The stage is now set for an unconstrained increase in public spending ahead of presidential elections in October. President Hugo Chávez used the powers conferred on him by the national assembly in late 2010 to legislate by decree the removal of the debt ceiling that can be contracted by the State. The opposition Mesa de la Unidad Democrática (MUD) contends that the Chávez administration will now ramp up spending even more to fund ever-more costly ‘missions’ in order to try and buy re-election, not to mention saddling the public, and future governments, with enormous debt.

Chávez used his ‘enabling powers’ to reform the ‘organic law for the financial administration of the public sector’ to allow the government to borrow beyond the limit imposed by the ‘law of annual indebtedness’ without consulting either congress or the central bank. The official gazette explained that the reform would enable the government to respond to “unforeseen circumstances or circumstances that are difficult to foresee.” In theory, the reform only permits additional debt to be contracted in order to guarantee food sovereignty, the preservation of social investment and security or integral defence, and the restructuring of debt. In practice, this provides sufficient latitude to justify any additional spending the government wishes.

The MUD argues that the reform contravenes the government’s own (1999) constitution, article 312 of which specifically states that the government must obtain special approval to contract new debt, which must be “at a prudent level in relation to the size of the economy”. Last year, Chávez promulgated the ‘Special Complementary Indebtedness Law’, allowing the government to issue an additional BF45bn (US$10.4bn) in debt.

The biggest concern is that the latest reform does not require the government to account for the money that it chooses to borrow. The government’s reputation for the transparent use of funds precedes it: the national development fund (Fonden) is probably the largest of all of the Bolivarian Revolution’s opaque funds, where billions of dollars are shuffled to and from the state oil company Pdvsa, for instance, and also into other smaller funds ostensibly created for more specific social development projects.

Confronting insecurity
“Where is there greater public insecurity? In Venezuela or the US? I ask you, look at the figures… The Yankee empire is working with the Venezuelan opposition again.” This was the reply President Chávez gave on radio and television from Havana this week to a decision by the US State Department to warn its citizens about foreign travel to Venezuela because of the levels of violence.
It is not quite sure what figures Chávez was referring to as even his own government has released statistics showing the murder rate in Venezuela to be higher than that in the US, but what is clear is that the issue of insecurity is the main front on which the opposition presidential candidate, Henrique Capriles Radonski, will mount his attacks on Chávez. Capriles quipped this week that “There is a curfew every night and not by the government’s decision”.
Chávez said that his government was working “incredibly hard” to confront insecurity, which he said was a scourge “inherited from capitalism”, in spite of the fact that the murder rate is higher now than before he came to power in 1999 [WR-12-13]. He also maintained that insecurity was not caused entirely by “the internal situation but by the international situation”.

The UN’s Economic Commission for Latin America (Eclac/Cepal) reports that the region attracted a record US$138bn in foreign direct investment (FDI) in 2011. Although China maintained its place as the region’s third biggest external investor, it actually reduced the size of its direct investment in the region in 2011 compared with 2010.

The US accounted for 17% of the region’s 2011 FDI and Holland supplied 13%. China provided 9%, well ahead of both Spain and Canada, traditionally heavy direct investors in the region, which each accounted for 4%. In 2010, according to Cepal, FDI in Latin America had come to US$112.6bn. At 9% of the total, China’s fresh investment in Latin America in 2011 was just under US$12.4bn on Cepal figures. In 2010 Cepal estimated that China invested around US$15bn in Latin America.

China is selective about where it invests. It has invested little in the region’s two biggest economies, Mexico and Brazil where the bulk of Latin America’s FDI traditionally goes. Cepal reports that, during 2011, total FDI in Brazil was US$81.5bn while the figure for Mexico was just under US$10bn. It is worth noting that the Banco de México reports an even lower FDI figure: US$8.04bn, down 53% on the 2007 figure.

China’s big bets are on three Andean countries. Given the small size of the Ecuadorean economy, China was, by the end of 2011 with around US$7bn invested, already heavily overweight in that country, but, as we note inside, it shows little sign of pulling back. China’s involvement with Venezuela is also well known.

The Andean country with which China has had the longest foreign investment relationship, is Peru. China’s experience has been surprisingly successful and Chinese companies are now on course to control 25% of Peru’s copper production by 2020.

