Latin America News Round-up
June 8, 2012
Over 11,000 Colombian Politicians, Officials, Businessmen Involved in Parapolitics
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 signals more rate cuts as inflation slows. Reuters
GM Announces Voluntary Layoff Program in Brazil. Dow Jones
Argentina president says to ditch her dollars. Reuters
Singer, Elliott under radar at Hill hearing. New York Post
Augusto Pinochet documentary prompts protest in Chile. BBC
Northern Andean Region
Youth boxing hits the streets in Venezuela program. AP
World Bank Chief Zoellick Says Chavez’s ‘Days Are Numbered’. Bloomberg
Guyana rebuffs Venezuela opposition complaint. AP
Venezuela court decisions shake up 2 small parties. AP
11,179 Colombian politicians, officials, businessmen involved in parapolitics: Report. Colombia Reports
Colombia and Bolivia to coordinate fight against organized crime. Colombia Reports
Western Andean Region
Another Lawmaker Resigns From Peru Ruling Party. Wall Street Journal
Peru Keeps 4.25% Rate on Global Outlook and Commodity Declines. Bloomberg
Ecuador’s Rating Raised by S&P on China Loans, Oil Proceeds. Bloomberg
Mexico, Central America and Caribbean
Computer files link TV dirty tricks to favourite for Mexico presidency. The Guardian
Mexico approves plan to auction TV frequencies for 1st time. EFE
Nicaragua looks to one-up Panama with $30-bln canal. AFP
S&P Lifts Honduras Rating One Notch on Stable Political Environment. Dow Jones
Costa Rica announces trade agreements with Colombia and European association. Tico Times
Region: Trade, Security, Economy and Integration
China interested in a trade agreement with Mercosur reveals Uruguay. Mercopress
Bucking the Trend: Poverty Reduction and Inequality in Latin America. Huffington Post
Brazil and Southern Cone [contents]
Brazil signals more rate cuts as inflation slows
Guillermo Parra-Bernal and Alonso Soto. Reuters. June 8, 2012
SAO PAULO, June 8 (Reuters) - Brazil's central bank signaled it will keep cutting its benchmark interest rate as domestic inflation falls toward the target, testing the boundaries on record low rates to jump-start Latin America's largest economy.
The bank's Monetary Policy Committee said in the minutes of its last policy meeting that it sees decreasing risks stemming from a mismatch in supply and demand growth, as well as a potential gain in consumer prices.
The bank's committee, known as the Copom, maintained its guidance that more rate cuts should be conducted "sparingly." Policymakers unanimously cut its benchmark Selic rate for a seventh straight time to a record low 8.50 percent on May 30 as a once-booming economy stalled in the last three quarters.
"The Copom considers that at this time the risks for the trajectory of inflation remains limited," the minutes said. "The committee notes that, given the fragility of the global economy, the impact of the external sector has been disinflationary."
The Copom also reiterated that the domestic economy outlook remains favorable for this and the coming quarters. It also said that a reversal in 12-month inflation readings will lead to easing expectations of consumer price increases by market participants.
"The central bank is leaving the door open for more rate cuts, but is somewhat dependent on future data," said Alberto Ramos, head of Latin America economic research for Goldman Sachs. "If the external scenario deteriorates and domestic economic conditions remain weak, the committee might extend the easing cycle further."
Like Ramos, most market economists forecast the bank will lower the its benchmark rate, the Selic, to 8 percent this year, meaning it will keep the pace of rate cuts at 50 basis points at its next rate-setting meeting on July 11.
Yields on interest rate futures contracts fell across the board on Friday, indicating that more rate cuts are looming.
The yield on the rate futures contract due in January 2013 , the most widely traded in São Paulo's BM&F commodities and futures exchange, fell 7 basis points to 7.82 percent. Markets in Brazil were closed on Thursday for the observance of a national holiday.
The yield indicates investors' expectations for the Selic at the end of this year.
The yield on the January 2014 contract tumbled 10 basis points to 8.18 percent, while that for the contract due in October this year fell to 7.94 percent from 8 percent on Wednesday.
AGGRESSIVE EASING
Brazil has led one of the most aggressive easing cycles among emerging-market nations, cutting 400 basis points off its rate since August to shield its economy from a worsening debt crisis in Europe.
The central bank is at the heart of President Dilma Rousseff's crusade to revive the economy and bring down some of the world's highest interest rates.
Rousseff has unleashed a flurry of tax cuts for consumers, but many analysts say the country's consumption-led growth model is reaching its limits as Brazilians become increasingly indebted and businesses struggle with high labor costs and low productivity.
Brazil's economy again disappointed in the first quarter, growing only 0.2 percent versus the fourth quarter of last year and raising pressure on Rousseff to do more to revive activity.
That slower growth has helped ease price pressures in Brazil. Annual inflation slowed for its eighth month in a row in May to hit its lowest level in 20 months.
The annual inflation rate is falling near the center of the official target range of 4.5 percent - plus or minus two percentage points.(Additional reporting by Asher Levine, Patricia Duarte, Camila Moreira, Natalia Cacioli and Reese Ewing in São Paulo; Editing by W Simon)
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Argentina president says to ditch her dollars
Reuters. June 6, 2012
BUENOS AIRES, June 6 (Reuters) - Argentina's President Cristina Fernandez vowed on Wednesday to stop saving in dollars and told government officials to follow her example as tight foreign currency controls spook ordinary savers.
Fernandez, who needs to keep dollars in the country to repay public debt, said she had decided to lead by example and swap her only dollar-denominated savings account for a fixed-term deposit in pesos.
"I've decided to put my savings account into pesos," she said at the presidential palace besides an image of the country's famous first lady Evita Peron.
"I'd urge any officials who've got a few little dollars to do the same thing," the center-left Peronist leader said.
Fernandez's administration is battling brisk capital flight and relentless safe-haven demand for dollars. She wants Argentines to end their love affair with the greenback and start saving in the country's peso currency despite high inflation.
Several close allies of the president called last week for the country to start "thinking in pesos."
The near-impossibility of buying dollars at the official rate is driving some savers and investors to pay a hefty premium in the black market.
Others are withdrawing dollars from banks and stashing them under the mattress or in safety deposit boxes, fearing moves by the government to forcibly "de-dollarize" the economy. Officials have strongly denied any such plan.
Meanwhile, the central bank has been snapping up almost all the dollars available as it seeks to replenish the foreign reserves earmarked for debt repayments. So far this year, the monetary authority has bought about $7 billion.
Savers are notoriously jittery in Latin America's No. 3 economy, where memories of tight limits on bank withdrawals and a sharp currency devaluation remain fresh a decade after a devastating economic crisis.
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GM Announces Voluntary Layoff Program in Brazil
Paulo Winterstein. Dow Jones. June 8, 2012
SAO PAULO--The Brazilian unit of General Motors Co. (GM) said Wednesday that it was instituting a voluntary-layoff program to adjust employment levels to current production after Brazilian auto sales continued to slide in May.
The auto workers union Sao Jose dos Campos announced the program earlier Wednesday, saying that GM was seeking volunteers to be dismissed from the company's factory there, at the same time that it was adding a third shift to produce the Chevy S10 pickup truck.
