The Americas Blog

El Blog de las Americas

The Americas Blog seeks to present a more accurate perspective on economic and political developments in the Western Hemisphere than is often presented in the United States. It will provide information that is often ignored, buried, and sometimes misreported in the major U.S. media.

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This post analyzes SDR holdings as reported by the IMF at the end of September and compares them to previous months’ reports.
This post analyzes SDR holdings as reported by the IMF at the end of September and compares them to previous months’ reports.
The winner of Sunday’s presidential elections -- and the subsequent second round -- will largely determine how impactful a new constitution could be, as it would be enacted during their time in office
The winner of Sunday’s presidential elections -- and the subsequent second round -- will largely determine how impactful a new constitution could be, as it would be enacted during their time in office
Aside from the ethics and the universal discussion around tax havens, the Commission’s report centers around a critical element: did Mr. Lasso break the law, known as the Ethical Agreement Law, which prohibits candidates and public officials from owning, directly or indirectly, assets or holdings in jurisdictions that Ecuador considers to be tax havens?
Aside from the ethics and the universal discussion around tax havens, the Commission’s report centers around a critical element: did Mr. Lasso break the law, known as the Ethical Agreement Law, which prohibits candidates and public officials from owning, directly or indirectly, assets or holdings in jurisdictions that Ecuador considers to be tax havens?

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On August 23, 2021, the International Monetary Fund (IMF) allocated $650 billion worth of Special Drawing Rights (SDRs) to its members to add liquidity to the global economy during the unprecedented health and economic crises caused by COVID-19. SDRs, which are an international reserve asset, can be exchanged for hard currency or donated among member countries, meaning the injection by the IMF can be used by governments to stabilize their currencies and shore up their reserves, or for a number of social or health policies — the latter being an especially important use for SDRs during the pandemic, as IMF Managing Director Kristalina Georgieva has said.


 Based on the IMF’s August 31 accounting of SDR holdings at the SDR Department as well as media reporting on member countries, we can get a preliminary sense of what countries immediately used the additional allocation of SDRs and for what purposes. Not all uses of SDRs involve operations at the SDR Department that modify member countries’ SDR holdings; some are domestic operations leveraged on SDR holdings. These types of operations will be discussed in upcoming articles. 

Key takeaways from this month’s data:

  • This analysis of the first available data from the IMF demonstrates that several countries immediately exchanged large portions of their share of the new $650 billion allocation for hard currencies. $1.6 billion worth of SDR transactions took place.
  • Countries that exchanged SDRs for hard currencies cited liquidity problems, dwindling foreign exchange reserves and a need for more imports, and a desire to implement measures to address the pandemic.
  • Several richer countries, including some with Voluntary Trading Agreements with the IMF, exchanged hard currencies for SDRs.
  • Many countries expressed that SDRs improved their financial position, increased investor confidence, or that they were developing plans to exchange SDRs for certain uses, but had not exchanged SDRs for hard currencies as of the August 31 IMF data release. These are countries to watch in future months.
  • There was a net total of $1.614 billion worth of SDRs exchanged in the last week in August.

The $650 billion allocation of SDRs, based on this preliminary data, appears to be a success. It is worth noting that in the US Congress there are calls and legislation (which has already passed the US House of Representatives again this year) in support of an additional allocation of SDRs — about $2.2 trillion worth of additional SDRs, which would bring the total issuance up to the amount that was twice approved by the US House of Representatives last year.

Note that there is an upcoming event on October 4, Making the Most of Special Drawing Rights: Approaches to Maximize Impact and Create a Sustainable and Just Recovery, co-sponsored by CEPR and other organizations and featuring introductory remarks by IMF Managing Director Kristalina Georgieva.


IMF Data: SDR accounts with large decreases

While reductions usually imply an exchange of SDRs for hard currency, decreases in SDR holdings may also result from a payment in SDRs to the IMF for a loan or a transaction (such as a deposit) with a prescribed holder of SDRs. Countries may also lend SDRs to each other. There was a net total of $1.614 billion worth of SDRs exchanged in the last week in August.

Chad and the Republic of Congo
Collective decrease of $253 million (representing a 100 percent and a 27.9 percent reduction of new SDR allocations, respectively)

Chad and the Republic of Congo had significant decreases in holdings that exactly match an increase in holdings of their common regional central bank, the Bank of Central African States (BEAC, its acronym in French). The IMF can qualify supranational monetary or financial institutions as “prescribed holders,” i.e. entities that can also have accounts at the SDR Department and engage in transactions with SDRs. BEAC is a prescribed holder. 

While Chad delivered 100 percent of its new $191 million SDR allocation to the BEAC, the Republic of Congo only delivered 27.9 percent of its new $221 million SDR holdings to the BEAC. Other BEAC member countries did not show significant movements as of August 31.  

Bosnia and Herzegovina
$362 million decline (representing a 100 percent reduction of its new $362 million allocation) 

Bosnia and Herzegovina had a net decrease of $362 million worth of SDRs, which represented 100 percent of its new allocation of about $362 million. Approximately $120 million of the allocation was distributed by the Federation of Bosnia and Herzegovina to regional governments for reforms, infrastructure, and social and health programs to combat the pandemic. The Republika Srpska receivedabout $120 million as well, which was used to support a budget that includes increases in social spending. 

Comoros
$24.2 million decline (99.7 percent reduction of $24.3 million allocation)

Comoros had a net decrease of virtually all of the $24.3 million worth of SDRs in the new allocation. There are few details on the use, although the government recently announced measures to address a dire food crisis in the country. In 2020, Comoros received a disbursement under the IMF’s Rapid Credit Facility and used the Rapid Financing Instrument to meet urgent financial needs. 

Antigua and Barbuda
$27.1 million decline (99.1 percent reduction of $27.3 million allocation)

Antigua and Barbuda saw a decrease in SDR holdings of about $27.1 million, which represented the vast majority of its $27.3 million allocation worth of SDRs. There are no details on what specifically the liquidity would be used for. Antigua and Barbuda was considering an IMF program earlier this year due to challenges from the pandemic, and just recently was categorized as “highest risk” for COVID-19 by the American Centers for Disease Control. Given the importance of tourism to the economy and that Americans historically represent a large number of tourists, the CDC’s categorization could have an impact on the country’s financial stability.

Sri Lanka
$673 million decline (85.2 percent reduction of $790.1 million allocation)

Sri Lanka received $790.1 million worth of SDRs in the allocation and saw a reduction of 85.2 percent, or nearly $673 million. A loss of tourist income during the pandemic was one of the reasons that Sri Lanka sharply reduced imports, as it faced dwindling foreign exchange reserves. Sri Lanka’s exchange of SDRs improved the situation significantly in the near term, with reserves rising 26 percent to $3.55 billion. This is especially important given the importance of food imports to the country.

The Bank of International Settlements
$76.4 million decline (3.3 percent reduction of previous SDR holdings)

The Bank of International Settlements (BIS) is a prescribed holder. It does not receive SDRs when allocated, but it may transact in SDRs with other prescribed holders or with member countries. In the case of the BIS, it is possible that this decline was a portfolio diversification strategy.

