AMERICA ECONOMIA
America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.
Economy
Gwendolyn Ledger

China, The Silent Conductor In Latin America's Big Rail Projects

China's global investment tentacles have reached South American railways, where Chinese firms are "silent" partners in expanding rail networks, through financing or sale of rolling stock.

SANTIAGO — From public mistrust of its goals to suspicions of its ties to corruption rackets, Chinese investment in Latin America's railway sector has gotten off to a shaky start. Over the past decade, the Asian superpower may have suffered from its unfamiliarity with regional and domestic policies, but it's going full steam ahead on investment in an industry where there is much to gain, but also much to risk.

Francisco Urdinez, a politics professor at the Catholic University of Chile, cites the aborted Mexico City to Querétaro railway project as a cautionary tale: The deal was canceled for corruption, and public opinion singled out the Chinese firm in the scandal, even though it was part of a multi-company consortium.

"I think the reputational harm ends up being greater than the project's potential benefits," says Urdinez. "Chinese firms have more to lose than win out of uncertainties around the risks of domestic corruption here in Latin America."

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Economy
Natalia Vera Ramírez

Cannabis Business: Latin America Can Export More Than Raw Material

Latin American businesses and governments are seeing the marketing and export potentials of an incipient liberalization of marijuana laws in the region. But to really cash in, it must be an investment in more than simple commodity crops.

LIMA — After his stint at Stanford University business school in California, Uruguayan entrepreneur Andrés Israel began to research the nascent global cannabis industry, to find the countries with the most favorable regulations for its large-scale production and use. They were Canada and Uruguay, with the latter legalizing its recreational use in 2013.

After he returned home, Israel founded the Cannabis Company Builder (CCB) to help new firms exploit Uruguay's new legal framework. Cannabis, he says, is a "blue ocean" industry, with major growth horizon and few current regulations — and Uruguay is at its forefront.

"When I returned from Stanford, I could see that [for the potential size] it is very difficult to know where it's going exactly," Israel said. He notes that there is open debate in the business community whether the future is in THC (the principal psychoactive constituent of cannabis), or CBD (Cannabidiol, derived from the plant for medicinal purposes), or indeed in other derivatives or in cultivation. "That's why I created a business strategy or a vehicle that is flexible and dynamic," he says.

His company aims to help entrepreneurs in all these sectors, providing services, helping with licences, with regulation, certifications. Israel adds: "The cannabis industry entrepreneur sometimes doesn't know the basic things of the startup world."

Latin America knows the pitfalls of commodity-only business

Formed in 2020, CCB was the first cannabis business adviser in Latin America, taking a fee between five and 10% of the new firm's equity. So far Israel and his colleagues have helped 23 startups in the sector, hoping to make this 50 by the end of 2021.

This startup incubator seeks to generate synergies between the firms in its portfolio. It has startups that focus on cultivation, drying cannabis, developing flowers with a high CBD content, or on sleeping products. After the boom in cannabis cultivation and advances in regulating its use, especially in medicine, in several Latin American countries, the challenge now is for a nascent industry to develop an efficient production and supply chain, and assure high-quality crops.

It must also develop new products, ranging from medicines to pet products and even textiles. This existing cannabis ecosystem plays an important role in helping reach these goals. "There is a big opportunity in cultivation," says Israel, "and many entrepreneurs are turning that way ... but only in the short term. In CCB, we're looking at the medium to long-term. We're pushing for the real aggregate value."

Planting cannabis, he said, would in time mean "a commodity, and you have to look for the differentials. Otherwise we fall into the same dilemma of many Latin American countries that export raw materials, and import finished products."

The Global Cannabis Report: 2020 Industry Outlook published by consultants New Frontier Data expects Latin American sales of legal cannabis to reach $44.8 billion by 2025, up from $7.3 in 2020.

Photograph of a person holding a drop bottle of CBD oil

Cannabidiol, or CBD, is derived from the plant for medicinal purposes

Enecta Cannabis extracts

In Colombia, studying if cannabis can treat Alzheimer's

Colombia, which is following Uruguay's regulatory steps, has received investments from Canada for medicines and cosmetics based on cannabis. In July 2021, President Iván Duque signed Decree 811 to allow export of cannabis leaves and specific commercial and industrial usage for hemp.

Within two months of the decree, the Colombian firm Tarkus Pharma Lab, opened its first laboratory in the Tocancipá Free Zone in the Cundinamarca department, with the monthly capacity to process six tons of cannabis flower for exportation.

The aim is to produce "tailor-made" cannabis seeds.

Medical Extractos is another local firm that will settle in the zone, to pack CBD and THC for exports. But Colombian firms are making plans to go beyond export cannabis as raw material. CEO and founder of Medical Extractos, Henry Muñoz, says firms are already working on "quality" medicinal products that are affordable and marketable abroad.

Muñoz says his firm is researching with scientists and other companies the effects of cannabis on Alzheimers' disease. The research is taking place in Yarumal, a town in Antioquia where 8% of residents have Alzheimer's due to a genetic mutation.

His firm is also working with the University of Antioquia through a spin-off firm, Fasplan, to improve cannabis genetics. The aim is to produce "tailor-made" cannabis seeds to suit foreign customers' needs, says Muñoz. His firm is also looking at fusing typical Colombian cannabis seeds with "typical seeds from Europe, which are highly medicinal."

In Argentina, AI innovation to boost plant quality 

Argentina most recently welcomed the first legal and medicinal cannabis plantation, run by a private startup and the National Institute of Farming Technology (INTA). The firm is called Pampa Hemp, and imports seeds from Colorado to plant in the Pergamino Experimental Station in the Buenos Aires province.

Pablo Fazio, managing partner of Pama Hemp, says the firm wants to supply the "raw material" for a "legal market in Argentina," which he says is set on developing a "national cannabis industry."

As an important farming country, he says, "it would be absurd to have to import the raw material." The firm has also collaborated with parties in developing technologies to boost plant quality, including AI to detect disease early.