GM said in a note that it decided to open the layoff program "based on the intense competitiveness of the Brazilian vehicle market, in addition to growing costs of labor, raw materials and supplies in general. GM believes that, with this measure, it will be able to reach the structural adjustment that is adequate to its current production program."
Brazil's government last month announced tax cuts on auto sales and eased banks' reserve requirements on car loans after auto credit seized up. But Finance Minister Guido Mantega said at the time he announced those measures that auto makers had made a commitment to not lay off any employees until the end of the tax stimulus, set to expire at the end of August.
The Finance Ministry confirmed Wednesday that automakers had agreed to not lay off any employees, but declined to comment further. GM's press office told Dow Jones Newswires that because this is a voluntary layoff program, it doesn't consider it to be a violation of that agreement.
GM sold 45,826 cars and 8,959 light commercial vehicles in May, showing improvement from a weak April but still lower than the year-earlier month, according to automaker assocation Anfavea. Year-to-date sales are lagging the same period in 2011, with car sales through the end of May down 6.8% on the year, while light-commercial vehicle sales are 6.3% below 2011 levels.
Anfavea said earlier Wednesday that total Brazil vehicle sales are down 4.8% so far this year, while production slipped 9.5% in comparison with the 2011 period. The weak global economy has eroded demand at the same time that high auto-loan default levels caused banks to pull back on auto credit.
Anfavea President Cledorvino Belini told reporters that although some companies and sectors of the auto industry are facing difficult times this year and could cut back on employment, the industry as a whole should see stable job levels. Mr. Belini said that the last days of May showed a positive impact from the tax cuts, and a recovery in sales should be more clearly seen in June. Growth should firm up in the second half after Brazil's central bank started slashing interest rates last year, Mr. Belini said.
GM said that the voluntary layoff program runs through June 15. The company didn't say how many employees it expects to adhere to the program and be laid off.
The Sindicato dos Metalurgicos de Sao Jose dos Campos, the union representing auto workers at that GM factory, said the company added a third shift to avoid excessive overtime for employees after producing a record 6,800 S10 trucks in May. The company plans to transfer workers from other shifts to carry out production rather than hire new employees, the union said on its website.
Write to Paulo Winterstein at paulo.winterstein@dowjones.com
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Singer, Elliott under radar at Hill hearing
MICHELLE CELARIER. New York Post. June 8, 2012
Ted Olsen, former George W. Bush solicitor general, testified yesterday for Republican heavy-hitter Paul Singer at a House financial services committee hearing on “the need to protect investors from the government.” Yet neither Singer, nor his firm’s name Elliott Management, was ever mentioned.
Olsen was billed as a representative for the American Task Force Argentina, a lobbying group that is mainly financed by Singer. His firm has been battling Argentina in the courts for years to get the country to pay its debt to him.
At the hearing, Olsen said he represented NML Capital, which he defined as “a family of funds that manages capital for dozens of US-based organizations, including colleges, universities, hospitals and pension funds.”
In fact, NML is part of Elliott, a $20 billion hedge fund that is known as a “holdout creditor” for taking busted countries to court in order to profit handsomely on debt it purchases for pennies on the dollar.
Rep. Jim Himes (D-Conn.) referred to these investors as “swashbuckling investors who knew what they were getting into.”
At issue is a friend-of-the court brief the US filed on Argentina’s behalf in a case coming before the US Court of Appeals for the Second Circuit on June 20. Olsen will argue for Elliott.
“I am troubled by our government’s eagerness to side with lawless nations against the interests of Americans,” Olsen said, referring to the brief. He acknowledged that the Bush administration had also done so.
Argentina has ignored more than 100 court judgments to make it pay up, but law professors said that Elliott’s latest legal tactic sets a bad precedent.
“The US government has quite legitimate reasons to file the amicus (friend-of-the-court) brief, namely protecting global financial stability and the US’s ability to benefit from sovereign immunity abroad,” said Adam Levitin, professor of law at Georgetown University Law Center, who also testified.
He added that Elliott’s legal reading of a technical issue that the appeal rests on is “absolutely bizarre, but I hardly think a Congressional hearing is the place to get into the interpretation of the language.”
The Argentina legal drama was one of three cases the committee explored. The other two were the $25 billion mortgage settlement that neither Democrats nor Republicans like and the highly politicized and divisive Chrysler bankruptcy.
Adding Elliott’s Argentina battle to the list was “very creative and somewhat audacious,” said Anna Gelpern, professor of law at American University Washington College of Law.
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Augusto Pinochet documentary prompts protest in Chile
BBC. June 8, 2012
Relatives of victims of Augusto Pinochet's military rule in Chile have protested against plans to pay homage to the late general this weekend.
They held a rally in Santiago, calling for the screening of a new pro-Pinochet documentary to be banned.
The relatives say it is insensitive, but the government says it is a private event and it will not intervene.
More than 3,000 people disappeared or were killed during Gen Pinochet's rule, which ended in 1990.
Gen Pinochet, who ruled the South American nation for 17 years, died in 2006.
Divisive figure
The protesters held a rally at a former detention and torture centre in the Chilean capital.
Many wore photos of their relatives.
"In Chile, state-sponsored terrorism existed. Forced disappearances existed. Torture existed. Executions. And the systematic violation of hundreds of Chileans. We cannot allow this. We can't allow a tribute to this," Alejandra Arriaza, of the Corporation for the Promotion and Defence of People's Rights was quoted as saying by the AP news agency.
The documentary, "Pinochet", will be screened in a theatre in Santiago on Sunday.
The organisers say it aims to show Gen Pinochet as he really was, and not as the media portrayed him - as a ruthless dictator.
Right-wing politicians and former members of the Chilean military have been invited.
The controversy shows how divisive Gen Pinochet remains, nearly four decades after the coup that brought him to power, the BBC's Gideon Long in Santiago reports.
For some he was a hero who saved Chile from Communism, but for others he was as brutal murderer who should be reviled, not applauded, our correspondent says.
Northern Andean Region [contents]
Youth boxing hits the streets in Venezuela program
JORGE RUEDA. AP. June 7, 2012
CARACAS, Venezuela (AP) — Migadalia Flores was worried about raising her 13-year-old son in a poor Caracas neighborhood where teenage boys often drift into crime.
So she sent him to fight.
Her son, Miguel Uzcategui, is now a standout among the youths who line up with their gloves every weekend to slug it out in a boxing ring that is moved around Caracas from parks to plazas to streets in the slums.
They're participating in a program supported by the Venezuelan government that aims not only to develop stellar fighters and expand the sport's reach but also to give poor adolescents an alternative to crime, alcohol and drugs.
Boys start as young as 8 compete in the outdoor matches, joining older boys as well as some teenage girls in the weekend competitions, where renowned Venezuelan coaches give them pointers.
Miguel said the sport has given him goals and improved self-confidence. Dozens of boxing medals hang on the wall of the family home. "Boxing has helped me a lot. I'm stronger," he said.
Flores, a hairdresser, said she thinks boxing is giving is teaching Miguel discipline and will help keep him in school. She said she hopes the sport will lead to scholarships for her son's high school and university studies.