China’s first major bet on Latin America’s commodities was its US$120m investment in HierroPerú when that company was privatised in 1993. Despite persistent labour unrest, that investment has proved hugely profitable. Shougang, the Chinese company which bought HierroPerú, timed its purchase brilliantly. It bought when iron ore was fetching US$25.20 a tonne. In 2010 the average iron price was US$100.90 and the Chinese owners have managed to increase Hierroperú’s production from 4.6m t a year in 1994 to just over 6m t a year in 2010.

The immediate top priority the US Southern Command (Southcom) has set itself in its role as ‘the lead US agency responsible for directing illicit trafficking detection and monitoring activities’ is ‘strengthening the security capacities of our partners in Central America’. This reflects the appreciation that this subregion, a key transshipment zone for illicit trafficking, is where organised crime has ‘most acutely [...] evolved into a volatile and potentially destabilising threat to both citizen and regional security.’ 

This is what the outgoing chief of Southcom, General Douglas Fraser, told representatives of the House Armed Forces Committee in the Posture Statement he delivered on 6 March. His key reading of the situation was, ‘While we do not see a traditional military threat emanating from the region, nations throughout our hemisphere are contending with an asymmetric threat to national and international security: Transnational Organised Crime (TOC).’ 

The situation is felt most acutely in Central America: ‘Guatemala, Honduras, and El Salvador are experiencing alarming increases in murders and brutality. The rising wave of violence and illicit trafficking, coupled with the expansive resources of transnational organized crime, is challenging the law enforcement capacities of some Central American governments. Accordingly, these countries view their militaries as the only entities capable of responding to these threats.’ Hence, Southcom ‘is supporting the efforts of militaries throughout Central America that have been tasked by their civilian governments to assist in countering transnational organised crime.’ 

A point highlighted by General Fraser is that the networks of organised crime ‘traverse the boundaries of the Geographic Combatant Commands (GCCs). Illicit trafficking by transnational criminal organisations is expanding between our AOR [area of responsibility] and the AORs of United States Northern Command, United States Africa Command, and United States European Command, underscoring the truly global nature of this networked threat.’ 

The boundaries he appears to have most in mind are those that split responsibilities between Southcom and Northcom in Latin America and the Caribbean. The latter’s remit includes Mexico and the Bahamas; the former’s stretches south of Guatemala and the rest of the Caribbean. ‘Events in Mexico and in [Southcom’s] AOR’, says Fraser, ‘are inherently connected, requiring an integrated effort across law enforcement, military, and civilian agencies. Many countries in Central America face challenges in addressing impunity, porous borders, and large areas of under-governed territory.’ 

To this is added the strong suggestion that Southcom is doing a more efficient job than others. Fraser notes that in 2011 operations conducted by Southcom’s Joint Interagency Task Force South (JIATF South) resulted in the ‘disruption’ of 117 tonnes of cocaine. 'Our return on investment is substantial; in 2010, JIATF South supported the interdiction of eight times the amount of cocaine than was interdicted on the Southwest border [of the US], at a third of the cost and in an operating area that covers 42 million square miles.’ 

This claim is supported in the distributed version of Fraser’s Posture Statement with the following data: In FY2010, 11 US government agencies jointly spent US$1.8bn on interdiction efforts along the 1,969-mile south-west border, while JIATF’s total operating cost was US$565.5m. Law enforcement agencies seized 19t of cocaine along the south-west border; JIATF achieved the ‘disruption’ of 154t (see table in page 7 for US Coast Guard seizures in FY2011). 

Fraser points out that many Central American states lack the financial reserves of transnational criminal organisations. He cites the UNODC calculation that retail and wholesale drug-trafficking profits in North America amount to some US$35bn, and the Drug Enforcement Administration (DEA)'s calculation that Mexican and Colombian drug traffickers generate, remove and launder between US$18bn and US$39bn annually in wholesale drug proceeds, which are largely smuggled in bulk out of the US via the south-west Border. 

The distributed version of his Posture Statement includes data suggesting that Southcom expects the flow of cocaine towards the US to decline this year. JIATF South’s Projected Cocaine Movement (PCM) towards the US for calendar 2012 is between 775t and 930t. This is compared with the US inter-agency’s Documented Cocaine Movement (DCM) for calendar 2011 of 1,086t. The latter, which despite its name is an estimate, is described as ‘drawn from analysis of the Consolidated Counterdrug Database (CCDB) and augmented by law enforcement reporting’. The former is described as ‘calculated based on demand-driven methodology to project the amount of cocaine that must be leaving South America to satisfy global demand’ using a methodology that ‘attempts to capture the “unknowns” inherent to cocaine flow figures.’ 