The Uruguayan government wants to turn medicinal hemp and cannabis into an industry with big export potential, "like with meat," in the words of Rodrigo Ferrés, the Assistant Secretary at the Presidency. An important step in this ambition was the present government's decree allowing sales abroad. The country expects to export some 60 tons of cannabis by the end of 2021.

Mexico, ripe for marijuana growth

Photograph of a woman drying cannabis plants in a greenhouse

Drying cannabis plants

Terre di Cannabis

But along with Brazil, and its 220 million inhabitants, there is another player that could become the biggest in the cannabis market: Mexico. After vicissitudes, the country's Supreme Court ruled in June 2021 that the ban on recreational use of marijuana was unconstitutional. It thus annulled those articles of Mexico's General Law on Health that banned the recreational use, private cultivation and transportation of marijuana.

If and when the country legislates to permit recreational marijuana, it will become the "cherry on the cake in this industry, and earn big profits for its economy," says Henry Muñoz. With a population of some 130 million, it amply exceeds Canada (38 million) and Uruguay (3.4 million) as a market.

Legalization attracts major investments.

Consultants New Frontier Data estimated early in 2021 that the Mexican marijuana industry could be worth up to $2.3 billion, and believes legalization would attract considerable investments to the country and the region.

Yet, Mariana Sevilla, founder of the Mexican NGO México Regula and a member of Regulation for Peace ("Regulación por la paz"), a civil coalition, says the Supreme Court's ruling does not mean full legalization of recreational cannabis. People still need permits for its use, and the Court ruling only allows cultivation for personal use. Very few Mexicans, she said, have the necessary means and space to cultivate cannabis at home.

She says there is work to be done before "Mexico can be a producer.. of this plant, for our geography, our history, our culture." The coalition, she says, is "pushing for this initiative to advance as fast as possible, but that it should also focus on social justice because possession is still a criminal offense. We need changes to assure fair access."

High returns

Paco OG, the founder of HEMPresarios, a platform with events linking cannabis-related businesses and investors, says Mexico has "high-quality genes when it comes to planting cannabis."

The best plants, he says, come from Oaxaca, in south-central Mexico, thanks to the climate and soil. The industry, he added, now needs laws to bring this sector out of its "grey zone," and attract investors and startups.

Cannabis is no fad, and certain bigger firms involved in the sector have had good results on the stock markets in New York, in spite of a downturn in 2019-early 2020. Shares of some firms, like Tilray or Cronos Group, which sell recreational or medical cannabis products, shot up over 2020-21.

In some parts of the world, during the confinement, cannabis came to be declared an essential medical product. Aware of investor interest, Andrés Israel wants to list CCB on the Toronto stock market.

"When an investor wants to invest in the Latin American cannabis industry, they'll do it with us," he declares. "We're going to function like a cannabis index in the region. We have two value proposals: one, helping entrepreneurs develop their potential and ensure their startup's success, and another, for investors seeking diversified vehicles."

Economy
Luis Rubio

How Mexico Can Exploit The U.S.-China Showdown

If Mexico could forge a clear vision of its business interests, the showdown between the United States and China would present it with some major trading and strategic opportunities.

-Analysis-

MEXICO CITY — New Zealand rugby players famously perform a Maori dance called the Haka before each match. Its gesticulations, grimaces and threatening noises are meant to intimidate adversaries, though most see it as nothing more and nothing less than a celebration of heritage. I wonder if after the Donald Trump presidency and the Afghan débacle, the world will see the United States, the erstwhile leader of the free world, with the same rational distance.

Trump's election surprised the world, and his refusal to moderate his discourse once in the White House stretched the surprise out for four years. His successor, Joe Biden, though seeking to remove everything relating to Trump, still shares a common objective: to change the basic premises that have marked the U.S. since 1945.

Trump was elected in part for the effects of globalization and technological changes, which made ordinary folk feel increasingly vulnerable. Biden was elected as a reaction to Trump, but has similar goals and the same inward-looking vision that is bound to reduce America's global presence.

Recreating the British Empire

These changes have curiously coincided with China's ascent as a global power. Its economy is now almost as big as the United State's, and its leaders have exhibited an exceptional sense of strategy. In the U.S. in contrast with their predecessors of the late 20th century, the last two presidents have shown they do not even believe strategic thinking is necessary. Their way is to react to circumstances, even spontaneously it seems, as shown in the shambolic departure from Afghanistan. The objective was probably the right one, but its implementation was pathetic.

Mexico could move into the enviable position of being a natural alternative in both those nations.

In contrast, the international affairs specialist Parag Khanna describes China's systematic rise as the recreation of the British Empire, not through colonies, but infrastructures. China's expansive Belt and Road project is certain to threaten the weight and power of the U.S., whose leadership seems unable, or unwilling, to see and react to what is happening.

Photo of a worker at an Audi car factory in Chiapa, Mexico.

A car factory in Chiapa, Mexico

Carlos aranda

Supplanting Chinese imports

For many here in Mexico, this is seen as an opportunity to reduce the depth of our ties with the U.S. and start diversifying our commercial relations. As the Mexican analyst Luis de la Calle observes, the commercial and political confrontation between the two superpowers opens up opportunities for Mexico to "reaffirm its position as a credible competitor in the two leading economies."

Mexico can supplant Chinese imports in the U.S. market, and attract new sources of foreign investment. It is an enormous opportunity, but requires a concerted strategy to move into the enviable position of being a natural alternative in both those nations. It won't last forever.

Nothing is written in stone.

The wider framework for Mexico's future in a changing international setting means observing the implications in coming years of China's ascent and of possible political changes in the U.S. The interaction of the two powers will determine the panorama in which we'll be moving. China has exceptional strategic leadership and an extraordinary ability to adapt, while its political nature means it can forge ties democratic states would not even contemplate.

