Inter Press Service » Southern Aid & Trade Journalism and Communication for Global Change Fri, 01 Aug 2014 14:01:01 +0000 en-US hourly 1 Oil Alliance Between China and Costa Rica Comes to Life Again Wed, 30 Jul 2014 02:22:47 +0000 Diego Arguedas Ortiz The presidents of China, Xi Jinping, and Costa Rica, Luis Guillermo Solís, both at their microphones during a Jul. 17 meeting in Brasilia. Credit: Presidencia de Costa Rica

The presidents of China, Xi Jinping, and Costa Rica, Luis Guillermo Solís, both at their microphones during a Jul. 17 meeting in Brasilia. Credit: Presidencia de Costa Rica

By Diego Arguedas Ortiz
SAN JOSE, Jul 30 2014 (IPS)

China’s plan to become Costa Rica’s main energy ally through the joint reconstruction of an oil refinery has been revived after the presidents of the two countries agreed to review the conditions of the project during a meeting in the Brazilian capital.

The two countries initially signed a framework accord in 2008, including Chinese participation in oil projects, especially the upgrade and expansion of the Moín refinery on Costa Rica’s Caribbean coast, with an investment of 1.5 billion dollars.

But criticism from public institutions, political leaders and social organisations brought the initiative to a halt.

The Costa Rican president’s office stated in a communiqué that Beijing had accepted its request to renegotiate the project, with the aim of “resolving inconsistencies in the contract,” in which each country has invested 50 million dollars so far.

Costa Rican Foreign Minister Manuel González said in a Jul. 22 press conference that “we have no deadline” for that review, which all of the involved institutions will take part in.

President Luis Guillermo Solís participated in the news briefing, although he did not specifically refer to the refinery.

Under the microscope

A year ago, the comptroller general’s office ordered Soresco, the joint venture, not to use the 1.8 million dollar feasibility study due to a conflict of interest, because it was conducted by a subsidiary of the Chinese partner CNPCI.

The study saddled Recope with costs from Soresco, such as land, fuel tanks, environmental damages and the expansion of the oil pier.

The comptroller general’s office ruled that the 16.28 profit margin established could be too high. A second consultancy, the U.S.-based Honeywell, also questioned that figure.

While the agreement creating Soresco stated that each partner would pay its own workers involved in the project, Recope paid half of the wages of the Chinese employees, as well as bonuses and incentives. Recope is seeking to be repaid 12 million dollars.

Solís held a bilateral working meeting with Chinese leader Xi Jinping on Jul 17 in Brasilia, during a summit of presidents of the Community of Latin American and Caribbean States (CELAC) with Xi, after the sixth summit of the BRICS (Brazil, Russia, India, China and South Africa) grouping.

The upgrade of the Moín refinery, which belongs to the state oil refinery Refinadora Costarricense de Petróleo (Recope), would increase its processing capacity from 18,000 to 60,000 barrels a day of crude. The company controls Costa Rica’s oil imports, and since 2011 it has had to purchase only refined products, because the plant was shut down.

The joint refinery project, or “Chinese refinery” as it is referred to locally, was criticised by politicians and a large part of organised civil society from the start.

“We have always defended the construction of a refinery, whether it was with China, Russia or France,” said Patrick Johnson, a leader of the oil workers’ union, the Sindicato de Trabajadores Petroleros Químicos y Afines.”We want the confusion to be cleared up…and if the project is beneficial, then it should go ahead because the country needs a refinery,” he told IPS.

In June 2013, the office of the comptroller general brought the initiative to a halt arguing that there were serious problems with a key feasibility study. Since then, the project has been on hold.

The renegotiations should overcome the first real hurdle that China has run into in Costa Rica. In 2007, this country became the first in Central America to establish diplomatic relations with China, in a part of the world that continues to have ties with Taiwan – incompatible with relations with China.

“Having an embassy here makes it easier to deal with matters with Central America,” Patricia Rodríguez, an expert on China who was an official in Costa Rica’s embassy in Beijing from 2008 to 2010, told IPS.

China is now Costa Rica’s second-biggest trading partner after the United States. This country’s sales to the Asian giant climbed from 91 million dollars in 2000 to 1.5 billion in 2011, when a free trade treaty signed in 2010 went into effect.

In strategic terms, the joint refinery between Recope and the state-run China National Petroleum Corporation International (CNPCI) is China’s star project in the country, and the joint venture Sociedad Reconstructora Chino Costarricense (Soresco) was set up in 2009 to carry it out.

The investment is to amount to 1.5 billion dollars, of which Soresco would receive 900 million in loans from the China Development Bank. The rest will come from the partners. The construction and remodeling of the plant will absorb 1.2 billion dollars of that total.

The work was to begin early this year and was to last 42 months. The comptroller general’s office’s decision to put it on hold was due, among other things, to the fact that the feasibility study was carried out by a subsidiary of CNPCI, which it said subverted the evaluation.

The resolution had the effect of “completely paralysing the refinery upgrade process by leaving it without the technical studies necessary for it to continue,” explained Recope in a lawsuit brought against the comptroller general’s office in response to the measure.

Despite the ruling by the comptroller general’s office, the administration of conservative President Laura Chinchilla (2010-May 2014) continued to defend the refinery modernisation project. But the centre-left Solís promised during the election campaign to renegotiate the agreement, because he considered several aspects of the contract negative for the country.

The request to renegotiate the contract had the support of political sectors and in particular of lawmaker Ottón Solís, an economist and university professor who was one of the first to speak out against certain facets of the agreement.

“We have enormous bargaining power here because China is desperate to open up negotiations with Costa Rica and this country has prestige,” Deputy Solís, of the governing Citizen Action Party, told IPS.

“If we insinuate that it’s impossible to negotiate with China because they take advantage of you with unfair contracts, the whole world will be put on the alert and other countries won’t want to negotiate with them,” and that gives Costa Rica bargaining power, he said.

One of the promises made was that the upgrade of the refinery will bring down fuel costs for consumers, who currently pay 41 percent extra in taxes and profit margins for service stations and Recope’s operating costs.

Petrol currently costs 1.48 dollars a litre in Costa Rica, which makes it the most expensive gasoline in Central America. Official figures from 2012 indicate that oil consumption in the country stood at 53,000 barrels per day.

“Fuel is a fundamental element for price stability because there are public services that depend on its price, like public transportation and electricity, and the same is true in the case of the productive apparatus,” the president of Costa Rica’s consumers association, Erick Ulate, told IPS.

During the meeting with President Solís, Xi also agreed to expand the timeframe for carrying out studies for the project of widening the road connecting San José with the Caribbean port of Limón, where 90 percent of the country’s exports are shipped out. The expansion of the road will be financed with a 395 million dollar loan from Beijing.

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As Winds of Change Blow, South America Builds Its House with BRICS Fri, 18 Jul 2014 14:36:36 +0000 Diana Cariboni Russian President Vladimir Putin, Prime Minister of India Narendra Modi, President of Brazil Dilma Rousseff, President of China Xi Jinping and South African President Jacob Zuma take a family photograph at the 6th BRICS Summit held at Centro de Eventos do Ceara' in Fortaleza, Brazil. Credit: GCIS

Russian President Vladimir Putin, Prime Minister of India Narendra Modi, President of Brazil Dilma Rousseff, President of China Xi Jinping and South African President Jacob Zuma take a family photograph at the 6th BRICS Summit held at Centro de Eventos do Ceara' in Fortaleza, Brazil. Credit: GCIS

By Diana Cariboni
MONTEVIDEO, Jul 18 2014 (IPS)

While this week’s BRICS summit might have been off the radar of Western powers, the leaders of its five member countries launched a financial system to rival Bretton Woods institutions and held an unprecedented meeting with the governments of South America.

The New Development Bank (NDB) and the Contingent Reserve Arrangement signal the will of BRICS countries (Brazil, Russia, India, China and South Africa) to reconcile global governance instruments with a world where the United States no longer wields the influence that it once did.“The U.S. government clearly doesn't like this, although it will not say much publicly.” -- Mark Weisbrot

More striking for Washington could be the fact that the 6th BRICS summit, held in Brazil, set the stage to display how delighted the heads of state and government of South America – long-regarded as the United States’ “backyard”— were to meet Russia’s president Vladimir Putin.

At odds with Washington and just expelled from the Group of Eight (G8) following Russia’s intervention in the Ukrainian crisis, Putin was warmly received in the region, where he also visited Cuba and Argentina.

In Buenos Aires, Putin and the president of Argentina, Cristina Fernández, signed agreements on energy, judicial cooperation, communications and nuclear development.

Argentina, troubled by an impending default, is hoping Russian energy giant Gazprom will expand investments in the rich and almost unexploited shale oil and gas fields of Vaca Muerta.

Although Argentina ranks fourth among the Russia’s main trade partners in the region, Putin stressed the country is “a key strategic partner” not only in Latin America, but also within the G20 and the United Nations.

Buenos Aires and Moscow have recently reached greater understanding on a number of international issues, like the conflicts in Syria and Crimea, Argentina sovereignty claim over the Malvinas/Falkland islands and its strategy against the bond holdouts.

Meanwhile, the relationship between Washington and Buenos Aires remains cool, as it has been with Brasilia since last year’s revelations of massive surveillance carried out by the National Security Agency against Brazil.

Some leftist governments –namely Bolivia, Venezuela and Ecuador— frequently accuse Washington of pursuing an imperialist agenda in the region.

But it was the president of Uruguay, José Mujica –whose government has warm and close ties with the Barack Obama administration— who better explained the shifting balance experienced by Latin America in its relationships with the rest of the world.

Transparency clause

In an interview before the summit, Ambassador Flávio Damico, head of the department of inter-regional mechanisms of the Brazilian foreign ministry, said a clause on transparency in the New Development Bank’s articles of agreement “will constitute the base for the policies to be followed in this area.”

Article 15, on transparency and accountability, states that “the Bank shall ensure that its proceedings are transparent and shall elaborate in its own Rules of Procedure specific provisions regarding access to its documents.”

There are no further references to this subject neither to social or environmental safeguards in the document.

After a dinner in Buenos Aires and a meeting in Brasilia with Putin, Mujica said the current presence of Russia and China in South America opens “new roads” and shows “that this region is important somehow, so the rest of the world perhaps begins to value us a little more.”

Furthermore, he reflected, “pitting one bloc against another… is not good for the world’s future. It is better to share [ties and relationships, in order to] keep alternatives available.”

Almost at the same time, Washington announced it was ready to transfer six Guantanamo Bay detainees to Uruguay, one of the subjects Obama and Mujica agreed on when the Uruguayan visited the U.S. president in May.

Mujica has invited companies from United States, China and now Russia to take part in an international tender to build a deepwater port on the Atlantic ocean which, Uruguay expects, could be a logistic hub for the region.

But beyond Russia, which has relevant commercial agreements with Venezuela, the real centre of gravity in the region is China, the first trade partner of Brazil, Chile and Perú, and the second one of a growing number of Latin American countries.

China’s president Xi Jiping travels on Friday to Argentina, and then to Venezuela and Cuba.

“The U.S. government clearly doesn’t like this, although it will not say much publicly,” said Mark Weisbrot, co-director of the Center for Economic and Policy Research.

“With a handful of rich allies, they have controlled the most important economic decision-making institutions for 70 years, including the IMF [International Monetary Fund], the World Bank, and more recently the G8 and the G20, and they wrote the rules for the WTO [World Trade Organisation],” Weisbrot told IPS.

The BRICS bank “is the first alternative where the rest of the world can have a voice.  Washington does not like competition,” he added.

However, the United States’ foreign priorities are elsewhere: Eastern Europe, Asia and the Middle East.

And with the exception of the migration crisis on its southern border and evergreen concerns about security and defence, Washington seems to have little in common with its Latin American neighbours.

“I wish they were really indifferent. But the truth is, they would like to get rid of all of the left governments in Latin America, and will take advantage of opportunities where they arise,” said Weisbrot.

Nevertheless, new actors and interests are operating in the region.

The Mercosur bloc (Argentina, Brazil, Paraguay and Uruguay) and the European Union are currently negotiating a trade agreement.

Colombia, Chile, México and Perú have joined forces in the Pacific Alliance, while the last three also joined negotiations to establish the Trans-Pacific Partnership.

In this scenario, the BRICS and their new financial institutions pose further questions about the ability of Latin America to overcome its traditional role of commodities supplier and to achieve real development.

“I don’t think that the BRICS alliance is going to get in the way of that,” said Weisbrot.

According to María José Romero, policy and advocacy manager with the European Network on Debt and Development (Eurodad), the need to “moderate extractive industries” could lead to “changes in the relationship with countries like China, which looks at this region largely as a grain basket.”

Romero, who attended civil society meetings held on the sidelines of the BRICS summit, is the author of “A private affair”, which analyses the growing influence of private interests in the development financial institutions and raises key warnings for the new BRICS banking system.

BRICS nations should be able “to promote a sustainable and inclusive development,” she told IPS, “one which takes into account the impacts and benefits for all within their societies and within the countries where they operate.”

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India’s Cut-Rose Sector Pushes Past Barriers Fri, 18 Jul 2014 12:33:35 +0000 Keya Acharya Rose growers in Bangalore, India, rely on sustainable rainwater harvesting techniques. Credit: Keya Acharya/IPS

Rose growers in Bangalore, India, rely on sustainable rainwater harvesting techniques. Credit: Keya Acharya/IPS

By Keya Acharya
BANGALORE, Jul 18 2014 (IPS)

Neat rows of pampered-looking rose plants, drip-irrigated and ‘misted’ by tiny sprinklers, grow inside temperature-controlled greenhouses with high domes opened periodically for fresh air, offering 10 million cut-rose stems for export each year.

The 25-hectare farm, located roughly 35 km outside the southern Indian city of Bangalore, belongs to Suvarna Florex, arguably India’s largest cut-rose exporter.

But though the plants are thriving, the industry is hassled by such thorny issues as the high royalty rates of its foreign-bred roses and steadily increasing input costs.

“This is a billion-dollar industry, controlled by European [mainly Dutch and French] breeders." -- Dr. Thilak Subbaiah, horticultural consultant
Occupying a niche in the flower market – hitherto dominated by traditional demand for loose flowers for cultural and religious occasions – the cut-rose industry in India is on the rise, registering a 17-20 percent increase last year alone, with growers exporting some 76.73 million tonnes, mainly roses, in 2012-2013.

Major export destinations are Europe, the United Arab Emirates (UAE), Japan, Canada and Australia.

Until 2010, the Bangalore-based operation Karuturi commanded nearly 10 percent of the cut-rose market in Europe and expanded rapidly from rose farms in Kenya to agricultural crops in Ethiopia.

Tangled in a web of bankruptcy, violations of labour and taxation laws in Kenya and money troubles – among others – in Ethiopia, Karuturi faced a storm of criticism over its controversial acquisition on paper of 400,000 hectares of virgin lands in Ethiopia at a very inexpensive rate, beginning in 2010.

The move, which some called a ‘land grab’ and which resulted in the threat of displacement of thousands and the loss of livelihoods for many in the Gambella region of Ethiopia, quickly became synonymous with Karuturi’s notorious founder Sai Ramakrishna, whose reputation tainted India’s operations in Africa.

According to a disgruntled rose-grower and former chief of the forest services in the neighbouring state of Andhra Pradesh, R. D. Reddy, Ramakrishna is “a playboy in all respects; one who speculated in stocks with borrowed money and lost heavily, and now the whole industry in India is being blamed because of him.”

