Weekly Roundup: Canadian Elections, Peru's Cabinet Resigns, and LatAm Eyes U.S. Election

Latin America Feels Financial Pinch

The World Bank announced that Latin American economies now feel “the effects of the global financial crisis as credit contracts, demand for exports declines, and commodity prices fall, resulting in a deterioration of terms of trade.” The Bank predicted that, even though growth over the past five years helped to bolster the region, the growth rate will likely slow from an estimated 4.6 percent to between 2.5 percent and 3.5 percent in 2009. After a shaky week, Latin American markets made a strong recovery on Monday followed by moderate gains on Tuesday. Yet the region’s major currencies continued to slide Wednesday following days of volatility, with Chile’s peso leading the pack and falling to its lowest level in almost two decades. Wall Street Journal reports that, with commodity prices down and credit frozen, the benefits of a boom time may have reached their limit for the region.

The Inter-American Development Bank, the Latin American Reserves Fund, and the Andean Development Corporation agreed on Monday to provide $9.3 billion in emergency aid across the region.

Chinese Downturn Could Slow Down LatAm

In a recent column for Latin Business Chronicle, Institute of the Americas’ Jeremy Martin and Roger Tissot explain why Latin America should prepare to absorb the impact of a possible Chinese economic slowdown. In recent years China’s energy hunger fueled the commodity boom benefiting much of the region and some countries bases their budgets and social expenditures on that demand. The experts warn that such scenario paired with the present financial crisis in the United States could result in chaos.

Canada’s Conservatives, Still Minority, Gain Stronger Mandate

Battered by last week’s stock market dives, Canada’s Conservative Party failed to gain the majority government it was poised to attain when Prime Minister Stephen Harper called federal elections in early September. However, though Harper will run a minority government, his party picked up 13 seats to strengthen its mandate. Toronto Star offers full coverage of the election results.

Writing in The New Republic, author Stephen Marche analyzes a policy proposed by Canada’s opposition parties that would make carbon taxation the government’s principal source of revenue. He calls the proposal “ambitious” but warns “given the current economic crisis, a dive into fiscal uncertainty may have less appeal that it might otherwise.”

WEF Ranks Canada’s Bank System World’s Soundest

A new survey by the World Economic Forum rated Canada’s banking system the soundest in the world, ahead of Sweden, Luxembourg, and Australia. Chile took the spot of 18, with the most stable banking system in Latin America. The 2008-2009 Global Competitiveness Report rated the U.S. banking system at 40, just ahead of El Salvador and Peru, but ranked the U.S. economy as the world’s most competitive.

Corruption Scandal in Peru Spurs Cabinet’s Resignation

The entire cabinet of Peruvian President Alan García resigned on October 10 as a result of a corruption scandal. The Los Angeles Times reports that Prime Minister Jorge del Castillo and 14 cabinet members submitted their resignation as news broke that several officials were involved in soliciting bribes from a European company in return for energy contract concessions. Peru’s Congress announced that it will investigate concessions granted in the countries oil and gas sector. The corruption scandal comes at a time when García faces low approval ratings despite his country’s economic growth as Peruvians say boom times have not halted corruption or poverty.

An editorial in La Opinión credits García with reacting quickly “to dispel the clouds of corruption that threatened to topple his government.” The article notes that the president’s choice of leftist Yehude Simon, who spent eight years in prison during the Fujimori administration because of possible guerilla ties, signals support for regional development.

Shining Path Reemerges, Ambushes Convoy

Peruvian rebel group the Shining Path, once 10,000 strong but decimated after the 1992 arrest of leader Abimael Guzman, ambushed four army trucks over the weekend in an attack that left 19 dead. The rebels staged their deadliest attack in a decade in southeastern Peru. Though the Shining Path has grown in recent years—aided by drug money—estimates place their number at 600.

Latin American Eyes on U.S. Election

An October article in Poder says countries south of the United States watch the presidential elections “expectantly” as they wonder if it could spell new engagement across the region. The report offers a country-by-country analysis of U.S. relations with Latin America; where the candidates stand on policies; and challenges for the next administration that include Mexico’s problems with drug violence and need for economic reform, the anti-U.S. government of President Hugo Chávez, and how to handle a transitioning Cuba.

1930s and Now: Comparing U.S. Immigration Enforcement

The Dallas Morning News draws parallels between the current rise in immigration enforcement and the 1930s wave of mass deportations of Mexicans during the Great Depression. The article notes that in the 1930s, following the stock market crash, roughly 1 million Mexicans returned to their home country through deportations and repatriation. In the past three years, more than half a million Mexicans have been repatriated from the United States.

Supporters of Constitutional Reform March in Bolivia

President Evo Morales joined a 120-mile march started Monday by supporters of the new constitution championed by his administration. Marchers, who started in Caracollo, are expected to reach La Paz over the course of the week and the demonstrations serves to pressure the Bolivian National Congress to schedule a date for a referendum on the new constitution. The reform has been a source of controversy in a politically divided country as the constitution supports land and resource redistribution.

Read an AS/COA analysis of political tensions between supporters and opponents of Morales, which sparked violent clashes last month.

In a recent AS/COA interview, Professor Alfonso Quiroz discusses the recent trend of constitutional reform in the Andes.

Andean Divisions on EU Trade Deal

At a Tuesday summit in Guayaquil, Ecuador and Bolivia expressed reluctance to support a trade agreement between the Andean Community (CAN) and the European Union while Colombia and Peru expressed that they intend to move ahead with the deal. CAN is expected to discuss the pact with EU representatives during the IberoAmerican summit at the end of October in San Salvador. 

Lula Meets with South African, Indian Counterparts

At an IBSA summit in New Delhi on Wednesday, Brazilian President Inácio Luiz Lula da Silva met with Indian Prime Minister Manmohan Singh and South African President Kgalema Motlanthe, where the leaders called for UN and G-8 reform as a way to include their development priorities in the face of an international financial crisis. The three countries criticized wealthy countries for their handling of the global economy.

Aerolineas Argentina Deal Stalls

After falling short on agreeing on the value of Aerolineas Argentina, a deal between the Argentine government and Spanish company Marsans stalled on Tuesday. According to a recently expired July pact, a government-run board is now running the company as it returns to state hands after twenty years in Spanish control. However, Buenos Aires is reluctant to pay for a company takeover because none of the airline’s 22 routes currently run a profit.

Uribe, Lula, Vázquez Receive High Marks

According to the Ibero-American Governance Barometer of 2008—a poll conducted in April that surveyed nearly 12,500 in 22 countries and with results published this month—Colombian President Álvaro Uribe ranks first among Iberoamerican presidents. He commanded the highest approval ratings at 85 percent. Brazil’s Inácio Luiz Lula da  Silva ranked second and Uruguay’s Tabaré Vázquez took the bronze.

Boosting Colombia’s National Defense

Nicolás Urrutia of Fundación Ideas para la Paz writes in Semana that not only must Colombia’s government worry about the twin dangers of terrorism and organized crime, but also how to develop a defense department that can handle international threats. He warns that although Bogotá remains unaccustomed to bolstering national defense to prepare for possible aggression beyond its border, the time may have come as Venezuela increases military spending and Moscow’s influence grows in the region.