VOXXI: Argentina may have reached a milestone deal with Repsol

Argentina may have reached a milestone deal with Repsol
W. Alejandro Sanchez
VOXXI
November 26, 2013
Originally published: http://voxxi.com/2013/11/26/argentina-milestone-deal-with-repsol/

The deal between the Buenos Aires’s government and the Spanish company Repsol about Argentina’s controversial expropriation of the YPF energy company in 2012 may bring new possibilities to the South American nation for jumpstarting its stagnant economy.

The deal signed on Monday could signal that President Cristina Fernandez de Kirchner is revising her confrontational stance towards foreign investors.

The deal

The Spanish company Repsol had a 51% stake on YPF when it was expropriated by the Argentine government in April 2012 “without paying a single cent,” as explained by a November 25 article by the Associated Press. President Kirchner justified her decision by arguing that Repsol had not invested enough in YPF to extract Argentina’s oil.

At the time, the move was very popular among Argentines, as large segments of the population regarded free market and privatization as the source of Argentina’s economic woes over the past two decades.

In 2012, the South American state was still feeling the effects not only of the global economic meltdown but also of Argentina’s own economic shock in 2001-2002, which prompted the government to default on its debt and led to a carousel of heads of state.

But things may be changing as the Spanish Minister of Energy and Tourism, Jose Manuel Soria, recently travelled to Buenos Aires where he met with the recently elected Minister of Economy, Axel Kicillof.

Representatives of the Mexican energy giant PEMEX apparently were also involved in the negotiations as the company has a stake on Repsol. It would seem that the senior officials have reached an agreement on YPF’s future, but this solution is still at a preliminary level.  It still has to be ratified by Repsol’s board.

No exact amount has been mentioned so far regarding how much Argentina will pay Repsol over YPF.

The Spanish company has demanded $10.5 billion in compensation for the 2012 expropriation – Repsol bought YPF from the Argentine government for an estimated $15 billion in 1999.

However, it is highly doubtful that Buenos Aires will pay this amount, as Minister Kicillof has publicly stated that “we are not going to pay them whatever they want,” in reference to the Spanish company’s demands.

The renowned Argentine daily El Clarin  reported that Spain has circulated the rumor that Argentina will pay a compensation worth $5 billion, while Argentina at one point apparently threatened to unilaterally pay $1.5 billion. We will have to wait to see if a final accord is finally signed and how much will it be worth.

A sign of things to come?

Argentina’s decision to improve relations with Repsol comes at an interesting time regarding Argentine politics. President Kirchner has recently sworn in a new cabinet, which included the aforementioned Axel Kicillof as the Minister of Economy.

Curiously, Kicillof was the mastermind of the decision to seize YPF in 2012 when he was deputy minister.

Some analysts argue that “the appointment of Kicillof is not going to be welcomed by the markets […] it confirms that government policy will not be altered by the results of the midterm election,” said Ignacio Labaqui, an analyst for the New York-based consultancy Medley Global Advisors, for a November 18 article for Reuters.

Argentina’s opposition parties are trying to capitalize both on the recent cabinet changes and the government’s decision to revisit the takeover of YPF.  For example, opposition deputy Elisa Carrio argued that the deal over YPF shows that the government is backing down from some of its previous initiatives and “it wants to be irresponsible towards the [Argentine] population.”

To put the YPF decision in a wider context, it is important to note that Argentina held legislative elections this past October. While Kirchner’s Frente para la Victoria (FPV) coalition managed to keep a majority in congress, it lost important seats in as well as the control of several provinces, including Buenos Aires.

Kirchner’s goal was to run for a new presidential term in 2015 (she was first elected in 2007 and re-elected in 2011), but she lacks the two-thirds majority in Congress to modify the country’s constitution in order to get rid of presidential term limits which prohibit her from running again.

At this point, it is hard to tell where Kirchner and Kicillof will take the country in the final two years of the lengthy Kirchner dynasty.