Dr. Manjunatha Reddy, a Dubai-based Indian industrialist with a rose farm located just five km away from Karuturi’s flower operations in the Holata region, near the Ethiopian capital Addis Ababa, says that the ‘takeover on paper’ in the Gambella region is symptomatic of Ramakrishna’s speculative Ponzi-like financial schemes.

“His misdeeds have really turned public sentiment against Indian industry in Africa,” he told IPS, adding that a bad commercial reputation goes viral in a continent where local communities rely heavily on the land for their livelihoods.

Reddy says other Indian enterprises like telecommunications and farming have also been tarnished with the same negative image cast by Karuturi’s actions on the ground.

“We now have difficulty even in raising funds for agri-business from venture capitalists and investment brokers,” Reddy asserted.

Karuturi’s head offices in Bangalore did not respond to IPS’ repeated requests for an interview.

A matter of royalties

Other growers, situated in the elevated Deccan plateau lands surrounding the southern cities of Bangalore and Pune, dismiss Karuturi’s reputation as ‘immaterial’, nothing more than an embarrassment for the sector.

What’s really bothering major players in the industry, according to Suvarna Florex Managing Director Sridhar Chowdary, are the “huge royalties we have to pay foreign breeders for rose varieties.”

An ‘introduced industry’ stemming from the demand for cut-flowers in the international market, India’s flower sector was initially heavily in debt due to huge capital expenses incurred from the purchase of foreign greenhouse infrastructure imported from the Netherlands, along with Dutch patents for its roses.

On average, each grower incurred costs of up to 20 million rupees (roughly 332,000 dollars) per hectare of rose farm. Now, 20 years later, the cost of setting up a farm with indigenous technology costs less than half that amount.

“This is a billion dollar industry, controlled by European [mainly Dutch and French] breeders,” horticultural consultant Dr. Thilak Subbaiah told IPS.

“There is no way we can compete,” he stressed, adding that problem is made worse by Indian horticultural institutes’ lack of attention to breeding research.

According to Anne Ramesh, president of the South India Floriculture Association and chairman of Suvarna Florex, royalty rates for Indian growers average between 0.85 and 1.25 euros per plant for each variety of rose.

“This is the same rate as Kenya, which grows 100 percent [of its flowers] for export, whilst we grow half that percentage at best, the rest being for the domestic market,” he told IPS. “We find it unfair to have the same rate of royalty imposed on us.”

Small steps in a growing industry

As late as 2007 the industry at large was still complaining about a marked lack of awareness on exporters’ needs and a dearth of any government assistance.

Cold-chain systems for transportation, facilitated international flights, phyto-sanitary inspections and the lack of any financial incentives for the industry were among the top concerns over half a decade ago.

Recents developments, however, have stemmed some of the criticisms directed at the administration.

A cold-chain flower-auction centre set up in Bangalore, capital of the state of Karnataka, is described by rose-growers as one of the best in the world market. This, coupled with speedy transportation and easy facilitation at Bangalore’s Kempegowda International Airport, is putting a smile on many exporters’ faces.

In addition, the government has made some important concessions that have greatly reduced the burden on local growers.

“The South India Floriculture Association approached the government with our financial constraints and we subsequently got a one-time waiver of 50 percent of our heavy loans [in 2004-2005] incurred due to imported infrastructure,” Ramesh said.

“Today we have greenhouse-technology pioneers, we have employment at the village-level and small farmers who can put up greenhouses because of state and central government incentives. We managed to progress because the government saw the industry as a way to rural development,” he stated.

In the neighbouring state of Tamil Nadu alone, the rose industry employs 10,000 women and 3,000 men.

Rural farmers now cater mostly to the domestic market, says Satish Aswathappa, co-owner of Nandi Floriculture, based in Devanahalli, about 40 km outside Bangalore city.

“We are farmers ourselves, we deal directly with other rural farmers who give us their roses and we have a same-day system of grading and sending the roses by public bus to Hyderabad [capital of Andhra Pradesh],” he added.

Environmental concerns also influence the industry, whether domestic or export-oriented.

Chowdary says protective environmental measures are perceived by growers as “survival technologies.”

Walking IPS around Suvarna Florex’s huge farm, Chowdary demonstrated how rainwater is collected in aqeducts and then channeled into a central pond, reducing dependency on groundwater.

There are also checkdams, plastic sheeted ‘ponds’ where rainwater is held in troughs, recharge measures around groundwater pumps and wells, and vermicomposting of plant leafage for manuring.

With groundwater sources steadily depleting due to overusage by consumers and mismanagement by the government, the quality of groundwater has also suffered, he said, which could be disastrous for rose-growers since the plants thrive best when fed uncontaminated water.

Rose growers guzzle water at the rate of millions of litres per week for a farm covering 25 hectares. Sustainable rainwater harvesting techniques are crucial, since an hour’s rain provides enough water to sustain a 25-hectare plot for two days.

Still, input costs remain high, since the use of chemicals has increased in “application and in price”, according to Subbaiah. “We also pay more than government-stipulated wages plus incentives just to ensure the [workers] turn up,” he added

Organic compost has depleted too as lands and cattle around the cities disappear into urbanisation.

Despite these problems, a steadily increasing domestic market means the industry will likely be around for a while.



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International Reform Activists Dissatisfied by BRICS Bank Thu, 17 Jul 2014 21:39:24 +0000 Mario Osava Chandrasekhar Chalapurath, an economist at Jawaharlal Nehru University in New Delhi, talks about development banks in India, at the International Seminar on the BRICS Bank. Credit: Mario Osava/IPS

Chandrasekhar Chalapurath, an economist at Jawaharlal Nehru University in New Delhi, talks about development banks in India, at the International Seminar on the BRICS Bank. Credit: Mario Osava/IPS

By Mario Osava
FORTALEZA, Brazil, Jul 17 2014 (IPS)

The creation of BRICS’ (Brazil, Russia, India, China and South Africa) own financial institutions was “a disappointment” for activists from the five countries, meeting in this northeastern Brazilian city after the group’s leaders concluded their sixth annual summit here.

The New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), launched Tuesday Jul. 15 at the summit in the northeastern Brazilian city of Fortaleza, represent progress “from United States unilateralism to multilateralism,” said Graciela Rodriguez, of the Brazilian Network for the Integration of Peoples (REBRIP).

But “the opportunity for real reform was lost,” she complained to IPS at the International Seminar on the BRICS Bank, held in this city Wednesday and Thursday Jul. 16-17 as a forum for civil society organisations in parallel to the sixth summit.

The format announced for the NDB “does not meet our needs,” she said.

The NDB will promote “a new kind of development" only if its loans are made conditional on the adoption of low-polluting technologies and are guided by the Millennium Development Goals and their successors, the Sustainable Development Goals. -- Carlos Cosendey, international relations secretary at the Brazilian foreign ministry
The bank’s goal is to finance infrastructure and sustainable development in the BRICS and other countries of the developing South, with an initial capital investment of 50 billion dollars, to be expanded through the acquisition of additional resources.

“We want an international system that serves the majority, not just the seven most powerful countries (the Group of Seven),” that does not depend on the dollar and that has an international arbitration tribunal for financial controversies, said Oscar Ugarteche, an economics researcher at the National Autonomous University of Mexico.

“It is unacceptable that a district court judge in New York should put a country at risk,” he told IPS, referring to the June ruling of the U.S. justice system in favour of holdouts (“vulture funds”) in their dispute with Argentina, which could force another suspension of payments.

“We need international financial law,” similar to existing trade law, and an end to the dominance of the dollar in exchange transactions, which enables serious injustice against nations and persons, like embargoes on payments and income in the United States, he said.

“Existing international institutions do not work,” and the proof of this is that they have still not overcome the effects of the 2008 financial crisis, said the Mexican researcher.

Major powers like the United States and Japan have unsustainable debt and fiscal deficits, yet are not harassed by the International Monetary Fund (IMF), in contrast to the treatment meted out to less powerful nations, particularly in the developing South.

During the seminar, organised by REBRIP and Germany’s Heinrich Böll Foundation, oft-repeated demands were for civil society participation, transparency, environmental standards and consultation with the populations affected by projects financed by the NDB.

These demands have not yet been included in the NDB but may be discussed during its operational design over the next few years, while the group’s parliaments ratify its approval, said Carlos Cosendey, international relations secretary at the Brazilian foreign ministry, in a dialogue with activists.

Participants at one of several panels at the International Seminar on the BRICS Bank, held Jul. 16-17 in Fortaleza, Brazil. Credit: Mario Osava/IPS

Participants at one of several panels at the International Seminar on the BRICS Bank, held Jul. 16-17 in Fortaleza, Brazil. Credit: Mario Osava/IPS

Cosendey said that a disadvantage of the multilateral bank was the need for its regulations not to be confused with infringement of national sovereignty of member states. The political, cultural, legal and ethnic differences between the five countries could pose a major obstacle to the adoption of common criteria, he said.

The NDB can be constructive “if it integrates human rights” into its principles and presents solutions for the social impacts of the projects it finances, said Nondumiso Nsibande, of ActionAid South Africa, an NGO.

“We need roads, other infrastructure and jobs, as well as education, health and housing,” but big projects tend to harm poor communities in the places where they are carried out, she told IPS. It is still not known what levels of transparency and social concern the bank will have, she said.

In the view of Chankrasekhar Chalapurath, an economist at Jawaharlal Nehru University in New Delhi, the NDB will alleviate India’s great needs for infrastructure, energy, long distance transport and ports. However, he does not expect it to make large investments in one key service for Indians: sanitation.

Having an Indian as the bank’s first president, as the five leaders have decided, will help attract more investments, but he said people’s access to water must remain a priority.

Cosenday said the NDB will promote “a new kind of development.”

But Chalapurath told IPS that this will only happen if its loans are made conditional on the adoption of low-polluting technologies and are guided by the Millennium Development Goals and their successors, the Sustainable Development Goals, as well as human rights and other best practices.

Adopting democratic processes within the bank will facilitate dialogue with social movements, parliaments and society in general, he said.

Incorporating environmental issues and gender parity is also essential, said Ugarteche and Rodriguez, who regards this as necessary in order to make progress towards “environmental justice.”

Not only roads and ports need to be built; even more important is the “social infrastructure” that includes sanitation, water, health and education, said Rodriguez, the coordinator of the REBRIP working group on International Economic Architecture.

Mobilising resistance to large projects that affect local populations in the places they are constructed will be part of the response to the probable priority placed by the NDB on financing physical infrastructure projects, she announced.

The social organisations gathered in Fortaleza, with representatives from Brazil, India, China, South Africa and other countries that are not members of the group, are preparing to coordinate actions to influence the way the bank and its policies are designed, and to monitor its operations and the actions of the BRICS group itself.

Brazilian economist Ademar Mineiro, also of REBRIP, said there was potential for national societies to influence the format and policies of the NDB, and time for them to organise and mobilise. “It is an unprecedented opportunity,” he told IPS.

Russia did not originally support the BRICS bank, preferring private funding. But Mineiro said its position changed after the United States and the European Union involved multilateral financial institutions like the World Bank in sanctions against Moscow for its annexation of Crimea, a part of Ukraine.

BRICS evolved “from the economic to the political,” with its members demanding more power in the international system. The alliance is one of the pillars of the Chinese strategy to conquer greater influence, including in the West, said Cui Shoujun, a professor at the School of International Studies of Renmin University in China.

“The BRICS need China more than the other way round,” he told IPS, adding that the Chinese economy is 20 times larger than South Africa’s and four times larger than those of India and Russia.

As well as seeking natural resources from other countries, among the reasons why China has joined and supports BRICS is strengthening the legitimacy in power of the Communist Party through internal stability and prosperity, the academic said.


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BRICS Forges Ahead With Two New Power Drivers – India and China Thu, 17 Jul 2014 18:07:51 +0000 Shastri Ramachandaran By Shastri Ramachandaran
NEW DELHI, Jul 17 2014 (IPS)

The Sixth BRICS Summit which ended Wednesday in Fortaleza, Brazil, attracted more attention than any other such gathering in the alliance’s short history, and not just from its own members – Brazil, Russia, India, China and South Africa.

Two external groups defined by divergent interests closely watched proceedings: on the one hand, emerging economies and developing countries, and on the other, a group comprising the United States, Japan and other Western countries thriving on the Washington Consensus and the Bretton Woods twins (the World Bank and the International Monetary Fund).

The first group wanted BRICS to succeed in taking its first big steps towards a more democratic global order where international institutions can be reshaped to become more equitable and representative of the world’s majority. The second group has routinely inspired obituaries of BRICS and gambled on the hope that India-China rivalry would stall the BRICS alliance from turning words into deeds.The stature, power, force and credibility of BRICS depend on its internal cohesion and harmony and this, in turn, revolves almost wholly on the state of relations between India and China. If India and China join hands, speak in one voice and march together, then BRICS has a greater chance of its agenda succeeding in the international system.

In the event, the outcome of the three-day BRICS Summit must be a disappointment to the latter group. First, the obituaries were belied as being premature, if not unwarranted. Second, as its more sophisticated opponents have been “advising”, BRICS did not stick to an economic agenda; instead, there emerged a ringing political declaration that would resonate in the world’s trouble spots from Gaza and Syria to Iraq and Afghanistan.

Third, and importantly, far from so-called Indian-China rivalry stalling decisions on the New Development Bank (NDB) and the emergency fund, the Contingency Reserve Arrangement (CRA), the Asian giants grasped the nettle to add a strategic dimension to BRICS.

With a shift in the global economic balance of power towards Asia, the failure of the Washington Consensus and the Bretton Woods twins in spite of conditionalities, structural adjustment programmes and “reforms”, financial meltdown and the collapse of leading banks and financial institutions in the West, there had been an urgent need for new thinking and new instruments for the building of a new order.

Despite the felt need and multilateral meetings that involved developing countries, including China and India which bucked the financial downturn, there had been no sign of alternatives being formed.

It is against this backdrop – of the compelling case for firm and feasible steps towards a new global architecture of financial institutions – that BRICS, after much deliberation, succeeded in agreeing on a bank and an emergency fund.

From India’s viewpoint, this summit of BRICS – which represents one-quarter of the world’s land mass across four continents and 40 percent of the world population with a combined GDP of 24 trillion dollars – was an unqualified success. The success is sweeter for the National Democratic Alliance (NDA) government led by the Bharatiya Janata Party (BJP) because the BRICS summit was new Prime Minister Narendra Modi’s first multilateral engagement.

For a debutant, Modi acquitted himself creditably by steering clear of pitfalls in the multilateral forum as well as in bilateral exchanges – particularly in his talks with Chinese President Xi Jiping, with Russian President Vladimir Putin and with Brazilian President Dilma Rousseff – and by delivering a strong political statement calling for reform of the U.N. Security Council and the IMF.

In fact, the intensification and scaling up of India-China relations by their respective powerful leaders is an important outcome of the meeting in Brazil, even though the dialogue between the Asian giants was on the summit’s side-lines. Nevertheless, Modi and Xi spoke in almost in one voice on global politics and conflict, and on the case for reform of international institutions.

The new leaders of India and China, with the power of their recently-acquired mandates, sent out an unmistakable signal that they have more interests in common that unite them than differences that separate them.

Against this backdrop, Indian Prime Minister Modi’s outing was significant for other reasons, not least because of the rapport he was able to strike up, in his first meeting, with Chinese President Xi. The stature, power, force and credibility of BRICS depend on its internal cohesion and harmony and this, in turn, revolves almost wholly on the state of relations between India and China. If India and China join hands, speak in one voice and march together, then BRICS has a greater chance of its agenda succeeding in the international system.

