Political Risk Latin America Blog @PolRiskLatam

Colombia-Brazil: where’s the trade, hombre?

Posted in News and Articles, Political Risk by politicalrisklatam on August 4, 2011

by Naomi Mapstone for Financial Times – Beyond Brics, August 4th, 2011

For all the talk of south-south investment flows, some of Latin America’s strongest economies are finding it easier to access Chinese, American or European consumers than Brazilians.

Colombia, which shares a 1,950km Amazon border with Brazil, is a case in point.

Bilateral trade between the two nations has quadrupled since 2004, off a low base, largely thanks to Brazilian exports.

According to a new study by the Inter-American Development Bank, out on Thursday:

Despite all the dynamism of the last decade, bilateral trade in 2010 accounted for only 0.7% of the total trade of both countries, well below the already modest 20% share intraregional trade in Latin America.

The study’s lead author, Mauricio Mesquita, told beyondbrics the slow progress was due in large part to Brazil’s reluctance to lower tariffs. This year, as part of a 15-year tariff reduction deal, the average preferential tariff on Colombian exports to Brazil was 5.8 per cent, while Brazil’s was 2.4 per cent. Other factors – including a significant infrastructure deficit in the Amazon region and high logistics costs – have also contributed to the low level of trade between the two countries.

Stiff competition from Chinese manufacturers should also strengthen the case for boosting internal markets, the report notes. (continue reading… )


Indigenous in Colombia call for demilitarization

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

by William Lloyd George for The Christian Science Monitor, August 2nd, 2011.

After a bomb exploded in the southern province of Cauca last month, local leaders issued a statement urging both the Colombian government and guerrillas to disarm and leave their communities in peace.

On most days Toribio can be described as a sleepy farming town of 4,000. Life revolves around the leafy central square, especially on Saturdays when farmers flock to the market to sell their produce. In recent years the town has been left in relative peace despite conflict raging between guerrillas and the Colombian government in the southern province of Cauca.

That changed on Saturday, July 9.

Like most Saturdays, Sara Munoz was at the bank to deposit money when she heard an explosion outside. She recalls the roof falling down around her, trapping her with her three children. Her father was running their meat stall in the busy market outside and was killed instantly as a gas cylinder from the homemade bomb hit his head. FARC guerrillas, who have waged civil war with the state since the 1950s, had detonated a car bomb outside the police station. While the police station was left intact, 25 homes were destroyed, nearly 500 damaged, and three civilians were killed with hundreds of others injured.

“Many innocent and good people are being caught up in a conflict we have nothing to do with,” Ms. Munoz said from her mother’s home, a week after the blasts.

While urban Colombia has seen a dramatic decline in politically-motivated violence in the past decade, in recent months the government has increased its military presence here in rural Cauca in order to flush FARC rebels out of strategic mountains where they are believed to be hiding key leaders. Countering the offensive, the FARC have increased bombings, attacks, and assassinations with little care for the native population, say the indigenous leaders who also criticize the Colombian military for establishing bases inside their towns. Colombian think-tank Nuevo Arco Iris has reported a 10 percent increase in attacks for the first half of this year by the FARC compared to the same period last year.

Fed up with innocent bloodshed, Colombian indigenous communities from Cauca have now called on all military groups to leave their territories and put an end to the violence coming from both sides. The demand was made by indigenous leaders following a meeting on July 20 with over 5,000 natives from neighbouring reserves, to find a solution to surging violence in their territory. They have also requested that the government and FARC begin a peace dialogue to end the conflict. (continue reading… )


By William Lloyd GeorgeContributor / August 2, 2011

Toribio, ColombiaOn most days Toribio can be described as a sleepy farming town of 4,000. Life revolves around the leafy central square, especially on Saturdays when farmers flock to the market to sell their produce. In recent years the town has been left in relative peace despite conflict raging between guerrillas and the Colombian government in the southern province of Cauca.

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… )

Tackling Colombian corruption: a Sisyphean task?

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

by Naomi Mapstone for Financial Times – Beyond Brics, July 15th, 2011.

Colombia’s president has stamped on another tentacle of Colombian corruption, ordering the arrest of a dozen tax officials who siphoned off hundreds of millions of dollars.

Juan Manuel Santos says five more officials are still on the run, after authorities unveiled a “parallel office” that authorized value added tax refunds on fake exports.

Police are looking into VAT receipts for everything from false companies to Maseratis in an attempt to put a number on the fraud, which Santos said would run into millions of dollars.

Authorities had been investigating the scheme for at least eight months before this week’s bust, but Santos said an earlier investigation team had been “bought off”.

This underscores the depth of the problem Santos faces. In a thoughtful article “Five reasons why corruption won’t stop growing”, Bogota news magazine Semana points to a recent study of entrepreneurs who conceded that, on average, 13 per cent of a contract’s value is earmarked for bribery. (continue reading… )

Colombia oil: Blocked pipes

Posted in News and Articles, Political Risk by politicalrisklatam on June 24, 2011

by The Economist Intelligence Unit, June 21st, 2011.

Guerrilla violence is not the biggest threat to Colombia’s burgeoning oil sector.

