Political Risk Latin America Blog @PolRiskLatam

Corruption in Colombia: Closer and closer to the top

Posted in News and Articles, Political Risk by politicalrisklatam on August 2, 2011

by S. B. for The Economist – Americas View, July 29th, 2011.

Juan Manuel Santos, Colombia’s president, was one of the star members in the cabinet of his predecessor, Álvaro Uribe. As defence minister from 2006 to 2009, he oversaw many of the most successful attacks in the government’s 45-year-old war against the country’s leftist guerrillas. That record helped catapult Mr Santos to the presidency a year ago.

Several of his colleagues from Mr Uribe’s cabinet, however, have fared rather worse. Within a few days in late July, both Andrés Felipe Arias, the former agriculture minister, and Bernardo Moreno, Mr Uribe’s chief of staff, were jailed while they await trial in separate scandals. Meanwhile, a case against Sabas Pretelt, the former interior minister, involving yet another scandal was sent back to the prosecution because of procedural errors. Numerous officials from Mr Uribe’s government had already been charged with crimes including collaborating with paramilitary warlords, bribing legislators, spying on opponents and corruption. But none of them were as high-ranking or close to the president as Mr Arias and Mr Moreno were.

Mr Arias (pictured) is widely known as “Uribito” or “Uribe-Two” because of his physical likeness to the former president and their shared conservative politics. When Mr Uribe signed a free-trade agreement with the United States in 2006—which has not yet been ratified—Mr Arias introduced a programme of subsidies for small farmers to help them compete with American agricultural products. On his watch, some of the money went to bigger landholders and politicians—as well as to the owner of an influential newspaper, and to a former beauty queen who owned no land. (continue reading… )


Colombia’s criminal networks consolidate around two forces

Posted in News and Articles by politicalrisklatam on August 1, 2011

by Jeremy McDermott for The Christian Science Monitor, August 1st, 2011.

As Mexico‘s criminal underworld fragments under pressure from the security forces, that of Colombia appears to be consolidating around two opposing criminal networks.

New criminal syndicates are continually forming in Mexico, as the bigger cartels are decapitated and middle ranking leaders step up to form their own organizations. In Colombia, however, the reverse seems to be the case, as the number of major league criminal gangs shrinks. However, the two names that are left standing in Colombia represent not integrated structures, but loose networks.

These two structures, called BACRIMs (criminal bands – “bandas criminales”) by the government, are the Rastrojos and the Urabeños. While there are other major players on the drug trafficking criminal scene, they are all in one way or another linked to the Rastrojos or their bitter enemies the Urabeños.

The Rastrojos have their roots in the Norte del Valle Cartel, born in the province of the same name on Colombia’s Pacific coast. They are now the biggest players on Colombia’s criminal scene, with a presence in at least 12 of the country’s 32 provinces or departments. Led by two brothers, Javier and Luis Enrique Calle Serna, known collectively as the “Comba,” they are the dominant organization along the Pacific coast, and have locked down a significant part of the border with Venezuela, the latter now being one of the principal transit nations for Colombian cocaine. (continue reading… )

Investments in Latin American and the Caribbean are driven by developing Asian firms in the oil and gas sector, study says

Posted in Uncategorized by politicalrisklatam on July 29, 2011

United Nations Conference on Trade and Development Press Release, July 29th, 2011.

Foreign direct investment (FDI) flows to Latin America and the Caribbean increased by 13 per cent in 2010 to reach $159 billion, UNCTAD´s annual investment survey reports.

The strongest increase was registered in South America, where FDI rose by 56 per cent to $86 billion, with Brazil alone accounting for 56 per cent of this amount. Inflows to Central America climbed 20 per cent to $25 billion, of which Mexico attracted $19 billion. Flows to the Caribbean decreased by 26 per cent, to $48 billion, of which offshore financial centres represented 95 per cent, the World Investment Report 2011(1) (WIR11) reveals.

The report, subtitled “Non-equity modes of international production and development“, was released today.

FDI outflows from Latin America and the Caribbean increased by 67 per cent to $76 billion in 2010, the biggest surge among the world´s economic regions, the report says. The rebound was due to strong increases registered by Brazil and Mexico, the region´s two principal outward investors (figure 1).

