The Mayor of Lima, Luis Castañeda Lossio, considered quite conservative, and the leader of the left wing and former presidential candidate, Ollanta Humala, were shown to be leading the most recent public opinion survey on the vote for succession in 2011, carried out by the company CPI.

 

According to the polls, Castañeda Lossio has 18% compared to Humalla’s 16.9%. The third position is held by former presidential candidate Lourdes Flores, with 13.4%, technically tied with right wing congresswoman Keiko Fujimori (13%), daughter of former President Alberto Fujimori. Former President Alejandro Toledo holds 10%, president of the Board of Ministers, Yehude Simon, 3.3% and congresswoman from the Aprista Peruano Party (APRA), Mercedes Cabanillas, has 3.2%.

 

Even though the elections are a long way off (three years), the similar percentages of Castañeda, Humalla, Keiko and Toledo suggests that the scenario will lead to a very close run off among the various competitive candidacies. With such similar numbers, the probability of the dispute ending in the 1st runoff has become greatly reduced. Therefore, the goal of the players will be to win at least 20% of the votes to ensure a place in the runoff. 

 

The victory of Democrat Barack Obama for the presidency of the US has given indications of a change in America’s foreign policies in relation to Latin America. During the eight years of George W. Bush’s administration, and especially after 9/11, the US focus has been on the fight against terrorism in Afghanistan and Iraq. Due to this, Latin America was largely sidelined.

 

A change is expected with Obama, as historically Democrats view Latin America with more “care” than Republicans. However, the interventionist character of the Democratic government creates obstacles for free trade deals with the region.

 

According to the president-elect, a new chapter will be written on the relationship with the southern hemisphere. In interviews given throughout his campaign, Obama’s assistants spoke of working together across the continent.

 

If on one hand he shows signs of possible dialogue with his Latin American counterparts, on the other, his protectionist character is still apparent. For the Democrats, it is necessary to maintain the market open and dynamic, as long as it does not benefit only the rich and large companies.

 

The differences are clear in relation to George W. Bush. There may be gains in the region in terms of dialogue. However, Obama may give in to the agenda of American trade unions, which are against free trade agreements.

 

Besides the damaging of partnerships with strategic allies (Colombia and Mexico, for example), Latin Americans will have a harder time entering the American market due to the “more restricted” character of the economy, as expected to be conducted by the Democrats.

 

ARGENTINA: The country is experiencing a crisis of confidence. The nationalization of pension funds is seen by the market as a sign that the rules of the game can be changed at any moment in the country. Thus,increasing the rumors related to a strong and growing economic crisis.

 

URUGUAY: The alliances for the presidential election of 2009 has began. The President Tabaré Vázquez wants his substitute to be the former Minister of Economy, Danilo Astori, however, the foundations of the Broad Front (Frente Ampla) have started a petition signed to go for a constitutional change allowing the president to re-elect. Behind all this, is the fear of an economic recession. If this occurs, only the candidacy of Tabaré could avoid a return to power of the conservative parties.

 

PARAGUAY: President Fernando Lugo begins to taste problems in his coalition. The main advantage of his alliance, the PLRA (Authentic Radical Liberal Party), claiming more influence. Some of their leaders show reluctance in the support given to the Paraguayan head of state.

 

CHILE: The project of the Concertación power is seriously threatened. In municipal elections last Sunday, the National Renewal, right-wing coalition, won the elections. In opinion polls, Sebastián Piñera is leading all of them. After 18 years, the Concertación might be defeated in the presidential succession of 2009.

 

COLOMBIA: National Congress rejected the bill which attempted to open the possibility of President Álvaro Uribe to run for a third mandate.

 

VENEZUELA: Drop in price of oil on the international market creates problems for the government’s budget for next year, threatening the political project of Chavez. Thus, the President will use the regional elections of November to radicalize his speech, turning the election into a referendum on his leadership. If Chavez wins, he will try a new referendum to bid for reelection indefinitely

 

BOLIVIA: Division in opposition around the approval of the referendum which may approve the new constitution favors the government. Aware of this, the MAS (Movement towards Socialism) might be on the way to the construction of a hegemony in the country.

 

PERU: Political crisis forced Alan García to change his entire cabinet team due to the bribery of officials that his government received to avoid bidding for oil exploration. That increased the rejection of the president who today is 70%.