Similar boxing programs exist in other countries, but organizers say the Venezuela matches have been held more consistently than in many places. Since 2009, young boxers have participated in more than 3,000 fights in outdoor rings, sometimes even fighting in the rain.
"Our mission is to pull the kids out of the clutches of crime, teach them values along with discipline," said Williams Gonzalez, who helped start the program in 2009 and is president of the Caracas Boxing Association.
The government's Sports Ministry provides financial support, and organizers say one of the long-term goals is to bring the country another Olympic medal. Boxing has long been popular in Venezuela, accounting for five of the country's 11 Olympic medals to date. But the last came in 1984, when Omar Catari won a featherweight bronze.
The country's fighters are expected to face long odds at the London Games this year. The three who qualified include Gabriel Maestre and Jose Alexander Espinoza, as well as Karlha Magliocco, the first Venezuelan woman boxer to reach the Olympics.
Some of the young boxers who compete in the weekend matches say they hope one day to join them.
"In about 120 fights, I've had 14 losses. All the rest I've won," said Ronnis Hidalgo, a 14-year-old who is a national champ in his age group and who receives a monthly scholarship of about $460 through the program.
Hidalgo said boxing helps him stay away from the gangs and frequent shootings that terrorize many in his neighborhood.
Cristian Lopez, 11, said there are no soccer fields or baseball diamonds near his home in the crowded slum of La Vega, making boxing a convenient option. "It has kept me away from problems and it doesn't cost much. I can practice it in any alleyway, in the living room of my house," Lopez said.
One coach who encourages the young athletes is Jesus "Kiki" Rojas, a former flyweight and super flyweight World Boxing Association champion. He said it's rewarding to help youngsters who otherwise could slide into trouble.
"Every time a kid ends up in our hands who has behavior problems, who's doing poorly in school, and later you see that he becomes disciplined, that he manages to get ahead, it's one of the most beautiful experiences," Rojas said.
Cuban boxing coach Jorge Garcia also helps train the boxers under an agreement between the Venezuelan and Cuban governments. He said the weekend matches are helping fighters improve and that the country can still do more to develop its teaching programs.
"I see a big future for Venezuelan boxing," Garcia said. "These matches promote boxing in Venezuela a lot, which is what's needed. The talent is there."
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World Bank Chief Zoellick Says Chavez’s ‘Days Are Numbered’
Daniel Cancel and Eric Martin. Bloomberg. June 8, 2012
World Bank President Robert Zoellick said Venezuelan President Hugo Chavez’s “days are numbered” economically and politically and that the region should prepare to move into a new era of democracy on his eventual exit.
Zoellick spoke last night at the Organization of American States in Washington where the Inter-American Dialogue, a policy analysis group, held a reception celebrating its 30th anniversary. He said countries dependent upon Venezuela’s aid like Nicaragua and Cuba will face difficulties if subsidies are cut, which may pave the way for rapid policy changes.
“Chavez’s days are numbered,” Zoellick said. “If his subsidies to Cuba and Nicaragua are cut, those regimes will be in trouble. There will be an opportunity to make the Western Hemisphere the first democratic hemisphere. Not a place of coups, caudillos, and cocaine -- but of democracy, development, and dignity.”
Chavez, a 57-year-old former paratrooper who is seeking re- election in October to extend his 13-year rule until 2019, has undergone three operations in Cuba as part of his battle with cancer in the past year. The government has refused to say what type of cancer he has or provide a prognosis for Chavez, leading to speculation that his health may be worse than he has let on.
The Venezuelan leader will be challenged by Henrique Capriles Radonski, a 39-year-old former governor of Miranda state who won a primary election by a landslide in February and has been endorsed by a group of opposition parties.
Oil Shipments
Chavez sends Cuba about 100,000 barrels of oil a day in exchange for more than 20,000 doctors who work in state-run Venezuelan clinics. Nicaragua also receives oil from Venezuela, through the Petrocaribe agreement, which is repaid over as many as 25 years and can include food and textiles as payment.
Phone calls and an e-mail sent to the Venezuelan Information Ministry seeking comment weren’t immediately returned.
Zoellick said that the Americas should look toward the future rather than bicker about past U.S. intervention in the region, echoing comments by U.S. President Barack Obama.
Chavez often criticizes the World Bank and the International Monetary Fund for being instruments of what he calls the U.S. “empire” and for dictating market-friendly policies that fail to improve the lives of the region’s poor.
Arbitration Exit
Chavez said in January that he’s pulling Venezuela from the World Bank’s arbitration court -- the International Centre for the Settlement of Investment Disputes, known as ICSID -- this year as investment dispute cases have mounted against the South American country after a wave of nationalizations. He also threatened to withdraw from the IMF in 2007.
Zoellick, whose term as World Bank president winds up at the end of this month, served as U.S. Trade Representative in the administration of former President George W. Bush.
The U.S. needs to deepen its commitment to free-trade agreements in the Americas as the country is “no longer leading the open trade agenda,” and “relies increasingly on defensive measures,” Zoellick said in the speech.
The World Bank chief said Latin American countries need to continue to pursue trade ties with Asia, develop capital markets in local currencies, invest in infrastructure, diversify away from commodity-dependent economies and to focus on maintaining productivity to achieve sustainable growth.
“Many developing economies make early rapid gains. But then productivity and growth tend to slow,” he said. “Many Latin American countries will need to translate the commodity boom into broader, more diversified economies. This region has lived through roller-coaster booms and busts before.”
To contact the reporters on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net Eric Martin in Washington at emartin21@bloomberg.net.
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net
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Guyana rebuffs Venezuela opposition complaint
AP. June 7, 2012
GEORGETOWN, Guyana -- An offshore oil exploration concession granted by Guyana's government to Exxon Mobil Corp. is stirring controversy in neighboring Venezuela.
Guyana's government reacted with surprise on Thursday after Venezuela's opposition coalition condemned such oil concessions and demanded a response by President Hugo Chavez's government.
Natural Resources Minister Robert Persaud said Guyana officials believe the Venezuelan opposition's stance is largely political posturing ahead of the neighboring country's October presidential election. "There is not a single rig or piece of equipment in the concession now," Persaud said.
Venezuela and Guyana have a longstanding territorial dispute over the mineral-rich Essequibo region, as well as offshore areas where there are thought to be deposits of oil and natural gas. Officials in Guyana say that Exxon Mobil has a 17 million acre (6.9 million hectare) concession where it's conducting seismic work.
Venezuela's opposition coalition, the Democratic Unity Table, expressed concern in a statement on Wednesday, rejecting "all the concessions granted by the government of Guyana in areas corresponding to the Atlantic coast of Venezuela." In particular, it mentioned oil exploration work by Exxon Mobil and Royal Dutch Shell PLC in the area.
"President Hugo Chavez's government should state its position," the opposition said in the statement, which came after a report in a Venezuelan newspaper that oil exploration work had been reactivated in an offshore area known as the Stabroek block.
Venezuela's Foreign Ministry did not immediately comment on the matter.
