Sporting Fever

Posted on August 7, 2016 by LatAmLowdown

The 2016 Olympics opened in Rio de Janeiro on Friday, with a ceremony celebrating Brazil’s diversity, its – often controversial – history and, looking ahead, its commitment to an environmentally responsible future. And for a games that had already weathered budget cuts and well-publicised doping controversies before athletes had even stood in the blocks, it was the contagious enthusiasm of cariocas for their moment in the global sporting sunshine that shone through.

Contagions, however, have also been much on the mind of athletes and organizing authorities in recent months. The threat of the Zika virus has cast a modest shadow over the games; golf’s return to the Olympic fold after a 112-year hiatus was dampened by the news in June that World Number 1 Rory McIllroy would be among several on the PGA tour not competing in Rio, nominally due to the mosquito-borne disease.

Likewise, USA Women’s Soccer Goalkeeper Hope Solo took to Twitter, posting pictures of her brimming arsenal of insecticides and posing in a costume that even a well-dressed beekeeper might find excessive. Predictably, the impromptu photoshoot drew the mockery of local fans during the USA’s opener against New Zealand.

Some have gone so far as to brand the McIlroy abstention ”extreme”, with even the director general of the World Health Organization stepping in to assert that the risk posed by Zika to athletes is low.

But what few can ignore are the hazards faced by any athlete bold enough to dip their toes in one of Rio’s open-water aquatics venues – Guanabara Bay and the Rodrigo de Freitas Lagoon.

As part of the bidding process, state and city authorities had pledged to embark on a major cleaning operation, promising that the games would “rejuvenate Rio’s waterways”. And the city was certainly crying out for it – over the past few decades, many of the 55 rivers flowing into Guanabara Bay have been successively declared “dead” by scientists.

But despite the vows, levels of pollutants – industrial effluent, landfill runoff and raw sewage – have remained stubbornly, and deplorably, high. Water samples taken in the last month have revealed extreme levels of pollution, with one test weighing in at 1.7 million times the admissible limit in the USA, a country not normally noted for its environmental sensitivity.

For those at the games, this state of affairs has been a mixed blessing; while the world’s press have been falling over each other to snap lurid shots of semi-submerged corpses for gleeful picture editors, one can only assume that actual participants in aquatic events met with a shudder news that ingesting a mere 3 teaspoons of water could lead to serious illness.

So spare a thought for Serbia’s men’s rowing pair, capsized in choppy conditions on the Lagoa Rodrigo de Freitas.

Meanwhile, organizers are investigating reports that competitors in a kayaking warm-up event were torpedoed by a rogue sofa. The veracity of the story has yet to be established, but the sofa in question has taken to Twitter, presumably seeking to capitalize on its 15 seconds in the sporting spotlight.

ADDENDUM: But why should Brazil have all the fun? The enthusiasm for all things athletic has spread to Peru, with newly-elected president Pedro Pablo Kuczynski hosting his first cabinet meeting over a 25 minute gym class with his ministerial subordinates. The stunt comes as part of an initiative to promote healthy living among Peruvians, and one can only assume that the electorate, who helped the 77 year old former World Bank economist squeak home in April’s election, hope he will pursue his promised “social revolution” with similar vigour.

Posted in Brazil, Peru, Sport | Leave a comment

Mayors in the crosshairs – the dangerous world of Mexican local government

Posted on July 27, 2016 by LatAmLowdown

According to data released earlier this week by Mexico’s National Institute for Statistics and Geography (INEGI), there were 20,525 registered homicides in the country in the last year.  At a per capita rate of 17 per 100,000, Mexico weighs in worryingly high up the rankings, though maintaining a marked margin below some of its Latin American neighbours. On a domestic level, the latest batch of stats marks the first increase in killings since 2011, the final year before the Peña Nieto government took drastic measures to curb rising violence.

Beyond the boundaries of the capital Mexico City and the notoriously violent State of Mexico that surrounds it, the state of Guerrero leads the table, followed swiftly by its northern neighbour Michoacán. Collectively, these states are known as the Tierra Caliente, notable for their arid climate and parched landscape. Now they seem hot for all the wrong reasons, with even President Enrique Peña Nieto admitting that the region presents significant challenges for his national security initiative.

Guerrero has already achieved some considerable notoriety. In September 2014, the town of Iguala in the northeast of the province attracted the attention and horror of international media when 43 students from a local agricultural college disappeared, allegedly at the hands of an unholy alliance of police and criminal gangs. The “Missing 43” – or rather, their remains – have yet to be found.

Not to be outdone, in 2014 Michoacán had its own dalliance with the Knights Templar, a narco-religious faction who revelled in their reputation as the “Cannibal Cartel” before being quashed by an alliance of armed vigilantes and federal forces.

But while the sensationalism may have subsided, the violence is no thing of the past. This Saturday saw the ambush and killing of Ambrosio Soto Duarte, the mayor of Pungarabato, a municipality on the Guerrero-Michoacán border. Earlier this month, Mr Soto Duarte had spoken out on Twitter against gang violence, revealing that he had been receiving death threats and calling on Mr Peña Nieto to take a tougher line.

The assassination of Mr Soto Duarte came mere hours after news that Domingo López González and Narciso Lunes Hernández, the mayor and deputy mayor of the indigenous community of San Juan Chamula, were among 5 killed in a shooting in the southern state of Chiapas.

In response to the latest shootings, the National Association of Mayors (ANAC) issued a statement, petitioning the government to provide greater protection for mayors and public servants. But Mexico is no stranger to violence against local officials and this is not the first time ANAC has made this plea. In January, following the death at the hands of gunmen of Gisela Mota Ocampo, mayor of Temixco, Morelos, the state governor revealed that 13 other mayors in Morelos had been subjected to threats and intimidation.

So why have the leaders of Mexico’s 2438 municipalities found themselves in the firing line?

Like so many of modern Mexico’s ills, the answer lies chiefly in organized crime and the ongoing War on Drugs. Increasingly in recent years, the narcos have sought to “diversify their portfolios”, moving away from the simple traffic of arms and drugs and into the world of local government.

