Political Risk Latin America Blog @PolRiskLatam

Cuban Parliament Holds off on Deeper Economic Reforms

Posted in News and Articles, Political Risk by politicalrisklatam on August 3, 2011

by Roque Planas for Americas Society / Council of the Americas, August 2nd, 2011.

Cuban head of state Raúl Castro surprised observers Monday by announcing the possibility reforming the island’s restrictive immigration laws. Cuba remains one of the few countries that requires its citizens to apply for permission to leave. Castro said the rule made sense in the 1960s when the revolutionary government adopted it as a way to protect itself from hostile political exiles, but did not make sense today, given that most Cuban migrants leave for economic reasons. Castro has previously indicated intentions of reforming a state-dominated economy that has grown sluggishly since the onset of the worldwide recession in 2008, posting GDP growth of 1.4 percent in 2009 and 1.5 percent in 2010. While the possibility of immigration reform stole the show at Monday’s day-long congressional session, the National Assembly did not publicly address Cuba’s many pressing economic challenges.

Some observers expected the Cuban Parliament to finalize game-changing rules permitting home sales at its Monday meeting for the first time since the 1960s. The body did not do so. Despite putting the task off, the Cuban government says it will finish crafting rules governing home sales by the end of the year. Even without the law on their side, The Miami Herald points out that Cubans have already begun advertising their homes on Revolico—a website for classified announcements. And foreigners may soon get the right to buy Cuban property. Canadian company Standing Feather International, which has a contract to build a luxury golf resort in Holguín, says the Cuban government will allow both foreigners and nationals to purchase property there in perpetuity. Previously, foreigners could only lease Cuban property for 50 years, a ceiling Raúl Castro raised to 99 years in September of last year.

Cuba is also struggling just to feed itself. In preparation for Monday’s legislative meeting, Minister of Agriculture Gustavo Rodríguez announced Friday that the government would have to import even more food this year than planned, because the state failed to produce as much as it anticipated in 11 categories of foodstuffs during the first six months of 2011. It was the second time this year the government was forced to bump up its outlay for foreign food purchases. Costs continue to mount despite a 2009 agricultural reform that distributed usufruct rights to 150,000 families to farm fallow land. BBC correspondent Fernando Ravsberg says the reform has yet to boost production because it does not address the main problem of lack of access to basic resources such as fertilizers, tools, seeds, tractors, and other inputs. Cuba imports somewhere between 60 percent and 80 percent of its food (official and private estimates vary widely).  (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… )

Rousseff’s New Cabinet Picks Tasked with Handling Coalition

Posted in News and Articles, Political Risk by politicalrisklatam on June 15, 2011

by Roque Planas For Americas Society/Council of the Americas, June 14, 2011.

Keeping a coherent governing coalition together in Brazil is not easy. The country boasts 27 officially inscribed political parties, making it difficult for any one to come out on top. With the resignation of her Chief-of-Staff Antonio Palocci over allegations of ethics violations, Dilma Rousseff’s job of keeping the 15 parties in her coalition on the same page just got harder. The task now falls to Gleisi Hoffmann and Ideli Salvatti, whose diplomatic skills have yet to be tested on such a scale.

A towering political figure, Palocci began his political career as a far leftist and helped found the governing Workers Party (PT) in 1980. As he ascended politically, however, he grew closer to Brazil’s private sector, first as treasury minister under the Luiz Inácio “Lula” da Silva administration and then as a congressman from 2006 to 2010. Palocci became one of the few major PT figures to weather the “mensalão” scandal of 2005, in which high-ranking PT officials were accused of paying monthly salaries to minor legislators to support the Lula administration’s congressional agenda. But Palocci resigned on June 7, after the A Folha de São Paulo revealed he had multiplied his assets 20 times and purchased luxury properties between 2006 and 2010 through his consultancy.

Losing Palocci created a vacuum. According to The Economist, the president recruited Palocci into her administration “to act as the political enforcer to keep Rousseff’s unwieldy coalition in line.” He accomplished that goal partly by usurping the role of congressional liaison. So when Rousseff accepted his resignation, she also accepted that of Luiz Sérgio, head of Institutional Relations, the ministry charged with coordinating relations between the executive and Congress. He was widely considered ineffective at managing the differences among the governing coalition.  (continue reading… )

In Tight Race, Humala Wins Peruvian Runoff Vote

Posted in News and Articles, Political Risk by politicalrisklatam on June 6, 2011

by Carin Zissis for Americas Society / Council of the Americas, June 6th, 2011.