Untapped potential

Argentina is a nation full of natural resources, but it arguably needs foreign financial investment in order to exploit them. One project that could bring some important revenue is the Vaca Muerta (Dead Cow) oil deposit in the southern province of Neuquén, near the Argentine-Chilean border.

An October 15 article by El Clarin explains that there are some 30 companies searching for oil in Vaca Muerta. The article optimistically argues that the fields could produce 100 thousand barrels a day for the next 15-20 years.

Perhaps the pre-agreement over YPF may be a sign that the economic tides in Buenos Aires are changing, but there is still plenty of skepticism in the international community regarding Argentina as a target for foreign investment.

The South American nation is an attractive market, particularly because of the Vaca Muerta oil deposits, but it is too early to tell if Argentina’s economic problems are anywhere near an end.

Blouin Beat: World - Cuba’s military maneuvers come amid potential regional shift

Cuba's military maneuvers come amid potential regional shift
W. Alejandro Sanchez
Blouin Beat: World
November 26, 2013
Originally published: http://blogs.blouinnews.com/blouinbeatworld/2013/11/26/cubas-military-maneuvers-come-amid-potential-regional-shift/

The Bastion 2013 military exercises in Cuba took place from November 19 to 24. While the exercises themselves were not remarkable in scale or scope — the Cuban armed forces are not a global military power — they do provide a glimpse into the status and security concerns of the Cuban government and its national-security apparatus. It is interesting, as well, to note that they occurred hard on the heels of an important speech by U.S. Secretary of State John Kerry on the future of U.S.-Latin America and U.S.-Cuba relations.

Not much is known about Bastion 2013. This was the sixth iteration of the Bastion training operations. They were first carried out in 1980 and subsequently in 1983, 1986, 2004 and 2009. The 2013 version had originally been scheduled to take place in 2012, but it had to be delayed due to Hurricane Sandy.  The Cuban government has been tight-lipped on specific details about units and ordnance. But there was plenty of nationalist rhetoric around the event. The website Cubadebate stated that “The exercise, which . . . includes tactical drills by Cuban regular troops made up of young men and women, who honor their [commitment to] the defense of their homeland.” State-run media outlets, such as Juventud Rebelde andGranma, praised Bastion 2013 and highlighted the role of Cuban civic society, particularly university students, played during the last stages of the exercises. The website CubaDefensa has analyses and photographs of Cuban students as they drilled with rifles and gas masks.

The hypothetical scenario portrayed during the exercise was an attempted invasion by an unidentified country (it shouldn’t be difficult to guess whom the Cuban government was imagining as the invader). Its aim was to prepare Cuba for a so-called “people’s war.” An article in Juventud Rebeldedescribed how an “enemy ship” reached the beach line of the Ciego de Avila province, where it was destroyed by the local militia. It is unclear if live ammo was utilized and if the actual vessel was destroyed during the exercises, but Juventud Rebelde report stated that “minutes later [after the ambush] the [enemy] vessel blew up in the air . . . The homeland had been defended.”

The presence of U.S. military elements may have been imaginary, but the presence of Venezuelan military personnel is an open question. A November 21 article from the Agencia Venezolana de Noticias mentions that senior Venezuelan officers (General Vladimir Padrino López and Major General Alexis López Ramirez) led a delegation of military personnel to the Caribbean island. Cuban media outlets maintained silence on the subject, but a Venezuelan involvement would make sense. Especially in light of growing Cuba’s military presence in Venezuela, as reported by theVenezuelan daily El Nacional this past July and by the Spanish daily ABC in September.

That all this took place after Kerry gave his speech at the headquarters of the Organization of American States (OAS) is noteworthy, as well. The November 18 speech has been widely publicized; in it, Kerry declared that “the era of the Monroe Doctrine is over” — i.e., he seemingly repudiated the assumption, which stems from President James Monroe’s notion that European powers must not interfere in the affairs of Western-Hemisphere states, that only the U.S. can influence continental affairs, which is also the cornerstone of the belief that Latin America and the Caribbean are Washington’s “backyard.” (The full text of Kerry’s speech can be found here). Kerry also took the time to discuss U.S.-Cuba relations, both praising cooperation initiatives between Washington and Havana as well as reminding the audience about “the authoritarian reality of life for ordinary Cubans.”