Typically, this started off along classic mafia lines – the corruption and intimidation of municipal politicians and the running of protection rackets against civic authorities. During the chaos in Michoacán 2 years ago, local officials tell of how regional gangs would demand protection payments, carrying off as much as 10% of federally-dispensed funds. Town hall functionaries were hardly in any position to resist.

But the methods of the cartels are developing ever greater sophistication. Not content to extort local government, some criminal elements have sought to become local government, de facto and de jure. And “clean” politicians – Mr Soto Duarte among them – stand little chance in opposing them.

Take, for example, the now notorious example of Iguala, Guerrero. While months of federal investigation failed to shed much light on the fate of the 43 students, inquiries did reveal that María de los Ángeles Pineda Villa, wife of the town mayor, was a senior figure in the command structure of Guerreros Unidos, the gang suspected of carrying out their kidnapping and execution.

Unsurprisingly, infiltration of local government carries many benefits for criminal organizations in Mexico. Not only does it offer the cachet of officialdom, it is also immensely lucrative.

In 1984, the de la Madrid government pursued a then-popular policy of decentralization, amending the constitution to give municipalities freedom to administer finances and raise revenue. Although designed to put power back into the hands of the people, in the more chaotic parts of 21st century Mexico, the policy has served simply to deliver the apparatus of state directly to the door of those who wield most local power. With frankly depressing regularity, this has been the cartels, which have benefitted from an absence of centralized oversight in order to jam their fingers deep into the pie of local government, extorting procurement contracts and creaming off local taxes.

But subverting local government for their own ends offers Mexico’s criminal class another crucial advantage. Throughout the country, municipal policing falls under the remit of many town halls and thus, removing the mayor of a locality – by pseudo-democratic means or at the end of a gun – directly eliminates a major obstacle to criminal activity. Deprived of leadership, underfunded and unmotivated, local police are unlikely to put up much resistance.

The consequences for Mexico are all-too-well documented.  The body count rises – among local politicians and the civilian population – and investment is siphoned off or dries up altogether, suffocating development in the poorest and most violence-afflicted states.

To tackle the problem, Mr Peña Nieto would do well to heed ANAC’s call for greater security for local mayors. Having dedicated, on-the-ground politicians of any hue will be essential for driving through change at a local level and restoring popular faith in government, a sentiment that has been eroded by decades of violence.

More importantly, having a coherent strategy to deal with – or at least, suppress –the criminality is essential. In 2013, the deployment of the army onto the streets of 13 northern states brought a significant reduction in violence. A similar strategy might be employed to cool off the Tierra Caliente.

Looking longer term, re-centralization of policing and revenue-raising would be a viable policy initiative, taking these essential functions out of the hands of vulnerable local politicians and placing them under the umbrella of state government.  State-level management may indeed be imperfect, but the greater structural integrity of state government would permit it to effectively enact policy and uphold the law, with its relative proximity to the executive allowing for greater oversight.

Perhaps then can the elected representatives of the Mexican people begin to govern in peace.

Posted in Mexico, Politics, Security | Leave a comment

Puerto Not-So-Rico

Posted on July 2, 2016 by LatAmLowdown

This Friday, the Commonwealth of Puerto Rico had been due to make $2 billion of debt repayments, the first step on the road to tackling the burden of the $70 billion debt load currently encumbering the island territory.

But things have not gone according to plan. As the deadline loomed, an executive order came from the office of Governor Alejandro García Padilla, declaring that repayment would be suspended on almost half the outstanding debt, including $779 million of constitutionally-backed general obligation bonds.

The announcement has not come as a surprise to many. Indeed, political wheels had been turning for several months to avert – or at least mitigate the impact of – Puerto Rico’s debt crisis. Only on Thursday – mere minutes before the order went out in San Juan – President Barack Obama had put pen to paper on the Puerto Rico Oversight, Management, and Economic Stability Act – optimistically-acronymed PROMESA – subjecting the unincorporated territory to the fiscal rigour of a federal oversight board.

The losers in this scenario are, unsurprisingly, unlikely to be the hedge funds and municipal bond funds that make up the majority of Puerto Rico’s creditors. Although individually some have exposure to Puerto Rican debt in excess of $1 billion, it is fully expected that bond insurers will bear the brunt of the default, picking up the short term tab, with the long term financial consequences suffered by ordinary Puerto Ricans.

Governor Padilla has come out fighting, declaring that the default is the consequence of the Commonwealth becoming a “colony of Wall Street”. But to many, this will seem a little too much like “doing a Kirchner” – holding faceless foreign financial organizations solely responsible for a crisis caused by myriad factors, not least domestic economic mismanagement. In reality, blame for Puerto Rico’s unenviable status as the “Greece of the Caribbean” can be apportioned just as much at home as abroad.

Puerto Rico is no stranger to debt defaults. Only last August, the Government Development Bank reneged on $58 million of bond repayments, citing concerns about the Commonwealth’s liquidity. But this latest turn of events is many orders of magnitude greater, reflecting a growing crisis in domestic fiscal administration. Concerns have even been raised that the territory is entering an irrecoverable “death spiral”, as an increasingly large proportion of revenue goes towards debt servicing over economic stimulation.

The latest default forms part of a continuum of indignities suffered by Puerto Rico in recent years. The island has experienced almost consistently negative GDP growth since 2006, culminating in the simultaneous “junking” of the territory’s credit rating by all 3 major ratings agencies in 2014.

The whys and wherefores of this litany of misfortune can be traced back over a decade. In 2006, IRS Code 936 – a tax code giving mainland US companies a federal tax exemption on income earned through subsidiaries based in Puerto Rico – was repealed after a 10-year phase-out. Although a seemingly minor administrative change in the context of wider US tax policy, the local effect was crippling – removing incentives for businesses nationwide to operate on the island, it hit manufacturing particularly hard.

Moreover, this local setback coincided with the global economic crash of 2007-2009, with Puerto Rico acutely affected given its exposure to the USA, the territory’s largest investor, trade partner and source of tourist revenue.

The local economy has struggled to recover from this double whammy, in large part due to an array of structural problems.

