Likely top stories this week: Brazil will reduce lending by 20 percent next year; Argentina wins a stay on its $1.33 billion payment; Tropical Storm Sonia Hits Mexico; Honduras’ police chief denies abuses; Brazilian delegation opposes Uruguayan marijuana legalization.
Brazil to Reduce Lending Due to Budget Deficit: Brazilian Finance Minister Guido Mantega said Friday that Brazilian development bank BNDES will reduce lending by 20 percent next year, down to about 150 billion reais ($66.6 billion) from this year's estimated 190 billion reais. The announcement came after an Oct. 31 report showed Brazil’s budget deficit widened to 3.3 percent of gross domestic product, the most since November 2009. Some experts speculate that Brazil's credit rating could be cut.
U.S. Court Upholds Stay on Argentine Debt Payment: The 2nd U.S. Circuit Court of Appeals ruled in favor of Argentina on Friday by denying a motion that would have forced the country to start paying $1.33 billion to holdout bondholders. Friday’s decision will permit Argentina to make a second appeal to the U.S. Supreme Court before it is forced to pay the $1.33 billion to NML Capital Ltd and other holdout bondholders who did not accept a debt swap in 2005 and 2010.
Tropical Storm Sonia Hits Mexican Coast: Tropical Storm Sonia hit Mexico's Pacific Coast on Monday morning near the city of El Dorado in Sinaloa. By the time the storm made landfall, it was downgraded to a tropical depression and winds had decreased to about 35 mph. Though the storm is weakening, the U.S. National Hurricane Center said it could still cause floods and landslides in the region. Mexican authorities issued storm warnings from Mazatlan north to Altata on Sunday, and the government of Sinaloa state canceled classes on Monday in five municipalities.
Honduran General Denies Role in Police Abuses: In an interview, Honduran general and police chief Juan Carlos Bonilla denied knowledge or involvement in a wave of police abuses this year in which at least seven detainees have gone missing or been killed in police custody. He also said that he was not involved in setting up death squads starting in 1998, as reported by the police department's internal affairs section in 2002.
Brazilian Delegation Concerned About Uruguayan Marijuana: Brazilian political leaders from the southern state of Rio Grande do Sul will travel to neighboring Uruguay this Tuesday to oppose Uruguayan legislation that will legalize marijuana sale and consumption in the country. The Brazilian delegation will testify before the Uruguayan Senate's health committee in an attempt to prevent the country from moving ahead with legalization.
On October 21, Indian oil and gas firm ONGC Videsh Ltd (OVL) was among 11 foreign companies in Rio de Janiero to bid for Brazil’s latest oil find, the Libra oil field.
The winning consortium was made up of a Sino-European mix of four companies, with Brazil’s Petrobras holding the majority stake. Although OVL didn’t make the final cut, its presence in the bidding process points to India’s growing energy equation with Latin America, as does the recent success of Indian oil majors in acquiring large contracts in Latin America.
Eight Indian companies—OVL, Reliance Industries, Essar Oil, BPCL, Oil India, Videocon Industries, Assam Company, and Indian Oil Corporation—are part of 12 joint ventures in Venezuela, Brazil, Colombia, Ecuador, Cuba, and Peru. Their approach is pragmatic: invest substantial capital with state-run oil companies and use local expertise.
In Venezuela and Brazil, the national oil companies—PDVSA and Petrobras, respectively—get their governments’ support in procuring funding and project clearances, which further facilitates the joint ventures. As a result of the enhanced trade in oil from these countries to refineries at home, India’s total oil imports from Latin America increased from 4.5 percent in 2003 to 11 percent in 2012-13.
Barrick Gold Corporation, a Canadian mining company and the world’s largest gold producer, announced Thursday that it has temporarily halted operations at its Pascua-Lama gold mine in the Andean border region between Argentina and Chile. Production was scheduled to begin by early 2014, but environmental regulations, depreciating gold prices and declining company profits led to a decision to indefinitely suspend construction at the mine. Barrick said it has already spent over $5 billion of the total estimated project cost of $8.5 billion. The company told investors in a quarterly earnings statement that the postponement would provide capital savings of up to $1 billion in 2014.
Barrick’s stock prices fell 8.65 percent in April when a Chilean appeals court announced that it would block operations at Pascua-Lama due to “environmental irregularities.” The announcement came after members of Diaguita Indigenous communities filed a complaint that the mine had polluted glacial deposits and contaminated scarce water resources in the Atacama Desert. Chilean Interior Minister Andrés Chadwick welcomed the April announcement and said he hoped the company would be able to address the court’s concerns and conduct environmentally sound operations. The Chilean government has not announced plans to revise or lift the restrictions.
Officials voiced greater concern in Argentina, where operations were not discontinued until the company’s recent announcement. On the Argentine side of the mine, Barrick operations provide thousands of jobs and accounts for a third of San Juan province’s economy. Officials there have advocated repeatedly for the project, and it remains unclear how the closure will affect the region’s economy. Nevertheless, Guillermo Calo, Barrick’s top official in Argentina, said the company still plans to invest $400 million there next year.
“Women are not doing well because they want to do it all. They want to study, go out and get a job and be housewives as well. Well, that is really difficult to achieve.”
These were recent and controversial words spoken by Ricardo Salinas Pliego, president of Grupo Salinas and owner of TV Azteca, one of the two television media conglomerates in the country. Salinas made the remarks during the Mexico Cumbre de Negocios (Mexico Business Summit) on October 20-22.
Salinas went on to say that women should receive a salary from their husbands “so that their work at home as caretakers […] is monetized and better valued.”
Unfortunately, his ignorant point of view on gender equality is not as unusual in Mexico as some may think. Even in this day and age, many talented Mexican women face such myopic views as an obstacle to their professional development.
Given the growing number of women with advanced graduate degrees in Mexico—currently 50.4 percent, according to a recent study by the Asociación Nacional de Universidades e Instituciones de Educación Superior (National Association of Universities and Higher Educational Institutions—ANUIES)—forward-thinking companies have begun to understand the need to tap into a talent pool they didn’t used to, given prejudices in hiring and professional development processes.
A Representative from California became the third Republican in the House of Representatives to pledge support for comprehensive immigration reform legislation proposed by House Democrats. Rep. David Valdadao of California’s twenty-first congressional district joins Jeff Denham (R-Calif.) and Ileana Ros-Lehtinen (R-Fla.) in publicly supporting H.R. 15 this week, the House version of the bipartisan bill that passed the Senate in June.
Similar to the Senate version, H.R. 15 includes a 13-year pathway to citizenship for undocumented immigrants, but includes a distinct border security measure approved by the House Homeland Security Committee in May. "By supporting H.R. 15 I am strengthening my message: addressing immigration reform in the House cannot wait," said Rep. Valadao, who represents a largely Latino district and was targeted in an online ad campaign last week highlighting that public opinion in his district overwhelming favors comprehensive reform. The bill currently has 190 cosponsors, short of the 218 needed to get a majority in the House. So far, Speaker of the House John Boehner has declined to allow a vote on the Senate bill or H.R. 15, unless a majority of his Republicans colleagues support it.
Rep. Valadao’s announcement comes on the heels of a “fly-in” on Capitol Hill on Tuesday by 600 advocates, including conservatives, evangelicals, and business leaders who lobbied their representatives in support of immigration reform. While the chances of comprehensive reform passing the House this year still appear slim, the fallout from the government shutdown may make it more politically difficult for House Republicans to opt for inaction on the issue.
