Tuesday, 20 January 2009

MM Latin Political Risk Bulletin (Week of Jan. 19-23)

COLOMBIA -- Senator Vargas Lleras, Uribe Supporter, Voices Discontent With Government (click here for link): Senator German Vargas Lleras is on the eye of the hurricane these days. The staunchest supporter of President Alvaro Uribe during his first term (2002-2006), Vargas is now alleging the government is persecuting him for refusing to back a plan to allow Uribe to run for a second re-election. The tussle isn't doing him any good: the government is managing to break the unity of his Cambio Radical party, which is losing key posts, and is portraying him as a traitor to the cause. Vargas is also contending for the presidential nomination but ... what parties would be willing to back his name at this point? This is one of the most important political stories taking place in Colombia. Last night, Cambio Radical said it would endorse allowing uribe to seek a second re-election but only from 2014. We expect Congress to pass a bill allowing Uribe to seek another re-election, but not in 2010.

ECUADOR -- Correa's Mining Law Begins to Stir Opposition; We Expect More Clashes (click here for link): The new mining law in Ecuador is already stirring opposition. The National Indigenous Confederation is holding a national demonstration Tuesday. President Rafael Correa is likely to call on his supporters to fight any opposition to his law. Check on Inca Kola News for further information on this. Nevertheless, here are the main points of the law (a courtesy of IKN): a) open pit mining with further environment controls will be allowed; b) concessions will have no limits; c) depending on the size of the mine, royalties will be between 3 percent and 8 percent; d) tax breaks will be awarded for exports and sales taxes. It reads very indulgent to mining companies -- and that is the reason why the CONAIE is against it (it considers it damaging to the environment, and too easy on foreign interests.)

BRAZIL -- Lula Signals Leaning Toward Interests of Companies in Labour Issues (click here for link): The carrot and the stick. Lula told labour union leaders yesterday about his intentions to propose lawmakers a 12 percent increase in the minimum wage to 465 reais a month before May 1. The proposed pay raise, far from being a concession to unions, has in my view a political meaning -- most pension and work benefits area pegged to the minimum wage (making the latter a powerful political weapon.) Afterwards, he told them that companies need cash (yes, cash, not whinny workers banging the doors,) and basically ruled out endorsing a union-sponsored plan to put companies to pay for an increase in unemployment benefits and job stability. So, alea jacta est: unions will continue asking for the impossible, Lula finally understood the real problem that corporate Brazil is going through and companies won a new ally. The easing of labour rules might be difficult but it will certainly be discussed and perhaps, why not, passed at some point.

VENEZUELA -- Referendum, Oil Prices and Chavez: an Update (click here for link): Chavez seized last week $12 billion from international reserves to beef up the Fonden with more petro-dollars. He is seeking to get passed the referendum on the end of presidential limits to perpetuate himself in power. Now, the initiative is clearly unconstitutional, as leaders of the Podemos party said yesterday. It's hard to make a call on the outcome of that referendum -- but one thing is clear. Whatever the result, Chavez will continue with a policy of uncontrolled spending, restrictions on imports and exchange rate trading and price controls.

CUBA -- Fidel Castro on his Death Bed; No One Dares Forecast What Will Come Next (click here for link): When on Jan. 1, Cubans were celebrating (some??) the 50th anniversary of the revolution, Fidel Castro failed to appear in official media. Fidel only sent a very short anniversary greeting in the official newspaper. Sources close to President Lula of Brazil said he was ''shocked´´ to see Fidel almost non-responsive, in bed, in a recent visit. The thing is, Fidel will die and what will happen to Cuba after that? It will for sure put more pressure on brother Raul to implement broad reforms to jobs, immigration, and the agriculture and services industry. Within three to five years there will be a new discussion in Cuba. It is unrealistic to think that the final caretaker of the Revolution will change the premises of the Cuban economy, the armed forces and political system in the aftermath of Fidel's death. The most pressing short-term issue for the Cuban government will be finding a way to resume negotiations with countries other than the Bolivarian Axis, and start talks with the U.S. Cuba will need more investment amidst the current global crisis.

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