Categories
Latin America

Brazil-Paraguay border reopens after seven months

Connecting the Brazilian city of Foz do Iguaçu to Paraguay’s bargain shopping paradise Ciudad del Este, the Friendship Bridge is one of the most-used bridges in South America — and the busiest of Brazil’s border crossings. Before the pandemic hit, some 100,000 pedestrians and 40,000 vehicles would cross on an average day.

A notable free-trade zone, Ciudad del Este welcomes droves of Brazilian tourists looking for tax-free goods such as perfumes, electronics, and clothing. Thousands of informal salespeople also join the throngs of shoppers, in search of cheap products they can resell in Brazil for higher prices.

But that bustling tradition of commerce ground to a halt in March, when Paraguay closed its borders to protect itself from imported coronavirus cases, blocking off the Friendship Bridge in the process. [restricted]At the time, Asunción called Brazil’s Covid-19 response “chaotic,” and Guillermo Sequera, head of the Paraguayan Health Surveillance Board, said the border would remain closed “until the wave in Brazil was over.”

Indeed, closing the border made sense, as 40 percent of all cases in Paraguay were recorded in Ciudad del Este.

Now, the Friendship Bridge is open for the first time in seven months, with Brazil showing progressively lower daily Covid-19 death numbers. For the time being, only private vehicles and cargo trucks will be able to cross between the two countries, and only between 5 am and 2 pm. On November 1, pedestrians will be allowed to use the bridge once again.

Reopening the Brazil-Paraguay border

Bridge Paraguay Brazil border
Federal Road Patrol car blocks Friendship Bridge. Photo: Arquivo/PRF

Closing the border came as a hefty blow to the Ciudad del Este economy. Revenue from commerce in the city dropped from around USD 400 million per month to just 5 percent of that. Sixty-four thousand people were left unemployed, accounting for almost half of the city’s population of working age.

“The bulk of sales depends on people coming over from Brazil,” said Juan Vicente Ramirez, chairman of the local chamber of commerce. “For many store owners, there was no point in opening just for local shoppers — and about 80 percent of them remained closed for the past few months.”

Strained by their economic needs, local business owners launched an intense campaign to reopen the border — a struggle that culminated in violent protests in July.

After falling out over Covid-19, Brazil and Paraguay have begun to mend fences, signing a bilateral agreement to allow the partial resumption of commerce. 

Six trade centers in border towns were created — where citizens can go to buy goods from the neighboring country.

In a second stage, which has yet no date to be enforced, other border crossing points will be reopened. That is the case for the border between Pedro Juan Caballero (Paraguay) and Ponta Porã (Brazil), two cities 400 kilometers north of the Friendship Bridge, and separated by nothing more than a street.

In preparation for the reopening, the city of Foz do Iguaçu has requested federal funds to expand its healthcare network — increasing its number of intensive care units in anticipation of Paraguayan patients flocking to hospitals on the Brazilian side of the border.

Drug smuggling boomed despite closed borders

Paraguay is a massive gateway for drugs coming into Brazil, in what is called the “hillbilly route” of South American narcotics trafficking. Drugs from Bolivia and Peru pour into the Brazilian state of Mato Grosso do Sul, via Paraguay, before being transported to the Port of Santos — and shipped to Europe.

In recent years, Brazil has invested big bucks to secure its border with Paraguay. The country is implementing the first phase of the Integrated Border Monitoring System (Sisfron) — a sophisticated surveillance network to patrol a stretch of 650 kilometers of the border.

But not even the increased surveillance — coupled with Covid-19 border closures — has slowed down drug smugglers, who seem to be busier than ever. Between January and August, the Federal Highway Police apprehended almost 45 tons of cocaine, 136,000 amphetamine pills, and over 1 million cannabis plants — enough to fill the equivalent of 28 football pitches.

The numbers give the impression that the drug problem is a bottomless pit. In trying to deal with the issue, Paraguayan lawmakers are taking steps to change the laws on legal cultivation of cannabis — going in the direction of Uruguay, where recreational marijuana is legal.

But the conservative Brazilian Congress resists even entertaining discussions on medicinal cannabis — let alone debating relaxed rules on recreational drugs.[/restricted]

Categories
Latin America

The history of Nobel Prize winners across Latin America

The 2020 Nobel Prize season came to a close on Monday, as the Royal Swedish Academy of Sciences announced American economists Paul Milgrom and Robert Wilson as the laureats for Economic Science.

No Latin Americans made the cut this year — though only two had outside chances: Mexican poet Homero Aridjis (33-1 odds), for the Literature Prize, and indigenous leader Raoni, for the Peace Prize. They were pipped by American poet Louise Glück and the United Nations World Food Program, respectively.

To date, just 17 Latin Americans have won a Nobel Prize. Today, we look back on their achievements:[restricted]

Peace

  • Carlos Saavedra Lamas (Argentina, 1936). The former Foreign Minister was Latin America’s first laureate, being recognized for his work mediating peace negotiations between Paraguay and Bolivia after the so-called “Chaco War,” which killed at least 90,000 people between 1932 and 1935. Mr. Saavedra Lamas was also pivotal in Argentina’s admission to the League of Nations in 1932, the first worldwide intergovernmental body whose principal mission was to maintain world peace.
  • Adolfo Pérez Esquivel (Argentina, 1980). Born in Buenos Aires in 1931, Mr. Esquivel was one of the leading human rights defenders in Latin America during the 1970s — a time in which nearly all of the region’s countries succumbed to far-right military dictatorships. He headed human rights organization SERPAJ and built pro-democracy networks across the region. In 1977, Mr. Esquivel was arrested and tortured by the Argentinian military regime — only to be released 14 months later.
  • Alfonso García Robles (Mexico, 1982). Born in the city of Zamora in 1911, the lawyer and diplomat played a crucial role in making Latin America a nuclear-free zone, following the 1962 Cuban missile crisis. Mr. García Robles’ efforts led to a 1967 treaty signed by 14 countries in Mexico City — an effort that earned him the nickname “Mr. Disarmament.”
  • Óscar Arias Sánchez (Costa Rica, 1987). During his stint as president of Costa Rica, Mr. Sánchez championed a peace plan to end the devastating civil wars being fought in Central America. The plan was signed in August 1987 by Costa Rica and four neighboring countries (Guatemala, El Salvador, Honduras, and Nicaragua), and aimed at free elections, human rights protections, and plans to diminish foreign interference in the region.
  • Rigoberta Menchú (Guatemala, 1992). The first direct descendant of native Latin American groups to win a Nobel prize, Ms. Menchú was recognized for her work in social justice and ethno-cultural reconciliation based on respect for indigenous rights — amid a period of large-scale repression against native communities in Guatemala. Her work came at great personal cost, as Ms. Menchú’s father was murdered during a peaceful protest in Guatemala City, in 1980. Not long after, the Army tortured and killed her brother and mother, forcing her into exile. 
  • Juan Manuel Santos (Colombia, 2016). The former Colombian president is the last Latin American person to receive a Nobel Prize — and his win is surrounded by controversy. The Royal Swedish Academy bestowed the honor upon Mr. Santos for his work in negotiating peace with the Revolutionary Armed Forces of Colombia (FARC), an armed guerilla group in Colombia known for deploying terrorist tactics. Though the deal officially ended more than half a century of civil conflict, it was more a comma than a full stop: violence continues in Colombia, and Mr. Santos’ peace deal was voted down by Colombians in a referendum.

Literature

Latin America’s political turmoil during the Cold War — which culminated in dozens of military dictatorships across the region — also fueled a literary boom. New, emerging voices redefined literature in the region, and became powerful and influential authors worldwide.

  • Gabriela Mistral (Chile, 1945). Born Lucila Godoy Alcayaga in 1889 in Vicuña, the educator, poet, and diplomat made history as the first female South American laureate. Besides her poetry, Ms. Mistral is praised for her work regarding education and the improvement of literary knowledge. By the time she won the award, she was living in Brazil, in the city of Petrópolis, in Rio de Janeiro state. 
  • Miguel Ángel Asturias (Guatemala, 1967). With his famous and unique work centered on the Central American imagination and cultural peculiarities, especially seen in his 1949 work “Men of Maize,” Mr. Asturias won the Nobel Prize in 1967 for his “vivid literary achievement,” in the words of the Academy, especially for bringing light to the indigenous roots and struggle in Central America. A year before his win, he had also received the Lenin Peace Prize from the Soviet Union. 
  • Pablo Neruda (Chile, 1971). One of the most famous writers in Latin America, Mr. Neruda was awarded “for poetry that with the action of an elemental force brings a continent’s destiny and dreams alive.” He died just 12 days after Augusto Pinochet deposed Chile’s democratically elected President Salvador Allende, in 1973. The official cause of death was prostate cancer, though a team of international scientists said in 2017 they were “100-percent convinced” that “a third party” was responsible for his death, following lab analysis of his remains.
  • Gabriel García Márquez (Colombia, 1982). “Gabo” was one of the creators of magical realism, a literary style born in Latin America that intertwines realistic depictions of the world and elements of fantasy. Despite being a supporter of the Cuban regime — and a personal friend of the late dictator Fidel Castro — Mr. Márquez was able to forge a friendship with former U.S. President Bill Clinton, who regarded the Colombian as his favorite fiction writer
  • Octavio Paz (Mexico, 1990). A poet and a diplomat, the Mexico City-born Mr. Paz was awarded in 1990 “for impassioned writing with broad horizons, characterized by sensuous intelligence and humanistic integrity.”
  • Mario Vargas Llosa (Peru, 2010). Through his books, which often contain biographical elements, Mr. Vargas Llosa offered a deep examination of how power and corruption play out in Latin America. The author’s political work, however, was not limited to his writing — he ran a failed, quixotic presidential campaign in 1990, eventually losing to Alberto Fujimori. He said the win was an important element in changing international perception around the region. “Latin America seemed to be a land where there were only dictators, revolutionaries, catastrophes. Now we know that Latin America can also produce artists, musicians, painters, thinkers and novelists,” he said in 2010.

Physiology or Medicine

  • Bernardo Alberto Houssay (Argentina, 1947). During his life, Dr. Houssay worked in almost every field of physiology and published over 500 papers and several books. He was awarded the Nobel Prize for his discovery of the role of pituitary hormones in sugar metabolism. The achievement was, at the time, a source of embarrassment for the Argentinian government: then-President Juan Perón had dismissed Dr. Houssay from the University of Buenos Aires School of Medicine for opposition to his education policy.
  • Baruj Benacerraf (Venezuela, 1980). The first and only Venezuelan to be awarded a Nobel Prize, Mr. Benacerraf was celebrated for discovering and improving studies in topics related to the immune system, especially in a research of the histocompatibility complex (MHC). He is often described as being Venezuelan-American, due to later obtaining U.S. citizenship.
  • César Milstein (Argentina, 1980). Considered one of the fathers of modern immunology, he went to the United Kingdom to study antibodies and how they can be used for the prevention, diagnosis, and treatment of several diseases. He shared the prize with Germany’s Georges J. F. Köhler. 

