Download Headlines Week # 02nd January

Headlines Week # 02nd January
Argentina’s socioeconomic statistics: still lying after all these years, says The Economist
For years the IMF turned a blind eye as Argentina doctored its inflation index and plumped up its
numbers for economic growth. Then last February the fund steeled itself and censured the country,
warning it to improve its statistics by September or face potential suspension or expulsion. This threat
was unprecedented in the fund’s history.
Cristina Fernandez determined to decide on the incumbent candidate for 2015
Argentine president Cristina Fernandez denied point blank any prospects of her running for office for a
third consecutive period or any other elected post in the 2015 elections. Member of Congress Carlos
Kunkel, considered an 'ultra-Kirchnerite' said on Christmas that at the end of her mandate “Cristina will
continue in politics”. However Cristina will apparently decide on the incumbent presidential candidate
for 2015.
Inflation in Argentine provinces expected to reach over 30% at the end of 2013
Consumer prices in the Argentine province of San Luis climbed 2.9% in November over October, 27.8%
over December 2012 and 29.3% in the last twelve months, according to the provincial stats office. San
Luis is ruled by dissidents from the ruling Peronist coalition headed by President Cristina Fernandez.
Argentina makes its case to Forbes: 'commitment has been to treat all bondholders equally'
By Cecilia Nahón (*) - The op-ed published on October 21 entitled “Supreme Court Moves Us Closer To
Holding Deadbeat Argentina Accountable” openly distorts Argentina´s recent history and the facts
surrounding its debt restructuring.
Blackouts continue in Argentina while government keeps threatening power distributors
Blackouts continued in several neighborhoods of Argentina's metropolitan Buenos Aires area while
protests increased including pickets in highways, attempts to set on fire power distributors offices or
kidnap power companies' officers while the only resource from government has been to blame
companies and threaten to take over utilities.
Gov't: 98% of blackout victims have power
The Security Ministry today affirmed that power services were returning to normal following almost two
weeks of blackouts, revealing that 98 percent of users that were affected by interruptions now had
electrical energy.
* By M. Fernanda López Ortiz
Tolls to coast see increases
The tolls for the highways 2 and 11 — the ones that go toward the Atlantic Coast — will increase an
average of 35 percent starting today, according to a resolution published in the Buenos Aires province
Official Gazette.
The Economist’s country of the year: Uruguay
Human life isn’t all bad, but it sometimes feels that way. Good news is no news: the headlines mostly
tell of strife and bail-outs, failure and folly.
Uruguay's new Economy minister pledges continuity of current market friendly policies
Uruguay will continue to consolidate its market friendly policies, pledged incoming Economy minister
Mario Bergara, 48. on taking office on Thursday surrounded by President Jose Mujica and Vice president
Danilo Astori. He replaced Fernando Lorenzo who was forced to resign following a major scandal
involving the failure and shut down of the country's flag air carrier Pluna.
Trickle-down economics in one of South America’s poorest countries, Paraguay
The Economist has dedicated an article to the recently inaugurated Paraguayan president Horacio
Cartes, and his attempts to improve the living conditions of the majority of a population which is poor in
a country rich in agriculture and energy.
* By M. Fernanda López Ortiz
Argentina’s socioeconomic statistics: still lying after all these years, says The Economist
For years the IMF turned a blind eye as Argentina doctored its inflation index and plumped up its
numbers for economic growth. Then last February the fund steeled itself and censured the country,
warning it to improve its statistics by September or face potential suspension or expulsion. This threat
was unprecedented in the fund’s history.
Yet it seems it was a largely empty one. On December 9th the IMF board met to review Argentina’s
progress on a new inflation index. It declared that, although the country had not adopted the measures
the fund wanted, it “recognized” the government’s “ongoing work” and deferred further action until
March.
Certainly, those who care about the integrity of statistics cheered the recent resignation of Guillermo
Moreno, the secretary for interior commerce. Mr. Moreno was the man who intervened at INDEC, the
statistics institute, in 2007, after which it began to fudge inflation data. Many officials nowadays take
less care to pretend that inflation is around 10% rather than the true figure of around double that.
Some economists believe the new inflation index will be an improvement. Others doubt that the
government has suddenly embraced numerical honesty. INDEC is likely to cherry pick items for which
the government has ordered price freezes and leave out those whose prices rise, thinks Juan Luis Bour
of FIEL, a think-tank in Buenos Aires.
