Latin America: Organized Crime Taking Advantage of COVID-19

By Carolina Sampó*

Favela in Rio de Janeiro, Brazil

Favela Villa Canoas, Rio de Janeiro, Brazil/Phillip Ritz/Flickr/Creative Commons License (not modified)

Latin American criminal organizations have faced some new challenges during the coronavirus pandemic – such as disruptions in transportation routes and markets – but they have also exploited opportunities to expand operations in ways that further threaten governments’ control in vulnerable communities.

  • Shelter-in-place controls in the region and the United States have complicated the groups’ most profitable business area: drug trafficking. Moreover, breaks in supply chains, especially those related to chemical precursors from China, have caused shortages of fentanyl, a synthetic opioid preferred by U.S. drug users, and ingredients used to make methamphetamines.
  • Trafficking of cocaine and other plant-based drugs has not stopped within Latin America, although some reduction in their movement to market has driven up prices somewhat. Quarantines have posed new difficulties for transportation, but traffickers usually avoid legal border crossings and pass through areas with no or minimal government presence anyway. Governments have also moved detection and interdiction resources elsewhere. Brazil, as the region’s main consumer, still seems to be receiving regular shipments of cocaine.
  • Shipping drugs outside the region has been more difficult because airports are closed and commercial ship traffic has declined, but criminal organizations have accepted to run the risks of continuing their own maritime activities, which raises the price to consumers. Authorities say that cocaine shipments tend to be large – over one ton – and narco-submarines are being used.

Supply and demand have both declined during the coronavirus outbreak, but prices of meth and synthetic opioids have risen considerably – some even tripling in recent weeks, according to U.S. official sources. Demand from consumers of illicit drugs at parties is down with the implementation of social distancing, but dealers in food delivery services are distributing their merchandise directly to users’ homes. Supply and demand seem to be balanced, but dealers are charging higher prices for their enhanced service and greater risks.

As in the past, criminal organizations are showing high adaptability. International experts report the groups are increasingly getting involved in cybercrime. They have also been caught peddling counterfeit medical items. Interpol has seized substandard masks and sanitizers as well as drugs the gangs claim will help people combat the virus. The pandemic has also enabled criminals to deepen their ties with vulnerable communities, such as by providing essential goods and services.

  • They are consolidating criminal governance in the communities where they play the role of social order providers. In the slums in Rio de Janeiro, for example, the criminal organizations have been the ones to enforce lockdowns to stop the spread of COVID‑19. Where criminal organizations cannot guarantee social order, they use violence or cooptation to establish territorial control. And they continue efforts to expand prison control, using jails to recruit members and build their power base. During the coronavirus outbreak, the gangs have organized riots and jailbreak attempts in Argentina, Brazil, Colombia, Peru, and Venezuela. Power in the prisons projects into power on the streets.

The pandemic has forced governments to prioritize resources on the health and economic crises it is causing, and efforts to control criminal organizations have by necessity been more lax. The gangs are also scrambling to return to “normalcy,” but they are again demonstrating greater adaptability than are the governments.

  • Governments have no easy solution. While organized crime is diversifying its portfolio of activities, reinforcing its territorial control, building its prison base, and recruiting new members – exploiting the economic and social situation – governments have little choice but to beef up efforts any way they can domestically while paying special attention to cooperation with neighboring countries facing similar challenges, in hopes of hemming in the criminal organizations. It is a huge challenge – against difficult odds – but perhaps the pandemic also gives governments a one-time opportunity to hit the gangs at a time that they face challenges too.

May 22, 2020

* Carolina Sampó is Coordinator of the Center for Studies on Transnational Organized Crime (CeCOT), International Relations Institute, La Plata National University, and a researcher at the National Scientific and Technical Research Council (Conicet) and Professor at the Buenos Aires University.

Central America and the Pandemic: Different Priorities and Risky Bets

By Alexander Segovia*

Presidents of Central America participate on a SICA virtual meeting

Reunión Extraordinaria de Presidentes del Sistema de la Integración Centroamericana (SICA)/Flickr/Creative Commons

In most Central American countries, the social dimension of the COVID‑19 emergency has competed with economic priorities, and in some it hasn’t even been a top priority. Governments have responded independently of one another, showing little regional coordination aside from a $1.9 billion Regional Contingency Plan approved by the Sistema de la Integración Centroamericana (SICA) and funded by the Central American Bank for Economic Integration (BCIE), to support national-level efforts.

El Salvador has designed a response strategy that prioritizes the health dimension of the crisis, not the need for economic recovery. The rigorous implementation of stay-at-home and social isolation measures has caused a number of problems, including essentially shutting down the economy, with enormous political costs. The Legislative Assembly authorized the government to issue coupons worth $3 billion to help families get by, causing a significant increase in the country’s external debt and fiscal deficit.

