As the world grapples with generating employment, growth and innovation, a new club of countries has emerged as an engine of regional growth. Through improved governance, liberalized trade and stable macroeconomics, the economies of Mexico, Colombia, Peru, and Chile have rallied in recent years.
Rather than following the lead of the increasingly protectionist and interventionist Mercosur countries, these Pacific economies have taken their cues from the Asian tigers of the 1980s, quietly becoming economic overachievers. Given the rise of China and the American pivot to the East, the Puma countries are poised to play a significant role in the emerging Pacific century.
Statistically, the Pumas are growing by leaps and bounds. They have averaged 4.69 percent annual growth since 2005. The Colombian, Chilean and Peruvian middle classes expanded more than 10 percent between 2000 and 2010, while some estimate that the Mexican middle class already accounts for more than half the population. Inflation, a great scourge of Latin American economies, has been held within central-bank bands across the Puma economies. Puma sovereigns are investment grade, and their issuances are hot.
On paper, the Pumas roar. But what is driving these figures, and are they sustainable?
Top stories this week are likely to include: Cuba prepares for political successors in 2018; Venezuela’s opposition protests lack of information on Chávez; Tensions between Chile and Bolivia rise over Bolivian soldiers’ arrest; Oscar Arias visits Paraguay for OAS elections observations; and Cerrejón strike continues after explosives destroy trucks.
Raúl Castro Says he'll Step Down in 2018: On Sunday, Cuban President Raúl Castro told the Cuban National Assembly that he will step down at the end of his upcoming five-year term as president in 2018. Revolutionary icon Fidel Castro, whose public appearances are now rare, was present when his brother made the announcement putting an official end-date on an era of Castro rule that began in 1959. Raúl Castro then named Miguel Diaz-Canel Bermúdez, 52, his first vice-president. The younger Castro had indicated on Friday that he was thinking of retiring and might name a successor from among the next generation of Cuban politicians.
Venezuelan Opposition Demands Information as Chávez' Health Remains Uncertain: Hundreds of government opponents marched in Caracas on Saturday as part of the opposition’s new political offensive to protest the current political stasis in Venezuela as President Hugo Chávez remains out of sight in a military hospital. Since returning from Cuba on February 18, the Venezuelan government has shared limited information about the president’s cancer treatment and prognosis. On Friday, Venezuelan Vice-President Nicolás Maduro said that Chávez was “energetic” and had participated in a five-hour meeting with government leaders, though he acknowledged that the president can't speak because he is breathing through a tracheal tube. Meanwhile, Chávez supports held candlelit vigils outside the presidential palace to pray for the president’s recovery.
Hearing for Bolivian soldiers in Chile begins Monday: Three Bolivian soldiers arrested in Chile for crossing the border with weapons on January 25 will face a judicial hearing today in the northern Chilean city of Iquique to determine whether they'll remain in prison. The arrest of the soldiers has increased the diplomatic strain between Bolivia and Chile after Bolivia denounced Chile's actions via a letter to the UN on February 18. On Sunday, Bolivian President Evo Morales compared Chile’s imprisonment of the soldiers with Bolivia’s lost access to the Pacific Ocean since 1879, another source of recent tension. Chilean Minister of Foreign Affairs Alfredo Moreno said that Bolivia is blocking a swift resolution to the soldiers’ cases.
Oscar Arias Visits Paraguay to Prepare for April Elections: Former Costa Rican President Oscar Arias is visiting Asunción, Paraguay, until February 27 as head of the Electoral Observation and Political Accompaniment Mission of the Organization of American States (OAS). The mission aims to facilitate and monitor Paraguay’s presidential elections on April 21 to ensure that they are free and fair. It will be setting up elections observers and meeting with members of the Paraguayan government for the next two months. A number of the country’s neighbors view Paraguayan President Federico Franco as illegitimate due to the controversial impeachment of his predecessor, former Paraguayan President Fernando Lugo, in June 2012. Members of Mercosur and Unasur elected to suspend Paraguay from regional membership until the elections are held.
Explosives Destroy Trucks at Cerrejón while Mining Strike Continues: Unknown assailants detonated explosives at the Cerrejón coal mine in Colombia on Sunday as a strike that began on February 7 continued into its seventeenth day. Both Cerrejón and the leader of Sintracarbon, the coal miners' union, denounced the attack, which damaged four trucks but reportedly did not result in casualties. Cerrejón workers initially demanded a 7 percent pay raise, but they have since decreased that amount to 5.8 percent. According to the World Coal Association, Cerrejón’s coal accounted for 80 percent of Colombia’s coal exports last year. Union leader Igor Diaz said that the workers will meet with Cerrejón today to restart wage negotiations despite the attack.