 

MEXICO: The National Congress approved the Energy Reform. With this, the president Felipe Calderón could rely on resources from the private sector to increase  PEMEX`s production.

The effects of the international credit crisis has provoked an exodus of US$ 4.397 billion in Brazil from the 1st of October to the 24th. This number is the difference between the amount of dollars entering the nation and the amount leaving; just last week, there was an exit of US$ 646 million.

 

The data is part of the monetary flux that monitors the movement of dollars both entering and exiting Brazil and was divulged this Wednesday by the Central Bank. For the entire year of 2008, the monetary flux registers a positive gain of US$ 12.791 billion. The result of US$ 45 billion entering and US$ 32.214 exiting the nation.

The House of Representatives approved last night the MP 442/08, which gives the Central Bank the power to accept the credit portfolios of banks facing difficulties with liquidity as guarantees of loans. The BC is also authorized to lend directly from the nation’s international reserves (around 200 billion dollars) to banks that finance exporting companies. The measure is now being analyzed by the Senate.

 

The text was approved with changes. The reporter, Representative Rodrigo Rocha Loures (PMDB-PR), highlighted four of the seventy-four amendments presented. One of the changes is that the BC has to send every trimester a report to the Congress including: the total value for the trimester and the value accumulated for the year of the loans; the financial conditions of the applied measures (discount and spread, for example); the accumulated value - annually and Quarterly - of credit (paid on time or late); and an explanation of the impact these operations described in the BC’s results.

 

This information will be debated at the Biannual meeting that occurs between lawmakers and the president of the BC, as outlined by the Fiscal Responsibility Law (Complementary Law 101/00).

 

The national monetary aid comes in the following form: a bank having difficulty capturing money on the market, but has a low risk credit portfolios, can “sell it” to the BC with the agreement to repurchase it, as a loaning operation known as rediscount. The credit portfolios are composed of values that the bank have the right to receive, in the form of legal and individual debts.

 

From the value of this credit, the provision (value to cover the debt should the credit not be honored) will be deducted. What remains will have a discount (percentage variable according to the credit’s evaluation) applied to it.

 

Additionally, the BC will be able to accept a physical guarantee (property, for example) or financial one given by the controlling stock holder of a united company or other bank.

 

The text approved by the House of Representatives also stipulates that there are transparent rules and not discrimination for the acceptance of actions in a rediscount operation.

 

In November, the House of Representatives should vote a second MP against the crisis: 443/08, which authorizes the BC and Caixa to purchase banks having difficulties.

The Peruvian opposition is expected to benefit from the political crisis. Not only unfavorable market conditions affecting the nation’s poor, but also the political predicaments of persons having close ties with Alan García have given ammunition for the General Labors Confederation of Peru (CGTP) to call for changes in economic policy.

 

The government has demonstrated its inability to conciliate economic growth and wealth distribution, say the oppositionists. According to the local media, popular manifestations against the president are a consequence of the Peruvians people’s frustration with the government, added to fears related to the international financial crisis.

 

In light of these circumstances, the lobby demanding Alan García to change economic policy, already strong in the past, will now increase in intensity. The first reaction by the Peruvian leader has been positive, however. He has adopted a fierce speech against corruption, thus avoiding that the implicated persons are linked to the president’s image.

 

Significant changes in his administration are virtually inevitable, however. The first sign of change has come from Jorge del Castillo. Prior to attending a meeting, he said that all ministers had resigned from office, and that Alan Garcia had accepted such resignations. The substitutes have yet to be appointed, however.

 

The government will have to form an “assault squad” in Congress upon forming the new ministerial line-up because an inquiry has been launched to investigate oil concession agreements. 

Local entrepreneurs anticipate that local politics, specially in the economic area, will hurt because of the dismaying external scenario. Forecasts indicate that the financial crisis will reduce the influx of foreign currency from oil sales as a result of declining oil prices in international markets. This is likely to worsen Venezuela’s fiscal deficit.

 

In addition, local entrepreneurs anticipate a throttling supply of food in the domestic market. As if such scenario was not enough, data compiled by the Venezuelan Central Bank (BCV) show an annual inflation already at 21.8%.

 

This gloomy scenario has already caused grief in the local industry. In a recent survey launched by the Venezuelan Chemical and Petrochemical Industry Association (Asoquim), respondents stated that the industry’s production plunged by 40%.

