Latin America News Round-up
October 27, 2011
Argentina, Uruguay Take Aim at Dirty War Figures

For the latest news and developments on Haiti, please see CEPR's blog, "Haiti: Relief and Reconstruction Watch."

For archives of past Round-ups, please click here.

Brazil and Southern Cone
Brazil creates truth commission to probe rights abuses. BBC
Volkswagen to build $2 bln Brazil factory-report. Reuters
Brazil Says Global Slowdown Allows for Moderate Rate Cuts. Bloomberg
Sao Paulo New-Home Prices Jump as Brazil Housing Demand Climbs. Bloomberg
Scandal brings down Brazil sports minister. Al Jazeera
Argentina's 'Angel of Death' jailed for crimes against humanity. The Guardian
Uruguay overturns war crime amnesty law. AFP

Northern Andean Region
Venezuela scrambles to bring home gold reserves. Reuters
Colombia, Venezuela summit 'successful': Chavez. Colombia Reports
Thousands protest education reform in Colombia. AFP
Drummond sues lawyer over Colombian claims. AP
Colombian indigenous communities caught in crossfire. BBC

Western Andean Region
Ecuador Economic Policy Minister King Announces Resignation. Bloomberg
Ecuador Ruling Party ‘Certain’ Tax Law Will Pass, Lawmaker Says. Bloomberg
Peru's Fin Min Sets Up Group To Study Private Pension Funds. Dow Jones

Mexico, Central America and Caribbean
Mexican presidential hopeful vows drugs war shift. Reuters
NAFTA Is Starving Mexico. FPIF
Cops implicated in students' murder, Honduran gov't says. EFE
El Salvador Coffee Output to Drop After Rain, Procafe Says. Bloomberg
A Mining Ban in El Salvador? NACLA

Region: Trade, Security, Economy and Integration
New investments totaling $16 bn announced at Petrocaribe summit. EFE
World Bank forecasts Latam growth of 3.5% to 4% this year and 4% in 2012. Mercopress
Renewables Hit a Wall in South America. New York Times


Brazil and Southern Cone [contents]

Brazil creates truth commission to probe rights abuses
BBC. October 27, 2011

Brazil's Senate has voted to set up a truth commission to investigate rights abuses, including those committed during military rule from 1964 to 1985.

The bill, already passed by the Chamber of Deputies, now goes to President Dilma Rousseff to be signed into law.

Ms Rousseff, a former left-wing activist jailed by the military, had urged Congress to pass the legislation.

The commission will examine abuses from 1946 to 1988, but a miitary-era amnesty means there will be no trials.

The amnesty law, passed in 1979 and upheld last year by the Supreme Court, means neither military officials accused of torture nor left-wing guerrillas accused of violence can face prosecution.

Nearly 500 people were killed or disappeared during military rule in Brazil, a far smaller number than in neighbouring Argentina and Chile.

But thousands of Brazilians were tortured, exiled or deprived of their political rights.

Supporters of the truth commission argue that it will help Brazil to come to terms with its recent past.

"We have a wound that will never heal, no matter what the commission finds. We want to find answers to the questions that remain and which cannot continue in a democracy," said Senator Aloysio Nunes.

But for some, the commission does not go far enough.

"It's a timid commission, much less than those set up in Uruguay and Argentina," Senator Randolfe Rodrigues was quoted as saying by Brazil's Folha newspaper.

It will be composed of seven people who will have two years to examine reported abuses and draw up a report.

The commission was proposed under the previous president, Luiz Inacio Lula da Silva.

At the time, military chiefs were reported to be deeply unhappy at the proposal, fearing it would be an attempt to circumvent the amnesty law.
_______________________________

Volkswagen to build $2 bln Brazil factory-report
Reuters. October 26, 2011

SAO PAULO, Oct 26 (Reuters) - Volkswagen (VOWG_p.DE), Europe's largest carmaker, is negotiating with Brazilian authorities the construction of a $2 billion factory in the nation's northeastern corner, Valor Economico newspaper said on Wednesday, citing people with knowledge of the situation.

Wolfsburg, Germany-based Volkswagen and Brazil's state of Pernambuco are finalizing details on the funding for the plan, Valor said. The company seeks 2 billion reais ($1.12 billion) in a 30-year loan from state development banks BNDES to seal the deal, Valor added.

An announcement on the investment is likely on Nov. 8, Valor noted, adding that the new facility could produce as many as 200,000 subcompact vehicles a year. The model that is being considered for the factory is the Up! subcompact, which was introduced at a car fair in Frankfurt this year, Valor said.

The news comes as the government is seeking to stimulate investment in the industry to fend off a surge in car imports. [ID:nE5E7JC06X]

The government last month hiked a tax on imported cars by 30 percent, aiming to encourage local sourcing of components and protect the domestic auto-industry from a deluge of cheap imports.

Calls made to the Sao Paulo-based Brazil media office of Volkswagen were not immediately answered.
_______________________________

Brazil Says Global Slowdown Allows for Moderate Rate Cuts
Matthew Bristow and Andre Soliani. Bloomberg. October 27, 2011

Oct. 27 (Bloomberg) -- Brazil’s central bank said slowing global growth will have a large enough disinflationary impact on Latin America’s biggest economy to allow policy makers to carry out “moderate” cuts to interest rates.

The bank, in the minutes to its Oct. 18-19 meeting, said it sees “declining risks” of missing its 4.5 percent inflation target next year. The inflation rate fell to 7.12 percent in mid-October, the first decline in 14 months, though it remains above the 6.5 percent upper limit of the government’s target range.

“Even with a moderate adjustment in the basic rate, the inflation rate in the relevant horizon is positioned near the 2012 goal,” the bank said in minutes. The report was published hours after European leaders agreed to expand a bailout fund to stem the region’s debt crisis, easing concern that the global economy is heading for recession.

Policy makers cut the benchmark interest rate a half point for a second straight meeting last week, to 11.5 percent, to protect Brazil from turmoil that has wiped more than $6 trillion from world stock markets since the end of July. The central bank is betting that weaker growth in Europe, the U.S. and China will offset the stimulus provided by lower borrowing costs and curb the fastest inflation in six years.

The yield on the interest rate future contract maturing in January 2013, the most-traded in Sao Paulo today, rose four basis points, or 0.04 percentage point, to 10.37 percent at 8:12 a.m. New York time. The real strengthened 1.4 percent to 1.7350 per U.S. dollar.

Half-Point Cuts

The bank’s repetition of the phrase moderate adjustments, and a central scenario showing inflation converging to the target next year, is a signal that policy makers plan to keep cutting rates in half point increments, said Zeina Latif, a senior economist with RBS Securities Inc. in Sao Paulo.

“We thought they could eventually leave the door open for accelerating the pace, but they did not do that,” Latif said in a telephone interview from Sao Paulo.

Traders are betting on an additional 1.25 percentage point of rate cuts by March, according to Bloomberg estimates based on interest rate futures. Recent data show growth and inflation are slowing faster than expected, bolstering bank President Alexandre Tombini’s case for rate cuts.

Slowing Inflation

Consumer prices rose 7.12 percent in mid-October from a year earlier, down from 7.33 percent in mid-September. The central bank said the inflation outlook had “accumulated favorable signs” since its August meeting.

Economists covering Brazil cut their 2012 inflation forecast for the first time in eight weeks, to 5.6 percent, in the most recent weekly central bank survey. Analysts also dropped their forecast that Brazil will miss its inflation target this year.

The central bank published a “base scenario,” which assumes that the world economic turmoil has an impact on Brazil a quarter as strong as the 2008 crisis, allowing inflation to slow to 4.5 percent next year.

“These minutes show a central bank much more confident in its strategy of cutting rates amid this environment of strong risk aversion,” said Luciano Rostagno, chief strategist at Banco West LB SA, said in a telephone interview from Sao Paulo. Rostagno expects the central bank to cut its benchmark rate to 11 percent at its next meeting, and to 10 percent next year.

In the reference scenario, which assumes a benchmark interest rate of 12 percent, and in the market scenario, which assumes that the central bank cuts its benchmark rate in line with economists’ forecasts, inflation will exceed the 4.5 percent goal next year, the minutes show.

Labor Market

The central bank said that a “tight” labor market would continue to propel demand during the global economic slowdown. Wage increases incompatible with increases in productivity are a “very important risk” for inflation, the minutes said.