When masked men burst into the tiny hamlet of San José Nacahuil on a peaceful Sunday evening last month, what followed was all too familiar to Guatemalans.
Eleven people were killed and numerous injured as armed assailants moved from house to house. Children safe in their beds were awoken by shots fired into their bedrooms. They tumbled out of bed terrified and in pain, checking to see if their relatives were alive or dead, then, confused and crying, waited for help.
Over 50 firefighters and 20 ambulances arrived at the scene according to Sergio Vásquez, the Bomberos Voluntarios (Volunteer Firefighters) spokesman. “We got a call and a calm voice said several people had been injured. We found victims in hiding places, in the bathrooms of bars and in the streets surrounding the scene,” Vásquez said.
A burnt-out car stolen from the streets of San José Nacahuil was all that remained of the attackers, who fled quickly into the dusk, leaving behind another broken neighborhood.
Guatemalan Interior Minister Mauricio López Bonilla arrived quickly on the scene, and presented three possible theories to the press corps: the attackers were either extortionists, one of three maras clicas (organized crime groups) in the area, or bandits that had been refused liquor and returned to seek revenge.
Quietly, locals pointed to a fourth theory—that members of the government’s Policía Nacional Civil (National Civil Police—PNC) had perpetrated the crime. It turns out that San José Nacahuil has had a difficult relationship with the police. In 2005, residents burned down the PNC substation and two motorbikes to protest alleged corruption, lack of public services and rising inter-city bus charges. There had been no police presence in the area since then.
Voters in Argentina’s October 27 midterm elections delivered a clear message to the country’s politicians on Sunday: they are ready for change. The incumbent, Peronist-affiliated Frente Para La Victoria (Front for Victory—FPV), led by President Cristina Fernández de Kirchner, suffered key losses as the country voted on available seats in one-third of the Senate and half of the Chamber of Deputies.
The results may reflect voters’ concern with issues such as rising inflation, corruption, and crime, which have become increasingly severe in recent years under the Fernández de Kirchner government. They also suggest that the 2015 elections may feature a divided Peronist movement—as well as a plausible non-Peronist alternative for the first time in 12 years.
Though the FPV maintains a majority in both houses of Congress—40 of 72 seats in the Senate and 132 of 257 seats in the Chamber of Deputies—their losses in 12 of 24 districts in Sunday’s elections indicate that the party’s popularity is slipping. Perhaps the most important loss took place in the province of Buenos Aires, a traditionally Peronist region with over 11 million registered voters.
As predicted in the August primaries, Sergio Massa, an ex-FPV candidate and mayor of the populous city of Tigre, secured a seat in the Chamber of Deputies. His new Peronist-inspired party, Frente Renovador (Renewing Front), provides traditional Peronist voters with an alternative to the FPV. On Sunday, Massa soundly defeated his FPV competitor, Martín Insaurralde, who trailed by over twelve points. Whereas the FPV considers itself a leftist party, Massa’s Frente Renovador appears to represent more centrist, business-friendly interests.
Clarín Group, Argentina’s largest media conglomerate, will have to sell off part of its holdings due to a Supreme Court ruling handed down on Tuesday. The high court declared constitutional the four articles of the Ley de Medios (Media Law), Argentina’s anti-monopoly broadcast law that congress passed four years ago but has stalled in the courts since.
The 2009 law reduces the number of radio and television licenses that a single owner could hold from 24 to 10, which the government has said is necessary to reduce market concentration. But Clarín Group sees it as an attempt by President Cristina Fernández de Kirchner to stifle opposition voices, saying in a statement that it “laments the ruling, which doesn't take into account the value of journalistic independence as a precursor for freedom of speech.” In its ruling, the Supreme Court found “no evidence in the case that there is a violation of freedom of expression derived from the law."
As a result, in addition to reducing the number of licenses it holds, the Clarín Group will likely have to break up its Cablevisión-Fibertel holding, the largest cable and internet operator in Argentina, and sell off its Canal 13 television network. The ruling was seen as a victory for the embattled administration of President Kirchner whose party suffered a setback in Sunday’s midterm elections. Clarín Group has not ruled out appealing the law in international courts.
On Friday, October 25, former New York City Mayor Rudy Giuliani spoke at Montreal’s Board of Trade on the eve of the Montreal mayoral election.
The Board of Trade, anticipating the fervor of the final stretch of the campaign for a new mayor, chose to invite Giuliani for his take on how to revive Canada’s second largest city after a year of upheaval in which two mayors were forced out of office and a new election is scheduled for November 3.
Against a backdrop of corruption investigations, crumbling infrastructure and a general feeling of decline, Giuliani’s presence was most welcome. While the former mayor was careful not to appear smug or condescending, he did outline what he considered to have been the formula for his success in reviving the fortunes of New York City.
Having a vision and a sense of direction for your city is the first major ingredient for success, Giuliani said. When he took over in the early 90s in New York, the crime rate was high and people were leaving the city. When he left office shortly after 9-11, crime was down 80 percent and people were coming back to the city.
To measure the progress of a city, Giuliani emphasized the need for both accountability and measurable goals. He recognized that there were risks in this approach, but said that one should govern as if it is a single mandate and that the population will respect the efforts even if the results are inconclusive. Transformational governance, says Rudy, requires taking risks even at the prospect of failure and ultimate electoral defeat.
Uruguayan President José Mujica announced at the Council of Ministers on Monday his decision to withdraw Uruguayan troops from the United Nations Stabilization Mission in Haiti (MINUSTAH). The Mission was installed by the UN Security Council in 2004 following the coup d’état against former Haitian President Jean-Bertrand Aristide, and was reinforced in early 2010 when a devastating earthquake resulted in more than 220,000 deaths, according to government figures.
The UN has encouraged a progressive reduction of MINUSTAH’s troops as the peacekeeping mission’s mandate is coming to an end in June 2014. The latest Security Council resolution established that troops must be reduced to 5,021 soldiers and 2,601 police agents—down from the 8,690 officials who are currently on the island.
According to Uruguayan Defense Minister Eleuterio Fernández Huidobro, Mujica ordered the early withdrawal of the Uruguayan troops, which must be done in coordination with the Security Council and other countries from the Union of South American Nations (UNASUR). The president stated that the process should not be postponed any further, since other countries like Brazil have already decided to leave.
With 950 officials in Haiti, Uruguay is second only to Brazil as the country that provides the greatest number of military officials to MINUSTAH. Besides Uruguay, other nations with peacekeeping troops in Haiti include Argentina, Bolivia, Brazil, Chile, Ecuador, Paraguay, Guatemala, El Salvador and Peru.
The presence of peacekeepers has been the target of popular protests and a source of controversy in Haiti because of the peacekeepers’ role in re-introducing cholera to the country, numerous cases of sexual exploitation and abuse involving MINUSTAH personnel—including the sexual assault of a young Haitian man by Uruguayan troops—and other abuses.
Honduras will hold its presidential elections on November 24, and voters—for the first time in this Central American country’s history—might elect a female and openly socialist president, signaling the nation’s growing frustration with its male-dominated conservative leadership.
Xiomara Castro de Zelaya, representing the Partido Libertad y Refundación (Liberty and Refoundation Party—LIBRE), was slated as the frontrunner in several preliminary polls conducted in September that monitored intended votes in the upcoming election. She earned 29 percent of votes in a CID-Gallup survey, followed by Juan Orlando Hernández of the National Party in second place with 27 percent; and she earned 22.8 percent of votes in an Encuestadora Paradigma study, followed by Hernández with 21.9 percent, according to the Huffington Post.