"ExxonMobil and Shell have had an active exploration license offshore Guyana for several years," Exxon Mobil spokesman Patrick McGinn said in an emailed statement. "Exploration is a process that takes many years and has multiple phases. Currently, we are evaluating next steps in the Stabroek Block's exploration."
Other companies exploring for oil off Guyana's coast include Spain's Repsol, Britain-based Tullow Oil and CGX Energy Inc. of Canada.
Last year, Venezuela's government expressed concerns after Guyana filed a claim with the United Nations for a larger share of the continental shelf to take in offshore areas thought to hold oil and natural gas deposits.
Venezuela has maintained a longstanding claim to the vast Essequibo region, which is rich in gold, bauxite and other minerals. Venezuela argues that it was cheated out of the area when the border was drawn in 1899. In recent years, though, Venezuela and Guyana have maintained cordial relations despite the dispute.
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Venezuela court decisions shake up 2 small parties
JORGE RUEDA. AP. June 8, 2012
CARACAS, Venezuela -- Venezuela's Supreme Court has issued decisions shaking up the leadership of two small political parties, apparently preventing them from backing opposition presidential candidate Henrique Capriles.
Capriles condemned the court decisions on Thursday, saying that President Hugo Chavez's government is resorting to desperate tactics to keep the parties Podemos and PPT from supporting his candidacy. Both used to be pro-Chavez but have in recent years moved to the opposition.
Chavez's critics have repeatedly accused the president of wielding undue influence over the judiciary and using it to go after his adversaries. Chavez has denied those accusations.
"Only those who are desperate resort to judicial tricks!," Capriles said in one of several messages on Twitter. "Whatever they do, the majority of the bases of those political organizations are with us."
The Supreme Court said in a statement on its website Thursday that it had decided to recognize former pro-Chavez state governor Didalco Bolivar as the leader of Podemos, rather than established leader Ismael Garcia, a vocal government critic.
A similar ruling in the case of PPT was announced by the court on Wednesday. It voided the party's most recent internal elections, which were carried out in October, and ordered it to hold new elections within 90 days.
The decisions appear to prevent the parties from backing Capriles before a Monday deadline for parties to specify the presidential candidate they will support. Capriles and Chavez both plan to formally sign up as candidates on Sunday and Monday, respectively, as they prepare for the Oct. 7 presidential vote.
Leaders of the two small parties could not immediately be reached for comment. Podemos broke with Chavez's government in 2007. PPT, which in Spanish stands for Fatherland For All, similarly has irked Chavez's government by defecting from its camp.
The court's decisions drew criticism from others as well. Gustavo Hernandez Acevedo, a blogger writing on the website Caracas Chronicles, said the ruling "showcases just how far Hugo Chavez is willing to go to punish those he sees as traitors."
In the case of Podemos, the Supreme Court said in a statement that it had decided to review an earlier decision by its Electoral Chamber, which in March had denied a challenge by Bolivar to an agreement by party leaders to postpone internal elections.
The court said that Bolivar will lead the party "until the current case is dealt with in depth." That means Bolivar is to have the last word on which candidate the party will back in the presidential election, and he is expected to support Chavez.
On the ballot in Venezuela, candidates' photos typically appear along with the symbols of parties that back them.
Bolivar, a former governor of Aragua state, previously faced corruption charges and has changed political loyalties. He split with Chavez in 2007 when the governor refused to participate in the president's plan for various parties to join together in a single pro-government party.
In 2009, Bolivar was summoned for arraignment on corruption charges and sought asylum in Peru, saying he was being targeted for political reasons. He then returned to Venezuela in August 2011 saying he would face justice. He was jailed but later freed.
Since his return to Venezuela, Bolivar has repeatedly expressed support for Chavez.
Capriles has the backing of a coalition of opposition parties. He was chosen in a February primary to be the opposition's single challenger to take on Chavez.
The leftist president, who was first elected in 1998, is seeking another six-year term. He has recently scaled back his public appearances after undergoing cancer treatment in Cuba, and the race so far has been dominated by speculation about whether his illness may interfere with his re-election bid.
Capriles has been trailing in the polls, with survey results varying widely. Some polls touted by the government have given Chavez a lead of more than 20 percentage points, while others indicate a smaller margin for the president, some less than 5 percentage points.
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11,179 Colombian politicians, officials, businessmen involved in parapolitics: Report
Sarah Kinosian. Colombia Reports. June 7, 2012
More than 11,000 Colombian politicians, state officials, businessmen and citizens are facing accusations of being accomplices to paramilitary groups, said research group Verdad Abierta Thursday.
“We asked the Prosecutor General’s Office how many people the paramilitaries mentioned voluntarily in their trials or in investigations and the prosecutor general gave us the number of 11,179 politicians, government officials, businessmen and citizens that were accomplices to paramilitary dealings,” Cesar Molinares Duenas, editor of Verdad Abierta, told Colombia Reports.
The infiltration of paramilitary groups into Colombian politics has become popularly known as "parapolitics." Former president Alvaro Uribe and hundreds of his former officials have been implicated in the scandal, with dozens facing prosecution.
Verdad Abierta’s report revealed the extent to which the scandal has affected the country, from the highest political office to regional governments and businessmen.
From the beginning of 2005's controversial Justice and Peace Law until the end of April 2012, prosecutors and officials have requested the investigation of 943 politicians, 870 military members, 330 public servants and 9,036 civilians, including several business owners suspected of contributing to paramilitary organizations in some fashion. The Justice and Peace reform sought to provide legal benefits to demobilized members of illegal armed groups, but instead invoked waves of criticism for granting impunity to human rights violators.
Seven of the past ten Senate presidents between 2002 and 2012 are being investigated for their ties to paramilitaries, while extradited AUC leader Salvatore Mancuso and other paramilitary leaders claimed President Uribe’s reelection campaign in 2006 was financed by the right-wing group.
Four institutions are in charge of investigating the alliances between paramilitaries and politicians: the Supreme Court, the offices of the prosecutor general, the inspector general and the Commission of Accusations for the House of Representatives.
The Prosecutor General’s Office, whose responsibilities include monitoring public officials, created a specialized commission to investigate parapolitics cases, known as the Monitoring Disciplinary Process Group. Initially, the group was meant to span only 2011, but was extended indefinitely in March. The investigative office at present has 356 ongoing cases and counting against public officials for ties to paramilitary groups, with the majority of cases concentrated in the northern Colombian departments of Antioquia, Cesar and Sucre.
Currently the Inspector General’s Office is processing 103 parapolitics cases, of which 88 are ongoing, 11 have disciplinary sanctions and four have been acquitted. The most notable of these cases is that of ex-senator and former ambassador to Peru Jorge Anibal Visbal, who was linked to paramilitaries during his time as the president of the Federation of Livestock through evidence and testimony. Current investigations also include mayors, senators and house representatives from throughout the country.
The Accusation Commision of the House of Representatives, which has the power to investigate the highest authoritative bodies in the country, including the President and the Supreme Court, is currently investigating only two cases, that of Mario Iguaran and Luis Camilo Osorio, who both held the prosecutor general position. Both high-profile cases have been stalled numerous times by the defense.
