November 6, 2013
“Nations be spyin’, yo!”
That’s how Jon Stewart of The Daily Show recently summed up the ongoing-and-ever-expanding allegations that the U.S. National Security Agency spied on Brazil and other nations, a story to which Wikipedia now devotes more than 33,000 words and nearly 600 source references.
“All nations act in their own self-interest,” Stewart said on October 24, addressing those such as Brazilian President Dilma Rousseff who have responded with outrage to the allegations. “Don’t act like your s*** don’t stink, it does, and we know, because we have a super-secret program that goes through your s***.”
Stewart was more right than he knew.
This week in Brazil, local media revealed that the Agência Brasileira de Inteligência (Brazilian Intelligence Agency—ABIN) has spied on diplomatic allies including the United States—an embarrassing revelation for Rousseff, who in recent months has positioned herself as a champion of privacy rights and even canceled an official state visit this fall to the White House because she said the U.S. refused to swiftly end its spying program.
Awkward. But now, the revelations about Brazil’s spy program have sparked a reaction similar to Stewart’s.
“Brazil has an intelligence agency, so it is not big news that Brazil spies,” Rafael Alcadipani da Silveira, of the Rio de Janeiro think tank Fundação Getúlio Vargas, told me.
“Everybody spies,” agreed Christian Lohbauer, a political scientist at the Universidade de São Paulo (University of São Paulo—USP). If anything, he is now more annoyed at Brazil’s government for having used the issue to gain political points at home.
Monday Memo: Brazil’s Economy – Argentine Debt – Tropical Storm Sonia – Honduran Police Abuses – Uruguayan Marijuana
November 4, 2013
Likely top stories this week: Brazil will reduce lending by 20 percent next year; Argentina wins a stay on its $1.33 billion payment; Tropical Storm Sonia Hits Mexico; Honduras’ police chief denies abuses; Brazilian delegation opposes Uruguayan marijuana legalization.
Brazil to Reduce Lending Due to Budget Deficit: Brazilian Finance Minister Guido Mantega said Friday that Brazilian development bank BNDES will reduce lending by 20 percent next year, down to about 150 billion reais ($66.6 billion) from this year's estimated 190 billion reais. The announcement came after an Oct. 31 report showed Brazil’s budget deficit widened to 3.3 percent of gross domestic product, the most since November 2009. Some experts speculate that Brazil's credit rating could be cut.
U.S. Court Upholds Stay on Argentine Debt Payment: The 2nd U.S. Circuit Court of Appeals ruled in favor of Argentina on Friday by denying a motion that would have forced the country to start paying $1.33 billion to holdout bondholders. Friday’s decision will permit Argentina to make a second appeal to the U.S. Supreme Court before it is forced to pay the $1.33 billion to NML Capital Ltd and other holdout bondholders who did not accept a debt swap in 2005 and 2010.
Tropical Storm Sonia Hits Mexican Coast: Tropical Storm Sonia hit Mexico's Pacific Coast on Monday morning near the city of El Dorado in Sinaloa. By the time the storm made landfall, it was downgraded to a tropical depression and winds had decreased to about 35 mph. Though the storm is weakening, the U.S. National Hurricane Center said it could still cause floods and landslides in the region. Mexican authorities issued storm warnings from Mazatlan north to Altata on Sunday, and the government of Sinaloa state canceled classes on Monday in five municipalities.
Honduran General Denies Role in Police Abuses: In an interview, Honduran general and police chief Juan Carlos Bonilla denied knowledge or involvement in a wave of police abuses this year in which at least seven detainees have gone missing or been killed in police custody. He also said that he was not involved in setting up death squads starting in 1998, as reported by the police department's internal affairs section in 2002.
Brazilian Delegation Concerned About Uruguayan Marijuana: Brazilian political leaders from the southern state of Rio Grande do Sul will travel to neighboring Uruguay this Tuesday to oppose Uruguayan legislation that will legalize marijuana sale and consumption in the country. The Brazilian delegation will testify before the Uruguayan Senate's health committee in an attempt to prevent the country from moving ahead with legalization.
November 4, 2013
On October 21, Indian oil and gas firm ONGC Videsh Ltd (OVL) was among 11 foreign companies in Rio de Janiero to bid for Brazil’s latest oil find, the Libra oil field.
The winning consortium was made up of a Sino-European mix of four companies, with Brazil’s Petrobras holding the majority stake. Although OVL didn’t make the final cut, its presence in the bidding process points to India’s growing energy equation with Latin America, as does the recent success of Indian oil majors in acquiring large contracts in Latin America.
