Political Developments
South America – Argentina, Chile, Ecuador, Peru and Bolivia – was convulsed through October:
On 18 October Chile’s government was caught unawares by violent protests, looting of shops and vandalising of public property. The immediate spark was the government’s hiking of local metro fares by 3 percent, rolled back by Congress but too little too late. The death toll rose to 19, with hundreds injured in police firing and riots, with the army called out and emergency measures invoked. Chile, a model political economy in a volatile region, with an enviable per capita GDP over US$ 20,000, has not seen violent riots in a long time. Clearly the political environment has been poisoned by a hidden but insidious inequality that denies basic benefits of health, education, and other services commensurate with Chile’s economic status to a vast number while the business sector is patronised. On 25 October, the capital Santiago saw the largest protest in Chile since 1988 under dictator Augusto Pinochet. More than 1 million people gathered to denounce the right-wing government’s austerity policies. President Sebastian Pinera, who initially condemned the protests, had to acknowledge the underlying rage, and sacked his Cabinet. Piñera pledged a 20 percent rise in government-subsidized base pensions, a guaranteed minimum wage, and the reversal of a planned increase in electricity prices and plans for pay cuts and term limits for members of the National Congress. As the protests continued, President Pinera announced on 29 October the cancellation of the APEC and COP25 climate summits. The former was to be held on 16-17 November and the latter in early December in Chile.
On 27 October Argentina’s voters rejected centre-right President Mauricio Macri’s government. The president-elect Alberto Fernandez (47 percent of the vote) was nominated by his former president and running-mate Cristina Fernandez de Kirschner, who extracted revenge on Macri for having instituted criminal prosecution against her (admittedly) corrupt administration. If Dutch Disease became a generic term symbolizing the detrimental effects of a resource-rich economy, the Argentine Disease could mean an economy overly reliant on commodities, mainly agricultural, and subject to international economic vicissitudes. Macri attempted to wean the population away from a Peronist diet of subsidies, crony business and trade unions. An unsustainable debt burden (over 90 percent of GDP) and a massive devaluation of the peso put paid to his strategy and presidency. Argentina has defaulted on its foreign debt nine times since 1838. GDP has contracted for 22 of the past 58 years, while Peronists held power for 24 of the 36 years since democracy returned in 1983. Peronism seems to thrive on short-term measures that render immediate benefits, at the cost of longer term stability. Argentinians have lost faith in their currency and prefer US dollars, so governments maintain currency controls that distort economic development. According to most analysts, lack of reliable and honest institutions have added to public mistrust.
On 24 October Bolivia’s Supreme Electoral Court decreed President Evo Morales re-elected for a record fourth term. The leader of the leftist MAS party received 47.8 percent of the votes cast on Sunday, compared with 36.51 percent for main challenger Carlos Mesa. Morales, the first fully indigenous President of Bolivia is popular and has governed reasonably successfully, but has been criticized for bending the political rules. He is opposed by the mainly non-indigenous business lobby centred in the prosperous south-east, but has managed the Bolivian resource base – gas, lithium among others – skillfully without resorting to excessively populist politics, unlike his counterparts in Venezuela and Nicaragua. After he lost a referendum in 2016 that would permit re-election, a tribunal ruled that his initial term (which began in 2006, prior to the enactment of a new constitution) did not count toward term limits. It then appeared Morales would not run for another term, but the Constitutional Court ruled in 2017 that term limits violate candidates’ human rights. Mesa became president in 2003 but was forced to resign in 2005 amid massive protests demanding the nationalization of the oil and gas industry. He refused to recognize the first-round victory by Morales, and is backed by the United States, its Latin American allies, the Organization of American States and the United Nations. Morales finally agreed to an audit of the election results.
On 30 September, after a political standoff, Peru’s President Martin Vizcarra dissolved the Congress (Parliament) and called for fresh elections after it appointed a new member to the constitutional court without debating the government’s objection. The opposition – mainly from the right-wing Popular Force party led by jailed former presidential candidate Keiko Fujimori, retaliated by voting to temporarily suspend him for 12 months, naming Vice President Mercedes Araoz as the country’s acting chief executive. This prompted Prime Minister Salvador del Solar to step down. These developments led to massive public demonstrations in the streets as the military stepped in to restore order in support of Vizcarra. Araoz declined the presidency soon after in the light of the political mood in favour of Vizcarra, who enjoys massive public support for his fight against corruption and transparency. Political developments over the next months, leading up to the elections to Congress in January 2020, will bear watching.
Ecuador has been an economy in turmoil for decades. Oil-rich but ecologically sensitive, its production of around 500,000 barrels per day entitled it to be a minor member of the OPEC. It did not see much benefit and in October President Lenin Moreno announced Ecuador would leave the cartel in January 2020. A deal with the IMF for a $4.2 billion loan package, along with $6 billion from other lenders, bolstered the economy but came with strings attached. On 2 October Ecuador announced tax reforms, eliminated fuel subsidies, and introduced drastic labour reforms, apart from privatisation measures. The measures ignited massive protests, provoking the government to impose a state of emergency. Eventually the decree was withdrawn by the government. Since 2000, following a severe economic crisis, the US dollar has been the national currency in Ecuador (Panama and El Salvador also use the dollar as national currency). This provides a hedge against inflation, which has been held in check. The government claimed the fuel subsidy costs $1.5 billion annually and the tax reforms will yield over $ 2 billion in revenues.
