Latin America & Caribbean Review

Latin America & Caribbean Review- Special Bulletin by Ambassador Deepak Bhojwani

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Adviser, Latin America & Caribbean, Ananta Centre
Former Ambassador of India to Colombia, Venezuela and Cuba
NOVEMBER 2018| VOL 03 | ISSUE 06 | BI-MONTHLY

● Political Developments ● Economic Developments ● Focus India-LAC

Political Developments

On 28 October, Brazil elected Jair Bolsonaro as President in the second round. A former military officer, 63-year old Bolsonaro has represented the Social Liberal Party (PSL) in Brazil’s Congress (parliament) from Rio de Janeiro since 1991. His left-wing challenger, Fernando Haddad of the Workers Party (PT), did better in the second round with 44.8 percent to Bolsonaro’s 55.2. Haddad was a late entrant to the race and labored under the shadow of his patron, former President Lula – the original front-runner in the election – who was imprisoned earlier this year on corruption charges. None of the other candidates, including those from the former ruling Social Democrats (PSDB) stood a chance. The deeply polarized election saw massive abstention in a country where voting is obligatory. Around 21 percent did not vote, while another 10 percent cast invalid or blank votes.

Former President Dilma Rousseff lost her Senate election and her party PT was defeated in its stronghold of Minas Gerais State. While it won the highest number of seats in the lower house (56), it is a long way from exercising influence in a Congress with 30 political parties. Bolsonaro’s PSL, with 52 seats, may be able to attract enough support to manage legislation. Establishment parties PSDB and PMDB (Centre Right) fared badly.

Though a parliamentarian for 27 years, Bolsonaro was relatively unknown on the national stage till this year when he galvanized support with tough rhetoric, promising to abolish corruption, expressing nostalgia for the military dictatorship (1964-85), and his anti-liberal line on most issues from abortion to gay rights to climate change. The prospect of his election led to a coalescence of political forces behind Haddad after the first round on 7 October, but it was too late. Popular Brazilian disgust with corrupt politicians, deteriorating law and order and precarious economic conditions sustained support for Bolsonaro, an evangelical labelled as the ‘Trump of the Tropics’. The markets recovered with the prospect of market friendly measures and extensive privatization of government assets. While his views on foreign policy are still to crystallise, Brazil is expected to be far more insular, protectionist and conservative under his leadership. The impact on participation in IBSA, BRICS (Brazil is to host the 2019 summit) and other institutional arrangements, apart from cooperation on energy and trade with India, will become more apparent after his swearing in on 1 January 2019.

The International Court of Justice (ICJ) in The Hague delivered on 1 October a long-awaited judgment on the lawsuit brought by Bolivia against Chile in 2013, seeking access to the sea. By a 12-3 vote, the ICJ ruled that Chile is not legally obliged to negotiate with Bolivia to give the landlocked nation “sovereign access” to the Pacific Ocean. Bolivia lost 400 kilometres of coastline and 120,000 sq. kilometres of territory to Chile as a consequence of the 1879-1880 War of the Pacific. It claims Chile unjustly captured its territory and only gives Bolivia duty-free access to the northern Chilean port of Arica. Bolivia aspires to have a corridor, including a train line and port under its own control. Chile has argued that the 1904 Treaty of Peace and Friendship between La Paz and Santiago settled the border issue. The ICJ ruled that documents, notes and declarations exchanged between the two countries, over the last 116 years, imply that Chile has been willing to negotiate but does not have a legal obligation. Access to the sea is a major Bolivian foreign policy goal. President Morales, who travelled to The Hague for the verdict put on a brave face, claiming Bolivia would maintain its demand through political channels like the United Nations.
As the crisis in Venezuela continued, its regional ramifications intensified. Argentina, Chile, Colombia, Paraguay, Peru and Costa Rica, along with Canada, approached the International Criminal Court to investigate Venezuelan President Nicolas Maduro for human rights abuses. After a speech in the UN where Ecuador’s President Lenin Moreno criticised Venezuela for the refugee outflow (over 300,000 in Ecuador alone), Venezuela’s Information Minister, close to Maduro, called Moreno a liar, leading to the expulsion of the Venezuelan Ambassador in Quito. Ecuador is a member of the left-wing ALBA grouping that is losing momentum with the meltdown in Venezuelan and its consequent inability to subsidise oil supply to the region and finance other joint programs. Moreno has distanced Ecuador from the ideological leanings of his predecessor Rafael Correa – now a fugitive from Ecuadorean justice – and does not claim any solidarity with today’s Venezuela.