As it happened, Modi and Xi hit it off, much to the consternation of both the United States and Japan. They spoke of shared interests and common concerns, their resolve to press ahead with the agenda of BRICS and the two went so far as to agree on the need for an early resolution of their boundary issue. They invited each other for a state visit, and Xi went one better by inviting Modi to the Asia-Pacific Economic Cooperation meeting in China in November and asking India to deepen its involvement in the Shanghai Cooperation Organisation (SCO).

Modi’s “fruitful” 80-minute meeting with Xi highlights that the two are inclined to seize the opportunities for mutually beneficial partnerships towards larger economic, political and strategic objectives. This meeting has set the tone for Xi’s visit to India in September.

Although strengthening India-China relationship, opening up new tracks and widening and deepening engagement had been one of former Indian Prime Minister Manmohan Singh’s biggest achievements in 10 years of government (2004-2014), after a certain point there was no new trigger or momentum to the ties. Now Xi and Modi are investing effort to infuse new vitality into the relationship which will have an impact in the region and beyond.

As is the wont when it comes to foreign affairs and national security, Modi’s new government has not deviated from the path charted out by the previous government. BRICS as a foreign policy priority represents both continuity and consistency. Even so, the BJP deserves full marks because it did not treat BRICS and the Brazil summit as something it had to go through with for the sake of form or as a chore handed down by the previous government of Manmohan Singh.

Before leaving for Brazil, Modi stressed the “high importance” he attached to BRICS and left no one in doubt that global politics would be high on its agenda.

He pointed attention to the political dimension of the BRICS Summit as a highly political event taking place “at a time of political turmoil, conflict and humanitarian crises in several parts of the world.”

“I look at the BRICS Summit as an opportunity to discuss with my BRICS partners how we can contribute to international efforts to address regional crises, address security threats and restore a climate of peace and stability in the world,” Modi had said on eve of the summit.

Having struck the right notes that would endear him to the Chinese leadership, Modi hailed Russia as “India’s greatest friend” after he met President Vladimir Putin on the side-lines of the summit.

India belongs to BRICS, and if BRICS is the way to move forward in the world, then BRICS can look to India, along with China, for leading the way, regardless of political change at home. That would appear to be the point made by Modi in his first multilateral appearance.

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BRICS Build New Architecture for Financial Democracy Wed, 16 Jul 2014 20:41:04 +0000 Mario Osava The five BRICS leaders pose for the cameras at the sixth annual summit in the Brazilian city of Fortaleza. Credit: Agência Brasil/EBC

The five BRICS leaders pose for the cameras at the sixth annual summit in the Brazilian city of Fortaleza. Credit: Agência Brasil/EBC

By Mario Osava
FORTALEZA, Brazil, Jul 16 2014 (IPS)

The BRICS alliance (Brazil, Russia, India, China and South Africa) launched the New Development Bank (NDB) and Contingency Reserve Arrangement (CRA) during its sixth summit, institutionalising a new financial architecture for the emerging powers.

Two other agreements, one for Cooperation among Export Credit and Guarantees Agencies and another on Cooperation for Innovation among national development banks, complete the structure established Tuesday Jul. 15 by the five heads of state in the northeastern Brazilian city of Fortaleza.

The BRICS Summit concludes Wednesday with a meeting between the five leaders and the presidents of the Union of South American Nations (UNASUR) held in Brasilia, as well as several bilateral meetings.

The NDB and CRA are not being created “against anyone,” but as a “response to our needs,” said the summit host, Brazilian President Dilma Rousseff, at a press conference after the meeting with Vladimir Putin (Russia), Narendra Modi (India), Xi Jinping (China) and Jacob Zuma (South Africa).

BRICS leaders reject interpretations that the mechanisms have been created in opposition to or as alternatives to the World Bank and the International Monetary Fund (IMF), part of the Bretton Woods global financial system established in the 1940s.

Social inclusion - a voice from India

A key promoter of the New Development Bank and the country that will appoint the first NDB president, India was also the voice of social concerns at the Sixth BRICS Summit.

Prime Minister Narendra Modi said in Fortaleza that fighting poverty should be the main focus of the group, especially through construction of the Sustainable Development Goals which will shape the development agenda after 2015.

Food security is another issue that Modi identified as a priority, as did members of the Indian business community who participted in the BRICS Business Forum on Monday Jul. 14. It is a highly sensitive topic in India, where hundreds of millions of people live in poverty, most of them subsistence farmers in rural areas.

BRICS should not be a centralised, hierarchical institution, but should focus attention on local areas and people, and involve youth, Modi said in his speech at the Summit. He suggested the creation of a Young Scientists’ Forum and a BRICS university, using the internet for intensive contact between students in the five countries.

The uniqueness of BRICS, he said, is that “for the first time” it brings together a group of nations on the basis of “future potential,” rather than existing characteristics. This “forward looking” idea creates fresh perspectives and institutional changes for a more stable world, overcoming present economic conflicts and turbulence, Modi said.

The theme of the BRICS Summit is “Inclusive growth: sustainable solutions.”

Chinese President Xi Jinping said his country, which is the major trading partner of 128 nations, seeks “win-win” cooperation to promote better world economic governance.

Africa is in urgent need of “inclusive and dynamic growth,” said Jacob Zuma, the president of South Africa, while Russian President Vladimir Putin proposed the formation of a BRICS Energy Association, with a fuel reserve bank to ensure the energy security of its member states.

The NDB will complement existing multilateral and regional financial institutions, whose lack of resources constrain financing of infrastructure projects in developing countries, according to the summit’s final declaration, signed by the participating heads of state.

The CRA, a mechanism through which the five countries make available a total of 100 billion dollars from their reserves, is a currency pool that provides financial security for its members, without departing from the IMF, summit speakers said.

If one of the BRICS countries wishes to borrow more than 30 percent of the sum it is entitled to, in order to overcome threats to its balance of payments, it will have to face questions from the IMF about conditions of payment, said the Brazilian finance minister, Guido Mántega.

Brazil, Russia and India can withdraw up to the value of their contributions of 18 billion dollars each. South Africa may take out twice the five billion dollars it will contribute to the mechanism, and China up to half its 41 billion dollar commitment.

The new institutions “consolidate” the BRICS alliance, Mántega said. Before they become operational, they must be ratified by the countries’ parliaments, he said.

The bank and the reserve fund are so constituted as to prevent aspirations of dominance, Rousseff said. The countries will have equal shares in the NDB, of 10 billion dollars each, and equal voting rights. The capital may later be doubled.

Bank presidents and its governing councils will be appointed on a rotating basis.

China will contribute 41 percent of CRA funds but decisions will be taken by a broader majority, reaching consensus for the negotiation of larger loans, Mántega said.

But the NBD headquarters will be located in the Chinese city of Shanghai, and it will be difficult to avoid the economic and monetary weight of the Asian power from translating into greater decision-making power for Beijing.

The NDB’s composition avoids inequalities at the outset, but equal participation is only a formality as “in practice the future trend will be towards greater Chinese influence,” according to Carlos Langoni, former president of the Brazilian Central Bank.

To be effective, the bank will have to increase its initial capital of 50 billion dollars, recruiting new financing resources, and in this as well as in crises the “dominant role” of the country offering most capital and guarantees is an influential factor, added Langoni, who is the present director of the World Economics Centre at the Getulio Vargas Foundation.

China is interested in diversifying its investments, in multilateral and regional institutions as well as bilaterally. In recent years it has become the largest investor in Latin America.

It already participates in several regional financial mechanisms, such as the Chiang Mai Initiative, similar to the CRA and involving countries of the Association of Southeast Asian Nations, and it is seeking to establish the Asian Infrastructure Investment Bank, as an alternative to the Asian Development Bank in which Japan has decisive influence.

Langoni believes that the BRICS, with the CRA resting on “mega-economies” with their enormous currency reserves, will in the long term be able to “grow faster and have more weight than the IMF, which is already facing difficulties raising funds because of its rules.”

However, the IMF will remain the most powerful multilateral financial body over the next decade, he said.

The rise of the BRICS reflects a multipolar world, as the alliance includes military powers like Russia and China, nuclear powers like both these countries and India, and “moderators” without military ambitions like Brazil and South Africa.

Progress in strengthening and institutionalising the group at its Fortaleza summit could help reduce border tensions existing between China and India, or between Russia and the West, Langoni said.

In his view, what cements the group is its “frustration over the action of multilateral bodies, particularly the IMF,” in the face of the financial crises. These institutions are very complex and made up of a large number of countries.

The BRICS countries can operate with greater ease with their own financial instruments, which can also supply their urgent needs for investment in infrastructure, especially in Brazil and India, he argued.

The BRICS “found their identity” by working with the Group of Twenty (G20) industrial and emerging countries to defend the stimulation of growth, rather than recession-inducing austerity, after the 2008 global financial crisis, Mántega pointed out. Later they came to demand reform of the IMF, which spearheaded response to the crisis.

Some reforms to grant emerging countries greater participation in IMF decision-making were approved by the G20, but then stalled because they were rejected in the U.S. Congress.

The IMF is regarded as extremely undemocratic, because the United States has power of veto and some countries of the industrial North have a majority of votes, in contradiction with the present correlation of economic forces and the weight of emerging powers.

The absence of reforms “negatively impacts on the IMF’s legitimacy, credibility and effectiveness.” The reforms must lead to the “modernisation of its governance structure so as to better reflect the increasing weight of emerging markets and developing countries (EMDCs),” says the Fortaleza Declaration, signed by the five BRICS leaders.

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Russia Hoping Cuba Can Help Spur Trade with Latin America Wed, 16 Jul 2014 16:20:51 +0000 Peter J. Marzalik By Peter J. Marzalik
MOSCOW, Jul 16 2014 (EurasiaNet)

Amid deteriorating relations with the West, Russian President Vladimir Putin is looking to diversify a Russian economy that is tightly linked to European markets. Fittingly, an old Soviet-era satellite state seems eager to lend a helping hand.

Emilio Lozada, Cuba’s ambassador to Russia, led a trade delegation in June to Kazan, the capital of Tatarstan, a resource-rich republic located 500 miles east of Moscow on the Volga River. Garcia met with Tatarstan’s chief executive, Rustam Minnikhanov, to discuss Cuba’s efforts to emulate the “Tatarstan model,” which has seen the autonomous republic emerge as one of Russia’s most prosperous regions during the post-Soviet era.The diversification push stands to make Russia less vulnerable to economic pressure, especially sanctions exerted by the United States and European Union in response to the ongoing crisis in Ukraine.

Lozada explained that Cuban officials, in studying Tatarstan’s economic experiences over the past few decades, seek to “find many useful things for ourselves,” the Tatar-Inform news agency reported.

Cuba by no means represents an alternative to Europe, but the Kremlin is still very interested in encouraging Cuban trade. In late May, prior to the Cuban delegation’s trip to Tatarstan, two major Russian energy companies, Rosneft and Zarubezhnetf, signed joint exploration agreements with the Cuban energy concern, Cupet.

Underscored by its recent gas deal with China, Russia is intent on reorienting trade away from Europe. Toward this end, the Kremlin hopes an expansion of commerce with Cuba could act like a wedge, opening broader ties with Latin American states.

The diversification push stands to make Russia less vulnerable to economic pressure, especially sanctions exerted by the United States and European Union in response to the ongoing crisis in Ukraine. Annual trade turnover between Russia and Latin America stood at 16.2 billion dollars in 2012, according to International Monetary Fund data.

The Kremlin’s revived interest in Latin America was also evident in Foreign Minister Sergei Lavrov’s recent tour of the region. Lavrov sought to bolster relations with old allies, such as Cuba and Nicaragua, as well as woo traditionally anti-Communist states, especially Chile and Peru.

During their Kazan meeting, Lozada and Minnikhanov discussed ways Tatar businesses in the oil, pharmaceutical, and tourism sectors could help bolster economic development in Cuba.

“I think that this is a very useful undertaking. These contacts were started [back in the Soviet era], and now they need to be restored, to work actively with Cuba; through it they can access all of Latin America,” Shamil Ageev, the chairman of Tatarstan’s Chamber of Commerce, asserted.

While many Russian regions are struggling, Tatarstan has comparatively thrived over the past two decades. The republic produces 32 million tons of oil per year and possesses reserves estimated at more than one billion tonnes. In addition, Tatarstan hosts the Kamaz truck factory, the Kazan helicopter plant, and Tupolev aviation production facilities.

Cuba’s ties to Tatarstan date back to the early 1990s, a time known among Cubans as the special period, when the island’s economy imploded due to the Soviet Union’s collapse and cut-off of aid from Moscow.

“We will never forget that late in the 90s, when our country experienced serious difficulties, Tatarstan opened an economic representation in Cuba,” Ambassador Lozada said in Kazan.

“Cooperation between Russia and Cuba are getting stronger and diverse ties between Tatarstan and Cuba develop within its framework. We are your friends and Tatarstan is open for you,” Mintimer Shaimiev, the former long-time Tatar president who now serves as a senior advisor to the autonomous republic’s government, was quoted as telling the visiting Cuban delegation.

Editor’s note:  Peter J. Marzalik is an independent analyst of Islamic affairs in the Russian Federation. This story originally appeared on

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Big Business Opportunities Seduce BRICS Entrepreneurs Tue, 15 Jul 2014 20:49:23 +0000 Mario Osava Brazilian officials at an information meeting prior to the Sixth BRICS Summit. Credit: Agência Brasil/EBC

Brazilian officials at an information meeting prior to the Sixth BRICS Summit. Credit: Agência Brasil/EBC

By Mario Osava
FORTALEZA, Brazil, Jul 15 2014 (IPS)

The growing vitality of the group of countries made up of Brazil, Russia, India, China and South Africa (BRICS), which is beginning to formalise its institutions even as it tries to bridge very disparate realities, seems to be partly cemented by increasing links between its companies.

The complementary nature of their economies was highlighted at the BRICS Business Forum on Monday Jul. 14, one of the meetings prior to the sixth annual summit of the five leaders, inaugurated Tuesday Jul. 15 in the northeastern city of Fortaleza and closing on Wednesday in Brasilia.Trade between the five countries has multiplied 10-fold between 2002 and 2012, reaching 276 billion dollars.

More than 700 members of the business community participated in the entrepreneurial debates, designed to promote 3.9 billion dollars worth of contracts in the sectors of agriculture, infrastructure, logistics, information technology, health and energy.

The Business Forum of the BRICS group of emerging powers began its work five years ago.

There is “an immense complementarity” among BRICS members, which can be appropriately used to greatly benefit all its countries, said Marcos Jank, head of corporate affairs at BRF, a Brazilian transnational and leading meats exporter.

“China has an enormous market and Brazil has vast reserves of natural resources,” with a lot of productive land to supply large populations, he said.

This is one way of looking at what many criticise as unbalanced trade, in which Brazil exports virtually exclusively commodities, especially soya and iron ore, and imports mainly manufactured goods from China.

But integration of production chains and higher added value in exports can happen even in the agriculture and livestock business, Jank said. Instead of importing soya to feed its meat production, China could import the meat from Brazil, he said.

A major hurdle to the growth of trade and productive integration between the BRICS countries are barriers of all kinds, tariff and non-tariff, technical, subsidies and other protectionist measures that affect trade, particularly in agricultural products, Jank complained.

India has prohibitive tariffs of up to 100 percent on Brazilian chicken, while South Africa “is closed” and Russia is a “volatile” market, opening and closing in rapid succession for Brazilian meats, he said.