Yet one cannot underestimate the economic and political challenges it will also face in coming decades. The Americans, for their part, find themselves lacking clear-sighted leadership and are sharply polarized. That may entail swings in domestic politics before they regain their traditional, strategic clarity as they so often have in the past. It is easy to underestimate the U.S. at this moment, but their open political system allows them to rebound swiftly. Nothing is written in stone.

Mexico has exceptional opportunities if it can deftly exploit the divisions between the U.S. and China. But that would require vision and leadership, which hasn't been one of our most notable traits. Separately, the fading liberal vision, at least in economics, may prove a formidable obstacle to grabbing this opportunity.

Geopolitics
Farid Kahhat

Cuba: Growing Internet Access Is About Money Not Freedom

People used social media to help organize the large, anti-government protests that took place on the island last July. And yet, unlike their counterparts in China, Cuban authorities are loath to prohibit access to such sites. Do the math.

-Analysis-

Mobile phones, as the former Facebook executive Antonio García Martínez writes in his blog The Pull Request, were illegal in Cuba until 2008. Even after that, it took another decade before people were allowed to connect those phones to the internet. And more recently, on July 11 — when people held large protests (organized in large part online) — Cuban authorities blocked the internet for several hours.

Overall, however, internet access is finally available in Cuba, albeit with some limitations — for two reasons. The first is the expensive. An Amnesty International report titled Cuba's Internet Paradox reveals that the connection cost, as of 2017, was $1.50 per hour, a tremendous amount for people where the average monthly wage is roughly $25.

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Future
Natalia Vera Ramírez

Latin America, The Next Mecca For Digital Nomads

Latin American countries want to cash in on the post-pandemic changes to the fundamental ways we work and live, in particular by capitalizing on a growing demand from the new wave of remote workers and "youngish" professional freelancers with money to spend.


LIMA — Niels Olson, Ecuador's tourism minister, is working hard to bring "digital nomads" to his country. He believes that attracting this new generation of freelancers who can work from anywhere for extended visits is a unique opportunity for all.

Olson recently tweeted that the average freelancer based in New York City could lower standard monthly costs from $4,000 to $1,000 by setting up shop in Ecuador.

Living in a town like Puerto López, he wrote, the expat freelancer could "work by the sea, live with a mostly vaccinated population, in the same time zone, (enjoy) an excellent climate, and eat fresh seafood." For Ecuador, the new influx of visitors with money to spend would help boost the country's economy.

To this end, he says, the government of President Guillermo Lasso is preparing a temporary residency visa for such workers. It "allows foreigners to work remotely for foreign firms in Ecuador. How does it benefit our country? By bringing foreign exchange into our economy and creating jobs," Olson stated.

Ecuador wants to be the first Latin American country to issue such visas, and the timing could not be better. While online-based freelancers already hopped from country to country before COVID-19, the pandemic has boosted their current numbers to around 100 million worldwide. The Inter-American Development Bank estimates there could be a billion roaming, digital workers by 2050.

A remote worker on the beach in Mexico

A remote worker on the beach in Mexico — Photo: Wonderlijk Werken

Latin America wants to compete with Europe 

Some European countries already issue visas for digital nomads. They include Germany, Portugal, Iceland, Croatia, Estonia and the Czech Republic, but in the Americas, only four countries make the list, namely Antigua and Barbuda, Barbados, Panama and Costa Rica.

In August 2021, Costa Rica approved a law for remote workers and international service providers, intended to attract digital nomads and make its travel sector more competitive. The law provides legal guarantees and specific tax exemptions for remote workers choosing to make the country their place of work.

It allows foreign nationals earning more than $3,000 a month to stay for up to a year in the country, with the ability to renew their visa for an additional year. If applicants are a family, the income requisite rises to $5,000.

Carlos Ricardo Benavides, the legislator promoting this law, says it will be a stimulus for Costa Rica's "economic reactivation. With this legislation, which is pioneering in its area, Costa Rica has a great tool to boost the country as a choice destination."

Neighboring Panama is also creating short-term residencies for remote workers and plans to extend tourist visas. The nation hopes to use the foreign cash spent on hospitality, retail and local services to revive an economy that shrank 17.9% in 2020.

Mexico offers temporary residencies to attract digital nomads

Mexico, meanwhile, offers no particular visa for digital nomads but remains one of their favored destinations, with 20 Mexican cities and towns currently hosting remote workers.. At the moment, the country simply offers temporary residencies for applicants able to show financial solvency (either $1,650 in monthly income or a bank balance with at least $27,000).

In Colombia, the government approved a Law of Enterprises that includes special migratory rules. It stipulates that the "Government, through the Ministry of Foreign Relations, shall expedite a special regimen for the entry, residence and work of digital nomads [...] with the purpose of promoting the country as a center for remote work."

When it comes to choosing a destination, taxes are often a decisive factor for digital nomads. Foreigners must consider facilities and infrastructure provided by host country, says Valeria Galindo, People Advisory Services Partner with the accounting firm EY Perú. But no less important in the choice of destination are " the tax consequences moving to a foreign country can have for themselves and their firm. Let's remember, many countries work on the basis of territoriality, which can generate taxes both in the destination country and in terms of the firm's settlement arrangements."

AirBnB partners with the city of Buenos Aires

Why are various Latin American countries courting digital nomads as residents? A study by the Adventure Travel Trade Association, called "Work and Wander: Meet Today's Digital Nomads," found that 87% of them earned around $4,500 a month, and spent around 36% of these earnings wherever they reside. Their work profiles were a mix of writing, sales and IT programming.

The website Nomadlist also finds these workers are generally young and more disposed to try different experiences and visit new places.

Their disposable income — and their willingness to spend it — makes digital nomads a boon to the continent's battered travel sector. The Mexican government found that a single person's stay for three months or longer translates to thousands of dollars poured into the local economy.

