Top Latin America Stories, April 24, 2015

Petrobras' ongoing scandal

Brazil's state oil Petróleo Brasileiro SA (Petrobras) wrote off $17 billion due to losses from graft and overvalued assets. The disclosures were part of the first audited financial statements released by Petrobras in more than eight months, reports the Wall Street Journal.


Petrobras is under investigation for a widespread graft scheme that has involved members of the governing Workers' Party and battered the government. The scandal has hit the company hard, affecting its shares and impacting the Brazilian economy at large. "The events surrounding Petrobras have slowed both the construction sector and the oil industry, leading to reduced spending, thousands of layoffs and several bankruptcies," according to the WSJ. Petrobras' slashing of costs will further hurt the Brazilian economy which is expected to enter a recession this year.

President Dilma Rousseff was president of the company between 2003 and 2010, but she has not been accused of corruption in the ongoing investigation. Though she denies knowledge of the graft scheme, most Brazilians don’t believe her, reports the Wall Street Journal. In a survey by the Datafolha polling company taken in mid-March, 84% of the nearly 3,000 Brazilians asked said they believed the president knew about the corruption scheme at the oil company.

The Economist questions her ability to survive in office, saying she is "for many practical purposes is no longer in power. And the nominally ruling left-wing Workers Party (PT) no longer calls the shots in Brasília, the capital." The possible recession has her new finance minister implementing austerity measures, which go against the PT ethos, and she's lost control of Congress to a coalition partner.


Petrobras' report came only a few days before an April 30 deadline that would have permitted Petrobras debt holders to demand early repayment of billions of dollars. Petrobras has been locked out of capital markets since late 2014 due to repeated delays in its financial statements. Though company shares rallied this month in anticipation of the report, investors are still skeptical, according to the paper. They are willing to give new management a chance, however, according to The Economist, which reports that the company will save cash by cancelling this year’s dividend, slashishg capital expenditure, and selling $14 billion of assets by the end of next year.


The corruption scheme itself grew out of an agreement among some of the country’s biggest construction companies to divvy up contracts from the state-owned oil company, a witness testifying before a committee in the country’s Congress, reports the Wall Street Journal in a separate piece. The conspiracy started in 1997, according to Augusto Mendonça Neto, president of Setal Engenharia, when a group of Brazilian construction companies got together informally to try to increase their bargaining power against Petrobras. The group of companies initially had no control over who was able to bid on Petrobras contracts, but that changed after Petrobras executives joined the scheme in 2003 or 2004, Mr. Mendonça Neto alleged. Once they were on board, the group of suppliers grew to include more companies and together they were able to control which businesses got invited to bid on contracts, he said.

News Briefs

• Representative Ileana Ros-Lehtinen of Florida will withdraw her opposition to removing Cuba from the State Department's list of countries that sponsor terrorism, saying there was no legal basis to do so. "A joint resolution to repeal President Obama's de-listing of Cuba from the state sponsor of terrorism list would not have the far-ranging implications that many had assumed it would," she said, according to the Miami Herald. President Obama recommended the change last week -- demanded by Cuba as a precondition for restoring formal diplomatic relations -- and Congress has 45 days to block the decision. However, analysts in the New York Times' coverage say Republicans probably didn't have the necessary votes to overrule the change.

• The Mexican state of Michoacan must implement policies that go beyond the traditional response to organized crime, writes Jesus Perez Caballero for InSight Crime, in an analysis of the disappearance of 12 vigilantes in November. Though it's not clear who is behind the disappearances -- families are accusing the police, but the Knights Templars and other self-defense groups are also possibilities -- they are indicative of a wider problem in Mexico. With so many competing armed forces between the Knights Templar and self-defense groups, it's not clear who is and who isn't a criminal in Michoacan, explains the piece. "An important step towards getting real results -- in Michoacan and elsewhere -- will be recognizing the disappeared, as well as those displaced from their homes by the Knights Templar, and those affected by extrajudicial killings or other manifestations of the state's excessive use of force."

• The governor of Venezuela's Amazonas state says about 4,000 FARC members are operating in his territory. They are operating gold and coltan mines and are involved in contraband and drug-running, according to a piece in the Miami Herald. Though his estimates on the amount of guerrillas is likely exaggerated, its true that illegal mining is increasingly a source of revenue for the rebels. are becoming more reliant on illegal mining as they've seen their drug routes squeezed. Organizations that study the conflict estimate that gold mining in Colombia alone might represent 20 percent of FARC income, according to the Herald.