Brazil’s jobless rate was unchanged in September at 6 percent, the national statistics agency reported today. Economists had forecast it would fall to 5.8 percent, according to the median estimate of 41 analysts surveyed by Bloomberg.

The economic activity index, a proxy for gross domestic product, contracted 0.53 percent in August from the month before, its biggest monthly drop since the global financial crisis of 2008. August retail sales fell the most since March 2009, while industrial production registered its third decline in five months.

Growth in the world’s seventh-biggest economy will slow to 3.3 percent this year from 7.5 percent in 2010, according to the median forecast in the most recent central bank survey.

After reading the minutes, Solange Srour, chief economist at BNY Mellon ARX Investimentos, said the central bank may cut the interest rates by an additional 150 to 200 basis points, from an earlier forecast of 100 to 150 basis points.

--Editors: Philip Sanders, Richard Jarvie

To contact the reporter on this story: Andre Soliani in Brasilia at asoliani@bloomberg.net; Matthew Bristow in Brasilia at mbristow5@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.
_______________________________

Sao Paulo New-Home Prices Jump as Brazil Housing Demand Climbs
Gabrielle Coppola. Bloomberg. October 26, 2011

Sao Paulo new-home prices climbed 14 percent in the past seven months as surging real estate demand in Brazil showed few signs of ebbing, according to an index released today that measures values by square meter.

Prices also rose by at least 11 percent in Rio de Janeiro, Porto Alegre and Recife from April through this month, Ibope Inteligencia said in a report. The average price per square meter of a new home in Sao Paulo, Brazil’s biggest city, was 6,019 reais ($3,400) in October, the research firm said, without giving specific figures for previous periods.

Rising housing demand is being fueled by record-low unemployment, expanding credit and inflation running above the government’s target rate, said Antonio Carlos Ruotolo, director of the company’s business geography division in Sao Paulo. The government’s homeownership initiative known as Minha Casa Minha Vida, which offers cash incentives for home purchases to Brazil’s lowest-earning families, is also bolstering prices.

“There is still no sign of accommodation in real estate prices,” Ruotolo said today in a press conference at Ibope’s Sao Paulo offices. “Price increases are still significant.”

The average price per square meter for a new home in Sao Paulo is up 85 percent since April 2009, Ibope said.

Sao Paulo prices by square meter for previously owned homes, which are made up primarily of apartments, rose 11 percent since April. The increases imply annualized appreciation of 22 percent to 28 percent, Ibope said.

In Rio de Janeiro, the gauge of new home prices per square meter rose 18 percent in the past seven months, and 79 percent since April 2009. The measure of previously owned home prices increased 19 percent since April of this year.

Some neighborhoods, which Ruotolo declined to name, showed a decrease in both new and existing home prices for the first time since Ibope began collecting the data in 2009.

The declines were “an exception” to the trend but could be the first indicators of a slowdown in housing prices, he said. “‘It all depends on the economy.’’

To contact the reporter on this story: Gabrielle Coppola in New York at gcoppola@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net
_______________________________

Scandal brings down Brazil sports minister
Al Jazeera. October 26, 2011

Brazili's sports minister, Orlando Silva, has resigned after facing accusations of corruption, one day after the launch of a formal enquiry.

Silva is the fifth member of Dilma Rousseff's government to resign amid corruption allegations since she took office in January.
 
Silva, who was in charge of the 2014 World Cup and 2016 Olympics preparations, denies accusations that he helped arrange kickbacks worth million of dollars from schemes through social programmes funded by his ministry.

"I asked to leave the government. I am leaving the government to defend my honour. I leave having fulfilled my duties," Silva said in a brief statement after a meeting with Rousseff.

The presidential spokesperson, Gilberto Carvalho, told the Brazil state news agency that the decision by Brazil's supreme court on Tuesday to open a formal investigation into corruption allegations involving Silva had been a key
factor in the request for his resignation.

Embezzlement claim

The Brazilian news magazine Veja accused Silva of helping to embezzle $23m from a government scheme that promotes sport for children from poor backgrounds.

The money was allegedly used for personal enrichment and to fund the Communist Party, which is part of Rousseff's governing coalition.

Silva called his accusers as "delinquent" and warned against what he called a modern inquisition in which people faced accusations without proof.

Rousseff, who took office at the start of the year, was compelled to launch an anti-corruption drive in July after several prominent members of her government were accused of corruption, including her chief of staff, Antonio Palocci, who was forced to resign in June.

Additionally, Wagner Rossi, the agriculture minister; Alfredo Nascimento, the transport minister; and Pedro Novais, the tourism minister; were forced to step down amid allegations of corruption and embezzlement.

The mounting scandals come as the country prepares for the 2014 World Cup and the 2016 Summer Olympics, in what Brazilians had hoped would offer a showcase for its development as an economic and political power.
_______________________________

Argentina's 'Angel of Death' jailed for crimes against humanity
Uki Goni. The Guardian. October 27, 2011

To his victims, he was the Blond Angel of Death, the man who took them from their homes or kidnapped them off the street and delivered them to a notorious camp to be tortured and murdered for the crime of thinking different. To his fellow navy officers he was the Hero of Malvinas, the intrepid commander of Argentinian forces who landed on the South Georgia islands in 1982 in the first move that sparked the Falklands war.

On Wednesday Alfredo Astiz became "guilty as charged" as he and 11 other former officers were sentenced to life imprisonment in one of Argentina's biggest human rights trials over the crimes committed at the ESMA naval unit, where about 5,000 dissidents were held and tortured.

"This act of justice at last allows the relatives of the victims to fully mourn their dead," said Horacio Mendez, the lawyer whose original attempt to have Astiz sentenced was thwarted in 1987 by amnesty laws passed by Congress as a concession to the military who were threatening to overturn democracy once again.

The two-year trial was the latest in a succession of cases into the "disappearance" of around 30,000 mostly young political opponents of the military regime. The courts have been handing out sentences at a glacial pace so far.

Among other crimes, Astiz and the other defendants were sentenced for the kidnapping and murder of two French nuns, Alice Domon and Leonie Duquet, and a group of mothers 34 years ago during Argentina's last military dictatorship.

The French missionaries aided the mothers of Argentina's desaparecidos by accompanying them to police stations and military barracks looking for news of their children, before being kidnapped themselves by Astiz.

"I am extremely moved by this sentence because after so many years justice has finally been done," said Genevieve Jeanningros, a niece of Duquet, who flew in from France for the sentencing.

Astiz remained defiant till the end, laughing in the face of the judge, Daniel Obligado, and pinning a ribbon with the blue and white colours of the Argentine flag to his coat lapel as Obligado read the sentence against him.

In his closing words to the court a few days earlier, Astiz, who was condemned in absentia in 1990 by a Paris court for the murder of the two nuns, accused the court and the plaintiffs in Buenos Aires of being "accomplices of foreign colonialism" by condemning him for the murder.

Astiz was also condemned for the murder of three of the founding members of the Mothers of Plaza de Mayo, the mothers of the disappeared who started a defiant march every Thursday in front of the presidential palace in downtown Buenos Aires.

"It is a historic day," said Ana María Careaga, the daughter of Esther Careaga, one of the mothers that Astiz befriended and then kidnapped. "But the loss remains irreparable, nobody can give us back the family moments we never enjoyed again."

For Robert Cox, the British former editor of the Buenos Aires Herald, the only newspaper in Argentina that reported on the disappearances when they happened, Wednesday's ruling had been long overdue. "I was always convinced that this day would come, there was no way it could be covered up," said Cox.

But for some, the bitter overruled the sweet. "I don't believe in justice 34 years after the fact, now that the accused are too old and decrepit for it to matter," said Cecilia Devincenti, the daughter of the founder of the Mothers of Plaza de Mayo, Azucena Villaflor. "My father died of sadness three years after my mother was taken, I think it is more a parody than real justice now."
_______________________________

Uruguay overturns war crime amnesty law
AFP. October 27, 2011

Lawmakers in the Chamber of Deputies approved the latest measure after it was passed by the Senate on Tuesday. It will now go to President Jose Mujica, a one-time guerrilla who fought the dictatorship, for final approval.

The latest bill passed after 12 hours of intense debate. Previous efforts to overturn the amnesty law failed earlier this year.

The bill "returns the full exercise of punitive powers to the state for crimes committed in the application of state terrorism," until March 1, 1985, the end of the 12-year period of military rule.

It also refers to such violations as "crimes against humanity under international treaties" and revokes any statute of limitations.