Impact on US security

Fraser pointed to several potential and actual threats to US security arising from the activities of the TOCs. Prominent among them are the following: 

- Their smuggling routes represent potential access points that could be leveraged by other groups: South American-based Alien Smuggling Organizations (ASOs) provide a critical link for international trafficking networks and facilitate the illegal movement of Special Interest Aliens (SIAs) through South and Central America for attempted entry into the United States. He does note that ‘we have not yet seen any attempts by international terrorist groups to leverage these smuggling routes.’ 

- Mexican-based TOCs and their associates operate in more than 1,000 US cities, working with domestic US gangs to distribute and traffic illicit drugs. 

- Transnational gang activity in the US is a growing concern: ‘MS-13 [Mara Salvatruchas] leaders in El Salvador manage five regional “programs” of cliques in cities such as Boston, Greensboro, Miami, and Dallas, and have authorised retaliatory actions against US law enforcement personnel in the Virginia and Maryland areas, which fortunately did not come to fruition.’

In an unprecedented move, the federal public ministry has filed criminal charges against 17 workers from the US companies Chevron and Transocean for an oil spill in the Campos basin, off the coast of Rio de Janeiro state, in November 2011. Federal prosecutors said that the 17, which include Chevron’s local boss George Buck, could face a jail sentence of up to 21 years each for presiding over a “contamination time bomb”. Chevron rejected the charges – for environmental crimes and damage to public patrimony – as “outrageous and without merit”. The case has put the wind up the entire industry, which is operating in unchartered territory in Brazil’s offshore ultra-deep Atlantic waters.

Chevron and its partner Transocean, which was responsible for the drilling – and which, incidentally, was also at the centre of the BP oil spill disaster in the Gulf of Mexico in 2010 – are already facing an US$11bn civil lawsuit and a string of official fines.

The federal government is taking a stern line, on the grounds that while the actual leak was relatively small, Chevron was in effect running a potentially very hazardous operation in the only field it operates (as the majority partner) in Brazil, the Frade. Chevron has a 52% stake in the field; Brazil’s state oil company, Petrobras, has a 30% stake; and a joint-venture, Frade Japan, has 18.3%. Chevron has invested over US$2bn to develop the field. Between 2,400 and 3,000 barrels of oil escaped from the seabed in the November incident, leading to the suspension of Chevron’s drilling rights in the country.

Awkwardly, last week, Chevron was forced to suspend production completely in the Frade, after a fresh oil seepage was discovered. Chevron denies that it caused the second leak, suggesting it could be a natural seepage, typical of the area. Fabio Scliar, the head of the federal police environmental division in Rio de Janeiro, concluded in a report in late 2011 that the well at the centre of the November spill “should not have been drilled”.

Federal prosecutors thus argued that Chevron knew that it was operating at the very edge of acceptable safety standards. The leak occurred after the wall of the well broke, presumably the result of undue drilling pressure. In its file, the public ministry also said that the national petroleum agency (ANP) had detected “very serious faults” in equipment on the Transocean-operated SEDCO platform used by Chevron for drilling activities. Chevron insists that it operated well in line with safety standards at all times, noting that the authorities, including the ANP, gave their approval at each and every stage.

A judge will now rule on whether to proceed with a formal case, which would likely drag on for years, obliging the companies to fork out billions in legal fees. In the meantime, the judge has ordered the seizure of assets and set bail at R$1m (US$549,000) each for the 17 executives. Late last week the federal prosecutor leading the case, Eduardo Santos de Oliveira, instructed the executives to hand in their passports and suggested that he could also request their preventative detention should the criminal charges proceed. Chevron is also facing an US$18bn case in Ecuador, leading some sector analysts to speculate that high costs may force it to rethink its operations in Latin America.

Petrobras has faced much lesser sanctions over bigger leaks, prompting some to suggest that the federal case is not only a warning to the entire industry but may also be politically motivated.

• Middle class falls for Dilma

According to leaked details of the latest (March) national public opinion survey by Ibope for the National Confederation of Transport (CNT), set for publication in early April, President Dilma Rousseff’s approval rating has continued to rise. In December the government’s approval rating was 56% in the Ibope poll, a high for any administration at the end of its first year in office. Most notably, support for Rousseff has risen most among the middle class, which is bad news indeed for the weakened opposition Partido da Social Democracia Brasileira (PSDB) ahead of the 2014 general election. It also underlines the fact that Rousseff’s main opposition for the foreseeable future will continue to come from within.