Covering up the true rate of inflation has knock-on effects on other statistics. Take poverty. The
government says only 4.7% of the urban population is poor. Oddly, the UN Economic Commission for
Latin America and the Caribbean has an even lower number, at 4.3%. But the Catholic University of
Argentina calculates that, going by the true cost of living, the correct figure is 27%.
Similarly, underestimating inflation has had the effect of bloating the official calculation of GDP since
2007. In September the government raised eyebrows when it reported suspiciously buoyant quarterly
growth figures. That was despite the IMF’s warning and the fact that the official numbers could trigger a
multi-billion-dollar payment to holders of GDP-linked bonds. The economy ministry’s forecast of 5.1%
growth in 2013 exceeds that of most private analysts by more than two percentage points.
The problem of dodgy statistics goes much wider. For example, while INDEC claims construction
expanded by 4.7% in the first ten months of 2013, EconViews, a consultancy which makes its own
calculations, puts this number at just 0.5%. In 2008 and 2009 private and official estimates of the
expansion in industrial production varied by up to ten percentage points. Although the deviation has
since decreased, private economists still prefer to rely on their own numbers.
Farm-watchers were confused when their estimates for the 2013 maize harvest of around 25.5 million
tons trailed that of the agriculture ministry by more than 6 million tons. It turned out the ministry had
quietly included maize retained by farmers to feed their livestock, contrary to its previous practice.
When it comes to official economic numbers, only those of the Central Bank still command some
credibility.
* By M. Fernanda López Ortiz
The official inability to face the truth extends to crime. The justice ministry stopped publishing annual
crime statistics in 2009. In its statistics the health ministry has reduced the murder count by two thirds
by subtracting “deaths from outside aggression, of unknown intent”, of which there were 3,124 in 2011.
The problem for President Cristina Fernández is that her government’s statistical solipsism no longer
washes with Argentines. This month a dozen provinces were shaken by police strikes (settled with wage
increases of over 30%) and looting. Argentines know perfectly well that inflation, poverty and crime bear
little resemblance to the official statistics.
Cristina Fernandez determined to decide on the incumbent candidate for 2015
Argentine president Cristina Fernandez denied point blank any prospects of her running for office for a
third consecutive period or any other elected post in the 2015 elections. Member of Congress Carlos
Kunkel, considered an 'ultra-Kirchnerite' said on Christmas that at the end of her mandate “Cristina will
continue in politics”. However Cristina will apparently decide on the incumbent presidential candidate
for 2015.
“What happens is that Carlos adores me”, said the president, who emphasized there “is no chance of
‘Cristina 2015' for any elected post”.
Victory Front lawmaker Kunkel said on Wednesday that President Cristina Fernández in the 2015
elections would ”still in politics and running as candidate”. Kunkel did not say, however, what office she
would be running for. “Ask me again in 18 months,” he said.
Cristina Fernández, currently spending holidays in Santa Cruz with her family, has never openly
supported the idea of amending the Constitution to run for a third presidential term, although staunch
Kirchnerite ally Diana Conti has said in the past her intention was to do so.
Cristina Fernandez herself ruled out the possibility last year, before the chance disappeared completely,
following the poor results in the October 27 midterms. But Kunkel’s hint may indicate the president may
run as a senatorial candidate — after all, Cristina Fernandez has represented two different provinces
(Santa Cruz and Buenos Aires) in the Upper House.
The lawmaker is known for revealing key movements of the national government. He was, for instance,
the leader who anticipated that Cristina Fernández would run as president in 2007, when she succeeded
her husband, the late Néstor Kirchner.
Kunkel also anticipated that the ruling party is going to hold the long-delayed Justicialista Party (PJ)
primaries next March and sent an indirect message to Buenos Aires province Governor Daniel Scioli,
who has already announced his desire to run for the presidential office in 2015.
The lawmaker said he favored a “unity ticket” for both the party primaries of March, 2014 and the
general primaries of August, 2015, meaning the national government wants Scioli to run for the same
ticket as CFK.
* By M. Fernanda López Ortiz
Scioli is technically a Kirchnerite but has been at odds with the federal government during the last few
years, ending on opposite sides over a series of differences which the governor calls “of style.”