• Former Uruguayan president José Mujica will act as a mediator between the Colombian government and the FARC in ongoing peace negotiations being held in Havana.

• The Honduran Supreme Court struck down an article in the constitution prohibiting multiple-term presidencies. The issue is polemic in Honduras, where President Manuel Zelaya was ousted in a 2009 coup precisely for seeking to hold a referendum on revising the constitution. Proponents of the change spoke in terms of human rights, but opponents say it will allow politicians to stay in power indefinitely. The push by the governing National Party to make the change, which would permit President Juan Orlando Hernandez to seek a second term, has drawn widespread criticism from the opposition, which notes the same politicians behind it were involved in the coup against Zelaya, reports the AP.

• Former Argentine spy chief Jaime Stiusso failed to show up for a court hearing yesterday. He was meant to testify about allegations that he and (now dead) Prosecutor Alberto Nisman had held up an investigation into a 1994 terrorist attack on the AMIA Jewish community center. He is also accused of tax evasion and running a contraband operation, reports The Guardian. His lawyer said he has left the country to escape threats against his life and attempts to sully his reputation. Government officials say judicial authorities could order an international arrest if he does not return to testify.

• Haiti's First Lady Sophia Martelly will run for a Senate seat in upcoming August elections. Haiti watchers have been speculating whether she would attempt to replace her husband in the presidency, or run for Senate, according to the Miami Herald. 

• The head of Uruguay's Junta Nacional de Drogas will participate in a high level U.N. debate on drugs next month, in preparation for a special session on the topic next year. Uruguay was one of ten countries that led a resolution approved last month in Geneva: "Contribution of the Human Rights Council to the special session of the General Assembly on the world drug problem of 2016." The resolution was considered a success because its the first time the Human Rights Council linked human rights with the drug problem, reports EFE.

• About 37 million people in Latin America and the Caribbean still suffer from malnutrition, according to the U.N. World Food Program, reports EFE. Yet, regional malnutrition was reduced by 11 points in the past 24 years, and 14 Latin American countries achieved the first Millennium Development Goal of reducing hunger by 50%.

• Mexico's drug war fuels violence against women, says Angelika Albaladejo in the Security Assistance Monitor. "Violence against women in Mexico is deeply entrenched in the drug war, yet it is often perceived as a private sphere issue manifesting itself as domestic violence or sexual abuse committed by an intimate partner or family member. However, numbers show that as military deployments increased in Mexico and Guatemala, so did the number of femicides," she writes.

• Andres Oppenheimer grudgingly approves of Mexico's new anti-corruption system in his Miami Herald column. The new system will give powers to congressional and law enforcement anti-graft agencies, an important step in battling corruption. But he is skeptical of a requirement that state legislatures approve the new measures, saying there is risk they will be watered down in the process.

• Mexico's Congress approved a legal reform yesterday that will allow foreign immigration and customs agents to bear arms while in the country, reports Reuters. The issue has been a source of tension with the U.S. An unarmed U.S. Immigration and Customs Enforcement agent was killed in 2011, after his car was ambushed by drug gang members in central Mexico.

• The rate of unaccompanied minors crossing the U.S. is already 45% less in the beginning of this year compared to last, when 68,000 children crossed the border alone. EFE reports that migration authorities credit U.S. and Central American efforts to stop trafficking of minors.

• Russia and Argentina have signed a series of framework agreements on economic and energy co-operation following talks in Moscow, reports the BBC. The agreements include a defense cooperation memorandum and Russian investment in a hydroelectric plant and a nuclear power plant in Argentina. Russia is seeking to ameliorate the impact of European and U.S. sanctions in the wake of the Ukrainian crisis by boosting trade with Latin America. 

• Gangs in El Salvador will order their armed groups to stop attacking authorities, they announced yesterday. They are willing to end the wave of violence affecting the population, in order to begin discussion on a peace agreement, reports the AP. They are responding to a proposal brought forward by a mediator of the (now-defunct) 2012 truce that brought down homicide rates. 

• An Argentine baby was registered with two mothers and a father, the first case of triple filiation in the country and the region, authorities announced yesterday. The family said they wanted to respect their son's right to a full identity, and to mark all three parents' rights and obligations. The family's request was supported by the Federación Argentina de Lesbianas, Gays, Bisexuales y Trans. Buenos Aires provincial authorities noted that there was no explicit prohibition on registering more than two parents, reports La Nación.

• Venezuelan President Nicolás Maduro was hit on the head with a mango while making a public appearance. However it turned out to be from a supporter, who scribbled her phone number on the fruit and asked him to call her. The president announced on his television show that he would accede to her request for housing.