Other notable accounts:

  • Nauru
    $1.1 million decline (22.4 percent reduction of $4.9 million SDR allocation)
  • Albania
    $25.1 million decline (13.2 percent reduction of $190.1 million SDR allocation)

IMF Data: SDR accounts with large increases in excess of the new allocation

These countries likely exchanged hard currencies for SDRs, or in some cases, could have received a loan of SDRs from other countries. Alternatively, they could have accepted SDRs as payment for previous loans.

The IMF has reached Voluntary Trading Arrangements (VTA) for SDRs with several entities: Australia, China, Japan, Korea, New Zealand; the European Central Bank, Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Israel, Italy, Malta, Netherlands, Norway, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom; Canada, Chile, Mexico, United States; and Saudi Arabia. Therefore, these countries will likely show increases in their holdings to fulfill the requests of those countries whose holdings have decreased. Conversely, countries not on this list with increases in SDR holdings are candidates for other types of transactions. 

In the first week after the SDRs were allocated, countries with Voluntary Trading Arrangements collectively purchased $1.16 billion in SDRs.

  • Canada
    $385.1 million increase over new allocation
  • Mexico
    $273.8 million increase
  • France
    $151 million increase
  • Italy
    $144.9 million increase
  • Portugal
    $77.2 million increase
  • Chile
    $64.1 million increase
  • Switzerland
    $27.4 million increase
  • Cyprus
    $24.2 million increase

These countries’ total holdings of SDRs was worth $128.6 billion. They increased their total SDR holdings by less than 1 percent.

IMF General Resources Account
Significantly increased its SDR holdings on August 5

A few weeks before the SDRs were allocated, the IMF received SDR payments corresponding to previous loans from several countries: Argentina ($347 million), Egypt ($134 million), Ukraine ($63 million), and others. It is important to remember that no SDRs are allocated to the IMF. After the allocation, the IMF’s SDR holdings did not increase significantly. It is expected that major increases will take place in November, considering the projected payment schedules to the IMF.

Trinidad and Tobago
$110 million increase (17.1 percent increase in excess of $641 million allocation)

It is possible that some countries, such as Trinidad and Tobago, received SDRs over their allocation as a transfer (loan or donation) from other countries. In this case, the SDR amounts point to a loan in SDRs from another country, possibly to purchase vaccines. Trinidad and Tobago had indicated the liquidity from the recently allocated SDRs could be used to support export sectors, indicating the country may draw down SDRs for hard currency. 

Ghana
$12 million increase (representing a 1.2 percent increase in excess of its new $1 billion allocation)

Ghana has stated SDRs will be used for a post-pandemic recovery program. It is possible Ghana purchased SDRs from New Zealand, a VTA country, to pay its September 8, 2021 Poverty Reduction and Growth Trust loan installment to the IMF for $12 million. The amounts match almost exactly. 


Countries to watch

Many countries expressed that SDRs improved their financial position, increased investor confidence, or that they were developing plans to exchange SDRs for certain uses, but had not exchanged SDRs for hard currencies as of the August 31 IMF data release. These are countries to watch in future months.

On August 23, 2021, the International Monetary Fund (IMF) allocated $650 billion worth of Special Drawing Rights (SDRs) to its members to add liquidity to the global economy during the unprecedented health and economic crises caused by COVID-19. SDRs, which are an international reserve asset, can be exchanged for hard currency or donated among member countries, meaning the injection by the IMF can be used by governments to stabilize their currencies and shore up their reserves, or for a number of social or health policies — the latter being an especially important use for SDRs during the pandemic, as IMF Managing Director Kristalina Georgieva has said.


 Based on the IMF’s August 31 accounting of SDR holdings at the SDR Department as well as media reporting on member countries, we can get a preliminary sense of what countries immediately used the additional allocation of SDRs and for what purposes. Not all uses of SDRs involve operations at the SDR Department that modify member countries’ SDR holdings; some are domestic operations leveraged on SDR holdings. These types of operations will be discussed in upcoming articles. 

Key takeaways from this month’s data:

  • This analysis of the first available data from the IMF demonstrates that several countries immediately exchanged large portions of their share of the new $650 billion allocation for hard currencies. $1.6 billion worth of SDR transactions took place.
  • Countries that exchanged SDRs for hard currencies cited liquidity problems, dwindling foreign exchange reserves and a need for more imports, and a desire to implement measures to address the pandemic.
  • Several richer countries, including some with Voluntary Trading Agreements with the IMF, exchanged hard currencies for SDRs.
  • Many countries expressed that SDRs improved their financial position, increased investor confidence, or that they were developing plans to exchange SDRs for certain uses, but had not exchanged SDRs for hard currencies as of the August 31 IMF data release. These are countries to watch in future months.
  • There was a net total of $1.614 billion worth of SDRs exchanged in the last week in August.

The $650 billion allocation of SDRs, based on this preliminary data, appears to be a success. It is worth noting that in the US Congress there are calls and legislation (which has already passed the US House of Representatives again this year) in support of an additional allocation of SDRs — about $2.2 trillion worth of additional SDRs, which would bring the total issuance up to the amount that was twice approved by the US House of Representatives last year.

Note that there is an upcoming event on October 4, Making the Most of Special Drawing Rights: Approaches to Maximize Impact and Create a Sustainable and Just Recovery, co-sponsored by CEPR and other organizations and featuring introductory remarks by IMF Managing Director Kristalina Georgieva.


IMF Data: SDR accounts with large decreases

While reductions usually imply an exchange of SDRs for hard currency, decreases in SDR holdings may also result from a payment in SDRs to the IMF for a loan or a transaction (such as a deposit) with a prescribed holder of SDRs. Countries may also lend SDRs to each other. There was a net total of $1.614 billion worth of SDRs exchanged in the last week in August.

Chad and the Republic of Congo
Collective decrease of $253 million (representing a 100 percent and a 27.9 percent reduction of new SDR allocations, respectively)

Chad and the Republic of Congo had significant decreases in holdings that exactly match an increase in holdings of their common regional central bank, the Bank of Central African States (BEAC, its acronym in French). The IMF can qualify supranational monetary or financial institutions as “prescribed holders,” i.e. entities that can also have accounts at the SDR Department and engage in transactions with SDRs. BEAC is a prescribed holder. 

While Chad delivered 100 percent of its new $191 million SDR allocation to the BEAC, the Republic of Congo only delivered 27.9 percent of its new $221 million SDR holdings to the BEAC. Other BEAC member countries did not show significant movements as of August 31.  

Bosnia and Herzegovina
$362 million decline (representing a 100 percent reduction of its new $362 million allocation) 

Bosnia and Herzegovina had a net decrease of $362 million worth of SDRs, which represented 100 percent of its new allocation of about $362 million. Approximately $120 million of the allocation was distributed by the Federation of Bosnia and Herzegovina to regional governments for reforms, infrastructure, and social and health programs to combat the pandemic. The Republika Srpska receivedabout $120 million as well, which was used to support a budget that includes increases in social spending. 

Comoros
$24.2 million decline (99.7 percent reduction of $24.3 million allocation)

Comoros had a net decrease of virtually all of the $24.3 million worth of SDRs in the new allocation. There are few details on the use, although the government recently announced measures to address a dire food crisis in the country. In 2020, Comoros received a disbursement under the IMF’s Rapid Credit Facility and used the Rapid Financing Instrument to meet urgent financial needs. 

