues to run, this sort of, this malaise obviously not just political, but you know, in every sector of society and every and every topic we have touched on. And I think we could we peg this now to, Díaz-Canel being reelected in April.

Of course, he gained a majority, but low turnout, and I think this obviously reflects Cuba's, as you say, uncertainty, instability, mistrust, I imagine, and just basic... Rage? Can we say that? I think.

Dr Emily Morris: it's more, I think it's more loss of hope. Okay. It's just despair. Despair rather than rage.

Some people get clearly... But it's very difficult to be furious with an administration. Díaz-Canel himself is a total contrast to...

Richard McColl: Yeah.

Dr Emily Morris: his predecessors. He's not a charismatic person. He is stolid, hardworking, traipsing around the country trying to talk to people, trying to understand, trying to say that they're doing something, but also trying to explain that there's very little they can do.

So a kind of hapless figure really. I think it... And so he doesn't inspire confidence because he doesn't project an idea of hope. They're trying to, use what they have. They're trying to come to terms with the fact that they can't rely on a US opening. This is what, what's going on in terms of economic policy, and that kind of explains what's going on in terms of foreign policy or the people that they've got visiting and the tours that they're doing.

So Cuba is reestablishing apparently very friendly relations with Russia. Now, of course, there's no ideological affinity between them whatsoever, except a lot of Cubans of the older generation could speak Russian. They've been to Russia. So it's possible to construct a kind of friendliness between them.

But, culturally, politically, ideologically, even economically they're miles apart. But it's very interesting to watch that happening in the past few weeks. So the Russians are talking very friendly. They're going to provide some kind of financing, which is what Cuba needs more than anything else.

The Cubans can't get it from anywhere else because of the state-sponsored terrorism thing. So now they're being forced into a relationship which is an uncomfortable one, I think, it has to be said. But they're also at the same time working very closely with the Chinese.

They've always been very good friends with the Vietnamese. So that continues. They have good, strong relations with all of the Caribbean countries and with CARICOM, and building better relations with Latin America after a kind of period of more difficulties. And then of course, they've got the EU.

So what they're trying to do is to yeah, to maintain relations, a wide range of relations. But the one that will obviously catch the attention of the US at the moment is the relationship with Russia.

Richard McColl: Yeah.

Dr Emily Morris: And I get the impression that Cubans are quite enjoying accentuating that part of it.

What it'll produce in real terms is, more difficult to see because the Russian private sector is going over there trying to get a good deal, and the Cubans are not giving up their process of vetting investors. So and it was quite interesting 'cause the Russians said, "Yes, and we're talking about reducing the bureaucracy."

And you think that bureaucracy is actually a kind of due diligence on the Cuban side. So that's a kind of an interesting... It would be interesting to watch in concrete terms what happens with Russian investment in Cuba over the next year or so. Anyway, so that's what's happening now. And I don't know whether that's going to persuade anybody in the US it's maybe not wise to isolate Cuba in that way or to cut off relations with Cuba.

'Cause what they're doing is they're creating what they had in the Cold War. The Russians as a neighbor.

Richard McColl: This is a fascinating prospect, concerning of course. And of course I'm sure it's being looked at with some interest by the government of President Biden. Of course, people like Ron DeSantis as well will be very aware from his base in Florida.

But do you feel then, and as we wind this down, do you feel that in order for the US and the government of President Joe Biden to address the, let's say, Cuba dilemma, they're going to need some suggestions from Díaz-Canel of meaningful political reform on the island?

Dr Emily Morris: That's an interesting question.

It's like who, who's going to move first? The Cubans have actually in 2021, they moved ahead with the opening up of in 2022, yeah, to private enterprises. So they had you could be self-employed before, so there were small enterprises. They've now taken away that. So large enterprises, private enterprises are now possible in Cuba, and those private enterprises can also, if they can find anybody who will give them finance from abroad, would...

can use external finance. And so this is a really fundamental reform. It's huge. But obviously that sector's not growing as fast as it could be because it has no finance, and the Cuban financial system has neither the resources nor the skills, if you like, the capacity to fill that gap.

But so reforms are continuing. So then the question is the people who the US is saying they need a gesture and in terms of releasing what they call political prisoners, what the Cubans call people who rioted. And so where in the past those kind of releases have always been mediated through the church or some, some other kind of organization.

It wasn't a coincidence that when they opened to Obama, there were a lot of prisoner releases. But the Cubans said it wasn't at the behest of the US because it's their own domestic, personal, thing. They don't tell the US to release their prisoners. The US can't tell them to release their prisoners.

So in principle, the Cubans say, "No, we don't do anything under duress." The sanctions are unilateral sanctions imposed by the US, and that they have no right to do. The Cubans won't make concessions. On the other hand, when they start talking, things do happen.

Richard McColl: Yeah.

Dr Emily Morris: And that is quite clear from when, the...

there's a precedent for that. Once they have diplomatic relations restored under Obama, there were a whole load of commissions got created, and they started to move forward on lots of different fronts. So the question is how do you begin this process? And I don't think that if Biden thinks he can just shout across and say, you have to do that.

You have to do that, otherwise we won't move," it's gonna have any impact at all. The Cubans will not move under those circumstances, and the US diplomatic people must know that. They're already in discussions about, strangely about anti-terrorism because they collaborate in that area. They collaborate on migration, on drugs and anti-terrorism.

So all of that they actually, you know, in the security services, they're, The last thing they want is instability in Cuba because Cuba's their strongest ally in the region. So it's a kind of a very contradictory thing. Cuba is no threat at all to the US. But politically, you're quite right.

Politically, you're quite right because the people who insist on maintaining and strengthening sanctions demand that there must be some concessions on the Cuban side. And a lot of those people are very well-placed on various commissions, on congressional commissions, that are able to block anything, so many things that Biden might want to do in other areas.

Cuba's simply not worth it for him. So it's not, I don't believe that it's actually a matter of if the Cubans make concessions, the US would make concessions. I think if Cubans make concessions, they would actually never be enough for those people.

Richard McColl: Yeah.

Dr Emily Morris: Whatever they did, they'd find another reason. And the Cubans that's the experience.

That's what they've experienced in the past. So I think it's a funny way, it's a way that the discussion has been framed in the US but it's not actually a useful way of framing the question. If they want to move ahead, they'll need to move away from what the Cubans describe very similar to what the US is saying about China at the moment.

This is economic coercion. Very strong. A weapon used very strongly. But it doesn't achieve anything in terms of their aims.

Richard McColl: So how, we've gone through this. We've gone through the, again, the peak, the trough, and now what's continuing. How do you feel about the coming months?

The immediate future for Cuba?

Dr Emily Morris: I don't think, and actually nobody I spoke to in Cuba at any level in any department thought that there was gonna be a quick escape from this. This is... These difficulties are going to persist. They... I did say I have suggested that they may be in the trough at the moment.

And tourism will pick up. They're getting a little bit of finance from Russia, from China, from, various places. Tiny bits of finance compared to other places, but at least it's some. But even as they pick up, even as those things recover, it does remain a priority for Cuba, which people find surprising, to service the debt.

And that is gonna be expensive. It's gonna hold back the recovery of living standards. So the private sector is certainly growing. There's more happening there. There are some improvements in efficiency in the state sector in terms of administrative efficiency, and the kind of application of information technology communications is improving.

It's a slow process though. And in the meantime, you have... It's like a safety valve. The young people just go abroad rather than protesting. But you have this kind of hemorrhaging of their talent which is serious in so many areas, not just in higher education, but even in electrical engineering. Again, they're in a situation where, until they can get a strong enough economic recovery, the damage is continuing.

It would be several years before anybody... And still aren't coming from some places because of problems with insurance and so on because of the state sponsors of terrorism. That would be actually the... I suppose the thing that could accelerate recovery could be removing from that list, which actually has no justification.

Richard McColl: Certainly bleak right now, I think. But not the...

Dr Emily Morris: end. There have been so many predictions of there being an end. Things are terrible at the moment. But trying to see how the end would come about, I don't feel that there's a rage and anger on that level.

There's a frustration but there is a kind of sense of kind of limping through this awful period that they have and which is continuing. I may be wrong. I may be wrong 'cause levels of frustration, you never know when they're gonna boil over. But yeah, it doesn't feel like that at the moment.

Richard McColl: Okay. Okay. Thank you so much for your time. It's so very interesting to discuss Cuba with such prodigious knowledge because you've been able to give us a very profound look at what's going on in Cuba, and I know that you're heading off there shortly, so we hope to hear more about your observations of the country in coming months.

And let me take this moment to say thank you so much to Dr Emily Morris, who is a research fellow at UCL's Institute of the Americas, expert in all things Cuba. Thank you so much for your time, for being on The LatinNews Podcast. Thank you very much. Thank you, Richard. It has been an absolute pleasure.

This has been episode five of The LatinNews Podcast. Just check out our website, thelatinnewspodcast.com, and you can find all the links to the various places to listen to this podcast or view it on YouTube. Thank you again. I've been Richard McColl here in Bogotá, Colombia, and goodbye. You've been listening to The LatinNews Podcast.

Outro: For more news and analysis on Latin America and the Caribbean, visit www.latinnews.com.

Andrew Nickson has four decades' experience of teaching, research and consultancy on public administration reform, local governance, decentralization and urban water supply. He has a particular interest in Sierra Leone, Nepal and Paraguay, countries where he has had long-term work assignments. He is currently lead trainer on 'Decentralised Governance and Peacebuilding' and 'Acting Locally: Citizen Participation for Resilient Institutions' for the Turin-based United Nations System Staff College (UNSSC), delivered both through distance learning and face-to-face courses.

He also writes regularly for the Economist Intelligence Unit, Oxford Analytica and HIS Markit.

Intro: Welcome to The LatinNews Podcast, a fortnightly deep dive into key developments from across Latin America and the Caribbean. Here's your host from Bogotá, Colombia, journalist Richard McColl

Richard McColl: This is The LatinNews Podcast, episode four. I'm your host, Richard McColl, here in Bogotá, Colombia. My very special guest is Andrew Nickson.

He is the honorary reader in public management and Latin American studies at the University of Birmingham. He's an expert in all things related to Paraguay, and that is our topic this week. We're going to be discussing the results of the recent election, the issues surrounding the recent election, 'cause we know the results of course, but we're gonna have a summary about it.

But we need to think of Paraguay as a whole. We need to think of the economic reality in Paraguay, not only the political economy reality, but we also need to think about the international subjects that surge from this election. So Andrew, welcome on The LatinNews Podcast.

Andrew Nickson: Thank you, Richard. It's a pleasure to be on the podcast with you today.

Richard McColl: Thank you so much. I hope everything's there in Birmingham, but let's transport ourselves to Asunción. At least figuratively. Let's transport ourselves there. We've had the election. We know the results, but perhaps for our listeners we could give a little overview of what took place.

Andrew Nickson: Yes, the election result was a surprise. It was on the 30th of April, and Santiago Peña, a 44-year-old economist, was the candidate of the Colorado Party against a broad opposition movement called the Concertación, which was mainly built around the other traditional party in Paraguay, the Liberal Party.

Prior to the election, most observers and opinion polls had suggested it was going to be neck and neck, and yet when the result came out, it was a clear victory for Santiago Peña and the Colorado Party with 43% of the vote, whereas the opposition Concertación got a much lower vote at 27 and a half percent of the vote.

So it was a 15% margin. Very large. And for the first time for over 25 years in Paraguay because there are also congressional elections at the same time, the Colorado Party came out with an absolute majority in both houses of congress, the Senate and the lower house. So it was a resounding victory for Peña and for the Colorado Party.

The other unusual aspect of the result was the third party candidate Payo Cubas, who got 20 21, 22% of the vote, not far short of the opposition Concertación. And that was a big surprise. Came out of nowhere. A figure who had been a former senator until he was kicked out of the Senate for, and what was regarded at the time as very unacceptable behavior by his colleagues in the Senate.

And he led this populist movement with a very strong following in the east of the country, near the Brazilian border, and did very well, to the point that he has got now six senators in the incoming congress, which takes office, as does the president, on the 15th of August. And also some deputies.

The other aspect worth mentioning about the election was the destruction almost erasure of the left-wing political movement, Frente Guasú, in Paraguay. They previously had got six or seven senators. Now they've only got one. And it's said that the reason for the demise is that they sided with Alegre, the candidate of the opposition. And this third party candidate took votes away also from the left-wing party, which has never been particularly strong in Paraguay by comparison with other parts of the region.

So this is an election result which does not follow the recent trend of a slight move to the left such we've seen in many other countries in the region. On the contrary, it is a strengthening an embedding of a particularly powerful, very self-confident right-wing political party, the Colorado Party.

It's one of the oldest parties now in Latin America that's still in power that was created back in the 1880s. And unusually, and this is a really important point to understanding politics in Paraguay, is that it is the only case in the whole of the region where a party has got not a monopoly, but a very high proportion of the public sector administrative staff.

We know this because now with recent transparency laws that have been introduced, we can do a cross-referencing between the public domain, publicly available information on party membership, and the names of people who have got jobs in the ministries and the state companies. And what we find is that there is 85% of the just under 400,000 public sector employees are members of the Colorado Party.

If one wants to make an international comparison, it's more like the comparison that we find in some countries of the past, of the previous Soviet Union and the post-Soviet some of the countries of Eastern Europe today. So that's the in a nutshell what's been happening in the election on the 30th of April.

So it is, there'll be many surprises.