Supporters said the new law would also entail compliance with a ruling by the Inter-American Court of Human Rights, which has ordered Uruguay to investigate alleged crimes committed during the dictatorship era.

Opponents slammed the new measure, however, saying it went against referendums held in 1989 and in 2009 which failed to garner enough votes to overturn the amnesty law.

The amnesty law of 1986 requires judges to consult the executive before trying cases related to alleged crimes committed during the dictatorship.

For almost two decades, successive Uruguay governments rejected such investigation requests, until then-president Tabare Vazquez gave the green light in 2005 for the first trials.

A presidential peace commission established in 2000 found that 38 people were abducted and either executed or tortured to death during the period of military dictatorship.

Uruguay's military often worked with the militaries of neighbouring nations, putting into effect a secret plan called "Operation Condor" to eliminate leftist political opponents.

Several Latin American countries have prosecuted former military officers and even heads of states for crimes committed from the 1960s to the 1980s, when rightwing dictatorships battled leftist opponents across the continent.

On Wednesday Brazil's Senate agreed to set up a Truth Commission to investigate human rights violations during its own 1964 to 1985 military dictatorship.

Northern Andean Region [contents]

Venezuela scrambles to bring home gold reserves
Eyanir Chinea. Reuters. October 26, 2011

CARACAS, Oct 26 (Reuters) - At the foot of a dimly lit spiral staircase far below Venezuela's Central Bank, workers prepare for an unusual arrival: 17,000 gold bars being shipped back on the order of President Hugo Chavez.

Repatriating about 190 tonnes of bullion worth more than $11 billion from banks in the West will be risky, slow and expensive, experts say.

It is just the latest in a string of grand gestures and controversial plans by the unpredictable socialist leader that are easier for him to order than to put into practice, and it has set officials scurrying to make it happen.

His political opponents accuse Chavez of planning to use the country's gold to boost his campaign war chest ahead of next year's presidential election, and others say bringing the gold home is a waste of money and effort.

"It doesn't make sense. It would be cheaper to sell the gold and at the same time buy gold in closer locations," said Russ Dallen of Caracas Capital Markets.

Chavez's government insists the operation will not cost much, and that Venezuela's reserves will not be put at risk.

"People must be calm. Nothing is going to be lost, nobody is going to steal anything. This isn't a Hollywood movie," said the central bank's president, Nelson Merentes.

A senior government source involved in transporting the ingots, which amount to 90 percent of Venezuela's gold held abroad, told Reuters they will be shipped in several cargo flights beginning next month and ending before the New Year.

"The total cost of the operation will not exceed $9 million including transport, guards, insurance and reinsurance," the source said, without giving more details.

That price seems low, but the details of such deals are closely kept secrets for good reasons, and there are few precedents for moving gold on such a huge scale.

In 1936, Spain shipped more than 500 tonnes of gold to Moscow from Madrid at the start of its civil war. Historians say it paid 2.1 percent in commissions and an additional 1.2 percent for transport, storage and other costs.

BIG IDEAS, GRAND PLANS

Chavez announced the move in August as a "sovereign" step that would help protect Venezuela's foreign reserves from economic turbulence in the United States and Europe. Most of Venezuela's gold held abroad is in London.

It was also seen as another populist measure ahead of the election next October, when Chavez will seek another six-year term.

It will likely to be a hard fought and contentious vote, and some critics suggest Chavez is frightened by the chance of Venezuela's foreign reserves being frozen by sanctions -- as happened to his friend and ally, Libya's late Muammar Gaddafi.

By doing this, he also reduces the risk of any seizure of assets related to ongoing arbitration cases, including those linked to the nationalization of multi-billion dollar oil projects run by major U.S. companies.

Chavez's decision to repatriate almost all of Venezuela's international bullion reserves has shone a spotlight on the large proportion of the country's reserves that are held in gold, and the risks it runs if prices were to fall.

More than 60 percent of its international reserves are in gold, nearly eight times the Latin American average of just over 8 percent and twice that of the second highest in the region, Ecuador.

The move has also triggered arguments in the Venezuelan parliament, where opposition politicians accused Chavez of planning to sell off the ingots and spend the cash on his re-election campaign.

Merentes, the central bank chief, told reporters none of the gold would be sold after it was brought home, and that 10 percent of the reserves currently in London would stay there.

It is far from the first example of Chavez surprising the nation with a controversial grand plan.

He once proposed building a gas pipeline all the way from the Caribbean to Argentina, he ordered the exhumation of the bones of independence hero Simon Bolivar to investigate whether he was murdered, and he changed the time zone by 30 minutes to help children who wake up before dawn to go to school.

The gold move will have limited impact in financial markets.

"This issue should be absolutely irrelevant for the markets," said Alejandro Grisanti of Barclays Capital. "They are simply returning it to the custody of the central bank, because the Venezuelan government lacks trust in other institutions, and in the other governments of the world." (Editing by Daniel Wallis and Kieran Murray)
_______________________________

Colombia, Venezuela summit 'successful': Chavez
Tim Hinchliffe. Colombia Reports. October 26, 2011

A meeting between the foreign ministers of Colombia and Venezuela Monday was "successful," Venezuelan President Hugo Chavez said Wednesday.

Talking to press in Caracas, Chavez announced that his and the Colombian government are "setting agendas" for a presidential summit between the Venezuelan head of State and his Colombian counterpart Juan Manuel Santos.
Quoting a line from Santos, Chavez said that the two countries will not allow their improving relations to "derail."

The Venezuelan president stressed that relations between the countries "will continue to improve at all levels," contributing "mightily to the union of South America."

Chavez added that "there will always be those who try to sow discord, those who seek - as they say in Colombia - to put a stick in the wheel, those who seek to derail."

Relationships between the two South American countries were rocky under former Colombian President Alvaro Uribe's tenure when Venezuela on several occasions imposed a "quasi-trade embargo" on Colombia, but improved after Santos took office last year.

Venezuela is Colombia's second largest trading partner after the United States.
_______________________________

Thousands protest education reform in Colombia
AFP. October 27, 2011

BOGOTA: Thousands of students from more than 30 public universities took to the streets in Colombia to protest against proposed education reforms they fear will partially privatize higher education.

The protests in several major cities on Wednesday were mainly peaceful, with demonstrators in the capital Bogota stopping to hug riot police stationed along the route.

"We are asking for the creation of a space for dialogue and consultation on our education, and respect for mobilization," Sergio Fernandez, a spokesman for the protesters, told AFP.

The students have been on strike over the past two weeks to protest a bill put forward by President Juan Manuel Santos that would require public universities to generate some of their own revenues.

The government has defended the bill, saying it would provide another $5.7 billion for higher education over the next 10 years and allow for the admission of another 600,000 students.
_______________________________

Drummond sues lawyer over Colombian claims
JAY REEVES. AP. October 27, 2011

BIRMINGHAM, Ala. (AP) - The Alabama-based Drummond Co. filed a federal defamation lawsuit against a Washington labor lawyer who has campaigned publicly and in court for years trying to link its Colombia coal-mining operations to paramilitary violence in the South American country.

Drummond sued Terry Collingsworth, who has twice sued Drummond over claims it was involved in the killings of union members a decade ago and other corruption in Colombia.

The suit contends Collingsworth has a financial relationship with a Dutch company, Llanos Oil Exploration, which is suing Drummond over mineral rights. Drummond argued that Collingsworth repeatedly made false claims about its involvement in killings and other paramilitary violence in Colombia, and it asked a court to make him pay an unspecified amount.

Collingsworth, whose law firm of Conrad and Scherer also is named in the suit, did not return a message seeking comment Tuesday, and he hasn't filed a written response.

The lawsuit was filed last Friday. The complaint includes claims that Collingsworth wrote letters that are now available on the Internet linking Drummond to Colombian violence.

Ruling in a lawsuit Collingsworth filed on behalf of the widows of slain Colombian miners, a federal jury decided in 2007 that Drummond and the head of its Colombian operations was not to blame for the killings of three union leaders, including one who was pulled off a company bus and shot to death as co-workers watched. Drummond attorneys denied the company had any role in the killings or ties to paramilitaries, arguing instead that the slayings were part of years of violence in Colombia.

The 11th U.S. Circuit Court of Appeals resurrected the complaint in February, ruling that the children of the slain workers could sue in the United States. A lower court had dismissed the children's lawsuit, saying they should have sued on behalf of their parents instead of own their own.
_______________________________

Colombian indigenous communities caught in crossfire
Arturo Wallace. BBC. October 26, 2011

Next to the police station in the Colombian town of Toribio, there are no longer houses but piles of rubble.