Foremost among these is labour force participation rates. Although the formal unemployment rate has now climbed to 11.4%, a 2015 GDB report found that only 40% of the adult population is in or seeking formalized work, with the rest either idle or employed in the informal economy.

The reason for this is twofold. Firstly, the cost of formalized employment is prohibitively high for Puerto Rican employers – particularly in the low-skilled, seasonal tourism industry that provides 7.3% of GDP – a by-product of the federally-mandated minimum wage. On the mainland, this runs at 28% of per capita income but on the island this jumps to 77%. Hiring off-the-books – and beyond the reach of the taxman – makes financial sense for most employers.

Secondly, Puerto Rico runs a generous welfare system; an estimate cited in the report shows that a household of three eligible for food stamps, Aid to Families with Dependent Children, Medicaid and utilities subsidies could receive $1,743 per month – as compared to a minimum wage earner’s take-home earnings of $1,159. Work, formal or informal, does not pay.

And this is to say nothing of the toll that a decade of economic stagnation has imposed on the Commonwealth’s human resource. The population has dropped by an average of 1% per annum, with the principal demographic being people of working age. While the desire to seek fortunes elsewhere is eminently understandable, the loss of the most economically activity in society further undermines efforts to alleviate the slump.

The response of the government in San Juan has been a triumph of hope over reality. The same GDB report draws particular attention to “extremely optimistic revenue projections”, consistently overestimating collections at 15% more than the figure actually received, whilst tax revenues have slid by 3% as a percentage of GNP since 2006.

Against this backdrop, public sector debts have cantered over the horizon, rising to 100% of GNP by the end of 2015. Whilst the government has, over the years, introduced a series of ad hoc measures in an attempt to stave off the looming crisis – a sales tax hike in 2006, public sector staff cuts in 2009 and pension reform in 2013 – but there has been no grand strategy to tackle it once and for all. A short-termist politics has emerged that mandates plugging holes by raiding public pension schemes rather than face the fiscal music.

For the most part, this is down to a lack of proper oversight at local or federal level. Given the situation, it is perhaps ironically appropriate that the Office of Management and Budget, which has been diligently lowering revenue forecasts and assigning lower spending targets for several years, has limited authority to actually manage budgets.

But now that the chickens are home and well-and-truly roosted, signs of change are emerging. In September, the appropriately-named Working Group for the Fiscal and Economic Recovery of Puerto Rico put together a comprehensive plan for growth, putting forward a raft of practical solutions to the principal problems: greater fiscal responsibility, proposed exemptions to the federal minimum wage and plans to make doing business easier.

However, whether these changes are now implemented domestically or imposed by a Washington-based committee under the terms of PROMESA remains to be seen. The deal allows plenty of room for Puerto Rico to restructure its debt, avoid economic implosion and move forward; however this is likely to come at the cost of some drastic public sector belt-tightening.

Moreover, the incursion of Washington into Puerto Rican affairs will, in all probability, bring up another vexed question: that of the island’s relationship with its mainland neighbour.

Since its capture during the Spanish-American War of 1898, Puerto Rico has held the status of “unincorporated territory”, a quasi-statehood that grants unspecified “fundamental rights” without guaranteeing full membership of the union or “constitutional rights” for its citizens, including a vote in presidential elections.

This arrangement has held for 118 years but recent times have seen a change. In a 2012 referendum, 54% of Puerto Ricans voiced their dissatisfaction with the existing political settlement, with 61% favouring full statehood and accession as the USA’s 51st state. By contrast, a modest 5% rowed in the other direction, casting a vote for independence, a position backed by the Puerto Rico Independence Party (PIP). Meanwhile, the generation of puertoriqueño politicians currently in power favours a middle ground; an “Enhanced Commonwealth” featuring voting rights and entitlement to financial support whilst remaining exempt from federal laws, a “rights without responsibilities” position that is never likely to gain traction in Washington.

The problem seems intractable but if anything was going to break the deadlock it is this present crisis. Whether Puerto Rico finds itself drawn inexorably closer to the USA or straining at the leash for a separation, the Commonwealth is in for an arduous political and economic adventure.

 

Posted in Money, Politics, Puerto Rico | Leave a comment

A Farewell to Arms: Peace in Colombia

Posted on June 24, 2016 by LatAmLowdown

Last month, we reported in detail on the long and arduous peace process currently being navigated by Colombia, as the country seeks to end 52 years of civil war between the government and leftist FARC guerrillas. Deadlines had been missed and proposals had been torn up, but this week saw the culmination of the gradual rapprochement that had taken place in recent months: the announcement of a formal bilateral ceasefire and the disarmament of the rebel group, signed off in Havana with smiles and handshakes between President Juan Manuel Santos and FARC leader Rodrigo “Timochenko” Londoño.

The deal will now go to a nationwide referendum, potentially within the next 2 months. But with many Colombians clamouring for an end to hostilities, the outcome of the vote ought to be a foregone conclusion.

In the short term, the roadmap for peace is clear. 23 demobilization zones will be set up in FARC strongholds across Colombia, with the incremental surrendering of arms and ammunition taking place under Colombian Army supervision over the next 180 days.

Yet what becomes of the FARC fighters themselves is less obvious. Though their numbers had dwindled to 7000 in recent years – from a peak of almost 20,000 a decade ago – they remain a polemical group. The government is believed to be considering a variety of options to reintegrate the guerrillas into wider Colombian society – including public and private financial subsidies for social welfare projects – while Barack Obama recently pledged $450 million in aid to rebuild the areas of the country hardest-hit by decades of violence.

The risk is, of course, that these significant resources will not reach their intended recipients and now-unoccupied FARC fighters will find employment in the narcotics trade that continues to flourish across the country.

Doubts can also be raised with regard to what happens to the political ideals of the Revolutionary Armed Forces of Colombia. The group holds its founding Marxist-Leninist principals close to its heart and is unlikely to give up the social fight entirely. With elections due in 2018, the FARC – or a reincarnation of its political arm, the Patriotic Union (UP) – is expected to field candidates at local and congressional level.

But the shift from rainforest guerillismo to the political jungle is a challenging one, and many Colombians will remember only too well the last time such a metamorphosis was attempted; during the Uribe ceasefire of 1984-1987, which resulted in the bloody slaughter of UP candidates at the hands of its political enemies. Ex-Farquistas will enter the political arena cautiously, and with good reason.

