Central America: The Great Failure of Capitalism

By Alexander Segovia*

San Salvador’s Torre El Pedregal opposite a slum/ ContraPunto-Diario Digital El Salvador

Central American capitalism is inefficient, concentrates wealth within small elites, and hinders broader economic and political participation – and, even as the COVID pandemic underscores its failures, shows little prospect of changing. With the exception of some aspects of the Costa Rican version of Central American capitalism, the entire region has categorically failed in at least four fundamental areas: building productive, competitive, and integrated economies; achieving social progress for the majority of the population; consolidating democracy; and protecting the environment.

My recently published comparative historical review of the region’s brand of capitalism analyzes the development and implications of its two main stages.

Agro-export capitalism. In the 1870s, Costa Rica, El Salvador, and Guatemala – and later Honduras and Nicaragua – found that they could incorporate themselves into world capitalism through the production and exportation of coffee and bananas, and subsequently through other primary products. That strategy brought certain innovation, economic modernization, and national cohesion. After World War II, despite extreme dependence on enormously volatile foreign markets, the model generated some material wealth and even some temporary social progress, especially in urban areas. 

  • Agro-export capitalism, however, caused deeper poverty among the population, especially in rural areas; a greater concentration of wealth and power within a small elite; and a disproportionate exploitation of natural resources. The result was a system that concentrated wealth and power on some while excluding others – a system incompatible with democracy everywhere except Costa Rica. The failure to create jobs, promote social progress, and create conditions for democracy was a major driver of the region’s armed conflicts of the 1980s.

Rentier-transnational capitalism. The wars in the 1980s (along with the mass migration and internal economic, political and social crises they entailed), a deepening of capitalist globalization, and a wave of neoliberal reforms throughout the region brought about a transformation that modified the region’s capitalist model for the first time. The new rentier-transnational capitalism, based on the dynamism of services and trade and favoring consumption over production, turned out to be even less productive than before. 

  • These changes worsened the concentration of wealth and power on elites, who were even further bolstered by kinship with a transnational economic elite that emerged in the 1990s. Rather than create wealth, rentier-transnational capitalism deepened dependency on family remittances from abroad – from the very people who left their homeland to escape violence and unemployment that the failed economic model aggravated. 

COVID-19 has deepened Central America’s socioeconomic crisis, worsening poverty and inequality, putting democracy at even graver risk, and increasing the urgency for socioeconomic, legal, and institutional reforms of the system of privileges and perks for the elites and to establish a more equitable distribution of income and wealth. But the region’s form of capitalism, which has so obviously failed, continues to operate with impunity – and very few national and international actors, including most academics, ask why. Without rupturing this model of elite accumulation, neither democracy nor inclusion will come about.

  • Last century and in the first two decades of this, national and international actors tried to make changes, including efforts to adjust the role of the state. They argued that a democratic and social state with enough autonomy from the economic elites could create a capitalism that is more inclusive and compatible with democracy. But their efforts were either simply not permitted by the local conservative forces (often buttressed by regional and international allies) or were modified in such a way that they did not change the status quo. The problems of inequality, weak institutions, and undemocratic practices are clearly not going to fix themselves.
  • The United States has enormous historic responsibility for the configuration, functioning, and maintenance of the Central American variety of capitalism. It had great influence over the formation of national states and economies, especially in Honduras and Nicaragua, and was a fundamental actor in impeding the modernization of capitalism, such as in Guatemala in the 1950s. It has also been consistently the principal ally of the economic elites opposed to democracy and redistribution, and it has promoted neoliberal economic reforms and electoral strategies that further strengthened their economic and political power. If Washington is serious about addressing the root causes of Central America’s troubles, it could shift toward supporting reforms that would move the region toward a capitalism that is inclusive, sustainable, and compatible with democracy. 

January 12, 2022

* Alexander Segovia is a Salvadoran economist who has held wide-ranging positions in government, multilateral institutions, and academia. His book, El gran fracaso: 150 años de capitalismo ineficiente, concentrador y excluyente en Centroamérica (also available on Amazon) was published in October by F&G Editores (Guatemala).

