HIGHLIGHTS
● Political Developments
● Economic Developments
● Focus India-LAC
Political Developments
Russia’s special military operation in Ukraine elicited a range of reactions in LAC, from outright support to outright condemnation, more or less along expected lines. With high level visits from Russia’s Deputy PM and Head of the Duma, days before the action began, Venezuela’s Nicolas Maduro strongly supported Russia, and condemned NATO expansion. Nicaragua not only supported the action but even recognized the independence of the Donetsk and Luhansk republics. Cuba defended Russia’s “right to defend itself”.
Chile and the Dominican Republic came out with the strongest condemnation. Even Chile’s leftist President-elect, Gabriel Boric condemned “the invasion of Ukraine… the violation of its sovereignty and the illegitimate use of force”. Brazil and Mexico voted in favour of the UN Security Council resolution on 25 February – India abstained – deploring Russia’s actions. President Bolsonaro had controversially visited Russia to meet Putin on 16 February and expressed “solidarity” with Putin’s explanation of the brewing conflict and the fact he was being cornered by NATO and Western countries, but was contradicted by his Vice President, General Hamilton Mourao, who condemned Russia’s action, and was in turn upbraided by Bolsonaro, who announced that Brazil was “neutral” in this conflict! The MERCOSUR trade bloc (Brazil, Argentina, Uruguay and Paraguay) retracted a statement drawn up by Paraguay calling it an “open violation of the principles and norms of International Law” and calling for “the immediate withdrawal of the Russian military forces from Ukrainian territory” after reported opposition from Brazil. Left-wing regimes in Peru and Bolivia did not react strongly, calling for cessation of hostilities, while Colombia, Ecuador and Uruguay, more to the right, were critical of the violation of Ukraine’s sovereignty. Argentina, whose president visited Russia in February (see below), rejected the use of armed force and called for dialogue.
The rise of the left in LAC has the US worried with the resurgence of the Cold (now perhaps hotter) War. At their summit in February, Presidents Putin and Xi Jinping reportedly reaffirmed an informal understanding over their presence in Latin America. Earlier the Russian Defence Minister Sergei Shoigu had alluded to the possibility of enhancing Russia’s military presence in certain countries – notably Venezuela, Nicaragua and Cuba – as a riposte to NATO’s moves closer to Russia’s borders. This was separately hinted at by Putin. Venezuela has close military ties, even defence production facilities set up with technology and supplies from Russia, whose intelligence gathering and generating capabilities could be enhanced with Chinese resources. On 17 February, President Maduro after a meeting with Russian Deputy Prime Minister Yuri Borisov, declared “…we have ratified the path of a powerful military cooperation between Russia and Venezuela…to increase all the preparation, training and cooperation plans with a military power in the world such as Russia.” Years ago, Shoigu had spoken of the possibility of Russia setting up a naval base in Nicaragua. Other countries such as Bolivia and Peru could conceivably coordinate military strategy with Russia and China, which may not redress the strategic balance in the region but will create problems for the western alliance.
The year began tenuously for the opposition in Venezuela. The four-party opposition grouping in the National Assembly (derecognized by President Maduro) ratified Juan Guaido as the country’s ‘interim President’ for 2022 but curtailed his powers, making him accountable to a committee of opposition lawmakers, especially for funds under his control. Foreign policy will also be run by the committee, which will authorize the appointment of ambassadors in opposition allied countries. Shortly before, Guaido’s ‘foreign minister’ Jorge Borges resigned. Guaido’s support within the country, according to opposition surveys, has fallen to 16% as of October 2021 from 61% in early 2019, when he was recognised by the US, followed by 57 other countries. The UN General Assembly in December voted 177 in favor and only 16 against to recognise the Maduro government, meaning that the vast majority of the 58 nations that had recognized Guaidó as the legitimate president no longer do so. These developments come in the wake of a strong showing by the Maduro regime in regional and local elections, with the opposition also securing some important victories. The dialogue between the opposition and Maduro in Mexico, denounced by Guaido, is stalled. Meanwhile oil production is looking up, peaking at 1 million barrels per day in December, with China and Russia openly backing the Maduro regime, and the west searching for options, despite a State Department statement on 4 January reiterating support for the opposition ‘Unitary Platform’, withholding Venezuelan oil assets in the US and up to 1 billion dollars in gold in England from the Maduro government.
A little noticed development in the tussle between left and right in South America has been the development and consolidation of an organisation call PROSUR (Forum for the Progress of South America). It was founded in Santiago, Chile in March 2019. Eight South American countries – Argentina, Brazil, Chile, Colombia, Ecuador, Guyana, Paraguay and Peru – signed onto the declaration creating ‘a regional space for coordination and cooperation, without exclusions, to move towards a more effective integration that allows us to contribute to the growth, progress and development of the countries of South America….’ PROSUR advocates make no secret of their disdain for UNASUR, created in 2008 with all 12 South American nations as members, and inspired largely by then Brazilian President Lula. The latter was an attempt to bridge the ideological divide between left and right-wing regimes and find consensus on political and economic solutions to common issues. It achieved some successes, mostly as a forum where leaders with diametrically opposed attitudes such as Hugo Chavez of Venezuela and Juan Manuel Santos of Colombia could meet along with centrist leaders like Lula and Michelle Bachelet of Chile. The ideological divide has however prevailed. Recent elections have thrown up regimes opposed to their right-wing predecessors – in Argentina, Peru, Chile – affecting economic policy as well as diplomacy. The third PROSUR summit in Colombia was not attended by Argentina, currently under a left-wing presidency, and Chile which just elected a left-wing president. In some cases, left-wing presidents (Argentina, Peru, Honduras), face resistance from vested interests exerting pressure through parliaments and other institutions, which impacts governance. PROSUR seems a low-key attempt to overcome this malaise, though the organisation does not conceal its anti-left bias. It was formed 18 months after the Lima Group, comprising thirteen Latin American countries, derecognised the Venezuelan regime of Nicolas Maduro in favour of ‘Interim President’ and opposition leader Juan Guaido. Venezuela was not invited to the inaugural PROSUR summit while Bolivia, Suriname and Uruguay – then under a left-wing presidency – did not sign on to the declaration. With Brazil and Colombia, which may see left-wing victories later this year, and the left resurgent in Mexico and Central America, Latin America seems headed for a more polarised future.