The scene is a graphic reminder of how the long-running civil conflict is pretty much alive in this part of the country.

Soldiers patrol the streets with their index fingers firmly on the triggers of their Galil assault rifles.

And behind the barricades erected next to the police station, which was targeted by Farc rebels in July, young men in uniform keep a nervous watch over the mountains, mindful of the possibility of a new attack.

More troops were sent to the south-western region of Cauca in the wake of the attack on Toribio.

Clashes have become more frequent in the surrounding mountains, which are a key corridor for drug trafficking and one of the strongholds of the Farc.
Wire fences

Evidence of the escalating conflict can be seen in Caloto, where a new military base occupies what used to be the town's sports compound, and where soldiers man roadblocks on the outskirts.

Indigenous communities who live in the nearby mountains have also experienced the fallout from the fighting.

Local schools are fenced by chicken wire in an attempt to keep the armed groups at bay.

The house of Abel and Miriam Coicue, who belong to the Nasa indigenous community, bears the scars of a recent clash. Marks of shrapnel are still visible in the outer walls of the house.

Inside, a candle and a bunch of flowers pay tribute to Maryi, their 11-year-old daughter, who died last month during a clash between the army and the Farc.

"I heard when they set off the explosive, and asked myself, where will it fall?" a tearful Miriam Coicue told the BBC.

"I heard the explosion and when I opened my eyes everything was dark, there was dust, there were leaves, and I didn't know what had happened. We were shaking, everything was shaking. And then I heard the screams," she said.

Six people were injured by the blast. Maryi died before she could receive medical attention.

Her father, a journalist with the local indigenous radio station, Pa'Yumat, said that despite his long experience of the conflict, nothing had prepared him for what happened.

"I've seen many families cry, many fellow Nasa Indians die in other communities, other hamlets," Mr Coicue told the BBC.

"I think that prepared me for anything, except mourning a child."
Determined to stay

The Nasa people say that the escalation of the conflict is bringing more death and suffering to their communities.

Colombia's conflict has displaced an estimated 3.4 million people over the years, according to the UN.

But the Nasa are determined not to be forced off their land.

They have set up safe areas such as school buildings or communal houses, identified with white flags, where they try to assemble during fighting.

But such signs are not always respected by the fighters.

The day before Maryi died, soldiers looking for the guerrillas camped next to her school, the safe area she would have been expected to move to in case of fighting.

And, according to Floresmiro Palomo, a member of the Nasa Indigenous Guard in charge of the safe area, the soldiers' presence put everybody there in harm's way.
map

"Some were shooting from down here, the others from up there, the bullets all over us," he said, pointing towards the mountains, in the direction of Maryi's house.

"We had asked them (the soldiers) to move away from the safe area but to no avail."

Fighting lasted for two days. According to Mr. Palomo, the army only left when the safe area when they heard about the girl's death.

He also said that what the Nasas really want is for both the guerrillas and the army to leave their territory for good.

"Because of what happened, the community has decided to do something drastic: they decided that if they saw more guerrillas around here they would disarm them and burn all guns. And the same with the army," Mr Palomo said.

Strong words but the only weapons carried by the members of the Nasa Indigenous Guard are wooden sticks with colourful ribbons.

Since Maryi's death, the security situation has worsened.

There have been reports of fighting in Suarez, west from Caloto and Toribio, where there is a hydroelectric plant.

And earlier this month, a Farc attack in El Palo - a small village located on the way to the Coiuce family's house - left seven soldiers dead.

Defence Minister Juan Carlos Pinzon promised a strong response.

"We'll continue to act forcefully against all armed groups, we won't rest," Mr Pinzon said.

With local and regional elections due on 30 October, tensions have been increasing in some rural areas.

Rebels tend to step up attacks in the run-up to polling, and many hope the situation will calm down once the election is concluded.

But for the inhabitants of Torbio and the surrounding area, the conflict is a permanent fact of life, and they see little prospect of the problem diminishing.

Western Andean Region [contents]

Ecuador Economic Policy Minister King Announces Resignation
Nathan Gill. Bloomberg. October 26, 2011

Oct. 26 (Bloomberg) -- Ecuador’s Economic Policy Minister Katiuska King, who coordinated President Rafael Correa’s macroeconomic policies within the Cabinet, resigned today, citing policy difference with the president.

“Given certain differences, the appropriate thing to do is to step aside,” King, a 35-year-old economist appointed in April 2010, said to reporters in Quito. King is the first minister to step down since Correa on Oct. 21 asked his Cabinet to offer their resignations.

King, whose ministry nominally oversaw the South American country’s central bank, said there was “persistent resistance” to her efforts to increase the role of government-controlled banks in the economy. She also criticized ongoing trade talks with the European Union, a sign that her exit means Correa plans to push forward with talks stalled since 2009.

“In trade policy, it is indispensable not to lose sight of the critical posture of the revolutionary process,” King said. “It is something that should continue, but without losing sight of our sovereignty.”

Correa said he would announce new ministers on Nov. 7. King didn’t say who her replacement might be.
_______________________________

Ecuador Ruling Party ‘Certain’ Tax Law Will Pass, Lawmaker Says
Nathan Gill. Bloomberg. October 26, 2011

Ecuador’s government has enough support in congress to raise taxes for the ninth time since 2007, almost doubling beer prices and raising fees on cigarettes and capital exports, the head of congress’ tax commission said.

The proposed law, which would increase the tax on money taken out of the country to 5 percent from 2 percent, seeks to shore up liquidity in South America’s seventh-biggest economy, Francisco Velasco, president of congress’ Economic and Tax Commission, said in an interview in Quito.

“I’m certain” the law will pass, Velasco, a former radio talk-show host, said yesterday by telephone. “It’s not fair that the money and capital stays abroad in a country that needs it urgently.”

Ecuador uses the U.S. dollar as its official currency, meaning that any capital taken out of the country reduces the amount of money in circulation, acting as monetary tightening. The law has raised concerns from groups including the Quito Chamber of Commerce that it will spur inflation by pushing up the cost of imported goods, hobble foreign investment and place an extra burden on the middle class.

Companies that would be affected include a unit of Brazil’s Cia. de Bebidas das Americas, the biggest beer maker in South America, and Cerveceria Nacional SA, a unit of SABMiller Plc (SAB), the world’s second-largest brewer by volume. Officials from Cia. Cervecera AmBev Ecuador, controlled by Belgium-based Anheuser- Busch InBev NV, will speak with lawmakers today about the tax, Ecuador’s congress said yesterday in an e-mailed statement.
‘Gigantic Budget’

The tax increase, which would raise the cost of alcohol by 75 percent, “will continue funding a gigantic budget that has devoured not only the hopes of the nation’s industrial sector, but also its middle class,” Blasco Penaherrera, president of the Quito Chamber of Commerce, said in an Oct. 24 e-mailed statement.

President Rafael Correa said in August that the tax increase was necessary because capital flight from Ecuador is one of the “grave dangers” of dollarization. Money is already flowing out of the country because of a trade deficit that totaled $488 million in the first eight months of the year.

Previous tax increases have helped fund increased government spending. Investment in public works projects, including roads, hospitals and schools, helped spur annual economic growth of 8.9 percent in the second quarter.

“This law seeks to do what every tax in the world seeks, to redistribute wealth,” Velasco said. “Those that have more, spend more and waste more, should pay more.”

To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net.

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.
_______________________________

Peru's Fin Min Sets Up Group To Study Private Pension Funds
Robert Kozak. Dow Jones. October 27, 2011

LIMA -(Dow Jones)- Peru's finance ministry has set up a working group to study and design a plan to widen coverage and increase efficiencies in the nation's private pension fund system.

The working group, which has four months to report back to the ministry, is made up of representatives from the finance ministry, the Central Reserve Bank of Peru, the Superintendent of Banking, Insurance and Pension Funds, Congress and some economists.

In a statement, the finance ministry said that although the private pension system, or AFP, has 4.8 million members, "the advances in terms of widening the number of persons with coverage have been modest."

It said that only 20% of the active working population regularly contributes to their private pension funds.

"It is necessary to improve the private pension funds, with reforms that permit a widening of coverage and an improvement in the competitiveness of the private pension system," the ministry said.

President Ollanta Humala's Gana Peru party criticized the AFPs during the election campaign this year, and at one point proposed setting up a new government-run pension system.