Watch a recent AQ documentary on Cerrejón. http://www.americasquarterly.org/rio-rancheria-documentary
Natural resource extraction is a key contributor to economic growth in various parts of the Western Hemisphere, but governments, businesses and civil society are faced with how to improve extractive activity and its effects on broad-based socioeconomic development in respective communities. A special section in the Winter 2013 issue of Americas Quarterly, released today, includes photo essays and analysis to look at these challenges and compare the potentials and pitfalls for the natural resource industry in Chile, Colombia and Peru in four critical areas: community relations and consulta previa (prior consultation); value-added economic development; the nature of governance and public management; and the environment.
In the case of consulta previa, although Convention 169 of the International Labour Organization—on the right of Indigenous and tribal peoples to prior consultation—has been ratified by 20 countries, most of which are Latin American nations, the accord is still subject to competing interpretations by community leaders and governments.To maximize success and mitigate conflict, the AQ special section urges all stakeholders to view consulta previa as a regular process throughout the life of the exploration or exploitation project, and for businesses to broaden the scope of consultative mechanisms beyond extraction’s original impact zone.
The special section also suggests that governments and businesses work together to ensure a positive impact of extractive industry over national economies. By leveraging tax and royalty resources, governments can attract investment and promote local innovation. It cites Chile as a model in terms of its Fondo de Innovación para la Competitividad (Innovation Fund for Competitiveness). However, clear priorities for social policy and investment must be in place to ensure an equitable resource distribution.
In addition, despite some progress in economic and community development over the life of extractive industry in the three countries, governments and businesses still lag behind in protecting the environment from the negative effects of mining exploration. The AQ section asks governments to boost the capacity and strengthen the authority of federal environment ministries and for businesses to monitor energy consumption levels and seek creative ways to reduce them.
In addition to the photo essays and analysis, an exclusive AQ documentary looks at a proposed project by the coal mining company Cerrejón to move an entire river 16 miles (26 kilometers) and the effects that would have on the Wayúu Indigenous community that lives alongside it .
More than 600 Mapuche representatives gathered in Chile’s conflict-torn La Araucanía region on Wednesday to discuss proposals for self-government and address the violent clashes between Indigenous activists and state authorities in southern Chile over land ownership and restitution.
Mapuche leaders organized a special summit at the cerro Ñielol (Ñielol hill) in the city of Temuco in an effort to assert Indigenous autonomy and protest the Chilean government’s response to the growing unrest in La Araucanía, including a special anti-terrorist group sent to combat violence in the region.
The latest tragedy in the long-running conflict between the Mapuche and the Chilean government occurred after an elderly couple, Werner Luchsinger and Vivian Mckay, died in an arson attack on January 4. Local Mapuche activists reportedly believed that the land-holding couple had usurped ancestral Mapuche territory and targeted their home.
Celestino Córdova Tránsito, a young Indigenous man, was detained near the scene of the crime and charged with the couple’s death last Friday under a controversial anti-terrorism law first enacted under the military dictatorship of Augusto Pinochet. The law considers the destruction or illegal occupation of property an act of terrorism that can be tried in both civilian and military courts.
The United Nations Commission on Human Rights, Inter-American Commission on Human Rights and Minority Rights Group International have criticized the anti-terrorism law being invoked against Mapuche activists, claiming that it has been used exclusively against the Mapuche since Chile returned to democratic rule.
Chilean President Sebastián Piñera declined an invitation to attend the Mapuche summit in Temuco, but Interior Minister Andrés Chadwick and Social Development Minister Joaquin Lavin planned to meet with local lawmakers and Indigenous leaders to discuss the ongoing conflict. The government said it would send a representative as an observer to the summit at cerro Ñielol.
Chile has embraced extractive industries as a tool for sustained economic growth, but this relationship does not come without controversy. At the beginning of this month, only one week after the government had announced the winner of its lithium contract, the concession had been scrapped and Sub-Secretary of Mining Pablo Wagner had resigned.
Chile is the world’s biggest lithium producer, generating 30 percent of the world’s profits on the sale of raw lithium and sitting on an estimated 23 percent of global lithium reserves—second only to neighboring Bolivia.
The latest controversy began on September 24 when a 20-year Contrato Especial de Operación de Litio (Special Lithium Operation Contract—CEOL) was awarded to Chilean company Sociedad Química y Minera de Chile S.A. (SQM). SQM was one of three companies whose bids to explore Chile’s lithium potential had been accepted by the government.
