Political Risk Latin America Blog @PolRiskLatam

Chávez, Correa Increase Bilateral Cooperation

Posted in News and Articles, Political Risk by politicalrisklatam on June 8, 2011

by Americas Quarterly Online, June 8th, 2011.

In a sign of tightening economic cooperation, Venezuelan President Hugo Chávez and his Ecuadorian counterpart Rafael Correa signed 12 bilateral agreements yesterday in the Ecuadorian resort town of Salinas. Some of the agreements focused on creating joint ventures for housing and the production and sale of cocoa. Others covered the sectors of tourism, health, social security, and technology.

Furthermore, despite calls among Gulf Arab states of the Organization of the Petroleum Exporting Countries (OPEC) to escalate daily outputs by its members, both presidents rejected such demands while in Salinas. Correa claimed that OPEC quotas should not increase given current global demand levels, noting that “production will have to increase when demand grows.” Ecuador and Venezuela are OPEC member nations.

The two leaders also celebrated the victory earlier this week of Peruvian President-elect Ollanta Humala. They noted that Humala’s victory and yesterday’s bilateral agreements are further signs of regional integration. Chávez added that this integration is intended to turn Latin America into “a zone of peace and democracy.”


Ecuador’s politics: Not over yet

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

by S.K. for The Economist – Americas View, June 1st, 2011.

After being trapped for hours in a hospital during a police mutiny last September, Rafael Correa, Ecuador’s president, bet much of his political capital on an attempt to shore up his power through a constitutional referendum. On May 7th, he put to voters a package of ten amendments that would allow him to increase his control over the courts and media. The early results suggested a split decision, with most of the proposals narrowly passing but two key measures falling short. However, towards the end of the drawn-out vote-counting process, the Yes camp pulled ahead on both questions. Its lead held up: the National Electoral Council (CNE) announced on May 19th that all nine amendments put to a national vote had been approved, albeit mostly by very slim margins. (The final question, on whether to ban killing animals for public entertainment, was settled at the local level).

The opposition has cried fraud, and filed hundreds of legal appeals. Its leaders have honed in on low-income neighbourhoods in Guayaquil, the country’s biggest city, as the likely site of the government’s mischief. Many polling stations there reported more than the maximum of 400 voters. Electoral officials have argued the numbers were caused by high turnout from the police and army. But Martha Roldós, an opposition leader, notes that the rolls from those locations include high numbers of women. Even one of the CNE’s directors, Marcia Caicedo, has accused her colleagues of favouring the government and dragging its feet on the opposition’s complaints. Mr Correa’s rivals say they hope their appeals will at least delay the publication of the official results of the referendum and the implementation of its most controversial measures.

The president, by contrast, has focused on locking in his tenuous gains, touting the outcome as a “ten to zero” landslide. The referendum’s changes to the judiciary will automatically take effect as soon as the CNE releases its final results. But legislative approval is required for its provisions on regulating the media, outlawing “unjustified” wealth, closing for-profit gambling operations and criminalising employers’ failure to register their workers with the social-security service. (continue reading… )

Final Referendum Tally Signals Victory for Correa

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

by Americas Quarterly Online, May 19th, 2011.

Almost two weeks after Ecuador held its sixth referendum in three years, the National Electoral Council (CNE) announced last night that nine of 10 referendum questions received majority votes in favor of President Rafael Correa’s proposals.  Official results indicate that votes in favor of the proposals accounted for between 44.96 and 50.46 percent of votes cast, while votes opposed to the questions received between only 39.25 and 42.56 percent of votes. The results omit nullified votes or “blank” votes.

The final referendum question on whether to outlaw cock and bullfighting, a question to be addressed by individual districts, received approval in 127 of 221 districts. It will be implemented only in those districts where approved.

The referendum, viewed by many as a vote of confidence in the president himself, was largely expected to be approved. However, growing resentment of the president’s perceived reach into control of the media and his proposal to revamp the judiciary led many to believe that this would not be a landslide victory for Correa. The victory may bolster Correa’s chances for reelection in the next presidential elections, to be held in 2013, although its narrow margin suggests such an outcome may not be as easily achieved as was previously thought.

The results of the referendum now await final confirmation from the CNE, and opposition politicians may still contest the results by filing complaints with the electoral authorities. (continue reading…. )

Correa Opens Door to Bond `Monsters’ He Shunned as Ecuador Seeks Expansion

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

by Helen Murphy, Alexander Emery and Nathan Gill for Bloomberg News, March 2nd, 2011.

Ecuador’s President Rafael Correa, who in 2008 called bondholders “true monsters,” is reviewing proposals from banks to sell bonds and is seeking to lure private investors to finance infrastructure and energy.