The AFPs that operate in Peru are: AFP Horizonte, owned mainly by Holding Continental and Spain's Banco Bilbao Vizcaya Argentaria (BBVA); AFP Integra, mainly owned by the ING Groep (ING); AFP ProFuturo, whose main shareholder is a unit of Bank of Nova Scotia (BNS), and AFP Prima, controlled by Peru's Credicorp Ltd. (BAP)

Mexico, Central America and Caribbean [contents]

Mexican presidential hopeful vows drugs war shift
Dave Graham and Miguel Angel Gutierrez. Reuters. October 27, 2011

(Reuters) - A leading presidential candidate of Mexico's ruling party said on Wednesday he would break with government policy and withdraw the army from the fight against drug gangs if he wins the election in 2012.

Santiago Creel, a former interior minister belonging to the conservative National Action Party (PAN), told Reuters that President Felipe Calderon's military strategy had served its course and that he would change "everything" as leader.

"The direct, frontal, expansive strategy is a strategy that should end with this administration," said Creel, who is seeking the PAN's nomination for the presidency.

Deaths from drug-related violence in Mexico have surged since Calderon sent in the army to fight the cartels when he took office in December 2006, damaging support for his party and causing strains in relations with the United States.

Calderon has endured withering criticism from victims of the drug war and opposition lawmakers for his U.S.-backed military approach but he has stood firm, arguing the cartels would have become too powerful if he had not acted.

More than 44,000 people have died in the conflict to date, and Creel said that if elected in the July vote, he would start taking the Mexican army off the streets as soon as he took office in December 2012.

"By my calculations this would be a period of transition of around 24 months," said the 56-year-old Creel, a descendant of a U.S. immigrant to Mexico of Scottish origin.

Instead, he said priority should be given to attacking cartels' revenue streams, cracking down on money laundering and cleaning up Mexico's prisons, where top criminals are often able to continue running their crime gangs on the outside.

Creel, who also sought the PAN's candidacy for the 2006 election, was an early front runner this time, though some recent surveys have shown former education minister Josefina Vazquez Mota could be overtaking him.

Opinion polls also show the PAN trailing the opposition Institutional Revolutionary Party, or PRI, which ruled Mexico for seven decades until 2000.

If the PRI won the election, it would be a serious setback for Latin America's second biggest economy, said Creel.

"People are going to think hard about what returning to the past means, returning to this model ... of agreements or shady deals with criminals," he said.

Calderon also said earlier this month that some in the PRI could consider making deals with organized crime, a practice the party's opponents say was widespread in Mexico in the past.

(Editing by Kieran Murray)
_______________________________

NAFTA Is Starving Mexico
Laura Carlsen. Foreign Policy in Focus. October 26, 2011

Since the North American Free Trade Agreement (NAFTA) became the law of the land, millions of Mexicans have joined the ranks of the hungry. Malnutrition is highest among the country’s farm families, who used to produce enough food to feed the nation.

As the blood-spattered violence of the drug war takes over the headlines, many Mexican men, women, and children confront the slow and silent violence of starvation. The latest reports show that the number of people living in “food poverty” (the inability to purchase the basic food basket) rose from 18 million in 2008 to 20 million by late 2010.

About one-fifth of Mexican children currently suffer from malnutrition. An innovative measurement applied by the National Institute for Nutrition registers a daily count of 728,909 malnourished children under five for October 18, 2011. Government statistics report that 25 percent of the population does not have access to basic food.

Since the 2008 food crisis, there has been a three percent rise in the population without adequate access to food. The number of children with malnutrition is 400,000 kids above the goal for this year. Newborns show the highest indices of malnutrition, indicating that the tragedy begins with maternal health.

The dramatic change in Mexican eating habits since NAFTA is not only reflected in the millions who go to bed hungry. On the other side of the scale, Mexico has in just a decade and a half become second only to the United States worldwide in morbid obesity. Child obesity, overweight, and diabetes now constitute major health problems, alongside the more traditional problem of hunger.

It’s not that the rich are getting too fat and the poor too thin, although inequality plays a role in the erosion of healthy diets for all. Fatness no longer represents abundance. It is the poor who drink cheap Coca Cola when they do not have access to potable water or who give their kids a bag of potato chips when local fresh food is no longer available. The International Journal of Obesity finds that worldwide the spread of what they call “the Western diet” (“high in saturated fats, sugar, and refined foods but low in fiber) has meant that “the burden of obesity is shifting towards the poor.” The NAFTA generation reflects the paradigm so eloquently described by food researcher and activist Raj Patel of “stuffed and starved”.

With another food crisis looming due to rising international prices, Mexico could face food riots as well as the spread of starvation and its consequences over the coming year. Unless the riots turn violent or spark more widespread social upheaval as they did in Arab countries, it’s not likely that the news media will pay any attention.

NAFTA’s Food (In)security Model

Something has gone terribly wrong. The nation that was slated for prosperity when it signed NAFTA has become an international example of severe structural problems in the food chain, from how it produces its food to what and how much (or how little) it consumes.

Mexican malnutrition has its roots in the way NAFTA and other neoliberal programs forced the nation to move away from producing its own basic foods to a “food security” model. “Food security” posits that a country is secure as long as it has sufficient income to import its food. It separates farm employment from food security and ignores unequal access to food within a country.

The idea of food security based on market access comes directly from the main argument behind NAFTA of “comparative advantage.” Simply stated, economic efficiency dictates that each country should devote its productive capacity to what it does best and trade liberalization will guarantee access across borders.

Under the theory of comparative advantage, most of Mexico was deemed unfit to produce its staple food crop, corn, since its yields were way below the average for its northern neighbor and trade partner. Therefore, Mexico should turn to corn imports and devote its land to crops where it supposedly had a comparative advantage, such as counter-seasonal and tropical fruits and vegetables.

Sounds simple. Just pick up three million inefficient corn producers (and their families) and move them into manufacturing or assembly where their cheap labor constitutes a comparative advantage. The cultural and human consequences of declaring entire peasant and indigenous communities obsolete were not a concern in this equation.

Seventeen years after NAFTA, some two million farmers have been forced off their land by low prices and the dismantling of government supports. They did not find jobs in industry. Instead most of them became part of a mass exodus as the number of Mexican migrants to the United States rose to half a million a year. In the first few years of NAFTA, corn imports tripled and the producer price fell by half.

Conversion to other crops turned out to take years in most cases. Prices were volatile and harvests unreliable. It was not feasible at all on many small, often rocky plots where corn guarantees a subsistence diet for farm families. Niche markets failed to grow to much more than 2 percent of total agricultural production.

The areas that adapted successfully to industrial agriculture and agroexport crops are characterized by flagrant violation of the labor rights of migrant farm workers, widespread pollution and water waste, and extreme concentration of land and resources.

For the hungry, this means that prices set on the international market determine who eats and who starves. Mexican consumers now pay more for tortillas and food in general. Price hikes on the international market push basic food out of reach for the millions of poor in the country.

Food Dependency

In post-NAFTA Mexico, 42 percent of the food consumed comes in from abroad. Before NAFTA, the country spent $1.8 billion dollars on food imports. It now spends a whopping $24 billion. In an interview, rural researcher Ernesto Ladrón de Guevara noted that in some basic foods, the dependency on imports is dramatic: 80 percent in rice, 95 percent in soybeans, 33 percent in beans, and 56 percent in wheat. The country is the world's number-one importer in the world of powdered milk. NAFTA decimated Mexico's once-thriving dairy sector, and the market takeover by transnational powdered milk is linked to the crisis in infant malnutrition.

Mexico imports 33 percent of its consumption, a figure that belies the reliance on imports because the sheer volume of consumption is so large. Ladrón de Guevara stated that it has gone from importing around 250,000 tons before NAFTA to 13 million tons. Transnational traders often favor imports over national production because of the attractive credit arrangements offered by the United States, making it “a double business—importing corn and money.”

The U.S. department of agriculture estimates that if current trends continue Mexico will acquire 80 percent of its food from other countries (mostly the United States). The UN's Food and Agriculture Organization calls a country food dependent when the cost of its imports exceeds 25 percent of total exports. Peasant farmer organizations have criticized the definition as ludicrous in an oil-producing country that nonetheless has seen serious erosion in its capacity to feed its people and guarantee access to basic foods for all.