On 17 September, soon after Venezuela’s ‘Interim’ President Juan Guaidó announced the opposition was no longer going to attend the Norway-sponsored talks with the government in Barbados, an agreement between the Maduro regime and smaller opposition parties was announced, under which over 50 members of the National Assembly from the ‘Chavista coalition’ would return to that forum almost three years after they left the legislature to form part of the National Constituent Assembly, a parallel legislature made up entirely of pro-government members. In addition, the deal says that a new National Electoral Council will be formed soon, as the current one has been constantly questioned and accused of pro-government bias by the opposition. The document, which was publicised by the Venezuelan Foreign Ministry, also provides for the release of political prisoners.
The OAS passed a resolution condemning events in Venezuela and levying more sanctions on the Maduro government. As the resolution was passed in New York, Maduro was in Moscow where President Putin reiterated his support, although the official statement spoke of “all the legitimate power organs of Venezuela, including the presidency and its parliament…” This could be interpreted to refer to the opposition-dominated National Assembly which has elected Juan Guaidó as interim President. Russia is the Maduro regime’s main ally, along with China, Bolivia, Cuba, Nicaragua and Turkey. In the last 18 years, Russia and Venezuela have signed about 260 cooperation agreements in mining, oil, economic, energy, food and military matters. Venezuela expects Russian investments of about $1 billion in mining projects.
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Economic Developments
On 23 September, the US along with the majority of Latin American nations voted to sanction Venezuela. In a meeting convened by the Organization of American States, 16 of the 19 states party to the Inter-American Treaty of Reciprocal Assistance – a 1947 pact popularly known as the Rio Treaty – backed using the pact to collaborate on law-enforcement operations and economic sanctions against Maduro and his associates. Uruguay opposed the resolution, claiming this could lead to military intervention to remove the Maduro regime and threatened to leave the Rio Treaty forum. Trinidad and Tobago, a neighbour with overlapping hydrocarbon deposits, abstained and Cuba was absent. The Rio Treaty was created as a means of mutual defense for Western Hemisphere countries and was last employed after the Sept. 11, 2001, terrorist attacks on the US. Many of the countries that are part to the treaty lack statutes by which they could impose sanctions on their own.
Focus India-LAC
On 25 September PM Modi met with leaders of the Caribbean on the sidelines of the UNGA meeting in New York. The meeting was attended by the Heads of Governments of Antigua and Barbuda, Barbados, Dominica, Jamaica, St. Kitts and Nevis, St Lucia, St Vincent and the Grenadines, Trinidad and Tobago, Vice President of Suriname, and Foreign Ministers of Bahamas, Belize, Grenada, Haiti and Guyana. It was the first-ever meeting of PM with CARICOM leaders in a regional format. Indian diplomacy has focussed on the diaspora in the Caribbean, though relations have been less prominent in the bilateral than in the regional context. Caribbean countries like Trinidad & Tobago and Guyana have had Indian origin leaders as heads of state and government, identity politics has diluted the influence of the Indian diaspora in favour of the Afro-Caribbean recently. The Caribbean Community (CARICOM) 15 members meet in the forum of the Association of Caribbean States (ACS) with other Caribbean countries. These countries form an important multilateral vote bank. PM announced a USD 14 million grant for community development projects in the CARICOM and another 150 million Line of Credit for solar, renewable energy and climate-change related projects. In what may be considered a diplomatic victory for India, the PM of Antigua and Barbuda, who attended the meeting declared that fugitive businessman Mehul Choksi, who obtained citizenship of that country, and is appealing his extradition to India, is a crook and would be extradited as soon as the judicial process was over.
A Reuters report in October quoted a representative of Reliance Industries saying that the company has been supplying Venezuela with petroleum products, including diesel, permitted under U.S. sanctions and thus it “is able to recommence crude sourcing”. Reuters also put out a quote of Finance Minister Nirmala Sitharaman on the issue of US sanctions in which she stated that India, as a strategic partner of the US India needed to be economically strong as well, implying that Indian entities could not be expected to comply with all US sanctions to the letter. Reliance is the largest Indian oil buyer from Venezuela and one of the main suppliers of diluent, which is necessary to process extra-heavy crude oil and convert it into exportable hydrocarbon. When sanctions took effect, the company also announced it would stop selling the diluent until the US sanctions were waived. Reliance is understood to have lifted 2 cargoes of heavy oil in October from Venezuela’s state oil company PdVSA, which desperately needs to draw down almost 39 million barrels of unsold crude inventories. The situation has forced it to reduce output and suspend crude blending. Political uncertainty over the fate of the Maduro government has almost left the field open for Russian strategic ingress and exploitation of the largest reservoir of hydrocarbons in the world. Reports also indicate that India’s Nayara Energy (former Essar, bought out by Russia’s Rosneft) is receiving Venezuelan crude in exchange for petroleum products supplied to Rosneft. China is also heavily invested. Chevron remains the only US company operating in Venezuela. India’s state owned ONGC is invested in 2 oil producing joint ventures with PdVSA but refuses to invest more, despite dwindling output, till the Venezuelan government releases hundreds of millions of dollars it owes ONGC for past dividends from the joint ventures.
India’s public sector ONGC (Videsh) Ltd. has struck oil in Colombia, in a producing field in which it has 70% participating interest. It has also made a major gas discovery in an offshore field in Brazil at a depth of almost 6 kms. The field, in which OVL has a participating interest of 25 percent along with the Brazilian national oil company Petrobras, promises rich dividends. OVL, the first Indian oil company to venture into Latin America almost two decades ago, has a significant presence in the oil and gas sector of Brazil and Colombia, with stakes in seven exploratory blocks.
On 18 October 311 Indian citizens who had entered Mexico illegally, looking to enter the US, were deported by Mexico in a chartered aircraft. The Indian Embassy issued Emergency Certificates permitting the Indians to travel only to re-enter India. The episode underlines the Mexican government’s determination not to become a staging ground for illegal migration into the US, as well as the growing threat of desperate Indian migrants seeking to go west through Latin America.