Eight Indian companies—OVL, Reliance Industries, Essar Oil, BPCL, Oil India, Videocon Industries, Assam Company, and Indian Oil Corporation—are part of 12 joint ventures in Venezuela, Brazil, Colombia, Ecuador, Cuba, and Peru. Their approach is pragmatic: invest substantial capital with state-run oil companies and use local expertise.
In Venezuela and Brazil, the national oil companies—PDVSA and Petrobras, respectively—get their governments’ support in procuring funding and project clearances, which further facilitates the joint ventures. As a result of the enhanced trade in oil from these countries to refineries at home, India’s total oil imports from Latin America increased from 4.5 percent in 2003 to 11 percent in 2012-13.
October 17, 2013
Janet Yellen, nominated by President Obama last week to be the new chairwoman of the U.S. Federal Reserve, might not know it yet, but she has friends in high places in Latin America.
This is because many in the region rightly believe that Yellen's forecasted doveishness will give Latin America time to make the necessary adjustments while U.S. monetary tightening slowly winds its way through global markets.
Even in Brazil, where there aren’t many kind words being said about the U.S. these days, Central Bank Governor Alexandre Tombini has been buttering up markets with measured comments about the Fed’s tightening policy.
But Latin America is watching the aftermath of this appointment closely because there is an ominous feeling that, despite the region’s growing monetary autonomy, tightening U.S. policy will have important consequences for the region—such as creating more expensive imports, pricier debt payments, and higher local interest rates.
Past crises in the region have happened around moments of decisive Fed action—think 1982 and the 1994 Tequila Crisis, without even mentioning the trail of broken exchange rate pegs. But what is remarkable about the last few years is the contrast between Latin American governments having their economic houses in relative order and the chaotic, then sclerotic macro-environment amongst the world’s wealthiest countries.
This is a much different reality than Argentina in 2001 or Mexico in 1994. Only ten or twenty years ago, sovereign, dollar-denominated debt would have been the biggest part of any Fed monetary tightening problem, followed by fixed currency values. These days, after remarkable growth and a decade of responsible policy, much of the region can keep a full-blown crisis at bay. Instead, Latin Americans can now expect mild recessions, hampered growth, and a reckoning for low levels of invested in the good times.
Loose policy in the U.S. and elsewhere over the past few years has given Latin America a relatively favorable environment to conduct its own responsible monetary policy. At the same time that money was cheap in the U.S. and Europe, the relative high returns in Latin America drove capital their way, which provided a boon to economies in a strong phase of growth. China was still growing quickly and South American commodities were fueling that growth. But that new Latin American normal has evaporated relatively quickly with the specter of a developed world recovery and monetary tightening.
October 15, 2013
The Estádio Jornalista Mário Filho in Rio de Janeiro—better known as the Maracanã—reopens its doors to tourists today, almost three years after it was closed for renovations. Visitors can now take a guided tour of the historic stadium where nearly 200,000 people watched Uruguay beat Brazil in the 1950 World Cup Final—the largest crowd ever to attend a sporting event. The stadium will host the opening and closing ceremonies of the 2014 World Cup, as well as the final match scheduled for July 13.
According to historian and lead tour guide Bruno Lucena, “it took too long to reopen the stadium for tourists. A place as important for soccer history as Maracanã should always be open to the public.” The tour includes a visit to the honor tribune, the press box, the locker rooms and VIP areas and costs between 15 reais ($7) and 30 reais ($14). Maracanã reopened for play in April 2013 with a “legends” match featuring Brazilian greats like Ronaldo and Bebeto, and hosted the Confederations Cup in June when Brazil won with a 3-0 victory over Spain. The stadium’s reopening followed controversy over delays, costs and the future privatization of the site as well as threats to close the venue amid fears that it does not meet minimum safety standards.
Other Brazilian World Cup stadiums are far from being complete. Five venues are currently facing construction delays: Manaus, Curitiba, Cuiaba, Porto Alegre and Natal. According to Brazilian Sports Minister Aldo Rebelo, “We cannot keep on the same rhythm or we will not deliver them on time” for FIFA’s December deadline.
October 8, 2013
On Monday, Brazilian President Dilma Rousseff demanded an explanation from the Canadian government over a media report that claims the North American country spied on Brazil's Mines and Energy Ministry—the institution that manages the country's mineral and oil resources. This comes only a few weeks after a similar report claimed the United States was also spying on the South American country. "That is unacceptable between nations that are supposed to be partners," Rousseff said via Twitter. "We repudiate this cyber warfare.”