The original case against Osorio, who served as prosecutor general from 2001 to 2005 under President Uribe, was dropped due to an apparent lack of evidence. The investigation was reopened in March when he was ordered to testify about allegations that he allowed paramilitary infiltration during his tenure in office.
The former prosecutor general has also been repeatedly accused of purposefully dismissing cases against high-ranking Colombian officials with suspected ties to the AUC.
According to government officials, the biggest problem with parapolitics investigations is that the statute of limitations expires five years after the alleged crime takes place. For investigations that also include human rights violations, prosecutors have a 12-year window to process the case. Given these time limitations, many of the cases dealing with politicians’ ties to paramilitaries in the parliamentary elections in 2002 and 2003 have expired.
Another major obstacle to prosecutions is the inability to verify allegations. In several cases, public officials quit their post once an investigation was opened against them, and the prosecution loses its jurisdiction to investigate once an official has left their post.
A cache of emails from the computer of Vicente Castaño, who was one of the founders of the Peasant Self-Defense Forces of Cordoba and Uraba (ACCU), a precursor to the AUC, was released Wednesday implicating many high-profile politicians in the parapolitics scandal. Among the most damaging emails was one that mentioned former Minister of the Interior and Justice, Sabas Pretelt de la Vega, who reportedly offered to issue a law that would prevent paramilitaries from being extradited to the U.S.
It was also revealed that officials and AUC members met to discuss hastening the passing of 2005's Justice and Peace Law to avoid scrutiny. "We have to push through the Constitutional Court ruling regarding Law 975. Surely it will come with substantial modifications to the original text approved by Congress. This has to be done in haste," an email read.
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Colombia and Bolivia to coordinate fight against organized crime
Jet van Dijck. Colombia Reports. June 7, 2012
Colombia's minister of foreign affairs and her Bolivian counterpart signed an agreement on security and defense with an emphasis on transnational organized crime, government officials reported Tuesday.
It will coordinate the two countries' policies on risk prevention and the fight against drug trafficking and organized crime.
"We want to support Bolivia, we have the experience to prevent the cartels from coming to this country and to prevent them from suffering from the terrible scourge that Colombia has suffered from," said Colombia's Minister of Foreign Affairs Maria Angela Holguin.
According to Bolivia's Foreign Minister David Choquehuanca, the agreement "strengthens the relations between both countries, which face common challenges, and will allow the two countries to coordinate measures to fight organized crime.
Bolivia ranks third in the world in the production of coca and cocaine after Colombia and Peru, according to the 2011 World Drug Report by the United Nations Office on Drugs and Crime.
According to the report, clandestine drug producers in Bolivia have been benefiting from information-sharing with Colombian producers and traffickers since about 2007. Laboratories using the Colombian method are apparently more efficient in extracting cocaine from coca leaves.
The cooperation agreement was signed on June 5 at the 42nd Assembly of the Organization of the American States.
Western Andean Region [contents]
Another Lawmaker Resigns From Peru Ruling Party
RYAN DUBE. Wall Street Journal. June 7, 2012
LIMA—Another legislator from President Ollanta Humala's ruling Gana Peru coalition has resigned from the party over the government's handling of antimining protests.
Congressman Ruben Coa, a representative for the southern region of Cuzco, announced his resignation Thursday, a few days after three other lawmakers decided to break away from the ruling party.
Mr. Coa had strongly criticized the government's handling of recent protests against Xstrata XTA.LN +3.00% PLC's Tintaya copper mine in Cuzco's Espinar province. Two people were killed and dozens were injured during the violent protests, which led the government to declare a state of emergency and detain protest leaders, including the mayor of Espinar.
Mr. Coa and two other legislators from Gana Peru had called for the resignation of Prime Minister Oscar Valdes, who was accused of neglecting dialogue in favor of hard-line tactics to crack down on demonstrators.
Mr. Coa's resignation, which wasn't unexpected, is the latest blow to Mr. Humala's coalition in Congress, which is well short of a majority. Gana Peru now has 42 seats in the 130-seat parliament, meaning that it will require the support of opposition parties to pass legislation.
On Monday, three left-leaning members of Mr. Humala's bloc left his party over differences with the administration, which has veered to the right since taking office last July.
The discontent among leftist members of Congress has simmered since late last year when Mr. Humala removed center-left Prime Minister Salomon Ghitis, replacing him with Mr. Valdes, a former military officer and businessman.
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Peru Keeps 4.25% Rate on Global Outlook and Commodity Declines
John Quigley. Bloomberg. June 8, 2012
Peru’s central bank kept borrowing costs unchanged yesterday for a 13th month as global market turmoil and declining commodity prices threaten to derail a rebound in domestic investment.
The seven-member board, led by bank President Julio Velarde, maintained the overnight rate at 4.25 percent, matching the forecasts of all 18 economists surveyed by Bloomberg.
“Uncertainty has increased again in the international financial markets and as a result a decline in international commodity prices is being observed,” policy makers said in a statement posted on the central bank’s website.
Growth of South America’s sixth-largest economy accelerated in the first quarter for the first time since 2010 as investor confidence fueled a rebound in construction. Though rising demand may fuel inflation that’s been above target for 11 months, policy makers are more concerned about the effects of a global slowdown, said Siobhan Morden, head of Latin American fixed income strategy at Jefferies & Co Inc.
“Domestic demand is very strong but external risks have clearly worsened,” Morden said in telephone interview from New York. “They won’t hike rates not knowing the outcome of Europe. Central banks are typically conservative and don’t want to flip flop in terms of their policy management.”
‘Less Optimistic’
The price of copper, Peru’s top export, has dropped 19 percent in the last year as Europe’s recession damps growth in China, the biggest consumer of industrial metals, and amid concern the U.S. recovery is faltering.
Peru’s exports fell 12 percent in April from a year earlier to $3 billion, a one-year low, on declines in copper, zinc and fishmeal prices, the Trade Ministry said June 5.
“There’s great uncertainty about what will happen to external demand and how it will hit economic activity,” Velarde said May 29. “We’re probably less optimistic than we would have been six weeks ago” about growth exceeding the central bank’s 5.7 percent forecast for this year, he said.
Increased social unrest has also clouded the outlook for the $176 billion economy, he said.
The government declared a state of emergency last week in the southern Andean province of Espinar after at least two people died in protests against an Xstrata Plc (XTA) copper mine that community leaders say is polluting water supply. Local residents are also demanding a bigger share of profits.
Investment Standby
Newmont Mining Corp.’s (NEM) (NEM) $4.8 billion Minas Conga gold project was suspended in November after street protests against what would be Peru’s biggest-ever investment. The protesters resumed demonstrations on May 31.
About $50 billion of mining investment is on stand-by because of the unrest, Finance Minister Miguel Castilla told state television June 4. The industry accounts for about 20 percent of fiscal revenue and 60 percent of exports. The investments are needed to fuel 6 percent growth this year and halt a decline in the country’s mining production, he said.
Gross domestic product rose 6 percent in first three months of this year as private investment climbed at the fastest pace in three quarters and the government stepped up infrastructure spending.
Government tax revenue rose an annual 8.9 percent last month, the most since February, while demand for consumer goods fueled a 9.4 percent increase in imports, the tax and customs duty collection agency said June 4.