Richard McColl: It is surprises. So we've got Santiago Peña. He is now president-elect. He's 44 years old, so young. Now if I'm not mistaken, he was a member of the other party to begin with, and then has moved over to the Colorado Party. So does this make him There are suggestions out there that, of course, he's he's easily manipulated perhaps by Horacio Cartes

Andrew Nickson: Well, there is some probably some truth in that.

It is absolutely true that he comes from a liberal party family, from a very wealthy family, urban family, and in the capital city. He's not a Guaraní speaker. Frankly, doesn't know his own country very well, has not traveled very extensively in the country. But he was singled out for reasons we don't really know very early on by Horacio Cartes, and more about him later.

The president of Paraguay from 2013 to 2018, who himself incidentally had never voted in an election until he voted in the election that brought him to power in 2013. He also was not a member of the Colorado Party. But in 2016 he identified him as perhaps as an upcoming young technocrat, and he

At that time, Peña was working in the central bank. He'd done a pasantía a short period, a 18-month period in the IMF in Washington, and he catapulted him to become his Minister of Finance. Months after appointing him, there were noises inside the Colorado Party against him because there's it's, a party that likes very much to have its own people occupying ministerial posts.

And to overcome that sort of problem Santiago Peña in a public display at a big public meeting he took off his tie and put on the red handkerchief of the Colorado Party and said, "I'm a Colorado." And ever since then he's been a member of the Colorado Party. He was then Horacio Cartes' candidate to be the candidate of the Colorado Party in the 2018 presidential election.

But he lost that. He lost that to the current incumbent Mario Abdo Benítez. And one thought at that time that Cartes would ditch him because he had failed in his effort to make him become president of the party president of the country. And however, Cartes stuck with him. And he put him forward once again to be the party candidate in internal elections held in December of 2022, some months ago.

Internal elections, incidentally, where Cartes himself, the former president of the country, was elected to become president of the Colorado Party, and at the same time, Santiago Peña was chosen by Colorado Party members in a popular vote, to be fair, amongst Colorado Party membership to become its candidate for the presidential election, which he then went on to win on the 30th of April.

It's worth also pointing out that over the past five years, during the period of Abdo Benítez's presidency Santiago Peña has occupied a senior post in a commercial bank owned by the Cartes family. Cartes has run into growing difficulties with the United States. In July of last year, he was declared a significantly corrupt person by the US government followed by financial sanctions in January of this year, which forced Cartes, probably the richest man in Paraguay today, to divest himself of part of his unwieldy business empire by selling off the, his share ownership to friends and relatives, including his own children.

And in, and in doing so I think the US got somewhat got egg on its face. It assumed that this would be a problem for Cartes's, A chosen successor Santiago Peña. But it didn't work out that way. In fact, it rebounded very much because Peña was very clever in suggesting in his speeches that the attack on him as Cartes' chosen presidential candidate was really an attack on the Colorado Party.

And that was very clever because the Colorado Party is a very strong nationalist culture, and US policy in that respect rebounded. And if anything, I think it helped get the Colorado Party vote out more effectively than it perhaps would have done otherwise.

Horacio Cartes is still very much under a cloud. There are rumors even now swirling around in Paraguay that maybe he will be extradited, there will be an extradition order at least by the US authorities, who've accused him of some extraordinary things. Of paying regular $50,000 payments to a range of senators and deputies, being involved in international terrorism and money laundering.

These are very serious accusations. If an extradition order is to take place, it will surely be before the 15th of August. After that, it will be very difficult. With the Colorado Party majority in Congress, it is hard to see how the government of Peña would be if it wanted to, will be able to get through an extradition order.

But that, the other side of the coin is that continuing strong support that Peña's giving to Cartes, he was on the platform in the victory ceremony on the night of the 30th of April, holding hands with Cartes, is undoubtedly going to be an embarrassment internationally because the United States certainly do not look at Cartes in a positive light.

Richard McColl: So it seems to me that, Santiago Peña, someone perhaps with an unblemished political record, has been potentially groomed for this position, and it's been a very strong move by Horacio Cartes, and of course within the Colorado Party. But this tethers quite nicely into a subsequent point, is the US foreign policy obviously towards Paraguay and pro-Taiwan over China, this sort of chessboard that's taking place.

How can we see this then playing out?

Andrew Nickson: It's a complex very complex scenario at the moment, Richard, as you've highlighted. The US policy towards Paraguay, it's certainly, it's small, not of great geopolitical significance, but after all, this is the fourth largest exporter of soybean in the world, the eighth or the ninth meat exporter in the world, a growing exporter of rice, has the third-largest barge fleet in the world taking all this stuff down to the Atlantic coast.

It's facing two ways. The US is facing two ways. They've got it in for Cartes, and yet Cartes' own delfín, as they say in Spanish, is now president of the country. And what I have noticed in they're trying to square the circle to some extent, and in what one way that they're doing this, they're very pleased that Peña is, has reaffirmed his commitment to maintaining ties with diplomatic ties with Taiwan and not switching to the PRC as Efraín Alegre of the Concertación wanted.

But there's still a problem. There's a problem in, insofar as grain exporters are pressing or have been lobbying for some time now for a switch, not because they're, they're crypto communists, but because the enormous Chinese market is still accessible to Paraguay, but it has to be triangulated trade.

It's trade. They sell the soybean to Argentina, Brazil, or other countries or in Europe, and then it is resold to Chinese importers. But in doing so the actual return, the net return to the exporters in Paraguay and the producers is somewhat less. There are different calculations, but it can be in the region of 10 to 15% less.

So clearly they want to engage in direct trade. Yeah. But the US is keen for Paraguay to maintain its ties with Taiwan. What they're trying to do now is very much curry favor to counter that continuing pressure that's coming from powerful economic interests. And in doing so they've done two things recently in the past few months.

What, the first thing they've done is to offer, I think the contract's been signed now, for a major hydrological study to deepen the canal on the Paraguayan section of the Hidrovía. This is the kind of the main waterway route that extends further north from Paraguay, incidentally, into Brazil, which brings down all these this growing massive cargo traffic of cereals and meat products to the global market.

And in doing so it will cut transport costs quite considerably because at times of drought there have been growing problems, in fact, with climate change, of slowdown in transport and blockages on that, on the river Paraguay down to Buenos Aires and Montevideo.

The second thing they're doing, perhaps more significantly, is suddenly after decades of lauding Paraguay as the US' best friend in Latin America they finally said that they are going to allow Paraguay to export meat to the US because as of today Paraguay can still not export its meat products to the US.

So I think they are, the US thinking is if we're gonna open the meat market to Paraguayan producers, they will not be pressing so hard against the, on the question of the diplomatic ties with Taiwan. It is not of, going to be of any benefit to soybean producers incidentally.

The only beneficiaries would be meat exporters. But there's a problem there because although the Department of Agriculture has said Paraguay's no longer dangerous from a foot-and-mouth disease point of view large powerful producers meat producers in the US have lodged a complaint.

There is a, according to US law, there is a period of consultation which ends in May or June of this year. So the Department of Agriculture has set the ball rolling, but it could well be that these complainants arguing that Paraguay's still a risk of, from foot-and-mouth disease will block this initiative.

But these two initiatives the hydrological study and the attempt to open the meat market are an indication. I, and these decisions have been taken very hurriedly, incidentally, in the past couple of months. They were taken completely out of the blue. They are clearly a response to this changing geopolitical situation.

But it's early days yet to see how this is actually going to play out.

Richard McColl: I see too many complexities related to this issue, and I also wanted to bring in, because that again nicely feeds into the next issue, let's say, on an international scale.

Peña, President-elect Peña has talked about moving the Paraguayan embassy to Jerusalem, and this could alienate a lot of the Paraguayan, let's say the meat market that is sold to a lot of the Arabian states. Is, So both sides seem to be conflicted.

Andrew Nickson: Yeah. Absolutely. Absolutely.

The background to this is in the dying days of the Cartes administration. Cartes, by the way, had very close personal ties to Benjamin Netanyahu of the Israeli head of state. And to everyone's surprise, it was, again, this was taken I think months before he left office to switch the embassy from Tel Aviv to Jerusalem, which they began this process.

They began the process of actually closing down and moving. But as soon as Abdo Benítez got into power on the 15th of August, 2018, within weeks the decision was reversed. And it was reversed because of the international implications in terms of the general international community. Has

There are very few countries that actually have a an embassy in Jerusalem. So it's a highly political decision and very much reflecting the personal interests of Cartes. The fact that Peña has said that he is also going to do this is again most surprising, and for many commentators this is a sign of how he's still very much under the thumb of Cartes.

Because it is going to create considerable problems for this little country of Paraguay not just because of the reaction of meat importers from the Middle East who could well decide to cancel their contracts with Paraguay because they feel very strongly about this issue.

But also within Mercosur as well, and more widely. So again, the linkage, what it's telling us about his relationship to Cartes is very interesting. Peña is experienced. He, you mentioned earlier about him being groomed by Cartes. The problem is that he is a technocrat.

He's not by background a politician. And the internal dynamics in the Colorado Party are very complicated with regional leaders, clan leaders- rampant clientelism and it is very hard to see your way through that if you're president of the country to get, particularly to get the passage of reform legislation.

He's come out with a big reform agenda on civil service reform of the state pension system and so on. But just having a majority of Colorado Party in both houses of Congress is not as positive as it sounds. Because we know now already within days of the election, those senators and deputies, lower house representatives, who have their allegiance to Abdo Benítez faction called Fuerza Republicana have said, "We're going to have a separate bancada.

We're going to we're going to sit together." So they are both formally member as, of the they are both groups, members of Colorado Party, but it doesn't mean that the passage of legislation and governance will be, an easy operation. On the contrary. That's what happens in Paraguay.

You have the intense debate within the Colorado Party, and it could well be that the faction bears allegiance to the outgoing president, Abdo Benítez, will hook up with the new representatives of Payo Cubas' party in both houses of congress and have an overall majority against Peña. That is very possible.

I would say it's almost probable. So we cannot expect just because there is a Colorado Party majority in Congress now that governance will be will be a simple process.

Richard McColl: It's this is a very interesting point to bring up because we take a look at Paraguay, and we take a look at what has been going on.

And we're looking at, you say the Colorado Party was at it's been around since sort of the 1880s and it's only been a few years out of power. It's been in power for 71 of the 76 years and so on. So we can rest a lot of the responsibility of what is now being faced by Paraguay, who Freedom House qualifies Paraguay as in inverted commas, partially free.

So the challenge is weak rule of law, rampant corruption the below the regional average in electoral integrity, and we'll come to that in a second. A terrible ranking in terms of education, no trust in the institutions drug-related violence, and now what we are facing, and when I say about the electoral integrity, you've got Payo Cubas calling for a recount of votes.

So the third place, but very closely into third place candidate this larger than life figure populist we'd say as well, he's calling for a recount in the votes in the elections. What can we expect from this? Will there be a recount?

Andrew Nickson: As of today there will not be a recount.

I'm just going to mouth the words of the president of the Electoral Commission. Their let out, get out clause is that even if we wanted to do a recount, we cannot do it because we according to the electoral law, we are not allowed to do it. There is no provision in the electoral law for a recount.

The votes have been recounted. The voting slips have been put in envelopes. The famous sobre cuatro, the envelope number four, and that's the end of the story. If you want a recount, Payo Cubas and your followers, then this must be granted by a legislative reform in Congress. It's none of our business.

We can't do this unilaterally. I have some sympathy with that with that view. But it then puts the ball in the court of Congress. And at the moment, the impression I get on from what my contacts tell me on the street is that the There will be a continuing buildup of anger against the inability or to hold a recount.

And so the political stability that has characterized Paraguay for the past few years could well change very dramatically. And that things have got a tendency in Paraguay to change quite suddenly in that respect. There was, the Congress was burned. The whole front of the area of the Congress building was burned some years ago when Cartes tried to change, have a constitutional amendment to allow him to stand again, which is not allowed under the 1992 Constitution.

A vice president was being assassinated some years before that which led to violent protests in the center, right in the center outside the Congress building in Paraguay. So we could be in for a surprise over the coming days. As of today there is a mobilization by truck drivers throughout Paraguay which is surprising because truck drivers have historically not been heavily involved in political activities of this kind whatsoever.

And they are threatening to drive their trucks into the capital city of Asunción from all over the country if a recount does not place. They're threatening to do this on Wednesday. And when we're talking about Paraguayan trucks, we're talking about these massive Scania trucks that are used to transport soybean to the ports to take soybean to the international market.

There have been at least 50 protests, spontaneous protests most of them, in different parts of the country. Parts of the country which have not seen any significant protests in recent years on anything. Smaller towns. Over 200 people have already been arrested. Half of them are being held in Paraguay's top-security jail where the narcos who have been arrested are kept, and where the leaders of this small insurgency movement, the EPP, the Ejército del Pueblo Paraguayo are kept.

They put they put in that prison, which is again a surprising decision. And of course, Payo Cubas himself was arrested a couple of days ago and is now in the same prison. There is a real danger that these moves by the state will fan the flames of protest amongst his supporters.

Interestingly, Alegre and other parties initially accepted the results and went on radio and television and said, "Yeah, we did very badly. We have to think again. We have to change our parties." But after the Payo Cubas phenomena began to take root and spread throughout the country, they switched their position, and Alegre has called for a public protest this morning as we're talking outside the Electoral Commission headquarters.

So the situation is quite volatile.

Richard McColl: Yeah tense definitely. I So I think we can expect when we talked about it and when we were looking at the reports prior to the elections and yourself included we really thought it was going to be neck and neck. And there is reason for skepticism.