Ecuador’s President Rafael Correa is facing what he is calling the final test of strength before the formal start of the election campaign on 18 October, ahead of presidential and congressional elections on 17 February 2013. An indigenous march is approaching Quito from Zamora Chinchipe, the country’s southernmost province, and should reach the capital on 22 March. The marchers are protesting against large-scale mining projects: Conaie, the umbrella indigenous group organising the march, maintains that mining will consume and contaminate vital water supplies and that it has never been consulted by the government about its plans. The march will pass through Andean highland provinces where support for Correa has waned in recent years. The government is trying to undercut support for the march by rolling out projects in these provinces in advance of its arrival, as Correa seeks to crush any confidence the political opposition could derive from it.

Some 300 indigenous protesters set off on 8 March from the small Amazonian canton of El Pangui, near the site of the concession awarded last week to the Chinese company Ecuacorrientes to invest US$1.4bn in developing a huge open-cast copper mine [WR-12-10]. They were soon joined on the 700km “march for water, life and dignity” by a further 300 protesters en route to the province of Loja. “Correa minero, el agua está primero” (“Correa the miner, water comes first”, the rather less-catchy translation) was a popular chant. They also called for the impeachment of the ministers who signed the mining concession with Ecuacorrientes in the Cordillera del Cóndor mountain range [WR-12-10].

The marchers then turned up the central spine of the country, arriving in Cuenca, the capital of Azuay, on 12 March. Here, the prefect (governor) of Zamora Chinchipe, Salvador Quishpe, who had launched the march with a symbolic “bath” attended by national deputies representing Conaie’s political arm Pachakutik, was greeted by his Azuay peer Paúl Carrasco. As we went to press, the march had passed through Azogues, the capital of the province of Cañar, and was approaching Riobamba, the capital of Chimborazo. It will then head to Ambato, the capital of Tungurahua; Latacunga, the capital of Cotopaxi; and finally Pichincha, where Quito is located (see map below).

A group of some 500 supporters of President Correa’s party Alianza País (AP) gathered in the centre of Cuenca outside the Azuay government building in rejection of the march. Backed by the six AP mayors in the province (out of 15), they accused Carrasco of corruption and clientelist practices. There was a degree of irony to the claims of clientelism. Days before the march reached Chimborazo, for instance, various government officials programmed a series of visits to indigenous communities bearing gifts in the form of subsidies and social projects. Promises of land titles; agricultural insurance; mobile medical provision (from Cuban doctors); human development bonds and credits; and a health campaign, “the State by your side”, are being rolled out. The ministries of agriculture, health and social inclusion, as well as the national secretaries of peoples and water, in conjunction with the political coordination ministry and interior ministry, are all being deployed throughout March.

The government maintains that this was already envisaged under its overarching rural territorial development programme ‘Buen Vivir’. But, the timing of this surge in activity looks like a systematic attempt to undercut support for the march so that it does not amass more and more followers along the way and is comfortably outnumbered by AP supporters when it arrives in Quito.

Correa said on his weekend broadcast that Quito would be filled with tens of thousands of supporters of his citizens’ revolution to greet the marchers on 22 March. “In a peaceful, democratic way, we will show that we are millions and that we will not allow the same old people, extreme Left, extreme Right and the corrupt press to destabilise this historic process of change,” Correa said. “It has been a total failure… I think there are more organisers than marchers,” he quipped, before adding, “They are few but their power is inversely proportional to their size. They are few but they have the media.”

Correa alternately belittles the march and acknowledges it as the biggest test for his citizens’ revolution before the elections, intent on destabilising his government. Conaie protests provided the catalyst for bringing down two of Correa’s predecessors, Abdalá Bucaram (1997) and Jamil Mahuad (2000). Correa is in a much stronger position than either of them as he remains, by a distance, the most popular politician in Ecuador, but he suffered an electoral setback in the Andean highland provinces through which the march is passing in his referendum on constitutional, judicial and media reforms last May. The “no” vote prevailed in Bolívar, Cañar, Carchi, Chimborazo, Cotopaxi, Loja and Tungurahua, where the indigenous population is most highly concentrated, and five of the six Amazonian provinces (in many cases by large margins).

Correa had initially celebrated a crushing victory in the referendum based on an erroneous exit poll. The president of Conaie, Humberto Cholango, reminded him of his premature triumphalism. He predicted that the government’s clientelistic practices would not deter people from joining the march, while insisting that the march had absolutely no intention of destabilising the government and merely sought consultation over mining projects and entrenchment of water rights. Cholango also dismissed Correa as a pseudo Socialist: “a true Socialist,” he said, “would not hand over Ecuador’s natural resources”.

