Join Us

Member Area

LatinNews Consulting

Wednesday, 08 February 2017 12:18

Region: Corporate Radar

United Airlines to buy into Avianca: Avianca Holdings (which operates in Colombia, Peru, Ecuador and the Caribbean) and Avianca Brasil say they are discussing a merger, which would also bring in United Airlines of the US as minority partner. Two brothers, Germán and José Efromovich, hold the controlling stakes respectively in Avianca Holdings and Avianca Brasil. Avianca Holdings carried 29.5m passengers in 2016, reporting US$1.1bn in net revenue and US$102.1m in net profit in Q316. Avianca Brazil is the fourth largest Brazilian carrier, reporting H116 revenue of BRL1.4bn (US$448m) and a loss of BRL142.5m (US$45.6m) in the same half year period. United Airlines said it was talking with both Avianca Holdings and Avianca Brasil to “expand commercial and equity partnerships”.

Chinese mining companies pile into Peru: According to the Peruvian minister of energy and mines, Chinese companies have commitments to invest US$10.2bn in seven mining projects in the country, mainly in copper. China is the single largest investor in planned Peruvian mining operations, with 21.7% of total future projects. The main new Chinese projects are in Pampa del Pongo (Arequipa), Galeno (Cajamarca), Don Javier (Arequipa), Explotación de Relaves (Ica) and Río Blanco (Piura). There are also expansion projects at Toromocho (Junín) and Marcona (Ica). The ministry said the figures excluded the US$10bn Las Bambas project, in which China MinMetals has an equity stake, and which is already in production. Companies from Canada are the second largest investors with US$8.8bn in new projects, followed by those from the US (US$6.1bn) and UK (US$6bn).

Colombian retailers unhappy over VAT: The Federación Nacional de Comerciantes (Fenalco), which represents Colombia’s main retailers, says that January sales have been impacted by an increase in VAT, which has increased = to 19% (from 16%), as part of the government’s fiscal reforms. Fenalco’s president, Guillermo Botero, says that sales have fallen. He also expects inflation to rise, calculating an increase of about 0.9% in January, above the government target of 0.7%. He also cites a 7% increase in fuel prices, which will feed through to the price of consumer goods. Analysts say that consumers are already switching to lower cost items in supermarkets, such as own-brand goods. Retailers targeting this sector of the market, such as D1 and Justo & Bueno, are reported to be gaining market share, especially in food lines like rice, cooking oil, and prepared meats. Increased taxes on alcoholic drinks are also in play, with consumption of imported wines and whiskies expected to fall. Retailers of footwear, clothing, and personal hygiene products are also reporting weakness in sales. Botero says that the VAT increase has taken COP9bn (US$3.6bn) out of the pockets of Colombian consumers.

Tuesday, 20 December 2016 16:24

Region: Corporate Radar

Televisa linked to FIFA investigation: Televisa, the Mexican media conglomerate controlled by the Azcárraga family, could be involved in the ongoing scandal affecting FIFA, the international football federation. US prosecutors have claimed that an unnamed affiliate of a major broadcasting company headquartered in Latin America helped to pay millions of dollars in bribes to obtain the rights to broadcast the next four World Cup tournaments in Argentina, Paraguay and Uruguay. The Reuters news agency said it had been able to identify the affiliate as Mountrigi Management Group Ltd, a Swiss company controlled by Televisa. It said that Swiss company registrations indicated that Mountrigi Management and Televisa shared the same addresses and some board members. “We are certain that all of the people from Mountrigi or Televisa that have dealt with FIFA have acted correctly and have not paid any bribes nor any kickback to FIFA official related to the acquisition of rights,” a Televisa spokesman was quoted as saying.

Google in Cuba deal: Google, the US-based internet and technology company, has signed an agreement with Etecsa, Cuba’s state-owned telecommunications company, to provide faster data access on the island. The deal involves installing local servers that will hold much of Google’s content, reducing the need for signals to travel back and forth via Venezuela and from there to the US. Because of the half-century old trade embargo imposed by the US on Cuba, there are few direct data links. While the deal is seeing as improving internet speeds, it will not necessarily remove other obstacles to connectivity, such as the limited number of home connections or the high cost of access to public Wi-Fi (10 hours of Wi-Fi access can cost the equivalent of one month’s average salary). According to a statement from Google: “This deal allows Etecsa to use our technology to reduce latency by caching some of our most popular high bandwidth content like YouTube videos at a local level.”

Vale opens giant mine: Vale, the Brazilian mining group, has opened its S11D iron ore mine (also known as Serra Sul) in the Amazon state of Pará. The mine, representing total investment of US$14.3bn, is expected to produce 75m tonnes or iron ore per annum when output ramps up over the next four years, making Vale the world’s largest iron ore producer, ahead of Rio Tinto of Australia. The Brazilian company has persisted with the project despite the global fall in iron ore prices, which slumped from US$191/tonne in 2011 to US$37/tonne in January 2016 (although they have subsequently climbed back to US$79). S11D is expected to provide some of the best quality iron ore, at the lowest production cost, anywhere in the world.