Antigua and Barbuda
$27.1 million decline (99.1 percent reduction of $27.3 million allocation)

Antigua and Barbuda saw a decrease in SDR holdings of about $27.1 million, which represented the vast majority of its $27.3 million allocation worth of SDRs. There are no details on what specifically the liquidity would be used for. Antigua and Barbuda was considering an IMF program earlier this year due to challenges from the pandemic, and just recently was categorized as “highest risk” for COVID-19 by the American Centers for Disease Control. Given the importance of tourism to the economy and that Americans historically represent a large number of tourists, the CDC’s categorization could have an impact on the country’s financial stability.

Sri Lanka
$673 million decline (85.2 percent reduction of $790.1 million allocation)

Sri Lanka received $790.1 million worth of SDRs in the allocation and saw a reduction of 85.2 percent, or nearly $673 million. A loss of tourist income during the pandemic was one of the reasons that Sri Lanka sharply reduced imports, as it faced dwindling foreign exchange reserves. Sri Lanka’s exchange of SDRs improved the situation significantly in the near term, with reserves rising 26 percent to $3.55 billion. This is especially important given the importance of food imports to the country.

The Bank of International Settlements
$76.4 million decline (3.3 percent reduction of previous SDR holdings)

The Bank of International Settlements (BIS) is a prescribed holder. It does not receive SDRs when allocated, but it may transact in SDRs with other prescribed holders or with member countries. In the case of the BIS, it is possible that this decline was a portfolio diversification strategy.

Other notable accounts:

  • Nauru
    $1.1 million decline (22.4 percent reduction of $4.9 million SDR allocation)
  • Albania
    $25.1 million decline (13.2 percent reduction of $190.1 million SDR allocation)

IMF Data: SDR accounts with large increases in excess of the new allocation

These countries likely exchanged hard currencies for SDRs, or in some cases, could have received a loan of SDRs from other countries. Alternatively, they could have accepted SDRs as payment for previous loans.

The IMF has reached Voluntary Trading Arrangements (VTA) for SDRs with several entities: Australia, China, Japan, Korea, New Zealand; the European Central Bank, Austria, Belgium, Cyprus, Denmark, Finland, France, Germany, Greece, Ireland, Israel, Italy, Malta, Netherlands, Norway, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom; Canada, Chile, Mexico, United States; and Saudi Arabia. Therefore, these countries will likely show increases in their holdings to fulfill the requests of those countries whose holdings have decreased. Conversely, countries not on this list with increases in SDR holdings are candidates for other types of transactions. 

In the first week after the SDRs were allocated, countries with Voluntary Trading Arrangements collectively purchased $1.16 billion in SDRs.

  • Canada
    $385.1 million increase over new allocation
  • Mexico
    $273.8 million increase
  • France
    $151 million increase
  • Italy
    $144.9 million increase
  • Portugal
    $77.2 million increase
  • Chile
    $64.1 million increase
  • Switzerland
    $27.4 million increase
  • Cyprus
    $24.2 million increase

These countries’ total holdings of SDRs was worth $128.6 billion. They increased their total SDR holdings by less than 1 percent.

IMF General Resources Account
Significantly increased its SDR holdings on August 5

A few weeks before the SDRs were allocated, the IMF received SDR payments corresponding to previous loans from several countries: Argentina ($347 million), Egypt ($134 million), Ukraine ($63 million), and others. It is important to remember that no SDRs are allocated to the IMF. After the allocation, the IMF’s SDR holdings did not increase significantly. It is expected that major increases will take place in November, considering the projected payment schedules to the IMF.

Trinidad and Tobago
$110 million increase (17.1 percent increase in excess of $641 million allocation)

It is possible that some countries, such as Trinidad and Tobago, received SDRs over their allocation as a transfer (loan or donation) from other countries. In this case, the SDR amounts point to a loan in SDRs from another country, possibly to purchase vaccines. Trinidad and Tobago had indicated the liquidity from the recently allocated SDRs could be used to support export sectors, indicating the country may draw down SDRs for hard currency. 

Ghana
$12 million increase (representing a 1.2 percent increase in excess of its new $1 billion allocation)

Ghana has stated SDRs will be used for a post-pandemic recovery program. It is possible Ghana purchased SDRs from New Zealand, a VTA country, to pay its September 8, 2021 Poverty Reduction and Growth Trust loan installment to the IMF for $12 million. The amounts match almost exactly. 


Countries to watch

Many countries expressed that SDRs improved their financial position, increased investor confidence, or that they were developing plans to exchange SDRs for certain uses, but had not exchanged SDRs for hard currencies as of the August 31 IMF data release. These are countries to watch in future months.

On August 17, the Interdisciplinary Group of Independent Experts (GIEI in Spanish) released its report on human rights violations committed in the context of the 2019 coup d’état that overthrew President Evo Morales and installed the de facto government of Jeanine Áñez in Bolivia. The 468-page report, based on eight months of research, sheds light on a series of major human rights abuses committed between September and December 2019.

Among its many findings, the report clearly establishes that “massacres” were perpetrated by Bolivian state security forces in the communities of Senkata and Sacaba. The report also includes a number of recommendations regarding the treatment of victims, calls for those responsible for human rights violations to be held accountable, and stresses the need for a greater autonomy and depoliticization of the Bolivian judiciary. Many of the report’s recommendations seek to address structural issues, including the pervasive racism in both the Bolivian state and in Bolivian society. The report concludes “that the [2019] violence had a racial and anti-indigenous character, and that the security forces used excessive or disproportionate force and did not adequately prevent acts of violence.”[1]

In the preliminary section of the GIEI report, which provides general background on the events that preceded the Senkata and Sacaba massacres, the authors clearly identify the audit of the 2019 elections carried out by the Organization of American States (OAS) as a major factor that contributed to the political crisis that led to the forced resignation of President Morales and the installment of Jeanine Añez as de facto president. The report states:

The worsening of the crisis was marked by multiple events, including the police riot, the publication of the preliminary report of the results of the audit of the Organization of American States (OAS) and the statements of the commanders of the Armed Forces and the Police to pressure the resignation of Evo Morales.

The OAS’s delegitimization of the outcome of the 2019 elections in Bolivia was debunked by dozens of statisticians, and in-depth reports and academic papers from researchers at CEPR and by scholars from the MIT and the University of Pennsylvania and the University of Tulane, whose findings were eventually published in The Washington Post and The New York Times, respectively. 

A June 2020 New York Times article stated that the OAS’s claims “heightened doubts about the fairness of the vote and fueled a chain of events that changed the South American nation’s history. The opposition seized on the claim to escalate protests, gather international support, and push Mr. Morales from power with military support weeks later.”

The OAS’s flawed claims were not just used to justify the forced removal of Morales. As the GIEI report shows, they also served to justify the criminalization of electoral officials — both former members of the Supreme Electoral Tribunal (TSE), in charge of overseeing elections nationwide, and former members of the Departmental Electoral Tribunals (TEDs).

Whereas the GIEI report clearly establishes that “the GIEI does not have the mandate nor does it qualify, as valid or invalid, the October 2019 election,” it does show how the OAS’s accusations of fraud helped pave the way for “the human rights violations that were committed against the election officials in the context of the process of alleged electoral fraud.”