The political novice has captured the attention of Hondurans around the world with calls for the establishment of a constituent assembly and nationalization programs aimed at redistributing the country’s highly concentrated wealth. She is the wife of former President José Manuel Zelaya Rosales, who was forcibly removed from office in a 2009 coup d’état after being accused of violating the constitution by scheduling a referendum on proposed constitutional reforms.
The military coup, which was orchestrated by members of both the Partido Nacional (National Party) and the Partido Liberal (Liberal Party)—the two dominant political parties in the country—was followed by the interim de facto rule of Partido Liberal member Roberto Micheletti and the subsequent election of President Porfirio Lobo Sosa, who belongs to the Partido Nacional.
Honduras has been plagued for decades by economic inequality, violent crime and the political persecution of journalists who criticize the government, but these problems have intensified since 2009.
Likely top stories this week: Argentine opposition gains influence in midterms; Brazil and Germany lead a UN anti-spying initiative; lobbyists push for U.S. immigration reform; Paraguay to represent Mercosur in negotiations with EU; hostage Kevin Scott Sutay is released by the FARC.
Argentines Vote in Midterm Elections: With 72 percent of the votes counted in Argentina's Sunday midterm elections, the governing party of Argentine President Cristina Fernández de Kirchner retains a narrow majority in Congress, but Fernández de Kirchner’s chance of running for a third presidential term appears to be gone. In the face of rising consumer prices and a weakening currency, the opposition has won a key House of Deputies race in Buenos Aires province, with a convincing victory by opposition leader Sergio Massa, the former mayor of Tigre. Massa is seen as a potential presidential contender in 2015. Sunday’s elections also marked the first time that 16 and 17 year-old Argentines were allowed to vote.
21 Countries On Board for UN Anti-Spying Resolution: Twenty-one countries, led by Brazil and Germany, have agreed to meet for talks to draft a UN resolution that would condemn and monitor electronic surveillance. Brazil and Germany proposed the resolution last week after leaked reports that the U.S. National Security Agency (NSA) was spying on heads of state, including Brazilian President Dilma Rousseff and German Chancellor Angela Merkel. According to the Wall Street Journal, the White House ordered an end to the eavesdropping on foreign leaders this summer after a wiretapping program targeting about 35 leaders was disclosed to the White House. The NSA said Sunday that its director never notified Obama about the program. On Monday, El Mundo reported that the NSA monitored 60 million Spanish phone calls in one month.
Immigration Lobbying Intensifies in Washington DC: A major lobbying effort is expected to intensify in Washington DC this week, targeting Republican members of Congress to take action on immigration reform. Approximately 600 business, religious and agricultural leaders—most of them conservative—are expected to put added pressure on 80 Republicans from the House of Representatives to pass one of four immigration reform measures approved by the House Judiciary Committee. The Senate passed a comprehensive immigration reform bill in June.
Paraguay to Represent Mercosur in Brussels: Paraguay appears to have made progress in its quest to rejoin Mercosur after a meeting between Paraguayan President Horacio Cartes and Uruguayan President José Mujica on Friday in Montevideo. Upon returning to Asunción this weekend, Cartes said that Paraguay was prepared to represent Mercosur in negotiations with the European Union in December, though the country has not yet officially rejoined the trade bloc after being suspended in June 2012 following the controversial impeachment of former Paraguayan President Fernando Lugo.
FARC Releases U.S. Citizen: The Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia—FARC) released former U.S. soldier Kevin Scott Sutay on Sunday after he was kidnapped by the rebels in late June. Scott appeared to be in good health after he was released to the International Committee of the Red Cross and representatives from Colombia, Cuba and Norway.
El sueño de que en unas elecciones se vote por ideas y no por personas ha cabalgado por las sociedades latinoamericanas comicios tras comicios. En Argentina, que elige el próximo domingo un tercio del Senado (24 bancas), la mitad de la Cámara de Diputados (127), así como legisladores de todas las provincias del país—incluida la Ciudad de Buenos Aires—, el sueño persiste. Pero la regla en campaña fue la misma: los partidos aceitaron sus maquinarias y militantes con el ánimo de conservar a los fieles y atraer a los novatos, promoviendo las personas y olvidando la discusión de las ideas.
Por esta razón, varias iniciativas de los ciudadanos y la sociedad civil han querido poner en jaque esa regla. Una de ellas—de la cual soy partícipe—llamada Elegibien.com es una plataforma digital inspirada en el portal Votebien.com Colombia que permite que los ciudadanos respondan a preguntas sobre la situación del país, bajo la premisa de que las redes sociales nos ofrecen la posibilidad de participar todos en igualdad de condiciones en la discusión de los problemas del país.
ElegíBien busca concentrar en un solo lugar a todos los candidatos y generar nuevas formas de debate interactivo. El objetivo es demostrar que—a pesar de la polarización en Argentina que ve la política con los lentes K y Anti K (por kirchnerismo y antikirchnerismo)—no hay una única lectura, ni protagonismos más grandes ni más chicos. En esta oportunidad, se invitó a los candidatos a responder 5 preguntas en el formato video-minuto sobre los problemas que más preocupan a los argentinos: #seguridad #inflación #desempleo #educación y #corrupción. Aunque terminen las elecciones, la iniciativa ve más allá del voto y el día electoral como formas de expresión y participación ciudadana para construir democracia.
A Washington, DC-based advocacy organization began running pro-immigration reform advertisements on the websites of local newspapers in Republican Congressional representatives’ districts on Thursday. In order to pressure the House of Representatives to vote on pending immigration reform legislation, Americas Voice’s web ads target news outlets in Republican members’ districts that, according to recent polling data, overwhelmingly support such reform.
Ads ran on the two California papers’ websites—the Fresno Bee and the Modesto Bee—highlighting data from a poll conducted by Magellan Strategies showing that the majority of voters in the state’s congressional districts 10, 21, and 22 support immigration reform along the lines of bill proposed by House Democrats on October 2. The bill, titled the Border Security, Economic Opportunity, and Immigration Modernization Act (H.R. 15), is similar to a bi-partisan bill passed in the Senate in June and includes a pathway to citizenship for the 11 million undocumented immigrants currently in the United States.
The ads implore the Republican representatives from these districts—Representatives Jeff Denham, David Valadao, and Devin Nunes, respectively—to vote for H.R. 15. Similar ads will be run in local newspapers in Nevada and Colorado next week targeting Republican Representatives Mike Coffman (CO-6) and Joe Heck (NV-3), whose constituents similarly polled to show overwhelmingly support reform. Seventy-four percent of likely voters support legislation along the lines of H.R. 15, including 71 percent of Republicans in both Representative Coffman and Hoff’s districts.
In a televised speech on Thursday, President Obama urged House Republicans to vote for a comprehensive overhaul that includes a path to citizenship, noting that “anyone still standing in the way of this bipartisan reform should at least explain why.”
Mexico’s ruling Partido Revolucionario Institucional (Institutional Revolutionary Party—PRI) announced its support on Wednesday for an opposition proposal to increase the 5 percent tax on junk food set out in President Enrique Peña Nieto’s fiscal reform plan. The tax would be applied to purchases of high-calorie foods including chocolates, sweets, puddings, potato chips and ice cream, but would not be applied to hamburgers or tacos.
Last week, the lower house of Congress approved the fiscal reform package with a 5 percent tax on junk food, and Armando Rios Piter, a Senate finance expert from the Partido de la Revolución Democrática (Democratic Revolution Party—PRD), proposed increasing the tax to 8 percent. On Wednesday, PRI Senate leader Emilio Gamboa said that his party would “undoubtedly support” the tax increase. If Piter’s plan is formally adopted, the reform bill would go back to the lower house, before being sent to the Senate for a final vote.