After a series of comings and goings, the BA province leader finally re-aligned with the FpV shortly
before the June 22 deadline to register electoral tickets. But he has not resigned his presidential
aspirations.
However Pablo Moyano, son of the anti-government CGT umbrella union leader Hugo Moyano and
second-in-line in the powerful teamsters’ union, also had something to say about the next presidential
elections.
“Peronist candidates for 2015 are Scioli, (Córdoba province Governor José Manuel) De la Sota and (Tigre
Mayor Sergio) Massa,” he said and anticipated that the opposition CGT would likely support any of those
three candidates in the upcoming elections.
“Any leader who attends the demands of the CGT regarding health insurance, income tax, pension
increases and free wage bargaining will have our support” Moyano said.
Inflation in Argentine provinces expected to reach over 30% at the end of 2013
Consumer prices in the Argentine province of San Luis climbed 2.9% in November over October, 27.8%
over December 2012 and 29.3% in the last twelve months, according to the provincial stats office. San
Luis is ruled by dissidents from the ruling Peronist coalition headed by President Cristina Fernandez.
”The item with greatest incidence on the index was Food and Beverage, which climbed 4.3%, pushed by
fruit prices (13.3%); infusions, bottled water, bakery, beef, chicken, sausages, cooking oil alcoholic and
non alcoholic drinks, among others“ said the San Luis Stats and Census office. However there was a
slight drop in legumes and vegetables because of the season.
Nevertheless for the lowest income bracket of the population, ”the food item has accumulated so far
this year 30.7% and 31.5% in the last twelve months”.
Transport was up 1.9%; housing, 3%; clothing, 1.9% and household appliances, 2.3%.
Meanwhile in the City of Buenos Aires, another stronghold of the opposition, inflation in November was
2.4% over October and 26.2% in the last twelve months with food up 3.1%; transport, 4.4%; hotels and
restaurants, 3.5% and 2.1% in housing.
Regarding December things look even more complicated since independent economists and consultants
are estimating a floor of 3% which would take annual inflation to 29%.
Regarding December forecasts are even worse particularly since there is a round of salary negotiations
with the strongest unions, and following the police conflict with widespread looting, it is anticipated that
the floor for the discussions is expected to take off at 35%.
For the government of President Cristina Fernandez stats office Indec, inflation in November was 0.9%
over October; 9.4% since January 2013 and 10.5% in the last twelve months.
* By M. Fernanda López Ortiz
Argentina makes its case to Forbes: 'commitment has been to treat all bondholders equally'
By Cecilia Nahón (*) - The op-ed published on October 21 entitled “Supreme Court Moves Us Closer To
Holding Deadbeat Argentina Accountable” openly distorts Argentina´s recent history and the facts
surrounding its debt restructuring.
Moreover, it conveys a completely erroneous impression about my country’s attitude toward this
matter. Indeed, FORBES readers should be concerned about the negative systemic consequences that
would arise if the current judgments in U.S. courts are upheld.
In this regard, the following aspects deserve clarification.
First, litigation against Argentina before New York courts derives from the cataclysmic crisis suffered by
my country in 2001-2002, the worst in its history. In 2002, public debt as a percentage of GDP reached
166%. The consequences for our economy and our people were devastating. With an unemployment
rate exceeding 21%, Argentina was at a critical juncture, with a paralyzed economy and a dire political
situation, struggling to preserve social cohesion.
Pretending that “the Argentine people essentially had a wild party and woke up with a hangover”
reflects utmost disrespect for the suffering of the Argentine people as well as an astounding lack of
knowledge about what really occurred in my country. The Argentine people were unquestionably the
default’s main victims, not beneficiaries. The only potential beneficiaries of this unfortunate situation
would be the profiteers (worldly known as “vulture funds”) that bought distressed debt –important
parts of it after the default—for mere pennies on the dollar and now expect a return exceeding 1,300%
while holding 93% of the creditors that accepted the terms of the debt restructuring offered by
Argentina hostage.
By the same token, the allegation that Argentina had an alternative to default is also misguided. For the
reasons explained above, Argentina’s inability to pay its sovereign debt was indisputable. It cannot be
seriously stated that “no one forced the Argentine government to default.”
Secondly, since 2003 a new government has implemented a successful debt management strategy
under the premise that it was necessary to resume economic growth in order to be able to service debt.