After a neck-and-neck race, Ollanta Humala edged out Keiko Fujimori to win the June 5 runoff vote for Peru’s presidency. With over 88 percent of votes tallied on the morning of June 6, Humala had won 51.27 percent of the vote against Fujimori’s 48. 5 percent. Though Fujimori carried Lima, Humala won in a majority of Peru’s regions. A retired military officer, he spent much of his candidacy trying to shake off comparisons with Venezuelan President Hugo Chávez and replace them with the more centrist model of ex-President of Brazil Inácio Lula da Silva. But his opponent had ghosts of her own; Keiko Fujimori, an ex-legislator, is the daughter of former President Alberto Fujimori—now serving time for corruption and human rights abuses carried out under his watch. To some degree, both candidates can thank the centrist candidates in April’s first-round election for dividing the centrist-voter block, thereby letting the left-leaning Humala and the conservative Fujimori advance (Humala won the first round with 31.7 percent against Fujimori’s 23.6 percent). When he takes office next month, Humala faces the challenge of reuniting a country split by a divisive presidential race.

The Nationalist Party’s Humala has spent much of his campaign distancing himself from the label “leftist.” An El País article makes the case that his political shift dates further back. When he lost a 2006 runoff against current president Alan García, reports the article, Humala realized that his biggest misstep involved linking his political platform to chavismo. Observers still have their doubts, evidenced in comments from Peruvian congressman and Humala-campaign spokesman Daniel Abugattas, who contended that property will not be nationalized under the new president. “There isn’t going to be a tax on your chickens,” he told a Lima-based TV station. “Nobody’s going to take away your house or your garage. Nothing that’s being posted on Facebook or Twitter is going to happen.” In a country that has seen rapid economic growth, Humala has not won over the business community but found support among poor voters who feel left out of the boom. (continue reading… )

Latin America and the Call for a Non-Euro IMF Director

Posted in News and Articles, Political Risk by politicalrisklatam on May 30, 2011

by Roque Planas for Americas Society / Council of the Americas, May 24th, 2011.

Dominique Strauss-Kahn’s May 18 resignation from his position as head of the International Monetary Fund provided Latin American leaders with an unexpected opportunity to challenge the European stranglehold on one of the world’s most powerful financial positions. By informal arrangement, the position of IMF director has gone to a European since the institution was created in 1944, while Americans heads the World Bank. The arrangement reflected the political realities of the post-World War II world, but have little to do with today’s geopolitical realities and should be reformed, several Latin America experts argue.

“I don’t think that either the IMF or the World Bank should continue to be the monopoly of the United States and Europe,” said former Brazilian Foreign Minister Celso Amorimduring a press conference at the Americas Society on May 16. “Of course, I would prefer someone from an emerging market, but it has to be a good person.” Using less diplomatic language, Venezuelan columnist Moisés Naím called the IMF’s tradition of appointing exclusively European directors “colonialist” and argued the Fund should instead adopt a non-discriminatory selection process based on merit. “In its daily work, the IMF demands that the governments that seek its financial assistance adopt market principles of efficiency, transparency, and meritocracy in exchange for its help. Yet that same institution selects its leader through a process completely at odds with those values,” Naím wrote. “[That policy] is now obsolete, unacceptable, and counterproductive to the cause of global economic stability.”

The IMF appears to be listening. In a May 20 press release, the Fund said it will adopt an open and meritocratic process to select its next director. The only requirement regarding country of origin is that the successful candidate “be a national of any of the Fund’s members.” If the IMF receives more than three eligible candidates by the closing date on June 10, the Fund’s directors will decide on a shortlist of three candidates. The Fund employs a weighted voting system slanted toward developed countries. “The point is that, if the decision is made to open the doors to non-Europeans for consideration, the Western Hemisphere boasts a level of talent that is genuinely world class,” writes COA’s Eric Farnsworth in The Huffington Post. “There is an opportunity here that should not be missed.”  (continue reading… )

Brazil’s Proposed Reform of Forest Code Sparks Environmentalist Outcry

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

by Roque Planas for Americas Society / Council of the Americas, May 27, 2011.