The Obama administration has brought a momentum to improve U.S.-Cuba relations. While President Obama has not kept some of his campaign promises, such as closing down the detention center in Guantanamo Bay, his government has carried out negotiations with the Cuban government in recent months on issues like migration and restoring postal service between the two countries. Not even a bizarre incident last July involving a vessel that was stopped in Panama apparently carrying obsolete Cuban weapons to North Korea seems to have prevented these bilateral initiatives.

The timing of the Bastion 2013 exercises, which occurred right after Kerry’s optimistic-speech seems to have been a sad coincidence, but nothing more than that as they were originally scheduled for 2012. Nevertheless, it is clear that time is running out if the world wants to see a major breakthrough in U.S.-Cuba relations, as the next heads of state (the U.S. will have elections in 2016 and Cuba’s Raul Castro has stated that he will retire in 2018), may not be interested in a (historical) rapprochement. If the Cuban media is to be believed, the Cuban armed forces (and population) are ready for anything.

VOXXI: Juan Manuel Santos seeks ambitious re-election

Juan Manuel Santos seeks ambitious re-election
W. Alejandro Sanchez
VOXXI
November 23, 2013
Originally published: http://voxxi.com/2013/11/23/juan-manuel-santos-seeks-re-election/

Colombian President Juan Manuel Santos has announced that he will seek a second term in his country’s upcoming elections, which will take place on May 25, 2014.  He declared his candidacy this past Wednesday, November 20, but the move came as a surprise to very few as he has hinted his intentions regarding re-election for a long time.

This is an ambitious endeavor as Santos will have a difficult time winning over (again) the support of the majority of the Colombian population.

The Negotiations

The Santos presidency is currently in a difficult moment, as it seems to have had more failures than successes, which has resulted in Santos’ plummeting popularity in the past months.

Santos’ declaration comes at the heels of a historic agreement between the Colombian government and representatives of the Colombian insurgent movement, the FARC. The two sides have been negotiating in Havana, Cuba over the course of a year to try to find an end to this decades-old internal conflict.

Out of a five-point peace plan, the two sides reached an agreement over land reform this past May. More recently, in early November, the two sides accomplished another milestone: the insurgent movement will be allowed to participate in Colombia’s political system if a full peace agreement is reached.

Nevertheless, there are other issues that need to be agreed upon and the parties do not have much time left before the May elections.

It is worth noting that the FARC leadership has praised Santos’ willingness to negotiate. This is best exemplified by a November 13 interview between the Voice of Russia’s Brittany Peterson with Victoria Sandino Palmera, a female FARC commander and representative in the negotiations that are taking place in Cuba.

FARC’s Sandino Palmera declared that “You could say that the government has political will, as does […] Santos […]. But at least in the most recent times he has expressed more of an emphasis for arriving to a deal that allows an end to the conflict.”

Should another head of state come into power to replace Santos, it is debatable whether he (or she) may want to continue with the negotiations.

The momentum (broadly speaking) of the peace negotiations with the FARC has made Santos become even more ambitious as it has been hinted that the Colombian government may also start negotiations with the country’s other insurgent movement, the ELN.

Without a doubt, if some kind agreement is reached with either group in the near future, Santos can use this as a propaganda tool during his presidential campaign.

Protests by Peasants

It is important to stress that Colombians will not cast their votes solely based on their country’s security situation (though this is central issue). Obviously, the national economy is also critically important.

Colombia may be a member of the Pacific Alliance, the latest trade bloc to appear in Latin America and whose members are pro-free trade economies, but segments of Colombia’s workforce, particularly the agricultural sector, are displeased with the government’s pro-free trade stance.

This is best exemplified by the weeks of (sometimes violent) protests that were carried out both on Colombia’s countryside as well as major cities this past August-September. The protests started via Colombian farmers and peasants who were upset about Colombia’s free trade agreement with the U.S., which they argue will hurt Colombia’s important agricultural sector.