Nevertheless, trade between the five countries has multiplied 10-fold between 2002 and 2012, reaching 276 billion dollars, according to the World Trade Organisation. The share of the BRICS group in global trade has doubled from eight to 16 percent between 2001 and 2011.

Two new instruments that will be formally created at the Summit contradict views that the group had little chance of integration because of its political and historical differences, disparate levels of development and even commercial strategies.

These are the New Development Bank (NDB) and the Contingency Reserve Arrangement (CRA), a common fund to combat financial crises.

The progress seen in only a few years, since the BRIC acronym was coined in an analysis of emerging economies by an economist at a U.S. bank, contrasts with the stagnation of other coalitions, like the IBSA Dialogue Forum involving India, Brazil and South Africa, which interrupted its summit meetings in 2011.

“What unites the emerging BRICS countries is power,” according to Narinder Wadhwa, executive director of SKI Capital Services, in India.

Jointly, the BRICS have 46 percent of the world’s population and 26 percent of its land mass. The BRICS countries’ combined gross domestic product, based on purchaing power parity (PPP), is greater than that of the U.S. or the European Union, “so it is natural that they should demand greater participation in decision-making bodies,” he told IPS.

This seems to have fuelled the group’s high rate of progress since its first summit was held in 2009.

Another factor accelerating integration is the potential for exchange of trade and investments in these large countries with a combined population of nearly three billion people, where numbers of middle class consumers have grown rapidly in recent decades.

For this reason, Wadhwa says he is “optimistic” about the future of what many people are already calling a “bloc,” although no treaties have been signed that would justify the term and its governments are reluctant to be considered as such.

But realising this potential calls for pragmatism, said Sergy Katyrin, president of the BRICS Business Council in Russia, and Rubens de La Rosa, of Brazil’s BRICS Business Council and executive director of Marco Polo, a Brazilian transnational company that produces large vehicles, especially buses.

Africa is a new frontier for global trade and investment, with consumption growing rapidly in the middle population sectors, the president of the African Business Council, Patrice Motsepe, told IPS.

Motsepe, a mining magnate regarded as the first black South African billionaire, chaired a report on the business potential of the five countries that underscored Africa’s high potential.

According to the African Development Bank, trade between the continent and BRICS reached 340 billion dollars in 2012 and is expected to rise to 500 billion dollars in 2015. Sixty percent of this trade is with China.

Each national chapter of the Business Council is made up of 25 business people, who have set up five working groups to study potential joint business enterprises in infrastructure, financial services, manufacturing, energy and capacity development.

Much still remains to be done to increase economic integration between the BRICS countries, which were formerly practically unknown to each other, these business leaders said.

De la Rosa said that among the proposals to be made to heads of government in Fortaleza was promoting trade in national currencies, because this would “reduce the cost of transactions” and could favour trade and investments.

Facilitating visas for business trips, harmonising technical standards, intensifying communication between companies in the different countries and overcoming barriers, including red tape, will be some of the other recommendations made by Robson Andrade, the president of the Brazilian National Confederation of Industry (CNI) which organised the Business Forum in Brazil.

The main concern of Brazilian industrialists is the trade deficit of Brazil with its partners, which amounted to 101 billion dollars in 2013, equivalent to 21 percent of Brazilian trade.

More than 70 percent of Brazilian exports to China, India, Russia and South Africa are soya, iron ore and oil, while in the opposite direction 95 percent of what Brazil imports from these countries are manufactured goods, according to CNI.

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New BRICS Monetary Fund May Reproduce Inequalities Sat, 12 Jul 2014 00:11:13 +0000 Mario Osava Mega-projects like the Itaipú hydropower station shared by Brazil and Paraguay could in future be financed by the new fund and new bank to be launched by BRICS leaders in the Brazilian city of Fortaleza. Credit: Mario Osava/IPS

Mega-projects like the Itaipú hydropower station shared by Brazil and Paraguay could in future be financed by the new fund and new bank to be launched by BRICS leaders in the Brazilian city of Fortaleza. Credit: Mario Osava/IPS

By Mario Osava
FORTALEZA, Brazil, Jul 12 2014 (IPS)

The first common institutions to be set up by Brazil, Russia, India, China and South Africa – the BRICS – are financial, and have arisen as a result of reforms to an international system that continues to largely ignore the growing influence of emerging countries.

But the Contingency Reserve Arrangement (CRA), the BRICS countries’ monetary fund, will also be unbalanced in the composition of its resources, leading to the possible reproduction of these inequalities. The cement that binds the BRICS together is their aspiration to wield more power in international economic bodies.

The CRA and a development bank will be formally established at the Sixth BRICS Summit, to be held in Brazil on Tuesday Jul. 15 in the northeastern city of Fortaleza and on Wednesday Jul. 16 in Brasilia. On Monday, preparatory meetings will take place between ministers, members of the business community and the group’s central banks.

The reserve fund will have 100 billion dollars to come to the rescue of any of its members suffering an exchange crisis. China would contribute 41 percent of the total, South Africa – the smallest partner – five percent, and the other countries 18 percent each.

These percentages reflect the size of each country’s economy. However, participation in the New Development Bank (NDB), the other instrument that will be established at the summit, will be on the basis of equal shares: 10 billion dollars each and equal voting rights for each member.

This is the big difference between the NDB and the World Bank, of which it is a reflection. “The NDB is democratic,” Christopher Wood, a researcher for the South African Institute of International Affairs in Johannesburg, told IPS.

This aspect of the NDB is also very different from the CRA, where China, as the largest country, “will probably have a disproportionate influence,” but it is hoped that the design of the institution will prevent it from being overly one-sided, Wood said.

Negotiations have been under way to create the development bank and the monetary mechanism since 2012, and now only a legal review is required before they are signed by the five BRICS leaders in Fortaleza, announced José Alfredo Graça Lima, the undersecretary- general for political affairs at the Brazilian foreign ministry.

BRIC, an acronym coined in 2001 by U.S. economist Jim O’Neill for the four emerging powers that are changing the shape of the world, began to hold meetings of heads of state and government in 2009, forming “a coalition” that was joined by South Africa in 2011.

“It is not a bloc” that adopts common policies for trade and other sectors, Brazilian diplomats said in response to critical observations about the discrepancies between the countries in different economic or political international forums.

The huge countries, or “whale-economies,” are getting to know each other and have expanded their dialogue. They have “a positive role in democratising international relations,” Graça Lima said.

Cooperation between the five countries is already ongoing in more than 30 areas, and their societies are also interacting through business and academic forums and other means, said Flavio Damico, the head of the Brazilian foreign ministry’s department of inter-regional mechanisms.

But the cement that binds the BRICS together is their aspiration to wield more power in international economic bodies. “The structure of power and privileges” of the global financial and political system “has remained set in stone” since 1945, and will have to change “to adjust to present reality,” he said.

The blocking of a proposed reform of the International Monetary Fund (IMF) in the U.S. Congress spurred the BRICS countries to make headway with their own solutions. The CRA will probably “not substantially change the world economic order in the short term, but it certainly could erode the centrality of the IMF in the long run,” said Wood.

The CRA is being formed in the context of persistent after-effects of the 2008 financial crisis and the “systemic imbalances in the global economy, perpetuated by the monetary policies of advanced economies, such as the United States and the European Union,” Vivan Sharan, an expert on BRICS with the Observer Research Foundation in India, told IPS.

With the “monetary safety net,” BRICS will be signalling “lesser levels of dependence on Bretton Woods institutions such as the IMF, which urgently requires structural and governance reform,” he said. But the group is not aiming at “a recalibration of the global economic order,” he said.

Brazilian economist Fernando Cardim, professor emeritus of economics at the Federal University of Rio de Janeiro, doubts the CRA will be successful. Its resources will be too few, as its entire funds would not even be able to protect Brazil alone from mass capital flight, he argued.

Moreover, it will not necessarily prevent potential intra-BRICS strife, as China will have decisive powers “similar to or even greater than those of the United States over the IMF,” and is likely to wield power with less subtlety, he said.

But the BRICS institutions are not seeking to substitute for or confront the IMF or the World Bank. The CRA’s goal is to “complement” them, as “an additional line of defence” for the five countries, which are not facing balance of payment difficulties, according to Graça Lima.

The IMF’s resources total 937 billion dollars, more than nine times the value of CRA funds, and it will continue to play a key role for the CRA itself and other monetary mechanisms created to combat financial crises, Wood said.

In the Chiang Mai Initiative, a similar mechanism adopted by the Association of Southeast Asian Nations after the region’s 1997-1998 crisis, and which is backed by China, South Korea and Japan, countries must first request IMF assistance if they wish to draw a large loan from the funding pool, said Wood.

The NDB, already known as the BRICS Development Bank, is less controversial, although it has drawn criticism from social and environmental activists. The plan is for it to begin financing infrastructure and sustainable development projects in two years’ time, after obtaining parliamentary approval from member countries.

Its starting capital of 50 billion dollars is limited in comparison with the needs of BRICS members and other developing countries that could benefit from loans and even join the bank. It is less than the amount loaned annually by Brazil’s National Bank for Economic and Social Development (BNDES).

The Indian government, for instance, estimates that one trillion dollars are needed for financing domestic infrastructure projects over the next five years, around half of which is to come from the private sector.

However, new sources of funding are important because Indian infrastructure projects are facing serious liquidity challenges, as they are over-dependent on banking sector finance due to “the non-existence of a robust corporate bond market,” said Sharan in New Delhi.

“South Africa has a lot to gain,” as the NDB will focus on large infrastructure projects, a common problem amongst all the BRICS, and can offer long-term financing which is often difficult to obtain, particularly from the private sector, Wood said.It will also support project preparation, like surveying work, which often needs to be done before financing for the project can be accessed.

The NDB is authorised to double its funds, but its key importance is that co-financing projects acts as a catalyst, by reducing the risk and cost burden for other lenders and so attracting resources from private investors and national and multilateral development banks around the world, according to Wood and the Brazilian diplomats.

With additional reporting from Ranjit Devraj in New Delhi and Brendon Bosworth in Johannesburg.

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Violence Casts Shadow Over ‘Himalayan Viagra’ Harvest in Nepal Fri, 27 Jun 2014 11:39:44 +0000 Naresh Newar Hundreds of thousands of harvesters flock to high-altitude pastures in Nepal to gather a fungus known as ‘Himalayan Viagra’. Credit: Uttam Babu Shrestha

Hundreds of thousands of harvesters flock to high-altitude pastures in Nepal to gather a fungus known as ‘Himalayan Viagra’. Credit: Uttam Babu Shrestha

By Naresh Newar
KATHMANDU, Jun 27 2014 (IPS)

Intense competition during harvest season for a fungus dubbed ‘Himalayan Viagra’ – coveted for its legendary aphrodisiac qualities – has sparked violence in Nepal’s remote western mountains, causing concern among security officials here about the safety of more than 100,000 harvesters.

“The violence has already begun even at the initial stage of the harvest, and we can expect more,” Nepal Police Divisional Inspector General Kesh Bahadur Shahi, head of the Midwestern Development Region headquarters in Surkhet District, 600 km west of the capital Kathmandu, told IPS.

Earlier this month a harvester named Phurwa Tshering (30) was killed in a violent tussle in the Dolpa District, northeast of Surkhet, where tens of thousands of harvesters gather each year.

A second harvester, Thundup Lama, died some days later in a Kathmandu hospital from injuries sustained in the scuffle, amid allegations of police misconduct.

Known among the scientific community as ophiocordyceps sinensis – though harvesters refer to it simply as ‘caterpillar fungus’, and Tibetan traders use the name ‘yartsa gunbu’ (meaning, literally, ‘winter worm, summer grass’) – the fungus germinates underground inside living larvae, mummifies them during the winter, and then emerges through the head of the dead caterpillar, pushing up through the soil in the form of a stalk-like mushroom.

For over 2,000 years people across the Asiatic region have sought this fungus for its healing properties, including its fabled ability to treat diseases of the kidney and lungs, as well as cure erectile dysfunction.

A harvester holds up a single piece of ‘Yartsa Gunbu’, otherwise known as ‘winter worm, summer grass.’ Credit: Uttam Babu Shrestha

A harvester holds up a single piece of ‘Yartsa Gunbu’, otherwise known as ‘winter worm, summer grass.’ Credit: Uttam Babu Shrestha

Since 2001, when the Nepali government legalised harvesting of the fungus, the mountains have become the site of a veritable battle royal.

Lured by the promise of high profits harvesters flock to the Himalayas every June to participate in the two-month hunt for the prized fungus, setting up camp on the northern alpine grasslands of Nepal, Bhutan, India and the Tibetan Plateau, at altitudes of between 3,000 and 5,000 metres above sea-level.

Though each stalk measures no more than four centimeters in length, a single gram of yartsa gunbu can sell for up to 80 dollars (mostly in China), making the dangerous, high-altitude hunt more than worth it for thousands of impoverished farmers.

But because the substance is so rare and so valuable, the collection period often turns deadly. So far, no one has been held accountable for the deaths, and Nepal’s police force has denied allegations of wrongdoing.

Unsatisfied with officials’ assurances, the National Human Rights Commission (NHRC) recently deployed an investigation team to the Dolpa district, which borders Tibet.

“Our team has headed for field investigations to the site where the incident occurred and we will also speak to the Nepal police to uncover the truth,” Bed Prasad Adhikari, secretary of the NHRC, told IPS.

“We need to wait until the investigation is concluded, and only then will NHRC reveal the truth to the public,” he added.

In 2011 a local court sentenced six men to life in prison for the murder of seven of their harvest rivals.

While Nepali security officials scramble to patrol some of the world’s roughest terrain, ecology experts warn of over-harvesting and the need for sustainable practices that could support local economies and end the cycle of violence.

Stepping up security

“There is an urgent need for sustainable harvesting practices and an equitable benefit-sharing mechanism with the local people." -- Yam Bahadur Thapa, director general of the Department of Plant Resources (DoPR) at Nepal’s ministry of forests and soil conservation
The police are expecting more violence as the season enters its third week, and have already dispatched 160 personnel attached to the Armed Police Force (APF) – a paramilitary set up during Nepal’s decade-long civil war – to patrol harvesting sites, including the northern Mugu and Dolpa districts.

“We have asked for more personnel from the Nepal police to support our security operation,” Shahi said.

Speaking to IPS in Kathmandu, Police Spokesperson and Senior Superintendent of Police Ganesh KC told IPS this is the first time armed personnel have been deployed to oversee the harvest, and they are facing challenges due to the huge radius of the harvesting zone, and the extremely difficult terrain.

The Dolpa District alone – home to 24 pastures rich in the caterpillar fungus – spans nearly 8,000 square km.

To make matters worse, commercial traders and so-called ‘cartels’ have now joined the fray.

“There is a mafia of traders from Kathmandu and other adjoining Nepali districts near the Chinese border who are involved in the scheme, and they come with huge stacks of cash and will not return empty-handed,” Shahi said. “Some traders even bring helicopters to buy as much as they can.”

From policing to long-term policies

Various studies suggest that China’s booming economy, which has fueled demand for the ‘winter worm, summer grass’, has created a global market for the fungus that touches 11 billion dollars a year.

Nepal currently meets two percent of the global demand for the precious fungus, making it the world’s second largest supplier.

But as demand outpaces supply, and a valuable natural resource is plundered away annually, tensions over access rights have been mounting.

“There is loss of social integrity among local people; there are cases of robbery and deaths as a result [of this harvest],” Yam Bahadur Thapa, director general of the Department of Plant Resources (DoPR) at Nepal’s ministry of forests and soil conservation, told IPS.