Victoria Bramati, Airbnb's communications chief for South America, says "the pandemic is changing the way we work, live and travel. People want to live anywhere," and technology is making this possible. This, she adds, is "happening in real time." In June 2021, the company came up with Live Anywhere on Airbnb, a pilot program where 12 people shared various Airbnb lodgings for 10 months. She said it was an opportunity for people to "make the world their home" for nearly a year, with most of the costs at Airbnb's expense. The firm recently signed an agreement with the Buenos Aires city government to jointly promote the Argentine capital as an international destination, particularly for remote workers.

Between its low costs, exotic destinations and colorful cultures, Latin America has a major potential to become the next digital nomad hotspot. And the moment is ripe to entice travelers who don't need — or want — to return home.

Future
Sol Park

Latin America's Copycat Startups: Thieving Or Innovation?

Across the region, entrepreneurs have been hailed for taking innovative ideas inspired elsewhere and applying them nationally or regionally. But the business and ethical dynamics involved are not so simple.

SANTIAGO — When Chazki, a Peruvian courier startup, entered the market in 2015, its founders described it as "the Uber of logistics." It made sense. The firm initially recruited freelance collaborators, not to carry passengers, but deliver purchased items in their "last mile."

The Uber tag stuck though, as tags have done with other regional startups: Mercado Libre was "Argentina's eBay," Nubank the "Revolut of Brazil," and Rappi was the WeChat of Colombia. Indeed, many Latin American firms are termed copycat startups for replicating successful business models conceived in developed hubs like the Silicon Valley.

This isn't new in the business world. Popular Latin American e-trading platforms like Linio and Dafiti were created by the German incubator Rocket Internet, which replicates successful digital startups for developing markets and often ends up selling them to the original developers.

Some see this as crass thieving (a charge thrown at Rocket Internet in 2012), but not everyone. Is the retailing giant Falabella just a copy of Macy's, asks Federico Antoni, a co-founder of the Mexican venture capital firm ALLVP? Is Mexico's Banorte a knock off Wells Fargo?

"The important thing is not what inspired the founders of Cornershop (a Chilean version of the U.S. delivery app Instacart) or Nubank, but how they adapted to the market and became a giant company," he says.

In the case of Chazki, founder Gonzalo Begazo himself described it as the Uber of logistics, but also pointed out in an interview that it had developed its own technology and practices to meet the needs of Peruvian customers.

It's not because you did things well in one country that you can go next door and do exactly the same.

Today the firm allows clients to send and receive packages in a day or sooner, and to track them. This is new in a region where customers might wait weeks, if not months, for an online purchase to arrive. The firm has partnered with Falabella in Chile, Peru and Colombia, and its customers include Mercado Libre, Walmart, Amazon and Nestlé. Its sales increased 600% in 2020, and the target for 2021 is to increase sales from $10 million to $35 million.

Latin flavor

Chazki's country manager in Chile, Felipe Rivas-Struque, worked with firms based outside the region like Rappi, Cabify and PedidosYa, and says the "natural mistake would be to want to bring the way they do things outside to the region." Part of Chazki's success, he says, is that "we're Latinos and work for Latinos."

In fact, local markets will likely prevent a "cut and paste" solution as their needs will force entrepreneurs to "tropicalize" their product. As Claudio Barahona, managing partner of the Chilean venture capital firm Alaya Capital, explains: "Consumer cultures and habits" and the purchasing power of customers differ sharply between the United States, Chile and other regional countries.

Alaya's portfolio includes Rocketpin, an Uber-type firm that provides services for customers (like checking a site or getting a document signed). Barahona says that in the United States, people may work with such firms to supplement their revenues. In Latin America, in contrast, it's their job. That completely changes the business model and how users view its services and workers.

Rivas-Struque points to differences between Latin American states. Paying in cash for example, remains a sensible option in Peru, but less so in Chile, where banking services are pervasive. The right strategy for expansion, he says, "is not to be complacent."

"It's not because you did things well in one country that you can go next door and do exactly the same, because it won't work as well," Rivas-Struque explains. "That's why local market knowledge is so important, as are local good practices and 100% local implementation."

Delivery app Rappi was described as the WeChat of Colombia — Photo: Sebastian Barros/NurPhoto via ZUMA Press

Andrés Sarrazola is the founder of Ayenda, a reservations platform for small hotels, often termed a copy of Oyo, the Indian version that grouped small hotels under a brand that brought them business and assured quality for guests. Sarrazola says Ayenda's model arose from conversations with newcomers in the hotel business, and attributes its success to "our being Latin Americans."

Ayenda has a team of 50 people visiting independent hotels to persuade them to join the project. "They have coffee and spend time creating a relationship that goes beyond just a number," he explains. "Foreign executives could not relate to local partners this way."

Copycats compete efficiently with original brands, not just by expanding geographically but through more services attuned to local needs. Mercado Libre, which took its inspiration from eBay, did this, and its services now include digital payments, advertising and property sales and rentals. The firm emerged in the 1990s.

"eBay launched into Latin America in that period and could never compete," says Federico Antoni. "Today, Mercado Libre is not just very different but much bigger."

We can't underestimate the impact a copycat can have on people's lives.

Ayenda's Sarrazola says local versions may not be the first with an idea, "but what we can do is to be the best."

"I" for innovation

Fernanda Cahen, a professor at the private FEI University in Sao Paulo, says the innovation of copycats from Brazil or Latin America should be assessed in the local context, not in comparison with advanced economies. She cites different types of innovation. First, scientific, which transforms objects and creates disruptive products — like the iPhone — and requires big investments. These generally happen in advanced economies.

Then there are "frugal" innovations, derived from local needs, Caheln explains. This leads firms to even transform a high-tech product to meet local needs for people with less money. "It's not an iPhone, but a good enough," she says.

The third type is what copycats do: innovating with and adapting software or business models. Cahen says that in a "young ecosystem, with a difficult institutional environment, if a technological firm, even one that copies, can grow and develop into a big firm, it's impressive."

Such firms are particularly attractive to investors. "We like startups that are resolving some of the region's big problems. We don't ask if it's a copycat or not," says ALLVP's Antoni.