Cholango is under pressure to demonstrate that Conaie can still mobilise large numbers of people. Conaie and Pachakutik regained some of their political clout after stalling the government’s planned water reform bill in May 2010 [WR-10-20] and then again in the referendum a year later when Facebook and Twitter campaigns played a key role. Both are also being used to promote the march, but Conaie and Pachakutik need more than virtual numbers to build momentum ahead of the elections – and for the rest of the opposition to take heart.

• Opposition

The opposition is fragmented and lacks a clear figurehead. It cannot rely on President Correa’s narrow victory in last May’s referendum as reflective of overall support for the government. In many cases this showed a desire to constrain Correa not replace him. The government, meanwhile, will continue to polarise politics, while being dismissive of all opponents. The official daily El Ciudadano ran a piece this week implying, with racist undertones, that the indigenous had not evolved from colonial times when they were paid in alcohol for working in the fields: “520 years later alcohol continues to be the motor of the indigenous,” it argued, after Azuay’s prefect, Paúl Carrasco, presented his peer Salvador Quishpe with a bottle of spirits when greeting the marchers.

The central bank’s monetary policy committee (Copom) cut the benchmark Selic interest rate by a full 75 basis points (bps) this week, taking it down to single digits (9.75%) for the first time since 2009. In a curt one-line statement, the Copom revealed that the larger-than-expected cut was not unanimous, with five votes in favour and two in favour of a smaller (50 bps) cut. The Copom took the opportunity to act more forcefully in support of domestic economic growth after the national statistics institute (Ibge) this week reported a weak real annual GDP growth rate of just 2.7% for 2011 and a steep fall in industrial production (IP). The IP index fell the most in three years in January 2012, declining 3.4% year-on-year, its biggest drop since December 2008. It also fell 2.1% month-on-month over December 2011.

The GDP result, though the weakest since 2003, was cushioned by the continued domestic consumption boom, with private consumption running much faster than overall GDP growth at 4.1% year-on-year. Government consumption rose 1.9% year-on-year in 2011, in line with the official efforts to rein in public spending. Gross fixed capital formation was up 4.7% year-on-year, which the government took as a reassuring sign. The combination of the domestic consumer boom and a strong Real stimulated strong import growth of 9.7% in 2011. In contrast, export growth was slower (though still respectable) at 4.5%, thanks largely to the Asian demand for commodities. In effect, Brazil is running a two-speed economy at the moment; domestic consumption continues to boom, but domestic industry is struggling to compete, both externally and against a flood of cheap imports at home.

The Rousseff administration, which is facing its first electoral test this October in municipal polls, is anxious to shore up growth. Finance Minister Guido Mantega – who began last year forecasting a GDP result of 4.5%, only to backpedal every quarter – insists that Brazil will rebound over the course of 2012, with the pace of growth accelerating back towards 4.0%-4.5% (in annualised terms) in the second half. Arguably, the central bank is frontloading its planned interest rate cuts now; it might not get the same opportunity again come the second half if Mantega’s rebound gathers pace.

Local producers and exporters are clamouring for the government to take urgent measures to re-balance the economy away from its current reliance on private sector consumption as the main engine of growth. This, they say, is leading Brazil into an uncomfortable reliance on a strong Real so as to fund imports, avoid higher inflation and also to attract external financing. Brazil needs to boost its domestic savings rate (17.2% in 2011) so as to be able to lift its investment rate from below 20% of GDP (19.3% in 2011) to the estimated 25% of GDP required to sustain targeted annual growth of 4.5%-5.0%.

In fact, this is only the second time ever since inflation targeting was first introduced in 1999 that the Selic has been in single digits. In mid 2009, the Copom reduced it to 9.25% (from 10.25%) and then again to an all-time low of 8.75%, where it remained until late April 2010. When the Copom first began its current easing cycle last August, the central bank president Alexandre Tombini signalled that the bank would seek to leverage the crisis in Europe to bring down Brazil’s structurally high interest rates. Tombini and President Dilma Rousseff strongly agree that permanently lower interest rates are key to ensuring more sustainable (read, domestic-led) investment growth in Brazil, reducing its historical over reliance on external financing.

