China in Latin America: Exaggerating Medical Diplomacy

By Christopher Kambhu*

Peru’s Foreign Ministry greets Sinopharm staff/ Ministerio de Relaciones Exteriores/ Flickr/ Creative Commons License

China has garnered positive media coverage throughout Latin America for its COVID‑19 diplomacy, but it is far from clear if these efforts have altered the country’s regional standing. Coverage of its medical diplomacy has oversold its impact compared to the United States and obscured varying levels of support between countries.

  • Since the pandemic’s emergence across Latin America in early 2020, China has engaged in diplomatic efforts to send medical supplies – and later vaccines – throughout the region. Research by CLALS shows that, as of this month, China has donated $253 million worth of medical supplies, from masks to field hospitals. In addition, Beijing and its diplomatic corps have facilitated donations worth tens of millions of dollars from other Chinese entities, including foundations, businesses, and provincial and local governments. China has sold 409 million doses of domestically developed vaccines and further donated 1 million doses in Latin America and the Caribbean.

Deliveries of vaccines and medical supplies typically include photos ops at the airport, with Chinese flags conspicuously placed on packaging. Announcements of medical donations often include ceremonies at the Chinese embassy in the recipient country, even when the donation is from a non-state entity. These events obscure the line between state and non-state aid, and between vaccine sales and donations. By blurring these distinctions, some media have given unearned credit to Beijing by reporting “Chinese donations” without specifying the source.

  • This communication strategy has effectively created a narrative that China is gaining influence in Latin America through its medical diplomacy. The resulting media coverage – particularly think pieces analyzing geopolitical implications – has overshadowed the fact that Washington has provided more regional assistance than Beijing. As of this month, the United States has donated $310 million in medical supplies and cash assistance, significantly more than what China has donated. The same is true with vaccines: the U.S. has sold 427 million doses of domestically developed vaccines and donated 46 million more, outpacing Chinese efforts.
  • The narrative surrounding China’s medical diplomacy has also buried differences between individual countries. None of the countries that recognize Taiwan – Guatemala, Haiti, Honduras, Nicaragua, and Paraguay – have received any medical donations, nor have they been able to procure Chinese vaccines. In April 2020, Paraguay’s legislature debated switching recognition to China from Taiwan to appease Beijing and gain access to Chinese support.
  • The Chinese government has also used vaccines to quell criticism from regional leaders. In May 2021, Sinovac executives reportedly told Brazilian officials that vaccine shipping delays were due to Brazilian President Jair Bolsonaro’s continued ridicule of China as COVID-19’s country of origin. Acting under reported pressure from Beijing, the executives indicated that improved Sino-Brazilian relations would resolve the issue.

As the pandemic continues wreaking havoc on Latin American economies and societies, China’s medical diplomacy faces a changing landscape. The United States has increased its own vaccine diplomacy in recent months, including donations totaling 2.6 billion doses to COVAX, a UN-backed initiative distributing vaccines to low- and middle-income nations (China has only contributed 120 million doses). The Administration of President Joe Biden now is also promoting its medical diplomacy efforts with as much fanfare as Beijing.

  • While China’s efforts have generated a positive narrative, they have not fundamentally altered its standing in Latin America. Politicians, public health workers, and citizens appreciated the donations of masks and other medical supplies in the pandemic’s early days, but the response to China’s vaccines has been more muted. Access to Chinese-made vaccines is better than none, but they do not match the higher efficacy (real and perceived) of U.S. and European vaccines. Moreover, regional leaders are not rushing to embrace Beijing; Bolsonaro continues denigrating China even while its vaccines constitute more than one third of Brazil’s supply. Despite its successful communication strategies to date, China must look long-term to convert this generally positive narrative into improved public opinion.

November 23, 2021

* Christopher Kambhu is a Program Coordinator at CLALS. This research is part of a CLALS project on China’s Messaging in Latin America and the Caribbean, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State. 

Latin America: China’s Huawei Maintains its Foothold

By Luiza Duarte*

Brazilian President Jair Bolsonaro meets with Zou Zhilei, regional president of Huawei Latin America/ Palácio do Planalto/ Flickr/ Creative Commons License

Resisting U.S. pressure, Latin American countries are proceeding with Huawei as a potential or confirmed choice for their 5G wireless networks – while trying to attract other Chinese investments in their technology infrastructure.

  • Washington has been trying to shut out Huawei on security grounds since 2012, when U.S. companies were forbidden from using Huawei networking equipment. In May 2019, in the context of an escalating trade war, President Trump labeled the company a security threat and banned it from U.S. communications networks. The Biden Administration hasn’t reversed the sanctions.
  • These actions and the U.S. “Clean Network” campaign, emphasizing Huawei’s links to the Chinese government and alleged espionage activities, influenced Australia, Japan, Sweden, the United Kingdom, and others to institute similar bans. In 2018, at Washington’s request, Canada arrested Huawei’s Chief Financial Officer and Vice-Chairwoman, Meng Wanzhou, for alleged fraud, moving the issue into the international media spotlight.

Huawei has been present in Latin America for about two decades; it’s a key provider for the 4G network and associated infrastructure used by major telecom operators. Research for the CLALS China’s Messaging Project shows that 10 countries are likely to use Huawei technology despite U.S. concerns. Eight or so others are avoiding taking a position on the issue, but none have come forward to declare a ban on the company. 