With Ayenda hotels, Sarrazola says the firm linked numerous, small hotels with a digital reservation system that brought them business. Few had this before.

"We made hundreds of thousands of guests loyal customers of our chain, which benefits our hotel partners as they start receiving a large volume of clients," he explains. Ayenda now has more than 300 hotels in Colombia, Peru and Mexico, and grew 150% in 2020, in spite of the pandemic.

Claudio Barahona points out that copycat startups can have a "vital" impact locally. Nubank, for example, "isn't a digital bank just to be cool, but solves the problem of access to finance for millions of people in Latin America," he explains. "We can't underestimate the impact a copycat can have on people's lives."

Conservative investment attitudes in Latin America tend to favor copycats, as investing in a new firm is seen as risky or slow to yield returns. But this may be changing, with big regional firms more willing to invest in scientific or biotechnology firms.

In time, the copycat model may even lose steam. But by then, these same firms may be well placed to act as the region's technological innovators or investors in home-grown science and biotechnology, giving a further boost to the consumer markets they understood and served with intelligence.

Geopolitics
Carlos Escaffi

Peru: Will The Real José Pedro Castillo Please Stand Up?

A source of major concern for investors and the economic and political elite, Peru's freshly-inaugurated leftist president is now trying to make nice. What happens next, though, is anybody's guess.

-Analysis-

LIMA — Forty three days after the last votes were cast in Peru's presidential runoff, the country's electoral authority officially proclaimed as president-elect José Pedro Castillo Terrones, a socialist schoolteacher from Cajamarca in northern Peru. His inauguration, on July 28, coincides with the 200th anniversary of Peru's independence.

This was a narrow victory that had to ride a wave of challenges and calls to recount votes from Castillo's rival, Keiko Fujimori.

The 51-year-old Castillo is a Catholic and the spouse, for 21 years, to Lilia Paredes, also a teacher though evangelical. He has three children. In his youth, he was a member of the village "patrols' or rondas that kept the peace in the countryside and later resisted the violent Shining Path insurgency in the 1980s. He represents a break, in other words, from the country's ruling elite, established parties and dominant economic groups, and reached the presidency on the back of the votes of the Andean peasantry.

Castillo is giving representation to a sector of the population that has mostly been excluded from the country's socio-economic system.

Castillo is giving representation to a sector of the population that has mostly been excluded from the country's socio-economic system, and his discourse offers them hope of inclusion finally in a country that is often reluctant to give them visibility and recognition. His message centers around simple declarations such as "No more paupers in a rich country," statements directed at all those who have for decades felt sidelined and unseen, and that raise considerable social and welfare expectations.

While campaigning, the president-elect promised reforms to healthcare, education and farming, but also a million jobs a year. Above all, he has vowed to call a constituent assembly to write a new constitution within six months. The current one, he claims, unduly favors the free-market economy.

Castillo" in Peru's capital Lima on July 20 — Photo: EC/GDA/ZUMA

But Castillo also vowed, once his victory was confirmed, to reject "any bid to bring a model of hate. We shan't permit any imported model. This constitution remains in force until the people decide otherwise." Furthermore, he has promised juridical and economic stability for businesses, responding to the conservative Fujimori's calls not to "put up more obstacles' to the economy.

The president-elect promised reforms to healthcare, education and farming, but also a million jobs a year.

Castillo needs to be moderate, something it appears he has begun to understand. Part of that is the need to emit reassuring signals, both to rating agencies and to investors waiting to see what his final postures will be on a range of issues including investments, employment, COVID vaccinations and pandemic management. His earlier declarations in favor of nationalizations and state interventionism alarmed big, foreign investors. And yet, in June, he insisted: "We're not Chavistas or communists. Nobody has come to destabilize this country. We're workers, fighters and entrepreneurs."

Moderation must transcend words, and requires an understanding of what confidence-building entails. It also means working with parliament. The executive and legislative branches cannot continue to be at loggerheads as they have in the past five years, a period in which Peru had five presidents. Parliament will likely closely observe any bid to reform the constitutional principle of presidential incapacity or parliament's powers to sack the president, as it has in past years.

In short, the new president will have to forge pacts and build alliances to implement his promises on health, welfare and jobs, and to build his vision of national dignity and a Peru free of class and ethnic prejudices.

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Geopolitics
Luis Rubio

President AMLO's Misguided Nostalgia Creeps Toward Despotism

Mexico's socialist president is determined to restore a 'strong' presidency he believes will put things right in Mexico. To many, he is starting to look like another tropical dictator of sort.

-OpEd-

MEXICO CITY — Napoleon Bonaparte once declared that one must be petty to win power, but high-minded and generous in its exercise. Three years into his presidency, Mexico's Andrés Manuel López Obrador (AMLO) seems only to have grasped the "petty" part. He doesn't — or refuses to — understand the difference.

Instead of governing, which he has said is "so easy," he has devoted himself to dividing Mexicans while he forwards his own agenda. That essentially consists of sweeping away everything pertaining to the last 40 years. It is entirely understandable, as his project clashes head-on with the reform policies and gradual development of state institutions undertaken over four decades.

People protest against Mexican President Andrés Manuel Lopez Obrador in Mexico City — Photo: Jose Pazos Fabian/EFE/ ZUMA

What he wants is to build on his own vision of how this country should work. That means reviving his recollection of Mexican history, and as he remembers it, a society living a golden age in the 1970s, under an all-powerful presidency. In this mental caricature of our recent history, the president could impose his will, which meant the country worked, the economy grew and there was order. Those of us who remember the 1970s know that the decade's two presidents, Luis Echeverría and José López Portillo, were precisely the initiators of a period of economic instability that would soon run out of control.

The author of a book on the palace at Versailles once observed that King Louis XIV had built it, Louis XV enjoyed it, and Louis XVI paid for it. Mexico's history in the mid-20th century isn't so different. Stabilizing development allowed the economy to grow, Echeverría and López Portillo (who presided over the so-called "tragic 12 years') enjoyed its fruits and in the 1980s, Mexicans had to pay for their leaders' frivolity and (personal, political and financial) recklessness.