There's reason perhaps not 100% skepticism, but there's reason for skepticism, and we can believe that the these protests will snowball in coming days. If the truck drivers are going to get involved, if they're going to block the roads all over the country and it's not just Asunción, I think in, also in Ciudad del Este, a Yes

Point for Paraguayan trade. This then will obscure all the other issues that I've mentioned. There's no They won't be working on the other issues that need to be addressed in Paraguay. It will all be an internal volatile situation.

Andrew Nickson: Absolutely, and this is the period of the transfer of power, which is always a dangerous period in terms of political stability in any country.

The current president, Abdo Benítez, incidentally went to the coronation in London. And so he's out of, he's out of the out of the country. And his deputy, the vice president, was another politician that the United States government declared to be significant Hugo Velázquez, who declared to be significantly corrupt.

So it is a very complex and volatile situation at the moment. But as you said, many of these other issues now will be on the back burner. This is the key issue in the country, how to deal with this growing discontent. It may well be, it may well be that the election process was free and fair and the votes were counted correctly.

It may well be the case, but frankly, that doesn't matter. There is enormous mistrust amongst the general population in the political class in Paraguay, and this is a popular manifestation of that distrust. The, and is expressed in this manner. It has taken people by surprise, but more seasoned observers of Paraguay would say that this was going to come up eventually, and it has come.

It's come up in a, an extraordinary way and a rather surprising manner. But it is a reflection of the fact that Paraguay's one of the most deeply unequal societies in terms of income and wealth distribution in, and land distribution in the Americas.

Richard McColl: This is, this the issue of, this obscuring of what needs to go on, and you say this land distribution, a bit more wealth equality, I have to ask then, we've got Lula in power in Brazil, and then the other big topic, of course, is the renegotiation around the Itaipu Dam.

You were talking about Paraguay and the Colorado Party and their deep nationalistic event. So where will this sit, the Itaipu Dam renegotiation?

Andrew Nickson: A party that has such a deep nationalistic discourse, one might expect would be a party that will be concerned with getting the best deal for Paraguay and overcoming the scandal of the 50-year treaty that comes to an end around the ironically around the time of the presidential handover, under which Paraguay has to, is required under the 1973 treaty to sell its surplus energy that it doesn't use to Paraguay to Brazil, sorry, at a rock bottom price that is nowhere near the even the regional price market price for electricity.

So there is right across the political spectrum, there has been a demand for a hardline strong stance to renegotiate the treaty in Paraguay's interest. However, Peña as ANR Cartistas are very much seen as politicians who are prepared to sell out to Brazil, to put it crudely.

And Peña has made a statement to a foreign journalist two days ago, a very surprising statement in which he said that we will not be pressing for, this, I use these words correctly, "We will not be pressing for a radical reinterpretation of the treaty. We must remember that when that treaty was signed in '73, we were just a little village."

That is a rather a rather surprising statement to say the least at a point where he has to, his administration has to renegotiate what is without a doubt the single most important public policy issue of the country in the past decades. There's no doubt about that. Everybody recognizes that.

There is a real danger that another Colorado administration will again sell out to Itamaraty, the Brazilian Foreign Ministry. Hopefully it won't happen but we'll just have to wait and see on that.

Richard McColl: We can see all sorts of different pressure points facing Paraguay, and of course we've covered so many of them right now.

This Itaipu Dam, as you say, selling out. The, these terms selling out to Brazil and also Peña discussing Paraguay. This is a nationalistic party as a little village even back in '73. It's, it, this is, I don't know. It, the mind boggles somewhat with these sort of duplicitous nature of the politicians who are coming into power and in power at the moment.

So to end this conversation, Andrew, so how do you, how do you feel personally speaking? I can't imagine that you're overwhelmingly positive for the immediate future and maybe perhaps long-term future of Paraguay.

Andrew Nickson: You've hit the nail on its head when you use the word, Richard, duplicitous.

That unfortunately is very much the characteristic of the decades and decades of Colorado Party rule, who have very cleverly used nationalist rhetoric to bring in the vote, and yet in their political actions have carried out a policies completely anathema to that. One of which incidentally is the, is the way in which Brazilian colonists now control large sways of the Paraguayan economy, including over 90% of soybean production.

No control over land purchase in the border areas whatsoever despite laws which prohibit that. So I am you have to be realistic in assessing the situation. But I am rather pessimistic as to the ability of the Peña administration to really move in the direction which he proclaims himself as every previous Paraguayan Colorado president has done in the direction of bringing about a fairer, more equal, and more democratic society in Paraguay.

I'd like to believe that was the case, but the two factors that lead me finally in that direction are his own inexperience. Very inexperienced. He's, he is without a doubt the most politically inexperienced politician to become president of the country for generations, without any doubt.

I would say for about 100 years, politically inexperienced. Okay, he's been minister of finance, but he very much very much a figurehead in that respect responding to the head of the central bank and the IMF rep in a sense. That's the first thing. The second thing is the fact that he is very much seen as under the thumb of Horacio Cartes.

And Horacio Cartes' relationships with the United States cannot be mended. Having declared him significantly corrupt, they cannot now go back on that. They have to maintain that distance, that political distance. Will Santiago Peña himself distance him from Cartes? I see that as extremely unlikely, 'cause if he does, he will be like a ship without a rudder.

He and then again, he will be very much the creature of the internal divisions inside the Colorado Party itself. So my estimate is that the governance situation in Paraguay is going to take a turn for the worse in the coming period.

Richard McColl: Thank you so much, Andrew Nickson, for this feedback and incredibly unselfish wealth of knowledge shared with us here on The LatinNews Podcast about Paraguay and the recent events obviously resulting from the Colorado victory in the presidential elections.

And so we covered a lot of topics there. And Andrew, thank you so much for your time, and obviously talking with such authority. We've been talking to Andrew Nickson, who is honorary reader in public management and Latin American studies at the University of Birmingham. Thank you so much for your time.

It really has been quite enlightening.

Andrew Nickson: Thank you, Richard. I enjoyed it very much. Thank you for inviting me.

Richard McColl: And this has been The LatinNews Podcast, episode four. I've been your host, Richard McColl, here based in Bogotá, Colombia. We'll be back in a fortnight's time with further reports from the region.

Bye-bye.

Outro: You've been listening to The LatinNews Podcast. For more news and analysis on Latin America and the Caribbean, visit www.latinnews.com

Richard Lapper is a writer and consultant, specializing in Latin America. He has extensive experience as a journalist in the region and is a research affiliate at King's College, London.

Richard is author of 'Beef, Bullets and Bible: Brazil in The Age of Bolsonaro' published in June 2021 by Manchester University Press.

He worked for the Financial Times for 25 years, occupying the post of Latin America editor between 1998 and 2008. He was a principal at FT Confidential between 2010 and 2015, an FT information service for investors.

He has written and broadcast widely on Latin America and Southern Africa and spoken at a range of international conferences.

Intro: Welcome to TheLatinNews Podcast, a fortnightly deep dive into key developments from across Latin America and the Caribbean. Here's your host from Bogotá, Colombia, journalist Richard McColl

Richard McColl: Well, this is The LatinNews Podcast. I am your host, Richard McColl here based in Bogotá, Colombia. My very special guest this week is Richard Lapper, author, journalist, writer, most recently Beef, Bible and Bullets: Brazil in the Age of Bolsonaro, and later on there will be a book about Lula coming out, so yes, you've got it, we're gonna be talking about Brazil.

This is Lula 3.0. Richard, welcome on The LatinNews Podcast.

Richard Lapper: Thanks very much, Richard.

Richard Lapper: Thanks. Good to be here.

Richard McColl: Yeah, it's a real pleasure to have you. I used to read all of your articles in the FT, but it's been a few years and you've rebranded yourself as an author. You're out there, spreading the news about Brazil.

It's a very hot topic right now as there's four key points as we see it: China, Russia, the economy, political difficulties, and of course the environment. I just think I should just hand it over to you and say Lula 3.0, this is a whole different situation this time, three months into his term.

Deeply divided Brazil, his popularity's already dropping. There's no majority in Congress, and there's a sizable fiscal debt. Let's start with point one. There's too much to talk about, but let's start with point one, China, Russia

Richard Lapper: Yeah, I suppose it's been a really difficult start really, hasn't it?

If you compare it to 2003 when Lula first came to office, 2007 when he was reelected Brazil was riding high partially, on the back of a commodity boom that was generated by Chinese demand. And I think, one of the elements of the last 20 years really has been the growing importance of China to Brazil.

Its biggest market for Brazil's exports now. And, huge exports there of soya and oil and iron ore, and very important to Brazil, and it's one of the reasons that Brazil's got this very solid cushion of reserves. And, one of the features of the PT government, both under Lula one and two, and then under Dilma Rousseff, was a close togetherness with China.

You remember the BRICS were formed in the 2000s, first as a sort of marketing ploy by the investment banks to sell their bonds, and then that idea adapted by the governments themselves to give themselves a brand that was distinct. So I don't think it's too surprising that Lula in his first, few weeks in office has moved towards, has shown a preference for China.

He did go to the United States in February, I think, had a very disappointing result from his meetings there. Didn't get as much money as he would've wanted, and they made a lot of this big trip to China earlier this month there's been, several highfalutin announcements, and behind the scenes we understand that they are in fact negotiating quite extensive funds from China, mainly through the China Development Bank and through the BRICS bank which of course interestingly the, Lula's successor, Dilma Rousseff is the new president of.

Richard McColl: Yes.

Richard Lapper: And some of that money will go into the infrastructure program which is absolutely pivotal for Lula's efforts to get the economy moving again. At the moment Brazil's economy is still only looking at 0.9% growth according to the consensus forecast released earlier today by the Central Bank. So it's not good.

It's not good. And as you said in your introduction, his popularity is not disastrous. This has still got positive popularity, but it's nowhere near as good as his first two terms or Dilma in her term in office. And only one president has been worse in the last, since the return to democracy in 1985, and that is Bolsonaro.

That was marginally worse in March 2019. So China. So China's bit, there's a big play on China, and really I think they've gone in quite aggressively with a pro-China and a pro-Russia stance really in relation to Ukraine. And I think this has been It looks on the surface to have been quite a bad miscalculation.

There's been a terrible response to Lula's pronouncements on Ukraine in which he seemed to be blaming Ukraine for its own invasion. A patently absurd position. It's tantamount to, you can be nuanced about why Russia invaded Ukraine, and the buildup of NATO and so on and so forth.

But to phrase it in the way that Lula did seemed to be really fatuous. And it has provoked a storm of response, not just in the United States, but more particularly from European governments who feel the threat of Russia very keenly.

Richard McColl: Yes.

Richard Lapper: And the danger here is that all that Lula gains in China in terms of economic aid, he loses in terms of potential trade investment links with Europe.

And in particular, in that sense, I suppose, the great risk is there would be a failure to push through the Mercosur European Union trade deal originally agreed back in 2019, but so far not ratified by the Europeans because of concerns about the Amazon and deforestation. So that brings you, I mean this episode really of Lula going to China, making these slightly bizarre comments in relation to Ukraine and suffering quite a bit of bad publicity, brings to an end the first four months really.

We're still not into the fifth month of his administration. But I'm talking too long here, Richard, so I think.

Richard McColl: No.

Richard Lapper: I'm keen for you to bring some order back to the proceedings.

Richard McColl: But that's okay. No, it's absolutely, it's fascinating stuff. It just seems so curious.

I realize he needs to curry favor from China, but at the same time he needs to balance it off, of course, with the United States. These are the two obvious markets, and of course there's the Russia question. I guess they buy their fertilizers or what's needed for fertilizers from Russia, and so therefore there's a balancing act.

But he sets out his stall to be a diplomat and say, we're not on any side. Surely more diplomatic would have been to say nothing.

Richard Lapper: Yeah, I think it could have been, I think he could have been much more nuanced in his comments. And the particular formulation that both sides are responsible just doesn't get anywhere close to the

the interventionist character of Russia. And but on the other hand, don't forget that Bolsonaro you mentioned the fertilizer issue. Brazil I think gets about 25, 30% of its fertilizers from Russia and Belarus, a Russian ally Bolsonaro sidled up to the Russians as well, and also made some slightly questionable comments in relation to Ukraine back in February last year.

So Lula's not alone in this. But I think he should be. For someone who aspires to be a global peacemaker whose ambition, I think, is to win the Nobel Peace Prize and go out in a blaze of glory on the international stage, not just in Brazil. That's what he wants. But I think this sort of mismanagement of the diplomatic effort isn't good. He would probably argue that last week, after he'd left China, Joe Biden went back to the Brazilians and said, "Oh, actually, I'm gonna try and get $500 million for the Amazon Fund, not just $50 million, as I previously promised." And of course, some people are suggesting that is a success for Lula. But I think nonetheless, there's lots of collateral issues here around this. And alienating the Europeans is just not a good thing to do, I think, particularly given Lula's sort of rise and the origins of the PT, and its close connections to European social democrats.

Back in the '70s, A lot of people were saying that the PT were an outgrowth of European social democracy. You had all sorts of German unionists and Swedish trade unionists going to Brazil, encouraging the growth of the PT. And it's a great opportunity, I think, for Brazil to really present its European side.

So this is a misstep.

Richard McColl: Yeah

Richard Lapper: in that context.

Richard McColl: Again, as you say, that link, that's not one that I had thought of, again the sort of heritage from Europe. But let's move on then to the economy. We know there's a sizable fiscal deficit, so he's trying to get these huge loans banking, perhaps to use the word, on a massive infrastructure project.