Chemistry

  • Luis Federico Leloir (Argentina, 1970). Born in Paris of Argentinian parents, he was raised in Buenos Aires from the age of two. Despite dealing with a lack of financial support and second-rate equipment throughout his career, Mr. Leloir developed a world-renowned study into sugar nucleotides, carbohydrate metabolism, and renal hypertension — which led to significant progress in understanding, diagnosing and treating congenital disease galactosemia.
  • Mario J. Molina (Mexico, 1995). Mr. Molina’s work on climate change was crucial toward enacting the Montreal Protocol on Substances that Deplete the Ozone Layer in 1987, and it made him one of the most important scientists of the past 50 years. He died just last week — and was hailed by Science Magazine as the “Nobel laureate who helped save the ozone layer.”[/restricted]
Categories
Latin America

The Venezuelan embassy isn’t big enough for the both of us

Diplomatic relations between Brazil and Venezuela reached an all-time low with the former electing far-right President Jair Bolsonaro in 2018. Now, almost two years on, the grave is being dug even deeper. In its latest demonstration of hostility toward the Nicolás Maduro administration in Caracas, the Brazilian government moved to make all of the Venezuelan left-wing leader’s diplomats personae non gratae in the country. In practical terms, these staff members are allowed to remain in Brazil, but they have been stripped of their diplomatic status, along with other immunities and protections ensured around the world. 

The decision came as little surprise, from a government that recognizes Mr. Maduro as Venezuela’s “illegitimate” leader. After the administration in Caracas publicly demanded answers from Brazil over what it called the country’s “criminal negligence” in facing the Covid-19 pandemic, the Bolsonaro government moved to further isolate Mr. Maduro’s diplomatic representation in Brazil.[restricted]

Recognizing the head of Venezuela’s National Assembly Juan Guaidó as Venezuela’s rightful leader, Brazil had already decided to close its embassy in Caracas along with a series of consulates around the country. Brazilians in Venezuela were told to seek guidance in Colombia, while diplomats and employees were brought home.

The Bolsonaro government had already ordered the expulsion of Venezuelan diplomats back in April, but the decision was blocked by the Supreme Court due to humanitarian reasons, with both countries in the throes of the Covid-19 pandemic. The court’s ruling, however, is only an injunction and could be overturned at any moment, thus forcing the deportation of Mr. Maduro’s embassy staff.

The struggle for power in Venezuela has created several knock-on effects in Brazil’s capital. Since February 2019, the country has actually had two separate embassies, neither one of them functioning properly. The 230,000 Venezuelans that sought refuge in Brazil, fleeing the economic collapse in their home country, are left to fend for themselves for many consular services.

The official Venezuelan Embassy in Brasíla — which takes orders from the Nicolás Maduro government — has been without an ambassador since May 2016, when Alberto Castellar was brought back to Caracas in response to the impeachment of then-President Dilma Rousseff, a process Venezuela labeled a parliamentary coup. Since then, the diplomatic mission has been led by chargé d’affaires Freddy Margote, who maintained a relationship with Brazil’s Foreign Affairs Ministry during the Michel Temer government, before being completely cut off after the election of Mr. Bolsonaro.

Now, without recognized legitimacy from the current Brazilian government or financial assistance from Venezuela amid the country’s long-lasting economic nightmare, the Venezuelan Embassy in Brasília does not provide any of the standard services expected from diplomatic missions, such as issuing visas. Moreover, there is no money to pay utility bills, such as electricity and water. Brazilian left-wing activist organizations have stepped in to use the embassy’s facilities in exchange for paying their bills on time.

Leasing out the Venezuelan Embassy

Almost deserted, the "traditional" Venezuelan Embassy leases its auditorium to left-wing events. Photo: MST
Almost deserted, the “traditional” Venezuelan Embassy leases its auditorium to left-wing events. Photo: MST

The Venezuelan Embassy sits on a massive plot of land in Brasilía’s Embassy Sector, donated to the country when the city was constructed in the late 1950s. One two-story building houses the embassy offices, while other constructions serve as homes for the diplomats and their families. There is also a large round swimming pool, beside a football pitch with a small grandstand.

The walls of the embassy building are decorated with posters and portraits of former Venezuelan President Hugo Chávez, while there is only a single picture of current President Nicolás Maduro hanging in one of the halls. Outside, Venezuelan flags flutter in the wind, alongside those of left-wing Brazilian political parties and social movements.

Due to their severe lack of funds, the embassy’s security is operated by local supporters of the Maduro regime. Members of the Landless Workers’ Movement (MST) patrol the perimeter of the area, while others tend to the gardens and clean the halls. The need for 24-hour security came after an incident in November 2019, when a group of Juan Guaidó supporters broke into the embassy and intended to squat, using the coincidence with the annual BRICS summit — taking place just a few kilometers away — to draw attention to their cause. They eventually vacated the premises by the end of the day, amid pressure from left-wing social movements, whose members surrounded the embassy.

In exchange for its assistance with security, maintenance, and paying utility bills, the MST has used the Venezuelan Embassy as its headquarters in Brasília. It often holds events held in the building’s auditorium, inviting leaders from the movement and members of other left-wing groups.

The Other Ambassador

María Teresa Belandria is recognized by Brazil as the righteous Venezuelan diplomat. Photo: Anabel Morey
María Teresa Belandria is recognized by Brazil as the righteous Venezuelan diplomat. Photo: Anabel Morey

Meanwhile, as the official embassy barely remains open, the Brazilian government recognizes lawyer, professor, and diplomat María Teresa Belandria as Venezuela’s legitimate ambassador in the country, after she was appointed to the role by Juan Guaidó’s National Assembly in February 2019.

However, she works out of a hotel room in the Brazilian capital, alongside her deputy Silva Guzmán and three other staffers. The work of this “parallel embassy” is funded privately, but the employees refused to reveal who is paying their expenses.

Mr. Guaidó’s representatives are welcomed by Brazilian authorities and treated with diplomatic deference by the closest allies of President Bolsonaro — particularly one of his sons, Congressman Eduardo Bolsonaro. 

Furthermore, without access to the Venezuelan government’s communication systems, Ms. Belandria’s team is unable to issue visas or passports, or perform the vast majority of consular services.

The impasse remains, however. If the Bolsonaro government decides that Juan Guaidó’s diplomatic representatives have the right to use the Venezuelan Embassy in Brasília, the current tenants are unlikely to vacate willingly.

The hotel-dwelling members of the parallel Venezuelan Embassy are assured of their legitimacy. “Ambassador Belandria has been recognized as such by the Brazilian government, as has her deputy Silva Guzmán. Both are treated by government agencies as being Venezuelan authorities,” said the group’s press officer, who also doubles up as Ms. Belandria’s driver.

However, this recognition comes with responsibility. In May, Ms. Belandria was held responsible for a case filed by the Labor Prosecution Service against the Venezuelan Embassy in Brasília. Brazilian employees working in the embassy have gone without pay for months, according to the complaint. Ms. Belandria responded, saying that she has no way of paying this debt, as she does not even know the quantity or identity of the embassy’s employees, as she is denied access to the premises.[/restricted]

Categories
Latin America

Tourism in Dominican Republic tries to dodge Covid-19

As of the end of September, the Dominican Republic had recorded 109,000 confirmed Covid-19 cases and just over 2,000 deaths for its population of 10.6 million. While the pandemic did not hit the Hispaniola nation as severely as other parts of Latin America, with the country being ranked 12th in Covid-19 death rate per million people (190), the major impact of the coronavirus crisis has been the near stoppage to the country’s tourism industry. 

According to the Dominican Tourism Ministry, the influx of foreign holidaymakers accounts for 12 percent of the country’s GDP. [restricted]During the health crisis, due to the shortage of people coming to enjoy the Dominican beaches, this tourism-oriented country might fall into recession. 

In April, seeing the chaos on the horizon, the government in Santo Domingo successfully applied for a USD 650 million loan through the Rapid Financing Instrument of the International Monetary Fund (IMF). And with the Covid-19 curve beginning to flatten in mid-September, Tourism Minister David Callado announced the country’s “Responsible Tourism Recovery Plan” to try and safely attract foreign visitors once more.

The plan forecasts “random and non-invasive” coronavirus tests on tourists, as well as a special form of travel insurance to cover medical expenses of those who may be infected during their stay. “The Tourism Recovery Plan includes measures that no country in the region currently has,” Mr. Callado said, while launching the initiative on September 15. 

Indeed, the Dominican Republic has stood out among its neighbors. Despite an economic downturn and the huge dip in tourism, the IMF said the nation was the only one in the region to have “stable” GDP changes during the pandemic, expected to fall just 1 percent over 2020. 

Beyond offering medical assistance, the Dominican government will provide extra hotel stays and flight alterations — free of charge — in the case of contamination. The Dominican Health Ministry will also publish a health control report listing specifications related to infection and potential among tourists staying in the country. 

Tourism, the Dominican cornerstone 

The first Covid-19 case in Latin America was reported on February 26, in São Paulo, Brazil. Until September 23, the disease has killed 332,342 people and infected more than 9 million across the entirety of the region. When the crisis started, the Dominican Republic’s President Luis Abinader had yet to be elected, becoming the first and so far only Latin American leader to face the polls and win the presidential sash during the pandemic. 

Even during his campaign, Mr. Abinader showed himself to be fully aware that Covid-19 and the tourism industry — and their impacts on each other — were the country’s top priorities. He even tested positive for the coronavirus during canvassing.

Now, with the virus spread stabilizing for the time being, all the focus is on galvanizing the Dominican Republic’s prime cash cow. Every year, more than 6.5 million people visit the country’s paradisiacal beaches, including 2.2 million tourists from the U.S., according to the Caribbean Tourism Organization. 

Tourism authorities in the Dominican Republic began gearing the country toward tourism back in the mid-1970s. With an economy largely centered on the export of tropical fruits and ores, the country realized its tourism potential and opened itself up to foreign investment — mainly from major Spanish hotel groups.

The strategy began working, and the Dominican Republic has not stopped raking in money from abroad. Between 2010 and 2018, the country received more than USD 22 billion in foreign direct investment (FDI), an annual average of almost USD 2.4 billion, according to the Dominican Central Bank. The top three investors are the U.S. (USD 4.7 billion), Canada (USD 4.3 billion), and Brazil (USD 2.3 billion). 

And it’s not just foreigners Mr. Abinader is trying to attract to the Dominican Republic’s lavish resorts. The government has also implanted an incentive plan for domestic tourism, allowing Dominicans to take out zero-tariff loans to spend in hotels. Next month, the plan will be truly put to the test, as 50 hotels and resorts will reopen in different tourist spots around the country.[/restricted]

Categories
Latin America

World’s longest lockdown didn’t avoid a coronavirus disaster in Argentina

Argentina was one of the first Latin American countries to respond to the coronavirus pandemic, with the government placing the country under lockdown by March 20 — even before European countries such as Germany. And, while most of the world has already returned to some version of normalcy, around 30 percent of Argentina’s population is still adhering to restrictive measures — even if many people stopped abiding by these rules — in what is the world’s longest lockdown.

However, that hasn’t prevented a major surge in new daily coronavirus cases and deaths, with the country posting much higher figures per million people than neighbors Brazil — deemed to be Latin America’s textbook example of how not to deal with a pandemic.[restricted]

How effective was the lockdown?

As our Explaining Brazil podcast discussed, having responsible leadership that takes all medically-accepted measures is no guarantee of success in countries defined by structural inequality. And nowhere in the world is as unequal as Latin America. 

The region has seen a wave of informal employment in recent years. In Argentina, the problem has always existed — and nearly half of all workers are in unregistered jobs. These workers often rely exclusively on the in-person economy, and it doesn’t take long before circulation bans smother their way of living. 

“Despite its length, Argentina’s lockdown was never really enforced, as many people depend on leaving their homes to provide for their families,” says Gustavo Montero, a public health expert at the University of Buenos Aires. “Plus, once the virus reached poor and peripheral regions, as it would invariably, the epidemic would derail due to social, housing, and economic imbalances,” he tells The Brazilian Report.