U.S. Foreign Assistance Portals are Inadequate to Assess Reform on Locally Led Development

By Katerina Parsons*

USAID Administrator Samantha Power / Flickr / Creative Commons License

USAID has committed to increase direct assistance to local partners around the world – rather than directing aid through governments, international NGOs, or for-profit contractors – but civil society groups will have difficulty holding the agency accountable without significant changes to existing transparency portals.

  • In a recent speech, Administrator Samantha Power announced that USAID would increase assistance to local partners to 25 percent of total funding – short of earlier commitments but more than the current 5.8 percent. By the end of the decade, she added, 50 percent of USAID programming would “place local communities in the lead,” allowing them to co-design projects, set priorities, drive implementation, or evaluate programs’ impact. The NGO community has long called for these goals.

The U.S. government’s searchable foreign assistance trackers are still inadequate to assess progress, however.

  • ForeignAssistance.gov was relaunched in October, combining the State Department tracker of the same name with USAID’s Foreign Aid Explorer, which will no longer be updated. Aid organizations applauded the change for streamlining data, but the new site still does not include key data, such as the percentage of foreign assistance that is locally led, or even which implementing partners are based in the countries where they work. Many awards list no supporting documents detailing participants or outcomes; those that do include this information as a PDF file that is not searchable and cannot be easily compared across awards.
  • Some additional information can be found on other U.S. government sites. USASpending.gov, the open data source for all government spending, includes sub-award data for USAID, listing the percentage of the total amount that is sub-awarded and recipient names and sub-award amounts. Because most small, non-U.S. organizations that receive U.S. funds do so indirectly through sub-grants; this information is crucial for transparency.

An example – a Honduran organization for which I worked for several years – illustrates the challenge of tracking aid. According to USASpending.gov, as a USAID sub-grantee on a governance and citizen participation project, it received $787,000 over an eight-year period (FY2011-18) – enough to fund a small office of Honduran auditors, researchers, and legal experts who created a national corruption complaint mechanism, conducted social audits of government agencies, and led consultancies to strengthen the country’s higher courts. While substantial, this funding represented less than 4 percent of the $19.8 million total granted to the U.S. NGO managing the project. The U.S. NGO provided 36 percent of the total grant to Honduran implementing partners. Neither USASpending.gov nor ForeignAssistance.gov account for the remaining 64 percent of award funds.

  • This gap between amount awarded and amount delivered to community-based partners is not atypical. A $34.2 million violence-reduction award (FY2016-23) granted to a major U.S. contractor has given out just 13.1 percent of its funding in sub-contracts – and those only to U.S. and Honduran businesses, not Honduran NGOs. A $4.1 million “civil society and media activity” grant (FY2018-20) awarded just $80,000 to Honduran civil society organizations.
  • USASpending.gov does not code this as “international” or “local” spending; first-hand knowledge or web searches are required to determine the recipients. ForeignAssistance.gov provides even less detail.

USAID’s promises of millions of dollars to empower local organizations so far have not been complemented by a commitment to make public data on localization more transparent. One straightforward fix would be to add a search query to ForeignAssistance.gov for “recipient type” such as “local,” similar to USASpending.gov, where one can filter by contract recipients owned by women, minorities, or veterans.

  • Information on sub-grantees or sub-contractors (local, U.S., international) is also lacking. Additional clarity on the term “local” is also merited; USAID does not distinguish between “local entities” and “locally established partners,” which may be national chapters of international organizations. Particularly in larger multicultural countries, “local” leadership may still not be proximate to communities being served.
  • Fulfillment of Administrator Power’s pledge “to interrogate the traditional power dynamics of donor-driven development and look for ways to amplify the local voices of those who too often have been left out of the conversation” will depend on making public data on localized development transparent enough to make proximate leadership in foreign assistance – or the lack of it – more visible.

December 16, 2021

* Katerina Parsons is a master’s student in Development Management in the School of International Service. This article is based on research done for the Accountability Research Center, where she is a research assistant.

Honduras: Is the Coup Finally Over?