What else can he do

Richard Lapper: I think first and foremost what Lula's gotta do is restore some sort of sense of stability and predictability to the economy 'cause obviously he's been left with a terrible mess by Bolsonaro, who ran the economy during 2022 really with one eye on the election and really overspent and left a complete mess.

And I think that the government has gone about it. They've got the team at the Ministry of Finance led by Fernando Haddad has done some good work in this sense. The fiscal framework still hasn't been approved by Congress, but it was announced in March, proposes a new set of fiscal targets and tries to bring into order the sort of growing fiscal deficit and try to start reducing it in perhaps a more realistic way than its predecessor, the fiscal spending ceiling, the teto fiscal which was introduced by Bolsonaro's predecessor, Michel Temer, back in 2016-'17.

It was a very rigid framework, and the new one gives a little bit more room for leeway. Now, some people would argue though, on the other hand, that it puts too much emphasis on raising revenue, and there's far too many hostages to fortune there, and that's in the sense that the government's not gonna have the easy ride it thinks it will in getting this extra money.

And the markets, therefore, institutional investors don't necessarily buy into this because they don't think it's credible, and I think there's a battle there. We've got to see. Haddad's talked about a fiscal reform, a tax reform. He's talked about additional measures.

So the jury's out on this one. Okay. They're shaping up in the right way. It's interesting, I think, that Haddad's biggest critics have been on his own left wing from the Workers Party. And I think the slightly concerning thing for me is that Lula has, urged them on in many respects.

You'd expect given Lula's record in the 2000s that he'd be more circumspect especially when he talks about interest rates. Interest rates in Brazil are high. But it's not the job of the president to be criticizing an independent central bank because when the central bank starts lowering interest rates, as it surely will, the markets will see it as not credible.

They'll say he's doing that because of political pressure." So I think he's got to be careful. Again, they've got to be very careful about how they manage this, but I think there is the possibility that this is gonna work. And then you've got to ask where the growth is gonna come from.

Where's the growth gonna come from? Where's the feelgood factor gonna come from, which at the moment is lacking in Brazil. You've still got quite a high unemployment. It has come down in the last couple of years, but there's still quite high unemployment. Tremendous rates of informality.

And tremendous poverty, a reemergence of poverty really in the last couple of years. And this is You know, this will weigh on Lula's popularity. He knows he's gotta do something about that. He knows he's gotta get job creation back. And infrastructure is seen as a way to do that.

The problem is at the moment that infrastructure, they don't have the money to do infrastructure properly. There are literally hundreds of projects. The numbers escape me, but there's over 100 projects that Rui Costa, Lula's chief of staff has been titled the father of the infrastructure program.

He's got this list of projects, roads and ports and it's a list of projects some of which are unfinished, some of which are, just, greenfield sites, whatever. But these things, they have to start this and it's not clear how that's gonna happen even now. The Chinese are quite keen to get involved, but, the problem with the Chinese is that as we've seen elsewhere in Latin America, and I'm sure, your reporters have written about this, it's not a brilliant record, the Chinese in, in infrastructure.

Ecuador, terrible experience with Chinese dams. I know from my own experience. I've been doing quite a lot of reporting on Bolivia, and some of the Chinese investments there have not been very impressive in the mining sector. And then you've got Venezuela, where it didn't happen at all.

Sometimes it does. And there are positive examples, too. And Brazil you have to say that the transmission company, State Grid, has done a pretty good job by all accounts in that sector. So there are good examples, but it's not necessarily a silver bullet.

And you need other people involved, and they need to get Brazilian companies involved, Brazilian investors involved, and I think they also need to get other international companies involved

Richard McColl: So I'm curious, as you said we're in early days. I'm curious when we talk about all of this it's upheaval it's very unsettled.

The polarization is probably greater than it's ever been before. I imagine Lula has been blaming it on his predecessor. But he can't do this for too long. And I don't know if it can work because the, he only won by the skin of his teeth. How do you feel, where we've got Bolsonaro lurking in the wings.

He's still very much a political figure immensely popular in the south of Brazil, whereas Lula is strongest in the north, northeast and these areas. And we saw the 8th of January, what I call the insurrection with the broadest and most descriptive possible term. What kind of possibilities do we have of something else happening or further aggressions of this type or violence in Brazil?

Richard Lapper: I think that insurrection is probably not the danger. I think that the danger is the right winning a slow stranglehold in the country and in Congress really and blocking Lula. And I think that can happen with Bolsonaro as a kind of rabble-rouser or without Bolsonaro if he's excluded from politics as is possible.

I think that there's, a lot of people who are allied with Lula. First of all, there's two things really, aren't there? There's the situation in the country. And essentially Lula's starting from a somewhat weaker position than he's had before, right? He lost in every state in the south and southeast and center west.

He really only won in the northeast and in some Amazonian cities really, in Manaus and Belém. And so he does, he's starting from a weak position in the country. I don't think he's been helped by the left. I'm thinking particularly recently of the Sem Terra, the landless movement'activities who launched with the worst possible timing, it must be said for Lula, a red April when they started invading productive farms, including farms run by, sort of agricultural properties I should say, run by Suzano, which is a listed paper company. And by Embrapa, which is a well-respected, state-owned agricultural research entity.

Now, I don't know why Stédile, who's the head of the MST, was invited to China and presumably, Lula was, he's keeping the left happy. But this does nothing to calm, anxieties in the southeast and particularly in the center west of the country. And there's no surprise that the ruralistas have been up in arms about it.

And, it's reviving fears about, in this, sort of Bolsonarista heartland really.

Richard McColl: I know.

Richard Lapper: So that's a real negative. Now in Congress, I think all this is very delicate. Yeah. At the end of the day, the PT have about 1/5 of the 513 deputies in the lower house.

And the balance is held by essentially two separate factions, one of which is led by Arthur Lira and the other by Rodrigo Pacheco. And the, I suppose the common feature of these factions is that they are supporting Lula for now while they think their interests are best served by being part of the government.

But one of the features of the Centrão is, as Bolsonaro discovered, that when things get tough, the Centrão tend to look after their own interests, and that's as true for Lira or Pacheco or for Renan Calheiros, the MDB politician who's also allied with Pacheco and his faction. That is as true for them and that's the problem.

This is a problem for Lula because if things don't take off, they don't manage to revive the economy, and say we get into the middle of next year and his popularity is beginning to fade badly and fall badly, then they'll be looking at jumping ship. And I've been told that some of these guys in Congress were already thinking of support for Tarcísio de Freitas, the governor of São Paulo, who was of course Bolsonaro's infrastructure minister, and is widely touted as being the most likely conservative candidate for president in 2026.

And I think the more the faction fighting within the PT goes on and Gleisi Hoffmann continues to target Haddad and the more moderate wing of the party, the more likely it is that tensions within this centrist group will grow. And it's not impossible to imagine them shifting and supporting the right.

I think the problem is that many conservatives in Brazil don't want another Bolsonaro because they don't want the kind of unpredictability and incompetence that was associated with his administration. Not just him, but his administration.

A lot of people in the country identify with Bolsonaro, but I think, people in the elite did not. At the end of the day they felt that actually Lula was probably gonna be safer than another round of Bolsonaro.

Richard McColl: I see that. There's a great difference. At least you know you can fit Lula into the sort of matrix, whereas Bolsonaro you couldn't.

We just didn't know what was gonna come next. I'm curious then on, on that level is before we get into environment and the Amazon and so on, so where do the middle class sit in all of this then? Because I can only assume right now that Lula's not immensely popular amongst the middle class.

Richard Lapper: I think a lot of people voted for Lula in the middle class because, and it depends what you mean by the middle class, but if you think about it.

Because some people talk about class C, which is seen as middle class: families who earn more than $1,000, which is really more like a working class, but a better-off working class. But I'm thinking more about the professional groups, you know. Okay.

classes A and B, which in a way in European or American terms are middle class. And I think they voted for Lula because they'd have had enough of the unpredictability of the Bolsonaro years. His, Bolsonaro's management or mismanagement of the COVID pandemic was a frightening thing for many middle class people.

And I think people wanted stability. So but I think on the other hand, they probably had higher expectations from Lula. I think, and maybe we can go into this a bit when we talk about the environment, but I think people thought that we were going back to normal, and we didn't want the unexpected.

And I think Lula will strain that support. He needs to settle things down. I think he's had one eye all the time on keeping the grassroots, the PT happy. And the thing is about the PT that it has moved to the left, I'm told, since 2016.

The grassroots of the PT, really bought into the idea of the impeachment of Dilma and Lula's own imprisonment as a coup attempt really, as a coup, as a consummated coup, not a coup attempt. And they were radicalized. And I think that faction of the PT that's always seen the possibility of a broad alliance with progressive business groups and has looked to, build a kind of more European style social democracy got slightly more, became isolated to some extent.

And the left of the PT held the upper hand. I think Lula is appealing to that kind of revanchist sentiment to some extent. They don't believe that the wealthy are going to go for a liberal option anymore. But the problem is for these guys that they're nowhere near a majority.

There's nothing there for that kind of strategy. A hard left approach in Brazil can't work any more than it can work in Europe or the US. You go down the road of Jeremy Corbyn or all the other guys who've gone, gone into that pure ideological purism.

Lula's not about that historically he's not been about that. He's been much more pragmatic, much more sensible, gradual reform. But I think he needs to, at the moment he's very keen to keep the PT radicals on side by all appearances at least.

So I think that doesn't help his support with the middle class.

Richard McColl: Okay. Yeah, that makes sense to me. And then, when we talk about this, we've talked about China, Russia, the economy, the political difficulties, and we need to then move into the environment here into this final segment of the show.

And of course, I think all of these three previous points feed into the environment the protection of the Amazon. We can all remember the massive fires taking place in the Amazon, the destruction of the rainforest. It's obviously a huge mobilizing international cause. And I think personally Lula could have put that higher up his list of important topics with which to discuss, internationally and nationally.

Obviously after Bolsonaro's lack of immediate attention to the situation. How do you feel on this topic?

Richard Lapper: Yeah, that's absolutely right. I think before the election a lot of us were thinking that this is the great opportunity. There were many reasons for thinking that.

Lula's performance, certainly between 2004 and '10, and then in the first couple of years of Dilma's government, it was quite impressive on the deforestation front. They empowered the environmental agencies like IBAMA and ICMBio. There was a lot of intervention, and they really brought down the rate of deforestation very markedly.

And by 2012 it was, very much less, I think probably about a sixth of what it had been in 2004. It had not been eliminated, obviously, but they'd made huge progress, and they were lauded internationally for that achievement. I think what happened under Dilma is that there was a bit of a drift, there was a bit of a fightback from the agribusiness sector that wanted slightly looser controls, and that did lead to a bit of an increase in deforestation.

But obviously things deteriorated very markedly under Bolsonaro when deforestation took off again. 2021 was a high point. And so Lula comes in at the beginning of 2023, and the first thing he does is he starts to channel extra budget to IBAMA and ICMBio. He brings in Marina Silva who's a very respected former Petista, but a person who left the PT and formed her own sort of center-left party.

Got a lot of credibility internationally. He brings her in as environment minister and some of her old técnicos alongside her. In the first month he's in office he sends in the agencies and the police into Roraima to clamp down on the garimpo, a huge illegal mining operation there.

And that wins a lot of international attention. So it's quite a good start. But where are we now? Three months in, just looking at the numbers today, deforestation in this first quarter has been the worst since 2021, and before that, the worst since 2008. So it's not good, you need to continue and follow up these things, and I think it needs to be higher on the agenda. And that is the great opportunity. Maybe it's early days and maybe they'll turn round and say actually we are doing quite a lot.

And it takes time to feed through. And these places, places like Roraima or wherever else, Pará and Amazonas are the worst states in terms of numbers, but you'd expect that they're the biggest states in the Amazon. But these places are difficult to police.

There's no question about it. But I do feel that it's surprising that he's gone out on a limb on Ukraine where Brazil has zero influence to all intents and purposes, and not made more of an issue about his green credentials, which would first of all chime in with, Biden and the US Democrats and the Europeans.

It would help the trade deal with the European Union. And Brazil can do something about it. So it would be a bigger priority and maybe it's communications. Maybe it's happening and we will be told that there's new initiatives in that area. There's nothing to suggest they don't think it's important, but it doesn't seem to be. What can one say?

Richard McColl: Like you, I think it could be something if he does. We've had, again, a lot of visuals right when he started. I think the army was up there and so on, and the talk of drones and talk about satellite spotting. As you say, nigh on impossible to police out there. Easier to police, I think, when you're shipping the goods, but by then the damage has been done.

But I just think that were he to create more noise around that, he could start to patch up some of the difficulties created in his, let's say, foreign policy announcements a bit, 'cause I think we would immediately, or people would immediately shift. As you say, the European Union, the US would shift their interests to "Okay, let's do this.

Let's protect the Amazon," and so on. We're coming to an end of this conversation, this episode three of The LatinNews Podcast. I've got two further questions, and they're a little bit tricky, so I wanna put you on the spot. The first one is what is your perspective, what is your opinion on the likelihood of the trade deal with the European Union going through?

Richard Lapper: I can't say because I don't know. I would have thought that these comments. And the thing is that one of the sources of dissatisfaction is the European Parliament, right? It's each of the national parliaments that have got to approve it.

So you've gotta have, you've really gotta have a fair wind for that to happen. And at the moment the, Ukraine comments and the deforestation figures won't help.

Richard McColl: No.

