A Right Turn in Latin America?

By Santiago Anria and Kenneth Roberts*

Jair Bolsonaro

Brazilian President Jair Bolsonaro in January 2019. / Marcos Brandão / Agência Senado / Flickr / Creative Commons

After a long winning streak, the left in Latin America has experienced electoral defeats in a number of former strongholds since 2015 – including Argentina, Chile, and Brazil – but the trend is not unidirectional and so far falls short of being a regional “right turn.”

  • Right wing presidents govern today in those three countries as well as Colombia, Guatemala, Paraguay, Honduras, Panama, and Peru – a scenario that is quite different from 2010, when about two-thirds of Latin Americans lived under some form of leftist government. Democratization, financial crises, and market liberalization shaped the 1980s-90s, while mounting social discontent against neoliberal market reforms helped to produce a “left turn” that spread across the region following the election of Hugo Chávez in 1998.  Leftist candidates won 30 presidential elections in 11 different Latin American countries between 1998 and 2014.

The current trend lines are hardly unidirectional across the region.  Mexico, which remained under conservative government when most of the region turned toward the left after 1998, has recently elected long-time leftist leader Andrés Manuel López Obrador to the presidency.  Incumbent leftist parties have been re-elected one or more times in Uruguay, Bolivia, Costa Rica, and El Salvador.  Notably, leftist parties in some countries where they have been historically weak, such as Colombia and Honduras, have strengthened electorally and organizationally, laying the groundwork for further growth.  Leftists’ records elsewhere are mixed.  Rivalries among Ecuadorean leftists make their future uncertain.  Venezuelan President Maduro and Nicaraguan President Ortega have resorted to increasingly repressive and authoritarian measures to maintain their grip on power.

  • With the possible exception of Brazil, the right’s surge is not the result of the sort of social backlash that brought the left to power. In general, the right’s victories appear to be a routine alternation of power rather than a regional wave with common starting points and driving forces.  Argentina and Chile are the two clearest examples of routine electoral alternation of power explained by retrospective, anti-incumbency voting in contexts of economic slow-downs, corruption scandals, and social policy discontent.  In countries like Paraguay and Honduras, on the other hand, the shifts were initiated by non-electoral means – a politically motivated presidential impeachment in the former and a military coup in the latter – and then consolidated through elections after the fact.  In Brazil, the right turn can be traced back to the social protests that broke out against Dilma Rousseff’s leftist PT government in June 2013, but former conservative allies’ opportunistic impeachment of Rousseff, along with their imprisonment of former President and PT founder Lula, seriously weakened her party – paving the way for the election of anti-establishment candidate Jair Bolsonaro.

The left in power is still strong, though probably not unbeatable today, in countries like Bolivia and Uruguay, at least in part because of their roots in and strong connections with social movements.  Unlike the PT, both Bolivia’s MAS and Uruguay’s FA have managed to preserve more of their movement character and to avoid extreme forms of top-down control and professionalization.  The ability of mass popular constituencies and grass-roots activism to hold party leaders accountable and steer public policies in desired directions—a condition largely absent in countries like Brazil, Ecuador, and Venezuela—has helped the left maintain cohesion in Bolivia and Uruguay.  This cohesion, accompanied by significant reductions of inequality, helps to explain the continued vitality of left parties in these countries.  The recent strengthening of leftist alternatives in Mexico and Colombia, moreover, should guard against facile assumptions that a region wide right turn is underway.  Conservative forces’ recent victories are better understood as a reinforcement of the post-neoliberal left-right programmatic structuring of political competition in Latin America than a unidirectional political shift to the right.  That said, Brazil wields significant political and economic influence in the region and, traditionally seen as an “early mover” in the region, may be a bellwether of the future.  The ability of President Bolsonaro and his model of governance to deliver the results that Brazilians want—and to operate within the parameters of democratic institutions—will be key factors in determining the direction and strength of the region’s rightist wave.

January 9, 2019

*Santiago Anria is Assistant Professor of Political Science and Latin American Studies at Dickinson College, and Kenneth Roberts is Professor of Government and Director of Latin American Studies at Cornell University.

Mercosur: Diversifying Partnerships

By Andrés Serbin*

Mercosur Summit

A seminar at the 53rd Mercosur Summit. / Sabrina Pizzinato / UCIM / Creative Commons

Mercosur’s signing of a memorandum to increase economic and commercial cooperation with the Eurasian Economic Commission (EAEU) signals the trading bloc’s interest in diversifying its trade and political relationships beyond the western hemisphere.  The presidents of the Mercosur countries – Brazil, Argentina, Uruguay, and Paraguay –signed the agreement at the 53rd Mercosur Summit, held last month in Montevideo.  At a ceremony at which he accepted the rotating presidency from Uruguay, Argentine President Mauricio Macri emphasized the need for Mercosur to open not just to the Pacific Alliance, but also to Central America, Asia, and Africa.

