As the U.S. government’s shutdown stretches into its second week, local economies everywhere are suffering—but perhaps none as acutely as Puerto Rico.
The Island of Enchantment, which is home to nearly four million people, is slogging through its seventh straight year of recession with an economy that has already contracted 5.4 percent since August 2012. And the shutdown is making it difficult for the U.S. territory to overcome the economic difficulties that have plagued it for the better part of the decade.
Though Puerto Rico’s average per capita income is half that of Mississippi’s— the poorest state in the union—consumer prices on the island are sky high. On average, electricity costs on the island are double those on the mainland, and the cost of importing 85 percent of Puerto Rico’s food is often passed onto the consumers.
The result: nearly half the population lives under the poverty line, and Puerto Ricans are abandoning the island at a record pace due to high costs, a wobbly economy and high unemployment. The government shutdown that began on October 1 will only exacerbate Puerto Rico’s already fragile economy.
The island is burdened by $69 billion in public debt and relies on federal funding for 39.6 percent of the money it spends, compared to the average of 26.2 percent for U.S. states. While less than $6.6 billion of the funding the island receives from the federal government is considered discretionary, the unintended side effects of the shutdown will ripple through various industries and could bring the unstable economy to a grinding halt.
With Puerto Rico’s unemployment rate at a staggering 13.9 percent—the highest in the country—the federal shutdown means the continued loss of what little employment is available on the island. Federal employees, already suffering with furloughs due to sequestration, number about 10,000 on the island; about half of those are considered non-essential and affected by the shutdown. The longer Congress fails to pass a resolution, the more likely it is to increase the unemployment rate in Puerto Rico where workforce participation is just 40 percent and there are fewer than 900,000 jobs.
But the shutdown also threatens to affect the other main source of income on the island: tourism.
In 2011 alone, tourism contributed over $6 million to the GDP and supported 59,500 jobs across sectors. The lost revenue from the closure of some of the island’s main tourist attractions, including Fort San Felipe del Morro and Fort San Cristobal in Old San Juan, as well as El Yunque National Park— the only tropical rainforest in the U.S. National Forest System —will also have a negative impact on local businesses that depend on tourism.
The negative consequences go further still. Besides decreasing the revenue from the island’s most popular industry, the shutdown affects more than just vacationers and tourist destinations. Perhaps the most dangerous consequence of the shutdown will be the reduced resources to combat violent drug crime.
With a per capita murder rate six times that of the U.S. mainland, more than 70 percent of homicides in Puerto Rico were related to the drug trade in 2012. Up until recently, the federal government paid little attention to what was happening on the island. By 2012, Puerto Rico had received just $260 million to combat drug-related crime—compared to the $1.6 billion that the U.S. initially pledged to Mexico as part of the Mérida initiative.
This all changed with Operation Caribbean Resilience, which began in July 2012—one year after murders in Puerto Rico surged to a record 1,117 per year. While the drug trade began to thrive on the island in the 1980s, it saw a dramatic spike in drug violence 2009, when tighter security at the U.S.-Mexico border closed off traditional drug trafficking routes.
While the federal government has sent 30 additional Homeland Security investigation agents to Puerto Rico and the Coast Guard has increased patrols of the Caribbean smuggling routes, the shutdown affects federal agencies on the island that are already chronically understaffed. Even the U.S. District Court for the District of Puerto Rico halted new judicial activities as of October 1.
With more than 43,000 pounds of narcotics seized in 2012 alone, it is clear that the U.S. can’t afford to neglect nearly 4 million citizens affected by the drug war due to partisan politics.
On the day of the shutdown, the FBI announced that it had dismantled a powerful drug organization in Puerto Rico that had generated over $100 million in revenue since 2005. I applaud that success and the new U.S. interest in the Caribbean—and recognize that federal agencies such as the FBI and Coast Guard are not currently affected by the shutdown.
Yet with chronically understaffed federal offices—even when the government is functioning at its full capacity—the shutdown seems poised to stifle the progress that has been made to reduce crime on the island.
A Nicaraguan court began the trial Wednesday of Henry Fariñas, the Nicaraguan businessman who was accompanying Argentine folksinger Facundo Cabral to the Guatemala City airport on July 9, 2011, when Cabral was shot and killed by assailants. The trial of Fariñas could shed some light on the motivations behind the murder of Cabral, who was touring in Guatemala at the time of his death at age 74.
Guatemalan authorities said that Fariñas was the intended target of the July 2011 assassination, allegedly masterminded by Costa Rican Alejandro Jiménez. Both Jiménez and Fariñas have been accused of trafficking drugs from Costa Rica to Nicaragua for the “Los Charros” gang, which is linked to Colombian and Mexican drug cartels.