“There is an urgent need for sustainable harvesting practices and an equitable benefit-sharing mechanism with the local people,” he noted, adding that the presence of outsiders often exacerbates tensions.

Thapa said the number of harvesters has doubled since 2001, while the number of units collected per person has declined drastically, from 260 pieces of fungus per person in 2006 to less than 125 now.

In addition, he asserted, “The price difference between the local and international market is huge, leading to an inequitable share of income among the primary collectors.”

For instance, a kilogram of fungus sold for 25,000 dollars by a middleman in Nepal could sell for up to 70,000 dollars once it is shipped abroad, he said.

A DoPR draft policy for caterpillar fungus harvest management submitted in April to the prime minister’s cabinet is still awaiting approval. The policy proposes regulating trade to increase government revenue, investing in scientific research, strengthening local institutions and raising awareness among the locals.

“There is no single inch of habitat left untouched…at the end of the harvesting season,” Uttam Babu Shrestha, a research fellow at the Institute of Agriculture and the Environment at the University of Southern Queensland in Australia, told IPS.

His research during the 2011 harvest season in Nepal showed that, “Virtually all harvesters (95.1 percent) believe the availability of the caterpillar fungus in the pastures to be declining, and 67 percent consider current harvesting practices to be unsustainable.”

Shrestha found per capita harvesting to be higher in Nepal than in other countries, which adds to the tension. “Nepal’s harvesters and traders are doing business in a fearful environment,” he said, echoing the concerns of law enforcement officials.

Better central regulation would not only enhance sustainability and security, but would also increase government revenue, experts say.

The official royalty rate of around 10,000 Nepali rupees (about 100 dollars) per kilogram was set when Nepal legalised the harvest in 2001.

Since then, “The market price… has increased up to 2,300 percent and yet the royalty rate is the same,” Shrestha said, describing the stagnant rate as a “missed opportunity.”

The International Centre for Integrated Mountain Development (ICIMOD) estimates that the government of Nepal currently earns about 5.1 million rupees from the trade.

Experts say that by paying local harvesters a higher price, the government could witness a substantial increase in revenue flows.

Until the government agrees upon a comprehensive plan, the high-altitude pastures will continue to see fear, violence and destruction in pursuit of the mysterious fungus.


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Argentina Once More on the Map, Invited by BRICS Wed, 18 Jun 2014 18:55:43 +0000 Fabiana Frayssinet “Family photo” at the fifth BRICS Summit, held in 2013 in Durban, South Africa. Credit: Government of South Africa

“Family photo” at the fifth BRICS Summit, held in 2013 in Durban, South Africa. Credit: Government of South Africa

By Fabiana Frayssinet
BUENOS AIRES, Jun 18 2014 (IPS)

As Argentina starts to mend fences with the international financial markets, the emerging powers that make up the BRICS bloc invited it to their next summit. This could be a step towards this country’s reinsertion in the global map, after its ostracism from the credit markets since the late 2001 debt default.

For now, there is no letter “A” in the BRICS acronym, which stands for Brazil, Russia, India, China and South Africa. But in Buenos Aires speculation is rife about whether it should be called BRICSA, ABRICS or BRICAS, if Argentina is admitted.

The invitation for President Cristina Fernández to participate in the group’s sixth summit, scheduled for Jul. 15 in the northeast Brazilian city of Fortaleza, is seen as another sign that Latin America’s third-largest economy may be incorporated, after India, Brazil and South Africa indicated their interest.

“This is very significant for Argentina,” Fernanda Vallejos, an economist at the University of Buenos Aires (UBA), told IPS.

“It not only points to the recognition by the rest of the members of Argentina’s importance and potential, but also opens a door for our country to gain greater political and economic clout on the international stage.”

Vallejos stressed the key role played by BRICS over the last decade in the growth of the global economy at a time of financial crisis in the industrialised North.

The term BRICS was coined for the world’s major emerging markets in 2001 by economist Jim O’Neill of investment bank Goldman Sachs. Together, these countries represent around one-quarter of global GDP, 43 percent of the planet’s population, and 20 percent of global investment.

In addition, as Argentina’s foreign ministry stressed, the five countries account for 45 percent of the world’s labour force, hold over three trillion dollars in combined foreign reserves, and produce two billion tonnes a year of agricultural products.

Vallejos said that in a world where blocs are playing a bigger and bigger role, BRICS has a growing voice in international forums, where the members are “demanding participation in accordance with the weight of their economies.”

“The proposal set forth by India – with which bilateral trade expanded 30 percent in 2013 – and backed by Brazil and South Africa also puts paid to the opposition’s tired complaint about our country supposedly being isolated from the world,” said Vallejos, who is also a researcher at the Energy, Technology and Infrastructure Observatory for Development (OETEC).

The formal invitation to Fernández was issued by Russia, which also thus confirmed its support.

“I think this shows that Argentina is fully inserted in international relations, not ‘isolated from the world’,” Nicolás Tereschuk, a political scientist at UBA, told IPS. “It simply doesn’t toe the line with the policies of the central countries at just any cost or in any circumstances, as it used to do at other times in its history.”

Argentina’s invitation from BRICS came almost simultaneously with the May 28 announcement of an agreement reached by the Fernández administration and the Paris Club, which this country owed 9.7 billion dollars since the default 13 years ago.

Some political sectors here see the public debt contracted by the 1976-1983 military dictatorship as illegitimate. But the centre-left Fernández administration hopes the agreement with the Paris Club will facilitate the renewed flow of international credit and investment.

Economist Diego Coatz said the agreement and other measures adopted by the government such as “improving” its economic data, whose reliability was questioned by the International Monetary Fund (IMF), point to a “shift” by the authorities aimed at “reintegration in the world in financial terms…and at positioning the country better on the international front.”

Coatz, with the research centre of the Argentine Industrial Union – the country’s leading industrial employer federation – said that if Argentina is admitted to the BRICS bloc, “it will once more be seen as an emerging developing country with great potential.”

In addition, incorporation in the bloc would open a new window for external financing, when Argentina is in need of foreign exchange and investment, he said.

At the Fortaleza summit a formal decision could be reached on creating a regional development bank as an alternative to international financial institutions like the IMF, World Bank or Interamerican Development Bank.

The new bank would have a 50 billion dollar fund for financing infrastructure in the bloc’s member countries. It would also establish a joint foreign exchange reserves pool of 100 billion dollars, “which would serve as insurance against the volatility of the markets,” Vallejos said.

“Argentina could access financing at very beneficial rates compared to the heavy interest rates of other international institutions” in order to finance infrastructure for development, she underscored.

“The strengthening of international trade by the possible admission to BRICS means important possibilities for Argentina to make significant progress towards a more developed industrial sector, with insertion in global production chains, the development of strategic sectors and the industrialisation of the countryside,” Vallejos said.

The interest would appear to be mutual.

“The invitation came after the turmoil in emerging markets early this year, after which the ‘establishment’ international financial press talked about a ‘decline’ of BRICS,” Tereschuk said.

In addition, “growth in China is slowing down, India is at a decisive moment, with the dilemma of faster growth or stagnation, and the Brazilian economy is not really flourishing at this time,” the economist said.

So for them and the rest of the members of the bloc, “joining together with a periphery country that makes up the G20 [Group of 20] would seem to be a decision of interest to the BRICS countries,” he said.

The G20 block of leading industrialised and emerging economies “is in somewhat of a crisis itself, because of the crisis that the central countries are still immersed in.”

For that reason, according to Tereschuk, Argentina would be useful to the BRICS so that the voice of their two South American leaders, Argentina and Brazil, “would be heard in unison in the greatest number of places possible.”

The political scientist said Brazil and Argentina have led a “shift to the left with growth, reduction of poverty and inequality in a framework of democracy and greater political, civilian and social rights for their citizens.

“The other members of BRICS cannot offer all of these characteristics combined,” he said.

Vallejos, for her part, stressed Argentina’s role as a supplier of raw materials. “We are an agricultural powerhouse,” she pointed out.

In addition, “Argentina has the world’s second-largest reserves of lithium, one of the biggest reserves of gold – nearly 10,000 tonnes – 500 million tonnes of copper, and 300,000 tonnes of silver, while we are becoming the third-largest global exporter of potassium,” she said.
“We are sitting on the world’s third- largest platform of unconventional fossil fuels. And to that you have to add our technological development, and the development of nuclear energy for peaceful purposes,” she added.
So would it be “BRICAS”, “ABRICS” or “BRICSA”? At any rate, what is at stake is a bit more than deciding on a new acronym.

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Natural Gas – Both Crisis and Solution in Chile Mon, 16 Jun 2014 21:26:03 +0000 Marianela Jarroud Aerial view of the Mejillones Liquefied Natural Gas (GNLM) regasification terminal in northern Chile, the biggest of its kind in Latin America and one of the biggest in the world. Credit: Courtesy of GNLM

Aerial view of the Mejillones Liquefied Natural Gas (GNLM) regasification terminal in northern Chile, the biggest of its kind in Latin America and one of the biggest in the world. Credit: Courtesy of GNLM

By Marianela Jarroud
MEJILLONES, Chile , Jun 16 2014 (IPS)

In April 2004, Argentina began to steadily cut natural gas exports to neighbouring Chile, triggering a major energy crisis and revealing structural problems in this vital sector.

Ten years later, a regasification plant which converts liquefied natural gas (LNG) back to natural gas in the port of Mejillones, 1,400 km north of Santiago, apparently goes a long way towards solving the energy problems in the north of the country, where water is scarce and where the mining industry is concentrated.

President Michelle Bachelet has expressed confidence that, along with renewable energies, natural gas will contribute to the diversification of Chile’s energy mix, and emphasised that “what we do or fail to do now will have consequences in the future.”

On May 14, Bachelet inaugurated an onshore storage tank at the Mejillones Liquefied Natural Gas (GNLM) regasification terminal, the biggest in Latin America and one of the biggest in the world.

French-Belgian power company GDF Suez holds a 63 percent share in the terminal and the rest is owned by the state-owned Corporación del Cobre de Chile (Codelco).

It was Bachelet , during her first term (2006-2010), who laid the first stone for the plant. And in February 2010 she was present to welcome the arrival of the first methane tanker.

Bachelet now inaugurated the huge storage tank with a gross capacity of 187,000 m3. It is a full containment tank with a nickel steel inner tank inside a pre-stressed concrete outer tank.

The CEO of GDF Suez, Gerard Mestrallet, said it was built to the highest safety standards, to withstand seismic activity and tsunamis.

The tank’s 501 elastomeric isolators enable it to withstand the stresses caused by a major earthquake, as well as sophisticated seismic monitoring and protection systems.

The expansion of GNLM involved an additional 200 million dollars, on top of the initial investment of 550 million dollars.

For four years, in the first stage of the project, the BW GDF Suez Brussels was moored on one side of the jetty in the bay and used as a floating storage unit when gas shipments came in.

The land tank’s capacity is equivalent to approximately 110 million m3 of standard natural gas after the regasification process. This is transported to clients, mainly mining companies, through the Nor Andino and GasAtacama pipelines.

It is the company’s clients that pay for importing the gas. The corporations that have signed contracts so far are the Anglo-Australian multinational BHP Billiton, Codelco and Generadora E-CL, a Chilean power company controlled by GDF Suez.

The natural gas storage tank inaugurated by President Michelle Bachelet May 14, to complete the natural gas terminal at Mejillones. Credit: Marianela Jarroud/IPS

The natural gas storage tank inaugurated by President Michelle Bachelet May 14, to complete the natural gas terminal at Mejillones. Credit: Marianela Jarroud/IPS

On May 15, Bachelet – who took office in March – presented her government’s energy agenda, which focuses heavily on clean energy sources as well as the use of LNG to replace diesel fuel and for industrial and household use as well.

The agenda proposes short-term measures to maximise the use of the country’s current electric power generation infrastructure and LNG terminals.

It also includes medium to long-term initiatives aimed at boosting LNG capacity and installing new combined cycle plants fueled with natural gas, “as far as possible with new actors.”

Besides Mejillones, Chile has another LNG terminal, in Quintero bay 154 km north of Santiago, which is owned by London-based BG Group PLC and Chile’s state oil and gas company Empresa Nacional del Petroleo (ENAP).

But the head of the Latin American Observatory on Environmental Conflicts (OLCA), Lucia Cuenca, said the government’s proposal should be looked at with a critical eye.

The country is making the mistake, she told Tierramérica, of not thinking about the high quality natural gas that Bolivia or Argentina could provide, but only about unconventional sources of natural gas. She was referring, for example, to shale gas, which is extracted from underground rocks by hydraulic fracturing or fracking.

“ Chile is preparing to incorporate this kind of gas and that has to be evaluated in a much broader manner,” Cuenca said.

Chile currently imports gas mainly from Trinidad and Tobago and Qatar. But the government will reportedly negotiate supplies of shale gas from the United States.

Cuenca added that, even though LNG emits fewer greenhouse gas emissions, “it’s still a fossil fuel, which means it does produce emissions.”

“LNG is considered a transitional fuel; in other words, it is a little better than coal, but it is not exactly the best option from the standpoint of clean energy,” he added.

In Chile, thermoelectric plants are run on three kinds of fuel: diesel, the most expensive and dirtiest; coal, which is also highly polluting, but abundant and cheap; and gas, which is the least polluting, but costs around 30 percent more than coal.

In 1991, a year after this country returned to democracy after the 1973-1990 military dictatorship of General Augusto Pinochet, the governments of Argentina and Chile signed an economic agreement that established the foundations for gas interconnection between the two countries.

But the late Néstor Kirchner, when he took office as president of Argentina in 2003, prioritised domestic supplies in the face of internal shortages of natural gas, which at the time only covered national demand.

The cuts in exports had a tremendous economic impact on Chile, because power companies were forced to use oil instead, whose international market price had soared.

At the time Argentina cut its gas exports, nearly 90 percent of industries in Santiago were using natural gas from Argentina, which also supplied much of the country’s natural gas pipeline network that serves households.

“The decision reached by Kirchner (2003-2007) was in line with Argentina’s political approach, which will always favour national interests; regardless of who is governing, they are prepared to assume the costs from the standpoint of the international cooperation agenda,” political scientist Francisca Quiroga told Tierramérica.

She said that after Argentina reduced its gas exports to Chile, a debate broke out in which many argued that Chile should not trust Argentina because it was a country that did not live up to its promises. But the political dividends Kirchner reaped outweighed any criticism from abroad, she added.

Quiroga said the question of energy “is a very touchy ideological and strategic issue and is important in debates on domestic policy.”

And in the current regional context, she added, “is it one of the most important issues on the multilateral agenda to address in terms of the challenges of the 21st century.”

In the meantime, Chile is planning the construction of a third LNG terminal in the south-central part of the country, with the participation of the state energy company ENAP.

Cuenca said it is a strategy that serves the large mining corporations that need cheap, abundant energy, because the aim is to offer lower prices on the domestic market.

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China Casts A Long Shadow Over Latin America Tue, 03 Jun 2014 14:03:58 +0000 Jill Richardson Unloading containers in the port of Pecém, Brazil. Credit: Mario Osava/IPS

Unloading containers in the port of Pecém, Brazil. Credit: Mario Osava/IPS

By Jill Richardson
BOSTON, Jun 3 2014 (IPS)

In the past 15 years, China has gone from being a relatively insignificant economic partner in Latin America to the number-one trading partner of some of the largest economies in the region.