SQM currently produces 24 percent of the world's lithium and is only one of two lithium producers operating in Chile. The concession, which was sold to SQM for around $40.6 million, would have allowed the company to begin mining a further 100,000 tons of lithium from the government-owned Salar salt flats in the northern Atacama Desert.
Just like the cueca (Chile’s national dance that will be on full display during Independence Day celebrations this weekend) Chilean politicians were running round in circles last week over controversial tax reform legislation to overhaul its protested education system.
The bill, which will increase education-allocated government revenue by $1.23 billion, originally did not clear the Senate—where it was rejected on August 28 by a vote of 6 yeas, 19 nays and 7 abstentions.
The legislation had included a welcomed increase of the top corporate tax rate to 20 percent. But it also included controversial measures, including a 2-to-5-percent tax decrease—compared to 2011—for the top income-earners in Chile as well as incentives for children in private subsidized schools.
Senator Ricardo Lagos Weber from the Partido para Democracia (Party for Democracy—PPD) opposed the hefty tax cuts for the country’s most wealthy—or about 81,000 Chileans that fall within the top two tax brackets, earning between $7,142 and $12,040 per month.
The Chilean Movement for Sexual Minorities (Movimiento de Integración y Liberación Homosexual—Movilh) filed a lawsuit against the Chilean State to the Inter-American Court of Human Rights (IACHR) on Monday. The action followed the Supreme Court’s rejection of a protection claim presented by three gay couples that were denied the possibility to get married. The Chilean Congress is the only organ that can modify the law, which currently authorizes heterosexual unions only.
Rolando Jiménez, head of Movilh, claims that Chile violates at least five articles in the American Convention of Human Rights by prohibiting same sex marriages in the country. Aiming to pressure for legalization, this is the first lawsuit of its kind to be presented to the regional body. The action was filed by renowned lawyers Ciro Colombara and Branislav Marelic, along with Hunter T. Carter, same-sex marriage activist in the United States.
The debate on gay rights in Chile is not new. Recent acts of violence and international pressure have revealed the pressing need for lawmaking in support of LGBT rights in Chile. A recent study by Radio Cooperativa showed that 54.9 percent of Chileans support same-sex marriage, and in 2011 President Sebastián Piñera sent a proposal to Congress seeking to legalize same-sex civil unions.
Despite these and other achievements in countries like Mexico and Argentina, discrimination towards gay populations still exists in the Americas, particularly in the political arena. Watch an AQ and Efecto Naim joint report on LGBT rights in the region.
Chilean Minister of Energy Jorge Bunster addressed concerns on Wednesday afternoon over the threat of rising energy prices and the risk of a power shortage in Chile after its Supreme Court ruled on Tuesday to halt the planned Central Castilla thermoelectric power plant and port project. While the $5 billion, 2,100-megawatt planned power plant would provide much needed energy for the growth of the mining industry, Minister Bunster made clear that there were alternative projects that will supply electricity in the medium and long term.
The Supreme Court ruling, coupled with setbacks on other power projects, has caused concern that copper production will slow or become too expensive. Increased costs of electricity also poses the threat of a reduction in mining investments—a major source of national revenue with roughly $20 billion inmining project investments planned over the next 10 years. According to some analysts, the concern is not about a shortage of electricity, but the risk of anincrease in price. Chile’s mining minister, Hernan de Solminihac, has called for a national development solution, so that the mining industry continues to be an engine of growth. Mining represents roughly 15 percent of its gross domestic product.
The Castilla project is a joint venture between Brazilian billionaire Eike Batista’s, MPX Energia SA and Germany’s E.ON. They will now have to go back to the drawing board to reevaluate their strategy in Chile. It remains to be seen whether they will resubmit their proposal with an environmental impact study. The ruling on the project brought cheers from local fisherman and artisan groups who expressed concern over potential environmental effects such asair and water quality.
Top stories this week are likely to include: student protests in Chile; Ecuador and the UK continue Assange standoff; newspaper kiosks close in Buenos Aires; Brazilian candidates start regular media appearances ahead of municipal elections.
Student Protests Persists in Chile: More than 130 activists were arrested last Thursday and Friday during protests at the University of Chile and other educational institutions. Gabriel Boric, president of the University of Chile’s student federation, responded via his Twitter account, “Secondary school students and university students are in the same fight and we are not going to take a step back on this.” The students demand free higher education for all. At the same time, a recent Harvard study found that Chile raised student learning more than three times the average in a 49-country survey; still, its PISA scores are in the bottom third of all countries. Expect more protests this week and a continued hardening stance from the government. Today, police used tear gas to clear student occupiers from the Instituto Nacional.
