This call for a debate about decriminalizing or legalizing drugs, soft and hard, is welcome. But these statements and the responses they generated from opinion editorialists and analysts focus too narrowly on the consumption side of the illegal drug business. This call focuses too much on the demand side, and too little on the complex supply side. What to do with the armed groups and blue and white-collar minions embedded throughout the supply chain? Neither these agents, nor their principals, would want to face prosecution or relinquish their ill-obtained riches. And even if they were willing to face prosecution and forfeit their easily obtained riches, would the same weak judiciaries that these groups have corrupted or fought viciously uphold the new rule of law or enforce previous sentences?

The debate, so far, is missing a key point.

This is certainly a busy electoral year. Each of the five elections is a stress test for kirchenerismo and Fernandez’s presidential bid. While the outcome of elections in the provinces of Tierra del Fuego, La Rioja, Misiones, Neuquén, Salta y Catamarca showed strong support for Fernandez de Kirchner’s candidates, the support Mauricio Macri received in the city of Buenos Aires in his reelection bid as mayor evidenced an expected and significant blow to Fernandez’s camp. True, voters in Buenos Aires do not behave like voters in the rest of Argentina and the comfortable victory by Macri’s party, Propuesta Republicana (PRO), over Danile Filmus last Sunday does not guarantee a strong performance by Cristina Fernandez’s competitors next October. A run-off election between Macri and Filmus is scheduled for June 31. However, PRO’s performance signals concerns for Cristina Fernadez’s kirchenerismo camp.

For one, PRO’s 20 percent vote difference in the Buenos Aires election with Daniel Filmus, Cristina’s pick for mayor running under the Frente para la Victoria (FPV) banner, shows PRO’s consolidation in one of Argentina’s most important political centers. In July 10’s elections, the incumbent Macri obtained 830 thousand votes which represents a four percent gain compared to the votes he obtained in the first round of elections for Buenos Aires’ mayoralty in 2007. Moreover, PRO’s list for the city’s legislature maintained the 44 percent share of support it obtained in the 2007 electoral contest electing 16 legislators, 2 more than in the previous elections. In addition, PRO lists won the majority of the votes for district councils (juntas comunales) in each of the citiy’s 15 districts (comunas). This includes victories in workers’ districts in the southern part of the city, traditionally seen as kirchenerismo’s support base.

Meanwhile, Cristina Fernandez’s anointed candidate Senator Daniel Filmus, a former Minister of Education under Nestor Kirchner’s government and running the Frente por la Victoria (FPV) ticket in Buenos Aires, did not perform as the government and its followers expected. Filmus gained 18 percent more votes that in the 2007 election, when he also confronted Macri. This significant variation in voter’s support and the 489 thousand votes obtained this time, however, were not enough to undermine PRO’s predominance in Buenos Aires’ politics. Filmus and the kirchenerismo tried to convince the public throughout the campaign that they would obtain important electoral gains in the city, which would allow them to boast kirchenerismo’s electoral strength and thick skin. Sunday’s elections were a blow to that idea. Macri prevailed in a camp familiar to him, and his victory evidences Argentines fatigue with the k political and economic model. Despite strong growth and rising internal demand, the government’s manipulation of key figures like inflation, government’s interference in corporate affairs increasing the state’s presence in corporate boards where nationalized pension funds have stakes, and a highly interventionist model may be starting to have political consequences. As the economy temperature increases to boiling levels, the government’s self-confidence in its electoral strength is undermined.

PRO’s victory in Buenos Aires boosts the party’s confidence to continue campaigning for the national legislature, where a strong performance is likely. The July 31 face-off between Macri and Filmus, probably preceded by a candidate’s debate common in the provincial and city levels but rare at the presidential level, will attest PRO’s muscle and confirm how weak kirchenerismo actually is. A strong showdown favoring Macri will weaken Cristina’s electoral position down the line. Blows to the k camp in other provinces, like in Santa Fe next July 24 or Cordoba in early August, will certainly increase fears in Cristinia Fernandez’s entourage about the un-likelihood of an easy reelection bid. The major showdown will come in a primary election scheduled for August 13, proxy for a popularity contents because all candidates have been chosen already by their parties. Should the opposition join forces around a single candidate, PRO’s recent performance may actually pose a threat to Fernandez’s reelection bid. For now, PRO’s strength in Buenos Aires is unquestionable.

Take the May 29 televised debate between Fujimori and Humala. In what was supposed to be an opportunity for each candidate to increase his or her voting support, given that most opinion polls showed a tie between the candidates, the two scripted and uncharismatic candidates presented their policy solutions on four broad subjects: poverty alleviation, public security and narco-trafficking, institutions and democracy, and economics and social inclusion. In each of their responses both candidates showed their support for the same broad policy goals: favor an institutional environment where private enterprise helps continue fostering growth in Perú, including stability en the regulatory environment for mining and other extractive industries; trickle down recent prosperity with nuanced doses of technocratic populism;  maintain the credibility and stability of the country’s economic and political institutions; strengthen the police and judicial system’s capacity for controlling and prosecuting illegal activates and prevent Perú becoming a narco-state. Just like the two agreed on this broader policy goals, so do the major personalities that have recently show supported for each candidate.