The GIEI report finds that “as a general rule, the accusations [against electoral officials] were based on the preliminary report of the OAS, which did not attribute individual responsibility, as well as on information obtained in the media, on statements of the persons detained and, in a few cases, on some testimonies of electoral officials. The detention of all the electoral officials was a generalized measure lacking objective motivation, applied without prior investigation.”

The GIEI report describes how on November 10, the day that the OAS published its preliminary audit report, and the day of the coup d’état, “… the Prosecutor General’s Office … initiated the ex officio prosecution of the members of the Supreme Electoral Tribunal (TSE)” based on “the conclusions of the OAS Preliminary Report.” The GIEI report also cites a statement from the Prosecutor General’s Office that states:

… in view of the report issued by the Organization of American States […]: [the Prosecutor General’s Office] has INSTRUCTED the Departmental Prosecutor’s Office of La Paz, early this morning, to IMMEDIATELY START ALL CORRESPONDING LEGAL ACTIONS for the prosecution and trial of the members of the Supreme Electoral Tribunal and other authors and participants of these alleged irregular acts. … Likewise, the nine departmental prosecutors of the country have been instructed to immediately initiate criminal actions against the members and public servants of the Departmental Electoral Tribunals.

The GIEI report describes how “an investigation was opened against the president of the TSE, María Eugenia Choque Quispe, and others, for the alleged commission of the electoral crimes of forging documents or use of forged documents, computer manipulation, alteration and concealment of results,” as well as a long list of other crimes, including violating Bolivia’s laws and constitution. Choque was arrested a few hours after the OAS preliminary audit report was published, alongside the other members of the TSE: Antonio José Iván Costas Sitic, Lucy Cruz Vilca, Lidia Iriarte Tórrez, Idelfonso Mamani Romero, and Edgar Gonzales López.

The GIEI report recalls that “in a press conference at the police headquarters, the recently apprehended María Eugenia Choque and Antonio José Iván Costas Sitic, president and vice-president of the TSE, respectively, were shown handcuffed.” They were paraded as trophies in a live press conference, looking confused and restrained in images that could only be described as deeply disturbing. Costas held a heap of prison blankets. 

The GIEI report finds that, in Santa Cruz, “most of the [TED] members were deprived of their freedom for periods ranging from one to eight months, until they were granted alternative measures to incarceration.” The GIEI also notes: 

The proceedings against the members of the departmental tribunals were dismissed in March 2021 because of ‘insufficient evidence to support the accusation.’ However, in the case of the TSE officials, as of July 2021, almost all of them were still under alternative measures to pretrial detention, including house arrest without authorization to leave the premises and with work restrictions, freezing of accounts and asset seizure.

The GIEI report also denounces the “various irregularities and arbitrariness on the part of the Prosecutor’s Office, the police and the judicial authorities” in the prosecution of the presidents of the TSE and the nine departmental electoral tribunals (TEDs). The GIEI criticized the “lack of objective criteria in the determination of [the electoral authorities’] legal situation, the treatment they received from the authorities, and the serious procedural irregularities that hindered their right to due process and the presumption of innocence. The same pattern of persecution was identified in basically all cases against election officials in the country.”

The GIEI report finds that the Bolivian police, which mutinied against the Morales government on November 8, 2019, played a central role along with the Prosecutor General’s Office in the persecution and intimidation of election officials, going as far as exerting pressures to force the resignation of a number of the members of the electoral tribunals. The report establishes that:

…the police did not intervene in the face of the threats and the burning of the facilities of several departmental tribunals [TEDs], which considerably affected personnel, property, and electoral material. Nor did it intervene in the persecution and public harassment that took place against the members [of the TEDs] until November 10. Among other events, it is worth mentioning what happened in Chuquisaca, where, when a group of people arrived at the TED to burn it down, the electoral personnel had to escape from the building by jumping over a wall to a neighboring building. The election officials remained hidden in a mezzanine until the following morning when they were rescued by their acquaintances. Most of the election officials interviewed told the GIEI that they decided to leave their homes due to the threats in the media of an attempt on their lives and property.

On [November] 10th and the following days, most of the departmental electoral officials were arrested. It is noteworthy that almost all of the officials interviewed reported having received aggressive and discriminatory treatment since their arrival at the police or Prosecutor’s Office. Similarly, all were deprived of their freedom until they were presented before the judicial authority for the hearing of precautionary measures and during this time were subjected to degrading conditions of incarceration. The prison authorities did not grant them sanitary privacy, did not take into account the preexisting health conditions of some of them, kept them in unhealthy places and intimidated them.

At this stage there was pressure from police, ministerial, and judicial authorities for the members to resign from their positions before the hearing on precautionary measures. Of the 21 people interviewed, only one said that he had not agreed to this measure [resigning], and one had already done so previously.

The OAS did nothing to prevent the persecution of former electoral officials.

It is clear, from the GIEI’s report, that Bolivia’s judicial authorities used the OAS preliminary audit report as a justification for the arrests and for the charges brought forward against Bolivia’s election officials. The GIEI report cites the La Paz Southern Zone’s First Criminal Court, which justified the charges against Bolivia’s electoral authorities by stipulating that whereas “the OAS report does not directly establish criminal responsibility,” “it is clear that this [OAS] audit report makes references to irregularities in the electoral process, as a result, there are indications that illicit acts may have arisen during the course of the elections.”

Throughout Áñez’s de facto rule, the OAS did nothing to oppose the heavy-handed treatment of former election officials. The OAS did not protest the arrest and public humiliation of the members of the TSE who had invited the OAS in good faith to come to Bolivia to act as impartial observers of their country’s elections. Nor has the OAS said anything, to date, to stop its flawed report from being used in legal proceedings against the former members of the TSE and TEDs, or to alleviate the plight of the electoral officials being tried with scant respect for due process, as the GIEI report clearly illustrates.

CEPR has highlighted in the past that the OAS went further than merely listing the irregularities that it considered invalidated the electoral results; the OAS added political and juridical opinions that clearly exceeded its mandate. In presenting the November 10 preliminary report to the OAS, Secretary General Luis Almagro declared that a “coup d’état” had occurred on October 20 in the form of “electoral fraud” in Bolivia. The December 2019 OAS final audit report and accompanying press release in particular spoke of “intentional manipulation.” The Spanish version of the same release — aimed at Latin American and particularly Bolivian audiences at a time when Bolivia’s de facto government, police, and armed forces were cracking down on the Movement Toward Socialism (MAS) opposition — used the term “manipulación dolosa.” In Spanish, “doloso” — which can be roughly translated as “fraudulent” — is used in criminal law to signify a criminal act. These claims made by the OAS in communications about its report heightened the sense of grievances felt by large sectors of Bolivian society, further polarized Bolivian politics, and set the stage for the witch hunt, incarceration, and public humiliation of election officials.

In a recent interview with the Bolivian daily Página Siete, former TSE member Antonio Costas, whose resignation from the TSE on October 21, 2019 has often been hailed by the OAS as a strong indication of wrongdoing on the TSE’s behalf, accused the OAS of being “the trigger for [the events of] that night and the night of Tuesday [October 22, 2019] when the Departmental Electoral Tribunals were burned down, and that was the responsibility of the head of the OAS Observation Mission.” Costas stated that the OAS’s 2019 election audit was “an extremely superficial report, not technical at all. It’s not an audit.” Costas also questioned whether the auditors were in fact the authors of the OAS report, and hinted at the possibility of manipulation from higher up. He raised the question of whether Secretary General Almagro could be prosecuted for being behind a report that caused “such havoc” in Bolivia.

