Publish in Special Reports - Tuesday, December 18, 2012
DIFFERENT STYLES, DIFFERENT RESULTS Presidents Dilma Rousseff of Brazil and Cristina Fernandez of Argentina in Brasilia on December 7, 2012. (Photo: Brazilian Presidency)
Former Brazilian presidential chief of staff Jose Dirceu was convicted to jail for his role in leading a scheme to pay legislators. (Photo: José Cruz/Agencia Brasil)
Rousseff does good, Cristina does bad.
BY LATINVEX EDITORS
The best and worst events in Latin American business this year, according to Latinvex editors.
Mexico’s New President Enrique Peña Nieto. Mexico’s new president is doing all the right things so far and deserves praise for taking bold steps in his first month (and even before he assumed office on December 1). He has spurred hope that Mexico will be able to reduce the horrific drug-related violence that has dominated much of the headlines in recent years, while his education reform is gaining widespread praise. Meanwhile, he helped the congress pass badly-needed labor reform even before assuming office.
Brazil Airport Concessions. Brazilian president Dilma Rousseff deserves praise for ordering the management of airports at Sao Paulo, capital Brasilia and Viracopos Airport in Campinas near Sao Paulo to be auctioned to private companies in February. The $9.4 billion concession to operate Sao Paulo Guaralhus airport was Latin America’s second-largest deal during the first nine months this year, according to a Latinvex analysis of data from Thomson Reuters and the Brazilian government. As the Financial Times pointed out: “The auction of the airport concessions represents a breakthrough in Brazil’s preparations to stage the World Cup soccer final in 2014 and the Olympics two years later, which have been struck by serious delays.”
Brazil’s Corruption Progress. Brazil has seen significant progress against corruption this year. In a historic trial, Brazil’s Supreme Court found 25 prominent politicians and businesspeople guilty of participating in a scheme to buy votes in congress with public funds. The leader of the so called mensalão scheme, Jose Dirceu, was the chief of staff of former president Luiz Luiz Inacio Lula da Silva. Meanwhile, Brazilian president Dilma Rousseff has also been active and deserves praise for acting swiftly and boldly against officials in her administration that have been accused of corruption. She has fired seven ministers and her chief of staff in Sao Paulo over bribe charges, sending a loud and clear message that she will not tolerate corruption. “Brazil is showing its willingness to tackle corruption,” Alejandro Salas, Regional Director for the Americas for Germany-based Transparency International, told Latinvex recently, citing among examples the mensalão trial and the recent resignation of ministers.
ABInbev Expansion. The $20.1 billion purchase of Mexico’s top brewer Grupo Modelo (and maker of such popular brands as Corona) in June and Dominican brewer CND (producer of Presidente and other brands) for $1.2 billion in April by the world’s largest brewer AB InBev are the latest in the trend towards consolidation in the sector. The acquisition of Modelo was Latin America’s top deal during the first nine months this year, according to a Latinvex analysis of data from Thomson Reuters and the Brazilian government.
Latin American Growth. Despite a weak US economy and the European recession, Latin America managed to see another relatively good growth year, albeit with a slowdown compared to last year. Latin America’s GDP likely expanded by 3.1 percent this year, slightly above the world average of 3 percent and higher than the US increase of 2.1 percent and European decline of 0.2 percent.
Argentina’s YPF Nationalization. In April, President Cristina Fernandez de Kirchner announced plans to nationalize oil company YPF, which belonged to Spanish oil firm Repsol. The move garnered widespread condemnation from business leaders and even Latin American leaders like Mexico’s then-president Felipe Calderon and Chile’s economy minister. The move will clearly only make Argentina’s energy situation worse.
Peru’s Conga Suspension. In August, the government of President Ollanta Humala suspended the final approval of the $4.8 billion Conga mine project – which would have been Peru’s largest foreign investment ever – after pressure from local groups. The mine, developed by US-based Newmont Mining and local miner Buenaventura, had seen several delays since Humala became president. His move sent a negative signal to foreign investors who had otherwise been positively surprised over his largely business-friendly economic policies despite earlier fears of radical reforms.
Brazil Treatment of Chevron. Foreign oil companies are having trouble recruiting executives to Brazil these days after the scandalous treatment of Chevron. In March, a federal prosecutor charged 17 executives at Chevron and its partner Transocean of criminal negligence in a spill in November the previous year. The 17 were barred from leaving the country as the prosecutor sought up to 31 years jail for the executives. In September, Chevron paid a $17.3 million fine in the case, but the criminal case against the executives is still pending although they have been allowed to leave Brazil. The Frade spill became more a case of politics than facts, with Chevron becoming a scapegoat, BusinessWeek reported earlier this year. As Reuters points out: “The spill was less than 1/1000 of the 5 million barrel 2010 Deepwater Horizon disaster and spill in BP Plc's (BP.L) Macondo field in the Gulf of Mexico. Eleven workers died in that accident and oil flowed into the ocean for months. The Chevron spill caused no discernable environmental damage, [did] not reach shore and did not harm human or animal life, according to the ANP. The Frade spill was controlled within four days.”
Argentine Meltdown. Apart from the YPF nationalization, Argentine president Cristina Fernandez has had her hands busy attacking everyone from the International Monetary Fund and foreign debtors to local media. The IMF has repeatedly warned Argentine to overhaul its methodology for measuring inflation. Argentina is likely to have Latin America’s highest inflation this year, according to a Latinvex analysis that compared private sector estimates in Argentina (more accurate than the official data) with IMF projections for the rest of the region. Rather than heed the advice from the IMF, Fernandez has answered with intransigent rhetoric. “My country is not a soccer club,” the president said in September, after the IMF Managing Director said Argentina faced a “red card” unless it fixed its inflation reporting. “It is a sovereign nation that makes its decisions sovereignly and will not be subjected to any pressure, let alone to any threats.” Similar language is being used against foreign debtors who refused to reach a settlement after Argentina’s debt default in 2001 and even local opponents and critics such as Clarin newspaper. Yesterday, the government made the first moves to break up Clarin’s media company in a move Argentina’s largest media group said was “totally inadmissible and illegal,” according to the Financial Times.
Dominican Problems. A combination of higher public spending (especially on electricity subsidies and public works) and lower than expected revenues led to a significant rise in the public sector deficit in the Dominican Republic to 8.5 percent or nearly double the level in 2011, according to the International Monetary Fund. Fitch downgraded its rating from Positive to Stable. Meanwhile, in response to the deficit, President Danilo Medina implemented a fiscal reform that hiked value added and other taxes in a move that retailers fear will lead to a 25 percent drop in sales during the first half of 2013.
© Copyright Latinvex
You can write a comment on this article by clicking here.
There are no comments on this article. If you wish, you can write one.