The central bank raised reserve requirements for the first time in a year on May 1, citing concern foreign inflows risk fueling demand for dollar-denominated loans and stirring inflation pressures.
Commodities
Annual growth in bank lending slowed to 16 percent in April from 18 percent in March as demand for dollar loans eased, the central bank said last week.
Consumer prices rose 0.04 percent in May, the slowest pace in four months, after food and fuel costs fell. Prices rose 4.1 percent from a year earlier. The central bank targets annual inflation of 1 percent to 3 percent.
Easing oil and grain prices will allow inflation to converge to the target next year, said Felipe Hernandez, an economist at RBS Securities Inc. in Stamford, Connecticut.
“Peru may want to hike once or twice more just to bring neutral rates to a slightly higher level” should external risks subside, Morden said. “If there were an extreme shock from Europe, there would be case for easing instead of hiking.”
To contact the reporter on this story: John Quigley in Lima at jquigley8@bloomberg.net.
To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net.
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Ecuador’s Rating Raised by S&P on China Loans, Oil Proceeds
Nathan Gill. Bloomberg. June 7, 2012
Ecuador’s credit rating was boosted by Standard & Poor’s for the first time in two years as loans from China and higher crude oil prices buoyed the South American government’s finances and economic outlook.
S&P raised the nation’s credit rating to B from B-, five levels below investment grade, according to a statement from the ratings company, which said the outlook is stable.
“The upgrade reflects the perceived improvement in the government’s willingness, as well as capacity, to service its debt due to improved financing options and higher oil production and economic growth prospects,” Richard Francis, an analyst at S&P in New York, wrote today in the statement.
Ecuador, a member of the Organization of Petroleum Exporting Countries, has relied on rising oil prices and tax increases to fund higher government spending while drawing on loans from China and the Inter-American Development Bank to cover shortfalls since defaulting on $3.2 billion of international bonds in 2008 and 2009.
A history of default and inconsistent economic policies remain “credit constraints,” according to S&P.
The yield on Ecuador’s benchmark dollar bonds due in 2015 dropped three basis points, or 0.03 percentage point, to 9.81 percent at 3:29 p.m. in Quito, according to data compiled by Bloomberg. The price rose 0.08 cent to 98.72 cents on the dollar.
Yields in 2012
Bond yields have increased 54 basis points this year while those on similar maturity Venezuelan bonds have decreased 239 basis points to 10.38 percent over the same time period, Bloomberg data show. This week, Ecuador’s yields reached their highest level since October, climbing to 10.27 percent, as concern that Europe’s debt crisis will derail a global economic recovery helped push oil prices lower.
Ecuador, which forecasts a $4.23 billion budget deficit this year, or 16 percent of total spending, is rated by Moody’s Investors Service at Caa2 and at B- by Fitch Ratings. The Finance Ministry expects the economy to expand 5.35 percent this year, according to the 2012 budget.
President Rafael Correa said in February the country is negotiating a $1.7 billion loan from China and expects to receive the first payment by August. Since the default, the government has borrowed about $7.25 billion from China, according to Fitch.
To contact the reporter on this story: Nathan Gill in Quito at ngill4@bloomberg.net
To contact the editor responsible for this story: David Papadopoulos at Papadopoulos@bloomberg.net
Mexico, Central America and Caribbean [contents]
Computer files link TV dirty tricks to favourite for Mexico presidency
Jo Tuckman. The Guardian. June 7, 2012
Mexico's biggest television network sold prominent politicians favourable coverage in its flagship news and entertainment shows and used the same programmes to smear a popular leftwing leader, documents seen by the Guardian appear to show.
The documents – which consist of dozens of computer files – emerge just weeks ahead of presidential elections on 1 July, and coincide with the appearance of an energetic protest movement accusing the Televisa network of manipulating its coverage to favour the leading candidate, Enrique Peña Nieto.
The documents, which appear to have been created several years ago, include:
• An outline of fees apparently charged for raising Peña Nieto's national profile when he was governor of the state of Mexico.
• A detailed media strategy explicitly designed to torpedo a previous presidential bid by leftwing candidate Andres Manuel López Obrador, who is currently Peña Nieto's closest rival.
• Payment arrangements suggesting that the office of former president Vicente Fox concealed exorbitant public spending on media promotion.
While it has not been possible to confirm the authenticity of the documents – which were passed to the Guardian by a source who worked with Televisa – extensive cross checks have shown that the names, dates and situations mentioned largely line up with events.
There is also evidence that actions suggested in the proposals did take place. The allegations come at a crucial time for Peña Nieto, the candidate of the ideologically nebulous Institutional Revolutionary party: recent opinion polls show his substantial lead beginning to erode as Televisa's role as political kingmaker has become a central issue of the campaign.
In a country where newspaper readership is tiny and the reach of the internet and cable TV is still largely limited to the middle classes, Televisa – and its rival TV Azteca – exert a powerful influence over national politics.
Televisa, the largest media empire in the Spanish-speaking world, controls around two-thirds of programming on Mexico's free television channels. The documents appear to have been developed within Radar Servicios Especializados, a marketing company run by a Televisa vice-president, Alejandro Quintero.
Contacted by the Guardian, Televisa declined to clarify the relationship between Radar and the core company, or Quintero's role at the two companies without first seeing the documents. A spokesman refused to comment on the allegations without seeing the files. "We cannot give an opinion about imformation and/or documents we do not know," he said.
Many of the computer files seen by the Guardian were saved under the name of Yessica de Lamadrid, who at the time was a Radar employee and Peña Nieto's lover.
De Lamadrid told the Guardian that she believed the documents were forgeries. She said the promotional projects she worked on for politicians never put content up for sale.
One of the documents is a PowerPoint presentation which explicitly states its aim of making sure "López Obrador does not win the 2006 elections". That bitterly contested election saw the leftwing candidate lose a commanding lead and ended with him claiming he had been cheated.
It was apparently created just after midnight on 4 April 2005, hours before President Fox was reported to have met the heads of Televisa and TV Azteca.
Fox was facing growing criticism for an attempt to get Lopez Obrador, then mayor of Mexico City, impeached over a minor planning dispute. The document outlines short-term measures for controlling the backlash, a period of national mourning for the recently-deceased Pope John Paul II to distract attention from the growing row. The next day Fox declared a day of mourning for the pontiff.
Longer-term strategies proposed to "dismantle the public perception that Lopez Obrador is a martyr/saviour," by boosting news coverage of crime in the capital and revisiting old corruption cases involving his former allies. The plan also envisaged "promoting personal stories of crimes suffered [in the capital] by showbiz celebrities" and "urging the inhabitants of the Big Brother house" to do the same. Some Televisa celebrities did just that, both on showbiz programmes and in the Mexican version of Celebrity Big Brother broadcast that May.
The document also advises that scriptwriters of a popular political weekly satire show called El Privilegio de Mandar should make the character who represented López Obrador appear "clumsy" and "inept." The final episode of the show, broadcast immediately after the 2006 elections – when the result of a recount was still pending – ended with a non-humorous speech by an actor calling on López Obrador to accept defeat.
