The Unión de Naciones Suramericanas (The Union of South American Nations—UNASUR) and the Banco de Desarrollo de América Latina (Latin American Development Bank—CAF) announced plans on Tuesday to develop the first fiber optic cable exclusively financed by Latin American institutions.
The creation of the proposed Red de Conectividad Suramericana para la Integración (South American Connectivity Network for Integration) could reduce South America’s reliance on foreign businesses for the infrastructure needed to connect to the Internet, subsequently lowering costs of access as well as increasing connectivity speeds.
UNASUR Secretary-General Ernesto Samper explained in a press conference in Montevideo, Uruguay, that Internet speed in South America is significantly slower than in other countries because of the challenges of broadband connectivity in the region, causing prices to surge up to 20 times higher than in developed countries.
There are an estimated 22.3 million Internet users in Latin America, accounting for 54.7 percent of the region’s population. Samper expressed concern about the digital divide in South America, stating that “one who is not connected is lost” and that Latin America “needs to generate value added processes and create autonomous communications highways to strengthen its independence and cyber defenses.”
CAF has pledged an initial investment of 1.5 million dollars for the first phase of the project, which will involve an in-depth analysis of the current Internet technologies in each South American country to determine how they will incorporate existing cables into the future fiber optic grid. The vice president of CAF, Antonio Sosa, stated that the study would focus on demographics, technical issues and institutional framework in each country.
On Monday, Argentine Judges Ariel Lijo and Daniel Rafecas turned down the case of late prosecutor Alberto Nisman against President Cristina Fernández de Kirchner, alleging that the president participated in a cover-up plot surrounding a 1994 terrorist attack in Buenos Aires.
After investigating the case for over a decade, Prosecutor Nisman presented an indictment for the president and Foreign Minister Héctor Timerman in mid-January for their suspected involvement in attempting to hide Iran’s role in the bombing of the AMIA Jewish Community Center in Buenos Aires in 1994, which killed 85 people. Nisman was found dead in his apartment on January 18, just four days after the indictment. His death, which initially appeared to be a suicide, was declared a “suspicious” death upon further investigation. It is still unclear whether or not the death was a suicide (forced or not) or murder.
The case has been wrought with controversy. Yesterday, Viviana Fein, the prosecutor overseeing the investigation into Nisman’s death, denied the existence of a document that Clarín reported had been found in Nisman’s trash. The document allegedly called for the arrest of Timerman and President Fernández de Kirchner in June 2014. The government has stated that Nisman’s request to arrest the president only came in January, due to unnamed foreign pressure. However, Fein admitted Tuesday morning that her denial of the detention order’s existence was a mistake.
Yesterday, Judge Lijo declined to take on the investigation of Nisman’s allegations on technical grounds, claiming that it was not in his jurisdiction. A federal chamber will now appoint a judge to manage the investigation.
This week's likely top stories: Colombians march against possible amnesty for FARC; Haitian Prime Minister Laurent Lamonthe steps down; Chinese railroad company wins $275 million in orders from Argentina; Venezuela seeks to expand PetroCaribe despite its fragile economic situation; Thousands gather across the U.S. in anti-police brutality protests.
Uribe Leads Protest Against Possible FARC Amnesty: Former Colombian President Álvaro Uribe’s Centro Democrático party and the Colombia Quiere movement led marches across the country on Saturday to protest a possible amnesty for the Fuerzas Armadas Revolucionarias de Colombia (Revolutionary Armed Forces of Colombia—FARC) in peace talks between the rebels and Colombian government in Havana. Currently, the government and the rebels are meeting to determine how to disarm FARC combatants and whether to prosecute them for crimes. Protesters across Colombia said that the FARC should face justice, and expressed concern that the peace talks would grant the guerrillas amnesty after 50 years of armed conflict. Further inflaming tempers, seven people—including two children—were shot to death on Friday in the department of Antioquia, in what appears to have been an execution. However, it is unclear whether the shooting involved members of the FARC, the ELN, or members of criminal gangs in the area.