Popularity Challenges

Given these drawbacks, it comes as little surprise that Santos’ popularity was at a worrisome 21% by early September. However, he appears to be on a rebound, as a recent poll gives him a slightly more encouraging29% approval rating.

As for potential contenders, the major challenger so far appears to be Oscar Iván Zuluaga. According to a November 20 article mentioned in the British daily The Guardian, a poll by Invamer-Gallup found that 27% of people surveyed would vote for Santos, while Zuluaga comes in second place at 15%.

Interestingly, Zuluaga and Santos know each other fairly well as they both served under the administration of President Alvaro Uribe (2002-2010). At the time Zuluaga was the finance minister while Santos was Uribe’s defense minister.

However, times have changed and Uribe has become one of Santos’ harshest critics, particularly due to Santos’ decision to negotiate with the FARC. (It has been recently revealed that the FARC had schemed a plot to murder Uribe, which adds to the former president’s anti-negotiations stance). President Uribe has even formed a political coalition, the Uribe Centro Democratico, with the aforementioned Zuluaga as his presidential candidate, to oust Santos.

After the Colombian head of state declared his intention to run again for the presidency, Zuluaga declared to the press that peace in Colombia “is not built by chasing peasants that protest while protecting terrorists that kidnap.” That is a pretty straightforward position on how Zuluaga views Santos’ ongoing negotiations with the FARC.

As for how the Colombian media has reacted to Santos’ presidential intentions, an op-ed in the renownedColombian daily El Colombiano argued that the president’s re-election plans actually started “almost 40 months ago, when he first assumed the presidency.”

It would seem that no one is surprised that Santos decided to run for a second presidential term. But whether he will be able to achieve this it is still too early to tell.

Blouin Beat: World: Brazil, Italy to butt heads over Pizzolato?

Brazil, Italy to butt heads over Pizzolato?
W. Alejandro Sanchez
Blouin News: World
November 19, 2013
Originally published: http://blogs.blouinnews.com/blouinbeatworld/2013/11/19/brazil-italy-to-butt-heads-over-pizzolato/

The phrase “the shoe is now on the other foot”, clichéd though it is, accurately summarizes the current state of Brazilian-Italian relations. On Monday, the Brazilian government looked into its options in the case of Henrique Pizzolato, a banker with dual Brazilian and Italian citizenship, who fled to Italy in order to avoid a prison sentence in the South American nation. Amazingly the Brazilian media has reported that Pizzolato may have fled to Italy over 45 days ago (according to statements by the banker’s relatives), but Brazilian authorities only realized that he had absconded when the police went to his home to arrest him over the weekend.

The case that resulted Pizzolato’s sentencing is known as the “mensalão” (big monthly allowance) scandal and has been a black eye for the Brazilian left: it has embroiled senior members of the Lula da Silva administration. As the BBC explains, the case involved the usage of public funds to pay coalition parties for political support between 2003 and 2005 — the first two years of the lengthy Lula presidency. Individuals convicted so far include Delubio Soares, the former treasurer of the Partido dos Trabalhadores (Lula’s party), and Jose Dirceu, who was Lula’s chief-of-staff during those two years.

Pizzolato was sentenced to a prison term of 12 years and seven months on money laundering, corruption and embezzlement charges after he authorized a US$ 31.8 million transfer from Banco do Brasil as part of the mensalão scheme, according to Brazilian daily Folha de Sao Paulo. The convicted banker justified his escape in a letter written before he fled, arguing that he was leaving Brazil so he could receive a “fair and media-free trial.” News agency Jornal Nacional reports that the Brazilian Federal Police consider Pizzolato a fugitive and that his name has been added to INTERPOL’s wanted list. But it is highly unlikely that the disgraced banker will be extradited: the Italian government does not extradite people with Italian citizenship.