Colombia goes Rappi: Rappi, a Colombian start-up company, is attracting attention as a new Internet and web-based delivery service. Initially set up in northern Bogotá under the name Grability in 2013 by three Colombian entrepreneurs, it took five months to build up a meal delivery service to 200,000 customers. The founders then changed the business model and renamed the company Rappi, raising around US$9m through Y Combinator, the California based accelerator. Rappi’s basic proposition is to use local messengers to carry out a wide range of tasks for customers – including everything from shopping through to the delivery of take away meals, documents or payments. One of the founders, Simón Borrero, says, “We live in cities like Bogotá and Mexico City with transport problems which complicate and consume peoples’ lives. Rappi identifies the needs of people who live in these complicated environments and presents solutions based on consumption and shopping trends”. Deliveries are carried out by self-employed individuals who set their own hours of work (similar to the Uber model). Known as rappitenderos, they now number approximately 2,000 and can be seen wearing bright orange uniforms. They must have an Android phone and a bike or motorbike. Rappitenderos can earn up to COP2m (US$600) a month. In one year, the company’s total staff has jumped from 10 to 600. The service is currently available in Bogotá, Medellín, Cali, Pereira and Barranquilla in Colombia. In Mexico, it is on offer in Mexico City, and is set to start soon in Guadalajara.

Wednesday, 23 November 2016 16:48

Region: Corporate Radar

Tough at the top in Brazil. According to a report by the Bloomberg news agency, the Brazilian recession is taking its toll on chief executives. At least 40 of the CEOs of 110 Brazil-based companies with assets of US$1bn or more have been replaced over the last two years, the report said. “Periods of crisis tend to drive up the exits of C-levels. This was intensified this year by a series of events in which you have a serious conflict between the interest of the company and the ones of shareholders and boards”, said Adeopato Volpi Netto, head of capital markets at Eleven Financial Research.

In October, Roberto Oliveira de Lima resigned abruptly as CEO of the beauty products company Natura Cosméticos after earnings missed analysts’ forecasts. Amos Genish of Telefónica Brasil has said he is stepping down for personal reasons at the end of this year. Bayardo Gontijo stepped down from Oi, the telecoms company in bankruptcy protection, after disagreements over how to reduce its heavy debt load. Education supplier Estacio Participaçoes has had no less than five different CEOs this year as part of a battle for control of the company. Itaú Unibanco, Brazil’s largest bank, has announced that Candido Bracher will take over from Roberto Setubal as chief executive in April 2017. Aerospace group Embraer said in June that CEO Frederico Curado was stepping down for personal reasons: less than two months later, its shares slumped after announcing a surprise second quarter loss and the fact that it was under investigation under the US Foreign Corrupt Practices Act. In October, Embraer announced that it was paying a US$205m fine to the US authorities to settle the investigation.

Chinese investment in Mexico. The first major foreign investment in Mexico after the US elections has a significant Chinese component. On 16 November, the government led by President Enrique Peña Nieto announced that the 20-year contract to build and operate a wholesale mobile communications network, which eventually could be worth up to US$7bn, had been awarded to the only bidder: the Atlán consortium. This is led by a Spanish telecoms businessman Eugenio Galdón, an infrastructure fund managed by Morgan Stanley, and the China-Mexico Fund, managed by a unit of the World Bank.

The China-Mexico Fund is the second largest shareholder in the venture with a 23.36% stake, after Morgan Stanley with 33.38%. The network was conceived as part of Mexico’s 2014 telecoms reforms, designed to reduce market dominance by América Móvil and promote greater competition and more competitive interconnection charges.

The deal is considered something of a risky investment however, given some uncertainty over telecoms demand in future years, and the requirement to offer low-cost service in isolated rural areas of the country. Rivada, a US-based company that was disqualified from the bidding on the grounds that it failed to provide financial guarantees by a 20 October deadline, has said it plans a legal appeal.

Mexico postpones oil and gas auction results. Mexico’s oil and gas regulator, the Comisión Nacional de Hidrocarburos (CNH), has approved a government proposal to delay the results of the second phase of the Round Two auctions of oil and gas exploration and production (E&P) contracts. The announcement will be pushed forward from 5 April to 12 July next year. This will allow the 12 E&P contracts to be announced on the same day as a further 14, which are due in the third phase of Round Two.

Contracts from these two phases are mainly for onshore gas prospects in the Burgos basin, in Tampico-Misantla, Veracruz, and in the southeast basin, in Tabasco and Chiapas. The auctions are part of the government’s policy to attract investment for international oil companies to help it reverse falling oil and gas output from mature fields.