  • The Salvadoran response has been well-received by the population so far, but this could change quickly in the face of the high economic and social pain it has caused. Moreover, the authoritarian and militarist way the confinement regulations have been enforced, and the government’s lack of respect for the Constitution and the separation of powers, have also troubled many.

Nicaragua is the opposite case of El Salvador. The government has refused to adopt social isolation measures and has encouraged people to take to the streets and participate in large events. The Ortega Administration’s concern is about the economy, which has been in a deep crisis since the social protests in 2018 and the government’s repressive reaction to them. This priority partly explains the government’s resistance to implementing shelter-in-place and social-distancing regulations.

  • The government is playing with fire. If the health crisis spins out of control, it will cause both a great loss of human lives and a profound socio-economic crisis – which sooner rather than later will spark a social and political crisis of massive proportions.

Costa Rica, with its good universal health care system and the region’s most developed state infrastructure, is best prepared. Its initial response to the health emergency was slow and permissive, reflecting a government decision to confront the crisis in a manner that causes the least damage possible to the economy. It has since acted more decisively and has suffered only 10 deaths from COVID‑19.

  • Costa Rica is the only country in the region trying to finance the additional costs by reducing non-priority public expenditures and by introducing a temporary solidarity tax on capital gains and on the salaries of higher-paid managers in government and the private sector, who have economic security and safe jobs.

Guatemala is implementing a response in which the health emergency is competing with leaders’ desire for economic recovery. This reflects the enormous influence over the government and Congress enjoyed by the economic elites, who hold sway over public policies and have a veto over any that affect their interests.

  • By putting the social and economic challenges on an equal plane, the elites have demonstrated, in what they see as a politically correct way, their ability to equate human life with the accumulation of capital.

Honduras has implemented a strategy that gives insufficient attention to the health crisis by assigning higher priority to containing the economic impact. Its response has been fragmented and confusing; it combines emergency measures with economic recovery actions that will take effect only in the second half of the year. In addition, policymaking processes have been opaque, and there are no guarantees that public funds will be used transparently.

  • Concerns that the crisis has also given rise to greater militarization of the country and an increase in human rights violations by security forces are also mounting.

The best way for Central America to confront the COVID emergency is through energetic responses focused on containing the health crisis – with effective stay-at-home and social-distancing measures – and strengthening of social protection systems and programs, including direct financial payments to households. These policies should be backed up with broad political and social agreements and sustained with absolute respect for democracy and human rights.

  • Preliminary evidence indicates that, while addressing the health crisis has high costs in the short term, delaying that investment increases the number of deaths and leads to a deeper and longer economic crisis. Central American governments and economic elites have a clear choice: pay a smaller price now combatting the virus, or pursue short-term benefits and pay a much higher price in the long run.

* Alexander Segovia is a Salvadoran economist. This blog article is based on and updated from an analysis originally published here by Análisis Carolina in Madrid.

Ecuador: Growing Political and Economic Repercussions of COVID-19

By John Polga-Hecimovich*

Lenín Moreno speaking at an event

Lenín Moreno, presidente de Ecuador/Flickr/Creative Commons

Despite early aggressive measures against COVID‑19, Ecuador has suffered one of the world’s most devastating outbreaks that, combined with the drop in international oil prices, may be catastrophic for the country’s economy and for President Lenín Moreno. Since March 16, the President declared a national state of emergency and curfew throughout the country; imposed strict social isolation (until May 4) that suspended all face-to-face activities; and established a special security zone in the province of Guayas, epicenter of the pandemic. Even so, Ecuador currently has the second-highest number of documented cases in South America, after Brazil, and the death toll from COVID‑19 may have reached between 7,600 and 11,000 during April.

  • Ecuador’s first case of COVID-19 was detected on February 27 in the port city of Guayaquil. As the virus spread in March and early April, the city experienced an unprecedented humanitarian crisis due to the much-publicized accumulation of hundreds of corpses in homes and on the streets. The local government’s response was erratic, with mayor Cynthia Viteri at one point ordering officials to block the runway at the airport to prevent a flight from Spain from landing, and later comparing the devastation to “the Hiroshima bomb.” Viteri has since estimated that perhaps as many as one-third of guayaquileños have COVID‑19.

Despite the lockdown measures, the national government has also shown a lack of capacity in addressing the public health crisis. Moreno created a task force to deal with the situation in Guayaquil, but even then, the government possessed a limited ability to determine who had the virus, to say nothing of addressing shortages of suits, masks, gloves, and ventilators for hospital personnel. In a national address in early April, the President acknowledged that official coronavirus figures had significantly understated the extent of the country’s health emergency. There have also been worrying accusations of corruption against officials in the Ecuadorian Institute of Social Security (IESS) in outfitting hospitals, and the Attorney General’s office charged the now ex-National Secretary of Risk Management Alexandra Ocles with influence-peddling.