The report broadcast on Sunday by TV Globo claims that Canada's intelligence agency, the Communication Security Establishment (CSEC), used software called Olympia to map the ministry's communications, including Internet traffic, emails and telephone calls. Rousseff noted that there are reasons to believe the espionage had economic and strategic motives as many Canadian mining companies are operating in Brazil.
In response to these claims, Brazil's Minister of Foreign Relations Luiz Alberto Figueiredo summoned Canada's ambassador Jamal Khokhar to demand an explanation for what it called a "serious and unacceptable violation" of Brazilian sovereignty and the right to privacy of its citizens and companies. On the Canadian side, the spokeswoman for Prime Minister Stephen Harper said that "CSEC does not comment on its specific foreign intelligence activities or capabilities." The Canadian Defense Department declined to comment.
This follows a previous disclosure that the U.S. National Security Agency (NSA) had spied on Rousseff's telephone calls and emails as well as on state-run energy company Petrobras. In response to this report that came to light in mid-September, the Brazilian president canceled a state visit to the United States scheduled for October 23 and denounced this operation as a violation of human rights and international law during her address at the United Nations General Assembly.
Both reports are based on documents leaked by former NSA contractor Edward Snowden who, according to the documents, attended the conference of the "Five Eyes" intelligence-sharing network between the United States, Britain, Canada, Australia and New Zealand. Snowden is wanted by the U.S. after revealing details of the NSA's massive intelligence activities, and is currently living in temporary asylum in Russia.
October 3, 2013
Ten police officers were charged yesterday in the murder and forced disappearance of Amarildo de Souza, a bricklayer and lifelong resident of Rio de Janeiro’s largest favela, Rocinha. The charges were announced months after Mr. Souza’s disappearance on July 14, which sparked public protests in Rio and São Paulo and led to the launch of a national social media campaign called “Quem Matou Amarildo?” (Who Killed Amarildo?).
Investigators say the murder was a coordinated effort by community police officers from the local Unidade de Polícia Pacificadora (Pacifying Police Unit—UPP), who allegedly tortured Mr. Souza via electric shock treatment and asphyxiation before murdering him and hiding his body in an undisclosed location. The investigation also revealed that Maj. Edson dos Santos, commander of the Rocinha UPP at the time of Mr. Souza’s disappearance, bribed two key witnesses in the case to blame the murder on drug traffickers. The witnesses later disclosed details to investigators before entering Brazil’s witness protection program. Investigators expect an arrest warrant to be issued in the coming days, in what will likely result in a lengthy and highly publicized trial.
UPP’s were created in 2008 in an effort increase police presence in Rio’s crime-ridden neighborhoods prior to the 2014 World Cup and 2016 Olympics. They have faced increasing criticisms from favela residents and human rights organizations, which began reporting abuses months prior to Mr. Souza’s disappearance. Brazilian Federal Human Rights Minister Maria do Rosario called yesterday for a public debate on police reform, calling the case a new precedent in holding security agents responsible for human rights abuses.
October 2, 2013
The Brazilian government intends to hire 4,000 Cuban doctors by the end of 2014 through its newly established Programa Mais Médicos (More Doctors Program). An initial group of 400 doctors arrived in late August from Cuba, through a cooperation agreement brokered by the Pan-American Health Organization between the governments of Cuba and Brazil. The doctors will be sent to rural municipalities in the North and Northeast regions of Brazil, where systemic poverty and low rates of human development persist. These municipalities have been unsuccessful in attracting Brazilian and other foreign medical professionals who enrolled in the Mais Médicos Program but who are unwilling to work in the impoverished communities.
Criticisms of the Programa Mais Médicos are prevalent in Brazil. The Ministério da Saúde (Ministry of Health) has been criticized for indirectly hiring Cuban doctors through a brokered agreement with foreign government agencies, rather than hiring them individually. Contrary to foreign doctors who are in private practice in Brazil, Cuban doctors enrolled in the public health program will only receive 25 to 40 percent of their monthly salary), the rest of which will be sent directly to the Cuban government.
On August 23, the Associação Médica Brasileira (Brazilian Medical Association—AMB) and the Conselho Federal de Medicina (Federal Council of Medicine—CFM) filed a joint lawsuit in the Supremo Tribunal Federal (Federal Supreme Court—STF) to suspend the program, claiming that the Cuban doctors’ medical practice in the country was illegal. The AMB and CFM require foreign doctors to be certified by the Exame Nacional de Revalidação de Diplomas (National Diploma Revalidation Exam) in order to practice medicine in Brazil, a condition that was not u the Cuban doctors participating in Mais Médicos. Critics argue that disregard for the legal framework governing medical practice will have negative implications for the quality of health care in Brazil, and say that the entry of foreign professionals to the domestic market will not compensate for existing deficiencies in the Brazilian health care system.