  • At least 30 5G tests have been recorded in a dozen Latin American countries, more than one third of them with Huawei as the provider. The company secured an agreement with Uruguay to deepen cooperation on 5G and donated a telecommunications tower to Guatemala for training technicians on 4G and 5G networks. Colombia announced it won’t ban the company and Argentina has enabled five connection points for the new system in Buenos Aires using Huawei’s technology. Costa Rica and Venezuela’s 4G network relies heavily on Huawei’s infrastructure. In 2008, the Chinese company opened an office in Honduras, and it’s now the main provider for telecommunications companies in the country. It supplied nearly all of Cuba’s internet infrastructure.
  • Other countries are also unwilling to cut all ties to Huawei. French Guiana will comply with the French cybersecurity agency’s decision to grant time-limited waivers on 5G for wireless operators that use Huawei. This year, the United States has struck a deal with Ecuador – helping it reduce its debt – conditioned on the exclusion of Chinese companies from its telecom networks, according to the Financial Times. Two months later, the country’s National Telecommunications Corporation (CNT) and Nokia announced that they will begin to deploy 5G in the country, even though its pre-commercial tests were done with Huawei.
  • The COVID‑19 pandemic and the political battle around Huawei have delayed 5G-specific spectrum auctions in many Latin American and Caribbean countries. About one third of them don’t have concrete plans yet to adopt the next generation of mobile technology, and only Chile and Brazil have completed the tender to assign the 5G spectrum. Operators in ArgentinaUruguayPeruTrinidad and Tobago, and Suriname have launched the network in limited areas. Others are in different phases of the technological transition. 

The region’s two biggest markets have spoken of restrictions on Huawei, but continued reliance on the company suggests major collaboration will continue in one form or another.

  • Brazil’s main wireless firms already use Huawei for more than half of their networks and argue that banning Huawei would add billions of dollars in additional costs that would be passed on to consumers. The country’s auction was delayed several times and finally established a compromise involving a dual network – one (non-Huawei) for the government and all federal agencies, and one that did not block Huawei from servicing more than 242 million active mobile connections, according to the National Telecommunications Agency (ANATEL).
  • In Mexico, Huawei is excluded from the system’s “core” and areas near the U.S. border, but it’s present in other parts of the country. The company claims to be building the largest public Wi-Fi network in Latin America, with more than 30,000 hotspots in the México Conectado project. 

Huawei is undertaking robust lobbying campaigns to circumvent U.S. pressure and security concerns surrounding the firm’s hardware and software. Competitive pricing for its mobile, network, and cloud-based services has been key to establishing itself as “affordable, reliable and ultramodern.” Chinese diplomats are mobilized in the press and in social media to defend the company. But Huawei is also deploying a mix of traditional and controversial public relations strategies: large advertisement campaigns with local stars, events, partnership with universities and institutions, donations of equipment to governmental branches and businesses. It has donated 5G network kits to test agribusiness “Internet of Things” (IoT) services. It is also directly engaging decision makers, such as by hiring former Brazilian President Michel Temer to do its 5G lobbying in Brazil. 

  • Economic dependency on China made local governments fear retaliation and substantial financial consequences of a Huawei ban – a scenario that’s been even more sensitive during the pandemic. China holds a strategic position as a supplier of pharmaceutical items and COVID‑19 vaccines, while the region faces a public health and economic crisis.

November 19, 2021

Luiza Duarte is a research fellow at the Wilson Center, Brazil Institute, and CLALS. Her work focuses on Latin America-China relations. This research is part of a CLALS project on China’s Messaging in Latin America and the Caribbean, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State. 

Confucius Institutes: Building a Capacity for Business with China

By Madeline Elminowski*

Confucius Institute at the Universidade Federal do Ceará in Brazil/ Universidade Federal do Ceará/ Flickr/ Creative Commons License

China’s Confucius Institutes (CIs) in Latin America and the Caribbean form a cornerstone of its global public diplomacy efforts – with an increasingly clear emphasis on laying the groundwork for deeper business relations. As the U.S.-China rivalry has heated up, these educational and cultural promotion centers, which are partially financed by China’s Ministry of Education, have come under greater scrutiny in the United States, Canada, Australia, the UK, and elsewhere in Europe. Questions about Chinese propaganda and free speech have led to the closure of a growing number of CIs in those countries.

  • Since the first CI was established in Latin America and the Caribbean in 2006 in Mexico, the number has expanded to 44 in 21 countries, and Chinese government statements indicate plans to create more. According to Beijing media, more than one million students across the region have so far engaged with CIs. While concerns about the CIs’ operations have also been raised in these countries, debate has been more muted and at least so far has not led to the closure of any.

CIs worldwide feature curricula focused on teaching Mandarin and Chinese government-approved courses on Chinese civilization and history. In Latin America and the Caribbean, they aggressively tie these courses to training in Chinese business practices. In 2012, for example, a “Business Confucius Institute” was established at the Fundação Armando Alvares Penteado in São Paulo, Brazil. Courses on China’s business lexicon, how to interact with Chinese business partners, and how to leverage business opportunities with Chinese companies are now common in other Confucius programs.