Lastly, it ought to be remembered that prospects for peace in Colombia do not begin and end with the FARC. The group is but one of a patchwork of revolutionary groups operating in the nation’s hinterlands who must be swept up in a peaceful resolution to the violence. For months, the government has planned to hold talks with the National Liberation Army (ELN), another Communist guerrilla movement and, with 2500 members, the largest after the FARC. But negotiations have been consistently stalled by the group’s reluctance to abandon its habit of kidnapping journalist and ambushing army patrols.

In short, the Havana deal is a significant – even momentous – step to securing a lasting peace in Colombia. However, this budding accord can only hold if targets are met, words are kept and complacency is kept at bay.

Posted in Colombia, FARC, Politics | Leave a comment

The Curious Incident of the Former Public Works Minister in the Night-Time

Posted on June 22, 2016 by LatAmLowdown

When concerned neighbours in the Buenos Aires suburb of General Rodríguez spotted a shadowy figure throwing bags – followed by himself – over the wall of the Convent of Our Lady of Fátima at 4am on a Tuesday morning, they dutifully called the police. Little can they or the responding officers have imagined that their nocturnal bag-chucker was José Francisco López, Public Works Minister in the previous Kirchner government; even less that the bags in question would contain $8.9million in cash, a showcase-worth of luxury watches and an AR-15 semiautomatic rifle.

When asked what had brought him to this unusual juncture, Mr López replied that he had stolen the money to “make a donation”. Presumably, this Argentine Robin Hood thought it would be immodest to deposit such a large sum on the nuns’ collection plate after a service…

In a series of preliminary hearings over the last week, Mr López has been represented in court by Fernanda Herrera, a singer and glamour model turned “hot lawyer”.  And, whilst not wishing to cast aspersions about her no-doubt considerable talents as an advocate, it is fair to say that she has a hell of a job on her hands – in his first appearance before a judge, her client shouted repeatedly, beat himself around the head and demanded cocaine.

Some might consider this a bad start to the case for the defence, and things haven’t improved since. In an interview with news network TN yesterday, Ms Herrera stated that Mr López “is not innocent” and that he has confessed how he obtained the money, though she declined to provide details.

The question of how a minor member of the Kirchner government came by so much money has been the source of much speculation since the events of last Tuesday. However, many in Argentina have joined the dots – a former planning minister, a large quantity of concealed cash and a thin cover story – and eyebrows would be raised if this latest turn of events did not relate, at least in part, to the largest scandal in recent Argentinian history – the so-called “Route of the “K” Money”.

In 2012, journalist Jorge Lanata launched Periodismo para todos, a series of television programmes investigating corruption in Argentina. Since then, the show has gained a cult following, in large part due to the magnitude of its scoops.

The centrepiece of the 2013 edition of the show was allegations of a corruption triangle at the heart of government – former president Néstor Kirchner – the “K” –, his wife and successor in the Casa Rosada Cristina and Lázaro Báez, a construction entrepreneur and close Kirchner confidant. Mr Lanata and his team claimed – with evidence obtained from former Kirchnerista financiers Federico Elaskar and Leonardo Fariña – that embezzlement of public funds on an industrial scale had taken place, with Mr Báez’s building firm, Austral Construcciones, channelling money earmarked for public infrastructure investment into private offshore bank accounts belonging to all three, supposedly to the tune of €55 million.

The TV investigation has spawned a panoply of official police and tax authority inquiries, many of which are still ongoing.  Mr Báez – himself an alleged associate of Mr. López – is in the middle of a trial that threatens to suck in several members of the previous government, including the former president herself.

For her part, Ms. Fernández de Kirchner has sought to distance herself from the allegations, the leftist former premiere declaring, in typical style, that corruption is a private sector phenomenon and that she therefore cannot be blamed.

But how long she can keep her hands officially clean remains a moot point. Recent information that suggests Alicia Kirchner, sister-in-law to the former president and Social Development minister in her cabinet, was a regular at the convent that played host to Mr López’s night-time activities brings the latest turn in the “K Money” case uncomfortably close to her door.

And this is but one thread in a tapestry of corruption accusations. Since stepping down from the presidency in December, Ms. Fernández de Kirchner has found herself besieged by allegations of impropriety; indicted by a judge last month on charges that she manipulated the Argentine Central Bank during her final months in office, “CFK” now faces allegations that her 2007 presidential run was partially financed by a pharmaceutical company with links to a narcotics dealer and suspect in a triple murder.

Revelations regarding the shenanigans of the previous government provide a welcome respite for incumbent president Mauricio Macri. In recent weeks, he had come under fire for his use of offshore funds and had been forced into promising to repatriate $1.3 million he had squirrelled away in the Bahamas, pending a federal prosecutor-led inquiry into his tax affairs. Now, with the spotlight of the press and the judiciary focussed on his predecessors in government, he can turn his attention back to matters of state and an ambitious reform programme.

Posted in Argentina, Corruption, Politics | Leave a comment

Riots, Scandals and Algal Blooms: A difficult 2016 so far for Chile.

Posted on June 12, 2016 by LatAmLowdown

For a country that, since its return to democracy in 1990, has been comparatively used to stability, the first half of 2016 has been a rocky one for Chile.  An upsurge of popular discontent with the pace of promised reforms and a prominent establishment corruption scandal – topped off with a liberal dollop of natural disaster – have taken their toll on national optimism and hopes of an economic uplift.  This week, the Chilean Central Bank gazed gloomily into its crystal ball and reported that growth may not be as strong as predicted, with unemployment set to surpass 7% by the end of the year.

This time last year, when faced with a similar raft of crises – a sluggish economy hindered by falling commodity prices and allegations of influence peddling among her inner circle – incumbent president Michelle Bachelet took radical action, axing senior ministers and reshuffling the cabinet in an effort to inject life and credibility into her government. But just over 12 months on, she cannot play that card again without looking capricious.