  • Proposals for closer cooperation with the EAEU have been under study for many years, since Russia first created the Commonwealth of Independent States (CIS) from among the former Soviet republics (except the Baltic countries) after the end of the Soviet Union in 1991. The CIS was intended as a post-Soviet space under Russia’s leadership that would reconnect its members within a “Eurasian” geopolitical region distinct from both Europe and Asia.  The EAEU, formalized in 2015 under the leadership of Russia and Kazakhstan, now also includes Belarus, Kyrgyzstan, and Armenia.  Mercosur ministers agreed to sign the memorandum during meetings immediately before the summit, stating that enhanced cooperation and coordination with the EAEU – with which Mercosur would account for a combined 6.5 percent of world GDP – was consistent with efforts to strike a similar arrangement with the European Union.
  • Mercosur’s decision comes amid international tensions over trade and protectionism, but it cannot be divorced from the ideological, cultural, and geopolitical elements of the vision for “Great Eurasia” of which Russian President Vladimir Putin has spoken (and which Chinese President Xi Jinping has shared). The tensions between Russia and Ukraine, and Western pressures in retaliation, were a key driver of Moscow’s push for formalization of the EAEU as a potential interlocutor with the European Union while at the same time putting a brake on U.S. presence in the region.  Western analysts have debated the power of “neo-Eurasian” identity as a tool of geopolitical projection beyond the creation of a new economic bloc.  China is also a factor in Russia’s calculations.  The “Shanghai Cooperation Organization” (OCS) fostered by both countries and Beijing’s “New Silk Road” project, through Central Asia and to the EU, have also increased the salience of “Great Eurasia.”  Russia and China have increased cooperation in trade, in technology (including military) and against terrorism and extremism.  Through the EAEU and OCS mechanisms, they have extended contacts all the way to India and Pakistan and, potentially in the future, Iran and other countries.

Mercosur’s trade with the EAEU is asymmetrical in favor of the Latin American countries, with the exception of Brazil (with which it is more balanced), according to EAEU officials.  The EAEU has high internal tariffs and limited internal trade – except in bilateral trade between Russia and Belarus – but there are already tariff exemptions for Mercosur members.  Food appears to be the biggest Mercosur export to the region.  Experts believe that trade between the two blocs can be significantly increased, and that a free trade agreement can be signed before the completion of the EU-Mercosur FTA, which has been under negotiation for 20 years.

Although many Western analysts remain doubtful about the success of efforts to form a “Great Eurasia,” Mercosur apparently has determined that engagement with it is low-cost and potentially beneficial.  Beyond the possibility of expanded trade, the memorandum of cooperation signed in Montevideo suggests Mercosur sees a geostrategic interest in signaling openness to such collaboration.  The right-leaning governments of Latin America and the Caribbean are likely to remain generally aligned with the United States, but they have learned the importance of trade diversification over the past two decades.  Setting tradition and ideology aside, most are trying to interact with whomever can bring good deals to their countries in terms of trade, investment, and cooperation.  In the context of Russia and China’s interest in a “Great Eurasia,” Mercosur’s increased outreach to EAEU also reflects an important piece in a strategy to undertake the necessary diversification of its foreign policy in a changing world.

  •  The United States may not appreciate the wisdom of Mercosur’s approach. Eurasia is a blind spot for Washington, which focuses on Russia’s actions in Europe and China’s in Asia – but not in Central Asia itself or as a bridge to India, Pakistan, Iran, Turkey, and the Arab world.

January 7, 2019

* Andrés Serbin is an international analyst and president of the Regional Coordinator of Economic and Social Research (CRIES), a network of more than 70 research centers, think tanks, NGOs, and other organizations focused on Latin America and the Caribbean.  This article is adapted from one published by Perfil.com.