Growth of both inflows and outflows stemmed from respective surges in cross-border merger and acquisition (M&A) sales and purchases. Latin America and the Caribbean witnessed a sudden increase in cross-border M&A sales from negative values (because of divestment) in 2009 to $29 billion in 2010, the highest level in the region since 2000. This shows a renewed interest by foreign firms in the acquisition of Latin American enterprises after a decade of sluggish cross-border M&A activity in the region. However, most of these acquisitions were undertaken by developing Asian transnational corporations (TNCs), mainly from China and India, in the oil and gas extractive industry in South America (table 1).

On the purchase side, the region´s TNCs, bolstered by strong economic growth at home, have increased their investments abroad, in particular in developed countries where investment opportunities have arisen in the aftermath of the global financial crisis. Brazilian companies such as Vale, Gerdau, Camargo Correa, Votorantim, Petrobras and Braskem have undertaken acquisitions in the iron ore, steel, food, cement, chemical, and petroleum refining industries in developed countries. Mexican firms such as Grupo Televisa, Sigma Alimentos, Metalsa and Inmobiliaria Carso have purchased firms in the United States in industries such as media, food, motor vehicles, and services. There also have been some important intraregional acquisitions, the most significant being the $1.9 billion purchase by Grupo Aval (Colombia) of BAC Credomatic, a foreign affiliate in Panama of General Electric Co.´s finance unit (table 1).

Preliminary data for 2011 show that FDI inflows have continued to rise in 2011, while outflows are declining. (continue reading… )

Bolivia: killing its cash cow slowly with its drill

Posted in Uncategorized by politicalrisklatam on July 29, 2011

by Andres Schipani for Financial Times – Beyond Brics, July 28th, 2011.

Cerro Rico, a mountain towering over the Bolivian city of Potosí, was once the world’s greatest treasure trove, a mine that for centuries bankrolled the Spanish empire.

But now, over 450 years after the first hole was drilled, it is in danger of collapsing. Intense mining has turned this soaring Andean peak into a honeycomb of gaping tunnels that threatens to cave in. For Bolivia, which has been riding the commodity price boom, the news could not have come at a worst time.

“The Andean mines are getting exhausted,” says Alicia Polo, a mining analyst at CRU.

Despite being largely a natural gas producer, Bolivia is inherently (socially as well as economically) a mining country, producing mostly tin, silver and zinc. It was born a republic thanks to mining and Cerro Rico is even emblazoned on the country’s heraldic shield.

“We have already hit almost $1.7bn in mineral exports in the first semester, seventy per cent more than last year, so we expect to surpass the $3bn by the end of the year. Volumes are slightly inferior, but the price is good,” Bolivia’s deputy mining minister, Héctor Córdova told beyondbrics. (continue reading… )

Argentina Update: Election Outlook

Posted in Uncategorized by politicalrisklatam on July 28, 2011

by Juan Cruz Díaz for Americas Society / Council of the Americas, July 27th, 2011.

President Cristina Fernández de Kirchner continues to dominate the political realm in terms of popularity as the presidential October 23 election approaches. After her husband, ex-President Néstor Kirchner, passed away in October of 2010, her approval ratings skyrocketed and remained at a relatively high rate. The outcomes of various regional elections earlier this year also showcased her wide-reaching influence. However, recent adverse electoral results for the ruling Frente Para la Victoria (FPV) party in the city of Buenos Aires and in the province of Santa Fe—two crucial districts—signal discontent among some sectors of the electorate.

Local Elections and Their Impact on the Presidential Race

Mayor Mauricio Macri from the Propuesta Republicana (PRO) comfortably won the July 10 first round of the local elections in the city of Buenos Aires against FPV’s Senator Daniel Filmus, and will most likely win again in the runoff elections slated for July 31. In Santa Fe, Antonio Bonfatti, protégé of the Governor and Socialist Party presidential candidate Hermes Binner, won the gubernatorial elections by a small margin. The wild card of that vote was comedian Miguel Del Sel, who ran for governor as a representative of the PRO party with the support of a large sector of dissident Peronists. Though a runner up, Del Sel’s performance was considered the surprise of the day when he pulled in 35.2 percent of the ballots. Macri, who abandoned his candidacy for this year’s presidential elections, claimed this result as a personal victory, positioning himself as a candidate for president in 2015. The FPV candidate Congressman Agustin Rossi finished in a distant third place.