He isn't just peddling nostalgia, but an extravagant dream that may become a nightmare.

The 1980s were a convulsive period. There was an economic crisis and almost hyper-inflation, excessive debt, tremendous anger and distrust, and repeated attempts to restore a semblance of order and stability in all aspects of national life. Various attempts to return to the period of stabilizing growth failed, until the country finally realized this was no longer possible. This was because the world, and Mexico, had changed; and that led the country into a period of political and economic reforms. These were partial and unequal, but without a doubt restored a measure of political and economic order in the country. Their costs however included loss of control over parts of the country and rising crime.

A key part of those reforms was to build institutions (including a new Supreme Court, an electoral body and an independent rights commission) meant to instill confidence among the public, businesses and other sectors of society. The new institutions were not all equally effective, but had a shared logic: to confer certainty, and act as checks to an all-powerful executive branch. The aim (at least) was to move toward a modern economy and democratic society.

Former U.S. President Jimmy Carter and former Mexican president José López Portillo toast during a luncheon hosted by the President of Mexico in 1979 — Photo: Public Domain

The problem for Mexico is that the presidential vision is sharply at odds with realities and public expectations in the 21st century. Many ordinary folk voted for AMLO, either believing in him or out of disgust at the state of things. Yet he isn't just peddling a nostalgic foray into the past, but an extravagant dream that may become a nightmare. This may well be why the presidential party took a drubbing in recent, regional and legislative elections.

As the Chinese journalist Deng Yuwen has observed, the essence of democracy is to restrict the power of the state, while an unfettered concentration of powers is the ultimate cause of social problems. President AMLO is starting to get a taste of both.

Geopolitics
Natalia Vera and Héctor Cancino

EVs Start Moving Latin American Cities To Sustainability

Electric vehicles are a novelty with promise in Latin America and are already expanding in several of its city bus fleets.

SANTIAGO — It's a distance of 1,150 kilometers, a 12-hour car journey, between Temuco in southern Chile and La Serena in the north. Now, you can drive this distance with an electric car, thanks to a network of charging points placed throughout the 1,400-kilometer length of Chile by Copec Voltex, a firm providing electromobility solutions.

The head of the firm's B2C (business-to-consumer) Commercial Projects Director, Alan Morgan Rojas, says Copec realized electromobility was "coming to stay," hence its decision to enter into recharging infrastructures, "which has a fundamental role. The question this scenario prompts is which comes first, electric cars or charging infrastructure? Without charging points at service stations connecting the country, automobile brands would find it difficult to risk bringing them out if they couldn't even leave Santiago, for example."

Morgan says that with electric cars arriving on the market, charging solutions at home and in public spaces will follow, expanding to different sectors like industry and public transport. "There are many programs like Mi taxi eléctrico, which we'll join and include a home charging solution for drivers. Programs like this encourage the arrival of more electric vehicles, which will mean wider public access. One of the restrictions today is precisely their high price."

Electromobility has started and it won't stop

Tamara Berríos, country manager in Chile for BYD, a Chinese electric carmaker, believes fleets of electric buses will trigger the expansion of e-vehicles in Latin America. "Electromobility has started and it won't stop. It has started in mass public transportation and should naturally flow toward expanding in more cities that are taking an interest, copying the model of cities like Santiago, Bogotá and Medellín, which can already absorb an electric fleet. The next step has to be taxis. We've made all the progress with public transport because buses are not sold individually but in fleets, which is key. It is important to go for markets with a large volume of mass public transport. That way you can absorb a small percentage of that volume, which still gives you an attractive number allowing competitive prices."

BYD currently has 400 buses in Bogotá, 50 in Medellín, 20 in Guayaquil, 15 in Mendoza in Argentina, 30 in Montevideo and 30 in Brazil. It has 435 of its e-buses operating with the Santiago bus system. Other firms eyeing the e-bus market include the world's big carmakers, Tesla, Hyundai, BMW, Nissan and Toyota.

Luis Felipe Clavel, e-vehicles business development chief at Nissan, says, "electric vehicles are happening now, and we're living this across the region. We're so convinced of it we were the first brand to produce and develop electric vehicles on a mass scale in 2010. That was our Nissan Leaf, which we market in eight Latin American countries." He said the firm is working with firms in related tech sectors, like charging infrastructure, to "help introduce e-mobility."

BYD electric vehicles that will be used to encourage the transition from fossil-fuel taxis in Santiago, Chile — Photo: Xinhua/ ZUMA Press

He cited pricing as key to the market's expansion. He said that when the price of a lithium battery, calculated as kWh (kilowatts per hour), drops below U.S. $100/kWh, demand for e-vehicles should rise. The price was around $2,500/kWh in 2010, when Nissan launched its first e-vehicle, and "today we're around $400," says Clavel, adding, "we're seeing a downward trend and hopefully between 2025 and 2030 the $100 barrier will be crossed, which will make this technology more accessible to consumers. We hope the retail boom will happen around those dates."

In 2020, in spite of the coronavirus pandemic, e-vehicle sales grew by 40.9% year-on-year, constituting 4% of all vehicle sales, according to the data analysis firm GlobalData. Indeed, other firms believe growth could be fast enough to prompt a shortage of batteries by 2030.

The three executives from BYD, Nissan and Copec Voltex spoke to América Economía at an E-mobility and Transport module in our online Energy Conference. They agreed Chile was currently ahead of the region in fomenting an e-mobility market. Berríos of BYD said initiatives begun in 2017 were now bearing fruit. "In Chile today we have six Chinese bus brands that are 100% electric, which arrived after us and have given the market a push in lowering prices. Some competing with us in this market are also competitors in Colombia, Mexico, Argentina and Peru, which are countries slowly creating fleets. BYD is the brand with most e-buses across the Americas."

E-mobility has come to stay in Latin America

The firm, she says, wants to expand into trucks and all long-haul vehicles that will benefit from cutting operation and maintenance costs.