The domestic economy has grown steadily for the past ten years benefiting those creditors who
believed in the country. New debt was issued as the result of two debt restructuring processes (2005
and 2010) and has been faithfully serviced ever since. Argentina has also paid all of its obligations with
the IMF ahead of schedule. Hence, debt as a percentage of GDP declined from 166% in 2002 to 45% in
2012—with public external debt being only 14% of GDP and foreign currency public debt less than 9%—
providing Argentina with strong foundations to sustain growth and social inclusion.
Unfortunately, 7% of bondholders have not yet agreed to the terms accepted by the overwhelming
majority. A small group within these holdouts is suing Argentina in U.S. courts, seeking privileged and
unwarranted conditions, insisting that Argentina be forced not to pay the other 93% unless they are paid
in advance in full. It is worth noting that many bondholders within the 93% who accepted the debt swap
are U.S. citizens or U.S. institutions including workers, pension or state retirement funds, employee
funds or teachers´ unions.
* By M. Fernanda López Ortiz
Argentina has never repudiated any debt. Argentina’s commitment has been to treat all bondholders
equally, including the litigant vulture funds. In fact, Argentina has formally reaffirmed this commitment
before the Courts.
Third, the actions by these sovereign debt profiteers have evident systemic consequences that reach far
beyond Argentina’s case. This is not just an issue between Argentina and the plaintiffs. In this sense, we
agree that “the New York battle ….matters for all of us” albeit for very different reasons than those
portrayed in the op-ed. If the U.S. courts uphold the complainant’s position, negative consequences will
be felt by the U.S. and the rest of the world. Sovereign debt restructurings will be virtually impossible in
the future.
What rational creditors would agree to restructure a debt if they know the flow of payments can be
interrupted by holdouts through litigation? Precisely, the growing concern about this systemic impact
has led international stakeholders as diverse as the IMF, governments of the U.S. and France, the G77
plus China and scholars like Joseph Stiglitz, Anne Krueger and Nouriel Roubini to express support for
Argentina’s position.
Finally, Argentina is a vibrant democracy firmly committed to the promotion of democratic values, the
maintenance of international peace and security within the UN framework, the fight against
international terrorism, drugs and human trafficking, the respect and protection of human rights,
pluralism and multiculturalism, and, in particular, respect for the rule of law. Argentina’s constructive
and valued role in the international community speaks for itself.
Blackouts continue in Argentina while government keeps threatening power distributors
Blackouts continued in several neighborhoods of Argentina's metropolitan Buenos Aires area while
protests increased including pickets in highways, attempts to set on fire power distributors offices or
kidnap power companies' officers while the only resource from government has been to blame
companies and threaten to take over utilities.
In Buenos Aires there was some brief relief with late Thursday evening showers after a full day of 38
degrees Celsisus. In the north of Argentina in the province of Santiago del Estero where there was a
record 47 degrees two people died and in downtown Buenos Aires some hospitals have warned that at
peak consumption hours they can't guarantee air conditioning or even some of the support equipment
including the blood banks.
In other areas power has been off for over a week and water supply is running short.
People have reacted with pickets in highways, bomb fires in corners and constant banging of pans, with
media giving the situation extensive coverage.
In other neighborhoods rail lines were interrupted and a power company station was set on fire but was
quickly dominated. In Rosario to the north a group of people tried to kidnap staff from the power
companies.
* By M. Fernanda López Ortiz
But the situation overall is that until the heat wave is not over and if temperatures rise above 32 degrees
Celsius there is no way of cutting back on blackouts. An estimated forty to fifty neighborhoods are
suffering the consequences of the collapse, which meant many Argentines spent Christmas without
power, or even water, not to say fresh drinks.
Neighboring Uruguay has all its thermal and hydroelectric capacity working for Argentina but it's not
enough.
However Edenor one of the two main power distributors in Buenos Aires said that “we have almost no
clients without electricity” and there are 'no neighborhoods affected, “just specific cases”. But this was
quickly dismissed in interviews on live television
In the city of Cordoba, central Argentina, the provincial power company blamed customers for the
blackouts arguing that companies “can't anticipate a significant increase in demand” if consumers 'don't
inform us of the electric powered appliances they have incorporated“.
Cabinet chief Jorge Capitanich was again on the air to blame distributors Edenor and Edesur for the lack
of power services and insisted that the 'nationalization ' of utilities' concessions is one of the
government’s”work hypotheses“.