Southern Cone: Rapid Transition to Non-Conventional Renewable Energy

By Thomas Andrew O’Keefe*

Edificio Alexander

Edificio Alexander, a building in Punta del Este, Uruguay, that produces wind energy on its roof. / Jimmy Baikovicius / Flickr / Creative Commons

South America’s Southern Cone is undertaking a transition to non-conventional, renewable energy resources – that is, production not dependent on fossil fuels or large-scale hydropower – that creates the opportunity for a historic regional consensus on energy policy.  Uruguay and Chile are at the forefront.  Both lack significant fossil fuel reserves and have experienced crises when droughts detrimentally impacted hydro-supplied electricity.  For them, the rapid shift to other forms of domestically sourced renewables is as much a means to guarantee energy security as to combat climate change.  Approximately a third of Uruguay’s electricity is currently generated from wind power (up from only one percent as recently as 2013).  Similarly, about a third of Chile’s electric power – depending on the time of day – is sourced from the sun and the wind.

  • Brazil has also made significant strides in incorporating wind, and to a lesser degree, solar power into its energy matrix. The primary motivation is the need to offset carbon emissions from the burning of rain forests and the country’s greater use of natural gas.  Brazil has long enjoyed the cleanest energy of any large economy in the world because of its heavy reliance on hydropower, which still covers some two-thirds of the country’s electric needs.  Brazil was also a pioneer in the development of more environmentally friendly sugar-based ethanol (as opposed to corn favored in U.S. ethanol production); most passenger vehicles today have flex-fuel engines.  Paraguay gets almost all its electricity from hydropower (and exports the bulk of what it produces).
  • Argentina, while increasing exploitation of its large shale gas and oil reserves, in 2017 expanded renewable energy projects nearly 800 percent over the previous year, according to reports. President Mauricio Macri has created a more inviting investment climate for the private sector, rapidly increasing natural gas output, especially from the Vaca Muerta shale reserves in Patagonia.  He is also encouraging the expansion of renewable energy beyond large hydro by, among other things, allowing long-term power purchase agreements in U.S. dollars as a hedge against currency devaluations.  Furthermore, large industrial consumers face penalties if they do not meet increasing thresholds set for renewable energy use.  Current laws require that at least 20 percent of the nation’s electricity come from non-conventional renewables by the end of 2025, and they include tax exemptions, import duty waivers, and a special trust fund called FODER, created in 2016, to provide subsidized loans and other assistance.

The rapid expansion of the renewable energy sector in the Southern Cone will enable countries to export excess production to their neighbors, facilitated by a robust regulatory framework to facilitate the cross-border trade in energy resources.  In addition, by creating a fully integrated regional market in renewable energy products, a crucial backup is established for resources such as wind and solar power that are inevitably prone to interruptions during the day.  It would also mitigate the impact of droughts on hydro-generated electricity, which are likely to worsen with global climate change.  Accordingly, there are strong incentives to revive efforts begun by MERCOSUR in the late 1990s to integrate energy markets that collapsed with the Argentine energy crisis at the start of the 21st century.  The fact that all the Southern Cone governments are now ideologically aligned in favor of market-oriented economic and investment policies facilitates achieving a regional consensus on energy for the first time.  Governments in the region now need to move beyond the discussion phase to turn all this into a concrete reality.

October 19, 2018

*Thomas Andrew O’Keefe is the President of Mercosur Consulting Group, Ltd. and currently teaches at Stanford University in Palo Alto and Santiago, Chile.

Paraguay: Stormy First Month for New President

By Barbara dos Santos*

Mario Abdo Benítez

Paraguayan President Mario Abdo Benítez. / Marcos Corrêa / Flickr / Creative Commons

A little over a month into his five-year term, Paraguayan President Mario Abdo Benítez is already being challenged by corruption scandals – including allegations against himself – and internal party squabbling, but he is continuing efforts to build his image as an ambitious reformer.  While emphasizing continuity with the previous administration’s economic policies – focusing on export-fueled growth, low taxes, and domestic investment – Abdo Benítez’s push for certain reforms is ruffling feathers.

  • In the wake of protests against highly publicized corruption and influence-trafficking cases involving national legislators and top judges, Abdo Benítez based his campaign on a pledge to fight government and judicial corruption though deep reforms. In his inauguration speech, he called for immediate priority to be given to comprehensive reform of the national judicial system.  Three days after taking office, he called on all political parties – including those without representation in the National Congress – to join a national debate on constitutional reform.

The president, however, faces a number of challenges to his image and leadership.