  • In welcome ceremonies for students, CIs highlight these themes, promote study-abroad programs and business courses, and present themselves as places to develop specific business skills directly transferrable to the job market. They often offer classes of varying lengths, up to eight weeks, to help students acquire the interpersonal skills and practical knowledge for business transactions with Chinese companies.
  • Language classes in the CI at Chile’s Universidad Santo Tomás, for example, are pitched as a way to become fluent in the language of Chile’s “main commercial partner.” The CI at the Pontifícia Universidade Católica do Rio de Janeiro (one of 11 CIs in Brazil) offers a business-oriented program of study designed for employment for Chinese companies in Rio and for Brazilian national companies seeking to develop a Chinese partnership. CIs serve as channels for interested Chinese companies to recruit employees and interns from the region. The Universidade Estadual Paulista’s CI routinely posts job opportunities on its website. It also offers an annual job fair to connect Chinese companies located in Brazil with local Brazilians interested in working in China-Brazil business relations.

The CIs are increasingly functioning as conduits to promote Chinese business relations with the region, often incorporating events to discuss Chinese business projects and showcasing potential professional avenues of advancement for students.

  • China’s Belt and Road Initiative (BRI) was the main topic of a World Forum of Chinese Studies at the Universidad National La Plata in Argentina in 2018. Speakers from both Latin America and China discussed inclusion of Latin America in the BRI and its potential to generate opportunities for Chinese tourism in the region.

The Confucius Institutes are a major element of China’s long-term strategy for promoting trade and economic relations with countries across Latin America and the Caribbean. While the Biden Administration is now slowly rolling out its “Build Back Better” initiative, China’s expanding Belt and Road Initiative has momentum – 18 countries in the region have signed on to the BRI since 2017. CIs support this effort by helping to train a generation of Latin American professionals to work more closely with Chinese partners. The potential long-term implications for the United States of a Latin American workforce and business class better positioned to leverage attractive opportunities in and with China are clear.

November 11, 2021

*Madeline Elminowski is a master’s student in International Affairs, with a focus on Comparative and Regional Studies. This post reflects work carried out for a CLALS project on China’s Messaging in Latin America and the Caribbean, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State.

Brazil: COVID Pandemic Worsens Gender Inequalities

By Cristina Pereira Vieceli*

Participation rate of men and women in the labor market – fourth quarter 2014 to second quarter 2021


Source: Author’s elaboration based on PNAD-C/IBGE.

The COVID‑19 pandemic has worsened the already precarious state of employment for women in Brazil, reversing the modest progress they made in recent years and deepening gender inequalities. Brazil has had one of the world’s worst infection and death rates during the pandemic. As of last month, more than 600,000 people had died from the disease, second worst worldwide in absolute numbers. The pandemic has profoundly affected the Brazilian economy, mainly hurting the poorest populations, including women.

The 2015‑2016 recession and its aftermath, as well as neoliberal reforms introduced in 2017, left Brazil and particularly its labor force vulnerable to the pandemic and resulting economic slowdown.

  • The industrial and civil construction sectors, for example, underwent changes that had a profound impact on the labor market, with the deepening of the precariousness of contractual forms of employment. Labor reforms established, among other changes, new hiring formats, such as intermittent working hours and more flexible rules for part-time contracts. Promoted as necessary to “modernize” the labor market and thus increase productivity and hiring, the reforms have actually increased informality in the labor market and growth in self-employment. Between the fourth quarter of 2014 and second quarter of this year, the number of registered workers dropped from 36.35 million to 33.66 million – a decrease of 2.682 million jobs. Informal jobs increased by 1.435 million during the same period.
  • Women workers experienced divergent effects from the recession. From 2015 to 2019, the percentage of female private-sector employees decreased from 43.6 percent to 42.06 percent, but expansion of self-employment increased their overall participation rate from 50.6 percent to 53.1 percent. Wage inequalities between men and women, against a backdrop of falling wages for the working class, also narrowed. This “feminization of the workforce” occurred mainly between the fourth quarter 2014 and the first quarter of 2017, when the average working female’s earnings rose from 75.41 percent of the average male’s to 78.64 percent.

The pandemic hit a precarious labor market – with dire implications for labor security, especially among women. 

  • In the year beginning the fourth quarter of 2019, about 3.8 million formal jobs in the private sector for both women and men disappeared. Between the fourth quarter of 2020 and the second quarter of this year – the period of greatest pandemic control – only 304,000 jobs were created in the formal private sector, and informal-sector jobs dipped by about 1.9 million. Unregistered workers in the private and public sectors, including domestic workers, self-employed, and auxiliary family workers – 44.3 percent of the workforce (or 41 million workers) in 2014 – amounted to 48.73 percent (43 million) this year. 
  • With COVID, the upward trend in participation of women in the labor market has reversed. Activities that employ women in education, tourism, and public and domestic services have contracted, while unpaid domestic work has increased the burden facing the female workforce. Men at the same social level have also suffered setbacks (dropping 4.7 percent in participation), but women have left the workforce in greater numbers (dropping 5.3 percent). The income ratio between women and men has also declined because many women work in sectorswith a low level of formalization. 