The findings of the GIEI, which were welcomed by the United Nations Office of the High Commissioner on Human Rights, are likely to reignite calls for an investigation into the role that the OAS played in delegitimizing the 2019 elections in Bolivia and in helping to pave the way for the November 2019 coup d’état and the human rights violations that took place during Jeanine Áñez’s de facto rule.

[1] This and the following quotations from the GIEI report are this author’s translations.

On August 17, the Interdisciplinary Group of Independent Experts (GIEI in Spanish) released its report on human rights violations committed in the context of the 2019 coup d’état that overthrew President Evo Morales and installed the de facto government of Jeanine Áñez in Bolivia. The 468-page report, based on eight months of research, sheds light on a series of major human rights abuses committed between September and December 2019.

Among its many findings, the report clearly establishes that “massacres” were perpetrated by Bolivian state security forces in the communities of Senkata and Sacaba. The report also includes a number of recommendations regarding the treatment of victims, calls for those responsible for human rights violations to be held accountable, and stresses the need for a greater autonomy and depoliticization of the Bolivian judiciary. Many of the report’s recommendations seek to address structural issues, including the pervasive racism in both the Bolivian state and in Bolivian society. The report concludes “that the [2019] violence had a racial and anti-indigenous character, and that the security forces used excessive or disproportionate force and did not adequately prevent acts of violence.”[1]

In the preliminary section of the GIEI report, which provides general background on the events that preceded the Senkata and Sacaba massacres, the authors clearly identify the audit of the 2019 elections carried out by the Organization of American States (OAS) as a major factor that contributed to the political crisis that led to the forced resignation of President Morales and the installment of Jeanine Añez as de facto president. The report states:

The worsening of the crisis was marked by multiple events, including the police riot, the publication of the preliminary report of the results of the audit of the Organization of American States (OAS) and the statements of the commanders of the Armed Forces and the Police to pressure the resignation of Evo Morales.

The OAS’s delegitimization of the outcome of the 2019 elections in Bolivia was debunked by dozens of statisticians, and in-depth reports and academic papers from researchers at CEPR and by scholars from the MIT and the University of Pennsylvania and the University of Tulane, whose findings were eventually published in The Washington Post and The New York Times, respectively. 

A June 2020 New York Times article stated that the OAS’s claims “heightened doubts about the fairness of the vote and fueled a chain of events that changed the South American nation’s history. The opposition seized on the claim to escalate protests, gather international support, and push Mr. Morales from power with military support weeks later.”

The OAS’s flawed claims were not just used to justify the forced removal of Morales. As the GIEI report shows, they also served to justify the criminalization of electoral officials — both former members of the Supreme Electoral Tribunal (TSE), in charge of overseeing elections nationwide, and former members of the Departmental Electoral Tribunals (TEDs).

Whereas the GIEI report clearly establishes that “the GIEI does not have the mandate nor does it qualify, as valid or invalid, the October 2019 election,” it does show how the OAS’s accusations of fraud helped pave the way for “the human rights violations that were committed against the election officials in the context of the process of alleged electoral fraud.”

The GIEI report finds that “as a general rule, the accusations [against electoral officials] were based on the preliminary report of the OAS, which did not attribute individual responsibility, as well as on information obtained in the media, on statements of the persons detained and, in a few cases, on some testimonies of electoral officials. The detention of all the electoral officials was a generalized measure lacking objective motivation, applied without prior investigation.”

The GIEI report describes how on November 10, the day that the OAS published its preliminary audit report, and the day of the coup d’état, “… the Prosecutor General’s Office … initiated the ex officio prosecution of the members of the Supreme Electoral Tribunal (TSE)” based on “the conclusions of the OAS Preliminary Report.” The GIEI report also cites a statement from the Prosecutor General’s Office that states:

… in view of the report issued by the Organization of American States […]: [the Prosecutor General’s Office] has INSTRUCTED the Departmental Prosecutor’s Office of La Paz, early this morning, to IMMEDIATELY START ALL CORRESPONDING LEGAL ACTIONS for the prosecution and trial of the members of the Supreme Electoral Tribunal and other authors and participants of these alleged irregular acts. … Likewise, the nine departmental prosecutors of the country have been instructed to immediately initiate criminal actions against the members and public servants of the Departmental Electoral Tribunals.

The GIEI report describes how “an investigation was opened against the president of the TSE, María Eugenia Choque Quispe, and others, for the alleged commission of the electoral crimes of forging documents or use of forged documents, computer manipulation, alteration and concealment of results,” as well as a long list of other crimes, including violating Bolivia’s laws and constitution. Choque was arrested a few hours after the OAS preliminary audit report was published, alongside the other members of the TSE: Antonio José Iván Costas Sitic, Lucy Cruz Vilca, Lidia Iriarte Tórrez, Idelfonso Mamani Romero, and Edgar Gonzales López.

The GIEI report recalls that “in a press conference at the police headquarters, the recently apprehended María Eugenia Choque and Antonio José Iván Costas Sitic, president and vice-president of the TSE, respectively, were shown handcuffed.” They were paraded as trophies in a live press conference, looking confused and restrained in images that could only be described as deeply disturbing. Costas held a heap of prison blankets. 

The GIEI report finds that, in Santa Cruz, “most of the [TED] members were deprived of their freedom for periods ranging from one to eight months, until they were granted alternative measures to incarceration.” The GIEI also notes: 

The proceedings against the members of the departmental tribunals were dismissed in March 2021 because of ‘insufficient evidence to support the accusation.’ However, in the case of the TSE officials, as of July 2021, almost all of them were still under alternative measures to pretrial detention, including house arrest without authorization to leave the premises and with work restrictions, freezing of accounts and asset seizure.

The GIEI report also denounces the “various irregularities and arbitrariness on the part of the Prosecutor’s Office, the police and the judicial authorities” in the prosecution of the presidents of the TSE and the nine departmental electoral tribunals (TEDs). The GIEI criticized the “lack of objective criteria in the determination of [the electoral authorities’] legal situation, the treatment they received from the authorities, and the serious procedural irregularities that hindered their right to due process and the presumption of innocence. The same pattern of persecution was identified in basically all cases against election officials in the country.”

The GIEI report finds that the Bolivian police, which mutinied against the Morales government on November 8, 2019, played a central role along with the Prosecutor General’s Office in the persecution and intimidation of election officials, going as far as exerting pressures to force the resignation of a number of the members of the electoral tribunals. The report establishes that:

…the police did not intervene in the face of the threats and the burning of the facilities of several departmental tribunals [TEDs], which considerably affected personnel, property, and electoral material. Nor did it intervene in the persecution and public harassment that took place against the members [of the TEDs] until November 10. Among other events, it is worth mentioning what happened in Chuquisaca, where, when a group of people arrived at the TED to burn it down, the electoral personnel had to escape from the building by jumping over a wall to a neighboring building. The election officials remained hidden in a mezzanine until the following morning when they were rescued by their acquaintances. Most of the election officials interviewed told the GIEI that they decided to leave their homes due to the threats in the media of an attempt on their lives and property.