  • During the campaign, he distanced himself from the legacy of his father, who was a top aide to Paraguayan dictator Alfredo Stroessner (1954-89), but a visit he made to his father’s grave after voting on election day and his use of Stroessner’s white Chevrolet on inauguration day fueled apprehensions about his commitment to democracy.
  • He is being buffeted by allegations that he has ties with drug traffickers. Social media have publicized a picture of the president in his home with his arm around drug kingpin Reinaldo Javier “Cucho” Cabaña, who was arrested earlier this month.  He has denied receiving money from Cabaña and said that he did not recognize the man – that he had taken “millions of photos” with sympathizers who came to his house to express support during the campaign.
  • One of his closest allies in the congress, Ulises Quintana, was also indicted this month for alleged involvement in “Cucho’s” international drug trafficking network. Another close ally facing corruption charges is Miguel Cuevas, the president of the Chamber of Deputies, who stands accused of illicit enrichment while in office and who has become the new main target of the anti-corruption protest groups.
  • A faction within his party, the Cartistas —allies of former President Horacio Cartes – has been holding back on support Abdo Benítez’s reforms. They claim his call for inclusive debate, rather than negotiating directly with them before opening to other parties, was a sign of bad faith, and they have not agreed to join the talks.
  • The president also faces challenges from the opposition Partido Liberal Radical Auténtico (PLRA), whose leader says he supports reforming the constitution, even drafting a new one, but that it should be based on a “national agenda” – not only Abdo Benítez’s priorities. PLRA and other parties are concerned that a key purpose of the reforms is open the way to presidential reelection, which has long been a goal of the Cartistas.  They also claim the president is appointing cronies to positions that require technical expertise, such as management posts at the Itaipú power plant on the Brazil-Argentina border.

Abdo Benítez’s commitment to reforms may be mostly rhetorical – his bottom line seems mostly about continuity – but the political threats that they entail could get out of control and spark protests.  Six weeks into his presidency, he seems unlikely to rally the domestic support necessary to enact deep reforms to make the electoral, political, and judicial processes more open and transparent.  He may find some comfort in the fact that neighboring presidents – Michel Temer in Brazil, Mauricio Macri in Argentina, and Evo Morales in Bolivia – all have their hands full too, and that, if anything, the region’s turn to the right during elections since 2015 means that he is not likely to be isolated politically.  As a new president, however, Abdo Benítez has to be wondering what the next five years hold.

September 27, 2018

*Barbara dos Santos is a Ph.D. Candidate in Political Science at the School of Public Affairs at American University.

Latin America: The Spirit of Constitutionalism under Attack

By Maxwell Cameron*

Venezuela constitition

A participant in a march in Venezuela holds up the country’s constitution. / TeleSURtv / Flickr / Creative Commons

Recent events in Paraguay and Venezuela raise yet again the issue of whether political leaders are capable of deliberating and acting in ways that show an appreciation for constitutional essentials, or whether they choose instead to perform their roles and offices in ways that continuously test constitutional principles and, over time, contribute to their erosion.  The principles of re-election and term limits are important in every presidential democracy, the product of historical circumstance.  In the case of Paraguay, a dictatorship under strongman Alfredo Stroessner from 1954 to 1989, sensitivity to the idea of a president serving for too long is strong.  Venezuela’s elimination of term limits a few years ago set a dangerous precedent.  Other constitutions limit incumbents to one term (Mexico, Paraguay) or two terms (United States, Colombia); in some constitutions, presidents cannot be re-elected immediately but can run later after a term has elapsed (Peru, Uruguay).

  • More important than the constitutionality of term limits is that the re-election issue be settled in a way that commands the assent of all parties – within a certain spirit of constitutionalism. Paraguayan President Horacio Cartes’s error was to think that he could change the constitution by means that violated this spirit, even if the public would arguably support a modification of the re-election rule if pursued in the right way.  (Since the fall of Stroessner, the Partido Colorado, the pillar of his rule, has won every election except in 2008, when Catholic priest Fernando Lugo was elected.  Lugo was deposed in 2012.)  The President of the Senate, Roberto Acevedo, opposed the change and was outraged by the way it was adopted: the Senate voted in a special session held behind closed doors.  In that session, 25 Senators approved the measure, bypassing the opposition Partido Liberal Radical Auténtico.

The showdown in Venezuela over President Maduro’s effort to shut down the congress was another undemocratic blunder.  A decision by the Tribunal Supremo de Justicia (TSJ), Venezuela’s supreme court, to arrogate legislative functions to itself or delegate them to other branches or agencies was unconstitutional.  (The TSJ has the power only to declare a law invalid or that another branch of government is operating outside the law.)  When the Fiscal General de la República, Venezuela’s equivalent of attorney general, Luisa Ortega Díaz argued that the TSJ’s decision was unconstitutional, she gave herself political cover by expressing loyalty to the Constitution of 1999 – the legitimacy of which has long been undermined by the fact that it is a document made to measure for chavismo.  As a result of this and significant domestic and international pressure, the government backed down – a rare event.  The attorney general’s insistence that the constitution not be violated indicates that a spirit of constitutionalism among chavistas is not completely dead, but it also shows that it remains a mechanism for coordinating the actions of agents within the government.  Her position also raises the possibility of a split between constitutionalists and hardline militarists within the regime.