In theory, lower interest rates should help temper the strong appreciatory pressure on the Real which, at R$1.74/US$ (8 March), has risen by almost 6% against the greenback to date this year, heaping the pressure on domestic manufacturers and exporters. To date this year, capital inflows have amounted to a whopping US$15bn, compared with outflows of US$3bn in the final quarter of 2011, as global investors pile back in. In Germany this week, President Rousseff warned that her government was prepared to take strong measures to protect local manufacturers from the “monetary tsunami” unleashed by the quantitative easing policies (i.e. money printing) being pursued in the US and Europe.

The obvious upside to a strong Real is that it protects Brazilian consumers from higher inflation. In January annual inflation was 6.22%, down from last year’s September peak of 7.3%. However, with virtually full employment, price pressures will remain to the fore. Local economists surveyed by the central bank expected year-end inflation of 5.24% on 2 March. Although Mantega is adamant that inflation will gradually return towards the targeted 4.5% this year, the truth is that the Rouseff government can live with a slightly higher figure in order to ensure economic growth.

Are exporters crying wolf?

Trade broke new records in February, according to latest figures from the ministry of  development, industry and external trade (MDIC). Exports were valued at US$18bn, up 7.7% year-on-year. Imports amounted to US$16.3bn, up 5% year-on-year. Notably, all three export categories posted decent growth, with manufactured exports up 18% year-on-year; semi-manufactured exports up 25.5%, and basic exports up 6.6%. Likewise, imports of capital goods were up 18.6% year-on-year, with  consumer goods up 14.2% and intermediary and primary imports up 7.3%. Total exports in the 12 months to February 2012 were worth US$258.26bn, up 23% year-on-year, while imports over the same period totalled US$229.64bn, up 21.6%. The trade surplus (US$28.6bn) was up 32%.  This would appear to contradict the loud complaints by Brazilian exporters. The government is targeting an export figure of US$264bn in 2012, up 3.1% in annual terms. The US was the main destination for Brazilian goods in February.

Brazil and FIFA settle their differences over drinks

    On 7 March the special congressional committee discussing the pending new legislative framework for the 2014 World Cup voted in favour of allowing the sale of alcoholic drinks inside football stadiums during the 2013 Confederations Cup and the 2014 World Cup. Brazil does not currently permit the sale of alcohol in stadiums but the International Federation of Football Associations (FIFA) asked Brazil to amend this regulation (among several others) under the contract to host the tournaments. The Brazilian government has had several run-ins with FIFA over these demands, which also, for example, sought to require Brazil to suspend temporarily its domestic regulations guaranteeing a quota of cheap tickets for students and pensioners at every game. FIFA has also made demands about the liability for security inside the stadiums and the protection of trademarks, asking Brazil to amend its domestic criminal penalties for those convicted of peddling counterfeit goods, for instance. The government led by President Dilma Rousseff has resisted such pressures, backed by its world famous football stars.

    Earlier in the week FIFA’s president, Sepp Blatter, was forced to send the Rousseff administration a letter of apology after FIFA’s outspoken French chairman, Jerome Valcke, said Brazil needed “a kick up the backside” in order to get a move on with the World Cup preparations. The government responded that it would no longer deal with Valcke, who has previously made other comments deemed offensive locally. Valcke, who was actually due in Brazil this week, had wanted the new framework legislation (The General Law of the Cup) in place by end-March but that is unlikely – it must first go before the full lower house and then to the senate for debate before approval. The government repeatedly insists all preparations are on track, although FIFA does not seem reassured.

• Supreme breakthrough

On 6 March Judge Cármen Lúcia Antunes Rocha was elected president of the supreme electoral court (TSE), becoming the first woman to sit at the helm of the court in its 67-year history. Upon accepting the post, Antunes Rocha noted that Brazil enfranchised women 80 years ago. Now, she said, women make up 52% of the Brazilian electorate; however, they are still under-represented in official life. Judge Marco Aurélio Mello was elected the TSE vice-president.  

Development: On 7 March Fabricio Correa, President Rafael Correa’s elder brother, announced that he had the 250,000 signatures needed to register a new political party to contest Ecuador’s 2013 presidential and congressional elections.

Significance: Fabricio, a businessman, has accused Rafael of dissembling in claiming that he did not know about Fabricio’s controversial (US$167m) contracts with his government. The president said that he cancelled all the deals with his brother’s companies when they became public.

Key points:

• Fabricio, 53, delivered the 250,000 signatures to the Consejo Nacional Electoral (CNE), registering his movement, Equidad, Progreso i Orden (Equipo). He wants to run in the 2013 presidential contest.

• Fabricio’s main business is construction. He is on bad terms with his brother and has not met him since 2009.