Jiménez allegedly ordered the attack on Fariñas in retaliation for a supposed betrayal, but Cabral, known as a voice of popular resistance during the 1976-1983 Argentine dictatorship, was killed instead.
Fariñas will stand trial with 23 other defendants, including members of his family and Julio César Osuna, an ex-magistrate for the Supreme Electoral Council of Nicaragua, for collaborating with drug cartels in various Latin American countries and for laundering more than $1 billion in drug money in Nicaragua. Jiménez, jailed in Guatemala, is being tried in Nicaragua in absentia.
Carlos Javier Chavarría, Fariñas’ lawyer, has said that charges against his client are false, arguing that Fariñas was not in fact the owner of a night club known as “Club Nocturno Elite” that is central in his supposed dispute with Jiménez. Jiménez allegedly sought to kill Fariñas because he refused to sell him the club, although there are other versions of what motivated the assassination attempt.
Nicaraguan judge Adela Cardoza will preside over the trial, which began Wednesday in Managua.
Top stories this week are likely to include: Dilma Rousseff in Washington; Sixth Summit of the Americas on Saturday; Chávez possibly seeking treatment in Brazil; Maras and Zetas reportedly joining forces; and Boudou under investigation.
Dilma in Washington: Brazilian President Dilma Rousseff begins a three-day visit to Washington today, where she will meet with her U.S. counterpart Barack Obama. This is Rousseff’s first visit to the U.S. since taking office in January 2011. Aside from meetings at the White House, Rousseff will speak at the U.S. Chamber of Commerce later today, and give a public speech at Harvard University tomorrow. In the Financial Times, Moisés Naim calls for the two countries to agree to a trade deal as a tangible outcome. Adds AQ Editor-in-Chief, Christopher Sabatini, “There will be plenty to discuss, from improving bilateral commerce and investment, Brazil’s recent flurry of legislation favoring local content and business, Iran, and—I hope—the upcoming presidential elections in Venezuela.”
Summit of the Americas on Saturday: Cartagena, Colombia, will host this weekend the Sixth Summit of the Americas, the regional conference of heads of state organized under the aegis of the Organization of American States. This year’s theme is “Connecting the Americas: Partners for Prosperity.” But will the summit yield any significant results? Notes Sabatini: “While this will be a great opportunity to show off how far Colombia has come in the 18 years since the summit process started, there is really very little the summit can accomplish beyond speeches and vague promises.”
Chávez May Seek Treatment in Brazil: Although Venezuelan President Hugo Chávez landed in Havana on Sunday to receive his latest round of radiotherapy, Brazilian media has been reporting that Chávez may seek further treatment at Sírio-Libanês hospital in São Paulo. This is the same hospital where former Brazilian President Luiz Inácio Lula da Silva last year successfully recovered from cancer surgery. Specifically, O Globo has reported—citing anonymous sources—that Chávez’ cancer has metastasized and may spread to his liver. Although the Venezuelan embassy in Brasília has denied the reports, pay attention to how this story develops over the coming days.
Maras-Zetas Alliance: Guatemalan authorities this weekend reported that the deadly Mara Salvatrucha gang, which dominates Central America’s Northern Triangle, has formed a pact with the equally dangerous Zetas group in Mexico for control of key drug transit routes from South America to the United States. In an already violence-plagued Central America, the alliance spells bad news for counternarcotics officials and may bolster the positions of Guatemalan President Otto Pérez Molina—a proponent of drug legalization—at this weekend’s Summit of the Americas. “An alliance between two of the region’s most feared criminal networks yet again reinforces the critical need for a real regional approach to reducing insecurity. The drug traffickers don’t respect borders and neither should counternarcotics efforts,” notes AQ Senior Editor Jason Marczak.
Future of Boudou: Argentine Vice President Amado Boudou is now under investigation by federal authorities for his actions as economy minister—in the two years prior to assuming the vice-presidency—specifically that he helped printing company Ciccone Calcográfica get out of bankruptcy. Boudou has denied the charges and still has the full support of President Cristina Fernández de Kirchner and her administration. After a raid of Boudou’s apartment last week, there may be new developments this week on the ongoing investigation.
Top stories this week are likely to include: Pope Benedict XVI’s ongoing trip to Latin America; Hugo Chávez in Havana for radiation therapy; Latin America’s verdict on the World Bank presidency; pro-FARC sentiments in Caracas; and Chávez neck-and-neck with Capriles Radonski.