Besides structural problems that predate the coronavirus, the current crisis saw millions left out of work. Per the International Labor Organization, more than 47 million positions were closed due to the pandemic. 

With that scenario, keeping people at home — sometimes facing starvation — was almost impossible.

Argentina was already in recession

The never-ending lockdown has also taken a huge economic toll on the country. Argentina has been in recession since 2018 — and the halting of the in-person economy for months has caused a massive GDP slump.

Argentina’s official statistics agency (Indec) says the country’s GDP dropped 19.1 percent in Q2 2020 when compared to the same period in 2019. That is a bigger skid than during the 2002 crisis — when Argentina faced economic collapse and had five presidents in a two-week period.

Despite the government’s early measures to prevent massive layoffs, the unemployment rate has risen from 10.4 to 13.1 percent between Q1 and Q2. “The [unemployment] numbers largely reflect the impact on labor market dynamics from the Covid-19 pandemic and from the restrictions on certain activities and movement,” Indec said in a report.

Indeed, entering the Covid-19 crisis while hamstrung by economic hardship was always going to be a recipe for disaster in Argentina. Speaking to the Financial Times, Andrés Borenstein, an economist in Buenos Aires, lamented that “the government had no resources to fight the crisis except [printing money].”

Meanwhile, President Alberto Fernández claims the country is no longer under strict lockdown, but has constantly threatened to reinstate the most restrictive measures should the virus spread continue.[/restricted]

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Latin America

Coronavirus reshapes Belt and Road in Latin America

The disruptions of the coronavirus pandemic have taken a toll on China’s flagship foreign infrastructure and investment program, the Belt and Road Initiative (BRI). Its nature, pace, and scope are all likely subject to change in Latin America in the near- and long-term. Many Chinese-backed projects framed as part of BRI have hit the brakes across the region, as the Covid-19 crisis affecting industries, supply chains, and the movement of people and goods. Many countries have been in lockdown for months, with only essential activities authorized.

There have been fewer new Chinese infrastructure projects in Latin America this year, and no new countries have formally signed a BRI agreement. The ones that already signed are raising concerns over debt repayments to China as their economies face significant difficulties.[restricted]

“We are entering into a new phase of BRI in Latin America, as China has been forced to transform the initiative,” said Ricardo Barrios, an analyst at RWR Advisory Group. “China has less money to lend and is being more selective about how it uses it, while it also has to cope with its own domestic economic problems.”

Launched in 2013, the Belt and Road Initiative aims to resurrect the ancient Silk Road and maritime trade routes, develop new links and enhance cooperation between participating countries and regions. Latin American countries began joining the initiative in 2017, and 19 nations have already signed an agreement.

In just a decade, trade between China and Latin America has increased more than 20-fold as regional partners have signed hundreds of agreements and broken ground on dozens of key energy, transport, and infrastructure projects in strategic locations. Diplomats have described the region as a “natural extension” of BRI.

“The coronavirus changes many things, both for China and Latin America. BRI is not a priority right now as everyone is preoccupied with the virus,” said Pepe Zhang, associate director at the Atlantic Council’s Adrienne Arsht Latin America Center. “The initiative is currently on the back burner.”

Belt and Road Initiative: Latin America’s hopes and dreams

For the Latin American countries that have already said yes to the initiative, closer ties with China through BRI were supposed to bring finance for energy, roads, and ports, among other benefits. However, that hasn’t necessarily been the case so far, and Chinese funds have declined over the past few years.

Margaret Myers, director of the Asia & Latin America Program at the Inter-American Dialogue, said that apart from a friendlier relationship with China, the direct benefits haven’t been clear. She listed a few exceptions, such as Bolivia getting easier access for exports to the Chinese market.

“It’s a tool that China uses to signal its commitments to a given country’s development and growth. If a country signs BRI, China sees it as an important symbolic gesture, especially now with the initiative being challenged by the U.S. and other developed countries,” she explained.

Argentina, Brazil, Colombia, and Mexico, the four largest Latin American economies — which account for about 70 percent of the region’s GDP —, haven’t signed an agreement yet, indicating that the Belt and Road Initiative still sparks doubts. Of those, Argentina could be closest to signing after a recent change of administration.

Still, all of them have comprehensive bilateral cooperation agreements with China and are host to Chinese infrastructure projects. This has raised questions about what can actually be classified as a BRI project, something that China has been trying to clarify in recent guidelines and documents.

“Not even China knows exactly what BRI is. Many things that already existed before BRI are being framed under it,” said Álvaro Méndez, co-founder of the LSE Global South Unit. “Latin America is still grasping to understand what the initiative actually involves. Policymakers in the region confuse it with other things.”

For Latin America, social and environmental risks feature prominently in concerns related to BRI. Non-governmental organizations have questioned various Chinese projects in the region, many labeled as part of BRI, for violating human rights and non-compliance with environmental standards.

But that’s not the only issue. Countries such as Venezuela and Ecuador have borrowed heavily from China over the last few years and now have a high debt-to-GDP ratio. Repayment looks difficult amid economic crises exacerbated by the pandemic.

Last month, China announced that it was pursuing debt relief for developing countries, mainly in Africa, through the G20 debt suspension initiative. With no announcements so far for Latin America, the most likely scenario will be more flexibility on interest payments and deadlines, experts say.

“China will likely show flexibility towards Latin America’s debt. But this doesn’t mean forgetting about the debt,” Barrios said. “China can’t expect the same things as before the pandemic, and showing flexibility will be effective to gain some goodwill from the region. But it will be on a case-by-case basis.”

Meanwhile, the funding seems to continue. State-owned oil firm Petroecuador is considering entering a new five-year oil export contract with China in exchange for USD 2.4 billion in Chinese state financing between June and October 2020. Between USD 300 and 400 million would be used to pay off part of Ecuador’s existing debt to China.

New areas of cooperation

With China mostly focused on its own economic recovery, investment in large infrastructure and energy projects in Latin American countries signed up to the BRI won’t likely be on the horizon, at least in the short-term.

Nevertheless, the pandemic opens up new areas of opportunity for China and its initiative across the region, especially the so-called Health Silk Road (HSR) and the Digital Silk Road (DSR) – both areas that experts agree have a lot of potential in the future.

The HRS has gained momentum through the coronavirus outbreak, with many countries from the region receiving donations or purchasing medical supplies from China. At the same time, the DRS is also booming amid the pandemic, with countries using China-inspired digital solutions to combat Covid-19.

Chinese companies that are already well established throughout the BRI, such as Huawei, Alibaba and Tencent, could find Latin America a natural fit for expanding their activities. That could also be the case for China’s medical technology sector.

For Latin America, an area of specific interest will be the deployment of 5G technology. Of the five companies in the world offering complete 5G telecommunication systems, two are from China – ZTE and Huawei. The latter has expanded across the region in recent years.

“China is a top provider of telecommunications equipment and tech, and it is trying to position its companies abroad,” Myers said. “It’s a critical industry for China that has received support from the government. There will be companies able to invest overseas in this sector.”

Overall, the short pause the pandemic has forced also represents an opportunity to reflect on how the BRI can be improved, Chinese researcher Xianbai Ji wrote in a recent column. This includes finding new ways to finance projects beyond loans from Chinese policy and state-owned commercial banks as well as discussing debt issues.

“For the countries along the Belt and Road, the main task is to control the impact of BRI on government debt,” he argued. “Countries should formulate special infrastructure strategies to clarify the role of BRI in their national long-term social and economic development plans.”

This article was originally publish by Dialogo Chino

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Categories
Latin America

Argentina tightens currency rules, affectin dollar-denominated card purchases

In a bid to protect Argentina’s U.S. Dollar reserves, the country’s central bank (BCRA) late Tuesday evening has tightened controls on buying and spending in foreign currencies. The package, set to expire next December, was designed to restrict the dollar purchases, and limit capital outflows ahead of a new sovereign debt restructuring. 

In practice, Argentines will be able to keep exchanging pesos up to the limit of USD 200 a month — a measure that was already in place since October 2019 — but from now on there are more hurdles and transactions will be more heavily taxed.[restricted]

Besides discouraging people and firms from hoarding dollars, a habit that is ingrained in Argentine society as a way to protect yourself from inflation, currently at 42 percent per year, and the devaluation of the peso, the financial authority has restricted the use of credit and debit cards for products or services from abroad as well as foreign exchange operations with bonuses.

Dollar-denominated purchases made with credit and debit cards will be deducted from the USD-200 quota. It is possible to exceed that amount, but buyers will face limits to buy foreign currency from official channels for savings.

Argentines who buy in dollars using cards or who purchase foreign currency for savings will also have to pay a new 35-percent tax on top of an existing 30-percent so-called “solidarity tax.” Estefanía Pozzo reported to LABS that the new levy may be later deducted from the income tax for those who pay it.

“I do not believe people will stop consuming [on cross-border e-commerce channels], they will only pay more for it,” Fausto Spotorno, an economist at the Orlando Ferreres & Asociados consultancy, said in an interview with LABS.

Payments for digital services, such as Netflix and Spotify, are also covered by the new tax and considered within the ceiling of USD 200 dollars per month, as long as they are charged in dollars. Providers may bill such subscriptions in pesos to avoid the quota. “International airline tickets could also suffer a 35-percent hike in prices, if they are charged in the American currency,” highlighted Ms. Pozzo.

The president of the BCRA, Miguel Pesce, said that it all depends on how digital services are billed: “If the company bills in dollars, if the card bill comes to you with consumption in dollars, you pay the tax and it is included in the allowance. If the company bills in pesos, if the card arrives as consumption in pesos, it does not apply to either,” he explained on Wednesday.

The widening gap between official and parallel rates

The administration was also seeking to reduce the gap between Argentina’s official exchange rate and the parallel market, but this has backfired. According to the official rate, USD 1 fetches about ARS 80. The so-called “solidarity dollar”, which was already levied and directed for those who want to buy the foreign currency for savings, jumped from ARS 103 to ARS 131 because of the new tax. The unofficial “blue” dollar, bought and sold in the parallel market has climbed from ARS 130 to 145. 

Julia Strada, Ph.D. in Economic Development and a director at both Grupo Banco Provincia and the Center for Argentine Political Economy (CEPA), told LABS that there was an urgent need for the government to stop daily losses of USD 150 million of central bank reserves.

Another measure is aimed at dollar assets received from abroad, which now must be held for a minimum period of 15 working days. Its goal is to prevent too much speculative money circulating in the securities market. 

“The aforementioned decisions will restrict speculative maneuvers by investment funds that are not resident in the country and their impact on the dynamics of the financial and exchange markets,” said the central bank. Dollar-denominated assets that settle in pesos will not need to comply with the holding period, though.

The central bank is also compelling companies with over USD 1 million in monthly foreign debt payments from now until March to refinance at least 60 percent of maturities. 

Argentinian President Alberto Fernández defended the new rules on the grounds that they intend to discourage hoarding of foreign currency and speculation “in a country where dollars are needed to produce, not to save.” “We are building the logic of an economy that no longer promotes speculation and wants dollars to stop being a speculation tool,” he said.

The South American nation is headed for a 12-percent economic contraction this year, which would mark the third straight year of recession, and is just emerging from its ninth sovereign default after restructuring nearly USD 110 billion in foreign currency debt.

New restrictions bring to mind measures implemented by former president and current vice president Cristina Fernández de Kirchner, who also imposed hard capital controls during her second term in Casa Rosada, the presidential palace, from 2011 to 2015.