Opposition leaders portrayed these results as a demonstration that the current administration is not invincible, questioning the validity of opinion polls that depict an easy reelection victory for Fernández de Kirchner (frequently referred to by her initials CFK). While it is true that both Macri and Bonfatti were the expected winners in those local elections, some observers see the results as a window of opportunity for the opposition to become serious contenders for presidency. Still, the opposition remains divided between five main candidates and none poll well enough to currently be seen as a threat to the president. CFK leads all opinion polls and, in most surveys, even tops the requisite 45 percent—or 40 percent plus 10 percent difference with the second-place candidate—needed in order to win in the first round. (continue reading… )

Parties, candidates hint at energy policy in a new administration

Posted in Uncategorized by politicalrisklatam on July 27, 2011

by Jeremy Martin for MexBizNews, July 27th, 2011.

In less than 12 months, Mexico will elect a new president. Surely, the security concerns gripping the country will dominate the campaigns. But, given energy’s role for the country’s economic well being, what candidates say on that topic will be important.

Across the parties and presumed candidates, there have indeed been hints and signals as to their thoughts on energy that are worth further assessment.

Beginning with the incumbent party, President Felipe Calderon’s National Action Party (PAN), there is much to dissect.

The president, energy secretary in his predecessor’s administration, has not completely shied from confronting Mexico’s energy dilemma. Not as deep as was hoped for, the energy reform of 2008 was, nevertheless, an important incremental step – and clear delineation of his government’s and the PAN’s position.

But there are two more recent developments that point up the PAN’s continued desire for “deeper” energy reform.

First were comments made in May by President Calderon. By expressing his hope for further energy reforms during his sexenio, he ignited a round of discussion and intrigue just as the election calendar was unfolding. But it was the response that underscored the PAN’s position on energy and is worth noting: Taking another shot at Pemex reform legislation was largely embraced by most PAN lawmakers.

Second are revelations that emerged from an internal party document crafted and circulated by PAN lower house member and presidential aspirant Josefina Vazquez Mota. Long on platitudes including commitment to oil sovereignty, the document did appear to reaffirm the PAN’s desire to remake Pemex and specifically in terms of fiscal reform, competitivity, and efficiency at the firm.

The outgoing PAN administration’s comments coupled with those made by PAN legislators send fairly clear signals as to the party’s platform, or at least their wishes, on energy policy and reform going into 2012.

Similarly transparent to date, but on the other side of the energy equation, resides the Party of the Democratic Revolution (PRD).

The party, led by Andres Manuel Lopez Obrador in the last election, spearheaded the anti-reform movement in 2008. The PRD, at least with Lopez Obrador at the helm, appears to remain firmly opposed to deep reform at Pemex and particularly to efforts to increase the firm’s ability to contract with private – and especially foreign – companies.

But more than either of the other major parties, the PRD’s internal deliberations to determine their nominee could conceivably alter the party’s broader views on energy. (continue reading… )

Chile mine strike raises fears for copper supply

Posted in News and Articles, Political Risk by politicalrisklatam on July 27, 2011

by Javier Blas for Financial Times, July 26th, 2011.

Copper prices rose on Tuesday as a strike at the world’s largest mine of the metal entered its fifth day, stoking worries of a stalemate which could reduce supplies.

The Escondida mine, located in the Atacama desert in Chile, accounts for around 7 per cent of global copper production. Although the strike has been, so far, too short to have a meaningful impact on physical copper markets, investors and traders worry that the lack of negotiations between the miners and the company could lead to a prolonged outage and potentially extend to other mines.

RBC Capital Markets said in a note to clients that the strike was providing some support to the copper market, but warned: “These industrial actions are generally short lived.” Investors are, however, worried that the strike could continue.

The operator of Escondida said the company would not engage in talks with the miners, which are demanding higher bonuses and salaries after a rally in copper prices of 32.7 per cent since January 2010, until they stop the strike. The miners have requested a second-round of government-mediated negotiations. (continue reading… )

Central America’s dirty drug wars

Posted in News and Articles, Political Risk by politicalrisklatam on July 26, 2011

Financial Times Editorial, July 25th, 2011.