On [November] 10th and the following days, most of the departmental electoral officials were arrested. It is noteworthy that almost all of the officials interviewed reported having received aggressive and discriminatory treatment since their arrival at the police or Prosecutor’s Office. Similarly, all were deprived of their freedom until they were presented before the judicial authority for the hearing of precautionary measures and during this time were subjected to degrading conditions of incarceration. The prison authorities did not grant them sanitary privacy, did not take into account the preexisting health conditions of some of them, kept them in unhealthy places and intimidated them.

At this stage there was pressure from police, ministerial, and judicial authorities for the members to resign from their positions before the hearing on precautionary measures. Of the 21 people interviewed, only one said that he had not agreed to this measure [resigning], and one had already done so previously.

The OAS did nothing to prevent the persecution of former electoral officials.

It is clear, from the GIEI’s report, that Bolivia’s judicial authorities used the OAS preliminary audit report as a justification for the arrests and for the charges brought forward against Bolivia’s election officials. The GIEI report cites the La Paz Southern Zone’s First Criminal Court, which justified the charges against Bolivia’s electoral authorities by stipulating that whereas “the OAS report does not directly establish criminal responsibility,” “it is clear that this [OAS] audit report makes references to irregularities in the electoral process, as a result, there are indications that illicit acts may have arisen during the course of the elections.”

Throughout Áñez’s de facto rule, the OAS did nothing to oppose the heavy-handed treatment of former election officials. The OAS did not protest the arrest and public humiliation of the members of the TSE who had invited the OAS in good faith to come to Bolivia to act as impartial observers of their country’s elections. Nor has the OAS said anything, to date, to stop its flawed report from being used in legal proceedings against the former members of the TSE and TEDs, or to alleviate the plight of the electoral officials being tried with scant respect for due process, as the GIEI report clearly illustrates.

CEPR has highlighted in the past that the OAS went further than merely listing the irregularities that it considered invalidated the electoral results; the OAS added political and juridical opinions that clearly exceeded its mandate. In presenting the November 10 preliminary report to the OAS, Secretary General Luis Almagro declared that a “coup d’état” had occurred on October 20 in the form of “electoral fraud” in Bolivia. The December 2019 OAS final audit report and accompanying press release in particular spoke of “intentional manipulation.” The Spanish version of the same release — aimed at Latin American and particularly Bolivian audiences at a time when Bolivia’s de facto government, police, and armed forces were cracking down on the Movement Toward Socialism (MAS) opposition — used the term “manipulación dolosa.” In Spanish, “doloso” — which can be roughly translated as “fraudulent” — is used in criminal law to signify a criminal act. These claims made by the OAS in communications about its report heightened the sense of grievances felt by large sectors of Bolivian society, further polarized Bolivian politics, and set the stage for the witch hunt, incarceration, and public humiliation of election officials.

In a recent interview with the Bolivian daily Página Siete, former TSE member Antonio Costas, whose resignation from the TSE on October 21, 2019 has often been hailed by the OAS as a strong indication of wrongdoing on the TSE’s behalf, accused the OAS of being “the trigger for [the events of] that night and the night of Tuesday [October 22, 2019] when the Departmental Electoral Tribunals were burned down, and that was the responsibility of the head of the OAS Observation Mission.” Costas stated that the OAS’s 2019 election audit was “an extremely superficial report, not technical at all. It’s not an audit.” Costas also questioned whether the auditors were in fact the authors of the OAS report, and hinted at the possibility of manipulation from higher up. He raised the question of whether Secretary General Almagro could be prosecuted for being behind a report that caused “such havoc” in Bolivia.

The findings of the GIEI, which were welcomed by the United Nations Office of the High Commissioner on Human Rights, are likely to reignite calls for an investigation into the role that the OAS played in delegitimizing the 2019 elections in Bolivia and in helping to pave the way for the November 2019 coup d’état and the human rights violations that took place during Jeanine Áñez’s de facto rule.

[1] This and the following quotations from the GIEI report are this author’s translations.

This post originally appeared on the Duke University School of Law FinReg Blog.

Convenience, speed, and cost are important considerations for electronic payments. Recent events surrounding the COVID-19 pandemic may accelerate these trends as peoples’ willingness to handle cash may be waning. As policy makers try to assess the benefits and risks of Central Bank Digital Currencies (CBDC) researchers at central banks and academic institutions have contributed to the discussion with theoretical works on monetary policy, disintermediation, and financial stability implications.(See Bordo and Levin, 2017Andolfatto, 2019Bindseil, 2019Chiu et al., 2019Keister and Sanches, 2019Fernández-Villaverde et al., 2020Schilling et al., 2020, and Garratt and Zhu, 2021.)

However, when it comes to actual implementation, there is no substitute for experience. In our recent paper, we provide a detailed account of the Ecuadorian experience with Dinero Electrónico (DE). DE was a real-time gross settlement retail mobile payment system developed by the Banco Central del Ecuador (Central Bank of Ecuador; hereafter: BCE) that allowed citizens to transfer money from person to person using the mobile phone operators’ Unstructured Supplementary Service Data (USSD) protocol, the same protocol originally used by Kenya’s M-Pesa. DE was the first CBDC based on a mobile platform.

DE Simplicity of Access

Although the first regulations were issued in 2011, DE operated from 2014 to 2018. Real time information provided by various governmental institutions made registering easy. Citizens of Ecuador could open an account by accessing the gateway, registering their national identity number, and answering security questions. People deposited or withdrew hard currency by going to designated transaction centers. At its peak, DE had 500,000 users.

A great advantage in the design of DE, which was proposed and implemented by the BCE, was its simplicity of access: users did not require Internet access, did not have to pay charges for the use of the cell phone line, and did not need to make an initial deposit or fill out any application. The only requirement was owning a cell phone operating through any one of the nationwide carriers and the person’s identity card. For a developing country, this meant that the design increased financial inclusion.

DE Simple P2P Demo

Origin and Tug-of-war

Ecuador became dollarized in 2000 and DE accounts were denominated in USD. After the 2008 oil shock resulted in a Balance of Payments deficit and a shortage of physical cash, the BCE carried out three initiatives to optimize the use of the dollar.

First, the government issued low denomination electronic securities/T-bills that were intended to be used as currency to make payments. When the Internal Revenue Services started to accept these securities as payment for taxes, their price discount in the secondary market dropped from 20 percent to 2.3 percent.

The second attempt was FactoRepo, a B2B accounts-receivable invoice clearing initiative launched in 2009 that sought to reduce liquidity needs of small producers and entrepreneurs by settling on a net basis. The FactoRepo prototype was evaluated in a simulation using tax data on transactions. It showed a large concentration of liquidity in few firms; supply chains quickly reached importers; and many formal businesses do not pay for their agricultural raw materials with invoices. Thus, the BCE would have required a contingency fund to backstop the system to convert net surpluses into cash. Legal issues regarding the backstop function aborted the project after the prototype phase.

Third, there was a central bank mobile money initiative. Official or de jure dollarization is the adoption of a foreign unit of account as legal tender. The central bank is responsible for the conversion of domestic bank book money (xenodollars) into foreign-issued notes and coins (Fed dollars). The BCE has to acquire USD by selling other assets, a drain on official international reserve holdings. At the time, it was estimated that 82 percent of all retail payments in Ecuador were settled in cash and only 10 percent were bank transfers. BCE ultimately reached the conclusion that the best way to reduce the drain of its reserves was to extend its domestic electronic payment system by improving financial inclusion.