  • The combined impact of the pandemic and oil crisis on the country’s economy may be catastrophic. Petroleum is Ecuador’s largest export commodity and accounts for about a third of its public-sector revenue. The 2020 national budget was planned with an oil price of $51.30 per barrel (currently hovering around $30.00), which will increase the country’s deficit. Ecuador also has little savings to implement a countercyclical fiscal policy and is on the brink of defaulting on its $50 billion debt. Adding to the troubles, due to dollarization, it cannot devalue its currency to reduce its deficit. The collapse of export revenues and massive foreign debt payments have greatly compounded the economic cost of the pandemic, and the country’s GDP may shrink by as much as 7-8 percentage points.
  • The government is just barely muddling through. Private bondholders have accepted the government’s request to defer interest payments on the country’s debt until August 15, freeing up $811 million and buying Moreno some breathing room. However, this could merely postpone a default: a fragmented and intransigent legislature and social sectors have balked at emergency austerity measures. Responding to the country’s social needs and economic well-being is a difficult line to walk. The government has issued a $60 stimulus (bono) that will benefit some 400,000 people, while at the same time it submitted a bill to the National Assembly that proposes an extraordinary tax on both companies and individuals to bring unbudgeted resources into the national treasury.

While the government confronts its public health and economic problems, general elections are nine months away and the National Electoral Council is already debating ways to carry them out. There is too much uncertainty at the moment to determine any potential frontrunner. Moreno is not running for re-election; ex-Guayaquil Mayor Jaime Nebot has suffered due to his city’s lack of preparedness at confronting the pandemic; and the fate of Interior Minister María Paula Romo may rest on the Moreno government’s (so far unconvincing) response. Like leaders around the globe, Moreno is faced with the unpleasant challenge of keeping the country’s economy shuttered longer or risking a resurgence of the virus. The success or failure of his strategy will undoubtedly shape the country’s political and economic future.

May 15, 2020

* John Polga-Hecimovich is an Assistant Professor of Political Science at the U.S. Naval Academy. The views expressed in this article are solely those of the author and do not represent the views of or endorsement by the Naval Academy, the Department of the Navy, the Department of Defense, or the U.S. government.

COVID-19 in the Caribbean: So Open, so Vulnerable

By Bert Hoffmann*

rows of empty beach chairs in Jamaica

Beach in Jamaica/ Marc Veraart/ Flickr/ Creative Commons License (not modified)

In the Caribbean, the COVID-19 crisis hits some of the world’s most open, specialized economies, forcing the region to rethink its development model. Eleven of the world’s 20 most tourism-dependent nations are in the Caribbean. The collapse of this sector leaves the import-dependent island states extremely vulnerable beyond the immediate health crisis and beyond the social and economic fallout from the current “shelter in place” rules and lock-down measures.

  • For most Caribbean nations, tourism is by far the most important economic activity. In small states like Barbados, St. Lucia, Antigua and Barbuda, and the Bahamas, tourism makes up more than 40 percent of GDP. In bigger countries like Jamaica, it accounts for more than half of exports and employs almost a third of the workforce. Many in the tourism industry cling to hopes of a speedy recovery, but this is not likely. Travelers’ confidence in cruise ships and exotic flight destinations will not fully rebound before vaccinations against the virus become readily available. Not only the low season this summer is lost, but also much of the crucial winter season.
  • The pandemic is also going to slash remittances from Caribbean emigrants. Most states have sizeable diaspora communities, and money transfers from abroad are a vital part of their economies. Unlike in the aftermath of hurricanes, migrants in the United States, Europe, or neighboring islands are affected by the same crisis. Many will also cancel visits “home.”

Current social policy measures may be able to mitigate some of the hardship, but foreign exchange buffers are hardly sufficient to maintain these on such a scale over a long time. Largely agricultural countries decades ago, most of the region today imports more than half the food they consume – seven CARICOM countries even more than 80 percent. With global supply chains and food production in the United States disrupted, imported food prices will rise. Reviving local farm tradition passes from a “romantic” niche concern to being a key issue of social policy.

  • In the Caribbean’s non-sovereign territories, the crisis underscores their population’s dependence on the welfare systems of the United States, France, the UK, and the Netherlands. At the same time, it casts a spotlight on persisting inequalities. Puerto Rico, for instance, has only one-fourth of intensive care unit beds per capita than the U.S. mainland, despite its much higher share of elderly residents.