The labor participation of men and women remains deeply polarized and, while both sexes face greater overall precariousness, the data clearly show that women have suffered significantly greater setbacks over the years. The unemployment rate among women grew from 7.7 percent in the fourth quarter of 2014 to 13.1 percent in the fourth quarter of 2019 – and jumped to 17.1 percent this year. Male unemployment was 9.2 percent in 2019 and 11.7 percent in the second quarter of 2021.

  • In-depth analysis of the data by class, race, and age would almost certainly show a similar trend: the vulnerable have grown more vulnerable through the country’s crises. It is clear that the populations most affected by the pandemic are those belonging to the low-income classes, which have a strong racial bias. Domestic workers, for example, were hit hard by job losses, with a dropout of 1.286 million workers in 2020 alone. Considering that more than 60 percent of domestic workers are black, most are in informal jobs with low wages.

November 3, 2021

Cristina Pereira Vieceli is an economist at the Inter-Union Department of Statistics and Socio-Economic Studies (DIEESE) in Florianópolis and the Universidade Federal do Rio Grande do Sul (UFRGS) in Porto Alegre. She is also a faculty fellow in economics at American University.

Putting “Teeth” in the Requirement for Consultation with Indigenous Peoples

By Thomas Andrew O’Keefe*

Indigenous groups in Bolivia march in defense of the TIPNIS/ Pablo Andrés Rivero/ Flickr/ Creative Commons License

In no other region of the world have as many countries ratified International Labor Organization Convention 169 – requiring that governments consult Indigenous communities before approving projects that may detrimentally impact them – as Latin America, but human rights due diligence standards adopted by companies involved in investment projects are proving much more effective in guaranteeing adequate and effective consultations rather than government action. This is true even though ILO 169 requires that governments consult with local communities before giving the green light to investment or development projects that affect Indigenous lands, natural resources, and water supplies. 

  • Neither Canada nor the United States has ratified ILO 169, and they were among only four countries that voted against the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP) when it came up for a vote in the UN General Assembly in 2007, which endorsed the “free, prior, and informed consent” principle. Colombia was the only Latin American country not to fully embrace the UNDRIP.

Despite widespread ratification of ILO 169 and endorsement of the UNDRIP, Latin America is plagued by social conflicts involving Indigenous peoples who feel they were never adequately consulted. The most infamous example was in 2009 at Bagua in Amazonian Peru, when the administration of President Alan García used lethal force to counter protests by Indigenous peoples opposed to legal changes that facilitated energy, mining, and agricultural concessions on their lands. The violence resulted in the deaths of 34 people (mostly policemen) and hundreds of injured. Many of these social conflicts have delayed the completion of major energy and mining projects throughout Latin America for years, sometimes forcing their abandonment or the revocation by governments of previously granted concessions. The direct financial losses incurred by businesses have been huge, not to mention the damage to corporate branding image.  

  • One reason for persistent conflicts throughout Latin America is that ILO 169 offers no definitive answer as to what happens if an Indigenous community vetoes a proposed project. Presumably that wouldn’t occur if the consultation were effective. But ILO 169 is vague on the precise consultation process a government must follow, leading to wide national variations as to who must be consulted and how. Although the UNDRIP implies that Indigenous peoples have the right to reject a project, its provisions are not considered legally binding by most governments unless specifically incorporated into domestic law. Even in Bolivia, one of the few countries where “free, prior and informed consent” is the law of the land, this did not prevent the administration of President Evo Morales from going ahead with a highway through the TIPNIS reserve in eastern Bolivia over the objections of its Indigenous inhabitants.

The growing importance of Environmental, Social and Governance (ESG) criteria in corporate decision-making, including the adoption of internal human rights due diligence policies and practices, may finally lead to effective consultation mechanisms that accept the notion that Indigenous peoples have the final say in either approving or rejecting a project that threatens their way of life or will permanently displace them from ancestral lands. For one thing, good faith consultation with Indigenous peoples is now a recognized international human right. More importantly, businesses are not absolved by a government’s failure to fulfill the obligation to consult Indigenous peoples on projects affecting them.

  • Multilateral lending agencies such as the Inter-American Development Bank have developed performance standards that include a consent requirement that must be adhered to by any company seeking their financing for investment projects that may impact Indigenous people. In addition, equity investors with investment risk management concerns are emerging as important guarantors of corporate consultation and consent with Indigenous communities, particularly in the natural resource extraction industry.
  • If the ESG criteria weren’t a big enough stick for private sector compliance, there is also an emerging trend in Europe and at the UN to make human rights due diligence principles mandatory for businesses. For example, France passed a law in 2017 that requires companies with a substantial presence in the country to adopt reasonable vigilance measures to allow for risk identification and for the prevention of severe violations of human rights directly or indirectly from the operations of the companies and their subsidiaries.  Businesses that do not meet their vigilance obligations are liable for damages incurred by victims. These emerging legal obligations encompass not only the foreign operations of corporations but increasingly extend to the entire production and supply chain. 

October 28, 2021

* Thomas Andrew O’Keefe is the President of Mercosur Consulting Group, Ltd and author of the chapter “Human Rights Due Diligence Practices for Adequate and Effective Consultation with Indigenous Peoples” in a forthcoming book to be published by the American Bar Association.