The initial launch of DE was in 2012. However, DE was rolled back because private banks disagreed with a central-bank-centered model. The platform name was changed to Sistema de Pago Móvil, and new regulations only allowed for transfers from deposit accounts in a financial institution. It did not involve the creation of central-bank-issued mobile money.

On February 28, 2014, the original DE legislation was reinstated. These changes turned the DE initiative back into a central-bank-issued mobile money scheme. The new system, with some improvements including payment system integration, operated with partial success and with heavy promotion by the government.

In August 2017, a new government decided that the BCE would no longer administer the system and that private banks would deploy one instead. This was an agreement between Ecuador’s largest banks and the new government. A Presidential veto to an economic law terminated DE. By March 2018, DE was no longer in force.

Deployment

DE was designed to serve multiple practical purposes. For example, there were initiatives to use it for public transportationonline purchasese-government services, and nano-credits. In 2017, the Ecuadorian government, NGOs and private firms organized the HACK153 Hackathon to develop API-based solutions using DE: 28 innovations resulted from this campaign, including app-based wallets for smartphones.

The Ecuadorian government launched a program whereby DE users received a rebate of 2 percentage points off the Value Added Tax (VAT) paid. An increase in usage followed the devolution of VAT in 2016, but this was mostly due to an increase in transactions by previous users, rather than the addition of new users. Until December 2017, 71 percent of the accounts were not used at all, and only 10 percent were used to make payments for goods and services, including public services. The government announced that public workers could request a portion of their salary to be transferred automatically to DE accounts. However, public institutions never developed a standardized procedure for doing so. In 2017, only 490 government employees (roughly 0.1 percent) received their salary in DE accounts.

Figure 1. Amounts in DE accounts

Transaction fees were competitive and transactions were executed through a real-time gross settlement system.

Transfers of less than 1.00 USD between two individual accounts of the DE system involved a 0.015 USD fee, transfers between 1.00 USD and 11 USD involved a 0.02 USD fee; the most expensive transfers, between 2,001 USD and 9,000 USD, involved a 0.15 USD fee. In contrast, an interbank transfer between two individual bank accounts could cost up to 0.45 USD and involved delayed net settlement (processed within 24 to 48 hours). A transfer from a DE account to a private bank account cost 0.25 USD. The fee for processing payments (not between citizens, but between a citizen and a firm) through DE was 0.02 USD for transactions of less than 10.00 USD, and 0.20 USD for transactions of more than 100.00 USD (up to 9,000.00 USD). In contrast, the commissions for credit cards range from 4.5 to 10 percent of the value of the sale and the payment could be processed with a delay.

The banks’ alternative

After a long gap, Ecuador’s banks finally deployed the inter-bank alternative late in 2019 called billetera vil (BIMO). It is a mobile wallet developed by Banred, a clearing house owned by a consortium of banks. People without existing bank accounts can theoretically open an account in a few minutes, without submitting any documentation. As of May 2020, 96 percent of BIMO’s 89,000 accounts were associated with previously existing savings and checking accounts, while only 4 percent were new accounts created within BIMO. As of July 2020, BIMO had not reached 50,000 downloads on Google Play.

Table 1. Comparison between BIMO (as proposed in 2019) and DE (as of its end in 2017)

   BIMO  DE
Features
Technology requirements Internet  Yes  No
Smartphone  Yes  No
Other requirements Bank account Yes (basic accounts can be opened without documentation).   No
Transaction Limits   USD50 per transaction, USD100 per day, USD300 per month. No
Backing Backed by Private Banks deposit accounts BCE liquid assets
Redeemed by Private Banks BCE
Provider BANRED BCE
Settlement Real time gross Real time gross
Fees (USD) Transaction between participants (individuals, not firms)  USD 0.01 – 5.00 0.09 Free
 USD 5.01 – 10.00 0.09 0.02
USD 10.01 – 50.00 0.09 0.10
 USD 50.01 – 100.00 not available 0.10
USD 100.01 – 9000.01 not available 0.20
Redeeming in ATM 0.45 0.35

Criticisms: Surveillance and Dedollarization

Alejandro Salas, then the regional director for the Americas of Transparency International, when interviewed by The Guardian, stated: “This can become a huge invasion of privacy because with electronic banking you can follow, even detect where the person is, and how much the person is spending. It has the potential to be a surveillance program.”

DE was designed to be traceable due to regulatory requirements. All transfers automatically record the identities of the sender and receiver, so it would be easy to criminally investigate the origin and recipient of any transfer. Although all DE information was stored, it was handled automatically by the platform, requiring minimal human intervention. Thus, one can argue that there was no inherent surveillance problem associated with DE.

The same concerns regarding data exploitation apply to information used for Internet transfers, debit cards, credit cards, credit history, and so on. This is evident from recent discussions surrounding Facebook’s Libra/Diem and other local issues. Christine Lagarde, former IMF managing director, has made the case that the central bank is a better steward of payments data than a private corporation would be.

Some Ecuadorian analysts stated that DE was designed to be a parallel or sovereign currency that was intended to cover the fiscal shortfall and thus put dollarization at risk. Critics such as the local association of private banks challenged whether DE was backed 100 percent by cash, arguing that if it was not, then DE was a new form of sovereign currency.

DE Was Backed by Cash

Although DE was not legally fully backed by USD bills, it was fully backed by USD-denominated assets. According to article 101 of the Código Orgánico Monetario y Financiero (2014) — the monetary law — DE was fully backed by liquid assets of the Banco Central. This policy was reaffirmed in an official ruling: Resolución Nro. 274-2016 of the Junta de Política y Regulación Monetaria y Financiera (art. 5). Moreover, DE was readily convertible to USD bills on demand. The holder of DE had a direct claim on USD banknotes, which made DE distinct from a typical “sovereign” currency. Some critical analysts argued that because DE was a claim on the BCE’s holdings of US dollars, and not a digital representation of a domestic fiat currency, that DE was not devoid of credit risk, and this may have induced some consumers to perceive it as more risky than other means of payment. This perceived risk could have been a factor that led some consumers not to adopt DE.

At all moments in its lifespan, the BCE held actual USD banknotes that were more than sufficient to meet expected DE cash conversions.

Main Conclusions: Ecosystem and Banks’ Acquiescence

The initial deployment competed directly with banks’ incumbent businesses. BCE should not have deployed a one-to-one commercial transaction center designation strategy. It should have developed an API platform-based open innovation and business model. The number of cash-in/loading transaction centers was limited, and some of them required the user to wait in line. In contrast, there are thousands of points to top-up (i.e., buy) airtime for mobile phones nationwide, including small convenience stores, drug stores, and even individual sellers waiting at traffic lights and using their own cell phones to sell mobile airtime. A small number of companies control the system for mobile phone top-up. DE could have used the same scheme, as was originally designed for the 2011 version, through an agreement with wholesale top-up resellers. BCE, together with the government, should have first promoted DE adoption in younger demographics and the rural areas.