Few events so far this year in Chile are more symptomatic of the nation’s malaise than the student riots that have spilled out onto the streets of major cities including Santiago and Valparaíso.  As part of her presidential campaign in 2013, Ms. Bachelet stood on a ticket of wide-ranging social reform, a key pillar of which was a promise to break up the private sector stranglehold on education and make university tuition free of charge. Young voters were duly wooed in their thousands, but now find themselves frustrated as slowing economic activity and declining tax takes have left the government’s hands tied on offering educational subsidies.

To compound the problem, the attention of Ms. Bachelet’s administration has been diverted from its reformist agenda by the need to manage a series of crises. Foremost among these is the “Red Tide”, a bloom of toxic algae that has devastated Chile’s lucrative fish-farming industry, knocking out 15% of the nation’s aquaculture. A sharp rise in sea temperatures after a particularly strong El Niño – combined with a lax approach to regulating the intensive farming methods employed by the sector – is the most likely the root cause, but the upshot is an $800 million hole from lost production and 17 days of strikes from disgruntled fishermen unable to earn a living. Farming is only just getting back underway after months of hiatus, but the economic damage is already done and precious government time and resources have been spent combatting the crisis.

But the mounds of seafood festering along 2000km Chile’s southern coast are not the only thing that smells fishy. Closer to home for the President are allegations that, during her 2013 presidential campaign, her son, Sebastián Dávalos, used his political influence to secure a $10 million loan from Banco de Chile for his wife’s land speculation company, Caval Ltd. An investigation and trial into the “Caval Scandal” are (still) ongoing, but the episode taps into a broad resentment in Chile towards members of the country’s elite and reinforces the widely-held belief that they benefit unduly from their position.

Potentially even more damaging is the latest by-product of the scandal – the legal suit brought by Ms. Bachelet against the magazine Qué Pasa. Back in early 2015, the Santiago-based weekly broke the Caval story and more recently, its journalists have uncovered phone transcripts that allegedly show Ms. Bachelet directly benefited from the wheeze. The President contests the accusations and is now suing for damages, with the magazine hitting back with the inevitable argument that printing the story was very much in the interests of the Chilean public and the pursuit of free speech in general.

Irrespective of the rights and wrongs of the case – and the ultimate legal outcome – the overall result is at best likely to be a Pyrrhic win for Bachelet. During her two presidencies, a large chunk of her popularity has stemmed from her “common touch” and ability to harness the popular press: Engaging in lengthy legal wrangles with a widely-read magazine like Qué Pasa is unlikely to strengthen those vital media relationships, particularly when 74% of Chileans aren’t fully on-board with her side of the story.

Securing public approval is, of course, not top of Ms. Bachelet’s to-do list. The fact that she is constitutionally barred from seeking another term in elections next year releases her from the politician’s obligation to constantly court voters. It matters not a jot that barely a fifth of the electorate now endorse her mandate. What now matters most in the final year of her premiership is the concern of all outgoing presidents: securing the legacy. Chileans will be hoping that she can pull rabbits out of fiscal hats and deliver that reformist manifesto they were promised.

Or, failing that, that at least the national team can raise spirits by delivering the goods on the football pitch and defending their Copa América title.

 

Posted in Chile, Politics | Leave a comment

The Weight of Political Baggage: Elections in Peru

Posted on June 3, 2016 by LatAmLowdown

Yesterday marked the final day of campaigning ahead of Sunday’s presidential second round run-off in Peru. The contest pits the Popular Force (FP) candidate Keiko Fujimori – daughter of disgraced former president Alberto Fujimori – against Pedro Pablo Kuczynski and his Peruvians for Change (PPK) party.

At face value, the result should be a foregone conclusion. In the first round of elections in April, Ms. Fujimori gained a healthy 39.9% percent of the popular vote in contrast her rival’s 21%. For even the most determined of underdogs, this looks like an unbridgeable gap. Yet recent weeks of campaigning have seen a shift – a wave of protests against Fujimori’s potential election seem to be translating into momentum at the ballot box, with the FP lead whittled down to a more rocky 5%.

The reasons for this swing are a little more complex than mere day-to-day politics. The late surge against Ms. Fujimori is a reaction not so much to her as a politician but as a political brand – her status as her father’s daughter and the figurehead of Fujimorista politics in Peru.

Fujimorismo comes with more than a little baggage. Named for Alberto Fujimori – the president who ruled Peru as an “elected autocrat” from 1990 to 2000 – the movement encompasses a body of policies ranging from staunch – usually violent – anti-communism and pro-free market principles to a tendency for top-down decision-making and a penchant for cronyism. Mr Fujimori himself is currently serving a 25 year prison sentence for embezzlement and organization of the notorious Grupo Colina paramilitaries.

For better or for worse, Peruvians at large still associate competent but hard-line governance with the Fujimori name. For her part, Keiko has sought to distance herself from her father and mark herself out as her own politician. Yet she would be unwise to sever all links entirely: Many in Peru attribute the defeat of Maoist Sendero Luminoso guerrillas and the stabilisation of the country to the tough stance of successive FP governments; many more acknowledge that the pro-business policies of her father laid the foundations for economic success, producing consistent growth in a region that has struggled of late.

But as with any political dynasty, old habits die hard. In Peru, the cronyism of the father is mirrored in the alleged corruption of the daughter’s FP team. Only as recently as two weeks ago, FP Secretary General Joaquín Ramírez Gamarra stepped down amid allegations that he laundered funds for the Fujimori presidential bid. Investigations are ongoing.

In light of the above, it should come as no surprise to anyone that Fujimorismo is a contentious topic in Peru, a continuation of the age-old debate on the fine line between pragmatism and authoritarianism. The upshot is that Mr Kuczynski can rely on a substantial block of votes simply by not being a Fujimori; whether that will be enough to put him in power is a different matter.

Addendum: As an aside, another interesting aspect of this election is the lack of a challenge from the political left. For his campaign in 2011, incumbent president Ollanta Humala brought together the Peruvian Nationalist Party (PNP), a conglomeration of disparate parties on the left of national politics. In 2016, voters are choosing between the Popular Force – a party historically unsympathetic to left-wing causes that took a limp-wristed approach to social policy during its previous spell in government – and Mr Kuczynski, a former investment bank, World Bank and mining executive now leading a mixed bag of religious conservatives and economic liberals. Peru’s elections are another sign that the Pink Tide is ebbing.