Alan Morgan of Copec Voltex cited the need to expand regulations in this youthful sector, and welcomed Chile's new regulations on installing charging points at home for e-vehicles. The government also needed to find financing mechanisms for sectors like taxis, which he said would help boost demand.

For Nissan's Luis Clavel, Latin America had one advantage over Europe, in the prevalence of parkings in most if not all residential buildings. Unlike Europe's older buildings, many of which have no car parking, he said, these could host charging points allowing people to charge their car and drive out every morning. He said charging infrastructure inside cities was a priority over facilities between cities.

E-mobility has thus come to stay in Latin America. Retail prices and availability of charging facilities will now decide how far and fast it will progress across the continent.

Impact: Education Innovation
Daniela Arce

From Europe To Latin America, Business Schools Are Going Green

Institutions tasked with training the next generation of business leaders are realizing that sustainability matters, and making significant adjustments to their curriculae.

SANTIAGO — The ESCP Business School, based in Paris but with campuses across Europe, recently opened a sustainability department. The goal is to shift away from traditional courses on corporate responsibility and instead train students and staff to understand and innovate along sustainability lines, a concept that is of growing interest to the business world.

Roxana Olaru, head of admissions and sustainability at ESCP Madrid, says the school has been working with sustainability for at least four years, "through consultancy projects and the creation of various, specialized masters courses." All MBA programs, she said, now have a sustainability module.

Another business school, Madrid's IE University, is boosting by 25% the hours devoted to social and environmental initiatives for students and staff and in its labs and workshops. And four yeras ago, ESADE, also in Madrid, created an Observatory of Sustainable Development Objectives as part of its Chair of Leaderships to evaluate how Spanish businesses were implementing the government's Agenda 2030 on decarbonization.

With sustainability's increasing relevance to all business sectors, it should come as no surprise that it's also an area of greater focus in business schools. Many have taken steps to enact one or more of the UN's 17 Sustainable Development goals, and some are even asking whether or not they contribute something specifically positive to society.

Results from a 2020 poll by the consulting firm Deloitte showed that despite the pandemic, millennials continue to prioritize environmental sustainability, socio-cultural diversity and inclusion, and expect corporations to do the same.

Businesses schools have gotten the memo, it appears, and are thus placing more emphasis on environmental, social and governance issues.

"The simple but fundamental reason is that these are places where people who will occupy leadership positions in all areas of society are trained," says María José Murcia, an assistant professor at the IAE Business School in Argentina. "These are the people who will be responsible for generating and creating conditions for global sustainability."

In addition to events and workshops such as the recent "sustainability week" at ESADE Madrid, "these issues must be woven into the fabric of curricula," says Marcos Sepulveda, head of LLYC, a corporate relations firm in Chile. "Universities must act as agents of change because pupils learn, incorporate knowledge and get to know experiences for application in the near future."

A new set of priorities

Business schools are adapting to the new scenario both in response to increased awareness among citizens and because firms understand the current economic model may soon threaten competitiveness and talent recruitment. And they're taking concrete steps, through one-off programs and curricular changes.

In 2019, the HEC business school Paris, one of eight partners in the Creative Destruction Lab, a nonprofit body that runs a science and technology-based program for firms, announced a new consultancy program, CDL Climate, aimed at 25 startups working on solutions to climate change. In Madrid, ESCP has a sustainable jobs fair, scheduled for October 2021.

In terms of teaching, there is the bachelor's program in transformational business and social impact at IE in Madrid, or ESADE's Sustainable Management and Agenda 2030, for executives. Other courses are being equipped with environmental or sustainability modules.

Paloma Baena, a senior executive at Chile's LLYC, says sustainability will not so much determine the success as "the survival" of firms in the future.

"We can speak of a change in social attitudes," she says. "Firms ultimately live off what they can produce, and thus sell and offer as a service. And consumers are increasingly looking for other types of products or products that respect the environment, the people who make them and safety measures."

Investors, Baena explains, are also starting to hold corporations to account over sustainability.

Regional innovation

In Latin America, in the meantime, schools and universities in Colombia, Peru and Chile are gradually including environmental and social themes into studies. "Sustainability is becoming vital to the survival of firms," says Horacio Arredondo, a vice-dean of postgraduate studies at Chile's UAI business school. "But still, this wave of changes is essentially led by developed countries and economies."

Peru's Pacífico business school includes ethics and social responsibility courses in all its masters programs, which also address some basic notions of corporate governance. The UAI has launched an entire Corporate Governance Center, indicating the importance it gives it in raising the value of organizations, and a masters course in sustainable business. The school has also organized events and talks open to students and the public, like the New Agenda and Managing the Crisis.

Colombia's Universidad del Norte is moving ahead as well after making a sustainability declaration known as the DuNord Ecofriendly manifesto. Goals include the efficient use of power and water. And courses now include sustainability modules, says Camilo A. Mejía, head of the business school's Innovation and Sustainable Development Centre.

The university has likewise begun outreach and volunteer programs to involve students with the community and its specific problems. "There are also research initiatives applied to sustainability issues, not just in course subjects but also as an MBA graduation option," Mejía explains.

Sources
Carlos Escaffi*

In Chile, Between Healthy Change And Outright Chaos

The social explosion of 2019, a referendum the following year, and last month's 'mega election' have pushed the country in a whole new direction. But is there any method to the madness?

-OpEd-

Chile recently held what was described here as a "mega election." On May 15 and 16, voters not only chose new governors, mayors and district councilors, but also the assembly members who will have the historic task of drafting the country's new constitution.

The election follows last year's referendum, in October, on whether to forge a new constitution and thus scrap the existing one (which dates back to 1980, when Chile was still in a dictatorship under Augusto Pinochet). The vote was overwhelming: 78% of people backed the creation of a new constitution, and 79% decided it should be written by a fully elected Constituent Assembly.