Argentina’s standing in global markets is at risk once again. The move sparked a selloff of Argentine bonds and stocks, while the price of dollars in unofficial markets spiked, widening a large gap with the official rate – the opposite of what the government intended. 

“It shows total desperation,” Agustín Monteverde, an economist at consultancy Massot Monteverde & Asociados, told Reuters. “They have just hung a sign around their necks that says ‘meltdown’.”

This article on remote work was originally published on LABS – Latin America Business Stories, a news platform covering business, technology, and society in the region for an English-speaking audience.

https://labs.ebanx.com/

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Categories
Coronavirus Latin America

Peru once again in political turmoil as pandemic rages on

Just 11 months ago, Peru witnessed a tug of war between President Martín Vizcarra and the country’s lawmakers. After anti-corruption legislation was blocked, Mr. Vizcarra dissolved Congress, and managed to block an attempt to remove him from office. But now lawmakers might get their way, as Mr. Vizcarra faces impeachment proceedings for “moral incapacity,” after he tried to obstruct a Congress-led corruption probe.

The case was called after the head of Congress, Manuel Merino, received leaked audio recordings in which the president appears to discuss ways to cover up the misuse of public funds.[restricted]

In the audio clips, he is heard telling advisers to lie while giving their testimony to a parliamentary hearings committee — downplaying details of his office’s hiring of a little-known singer, Richard Cisneros, to deliver pro-government motivational talks. Mr. Cisneros was reportedly paid PEN 175,400 (USD 49,500). To make matters worse, the contracts were made during the pandemic.

The case could result in the end of an administration marked by chaos from the start. Mr. Vizcarra took office in March 2018, after then-President Pedro Pablo Kuczynski resigned to avoid being impeached over corruption scandals. 

The worst possible timing for a political crisis

Almost one year after Congress tried to declare the presidency vacant and swear in Vice President Mercedes Aráoz as the head of state, Peru finds itself in turmoil yet again. 

This latest attempt to remove the president arrives just as Mr. Vizcarra is trying to pass a bill that would make those convicted of corruption by Peruvian courts unable to run for public office. Just as Brazil, the Peruvian political landscape has been devastated by massive construction scandals involving Brazilian construction group Odebrecht. The country has seen all of its living former presidents investigated for corruption. Two have been arrested — a third killed himself in 2019 to avoid a similar fate.

But this latest chapter comes precisely at a moment in which the coronavirus pandemic has worsened in the already badly hit country.

When the virus arrived in Latin America, Peru was one of the first countries to impose strict lockdown rules and set aside between 9 to 12 percent of its GDP for a major aid package to help vulnerable populations in coping with the economic effects of the sanitary crisis. Five months later, however, Peru leads the world in Covid-19 mortality rates, according to data from Johns Hopkins University.

So far, 730,000 Peruvians have contracted the coronavirus, and 31,000 have died . The Andean country now has 931 deaths per million people — far more than Brazil or the U.S., the worst-hit nations in absolute numbers in the Americas. 

Peru seems a textbook example of what we at The Brazilian Report have commented on in our Explaining Brazil Podcast — the success of social isolation measures is limited in countries defined by deep, structural inequality.


Why things got so out of hand in Peru

  • Deficiencies in the national healthcare system. According to Eduardo Gotuzzo, a professor emeritus at the Cayetano Heredia University, Peru invests very little in its healthcare system. The country lacks hospital beds (especially for intensive care), relies on overburdened and underpaid staff, and at the beginning of the year had only one lab capable of processing molecular tests.
  • Bungled attempts to trace the coronavirus. Experts say Peru’s response to the coronavirus had one key mistake: it was centered on treating infections rather than preventing them. The country also did a poor job with its testing — prioritizing rapid tests, better for epidemiological control, over serological ones (which are considered to be the gold standard by the World Health Organization).
  • Informal economy. About 70 percent of the Peruvian economically active population works in the informal sector — meaning that they can’t stay home for long, and that the government’s efforts to aid vulnerable populations wouldn’t be enough on their own. Moreover, even getting aid to these people forced them into risking their health — as less than 40 percent of Peruvians have a bank account. The result was massive gatherings at bank branches across the country.

The Peruvian government has lacked self-reflection, saying that the dreadful numbers are more linked to the administration’s “transparency” than to an unmatched epidemic. “I don’t know any country that is as transparent as Peru in dealing with the number of deaths caused by the pandemic,” said Walter Martos, president of the council of ministers. “We are adding suspected cases in the death tally, which increases our totals.”[/restricted]

Categories
Latin America

As Mexico’s opposition mired in scandal, AMLO eyes an opportunity

A growing scandal within Mexico’s state-owned oil company Pemex (Petroleos Mexicanos) is swallowing up key opposition political figures and could be a blessing in disguise for President Andrés Manuel López Obrador.

Emilio Lozoya, former chief executive of the oil giant that represents 6.6 percent of Mexico’s GDP, issued a declaration to the attorney general’s office that implicates three former presidents in a sprawling bribery scheme, along with a slew of other important political figures.[restricted]

Arrested in Spain in January and extradited to Mexico as a protected witness, Mr. Lozoya is accused of receiving USD 10.5 million in bribes from Brazilian construction firm Odebrecht — the company behind a veritable avalanche of corruption in Latin America — between his 2012-2016 term, in exchange for contracts. 

Denying the accusations, the businessman agreed to cooperate with the courts, pointing the finger at former Presidents Enrique Peña Nieto, Felipe Calderón, and Carlos Salinas, as well as many other high-ranking politicians in prior administrations. Mr. Lozoya confessed that Odebrecht distributed the money to several representatives during Mr. Peña Nieto’s term, seeking a legal and administrative modification in the country to allow the participation of private companies in the exploration of Mexican oil. 

The attorney general’s office stated that the former Pemex chief met “constantly” with Luis Alberto de Meneses Weyll, then-head of Odebrecht in Mexico. In 2016, Odebrecht executives admitted in a plea-bargain agreement that Mexico was one of the 12 countries involved in its bribery schemes. 

While the brunt of Mr. Lozoya’s accusations are leveled at the Peña Nieto government, the 60-page statement expresses that Felipe Calderón also established a “solid scheme of corruption” with Odebrecht during his 2006-2012 presidential term. Carlos Salinas, in turn, had allegedly used his lobby influence as president from 1988 to 1994 to benefit his son Juan Cristóban Salinas, who is linked to a company that held business with Pemex. 

According to Adolfo Laborde Carranco, an International Relations Professor at Anahuac University in Mexico, though the Pemex case is not the first corruption scandal involving major political figures, the sheer amount of former head honchos means any decision made will cause “many controversies and discrepancies.”

“There is a constitutional vacuum and multiple interpretations [about whether these authorities could end up in prison]. The president says yes, the opposition says no. Therefore, it is possible that, when these cases go ahead in the court, they end up being discussed in Congress or even in public consultations to understand the view of Mexican society toward it,” Mr. Laborde tells The Brazilian Report

But the possibility of seeing justice done depends on Mexico’s porous court system. A 2020 report by the University of the Américas Puebla (UDLAP) indicated Mexico as having among the highest rates of impunity in the world, ranking the 10th out of 69. In the Americas, only Honduras, Paraguay, and Guyana are classified as worse in this regard. 

For some skeptics, there is more chance of Pemex striking more oil than influential politicians being sent to jail by the scandal. “At least this will guide public opinion,” the professor added. 

An opening for AMLO?

All of the politicians mentioned by Mr. Lozoya are members of either the Institutional Revolutionary Party (PRI) or the National Action Party (PAN), the two establishment cornerstones in the country which also form the opposition to President López Obrador. Until 2018, when AMLO was elected, the PRI-PAN hegemony ruled Mexico for more than 90 years, from 1920 onwards. 

So, the revelations could serve as an opportunity for the president in what has been a tricky period.

As The Brazilian Report showed in March, the Mexican president has been criticized for some of his lax attitudes towards Covid-19. Also, months before completing two years in office, AMLO’s administration has seen an increase in drug cartel violence: in 2019, the country had increased homicide rates, jumping 2.5 percent from 2018. 

And last but not least, the Covid-19 crisis will put Mexico into its most severe economic crisis since 1929. The International Monetary Fund slashed its predictions in July, forecasting that Mexican GDP will fall 10.5 percent in 2020. 

But seeing his rivals in the courts’ crosshairs is set to be a boon for AMLO, says Mr. Laborde.

“It is a fact that AMLO will capitalize on this event. The scandal will also benefit the government in a strategic moment: in July 2021, Mexico will have legislative and regional elections, which will choose governments in 15 states.”[/restricted]

Categories
Latin America

Cold winters increase demand for Brazilian electricity in other countries

Brazil’s Mines and Energy Ministry has granted permission to a local power company to export electricity to Argentina and Uruguay. Copel Mercado Livre, the trading branch of the Paranaense Energy Company (Copel), had already gained the right to import power from the neighboring countries back in June, and now both licenses will be valid until December 2022.

The exchange of electricity with Argentina will take place by way of the Garabi and Uruguaiana power stations, both located in Brazilian border state of Rio Grande do Sul. The energy plants of Santana do Livramento and Jaguarão — in the same state — will be tasked with producing electricity for Uruguay.[restricted]

This form of electricity ‘sharing’ is a frequent occurrence, working in accordance with the energy resources and demand of each country. For instance, between the second half of 2017 and the first half of 2018, Brazil was forced to import power from its neighbors due to a drought in the country’s southern region, which dried up the hydroelectric reservoirs responsible for the majority of Brazil’s energy production. 

Energy consumption rises in the cold 

Argentina and Uruguay have particularly severe winters, which raises the demand for electricity at a time when Brazil enjoys high consistent winds, resulting in abundant wind power. Brazil’s exports are made through thermoelectric plants left unused by the national grid, due to the surplus wind energy.

In June 2019, Brazil exported 280 megawatts (MW) to Argentina, while June of this year saw the country send 320 MW to its neighbors to the south. According to Capel Mercado Livre, exports to Argentina usually happen in June and July, while Brazil in turn imports electricity between March and May. 

Copel Mercado Livre has roughly 800 consumers in 14 Brazilian states and trades an average of 1,300 MW of electricity per year. Brazil’s free energy market was opened in 1995, when legislation created the definitions of free consumers, independent producers, and the Wholesale Energy Market — now called the Electricity Trade Chamber (CCEE). Copel’s involvement with the free energy market began in 1998, when the company signed the first contract on Brazil’s free market.

Private sector involvement

Two weeks ago, Brazil also began exporting power to Argentina by way of another domestic trader. Tradener, a private firm headquartered in the southern city of Curitiba, was granted permission to sell electricity abroad in July. Valid until December 2022, the contract was signed directly with Argentinian wholesale energy company Compañia Administradora del Mercado Mayorista Electrico (Cammesa) represented in Brazil by Tradener. The value of the contract was not disclosed. 

Tradener is one of the largest independent traders of electricity and natural gas in the country, focused on free electric energy consumers and independent producers. A pioneer in the segment since 1998, it was the first company in Brazil to receive permission to trade power with consumers and generators in the free market.[/restricted]

Categories
Latin America

Coronavirus in Latin America: a tale of failed leadership and inequality

The first confirmed Covid-19 infection in Latin America occurred precisely six months ago when a 61-year-old man tested positive for the disease in São Paulo. Despite having weeks to prepare for the arrival of a virus that was already disrupting societies in Asia and Europe, most Latin American nations have decidedly lost the battle against Covid-19. In the past six months, the region quickly became the world’s epicenter for the coronavirus pandemic.