Posted in Elections, Peru, Politics | Leave a comment

Rebels without a cause: the FARC’s demise & Colombia’s slow-moving peace process

Posted on May 25, 2016 by LatAmLowdown

In the Cuban capital, Havana, we are witnessing the death throes of a conflict that has spanned over half a century.

It is symbolically appropriate that the Castro regime, a government that so often nourished and supported the Marxist insurrection in Colombia, play host to these talks. Violence associated with fighting between militant groups like the Fuerzas Armadas Revolucionarias de Colombia (FARC – the largest insurgent group within the country) and the Colombian Government has claimed the lives of around 220,000 people (80% of which are estimated to be civilian casualties), a figure comparable to those killed in the Syrian Civil War.

The FARC’s interest in peace reflects their political, economic and military collapse of recent years. Membership of the group has fallen precipitously over the course of the last decade; numbering around 7,000 in 2014 vs an estimated 17,000 in 2003. This reflects a constellation of factors: an effective military campaign spearheaded by the Colombian army with generous U.S. funding; violent confrontation with competing paramilitary organizations; the political and economic woes of the FARC’s biggest international backer Venezuela (although Hugo Chavez had a complex relationship with the group).

The spasmodic peace process has been 30 years in the making, but despite a setback earlier in the year, it seems a deal has never been closer.

One step forward two steps back

President Manuel Santos’ Government and the rebels had set a (perhaps ambitious) deadline of the 23rd March this year for a peace accord. And as many commentators predicted, the deadline came and went. However, in positive news, the following week saw the country’s second largest revolutionary group, the National Liberation Army (ELN) agree to enter into the multilateral negotiations in Havana to end fighting.

This is a welcome development. The reality of Colombia’s situation is not a Manichean opposition between FARC and Government forces. Frankly, a solely bilateral accord between the FARC and the military would have a limited impact. The country is divided into spheres of regional influence where drug lords, the FARC, the ELN and parmilitary groups compete for position. What is more, the line between ideologue fighting for socialist values and petty criminal is fairly gray. Both the FARC and the ELN have used kidnapping, illegal mining and most notoriously the drug trade to fund their activities. Despite pledges to cease kidnapping operations, the FARC have continued to abduct and ransom, likely underlining the autonomy afforded to regional chiefs and chaotic leadership structure within the group.

Even if the rebels formally agree to peace, it seems unlikely that those heavily invested in crime will turn to the straight and narrow. Moreover, a post-FARC Colombia would leave a power vacuum in its wake, which some analysts believe will result in an escalation of violence, as local barons and paramilitaries fight for influence.

So why did the talks fall through?

It seems it was the nature of the demobilization process that proved a sticking point. The primary issue surrounds the “Concentration Zones” (“Zonas de Concentración”) where guerrilla forces will demobilize. The combatants are expected to register and surrender their weapons (but to whom is another contentious issue – relinquishing arms to the government would be seen as a defeat). There seems to be no consensus surrounding the number of these zones, their geographic positioning or for how long they will exist. Nor is there agreement as to who will police or enforce the demilitarization and guarantee the security of the ex-combatants.

The number and extent of the Concentration Zones is significant, the FARC are reported to be demanding 60 zones spread across the country, the government have countered with suggesting as few as 10. This has obvious implications on allocation of resources for the military, and the FARC’s potential post-insurgency footprint. The revolutionary group has one eye on its future political mobilization, and wants to be able to reach communities over which it has traditionally held sway. Conversely, the government wants to limit the group’s influence, and therefore is pushing for the zones to be kept away from population centers.

This would mean demobilizing on largely rural land, which is likely to encroach on indigenous and Afro-Caribbean territory. Reports have illustrated that the indigenous and Afro-Caribbean groups have been amongst the most impacted by violence and destruction associated with fighting in the country. What is more, despite pleas from community leaders, the government has ignored a request to form an ethnic commission as a part of the Cuba delegation. The areas inhabited by these communities may also be the amongst worst affected in the wake of a peace accord, and the government’s high-handed denial of political participation to groups like CONPA (the Afro-Colombian Peace Council) and ONIC (the National Indigenous Organization of Colombia) is reprehensible.

History repeating itself

The question of the security and protection of the demilitarized FARC fighters is crucial. While a U.N. mission has been mandated to monitor the peace process (lead by the Veteran diplomat Jean Arnault), the organization will not provide a Peace Keeping mission. As such, the force of around 350 unarmed military personnel will be on the ground only to supervise the laying down of arms. The Colombian military will be responsible for safeguarding the revolutionaries, and this has FARC fighters worried.

For the more seasoned veterans amongst the revolutionaries’ ranks, this process will seem chillingly familiar. In 1984 the Colombian government and the FARC agreed to the Uribe Accords, a ceasefire that lasted from 1984-1987, and which set out to integrate the rebels into the Colombian political mainstream. This lead to the formation of the Patriotic Union (U.P. – a coalition of the Communist Party and the FARC), that ran for elections in 1986 with great success. Members of the U.P. and its politicians rapidly became the targets of violence on the part of the military, drug cartels and rival factions, and between 1988-1992 an estimated 4,000-6,000 U.P. members were murdered.

In 2002, the architect of the 1980’s ceasefire Álvaro Uribe won the presidency and aggressively pursued the insurgents. In the same year, the U.P. was outlawed as a political party. Clearly, the authorities and the U.N. will have to persuade the revolutionaries that they take their security concerns seriously if a deal is to be made.

Jobs for the boys

But it won’t just be groups like the FARC that will have to adjust to a new post-conflict norm. Guerrilla activity and violence has been the raison d’être for Colombia’s armed services. Indeed, the prospects of less generous funding and reduced remit and influence have likely been behind the military’s stance regarding the peace process in the past. President Obama’s foreign aid package, put before congress in February, attests to such a transition; now 50-55% of aid is destined for exclusively civilian institutions. The Whitehouse seems to think the fighting, at least, is approaching an endgame.