 

The 100 companies comprising Asoquim evaluated that restricted access to foreign money, administrative bureaucracy and legal uncertainty all have negative implications on production.

 

With regard to export forecasts for the second semester, 50% of the respondents believe that exports will decrease, 27.3% said that exports will improve and 22.7% stated that export performance will remain the same. A vigilant observer of this new international environment, president Hugo Chávez has called the financial system a target and locked on it.

 

According to the Venezuelan leader, the International Monetary Fund (IMF) is to be blamed for the crisis. For that reason, says Chávez, the IMF should “dissolve itself”. 

A major political scandal hit president Alan García’s administration beginning last week.

 

A footage broadcasted by América Televisión’s program “Cuarto Poder” shows Rómulo León and Alberto Quimper discussing kickbacks to be paid for aiding Norwegian oil company Discover Petroleum in a bidding for oil exploration blocks. León is a former minister linked to the Aprista Party’s, while Quimper is a high-ranking officer of Petroperú, the country’s agency for promoting and negotiation hydrocarbon contracts.

 

The oil company, which eventually won the bidding, denies any form of illicit facilitation. However, another recording was disclosed in which León discusses a purported benefit for Jorge del Castillo, head of the Council of Ministers, with a representative of Discover Petroleum.

 

Since disclosure of the scandal the Minister of Energy, Juan Valdivia, and the president of Petroperu, César Gutierrez, have been removed from their offices. This is undoubtedly the biggest political crisis in Alan García’s administration so far. This situation is likely to develop further into a predicament for president García because of his close ties with the persons involved in the scandal.

 

The population’s confidence in his administration is very low as of now. According to the latest surveys, only 19% of Peruvians approve his administration. The crisis is likely also to have negative effects on the Peruvian Aprista Party (Apra) on account of the involvement of persons having close ties with the president’s party.  

Meetings held at the Casa Rosada to discuss the implications of the financial crisis upon the domestic economy have fuelled rumors that an economic package is in the making. Measures being considered to fight off the crisis include a competitive exchange rate and the improvement of the trade surplus.

 

Building on these two premises, the Executive Branch will seek greater coordination and control of the State’s neconomic institutions. A reduction in subsidies through increased utility prices is also being entertained. Sources say that president Cristina Kirchner has determined her cabinet chairman, Sérgio Massa, to call for a round table to enter negotiations with those in charge of payment, collection, supervision and control bureaus.

 

These are to be in charge of monitoring the international crisis. Another issue that has brought concern to the Argentinean government, newspaper La Nación has said, are the effects that the depreciation of Real (the Brazilian currency) against the U.S. dollar may have upon the domestic industry, the main actor behind consecutive months of economic growth since 2003.

 

It is never too late to remember that Cristina managed to elect herself president and continue with the agenda of her husband, Néstor Kirchner, because of this economic growth. Her campaigning did not present electors with new promises for the future but rather kept on defending the agenda initiated in 2003.

A statement by Venezuela’s president, Hugo Chávez, that he will not leave office until 2021 even though his tenure expires in 2013 hints that the Venezuelan leader may attempt a new constitutional reform. Chávez sought to change the country’s constitution last December but was defeated in the process. According to current electoral rules, he cannot run for a third term because he was first elected in 1998 and re-elected in 2006.

 

Because no challenging nominees exist in the United Socialist Party of Venezuela (PSUV) that can replace him, and since his oppositionists are expected to emerge victorious in the next regional elections, it seems that the Venezuelan president will remain bent on changing the constitution before the end of his term in office.  

 

In an attempt to “choke” his opponents and force electors to vote for nominees who support the “21^st Century Socialism”, Chávez has announced that the “Regional Development Acceleration Program”, or PADRE, will only be implemented in Venezuelan states that will support his government in the next November elections. According to the country’s leader, this will be so because oppositionists are planning to throw a coup d’état in Venezuela. 

 
Welcome! Latin America is becoming consistently more important for the world. As the region becomes more stable, the world sees Latin America as a potential business area. In order to understand te potential Latin America has to offer, the world must understand the unique dynamics that the local politics function. This blog already exists in Portuguese since 2005 and is widely read. I believe it can be an important instrument to understand this amazing region. Suggestions, criticisms and opinions are welcome. + learn more

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