Many have succumbed to the temptation of placing the blame solely on national governments. After all, it is hard to dispute that Brazil’s Jair Bolsonaro or Venezuela’s Nicolás Maduro have actively made the crisis worse than it should be. The former did everything in his power to undermine social distancing efforts implemented by Brazilian state governors, while the latter went as far as calling patients infected with Covid-19 “bioterrorists.” Meanwhile, both have touted unproven treatments against the coronavirus, acting as disinformation agents.

But the reality is far more complex. Even in countries where the pandemic was taken seriously from the start — namely Argentina and Peru — infection and death curves have now spiraled out of control. And that is because of a deeply-rooted problem in the region: inequality.


For tens of millions of Latin Americans living in poor housing conditions, social distancing is not an option. Moreover, the region’s economy is extremely informal, being highly concentrated in sectors that depend on the functioning of the in-person economy — meaning that it is impossible for governments to keep their populations at home indefinitely. Quarantines can only work for so long before economic needs begin to throttle the population.

In an August 17 report, the Inter-American Development Bank (IDB) said that at least 23.9 million jobs were lost in Latin America, affecting 12.5 percent of the total workforce in the region. Meanwhile, the Economic Commission for Latin America and the Caribbean (ECLAC) estimates that trade in the region will fall 23 percent in 2020, a bigger skid than in the 2008-2009 financial crisis.

Besides the boom of informal jobs, the political impact of the coronavirus pandemic is already a reality. 

In Bolivia, self-appointed interim President Jeanine Áñez is using the pandemic as an excuse to prolong her time in office — despite promising to act as a stopgap president between the coup that ousted Evo Morales last year and democratic presidential elections.

In Brazil, the pandemic forced the government into creating an emergency salary for informal and unemployed workers, which has become the only source of income for 14 million people — and drove President Jair Bolsonaro’s approval ratings to their highest levels ever.

In other countries, leaders fear the coronavirus crisis could lead to their demise. That is the case with embattled Chilean President Sebastián Piñera, as well as Nicaragua’s authoritarian leader Daniel Ortega.

It remains too early to predict what post-pandemic Latin America will look like. However, it is safe to say that the economic depression — coupled with the sheer human toll of the coronavirus — will leave many scars on what was already the world’s most unequal region.

Here is how the pandemic has affected some of the region’s key economies:


Brazil (3.7 million cases, 116,580 deaths)

Key dates:

  • February 26. A 61-year-old man in São Paulo becomes the first confirmed Covid-19 patient in the region.
  • March 12. Fábio Wajngarten, the president’s press secretary, tests positive for Covid-19 after a presidential trip to Florida. Over 20 people in the president’s entourage were infected shortly after — many of the cases were traced back to that trip.
  • April 16. Health Minister Luiz Henrique Mandetta is fired by President Jair Bolsonaro after disagreements over the use of antimalarial drug hydroxychloroquine against Covid-19. The president supports the unproven treatment, against all scientific evidence. Oncologist Nelson Teich is named as his replacement.
  • May 15. Mr. Teich resigns, for the same reasons as his predecessor: disagreements over social isolation guidelines and the recommendation of chloroquine as a “possible cure” for the coronavirus. Since then, the Health Ministry has been run on an interim basis by Army General Eduardo Pazuello.
  • June 19. Brazil surpasses 1 million cases.
  • July 7. Jair Bolsonaro tests positive for Covid-19
  • August 8. Brazil surpasses 100,000 deaths and 3 million cases 

Expected GDP growth in 2020: -9.1 percent (IMF)

Even before the coronavirus arrived in Brazil, the government showed signs that it would take the risks of a massive spread seriously, with the Health Ministry proposing a bill to give the government legal support to carry out emergency measures. After that, however, Brazil’s public response has been a disaster. The federal government collided with state administrations over quarantine measures and President Jair Bolsonaro has been a focal point of misinformation and denialism.

As in other countries, inequality plays a huge role in how the pandemic has progressed in Brazil. Poor housing conditions mean that millions of people live cramped in densely-populated areas, where social isolation is near-impossible. Many more have no access to clean water, making regular hand-washing — a key tool to prevent infections — more challenging.

An informal labor market and an already sluggish economy meant that millions of people preferred the risk of a Covid-19 infection to the certainty of not having any source of income whatsoever. The government created a coronavirus emergency salary program — and in 25 of 27 states, beneficiaries already outnumber people who are formally employed.


Argentina (359,625 cases, 7,563 deaths)

Key dates:

  • March 20. Government announces compulsory quarantine;
  • June 20. Protests against the expropriation of grain exporter Vicentín erupt in several cities;
  • July 9. Demonstrations in several cities demand President Fernández ease quarantine measures;
  • August 17. Protests against a judicial reform also mix with disgruntlement over quarantine measures. 

Expected GDP growth in 2020: -9.9 percent (IMF)

The health crisis began soon after President Alberto Fernández took office, but the country was already battling a deep economic crisis — reaching the point of default earlier in the year. 

Mr. Fernández, however, managed to strike a deal with Argentina’s private creditors to restructure a USD-65 billion-debt. The agreement was a relief to a government that was growing unpopular, as Argentinians began protesting quarantine measures, among other reasons for disgruntlement.


Bolivia (110,999 cases, 4,664 deaths)

Key dates:

  • July 9. Interim President Jeanine Áñez tests positive for the coronavirus;
  • July 21. The Bolivian press reports that, between July 15-20, over 420 bodies were removed from the streets across five regions;
  • August 16. Esther Morales, sister of deposed President Evo Morales, dies of Covid-19 in Oruro.

Expected GDP growth in 2020: -2.9 percent (IMF)

The pandemic postponed long-awaited elections in Bolivia. While Ms. Áñez argues that holding a national election while the pandemic rages on is a bad move, it also raises questions about her willingness to leave power. Especially since courts in Bolivia are cracking down on former President Evo Morales’ Movement to Socialism (MAS) party.


Chile (400,985 cases, 10,958 deaths)

Key dates:

  • March 16. Chile closes its borders;
  • March 24. The government enforces a curfew;
  • May 15. Capital Santiago goes under full lockdown, along with six other communes in the city’s metropolitan area.
  • June 16. Health Minister Jaime Mañalich resigns, accused of being slow to react to the spread of the virus and tampering with official data.

Expected GDP growth in 2020: -4.5 percent (IMF)

At first, Chile seemed to be managing the crisis well. However, a precocious reopening in May led to an uptick in infections and deaths, with a 60-percent bump in new cases. Things got worse when Health Minister Jaime Mañalich resigned due to a data tampering-scandal. An independent report accused the government of concealing more than 5,000 coronavirus-related deaths.

Moreover, Chile was already a society in turmoil — in 2019, President Sebastián Piñera faced a massive wave of street protests, in a crisis that threatened to bring down his administration. To ease popular discontent, Mr. Piñera promised a constitutional referendum for October.


Colombia (562,128 cases, 17,889 deaths)

Key dates:

  • March 25. President Iván Duque enacts a mandatory quarantine;
  • July 15. Human Rights Watch denounces abuses by armed groups against civilians between March and June, in an effort to enforce their own measures to prevent the spread of Covid-19.

Expected GDP growth in 2020: -2.4 percent (IMF)

Violence in Colombia increased during the pandemic, as many armed groups have been using their unofficial authority to impose isolation measures. A report by Human Rights Watch denounced massacres, especially in border regions. 

Almost 65 percent of Colombians approve of President Iván Duque’s coronavirus response, according to a recent survey. However, the country reported a new record for daily Covid-19 deaths on August 22, with 385 lethal cases. Fears of new peaks pushed the government to suspend tax-free days on retail stores to avoid big shopping crowds.


Ecuador (109,030 cases, 6,368 deaths)

Key dates:

  • March 17. The country begins enforcing restrictions on movement;
  • March 30. Local press organizations report that families in Guayaquil had burned the belongings of Covid-19 victims;
  • March 31. Newspaper El Universo says 450-plus dead bodies featured on a waiting list to be removed from homes. At this point, many families were simply abandoning corpses on the streets;
  • June 6. Capital Quito starts its reopening process.

Expected GDP growth in 2020: -2.4 percent (IMF)

In April, one month before the WHO declared South America the coronavirus epicenter, the city of Guayaquil went viral around the globe due to being the site of the first Covid-19 collapse in South America. The nightmare included more than 100 bodies being collected on the streets during the first chaotic days, according to Interior Minister Maria Paula Romo. Four months after the disaster, the province of Guayas (of which Guayaquil is the capital) now shows a downward trend in cases and deaths, already targeting the final phase of control. 


Mexico (568,621 cases, 61,450 deaths)

Key dates:

  • March 15. President Andrés Manuel López Obrador publishes a video on Twitter hugging and kissing supporters;
  • March 31. Mexico suspends all non-essential activities.

Expected GDP growth in 2020: -10.5 percent (IMF)

At the early stages of the pandemic, President Andrés Manuel “AMLO” López Obrador dismissed the severity of the virus — drawing comparisons to Brazil’s Jair Bolsonaro and U.S. President Donald Trump. The left-wing leader even showed a Jesus medallion as his “protection” against the virus and urged Mexicans to go on with their lives as usual. 

While AMLO has since changed his stance, Mexico quickly became the third country with most deaths and cases in the Americas — trailing only the U.S. and Brazil.


Peru (607,382 cases, 28,001 deaths)

Key dates:

  • March 15. President Martín Vizcarra passes a nationwide quarantine;
  • July 22. The government adds a total of 3,688 unreported deaths between March and June;
  • August 23. At least 13 people suffocate after police raid a party in Lima. The police were deployed to avoid public gatherings.

Expected GDP growth in 2020: 14 percent (IMF)

Peru is a textbook example of how social inequality may offset any government action against the coronavirus. The government imposed strict lockdowns before the United Kingdom and many other European countries. Still, it has become home to the world’s second-highest rate of Covid-19 deaths per 1 million people — behind only Belgium.

Experts say that a lack of information — coupled with limited access to healthcare and poor housing conditions — turned poorer regions in the Andes into breeding grounds for the virus.[/restricted]

Categories
Coronavirus Latin America

The disputes over emergency coronavirus benefits in Brazil and Argentina

With the profound economic impact of the coronavirus pandemic, emergency wealth transfer policies have popped up in both Brazil and Argentina. While providing much-needed breathing room to vulnerable populations, they have also shown the size of the challenges South America’s two largest economies will face in the post-Covid-19 financial recovery stage.

According to data from Brazil’s federal government transparency platform, around 66 million people received the administration’s emergency aid benefit in July, comprising a BRL 600 (USD 107) monthly payment to the unemployed, informal workers, individual micro-business holders, and beneficiaries of the Bolsa Família cash-transfer program. Single mothers are entitled to a double payment of BRL 1,200 per month.

Before the Covid-19 pandemic, Bolsa Família was the most prominent wealth distribution initiative in Brazil, created back in the early 2000s by the Luiz Inácio Lula da Silva government and credited with bringing millions out of extreme poverty. Now, the sheer reach of the coronavirus emergency aid leaves the world-renowned Bolsa Família scheme to shame.[restricted] Data from the National Household Sample Survey Covid-19 (PNAD Covid-19), carried out by the Brazilian Institute of Geography and Statistics (IBGE), shows that 44 percent of Brazilian households have at least one individual receiving the benefit, a rate that drops to just 4.6 percent for Bolsa Família.