Benedict XVI in Latin America: In his six-day trip to Mexico and Cuba, the Pope has already waded into the thorniest political issues. He condemned drug trafficking in Mexico and urged followers of the Catholic Church to wield their faith against poverty and other social challenges. “Besides being a successful visit for the Pope, on the political front the question is whether his message will in fact translate into a boost in the polls for PAN presidential candidate Josefina Vázquez Mota,” observes AQ Senior Editor Jason Marczak. Amid an ongoing crackdown on human rights in Cuba ahead of Benedict XVI’s landing in Santiago today, the pontiff has spoken out against Cuba’s communist model, adding that “today it is evident that Marxist ideology in the way it was conceived no longer corresponds to reality.” The reserved response given by the Castros may overshadow the Pope’s visit through Wednesday.
Chávez’ Therapy in Cuba: Venezuelan President Hugo Chávez arrived back in Havana, the site of his two surgeries after being diagnosed with cancer, for further radiation treatment. He is expected to remain there until Thursday, and he will return to Venezuela for three days before flying back to Cuba for another five-day treatment. But the Venezuelan people still do not know the severity of their president’s health. Notes AQ Editor-in-Chief Christopher Sabatini, “This has already sparked the rumor mill. The lack of transparency on the part of Miraflores is troubling.”
Brazil and the World Bank: Brazil, Latin America’s strongest economy, has not yet decided whom to support for the World Bank presidency despite nominating José Antonio Ocampo (Colombia) on Friday. The two other candidates are Jim Yong Kim (U.S.) and Ngozi Okonjo-Iweala (Nigeria). Brazil has long argued for greater representation in global governance on the part of emerging markets, despite casting its vote for Christine Lagarde over Mexican Central Bank (Banxico) head Agustín Carstens last year for the International Monetary Fund managing director post. “Even under the realignment in the voting system, Brazil only controls just over 2 percent of the votes while the U.S. controls nearly 16 percent. Developing countries will certainly have more of a say in this election but the vote of countries like Brazil will ultimately be more of a political statement than one that will dramatically affect the outcome of the election,” notes Jason Marczak. The three candidates will be interviewed to succeed the World Bank’s outgoing President Robert Zoellick, with a decision to be announced at the latest next month.
Outrage over Tirofijo Tribute: Former FARC commander Manuel Marulanda Vélez—nom de guerre Tirofijo—was given a tribute over the weekend in Caracas to commemorate four years after his death. The Colombian government expressed indignation at the event, saying that Tirofijo represents “decades of terror of the FARC.” Venezuela’s perceived coziness with FARC and other rebel groups has always caused rifts with Colombia; Christopher Sabatini says: “President Santos’ policy of improving relations with his counterpart in Caracas helped to cool tensions and address regional issues. But this event is just another that tries those ties. Are they intended to provoke?”
Chávez Tied with Presidential Challenger: President Chávez is in a statistical tie with the opposition candidate, Miranda Governor Henrique Capriles Radonski, according to a Consultoras21 poll released last Friday. Chávez received 46 percent support and Capriles Radonski 45 percent, marking the first time in the general election that Capriles Radonski has moved to a technical tie with the incumbent. Chávez is seeking a third term on October 7; Christopher Sabatini observes that “there’s a long time until voting day, but things are certainly getting interesting.”
Bolivian President Evo Morales pushed for legalizing the chewing of coca leaves during a 53-country United Nations narcotics control meeting on Monday in Vienna. A former cocalero and coca grower’s union leader, Morales held up a coca leaf during his address and argued that growing and chewing the crop are staples of Bolivia’s Andean culture.
In 1961, Bolivia’s military government ratified the U.N. Office on Drug and Crime (UNODC) Single Convention on Narcotic Drugs that declared the coca leaf an illegal narcotic, along with cocaine, heroin opium and others substances. The Morales administration withdrew from the convention last year and yesterday the president called its ratification a “historic error,” and said the “absurd prohibition of coca chewing” is not acceptable in Bolivia. “The coca leaf is not cocaine. We have to get rid of this misconception," he added.
Bolivia is willing to rejoin the convention only if member nations approve an amendment allowing traditional cultivation and consumption of coca leaves. But Yuri Fedotov, chief of UNODC, responded to Morales’ appeal by warning that “such kinds of initiatives in the long run may undermine” international consensus on drug control and “have a domino effect.”