In the case of Keiko, Hernando de Soto has joined her to support Keiko’s economic team with a focus on property rights and titling. Similarly, popular and bitter journalist and political commentator Jaime Bayly wrote an op-ed in support of Mrs. Fujimori. In the Humala camp, Alvaro and Mario Vargas Llosa as well as former president Alejandro Toledo joined forces to support the former populist colonel turn moderate politician arguing Fujimori’s bid would bring back the tugs that co-governed with her father. All these individuals opposed, and some were persecuted by, the Fujimori regime. Similarly, they condemned Humala’s coup attempts and oppose his populist, Hugo Chávez’s backed, 2006 presidential bid. All in all, Humala and Keiko have similarities. The risks each candidate poses to any threat for the stability of a democratic market-based political and economic system are certainly lessened by the credibility cloud all these supporters of liberal democracy generate around each candidate. Peruvians, too, would not allow a center-right or center-left populist undo the road to prosperity initiated in the post-Fujimori era. This holds true even though a decade of extremely positive performance has not, and needs to, trickle down. This, in fact, is the challenge the next Peruvian president will have to address.

Elections are won on Election Day and if any, the run-off is less a deadly decease and more like a minor rash. If Alan Garcia’s first term was like an awful hangover after a terrible party and this second term of his was like a beautiful spring day bike-ride, then a Keiko or a Humala government could be completely the opposite of what people and markets fear. After all, Perú is the land of the comebacks to which Mr. Garcia can clearly attest. Stay tuned for the results.

S&Ps’ decision, expected by Colombian policymakers and long-internalized by markets as a result of the agency’s 2010 upward outlook for Colombia, reflects the relative sound macroeconomic environment of the Andean country. Credit agencies downgraded Colombia’s rating twelve years ago after the country underwent a banking and mortgage crisis. Increased insecurity and alleged inability of the government to control its territory also contributed to the downgrade. But unlike Argentina, Ecuador, and Venezuela, Colombia has had a historical responsible macroeconomic management, a solid independent Central Bank, and a credible commitment to service its obligations.

The upgrade comes despite implementation of pending macroeconomic reforms. Although fiscal policy still is moderately inflexible thanks to numerous constitutionally mandated obligations, the rating upgrade is a vote of confidence for ongoing reform efforts in Colombia. Legislation strengthening fiscal sustainability and discipline is pending approval in Colombia’s Congress. It includes an overhaul of the mining and hydrocarbons royalty management framework, which will create countercyclical stabilization funds, the adoption of a fiscal rule, and the adoption of stringent fiscal sustainability legislation whereby mandated government expenditures should be commensurate with income and debt capacity of the central government. S&Ps’ decision certainly boosts market confidence, serves the Colombia‘s government goal of luring investors to the country, and allows local businesses to access foreign credit in better conditions. Nevertheless, much needs to be done for business confidence to increase.

Land in Bogotá and you will understand why. Colombia’s capital city, home to 20 percent of the country’s population and the economic and financial hub of a region that contributed 14 percent to Colombia’s exports and concentrated 44.5 percent of the value of Colombian imports in 2009, has been struck by corruption in contracts for construction and adaptation of  8.5 miles of dedicated bus lanes in Calle 26 for Transmilenio, a world model bus rapid transit system.

The choking traffic road building started in late 2008 and was expected to end in mid 2010 but contractors were unable to meet deadlines; the city has been  paralyzed for almost three years now. Calle 26 is one of the main avenues connecting Bogotá with its airport, which also under renovation. Construction, as traffic, is moving slowly. The two-headed boogieman of corrupt businesspeople and public officials is to blame.

In a joint venture with other contractors, including a Mexican firm (Condux), cash-strapped Nule Group won the $170 million (COP 318.3 billion) public tender for the construction of Transmilenio’s Calle 26 dedicated bus lanes. Although the Group suspected they were not going to get the contract, their representatives approached the head of the district agency in charge of the tender –The Urban Development Institute of Bogota, IDU- to solicit awarding them the tender, which eventually occurred. One of the companies the Group used as front for competing in the tender had its registration cancelled before participating in the bid. That would have provided sufficient evidence for not granting Nule Group the contract in the first place. The Nule Group had also bribed the city’s comptroller so he would turn a blind eye to this and other red flags. From the $45.5 million (COP 85 billion) advance the group received to start the construction, equivalent to 10 percent of the value of the tender, the Group paid commissions to IDU’s chief.