Haiti in Turmoil over Long-Postponed Elections: Haitian Prime Minister Laurent Lamonthe stepped down on Sunday in an effort to quell protests over government corruption and delayed elections that have roiled the Caribbean nation since December 5. Lamonthe, who began his term in 2012, is the third prime minister to resign since President Michel Martelly took office in 2011. Despite international support for Lamonthe’s efforts to attract investment to Haiti, a commission appointed by Martelly last week called for the resignation of the prime minister, the head of the Supreme Court and the current members of the Provisional Electoral Council. Meanwhile, Haiti has yet to hold legislative and local elections that were scheduled for 2011, leaving 10 out of 30 Senate seats unoccupied. Martelly has blamed the stalled elections on opposition senators who refuse to pass his election law. If Haiti fails to hold elections, the parliament will be dissolved in mid-January and President Martelly will rule by decree. The president announced that negotiations to resolve the political crisis would begin today.
Chinese Railroad Company Brings in $275 million from Argentina: In another strong display of “railroad diplomacy,” state-owned China South Locomotive & Rolling Stock Corporation Ltd. (CSR) confirmed this morning that it received a $275 million order from Argentina for Chinese locomotive products. The 80 locomotives and more than 2,000 freight cars from China will be used to populate Argentina’s Belgrano Cargas line once a $2.1 billion railway rehabilitation project—contracted to China Machinery Engineering Corp (CMEC)—is complete. The project will be financed by a supplemental loan agreement finalized by Presidents Xi Jinping and Cristina Fernández de Kirchner in July. CSR, which has been supplying trains and other railway products to Argentina since 2006, is currently considering a merger with its principal domestic rival, China CNR Corp Ltd, which would make it competitive with multinational railroad behemoths Siemens and Bombardier.
Venezuela to Expand PetroCaribe Despite Oil Glut: On Sunday, at a summit in Havana marking the 10th anniversary of the leftist Alianza Bolivariana para los Pueblos de Nuestra América (Bolivarian Alliance for the Peoples of Our Americas—ALBA), Venezuelan President Nicolás Maduro revealed his intentions to expand the already frail PetroCaribe oil subsidy program, which has been providing Caribbean countries with oil at low interest rates and a favorable long-term payment plan since 2005. In light of the fact that PetroCaribe shipments fell 11 percent in 2013, which forced beneficiaries to diversify their energy portfolios, Maduro insisted that, “Petrocaribe, what it must do at this stage, is consolidate, strengthen, grow and deploy itself.” However, Venezuela’s capacity to deliver on its promise remains questionable, considering the impact of the severe global drop in oil prices on Venezuela’s economy, with inflation already hovering around 60 percent. In order to finance the expansion, Venezuela is considering a plan to sell billions of dollars of PetroCaribe debt to Wall Street.
Tens of Thousands March in U.S. to Protest Police Killings: Tens of thousands of Americans marched on Saturday in the largest anti-police violence protests since Michael Brown, a black teenager, was killed by a white police officer in Ferguson, Missouri this August. Marches took place in Boston, Chicago, New York City, Oakland, San Antonio, San Diego, and Washington DC in memory of victims of police shootings and to denounce the racial injustice and police impunity. No arrests were made at the Millions March in NYC—by far the largest event—which drew approximately 30,000 participants in a procession that ended at the NYC Police Department’s headquarters in Lower Manhattan. An estimated 25,000 people rallied in the nation’s capital, including the families and relatives of Eric Garner, Michael Brown, Akai Gurley, Tamir Rice, and John Crawford.
The Argentine government published a decree on Monday that establishes the Unidad de Seguimiento y Trazabilidad de las Operaciones de Comercio Exterior (Tracking and Tracing of Foreign Trade Transactions Unit), which will monitor the flow of goods, services, and currency into and out of the country. According to Decree 2103/2014, the new agency will operate under Chief of the Cabinet of Ministers Jorge Capitanich, and will be made up of representatives from the Central Bank, the Economy Ministry, the AFIP tax bureau, the Financial Information Unit, the Bureau for Economic Crimes and Money Laundering (Procelac), and the National Securities Commission (CNV).
According to the government, the new agency is meant to “assure macroeconomic stability,” yet the decree also notes that it was created because of an increase in foreign trade as well as illegal operations like tax evasion. The government claims there have been 9,600 cases of suspected Criminal Foreign Exchange Regime violations. The regulatory body will monitor trade and currency flows in order to prevent tax evasion, especially by companies earning money on imports.