Richard Lapper: But they've said, actually the Ministry of Development said this in one of the papers today that they are hopeful that it'll get it done.

I'm sure they are, but it may be more difficult than it might appear.

Richard McColl: That's

Richard Lapper: True. In my intuitive sense, but I might be wrong. They may be, maybe they're already there. Who knows?

Richard McColl: No, I'm not trying to trap you, though. I'm not trying to get you to

Richard Lapper: say something that

Richard McColl: would. Yeah.

Richard Lapper: I just don't know. I just can't say. I think intuitively you would think that this has become somewhat harder. Not impossible, but it needs some high-level attention.

Richard McColl: Somewhat harder, exactly. And then finally, we're looking at a polarized Brazil. We're looking at, again, the left losing ground with those, swing voters and the minimum amount.

The issues with the Congress, the issues with the economy. Will Lula see out his term or will he be ousted beforehand? So I think it's much more likely than not that Lula will see out his term. Okay. Because I think the impeachment of Dilma Rousseff set Brazil back. It set the stage for this very damaging polarization that led to Bolsonaro's election in 2018.

Richard Lapper: And I think a lot of people, looking on that think we don't wanna go through that again.

Richard McColl: Yeah.

Richard Lapper: And I don't think it's impossible that Lula could be impeached. I think the chance of a military coup can't be ruled out completely, but I think it's on the whole quite unlikely.

I think if it was gonna happen, it would have happened already in a sense. I think it's much more likely that the right will use their power at a local level and a national level to really surround and suffocate Lula's radical instincts. And I think one thing we should look at the next year's local elections, when the Liberal Party, Bolsonaro's party, plan to run.

They plan to triple the number of mayors they've got. That's always gonna be an interesting indicator of the mood of the country, to the extent to which local government shifts. I think these movements in Congress are really very significant in that sense because the breakup of the Lira Centrão it opens up spaces for the right and for new alignments. So I think that those are things to watch. And my suspicion is that Lula or a PT successor, probably Haddad. But again, the jury's probably out. He's probably the favored son for Lula at this point in time, but we're a long way away.

Other people I'm sure will be pressing from the left of the party. I think the likelihood is a conservative win, a centrist center-right win in 2026 at the ballot box.

Richard McColl: And a possibility of Tarcísio de Freitas, as you said, in, in São Paulo.

Richard Lapper: Yeah, I'm just repeating conventional wisdom in a way.

But I think that does seem to have a logic to it, actually. Yeah.

Richard McColl: It's, as you say early days. But if I could summarize that last intervention, it's like we are expecting common sense to prevail then. We don't want the instability of what happened, do you think?

Richard Lapper: Yeah, I think so. I think that's right. I didn't think the years between 2016 and 2022 were very good for Brazil. Take it further back, the decade from 2013 to 2023, it's not been a good 10 years. And I think probably there's a demand for greater stability and predictability amongst those with a stake in society.

And that includes a lot of people who are not that well off, actually. Yeah. 'Cause one of the things about the way that Brazil has changed is how, relatively poor people see their futures as in, in rather individualistic ways. As whether it's as a humble Uber driver or a, there's a lot of sort of entrepreneurial ideas out there which aren't necessarily gonna go anywhere, right?

But it's this idea of Brazil being empreendedor, empresarial is there. People are individualistic in their mindset. It's a conservative country anyway. So it's not clear what that means really, but I think it does.

It does mean we're moving probably into a more conservative period, I think.

Richard McColl: Okay. Thank you so much for this. I know that our listeners will have appreciated all of these comments. Because it's, again, the desire, the demand for greater stability and predictability that it seems like it will be a major driver in these next few years is Lula 3.0, as we've called this.

So Richard Lapper, let me say thank you so much for your time, for your expertise and sharing it with us here on episode three of The LatinNews Podcast. Everyone out there, please take a look at Beef, Bible and Bullets: Brazil in the Age of Bolsonaro, and of course, keep an eye out because at the moment as yet untitled, but there is a book coming out soon on Lula.

So Richard, thank you for your time.

Richard Lapper: Thanks very much, Richard. Been a great pleasure.

Richard McColl: It has been a pleasure. This has been LatinNews, episode three. Remember to subscribe. You can find us on all podcast channels. Of course, we're on YouTube as well. TheLatinNewsPodcast.com, our website, and of course, yeah, subscribe and check out the LatinNews page as well.

So thank you for listening. I've been Richard McColl, and this has been The LatinNews Podcast.

Outro: You've been listening to The LatinNews Podcast. For more news and analysis on Latin America and the Caribbean, visit www.latinnews.com

Andrew Thompson is a journalist and political risk analyst who covers Latin America.

He was previously a foreign correspondent in Mexico, Argentina and Brazil, and head of the BBC's Latin American Service.

He is currently focusing on journalism, economic analysis and political risk on a number of projects with different organizations, including Oxford Business Group, EIU, LatinNews, and Canning House.

Intro: Welcome to The LatinNews Podcast, a fortnightly deep dive into key developments from across Latin America and the Caribbean. Here's your host from Bogotá, Colombia, journalist Richard McColl

Richard McColl: I'm Richard McColl, and this is The LatinNews Podcast, episode two, recording here with Andrew Thompson, an expert in Chile, freelance journalist joining us today. Of course, I hope you enjoyed episode one. That was with John Farmer a fortnight ago. We were discussing Peru's continued constitutional and I would say crisis, overall crisis.

So if you've not yet listened to that, please tune in. But without further ado, let me say Andrew Thompson, thank you very much for coming on The LatinNews Podcast.

Andrew Thompson: It's a pleasure to be here.

Richard McColl: No I think it is a great time because we're watching things unravel for Boric, new president reasonably new president there in Chile, and you are the man to explain to us what is going on and, after the pendulum politics in 2019.

Can you put us into context about this a little please?

Andrew Thompson: Yes. It strikes me that a lot has happened in Chile over, let's say, the last three to four years, and I was searching for some way of, creating a framework of understanding, if you like. And I came up with this idea of pendulum politics, which is completely unoriginal.

And it's essentially the idea that people get fed up of governments over time and switch their allegiance to the opposition, and then things go backwards and forwards. And I, it's what political scientists have been talking about for decades in different ways. But I thought it might be interesting to look at how that has happened in Chile, starting from, to be ultra-precise, something like the 18th of October of two, 2019, when all of a sudden it seemed that Chile had exploded.

In fact, in Spanish they call it the estallido social, the social explosion, which was this massive wave of protest violence, disruption, looting, that really dominated Chile between, let's say October 2019 and March 2020. That was six terrible months which left something like 34 people dead billions worth of property losses and a very bad situation as far as human rights were concerned.

There were lots of people who'd been injured by who'd lost their sight, in fact by tear gas being fired directly at protesters. So if you like, that is that is the most violent point in the Chile cycle, and I started looking at how it then evolved.

Richard McColl: And where can we... you say this in this sort of pendulum politics, of course that's a, and a very visual way of explaining the things.

But this is something that has been simmering for some time, I think, in Chile, and I think it... could we be able to relate this to a certain search for identity in a post-Pinochet Chile? 'Cause I think this is a man that we cannot fail to mention on, on a podcast or in any conversation about Chile.

Andrew Thompson: Yes. One way of putting it is that after Pinochet's 17 years in power, which went up to 1990, Chile had apparently progressed very well. It kept some of the market-friendly, market-focused economic policies, but under a series, first of moderate left-wing governments and then an alternation between left and right, there was a lot of social reform.

And it seemed as if Chile had become a stable, rules-led functioning, strong democracy which people were happy with, or which analysts like me assumed people were happy with. And if you looked at Chile in terms of GDP per capita various measurements of economic growth, it was almost top of the class in Latin America.

So the social explosion caught, again, lots of pundits like myself completely off guard. It was unexpected. Looking back on it, there are a series of quite logical explanations. So to give you an example pension reform, the introduction of privatized pension systems in Chile, which goes back to the Pinochet era, was welcomed as a great success by people who were looking at how the pension funds were creating capital markets and providing a channel for investment.

So that seemed to be a success story. But if you look at it from a different angle, the fact that the pensions actually being paid out were not enough to live off you have this this basically crisis. People are very aware of the harsh inequalities of the Chilean sort of ideal economy.

And that was one of the factors. You look at other things, there's a big privatization of university-level education. A lot of students gained access to university education by incurring very large debt, very large loans, and then they find out when graduation time came, it was really hard to get a job.

So there was this basically simmering pot of discontent and anger that despite all the talk of the, the Chilean economic miracle, life was extremely hard. And that, if you like, was one of the, the triggers for the social explosion.

Richard McColl: So it's, it seems to me, we look at Latin America, these, this inequality, economic hardship seems to be regional, a regional issue.

But as, as you say I find this very interesting when we look at, the Chilean miracle, That was largely more when we... I'd like to take that really when we think of extractive industries and then of course stability. But of course it was not converting into economic wealth to the needy in, on the ground

Andrew Thompson: Correct.

And there's also a, a decentralization angle to it in that a lot of the mining, as occurs in the north of Chile. And a lot of the money from royalties and mining taxes somehow seems to go to Santiago ... and not come back to the local communities. So there was a level of of disenchantment and anger over that as well.

Richard McColl: Okay. So that let's say that brings us up to 2019 and Estallido Social, the image of the protesters round the, the, the monument and the flags coming up that every front page, chile got the front page for the first time, I think, since Tony Blair era and Pinochet in under house arrest due to Jack Straw there in England.

And, I'm, we get this, this figure who I suppose is a student leader, Gabriel Boric. Yes. And I am not a Chile analyst. You are. But was he known to you before this Estallido Social?

Andrew Thompson: No. I first found out about him during the Estallido Social when he appears as, ... a student leader.

And he's leading, I suppose one way of looking at it is saying that in Chile, one of the interesting that's, things that's happened is that there have been divisions on both the left and the right. And on the left, there was what you might call the old left, which had been apparently very successful.

It's those moderate left-wing governments I was talking about- ... throughout the 1990s and the noughties. But there was also an, a new more radical left which had slightly different concerns. It had the same concern for redistribution of income that social democrats have always had.

But it was much, much more aware of identity politics, of indigenous claims to, to to their ancestral lines, lands, and all sorts of things like that, particularly on, on the environment. So it was a new politics. There was a generational gap. You have the old left, left leaders who are in their, now in their 60s and 70s, a lot of them.

And you have Boric, who is, I think, now 37. He's a millennial. Much, much younger idealistic sort of approach. And he, out of the Estallido Social, this new left emerges with a greater appeal and strength And it seems as if that pendulum is still heading left. You have general elections in November 2021, and what you get there is the emergence of the new right.

The old right was slightly patrician, the traditional establishment. The new right is much more ... under José Antonio Kast, who actually wins the first ballot of the 2021 elections and Boric comes second. On the second ballot, Boric, Boric wins with a clear majority.

So it looks as if society's heading left. The other major element in this is an agreement to reform and write a new constitution. 'Cause all this time Chile's been working on the 1980 constitution, which was written and introduced under military rule. So even though over the years it's been reformed in many ways, it's still seen with a degree of resentment by the left.

This is Pinochet's constitution that's still ruling us, and it contains this idea which the left rejects which is that it is always up to... it should be left to the private sector to resolve any problem. It's the primary approach to managing activity in Chile, and if the private sector can't do it, then it's okay for the state to do it.

But the private sector gets the first bite of the apple which people call el estado subsidiario, the subsidiary state. And there is this intense opposition to it and this leads to a constitutional reform process which is very elaborate and very complicated which starts in 2022 mainly and is, I think A key turning point, if we're still thinking about the pendulum, the constitutional process which Boric hopes, and Boric's hope is that he's got a four-year term in office.

First year, change the constitution. Years two, three, and four, deliver what was promised in that constitutional change. And the project is basically, one version of it is to make Chile look a bit more like Denmark to increase public spending, to have a more inclusive social welfare state. And that will, if you put that into the constitution, then as a government, you start implementing it you start putting more public sector money to buoy up the state pension system.

You invest in education and various reforms. And the problem that hits Boric is that in his first year he fails to get the constitutional reform through. And the failure of the constitutional reform I think is very interesting because in many ways it looks as if the left overreaches. So what you've got is a, an elected in effect, an elected constituent assembly- which is which the right is underrepresented in, partly because the, the electorate didn't choose them but also partly because the left and independents and pro-indigenous community groups and NGOs campaign much more effectively. They get control of the constituent assembly, but they come up with with a draft constitution which for many people appears to be way too idealistic and impractical.

And you start getting public opinion beginning to shift from being all in favor of a constitutional reform it becomes, public opinion starts saying we're in favor of constitutional reform, but we don't agree with some of the with some of the details." And there begins to be this sort of Separation of ways, if you like.

The constituent assembly contributes to this up to a certain point. Because it, for example, it proposes a wide-ranging recognition of indigenous rights to their ancestral lands, and promises to give the land back or to compensate economically for the loss of land. And this is where it starts getting really complicated because it turns out that in the 19th century, successive Chilean governments encouraged immigration and brought in settlers and gave them land and title to land which overlaps on indigenous people's land.

So how you are going to resolve this gets quite complicated, and a lot of people think that the constituent assembly, which talks about a plurinational state- ... where you almost have parallel organizations for Mapuche Indians for the different different indigenous groups, is too divisive.

And it's unsustainable. And in a lot of other areas there are also queries about the viability of the reforms. There's an attempt to weaken the role of the Senate which the right doesn't like. And the whole process is, gets slow complicated, and increasingly unpopular. So during the course of 2022, you start seeing the opinion polls beginning to move in a more rightward direct- direction.