The results of an earlier phase of E&P auctions are due to be announced on 5 December – these involve deep water blocks in the Gulf of Mexico close to the US border, as well as a call by state-owned oil company Pemex for partners to help it develop the deepwater Trión block.

Viacom makes Argentina move. US media company Viacom has agreed to buy Televisión Federal (known as Telefe), Argentina’s largest TV network, for a cash payment of US$345m. The seller is Spain’s Telefónica, which has been following a programme of asset sales to reduce its levels of debt. Significantly, the deal will make Viacom the first US company to operate a free-to-air TV network in Argentina in almost 50 years. Apart from the main network, Viacom is also acquiring eight Telefe provincial networks, an international pay-TV channel, online platforms, and, importantly, 12 production studios and some 33,000 hours of existing Spanish-language content.

According to media specialist Martín Becerra, “If it is true that they want to create a production centre for all of Latin America, this would be a very good place to do that. Telefe has a very significant archive of content, but what Viacom is really buying is the production capacity”.

The deal may be followed by other US companies, as both Turner (a division of Time Warner) and Fox (owned by News Corporation) are reported in talks to buy Fútbol para Todos (FTP), a state-owned sports programme which holds football match broadcasting rights.

President Juan Manuel Santos maintained that the peace process was back on track this week after government negotiators re-launched talks with their counterparts from the Fuerzas Armadas Revolucionarias de Colombia (Farc) in Cuba. Santos said 500 proposals from those who campaigned successfully against the peace accord in the national referendum on 2 October had been condensed into “57 thematic sections” and that progress had been made with the Farc in discussing these. Former presidents Alvaro Uribe (2002-2010) and Andrés Pastrana (1998-2002), two of the most prominent critics of the peace accord, insisted this week, however, that “cosmetic” changes to the peace accord would not suffice.

After meeting the bulk of his peace negotiators on 5 November, President Santos ordered them to go into “conclave mode” with their Farc counterparts to reach an agreement over revisions to the peace accord “very rapidly”. He said the proposals from the ‘no’ camp had been grouped into discrete sections to expedite the revision process.

Santos maintained that “difficult points” had already been addressed and “very important advances” made after “working sessions of more than 12 hours a day” this week. He singled out an adjustment to the rural, land and agricultural development section of the accord to ensure respect for private property (one of Uribe’s demands) and to prioritise areas most affected by the armed conflict. Santos also said that changes had been made with regard to “combating drug-trafficking more firmly and to offer real alternatives to campesino communities caught up in it”. He even claimed that progress had been made on “the very difficult issue of justice and victim compensation”.

The ‘no’ camp will want to see substantial compromise from the Farc, however, if it is to accept the revisions without demur. Uribe expressed his concern this week that the government was entitled “juridically and politically to make superficial reforms…to the peace accord” and then push this through congress where it has a majority. Uribe argued, however, that this “would not convince the public”. Pastrana, meanwhile, argued that “peace is not just the preserve of one man or one government; peace is for all Colombians and therein lies the importance of the government calling everyone to participate in a national dialogue”.

Chronicle of a failed department

The north-eastern department of La Guajira, which borders Venezuela, held extraordinary gubernatorial elections on 6 November. Wílmer David González Brito, a former deputy in the lower chamber of congress for the Partido de la U, part of the ruling Unidad Nacional coalition, narrowly defeated Norberto ‘Tico’ Gómez Campo, of the right-wing Opción Ciudadana, to become the fifth governor of the troubled department since 2011.

If a peace accord with the Farc guerrillas is eventually approved, departmental governors will be responsible for implementing it and will receive millions of dollars of post-conflict resources for this purpose, making it important for responsible officials to be elected to office. President Santos had urged voters in La Guajira to turn out and cast their ballots, denouncing any irregularities, but it will need more than that to clean up politics in the department which are a byword for corruption and crime. Despite central government funding, numerous public works projects are never completed, poverty is widespread, and child malnutrition a serious problem.

González replaces Jorge Enrique Vélez, who has been serving as interim governor since June this year. Vélez assumed the post after the election of Oneida Pinto in October 2015 was annulled by the council of state. Pinto broke electoral law which bars someone who has served as mayor from registering as a candidate for another elected post until 12 months after stepping down. Pinto had left her position as mayor of Albania in La Guajira on 21 July 2014 and registered as a gubernatorial candidate on 25 June 2015, winning election four months later.

Pinto’s predecessor, José María ‘Chemita’ Ballesteros Valdivieso, had defeated González in extraordinary elections in June 2014. Ballesteros completed the term of Juan Francisco ‘Kiko’ Gómez Cerchar, who was elected in 2011. Gómez was arrested by the Cuerpo Técnico de Investigación (CTI), the investigative division of the attorney general’s office, in October 2013 on charges of corruption, arms-trafficking, murder (see sidebar), and links to the disbanded paramilitary group Autodefensas Unidas de Colombia (AUC) and their neo-paramilitary successors (Bacrim). Ballesteros had been backed by the Gran Alianza, which brought Gómez to power.