Morales also used his time on the floor on Monday to call on developed nations to give Bolivia the tools to crack down on illegal cultivation intended for the manufacture of cocaine. Bolivia is the third-biggest cocaine producer after Peru and Colombia and the president asked for helicopters and other technology to combat drug-trafficking. The U.S. Bureau of International Narcotics and Law Enforcement Affairs said this month that Bolivia has “failed demonstrably to make sufficient efforts to meet its obligations under international counter-narcotics agreements" over the last year.
With a visit this week to Washington by Guatemalan Foreign Minsiter Harold Caballeros, and an impending first-time visit to Guatemala City by U.S. Secretary of Homeland Security Janet Napolitano, Guatemala appears to have momentarily captured the attention of the United States. For Guatemala, the bilateral relationship is a top foreign policy priority. In addition, the over 1.2 million Guatemalans living in the U.S. are an economic lifeline to their native country, representing 10 percent of Guatemala’s GDP .
Guatemala’s fate is invariably tied to its Northern Triangle neighbors; each face an uphill battle in increasing the protections for migrants, reducing rampant organized crime and strengthening incomplete security apparatuses. For the U.S., relations with Guatemala are largely viewed within a larger Central American context, particularly through the Sistema de Integración Centroamericana (Central American Integration System—SICA). Guatemala also is the beneficiary of USAID projects and the U.S. as well supports Guatemala’s UN-mandated Comisión Internacional Contra la Impunidad en Guatemala (International Commission Against Impunity in Guatemala—CICIG). Still, funding increases for the Central American Regional Security Initiative is one area in which Guatemalans are lobbying for more support.
With democratic consolidation solidifying in Guatemala, the U.S. has the opportunity to address other Guatemala-specific issues that lie near the forefront of the bilateral relationship. One would be granting Temporary Protection Status for undocumented Guatemalans living in the U.S., the economic lifelines of Guatemala. Another would be for the U.S. to further boost investments in security and development to the levels that other regional and global partners receive from the United States. Lifting the current military cooperation embargo against Guatemala would further provide the country with the technology, know-how and equipment to fight organized crime within its territory, a problem that is severely crippling the central government. Considering that Guatemala shares a border with Mexico and is used as a “bridge” for most narcotics trafficked to the United States, Guatemala should be part of the solution to the violence plaguing the isthmus.
In efforts to combat an ongoing wave of narcotics-related violence, police forces in Honduras yesterday moved in on cities and neighborhoods dominated by criminal gangs. The mission, endorsed by President Porfirio Lobo and referred to as Operation Lightning, began in the large population centers of Tegucigalpa and San Pedro Sula. Lobo pledged to “do everything possible within the law to reduce the impunity that makes us all indignant.”
On Monday, the Associated Press reported that Honduras “has become a main transit route for South American cocaine” bound for the United States, and that Honduran authorities—in cooperation with the U.S. Drug Enforcement Administration and other partners—only intercept about 5 percent of the cargo.
According to the 2011 Global Study on Homicide, commissioned by the UN Office on Drugs and Crime and released last month, Honduras had the highest murder rate in the world last year: 82.1 homicides per 100,000 people. El Salvador, Honduras’ neighbor in the Northern Triangle, registered the second-highest homicide rate: 66 per 100,000 people.
Further, earlier this week Lobo fired his top police commanders in a measure to tackle corruption; four Honduran officers serving prison sentences for murder had been released from jail, inflaming public discontent.
Preliminary results following yesterday’s presidential election in Guatemala indicate that no single candidate won over 50 percent of the vote, meaning that a runoff election will be held on November 6. With 92 percent of ballots counted by the Tribunal Supremo Electoral, Guatemala’s election supervision body, Otto Pérez Molina, a former army general, obtained 36.16 percent of the vote despite polling as high as 49 percent shortly before the election. Pérez Molina will face the second-place candidate, Manuel Baldizón, an attorney, businessman and congressman, who collected 23.40 percent.
The central issue for both campaigns is how to effectively combat Guatemala’s rampant crime and insecurity. Guatemala has one of the highest murder rates in the hemisphere, according to the World Bank: 45 murders per 100,000 citizens. Guatemala, as with its Northern Triangle counterparts Honduras and El Salvador, is a key transit route in drug trafficking between South America and the United States. The amount of illegal drugs seized in Guatemala doubled between 2008 and 2009.
Pérez Molina has pledged to fight crime with a mano dura, or iron fist. He proposes beefing up Guatemala’s security force—hiring 10,000 police officers and 2500 soldiers. Baldizón supports the death penalty and has suggested creating a national guard. Both candidates have also pledged to continue anti-poverty programs in the interest of promoting social inclusion across Guatemala.