Padilha responded to criticism of the program by saying that it generates controversy because it is "bold and courageous." In an interview on August 24 at a health center in the Estrutural favela of Brasília, he said the decision to hire foreign doctors is legally sound: "The government has won every legal action. We have a great deal of legal security in what we are doing. [Medical professionals] can criticize and now make suggestions on how to make improvements, but they will not threaten the health of our population, which lacks doctors."
September 30, 2013
On September 18, only 11 companies signed up to participate in the auction of Brazil’s pre-salt Libra oil field, one of the largest offshore oil discoveries since 2007. This outcome fell sharply below the Brazilian government’s expectations. In fact, Magda Chambriard, head of the Agência Nacional do Petróleo (National Petroleum Agency—ANP), said the following day that she expected about 40 companies to sign up for the auction.
Because of its size and recoverable potential, the Libra field is known as one of the “elephants of pre-salt.” The field is estimated to contain between 8 to 12 billion barrels of oil, making it one of the largest in the world. Therefore, the Brazilian authorities placed a hefty price tag on registering for the auction—$2.05 million reais, or just over $900,000.
The companies that registered to participate included several Asian firms, such as Petroliam Nasional and Petronas from Malaysia; Oil and Natural Gas Corporation Limited (ONGC) from India; and China’s National Offshore Oil Corporation (CNOOC) and China National Petroleum Corporation. There were also joint ventures—such as the Chinese company Sinopec’s alliance with Spain’s Repsol—in addition to individual international oil companies that will bid, such as Total S.A., Royal Dutch Shell and Mitsui. The only Latin American company to register was Ecopetrol of Colombia.
Analysts have pointed to the absence of large international companies such as ExxonMobil, Chevron, and BP as representing the “failure” of the registration process. As stated in a recent AS/COA report, “Brazil’s Energy Agenda: The Way Forward,” government intervention in the bidding process may have deterred some companies from participating. One such deterrent, for example, is that Petrobras must be the sole operator in the pre-salt fields, and they must take at least a 30 percent stake in the project.
The relative lack of interest may spur Petrobras to change the terms of its participation, but it is unlikely to do so. Petrobras CEO Maria das Graças Foster recently stated that the company has the technical capacity to explore and produce all the oil from Libra, but needs financial backing to invest. Thus, Petrobras will need the winning bidder to put up a large share of the oil to sell from its own account in order to maximize its financial gain.
September 26, 2013
Brazil’s Supremo Tribunal Federal (Supreme Federal Tribunal—STF) was deeply divided on the afternoon of September 18. The court’s eleven justices had to decide whether they would accept a motion to hear the appeals of twelve politicians charged in last year’s landmark corruption trial, popularly deemed as the mensalão (monthly allowance).
Ten justices voted in last week’s decision: five voted in favor of the motion and five voted against it. The nation waited eagerly until last Wednesday to learn which way Justice Celso de Mello—the Court’s deciding vote—had leaned. If Justice Mello were to decide that the Court should deny the motion, the eight-year-long mensalão trial would have concluded that very day. But the result is now public: Justice Mello voted to accept the motion, thus beginning a new chapter in the historic case.
In a symbolic expression that represented the disappointment of millions of Brazilians who watched the televised judgment live on TV Justiça, Chief Justice Joaquim Barbosa appeared visibly frustrated upon learning of the results. But what does the decision mean, and why is the majority of the Brazilian public seemingly opposed to it?
The mensalão case has been recognized as the biggest corruption scandal in Brazilian history, involving important political figures such as José Dirceu, former chief-of-staff for President Luiz Inácio Lula da Silva, and João Paulo Cunha, former president of the Câmara dos Deputados (Chamber of Deputies).
Collaborators organized an intricate vote-buying scheme to ensure that legislation received quick congressional approval from a diverse governing coalition that otherwise lacked consensus. The scheme started in 2003, during Lula’s first year as president, but was not made public until 2005. The infamous trial leveraged a series of allegations against 39 politicians—25 were ultimately sentenced to various criminal charges in 2012.
Brazil’s Supreme Court has historically been seen as the nation’s moral pillar. Following the court’s 2012 verdicts, the media and the Brazilian public celebrated the emblematic outcome as the beginning of a new era, in which those involved in corruption could finally be held accountable. Sadly, they rejoiced too soon—the appeals process would quickly prove them wrong.
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