If the bill is passed by both chambers with the 8 percent tax provision included, the reform will contribute nearly 2.7 percent of GDP to government coffers by 2018 according to Deputy Finance Minister for Revenue Miguel Messmacher. The tax reform bill is a key part of the President Peña Nieto’s Pacto por México, a series of reforms agreed upon by Mexico’s three main political parties in 2012 that range from education and energy to security and telecommunications.
Brazil’s postponement of its White House state dinner–seen as a long-awaited wedding ceremony for the two countries after a very drawn out courtship–may signal more than just President Rousseff’s anger with revelations that the U.S. National Security Agency (NSA) had been spying on her personal life and Petrobrás, the state oil company. Since the postponement (which some have understood to mean cancellation), Rousseff has carved out a new niche for Brazil’s international identity, seizing the opportunity to make a bold and public statement about the direction of its foreign policy, away from the United States and its allies.
Brazil’s newfound enthusiasm for the issue of Internet privacy comes after a half-decade of an ambivalent foreign policy strategy. The predictions of a major shift in international political influence following the 2008 financial crisis, when the G-20 rose in importance to become the premier forum of global governance, signaled a potential new role for Brazil. However, this was problematic for Brazil since the G-20 represented everything that the country had long criticized: a private club of global power players.
Yet, predictions of a seismic change in global power did not come to fruition. Brazil has not made the transition to global player, and is instead juggling conflicting identities. It is a member of an elite club of global power players, but it’s also a committed proponent of global governance reform. Thus, Rousseff’s refusal to accept Obama’s explanation of spying and her recent championing of the right to privacy signal a turn away from the shaky middle ground and toward a more vocal role as a critic of the forums of global governance.
Cuba approved a plan to gradually unify its dual monetary system, a statement carried by official newspaper Granma revealed yesterday. The measure is part of a set of reforms adopted by the Communist Party in 2011 aimed at introducing market mechanisms and decentralizing the Cuban economy. "(Unification) is imperative to guarantee the reestablishment of the Cuban peso's value and its role as money, that is as a unit of accounting, means of payment and savings," the official statement said.
Cuba has had two currencies since the collapse of the Soviet Union in 1994 when the country introduced the U.S. dollar as its second currency. Cuba's monetary system currently consists of the peso (CUP)—in which most wages are paid and local goods are priced—and the convertible peso (CUC), used in the tourism industry and foreign trade. Introduced in 2004, the CUC is pegged to the U.S. dollar and is currently valued at 25 pesos at exchange offices. However, companies must exchange dollars and CUCs with the government at the official exchange rate of one peso.
Last July, Cuban President Raúl Castro recognized that the dual currency is one of the “greatest obstacles for the country’s progress.” The system greatly complicates accounting, the evaluation of performance, and trade in the island. It is also very unpopular as sought-after imported goods—such as toothpaste and cooking oil—are far from reach to those who earn their salaries in pesos.
According to Cuban economists, the unification of the two currencies will take up to 18 months, and will involve devaluing the CUC and slightly revaluing the peso. The government has not provided a timetable for the reforms, but it has already begun adjusting the official exchange rate by allowing some companies to exchange dollars earned abroad for up to 12 pesos instead of one. The Cuban central bank has pledged it will back both currencies during the process to give Cubans enough time to convert their savings.
Likely top stories this week: Protesters clash with Brazilian police forces in Rio de Janeiro; A commuter train crash injures 30 in Buenos Aires; Hurricane Raymond builds strength near Mexico’s Pacific coast; Michele Bachelet leads the polls in next month’s presidential elections in Chile; Newly leaked documents reveal that the U.S. spied on former Mexican President Felipe Calderón.
Violent Clashes Between Police and Protesters Ahead of Brazilian Oil Auction: 300 protesters clashed with national police forces today outside a state auction for offshore oil exploration rights of the Libra oil field, near Rio de Janeiro. Brazilian President Dilma Rousseff requested heavy security for the event after mass protests erupted last week in support of teachers’ strikes in Rio de Janeiro and São Paulo. Media reports said a small group of protesters tried to set a car on fire, and that the police fired tear gas and stun grenades onto a nearby beach with tourist onlookers.
Commuter Train Crashes in Buenos Aires: 30 passengers were injured in a Buenos Aires train crash this Saturday. The accident took place at Terminal Once, the same station where a crash killed 51 people and injured over 700 others last year. Last year’s crash reduced public support for Argentine President Cristina Fernández de Kirchner, and analysts expect her popularity to be damaged once again ahead of the upcoming Congressional elections scheduled for October 27. The crash comes amidst growing concerns over the quality of the Argentine capital’s rail system and a recent proposal by the federal government to seize administrative control of the city’s commuter rail operations.
Hurricane Raymond Builds Strength Near Mexico: Hurricane Raymond was upgraded to a category three hurricane by the Mexican Comisión Nacional del Agua (Mexican Water Commission—CONAGUA) today. Meteorologists said the storm currently reports sustained winds of 195 km/h (120mph), and that it would be the first category three storm to hit Mexico this year. Public officials say they are still recovering from the damage left by Ingrid and Manuel, two tropical storms that simultaneously affected Mexico’s Atlantic and Pacific coasts last month. The storms killed over 150 civilians and resulted in billions of dollars in damage.
Michelle Bachelet Leads Polls in Chile: A new poll by Universidad Diego Portales finds that former Chilean President Michelle Bachelet is expected to win 37.7 percent of votes in the country’s November 17 presidential election. Bachelet served as Chile’s first woman president from 2006 to 2010 and returns to her home country following her role as the first executive director of UN Women. A runoff is expected between Bachelet and one of the eight other presidential candidates. Bachelet polls far ahead of even the second-place candidate, Evelyn Matthei, who received 12.3 percent of expected votes in the poll.
New Revelations on U.S. Surveillance in Mexico: Newly released documents revealed that U.S. National Security Agency (NSA) secretly spied on former Mexican President Felipe Calderón. The documents state that the agency acquired access to the former president’s email communications with cabinet members. The Mexican Secretaría de Relaciones Exteriores (Ministry of Foreign Relations—SRE)— which modestly criticized revelations in September that the U.S. had spied on Mexican President Enrique Pena Nieto during his campaign—said more forcefully yesterday that U.S. surveillance in Mexico was “unacceptable, unlawful and contrary to Mexican law and international law.”
Thirty million people live in modern slave-like conditions according to a report published by the Australia-based Walk Free Foundation yesterday, titled the Global Slavery Index. An estimated 3.73 percent of the 29.6 millions of people in modern slavery—defined as those exposed to a range of practices, including forced and bonded labor, human trafficking, forced marriages, and the use of children in the military—are in the Americas.
Of the 162 countries ranked in the index, Haiti scored second with 210,000 slaves out of a population of 10.1 million. The report estimates that one in 10 Haitian children are trapped in an exploitative system of child labor, known as restavek, and that the number increased after the 2010 earthquake devastated the already poor Caribbean nation. Mauritania came in first with 151 thousand slaves out of a total population of 3.8 million. In the Americas, Peru was ranked 65 with 82,000 slaves out of a total population of 30 million, followed by Uruguay at 72 and Colombia at 73.