Five Questions About Nicaragua’s Predicament

By A Long-time Observer*

Students protesting against President Ortega/ Jorge Mejía Peralta/ Flickr/ Creative Commons License

As the people of Nicaragua prepare for presidential elections on November 7, they are a nation that sought to overcome dictatorship, revolution, and civil war by accepting and practicing democracy – just to find itself back at square one. The following questions address the recent past for an understanding of Nicaragua’s current predicament.

  1. How to explain President Daniel Ortega’s presence on the front lines of Nicaraguan politics for the last 40 years? Ortega has been head of government or head of the opposition in Nicaragua since 1979, when he led a coalition government of Sandinista guerrillas and independent civilians and then became President in his own right after elections in 1984. During the 1980s, the other main Sandinista leaders were busy running ministries and representing the country abroad, while Ortega started building a party structure loyal to himself. After losing the next election in 1990, his grip on the party increased as dissident Sandinistas left in protest over the transfer of public assets (mostly confiscated from Somoza and his cronies in 1979) as private property to the party leadership that remained loyal to Ortega.
  2. What is the Sandinista party (FSLN) today in terms of numbers, structure, and historical significance? The importance of the party structure has dwindled as the government relies more on alliances with non-Sandinista economic groups and Ortega becomes the great decider assisted by a small circle of confidants and family members. The party with a mass following is no more. Less able to mobilize people to counter or cower opposition as it might have done during, for example, the critical months of the 2018 uprising, it has resorted to outright repression (killings, imprisonments, exile).
  3. What was/is the role played by Venezuelan assistance during the latest Ortega governments? When Ortega returned to the presidency in 2007, Nicaragua was still recovering from the Contra War of the 1980s, which had drained the country of productive resources, and three neoliberal administrations, which cut social spending and sought to attract private investment. The 2008 worldwide economic downturn was an early challenge. President Hugo Chávez of Venezuela immediately stepped in to assist by providing Nicaragua with oil on credit and by purchasing foodstuffs for his own country. From 2010 to 2014, Venezuela provided more than $500 million yearly in petroleum. Venezuelan aid also altered the composition of the Nicaraguan business class by allowing Sandinista entrepreneurs to access credit and subsidies from semi-private companies set up to handle Venezuelan oil imports, as well as supporting social programs for their base in the countryside and urban barrios.
  4. What role does the private sector play in Ortega’s Nicaragua? Outside of the new Sandinista-owned businesses, the principal beneficiary of Venezuelan assistance was the traditional private sector headed by the country’s large agribusiness and banking concerns. Ortega mostly abandoned his revolutionary rhetoric and embarked on a new national development policy defined as “socialist, Christian, and caring,” while Nicaraguan companies exported meat and cereals to Venezuela at market prices. COSEP, the largest private-sector interest group, gave legitimacy to the alliance of convenience between Ortega and his public-private hybrid model. The economy grew at respectable annual rates of 4.5 percent to 6.0 percent from 2010 to 2017, but Venezuelan assistance declined after 2015, as did the Nicaraguan economy shortly afterwards. The last three years have witnessed negative economic activity, compounded by COVID‑19 and political unrest.
  5. What is the nature of the opposition to Ortega and how does it resemble opposition to the Somoza regime of decades past? It is difficult to estimate what proportion of the electorate would still support Ortega in an open election. There are no recent trustworthy polls, nor has the opposition been allowed to mobilize in public gatherings or participate in open political debate. However, the manner in which the regime has declared most, if not all, opposition candidates ineligible to run, and arrested many others, would suggest that it fears even the most timid of rivals. Nor does it have the economic resources to fund a large-scale campaign with even token opposition candidates akin to the “loyal” opposition that the Somoza dictatorship cobbled together to provide a veneer of legitimacy.

Ortega finds himself bereft of strong international support – even from a Latin American left that historically sided with the Sandinistas in their struggle against imperialism and interventionism – and must rely increasingly on the police and the army as a line of last defense. The army chief since 2010, General Julio César Avilés Castillo, has presided over a noticeable increase in the strength of the Nicaraguan Army, including the purchase of T-72 tanks and armored personnel carriers – cementing its political loyalties. The police, too, are now equipped with late-model pickups purchased from a dealership owned by a close business apologist of the regime.

  • Nicaragua’s current political landscape has a lot more to do with power – political, economic, military – than with the wishes of the electorate or the respect for human rights. No one doubts that Ortega will win his fourth consecutive election – by hook or by crook – come November 7, and Nicaragua’s predicament will not be over until at least one of the legs of the Ortega alliance gives way.

October 20, 2021

Latin America: Is COVID Creating Space for Tax Reform?

By Tasha Fairfield*

National strike in Colombia against the Duque administration’s proposed tax reform/ Oxi.Ap/ Flickr/ Creative Commons License

The COVID‑19 pandemic and associated fiscal stress have pushed taxation to the forefront of national political agendas in Latin America and beyond, but leaders need to learn from past failures to achieve success. The question of taxing the rich has gained salience, giving rise to multiple proposals for wealth taxes around the globe. Debate over raising revenue to finance social spending and other pandemic-related priorities by taxing economic elites is particularly important in Latin America, given its staggering inequality.