In short, this shows the eye-watering number of people in Brazil who previously didn’t depend on government income-transfer programs, but now require such policies to survive the economic impact of the Covid-19 pandemic.

According to Lauro Gonzalez, the coordinator of the Center for Studies in Micro-finance and Financial Inclusion at think tank Fundação Getulio Vargas, labor trends such as the increase of informal work and the rising proportion of people with variable income have accentuated this crisis. As The Brazilian Report has explained, the informal economy is a big problem across all of Latin America.

Mr. Gonzalez is among the authors of a study about the impact of the emergency aid on Brazilians’ income, using data from PNAD Covid-19. The paper showed that the program increased revenues by an average of 24 percent for all types of work in relation to pre-pandemic levels. In 11 of the 36 categories analyzed by the IBGE, the increase was higher than 40 percent.

“The number of people that have received the emergency salary is a conservative estimate of the size of the problem. A part of the [lower middle class] falls into this category: a bracket that is vulnerable, but not poor to the point that they would receive Bolsa Família or similar benefits under normal circumstances,” Mr. Gonzalez tells The Brazilian Report

Taking credit

As Mr. Gonzalez notes, the emergency salary program was not in the interests of the Bolsonaro government’s economic team at the beginning of the pandemic. The administration first put forward a proposal to pay BRL 200 per month, before they were pressured by Congress to triple this amount and then extend the program for a total of five months.

Now, with the program’s success in providing income to vulnerable households, the government has been able to claim ownership of the initiative, helping President Bolsonaro enjoy some much-needed popularity boosts around the country. This does not mean, however, that the administration will be able to maintain the benefit for a significant period of time without betraying its own economic agenda.

“The government could have pushed welfare transfer policies at the beginning of its term, but from the economic policy point of view, personified by Economy Minister Paulo Guedes, the emphasis is on reforms leading to the ultra-liberalization of the economy, reducing the size of the state and focusing on fiscal balance,” says Mr. Gonzalez.

What remains unclear, according to the researcher, is what the country will do with the millions who have grown to depend on the emergency aid. “Completely discontinuing the coronavirus salary will only be compensated if the crisis eases up, which seems unlikely. The effect on people’s lives and the economy will depend on this tug-of-war between the potential reduction in effects of the crisis and the end of the emergency aid, and it will be best observed in the last quarter of 2020, when the benefit is set to end,” explains Mr. Gonzalez.

While the government has signaled that it intends to replace the emergency aid with a welfare transfer program entitled Renda Brasil (Income Brazil) — seen as an amalgamation of all existing benefit schemes — the Economy Ministry has yet to give any details on how this new program might work.

Emergency aid in Argentina

Over in Argentina, President Alberto Fernández was elected in October 2019 running on a platform that was perhaps the antithesis of his Brazilian counterpart. Regardless, with the advent of the Covid-19 pandemic, the two presidents faced similar challenges. On March 20, three days after Argentina imposed social isolation measures nationwide, the Executive issued a decree establishing the so-called Ingreso Familiar de Emergencia (Emergency Household Income) program, aimed at people aged between 18 and 65 who are either unemployed, in informal work, single taxpayers — the equivalent of Brazil’s micro-business owners — and domestic workers. 

Sixty-one percent of recipients were informal workers or unemployed between May and April, when the first installment of aid was paid out. The initial plan was for citizens to receive a single payment of ARS 10,000 (USD 135.50), but there have now been three installments as of August.

Unlike what was seen in Brazil, the emergency income program was not the subject of intense disputes in Argentina, where the main sticking point between the government and opposition was the continuation of social isolation measures, which went on for five months in Greater Buenos Aires but have been gradually loosened since May.

According to Mr. Gonzalez, it would be difficult to make a regional analysis of the effects of income transfer policies without analyzing each country’s experience in detail. However, in general terms, he says that there are two defining characteristics in the region’s economies: medium-to-low income per capita, and high levels of inequality.

“The design and implementation of adequate policies involve the collective efforts of several levels of the government. Where there are more accentuated political conflicts, the pandemic’s effects may be worse, as we have seen in Brazil, with the federal government facing off against state administrations when they should have been thinking of a strategy to face the crisis,” he adds.[/restricted]

Categories
Latin America

Argentina’s judicial reform could spark a political crisis

After recently agreeing on a deal with private creditors for the repayment of Argentina’s USD 65 billion debt, President Alberto Fernández was able to take a quick breather and think about the future. In the foreseeable short term, however, there are a number of gigantic issues to be solved, namely Argentina’s USD 44 billion debt to the International Monetary Fund (IMF), the Covid-19 pandemic, and a sweeping judicial reform in the country. The latter is the only one that depends solely on Argentina, yet it is also the most divisive.[restricted]

The proposal to overhaul Argentina’s judiciary was submitted on July 30 and intends to increase the number of justices on the Supreme Court and establish a new and more technological law system, seeking “guarantee a more independent judicial effort” and speed up cases, as President Fernández said, upon presenting the bill. 

As a respected former professor in criminal law at the University of Buenos Aires, the 61-year-old Mr. Fernández could be the ideal person to lead such sweeping judicial change in Argentina, especially in a country where “in 99 percent of crimes committed, less than 1 percent has an effective sanction by the state, including homicides, drug trafficking, and corruption,” according to Germán Garavano, a former Justice Minister and now a reform consultant. 

But while the proposed overhaul could ensure greater transparency and increased efficiency in the Argentinian justice system, the reform could also spark a political crisis. In the wake of President Fernández’s presentation of the bill, cacerolazo protests could be heard in wealthy neighborhoods of Buenos Aires, with citizens banging pots and pans in opposition to the reform proposal, accusing the current administration to be using the opportunity to shield Peronist colleagues from corruption charges. And the pot-banging hecklers centered their rage on Vice President Cristina Kirchner. 

As something of an embodiment of the political division in Argentina, Mrs. Kirchner — who served as president from 2007 to 2015 — is currently answering 12 criminal cases, with six requests for her to be taken into preventive custody. She is accused of crimes as varied as leading a sprawling corruption scheme, covering up a terrorist attack, and stealing a historical document. Regardless of her potential guilt or innocence in these cases, Mrs. Kirchner is currently protected by parliamentary immunity. Her opponents demand that change as a result of the judicial reform.

Reform comes with bad timing

The legal imbroglio involving Cristina Kirchner is also surrounded by narrative. The ex-president claims she is the victim of lawfare, in a coordinated action by the Argentinian justice system and backed by the U.S. It should be said that such allegations are common among the Latin American left and center-left, being repeated continuously by Brazil’s former president Luiz Inácio Lula da Silva, who was arrested in 2018 and released in 2019

Mrs. Kirchner spent the last few years accusing federal judge Claudio Bonadio of leading a judicial witch hunt against her. Mr. Bonadio was in charge of several high-profile cases involving the ex-president, including the so-called ‘notebook scandal,’ which involved an alleged bribery ring led by Mrs. Kirchner, denounced by notebooks kept by her former driver Óscar Centeno. 

Aged 63, Claudio Bonadio died in February of this year, with the cause of death rumored to be a brain tumor. As many allies of former President Kirchner silently celebrated the end of what they defined as persecution, members of the opposition saw Mr. Bonadio’s death as the end of any hope they had of seeing the ex-president stand trial. Now, government opponents claim the judicial reform is another Peronist mechanism to help Mrs. Kirchner avoid prosecution. 

According to Daniel Sabsay, a constitutional lawyer and professor at the University of Buenos Aires, the government’s proposed reform is far from having unanimous support and could open some worrying precedents for violating entrenched constitutional principles, as well as creating an entirely avoidable political crisis at such a turbulent moment. 

“There is little political space to carry out a reform that was already poorly created. We have seen that, in addition to the opposition, the reform proposal has been criticized by members of the Peronist wing themselves,” the expert told The Brazilian Report. 

Ms. Sabsay explained that even if the government manages to pass the bill through Congress — where it holds a majority — the controversial reform is unlikely to make it into law and “not end up being declared unconstitutional.” 

After solving the pressing problem of Argentina’s private foreign debt, President Fernández has some credit in the bank. However, he risks throwing this away by pursuing judicial reform at such a delicate moment in Argentina’s history, battling the Covid-19 pandemic and with a country politically split down the middle. 

Today, August 17, opposition forces are set to hold a public protest against the government and the judicial reform plan. However, the demonstration has received criticism from all over the political spectrum, due to the risk it poses amid the coronavirus pandemic. One prominent trade union leader, Hugo Yasky, exclaimed that “if Argentina were governed by the people that are calling this march, we’d have the same number of [Covid-19] deaths as Brazil.”[/restricted]

Categories
Coronavirus Latin America

What is the future of health systems in Latin America?

Health systems all across Latin America have been put under extreme stress tests during the Covid-19 pandemic. The lasting effects of the crisis are likely to persist for the region’s economy and society, but healthcare is also likely to suffer. “The Americas are at risk of losing years of health gains in a matter of months”, said Pan American Health Organization (PAHO) director Clarisse Etienne, during the organization’s weekly press briefing.

Experts point out that the economic and social consequences of the Covid-19 crisis will severely affect the region’s health systems in the long and short term. Among the immediate impacts on the health sector will be the return to regular routines in hospitals and health clinics.[restricted]

“One big issue regards when society returns to normal and when people feel confident in going back to surgeries, and when hospitals will be ready and safe for these patients,” explains Zoe Dauth, senior manager at the Americas Society/Council of the Americas (AS/COA).

The interruption and suspension of treatments for chronic or contagious diseases — such as diabetes, tuberculosis, and HIV — will also have an impact on regional healthcare. “Eleven countries in the Americas have less than three months’ supply of antiretrovirals for HIV, and others are running short of tuberculosis medication,” said Ms. Etienne.

In Brazil, there was a 40 percent reduction in tuberculosis diagnostic tests during the pandemic period, according to pulmonologist and research professor at Oswaldo Cruz Foundation (FioCruz) Margareth Dalcomo. “This will leave a deep legacy, with an impact on the incidence of these diseases,” she explains.

Deepening inequalities in Latin American health

The pandemic laid bare the inequalities in access and deficiencies in the region’s health systems, caused by decades of underfunding. Latin America invests about 3.7 percent of its GDP on health, half what is recommended by the Organization for Cooperation and Development (OECD).

The Economic Commission for Latin America and the Caribbean (ECLAC) has predicted that the region’s GDP will contract by 9.1 percent this year, saying 83 million people could fall into extreme poverty. While this will pose a series of problems, experts say it is essential for Latin America to invest heavily in healthcare even in the face of this crisis.

“Health systems need to be a priority from now on”, declared the Social Affairs Officer of ECLAC’s Social Development Division, Heidi Ullmann. According to the Economist Intelligence Unit (EIU), however, the world’s top 60 economies will reduce healthcare spending by 1.1 percent in 2020 (in U.S. Dollars). That trend is even worse in Latin America — the region is expected to decrease healthcare investment by 13.4 percent in 2020.

EIU expects a recovery in late 2020, which will be carried over to 2021, when spending is predicted to go up by 11.2 percent. Plummeting healthcare investment in Latin America can be explained in part by the devaluation of local currencies in comparison to the U.S. Dollar, which has caused a “spending slump in dollar terms.”

Cooperation is the key

One strategy to address bottlenecks in the post-pandemic period is to galvanize cooperation between Latin American nations, which has fallen out of favor in recent years. “There needs to be regional strengthening, mainly for the development of technologies and to promote long-term economic recovery,” explained Ms. Ullmann.