In absolute terms, India, China, Pakistan and Nigeria have the highest numbers of people enslaved. The Walk Free Foundation report was supported by global leaders such as former U.S. Secretary of State Hillary Clinton, former UK Prime Minister Tony Blair and Bill Gates, co-founder of Microsoft. Clinton said, "I urge leaders around the world to view this index as a call to action, and to stay focused on the work of responding to this crime."
La vida en Venezuela es imprevisible. No se sabe cuándo los bienes básicos llegarán a los anaqueles, ni cuánto tiempo un corte eléctrico puede dejar el país a oscuras. Desplazarse de una ciudad a otra—en un país de 916 mil kilómetros cuadrados—puede llevar una hora como cinco. Ni siquiera el crimen es organizado. En términos prácticos, es como si cada día fuese una sorpresa, pero a la vez como si se tratase de un guión que se repite de manera incesante.
Dos semanas atrás, una protesta por mejoras salariales paralizó por completo las instalaciones de la Siderúrgica del Orinoco (Sidor), la mayor productora de acero del país que forma parte de la Corporación Venezolana de Guayana (CVG), un complejo de industrias básicas ubicado al sureste del país que en nació en los años 60 con la promesa de potenciar el crecimiento económico de la nación petrolera.
Si bien la sorpresa cayó de imprevisto en la golpeada gestión presidencial de Nicolás Maduro—el heredero político del fallecido Hugo Chávez—las luchas sindicales en Sidor y sus industrias hermanas no son novedad. Durante años, los trabajadores de Sidor han reclamado que las arduas condiciones de trabajo y la ausencia de un plan de jubilación deben ser recompensados con onerosos contratos colectivos. Chávez nacionalizó la empresa en 2008, bajo la premisa que acompañó los otros muchos procesos de estatización durante su gobierno: Venezuela es soberana. Revertir la privatización—firmada en 1997—le garantizó el apoyo de la masa obrera, a un costo muy alto para el país. Bajo el control del Estado, la empresa disminuyó sus niveles de producción en 60 por ciento; producto de la crisis eléctrica, la falta de insumos y corrupción administrativa.
Durante la última huelga, que se extendió por tres semanas y terminó con nuevas promesas, algunos trabajadores insistieron que la siderúrgica podría ser una empresa autosustentable, pero por decisión del Gobierno continúa produciendo a pérdida y subsistiendo gracias al desembolso directo del presupuesto nacional. Esta es la realidad nacional: los problemas administrativos y pésimas decisiones en materia económica obligan al Estado—antes suplantado personalísticamente por Chávez—a intervenir en cada fase del proceso venezolano. Así, el Estado oye a los trabajadores, el Estado garantiza hospitales, el Estado escoge los libros de texto para las escuelas, el Estado garantiza que haya leche y pollo en casa.
While thousands of federal workers in the U.S. went back to work today after grappling with the government shutdown and debt ceiling crisis, Canada’s Parliament has just now reopened for business, with Prime Minister Stephen Harper’s second Throne Speech since his party won a majority government mandate in May 2011.
Coming at mid-term, the speech has been properly described as a new beginning for the Harper government. He outlined consumer-friendly measures such as reducing the gap between cross-border prices on items purchased in the U.S. and greater subscriber freedom in purchasing cable TV packages. In addition, he announced more law and order policies to reinforce his conservative base. All this was presented in the usual pomp of a Speech from the Throne.
The past year has seen the Harper administration facing its most serious crises since it first took office in 2006. Election irregularities in the 2011 campaign have led to departures within the ranks, and a Senate scandal involving three Conservative senators dominated the spring session. Current polls place the Harper Conservatives behind the third party in the House of Commons—the Liberals, under new leader Justin Trudeau. While there is plenty of time for a resurgence before the 2015 general election, the Speech from the Throne delivered on October 16 does represent a potential second wind.
The Conservative victory in May 2011 was so impressive that some seasoned political observers saw the emergence of a new coalition made up of law and order types and Canadians with conservatives values— one which could transform the Conservatives into “the natural governing party” of the nation, as the Liberals were through most of the 20th century. Harper’s Conservative party is also seen as the most ideological party of its nature since Confederation.
Some pundits have postulated that the 2011 shift to the Right may develop into a permanent phenomenon. After all, in that year, the Liberals dropped to third place (Conservatives occupied 161 seats in the House of Commons while Liberals occupied 34) and seemed decimated in key strongholds across the country, including Québec and the greater Toronto area. The progressive view seemed in search of a principal voice. Enter the new official opposition party—the New Democrats (NDP), who are hoping to replace the Liberals as the alternative to the Conservatives.
Six people were reported dead after a massive gas explosion at a natural gas storage plant near Puebla, Mexico yesterday. Over 100 local residents were immediately evacuated from the surrounding areas and a major highway connecting Mexico City and Veracruz was closed for over four hours. Officials have not yet confirmed what caused the two containers holding approximately 250,000 liters (66,000 gallons) of natural gas to combust at the plant, owned by Gas Tomza.
Experts from the Secretaría de Energía (National Department of Energy) arrived at the site of the explosion yesterday to assist in investigations. Puebla State Governor Rafael Moreno Valle also visited the site. State authorities later stated, “Once the investigation has concluded, we will be able to hold the company and [individuals]” responsible for the explosion accountable.
Major gas explosions are not uncommon in Mexico, where limited oversight of safety protocol remains a challenge. Over 20 people were killed in May when a truck carrying gas tanks exploded on a highway outside Mexico City. In September 2012, an additional 26 people died in at a plant in Reynosa, owned by the state energy company, Petróleos Mexicanos (Mexican Petroleum—PEMEX).
Janet Yellen, nominated by President Obama last week to be the new chairwoman of the U.S. Federal Reserve, might not know it yet, but she has friends in high places in Latin America.
This is because many in the region rightly believe that Yellen's forecasted doveishness will give Latin America time to make the necessary adjustments while U.S. monetary tightening slowly winds its way through global markets.
Even in Brazil, where there aren’t many kind words being said about the U.S. these days, Central Bank Governor Alexandre Tombini has been buttering up markets with measured comments about the Fed’s tightening policy.
But Latin America is watching the aftermath of this appointment closely because there is an ominous feeling that, despite the region’s growing monetary autonomy, tightening U.S. policy will have important consequences for the region—such as creating more expensive imports, pricier debt payments, and higher local interest rates.
Past crises in the region have happened around moments of decisive Fed action—think 1982 and the 1994 Tequila Crisis, without even mentioning the trail of broken exchange rate pegs. But what is remarkable about the last few years is the contrast between Latin American governments having their economic houses in relative order and the chaotic, then sclerotic macro-environment amongst the world’s wealthiest countries.
This is a much different reality than Argentina in 2001 or Mexico in 1994. Only ten or twenty years ago, sovereign, dollar-denominated debt would have been the biggest part of any Fed monetary tightening problem, followed by fixed currency values. These days, after remarkable growth and a decade of responsible policy, much of the region can keep a full-blown crisis at bay. Instead, Latin Americans can now expect mild recessions, hampered growth, and a reckoning for low levels of invested in the good times.
Loose policy in the U.S. and elsewhere over the past few years has given Latin America a relatively favorable environment to conduct its own responsible monetary policy. At the same time that money was cheap in the U.S. and Europe, the relative high returns in Latin America drove capital their way, which provided a boon to economies in a strong phase of growth. China was still growing quickly and South American commodities were fueling that growth. But that new Latin American normal has evaporated relatively quickly with the specter of a developed world recovery and monetary tightening.
In the last round of regional conference qualifiers last night, Chile, Ecuador and Honduras punched their tickets to the 2014 FIFA World Cup in Brazil.