Ecuador and UK Continue Assange Standoff: Foreign ministers of the Union of South American Nations (UNASUR) expressed their solidarity with Ecuadorian President Rafael Correa for granting asylum to WikiLeaks founder Julian Assange over the weekend. They rebuked Britain for "threatening" to storm the country's embassy in London. A seven-point declaration notes that Britain's threat to force its way into the embassy is counter to the 1961 Vienna Convention on Diplomatic Relations as well as the 1963 Vienna Convention on Consular Relations. Correa’s decision was also backed by member nations of the Bolivarian Alliance for the Americas (ALBA), which issued a joint statement expressing "emphatic support.” AQ Editor-in-Chief, Christopher Sabatini, observes that “given all the other issues in the region—including challenges to freedom of expression in Venezuela and Ecuador themselves—it’s hard to believe that expressing support for Ecuador’s offering asylum to Julian Assange for unsubstantiated allegations of a U.S. witch hunt should rise to the level of a foreign ministers’ statement.”
Buenos Aires Newspaper Kiosks Threaten to Close Again: Kiosk vendors refused to sell newspapers in Buenos Aires and the surrounding urban zones this past weekend in protest over a decrease in fees collected from each newspaper sale. Distributors and publishers unilaterally reduced the take for vendors to 32 percent of the newspaper price; the vendors want it to be raised to 40 percent. Omar Plaini, secretary general of Sindicato de Vendedores de Diarios y Revistas (SIVENDIA), noted, “we will join our colleagues at a meeting next Friday and, if they do not comply with our claim for the return of what they seized unilaterally and arbitrarily, which is 20 percent of our income, we will have a battle plan that will extend what we are doing today.” He declared that the closures could take place again this weekend if no agreement is reached.
Brazilian Candidates to Begin Free Radio and Television Appearances: This week, candidates for mayor, vice-mayor and city councilor will begin appearing on radio and TV as part of the obligatory free programing mandated as part of the Horário Gratuito de Propaganda Eleitoral (HGPE). Elections will take place on October 7 and October 28, 2012, in the 5,566 municipalities across Brazil. The one hour of daily programming is divided into two half hour blocks: 7:00-7:30 am and 12:00- 12:30 pm for radio; and 1:00-1:30 pm and 8:30-9:00 pm for television. Beyond the TV and radio coverage, “look for a continued shifting of political alliances as national alliances don’t necessarily translate into local ones. Still, the results will have important national implications,” notes AQ Senior Editor Jason Marczak.
It’s not just Olympic athletes who live in fear of a drug test ruining their career. Chilean politicians are being threatened with the revival of a bill that would remove politicians from public office if caught using illegal drugs.
The legislative hype began last month when Chilean Senator Fulvio Rossi admitted in an interview with Chilean newspaper La Tercera that he smokes marijuana “two or three times a month”—a revelation that shocked his colleagues and delighted a nation of thousands of cannabis users.
In spite of the threat of this new law, Rossi, a Socialist Party politician, has chosen to stand by his personal admission. What’s more, Rossi has used his confession as a launching pad for a public debate about the legal status of the drug in Chile.
On the Chilean Sunday television program Tolerancia Cero (“Zero Tolerance”), Rossi called for an “intelligent” discussion about the drug—saying that legalizing the “auto-cultivation of marijuana breaks the business of drug-trafficking,” is less harmful to one’s health than either alcohol or tobacco, and is an individual human right.
“This is private behavior that occurs in the privacy of the home and doesn’t offend public morality or harm others,” Senator Rossi, who also has a degree in medicine, said on the show. “The state can’t interfere. This is guaranteed in the Chilean constitution and in international treaties that Chile has signed.”
While opposition politicians have branded Rossi as “seriously irresponsible” for publicly admitting his consumption, other Chileans like Sebastián Binfa, Director of Revista Cáñamo (Hemp Magazine) and owner of a café in Santiago that sells cannabis-seed smoothies and other marijuana merchandise, called the act “courageous” and applauded Rossi’s attempt to “normalize the issue.”
Senator Rossi has been keen to point out that Chile “must adapt its legislation to social reality,” and has introduced a bill of his own that would decriminalize the home cultivation of marijuana for personal or therapeutic use. The proposal also suggested legalizing the transportation of small, regulated quantities of the drug.
June 1: This AQ-Efecto Naím segment looks at sustainable cities in the hemisphere.