A foreign policy dilemma for the US was highlighted during the visit of Alberto Fernandez, President of Argentina, to Moscow and Beijing in early February. Though Fernandez is considered a moderate by the west, his public call for Russia to reduce Argentina’s dependence on the US and the IMF (with whom Argentina is renegotiating its massive debt) took the US by surprise at a time of heightened tensions with Russia. The event had personal overtones, with Fernandez looking directly at President Putin during his address, offering Argentina as a gateway for Russia to increase its limited presence in the region. Russia-Argentina diplomatic relations date back to 1885. The USSR assisted Argentina during the Falklands war in 1982 with satellite surveillance of the British fleet, helping in the sinking of HMS Coventry. Relations nevertheless remained tepid over the decades due to Russian preoccupations and the instability of domestic Argentine politics.
Fernandez’s visit to Beijing was more substantial though less controversial – unless his attendance at the Winter Olympics opening ceremony is seen as a political statement. Argentina formally joined the Belt and Road Initiative, the 21st LAC economy to do so since 2017, and the largest so far (Brazil and Mexico are outliers). His meeting with President Xi Jinping yielded generous handouts of investments and probable restructuring of some of the approximately $ 20 billion in debt. Mutual support for China’s claim on Taiwan, and Argentina’s on the Falklands/Malvinas archipelago, was reiterated. China will go ahead with construction of its newly designed Hualong-1 nuclear reactor at the Atucha nuclear complex, the first to be built outside China. Other areas included solar energy; electricity transmission; telecom and the ‘digital economy’ (Huawei has a massive presence in Argentina); biomedicine (Sinopharm vaccine production in Argentina); agriculture (soya mainly); mining (lithium); transport (railways and roads); and some commercial sideshows.
Economic Developments
The World Bank report, Global Economic Prospects notes that economic growth in Latin America and the Caribbean region (LAC) rebounded to an estimated 6.7% in 2021. Strong demand in key export destinations (the United States and China), high commodity prices, and continued high remittances to Central American and Caribbean countries were principal contributors. Regional growth is projected to soften, to 2.6 percent in 2022 and 2.7 percent in 2023, as fiscal and monetary policy is tightened, labour market conditions continue to be sluggish, and external conditions become less supportive. Brazil’s growth is projected to slow to 1.4 percent in 2022—owing to weak investor sentiment, erosion of purchasing power by high inflation, macroeconomic policy tightening, slowing demand from China, and falling iron ore prices—before rebounding to 2.7 percent in 2023. Mexico’s economy is forecast to soften to 3 percent in 2022 and 2.2 percent in 2023. Argentina is projected to slow to 2.6 percent in 2022 as private consumption slows on account of a drawdown of fiscal stimulus and investment fades, although carry-over from strong growth in 2021 underpinned a forecast upgrade for 2022. Strong cyclical rebounds in Chile, Colombia, and Peru in 2021 will soften in 2022 and again in 2023. Central America will grow at 4.7 percent in 2022, owing to an improved outlook for COVID-19 vaccinations and robust remittance inflows. Growth in the Caribbean is projected to accelerate in 2022, on account of the expected timing of the recovery in international tourist arrivals and oil discoveries in Guyana, Suriname and Barbados. Challenges to these predictions are: disruption due to COVID outbreaks; high debt servicing obligations, high inflation, lower commodity prices and extreme weather events. For its part, the UN Economic Commission for LAC (ECLAC) reported that while poverty levels remained stable through 2021 at around 33 percent, the number of those in absolute poverty rose from 81 to 86 million (13.8 percent of the total population).
The LAC region has the highest number of deaths due to COVID-19 reported worldwide (1,562,845 as of December 31, 2021), a figure that will keep rising as long as the pandemic continues. This represents 28.8% of all the COVID-19-related deaths reported in the world, despite the fact that the region’s population accounts for just 8.4% of the global population. As of January 26, 2022, 62,3% of LAC’s population (around 408 million people) had been vaccinated. The pandemic has had a severe economic effect on human resource development, adversely affecting basic education, work patterns and employment.
Focus India LAC
The government of India’s budget for 2022-23 on 1 February gave some indication of the pecking order in India’s foreign policy. The development aid allocated for LAC in 2022-23 is Rs 40 crores (US$ 54 million) – against Rs. 140 crores for Central Asia (5 countries), Rs. 250 crores for Africa – of a development budget of Rs. 6292 crores, from the total budget of the Ministry of External Affairs of Rs. 17,250 crores. This contrasts very poorly with the outlays from China, which is pouring in hundreds of millions of dollars in aid – medical, disaster relief, education, etc. for Latin America and the Caribbean.