Capitanich revealed that another option under consideration is to transfer control of the utilities to the
province of Buenos Aires and the City of Buenos Aires.
Federal Planning Minister Julio De Vido promised that residents who have suffered power outages
would be properly compensated, while assuring that energy suppliers would face financial sanctions.
”Every company will present their figures and there will be a repayment system, a form of economic
compensation independent of punishments, and fines to the company“said De Vido.
The minister added that the cuts were not caused by a lack of power supplies in the country.
”There is no shortage of energy, there is a distribution problem, “he affirmed.
De Vido also appealed to consumers to moderate there use of electrical appliances, in the face of
scorching hot weather in Buenos Aires and other provinces.
”At 38°C there is a climate crisis, we have to be responsible with energy use, using appliances rationally
so that power returns to those who do not have it.”
Gov't: 98% of blackout victims have power
The Security Ministry today affirmed that power services were returning to normal following almost two
weeks of blackouts, revealing that 98 percent of users that were affected by interruptions now had
electrical energy.
* By M. Fernanda López Ortiz
The Ministry also asserted, through a press statement, that personnel from all four Federal Forces had
assisted electricity technicians, "guaranteeing not just security but also lending logistic cooperation in
order to make the resumption of services easier."
"[The units] will continue working until every affected user has power services," the missive signalled.
Tolls to coast see increases
The tolls for the highways 2 and 11 — the ones that go toward the Atlantic Coast — will increase an
average of 35 percent starting today, according to a resolution published in the Buenos Aires province
Official Gazette.
The increases will involve the four tolls operated by the Autovía del Mar concessionaire —
Samborombón, La Huella, Madariaga and Mar Chiquita — and the only one run by the firm COVISUR —
Maipú.
The Samborombón and La Huella tolls will see an increase from 26 to 35 pesos for the smallest vehicles.
The General Madariaga toll will see the lowest vehicle toll increase to 12 pesos from 7.50 pesos, while
the Mar Chiquita toll will increase to 14 pesos from 10.50 pesos.
The toll for the smallest vehicle in the Maipú toll will increase to 35 pesos from 26 pesos.
The Economist’s country of the year: Uruguay
Human life isn’t all bad, but it sometimes feels that way. Good news is no news: the headlines mostly
tell of strife and bail-outs, failure and folly.
Yet, like every year, 2013 has witnessed glory as well as calamity. When the time comes for year-end
accountings, both the accomplishments and the cock-ups tend to be judged the offspring of lone
egomaniacs or saints, rather than the joint efforts that characterize most human endeavor. To redress
the balance from the individual to the collective, and from gloom to cheer, The Economist has decided,
for the first time, to nominate a country of the year.
But how to choose it? Readers might expect our materialistic outlook to point us to simple measures of
economic performance, but they can be misleading. Focusing on GDP growth would lead us to opt for
South Sudan, which will probably notch up a stonking 30% increase in 2013—more the consequence of a
55% drop the previous year, caused by the closure of its only oil pipeline as a result of its divorce from
Sudan, than a reason for optimism about a troubled land. Or we might choose a nation that has endured
economic trials and lived to tell the tale. Ireland has come through its bail-out and cuts with exemplary
fortitude and calm; Estonia has the lowest level of debt in the European Union. But we worry that this
econometric method would confirm the worst caricatures of us as flint-hearted number-crunchers; and
not every triumph shows up in a country’s balance of payments.
Another problem is whether to evaluate governments or their people. In some cases their merits are
inversely proportional: consider Ukraine, with its thuggish president, Viktor Yanukovych, and its plucky
* By M. Fernanda López Ortiz
citizens, freezing for democracy in the streets of Kiev, even though nine years ago they went to the
trouble of having a revolution to keep the same man out of office. Or remember Turkey, where tens of
thousands protested against the creeping autocracy and Islamism of Recep Tayyip Erdogan, the prime
minister-cum-sultan. Alas, neither movement has yet been all that successful.
Definitional questions creep in, too. One possible candidate, Somaliland, has kept both piracy and
Islamic extremism at bay, yet on most reckonings it is not a country at all, rather a renegade province of
Somalia—which has struggled to contain either. As well as countries yet to be, we might celebrate one
that could soon disintegrate: the United Kingdom, which hasn’t fared too badly, all things considered,
since coming into being in 1707, but could fracture in 2014 should the Scots be foolhardy enough to
vote for secession.