The Brazilian House of Deputies’ decision on May 24 to loosen environmental protections contained in the Forest Code invited plenty of international criticism. Brazil’s Forest Code, established in 1965, requires private landowners to keep 80 percent of protected areas forested, among other provisions. Proponents of reform say it would help small farmers stay in business and stimulate domestic food production, but environmentalists view the proposal as a step backwards in the country’s fight to protect the Amazon rainforest. The bill now goes to the Senate, where it could very well pass, though President Dilma Rousseff has threatened to veto key provisions.

With a vote of 273 to 182, the bill sailed through the House. Championed by Aldo Rebelo of the Communist Party of Brazil (PSdoB, in Portuguese) and the agribusiness lobby, the proposed law would open some areas of environmental protection to farmers by loosening restrictions on the clearing of hilltop and riverbank areas. The law would also provide amnesty to those who illegally cut down forested areas prior to a cutoff date of July 22, 2008, and would give states greater control over designating Permanent Areas of Preservation.

President Dilma Rousseff has reservations about the House vote. She threatened to veto the law if the provision extending such authority to state governments is not removed during Senate debate. Rousseff also says that amnesty sends the wrong message. She may be right. The Brazilian Space Agency (INPE, in Portuguese), which routinely conducts aerial surveys of the Amazon, found a 27 percent rise in deforestation over the last two months. Sources at Brazil’s environmental protection agency (known as IBAMA) attributed the unexpected deforestation bump to the debate over the reform, saying it created the expectation that infractions would be forgiven in the future. The IBAMA says it has issued some 13,000 unpaid fines prior to the amnesty’s July 22, 2008 cutoff date, for a total worth of $1.5 billion.  (continue reading… )

U.S.-Latin American Relations: From Here to Where?

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

by Eric Farnsworth for Latin American Policy. Published by the Council of the Americas / Americas Society.

Latin America is a region transformed. In the past 10 years, it has become confident, independent minded, and economically sound. The region, particularly the commodity-exporting nations of South America, is charting a new course, perhaps less beholden to the United States and more willing to explore diverse relationships. Brazil is leading the way as Latin America’s largest economy by far, but others, such as Colombia, Chile, and Peru, are adding considerable economic weight of their own. Mexico and Central America, so dependent for their own economic well-being on the sluggish U.S. economy and without commodities to export to China, are recovering more slowly. Nonetheless, the region as a whole is economically strong and, along with Asia, is pulling the global economy out of the crisis that the United States and Europe began. This marks a historic shift: Where once the region was known for its contributions to global economic difficulties—the debt crisis of the 1980s and the peso and so-called tequila crises of the 1990s—Latin America is now an engine of economic recovery. Prospects for the region are bright.

At the same time, the United States has arguably turned inward in most areas except for direct engagement in the Middle East and Central Asia. From September 11, 2001, until today, Washington has been obsessed with domestic and foreign security concerns in a manner quite different than before 9/11. The successful steps that the Bush Administration took to keep the United States free from subsequent attacks also created deep political divisions within the nation and in other nations that have yet to be resolved. Additionally, massive Bush-era tax cuts combined with greatly increased government spending, for enhanced security as well as for increased social programs such as a new, multi-billion dollar prescription drug benefit, combined with huge new spending by the Obama Administration in response to the financial crisis of 2008 and the ongoing “jobless recovery,” have put the United States on an unsustainable financial path with a $14 trillion debt load. Without further steps it will increase by $1 trillion per year. (continue reading… )


Sixth Congress of the Cuban Communist Party: Another Massive Disappointment

Posted in News and Articles, Political Risk by politicalrisklatam on April 20, 2011

by Frank Calzon for Americas Society / Council of the Americas, April 20th, 2011.

The Sixth Congress of the Communist party of Cuba has convened, and although General Raúl Castro has announced that it should be the last of the historical generation that overthrew the dictator Fulgencio Batista some 50 years ago, the decisions announced in Havana are just another great disappointment for the 11 million Cubans.

For a half century General Castro has functioned as minister of the armed forces and as such is responsible for the military expeditions that sent Cubans to kill and/or be killed in Africa. He is likewise responsible for the execution of his colleague General Arnaldo Ochoa for the crime of being more popular than Fidel himself. This is in addition to acts of international terrorism such as shooting down two unarmed civilian planes surveying the Florida straits for stranded refugees. Worst of all, he proposes to make Cubans believe that the naming of another octogenarian as vice-president of the Council of State—in this case, José Ramón Machado Ventura—constitutes something new in the sad history of the Cuban revolution.