In recent months, tax employees have carried out a number of raids in Buenos Aires and across Argentina due to a prosperous black market for U.S. dollars. The informal market started to flourish in 2011, when the Kirchner administration made it difficult for Argentines to get dollars through legal means in response to the alarming decrease in international reserves. After a devaluation of the peso in January 2014, the “blue” dollar exploded.
Alejandro Vanoli, who took over as head of the Central Bank in October 2014, has been imposing measures to limit the fall in the Central Bank’s reserves, including raiding cuevas, the informal currency exchange houses, and arbolitos, people who sell dollars illegally on the street. At Tuesday’s Central Bank conference, Vanoli noted that Argentina’s reserves grew by $800 million in the last month and stressed that the government would continue to fight tax evasion and money laundering.
This week's likely top stories: Ecuador's National Assembly dismisses referendum on controversial constitutional amendments; Argentina suspends Proctor & Gamble for fiscal fraud; Brazil grants contracts for 31 new solar parks; U.S. gears up for midterm elections and immigration reform; Colombian court sentences AUC paramilitary leader to 8 years.
Ecuador’s National Assembly Strikes Down Referendum on Amendments: On Friday, the Ecuadorian Constitutional Court dismissed the proposal for a referendum on a package of constitutional amendments sponsored by President Rafael Correa’s ruling party, Alianza País (Country Alliance—AP). Instead, the decision will be passed on to the National Assembly, where parliamentary approval of the amendments is virtually guaranteed given the AP’s two-thirds majority. The most contentious of the reforms would allow for the indefinite re-election of public officials, which would effectively permit Correa, who is currently serving his third and last term as president, to run again in 2017. Despite Correa’s high approval rating, a September poll found that 73 percent of Ecuadorians supported the referendum, which was called by Guillermo Lasso, a former presidential candidate and leader of the opposition party Creando Oportunidades (Creating Opportunities—CREO).
Argentina Bars P&G from Business for Tax Fraud: The Argentinian tax bureau, Administración Federal de Ingresos Públicos (Federal Administration of Public Revenue—AFIP), announced on Sunday that it has suspended the operations of multinational consumer products corporation Proctor & Gamble for alleged fiscal fraud and capital flight. AFIP stripped P&G of its importers/exporters registration upon discovering that the company evaded paying duties totaling up to $138 million on hygiene products imported from Brazil by billing through a Swiss subsidiary. P&G, which has been operating in Argentina since 1991, will be allowed to resume business once it has paid its tax bill and fines accordingly. In asking Argentine courts to place travel restrictions on top officials at the local P&G affiliate, AFIP chief Ricardo Echegaray commented, “Our main goal is for P&G to repay the Central Bank the stolen currency as well as the customs sanctions and the income tax that has been evaded.” P&G responded by announcing that it is working to understand and resolve the allegations.
Brazil Grants Contracts for 31 New Solar Parks: As the output from key hydroelectric plants in Brazil has decreased substantially amidst the worst drought in 80 years, the country has kickstarted the solar power industry by granting contracts for the construction of 31 solar parks on Friday. Brazil’s energy regulator brought the country’s first solar energy auction to a lucrative close on Friday by signing 20-year energy supply contacts with companies to invest $1.67 billion to begin powering the national grid by 2017. The parks, which are the first large-scale projects of their kind in Brazil, will have a combined capacity of 1,048 megawatts (MW), and at a price of $89 per megawatt-hour, the Brazilian government has earned itself one of the lowest rates in world. Brasília has been a latecomer to the photovoltaic industry—which currently supplies a meager 1 percent of the country’s electricity—because the government levies high tariffs on imported solar panels.
U.S. Midterm Elections and Immigration: U.S. voters will go to the polls on Tuesday in midterm elections that will be crucial for the future of immigration reform in the United States. Recent polls suggest that the Republican candidates are outperforming Democrats in several key states, and thus the GOP could pick up six new seats to take control of the Senate. Former Republican presidential candidate Mitt Romney said on Sunday that if Republicans win the Senate, comprehensive immigration reform will be a top priority. Last year, House Speaker John Boehner (R-Ohio) refused to bring a bipartisan immigration bill passed in the Senate to a vote. Meanwhile, President Barack Obama is expected to use his executive authority to overhaul immigration rules shortly after Tuesday’s elections.