Democracy is not just a system of rules.  It requires politicians to acknowledge and respect the essential constitutional agreements that have to underpin the struggle for power in a self-governing community.  The crises in Paraguay and Venezuela both forewarn of the dangers of excessive partisanship and the risks of playing fast and loose with constitutional rules.  Something similar seems to be playing out in Ecuador, where allegations of fraud have been made by the opposition.  If spurious, they are condemnable; if supported by evidence, they are deeply disturbing.  Either way, they reflect mistrust in institutions after a decade of rule by Rafael Correa (Likewise, U.S. Senate Republicans’ threats to use of the “nuclear option” to confirm Judge Gorsuch threatens to deepen the politicization of the U.S. Supreme Court.)  The cost of the failure of politicians and citizens to cultivate a spirit of constitutionalism is very heavy.  In Paraguay, it has resulted in deadly protests and resignations by top officials; in Venezuela it has taken the country to the brink of civil war; in Ecuador, there is a real prospect of debilitating governance problems as Lenín Moreno of Alianza PAIS takes office; and in the United States we are starting to see the kinds of governance problems that have long been associated with the “politicized states” (to use Douglas Chalmers’s phrase) of Latin America.

April 5, 2017

* Maxwell A. Cameron is Director of the Centre for the Study of Democratic Institutions at the University of British Columbia.

How are the Americas Faring in an Era of Lower Oil Prices?

By Thomas Andrew O’Keefe*

Gas Station Guatemala

Photo Credit: Josué Goge / Flickr / Creative Commons

The sharp drop in global oil prices – caused by a combination of a slowing Chinese economy hurting commodities sales and efforts by Saudi Arabia to retain market share – has both downsides and advantages for Latin America and the Caribbean.  By keeping production levels steady, despite decreased demand, so that a barrel of crude remains below US$40, the Saudis’ hope is to put U.S. shale oil producers and Canadian tar sands producers out of business.  The drop in oil prices has had a varied impact elsewhere in the Americas:

  • The effect in Venezuela, already reeling from over a decade of economic mismanagement, has been catastrophic. The ripple effect is being felt in those Caribbean and Central American countries that grew to depend on PetroCaribe’s generous repayment terms for oil imports that allowed savings to be used for other needs.  In 2015, for example, this alternative funding mechanism in Belize was slashed in half from the previous year.  The threat of interest rate hikes on money that must eventually be repaid for oil imports also pushed the Dominican Republic and Jamaica to use funds raised on international capital markets to reduce their debt overhang with Venezuela.  (For those weening themselves off PetroCaribe dependency, however, the lower prices are a silver lining.)
  • Low oil prices have also knocked the wind out of Mexico’s heady plans to overhaul its petroleum sector by encouraging more domestic and foreign private-sector investment.
  • In South America, the decline has undermined Rafael Correa’s popularity in Ecuador because the government has been forced to implement austerity measures. The Colombian state petroleum company, Ecopetrol, will likely have to declare a loss for 2015, the first time since the public trading of its shares began nine years ago.  In Brazil, heavily indebted Petrobras has seen share prices plummet 90 percent since 2008, although that is as much the result of the company being at the center of a massive corruption scandal that has discredited the country’s political class.
  • On the other hand, lower petroleum prices have benefitted net energy importers such as Chile, Costa Rica, Paraguay, and Uruguay.

The one major oil producer in the Americas that has not cut back on production and new investment is Argentina – in part because consumers are subsidizing production and investment by the state petroleum firm YPF, which was renationalized in 2012 and now dominates domestic end sales of petroleum products.  Prices at the pump remain well above real market values.  While successive Argentine governments froze energy prices following the 2001-02 implosion of the Argentine economy, this time policy is keeping some energy prices high.  This encourages conservation and efficiency and spurs greater use of renewable alternatives, but it becomes unsustainable during a prolonged dip because it will, among other things, make the country’s manufacturers uncompetitive.  The Argentine example underscores that predictions of a pendulum shift in Latin America in favor of private-sector investment in the hydrocarbons sector over state oil production are still premature.