Pérez Molina is the leader of the Partido Patriota (Patriotic Party—PP), while Baldizón is the founder of the more moderate Libertad Democrática Renovada (Renewed Democratic Freedom—LIDER) party. Regardless of the runoff election result, November’s election will usher in Guatemala’s first-ever female vice president. Pérez Molina’s running mate is Roxana Baldetti, a congresswoman, while former First Lady Raquel Blandón is on Baldizón’s ticket.
Early on June 14, the FARC attacked again, this time near the village of Puerto Rico in the Colombian department of Caquetá. Puerto Rico is very close to San Vicente del Caguán—one of the five municipalities that were demilitarized by President Pastrana in 1998 under peace talks with the FARC. Caquetá, a region of vast plains, located several hundred miles south of Bogotá, has been a FARC stronghold since the late 1960s. The FARC prospered there over four decades, under the cover of the jungle, and exploiting the lucrative business of cocaine that flourished in the region. Nonetheless, these types of guerrilla attacks had almost been eradicated during the administration of Álvaro Uribe. He had listed the FARC structures in Caquetá as main targets in his counteroffensive.
In principle, this single attack on June 14 would not justify wondering whether the FARC have successfully reactivated. But the FARC had executed more than five attacks in the past week alone, including the kidnapping of a number of Chinese oil workers in Caquetá and the virtual siege of the village of Caloto, in the department of Cauca. More attacks to police headquarters have taken place in villages of Cauca such as Argelia and Morales. Three weeks ago, in the coastal region of Chocó, the FARC kept a number of civilians under hostage for two days.
In the past seven years, after Uribe’s military offensive began to show results, guerrilla attacks occurred seldom; whenever they happened, reaction by the military was quick and effective. But reaction by the current government under Juan Manuel Santos has been slow, confusing, and often politically charged. For example, some observers perceive the minister of defense, Rodrigo Rivera, as being more concerned with image matters than actual results. Rivera has often downplayed the magnitude and the seriousness of the FARC facts.
Is the FARC undergoing a successful reactivation process? At this point, two things can be asserted. First, the FARC has decided to circle back to a guerilla-warfare model. Second, it has carefully chosen several areas of the country where such model can have a greater efficacy. Caquetá and Cauca are clearly two of them.
Assuming the U.S. government will be operational past the March 18 funding deadline, President Obama will make his first trip to Central and South America from March 19-23. Obama had previously visited Mexico before heading to the Caribbean in April 2009, where he represented the United States at the Summit of the Americas held in Port-of-Spain, Trinidad and Tobago.
President Obama will begin his Latin America tour in Brazil, where he will visit Brasília on March 19 and hold bilateral talks with his counterpart, President Dilma Rousseff, who was inaugurated on January 1. The central discussion points are expected to be infrastructure financing and energy cooperation, with energy an especially critical area for sustaining Brazil’s economic boom and future development. Obama will continue to Rio de Janeiro the following day, where he is expected to hold a CEO roundtable and visit select sites with his family.
Obama will arrive in Santiago, Chile on the afternoon of March 21 and be greeted by Chilean President Sebastián Piñera. The two leaders will have a working meeting and sign a joint declaration, followed later that evening by a state dinner at the Palacio de la Moneda. Piñera and Obama will discuss innovation and the Trans-Pacific Partnership (TPP) negotiations, the latest round of which concluded last month in Chile. President Piñera has expressed a desire to have the negotiating countries (Australia, Malaysia, Peru, United States, and Vietnam) join the existing TPP signatories (Brunei, Chile, New Zealand, and Singapore) before the next Asia-Pacific Economic Cooperation (APEC) summit in Honolulu, Hawaii, in November 2011.
On the morning of March 22, President Obama will deliver a speech to all Latin Americans from Santiago. The specific location is still being finalized; the Natural History Museum is a likely venue with the National History Museum and the UN Economic Commission for Latin America and the Caribbean (ECLAC) headquarters as alternative choices.
After his speech, Obama will fly to El Salvador for his final stop. He will be the fourth U.S. president to visit the Central American country while holding office, after Lyndon Johnson, Bill Clinton and George W. Bush. Obama will meet with his El Salvadoran counterpart, Mauricio Funes, and discuss a range of bilateral issues including U.S. immigration policy and the recently-announced $200 million pledge from the State Department to renew Central America Regional Security Initiative (CARSI) funding. The two heads of state will also discuss the success of CAFTA-DR. El Salvador was the first Central American signatory. The United States and El Salvador celebrated five years of free trade relations on March 1, 2011.
Follow AQ Online for daily developments leading up to President Obama’s Latin America trip.