Correa, speaking at the Bloomberg Ecuador Summit in Quito yesterday, said the Andean nation is the most stable politically it has been since 1996 and is ready to seek “responsible” private investment to boost economic growth above the government’s 5.1 percent forecast for this year. The government is listening to proposals from banks interested in helping the country sell debt to cover financing needs, Finance Minister Patricio Rivera said.

“We know perfectly well that Ecuador needs local and foreign investment to develop, but this must be done in a way so it benefits the country,” Correa, 47, said at the summit. “We welcome private investment. Ask any foreign investor if he lost money here.” (continue reading… )


A cure worse than the disease

Posted in News and Articles, Political Risk by politicalrisklatam on February 28, 2011

by S.K. for The Economist – Americas View, February 25th, 2011.

Last September Ecuador’s police staged a mutiny to protest a cut in their benefits. In the ensuing chaos Rafael Correa, the country’s leftist president, was trapped in a police hospital for hours until the army escorted him out, leading him to call the protest an attempted coup. Mr Correa can be forgiven for feeling a bit nervous about his hold on power: none of his three immediate predecessors finished their four-year terms.

The method the president has chosen to strengthen himself, however, may wind up harming Ecuador’s democracy even more than the police officers’ rebellion did. He has called a referendum that will be held on May 7th at a cost of $30m, which he is describing as a vote of confidence on his rule. Although some of its ten questions involve relatively trifling matters, like banning gambling and bullfights, others involve constitutional reforms that political scientists and legal scholars say could give the president a blank cheque to concentrate power in his own office.

Among the referendum’s most controversial questions is a proposal to form a temporary body that would overhaul the country’s courts within 18 months. “For the better, we will stick our hands into the judiciary,” Mr Correa has pronounced. He promises to welcome outside observers to ensure the reform doesn’t imply stocking courts with pro-government judges, but sceptics doubt he will be able to resist the temptation. The referendum also includes new limits on ownership of banks and media companies, demands that Congress pass a restrictive media law and makes “unjustified” wealth a crime. (continue reading… )

Ecuador Divided over Correa’s Referendum

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

by Roque Planas for Americas Society / Council of the Americas, February 23rd, 2011.

Ecuador’s Constitutional Court last week gave the go ahead for a 10-point referendum that supporters say will help fight crime and corruption in the judiciary, but opponents deride as an attempt to consolidate power in the executive branch. Contentious measures contained in the referendum—including a proposal for judicial reform and restrictions on the business activities of the national news media—have divided the country and eaten away at Correa’s coalition. However, the referendum’s proposals may have enough popular support to become law. No official date for the vote has been announced, though the president of Ecuador’s Electoral Council Omar Simón indicated Tuesday it may be held in May.

The referendum asks votes to approve or reject 10 unrelated proposals, five of which would require amending the Constitution approved in 2008. Not all of them will shake the country to its foundations; one measure would prohibit killing animals for entertainment, which would end bullfighting and cockfighting. Another proposal would ban gambling.

Other provisions are more contentious. Currently in Ecuador, prisoners charged with a crime must be released after a year if they have not yet gone to trial. One of the most popular measures, according to a recent poll by SP Research and Studies, would do away with this restriction—a change that Correa says is necessary to fight increasingly high levels of crime. Security has become a concern for voters in recent years, with the murder rate doubling over the last two decades to 20 homicides per 100,000, according to UN Special Rapporteur on Human Rights Philip Alston. (continue reading… )

Correa Proposes Referendum Vote on Banks’ Holdings

Posted in News and Articles, Political Risk by politicalrisklatam on January 10, 2011

by Nathan Gill for Bloomberg News, January 10th 2011.

Ecuadorean President Rafael Correa said a planned constitutional referendum will ask citizens whether to limit banks’ operations to only financial services and strip them of company holdings outside of their industry.

The proposed questions will be sent to the nation’s constitutional court for approval on Jan. 10, Correa said today in his weekly speech to the nation . “We are going to ask if bankers should have shares in businesses outside the financial system,” he said.

The referendum, announced Dec. 7 after the shooting deaths of two children, will ask voters to approve changes in the length of prison sentences for violent crimes and restructure the nation’s judicial system to remove “corrupt” judges, Correa said. It also will ask voters if media companies should be allowed to own non-media companies, Correa said. (continue reading… )


Just collecting the rent, really

Posted in News and Articles, Political Risk by politicalrisklatam on December 28, 2010

by S.K. for The Economist – Americas View, December 22nd, 2010.