With this track record it is little wonder that abstention in elections on 6 November surpassed 60% as many voters in La Guajira, which has a population of some 565,000, had reservations about the candidates standing for election. While González promised to tackle widespread poverty and fight corruption, he is far from squeaky clean.

González was backed by the electoral machinery of Deputy Alfredo Deluque, the son of Hernando Deluque, who served as governor of La Guajira from 2001 to 2003 and was sentenced to nine years in prison for embezzlement and unfulfilled contracts in May this year. González’s second wife, Laura Andrioli, was arrested for suspected embezzlement in 2006 when she was the departmental secretary of indigenous affairs. Meanwhile, González’s brother, José González Brito, a deputy in the lower chamber of congress representing La Guajira, was arrested in November 2011 accused of assisting illegal armed groups in the Alta Guajira.

  • Proposed revisions to peace accord

A group of Colombian think tanks, university professors and jurists published a statement on 6 November containing a series of proposals designed to be acceptable to the Farc while placating the ‘no’ camp opposed to the peace accord. They suggest, for instance, that revisions to the peace accord should include clarifying that Farc commanders and the military hierarchy should be held responsible for the actions of their subordinates; that the conditions of ‘restriction of liberty’ for members of the Farc sentenced by the transitional justice system should be fixed; and, on the vexed issue of political participation of former guerrillas, that those sentenced by the transitional justice system should recover political rights progressively in accordance, inter alia, with their satisfaction of victims’ rights.

  • La Guajira

Juan Francisco ‘Kiko’ Gómez Cerchar was twice mayor of his native town of Barrancas (1995-1997; 2001-2003), before being elected as governor of La Guajira in 2011 for Cambio Radical (CR), part of the Unidad Nacional coalition of President Santos. Gómez stands accused of three murders, including that of a political opponent (Luis López Peralta) in Barrancas in 1997.

Published in Andean

Development: On 7 November the judge investigating a corruption scandal at Ecuador’s state-owned oil company, Petroecuador, ruled that four of the accused (including the brother and sister of a former energy minister, Carlos Pareja) must be taken into custody while the investigation continues. 

Significance: The judge ruled that these individuals, which also include Ramiro Luque (from Galileo Energy, one of Petroecuador's suppliers) and Sonia Calero (from Grupo Azul, another supplier) had failed to comply with a 21 October ruling that required them to present themselves several times a week in front of a judge. Although the initial ruling also stated that the individuals must remain in Ecuador, it is believed that the four individuals have fled to the US. This has prompted the Ecuadorean authorities to request that Interpol add these people to a list of individuals being sought for possible involvement in the scandal. Interpol is already looking for Carlos Pareja, who is also believed to have fled to the US.

  • Around a dozen people are currently under investigation for alleged corruption relating to the refurbishment of Petroecuador’s Esmeraldas refinery in 2014-2015. Given Carlos Pareja’s close and long-running relationship with Ecuador's President Rafael Correa, the ongoing investigation could have political implications for the upcoming presidential election in February 2017. Although Correa is prevented from running for another term in office, the investigation could impact negatively on the ruling Alianza País (AP) party’s chosen presidential candidate, Lenín Moreno, particularly if the scandal widens significantly.
  • The suspected fleeing of individuals implicated in the Petroecuador case to the US is embarrassing for the Ecuadorean authorities, since it is not the first time that they have been unable to prevent high-profile suspects from leaving the country: a cousin of the president and former central bank governor, Pedro Delgado, fled to the US while under investigation for embezzling public funds in 2012. Given that Ecuador extradites suspected criminals to the US only infrequently, it may be difficult to secure the extradition of the accused from the US.

Looking Ahead: Currently, Moreno remains popular and well ahead of his nearest rivals in the pre-electoral polls, but the investigations into corruption in the Correa administration have the potential to make the presidential race a more closely-fought contest than in recent elections.

Published in Andean
Wednesday, 02 November 2016 16:32

Enforcing the law in no man’s land

The murder of a Mexican teenager has sparked a fierce legal debate about how to protect human rights on the Mexico-US border.

In 2010, US Customs and Border Protection (CBP) agent Jesús Mesa gunned down a 15-year-old Mexican national, Adrián Hernández Guereca, as he approached the US border in El Paso, Texas, from Ciudad de Juárez, in Mexico’s Chihuahua state.

For years, various US courts have been debating whether Mesa can be prosecuted for killing Hernández under US law. This month, the case is due to go to the US Supreme Court for a final ruling.

