Ibero-American News Digest

Brazil Suspends Privatization of Federal Highways

The planned privatization of seven Federal highways in Brazil—2,600 kilometers, considered the "filet mignon" of the nation's highway system—has been suspended, President Lula da Silva's chief of cabinet Dilma Rousseff announced on Jan. 10. Rousseff said the government made the decision to head off a possible "concessionaires' cartel." Shortly thereafter, Deputy Attorney General Aurelio Virgilio Veiga Rios charged that "the profit margin of the concessionaires is only comparable to the international drug trade."

Days later, London's Financial Times was still sputtering over that "extraordinary statement"! The same paper worried on Jan. 14 that this just might be a sign that "Latin America is shifting towards state control of the economy" again.

The private interests which were about to get their hands on lucrative tollroads are furious, and intend to reverse the decision, but there is talk that the government has plans to set up a state enterprise to run the roads. Officials representing other interests in the Lula Administration, including cabinet ministers, rushed to placate "the markets." Transportation Minister Paulo Sergio Passos denied that the privatization had been either cancelled or suspended, insisting that a decision had just not been made yet, and that a decision would be made within a few days, at a meeting with the President.

After 16 years of disinvestment by successive governments which made debt payments primary, the condition of Brazil's un-maintained highways is a real drain on national productivity. The real scandal, however, is, that 60-80% of all Brazil's cargo is transported by highway, since this would-be modern nation has very little railway.

Free-Trade Freak Dumped in Peru

After Senate Majority Leader Harry Reid's New Year's visit to Peru (see InDepth, last issue), the Alan Garcia government dumped Hernando de Soto as Special Free Trade Negotiator with the United States. On Jan. 8, Peruvian Foreign Minister Jose Antonio Garcia Belaunde announced that Peru's Ambassador to Washington, Felipe Ortiz de Zevallos, would handle the negotiations on the U.S.-Peru free-trade agreement. He explained that the decision was adopted "because of the changes in political winds blowing through the American legislature."

Actually, the news was let out right after the group of six Senators headed by Reid met with Alan Garcia Jan. 2, in which the Senate leader failed to exhibit any sympathy for a free-trade agreement.

Hernado de Soto is the head of the Liberty and Democracy Institute (ILD, in Spanish) an outgrowth of the NED (National Endowment for Democracy), and funded by USAID, for which reason it was also said there was a "conflict of interest" in representing Peru.

Mercosur Summit Turns into 'Presidents Club' Meeting

South Americans are not waiting to formally unify the two common markets of the continent (Mercosur and the Andean Community of Nations), but are simply doing that de facto. Brazil, as the outgoing secretary pro-tem of Mercosur (South American Common Market), invited the heads of state of the "associate members" (which include Chile, Bolivia, Ecuador, Peru and Colombia) to join the core members (Argentina, Brazil, Paraguay, Uruguay, and Venezuela) to attend the Jan. 18-19 Mercosur summit in Rio de Janeiro. And while they were at it, they also invited their colleagues from Surinam, Guyana, and Panama. Peru's Alan Garcia and Panama's Martin Torrijos, were the only two not to attend.

It was the first full meeting since Ecuador's Rafael Correa entered the Presidents Club, and he, along with Venezuela's Hugo Chavez, is pushing for creation of a "South American Bank" to finance development. Venezuela is prepared to put up at least 10% of reserves to help fund the bank, Chavez announced last week. He urged other South American countries to do the same, so that "in 5-10 years, we won't need the World Bank or have to go begging all over the world."

Financiers and their hangers-on are putting out the line that Mercosurs' supposed free-trade character is threatened by "Venezuelan, Ecuadorian, and Bolivian socialism," and that the body is nearing its death-bed. The State Department's U.S. Infoservice released two press releases on the eve of the summit: one, "Latin American Nationalization Trend Seen Hindering Progress," and another insisting that all Organization of American States members act to defend democracy in Venezuela, since Hugo Chavez is closing an opposition TV channel.

Brazilian Foreign Minister Celso Amorim dismissed such chatter in advance, telling reporters that Venezuela has been a fine addition to Mercosur, and what it does domestically is its business. If it affects U.S. or European interests, that's their problem, not Brazil's. What matters, is the process of Ibero-American integration.

Ecuador Policy: Social Payments First, Debt Last

Ecuador's Correa government will make a $135 million bond payment due on Feb. 15, only if there is enough money left over after taking care of social expenditures, Finance Minister Ricardo Patino told foreign journalists Jan. 17. His statements were coupled with the report that Argentina will be sending a team to Ecuador this week to offer assistance in restructuring that country's debt, based on Argentina's own experience in doing the same in 2005. This will certainly unnerve Wall Street and the City of London.

Patino explained that the government's aim is to renegotiate the debt so that "it doesn't drown us." Moreover, he added, no illegitimate debt will be paid. President Correa's priority is to first allocate the financial resources necessary to help the poor, the Minister stated, which includes a doubling of monthly welfare payments from $15 to $30 for 1.2 million people, as well as offering micro-credits for small businesses. "If we have the resources, we will certainly pay. But first we will pay for the human development bonds. First we will provide micro-credits."

Lengthy excerpts from Correa's Jan. 15 inaugural speech, which outlined this policy, are included in this week's InDepth section.

Honduras, Too, Seeks To Protect Its People

The Honduran government is taking control of foreign-owned oil storage terminals as part of an import program meant to reduce fuel prices, President Manuel Zelaya announced on Jan. 13. The measure affects ExxonMobil and Chevron. The Honduran government made a deal with ConocoPhillips to import at least 8.4 million barrels of gasoline and diesel a year and secured the terminals for that use. "It is not a nationalization, it's a temporary use of the storage tanks through a lease and payment of a reasonable price," explained Zelaya, after failing to reach a deal with the companies to rent the terminals.

Schemes Abound To Grab Migrant Remittances

International financial vultures are salivating over the possibility of seizing migrant remittances to fund public-private partnership (PPP) schemes in Ibero-America. Noting that the "free-trade agenda" in countries like Peru and Colombia is "running into trouble" with the new Democratic Congress in the United States, the City of London's Financial Times on Jan. 8 recommended PPP schemes as an alternative for Mexico and Central America, which could be financed, at least in part, by remittances sent by "migrant clubs" in the United States.

"Millions of dollars" have been channelled into roads in Mexican states like Zacatecas through "three-for-one" schemes, the FT enthusiastically reported. The Mexican Federal, state and municipal authorities provide one dollar for every dollar sent by migrants. So, why not go for a "four-for-one" deal, where the U.S. could provide an additional dollar of funding, and then "encourage governments in poorer remittance-rich [sic!] countries such as El Salvador, which have been much slower off the mark than Mexico in this area."

Some Mexicans are also eyeing remittances as a potential source of financing for projects that should be publicly funded—but aren't. The head of the PRI's Working Group on Migration in the Lower House, Edmundo Ramirez Martinez, laments that only 2% of the remittances sent from the U.S. ($24 billion in 2006) are used for "productive projects" that will create jobs, combat poverty, and foster the development that will stop Mexicans from leaving the country. He demanded greater commitment from the Executive and Legislative branches to create programs that can take advantage of the "potential" of remittances.