Ecuador’s GIR special police forces are supposed to be summoned only for extraordinarily dangerous or delicate missions. This year, for example, they were called upon to escort Rafael Correa, the president, out of a police hospital through a hail of gunfire. On December 17th, over a dozen GIR troopers swooped into a house in a posh neighbourhood of Quito, the capital, for the peculiarly mundane task of collecting the rent. The only clue as to why they were sent was the identity of the target: a weekly newsmagazine called Vanguardia that had repeatedly investigated corruption in Mr Correa’s government.

The president has long had stormy relations with independent media outlets, whom he calls “vultures” and criticises as biased representatives of wealthy interest groups. He has both sought to muzzle them as a group, by proposing a new media law that opposition leaders say threatens freedom of expression, and by harassing specific news organisations. El Comercio, a newspaper, was ordered to pay $60,000 last month in customs duties. And prosecutors are currently trying to get a reporter from Teleamazonas, a broadcaster, to reveal the name of a soldier who was quoted about his colleagues’ support for a police mutiny on September 30th, which the president insists was a failed coup. The constitution Mr Correa had passed in 2008 specifically guarantees journalists’ right to protect their sources’ identities. (continue reading… )

If it ain’t broke…

Posted in News and Articles, Political Risk by politicalrisklatam on November 30, 2010

by S.K. for The Economist – Americas View, November 29th, 2010.

For four years Rafael Correa, Ecuador’s populist president, has sought to renegotiate the country’s contracts with foreign energy companies, who he says have been earning far too much for the oil they extract from beneath its Amazon forests. Once his officials reached new terms with the firms this year, however, Mr Correa skipped the signing ceremony, held on November 23rd. He had good reason not to draw attention to the new agreement: Ecuador would have fared far better if it had simply kept the previous scheme in place.

Under the old contracts, signed in the mid-1990s, the state took 17-27% of the first $15-$17 in revenue for each barrel sold. The companies kept the remainder and any proceeds above the $15-$17 cutoff, a highly favourable arrangement for them. In 2006, after the world oil price reached $70 a barrel, Mr Correa’s predecessor, Alfredo Palacio, imposed an additional 50% tax on the firms’ revenues, ensuring that the state would receive a healthy share of the windfall. The companies continued to produce oil in spite of the new levy, although some of them also sued the government before international arbitrators.

After taking office in 2006, Mr Correa announced he was unsatisfied with the system he inherited, and that he hoped to move to a fee-for-service system like Mexico’s, in which the government would pay the companies a fixed amount for their work and keep all revenues from oil sales for itself. His government never made a formal proposal to the companies along these lines until August of this year. But in the meantime, he increased the windfall-profits tax to 99%, and seized the assets of Perenco, a French energy company, while threatening to do the same to the other firms. In response, the companies began cutting back on their business in Ecuador. Since Mr Correa took office in January 2007, private oil production in the country has fallen from 255,700 barrels per day to 162,000—a gap worth $2.3 billion a year, or 4% of GDP, at current prices. (continue reading… )


Ecuador cierra pactos con petroleras para aumentar sus ingresos

Posted in News and Articles, Political Risk by politicalrisklatam on November 24, 2010

by America Economia – Reuters, November 24th, 2010.

Con los nuevos tratos, el país miembro de OPEP pasa a ser propietario de todo el crudo que se produzca en su suelo y se aseguró inversiones por unos US$1.200 millones en un sector clave para su economía.

Ecuador acordó este martes nuevos contratos con la mayoría de las petroleras extranjeras, lo que le permitirá aumentar los beneficios que obtiene del sector y reforzar sus arcas, en momentos en que no puede acceder a los mercados internacionales de capitales.

Con los nuevos pactos, el país miembro de OPEP pasa a ser propietario de todo el crudo que se produzca en su suelo y se aseguró inversiones por unos US$1.200 millones en un sector clave para su economía.

“La participación del Estado en la renta petrolera se incrementa del 70% actual al 80% en los contratos nuevos”, dijo el ministro ecuatoriano de Recursos Naturales No Renovables, Wilson Pastor. La italiana Eni, la chilena ENAP y las chinas Andes Petroleum y PetroOriental firmaron acuerdos con el gobierno del presidente Rafael Correa.

La petrolera española Repsol-YPF, que con 41.800 barriles por día (bpd) de producción es la mayor para una petrolera extranjera, lo iba a hacer en las próximas horas. Los nuevos pactos eliminan los acuerdos de repartición de ganancias y los reemplazan por un esquema de servicio de tarifa plana, que sube los beneficios provenientes de los ingresos petroleros para el país. (continue reading… )