  • Economically, raising revenue from the upper crust of the income and wealth distribution can actually be optimal and efficient, as Piketty and Saez have shown. From a normative perspective, almost everyone agrees that, in principle, those with more should bear a larger portion of the tax burden. Taxing the rich should be especially popular in highly unequal countries, where the rich are a tiny fraction of the populations and the vast majority would stand to benefit.  

The politics of taxing economic elites tend to be more complicated, however. On the one hand, big business conglomerates and wealthy individuals often enjoy multiple sources of power that end up mattering more than public opinion during the policymaking process. On the other hand, while the majority may approve of progressive taxation, neither voters nor social movements have given priority to demanding that economic elites be taxed more heavily. They tend to see taxation as not directly affecting average citizens, and the technical details of reform initiatives can be difficult. Public support can nevertheless play an important role in counterbalancing the power of economic elites – especially during electoral periods, when politicians tend to be more concerned about what voters want.

  • When progressive tax initiatives do not visibly and narrowly target economic elites – as occurred in Bolivia’s attempt to reinstate an individual income tax in 2003 – the public may reject them. In the Bolivian case, Finance Ministry experts designed a technically appealing flat tax that would be easy to administer yet progressive in practice, thanks to a threshold exemption that produced higher effective tax rates for higher income earners. But the flat marginal tax rate sparked widespread misperception that the proposal was regressive.
  • Inconsistent government messaging also fostered misperceptions that the tax would affect a wide swath of Bolivians. President Gonzalo Sánchez de Lozada at one point asked the “middle class” to “assume this sacrifice,” even though in reality that “middle class” was only a tiny, privileged group of highly paid wage-earners and independent professionals. The proposed reform ended up provoking popular protests, despite the fact that most participants would have been exempt from the tax, and the reform was quickly abandoned. 

The pandemic era increases the opportunity that a strategy linking tax reform to social spending – an approach that has been used successfully in many previous instances – will gain momentum. Programs that provide tangible benefits naturally draw greater interest and support from popular sectors than taxes targeting economic elites.

  • The more immediate and visible the associated benefits, such as expanded and more generous cash transfers, the more effective this strategy can be. In Chile, for example, center-left governments in the 1990s and 2000s made popular social spending initiatives contingent on tax increases, leaving the rightwing opposition exposed to popular wrath if they the chose to vote against the package. An analogous approach is earmarking tax increases to finance social programs. Technocrats dislike earmarking because it creates budget rigidities, but the political advantages are clear.
  • The pandemic has greatly augmented social need and threatens to exacerbate inequality. Colombia’s experience last May, however, shows that linking spending to taxes alone may not be enough. The Duque administration’s proposed tax reform was explicitly intended to finance expansion of basic income support for poor Colombians, and the measures were presented together within a single reform package. Yet the initiative failed because the tax measures were not adequately targeted at economic elites. A second effort later in the year fared better because the sales tax measures and a proposed income tax threshold reduction were removed.

October 13, 2021

* Tasha Fairfield is an associate professor in development studies at the London School of Economics. Her book, Private Wealth and Public Revenue in Latin America: Business Power and Tax Politics, examines how and when the interests of economic elites prevail in unequal democracies through comparative analysis of tax reform in Chile, Argentina, and Bolivia after economic liberalization.

The Interamerican Democratic Charter Turns 20: Is it Becoming Irrelevant?

By Stefano Palestini Céspedes*

Commemoration of the 10th Anniversary of the Inter-American Democratic Charter, September 2011./ OEA – OAS/ Flickr/ Creative Commons License

Despite the clear merits of its text, the Interamerican Democratic Charter (IADC) has been enforced inconsistently over the 20 years since its singing; its effectiveness in curbing democratic backsliding remains unclear; and, with little chance of being reformed, it risks becoming increasingly irrelevant.

  • The Charter was speedily adopted in Lima on September 11, 2001, while the world was reacting to the terrorist attacks in New York and Washington. It emerged from a proposal by the government of Peru after the resignation of authoritarian President Alberto Fujimori to reinforce existing multilateral instruments for democracy. It became the main multilateral framework to deal with breakdowns of democracy and backsliding in the hemisphere.
  • The IADC developed a shared and precise definition of representative democracy; expanded the scope of action of the OAS to address coups and violations perpetrated by the elected governments; and defined procedures for various enforcement actions ranging from the dispatch of missions to the imposition of sanctions and the suspension states from the OAS.

Limits on the IADC mandate have compromised its enforcement and effectiveness, however. The enforcement of measures is under the control of governments, which take decisions through consensus or qualified majority-voting (in the case of suspensions from the OAS). Even though the IADC is grounded on the principle that democracy is a “right of the people” (Art.1), non-state actors and state institutions other than the executive branches have limited capacity to activate the IADC, and the Inter-American Commission of Human Rights does not play any role in its enforcement.