According to Zoe Dauth, one important lesson of the pandemic is countries’ need to reduce their foreign dependence on medical and pharmaceutical supplies. “It is a great opportunity for countries to strengthen their domestic industries and diversify their trading partners so as not to depend only on China. Regional cooperation can be instrumental in this supply chain.”

AS/COA represents the private sector and provides government officials with information to better understand key issues. In a recent report, the organization laid out a series of strategies for countries to build innovative and sustainable health systems.

The first suggestion is for countries to shift their healthcare models from disease management to health promotion. Ms. Dauth writes “that the promotion of health is beneficial for the population and for governments because it helps to reduce the costs of treating diseases.”

AS/COA also encourages investment in telemedicine and digital interventions, which have become all the more prominent during the Covid-19 pandemic. Ms. Dauth states that the time is right to further telemedicine, as it can “create more efficiency and a better allocation of funds in places where you have outlying regions, such as in Brazil.”

Beyond this, the report calls for a transition to a care model centered on patients and the strengthening of regulatory capabilities to further public-private partnerships in health. Many Latin American countries have ‘mixed’ health systems, with the public and private sector offering concurrent services. While this functions well in some countries, in others it has proved difficult to promote cooperation.

“With the region facing a deep economic crisis, private capital will be very important. Countries such as Mexico, Brazil, Chile, and Colombia are very open to private investment,” wrote AS/COA’s senior manager.

She also argues that “the public and private sectors need to align their incentives, so the expertise, management, and capital from the private sector can be sustainable.”

However, ECLAC warns that such a partnership must be carried out carefully. Ms. Ulmann says that mixed health systems can contribute to social erosion. “There is a very strong perception of the difference between the service and the resources available in the public and private systems. This dramatic fragmentation contributes to health inequity in the country.”

Such a situation can be seen in Brazil, which has a huge public health service that is dismissed by the middle class as slow and of poor quality, leading anyone with money to rely solely on private healthcare.[/restricted]

Categories
Coronavirus Latin America

Precarious housing a key factor in Covid-19 spread in Latin America

Late in February, when the first coronavirus cases were confirmed in Brazil and Argentina, the most affected demographics consisted of high-income families that brought the virus into the country after vacationing in Europe and Asia. As editor Euan Marshall explained at the time, Covid-19 entered Brazil as a disease of the jet-set elite.

But as Brazil tops the mark of 3 million confirmed cases — as well as reaching over 100,000 deaths — and with Argentina posting record numbers of new daily infections, the demographics of the pandemic have dramatically shifted. The contagion curve has spiked in lower-income areas, where social isolation is more challenging and often impossible. Experts believe that this trend has everything to do with the stabilization of new daily cases and deaths at high levels.

However, structural problems in regards to access to housing and public services — such as clean water and basic sanitation — drives home the point that Latin America’s brutal inequality hinders sanitary control strategies.

We take Brazil and Argentina — South America’s two largest nations — as a case study.[restricted]

Precarious housing in Brazil

Sixteen percent of Brazilians — that is, over 33 million people — have no access to clean running water. Meanwhile, almost half of the population doesn’t have access to a proper sewage system. Moreover, data from 2019 reveals that Brazil has over 5 million homes in ‘sub-normal clusters,’ defined as housing in areas without basic public services.

Rodrigo Faria Iacovini, a Ph.D. in urban planning and coordinator of the Citizenship School of the Pólis Institute, tells The Brazilian Report that housing precarity alone doesn’t explain the spread of the coronavirus in Brazil. It is, however, a key factor in aggravating the health crisis. The number of Covid-19 deaths per 100,000 inhabitants is significantly lower in areas with better sanitation coverage, according to data from think tank Trata Brasil Institute and the Health Ministry.

“The right to housing matters to the right of collective healthcare in the city. If a big proportion of families live without water or sewage systems, these conditions will obviously impact on their lives. These same families circulate around cities and impact the global state of healthcare,” says Mr. Iacovini.

The process of reopening economies after social isolation measures has been a disaster more or less everywhere in Latin America. According to Mr. Iacovini, it was a mistake to base local plans on what European countries were doing — as realities in urban areas are drastically different between the two continents.  “The Brazilian society has yet to face the debate around inequality and housing precarity as a violation of people’s right to their place in the public arena,” he says. “Gender, race, and social class tells us a lot about how a given group will fare in this pandemic.”

Argentina

In Argentina, 28 million people — or two-thirds of the population — live in 31 urban agglomerations. Those are areas with high population density in and around the country’s major cities, such as Buenos Aires, Mendoza, or Cordoba. According to the National Institute of Census and Statistics (Indec), of the 9.3 million households in these areas, 2.7 million lack basic sewage. 

Meanwhile, nearly 1 million people have no access to clean water — a basic need to deal with a virus which can be killed by the simple act of washing one’s hands. Data from 2018 shows that 9.2 million Argentinian households are located in precarious areas.

“Almost all coronavirus prevention measures are related to housing conditions. And none of these basic conditions are present in low-income neighborhoods. These are areas without running water and with grave risks of flooding — which is a vector for many diseases,” points out urbanist Eduardo Reese, director of economic, social, and cultural studies at the Center for Legal and Social Studies (CELS). 

In June, Villa 31 — a shantytown close to the upscale Buenos Aires neighborhood of Recoleta — became notable for having an infection curve that was much steeper than richer areas of the city. 

Midway through July, the city’s Health Secretary, Fernán Quirós, announced a program to provide serological Covid-19 tests to Villa 31, 53 percent of which came back positive. As The Brazilian Report explained in a previous piece, the higher the rate of positive tests, the more likely cases are left unidentified by health authorities.

Mr. Reese told The Brazilian Report that Latin American cities must not only face the Covid-19 pandemic, but also blatant inequality. “While in developed nations income is the biggest inequality multiplying mechanism there is, in Latin America, the key factor is housing.”

“Families in precarious houses have minimal chances to go through formal education, they face major hurdles in obtaining access to healthcare, and are more prone to missing work days due to floods and accidents,” says Mr. Reese. “Housing is key to understanding inequality.”[/restricted]

Categories
Latin America

Why is Latin America so dependent on loans?

On August 5, after 30 hours of negotiations, the Argentinian government announced that it had come to a long-awaited agreement with its private creditors, allowing it do restructure its debt of almost USD 65 billion in foreign loans. The deal is a simple one: for every USD 100 the country owes its creditors, Buenos Aires will pay USD 54.80. 

This agreement doesn’t just allow Argentina to emerge from its “technical moratorium” status — which is how Economy Minister Martín Guzmán refers to the country’s ninth debt default in May this year — it also represents USD 30 billion in savings for Argentina’s public accounts. Furthermore, it is seen as the first political triumph[restricted] of left-wing President Alberto Fernández, who took charge on the eve of the country’s current crisis. Three months after being sworn in, the Covid-19 pandemic reached Argentina’s borders. The country’s Central Bank says the economy is set to suffer a 9.5-percent drop in 2020. 

While this is certainly good news for Argentina, the country now turns its attention to another debt problem waiting in the wings: the USD 44 billion borrowed from the International Monetary Fund (IMF) during the administration of Mr. Fernández’s predecessor, Mauricio Macri. With the first debt terms resolved in August, now the government intends to resume its negotiations with the IMF until April 2021, believing that the positive outcome with private creditors may increase confidence in the country’s economic team.

Though Argentina has a particular penchant for borrowing, several other countries in the region have a history of resorting to international credit when money is short. This became even more intense during the coronavirus crisis when the collective GDP of Latin America and the Caribbean is tipped to fall 9.4 percent this year — the biggest regional recession in history.

Latin America and loans: a long-term commitment

Though the current financial calamity is the worst since the Great Depression in 1929, it won’t be the first time Latin America seeks out global creditors for financial aid. In 2019, before the coronavirus outbreak, the World Bank Group mobilized over USD 14.4 billion to support “sustainable development and poverty reduction” in Latin American and the Caribbean. With or without the virus, the economic mess in the region has been a constant reality. 

According to Axel van Trotsenburg, the Bank’s VP for the region, “to eliminate poverty and improve the lives of the people in the region” is the organization’s “overriding priority.” But this is nothing new, with similar platitudes issued about Latin America ever since these institutions were created after World War II. And still, the region is suffering financially, with almost 30 defaults registered since the 1950s, leading many to question whether these financial institutions are actually helpful to Latin America amid its constant economic convulsions. 

According to Marcelo Kfoury Muinhos, an economics professor at the Fundação Getúlio Vargas School of Economics (FGV-EESP), these institutions can help, but they are by no means a magic solution, especially when these developing countries don’t invest in stable macroeconomic cornerstones

“Many Latin American countries face a scenario of low savings. If we compare them with Asian developing countries, we see that these Latin nations end up depending on foreign capital and, as a result, always resort to loans to keep the economy running,” he tells The Brazilian Report.

To reach this current situation of huge foreign dependence, Latin America can lay the blame on its perpetual sociopolitical turbulence, with more than 100 coups d’etat in the region since 1948, according to the University of Costa Rica. And even though Latin America largely stayed out of the two World Wars of the 20th century, they were still left economically unstable. 

But regardless of the reasons that led the region to this scenario, fixing Latin America’s macroeconomic standards is a pressing matter, showing these governments have to look to the future if they want to stop calling upon the World Bank, the IMF, the Inter-American Development Bank, or even their neighbors for help. 

“Saying the ‘fault’ is because they are former colonies is not a good answer. For example, Southwest Asian countries like India and Vietnam were also colonies until the middle of the last century, and they don’t have the same problem. Things are much more related to macroeconomic balance and dollar savings. Otherwise, when you want to finance your national development plan, you need foreign capital and the country ends up being held hostage to it,” the expert explains. 

Born to borrow 

Among the best examples of how this dependence on lending can lead to bad management and a vicious cycle of debt is Haiti, the poorest country in the hemisphere, according to the World Bank. In what was once the richest European colony in the Americas, independent Haiti was born as a free nation with an astronomical debt to pay. Last year, it recorded a GDP of just USD 20.8 billion, ranking it 142nd in the world. 

In 1825, three decades after the Haitian Revolution overthrew French rulers in the slave colony of Saint-Domingue, creating the country we know today, then president Jean-Pierre Boyer signed a deal with King Charles X of France, who promised to reinsert the newborn republic in the global community. Haiti’s founding principles of abolition and equality displeased many countries around the world, who still say the slave trade as a successful business model.

France set about extorting Haiti to preserve its ‘diplomatic freedom,’ with the young country running up a debt of 150 million francs, equating to around USD 21 million in today’s money. And Haiti has never effectively recovered from this liability, bouncing from recession to recession every few years.

Almost 200 years since the French shakedown of Haiti, the domestic economy is once again contracting, boosted by the pandemic. Continuing the vicious cycle of lending, the Haitian Finance Ministry announced a new USD 229 million loan from the IMF, and USD 20 million from the World Bank. [/restricted]

Categories
Latin America

Ex-president’s arrest order could spell the end of Uribismo in Colombia

Arguably the most powerful politician in Colombia, former President Álvaro Uribe suffered a huge legal defeat on Tuesday, as the country’s Supreme Court ordered he be placed under house arrest as part of a case involving fraud and witness tampering. This marks the first time in Colombia’s history that a former president has been placed under arrest.

Mr. Uribe served as head of state between 2002 and 2010, but the scandal leading to Tuesday’s arrest order related to events in 2012, when the ex-president held a seat in the Senate.[restricted]

Accused by fellow Senator Ivan Capeda of having links to far-right paramilitary groups, Mr. Uribe sued his colleague for defamation — a ploy that soon backfired. The Supreme Court threw out the former president’s plea and instead moved to investigate Mr. Uribe over allegations he had coerced potential witnesses who may have provided evidence against him. 