The lower prices do not appear likely to harm the region’s continuing substitution of natural gas for coal and oil as a transitional fossil fuel to greener sources of energy.  Natural gas prices remain at their lowest levels in over a decade, and the expansion of liquefied natural gas plants allows for easier transport of natural gas to markets around the world.  They are also unlikely to dent the global shift to greater reliance on renewable energy resources driven by the international consensus that climate change can no longer be ignored and something must be done to address it.  At the UN climate change talks in Paris last December, for example, countries agreed to keep temperature increases “well below” 2 degrees centigrade above pre-industrial levels and made a specific commitment “to pursue efforts” to achieve the much more ambitious target of limiting warming to no more than 1.5 degrees centigrade.  The year 2015 was the second consecutive year in which energy-related carbon emissions remained flat in spite of 3 percent economic growth in both years. 

March 24, 2016

*The author is the President of San Francisco-based Mercosur Consulting Group, Ltd.  He chaired the Western Hemisphere Area Studies program at the U.S. State Department’s Foreign Service Institute between July 2011 and November 2015.

Ignoring MERCOSUR and UNASUR at Your Peril

By Thomas Andrew O’Keefe*

Mercosur map

Participating countries in MERCOSUR. Image Credit: Immanuel Giel (modified) / Wikimedia / Creative Commons

Pundits who dismiss MERCOSUR and the Union of South American Nations (UNASUR) as failed attempts at Latin American economic integration should look again.  MERCOSUR has presided over an explosion in intra-regional trade among its four original member states (Argentina, Brazil, Paraguay, and Uruguay) from just over US$ 5 billion at its launch in 1991 to US$ 43 billion by 2014.  UNASUR, for its part, is credited with thwarting a coup attempt against Evo Morales in 2008 and putting a damper on continental arms races.

  • MERCOSUR and UNASUR member countries have taken additional important steps toward convergence since 2014, when MERCOSUR’s highest governing body adopted “CMC Decision 32,” which allows initiatives pursued by either collective to be binding on both if they arise from a set of goals and objectives common to both. The document reaffirms the UNASUR founding treaty stipulation that “South American integration shall be achieved through an innovative process that includes all of the achievements and advances by the processes of MERCOSUR and CAN [Andean Community].”  Chile has spearheaded this effort as a means of reducing duplication of efforts, and is also attempting to bridge ideological differences between the Pacific Alliance (Chile, Colombia, Mexico, and Peru) and MERCOSUR to further build Latin American unity.

Given the relentless negative assessment of both integration projects, multinational pharmaceutical companies were caught off guard when MERCOSUR and UNASUR forced them late last year to make substantial price cuts for public-sector purchases of Darunavir, an antiretroviral to combat HIV-AIDS, as well as Sofosbuvir, used with other medications to treat Hepatitis C.  Both drugs are on the World Health Organization’s List of Essential Medicines.  As a result of CMC Decision 32/14, the Ministers of Health of all the South American nations met in Montevideo on September 11, 2015, and launched a joint MERCOSUR/UNASUR committee to negotiate with multinational pharmaceutical companies on the prices for bulk purchases of certain high-priced drugs.  The committee, made up of representatives from each government’s agency responsible for purchasing medicines, won major price cuts last November – a steep reduction for Darunavir from Hetero Labs as well as lower prices with Gilead for Sofosbuvir.  The new costs were premised on the lowest amount charged to any one of the member governments, and enabled Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir.  The South American governments as a whole are expected to save US$ 20 million in 2016 on purchases of this anti-retroviral.  A proposed 14 percent reduction in the cost of the combination Sofosbuvir-Ledispaver drug for Hepatitis C – if accepted by the MERCOSUR/UNASUR committee – would enable further savings.

The South American governments have their eyes set on several additional high-priced medications, with a particular focus on drugs used to treat cancer.  In order to aid the committee’s work, UNASUR is creating a data bank of the prices charged by the multinationals for specified medicines purchased by the public health sector in each member state.  The fact that the purchases are made jointly through the Pan American Health Organization’s already existing Strategic Fund opens the possibility that countries in Central America and the Caribbean can benefit as well.  It also means that all these countries can access the Fund’s capital account and do not need to have the cash in hand to acquire medications required to address public health emergencies.  MERCOSUR and UNASUR – often dismissed as ineffective – are demonstrating that integration produces tangible results.

February 11, 2016

* Thomas Andrew O’Keefe is President of San Francisco-based Mercosur Consulting Group, Ltd. and is former chair of Western Hemisphere Area Studies at the U.S. State Department’s Foreign Service Institute (2011-15).