Heads I Win, Tails You Lose

The corporate takeover of Mexico’s food system has led to the food and health catastrophe. Transnational food corporations not only import freely into Mexican food markets, they are now the producers, exporters, and importers all in one, operating inside the country.

Since NAFTA, corporations have gobbled up human and natural resources on an almost unbelievable scale. Livestock production has moved from small farms for local markets to Tyson, Smithfield, and Pilgrims Pride. The massive use and contamination of water and land has led to health and environmental disasters across the country. Millions of jobs have been lost to concentration and industrialized farming methods.

Take the case of Corn Products International (CPI). The transnational filed a NAFTA claim against the Mexican government in 2003, claiming a loss to its business due to a tax levied on high fructose corn syrup in beverages. Mexico’s reason for imposing the tax was to save a sugarcane industry that provided jobs for thousands of citizens and played a crucial economic role in many regions. The government was also frustrated by its failure under NAFTA to access the highly protected U.S. sugar market.

A 2008 NAFTA tribunal ruled that Mexico had to pay $58.4 million to CPI. The government paid up on January 25, 2011. CPI posted $3.7 billion dollars in net sales the year of the decision. The fine paid by the Mexican government could have provided a year’s worth of the basic food basket to more than 50,000 poor families.

CPI’s wholly owned subsidiary Arancia Corn Products is among the most powerful food transnationals operating in the country, along with Maseca/Archers Daniel Midland and Cargill. Large agribusiness companies allegedly played a key role in the 2007 tortilla crisis by hoarding harvest as the international price went up, artificially drying up the national market and selling at nearly double the price they paid for the harvest. That crisis brought tens of thousands of poor Mexicans out into the streets to protest a 50 percent rise in the price of tortillas.

NAFTA and other FTAs give corporations the power to define what we eat, what we buy at the store, who will have a job and who won’t, and whether a village sustained by local food production will survive or witness the end of generations of livelihoods.

Feed the Hungry, Fix the System

Mexican organizations have begun to come together after years of divisions to respond to the food crisis and fix the badly broken system. They recently succeeded in reforming the Mexican constitution to include the right to food. Now the battle is on to adapt the rural budget to make that right a reality.

Small farmer organizations have joined with family farm organizations in the United States and Canada to call for the renegotiation of NAFTA to remove basic foods and agricultural production from the agreement. They recognize, though, that the Obama administration’s about-face in its stated commitments to fair trade reforms has left little political space for change.

Instead, peasant organizations in all three countries are looking to grassroots efforts and movements to fix the food system before the crisis worsens. As Mexican organizations struggle for programs to address threats to food and agriculture, U.S. organizations are seeing an opportunity to join their demands to the Occupy Wall Street movement across the country. One of the grievances listed in the OWS Declaration of the New York City General Assembly reads: “They (large corporations) have poisoned the food supply through negligence, and undermined the farming system through monopolization.” Food activists are now bringing issues of corporate concentration in food, commodity speculation and price hikes, and free trade to the general protests.

Corporate control of the food system locked in by NAFTA not only starves people in Mexico. It locks in a profoundly unhealthy food system for the entire region. No one expects the situation to get better by itself. As the crisis deepens, citizen movements are again heating up and seeking each other out across borders to protect their health, their livelihoods and their rights. In the future, what we eat, how we eat, and if we eat will depend on their efforts.
_______________________________

Cops implicated in students' murder, Honduran gov't says
EFE. October 26, 2011

Tegucigalpa –  Investigators suspect police officers were behind the recent murder of the son of the president of the National Autonomous University of Honduras and another student, Security Minister Pompeyo Bonilla said Wednesday.

Rafael Vargas Castellanos, son of university President Julieta Castellanos, and his friend Carlos Pineda were killed last week while on their way home from a party.

The 22-year-old Vargas Castellanos was studying law and the 24-year-old Pineda was finishing a degree in sociology.

"Yes, sir, regrettably we are working under that theory," Bonilla said on Channel 5 television when asked about a story in La Tribuna newspaper indicating the double-murder was carried out by "police assassins."

The investigation has turned up evidence that the same cops who killed the two students were also linked to other homicides, the paper said.

The suspects' names have not been disclosed.

"I am going to make the biggest effort of my life to resolve all these problems," Bonilla, who took over the security portfolio two months ago from Oscar Alvarez, said Wednesday.

"If there are criminals in the police, the place for them is the Central Penitentiary," Bonilla said.

Honduras experiences an average of 20 homicides a day and members of the security forces have been implicated in numerous killings.

The slaying of the two college students has rocked this Central American nation, which, according to a recent U.N. report, leads the region with a rate of 82 murders per 100,000 residents.

Vargas Castellanos and Pineda left a party at a house in the capital last Friday night and called their families to say they were heading home.

Relatives began to search for the young men when they failed to arrive home. Their bodies were found early Saturday at kilometer 8 of the highway that leads from Tegucigalpa to southern Honduras.

The students' car was intercepted by a police patrol, according to media accounts.

Julieta Castellanos was a member of the truth and reconciliation commission that issued a report earlier this year on the events surrounding the June 28, 2009, coup that ousted President Mel Zelaya.

She also founded a watchdog organization that has exposed official abuses and corruption.

The administration of President Porfirio Lobo - elected in November 2009 in a process marred by violence, media censorship and low turnout - has so far failed on his promise to improve public safety.

Few murders are ever solved and Honduran authorities routinely ascribe violent acts to "score-settling" within and among the country's youth gangs and criminal outfits.

At the same time, many of the killings since Zelaya's ouster appear to be politically motivated, as victims are often associated with the resistance movement that sprang up in the wake of the coup.

The deposed head of state returned to Honduras five months ago under a pact brokered by regional leaders, but violence against his supporters and other activists continues.
_______________________________

El Salvador Coffee Output to Drop After Rain, Procafe Says
Marvin G. Perez. Bloomberg. October 26, 2011

El Salvador will lose 89,978 bags of coffee production because of heavy rains, Procafe, an industry group, said.

Losses may reach 239,000 bags because of high winds and road damage, Procafe said yesterday in a statement. That would mean a 17 percent drop in the harvest that was estimated to be 1.42 million bags, according to the group’s data.

A bag weighs 60 kilograms, or 132 pounds.

To contact the reporter on this story: Marvin G. Perez in New York at mperez71@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net
_______________________________

A Mining Ban in El Salvador?    
Emily Achtenberg. NACLA. October 26, 2011

Will tiny El Salvador, where two thirds of the population lives on less than $2 a day, become the first nation on the planet to legally ban gold mining? On June 28, President Mauricio Funes reaffirmed his campaign promise that no metals mining would be permitted in El Salvador during his administration. Despite the potential relief that mining revenues could offer his cash-strapped government, Funes said, “I will not put the public health of the population at risk in exchange for some additional income that we might receive.”

The National Roundtable Against Mining (known as the Mesa), a coalition of community, environmental, and human rights organizations that has led the anti-mining struggle, wants the government to go one step further—by passing a bill sponsored by Funes’s party, the Farabundo Martí Liberation Front (FMLN), that would permanently ban metals mining. They note that even conservative ex-president Tony Saca declared his opposition to mining in 2008, in response to public pressure. What’s needed, they say, is for the ban to be legally codified, rather than leaving mining policy to the discretion of each successive president.

The growing resistance to mining in El Salvador has focused on Pacific Rim, a Canada-based transnational that received a permit in 2002 to begin exploratory work on a massive gold mine in the north-central department of Cabañas. The mine is located in the basin of the country’s largest river, the Lempa, which is one of the few remaining uncontaminated water sources in El Salvador, supplying nearly half the country, including the capital, San Salvador. After Pacific Rim was granted its exploratory permit, a surge of applications by other mining companies followed, as gold prices sky-rocketed and opportunities for private investment increased under the Dominican Republic–Central American Free Trade Agreement (DR-CAFTA).

The Mesa argues that the water-intensive cyanide ore process used by mining companies like Pacific Rim will undermine rural farming and fishing economies, and deplete drinking-water supplies—the average metallic mine uses 24,000 gallons of water per hour, or about what a typical Salvadoran family consumes in 20 years. Toxic runoff, leaks, or spills could cause widespread contamination, and Cabañas is prone to earthquakes and torrential rains, further heightening public health and safety concerns. Such problems would add to the many environmental challenges already facing El Salvador, which is arguably the second-most environmentally degraded country in the Americas (after Haiti).