Sentenced AUC Leader Says Colombian Military Collaborated: In sentencing Colombian paramilitary leader Salvatore Mancuso to a maximum sentence of eight years on Friday, Judge Alexandra Valencia said that “the military and the army were institutionally responsible” for the deaths of hundreds of civilians in northern Colombia. Mancuso, who led the Colombian paramilitary Autodefensas Unidas de Colombia (United Self-Defence Forces of Colombia—AUC) between 2004 and 2006 and was later extradited to the U.S., said that the Colombian army was complicit in the AUC’s military offensives in the late 1990s that led to the deaths of hundreds of civilians. As part of a plea bargain with Colombia’s special Justice and Peace prosecution unit, Mancuso admitted to leading four massacres and committing hundreds of crimes. According to Mancuso, the Colombian military gave him special access, trained paramilitaries, and had informants in both the police force and the regional prosecutor’s office to warn paramilitaries of investigations or raids. “Without the action or inaction of the State, we wouldn’t have been able to grow the way we did,” he said.
Argentina’s Chamber of Deputies passed a bill yesterday that updates the country’s 47-year-old hydrocarbon law. The bill, which has President Christina Fernández de Kirchner’s support and has already been approved by the Senate, would ease foreign investment in energy exploration and production. Significantly, it includes regulations for off-shore and shale gas production—categories that were not included in the 1967 law.
The bill provoked significant debate along party lines, and passed largely on the strength of President Fernández de Kirchner’s Frente Para la Victoria (Front for Victory—FPV) representation in Congress.
Argentina’s energy deficit is estimated to reach $7 billion this year. The new bill is part of an attempt to set the country on a course towards energy independence by ramping up domestic production—especially in the country’s Vaca Muerta region, which is considered one of the largest reserves of shale oil and gas in the world. Faced with dwindling foreign reserves and access to credit, the government has looked to increased foreign investment. To do attract investment, the bill would lower the level of investment needed for companies to avoid export taxes and foreign exchange control to $250 million from $1 billion. “The desired horizon for Argentina is only possible if there are investments,” said Mario Metaza, a deputy for the FPV.
Opposition lawmakers have accused the government of steam-rolling provincial interests and selling off strategic resources. “They are ratifying the concept of hydrocarbons as a commodity and not as a strategic resource and a common good,” said Claudio Lozano, a deputy for the Frente Amplio Progresista (Broad Progressive Front—FAP). Outside observers have also raised questions about the current administration’s ability to manage any potential windfall derived from the energy reform, pointing to the mismanagement of the country’s wealth during the economic boom of 2003-2008.
The President of the Episcopal Commission for Social Pastoral Work in Argentina, Bishop Jorge Lozano, issued a call on Wednesday urging the country’s faithful to share information they may have regarding the fate of the children kidnapped during Argentina’s “Dirty War.” In the document, Bishop Lozano notes that, “There has been a network of silence and complicity that has kept the truth covered up.” The Church and its members have historically been a part of this network, Bishop Lozano admitted.
The announcement follows a meeting at the Vatican earlier this year between Pope Francis, formerly Archbishop Jorge Mario Bergoglio of Buenos Aires, and the leader of the Abuelas de Plaza de Mayo (Grandmothers of Plaza de Mayo), Estela de Carlotto. Carlotto and the Abuelas asked the pope to open Church archives that could lead to information regarding 400 children suspected of being kidnapped during the dictatorship. Francis reportedly told Carlotto, “Count on me.” The meeting was a turning point in the relationship between the Abuelas and Bergoglio, whom Carlotto has criticized for his silence on the issue of the kidnapped children.
The Church’s record during Argentina’s dictatorship is checkered. While many priests and other religious figures were among the victims of the regime, elements of the Church are considered to have been either tacitly or actively complicit in the worst abuses of the Dirty War. In the wake of his election, Francis’s own record was the subject of intense scrutiny and debate. Since then, a number of survivors have claimed that future pope secretly helped funnel potential victims to safety.