Around, I think April last year, the opinion polls were saying when the new constitution goes to referendum, there is a chance that it won't be approved, and that gathers pace is not helped by the government appearing quite, again, quite idealistic but inexperienced in the way it tries to solve a number of other problems.

And so what you get finally is in September last year, it goes as expected to a referendum, and it's rejected by a very significant majority. I think it was 62% rejected the new constitution. So what you then have is that Boric has to start again. So 2022, major attempt to reform constitution, it failed.

2023, this year, there is a new major attempt, a plan B to reform the constitution with a lot more safeguards to try and prevent it being too radical or idealistic. And that process is now running

Richard McColl: And what do we think? What, and you as an expert, what do we think's going to happen? I know, I realize we're early, early in.

When will it go to referendum, first and foremost?

Andrew Thompson: It'll go to referendum, I think the exact date is something like the 17th of December.

Richard McColl: Okay.

Andrew Thompson: And the key, one of the key points is happening now in a couple of weeks 7th of May. This time, previously there was 155-seat constituent convention it was called.

Now there will be a 50-seat constitutional council which has the job of proposing a new constitution. But Boric and the political parties he's worked with have put in all sorts of safeguards. There is something like 12 constitutional principles agreed by all parties which for example say there is a single unitary state.

You don't have autonomous- ... indigenous parallel states. And the there will be a Senate. It's limited what the new, the the radicalism of a new constitution. There's a committee of 24 constitutional experts chosen by Congress which in effect has already written the new constitution.

It goes to this 50-strong council, which will make modifications and ultimately it gets submitted to a new referendum- ... as, as I said, that'll happen in December. So Boric's hope is that he wanted to, he wanted to start proper social reforms in year two. Now it's gonna look like year three that he's gonna get round to that.

His position still remains pretty difficult because of this swing to the right. So to give you an example earlier in March his plans for a major tax reform which would fund these social social programs and changes blew up in his face because it failed to get through Congress where he didn't have a majority, but it was thought that he could pull a majority together for that issue.

It it represents something like 3.4% of GDP ... in additional revenues. And it was thrown out, and under Chilean regulations, when a tax bill of that kind gets defeated you can't present it again until after a year. So at the moment Boric's budget plans are looking very uncertain.

It's likely that what the government will try and do is raise other taxes that weren't in its first proposal. It it may go back and look at trying to get more out of a mining royalty, which the mining industry doesn't like obviously. But he will have to try and find money to to fund the planned reforms which will come later than expected.

Richard McColl: Yeah, so he's in a very difficult situation. First the constitutional reform, the referendum going against him, this tax reform not getting through Congress having to wait till December for the next referendum on constitutional reform.

Then of course, as you say, tax reform will need to be in 2024, as we're what we're looking at. And this pendulum, as you say, it seems to be very much with the right in ascendance still. I think h- how much, as you say that Kast is of the new right, a very Trumpist right. How much of their activity do, do you feel is just just to impede Boric rather than actually have a political mandate themselves?

Andrew Thompson: I think we need to introduce another factor into explaining this. And that factor is crime and security.

Richard McColl: Yes.

Andrew Thompson: Which has become the hottest topic in Chile at the moment. And if you like, the vehicle for the right to flex its muscles. So very briefly, 'cause it's a complicated story there is, there are growing crime rates in Chile.

There's argument over the exact statistic. But what you have is a significant number of refugees or migrants entering the country from the northern borders, largely through Bolivia, and these are often Venezuelans, some Colombians- ... Haitians, and people who've, rather than go north to the United States, they're going south to Chile because Chile has got a significantly high living standard compared to- to where they're coming from. Some of those people are being managed into Chile by people traffickers. And that is being used to spread a rising crime rate or one of its effects is to spread a rising crime rate into the country. So to give you an example, there's a Venezuelan crime syndicate called the Tren de Aragua.

Richard McColl: Oh, yes. Yes.

Andrew Thompson: And a lot of people have been trafficked into Chile, so they pay various thousand dollars to somebody from the Tren de Aragua who helps them cross into Chile. Once into Chile, the contact with the with the people smuggler guy is prolonged. And they start saying, "Oh, and you also owe me this, repay this debt," and they ru- start running an extortion business.

And one of the things that crime syndicates in Latin America are very good at is diversifying. So they move from people trafficking into drug trafficking, into extortion, into various things like that, and local criminal groups are following their lead and diversifying. So there is without is- without doubt there is a crime problem.

The homicide rate last year increased by something like 40% to, to over 800 homicides. To put this in context it's still, very low compared to Colombia or Mexico. Yeah. The homicides per 100,000 inhabitants in Chile are between four and five. Whereas I think in Colombia it's about 20 something like that, and in Venezuela it's it's even higher.

Richard McColl: Yes. Yeah.

Andrew Thompson: So the problem- The law and order issue is something that Chileans feel very threatened by, and the right is capitalizing on that. Now, it's not just Kast who's capitalizing on it. It's part of the old right, which is, if you like, re-energizing itself, and in particular, the Union Democratica Independiente, UDI, which is a long-standing right-wing party created during the Pinochet era.

It's come to the forefront- ... and it has, in effect forced the Boric government to approve a whole new set of decrees and regulations. One of the most important ones being the concept that there's a law called the Ley Naim-Retamal, which is named after two carabineros- military police who were shot dead by criminals. So it's quite an emotive, ... way of positioning it. And what it, one of the things it does is introduce the concept of legitimate privileged defense Which basically says that in a violent encounter, the Carabinero or police official involved is protected under law and this replaces the previous concept was that all actions by the police have to be proportional to the threat perceived.

So it shifts things a little bit in favor of of the police and gives them a degree of impunity when it comes to it in armed encounters. The, the left, this has caused a split in Boric's coalition. The left and human right groups are very worried and they have called it the trigger-happy law because it means that, police are likely to shoot first and ask questions later.

Interestingly the most popular politician in the country at the moment is Evelyn Matthei, who is a member of UDI and the daughter of an Air Force general. In fact, a daughter of the commander of the Air Force during the Pinochet era.

Richard McColl: Oh.

Andrew Thompson: She's previously been a presidential candidate. She's now a mayor of of one of the municipalities in Santiago.

And she has basically been leading this charge to the right, along with another UDI member who's come up with the idea of bulldozing houses that have been used, the narcocasas, which are houses where settlers, squatters have got in and turned them into crack dens or, drug distribution centers.

So what he's doing is he's literally getting bulldozers and flattening those houses, which has gained him a lot of popularity. And at the moment it looks as if Boric is he's lost the political initiative- Yeah ... and is having to make concessions to the right to try and keep his key projects on the go.

Richard McColl: That I can just imagine that the bulldozing we all love something so visual and of course it seems like an immediate solution to a very emotive problem, that of security and of course migration and crime. But how much of this, crime in Chile has always been, in my, at least in my lifetime, having been to Chile on various occasions, it's always been seen as the safest or if not the safest alongside like Uruguay or for example.

Are people... can people say that they're overreacting on this? It's if we put it into context with neighbors I don't like to put it like that because Chile has lived have worked into a privileged situation. Exports incomes, and of course a very low security issue.

But if when we put it into the whole sort of, into a regional league table, it's still soaring ahead. Yeah.

Andrew Thompson: It's interesting 'cause I think there are two important comparisons One is how is Chile doing relative to the rest of Latin America?

Richard McColl: Yes.

Andrew Thompson: And the answer to that is it's doing really well still.

But then the second question you have to ask is how is Chile doing compared to how it was doing 10 years ago or five years ago? And the answer to that is that crime has increased.

Richard McColl: Yes.

Andrew Thompson: And although there are arguments about the, the exact statistics, I think the average Chilean citizen is correct to be worried about crime.

And you can also understand that from his or her position, what's happening in Colombia or Brazil is of no interest. They're what they Yes ... they compare with, what it was like last year. So that remains an issue, and it is also the difficulty is that most experts on crime usually come up with the idea that reducing the crime rate, there is no silver bullet.

There is no magic, magical thing you can do. There is a combination of different factors. Human rights need to be protected in the process. You need a police that has the resources and the power to investigate. You need good forensic services. You need all that. And that doesn't make such a sexy political slogan.

So it would appear some members of the right of right-wing political parties may have a much more sophisticated analysis- ... but a lot of them are coming up with if you like, slogans which are popular, but which may not actually reduce the crime rate. And this I think is something that happens all around Latin America.

People do tend to like La Mano Dura even if there is not necessarily the evidence to show that it is working and actually reducing crime.

Richard McColl: It does seem that so much is, yeah he's up against the wall, Boric. Yeah. He really does have his back up against the wall. Is there any way that he can claw back support and try and somehow get through this constitutional reform later on in the year or are we looking at already, a lame duck within his term?

Andrew Thompson: I don't think he's a lame duck yet. He's basically just gone past the first anniversary. So he took office March 21 sorry, March, ... he's been in office for a year basically. One, one more positive thing from his point of view is that if you look at the approval ratings of previous presidents, he's not necessarily doing that bad.

So in other words I think he currently has an approval rating of about 35%- ... and a disapproval rating of 60%. So that the, the survey people say that's a, a net minus 25% approval rate. But it turns out that one of his predecessors the old left heroine if you like, Michelle Bachelet, who was president twice, at the same time in her first presidency she was about the same, in the same place- as Boric is now. And she then improved. So not all governments start popular and end up hatred. Some have ups and downs in between. And he did, for example around about last November he finally announced the shape of the pension reform, which was a sort of moderate reform. The private sector will be, will have a slightly different role but it'll still be present.

Contributions to pension funds will go up from 10% of salary to 16% of salary. There will be an attempt to create minimum pensions for everyone. When that was announced his his approval rating jumped by five or six points or something like that. So it is still possible that if he can find his way through this jigsaw puzzle of responding to the right-wing demands on security- while at the same time finding a way to raise taxes that gets round, the defeat of his tax proposal in Congress. It is possible that he might be able to deliver some of the other reforms- ... of different types, social programs of different types, and that will give him, if you like, some, some midterm oxygen-

And help him to move forward. O- one thing that has been part of this whole thing is that he is becoming increasingly reliant not on his old new left, but on the old left. For example his current interior minister Carolina Tohá, she's an old left sort of colleague of Bachelet going back some years.

And this is it depends how, what adjectives you want to choose, but they're ... You could say they're all older or you could say they're all more mature and politically experienced- ... and have a better way of handling political negotiations- ... than the new left, which tends, tended to think, we just say what we want and it gets imposed quickly.

And the, the old left knows it's not that, it's got to do give and take.

Richard McColl: The reaction to knee-jerk knee-jerk politics of the new left and sort of- Yes ... let's say more moderate negotiations and agreements behind closed doors that get Yeah ... the things through. We have to finish up quite soon, but let's talk about Boric's big problem number one, the Mapuche militants.

Andrew Thompson: Yes.

Richard McColl: And I guess this comes into land control and who is in, who, what belongs to whom.

Andrew Thompson: Yes. So what you have in, particularly in this area called La Araucanía. It's also known as the Macrozona Sur. You have a large Mapuche population. They don't just live there, they live throughout all of Chile, but there's quite a strong concentration there.

And some of their ancestral lands have been taken over the years by logging company, by farming companies, by incoming settlers. And this has led to a degree of ongoing resentment. A very small proportion of the Mapuche community, because it is small are extremely militant and are running what you might call as an armed insurrection throughout that area. And what happens is they will attack sawmills run by logging companies, burn them down. They will burn houses belonging to people who've come in from other areas of the country. And they have been clashing with the security forces. And, The new, the Boric government's approach was initially incredibly idealistic.

They said, "We're gonna we're gonna lift the the state of emergency because military repression is not the way to deal with this problem." And we're just going to negotiate. And there was a, an, an infamous incident just after Boric had been sworn in when his new interior minister just went to the Araucanía, "I'm here.

Talk to me." And as she entered in a particular sort of comuna, a particular district, gunfire broke out and it was clear that this was essentially a conflict zone, and her security staff had to pull her out of there. And this has become, it's ... It's indicative of this idea that there was a simple solution.

And of course it turned out that there wasn't a simple solution. Boric came under increasing pressure to reinstate the the state of emergency, which he ended up doing, and it now, it gets renovated every 30 days or so. So that remains in place. And no, despite the new government's efforts, no significant negotiations have commenced.

And it turns out that some of the radical Mapuche groups I'm almost tempted to say are not really that interested in negotiating because they, you'd think there might be a deal to be done about relative autonomy in particular parts of the country. But it seems what the m- what the more radical Mapuche groups really want is complete independence.

They want to break away from Chile which is a major issue. It also turns out, and I think from your knowledge of Colombia this will sound a familiar theme- ... that some of these radical groups have links to the illicit economy. So theft of logging various if you like, operations of that kind give them a, a resilience and an unwillingness to negotiate that is difficult to deal with for the Boric government or indeed for any other Boric government.

So it doesn't look as if there's an early solution to problem number one, but you have to find some way of managing it. And Boric's issue is that he's under pressure in the south over the Mapuche issue, and he's under pressure in the north over migration and crime. So it is a very difficult issue to deal with.

Richard McColl: It just sounds like there's so many complex issues, as you say to deal with. I think, he needs a quick win, doesn't he, to to gain back this political initiative. As you said, it was a, a political oxygen. A, a midterm dose of political oxygen for his party. But it seems to me an underlying fact is that people want to believe in, in, in change, but not extreme change.