Chile and Ecuador join Colombia and Argentina as the representatives from the Confederación Sudamericana de Fútbol (South American Football Confederation—CONMEBOL), while Honduras, which will play in its second consecutive World Cup, joins the United States and Costa Rica from the Confederation of North, Central American and Caribbean Association Football (CONCACAF).
In CONCACAF, the qualifying match that created the most late drama was the United States’ 3-2 comeback win over Panama in Panama City. As the game went into stoppage time, Panama led 2-1. If the result had stood, Panama would have claimed the fourth spot on the CONCACAF qualification table, requiring a home-and-away playoff series with New Zealand to book their first-ever ticket to the World Cup. But two stoppage-time goals by the U.S. ended Panama’s World Cup hopes and landed Mexico in the fourth CONCACAF spot, despite their 2-1 loss to Costa Rica. Mexico will play New Zealand twice next month to decide who will travel to Brazil.
In CONMEBOL, Chile’s 2-1 victory over Ecuador sent both countries through to Brazil. Uruguay defeated Argentina 3-2 in Montevideo to secure that conference’s fifth playoff spot, and it will play Jordan twice in November in order to qualify for the World Cup. The group stage of the World Cup begins on June 12 in Morumbi Stadium in São Paulo.
The Estádio Jornalista Mário Filho in Rio de Janeiro—better known as the Maracanã—reopens its doors to tourists today, almost three years after it was closed for renovations. Visitors can now take a guided tour of the historic stadium where nearly 200,000 people watched Uruguay beat Brazil in the 1950 World Cup Final—the largest crowd ever to attend a sporting event. The stadium will host the opening and closing ceremonies of the 2014 World Cup, as well as the final match scheduled for July 13.
According to historian and lead tour guide Bruno Lucena, “it took too long to reopen the stadium for tourists. A place as important for soccer history as Maracanã should always be open to the public.” The tour includes a visit to the honor tribune, the press box, the locker rooms and VIP areas and costs between 15 reais ($7) and 30 reais ($14). Maracanã reopened for play in April 2013 with a “legends” match featuring Brazilian greats like Ronaldo and Bebeto, and hosted the Confederations Cup in June when Brazil won with a 3-0 victory over Spain. The stadium’s reopening followed controversy over delays, costs and the future privatization of the site as well as threats to close the venue amid fears that it does not meet minimum safety standards.
Other Brazilian World Cup stadiums are far from being complete. Five venues are currently facing construction delays: Manaus, Curitiba, Cuiaba, Porto Alegre and Natal. According to Brazilian Sports Minister Aldo Rebelo, “We cannot keep on the same rhythm or we will not deliver them on time” for FIFA’s December deadline.
Two contrasting images of the police pacification programs in Rio de Janeiro this week are likely to remain in the public’s memory. The first is the swift and publicity-laden police occupation on Sunday of the Lins de Vasconcelos favela in Rio’s Northern Zone, where the Brazilian and Rio state flags were flown in a demonstration reminiscent of a military victory celebration. Hundreds of officers armed with assault rifles entered the community on foot, horseback, and in armored tanks, and speakers set up outside police cars played upbeat music as they announced that “Peace begins now.”
The second image comes from the announcement that ten officers from the Unidade de Polícia Pacificadora (Police Pacification Unit—UPP) in Rocinha, Rio’s largest favela, will be charged for the torture and murder of 42-year-old bricklayer Amarildo de Souza, who disappeared on July 14th. Investigators found that after officers called Souza into the Rocinha police station for questioning, they tortured him with electric shock treatments and suffocated him with a plastic bag before disposing of his body in an undisclosed location. Twenty-two Rocinha residents have reported being tortured at the same UPP station since March. The chiefs of Rocinha’s UPP force and of Rio’s state military police were both replaced in August. Rocinha made headlines again last week when the body of a nine-year-old girl—who was raped—was found fifty meters away from a UPP station.
The images from Lins de Vasconcelos and Rocinha draw a contrast between the theatrical expansion of the pacification program and the day-to-day reality of the more than 500,000 city residents now living through it. The program employs militaristic tactics and language in neighborhoods with promises of community development and improved living standards. Following the announcement from public prosecutors about the Souza case, Rio de Janeiro state Governor Sérgio Cabral said, “the Amarildo [de Souza] case is not the face of the UPP. The face of the UPP is civic participation and the guarantee to move freely [within one’s own community].”
In the second annual release of its Social Inclusion Index, Americas Quarterly measured 16 Latin American countries based on numerous performance variables, including access to formal employment and adequate housing, enrollment in secondary school and civil society participation. Among its most interesting findings, the Index provided insight on the systemic nature of racial discrimination in Latin America and the Caribbean. Brazil and Colombia—which possess two of the region’s largest Afro-descendant populations—offered particularly unsettling results.
The Inter-American Development Bank estimates that Afro-descendants represent one-third of the Western Hemisphere’s total population, with the largest concentrations living in Brazil, the United States, Colombia, Venezuela and Ecuador.
Across the region, Afro-descendants are more likely than others to live in impoverished areas affected by high rates of crime and violence. Racial inequality is further exacerbated by structural economic factors, including deep income disparities and minimal socioeconomic mobility among Afro-descendants.
Brazil and Colombia possess the region’s largest Afro-descendant populations and both countries continue to face formidable obstacles to reducing racial inequality. The 2006 national census in Colombia estimated that Afro-descendants accounted for 10.6 percent of the country’s population, but some demographers say this number is likely closer to 26 percent. Experts suggest this may be due to the fact that many Colombians of mixed European and African descent do not identify as black because “they do not feel discriminated against—or as a means to avoid discrimination.”
Similarly, the 2010 Brazilian national census marked the first time in history that a majority of Brazilians identified as Afro-descendants, including 50.7 percent of the population identifying as “black or mixed race.” In its official release of census results, the Instituto Brasileiro de Georgrafia e Estatística (Brazilian institute of Geography and Statistics—IBGE) noted that, “Among the hypotheses to explain this trend, one could highlight the valorization of identity among Afro-descendants.”
Secretary of the Interior Miguel Ángel Osorio Chong announced yesterday that organized crime in Mexico declined by over 26 percent from December 2012 to September 2013. In a speech to the Mexican Senate, Osorio Chong also said homicides were down 16 percent, and burglaries and car thefts dropped by 5 and 9 percent, respectively.
Of the 122 individuals deemed high-priority criminal targets, the current administration has arrested 58 and killed 9, according to Osorio Chong, while limiting gangs’ operational and logistical capabilities. In his speech, the secretary explained that "the only way to deliver results” on organized crime was to first understand that security is "a shared responsibility” among the federal government, states and municipalities. One reason for the drop in crime is the creation of five regional information and intelligence centers to promote cooperation and will be accessible to local security authorities for the first time—two of which are currently in operation.
The secretary was appointed by President Enrique Peña Nieto in December 2012 to deliver on the president’s campaign promise to reduce violent crime nationwide. Over 70,000 people were killed due to organized crime during former President Felipe Calderon’s administration from 2006 to 2012. Despite these efforts, violence and organized continue to plague Mexico. Acapulco, one of the country’s primary tourist destinations, now ranks as the second most violent city in the world and claims a murder rate of 142 homicides per 100,000 inhabitants, which is 28 times higher than the average for the United States.