That's part of context, as is the social explosion that took place in late 2019, a year before the plebiscite. And the lesson drawn from all this is that people are blatantly rejecting the current system, the political establishment and all our familiar people and practices, including the very model of politics to which we've ascribed for decades.

People have sought to explain the mega-election results with sophisms and excuses. They say that nobody could see this coming. Others — people here and there who managed to retain a mayorship or a few city council seats — respond with an absurd complacency. Either way, we are not considering the problem at its roots. There is no real or specific expression of contrition.

A voting center in Santiago, on the first day of elections in Chile, May 15, 2021 — Photo: Matias Basualdo

From my modest point of view, there are signs that we are in a political transition not just here in Chile, but at the regional level, and that the recent vote was a crude expression of social protest. Never mind if it is deep or considered: The point is that change is imminent. In aggregate terms, the current voter cares little about what's really going on in the background.

Social and online trends have imposed themselves. I repeat, there is no background, just a poverty of ideas and real debate. The point was to change things, that and nothing more. Another great conclusion is that the consequences of all this will only emerge in time. Let's just hope we don't slide down the slope of populist payouts and a ballooning public sector with more governors, officials and hangers-on.

Looking at the bulk of the 155 constituent assembly members, I fear that the text they will design will come from the heart, not the mind. The problem is that a passionate, possibly overbearing text — one that will then have to be ratified, again through a referendum — is no good. Its scope and shelf-life will be limited.

Finally, it is clear to me that this is the hour, in Chile, of the millennials. We should not be surprised that a 30-year-old economist, Irací Hassler, should have become Santiago's first communist mayor. Nor that Macarena Ripamonti, a 29-year-old lawyer with the Democratic Revolution party, would be elected mayor of Viña del Mar, on the coast.

It may be harsh to say, but our conventional politicians must take responsibility for recent events, and even retire. Especially those who had no vision or responsibility with education!

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Geopolitics
Redacción AméricaEconomía

Peru Election: Democracy At Risk, Pick Your Poison For President

Peru's two presidential candidates are far from reassuring in their democratic commitments, but in a country that fought a civil war with Maoists, the communist-style Pedro Castillo may be the bigger threat.

-Analysis-

LIMA — On Sunday, Peru will choose its next president in the second round election runoff. Approximately two-thirds of voters have been forced to decide which of the two candidates constitutes the lesser evil, the arch-conservative Keiko Fujimori, or the schoolteacher with communist sympathies, Pedro Castillo.

Together they barely garnered 32% of votes in the first round. Pedro Castillo, head of the Perú Libre (Free Peru) party, had 19%, while Fujimori, daughter of the former, and currently jailed, president Alberto Fujimori, had barely 13%.

This paucity of votes reveals problems that have become structural in Peru: fragmentation, the gap between voters and the traditional parties, a crisis of governance and scandals that have led to four presidents over five years.

Peru's Congress, elected in that first round, contains 10 parties, and Castillo's Perú Libre has just 37 of 130 seats. For some years now, the legislature has been nothing but a grouping of parties that are formed and dissolved in line with shifting, personalized interests. That has made governing incredibly difficult.

Parliament has abused its powers to charge and oust ministers and presidents, waging a zero-sum game with the executive branch. Admittedly, the presidents barely helped as they themselves were personalities bereft of party support.

Neither candidate will strengthen democracy.

So democracy in Peru is in a bind. And that, we believe, is the most important criterion for evaluating the rival candidates. Unfortunately, neither has a clean, democratic slate.

Castillo represents a party that declares itself Marxist-Leninist and was formed around a personality who had to drop out of this race, having been convicted on corruption charges. That was Vladimir Cerrón, the former governor of the Junín province.

Castillo will probably emulate Mexico's Andrés Manuel López Obrador leadership style, using made-to-measure referendums to serve their own interests. One recently elected Perú Libre legislator, Guillermo Bermejo, vowed that once elected, they won't leave power. Castillo did not reprimand him. On press freedoms, the party espouses "the legacy of Lenin and Fidel," or Cuba's late dictator, affirming that "Marxism does not advocate press freedom but a press committed to its people's education and cohesion."

There are also charges and suspicions — some based on a recent inquiry by the newspaper El Comercio — that some party members have ties to the political arm of the half-defunct Shining Path, the Maoist guerrillas that fought the state in past years. Castillo emphatically denies such links. His economic program remains vague, but with a strong tendency toward nationalizations. Castillo's democratic credentials are thus weak, and unnerving.

Keiko Fujimori at an election rally in May 2021 — Photo: Denis Mayhua/dpa via ZUMA Press

Fujimori's are barely better. As daughter of the dictator Alberto Fujimori whom she has vowed to pardon if elected, she has had a highly charged political career. She has been adept at destabilizing governments using her party's clout. Today, she has promised a strong government, which is of particular concern coming from her. Nor are voters appeased by her ongoing prosecution over corruption.

Neither candidate will strengthen democracy, and both have espoused the populist narrative. Their social and economic recipes, while poles apart, promise public handouts, which usually serve to concentrate power. Most Peruvians share our concerns. Indeed, the candidates have been forced to swear an oath to respect democracy and human rights.

As Peru's preeminent novelist Mario Vargas Llosa has said, it's a choice between two ills, and we agree with him when he cites Castillo as the worst of the two, with a program that poses a direct threat to Peru's democratic institutions. He has threatened to dissolve parliament, restrict press freedoms and govern in the "name of the people" through referenda.

At least Fujimori has been active inside the institutions for decades. She has done it badly of course, as a consummate disrupter. But that was her field of action, and she stayed there. She will need the support of other parties to govern, and those that give it must clearly demand that she respect the institutions.

There is no reason for optimism in either case. Whichever candidate wins, the system's fragility will continue. He may attack the institutions, she may become a right-wing demagogue, and parliament will continue to undermine the executive. What Peru needs is a political renaissance to yield a modern, competitive and responsible political system. Neither Fujimori nor Castillo represent that, but the candidate of Free Peru is the bigger threat.