A former Televisa employee, who is not the source of the documents, told the Guardian that they attended meetings within the company where the anti-López Obrador strategy was discussed. "There was a strategy and there was a client who paid a lot of money," the source said.
Most of the other documents are strategies and associated budgets apparently aimed at promoting political clients through TV adverts and programmes.
They include three Excel spreadsheets titled "Enrique Peña Nieto: Budget 2005-2006" apparently created at the start of his term as governor of the state of Mexico.
All three spreadsheets detail nearly 200 news reports, interviews and features. The earliest version puts the total cost of these services at 346,326,750 pesos (about $36m at the time, or £23m today). The latest includes a "50% rate reduction".
A paper document containing the same figures seen by the Guardian was cited by López Obrador during the a presidential debate last month, in which he repeated claims that Peña Nieto was a TV product. Peña Nieto and Televisa suggested the document – first published in the left-leaning news magazine Proceso in 2005 – could have been a forgery.
The document was obtained by investigative journalist Jenaro Villamil who has always refused to reveal the identity of his source. In the past Televisa has accused Villamil of being on a mission to smear the company.
Asked if the state of Mexico had ever paid for coverage on Televisa, Peña Nieto's campaign team refused to comment. In a written response, David López, who is Peña Nieto's head of communication and previously held the same post at the state of Mexico, said: "During Enrique Peña Nieto's term as governor of the state of Mexico (from 2005 to 2011) no contract existed of that kind." Lopez added that "all the publicity contracts for the communication of government activities and the sums involved have been transparent and put on the internet."
Mexican politicians have long been criticised for spending lavishly to promote the achievements of their administrations, amid suspicion of creative accounting that masks the real cost to the public.
Media expert Raúl Trejo said the kinds of practices detailed in the document did not appear to be illegal under Mexican law, but, if true, would be unethical. The only document detailing services apparently delivered refers to a TV campaign ahead of President Fox's fifth state of the nation address on 1 September, 2005.
The document describes an "agreed fee" of 60m pesos (around $6m) covering the production of six TV adverts featuring Fox, as well as media training for five of his ministers and a series of interviews with them. The Guardian has verified that at least three of the interviews took place. The section which could prove most controversial refers to arrangements for payment, which suggest deliberate manipulation to conceal the extent of spending. The document says that "as agreed" the presidential office has been billed directly for only 3m pesos, adding that invoices for the remaining 57m pesos will be sent out when "the presidential office tells us which other parts of the government to bill for what services."
The files also contain proposals, budgets and promotional material involving several other politicians including the former minister of Tamaulipas state, Tomás Yarrington accused by US prosecutors of laundering money for the Gulf drugs cartel. Yarrington's lawyers have denied the allegations of money-laundering.
Another politician mentioned in the documents, former senator Demetrio Sodi, said he had no knowledge of a promotional strategy drawn up by Radar shortly before his unsuccessful bid to become mayor of Mexico City.
Sodi said it was unlikely that the document was a forgery, but insisted that he had never paid for favourable coverage. He suggested the document might have originated among people who, unknown to him, wanted to support his candidacy.
None of the other politicians named in the documents would talk to the Guardian. The current wave of protests against perceived media dirty tricks was triggered on 10 May when Televisa first ignored an anti-Peña Nieto protest at a private university where he was giving a campaign speech – and then gave wide coverage to accusations that the protest was staged by non-student troublemakers.
One protester at a recent demonstration carried a placard proclaiming: "Not even my mother manipulates me like Televisa."
As the protests against alleged media bias gather pace, Televisa has become keen to prove that its coverage is balanced. It now covers the protest movement in detail, and the anchors of its main news shows recently put Peña Nieto through a gruelling interview. The network has also announced that it will broadcast the next presidential debate on 10 June on its most popular channel, which during the first debate was reserved for a talent show.
The former Televisa employee said that while the network was happy to promote Peña Nieto when "he was the best product," this did not necessarily mean long term commitment. The source pointed out that prior to the dirty tricks campaign against him, Lopez Obrador was on very good terms with the network."Never lose sight of the fact that this is a business. The loyalty is to the position, not to the person."
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Mexico approves plan to auction TV frequencies for 1st time
EFE. June 7, 2012
Mexico's telecommunications regulatory agency has approved plans for an unprecedented auction of frequencies for two nationwide television channels, part of a bid to expand competition in that sector.
The concession program will be the "first auction of television frequencies in the country's history," the Federal Telecommunications Commission, or Cofetel, said in a statement.
"The awarding of these frequencies is aimed at fostering diversity of content, driving competition in the sector and boosting digital terrestrial television, or DTT, infrastructure," the Cofetel said.
These frequencies will enable "two DTT broadcast channels (to be established) in 153 main population centers, representing the necessary coverage to service 93 percent of the country's population," the regulatory agency said.
The approval of the plan marks the first step in the auction process, which will be formally launched once announced in the Official Gazette, the Cofetel said.
After that time, "any interested party may request ... the auctioning of frequencies and geographical coverage in addition to or distinct from those provided for in this program," the Cofetel said.
It added that it was coordinating efforts to review the mechanisms and rules for the planned auction with the Federal Competition Commission, or CFC.
Mexico's broadcast television is a duopoly market dominated by Televisa, the world's largest Spanish-language media conglomerate, and the smaller TV Azteca.
Separately, the regulatory agency approved a draft Interconnection Framework Agreement, a mechanism designed to ensure market operators' compliance with interconnection requirements, one of the final conditions dominant fixed-line telephone operator Telmex must meet to become eligible for a pay TV license.
This document is to be sent to the Federal Regulatory Improvement Commission, or Cofemer, for consultation prior to its possible publication in the Official Gazette. EFE
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Nicaragua looks to one-up Panama with $30-bln canal
AFP. June 6, 2012
MANAGUA — Nicaragua is pressing ahead with plans for a new $30-billion Panama-style canal linking the Atlantic to the Pacific, with China, Japan and South Korea reportedly expressing interest in the project.
Nicaraguan President Daniel Ortega submitted a draft bill on Tuesday that details six possible routes for the proposed waterway, one of which would pass through the San Juan River that forms part of the border with Costa Rica.
"We've had talks with Japan, China, Russia, Venezuela, Brazil and South Korea and everyone is interested" in contributing to the $30 billion mega-project, project director Eden Pastora told local television.
He added that Nicaragua's conduit would be "larger and deeper" than the Panama Canal, currently the only man-made shortcut between the two oceans.
Feasibility studies are expected to cost $350 million while actual construction could hit $30 billion.
Pastora said the project would be carried out by a joint venture in which the government would own 51 percent of shares and tenders would be issued for the remainder.
The idea of building a canal across Nicaragua dates back centuries, but was overtaken by the construction of the 51-mile (82-kilometer) Panama Canal.
In recent years, however, Nicaraguan governments have revived the concept as a way to promote development of the country, the second poorest in the Americas after Haiti.
The idea has led to some controversy.
In late 2010, Nicaragua sparked a diplomatic row with Costa Rica when it began dredging the San Juan, leading Costa Rica to accuse it of invading a small island in the river.
The dispute has gone to the International Court of Justice in The Hague.