Although Pacific Rim and other mining companies promise jobs and tax revenues to benefit affected communities, the Mesa says few local residents have the technical skills to qualify for a permanent position. Under existing law, only 3% of mining profits would be paid to the Salvadoran government for potential reinvestment in social and economic programs. In any case, the projected operational life of Pacific Rim’s Cabañas mine is just six years.

Mining has also caused social conflict and violence in communities still struggling to overcome the effects of El Salvador’s civil war (1980–92). Pacific Rim targets funds for scholarships, schools, and other benefits to municipalities (and mayors) not directly impacted by mining, creating friction with those communities that are affected. In this context of mounting tension, four anti-mining activists in Cabañas have been killed since 2009 in what the Mesa describes as targeted assassinations. Dozens more, including environmental leaders, priests, and community radio journalists, have received death threats, which the company blames on “internal feuds”—that is, the very conflicts that its presence has created.

While some of those who carried out the murders have been convicted, the “intellectual authors” of these crimes have never been prosecuted. For anti-mining activists, the persistence of this climate of impunity evokes bitter memories of the civil war, with communities once again facing the threat of displacement and the loss of land and natural resources that they fought and died to protect.

In 2007, more than two thirds of those polled by the San Salvador–based Central American University agreed that the mining of precious metals should be banned in El Salvador. Faced with growing opposition from civil society, the Catholic Church, and even from the Saca government, Pacific Rim failed to complete the technical steps required to secure its permit for mining operations. In 2008, the company ceased all exploratory activities.

Pacific Rim then sued the Salvadoran government for $77 million under DR-CAFTA, alleging that the government’s failure to approve an extraction permit had violated its investors’ rights. The case, which is pending in a World Bank court, represents the first challenge to a sovereign government’s environmental policy under DR-CAFTA. A subsequent lawsuit filed by another gold-mining company in the same court was dismissed on a technicality in March, but only after the Salvadoran government spent $800,000 defending its claim.

The DR-CAFTA lawsuit was clearly on the mind of Environmental Minister Hermán Rosa Chávez when he met with a delegation from the Cambridge–El Salvador Sister Cities project in June, just a few days before Funes announced that no mining would take place during his administration. According to Rosa Chávez, a critical tool in formulating the administration’s new mining policy and legislative proposal will be the strategic environmental assessment that Funes commissioned from a Spanish consulting firm in 2010. The study, which is in its final stages, will evaluate the costs and benefits of metals mining in El Salvador. Both transnational mining companies and anti-mining activists are eagerly anticipating the results.

The Mesa, however, is concerned that the study’s highly technical framework may obscure what should be a foregone conclusion. “Instead of wasting money on this consulting project,” says Francisco Pineda, a farmer who was recently awarded the Goldman Environmental Price for his anti-mining work in Cabañas, “we should be studying how to help the communities most affected by the environmental damage” caused by mining.

But a major goal, according to Rosa Chávez, is to insulate the Funes government from legal challenges by Pacific Rim and other mining transnationals. With 26 active exploration permits inherited from past governments and 73 pending applications, the government’s potential legal exposure is enormous. The study will also help to build consensus within the government, including the legislature, which has diverse views on mining. (The FMLN has the largest voting bloc, but not a majority.)

For these reasons, Rosa Chávez says, the study must weigh alternative scenarios, ranging from selectively promoting certain types of mining to a partial or complete ban. “We are the government now,” he explains. “We have to play by the formal rules.”

Rosa Chávez believes that metallic mining, especially gold mining, is difficult to justify under current conditions in El Salvador. He’s confident that the blue ribbon commission he handpicked to oversee the environmental study will come to the same conclusion. And if mining is not appropriate for Cabañas, Rosa Chávez said, Funes will want to know what alternative regional development strategies the government should support—such as the sustainable farming initiatives that local communities are already developing.

The Mesa recognizes that renouncing gold mining would be an epic decision for El Salvador, with significant global implications. Though the stakes are high, it may be easier for El Salvador to ban mining than for countries already heavily dependent on mining export revenues—including those with left-leaning governments, like Bolivia and Ecuador. If Funes recommends a ban, the Mesa believes that popular pressure will force the legislature to support it, especially with local and congressional elections coming up next year.

But at the end of the day, Rosa Chávez stresses, governments and public officials should never be trusted. On that point, the Mesa fully agrees.

Emily Achtenberg is an urban planner and the author of NACLA’s weekly blog Rebel Currents, covering Latin American social movements and progressive governments (nacla.org/blog/rebel-currents). She visited El Salvador in June with the Cambridge–El Salvador Sister Cities delegation.

Region: Trade, Security, Economy and Integration [contents]

New investments totaling $16 bn announced at Petrocaribe summit
EFE. October 26, 2011

Managua –  The meeting here of ministers from the 18 countries taking part in the Venezuelan-sponsored Petrocaribe initiative ended with agreement on more than $16 billion in new investment and a commitment to studying the possible incorporation of food security into its programs.

"Progress is being made in developing eight energy infrastructure projects with an estimated investment of close to $16.7 billion," Venezuelan Energy Minister Rafael Ramirez said Tuesday in Managua.

Ramirez, who also is president of state-owned oil firm Petroleos de Venezuela SA, did not offer details on the projects, although the day before he had confirmed plans to build one new refinery in Cuba and another in Nicaragua, as well as expand Cuba's Camilo Cienfuegos crude-processing plant.

The minister, who read a statement on the summit's results in the company of Nicaraguan President Daniel Ortega, said Petrocaribe accounts for 45 percent of the energy needs of 14 of the initiative's 18 member countries.

He noted that trade among Petrocaribe countries, including the provision of hydrocarbons and other goods and services, amounts to roughly $14.96 billion annually, with $5.83 billion of the transactions occurring under the initiative's different financing agreements.

"This is a very important element (the financing) because it's been precisely this arrangement that has protected our countries from the volatility and instability that often afflicts the global energy market," Ramirez said.

He added that the Petrocaribe countries have built 25 facilities with the capacity to refine 135,000 barrels per day, store 262,000 barrels and produce 365 MW of electricity.

During the meeting in Managua, the ministers agreed to form a work group specifically focused on electricity projects and also discussed the need to develop the region's renewable energy sources, mainly geothermal and wind, Ramirez said.

Additionally, "an arrangement to supply up to 100,000 metric tons of petrochemicals" also will be discussed at Petrocaribe's next summit of heads of state and government, to be held at a date and place announced by Venezuelan President Hugo Chavez.

The idea, he added, is to increase agricultural activity and food production to "safeguard our countries from the mercantilist logic that's being imposed on food."

"We think Petrobras, given its development, should transcend the merely energy-related (and) make inroads into food (security) issues and a bigger push into fair trade-related issues," he added.

Petrocaribe, founded in June 2005 by Chavez, allows its Central American and Caribbean member countries to purchase crude and derivatives from oil-rich Venezuela on conditions of preferential payment.

Under the initiative, oil-importing countries also can pay Venezuela part of the cost of their crude imports with agricultural products such as plantains, rice and sugar.

In addition to host nation Nicaragua, delegates from Antigua and Barbuda, Belize, Cuba, Dominica, the Dominican Republic, Granada, Guatemala, Guyana, Haiti, Jamaica, St. Kitts and Nevis, St. Vincent and the Grenadines, Suriname and Venezuela participated in the summit.
_______________________________

World Bank forecasts Latam growth of 3.5% to 4% this year and 4% in 2012
Mercopress. October 26, 2011

Latin America’s economy is forecasted to grow between 3.5% and 4% this year, which is less than previous estimates before the current global financial crisis, said World Bank representative for the region, Pamela Cox.

The World Bank previous estimate for 2011 was 4.5% and 5%, said Ms Cox adding that the 2012 forecast is even lower, 4%.

“We have lowered our estimates because of the global crisis. We’re expecting growth this year in Latin America to reach 3.5% to 4%”, said Cox during a press conference in Lima, Peru where she met with President Ollanta Humala.

Cox said Latin American economies which managed to avoid the 2008 world financial crisis better than other regions, could face the impact of the Euro debt crisis and the slowing down of the US economy, although it won’t be homogeneous, “some will suffer more, others, less”.

“We are seeing many differences among countries of the region: Argentina for example is growing rapidly. Other countries such as Mexico are not showing a vigorous expansion”, said Cox.

As to next year the World Bank estimates growth at 4% in the midst of spreading uncertainty regarding the health of the world economy, particularly in Europe.