  • The IADC has not been invoked in cases in which member states have conflicting interests. For instance, it was not applied against Haiti in the wake of the forced removal of President Jean Bertrand Aristide in 2004 or against Honduras after the electoral fraud of President Juan Orlando Hernández in 2017. In both cases, Washington obstructed enforcement of the Charter for reasons other than “the defense of the right to democracy” of Haitians and Hondurans. More recently, Mexico has obstructed enforcement against Nicaragua despite the serious violations of the opposition’s political rights by President Daniel Ortega. Similarly, the IADC has been altogether ignored when the attacks against democracy have taken place in powerful states, such as after the assault against the U.S. Capitol in January.
  • Against this backdrop, the activism of current Secretary General Luis Almagro – who has pressured member states to take a stance through social networks and moral shaming on various occasions – has sought to work around governments’ monopoly of enforcement and break gridlocks. But his actions often compromised the impartiality of his post as he has been perceived as taking sides in the conflicts at hand and overreaching his powers under the IADC.
  • Disappointment with the IADC and Almagro’s performance has led Mexico and other governments to advocate for reinforcing alternative regional forums such as the Community of Latin American and Caribbean States (CELAC). However, these announcements have little credibility if they are not accompanied with sustained political leadership – in the face of certain U.S. opposition – and commitment of resources to build strong regional institutions.

Ironically, the IADC came into existence precisely when the conditions that made it possible – a liberal consensus and an international agenda on democracy promotion – were fading away. These two decades have demonstrated that the democracies of the hemisphere, including Washington, are not always willing to put the defense of democracy in the neighborhood before other foreign-policy interests. Governments are also prone to bypass the OAS and the IADC and go unilateral if they feel that a crisis affects their interests, as the Lima Group and the U.S. unilateral sanctions against Venezuela have recently shown.

  • These two decades have also demonstrated that member states are not up to even discuss reforming the IADC. They are reluctant, for example, to create an enforcement authority, which would render the application of the Charter more impartial and possibly more effective. This is certainly disappointing news for those who believe in Inter-American relations based not only on Realpolitik but also on principles and norms. The IADC will continue being a roadmap for the states in the region and a reminder of the commitment to democracy, but it will be – paraphrasing the first OAS Secretary General Alberto Lleras Camargo – what the states want to make of it.

September 28, 2021

* Stefano Palestini Céspedes is Assistant Professor of International Relations at the Pontificia Universidad Católica de Chile.

Pandemic Relief for Latino-Owned Businesses: Lessons from the Washington DC Metropolitan Area

By Robert Albro and Eric Hershberg*

Latina microenterprise in Washington DC/ Credit: Liz Albro

While the impacts of the pandemic and public health measures to contain it have been widespread across all demographic groups in the United States, minority-owned businesses have been disproportionately affected, with Latino-owned enterprises hit the hardest. A newly released CLALS study describes steps taken by local jurisdictions to ameliorate these impacts, identifies challenges experienced by Latino business owners in accessing pandemic relief, and offers recommendations to better support minority enterprises in anticipation of future crises.

  • By June of 2020, a Stanford Latino Entrepreneurship Initiative pulse survey reported that 83 percent of Latino businesses had experienced a negative impact from COVID‑19, and the National Bureau of Economic Research reported that the number of Latino business owners nationwide had declined 32 percent.
  • In the Washington Metropolitan Area, Latino business owners surveyed by CLALS during the same time period reported catastrophic losses of customers and sales, pressures on liquidity, employee layoffs, and dramatic disruptions of their day-to-day business operations.
  • In many cases the industries in which Latino businesses are concentrated made them more vulnerable. The onset of the pandemic had an immediate negative impact on Latino front-line workers in essential industries and on restaurants and retail establishments that rely heavily on foot traffic, forcing widespread closures. An estimated 25 percent of Latino businesses nationwide are either permanently shuttered or remain temporarily closed.

Nearly all Latino business owners CLALS surveyed in mid-2020 – 94 percent – ranked as most important the need for greater access to financial assistance to survive the crisis. However, the pandemic has exacerbated long-standing disparities between Latino-owned and other businesses, with Latinos among those receiving the least support to help weather the economic catastrophe.

  • According to a 2021 Federal Reserve report, Latino businesses were less than half as likely as White-owned firms to be approved for a loan during the COVID‑19 emergency. And the U.S. Small Business Administration reported only 7 percent of Latino businesses that applied received Paycheck Protection Program funding in 2020, compared to 83 percent for White-owned enterprises.
  • Latino small business owners experienced multiple barriers to access, including in many cases not having a relationship with a bank or professional financial service provider, lack of access to timely Spanish-language information about programs, immigration status, and inadequate accounting that left them ineligible for government relief.

CLALS’s study documents all federal, state, and local pandemic relief programs in the DC-metro region, and concludes that outreach by assistance providers did not always reach Latino business owners because local governments did not necessarily seek to engage them through preferred channels and familiar institutional counterparts. It further concludes that cities and counties striving to improve support for businesses in historically underserved communities in advance of the next crisis can be more inclusive and effective by discussing challenges and sharing best practices among each other,  targeting aid sooner to specific industries and business types, coordinating at the outset with trusted community ambassadors with strong local knowledge, and improving their awareness of how and where to best engage minority and Latino business owners, both in-person and through the right channels of communication.  