While some in the military might be concerned about funding cuts others will fear the judicial implications of a peace treaty. Members of the armed forces are to be held to the same ethical standards as guerrillas and will have to answer in like terms for their crimes. It is likely that the immediate aftermath of any peace negotiation will involve a deluge of ugly revelations as military personnel seek to commute their sentences in exchange for a confession of their crimes. Likely budgetary cuts combined with a FARC shaped hole in Colombia’s regional power structure may prove fertile ground for opportunistic paramilitary factions looking to gain influence.

It would be dangerous to assume that a peace treaty would mean an end to violence. An accord offers a platform for reintegration, but Colombia is a long way away from stability. The government must focus on a swift resolution that accommodates the legitimate concerns of the ex-combatants. Retraining and supporting a band of nomadic guerrilla fighters is no mean feat, it will be costly.

If Colombia is to develop economically the nation needs investment, and ratings agencies have already threatened a downgrade if uncertainty persists around the peace talks, making borrowing and direct investment more expensive. What is more, the authorities must confront the corruption endemic amongst its institutions. In a recent and promising development, more than 1,400 officers have been purged from Colombia’s police force in a crackdown on graft. Finally, the government must do more to incorporate indigenous and Afro-Colombian perspectives into any post-insurrection discourse. The peace process is not so much a reconciliation of two sides as it is a first step towards reconstructing a fragmented and divided nation.

Posted in Colombia, FARC, Politics | Leave a comment

Venezuela: a failing state and a dying breed

Posted on May 23, 2016 by LatAmLowdown

When the stability of a government is directly proportional to the loyalty of the military, it is reasonable to assume that something has gone wrong.  This is the situation in which crisis-gripped Venezuela finds itself, with the Bolivarian Armed Forces now deployed on the streets for over a week and this weekend witnessing the largest war-games in the nation’s history

Orders for these unprecedented manoeuvres issue from the office of Nicolás Maduro, the beleaguered president who has recently taken on a raft of fresh economic, political and military powers under his own State of Emergency Decree.

Like any sensible leftist demagogue in a fix, Mr Maduro has justified the deployment on the grounds of national security, playing up fears of a US-backed coup. Yet with troops concentrated around the presidential palace in Caracas rather than key strategic positions across the country, it does not take a leap of imagination to suggest that these measures are more about shoring up the regime and suppressing internal dissent than warding off the imperialistic machinations of foreign powers.

Presumably aware that his actions have more than a whiff of authoritarianism about them, Mr Maduro has moved to allay fears, publically stating: “I am not a dictator; I have to protect Venezuelan children.” If that doesn’t convince his detractors, this author does not know what will.

How the Venezuelan military will react to these events remains to be seen. Since the 2002 coup attempt that saw rival factions of the army depose and reinstate former leader Hugo Chávez in a little under 48 hours, the Bolivarian Armed Forces have enjoyed a close relationship with the Bolivarian Socialist government.

Post-2002, Mr Chávez and his successor Mr Maduro have taken pains to keep the military top brass sweet, rewarding them for their loyalty with a third of cabinet positions and a stake in the nation’s heretofore lucrative oil industry. Taken in tandem with the fact that President Maduro – astonishingly – retains the support of a third of the population, it seems unlikely that the military will challenge the government in the immediate future, albeit not for reasons of Bolivarian ideological purity.

More integral to the survival of Mr Maduro and his government is the 160,000-strong Venezuelan National Militia. Under the direct control of the president, the militia is styled as a guarantor of internal peace and stability; a more fitting description might be “political army”, widely held responsible for the suppression of dissidents and intimidation of journalists. Either way, as an organization, it is a useful asset for an unscrupulous leader facing a crisis.

Based on the events of the last week, it is easy to lose sight of the fact that a democratic process staggers on in Venezuela.

At present, the National Electoral Council (CNE) continues to rule on an opposition Democratic Unity Roundtable (MUD) petition calling for Mr Maduro’s electoral recall. The appeal has already attracted 1.8 million signatures, although the government contests its validity, suggesting that 190,000 of the petitioners are, in fact, deceased. A decision from the CNE is expected in the coming weeks but the longer the gears of electoral process whir, the more tensions on the street are likely to be exacerbated.

Yet on prior experience, there is little evidence that the ruling party will give ground. Even if the CNE should recall Mr Maduro and a subsequent referendum sees him ousted from power, his United Socialist Party of Venezuela (PSUV) is under no obligation to hold elections. If Vice-President Aristóbulo Istúriz is called upon to step into the president’s shoes, he would have a mandate until Venezuela next goes to the polls in 2019, barring catastrophic internal upheaval.

Should this be the case, former primary school teacher and Education Minister Mr Istúriz would face a mountainous challenge – his nation’s predicament now runs far deeper than mere economic malaise. The food riots that have gripped the country have now snowballed to such an extent that a trip to the supermarket involves a body-count, while violent crime soars beyond even pre-crisis peaks. Rolling power cuts have forced the public sector down to an energy-saving 2 day week, a measure soon to be imposed on what private enterprise clings on – Coca Cola has ceased local production as the government seizes privately-held factories to keep them operational.

Monetary policy has transcended satire, with the Venezuelan Central Bank ending up in a bizarre situation in which it lacks the money to pay to print more money yet refuses to cut costs by printing large denomination notes as that would be an acknowledgement of the runaway inflation plaguing the country.

But leaving aside the tragedy of missed potential in oil-rich Venezuela’s descent into madness, the country’s contortions may have serious regional implications.

In direct terms, it is difficult to be certain of the impact the steady collapse of Bolivarian Socialism in Venezuela will have over the border in Colombia. Negotiations between the Santos government and socialist FARC guerrillas to end half a century of violence are ongoing. But with the decline of one of the FARC’s greatest supporters in Caracas, it seems possible that the Colombian state may seek a more punitive settlement, reopening old wounds in the process.

A similar sentiment holds true across the region. Since the before even the fall of the Rousseff government in Brazil this month, the Maduro government has seen itself as a last bastion of the Pink Tide, the series of left-leaning governments elected in Latin America from the end of the 90s. Now, emboldened by the all-too-public breakdown in left-wing governments across the region, a new wave of politicians on the right are stepping up – viz. Argentina and Brazil – seeking not only to overturn a political order, but casting rapacious glances at the large social spending budgets that have been a mainstay of equitable economic progress in recent years. By and large, their gain would be the everyman’s loss.