At a hearing yesterday, U.S. Federal Judge Thomas Griesa decided to hold Argentina in civil contempt of court, asserting that the country’s recent efforts to circumvent his ruling on debt repayment are illegal. Argentina’s Congress passed a law on September 11 that would replace Bank of New York Mellon Corp. as a bond trustee with a branch of Banco de la Nación. This would allow the country to pay the bondholders that agreed to restructuring in 2005 and 2010 in country, while avoiding payment to creditors that rejected restructuring.
Griesa’s ruling came the same day that the Kirchner Administration sent a letter to U.S. Secretary of State John Kerry requesting that the U.S. avoid holding Argentina in contempt and asking for support against the federal judge. After yesterday’s decision, Argentine Foreign Minister Héctor Timerman released a statement claiming that Griesa’s decision was a “violation of international law,” and called for the U.S. to allow the International Court of Justice (ICJ) to preside over the case. The Argentine government filed a suit at the ICJ in August, claiming that the New York court ruling violated their national sovereignty, but no action will be taken by the ICJ until the U.S. agrees to its jurisdiction in the case.
Argentina is scheduled to make a $200 million deposit of an interest payment on restructured debt today in the Banco de la Nación Fideicomiso, and a Central Bank source has indicated that the deposit will be made in spite of the ruling. Timerman affirmed yesterday that the country will continue to fight the blatant violation of Argentina’s autonomy as a nation.
Griesa previously warned Argentina about the potential ramifications of refusing to pay the holdout creditors the approximately $1.5 billion owed to them. However, when NML Capital Ltd. lawyer Robert Cohen called for a daily $50,000 penalty until Argentina pays in full, Griesa declined and stated that potential penalties will be considered at a later, as yet unspecified date.
New technology and capital has boosted shale gas and tight oil production in the United States and Canada—a phenomenon dubbed the “shale revolution.” This revolution has important geopolitical implications and has shifted North America’s energy outlook from one of scarcity to one of abundance.
The rest of the Western Hemisphere is also sitting on expansive shale reserves, but these areas have not yet been fully exploited. A recently released AS/COA Energy Action Group Report, “Shale Gas Development in Latin America,” explores these issues in depth.
Within the Western Hemisphere, the primary point of comparison for Latin American countries looking to develop shale gas resources is the United States, where, in 2014, over 20,000 horizontal wells are expected to be drilled, according to RBC Capital Markets. This compares to 250 unconventional wells in Argentina and just 10 in Colombia that are expected to be drilled during the same time period. Investors spent $90 billion in the United States on developing shale gas in 2012 alone; in contrast, foreign direct investment in Latin America last year, in every sector, totaled $180 billion.
In addition to the U.S. and Canada, Argentina, Brazil and Mexico are among the 10 countries in the world with the greatest technically recoverable shale gas resources; together, they make up approximately 40 percent of the world’s total supply. Colombia also has significant potential.
As the shale gas revolution sweeps across Latin America, many governments are beginning to see the industry—and the significant influx of foreign investment—as a quick stimulus to their sluggish economies. Argentina is no exception—with an estimated 16.2 billion barrels of shale oil and 308 trillion cubic feet (TCF) of shale gas in the Vaca Muerta shale formation, the government aims to capitalize on their newfound resource wealth.
Although foreign investment may help Argentina’s fiscal woes in the short term, it is by no means a panacea for the country’s economic problems, and could in fact encourage poor financial practices.
Efforts by the Fernández de Kirchner administration to attract foreign investment have begun to bear fruit, with various international oil companies and investment firms increasing their stake in Vaca Muerta projects. Argentina’s national oil company, Yacimientos Petrolíferos Fiscales (Treasury Petroleum Fields—YPF), has also made a series of joint ventures with oil companies that will provide the state-owned energy company with much-needed cash and technical expertise to develop unconventional energy projects.
In addition to an infusion of financial capital, both YPF and international oil companies have been lobbying the Argentine government to create a more favorable legal framework for investors interested in shale oil and natural gas projects. The administration has undertaken efforts to rewrite the 1967 hydrocarbons law, which would simplify taxes, royalties, and licenses and effectively reaffirm Buenos Aires’ control over natural resources. Such a law would be a direct rebuke of the 1994 constitutional amendment that recognized subsoil hydrocarbon resources as property of the provinces where they are located.