Costa Rica on Wednesday demanded an explanation over the plans, with the foreign ministry saying that Nicaragua was free to develop infrastructure projects on its own territory but must adhere to relevant border treaties.
Ortega countered that Nicaragua had the right to build in the disputed waterway, saying: "No one can forbid the option of constructing the canal in the San Juan River and Lake Nicaragua."
The Panama Canal is currently undergoing a major $5.25-billion project, set to be completed in 2014, to expand its choked capacity. The expansion will allow some of the world's largest ships to pass through.
The vital waterway handles five percent of world trade annually, and has hosted more than one million vessels since it was inaugurated in 1914. The United States handed over control of the canal to Panama on December 31, 1999.
It also generated a record $1 billion for Panama in the fiscal year 2010-2011, for a total of $6.6 billion since the United States handed over control.
As global trade increasingly shifts towards the Asia-Pacific region, China and other Asian countries are keen to build a backup inter-oceanic shortcut.
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S&P Lifts Honduras Rating One Notch on Stable Political Environment
Nathalie Tadena. Dow Jones. June 8, 2012
Standard & Poor's lifted its ratings on Honduras by one notch, noting the Latin American country's political environment has stabilized since former President Manuel Zelaya was ousted.
S&P upgraded Honduras's ratings to B-plus, four notches below investment grade, from B. The outlook is stable, reflecting expectations that the government will maintain moderate fiscal deficits in 2012 and 2013 and maintain its low debt burdens.
The ratings firm said its upgrade also follows the government's ability to restore good ties with external donors and reduce political tension, which has helped created an environment for recent progress in fiscal and pension overhauls and gradual exchange rate flexibility.
S&P also noted Honduras's government has overhauled its largest public-sector pension fund, reduced its actuarial deficit and modestly improved its fiscal revenue.
Write to Nathalie Tadena at nathalie.tadena@dowjones.com
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Costa Rica announces trade agreements with Colombia and European association
Tico Times. June 6, 2012
President Laura Chinchilla announced that Costa Rica and Colombia will begin negotiations on a free trade agreement expected to be signed later this year.
On Tuesday morning, the president said in a press conference that negotiations will start June 15, when Colombian President Juan Manuel Santos visits Costa Rica.
According to Chinchilla, the agreement is the only requirement Costa Rica lacks to become a full member of the Pacific Alliance, a group that promotes the growth, development and competitiveness of member countries.
The president also said Costa Rica, Honduras, Guatemala and Panama and the countries of the European Free Trade Association on Wednesday will begin their second round of negotiations for signing a free trade agreement in Panama City. The first meeting with the association, formed by Iceland, Lichtenstein, Norway and Switzerland, was in March. The third round of negotiations will be held in Costa Rica at a date to be decided in coming days.
Costa Rica seeks to complement the association agreement between Central America and the European Union, whose signature is scheduled for June 29 in Honduras.
Region: Trade, Security, Economy and Integration [contents]
China interested in a trade agreement with Mercosur reveals Uruguay
Mercopress. June 8, 2012
China has offered Mercosur to consider the possibility of negotiating a free trade agreement revealed Uruguay, when the South American block is going through one of its worst moments ever so distant from the integration process pledges of 1991.
Beijing talked about the possibility during a recent visit of Uruguayan officials to China to promote trade and investments. China is Uruguay’s second trade partner and a leading associate for most of South American countries rich in commodities and minerals.
“They have proposed creating a task group to look into the feasibility of a Mercosur China agreement”, said Foreign Affairs minister and former ambassador in China, Luis Almagro.
In South America the only two countries with trade agreements with China are Chile, since 2006, and Peru in 2010.
But Uruguayan experts in international commerce believe the chances of reaching a trade agreement with China are remote given the promotion policies to benefit domestic industry mainly in Brazil and Argentina, the two major partners of the block; promotion that in the case of Argentina has received a formal complaint from the EU before the World Trade Organization.
Besides Paraguay has no diplomatic relations with Beijing and has just recently ratified links with Taiwan during an official visit to the island by President Fernando Lugo. Taiwan as well as several Central American countries receive massive aid from Taipei and are reluctant to break off from Taiwan which Beijing considers a “rebel province”.
Mercosur is also going through a difficult moment given the different economic policies applied by Argentina in contrast to the other three members, although Brazil has lately moved closer to the government of President Cristina Fernandez applying incentives to local industry and depreciating the currency to prop exports.
A further major dispute is anticipated in the coming Mercosur summit in a few weeks time when Argentina’s proposal to increase the external common tariff has to be discusses and agreed. Brazil has already anticipated it is going to up tariffs on several items which allegedly are highly subsidized overseas.
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Bucking the Trend: Poverty Reduction and Inequality in Latin America
Otaviano Canuto. Huffington Post. June 7, 2012
Recent data show that poverty is falling around the world. Today, 43 percent of people are considered to be living in "poverty" (on less than $2 per day), compared to 30 years ago when almost three-fourths of the developing world's population was doing so. Yet, while poverty is declining, the world is not becoming a more equal place, as a preponderance of income and wealth remain concentrated in the richest segments of populations. Indeed, as the adage goes, "rising tides raise all ships." But as reality shows, these tides have differentiated effects on equality across income groups.
Interestingly, this phenomenon -- mobility out of poverty accompanied by higher income concentrations and persistent inequality -- is evident in all regions of the world, with the exception of one: Latin America and the Caribbean (LAC). Bucking the global trend, the LAC region has managed to reduce both poverty and inequality (on the aggregate) over the past decade, even as countries dealt with the worst of the global economic crisis. So how did they do it?
As I highlighted in a recent presentation at the Inter-American Development Bank, there are several reasons why the region was able to reduce poverty and inequality simultaneously. First, as compared with other regions, a stronger labor market has increased employment and raised wages for unskilled workers, especially those in the lowest deciles of the income distribution. Second, demographic shifts have allowed for greater female labor market participation in the region, growing from 35 percent in the 1980's to more than 55 percent today. Third, progressive fiscal policy especially in the form of redistributive transfer programs -- such as Oportunidades, Bolsa Familia, and the like -- have greatly improved the opportunities of the poor. And last, governments in the region have taken a more pro-union stance which has raised minimum wages and increased pensions.
An especially impressive example in the LAC region is my home country, Brazil. A happy outlier among its fellow BRICS countries, Brazil managed to turn the corner on inequality between 2002 and 2009, as those in the bottom 50 percent were able to increase their share of total income by more than 15 percent. In fact, according to a recent issue of Inequality in Focus, "Inequality in Brazil declined at a faster pace than elsewhere in Latin America: After 1997, inequality declined by 0.8 percent per year; from 2001 on, the rate of decline accelerated to 1.07 percent per year, well above the regional pace of 0.63 percent."
Although progress is admirable in Brazil and the rest of the region, inequality in outcomes and opportunities remains high. Thus, I agree with Latin American governments that support policies to maintain macro-economic stability, expand access to education and health services, and strengthen social protections and safety nets. Only by doing so can the region sustain reductions in both poverty and inequality without compromising growth in the future.
Otaviano Canuto is the Vice President, Poverty Reduction at the World Bank