After months of investigations into these claims, Colombia’s highest court issued its historic decision.

Mr. Uribe pleads his innocence, tweeting that “the deprivation of my freedom causes me profound sadness for my wife, my family, and the Colombian people who still believe I have done something good for the country.”

Colombian President Iván Duque — himself a political disciple of the right-wing figurehead — went public in defending Mr. Uribe’s integrity, leading to questions about the extent of the separation of powers in the country.

Hours after the court’s decision, the 68-year-old former president announced he had tested positive for Covid-19.

‘Uribismo’ in trouble

The aftermath of the arrest order served to underline how influential Mr. Uribe remains in Colombian politics, from the statements of President Duque to the celebration of the opposition. However, his political clout is clearly waning.

His last major blow came during the regional elections of 2019, when Mr. Uribe’s Democratic Center (DC) party lost key mayorships across the board, namely in Bogotá and Medellín. What’s more, his conservative coalition only managed victories in two of the country’s 32 departments, electing governors in Casanare and Vaupés.

According to Sebastián Ronderos, a Colombian professor of politics at the University of Essex, these recent losses show that Uribismo is in “intensive care,” potentially paving the way for a new political cycle in a nation with a historically conservative agenda.

“Álvaro Uribe established a new power structure around himself when he was elected, with his own personality cult. But now, with his arrest and the popularity of the Iván Duque government collapsing, Uribismo is on life support,” Mr. Ronderos tells The Brazilian Report.

“Mr. Uribe’s house arrest is the most critical stress for the rule of law in Colombia in the last decade,” said José Miguel Vivanco, Americas director at Human Rights Watch. “The Duque administration and the ruling party need to respect the court’s decision and independence by ensuring that President Uribe defends himself through the legal process, not through threats of judicial reform and groundless accusations.”

Indeed, the fall of Mr. Uribe’s political sect is not solely down to its leader. President Duque, often called Mr. Uribe’s ‘puppet,’ has been targeted by street protests, with members of the public demanding more funds for public education, less corruption, and changes to labor laws. This unrest lit the fuse for the political bomb that went off on Tuesday, with the former president’s arrest order.

Terrorism under Uribe

The allegations against Álvaro Uribe involve witness tampering in connection to the ‘false positive’ scandal, when civilians murdered at the hand of the Colombian army and far-right paramilitary groups were erroneously presented to the media as deaths of guerrilleros, members of the Revolutionary Armed Forces of Colombia (Farc) or National Liberation Army (ELN).

Fighting guerrillas with a “strong hand” was always Mr. Uribe’s motto, and his presidency began as violence rates in the country escalated to over 60 homicides per 100,000 inhabitants.

A vast portion of the population didn’t care how President Uribe planned to solve the conflict, they were simply content with the fact that guerrilla forces would be hunted down by the state. At the same time, however, several NGOs denounced human rights violations in Colombia, with at least 2,248 ‘false positives’ recorded in Mr. Uribe’s second term alone.[/restricted]

Categories
Latin America

Chile’s pension withdrawal law could expose extent of social security deficit

Congress allowed Chileans to make withdrawals from individual pension funds as an emergency measure during the Covid-19 pandemic. This could spell trouble for the Piñera government. With over 360,000 confirmed cases and pushing 10,000 Covid-19 deaths, Chile has the eighth highest infection tally in the world, despite having only the 63rd highest population. In response, Congress approved a law allowing citizens to make a 10 percent withdrawal from their individual pension funds, called Pension Fund Administrators (AFPs).[restricted]

The move was pushed through without the consent of right-wing President Sebastián Piñera, but was supported by the majority of Chile’s lower house, in response to the severe economic crisis on the horizon, partly caused by the Covid-19 pandemic. In 2020 alone, the country’s own forecasts have Chile’s GDP falling 7.5 percent, which would be its worst result in 35 years.

Beyond causing another headache to Mr. Piñera only three months before Chile goes to the polls for a referendum on opening a new constituent assembly, the government fears that opening up the Pandora’s box that is the country’s AFP pension system could reveal the extent of the social security deficit — one of the main point of contention sparking 2019 street protests against inequality.

Over 10.9 million Chilean workers will be able to withdraw between CLP 1 million to 4.3 million (USD 1,250 to 5,400) from their individual pension funds. The government estimates an average withdrawal of CLP 1.2 million as a result of the measure.

This move comes close to the 40th anniversary of Chile’s private pension system, which has become fraught with criticism in recent years. Social security as a whole ammasses up to USD 200 billion, representing almost 80 percent of the country’s GDP. However, that wealth is not being passed on to the population. In June, pensioners received an average of CLP 195,000, nearly 40 percent less than the national minimum wage of CLP 320,000.

Withdrawal

The measly payments for retired Chileans helped cause national riots in 2019, something the government puts down to the country’s ageing population. At the beginning of the pay-as-you-go AFP pension system, brought in under hard-right dictator Augusto Pinochet, Chilean life expectancy was around 62 years old. In 2017, it reached 80 years. According to the Organization for Economic Co-operation and Development (OECD), the ‘demographic dependency ratio’ of senior citizens — the rate of over 65 individuals for every 100 citizens of working age — will jump from 17 to 43 percent in 2050. 

Inequality, a legacy of the dictatorship

Regardless, the fact that Chileans are living longer does not fully explain the massive social security deficit in the country. While the country’s economy appears to have been performing well on the surface, it is plagued by high levels of inequality. While there was stable inflation, modest GDP growth and low crime figures in 2019, the Gini coefficient shows Chile is the third most unequal nation out of OECD members.

But the current problem comes from a simple equation. The private pension model establishes that each Chilean should deposit 10 percent of their salary in individual accounts, which would be managed by private companies and funds. These companies would then invest the money, so that it accrues value over time, or such was the intention. 

However, with economic fluctuations, market volatility and episodes of economic crisis since the 1970s, Chileans often do not get back what they have paid in. In addition to the wait to see their hard-earned money again, they also have to hope for a favorable economic outlook and a profitable investment. Simply putting money aside for retirement is not enough.

The private pension system was established in 1981, during arguably the bloodiest chapter in Chile’s history, as the country was ruled by the brutal Pinochet dictatorship. The economists involved in creating the plan claimed they were unaware of the repression going on “outside the office,” while some claim the violence was the price to be paid for Chile to achieve its so-called “economic miracle,” which has left a legacy of inequality and poverty among some of the country’s most vulnerable populations.

And despite all those mismatches, no democratic government since 1990 has had enough power to change the AFP system.

Piñera must remain alert

After falling to paltry approval ratings of just 9 percent back in January — as a residual effect of Chile’s 2019 anti-government anti-inequality protests — President Piñera had hoped that an efficient administration in combating the Covid-19 pandemic would save his popularity and allow him to finish his term.

The reality has not been so clear cut, however. While managing to bump his approval ratings up to 29 percent in May, the capital city of Santiago has recorded a new increase in Covid-19 cases. Also, controversy around the proper reporting of cases and deaths led to the resignation of Health Minister Jaime Manalich. Suddenly, Sebastián Piñera is in hot water again. Now, this new law could cause him to sink further.[/restricted]

Categories
Latin America

Is Elon Musk coveting Bolivia’s lithium resources? Not really …

“We will coup whoever we want! Deal with it.” This was the Twitter response of Elon Musk, CEO of electric vehicle giant Tesla, when questioned about the alleged U.S. interference in the military coup of Bolivian President Evo Morales in 2019. The accusation — hardly debunked by Mr. Musk’s reaction — was that Tesla waded into the internal affairs of the Andean nation to gain access to Bolivia’s lithium resources — the world’s largest, reportedly making up between 50 and 70 percent of the world’s deposits. 

The conspiracy theory is not terribly complex. First, Tesla’s electric cars are run by lithium battery cells; second, Evo Morales, known for defending Bolivian sovereignty over natural resources, said in an interview to a Brazilian outlet in April that “the coup was against the indigenous and [it was] for lithium.” And suggesting that a coup in Latin America included U.S. involvement is not a stretch by any means.[restricted]

Nicknamed ‘white oil,’ the lithium market is growing at an annual rate of 18.7 percent. As reported by Allied Market Research, it was worth USD 36.7 billion in 2019 and is tipped to reach USD 129.3 billion by 2027.

And Tesla has had a hand in that. 

Valued at USD 34 billion in 2020, the company uses at least 28,000 tons of lithium hydroxide a year, according to Bloomberg. However, Bolivia’s Uyuni Salt Flat — the largest lithium deposit in the world — are not primary resource suppliers for Tesla, leaving that post to Ganfeng Lithium (China), Kidman Resources (Australia), and Pure Energy Minerals (Canada). 

Another component of this wild theory involving Mr. Musk and the endless crisis in La Paz are recent contracts between Bolivian state-owned lithium firm Yacimientos de Litio Bolivianos (YLB) and Chinese companies, suggesting that Bolivia would prefer looking east to strike up lithium deals, as opposed to U.S. firms. 

The overbearing question is whether Elon Musk gains anything from overthrowing a Latin American president in search of lithium. According to Emily Hersh, mining and energy expert and the host of the Lithium Podcast, the answer is no. 

“The coup in 2019 was not about lithium. Being the biggest ore resource doesn’t mean it is the best. Extracting lithium in Bolivia requires an expensive process involving chemistry and energy. And the landscapes in the country don’t help with the logistics,” Ms. Hersh told The Brazilian Report

The perspective of lithium as the commodity of the future is also one of the reasons why politicians like Evo Morales have always put it on a pedestal as a game changer. In 2006, when he was first elected, Bolivia nationalized the production of oil and gas, generated USD 31.5 billion profit over the decade and strengthened the image of the country being “independent” of foreign interests.

But this might not apply to lithium. Ms. Hersh explains that besides similar backgrounds — a developing country defending its sovereignty over a natural resource — lithium won’t be to Bolivia what oil has been to Venezuela, where the commodity makes up over 90 percent of exports.

“The world doesn’t really need Bolivian lithium that much,” says Ms. Hersh. “Many politicians talk about lithium because they know it will put them on the front page of the newspapers. But nobody puts their hands in it and gets it done. Without the proper investment and science (and, basically money), you won’t turn that feedstock into batteries anytime soon.” 

Bolivia's Uyuni Salt Flat — the largest lithium deposit in the world
Bolivia’s Uyuni Salt Flat — the largest lithium deposit in the world. Photo: Ksenia Ragozina/Shutterstock

Things will change, but not much 

After the coup against Mr. Morales and his Movement to Socialism (MAS) party, the previously unknown Jeanine Áñez swore herself in as interim president and a conservative shift began in the country after 13 years of left-wing administrations. Soon, Ms. Áñez started re-establishing relations with the U.S., starting with the appointment of Wálter Oscar Serrate as Bolivia’s first ambassador in Washington since 2008.

While Mr. Serrate was sending a letter condemning the support of Democratic Senators in the U.S. for Evo Morales and calling the former president a “terrorist,” many saw this new relationship as an opportunity for Bolivia and the U.S. to talk business — and lithium may well come up in conversation.

However, Juan Carlos Zuleta, the new head of YLB appointed after the coup, explained that the state-owned company “would apply strict limits to foreign investment” regarding Bolivian lithium. In other words, as Mr. Morales always said, Bolivia’s white oil will remain Bolivian.[/restricted]