This is not to lament the demise of Bolivarian Socialism, whose excesses have wrought such havoc in Venezuela and done so much to discredit the progressive cause in Latin America; it is merely to caution against dancing too enthusiastically on its grave. Just as a political pendulum swing brought Hugo Chávez to power in 1999 and Venezuela to the brink of disaster 17 years later, so a total reversal of political fortunes is unlikely to be in the best interests of very many Latin American citizens.

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Adeus Dilma: Brazil has a new acting-president.

Posted on May 13, 2016 by LatAmLowdown

Following months of political hokey-cokey in Brazil, a decision may have finally been reached. After weeks that saw a congressional vote to impeach President Dilma Rousseff annulled by the interim speaker – before being rapidly reinstated – Wednesday’s marathon session in the senate resulted in a 55/22 vote to suspend the president for 6 months, pending a further senate trial.

Former PMBD coalition partner and vice-president Michel Temer has wasted little time in stepping up to the presidential plate in an interim capacity, armed with a well-practiced first address to the nation.

But with another semi-judicial process to go through, potential criminal proceedings against Ms. Rousseff and a wider Lava Jato corruption investigation that refuses to go away, this latest turn of events looks more like the end of the beginning than the beginning of the end.

Naturally enough, the result of the vote set off squawks of a coup from Ms. Rousseff’s domestic and international backers:  Venezuelan president Nicolás Maduro took time off from his busy schedule ignoring the chaos in his own country to blame the impeachment on a US-backed plot.

However, the magnitude of the majority in the senate vote against Ms. Rousseff suggests that this outcome is not the imposition of political minority, a point backed up by the regular popular demonstrations against the Rousseff administration that have clogged the arteries of Brazilian cities for the last 18 months.

More significantly, it is telling that Ms. Rousseff and the top brass at her Worker’s Party (PT) do not actually contest the charges that have led to her potential impeachment.

The allegations relate to creative government accounting – known locally as pedaladas – in the run up to the 2014 presidential election. The Rousseff administration stands accused of taking unauthorised loans from – among others – state banks Caixa Econômica and Banco do Brasil to balance the books and pump money into popular social programmes ahead of a hard-fought campaign that saw the PT run out winners by a slim 3% margin. If true, these actions would represent a direct contravention of Brazil’s fiscal responsibility laws and concrete grounds for impeachment.

Rather than fight the charges directly, the PT points to the fact that similar behaviour is not uncommon among Brazilian presidents. This defence does reflect reality, particularly under the previous Lula and Cardoso governments, but the question is one of scale: neither Lula nor Cardoso took loans in excess of R$1bn from state institutions – a rounding error for an economy the size of Brazil – and all were repaid promptly. By contrast, the use of pedaladas increased to R$52.2bn with Ms. Rousseff’s return for a second presidential term at the end of 2014, and proliferated into the following fiscal year through a series of “special decrees”.

But as any good South American politician will tell you, Dilma’s cardinal error has not been in her government’s financial irregularities but in her inability to maintain a semblance of popularity.

Handed the unenviable task of keeping the PT seat in the Planalto Palace warm for the widely-favoured former president Lula ahead of his expected presidential campaign in 2018, Ms. Rousseff’s approval ratings have rarely climbed above 10% in the last year.

Moreover, she has found herself in the middle of a perfect storm: a serious economic malaise – a 3.5% shrinkage in Brazil’s GDP in 2015 and rocketing unemployment – and a series of corruption scandals that have rocked the Brazilian establishment, plus the breakdown of the PT-PMDB governing coalition in March, not to mention a series of negative headlines regarding August’s Olympic Games in Rio de Janeiro, 2002 World Cup hero Rivaldo warning tourist to stay away and ongoing concerns over the Zika virus.

In a presidential system, the figurehead rapidly becomes the lightning rod for the problems of the nation. For months now, Dilma has been playing golf in a thunderstorm, beset by domestic woes and increasingly surrounded by political adversaries sharpening their knives.

Ms. Rousseff’s supporters will accuse her opponents of political opportunism, pointing out that the impeachment process would never have happened were it not for a broader set of circumstances.  In this they would be quite correct. But it must be remembered that the impeachment is fundamentally a political process, with only a rough grounding in judicial systems. Legally, Dilma has done enough to technically be impeached; politics, circumstance and a dearth of popular support have done the rest.

So step forward Michel Temer, law professor and President of the Brazilian Democratic Movement Party (PMDB).

Brazil’s new acting president took to the podium on Thursday promising a “government of national salvation”, a bold proposition but one that saw the BOVESPA Index gain slightly in response to the business-friendly leader’s words. However, if observers of Brazil have learnt anything from the last year, it is that gains are illusory and steady courses of action are remarkably impermanent.

In his first speech, Mr. Temer outlined the two main issues faced by his nascent administration: Firstly, the task of steering the Brazilian economy back on track and balancing the government accounts, whilst reaffirming his commitment to the previous government’s social spending, presumably in an effort to stifle some of the more worrying noises emanating from his new cabinet.

Secondly, the new premier highlighted the importance of restoring popular faith in Brazil’s ruling class in the wake of several all-encompassing corruption scandals. Many in congress – some 60%, according to monitoring agency Transparência Brasil – would have been hoping that the almost-certain toppling of President Rousseff would lift the pall of investigation from over their own heads. Not so, claimed Mr Temer, who avowed his backing for Operação Lava Jato, despite the fact that he has been linked with the ongoing corruption case on more than one occasion. It was an act of astonishing probity or chutzpah, depending on your political persuasion.

And so Michel Temer begins his first 100 days as President-by-Default. Theoretically, Ms. Rousseff could yet survive an impeachment trial, but the weight of public, congressional and senatorial opposition make this a vanishingly unlikely prospect. Yet despite his own lack of both popularity and democratic mandate, Mr Temer can get to work safe in the knowledge that, for Brazil in 2016, to lose one president may be regarded as misfortune; to lose two looks like anarchy.

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