By Fulton Armstrong*

Honduran President-elect Xiomara Castro/ hablaguante/ Flickr/ Creative Commons License

Honduran President-elect Xiomara Castro’s actions since her election on November 28 reflect optimism that the country can turn the page on the 12 tumultuous years since the military coup that forced her husband out of the country at gunpoint – and realism about the monumental tasks ahead. The voter turnout (69.28 percent) and her 15-point victory over the incumbent party’s candidate were historic. So was the level of violence – 23 candidates murdered – during the campaign.

A similarly historic basket of problems awaits Xiomara when she’s inaugurated on January 27.

  • Experts say that the government is bankrupt because of corruption, mismanagement, downturns in commodities on which the country has traditionally depended, two major hurricanes last year, and the COVID-19 pandemic. The country’s foreign debt burden is more than $16 billion (nearly 60 percent of GDP), and the economy contracted 9 percent last year. Former Finance Minister Hugo Noé, Xiomara’s senior policy advisor during the campaign, says his team is already dialoguing with the IMF on a new debt deal.
  • U.S. investigations into outgoing President Juan Orlando Hernández (JOH) are reportedly very close to seeking his extradition for trial – which would thrust Xiomara’s young administration into a potentially major political crisis. JOH’s broad network of accomplices are not likely to go quietly either.

Most of the President-elect’s early actions have centered on building an effective transition to what she calls un estado solidario – drawing positive feedback even from potential opponents so far.

  • A transition commission is beginning a national consultation on priorities, especially “the elimination of poverty and hunger” among the 74 percent of Hondurans who are poor and 53 percent extremely poor. Noting that corruption is a major root cause of the country’s economic mess, Xiomara is calling for vigorous anticorruption efforts, including some with UN support, and for repealing the “impunity laws” and “secrecy laws” that have allowed illegal dealing that saps government resources. To address the violence that terrorizes citizens and drives them to migrate, she says she “will fight narco-trafficking head-on.”
  • She has pledged to fight for the protection of women and their rights. Honduras has the highest rate of femicide (4.7 cases per 100,000 women last year, according to CEPAL) and gender violence in the hemisphere – an ugly reality that analysts say is another root cause of migration. She’s advocated an unspecified loosening of restrictions on abortion, which is currently forbidden even in rape cases.
  • Potential opponents have so far gone along. The military high command, whose loyalty JOH worked hard to win, has released a statement committing to working with Xiomara and stating that “she will be the President and commander of the Armed Forces.” JOH allies in the business sector and traditionally conservative media such as the country’s largest newspaper, El Heraldo, have welcomed her.

Rhetoric that the 2009 coup reversed a flourishing democracy is exaggerated – it has always been a flawed democracy and ousted President Mel Zelaya, like his peers, was a flawed leader. But this vote and early reactions indicate broad agreement that the past 12 years have exhausted the country. Xiomara’s Partido Libertad y Refundación (LIBRE) has soundly thumped the country’s two traditional parties, sending both back to re-think their strategies.

  • Governing is likely to be a learning process for Xiomara. Some of her early foreign policy statements – such as repeating her pledge to normalize relations with China (a sovereign decision the United States and most in the hemisphere have taken) and issuing unvarnished praise for Venezuelan Presidents Chávez and Maduro – have drawn unwelcome attention, but she pulled back and quickly put the focus back on her top domestic priorities. She also has to continue finessing coalition politics; her vice president, right-of-center sportscaster Salvador Nasrala, seemed to wander during the campaign but turned out to be a good asset. Her husband, to whom she’s referred as her “best advisor,” still has a reputation that will require some managing.

The U.S. reaction to her government will be crucial. Xiomara’s agenda, with its focus on the “root causes” of the country’s multiple crises, could make her an ideal ally to U.S. Vice President Kamala Harris, who’s worked hard to focus U.S. policy on those drivers. Neither woman can be expected to do magic, but stopping Honduras’s slide, which started under the putschist regime in 2009 and continued under the two National Party presidents who came after, would be a major victory in itself. The surge in Hondurans encountered on the U.S. border – up to about 300,000 in the past 12 months – has grabbed Washington’s attention, but the real test will be whether the Administration and the Honduran government can seriously address the root causes as promised.