Hernández’s parents have asked the US Supreme Court for permission to sue their son’s killer for abusing his power. But until now, the US courts have been reluctant to rule in their favour due to questions of jurisdiction. Since the shooting took place just outside of US soil and Hernández was not a US national, some judges believe he should not be protected by the US constitution and the US courts should have no jurisdiction to hear the case.

But Mexican NGOs have rallied behind Hernández’s parents and maintain that failure to prosecute the CBP agent would be tantamount to granting immunity for all crimes committed by the authorities across the border, so turning the border into some sort of legal ‘no man’s land’.

The 2,000-mile land border between Mexico and the US is one of the busiest in the world. But it could also be one of the most dangerous. Herández’s shooting was not an isolated incident and a report released by the Mexican government in August 2015 shows that 51 people were killed in cross-border shootings between 2005 and 2015.

Furthermore, the case has wider implications which extend beyond the border. If the US Supreme court agrees to hear Herández’s case, this could set a significant legal landmark, that would open the way for non-US citizens who are victims of abuse by US law enforcement officials at the border to take their cases to the US courts.

  • Mesa’s defence

Initially, the US Federal Bureau of Investigations (FBI), which investigated the incident, claimed that CBP officer Mesa shot Hernández in an act of self-defence because he was surrounded by a group of illegal Mexican immigrants who were throwing rocks at him. But this version of events was discredited in the US courts after mobile phone footage showed that the officer was not surrounded by immigrants and that Hernández was, in fact, defenceless. Mesa’s lawyer now argues that his defendant may have been ignorant of the consequences of his actions.

Published in Postscript
Thursday, 27 October 2016 08:43

Region: Corporate Radar

Intercorp bets on Peruvian growth: A recent profile by the Spanish newspaper El País highlighted the steady growth of the Peruvian conglomerate Intercorp, led by the extremely low-profile businessman Carlos Rodríguez-Pastor Persivale, known by his initials, CRP. According to the US magazine Forbes, CRP has assets worth US$2.3bn, making him the wealthiest businessman in the country; yet Peruvian media report that he is known only to have conceded one press interview.

At first glance, the Intercorp group looks like an almost random spread of unconnected businesses. It includes Interbank, Peru’s fourth-largest bank; an insurance company (Interseguro); a nationwide supermarket and hypermarket chain (operating under the Plaza Vea and Vivanda brands); a department store (Oeschle); chains of film theatres and pharmacies; hamburger and BBQ chicken fast food outlets (Bembos and Don Belisario); and even schools (Innova Schools) and a university.

However, those who follow the group closely say it has a clear strategic focus: its businesses are all designed to benefit from the growth of the Peruvian middle class. Interbank is the flagship of this approach within the wider group. According to General Manager Luis Felipe Castellanos, the bank’s customer service paradigm is the US coffee chain Starbucks. The bank has made a point of opening mini-branches in supermarkets and malls. These branches open late (until 9-10pm) and over weekends for the convenience of their customers. The formula seems to be working.

Brokers Credicorp Capital report that Interbank is currently the most profitable bank in Latin America, with a return on assets of 23%. For the moment however, Intercorp, which has been built up over the last twenty years, since CRP acquired control of Banco Internacional del Perú (later renamed Interbank), appears to have no overseas ambitions and continues to concentrate on the Peruvian market.

Itaú snaps up Citibank: Itaú Unibanco, Brazil’s largest private banking group, announced in October that it had bought Citibank’s network of Brazilian retail bank branches for BRL710m (US$221m). In a press release, the Brazilian bank said it was acquiring 71 Citibank branches, together with its loan book and insurance and credit card businesses. Itaú Unibanco was also acquiring Citibank’s stake in technology company TECBAN (Tecnología Bancaria). The takeover remains subject to regulatory approval by Brazil’s central bank and by CADE, the competition authority.

Colombia setback for Novartis: The Colombian government says that the anti-cancer drug Imatinib, sold in the country by Novartis under the brand name Glivec, will be roughly 40% cheaper as a generic drug. The change came after a government decision in June to end Novartis’ exclusive rights to sell the drug, and to allow its production as a generic medicine.

Health Minister Alejandro Gaviria said that the government had benchmarked the price of the drug in 17 different countries where it is sold as a generic drug, and concluded that the retail price should be reduced from 12 US cents per milligram to 7 US cents. Novartis had the exclusive rights to sell Imatinib in Colombia for 12 years, during which the public health system paid around US$22.8m per annum acquiring supplies of the medicine for patients.

The government had initiated talks to persuade Novartis to make a voluntary reduction in the price. Those talks failed to reach agreement, triggering the government’s decision to allow production of Imatinib as a generic medicine.