• The CNE requires 158,000 signatures to register a new political movement for electoral purposes. The other movements already registered for the 2013 elections are: Movimiento Popular Democrático (MPD), a left-wing opposition movement; Sociedad Patriótica, which is led by a former president, Lucio Gutiérrez (2003-2005), whom Rafael Correa defeated in 2009; Movimiento CREO, another opposition party; and Partido Roldosista Ecuatoriano, headed by another former president, Abdalá Bucaram (1996/7); and finally, the ruling Movimiento Alianza País.

• The CNE is currently vetting the signatures presented by the indigenous movement, Pachakutik.

• Rafael Correa has yet to confirm whether he will stand for re-election in 2013.

Development: On 7 March in Havana, Cuba, President Juan Manuel Santos of Colombia met his Cuban and Venezuelan counterparts, Raúl Castro and Hugo Chávez.

Significance: Santos and Castro reportedly spent over four hours together at Castro’s private residence in Havana. According to one reputable commentator, Venezuela’s Nelson Bocaranda, the row over Cuba’s invitation to the Summit of the Americas in Cartagena next month was a smokescreen for the real agenda - talks between Santos, the Castro brothers and Chávez about the down-but-not-out largest Colombian guerrilla group, Fuerzas Armadas Revolucionarias de Colombia (Farc).

Key points:

• As expected, Cuba will not attend the hemispheric get-together of the 33 members of the Organization of the American States (OAS), of which Cuba is not a member. Santos said that as the host, Colombia could not get “a consensus” on extending an invitation to Cuba, as per a demand issued by the Venezuela-led left-wing regional integration bloc, Alianza Bolivariana para los Pueblos de Nuestra América (Alba).

• Santos publically thanked Castro for his “understanding and his generous gesture in not wanting to create a problem, either for the summit or for Colombia.” He added that Colombia would work on a diplomatic solution to ensure that this “uncomfortable situation does not present itself again”.

• This is the first trip by a Colombian president to Cuba since Andrés Pastrana (1998-2002) went in 1999. Curiously, Cuba’s then-president Fidel Castro (1959-2008) introduced Pastrana to a young Hugo Chávez and Cuba (along with Venezuela) went on to provide important behind-the-scenes support to peace talks between the Pastrana administration and the two left-wing Colombian guerrilla groups, the Ejército de Liberación Nacional (ELN) and the Farc.  Many former Colombian guerrillas and their families have retired in Cuba.

• Arguably, the context surrounding Santos’s trip is not that different – amid potential moves once again towards some form of talks with the Farc, which most security analysts agree is on the verge of a military defeat. In response to a 4 March letter from the Farc, Angelino Garzón, Colombia’s vice-president, repeated in Madrid, Spain, on 5 March that the Bogotá government would “not negotiate without conditions”, meaning that the Farc “abandon the path of terrorism”. Garzón listed the conditions as: the release of all remaining hostages, an end to drug trafficking, an end to the use of landmines and the release of all of forcibly recruited adults and children.

• The Alba countries’ threat to boycott the Cartagena Summit if Cuba was not invited looks deflated, after Chávez told Santos that he aimed to attend, health permitting.  Ecuador’s President Rafael Correa, the strongest proponent of the boycott, has not yet responded.

Guatemala's President Otto Pérez Molina has performed an unexpected volte-face by ditching his campaign stance of opposing drug legalisation and proposing an early top-level debate on the matter with a view to arriving at a regional consensus. He will take the issue to a Central American summit in March, and later to the Summit of the Americas in Cartagena, Colombia, on 14-15 April.

Pérez Molina aired the proposal on 9 February during a visit by his Salvadorean peer, Mauricio Funes, who said at a joint press conference that he was open to considering legalisation — only to reverse his stance upon returning home, arguing that legalisation would turn the region into a drug consumer’s paradise. He told the Salvadorean audience that he had told Pérez Molina that he personally didn’t agree with legalisation.

Since the Honduran president Porfirio Lobo has also declared his opposition to legalisation, it does not look as if Pérez Molina’s proposal will get far even in Guatemala’s immediate neighbourhood.

On 12 February, the US embassy in Guatemala issued a statement to the effect that the US opposes legalisation on the grounds that ‘the evidence shows our shared drug problem is a threat to public health and safety’ and that legalisation would not stop the drug gangs from continuing to traffic in people and guns, and from engaging in extortion and kidnapping.