And the winner is
When other publications conduct this sort of exercise, but for individuals, they generally reward impact
rather than virtue. Thus they end up nominating the likes of Vladimir Putin, Ayatollah Khomeini or, in
1938, Adolf Hitler. Adapting that realpolitikal rationale, we might choose Bashar Assad’s Syria, from
which millions of benighted refugees have now been scattered to freezing camps across the Levant. If
we were swayed by influence per head of population, we might plump for the Senkaku (or Diaoyu)
islands, the clutch of barren rocks in the East China Sea that have periodically threatened to incite a
third world war—though that might imply their independence, leading both China and Japan to invade
us. Alternatively, applying the Hippocratic principle to statecraft, we might suggest a country from which
no reports of harm or excitement have emanated. Kiribati seems to have had a quiet year.
But the accomplishments that most deserve commendation, we think, are path-breaking reforms that
do not merely improve a single nation but, if emulated, might benefit the world. Gay marriage is one
such border-crossing policy, which has increased the global sum of human happiness at no financial cost.
Several countries have implemented it in 2013—including Uruguay, which also, uniquely, passed a law
to legalize and regulate the production, sale and consumption of cannabis. This is a change so obviously
sensible, squeezing out the crooks and allowing the authorities to concentrate on graver crimes, that no
other country has made it. If others followed suit, and other narcotics were included, the damage such
drugs wreak on the world would be drastically reduced.
Better yet, the man at the top, President José Mujica, is admirably self-effacing. With unusual frankness
for a politician, he referred to the new law as an experiment. He lives in a humble cottage, drives himself
to work in a Volkswagen Beetle and flies economy class. Modest yet bold, liberal and fun-loving,
Uruguay is our country of the year. Congratulations!
Uruguay's new Economy minister pledges continuity of current market friendly policies
Uruguay will continue to consolidate its market friendly policies, pledged incoming Economy minister
Mario Bergara, 48. on taking office on Thursday surrounded by President Jose Mujica and Vice president
Danilo Astori. He replaced Fernando Lorenzo who was forced to resign following a major scandal
involving the failure and shut down of the country's flag air carrier Pluna.
* By M. Fernanda López Ortiz
“We must consolidate the emphasis of this economic policy which undoubtedly has a clear continuity
since 2005 when the Broad Front coalition took office”, said economist and US educated Bergara
“We have a great challenge ahead but the new economic team will keep the overall direction and
course”, pointed out Bergara, who until today was chairman of Uruguay's central bank.
“This policy is not new, it has been implemented since 2005 and has helped 25% of Uruguayans climb
out of poverty, ordered government's finances, strengthened the banking system and ensured a path of
sustained inclusive growth”, insisted Bergara who is identified with Vice-president Astori, an orthodox
economist and the first Economy minister of the ruling coalition 2005/2010.
Apparently Mujica and Astori at a meeting at his home agreed on the new economic team and central
bank officials, following the resignation of Lorenzo who last Saturday was sentenced for 'abuse of
power' regarding the liquidation of bankrupt Pluna.
Three of the private associates of the defunct airline have been jailed and the magistrate wanted
Lorenzo and banker Fernando Calloia, head of Uruguay's largest government bank, to join them for
forcing the approval of a 13 million dollars guarantee document for the auctioning of the airline's
Canadian manufactured Bombardier aircraft.
The defense of Lorenzo and Calloia argued that the crime 'abuse of power' is unconstitutional and this
must be decided by Uruguay's Supreme Court which could take several months on a ruling.
Mujica and the ruling coalition have given all their support to Lorenzo who was praised for his ethical
integrity and honesty as well as for his 'brilliant performance' as minister.
Trickle-down economics in one of South America’s poorest countries, Paraguay
The Economist has dedicated an article to the recently inaugurated Paraguayan president Horacio
Cartes, and his attempts to improve the living conditions of the majority of a population which is poor in
a country rich in agriculture and energy.
In October claims surfaced that Victor Bogado, a Paraguayan senator, had arranged two lucrative public
jobs for his children’s nanny. A few weeks later 23 of his peers—a majority—voted against stripping him
of the immunity from criminal proceedings that Paraguayan legislators enjoy.