As for that shoe-transfer mentioned above: Brazil will find itself in a hard-to-defend position if it follows up on its extradition demands. Why? Cesare Battisti. Battisti was a member of the Armed Proletarians for Communism, an Italian terrorist movement which was particularly active between the 1960s and 1980s; he was sentenced to life in prison by an Italian court for four homicides, but he managed to flee the country and make it to Brazil in 2007 and was arrested by the police in Rio de Janeiro on March 18 of that year for illegally entering the country and spent four years behind bars. On December 31st, 2010, the last day of Lula’s presidency, the PT member decided to grant Battisti asylum instead of deporting him back to Italy.  Battisti has been living a free man in Brazil ever since. The Italian has not denied being a member of the PAC, but he maintains his innocence regarding the four assassinations. He has argued that “in my case, there was a sort of artificial operation that created, from one day to another, the monster Cesare Battisti.”

The Italian government has had little leverage on this issue. Trade and diplomatic relations between the two nations are fairly strong, as well as security relations. In July 2012, then-Italian Defense Minister Giampaolo Di Paola met with his Brazilian counterpart, Celso Amorim. Di Paola expressed his country’s interest in embarking on joint ventures with the Brazilian navy to construct warships in the South American nation. And Italy is not a commercial partner with Brazil comparable to the U.S. or China, so imposing economic sanctions would probably hurt the struggling Italian economy more than the relatively robust Brazilian one. But the Pizzolato affair creates a new paradigm: now each country has a fugitive that the other country desires. The contingencies here are many and complex, and they make it unlikely that we will see a simple one-for-one swap, Battisti for Pizzolato. At the time of this writing, there have been no media reports about a meeting between Italy’s Ambassador to Brazil, Raffaele Trombetta, with either Brazilian President Dilma Rousseff or Foreign Affairs Minister Antonio Patriota, to discuss the Pizzolato affair. Likewise, the Brazilian ambassador to Italy has not been recalled (in 2011 Italy recalled its ambassador to the South American state when the extradition talks for Battisti failed). Pizzolato will not be able to leave Italy: INTERPOL’s website has published a warrant for his arrest among its 190 member countries. But given Italy’s unsuccessful extradition attempt against Battisti, look for Brasilia’s future attempts to discuss Pizzolato’s fate to go nowhere, fast.

Blouin News: Politics: Bachelet’s big agenda

Bachelet's Big Agenda
W. Alejandro Sanchez
Blouin News: Politics
November 15, 2013
Originally published: http://blogs.blouinnews.com/blouinbeatpolitics/2013/11/15/bachelets-big-agenda/

 Chile will hold its presidential election Sunday, November 17, and it is all but certain that former President Michelle Bachelet will emerge victorious. This anticipated and unsurprising victory comes amidst unusual (but luckily for Bachelet non-career-ending) allegations that the former president’s campaign team plagiarized part of a song by Jinja Safari, an Australian music band. (The song in question is called “Peter Pan,” which can be heard here; Bachelet’s campaign promo in question seems to be this one; a YouTube version of the campaign video has been taken down). The Australian band’s legal teams are “preparing an infringement notice,” to be sent to Bachelet’s office.

While this incident will quickly be forgotten — the website of the Australian Department of Foreign Affairs and Trade highlights that Canberra and Santiago enjoy good diplomatic ties and trade between the two states reached A$1.6 billion in 2012 [a1] – it does put the former head of state in an awkward position before her expected victory.

It does not obscure, however, the numerous clues as to how she would govern domestically. The past months have involved a flurry of promises by Bachelet, including a reform of Chile’s tax system within her first 100 days and potential alterations to the Chilean constitution. Another big plank is her promise of free education for university students (who have staged major protests over the past couple of years). Known for being on the left side of the spectrum when it comes to political ideology, there is concern that Bachelet’s promises are too “radical” for some Chileans. Bachelet’s sharpest critics include current President Sebastian Piñera and elements of the Chilean entrepreneurial sector, which does not like Bachelet’s promise of higher taxes on corporations.Forbes echoed their criticism in an article wondering whether Bachelet’s re-election might have a powerful negative effect on the South American nation’s vibrant economy. (Read more: Copper and reforms to drive Chile’s economy under Bachelet).