Nationwide Latinos are the most likely to start a business of any group, and they are also the fastest growing population in the Washington Metropolitan Area. Our region’s economic prosperity is increasingly connected to the success of its Latino entrepreneurs. How well its business ecosystem supports new Latino start-ups, business growth and stability, during normal economic periods but also the next inevitable crisis, will be a big part of sustaining any such prosperity. But this, in turn, will depend upon applying key lessons learned from the present pandemic crisis, including further institutionalizing the advantages of inter-jurisdictional collaboration and information-sharing, and the need to better support non-governmental and community-based institutions other than banks – which effectively channeled information, financial and technical assistance to Latino and minority enterprises throughout the crisis – as mediators between local jurisdictions and often hard-to-reach Latino business owners.

September 21, 2021

* Robert Albro is a Research Associate Professor in American University’s Center for Latin American and Latino Studies. Eric Hershberg is the Center’s Director and a Professor in American University’s School of Public Affairs. This report is part of an ongoing Center research program examining Latino Entrepreneurship.

China in Latin America: Influential But Not Liked

By Andrei Serbin and Luiza Duarte*

President Michelle Bachelet participates in a document-signing ceremony with the President of the People’s Republic of China, Xi Jinping./ Government of Chile/ FlickrCreative Commons License

An on-line survey of Latin American international relations experts reveals that China is viewed as having great influence in regional commerce, surpassing the United States and Europe, but that its engagement with the region is perceived as relatively negative. Although Chinese media have been increasing efforts to enter the information landscape in Latin America, they are not perceived to be a significant source of news for Latin American opinion leaders and do not appear to have significant influence on public opinion.

The questionnaire was administered by CLALS and CRIES last May and June as part of a broader project to assess the role of China and its communication strategies in Latin America and the Caribbean. It targeted academics and other thought leaders throughout Latin America. Some 379 experts responded.

Key findings:

  • China was perceived by 80 percent of the experts to have a “high” level of influence in Latin America, and only 5 percent said it was low. According to respondents, China’s influence was surpassed only by that of the United States. Madrid and Moscow scored slightly lower than Beijing.
  • The specific areas of Chinese influence were not homogeneous across the region. Asked about Beijing’s role in culture, the economy, health care, and technology, about 90 percent of respondents cited the economy as top area, followed by technology and medicine. (In each of these three categories, it was surpassed only by the United States.) Fewer than 5 percent named culture – higher than Russia and India but lower than six other countries on the list.
  • On the positive or negative impact of that influence, fewer than 10 percent said they had a “very good” opinion of the Asian power, while a little more than a quarter said they had a “good” opinion. About one-third said they had an “intermediate” opinion of Beijing, and the final third had a “bad” or “very bad” estimation. When asked to compare China with other world or regional powers, respondents ranked it among the lowest. A little more than one third view it negatively, 32 percent as neutral, and a little more than 25 percent positively. Germany, Japan, and Spain scored highest as “very good” and “good,” even if they’re ranked as having a lower level of influence. The United States scored somewhat lower, but China and Russia had stronger negatives and weaker positives. Only Russia’s influence is perceived more negatively than China’s.
  • Most of the experts felt the principal priority for having relations with China should be commercial, followed by foreign direct investment and other financial ties. International security ranked as their lowest priority – even lower than multilateral cooperation and human rights. Importantly, this order of priorities is the same as with U.S. relations – with the only statistically significant difference being a preference for cooperation on international security with Washington.

Important among the findings of the survey is that China is failing in its efforts to use media tools to create a positive image for the country and its government. Beijing has made significant investments in establishing a media presence, principally through its China Global Television Network (CGTN).

China’s state broadcaster launched CGTN Español in 2007, and it has significatively expanded operations worldwide in the past decade, multiplying platforms, newsrooms and crew. CGTN doesn’t have a Portuguese-language TV channel, but content in that language is produced by other Chinese media outlets, such as Xinhua, Radio China International, and People’s Daily.

  • Despite these efforts, fewer than 4 percent of those interviewed say Beijing’s influence was “high” or “very high,” while 38.8 percent say it was “low,” and 30 percent say it was “very low.” U.S. media influence, on the other hand, is high. More than 70 percent of the experts said CNN, for example, has “high” or “very high” impact. China’s CGTN international television network also ranked lower than the United Kingdom’s BBC, Venezuela’s Telesur, Russia’s RT, and France24.
  • According to most of the experts consulted, CGTN’s influence is principally “neutral,” but 33 percent of them said they didn’t know how to characterize it. That said, a greater percentage of them say its effect on China’s image is “positive” (about 20 percent) than “negative” (about 12 percent). In this regard, CGTN’s impact is similar to that of CNN (which is not a government entity tasked with burnishing the United States’ image) and RT, and much better than Telesur. But BBC and France24 reflect more positively on the British and French governments.
  • Even if findings indicate that Chinese media have “low” influence among Latin American leaders, a growing number of media-sharing agreements are facilitating the distribution of Chinese content through local media in Latin America. The influence of this indirect consumption has yet to be measured.

September 17, 2021

Luiza Duarte is a journalist, has a PhD in Political Science, and is a Research Fellow at CLALS, the Brazil Institute, and the Wilson Center. Andrei Serbin Pont is the Director of CRIES and an International Relations PhD candidate at the Universidad Complutense de Madrid. The survey is part of a CLALS project on China’s Messaging in Latin America and the Caribbean, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State