The Group also use the advance to finance other delayed construction projects throughout the country, particularly the concession awarded to the group by the national government for the construction of the road connecting Bogotá with the town of Girardot in the east of Colombia which will connect Colombia’s capital with the port of Buenaventura in the pacific coast. The advance from the Transmilenio contract allowed the Group to bribe IDU officials and Bogotá’s comptroller, according to testimonies by the Group’s representatives given to Colombian authorities from Miami where they now reside. Using contact advances to pay bribes appears to be a normal cost to infrastructure projects in Colombia, according to different accounts from corrupt and probe contractors. Would be investors seeking business opportunities need to make significant time investment in due diligence investigations.

Other current and former public officials participated in this corruption network. Germán Olano, a former legislator, and Senator Ivan Moreno the brother of Bogotá’s mayor Samuel Moreno, have been identified by the Nule Group as intermediaries between contractors and public officials. In exchange, they received substantial commissions. Colombia’s inspector general forced the removal of Bogotá’s comptroller and banned his participation in government positions and public procurement for twenty years for being unable to explain a rocket increase in his assets; Mr. Olano’s penalty was twelve years. Ivan and Samuel Moreno are under investigation. Other similar corruption rings of contractors offering and paying kickbacks and public officials extorting and receiving bribes have been uncovered in the departments of Antioquia, Cundinamarca, Valle, Cauca, Risaralda, Chocó, and Atlántico. The infrastructure contracts under scrutiny in these regions of Colombia, including those of Bogotá, are almost half the budgetary additions made to the national budget to confront the effects of rain and floods that damaged infrastructure throughout the country in late 2010 and early 2011.

There are many reasons behind rampant corruption in infrastructure projects in Colombia. Some argue it all starts with political campaign financing where contractors buy off candidates. Others mention the leniency by which procurement framework is put to practice where illiquid bidders receive contracts, national and sub-national government agencies open tenders where key technical and project design details are unclear or missing, contractors and awarding agencies are able to renegotiate contract terms shortly after contract awarding, and additions that end up doubling the original price of the tender are allowed.

What is true nonetheless is that corruption can paralyze a city. It also imposes fiscal pressures to public finances at sub-national and national levels. The macroeconomic policy decisiveness that rightly differentiates Colombia from its neighbors, evidenced by S&Ps’ upward rating, should be accompanied by a similar determination to fight against corruption throughout the country when the risk of a massive waste of resources resulting from this malady is high… and evident.

Venezuela’s National Assembly will decide today whether to grant full legislative powers to President Hugo Chávez for a year starting in January 2011. The bill is almost certain to be approved by the Chavista-majority Assembly, curbing any possibility for new legislators to be inaugurated in January 2011 to effectively influence Venezuelan policy decisions. Legislative elections held last September granted over two thirds of seats and 52 percent of the popular vote to opposition candidates summoned in the umbrella political organization Mesa de Unidad Nacional. If approved as introduced earlier in the week, the Enabling Law would allow Chávez to enable an “adequate legal framework” to finishdismantling the country’s economy. Moreover, the law would effectively strip incoming opposition legislators of any decision-making power.

Weather conditions provided an excuse to call for the special powers. Torrential rains and mudslides throughout the country have left thousands of people homeless and hundreds dead. Over 130,000 people have been affected by inclement weather. The rains have caused extensive infrastructure damage: 250 roads are intransitable, dams have broken, and several bridges have been closed. This inclement weather prompted the current Assembly and Chavéz’s government itself to usher the Enabling Law in a lame duck session. Of course, inclement weather was caused by“capitalism’s irrationality” requiring Bolivarian-inspired legislation penned by the executive office to solve these problems. Chávez will have legislative power over a broad number of issues if the Enabling Law is approved today. The president will have power to legislate on the following subjects:

1. Any policy issues related to human needs and poverty derived from inclement weather conditions, as well as those derived from social conditions caused by the country’s environmental challenges
2. Infrastructure, transportation, and public services
3. Housing
4. Use of rural and urban land as well as organization of Venezuela’s territory. In other words, stripping mayors and governors (particularly those in the opposition) of their limited powers and more property expropriations
5. Public and private finance and taxation
6. Public security and judicial security
7. Security and defense
8. International cooperation
9. And if the previous eight categories don’t give Chavez enough power to legislate over almost all policy areas, he would also have the power to legislate over Venezuela’s socioeconomic framework.

Although many were dispossessed by inclement weather, including the opposition, Chavez will receive a juicy gift from the outgoing Assembly.