The coronavirus crisis is bringing to the fore a number of long-term challenges for the Caribbean. If left solely to the logic of comparative advantages, the region’s world market integration tends to be one of specialization, not diversification. The downside is a high vulnerability to external shocks. In recent years, “resilience” became part of the vocabulary of Caribbean policymakers in the context of climate change, not to face global economic or health shocks. The current crisis demands thinking of “resilience” as a development goal in an even broader sense.

  • The pandemic also highlights the extent to which the Trump Administration takes the United States out of the game of soft policy approaches, and China finds a field left wide open. Beijing’s shipments of medical supplies and protective wear are a small investment, but they have a big impact in countries of some 100,000 inhabitants. Taiwan is also providing face masks and soft loans to those that still recognize it diplomatically. In contrast, what Washington seems to care about more than anything else is that the Caribbean nations should not accept Cuban doctors in to fight the disease.

April 20, 2020

* Bert Hoffmann is a Lead Researcher at the German Institute for Global and Area Studies (GIGA) and professor of political science at the Free University of Berlin’s Latin American Institute.

Cuba: Dealing with the Global Pandemic

By Ricardo Torres*

Cuban nurses carrying the Cuban flag

COVID-19 Response: Over 100 Cuban Nurses Arrive Barbados / Flickr / Public Domain

Cuba faces a “perfect storm” – a global health crisis – that poses the latest in a long list of challenges to its government, but a systematic destabilization of the country is highly unlikely, if not remote, for now. The COVID‑19 pandemic has caused an unprecedented disruption to the world economy, the devastating effects of which no country has escaped. The Cuban economy is critically dependent on tourism and remittances, two areas that have been deeply affected. Those countries from which visitors and cash flow to Cuba are greatest – the United States, Canada, Western Europe, and China – have been hit hard.

  • The shock is compounded by a drop in Cuba’s average annual growth from 2.7 percent in 2010‑15 to 1.4 percent in 2016‑19. The causes of that decline include the economic crisis in Venezuela; the cancellation of medical services agreements in Bolivia, Brazil, and Ecuador; the end of the international tourism bonanza; and the effect of new U.S. sanctions. Washington’s actions have complicated trade, foreign investment, and travel. The measures have limited remittances, reduced Cuba’s ability to import fuel, and clamped down on foreign firms operating in Cuba, such as through the first application of Title III of the “Helms-Burton Act.”
  • Another factor has been the disappointing results of Cuba’s internal economic reform, which has been wrapped up in political contradictions and a lack of clarity of its objectives. One costly flaw in these circumstances has been the government’s inability to stimulate industries that provide essential products, particularly food. Combined with the international challenges, including fresh, tough sanctions by the United States, this problem has contributed to a situation in which the Cuban people face growing shortages of all kinds of products, including food, medicines, and fuel.

The government’s response to COVID‑19 has evolved from caution to the gradual imposition of increasingly radical measures.

  • In mounting a medical response, the centralization and verticality of the Cuban model allows authorities to adapt plans and resources in the face of new priorities. The Cuban health system, for example, is known for its national coverage and access to resources (including 848 doctors and 5.5 beds per 100,000 inhabitants), and it has experience dealing with epidemics. Decisions have been taken around the concept of epidemiological vigilance, including closing the borders on April 2 and bolstering research, although the inability to carry out massive testing has been a weakness. The government has also guaranteed workers’ income and employment, except for parts of the private sector and informal economy, and expanded food-rationing to a broader list of products.

The economic impact in the medium term should not be underestimated. GDP growth will enter negative territory. Financial problems will surely deepen. Shortages of an array of basic necessities are going to worsen. Restructuring of foreign debt is necessary.

  • Internally, Cuban policymakers are going to have to take into consideration the new socioeconomic structure of the country and the need to focus support where it’s needed most. The crisis provides a good opportunity to give substance to longstanding rhetoric about improving agricultural production. Greater flexibility in regulating private businesses is also an obvious policy option. Accelerating and broadening digital access throughout society should also be a priority under the wisdom of “not putting off till tomorrow what can be done today.”

The Cuban Government is not presiding over a terminal crisis, however. Even considering the system’s weaknesses before the pandemic, this perfect storm is not its responsibility. For the medical challenge, Cuba is prepared and probably will overcome some of the criticisms made abroad about its medical missions, as brigades of Cuban doctors deploy to 19 countries. The country’s biotechnology industry also stands to make advances. It’s too early to say whether Cuba will be able to profit from these opportunities, but Havana may benefit from its willingness and ability to be a responsible international partner.

  • Washington’s policies also put it in sharp contrast with China, which continues to provide help during these difficult times. If the pandemic has made anything clear in Cubans’ minds, it’s that the United States is disqualifying itself as a positive force for change on the island.

April 17, 2020

*Ricardo Torres is a professor at the Centro de Estudios de la Economía Cubana at the University of Havana and a former CLALS Research Fellow.