Last week, Mexico seized more than 800 tonnes of precursor chemicals – enough to make several billion dollars worth of methamphetamine. The week before, the Mexican army also discovered the biggest marijuana field ever found in the country: a 120 hectare farm, yielding an average crop of 120 tonnes, worth $160m a year. These were rare triumphs in Mexico’s four- year assault on organised crime, which has so far cost 40,000 lives but done little to slow the flow of illegal drugs north to the US.

Of course, the idea that drug problems are caused by illegal drugs themselves is an illusion. Such problems are caused instead by the desire to consume drugs and the illicit industry that arises to meet that desire. Interdiction can only achieve so much. Even if the US built a 50ft wall around itself, drug traffickers would simply build 51ft ladders. What fighting organised crime can hope to do, however, is to raise the standards of law and order in the producing country, a good in its own right. It can also boost – if only slightly – the cost of illegal drugs. (continue reading… )

Hugo Chávez no longer lying low

Posted in News and Articles, Political Risk by politicalrisklatam on July 26, 2011

by Girish Gupta for The Christian Science Monitor, July 25h, 2011.

Venezuelan president Hugo Chávez’s silence during his initial trip to Cuba for cancer treatment raised speculation about his future. Now he is trying to remain in the public eye.

“THEY ROBBED US OF THE VICTORY GOAL!” screamed Venezuelan President Hugo Chávez’s Twitter account on Thursday morning, as Venezuela were knocked out of the Copa America after unexpectedly making the semi-finals.

As Mr. Chávez underwent his first phase of chemotherapy last week, he appeared to be keen to ensure that Venezuelans knew he was in charge – and eccentric statements like that are his modus operandi.

The firebrand socialist seems to have learned from the mistakes of last month, as an uncharacteristic three-week silence sparked speculation, compounded by his own ministers whose statements were confused and contradictory.

Their ubiquitous leader was missed and, thankfully for him, no one was able to fill the vacuum. This time around, there would be no vacuum to fill. “During the course of this week I have not lost focus on Venezuela for an instant,” Chávez said as he arrived back in Caracas on Saturday night.

His primary method of keeping up that appearance is Twitter. The maverick leader posted more than 50 times during his week away as he underwent medical treatment, spurring on the country’s soccer team, making budget statements, and alluding to his “great battle,” but without being specific as to why he was getting treatment.

Chávez is the face of government, and his public relations skills are second to none. Supporters hardly talk of their love for the party but, rather, their unflinching love for Chávez, the man. That fire has been kept burning for more than a decade by Chávez’s ubiquity on television, radio, and the streets of Caracas. (continue reading… )

Evaluating Mexico’s “New Security Model”

Posted in News and Articles, Political Risk by politicalrisklatam on July 25, 2011

by Latintelligence, July 25th, 2011.

Mexico’s recent state level elections informally hail the beginning of the presidential election season. The PRI triumph positions Enrique Peña Nieto, the outgoing State of Mexico governor, as the PRI’s candidate, and the one which everyone must beat.

As the politicking begins, so too does the legacy shaping. And here for the current administration no issue is more important than security. Perhaps the hallmark of the Calderón administration has been the creation of the Federal Police. Genaro Garcia Luna, the Secretary of Public Security (SSP) and head of this new force has just released a new book, Para Entender: El Nuevo Modelo de Seguridad to explain Mexico’s “New Security Model.” It is worth a read in order to understand what the government is officially trying to do – then one can judge how far it has progressed down that path.

Mexico’s new model comprises three essential parts. The first is technology – led by the much heralded Plataforma México, a comprehensive national crime database. Its goal is to make information easily accessible, searchable, and actionable for law enforcement across the nation. The second is people, working to make “Mexico’s finest” live up to the moniker. This involves creating a truly professional force through new ways of recruiting, vetting, training, and career planning. It has also meant changing the Constitution to give the federal police more powers than they previously had, including the ability to investigate crimes. The third arm is the prison system, seen more often as both a revolving door for powerful criminals and a training ground for those just starting out. The model envisions expanding and upgrading the current overcrowded and run-down facilities and professionalizing the staff. (continue reading… )