December 9, 2021

Chile: Astronomy Investments Help but Face Some Criticism

By Noah Rosen*

La Silla Observatory in Chile’s Atacama Desert/ European Southern Observatory/ Flickr/ Creative Commons License

Exceptional atmospheric conditions in northern Chile, an image of political stability, favorable tax policies, and diplomatic credentials for researchers have made the country a leader in international astronomy, but some Chileans want to see more benefits from the cooperation. 

  • Experts estimate that, by the end of this decade, over 70 percent of the world’s astronomical viewing capacity will be concentrated in Chile. The United States – including the National Science Foundation (NSF), universities, and private foundations – and Europe and other global players have invested billions of dollars in observatories, creating significant opportunities for Chilean astronomy as well as its high-tech engineering and computing sectors. 
  • Chilean researchers are guaranteed 10 percent of the observation time on all international telescopes established in Chile, a policy Chilean scientists won in the 1990s. According to Wolfgang Gieren, astronomy professor at Chile’s Universidad de Concepción, “the 10 percent has been the most important factor to boost development of astronomy in Chile.” International observatory projects often include significant funding and scholarship activities, including a multi-million-dollar contribution from the NSF to CONICYT, the Chilean science agency, and an annual scientific scholarship managed by the Agencia Nacional de Investigación y Desarrollo de Chile (ANID). 

The diverse range of support has helped Chile rapidly expand its astronomy capabilities. 

  • Four universities have opened new astronomy departments, bringing the total to eight, and PhD students have increased from five in the early 1990s to 40 by 2005. Joint work and technical exchanges have increased also. The Millimeter Wave Laboratory of the Universidad de Chile works with CalTech to develop advanced millimeter-wave receivers and other high-tech equipment. The Astro-Engineering Center at the Pontificia Universidad Católica works with the multinational Gemini Observatory to develop adaptive optics and vibration mitigation instruments, in partnership with Harvard and other U.S. universities. 
  • Chile’s domestic high-tech engineering and computing sectors are benefiting as well. The government estimates that 15 Chilean companies have provided advanced engineering and technology services to the observatories. A local firm, AXYS Technologies, installed fiber optics at an Atacama-area observatory that, experts say, was groundbreaking in understanding how fiber optics operate at high altitude (5,000 meters). A Dutch-Chilean engineering company conducted geological studies and construction consulting for the Rubin Observatory and for another observatory in Cerro Tolar. 
  • The huge data processing and storage capacities required by the observatories is positioning Chile as a big data player. Microsoft, Google, and Amazon are developing astro-data projects in Chile. The U.S. NSF is funding a data science summer school at Universidad de La Serena to build connections with the future generation of Chilean data scientists. 

Despite these advantages, Chilean scientists and civil society actors continue to question the relative balance of benefits they get for the globally unique natural attributes in their northern deserts, which make cutting-edge astronomy research possible. 

  • Chilean scientists are demanding more guaranteed observation time, in line with what hosts in Hawaii (15 percent) and Spain (20 percent) receive. They argue that current arrangements still make them too dependent on technologies and expertise from the Global North, which largely controls the research agenda. The Chilean government estimates that only 10-20 percent of the international dollars invested in the observatories enter the Chilean economy, the vast majority of which are channeled to goods and services – construction of roads, buildings, electricity, water and gas supply, hospitality, etc. – rather than building Chile’s scientific capabilities. Chilean scientists and engineers argue for new policies that more systematically involve Chileans in telescope construction and maintenance. 
  • Broader questions of justice also persist: in some places, the observatories consume significant amounts of water and electricity while nearby villages go without regular access. Labor strikes at the Atacama observatory some years back raised questions of fair working conditions, especially given that the favorable diplomatic status accorded to observatories limits oversight. 

Noah Rosen is a PhD candidate in the School of International Service, specializing in grassroots peace movements in Colombia. This article is adapted from CLALS research on U.S. engagement in Chile and Uruguay, supported by the Institute for War & Peace Reporting with funding from the U.S. Department of State. 

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