It should be noted that there is still ongoing debate whether Bachelet will retake the presidency in the first round of voting or if a second round will be necessary (this would occur on December 15) against opposition candidate Evelyn Matthei. According to figures from polling agency CEP, Bachelet is expected to get 47-48% of the votes. Chilean analysts have recently raised the issue of a “silent vote,” which could benefit Matthei. However, the CEP poll shows that Matthei is expected to receive only 14% of the vote. Hence, Matthei would need a major upset when it comes to “silent voters” if she wants to be a credible threat to the former leader.

It should also be stressed, however, that successful initiatives by the next Chilean head of state will depend on the future makeup of the country’s two-chamber Congress: it consists of a 120-seat chamber of deputies and a 38-seat senate. All seats in the deputy chamber are up for grabs this upcoming election, as well as 20 seats of the senate. Currently, Bachelet’s Nueva Mayoría coalition counts 20 senators and 57 deputies, while Alianza (Matthei’s coalition) has 16 senators and 55 deputies. These evenly matched numbers means that Bachelet will have to win big on Sunday at the legislative level if she wants to bring about radical reforms (like upgrading the country’s constitution). It is noteworthy that, just like in the U.S., Chile’s congress has a sky-high disapproval rating. A poll carried out by GfK Adimark throughout September showed that Chile’s deputy chamber has a disapproval rating of 76%, while the senate’s disapproval rating is at a very close 73%. Which means the next Chilean congress could have a drastically different make up than the current one, another potential hurdle for Bachelet.

At the international level, the question is more vexed. Chile will be the next representative for Latin America and the Caribbean at the U.N. Security Council for the 2014-2015 period, which brings with it a whole host of potential headaches — due less to the power Chile would wield than to the politicking such a seat necessarily entails.

The regional political terrain is also fraught: Bachelet declared over the summer that the Pacific Alliance — the newest trade bloc to emerge in Latin America — should open itself to more members. Bachelet’s declarations hint that her eventual government will be in favor of this type of free-trade coalitions, so we will also likely see her supporting the Trans Pacific Partnership (TPP). (Sebastián Piñera, the man whose office she looks likely to assume is also apparently of this mindset: on November 4-7, Santiago hosted a round of TPP negotiations, which focused on state-owned enterprises).

A more localized point of friction, however, will be her nation’s controversial maritime border dispute with Peru. The two countries have gone to the International Court of Justice (ICJ) in The Hague to get a ruling on the shape of their maritime. The ownership of roughly 38 thousand square kilometers of South Pacific waters (rich with marine life, which could be a huge asset to either country’s fishing industry) hangs in the balance, and a verdict is expected within the coming months.  So far both Santiago and Lima have declared that they will respect the ICJ’s verdict and will continue to maintain close trade relations and other “good neighbor” initiatives. Still, there is the lingering concern of what could happen should ICJ rule against Santiago and if an unfavorable ruling could hike up tensions between Lima and Santiago and, in a worst case scenario, lead to an armed conflict. Speaking on the subject, Bachelet declared in August that the dispute with Peru will be solved through international law and that Chile is a country that believes in dialogue and cooperation. As Chile’s former president and a one-time defense minister, Bachelet knows the capabilities of her nation’s armed forces and knows how to handle her country’s military, should The Hague rule in Lima’s favor, to prevent this dispute from escalating.

Barring an unexpected upset, Michelle Bachelet will be the country’s next president. There are issues that she will have to face at the international level, such as the aforementioned maritime dispute with Peru, tensions with Bolivia and Chile’s role in the UNSC. Nevertheless, her major challenges will be at the domestic level. While the country has experienced a vibrant economy over the past years, there are concerns that the “Chilean miracle” could burst sometime soon (her critics argue that this will happen under her leadership). This economic miracle has not reached all segments of the Chilean population, case in point being the protesting university students. Combine that with Bachelet’s plans for tax and constitutional reform and she will have plenty to keep her busy at home.