“Given the prevailing uncertainty in global markets, particularly Europe it’s very hard to anticipate what could happen in the region”, said Cox who pointed out that the performance of the region “is indirectly linked to Europe and closely to China and its economy, which is the world’s main consumer of commodities, particularly from Latin America”.
_______________________________

Renewables Hit a Wall in South America
VINCENT BEVINS. New York Times. October 25, 2011

SÃO PAULO, BRAZIL — Last year, to raise money for energy investments, Brazil carried out the largest share offering in the history of humanity. Petrobras, the state-controlled oil company, raised $70 billion to put towards projects to drill for its newly discovered, and potentially huge, deepwater offshore oil reserves.

This was not an encouraging day for those who had hoped that Brazil, the largest Latin American economy, would step up efforts to make the region’s energy use more sustainable.

“It’s a difficult and controversial moment for Brazil,” said Claudio Boechat, professor and specialist in sustainability at the Fundação Dom Cabral business school, in a phone interview from Minas Gerais. “On the one hand the reserves are a source of national wealth that can be used to lift people out of poverty and re-shape the country. On the other, this will make a huge negative impact on future emissions coming from Brazil.”

“This will likely become a very serious problem,” Mr. Boechat said. “I don’t think Brazil, or most of Latin America, will end up soon making the choice to ensure big emissions reductions just for the sake of increased responsibility.”

Despite enormous potential, South American countries still account for a relatively small proportion of the world’s output of renewable energy. Even though many of its economies are charging ahead, shrugging off fears of a double-dip recession in Europe and the United States, there are few signs that this will change quickly.

Brazil’s big oil discovery is only one of the factors holding the sector back.

Wind farms off the Brazilian coast and plans for solar power in the desert of Chile are promising, but still in early stages. New oil discoveries have recently been made in both Colombia and Argentina, while Venezuela looks unlikely to diversify away from petroleum.

Argentina is unlikely in the near future to expand in a large way into anything but ethanol, for political and economic reasons. In Brazil, most cars can run on that biofuel, and production continues to increase. But even ethanol, Latin America’s biggest renewable resource, has slowed its growth — and is, moreover, increasingly painted by critics as a less than green long-term solution.

In the early stages of the development of the “pre-salt” oil fields, so called because the oil lies under a thick layer of rock and salt beneath the Atlantic, the petroleum sector now already makes up more than 10 percent of the gross domestic product of Rio de Janeiro state, Brazil’s second-largest. Petrobras promises to put some of the returns toward renewables, but there is a limited amount of time and money that can be put into energy investment, critics say.

“Oil and renewables don’t compete directly, but they do compete indirectly,” said Sven Teske, director of Greenpeace International’s Renewable Energy Campaign. “Oil usually goes towards transport and renewables usually go into the electricity grid, but they do compete at the level of policy and resources.”

“What we tend to see is that a big oil discovery usually takes the attention off renewables,” Mr. Teske said. “Usually investments are seen as a way to ensure security supply, and the government believes they now have enough resources and don’t need other sources.

Moreover, he noted, the oil field projects “of course lock in huge amounts of investments that are no longer available” for alternative energy programs.

In Brazil, oil and biofuels compete directly, especially at the gas pump, where attendants will ask drivers which they want: gasoline or ethanol — largely derived from sugar cane. Some cars take only one or the other, but 90 percent of new cars and about half of all cars on the road run on “flex” engines, which can take either or any combination of both. Their owners usually make a decision based on the relative prices of the fuels at the time.

Brazil, the world’s largest ethanol producer, played a fundamental role in establishing it as a viable alternative to gasoline. But growth in output has slowed in the past few years, and the country could be overtaken by the United States.

Production for the most recent season fell short of forecasts, rising only 3 per cent to 25.3 billion liters, or 6.7 billion gallons, according to Czarnikow, the London-based sugar merchant. In 2010, the Brazilian economy as a whole grew at more than twice that rate.

“Ethanol output grew by 10 percent per year from 2000 to 2008,” said Marcos Jank, president of UNICA, the Brazilian sugar cane industry association. “Since then, it’s been just 3 percent per year.”

The crisis slowed down investments and stopped most new green field developments, he said. “But growing less quickly is better than not growing at all, as is the case in many sectors worldwide, and the industry has made great leaps in productivity.”

Mr. Jank said he did not expect the pre-salt discovery to be a problem for green energy development in Brazil. “I don’t think it will inhibit investments or dirty our energy matrix,” he said.

Dependence on petroleum is a “major challenge” a Petrobras spokesman said. With global energy demand continuing to rise and oil remaining the primary energy resource, “it’s a fundamental sustainability challenge to be able to combine the availability of primary energy sources with energy efficiency.” From this year to 2015, Petrobras says it will invest $1.2 billion in efficiency increases and emission reductions, and $4.1 billion in biofuels.

In Brazil, the question of sustainable energy is often seen as a dichotomy between petroleum and biofuel. But more and more critics question whether ethanol truly is a sustainable energy source in the long term. Few dispute that in the very short term it is a better source of fuel than petroleum, but sugar production takes up land and potentially raises the cost of food, and its production is far from carbon-neutral.

“Biofuels have lots of problems,” said Mr. Teske, “on the issues of land preservation, food price, and emissions. And in the long term, the answer for transportation, we believe, is really electrification.”

Still, he said, biofuels could play a role, even in a far-off and very green scenario for ships and airplanes, which are hard to electrify. And there is also biomass energy production, which uses more complex technology than just burning the stuff, noted Mr. Jank, who said he believed production could turn back up in the near future.

Across the continent in Chile, a much more ambitious project could eventually come to fruition. The Atacama desert has the potential to be the best solar resource in the world, with an even higher energy concentration than the Sahara. Early last year the Spanish company Solarpack won approval to build Chile’s first photovoltaic plant. More recently, MPX, part of the business empire belonging to the richest man in Brazil, Eike Batista, announced a $400 million investment in another solar facility. Still, the projects are tiny compared with the country’s potential.

In Argentina, the cost of importing the relevant technologies because of tax systems may be holding the country back from expanding into much beyond ethanol.

“Argentina has huge wind and solar potential, but nothing is happening,” Mr. Teske said. “Most of this is related to import barriers – these make it almost twice as expensive as in Europe.” Here, new oil and gas explorations may also be taking attention away from emerging technologies, he said.

Brazil offers the continent’s other major functioning renewable system, though it is much smaller than its ethanol production. Over the past few years, several offshore wind plants have gone online, and the technology is the closest of the truly renewable sources to looking cost-effective.

“Wind is becoming more and more competitive and is close to being actually economically sound,” Mr. Boechat said. “The government has changed its stance, and the national grid has been prepared to receive this type of power.

“Unfortunately,” he added, “solar is still not competitive.”

Headlines this year in South America have been grabbed by arguments over how best to make use of Brazil’s huge hydroelectric potential. The large Belo Monte dam project in the Amazon has become the target of international criticism and angry local protesters, who charge that it will destroy the surrounding environment and drive indigenous people off their land.

This drew so much attention that the Hollywood film director James Cameron himself journeyed to Brazil in April last year to join in protests, saying this was exactly the kind of exploitation he was depicting in his movie Avatar.

Belo Monte is likely to go forward in its present form, Mr. Boechat says, after concerns led to a scaling down of the project that will reduce total output.

But this project has long been in the works, and is in some ways part of a pre-pre-salt energy approach. The question is how the government moves forward with its new set of resources.

“Unfortunately, my best guess,” said Mr. Boechat, “is that in the next 20 years we won’t have a much better mix than we do now.”

Center for Economic and Policy Research, 1611 Connecticut Ave, NW, Suite 400, Washington, DC 20009
Phone: (202) 293-5380, Fax: (202) 588-1356

The Center for Economic and Policy Research is an independent, nonpartisan think tank that was established to promote democratic debate on the most important economic and social issues that affect people's lives. CEPR's Advisory Board includes Nobel Laureate economists Robert Solow and Joseph Stiglitz; Janet Gornick, Professor at the CUNY Graduate Center and Director of the Luxembourg Income Study; and Richard Freeman, Professor of Economics at Harvard University.

Subscribe • Update Subscriptions • Unsubscribe • CEPR RSS Feed • Become our fan on Facebook • Follow us on Twitter

If you enjoy CEPR’s unique perspectives on Latin America and the global economy, please consider making a tax-deductible contribution to the Center for Economic and Policy Research. We depend on the generosity of individuals like you to support our work. Federal employees can support CEPR through the Combined Federal Campaign, CFC #79613.