Correction: Due to an editing error, an earlier version of this post mistakenly stated that “a 14 percent reduction in the cost of its combination Sofosbuvir-Ledispaver drug for Hepatitis C will enable Chile’s Ministry of Health to pay 90 percent less than what it previously paid for Darunavir.”  The outcomes of the cost negotiations for the two medications are unconnected.

Pope Francis’s Pastoral Mission

By Alexander Wilde*

Photo Credit: Ministério da Defesa / Flickr / Creative Commons

Photo Credit: Ministério da Defesa / Flickr / Creative Commons

The primary purpose of Pope Francis’s trip to Latin America – like all papal visits since Pope Paul VI made the first in 1968 before the historic meeting of Latin American bishops in Medellín, Colombia – is pastoral.  The media are grasping for the implications of his visiting Ecuador, Bolivia, and Paraguay this week, looking for a theme, for example, in the common factors of their poverty, indigenous populations, and environmental conflicts.  Others wonder if this Argentine pope, well acquainted with Peronism, carries a political message about the dangers of left-wing populism.  Yet others posit this trip in terms of religious “competition” to recapture market share from Evangelicals.

This visit and this extraordinary pope, however, are focused on his broader pastoral message – conveying to the faithful his deepest beliefs about what their faith demands of him and of them.  Francis, in contrast to his immediate predecessors, has given a strongly social orientation to this pastoral ministry, while reinforcing its spiritual foundation in personal faith.  In doing this, he has embraced the renewal wrought by the Second Vatican Council (1962-65) and what he apparently judges the positive insights of liberation theology.  Christians must live their faith in the world and their times, and that includes engaging with other “men and women of good will” to realize God’s purposes for humanity.  Pope Francis repeats that phrase, taken from Pope John XXIII, in his new environmental encyclical Laudato Si’.  Visiting these three countries – in which conflicts over land, oil, forests, and water have mobilized social protests – presents clear opportunities to speak out about how the encyclical’s analysis and moral judgments may apply in concrete settings.

Pope Francis brings to his pastoral visit a belief that he and the Catholic Church should “meet people where they are.”  During 15 years as Archbishop of Buenos Aires, that meant being an active presence among the poor in the villas miserias.  Now he links that pastoral injunction to global issues of poverty, development, and the environment.  He appears to feel a deep responsibility to spur action but at the same time a strong grasp of the intractability of the larger processes, political and natural, involved.  He has said more than once that he expects his papacy to be brief, suggesting that he may view this trip within a God-given responsibility to use his limited time and moral authority to help us confront the most fundamental problems of our future together in this world.  Latin Americans have shown growing awareness of these problems.  Their response to this trip is probably not best judged by Mass attendance but rather by whether they can take concrete steps to link, as Francis does, the “cry of the poor” and the “cry of the earth” in their societies. 

July 7, 2015

* Alexander Wilde is editor of Religious Responses to Violence: Human Rights in Latin America Past and Present (University of Notre Dame Press, forthcoming December 2015). 

The Impact of Falling Oil Prices on the Western Hemisphere

By Thomas Andrew O’Keefe*

L.C. Nøttaasen / Flickr / CC BY-NC 2.0

L.C. Nøttaasen / Flickr / CC BY-NC 2.0

The sharp drop in the benchmark Brent crude price of oil from just under US$115 per barrel in June 2014 to its current perch around US$50 has important ramifications for the Western Hemisphere.  For Venezuela, which earns some 95 percent of its foreign exchange from petroleum exports, it is a potential disaster.  Underlying political tensions will be exacerbated if there is no money to continue funding social welfare programs or heavily subsidizing gasoline.  It probably also spells the end of PetroCaribe’s generous repayment holidays and what are in essence below-market interest loans for Caribbean and Central American nations.  Sharply lower oil prices also put at risk major energy projects such as the development of Brazil’s pre-salt reserves, which require a minimum price of $50 to $55 to be economically viable.  Equally tenuous are Argentine efforts to regain energy self-sufficiency by exploiting its vast shale oil and gas reserves and Mexican plans to attract foreign investors to participate in deep-water oil exploration and drilling.  The minimum price for a barrel of oil below which new investment projects in Canada’s oil sands are no longer attractive is around $65.  Shale oil producers in the United States are also being squeezed by low petroleum prices.

On the other hand, net energy importers such as Chile, Paraguay and Uruguay benefit from sharply lower oil prices.  Although being weaned off  PetroCaribe will be painful for the Caribbean and Central America in the short term, they will be able to seek oil at the lower prices elsewhere.  The pressure on the Obama administration to lift the ban on U.S. crude oil exports, in response to a glut of domestic shale oil production, could also redound in favor of the Caribbean and Central America by lowering international oil prices further through increased global supply.  Already, 2015 began with U.S. companies authorized to export an ultralight crude called condensate.