The natural gas situation in Mexico is frustrating when considering the country’s ample supply. While Mexico has significant unexplored potential that would benefit power generation, investment is deficient. The country must currently import liquefied natural gas (LNG) from the Middle East and Africa, paying four times the going rate in North America, in order to keep up with domestic demand. Despite the surplus of natural gas in the United States, all of the pipelines coming to Mexico are full, and thus Mexico must import from other parts of the world at a high premium. In order to meet its domestic demand—and potentially export—private investment could engage in exploration and production of the country’s ample natural gas reserves.
Petróleos Mexicanos (Mexican Petroleum—PEMEX) , the Mexican state oil company, holds a monopoly over the energy sector and has not yet been able to fully extract deep water oil and natural gas reserves due to a lack of technical expertise and limited spending on new investments for equipment and research. PEMEX is estimated to be sitting on approximately 500 trillion cubic feet of natural gas reserves. In addition to conventional natural gas, Mexico has significant shale gas capabilities, estimated to be the sixth largest amount in the world. The famed Eagle Ford Shale in South Texas has been a boon to the United States, yet the formation does not end at the border. Rather, it extends south into Northern Mexico and represents a tremendous economic opportunity.
The shale gas boom in the United States demonstrates how unconventional drilling techniques–such as hydraulic fracturing, or “fracking”–are leading to a significant reduction in natural gas imports. If Mexico brings in foreign expertise and investments to develop similar techniques, it would no longer need to import LNG from places like Nigeria or Yemen, and instead be able to enjoy a boom in natural gas production at home.
Human rights activists filed a lawsuit in New York yesterday against the United Nations, demanding compensation and public responsibility for the cholera epidemic that has affected thousands of people in Haiti since the 2010 earthquake. Numerous independent reports, including one produced by an expert panel commissioned by the UN, have concluded that the epidemic was most likely introduced by UN peacekeeping forces who were carrying a strain of the disease from Nepal, and that they did not take sufficient precautions to prevent its spread.
Cholera infections had not been reported for nearly a century in Haiti prior to the 2010 epidemic. The Boston-based Institute for Justice and Democracy in Haiti—the group representing the families and individuals seeking compensation in the trial—estimates that 685,000 Haitians have been affected by the disease since 2010. So far, 8,400 Haitians have died from cholera and the disease is expected to claim an additional 1,000 lives each year. Expert reports found that the disease was spread from a UN camp with “documented sanitation deficiencies,” and then carried by sewage channels into the island’s Artibonite River, used by many Haitians for bathing and drinking water.
UN Secretary General Ban Ki-moon announced in February that UN would not provide compensation to victims of the outbreak, citing provisions of the Convention on the Privileges and Immunities of the United Nations, which grants the UN immunity from domestic laws. International law experts agree, saying it is unlikely the case will be considered by the federal court where it was introduced, provided that the UN has enjoyed legal immunity from domestic laws since World War II. Haitian President Michel Martelly spoke on the issue last week in his address to the UN General Assembly, saying the entity has “a moral responsibility” to compensate victims.
Venezuelan President Nicolás Maduro requested on Tuesday that the National Assembly implement the Ley Habilitante (Enabling Law), granting him special powers in order to fight corruption, economic issues and “capitalist logic” for one year. Maduro will need at least one opposition vote next week to receive the legislative powers. Because his party already has a two-thirds majority in the legislature, it is expected that the Enabling Law—which former President Hugo Chávez was granted four times—will be implemented for the executive.
Maduro insists the legislative powers are necessary to fight graft, given that Venezuela was ranked as the third most corrupt country in the world behind Liberia and Mongolia. But the news sparked speculation that Maduro is seeking to use his powers to undermine opposition candidates and distract Venezuelans from the economic crisis in their country. Opposition leader Henrique Capriles stated that he believed Maduro’s government would “ use the law to persecute and distract the people from their real problems."
Maduro’s request comes at a time when Venezuela claims highest inflation rate in the region, a sluggish economy and a power outage that left more than 65 percent of Venezuelans without electricity last month. Many analysts believe that 14 years of the Cadivi system—currency and price controls that are a holdover from the Chávez era—are seen as the main culprit behind Venezuela’s high inflation and shaky economy. The system, which provides dollars to importers and Venezuelans who travel abroad, has long been exploited and helped drive the black market price of the dollar to seven times the official exchange rate.
As the U.S. government shutdown continues in its second week and there remains a looming possibility of a Congressional gridlock over the debt ceiling on October 17, much attention has been directed to the first-term Republican Senator from Texas, Ted Cruz. The Calgary-born Cruz has been dominating the headlines for the past three weeks with his 21-hour faux-filibuster against the Affordable Care Act (popularly deemed “Obamacare”), and his adamant stand against the president’s health care reform as a “job killer.” In so doing, the “Senator from Canada” (Cruz was born to an American mother and a Cuban father in Alberta, Canada. He currently holds both U.S. and Canadian citizenship.) has become the de facto leader of Tea Party Republicans in the House of Representations and the face of the GOP.
Republican House Speaker John Boehner seems unable to break Cruz’s hold on the Tea Party caucus. As a result, defunding Obamacare has become the leitmotiv for Republican support to end the shutdown. Speaker Boehner keeps asking for a conversation with President Obama to break the stalemate, but it seems his most intransigent opponent is within his own ranks. Cruz, however, may be calling the tune on this Republican shutdown position, but he is not without his detractors.
Republican heavyweights such as anti-tax zealot Grover Norquist and Bush operative Karl Rove have openly questioned the Cruz-led strategy to tie a budget vote to replacing the 2012 election result on Obamacare or making it inoperative. Some have openly speculated that a fratricidal war within Republican ranks could cost the GOP dearly at the polls in the 2014 midterm elections. Polls, while spreading the blame to both parties, indicate greater disapproval with the Republicans’ performance on this issue. It is undoubtedly a risky strategy.
Clearly, Cruz has ambitions beyond the shutdown and the debt ceiling fight—possibly even the next presidential cycle in 2016. While many Republicans are increasingly uncomfortable with his bravado, his leadership on this issue and his media presence are making Speaker Boehner look weak and vulnerable. This is a unique situation where the Speaker of the House is being held hostage by a first-term Senator of the same party from another arm of the legislature. Meanwhile, the Tea Party is keeping Boehner’s feet to the fire, despite his obvious inclination to find a compromise with Obama.
On Monday, Brazilian President Dilma Rousseff demanded an explanation from the Canadian government over a media report that claims the North American country spied on Brazil's Mines and Energy Ministry—the institution that manages the country's mineral and oil resources. This comes only a few weeks after a similar report claimed the United States was also spying on the South American country. "That is unacceptable between nations that are supposed to be partners," Rousseff said via Twitter. "We repudiate this cyber warfare.”
The report broadcast on Sunday by TV Globo claims that Canada's intelligence agency, the Communication Security Establishment (CSEC), used software called Olympia to map the ministry's communications, including Internet traffic, emails and telephone calls. Rousseff noted that there are reasons to believe the espionage had economic and strategic motives as many Canadian mining companies are operating in Brazil.
In response to these claims, Brazil's Minister of Foreign Relations Luiz Alberto Figueiredo summoned Canada's ambassador Jamal Khokhar to demand an explanation for what it called a "serious and unacceptable violation" of Brazilian sovereignty and the right to privacy of its citizens and companies. On the Canadian side, the spokeswoman for Prime Minister Stephen Harper said that "CSEC does not comment on its specific foreign intelligence activities or capabilities." The Canadian Defense Department declined to comment.