In many cases, China has unseated the United States in its own backyard. As a whole, Latin American exports to China have risen massively since 2000, averaging a 23-percent annual export growth rate.

However, this relatively rosy picture obscures the fact that in recent years this rate has dropped precipitously, slowing to a growth rate of just 7.2 percent in 2012. Much of this slowdown can be attributed to falling commodity prices. Despite Latin American exports to China growing in volume, price volatility has allowed for stagnant, or even declining, export values.

[A] recent study concluded that the more a nation trades with China, the more inclined that nation will be to vote in China’s favour at the United Nations.
The Latin American reliance on commodity-based exporting to China has allowed for regional vulnerability to price fluctuations. Over 50 percent of Latin American exports are in just three sectors: copper, iron, and soy. This lack of diversification is problematic, as copper and iron prices have both experienced a double-digit percentage global decline in recent years while global soy prices have also begun stagnating.

Additionally, these three main commodity exports are concentrated in Argentina, Brazil, and Chile, further demonstrating a lack of regional diversification in exporting to China. This lack of diversity in exports as well as exporting nations leaves Latin America as a whole vulnerable to unforeseen future disruptions or trends.

Conversely, Chinese exports to Latin America are growing in both volume and valuation, owing mostly to the diversity and relatively high-skilled nature of the exported goods. The majority of Chinese exports to Latin America are in the manufacturing sector, with a heavy emphasis on electronics and vehicles. Such industries, compared to raw materials, are much less prone to price volatility, thus preserving much of the overall value of Chinese exports.

The impact of these trends is that since 2011, a growing Latin American trade deficit in goods has opened up with China. Despite the fact that the volume of exports to China is increasing, the fundamental nature of Latin American exports is undermining growth and creating an impending balance-of-payments problem. As long as commodity price values remain on a downswing, this trend will continue through 2014.

As China continues to overtake the United States as the key trading partner of the region as a whole, U.S. influence may decline in Latin America.

A heavier reliance on Chinese demand for commodity exports will likely drive many Latin American foreign policy moves in the near future. Already China has used its economic leverage in the region to diminish the political influence of Taiwan in Latin America.

Chinese nationalists view the tiny island nation as a rebellious extension of the mainland, and consequently many Chinese leaders seek to circumscribe any international support for an independent Taiwan. Should the issue ever reach the United Nations or World Court, China has already locked down support from nearly every country in the Latin American region.

Some of Latin America’s traditionally leftist countries are cozying up to China for political reasons (viewing China as an alternative to the hegemony of the United States), and perhaps more significantly, for economic reasons.

Oil-producing nations such as Venezuela, Brazil, and Ecuador are hugely dependent on and influenced by their economic ties to China and, as a result, tend to follow China’s lead on the international diplomatic stage.

Indeed, one recent study concluded that the more a nation trades with China, the more inclined that nation will be to vote in China’s favour at the United Nations. That will place limits on international scrutiny of the Chinese human rights record, and it could mean a boon for proxy powers in world conflicts supported by China as opposed to the United States.

Ultimately, as China continues its expansion of political and economic influence in Latin America, the United States may find itself less and less at home in what Washington once considered “America’s Backyard.”


Jill Richardson is the Communications Fellow for Boston University’s Global Economic Governance Initiative and a contributor to Foreign Policy In Focus. She is currently working on her Master’s Degree in International Relations and Communications. This article originally appeared on Foreign Policy in Focus.

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Pakistan’s Coal Rush: A Bubble Waiting to Burst Sun, 01 Jun 2014 02:43:08 +0000 Farrukh Zaman and Chaitanya Kumar Estimates suggest that Pakistan can generate around 1,1000 megawatts of electricity through solar and wind sources. Credit: WWF-Pakistan

Estimates suggest that Pakistan can generate around 1,1000 megawatts of electricity through solar and wind sources. Credit: WWF-Pakistan

By Farrukh Zaman and Chaitanya Kumar

Mukhtar Ali is one of the many Pakistanis who are furious at politicians and authorities for failing to provide citizens with a regular supply of electricity during the smouldering summer months.

Life for the 42-year-old shopkeeper in Karachi, Pakistan’s financial hub, becomes especially unbearable when his business suffers due to load-shedding (rolling power cuts), or when he tries to sleep at night without a fan to cool him.

“This has been going on for years now,” Mukhtar told IPS. “We have been promised on several occasions by previous governments and even the present one that the energy crisis will be resolved in their tenure. But so far, things remain the same. I cannot even express my anger towards such hypocrisy.”

“Pakistan has been [badly] impacted by extreme weather disasters due to climate change [...]. We will only be adding to the problem if we expanded the use of coal and other fossil fuels.” -- Umama Binte Azhar, a sustainability expert at Brunel University
The ongoing energy crisis is certainly one of the greatest challenges that Pakistan is facing. The current power shortage in the country has been estimated to be around 6,000 megawatts, with the industrial sector being hit the hardest due to the shortfall.

Since 2011, almost 70 percent of industries have either shut down or have outsourced their operations to countries like Malaysia and Bangladesh. The Economic Survey of Pakistan notes that during 2011-2012 around 4.8 billion dollars, or two percent of gross domestic product (GDP) was lost due to power outages.

As a result, after years of massive blackouts that have plagued the country and destroyed much of its industrial sector, energy-starved Pakistan is setting its eyes on a coal-fired future. Recent discoveries of massive ‘low’ and ‘low to medium’-quality coal reserves in the southern part of the country have led many to endorse the decision to compensate for the current energy deficit by setting up coal-fired power plants.

An economic and environmental nightmare

Regarded as the dirtiest of all fossil fuels, coal is considered one of the largest contributors of carbon emissions that are causing rapid climate change. Around the world, coal has been the cause of several social and environmental conflicts, and has resulted in massive human displacements in recent history.

Additionally, coal-related industries are responsible for creating water scarcity and food risks in countries where the use of water for energy is prioritised over agriculture and food production. This has led many experts and specialists in the energy and climate sectors to show reservations towards coal-fired power plants.

“Coal is exhaustive and an unsustainable resource for Pakistan,” Umama Binte Azhar, a sustainability expert at the London-based Brunel University, told IPS.

“Pakistan has been one of the worst impacted by extreme weather disasters due to climate change in recent years. We will only be adding to the problem if we expanded the use of coal and other fossil fuels.”

Global Struggle Against Coal

“Who is this development for? Who benefits? Who profits and who loses their livelihoods?” asks Vaishali Patil, an activist in the western Indian state of Maharashtra who is currently fighting coal in her own backyard.

She is one amongst many across the globe who is bearing witness to upheavals against coal and fossil fuels as a source of energy to power our future.

Largely lead by front line communities, these struggles are being fought on various grounds. With loss of land as a prime driver, impacts on water, livelihoods, health and environment are all reasons for growing unrest amongst people.

The past two to three decades have given us ample evidence of the detrimental impacts of existing plants and mines on various ecosystems. From the struggle to save the Appalachian Mountains in the United States, to protecting livelihoods of fisherfolk in India, to fighting corruption and land grabbing in the Mpumalanga province of South Africa – strong voices are coming together to challenge a common enemy that is coal.

With such conclusive evidence in front of us, to further invest and proliferate coal usage is a folly that could cost our future generations and us dearly.
Energy production through coal consumes huge quantities of water. A typical 660-MW coal power plant, for instance, requires up to three billion gallons of water annually for its cooling system. Imagine having several such coal plants set up in a country that is already facing severe droughts and water shortages; it is a daunting prospect.

Despite this, the recent discovery of coal reserves in the Thar Desert in Pakistan’s southern Sindh Province has sparked both domestic and international interest. For example, China is set to invest around 1.5 billion dollars in Thar Coal. Similarly, Burj Power, a UAE-based company, has signed a deal worth 700 million dollars to set up four coal plants at Port Qasim, near Karachi.

Many UK and Czech-based companies are also expected to make such investments in Pakistan for the same purpose. A recent agreement signed between the Pakistan government and the Asian Development Bank (ADB) stipulated that the latter would provide 900 million dollars worth of assistance to help Pakistan set up a power project in Jamshoro, a district of the Sindh province.

An estimated four coal plants are poised to become operational by 2016 at various points around the country to generate electricity. What is alarming about this plan is that running the plants will require coal to be imported in huge quantities from countries like Indonesia and South Africa since most coal deposits in Pakistan have low energy density.

The operation will be extremely costly, and will hold Pakistan hostage to imports and international markets for many years to come. Neighbouring India is learning this lesson the hard way, with high import prices of coal making thermal power plants economically infeasible without massive government bailouts and soaring energy prices to the end consumer.

Regional experiences

Pakistan is not the only country with plans to exploit coal for energy. Developing countries around the world and primarily South Asia are fixated on the notion that coal is cheap and therefore a viable source of energy for growing the economy and fighting poverty.

With almost 450 coal-fired power plants proposed to come up in the region, India’s hunger for this dirty fuel is rising. But the truth is that a majority of these plants will likely fail to come into being, as the last few years have shown.

Domestic coal production has hit a plateau as poor mining and transport infrastructure, as well as corruption scandals, have crippled Coal India Limited (CIL), the world’s largest coal miner. Efforts are underway to import coal from countries like Indonesia and Australia but rising coal prices have put a spanner in the industry’s works.

Over 30 power plants went on a distress sale last year as enthusiastic entrepreneurs built coal plants in haste but were unable to run them owing to massive coal shortages. This has become a recurring theme in India that is pushing coal-financing institutions to completely rethink their investment strategy.

Bangladesh is another example of where coal is being looked at as the panacea for poverty. But the recent eruption of public dissent against the proposed 1,320-MW Rampal power plant in the southwestern Khulna district – which is known in Bangladesh as the gateway to the ecologically sensitive tidal forest area called the Sunderbans – shows that the industry will not have it easy.

As coal plants begin competing for people’s need for land and negatively impacting agriculture, health and livelihoods, opposition for them will only rise as witnessed in pockets across the subcontinent.

Sri Lanka is steadily increasing its coal dependence as it projects 70 percent of its energy by 2025 to come from coal but that growth is mired in complex geopolitics that questions the primary motive behind coal expansion: is it to satisfy the capital interests of a few or the energy needs of the masses?

The story in Pakistan could turn out to be the same, as coal prices continue to head northwards and international financial institutions like the World Bank and the ADB grow increasingly wary of their investments in this fossil fuel.

Solving the crisis with renewables

Among the available alternatives, renewable energy sources such as solar, wind, and biomass have vast potential in Pakistan. Despite their high installation costs, renewable energy systems incur far fewer operational and maintenance expenses, making them highly profitable in the long run.

Globally, the cost of renewables has decreased drastically. Considering that the prices for solar panels have fallen from five dollars/watt to less than a dollar per watt in just a few years, solar energy has proven to be an affordable and practical option for Pakistan, especially since the country falls under a sun belt.

The wind corridor at Gharo-Keti Bunder in coastal Sindh is another potential source of power generation waiting to be fully explored. It has the potential to generate about 11,000 megawatts of electricity, according to a report published by the Pakistan Meteorological Department.

Regrettably, “inadequate investments, power tariffs, and institutional constraints have resulted in the dismal situation where renewable sources are not being fully tapped,” Asad Mahmood, the technical manager at the Energy Conservation Fund (ECF), told IPS.

Experts say Pakistan can avoid the trap that rapidly emerging economies have fallen into, and instead draw up a blueprint for large-scale decentralised renewable energy deployment. In a rapidly changing climate, nothing less would be acceptable.


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Narendra Modi: More Continuity Than Change in Foreign Policy Fri, 23 May 2014 00:03:04 +0000 Rajan Menon Narendra Modi, India’s newly-elected prime minister. Credit: Narendramodiofficial/CC-BY-SA-2.0

Narendra Modi, India’s newly-elected prime minister. Credit: Narendramodiofficial/CC-BY-SA-2.0

By Rajan Menon
NEW YORK, May 23 2014 (IPS)

The Congress Party took a beating in India’s recent parliamentary election and has been now been sidelined by the Hindu nationalist Bharatiya Janata Party (Indian People’s Party, or BJP).

The spotlight is on Narendra Modi, the BJP’s leader who will be the next prime minister. A former tea vendor, Modi’s humble origins place him in a different world than the Nehru dynasty, which, via the Congress Party, has run India for all but a handful of its nearly seven decades of independence. Rahul Gandhi, Jawaharlal Nehru’s great-grandson, proved a dull campaigner — no match for the charismatic, silver-tongued Modi.

Modi knows that India can close the power gap with China only by achieving and sustaining high economic growth rates [...]. That means fixing what ails the Indian economy: corruption, red tape, and lousy infrastructure [...].
There appear to be two Narendra Modis. The first is the lifelong RSS (Rashtriya Swayam Sevak Sangh, National Volunteer Society) acolyte. Its anodyne name notwithstanding, the RSS is a hyper-nationalist Hindu movement known for its martial drills, uniforms, and belief in the specialness, indeed superiority, of Hindu civilisation.

The movement is committed to “Hindutva,” which sees “Indian” and “Hindu” as interchangeable. Modi has been drinking deeply from the RSS well for years, which is why Indian secularists and non-Hindus, especially Muslims (India has 170 million), are anxious.

Then there’s Modi the competent administrator (of Gujarat state, which he ran as chief minister from 2001-2014) and business-friendly manager who produces positive results, talks the lingo of business, prizes foreign investment, cuts through red tape, and shakes up the bureaucracy – the mastermind of the “Gujarat Miracle.”

Courting what political scientists call the median voter, these were the attributes Modi stressed during the campaign, artfully dodging, in the process, the ghosts of Gujarat’s 2002 communal riots that left 1,000 (mostly Muslims) dead, and 100,000 homeless. His message was basically: “Allow me to take the helm and I’ll do for the country what I did for Gujarat.”

The voters, disenchanted with the Congress, have put him in charge. Now the question is whether we’ll see Modi the ideologue or Modi the pragmatist. I believe the latter will prevail, though the former will inevitably make its presence known, both because Modi will play periodically to his BJP base and because his rhetoric is not just for effect: it reflects his deeply held beliefs.

Since the BJP’s sweeping victory, there’s been much speculation in this country about what kind of foreign policy Modi will pursue. Don’t expect any drastic course correction.

Modi will maintain India’s strong ties with Russia. There’s a long history of cooperation between New Delhi and Moscow that dates back to the early years of the Cold War. While trade and investment with Russia are now far less important for India, Moscow remains India’s chief arms supplier by far. Modi has no reason to rock that boat.

China: Both the Congress and the BJP have long believed that China is India’s principal geo-strategic adversary. That outlook won’t change. Yet things have become more complicated over the last two decades: China is now India’s main trade partner, so the relationship is not all about security and conflict. The Cold War alignment with Russia as a hedge against China won’t be as effective a strategy. China has surpassed Russia in just about every measure of power.

More importantly, the old Sino-Soviet schism is a thing of the past. Moscow and Beijing are united – and have been since the early 1990s – by what each calls a “strategic partnership”; they’ve put their territorial dispute to bed, Russia is China’s main weapons supplier, and Russian energy flows to China, as this week’s mammoth 30-year, 400-billion-dollar gas deal concluded by President Vladimir Putin and Chinese President Xi Jinping demonstrated rather dramatically.

Add to all this the economic and military weakness of India relative to China, and Modi, though he is a nationalist who’s attacked previous Indian leaders for not standing up to China, won’t be looking to pick fights with Beijing.