Despite recent progress in curbing the illicit trade, Colombia remains the world’s largest producer and exporter of cocaine. Now, the country is becoming known more for legitimate revenues from a black and sludgy commodity as for the white and powdery stuff. Oil production in Colombia rose by 16.9% last year, according to BP, the fastest clip of any country. Yet a spate of attacks and kidnappings has cast a shadow on this hopeful picture for hydrocarbons.

Three Chinese oil workers and their interpreter were kidnapped in early June by guerrillas from the Revolutionary Armed Forces of Colombia (FARC) in the south of the country and remain missing. This followed the abduction in March of 23 contractors conducting exploration work for Talisman Energy, a Canadian firm. Security forces have since rescued all but one of the workers, but the intervening months also saw several pipeline bombings.

All this conjures up the dark days of the 1990s, when such incidents were the norm. Yet renewed attacks do not herald a return to such turbulence, and pose a limited threat to Colombian oil production. Rather, oil industry insiders fret about less well-reported issues that they fear are far more likely to halt the industry’s progress. (continue reading… )

Peru Stock Exchange Operator’s Shares Plunge After Colombia Merger Delay

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

by Helen Murphy for Bloomberg, June 14th, 2011.

Shares in the operator of the Lima stock exchange plunged 11 percent after the company announced a delay of its merger with its Colombian counterpart to give Peru’s new government time to consider details of the accord.

Bolsa de Valores de Lima SA (BVLBC1) fell 11 percent to 10.18 sols at 1:15 p.m. New York time while Bolsa de Valores (VALORES) de Colombia SA, which operates the Bogota exchange, fell 2 percent to 42.20 pesos, a three-week low.

The BVL and BVC, as the exchanges are known, said in a joint statement yesterday the postponement allows them to provide information on the project to President-elect Ollanta Humala’s administration “before it is finalized.” The merger plan won’t be altered, the statement said. (continue reading… )

Chile, Peru and Colombia launch second largest regional stock market

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

by Merco Press News, June 3rd, 2011.

Chile, Peru and Colombia formally combined operations of their stock markets on Monday to form the Latin American Integrated Market (Mercado Integrado Latinoamericano, or Mila).

Authorities celebrated the integration of Mila, which will allow for greater access and investment in each country’s stock exchange.

“With the Mila, we are making concrete contributions to the growth of the capital markets, incorporating important benefits for investors, where they emphasize an issuers’ major diversification,” said Pablo Yrarrázaval, president of the Stock Exchange of Santiago.

Talks surrounding Mila began nearly two years ago as a way to compete with Brazil and Mexico, the larger markets of Latin America.

In the deal, Chileans will be able to buy stocks from Peru and Colombia through local brokers who will have counterparts in those countries. At the same time, foreign investors will have greater and simpler access to the Chilean market. (continue reading… )

Moody’s joins S&P and lifts Colombia’ credit rating to investment grade

Posted in News and Articles, Political Risk by politicalrisklatam on June 1, 2011

by Merco Press News, June 1st, 2011.

Colombia’s credit rating was raised to investment grade by Moody’s Investors Service, matching a move by Standard & Poor’s two months earlier, as economic growth accelerates and the threat posed by guerrilla groups and organized crime recedes.

Moody’s upgraded Colombia’s rating to Baa3, which is the lowest level of investment grade from Ba1. The move puts Colombia’s rating on par with Brazil, Peru and Panama with the outlook stable. Colombia was boosted to BBB- by S&P on March 16.

“Security concerns, historically a major issue for Colombia, have not disappeared, but have been waning after several major government wins against domestic guerrilla groups,” Moody’s said in a statement accompanying its decision.

Colombia recovered its investment-grade ratings from Moody’s and S&P 11 years after it was cut to junk when insurgent violence and a banking crisis helped trigger six straight quarters of economic contraction between 1998 and 1999. Fitch Ratings rates Colombia’s foreign bonds BB+, one level below investment grade.(continue reading… )

A Setback in Colombia’s Rapprochement with Venezuela

Posted in News and Articles, Political Risk by politicalrisklatam on May 23, 2011

by Andres Mejia Vergnaud for Americas Quarterly, May 19th, 2011.

President Santos’ policy of rapprochement with Venezuela has suffered a significant and unexpected setback: the resignation of José Fernando Bautista, Colombia’s ambassador to the Bolivarian Republic.

Bautista submitted his farewell letter anticipating revelations of deals with the infamous Nule Group, whose owners, two brothers and their cousin, remain in prison while they face trial for what will perhaps be the greatest corruption scandal in Colombia’s history.  The case involves multi-million bribes and illegal commissions in public contracting.  The Nule scandal has also resulted in the suspension of Bogotá Mayor Samuel Moreno, the arrest of his brother Iván —a senator— and the imprisonment of a number of second-rank officials.

At this point, it’s still not clear what kind of job Mr. Bautista did for the Nules. A long-time successful lobbyist, he might have sold his ability to be influential in the highest circles of fovernment. But concerns have arisen that he might have gone beyond this, and that he could have been involved in an alleged plot to discredit Sandra Morelli, the Colombia’s comptroller general. Mr. Bautista claims in his letter that he did nothing but advising what at the time was a successful and respected corporate group. This defense leaves a question open: if this was the case, why did he feel compelled to resign? It’s hard not to suspect there’s something more. (continue reading… )