In hopes of rallying OPEC to stabilize oil prices, Venezuelan President Maduro last weekend rushed off to lobby Saudi Arabia, which just two months ago refused to decrease production in order to raise prices, but oil industry sources say there’s little chance of a policy change.  Meanwhile, the environment may turn out to be among the biggest beneficiaries of lower oil prices.  Less investment in shale oil production reduces the risk of leaks of methane, a potent greenhouse gas, as well as decreases flaring.  Similarly, slowing down oil sands production in Alberta and Saskatchewan means that the very high levels of greenhouse gas emissions associated with extracting crude oil from bitumen (not to mention the negative impact on water resources) is diminished.  Although lower fossil fuel prices traditionally have undermined incentives to move to greater reliance on renewable and non-traditional energy resources, this may no longer be true.  For one thing many governments around the world are now embarked on ambitious efforts to reduce carbon emissions by, among other things, raising the costs associated with petroleum usage through cap and trade regimes that force companies to buy government-issued pollution permits.  Still others have enacted outright carbon taxes on utilities and large factories per metric ton of carbon dioxide emissions.  In addition, the heavy initial capital investment that was previously associated with things like wind, solar and geothermal power are falling.  For example, a combination of technological advances and Chinese overproduction have resulted in much lower prices for solar panels so that the cost of generation from a large photovoltaic solar plant is now almost 80 percent less than five years ago.  Geothermal energy may be the renewable that most benefits as drilling rigs idled by lower oil prices are now available at a lower cost for geothermal projects.  

*Thomas Andrew O’Keefe is President of San Francisco-based Mercosur Consulting Group, Ltd. and teaches at the Villanova University School of Law.

January 13, 2015

UNASUR Looking for Leadership and Direction

By Andrés Serbin

unasur meetingThe seventh UNASUR head of state summit, held in Suriname in August, failed to give the organization the shot in the arm that it needed to continue developing as an effective voice for South America. Despite grandiloquent declarations that it was a “historic event” for the region, the summit was in danger of being overshadowed by several incidents. The son of Suriname´s President and summit host, Desi Bouterse, (who himself has a checkered past) was detained in Panama the day before the summit and extradited to the United States, where he faced drug- and arms-trafficking charges.  (The son was subsequently charged with “attempting to support a terrorist organization” as well.)  Moreover, four of the 12 UNASUR heads of state didn´t attend the Summit, and bilateral tensions between some of the participants got the meeting off to a rough start:  Bolivia was irritated that Brazil gave asylum to a senator accused of corruption; Uruguay’s decision to expand a paper plant on the Paraná River peeved Argentina; Chile and Argentina were in a row regarding the Chilean airline LAN’s use of facilities in Buenos Aires; Chile and Peru continue a battle in the Hague about a territorial dispute; and Paraguay was still in limbo after being suspended from UNASUR (and MERCOSUR) after President Lugo’s removal last year by the Congress.

Even as the dust settled, however, UNASUR was unable to take on the most important task of the summit – appointing a new Secretary General for the organization.  Despite their contrasting styles – sometimes complementary and sometimes in open competition – Presidents Chávez and Lula de Silva had driven the creation and consolidation of UNASUR after the end of the FTAA project during the Mar del Plata Summit of the Americas in 2005, but that strong leadership is not there anymore.  Their absence laid bare the weak political will of most other South American leaders to consolidate the organization and to build a strong institutional basis for its development.  No one, except perhaps former (and controversial) Paraguayan President Lugo has expressed interest in the job of Secretary General.  It was no surprise, moreover, that the Summit was not able to advance other crucial decisions, such as the creation of the long expected Banco del Sur. A resolution condemning U.S. initiatives regarding Syria was one of the few relevant and consensual results of the Summit.

UNASUR started out as a political endeavor based on regional, instead of national, interests, and much of its earlier momentum was driven by rejection of earlier “neoliberal” attempts at regional integration and of the role of the United States in the region. Members’ new focus is clearly state-centric and political, as regional market and trade issues have been superseded by a new agenda focusing on infrastructure and communications development, energy and security agreements, global financial impact and environmental concerns. The absence of new leadership to move forward a regional agenda poses a series of challenges to this process.   In the meantime, other processes continue.  Paradoxically, some of the member countries are deeply involved in the creation of a new initiative – the Pacific Alliance (Alianza del Pacífico), clearly oriented towards free trade.