Pac Rim loses El Salvador mining dispute: Canadian and Australian-owned mining company Pac Rim Cayman has lost a long-standing arbitration dispute with the government of El Salvador at the World Bank’s International Centre for Settlement of Investment Disputes (Icsid). The case dates to 2009, when Pac Rim (subsequently acquired by Oceana Gold) said that El Salvador’s government had unfairly refused to grant it a concession to begin operations at its El Dorado mining project. It argued that government officials had encouraged it to invest in exploration activities, only to withhold permits once deposits had been discovered. Pac Rim’s demand for compensation and loss of profits initially ranged up to over US$300m, but eventually settled at US$250m.

However, the government of El Salvador countered that Pac Rim had failed to meet regulatory requirements for the requested permits, lacked environmental permissions, did not hold legal rights over much of the land required for the project, and failed to submit a final feasibility study.

The country’s attorney general, Douglas Meléndez Ruiz, said that the Icsid decision was a vindication for the people of Cabanas, who had been opposing the mine on the grounds that it would damage the environment, adding, “It is an important step for the country to have been victorious in this lawsuit”.

In a statement, Oceana Gold said it believed a modern resource industry operating in a safe and sustainable manner could unlock “a multi-decade development opportunity” for El Salvador, but that the government would need to “take positive and definitive steps towards establishing a stable business environment” if it wished to attract foreign investment.

The four founding members of the Southern Common Market (Mercosur) have agreed that they will not allow the bloc’s newest member, Venezuela, to assume Mercosur’s pro-tempore presidency until it meets all the requirements of full membership. This decision was taken as way out of Mercosur’s current institutional crisis which derives from the refusal by Argentina, Brazil and Paraguay to accept Venezuela’s assumption of the rotating six-month presidency in July as scheduled [RBS-16-06]. This stance has now been condoned by Uruguay, leaving Venezuela isolated within the bloc and at risk of being suspended from it.

The foreign ministers of Argentina, Brazil, Paraguay and Uruguay signed a joint declaration on 13 September, in which they announced that they had agreed (after Uruguay, the only country that continued to support Venezuela’s claim to the presidency, abstained from voting) that Venezuela shall not assume the presidency until its membership situation is resolved. Venezuela became a full Mercosur member after it signed an adhesion protocol in 2012, but since then the country has failed to adopt all the agreed norms contained in the protocol necessary for full membership by the stipulated August 2016 deadline. The founding members argued that as such Venezuela’s membership of the bloc has not been finalised, and so it could not assume the presidency. They said that instead the bloc would be led by its coordination committee until January 2017 when it is Argentina’s turn to assume the pro-tempore presidency.

But the declaration also gives Venezuela a “supplementary deadline” of 1 December by which to meet all its obligations under the 2012 adhesion protocol or face suspension. In this way, the four Mercosur founding members have increased the pressure on the Venezuelan government led by President Nicolás Maduro to engage with Venezuela’s political opposition and try to resolve the country’s deep political and economic crisis, which the likes of Paraguay, Brazil and Argentina cited as the main reasons why they believed that Venezuela is unfit to lead the bloc.

Indeed, the declaration not only officially prevents Venezuela from assuming the Mercosur presidency but also opens the possibility that it could be forced out of the bloc should the Maduro government continue to undermine democracy in Venezuela. According to a Mercosur technical study, Venezuela needs to approve some 300 Mercosur regulations and adjust 30 international treaties in order to meet its membership requirements, which include the adoption of democratic provisions and human-rights promotion agreements. Even if the procedural arguments used against Venezuela are hiding political motives by the new right-of-centre governments in Argentina, Brazil and Paraguay to exclude the hard-line leftist Maduro government (as Maduro is likely to claim), they are nonetheless valid in themselves. Venezuela’s political crisis has resulted in the complete paralysis of its national legislature, and it is improbable that Venezuela can meet this new deadline, making its suspension and the potential loss of its membership likely.

  • Serra celebrates

Brazil’s foreign minister, José Serra, who has taken a hard line against Venezuela since his appointment in May, celebrated the signing of the joint statement by the Southern Common Market (Mercosur) founding member states on Venezuela’s claim to the bloc’s presidency, as providing a viable way out of Mercosur’s institutional crisis and allowing the bloc to move forward. “Finally we have solved the impasse created at Mercosur by the possibility that Venezuela could assume the bloc’s presidency…. Venezuela will not assume the presidency…[and] if by 2 December Venezuela does not fulfil the commitments it assumed when it first joined, it will be suspended”, Serra tweeted on 14 September.

Published in Postscript
Wednesday, 27 July 2016 13:49

Region: Corporate Radar

Liverpool buys Ripley stake: Mexican department store chain Puerto de Liverpool said it had signed an agreement with the Calderón family, majority shareholders of Chile’s Ripley chain, under which it would launch an IPO to acquire a 25.5% stake in the Chilean company. Ripley has a network of 69 retail outlets in Chile and Peru. Liverpool said it would pay 420 Chilean pesos per share, which would place an overall value of CLP813.14bn (US$1.23bn) on the Chilean company. If the IPO is successful, Liverpool and the Calderón family will seek to agree joint management of Ripley.