Four days later, though, Pérez Molina held forth more extensively on the rationale behind his proposal in an interview granted to the Mexican television network ‘Televisa’. ‘I believe,’ he said, ‘that decriminalisation of drugs would have to be a strategy on which the entire region was in agreement. We’re talking about everyone from the south, where [drugs are] produced, through all the countries like Guatemala which are conduits, transit [countries], to Mexico and the United States [...] The analysis [of this option] should take place as soon as possible and in all seriousness’. He continued: ‘I believe that if that is not the path, we shall have to find another, but it will have to be a regional strategy in which we are all willing to make the same effort. President Calderón has made a huge effort [which] has not been matched by the US, which is his neighbour and the biggest market [for drugs]. This case proves that a country cannot be left to face on its own a phenomenon like this one, with transnational implications, in which cooperation is fundamental.’

On the same wavelength

On 13 February, Pérez Molina discovered that he was not alone. Colombia’s Foreign Minister María Ángela Holguín, who is preparing to host the Summit of the Americas, said, ‘For certain, the war on drugs has not been as successful as it should have been, and this is an issue which the countries should discuss and work out what should be done about it.’ That same day Juan Manuel Corzo, president of Colombia’s senate, said that legalisation worldwide is ‘a good remedy’ which should be discussed in international forums such as the Summit of the Americas and the Inter-Parliamentary Union.

Colombia’s President Juan Manuel Santos has been saying for some time — most recently in January at the Hay Festival in Cartagena — that legalisation should be considered. Like Pérez Molina, he believes no country could do it alone. ‘It is a solution acceptable to Colombia if the whole world adopts it.’ Mexico’s President Felipe Calderón has taken a similar position, urging the US to consider ‘market solutions’ (a euphemism for legalisation) to curb its drug consumption which is the main driver of the regional drugs industry.

A different real aim?

It has been suggested that Pérez Molina is well aware that regional (let alone global) agreement to legalise drugs is not attainable, at least not as urgently as he says the matter should be discussed. His real aim, this argument goes, is to persuade the US to increase antidrug aid and get the US congress to lift the ban on military aid, imposed in 1978, following the involvement of Guatemalan military in the killing of a US national. Top-level moves to lift that ban have been floated since early 2005, when then-defence secretary Donald Rumsfeld declared himself satisfied with Guatemalan efforts to reform its military, and announced that the move was imminent.

The man who coordinated Pérez Molina’s transition team, former vice-president Eduardo Stein Barillas (2004-08), says the President’s change of mind came from the realisation that, without the reduction of US demand, no amount of aid would suffice for Guatemala to combat the drugs trade effectively. Barillas described Guatemala as ‘a mere corridor of illegality’ and said that, while drug trafficking and use were marginal issues for the US, they were central issues for Guatemala and Central America as a whole. This said, Pérez Molina has made it clear that he does want more anti-drugs aid and the lifting of the ban on military aid.

The counter-arguments deployed by the US embassy, similar to those adopted by Funes, are debatable on two grounds. The first is that there is contradictory evidence about the effects of (partial) legalisation of drugs in different parts of the world. The second is twofold: almost all of the drug legalisation proposals are accompanied by calls for strong action against other organised crime activities, and Mexico’s experience suggests that there is no inevitable link between drug trafficking and other high-impact criminal activity.

Development: On 29 February Argentine media including the state news agency Telam reported that Industry Minister Débora Giorgi had asked several Argentine companies to substitute imports from the United Kingdom (UK) with alternative supplies.

Significance: The move is in line with the restrictive import policies being implemented by the government of President Cristina Fernández for the better part of two years now. Clearly, however, the move also has political implications, amidst the recent increase in diplomatic tensions over the Falklands/Malvinas archipelago. According to Argentina’s national statistics’ institute, Indec, Argentina’s imports from the UK were valued at a mere US$664.2m in 2011, constituting barely 0.9% of its total imports. This relatively small weight implies that the latest move is driven by politics primarily.

Key points:

• Argentina’s exports to the UK were valued at US$779.5m in 2011. However, its trade surplus with the UK shrunk 60% year-on-year in January-November 2011 to US$104m, down from US$274m in the same period of the previous year. Total bilateral trade was worth an estimated US$1.44bn in 2011, up 16.2% annually on 2010.

• According to the ministry of industry, the new measures are designed to halt the continued deterioration in Argentina’s bilateral trade surplus with the UK. Notably, the ministry says Argentina also wants to favour relations with “those who respect the territorial integrity of the country, its sovereign claims and the resources that belong to it”.