Finance Minister Juan Carlos Echeverry highlighted that Colombia’s government does not plan to modify royalty rates and that the bill in discussion would contribute to a more equitable distribution of royalties among sub-national governments, both for producers and for non-producers. Echeverry clarified that the national budget will not benefit from any changes in the royalties regime. This is the second of eight debates. The debate was postponed late last night and will resume today. The government will continue to face strong opposition, in particular once the bill reaches the lower Chamber’s floor in the third and fourth debates and legislators are preparing to support candidates for local elections in 2011. Royalties are a significant component of the income of sub-national government. Colombia’s government expects to receive COP 8 trillion in oil and mining royalties this year.

Will the joint exploration come to reality? Both companies are state-owned, however their management motivations are radically different. While Ecopetrol acts independently, PDVSA operates driven by political motivations fitting clearly into state-capitalism – where businesses’ drivers are “maximizing the state’s power and the leadership’s chances of survival”, as oppose to profit/growth maximization. Ecopetrol, a majority state-owned company, is a solid and well-governed company. Ecopetrol’s management independently decides about its investments based on project assessment without affecting Colombia’s fiscal position. The company is listed on the NYSE (EC) and, most recently, on the Toronto’s Stock Exchange. Ecopetrol’s share has performed positively, increasing value both in USD and COP, which has not been the case of other players such as Brazil’s Petrobras whose share has declined since January, according to Brooking’s Mauricio Cárdenas Santamaria.

PDVSA… well, is the opposite of Ecopetrol. The highly in-depth state owned company is crucial in Venezuela’s Hugo Chávez regime. Not surprisingly, the company’s CEO is also the head of the Ministry of Energy and Oil and one of PDV’s vice-presidents is Chavez’s brother. The company’s funds most of Venezuela’s “social” programs, which guarantee people’s support for Hugo Chávez.  PDVSA, more over, has unsuccessfully taken over several other nationalized companies in the sector.

Whether or not the joint exploration crystallizes, Ecopetrol should be wary of its business partner.

The bombing signals that illegal actors still pose a challenge to Colombia’s legitimate government. Most importantly, this terrorist act evidences that either in the extreme left or the extreme right, illegal actors are able to penetrate and take advantage of vulnerable security gaps in Colombia’s main urban hub, Bogota.

The relection debate has eclipsed Colombian legislative and national agenda, to the expense of many pressing issues including the status of the country’s economy and the division of powers in that country. Colombia’s leading think tank Fedesarrollo has affirmed through its Legislative Advisory papers, Op-Eds, rountables, and interviews throughout these two years that key economic discussions have been put aside. For example, Fedesarrollo has advocated for reducing non-wage labor taxes known as parafiscales because of its effects on increased costs of labor, informality, underemployment, and unemployment. One reason for Uribe’s reluctance to deal with this or other urgent economic issues according to Guillermo Perry Fedesarrollo’s former Executive-Director is that dealing with urgent matters affects the chances to reelect an incumbent. In fact, Uribe’s Social Protection Minister Diego Palacio affirmed that reforming parafiscales was highly unlikely because dealing with them will be unpopular vis-à-vis upcoming elections.

Despite successful, incremental yet highly controversial security policies Uribe’s government is leaving Colombia with high rates of unemployment (12%), informality (58% urban, 75% rural), and worrisome levels of underemployment as economic magazine Dinero suggests. Moreover, under the rubric of improving investor’s confidence in the country where Democratic Security = Confidence = Investment = Growth, Colombia’s current government has granted generous tax breaks and subsidies creating long-term fiscal problems. The government’s generosity created a distorted playing field for competitors in the market and eventual new entrants as those tax breaks and subsidies are only benefiting few companies. Coincidentally, many of those companies have contributed financially to Uribe’s two presidential campaigns and are linked to members of his Cabinet or allies in Congress.

In face of upcoming elections, this situation creates an opportunity for political parties running for Congress and the Presidency. Yet it is unclear what will Uribe do in the upcoming weeks as he and his supporters will still influence the electoral process. There are significant bright-minds running for seats in Congress, and supporting campaign efforts and platform development behind the scenes. Moreover, after years of political party weakness, political parties are more relevant now than in the recent past – a situation determined by some electoral law reforms and the Uribe presidency itself. The Liberal Party is attempting to reinvent itself after judiciously leading the opposition. The Conservative Party finally decided that its destiny may not be at Uribe’s mercy. The Alternative Democratic Pole (PDA) will contest its third national election, and most likely will continue to play a relevant role. And even Bogotá’s former mayors Antanas Mockus, Enrique Peñalosa, and Luis Garzón joined efforts in a Green Party although it remains to be seen whether this is just a temporary front or a long-term effort.

Colombia’s Constitutional Court decision ended a two-year decision-making lapse in the country. The economy and the country’s institutions have been severely weakened as a result of a highly personalized presidency. Upcoming elections represent an opportunity to get the country back on its course and effectively achieve growth and investment through genuine democratic governance and a truly market-oriented economy.