Venezuela seizes Kimberley-Clark: On 11 July the Venezuelan government said it was taking control of the local subsidiary of US personal and health care products company Kimberley-Clark. The company, which has operated in Venezuela for over two decades, had earlier said it was shutting down production because it could not secure supplies of raw materials or access the foreign exchange it needed to operate. Labour Minister Oswaldo Vera said the takeover was to protect jobs and re-start production at the Kimberly-Clark facility in Maracay, which manufactures a range of products, including toilet paper, sanitary towels, nappies and tissues. “Kimberly-Clark will continue operating under workers’ control”, the minister said. Since the Venezuelan economic crisis intensified, other companies have also been seized by the State, but widespread shortages of consumer goods have continued.

Graña y Montero wins Metro deal: Graña y Montero, Peru’s largest construction company, said it had won a US$410m contract to expand the Lima Metro system. Company president Gonzalo Ferraro said the contract would allow the purchase of new trains, the expansion of the total number of stations, and improvements to the electric power grid. The system currently has the capacity to carry 320,000 passengers a day, but this would increase to 500,000 with the number of operating trains to be increased from 24 to 44, he said. The new trains would be delivered in 2017-18. Ferraro said the Metro was experiencing a “crisis of success”, meaning that passenger numbers had increased much faster than anyone had expected. Graña y Montero participates in a range of sectors, including real estate, infrastructure, maintenance and oil and gas. It operates mainly in Peru, Chile and Colombia, and is seeking to start up in Mexico, so as to have a presence in all four Pacific Alliance countries.

Monsanto and Microsoft target Brazilian agro-tech: The US agricultural and biotechnology company Monsanto, together with computer software giant Microsoft, said they were launching a cooperative venture in Brazilian agriculture. Monsanto will invest BRL300m (US$92m) in a Microsoft fund set up to support and assess the application of digital technologies to Brazilian farming. The fund offers up to BRL1.5m (US$459,000) at a time to support start-up farm technology projects. After three years, the start-ups can treat the money as a loan, by paying interest, or give the fund a corresponding equity stake in their venture. “We want to promote new ventures in the agricultural sector. There is a vast area for investigation and development,” said Rodrigo Santos, chief executive of Monsanto Latin America.

Published in Postscript

‘Welcome to Hell’ read the banner unfurled by a few dozen police officers and firefighters at the arrivals gate of the new terminal 2 of Rio de Janeiro’s international Galeão airport: ‘Police and firefighters don’t get paid and whoever comes to Rio de Janeiro will not be safe’. As protests go, it was clever and well-timed, prompting headlines around Brazil and the world. With one month to go until the Olympics, there are serious concerns about Rio’s state of preparedness. While this is nothing unusual ahead of any sporting mega-event, the scale of Rio’s particular problems appears unprecedented.

Infrastructure

Almost all of the sporting venues are complete, with a few final touches necessary for both the velodrome and tennis centre, neither of which will have hosted a test event. The new express bus lane, the Transolímpica, connecting the main Olympic Village in Barra da Tijuca to Deodoro, another of the four Olympic Zones, was opened on 4 July. The biggest question remains whether the metro line extension, linking Rio’s touristic South Zone, with Barra, will be ready by its scheduled opening date of 1 August, four days before the opening ceremony. In an interview on 6 July, Rio’s mayor Eduardo Paes, gave a “100% guarantee” it would be open on time.

In the mayor’s own words, transport is the great legacy of the Games for Rio de Janeiro, but there are questions as to spending priorities. Almost R$1.8bn (US$500m) was spent on 28km of track for the new tram line in Rio’s redeveloped port area; the same amount that has been invested over the past decade on the 270km of track of Rio’s Supervia, its municipal railway network, used by the city’s working-class commuters. The so-called ‘rationalisation’ of Rio’s bus lines, by which many lines were taken out of circulation to reduce congestion with little or no information to the public, has angered many.

While local authorities admit that the new network of so-called Bus Rapid Transit (BRT) lanes is not as good as a metro, they argue it will cut commuter journeys down by avoiding Rio’s heavily congested roads. But the quality of workmanship has proved questionable, with the Transoeste line, completed in a rush ahead of Paes’ re-election in 2012, already showing signs of wear and tear. The lack of reinforced concrete means the road has buckled in places, damaging the high-speed buses and forcing some off the roads, prompting long queues and overcrowding on the ones that remain. Potholes also emerged on the Elevado do Joá, the new road connecting the Zona Sul and Barra, just one week after it opened; another illustration of shoddy workmanship.

