There was something depressingly familiar about Bolivia sending in troops to end protests at an oil facility in Santa Cruz province at the weekend. Evo Morales, who for months has been battling the opposition, now faces an even more dangerous foe: his own erstwhile supporters.
The revised contracts Bolivia signed last year with foreign investors in the gas sector were due to come into effect last week, but have been delayed to this week, a result of a disorderly change of leadership at YPFB, the state energy company. These contracts are regarded by most of the powerful leftwing social movements as having introduced a modest tax increase dressed up as “nationalisation”. Mr Morales’s use of the army against protestors who shut down domestic oil pipelines to demand “true nationalisation” is likely to inflame the situation further.
The president also faces strong opposition to his plans for big tax increases on mining from miners’ co-operatives – the backbone of the sector – which have been mobilising against what they see as an attempt by La Paz to control them. The miners have been at the forefront of previous protests that have dislodged several former presidents. That will give the current head of state something to think about.
Ecuador: dangerous games
Rafael Correa has been in office in Ecuador for just three weeks but on domestic politics and debt he is already playing dangerous games.
Congress is this week likely to approve his referendum on constitutional reform. It would have done so even if the president had not called on his supporters to take to the streets of Quito. As the protestors stormed the legislature, Mr Correa knew he had the congressional votes to win - his reasoning, presumably, that the running confrontations between his supporters and the police would make him look more like a man of the people than someone likely to co-operate with the hated legislature.
On debt, if there were any doubts remaining about Ecuador’s ability to pay, the budget Mr Correa unveiled last week banished them by including enough money for debt-servicing. For those seeing in this a sign that the government might back off from default, there was also a slight change of tone, in the government’s repeated stressing that negotiations with debt-holders would be “friendly” and a prediction by Guillermo Nielsen, who is advising Quito, that Ecuador would not default.
Nevertheless, Mr Correa insisted that a restructuring was now irreversible. It would be a surprise if Ecuador did not default on a $135m interest payment due to debt-holders on February 15.
Caribbean trade challenge
Time is running out for Caribbean heads of states if they are to agree a common position on the economic partnership agreement (EPA) that will govern the region’s future trade relationships with the European Union. Leaders of the English speaking countries plus the Dominican Republic – a group that for trade purposes calls itself Cariforum – meet on Tuesday and Wednesday in Jamaica and must act quickly to reach an accord on complex development and trade issues. Preferences conceded by the EU under the Cotonou agreement are currently exempt from World Trade Organisation rules but this waiver expires at the end of December. As a result the Caribbean – like five other developing regions from Africa and the Pacific – has just a few months to reach a new EPA deal that would help prepare the region’s countries for the rigours of global competition but would also preserve some of the advantages they currently enjoy in the European market.
Judging by the limited progress made to date, this looks like a tall order. Part of the problem – as advocates from non-governmental organisations frequently point out – is that the EU is taking an extreme negotiating position, demanding rules on investment and competition that were rejected by the developing countries in the Doha round of world trade talks. (Unfair trade discussion)
But another, perhaps more important, difficulty is the disunity of the Caribbean camp, much of which reflects the same kind of national divisions and vested interests that wrecked the Caribbean’s efforts to form political unity during the federation project of the late 1950s. Rich countries like Trinidad and poor ones like Guyana share membership of Caricom – the regional trade block – but they may have very different interests. So may the relatively efficient banana producers of the Dominican Republic and the much less productive ones of the eastern Caribbean.
As David Jessop of the London-based Caribbean Council pointed out in a recent column:“It is about the fault-lines that dissect the region: nationalism; multiple sovereignties; variations in physical size; differing national, regional and international objectives; uneven levels of development; and discordant national characteristics.”
Not surprisingly in this context, institutional arrangements are seriously deficient. Even if negotiators do reach common positions, they may lack the influence to persuade local politicians to implement them.
Inflation looms in Argentina
There will be more cause for concern in Argentina this week over inflation, still a thorn in the government’s side even after it was able to announce that consumer price rises had been kept to single digits – 9.8 per cent – in 2006.
Trouble now looms in the annual round of wage bargaining about to kick off. Last year, Hugo Moyano, the powerful leader of the truckers’ union, made a tacit pact with the government that unions would not demand rises of more than 19 per cent – the limit the government is hoping to fix this year, too. The agreement was widely respected.
But Mr Moyano’s power has waned since a bruising punch-up between union factions at the transfer last year of the remains of their beloved founder, Juan Domingo Peron, the three times former president. Now the unions seem determined to outbid each other, demanding rises of 20 to 30 per cent – more than the couple of percentage points above inflation that businesses would prefer.
The likely pressure on inflation – of especial concern in election year – may have contributed to the government’s decision on Wednesday to sack the person from the supposedly independent national statistics institute responsible for calculating the consumer price index. The replacement is from within the finance ministry and is close to Guillermo Moreno, the interior commerce secretary widely disliked by businesses for what many say has been his thuggish enforcement of the government’s controversial system of price controls.
More changes are now expected in the way inflation is calculated and the January consumer price figure, formerly expected to exceed 1.5 per cent, is now forecast at closer to 1.2 per cent. It seems the government’s taste for price controls now extends to price indexes. Neither policy is likely to be sustainable.
Mexico’s housing boom
Yet another record year seems in store for Mexico’s housing-development companies.
Promoting housing construction was one of the few real achievements of Vicente Fox, Mexico’s former president. Prudent handling of the country’s public finances has brought inflation and interest rates to historic lows, bringing home ownership within the reach of more Mexicans than ever before. According to Bancomer, the Mexican subsidiary of Spanish-based BBVA, a typical mortgage is now available at fixed interest rates of 11.75 per cent a year – and, in some cases, as low as 9 per cent – payable over 25 years. That compares with 25 per cent over 15 years just five years ago.
The government, through institutions such as the National Housing Commission, which guides public policy in the sector, and Infonavit, which has abandoned building homes in favour of providing loans to workers, has worked hard to stimulate growth in the sector.
Since taking office in December, president Felipe Calderón has made clear his intention to maintain house construction as a motor of economic growth. Significantly, he has also confirmed that the heads of Conavi, Infonavit and the Federal Mortgage Society, another government institution, are to stay on. Good news for GEO, ARA, Consorcio Hogar, Sare, Homex and Urbi, Mexico’s six largest private construction companies.
Notes by Hal Weitzman, Richard Lapper, Benedict Mander and Adam Thomson
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