Raúl Castro now speaks of establishing a limit of two terms of five years each for the present Cuban leadership—this, when he himself is almost 80 years old! Those who see past the charismatically challenged brother of Fidel can easily pick out the figure of Colonel Alejandro Castro, his son and right-hand man. Alejandro also holds a high position in the ministry of interior, the agency of the regime in charge of foreign espionage and domestic repression. Also, General Castro has just appointed Luis Alberto Rodriguez Calleja to the powerful Central Committee of the Communist Party of Cuba—a man who happens to be married to one of his daughters. (continue reading… )

Raúl Castro Pitches Term Limits amid Cautious Reform Proposals

Posted in News and Articles, Political Risk by politicalrisklatam on April 18, 2011

by Roque Planas for Americas Society/Council of the Americas, April 18th, 2011.

Cuba’s Communist Party gathered on April 16 to mull over a battery of reforms designed to soften the state’s grip on the island’s economy. But while the proposed economic reforms occupied most participants’ minds, Cuban head of state Raúl Castro’s call for political reform caught media attention. Many observers, including Phil Peters of the Lexington Institute, expected the Congress to clarify which leaders will inherit the Revolution by finally retiring Fidel Castro from his position as first secretary of the Communist Party and elevating Raúl to the top spot from his current position as second secretary. Raúl Castro’s replacement, in turn, could turn out to be the Castro brothers’ successor.

Instead, Castro opted for much broader change at the Party’s first Congress since 1997. He proposed a term limit of two five-year periods in order to rejuvenate a political system devoid of young leaders. “Today, we are faced with the consequences of not having a reserve of well-trained replacements with sufficient experience and maturity to undertake the new and complex leadership responsibilities in the Party, the State and the Government,” Castro said in his speech opening the Congress Saturday. Critics point out that the term limits probably will not have much effect on Raúl Castro himself, who took over in 2008 and could still govern until 2018, when he will be 86 years old. Oscar Espinosa Chepe, a Cuban independent economist,told The Miami Herald by telephone that term limits won’t “resolve our essential problem, which is the monopoly on power by a group whose policies have failed for 50 years.” Regardless, the reform, if enacted, would clear the way for a new generation to take a greater role in Cuban politics and prevent future leaders from installing themselves in power for five decades at a time. Several Cubans interviewed by foreign news agencies applauded the proposal.

But the term-limit announcement overshadowed what is shaping up to become Cuba’s most far-reaching economic reform since the government inaugurated its communist system in the 1960s. Castro called the Party Congress to discuss the “Guidelines to Social and Economic Policy,” a 32-page policy paper that envisions an increased role for private initiative, at the expense of the island’s cumbersome and notoriously inefficient state. The document also proposes phasing out the dual currency and ration card system. Castro views economic reform as his most urgent goal and called attention to examples of wasteful subsidies that drain state resources during his speech opening the Congress on Saturday.  (continue reading… )

Weekly Roundup from Across the Americas

Posted in News and Articles, Political Risk by politicalrisklatam on March 31, 2011

by Americas Society / Council of the Americas, March 30th, 2011.

Presidential Election Results Delayed in Haiti

Haiti’s electoral agency announced that preliminary results from a March 20 runoff election—originally scheduled to be released March 31—won’t be available until April 5, with final results planned for April 16. The council attributes the delay to signs of fraud in vote counts. The results will reveal whether ex-First Lady Mirlande Manigat or former pop singer Michel Martelly will serve as the country’s next president.

IDB To Help Cool LatAm Economies

The Inter-American Development Bank said it will help Latin American economies“de-dollarize” during its four-day annual meeting, which took place in Calgary this year. The Washington-based bank said it will offer more loans in local currencies and the option to exchange open loans from dollars in order to combat the soaring value of many of the region’s currencies and economic overheating. The International Monetary Fund’s regional director Nicolas Eyzaguirre said the region should terminate stimulus programs to stop overheating, but Brazil’s Deputy Central Bank Governor Luiz Pereira da Silva defended his country’s plan to limit inflows of speculative capital from overseas.

Bachelet on UN Gender Empowerment Initiative

In an interview with The New York Times, former Chilean President and current head of UN Woman Michelle Bachelet discusses her strategy to empower women worldwide. She emphasizes bringing women into positions of power and recruiting men to support the struggle for gender equality. (continue reading… )