Modi knows that India can close the power gap with China only by achieving and sustaining high economic growth rates – that’s what made Beijing a global power after all. That means fixing what ails the Indian economy: corruption, red tape, and lousy infrastructure, for example. That’s going to take time, but expect Modi to shake thing up on that front.

But there’s another reason why the economy will top his agenda: he knows that’s what Indians care about most and largely why they elected him. Indian economic managers have failed the poor. As a populist and a man who himself arose from modest circumstances, Modi wants to lift up India’s least fortunate.

Pakistan will be Modi’s other foreign policy preoccupation but he’s likely to prove wrong those who think he’ll take a dramatically tougher line toward Islamabad. He has already surprised people by inviting Pakistani Prime Minister Nawaz Sharif to his swearing-in ceremony and doubtless understands that intermittent confrontations with Pakistan will divert him from focusing on the economy.

War with Pakistan has also become dicier given the risk of escalation to nuclear war. The wild card is a terrorist attack on India that’s traced back to Pakistan. Modi will find himself under tremendous pressure to act decisively, not least because the don’t-mess-with-India message is a key part of his appeal.

India under Modi will continue to strengthen its ties with Israel. The BJP generally and Modi in particular admire Israel and believe that India’s traditional pro-Palestinian policy has earned it little goodwill in the Arab world, which, when the chips are down, backs Pakistan. Modi has visited Israel twice, professing admiration for its economic and technological achievements. Look for more cooperation on economic issues and intelligence sharing on terrorism. Israel can’t supplant Russia as an arms supplier, but India, already a major importer of Israeli arms, will likely buy even more Israel weaponry, especially drones.

Talk of an alliance between India and the U.S. to balance China is hyperbole. New Delhi and Washington have been steadily upgrading their defense co-operation over the years and that will continue; but neither country wants to commit to an alliance.

One country with which Modi is eager to step up its security ties is Japan. The Congress laid the foundation for this, and the BJP will build on it. Japanese Prime Minister Shinzo Abe was the chief guest at India’s Republic Day celebration in January, and Modi has invited also him to his inauguration. India is the one Asian power that’s not unnerved by Abe’s commitment to change Japan’s minimalist defense policy. New Delhi wants a strong partner on China’s eastern flank and sees Japan, with its economic and technological prowess, as well suited to that role. Both Tokyo and New Delhi see China as their biggest security problem. Likewise, India will strengthen its ties with Vietnam, another Asian country that is deeply concerned about China’s territorial claims and intentions, as demonstrated last week by clashes between them in South China Sea.

In all, those expecting big changes from Modi on the foreign policy front are apt to be disappointed. While he believes that India is destined to be a global power, he also understands that that goal will never be met unless India gets its economic act together. If Modi makes big changes, they’ll be on the home front.


Rajan Menon is the Anne and Bernard Spitzer Professor of Political Science at the Powell School, City College of New York/City University of New York and a Senior Fellow at the South Asian Center of the Atlantic Council. Among his publications are ‘Soviet Power and the Third World ‘(1986) and ‘The End of Alliances’ (2007).


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When China Sneezes, Latin America Gets the Flu Fri, 16 May 2014 23:56:41 +0000 Michelle Tullo A smelter at the El Teniente mine, which produces 37 percent of Chile’s copper. Credit:Marianela Jarroud/IPS

A smelter at the El Teniente mine, which produces 37 percent of Chile’s copper. Credit:Marianela Jarroud/IPS

By Michelle Tullo
WASHINGTON, May 16 2014 (IPS)

China’s massive urbanisation has been built, literally, by metal, supplied mostly by Latin American countries (LAC). Yet now China’s slowing economic growth and falling commodity prices threaten Latin American commodity booms.

“As commodity prices decline, Latin American policy-makers will wish that they had used some of the benefits of the commodity-boom to diversify into other sectors,” Kevin Gallagher, professor at Boston University and author of a recent China-Latin America bulletin published by Boston University’s Global Economic Government Initiative (GEGI), told IPS."That the prices go down is actually good for China, the buyers of the commodities, not so much for the Brazilian and Chilean exporters." -- Matt Ferhen

Regarding China’s growth rate and commodity prices, the report states, “Whereas from 2006 to 2011 the IMF primary commodity price index soared by an average annual rate of 9.8 percent and the Chinese economy grew at an average annual rate of 10.5 percent, in 2012 commodity prices fell by 3.2 percent and the Chinese economy slowed to 7.7 percent.”

The fall in commodity prices disproportionately affects LAC, as 86.4 percent of LAC exports to China are primary goods, while 63.4 percent of Chinese exports to LAC are manufactured.

“As prices rose, exports grew and growth improved significantly. Latin America can thank China and the commodity boom for not being so affected by the [global] financial crisis [of 2008-2009]. However, exchange rates appreciated, investment concentrated in commodities, manufacturers couldn’t compete with imports from China and beyond, and commodity-led growth led to numerous social and environmental conflicts,” said Gallagher.

According to the GEGI report, average annual export growth from LAC to China averaged 23 percent between 2006 and 2011, but dropped to 7.2 percent in 2012. These exports are mainly concentrated in copper, iron, and soy. The metals exports are densely concentrated in two countries: 86 percent of iron exports came from Brazil and 92 percent of copper comes from Chile.

China’s exports to LAC are significantly more diverse, coming mostly from manufactured goods like electronics and vehicles that are less sensitive to pricing variables than commodity goods. Effectively, commodity price declines have created a trade imbalance between LAC and China inChina’s favour.

“China bases its relationship with Latin America on its idea of win-win, complementary South-South relations, and they’ve been able to hang their hat a bit on high-price commodity trade that benefits reciprocally,” said Matt Ferhen, head of China and the Developing World Programme at the Carnegie-Tsinghua Center for Global Policy, at a discussion held here Thursday at the Inter-American Dialogue.

“That the prices go down is actually good for China, the buyers of the commodities, not so much for the Brazilian and Chilean exporters, where we might see some difficulties in the relationship.”

In response to slowed growth, the Chinese public demanded that the government institute financial reforms. Chinese President Xi Jinping has announced a series of reforms that have yet to be enacted.

“There is discussion under new party leadership about rebalancing China’s economy, away from heavy exports and government investment…consumption is meant to replace exports and government led investment and behind this is a new growing middle-class that will then further drive economic growth,” Ferhen said.

This new economic model responds to pessimistic concerns that government has invested heavily in transit, property development and infrastructure that might never be used and only increase debt. Yet a switch to emphasising internal consumption comes at the expense of LAC commodity exporters.

“Most LAC governments are not well prepared for a commodity price decline. Chile has a strong copper stabilisation fund and sovereign wealth fund that captured some of the commodity boom and stands ready to help out. Most other countries, such as Peru, were never able to admit that the price would change as they locked in a commodity-led growth path,” Gallagher told IPS.

Yet research by institutions like the World Bank suggests that Latin America is not as susceptible to external shocks in the commodity markets as in the 1980s and 1990s.

First, most LAC have instituted macro-financial immune systems, such as paying down debts, accumulating reserves, and reducing dependence on the dollar. The degree to which each country is insulated against external shocks varies.

For example, although the investment rate in the region is almost 25 percent of gross domestic product, close to the rate in Southeast Asia, Brazil’s rate is lower, at 18 percent, and critics say Venezuela has not invested its oil revenues smartly.

A semiannual report from the World Bank also highlights that LAC has rebalanced “its sources of financing away from portfolio and bank credit flows and towards foreign direct investment and remittances.”

On another positive note, China foreign direct investment in LAC, especially in infrastructure and energy, should positively influence LAC economies. Chinese presence, especially in mergers and acquisitions, has also expanded beyond traditional partners like Argentina and Brazil to include Ecuador, Bolivia, and Peru.

Experts hope that these other markets, particularly energy, can offset the commodity trade decline, which is expected to only decrease in 2014.

Based on data from the World Bank, the IMF, and the Economist Intelligence Unit Global Forecasting Intelligence, the GEGI report predicts a 3.1 percent price decline in the LAC-China export basket, nearly twice as deep as the 2013 price decline, implying a growing LAC-China trade deficit in goods for 2014.

The effect on countries’ growth will be nuanced across the region, based both on external factors, domestic demand factors, and internal economic policies. The World Bank predicts Panama will continue growth near seven percent, followed by Peru at five and a half percent.

They predict Chile and Colombia will hover around three and a half percent, Mexico at three percent, and Brazil close to two percent. Venezuela is expected to contract one percent.

This contraction in commodity-based markets has effects beyond Latin America.

“This is not just a concern within Latin America, but globally – Africa, Southeast Asia, and elsewhere. One of the interesting elements of this, and thinking of those who are interested in and concerned about the impact of labour, environment impact, questions of FDI, this is a shared concern across many nations,” said Fehren.

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Is Putin’s Eurasian Vision Losing Steam? Thu, 15 May 2014 14:03:09 +0000 Joanna Lillis By Joanna Lillis
ASTANA, May 15 2014 (EurasiaNet)

Victory Day on May 9 was an occasion for Russians to indulge in patriotic flag waving in Moscow. Russian President Vladimir Putin used the previous day to muster a show of diplomatic support for his efforts to bring formerly Soviet states closer together.

On May 8, Putin met with the presidents of Armenia, Belarus, Kyrgyzstan, and Tajikistan in the Kremlin. Following the success of the Euromaidan movement in Kyiv, Putin has made it a priority to shore up support among other formerly Soviet states for Russia’s geopolitical agenda, in particular the establishment of a regional economic union as a precursor to a wider political union of Eurasian states.“It’s hard to predict anything these days, but it seems to me that the treaty will be signed -- but in a reduced form, with most difficult issues to be resolved after signing,. -- Nargis Kassenova

A treaty on the formation of a Eurasian Economic Union (EEU) is due to be signed in Astana in late May, paving the way for its launch in January 2015. The body would be an outgrowth of the existing Customs Union, a free trade zone comprising Russia, Belarus, and Kazakhstan. Armenia and Kyrgyzstan are slated to join the Customs Union before the end of the year.

As Putin warmly welcomed existing and potential union members in Moscow on May 8, ostensibly for security talks unrelated to the economic integration project, the question on the lips of Kremlin watchers was: will they or won’t they put pen to paper on the EEU founding document in less than three weeks’ time?

The Moscow meeting came on the heels of a disastrous Customs Union summit in Minsk on Apr. 29, where expectations of finalising the treaty fizzled as Putin and his counterparts, Alexander Lukashenko of Belarus and Nursultan Nazarbayev of Kazakhstan, admitted that, at this late stage, they have differences over the pact’s wording.

Nazarbayev’s conspicuous absence from the May 8 talks in Moscow, convened under the auspices of the Collective Security Treaty Organisation, set tongues wagging about differences of opinion. Contacted by telephone by, Nazarbayev’s office said it had no comment — but some observers interpreted his no-show as a snub to Putin from one of his closest allies.

As other regional leaders were cozying up to the Kremlin, Nazarbayev was having a tete-a-tete in Astana with a senior official from the United States, Moscow’s arch-rival in the geopolitical struggle over Ukraine. Deputy Secretary of State William Burns used the meeting to assure Nazarbayev of America’s “enduring” commitment to Kazakhstan and Central Asia, the State Department said, as the Ukraine crisis helps “underscore what’s at stake.”

Regional analysts tend to believe that the recent signs are not indicators of insurmountable problems surrounding the EEU’s formation.

“It’s hard to predict anything these days, but it seems to me that the treaty will be signed — but in a reduced form, with most difficult issues to be resolved after signing,” Nargis Kassenova, director of the Central Asian Studies Center at Almaty’s KIMEP University, told

“If it’s not signed it will be a blow to the reputation of Vladimir Putin, but also to some extent that of Nursultan Nazarbayev,” she added. “Both invested a lot of personal image capital into it.”

Alex Nice, a regional analyst at the London-based Economist Intelligence Unit, also feels that integration plans are more or less on track.

“It’s possible there might be a further delay to the final signing of the document, but I’m confident that the treaty will come into force as planned next January,” he told, pointing out that “negotiations on the EEU treaty are very far advanced.”

“Of course, some of the more controversial provisions will be subject to lengthy transition periods,” Nice added.

The chances of the agreement being signed on time are “quite high,” concurred regional security expert Aida Abzhaparova of the University of the West of England. Nazarbayev is a cheerleader for integration, she pointed out, and signing the treaty in Astana would have huge “symbolism” for him: Nazarbayev first proposed the notion of a Eurasian union long before Putin took it up, and sees himself as “the father of the idea.”

Speculation that the union might be heading off the rails was fueled by reports on May 7 that Kyrgyzstan’s prime minister, Joomart Otorbayev, wished to postpone membership for a year — but his spokeswoman denied the claim. Otorbayev had, on the contrary, said Kyrgyzstan would complete the legislative groundwork to join by the end of the year, Gulnura Toraliyeva told by telephone.

Armenia is expected to join sooner – but is currently bogged down trying to negotiate some 900 exemptions to the union’s single customs tariff.

Analysts believe that incorporating the weaker economies of Armenia and Kyrgyzstan into the union is a sticking point in the treaty negotiations; Kazakhstan and Belarus are believed to be wary of the economic implications amid Russian efforts to expand its geopolitical clout.

Perhaps the biggest threat to the EEU’s success is Russia’s actions in Ukraine, suggests Kassenova.

“The Ukraine crisis undermined Russian policy in the post-Soviet space,” Kassenova said. “Now it’s seen as a bully without any respect for the sovereignty of its neighbors. Plus, the crisis undermined the economy of Russia and made it less capable of serving as the locomotive of integration.”

“On the one hand, the crisis should give more bargaining power to Belarus, Kazakhstan, and Kyrgyzstan,” she continued. “On the other, the overall destiny of the project is in doubt: will Russia have the will and resources to support and sponsor it further?”

Editor’s note:  Joanna Lillis is a freelance writer who specialises in Central Asia. This story originally appeared on

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UAE Diplomatic Offensive in Latin America Tue, 29 Apr 2014 16:01:01 +0000 IPS Correspondents UAE Foreign Minister Abdullah Bin Zayed Al Nahyan and his Uruguayan opposite number Luis Almagro at an Apr. 28 press conference in Montevideo. Credit: Presidencia de Uruguay

UAE Foreign Minister Abdullah Bin Zayed Al Nahyan and his Uruguayan opposite number Luis Almagro at an Apr. 28 press conference in Montevideo. Credit: Presidencia de Uruguay

By IPS Correspondents
MONTEVIDEO, Apr 29 2014 (IPS)

The visit by United Arab Emirates Foreign Minister Sheikh Abdullah Bin Zayed Al Nahyan to Uruguay, Paraguay and Peru brings to an end 10 days of unusually intense diplomatic activity by the Gulf nation in Latin America.

On Monday Apr. 28, Al Nahyan met with his Uruguayan counterpart Luis Almagro before he was received by President José Mujica. On Tuesday Apr. 29 he continued on his tour to Paraguay and Peru.

The minister is visiting the region as part of the delegation of Sheikh Mohammed bin Rashid Al Maktoum, vice president and prime minister of the UAE, who visited Mexico, Brazil, Argentina and Chile, in that order, from Apr. 20 to 26.

The agenda for dialogue in Uruguay included the opening of an embassy by this South American country in the UAE.

In a press conference with Almagro, Al Nahyan said “I look forward to the opening of a Uruguayan Embassy in Abu Dhabi in the near future. This will serve to increase dialogue between the UAE and Uruguay on a range of issues, and to support an expansion of business links.”

Uruguay is particularly interested in drawing investment from the UAE in the projected deep-water Atlantic port in the eastern department or province of Rocha.