The environment

Perhaps the Olympic goal that has received the most attention outside of Brazil was the city’s failed ambition to clean up the Guanabara Bay. Campaigns to clean up the water have been ongoing since at least the early nineteenth century, when slaves used to hurl barrels full of human faeces into the bay. As part of its bid process, Rio promised to treat 80% of the raw sewage flowing into the bay by the start of the Games; in fact the seven treatment stations installed along the edge of the bay have increased the amount treated from 16% to 48%. Though even that final number is disputed.

Various newspaper investigations have discovered high levels of viruses and super-bacteria in the water, which may prove dangerous for the open-water swimmers and sailors who will have to compete there. Once again, the city is putting a brave face on the situation, with the mayor arguing that the fact that the Games are taking place during the dry season means that there will be less effluence running off into the waters (see sidebar).

But it was not just the Guanabara Bay target that was missed. All of Rio’s environmental pledges during its bid procedure were abandoned in the course of delivering the Games. The lake at Jacarepaguá, abutting the Olympic Village itself, remains a fetid latrine; its drainage was suspended after the licencing process was questioned by independent public prosecutors. The goal of turning the Rodrigo de Freitas lagoon in Ipanema, the venue for the rowing, into a waterway safe for swimmers was also quietly shelved, as was a plan to plant seedlings to restore some of the much denuded Atlantic Forest.

Security

With military police officers threatening strike action over recent weeks, following delays in their salaries due to the bankruptcy of the state, acting governor Fernando Dornelles declared a state of “public calamity”. While arguably necessary to access federal funding usually reserved for the aftermath of a natural disaster, it is clear that it was hardly a masterful example of PR. Rio de Janeiro now has R$2.9bn (US$870m) of federal government funding, which the state government has promised to use to pay police officers, many of whom complained not just about delays in their salaries, but lack of equipment, including money for petrol in patrol cars.

Starting on 6 July, 85,000 security personnel, drawn from the armed forces as well as police services across the country, have started to patrol the streets of Rio. Combined with various private-sector initiatives to provide high-profile policing of tourist hotspots, it seems likely that violent crime against tourists will be kept to a minimum.

At the same time, there is a concern that the concentration of effort on the wealthier parts of the city could lead to a deterioration in the security situation in other, poorer areas. In the run-up to the Games, there has been a significant uptick in violent crime. While some of this has been attributed to Brazil’s dire economic situation, other security experts claim that drug gangs have been competing for territory ahead of a potentially lucrative period over the Olympics.

Brazil has little history of terrorism, but the intelligence agency, Abin, has warned of possible ‘lone-wolf’ style attacks and has advised locals to be vigilant. Abin has warned of increased Islamic State chatter suggesting the Olympics as a possible target, with one confirmed threat from an IS French militant. The terrorist group is also using the Telegram messaging app in an attempt to reach Portuguese-language sympathisers. Another cause of concern is the tri-border area between Brazil, Argentina and Paraguay, which has gained a degree of notoriety as a haven for financiers of terrorism. Abin is stepping up its coordination with the 110 foreign intelligence agencies which will be present in Brazil during the Games.

Zika

Another major issue of concern to visitors is the Zika virus. However, both the Brazilian authorities, and perhaps more credibly, the World Health Organization (WHO), have insisted that the colder winter months mean that the mosquito population is much lower, and therefore the risk of transmission is much lower. Although Zika may be a new and frightening development, Brazil has a long history of dealing with mosquito-borne illnesses; historical data shows that transmission rates for dengue and chikungunya drop significantly during the winter months.

  • The legacy

While it is to be hoped that the Olympics themselves pass off successfully, it is clear that the Games will have done little to address some of Rio’s most serious issues, and in some instances may have exacerbated existing tensions. Tens of thousands of poorer families have been resettled in Rio’s distant and poorly connected West Zone to make way for various Olympic and transport projects. Much of the investment in the Games has been spent in areas, like Barra da Tijuca, which are already relatively wealthy. In short, while local authorities believe the Games will transform Rio as they did Barcelona in 1992, the long-term result is likely to be an ever-more unequal and divided city.

  • Clean-up job

Patrols in Guanabara Bay by so-called Ecoboats, which scoop out physical objects, such as plastic bags, discarded television sets and animal carcasses, are also set to increase in the final weeks to ensure there are no major obstacles for the athletes.

Published in Brazil & Southern Cone
Page 1 of 25

We Recommend

Canning House logo

BACC

Member Area

Upcoming Conferences

No events

CONTACT

You may contact us via our online contact form, or write to us at:

LatinNews
Intelligence Research Ltd.
Hamilton House, Fourth Floor
Mabledon Place
Bloomsbury
London
WC1H 9BB
UK


Phone: +44 (0)203 695 2790

Terms and conditions

Upcoming Conferences

No events