Just, little by little let's move towards, I don't know, a Danish model, but not it, we don't want to do it All at once. It needs to be a process. Would you say that's correct?

Andrew Thompson: I'd say that is correct and that there's an interesting comparison with Colombia- ... where Gustavo Petro is searching for total peace.

It's almost like he's tackling all the problems at once everywhere all of a sudden or whatever the film is called. He wants to do it all very quickly. Yeah. And I think Boric's experience in Chile is that there has to be some form of priorities-

Richard McColl: Yes ...

Andrew Thompson: fixing one problem at a time because otherwise you you come under siege.

You're trying to... you don't have the bandwidth to tackle everything that needs to be tackled at once, so you need to find some way where some of the problems you put them on hold and you say I'll get back to that when I've solved, I can't get to Y until I solve X."

Richard McColl: It, so that sounds incredibly reasonable and very apt in terms of Colombia, Chile, and the comparison.

Of course, they're great friends, Boric and Petro, Yes ... but at the same time let's bring this to an end because we've covered so much and I'd just like to say thank you for your time as we've been talking to Andrew Thompson, freelance journalist, expert on Chile, giving us unrivaled and unselfish knowledge into Chile and a lot of the issues and problems facing Gabriel Boric, the current president at this moment in time.

Can he find a way to claw back an initiative and some sort of support and power? The question remains, doesn't it, Andrew, I think? And that's us signing off for episode two of The LatinNews Podcast. Uh, this is a new fortnightly episode from latinnews.com. Be sure to check out episode one, that was two weeks ago, where we discussed Peru's ongoing political crisis with the editor-in-chief of Latin News, John Farmer.

We'll be going on in two weeks' time to discuss Lula in Brazil. What more than Lula in Brazil? But let me say thank you again to Andrew Thompson. I've been your host, Richard McColl, for The LatinNews Podcast. Thank you. Please subscribe, tune in, and share the show all around. Bye-bye.

Outro: You've been listening to The LatinNews Podcast.

For more news and analysis on Latin America and the Caribbean, visit www.latinnews.com.

Jon Farmer is Editor-in-chief at LatinNews and editor of our Latin American Weekly Report, the company's flagship publication. Just as comfortable sitting in front of a camera as a computer, he has made numerous media appearances on news networks such as the BBC and CNN. He has participated in panel discussions for Canning House on key political developments in Latin America (the Honduran coup d'état in June 2009 produced a particularly lively debate).

Jon has also worked in Central America, covering elections in Guatemala, El Salvador and Panama, and has travelled extensively across the entire region. A prodigious reader on and off topic, Jon's special interests include governance and democracy; caudillismo and political leadership; and the challenge of national and indigenous identities.

He holds an MA in Latin American Studies from the Institute for the Study of the Americas, School of Advanced Studies, University of London, where he majored in the International Politics of Latin America and Economics of Latin America.

Intro: Welcome to The LatinNews Podcast, a fortnightly deep dive into key developments from across Latin America and the Caribbean. Here's your host from Bogotá, Colombia, journalist Richard McColl

Richard McColl: This is The LatinNews Podcast, our first episode in what will be a fortnightly update on events, news, and important issues taking place in the region. I am Richard McColl, your host. I'm a longtime foreign correspondent here in Latin America, an analyst. My very special guest will need no introduction to many of you out there. It's John Farmer, who is the editor-in-chief of LatinNews, latinnews.com, and we're going to be discussing this week Peru and what has been going on in Peru politically, economically and so on in the last few months because this is a really serious issue that's been going on. But first and foremost, let me just say welcome on this first, this inaugural podcast, John.

John Farmer: Hi, Richard. thanks for the big fanfare. That's always welcome. We have to. Yeah, very excited to be here at the start of this, this new venture for us at LatinNews, and yeah, we've got some, some fascinating podcasts lined up.

Richard McColl: Yeah, we do. So we're going to be going from Peru, and then we're going to move on to Chile. We've got Brazil, I believe, in the pipeline, and also Paraguay, because there are elections coming up. Paraguay. Yeah. We've we've got them all set up, so actually very exciting to be here. Very exciting to be leading this charge to, Yeah bring LatinNews out into the podcast arena. But yes, let's not create any more fanfare, and let's get into the sort of nitty-gritty of what's been going on in Peru. We know there's been daily protests since December. It's been incredibly unsettled of course. We're looking at look, if we take a full summary of what's going on, six years, six presidents, three congresses, 15 prime ministers, a reshuffling of more than 250 ministers. Right now we've got Dina Boluarte as president. What is going on, John?

John Farmer: So do you want the short answer or the long answer? I guess we've only got half an hour,

Richard McColl: Go on

John Farmer: I don't think we can do justice to, to, what's happening now without going back in time a bit. So some people would say you need to go way back to the colonial era and Yeah this created this indigenous provincial underclass governed by a, a white elite from Lima, and that, that's really at the root of these wrenching socioeconomic divisions of today, and that it's that old cleavage which is still very much there. But I think for the purpose of this podcast, I think if we start off in the present, and then, what's happening right now, and then we can work back I think to the Fujimori era is could be enlightening. and, yes, shed some light on how we got here and what might happen in the future.

Richard McColl: Okay. So we were looking at what, what happened, as in Pedro Castillo- was ousted. Obviously he was trying to run, I guess a, from an authoritarian perspective I would suggest. He was ousted. Dina Boluarte is in. We, we wouldn't have been mistaken to have thought that she may have gone fast as well given the unsettled nature of Peru, but she's still in power. How, what are the people, what are the people calling for? What I hear is there are calls for a new president. There's calls for a new constitution. There's an erosion of trust, but I think it goes back a long time, by the rural poor in the political class. We're looking at this population of 33 million, with millions living in poverty, and then the flash points at the moment, still continuing today, seem to be in the south of the country in Puno and Juliaca. Just because they're not in the press doesn't mean they've stopped. They're just not in the press. But I think, rather than look at Dina Boluarte, who's in power now, tell me a bit about former President Pedro Castillo. How did he First and foremost, it was, the election was him against Fujimori's daughter, Keiko Fujimori. And it was, it was a marginal win at best to get Pedro Castillo in. So how did we get to that point?

John Farmer: Yes Pedro Castillo, a massive outsider. He's, he really sprang from out of nowhere to win the election in 2021. Benefited really from the fact that there's a colossal sense of disillusionment with the political class in Peru, but also the total atomization of the political system, the party political system. There were 18 candidates running in that first round, and it, you didn't really need to get too many votes in order to get a place in that second round berth if you like in that runoff. So that, the threshold was so low to get there because the vote was so split, so divided. So there wasn't a single poll at the time that suggested that he would be in the runoff. So that all came as a sort of complete surprise. Having got there, of course then it's a different ballgame because there was this huge anti-Keiko, anti-Fujimori sentiment in Peru. And also I think a lot of particularly indigenous rural Peruvians who felt disenfranchised for years saw Castillo, this rural school teacher, as one of them. And certainly if you look at the second round voting in southern regions in particular, he got way over 80% of the vote. In fact, in Puno, which is the epicenter of the, has been the epicenter of the protests, he got 89% in, in this second round against Fujimori.

Richard McColl: Were we seeing also a higher turnout in voting especially in those regions, then, in sort of Puno, Juliaca and the areas, bordering Bolivia to the south?

John Farmer: I think there was a, there was a feeling amongst people, particularly in, in those regions, that he was an opportunity for change. There'd been so much disillusionment for so long with the established political class, and I think a lot of people bought into his sort of populist left-wing promises.

Richard McColl: So do we, when we talk about populist left-wing, we could digress massively across the region, but let's not. But do we think that there was, support coming from external influences, for his election? I think we need to get that out there.

John Farmer: absolutely that's what the Fujimoristas claimed. I personally don't think there was an enormous amount of that.

Richard McColl: We get to Pedro Castillo, and of course it's, we, as I mentioned in the sort of opening summary, so many presidents in such a, a short amount of time. Before him, we had Martin Vizcarra, who was also from a southern region, and I guess he ran on an anti-corruption ticket. He had political affiliations. But he was then let's say, ousted after two votes of no confidence because that's in the Peruvian Constitution. After two of those you have to step aside. This was November 2020. But he seemed- Yeah to have I would say steadied the ship a bit. He seemed to, and yet then the opposition found I, are they alleged cases of corruption in some sort of mining deals to the south? What happened with Martin Vizcarra?

John Farmer: Yeah, there were allegations of that sort but really Congress was just gunning for him. And, Vizcarra was ultimately exposed in the same way that President Kuczynski had by the fact that he just lacked a, a, a sort of serious presence in, in Congress. And again, that's the problem that Castillo has faced. And really the last six years in Peru that have just been so volatile with Peru's just lurching from one political crisis to another and so much of it is down to, yeah the fact that the presidents who've been in power have not really had much in the way of a congressional presence, and they've also faced a very hostile Congress, certainly when Kuczynski was in power at the beginning, Congress completely controlled by Fujimorismo enraged that Keiko wasn't elected- and, really practiced some seriously obstructionist tactics. But this, what this really makes me think of actually, and I think this is really pertinent, is Article 113 of the Peruvian Constitution, which, people might not be familiar with, but And I'm not sure I was particularly until suddenly it was just being used left, right and center. So this is the article which allows for the removal of a sitting president for permanent moral incapacity. But, let's put this into perspective because between 1839, when this was first introduced to the Constitution, and 2000, this procedure was used just three times.

Richard McColl: Oh.

John Farmer: And then Castillo's was the seventh impeachment attempt in the last five years for permanent moral incapacity. Three of those were obviously successful. They removed President Kuczynski in 2018, Martin Vizcarra in November 2020 and obviously now Castillo. So this is no longer a rare and extreme event. It's becoming commonplace- But all these heads of state that I just mentioned were all vulnerable in that they lacked this strong backing in Congress, and this article has really been seized upon by parties in Congress that just weaponized it and it's just a sort of political device now. And it should really have been, The, the Constitutional Tribunal had a chance to address this article and it really just fluffed its lines because it refused to define the instances in which Congress could actually invoke it. So it's, it remains so ambiguous and imprecise. And as long as you can muster a two-thirds majority in Congress, you can basically impeach a president for whatever. It's just about having the votes.

Richard McColl: it's very nebulous, isn't it? Moral incapacity-

John Farmer: Absolutely

Richard McColl: it makes me think of just about any leader anywhere in the world could then be this is one of these items in a constitution that maybe should have been left behind in the early 19th century. It's it's just there for posterity and to make us laugh a little bit. It does sound like that but now as you say, weaponized entirely. And if we are to back it somewhat, okay it's one of those things that can enable the political parties to, this is always what they seem to be aiming for, especially in the region. It's a device to combat corruption or presumed corruption. And of course Peru we know that the corruption is rampant and has this been really the driving force behind the unrest and the unsettled nature of Peru in recent years?

John Farmer: I think it's got a huge part to play in it. Obviously we had the Odebrecht corruption scandal prior to this. There were corruption allegations hurled at Castillo by, by Congress. I, I think, if we this is probably a good opportunity actually just to go back to Alberto Fujimori as kind of intimated at the beginning because, he was a populist anti-system outsider himself, came to power 1990, faced a hostile Congress which was obstructed his agenda, but he was very popular. And in 1992 he carried out this autogolpe dissolving Congress, concentrating power in his own hands. The difference to when Castillo attempted it, of course, is that Fujimori just parked a tank on the steps of Congress, whereas in Castillo's case he just the armed forces were never behind him and they issued a statement very promptly, a joint statement with the police disavowing sort of any, any part in it. But really so we have Fujimori in power 1992, autogolpe. For the next eight years he really just set about dismantling Peru's democracies, hollowed out institutions. Corruption permeated everything. Rampant cronyism, siphoning off of public funds. Media and judiciary totally co-opted. And but I think, one of the really baleful legacies of the Fujimori era is really the sort of collapsed party system- which just became totally atomized. Parties prior to him used to represent something. They had recognized ideologies. But then after this, after he departed and democracy was restored in 2000 the party system didn't, the party system didn't just spring back to life. And parties have no real links to society. People just don't feel unrepresented and this is damaging democratic legitimacy. But it's also, it just feeds corruption because these guys who are getting elected on, and supported by very shadowy sort of interest groups to Congress. And it's the I think we can't underestimate the impact of the sort of Fujimori era in the sense that it's just the public faith in institutions, in the party system and in politicians who are just fundamentally seen as being corrupt was just shattered, and that's just not being rebuilt. And if you look at, it's actually really interesting if you look at the sort of the presidents who, who were elected, say Alejandro Toledo, he's elected in 2001. His party, Perú Posible, had, if I remember, 45 seats in Congress. Two then his popularity sinks like a lump of lead and he's got single digit popularity towards the end, and this is not uncommon in Peru for presidents just to, just plummet in, in popularity. But when, in 2006, Perú Posible is completely wiped out, wins two seats in Congress. And it, this is the same story with Ollanta Humala, comes in 2011. His party, Gana Perú, has similar sort of amount, 47 seats I think. 2016, totally wiped out. So these parties, they don't have long-term visions. They're just personalist vehicles for the candidates who are, running for president.

Richard McColl: So we think that this party system really, they change names and they chop and they're altered and so on. It's for personal financial gain for these politicians Would you say it's

John Farmer: Yeah for the majority? Very much. And I think I heard a, a really interesting comment recently from Alberto Vergara, who's Peru's well-known academic and political scientist, and he said, Peru's often called a democracy without parties, and he said, "Look, actually it's now a democracy without Democrats." Members of Congress are sacrificing democracy for their own interests. There's no rules of the game anymore. It's like a football match, when all the players take to the pitch and to start using their hands.