Paraguay, which in May became the third country to move its Embassy in Israel to Jerusalem, announced it would shift back to Tel Aviv. Foreign Minister Luis Alberto Castiglioni said the status of Jerusalem “should be addressed by the parties involved through negotiations, in accordance with provisions laid out by international institutions.” The decision taken by former President Horacio Cartes was overturned by the newly elected Mario Abdo Benitez. Israel announced it was breaking off diplomatic relations with Paraguay.

The United States on Friday recalled for consultations its envoys to the Dominican Republic, El Salvador and Panama, that recently switched diplomatic ties from Taiwan to China. Washington accused Beijing of destabilising cross-Strait relations and engaging in a campaign of “political interference” by poaching Taiwan’s allies in the western hemisphere.

 

 

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Economic Developments

On 1 October, President Trump triumphantly announced the US had concluded a successful renegotiation of the NAFTA treaty with Mexico and Canada, after more than a year of talks, rebranding it the “United States-Mexico-Canada Agreement,” or USMCA. Marcelo Ebrard, the Foreign Minister-designate of the incoming government of Andres Manuel Lopez Obrador, accompanied by his colleagues, told the media that the agreement reached with the United States and Canada is an “opportunity to strengthen the internal market”, despite certain “challenges of adaptation,” particularly for small and medium firms from changes in rules of origin, mainly in the automotive sector. The incoming team of Lopez Obrador – who takes office 1 December – seems to be playing it cool with the US, stacking up positive points in an environment poisoned by US xenophobia and belligerence, to limit the potential damage to the Mexican economy.

Focus India-LAC

The 8th India–LAC Conclave got underway in Santiago, Chile on 1 October. This is the second conclave (organised by the CII sponsored by GOI) held abroad. The first was in Mexico in 2016. Chile is currently the fourth largest trading partner of India, with 89 percent of its exports comprising products from the mining sector and the fifth largest export market for India in 2017-18 ($763 million) in LAC. India and Chile in 2017 operationalised the expanded India-Chile Preferential Trade Agreement (PTA) which also incorporates new chapters on Rules of Origin, Technical Barriers to Trade and Sanitary and Phytosanitary Measures, contributing to the reduction of non-tariff barriers.

Media reports in September reported official sources saying that ONGC (Videsh Ltd – OVL) has rejected the offer of Venezuela’s national oil company PdVSA to buy an additional stake in the San Cristobal oilfield joint venture in Venezuela in which OVL already holds 40 percent since 2008. OVL has been demanding payment of $ 537 million in dividends from the project, which produces 18,000 barrels per day (bpd). Venezuela has paid a small portion but still owes $ 449 million for dividends till 2013. Dividends since 2014 have not yet been declared by PdVSA. Under an agreement in November 2016, OVL agreed to guarantee $ 318 million in additional investment to raise production from the field, in exchange for 17,000 bpd of crude. The Venezuelan side has been unable to meet its commitments.

TVS Motors announced in September its alliance with Torino Motors, a subsidiary of Groupo Autofin in Mexico. The agreement involves a distribution network for the two-wheeler manufacturer, which exports to over 60 countries and already has a presence in Latin America. Mexico is already a very large market for the Indian auto industry, with active linkages to the vast North American market. Separately, Mexico’s Cinepolis, the world’s second largest multiplex company by admissions (339 million last year) and fourth largest in terms of screens (over 5,300 of which 350 are in India), also announced in September a planned investment of Rs. 1500 crores to add 500 more screens over the next few years. Cineplois entered in India in December 2009 with its four-screen multiplex in Amritsar.

India’s pharmaceutical presence in Latin America has grown. Lupin, which has a strong presence in Mexico, will develop its Brazilian subsidiary, Medquimica into a manufacturing hub for the region, which accounts for four percent of Lupin’s global turnover. The firm exports to Mexico, Brazil, Chile, Cuba, Dominican Republic, Haiti, Guatemala, Honduras, Panama, Peru and Venezuela. Lupin, which sold around $88 million worth in Brazil hopes to soon catch up with Torrent, another Indian pharma major based in Brazil with sales of $ 110 million in 2017/18.

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