2007 Wrap Up and a peek at 2008

As this will be our last newsletter of 2007, we wanted to review briefly some of the year’s highlights and then take a peek into 2008.

Highlighted themes in 2007 include Chavez’s reach for more power and the resulting international friction between himself and Lula in Brazil. Bolivia has struggled with a Constituent Assembly. Truth telling in Colombia has unveiled a host of close ties between politicians and paramilitaries, but nothing yet has touched President Uribe.

Ecuador is flirting with China and the idea of a new port in Manta, where the US currently operates a military Forward Operating Location. And Kirchner succeeded in placing his wife in the president’s seat in Argentina.

Political violence in Guatemala underlines the strengthening grip of organized crime on that country’s political class. And ongoing violence in Mexico, as well as violence across the border into the United States, has prompted the discussion and now debate over the Merida Initiative.

In 2008, many of these ongoing themes will evolve and likely come to a head. We’re most interested in observing how the Merida Initiative is actually implemented. Will private contractors such as Blackwater USA or Dyncorp actually be used? Could increased pressure on drug trafficking organizations in Mexico lead to a spill over effect into Central America?

The last thing Guatemala needs is more Mexican criminals. Already, President-elect Colom has his hands full. His first 100 days will undoubtedly be marked by attempts from Guatemalan organized crime to show him – overtly or covertly – just how much they control wide swaths of his country.

We’re also interested to see how the humanitarian exchange process plays out in Colombia. Might Betancourt see freedom? We hear that Uribe invited Lula to mediate a humanitarian exchange process during President Cristina Fernández de Kirchner’s inauguration. For Lula it would be an opportunity to show the region and the world that he can succeed where Chavez has failed – a perfect maneuver for what appears to be an indirect approach to usurp Chavez from his regional leadership role.It is one he has purchased, not earned.

What will happen when the Venezuelan Bolivar drops two zeros (or three for that matter) in January? This slight change in the Venezuelan currency is certainly more cosmetic than economically sensible, as is the recently adjusted Venezuelan hour. It doesn’t make much sense to move the clock by half an hour, does it? Inside Venezuela a galvanized opposition has some momentum. In 2008, we will see how and where this momentum is used. May we see Chavez’s political core crumble? Not likely, but it will be interesting to see if the military takes a more active role in checking the president.

Can Morales hold his country together? The recent declaration of autonomy from the low-lands provinces seems serious enough, but Morales has – as of this printing – not sent in any troops to force order or obedience. He took the time to travel to the MercoSur meeting, so he cannot be too worried about the apparent mess at home.

Lula recently visited with promise of more Petrobras investment. He also told Morales to have “patience, patience, and more patience” with the opposition. Sometimes all it takes are a few words. Lula will likely work to bring Bolivia back into the Brazilian sphere of influence, further asserting his regional leadership role over Chavez.

Meanwhile, inside Brazil, we will be watching two important issues. First, the aviation crisis is still not resolved. How will Lula manage to keep Brazil’s skies safe? Might there be another accident? We’ve seen on many occasions reports of near misses in Brazilian media that some how doesn’t make it to the international scene. Just as important is Lula’s recent loss in the Brazilian Congress over the CPMF tax – one that taxes the movement of money through Brazilian banks. The bottom line is Lula’s administration will have roughly US$ 20 billion less to spend on social programs to pass along to state and municipal budgets in 2008.

Internationally this loss could hurt Brazil’s investment grade, we’re told by the Financial Times and sources in Brasilia, but what does it mean for the Brazilian economy in the long run?

Overall, 2008 promises to be another interesting year in Latin America. For now, and through the end of 2007, we will simply observe...