Instead of going unnoticed in a country where political clientelism has long been the norm, the story
sparked outrage. Restaurants, petrol stations and beauty salons in the capital, Asunción, put up signs
naming the “23 shameless rats”, and barring them as customers. Two weeks later a senate committee
overruled the vote for immunity.
The case of the “golden nanny” is part of a wider citizen revolt against political corruption. In October
the Supreme Court ruled that Daniel Vargas, a radio host, had the right to know the names and salaries
of municipal employees. Six years earlier listeners had asked him to investigate; he went to court after
being stonewalled. Without public pressure the Supreme Court would never have dared to move against
Congress, says his lawyer, Benjamín Fernández. Rather than obliging citizens to seek the information
* By M. Fernanda López Ortiz
piecemeal, Paraguay’s new president, Horacio Cartes told public bodies to publish it, though many are
dragging their feet.
Mr Cartes, a tobacco magnate, is a political neophyte who only joined the Colorado party in order to run
for office in April’s general election. The Colorados held power for 60 years, 35 as a notoriously corrupt
dictatorship, before losing in 2008 to Fernando Lugo, a former bishop whose left-Liberal alliance
promised to redistribute land and cut poverty. In power Mr Lugo turned out to be weak and politically
inept. After an unfairly abrupt, though constitutional, impeachment his Liberal vice-president, Federico
Franco, replaced him in 2012. Lacking a strong internal candidate, the Colorados plumped for Mr Cartes.
Many assumed the new president would be his party’s puppet. Does his support for the anti-corruption
fight show that the Colorados got more than they bargained for? On taking office in August, Mr Cartes
named technically able outsiders to his cabinet and passed a fiscal-responsibility law limiting budget
growth to 4% above inflation and the deficit to no more than 1.5% of GDP. Since most spending goes on
wages, that will squeeze patronage.
A new law will allow the executive to auction infrastructure concessions without having to get approval
from Congress, where the Colorado old guard holds sway. Some waterways should be auctioned in
months, says José Molinas, a former World Bank official who is now minister of planning. Landlocked
Paraguay relies on rivers to get its vast soya and beef exports to market. Intercity roads will follow. A law
providing for disputes between government and concession-holders to be settled by international
arbitration is planned for 2014.
The economy is predicted to have grown by 13.6% in 2013. But that is mainly because of a bumper soya
harvest after drought saw GDP shrink by 1.2% in 2012. Paraguay is one of South America’s most unequal
countries. A third of its people are poor and 18% extremely so, while 6% of farms occupy 85% of
farmland. Though Mr Lugo failed to reform landholding, partly because of opposition in Congress, he did
introduce modest handouts for the poorest. Mr Franco brought in an income tax, albeit at just 10% for
the highest earners.
Mr Cartes, too, promises to cut poverty and create a fairer society. But his plans rely less on
redistribution than on wooing foreign capital. He has ceaselessly plugged the opportunities offered by
the coming infrastructure auctions, Paraguay’s abundant land, cheap labor, light-touch regulation—and,
of course, low taxes. He vetoed a levy on the export of soybeans, the economy’s mainstay. A rise in land
taxes is the only one planned. He sometimes strikes an off-key note, as when he told Uruguayan
businessmen that Paraguay aimed to be easy, like a beautiful woman.
But he has swiftly restored ties with Mercosur, a regional bloc from which Paraguay was suspended
after the ousting of Mr Lugo. Mr Cartes has secured its readmission, partly by persuading Congress to
ratify Venezuela’s admission to the group (which had occurred, in dubious fashion, when Paraguay was
suspended). “It’s in Paraguay’s interests to be back inside Mercosur,” he says. “I don’t want to waste my
presidency on fights.”
In Brazil strident calls for land reform faded when growth boosted jobs and salaries in cities. But even if
Mr Cartes’s brand of trickle-down economics shows promise, many obstacles remain. Paraguay lacks the
skilled workers to build all the promised infrastructure. And the Colorado old guard will surely regroup.
* By M. Fernanda López Ortiz
“They are giving me time,” says Mr Cartes. “If I deliver results it’ll be fine.” He is counting on people
power and openness to maintain momentum. “People get used to things getting better. If you give them
improvements they won’t want to go back.”
* By M. Fernanda López Ortiz