This follows a previous disclosure that the U.S. National Security Agency (NSA) had spied on Rousseff's telephone calls and emails as well as on state-run energy company Petrobras. In response to this report that came to light in mid-September, the Brazilian president canceled a state visit to the United States scheduled for October 23 and denounced this operation as a violation of human rights and international law during her address at the United Nations General Assembly.
Both reports are based on documents leaked by former NSA contractor Edward Snowden who, according to the documents, attended the conference of the "Five Eyes" intelligence-sharing network between the United States, Britain, Canada, Australia and New Zealand. Snowden is wanted by the U.S. after revealing details of the NSA's massive intelligence activities, and is currently living in temporary asylum in Russia.
As the U.S. government’s shutdown stretches into its second week, local economies everywhere are suffering—but perhaps none as acutely as Puerto Rico.
The Island of Enchantment, which is home to nearly four million people, is slogging through its seventh straight year of recession with an economy that has already contracted 5.4 percent since August 2012. And the shutdown is making it difficult for the U.S. territory to overcome the economic difficulties that have plagued it for the better part of the decade.
Though Puerto Rico’s average per capita income is half that of Mississippi’s— the poorest state in the union—consumer prices on the island are sky high. On average, electricity costs on the island are double those on the mainland, and the cost of importing 85 percent of Puerto Rico’s food is often passed onto the consumers.
The result: nearly half the population lives under the poverty line, and Puerto Ricans are abandoning the island at a record pace due to high costs, a wobbly economy and high unemployment. The government shutdown that began on October 1 will only exacerbate Puerto Rico’s already fragile economy.
The island is burdened by $69 billion in public debt and relies on federal funding for 39.6 percent of the money it spends, compared to the average of 26.2 percent for U.S. states. While less than $6.6 billion of the funding the island receives from the federal government is considered discretionary, the unintended side effects of the shutdown will ripple through various industries and could bring the unstable economy to a grinding halt.
With Puerto Rico’s unemployment rate at a staggering 13.9 percent—the highest in the country—the federal shutdown means the continued loss of what little employment is available on the island. Federal employees, already suffering with furloughs due to sequestration, number about 10,000 on the island; about half of those are considered non-essential and affected by the shutdown. The longer Congress fails to pass a resolution, the more likely it is to increase the unemployment rate in Puerto Rico where workforce participation is just 40 percent and there are fewer than 900,000 jobs.
But the shutdown also threatens to affect the other main source of income on the island: tourism.
In 2011 alone, tourism contributed over $6 million to the GDP and supported 59,500 jobs across sectors. The lost revenue from the closure of some of the island’s main tourist attractions, including Fort San Felipe del Morro and Fort San Cristobal in Old San Juan, as well as El Yunque National Park— the only tropical rainforest in the U.S. National Forest System —will also have a negative impact on local businesses that depend on tourism.
The negative consequences go further still. Besides decreasing the revenue from the island’s most popular industry, the shutdown affects more than just vacationers and tourist destinations. Perhaps the most dangerous consequence of the shutdown will be the reduced resources to combat violent drug crime.
With a per capita murder rate six times that of the U.S. mainland, more than 70 percent of homicides in Puerto Rico were related to the drug trade in 2012. Up until recently, the federal government paid little attention to what was happening on the island. By 2012, Puerto Rico had received just $260 million to combat drug-related crime—compared to the $1.6 billion that the U.S. initially pledged to Mexico as part of the Mérida initiative.
This all changed with Operation Caribbean Resilience, which began in July 2012—one year after murders in Puerto Rico surged to a record 1,117 per year. While the drug trade began to thrive on the island in the 1980s, it saw a dramatic spike in drug violence 2009, when tighter security at the U.S.-Mexico border closed off traditional drug trafficking routes.
While the federal government has sent 30 additional Homeland Security investigation agents to Puerto Rico and the Coast Guard has increased patrols of the Caribbean smuggling routes, the shutdown affects federal agencies on the island that are already chronically understaffed. Even the U.S. District Court for the District of Puerto Rico halted new judicial activities as of October 1.
With more than 43,000 pounds of narcotics seized in 2012 alone, it is clear that the U.S. can’t afford to neglect nearly 4 million citizens affected by the drug war due to partisan politics.
On the day of the shutdown, the FBI announced that it had dismantled a powerful drug organization in Puerto Rico that had generated over $100 million in revenue since 2005. I applaud that success and the new U.S. interest in the Caribbean—and recognize that federal agencies such as the FBI and Coast Guard are not currently affected by the shutdown.
Yet with chronically understaffed federal offices—even when the government is functioning at its full capacity—the shutdown seems poised to stifle the progress that has been made to reduce crime on the island.
Likely top stories this week: Military operations expand into a Rio de Janeiro favela; Argentine President Cristina Fernández de Kirchner takes a month-long medical leave from office; Colombia-FARC negotiations advance in Cuba; Mexican tax reform faces new opposition; IMF warns against the threat of a U.S. debt default.
Rio de Janeiro Expands Military Control of Favelas: A peaceful military operation was conducted on Sunday in the Lins de Vasconcellos favela of Rio de Janeiro, home to approximately 15,000 residents. Authorities have already established 34 Unidades de Polícia Pacificadoras (Police Pacification Units—UPPs) across the Rio de Janeiro metropolitan area—and now plan to install two in Lins de Vasconcellos—in an effort to promote public security for the 2014 World Cup and 2016 Olympics. UPPs came under public criticism recently after 10 military police officers were accused by public prosecutors of torturing and killing Amarildo de Souza, a resident of the Rocinha favela.
Argentine President Takes Medical Leave: Argentine President Cristina Fernández de Kirchner was ordered by doctors to take a month-long leave of absence after they confirmed she had suffered a head trauma. Vice President Amado Bodou will assume presidential responsibility during Kirchner’s absence. The announcement precedes midterm congressional elections scheduled for October 27 during a political low for Kirchner’s governing coalition. The group recently reported its worst performance in ten years, having received just 26 percent of national votes in the electoral primaries.
Colombian Government and FARC Leaders Resume Peace Talks: Following disagreements that resulted in a two-week stall in peace talks between the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia—FARC) and the Colombian government, FARC Chief Negotiator Iván Márquez announced this week that both parties have agreed to resume negotiations. The talks began 10 months ago in Havana, Cuba, and have now been recorded in a 25-page document that includes agreements on the key issue of land reform. Colombian President Juan Manuel Santos said he hopes to conclude negotiations by the end of the year, with the ultimate goal of the FARC surrendering all weapons in exchange for legal and political integration.
Mexican Tax Reform Faces New Opposition: Mexican President Enrique Peña Nieto’s proposed tax reforms face new opposition from the Partido Acción Nacional (National Action Party—PAN). The plan seeks to promote annual economic growth beyond 5 percent by reducing government subsidies for national energy production and raising annual revenue by 1.4 percent from increased sales and income taxes. The PAN has cited concerns that the tax reform bill would disproportionately burden middle-income families by imposing new taxes on private education tuition, mortgages and home rentals.
IMF Warns against A Possible U.S. Debt Default: IMF Managing Director Christine Lagarde has warned against the looming threat of a U.S. debt default and the damaging effects it could have on the global economy as the U.S. Congress remains stalled in negotiations over a government shutdown. A recent report by the U.S. Department of the Treasury also warned against what would likely be the country’s worst economic crisis since the Great Depression, noting, “a default would be unprecedented and has the potential to be catastrophic.” In a recent speech, Lagarde said the U.S.’s ability to reach an agreement on the debt ceiling was “mission critical” to global economic growth and stability.
June 1: This AQ-Efecto Naím segment looks at sustainable cities in the hemisphere.