Richard McColl: This is a tough one. We're going back, I want to go back to Fujimori as well, Fujimori as well. I was there for the elections when Toledo got in and so on. Of course, he painted himself as more allied to the indigenous movement by being indigenous, descent himself. But if we look at Fujimori, he comes in and you say he parks his tank on the steps of Congress. It's a different time, of course, as well. I'm not supporting what he did. Of course, he had the backing of the armed forces. They were still combating what was the Shining Path, Sendero Luminoso, and the Túpac Amaru. Yeah. So again, there's a belief in the armed forces. Why this time were the armed forces not backing Castillo? Is it's because we've moved on from this era of, let's say, Abimael Guzmán and everything else? It's a different Peru altogether. economically it's been a success tourism-wise and also in extractive industries. Why did the armed forces say this time we are not involved"?

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John Farmer: I think all the points you make are relevant and all stack up for sure. But I just think that, equally, the security forces, they're looking at there was no real consultation from Castillo. This was just a complete bolt from the blue. He, he didn't have anything like the same level of popularity that Fujimori had. Fujimori was a, a far cannier politician, and he would never have attempted that without knowing full well that he had the backing of the armed forces beforehand. So this is what makes the whole thing difficult to understand. What, what possessed Castillo to think that he could pull this off? That's the million-dollar question, right? It's hard to know exactly what he was thinking, because even his closest advisors have said they had no idea what he was planning, and if they had, they would have tried to talk him out of it. We know that he'd been in this relentless standoff with a, a right-leaning Congress from the moment he took office really and appointed this far left cabinet, and then he's just harried relentlessly by Congress. And there's this kind of constant brinkmanship with Congress that had just been going on throughout, pretty much his entire time in power. But equally, Congress was It was advancing on several fronts with efforts to remove him. There's no question it had these constitutional complaints which, would have seen him suspended from office. But these, they weren't really necessarily going anywhere. The first one of them was actually just thrown out by the Constitutional Tribunal anyway, which was, some flimsy accusation of treason because he'd made some remarks to CNN that, about granting Bolivia sovereign access to the sea. But, he made no further attempt. It was just a comment he made. And the other one was much more substantial, the one that was presented by the attorney general. So this, that's the one that accused Castillo of leading a criminal organization, influence peddling and collusion. But again, this rested on very dubious constitutional grounds because in the constitution in Peru, corruption's not one of the four offenses for which the president can stand trial.

Richard McColl: Huh.

John Farmer: So I think, yeah, it's if I could have been in his head to see what motivated him I'd I'd love to know because it was, it seemed But what happened before, he basically sealed his own fate because, Congress had tried to impeach him twice before and it had failed to gather the two-thirds majority. There was absolutely nothing to suggest it was going to succeed to get it this time around. But, the second he announced the dissolution of Congress, it was like he's just signed his own death warrant and he's impeached by this absolutely thumping majority, and that's, yeah, that'

Richard McColl: We, we put this down to, I would put this down to total politically, political naivety, right? Lack Yes experience. it seems like a As you said, if his closest advisors and friends did not know that this was going to happen, it sounds he woke up and a knee-jerk reaction was, "This is what I'm doing, and I will be supported by the people who voted for me."

John Farmer: Yes

Richard McColl: we know something else happened. And but then, of course, things we're bringing it back up to the current day. Things kicked off. We got the images, the very visual reality of what was happening in Peru. At the time that we're talking, there are 50-plus people who have been killed. Of course, a large number of these by state forces. There has been investigations, I know it's been reported by The New York Times of a proven excessive force by state actors. And also, political scientists are saying that this is, a referendum on democracy. It's something that you brought up again with your quote there. I'm curious now is where does Peru go from here? It doesn't look to me like President Dina Boluarte is going to call an election any time soon. And should she call an election, it's, there's no certainty, of course, that this, they will or can restore any stability

John Farmer: No. Absolutely not. But she would say, look, well, elections aren't formally due until 2026. She would say that it's not in her power to call elections, and she's right, it's not. It's C-Congress needs to bring Congress needs to vote to stage early elections. And Congress has voted on this matter, I actually lose track, it's so many times, and they voted on so many different sort of bills to move it forward to, April next year or December this year. But every single time it's rejected, and it's rejected for, different reasons. The right are basically particularly as the protests have slightly petered the right are just thinking we can get through this. We can actually see this through to 2026 now. There's absolutely no need to do this." And then the left, Perú Libre in particular they are They'd be happy enough with early elections, but they're only prepared to vote to support them if there's also a vote on establishing a constituent assembly- at the same time to draft a new constitution.

Richard McColl: And presumably get rid of the item about moral incapacity.

John Farmer: Presumably

Richard McColl: it does seem like a very useful thing right now.

John Farmer: I was going to say I think everyone finds that potentially quite, quite useful. But in the short run though, I just don't there's no appetite in Congress- to impeach Dina Boluarte right now. The, the left, the Perú Libre is pushing for her impeachment. In fact, right at this moment, there's there should be any time now a vote on whether to stage an impeachment vote. There are several stages to the process. But I'm not even sure they'll get enough votes for that, but even if they did, there's I absolutely don't see that Congress would vote to do it. And the reason it won't, of course, is because- Although she came to power along with Castillo as she's like nominally left-wing she's now widely seen as being in league with the right. And the right sees her as a useful shield because of course if she were impeached, who would be next in line? The next in line in terms of the constitutional succession would be the President of Congress José Williams, and he's a former commander of the armed forces.

Richard McColl: Ah.

John Farmer: It's difficult to imagine that could take place without there being fresh protests, and I think Congress is very much aware of that. And also it's equally, it's, Boluarte is, she's not trying to advance a sort of controversial left-wing agenda which is really riling the right in Congress that it would really want to oppose. As I say, I think it just sees her as a sort of useful shield. And it will just hope that things will just chug along and it can see its way through to 2026. And I The protesters absolutely assumed that they would have seen the back boluarte and Congress by now. And yet that's 'Cause if we look at the obvious precedent is Manuel Merino. So he, Merino was the president of Congress. He took over as head of state after Martin Vizcarra was impeached in November 2020, and it was an abject disaster, and he resigned within five days. And this was after the police killed two, two pro-democracy demonstrators. Okay, yeah and scores more were injured but here's Boluarte clinging onto power after many more protesters have been killed by the security forces. So I think protesters would have assumed she would have gone. In their eyes done the honorable thing and resigned, she, if she didn't do it then it's difficult to imagine she would do now.

Richard McColl: Yeah, it's true. If we can chug on, if they can chug on till 2026 under the conditions that you're saying, is this going to be And I think as, as we move this towards the, as we wind down our conversation a little bit, we need to move on to the economic cycle. And we can say quite firmly that under Castillo, investment and consumption dropped, and the credit outlook was cut to negative by Fitch Ratings. And of course there's this, there's this, this issue of the Peruvian paradox. Despite all of the political unsettled nature, violence, et cetera, tourism and the extractive industries never really were affected until, I would say, this time around there was a wobble and there was a wobble. Tourism, if we go even more superficially, if Machu Picchu was closed, could you even imagine- Yeah the cash cow for tourism for Peru? For about

John Farmer: a month.

Richard McColl: For about a Yeah which is a big deal. If you Huge prior to this has not happened. The extractive industries were questioning their investments. So what do we think? Are we going to go back into a, will Dina Boluarte be a successful shield or et cetera for, I would say, economic stability? Will it, will the paradox continue or are we looking at a new situation now in Peru?

John Farmer: I think very much Peru is still a, a powder keg waiting to explode. I don't think it would take an enormous amount for these protests to, to flare up again.

Richard McColl: Yeah.

John Farmer: And the idea that she could somehow last till 2026 I think is almost inconceivable. But you were talking about the sort of impact on the economy, and you're absolutely right. I think, investors have It's not that they're not used to protests in Peru or, and elsewhere in Latin America. They've become accustomed to them. This is part and parcel of it, but this was big. This was bigger than anything they'd been accustomed to. I would certainly say this, at any stage this century really. But in terms of the sort of Peru paradox, I think, people Who live near mines often feel that they're not really benefiting from the wealth that they produce. And there's definitely a sensation- that, you know, wealth, there's this vast wealth in Peru, and it's not been filtered down, but it certainly has been siphoned up. So and again, this feeds back into, and this is the, at the root of that sort Peru paradox and this is why there's such widespread disillusionment with the sort of corrupt political class. But clearly investors don't like this kind of level of unrest. It, it gives them the heebie-jeebies. It's But I think they'll feel that they'll hang in there till the dust settles. Peru will get a new president and fresh elections in the short term, you they would hope. And who would be more investor-friendly than Castillo, and the uncertainty and political crisis will subside. But there's no question this was a big deal. And the In fact, I read a stat just a couple of days ago. The Central Bank president came out and projected zero growth for the first quarter as a as a result of the protests. And mining, which is obviously the, the dominant sector of the economy in Peru, worth about 10% of GDP things have improved. The protests have receded. Obviously massive disruption, but they have receded. But mining exports in January, so January's the peak of the protests, were down 20% year on year around about 2.5 billion. And this is mainly due to a, a, a slump in export volumes. A little bit to do with price, but it was mainly export volumes, and this can be directly attributable to the protests.

Richard McColl: Yeah. This has to knock investor confidence. But like you say, they'll hang on in there while there's, while there's still a possibility of getting the product out.

John Farmer: Oh, absolutely. Yeah

Richard McColl: I want to finally, there's a couple of final points here. This, as you say, a powder keg, and I genuinely believe you on this one as well. It is a powder keg. A solution in itself is closing the social gaps. It's But that's such a huge topic. And as you A

John Farmer:

Richard McColl: the people in the Monumental

John Farmer: undertaking

Richard McColl: yeah, the people around the mines, who work in the mines, who live off the mines and so on, have never really felt that they're receiving any of the trickle-down benefit of these things. How do you even start? And so I'm thinking about like a region-wide issue at present and of course we get the very visual images of people emigrating from their countries. Obviously Venezuelans, Central Americans going up, those big caravans. But if we think of the Venezuelans and now Ecuadorians are increasing, going up to, to cross the Darién so that slip of land between Colombia and Panama, so connecting South America with Central America the most dangerous trek in the world, as people say. Haitians, Cubans.

John Farmer: Yeah.

Richard McColl: Could we, could Peru be another source in the region now if the economy continues to falter?

John Farmer: I think the economy will bounce back. Already, they're, the central bank president is fairly calm that, the worst is behind and that the economy will bounce back and But that political crisis is, that's not resolved, and fresh elections for In the short term, fresh elections would help enormously and I'd, it would just defuse some of the tensions. But it's not a panacea, it's not going to suddenly fix everything, not least because in all likelihood, another political outsider would get elected and we could have this sort of perpetual cycle of political crisis in the future. But I think, what is needed is, and what is essential, is political reform. 'Cause the political system's broken. But the real vexed issue is that, though the people who can fix it have a vested interest in it staying the same. This is foxes guarding the henhouse kind of stuff. And Boluarte has no popular mandate and even if she were capable, and I've seen no indication really that she is or that she's really contemplating any of this, does she wouldn't have enough backing to push through a, a political reform either. And so I have limited hope really that deputies would advance with this. Although I did see that the President of Congress, José Williams, was adamant that actually they could, and he even put a couple of suggestions forward that, they could maybe have, members of Congress could be have a, be reelected at halfway through the mandate. There could be some discussion about renewing Congress after two and a half years, which is because of the five-year term. So things like that could help, but that's tweaking-

Richard McColl: Yeah

John Farmer: little tweaks really. And what's required is something really quite substantial, and I don't see the political will for that from Congress.

Richard McColl: Yeah, and they don't want to lose their seats. They don't want to lose, put themselves- No at risk on a, when a again, when we suggest that it's for personal financial gain. I think that's a, an ideal place to end this conversation, John. It really has been quite I think we could talk for hours, and I think we could go so much more depth. Yeah. You even started Yeah the colonial period. But fortunately we kept that under wraps. But yes, there underlying- Another time problems. Yes. Underlying problems in the Peruvian situation that as neither of us believe will be resolved in any, any moment soon. But at the same time, investors, tourists are not likely to be overwhelmingly affected unless you say, as you say, the powder keg gets that spark. What could be the spark? And who knows? Who knows really what Dina Boluarte might come out with soon enough. That's the unpredictability of Peruvian politics. So I think we'll bring this one to an end. I've been Richard McColl talking here to John Farmer, who's the editor-in-chief of LatinNews. Obviously a great knowledge on Peruvian politics and society, culture and so on. I'd like to say thank you so much for sharing your wealth of knowledge on this subject, and I hope out there the listeners have been equally as enthused with all of this background that we've been able to share.

John Farmer: Thanks so much, Richard. It's been great.

Richard McColl: It has been a real pleasure to host this first episode of The LatinNews Podcast. We'll be coming fortnightly with different topics on the region, so please subscribe to us. You can find us wherever you get your podcasts, and in two weeks' time we'll be back with Andrew Thompson, and we'll be discussing issues in Chile. And then after that, we've got Richard Lapper discussing Brazil, and beyond that we'll be talking about the Paraguayan elections as well. So of course, mark us down, bookmark us, subscribe, and continue to enjoy. Give us feedback. Take a look at the website, latinnews.com. Thank you again for listening, and bye-bye.

Outro: You've been listening to The LatinNews Podcast. For more news and analysis on Latin America and the Caribbean, visit www.latinnews.com.