Almagro, who visited the UAE in 2011, said that country had experience in participating in similar port projects in Brazil, the Dominican Republic and Peru.

The foreign ministers also reported a project involving cooperation in horse breeding genetics and renewable energy, although the two countries have not yet signed concrete agreements in these areas.

Al Nahyan stressed the need for an adequate legal framework, which according to Almagro is in the final stage of drafting and will include an agreement to avoid double taxation.

“Our countries also share a strong interest in renewable energy and cooperation on climate change issues,” said Al Nahyan.

He added: “We commend Uruguay for its efforts to spread important messages about climate change to the world and I look forward to welcoming Uruguay’s participation in the Abu Dhabi Ascent meeting, which will support preparations for the 2014 Climate Summit,” to take place Dec. 1-12 in Peru.

The May 4-5 Abu Dhabi Ascent meeting will draw senior U.N. officials, ministers, bankers, and representatives of business and civil society, to promote commitments towards reaching a new global climate treaty in 2015.

The UAE supports Uruguay’s candidacy for a seat on the U.N. Security Council for 2016-2017, Al Nahyan also stated.

In addition, the conversations focused on multilateral relations between the Arab world and Latin America, and particularly sensitive Middle East issues such as the Palestinian question.

Almagro returned Sunday Apr. 27 from an official tour to Jordan, Palestine, Qatar and Saudi Arabia.

In his meeting with Palestinian Authority President Mahmoud Abbas, the two governments indicated an interest in opening embassies.

In Montevideo, Al Nahyan expressed appreciation for Uruguay’s efforts, which he said formed part of “growing international support for the cause of the Palestinian people.”

Meanwhile, during his tour through four key Latin American countries – Mexico, Brazil, Argentina and Chile – Prime Minister Al Maktoum met with each president and signed agreements in important areas.

With Chile he signed an accord to avoid double taxation on income and wealth of air transport and naval companies.

In Argentina, a memorandum of understanding was reached for the peaceful use of nuclear energy.

With the Brazilian government, Al Maktoum signed an agreement in defence for technology sharing, cooperation in training and instruction, weapons, crisis management and logistical support.

With Mexico, where he began his tour on Apr. 20, Al Maktoum signed a declaration on the conclusion of the negotiations of the Accord for the Reciprocal Promotion and Protection of Investment between the two countries.

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Biofortified Tortillas to Provide Micronutrients in Latin America Thu, 17 Apr 2014 12:10:41 +0000 Fabiola Ortiz Biofortified beans. Credit: Courtesy of BioFORT

Biofortified beans. Credit: Courtesy of BioFORT

By Fabiola Ortiz
KIGALI, Apr 17 2014 (IPS)

Latin America is one of the regions in the world suffering from “hidden hunger” – a chronic lack of the micronutrients needed to ward off problems like anaemia, blindness, impaired immune systems, and stunted growth.

Brazil is heading up a food biofortification effort in the region to turn this situation around.

Nicaragua, Guatemala and Honduras are targets of the biofortification programme, after six countries in Africa (Democratic Republic of Congo, Ethiopia, Nigeria, Rwanda, Uganda and Zambia) and three in Asia (Bangladesh, India and Pakistan).

Behind the initiative is HarvestPlus, which forms part of the CGIAR Consortium research programme on Agriculture for Nutrition and Health.

CGIAR is an independent consortium leading the global effort to modify food in developing regions by adding essential minerals and vitamins.

In Latin America, the project is led by the Brazilian Biofortification Network (BioFORT), which since 2003 has brought together 150 researchers from EMBRAPA, the Brazilian government’s agricultural research agency, and from universities and specialised centres.

EMBRAPA food engineer Marília Nutti, who heads the BioFORT network in Brazil and the rest of the region, told IPS that the three countries in Latin America with the highest rates of micronutrient deficiency are Haiti, Nicaragua and Guatemala.

HarvestPlus developed a Biofortification Priority Index (BPI) to identify countries in the developing South with the highest levels of micronutrient deficiency.

Agronomist Miguel Lacayo at the Central American University in Managua told IPS that Nicaragua is second only to Haiti in terms of problems in the production and availability of food for a nutritious diet in this region.

An index to measure progress

The Biofortification Priority Index (BPI) ranks countries based on their potential for introducing nutrient-rich staple food crops to fight micronutrient deficiencies, focusing on three key micronutrients: vitamin A, iron and zinc.

For the BPI, country data on the prevalence of micronutrient deficiencies and production and consumption levels of target crops is analysed to help guide decisions about where, and in which biofortified crops, to invest for maximum impact.

BPIs are calculated for seven staple crops and for 127 countries in the developing South.

“The diet in Nicaragua is principally made up of maize and beans, which are eaten two to three times a day,” the expert said. “People eat a lot of maize tortillas, accompanied by beans, for breakfast, lunch and dinner.”

Lacayo spoke with IPS during the Mar. 31-Apr. 2 Second Global Conference on Biofortification, organised by HarvestPlus in Kigali, the capital of Rwanda.

“The idea is to increase the concentration of iron and zinc in these two staple foods, to reduce nutrition problems. We want to help bring down anaemia levels,” he said.

Severe nutritional deficits are especially a problem among children in rural areas in Nicaragua, one of the poorest countries in Latin America. “It’s a chronic problem among the rural poor, who make up 60 percent of the population,” Lacayo said.

Biofortification uses conventional plant-breeding methods to enhance the concentration of micronutrients in food crops through a combination of laboratory and agricultural techniques.

The United Nations Food and Agriculture Organisation (FAO) reports that two billion people in the world today suffer from one or more micronutrient deficiencies, and that every four seconds someone dies of hunger and related causes.

In December 2012, the World Bank released a toolkit providing nutrition emergency response guidance to policy-makers, seeking to ensure health, food and nutritional security for vulnerable mothers and their children in Latin America and the Caribbean.

According to the World Bank an estimated 7.2 million children under five are chronically malnourished in the region.

The Bank also warned about the economic costs of malnutrition, estimating individual productivity losses at more than 10 percent of lifetime earnings, and gross domestic product lost to malnutrition as high as two to three percent in many countries.

The World Food Programme (WFP) Hunger Map shows that the malnutrition rate in Nicaragua stands at between 10 and 19 percent, while in Haiti 35 percent of the population is malnourished.

Nicaragua began to biofortify foods in 2005 with support from Agrosalud, a consortium of institutions working in 14 countries of Latin America and the Caribbean that is mainly financed by the Canadian International Development Agency (CIDA).

Agrosalud has also supported the inclusion of micronutrients in foods in Bolivia, Brazil, Colombia, Costa Rica, Cuba, the Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama and Peru.

Of these countries, Panama went on to launch a national biofortification programme, with no outside financing.

The first phase of Agrosalud ended in 2010, and Nicaragua was made a priority target in the second phase, with backing from BioFORT, initially focused on maize and beans.

“We want to support biofortified crops,” Lacayo commented. “We are going to create a network in Nicaragua with HarvestPlus, governments, non-governmental organisations, universities, and national and international bodies.”

The alliance will include 125 researchers from 25 university institutions, and the national plan is to get underway in June, with the aim of promoting food security and sovereignty in Nicaragua.

Lacayo stressed that one element of the plan will be support for small farmers in the production of seeds “for their own consumption, as well as a surplus to sell…We want to give this added value, and to strengthen small rural enterprises.”

The agronomist foresees a lasting alliance with Brazil through EMBRAPA, to help reduce hidden hunger in Nicaragua.

BioFORT’s Nutti said the network has an “innovative focus” of combining nutrition, agriculture and health.

“Biofortification is a new science. The big advantage of the project is that it has brought together agronomists, economists, nutritionists and experts in food sciences behind the common goal of having an impact on health,” she said.

Initially, HarvestPlus asked Brazil only to biofortify cassava. But BioFORT decided it was also necessary to incorporate other micronutrients in seven other foods that are essential to the Brazilian diet: cowpeas, beans, rice, sweet potatoes, maize, squash and wheat.

“This is a very big country. You have to show people that this biofortified diet is better,” Nutti said.

Brazil is one of the HarvestPlus country programmes, because it operates with its own technical resources and is seen as a model in the administration of the biofortification effort.

While in Africa, the main target of the initiative, 40 million dollars will be allocated to biofortification, the budget for Latin America over the next five years will range between 500,000 and one million dollars.

That is not much, considering the magnitude of the task, BioFORT technology researcher José Luis Viana de Carvalho told IPS.

In his view, Brazil has the experience needed to forge alliances that contribute to the development of biofortification in the region.

“Brazil is a granary due to the quantity of cereals it produces and its cutting-edge technology. We should think in terms of a 20-year timeframe for reducing the pockets of hidden hunger,” he added.

He said that in terms of public health, the cost of spending on biofortification is lower than the cost of not undertaking the effort.

“Prevention through quality food is important. Biofortification is not medicine, it is prevention. It is the daily diet,” de Carvalho said.

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Brazilian Innovation for Under-financed Mozambican Agriculture Wed, 12 Mar 2014 08:15:41 +0000 Amos Zacarias Erasmo Laldás on his strawberry farm in Naamacha, Mozambique. Credit: Amos Zacarias/IPS

Erasmo Laldás on his strawberry farm in Naamacha, Mozambique. Credit: Amos Zacarias/IPS

By Amos Zacarias
MAPUTO, Mar 12 2014 (IPS)

Some of the technological excellence that revolutionised Brazil’s tropical agriculture is reaching small producers in Mozambique. But it is not enough to compensate for the underfinancing of the sector.

Last year, Erasmo Laldás, a 37-year-old farmer who has worked for 15 years in Namaacha, a village 75 kilometres from Mozambique’s capital Maputo, planted 15,000 seedlings of Festival, a new strawberry variety originated in the United States.

Laldás produced seven tonnes of strawberries, employing eight workers. He sold all his produce in Maputo, and in January was the lead vendor in that market, because there was already a shortage of the fruit in South Africa, his main competitor.Mozambique invests very little in the agricultural sector, although it has been increasing its expenditure. In 2013 it devoted 7.6 percent of its budget to agriculture, equivalent to some six billion dollars.

“The fruit is very good quality, it does not require as many chemical products as the South African strawberries and its harvesting season is longer than the native variety that I was growing before,” he told IPS.

Laldás is the first Mozambican producer to benefit from Brazilian and U.S. aid through technical support to the Mozambique Food and Nutrition Security Programme (PSAL).

Created in 2012, the project brings together the Mozambique Institute of Agricultural Research (IIAM), the Brazilian Agricultural Research Corporation (EMBRAPA) and the U.S. Agency for International Development (USAID), to expand production and distribution capabioities for fruit and vegetables in this African country.

First of all, studies were needed to adapt seeds to the local climate.

IIAM received more than 90 varieties of tomato, cabbage, lettuce, carrot and pepper, which are being tested at the Umbeluzi Agricultural Station, 25 kilometres from Maputo.

“The results of the trials are encouraging; we identified 17 varieties that have the desired phytosanitary characteristics, and are ready to be distributed to farmers.

“We are waiting for them to be registered and approved under the seal of Mozambique,” IIAM researcher Carvalho Ecole told IPS, regretting that his country has not registered new fruit and vegetable varieties for the past 50 years.

Fruit and vegetable growing is a key sector for generating employment and income among small farmers, as this produce represents 20 percent of family expenditure, according to Ecole.

“For a long time, horticulture was neglected. When talking about food security the government thought only about maize, sorghum and cassava,” Ecole said. Moreover, “our producers still do not have credit or financing,” he complained.

South Africa is the largest supplier of fruit and vegetables for southern Mozambique. IIAM figures show that prior to 2010, nearly all the onions, 65 percent of tomatoes and 57 percent of cabbages consumed in the cities of Maputo and Matola were South African. And those proportions have been maintained.

As a result, prices are high. A kilo of tomatoes costs between 50 and 60 meticals (between 1.60 and 2 dollars) and onions a little less. When the new varieties that have been tested are available for national small farmers, prices will be lower, Ecole said.

Mozambique also imports mangos, bananas, oranges, avocados, strawberries and other fruit from South Africa.

“We need to train and empower local small farmers so that in the years to come they can produce enough to supply the domestic market,” José Bellini, EMBRAPA’s coordinator in Mozambique, told IPS.

Agricultural cooperation is the path chosen by Brazil, ever since the Luiz Inácio Lula da Silva government (2003-2011), to consolidate its development aid policy, especially in Africa.

Embrapa, a state body made up of 47 research centres located throughout Brazil and several agencies abroad, has worked to transfer part of the knowledge of tropical agriculture accumulated over its 41 years of existence to other countries of the developing South. Its office for Africa was installed in Ghana.

But Brazil’s presence in Mozambique became unequalled with the creation of ProSAVANA, the Triangular Co-operation Programme for Agricultural Development of the Tropical Savannah in Mozambique, supported by the Brazilian and Japanese cooperation agencies (ABC and JICA, respectively), inspired by the experience that made the South American power a granary for the world and the largest exporter of soya.

The goal in the next two decades is to benefit directly 400,000 small and medium farmers and indirectly another 3.6 million, strengthening production and productivity in the northern Nacala Corridor.

Brazil is to build a laboratory for soil and plant analysis in the city of Lichinga. Embrapa is training IIAM researchers and modernising two local research centres.

But ProSAVANA is a controversial programme.

Small farmers and activists are afraid that it will reproduce Brazilian problems, such as the predominance of agribusiness, monoculture, the concentration of land tenure and production by only a few transnational companies, in a country like Mozambique where 80 percent of the population is engaged in family agriculture.

Students at the Agrarian Middle Institute in Inhambane study the development of a variety of lettuce at the Umbeluzi Agricultural Station in Mozambique. Credit: Amos Zacarias/IPS

Students at the Agrarian Middle Institute in Inhambane study the development of a variety of lettuce at the Umbeluzi Agricultural Station in Mozambique. Credit: Amos Zacarias/IPS

Supporting the PSAL makes sense in a very different way. It focuses on vegetable growing, and is clearly aimed at small producers and improving local nutrition. But it suffers from limitations of scale and resources.

“We cannot improve our production system without investment. We have taken a giant step, there is more research and technology transfer, but large investments are needed as well,” said Ecole.

Mozambique invests very little in the agricultural sector, although it has been increasing its expenditure. In 2013 it devoted 7.6 percent of its budget to agriculture, equivalent to some six billion dollars.

Thirty percent of the country’s population are hungry, according to 2012 figures from the Technical Secretariat for Food and Nutrition Security. And nearly 80,000 children under the age of five die every year from malnutrition, according to Save the Children, an NGO.

There is no justification for these figures in Mozambique, which has a favourable climate and plentiful labour for large-scale agricultural production, Ecole said.

Namaacha illustrates the contradiction. It is the only district in the country that produces strawberries. It was able to supply the entire Maputo market, but many producers were bankrupted by lack of credit, said Cecília Ruth Bila, the head of the fruits section in IIAM.

“The small farmers find it difficult to get financing, and our banks do not help much, so producers give up,” she complained.

Nearly 150 strawberry farmers in Namaacha gave up growing them in the last five years because they lacked access to credit, according to information from the section.

Laldás is one of the few to continue. Perhaps that is why his dreams are so ambitious. This year he has asked for 150,000 seedlings to expand his growing area to three hectares, and meanwhile he is seeking financing to put in electricity, three greenhouses, an irrigation system and a small improvement industry.

“It will cost me a total of nearly six million meticals [nearly 200,000 dollars],” he said with optimism.

This story was originally published by Latin American newspapers that are part of the Tierramérica network.

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