Additionally, given that there was no fee for small transactions, every DE user had the potential to be a DE top-up charge agent and arbitrageur: they could receive an amount in cash and transfer it by DE. This mechanism was not announced explicitly by the Banco Central, and many users did not realize it was feasible and convenient.

Ultimately, the banking sector’s opposition contributed significantly to DE’s demise, as admitted by the new government’s BCE general manager. The Ecuadorian experience suggests that the support or acquiescence of the private banking sector is crucial to the success of any CBDC initiative. Indeed, most advocates of CBDC do not seek to undermine their two-tier banking systems. Rather, they see CBDC as a potentially necessary evolution of their strategy to meet their existing mandate to provide payment services. Many countries are simultaneously working with their commercial banks to modernize their retail-payment systems, and at the same time they are contemplating CBDCs. As DE demonstrates, this could create a tension that will be difficult to manage if not properly addressed.

 

This post originally appeared on the Duke University School of Law FinReg Blog.

Convenience, speed, and cost are important considerations for electronic payments. Recent events surrounding the COVID-19 pandemic may accelerate these trends as peoples’ willingness to handle cash may be waning. As policy makers try to assess the benefits and risks of Central Bank Digital Currencies (CBDC) researchers at central banks and academic institutions have contributed to the discussion with theoretical works on monetary policy, disintermediation, and financial stability implications.(See Bordo and Levin, 2017Andolfatto, 2019Bindseil, 2019Chiu et al., 2019Keister and Sanches, 2019Fernández-Villaverde et al., 2020Schilling et al., 2020, and Garratt and Zhu, 2021.)

However, when it comes to actual implementation, there is no substitute for experience. In our recent paper, we provide a detailed account of the Ecuadorian experience with Dinero Electrónico (DE). DE was a real-time gross settlement retail mobile payment system developed by the Banco Central del Ecuador (Central Bank of Ecuador; hereafter: BCE) that allowed citizens to transfer money from person to person using the mobile phone operators’ Unstructured Supplementary Service Data (USSD) protocol, the same protocol originally used by Kenya’s M-Pesa. DE was the first CBDC based on a mobile platform.

DE Simplicity of Access

Although the first regulations were issued in 2011, DE operated from 2014 to 2018. Real time information provided by various governmental institutions made registering easy. Citizens of Ecuador could open an account by accessing the gateway, registering their national identity number, and answering security questions. People deposited or withdrew hard currency by going to designated transaction centers. At its peak, DE had 500,000 users.

A great advantage in the design of DE, which was proposed and implemented by the BCE, was its simplicity of access: users did not require Internet access, did not have to pay charges for the use of the cell phone line, and did not need to make an initial deposit or fill out any application. The only requirement was owning a cell phone operating through any one of the nationwide carriers and the person’s identity card. For a developing country, this meant that the design increased financial inclusion.

DE Simple P2P Demo

Origin and Tug-of-war

Ecuador became dollarized in 2000 and DE accounts were denominated in USD. After the 2008 oil shock resulted in a Balance of Payments deficit and a shortage of physical cash, the BCE carried out three initiatives to optimize the use of the dollar.

First, the government issued low denomination electronic securities/T-bills that were intended to be used as currency to make payments. When the Internal Revenue Services started to accept these securities as payment for taxes, their price discount in the secondary market dropped from 20 percent to 2.3 percent.

The second attempt was FactoRepo, a B2B accounts-receivable invoice clearing initiative launched in 2009 that sought to reduce liquidity needs of small producers and entrepreneurs by settling on a net basis. The FactoRepo prototype was evaluated in a simulation using tax data on transactions. It showed a large concentration of liquidity in few firms; supply chains quickly reached importers; and many formal businesses do not pay for their agricultural raw materials with invoices. Thus, the BCE would have required a contingency fund to backstop the system to convert net surpluses into cash. Legal issues regarding the backstop function aborted the project after the prototype phase.

Third, there was a central bank mobile money initiative. Official or de jure dollarization is the adoption of a foreign unit of account as legal tender. The central bank is responsible for the conversion of domestic bank book money (xenodollars) into foreign-issued notes and coins (Fed dollars). The BCE has to acquire USD by selling other assets, a drain on official international reserve holdings. At the time, it was estimated that 82 percent of all retail payments in Ecuador were settled in cash and only 10 percent were bank transfers. BCE ultimately reached the conclusion that the best way to reduce the drain of its reserves was to extend its domestic electronic payment system by improving financial inclusion.

The initial launch of DE was in 2012. However, DE was rolled back because private banks disagreed with a central-bank-centered model. The platform name was changed to Sistema de Pago Móvil, and new regulations only allowed for transfers from deposit accounts in a financial institution. It did not involve the creation of central-bank-issued mobile money.

On February 28, 2014, the original DE legislation was reinstated. These changes turned the DE initiative back into a central-bank-issued mobile money scheme. The new system, with some improvements including payment system integration, operated with partial success and with heavy promotion by the government.

In August 2017, a new government decided that the BCE would no longer administer the system and that private banks would deploy one instead. This was an agreement between Ecuador’s largest banks and the new government. A Presidential veto to an economic law terminated DE. By March 2018, DE was no longer in force.

Deployment

DE was designed to serve multiple practical purposes. For example, there were initiatives to use it for public transportationonline purchasese-government services, and nano-credits. In 2017, the Ecuadorian government, NGOs and private firms organized the HACK153 Hackathon to develop API-based solutions using DE: 28 innovations resulted from this campaign, including app-based wallets for smartphones.

The Ecuadorian government launched a program whereby DE users received a rebate of 2 percentage points off the Value Added Tax (VAT) paid. An increase in usage followed the devolution of VAT in 2016, but this was mostly due to an increase in transactions by previous users, rather than the addition of new users. Until December 2017, 71 percent of the accounts were not used at all, and only 10 percent were used to make payments for goods and services, including public services. The government announced that public workers could request a portion of their salary to be transferred automatically to DE accounts. However, public institutions never developed a standardized procedure for doing so. In 2017, only 490 government employees (roughly 0.1 percent) received their salary in DE accounts.

Figure 1. Amounts in DE accounts

Transaction fees were competitive and transactions were executed through a real-time gross settlement system.

Transfers of less than 1.00 USD between two individual accounts of the DE system involved a 0.015 USD fee, transfers between 1.00 USD and 11 USD involved a 0.02 USD fee; the most expensive transfers, between 2,001 USD and 9,000 USD, involved a 0.15 USD fee. In contrast, an interbank transfer between two individual bank accounts could cost up to 0.45 USD and involved delayed net settlement (processed within 24 to 48 hours). A transfer from a DE account to a private bank account cost 0.25 USD. The fee for processing payments (not between citizens, but between a citizen and a firm) through DE was 0.02 USD for transactions of less than 10.00 USD, and 0.20 USD for transactions of more than 100.00 USD (up to 9,000.00 USD). In contrast, the commissions for credit cards range from 4.5 to 10 percent of the value of the sale and the payment could be processed with a delay.

The banks’ alternative

After a long gap, Ecuador’s banks finally deployed the inter-bank alternative late in 2019 called billetera vil (BIMO). It is a mobile wallet developed by Banred, a clearing house owned by a consortium of banks. People without existing bank accounts can theoretically open an account in a few minutes, without submitting any documentation. As of May 2020, 96 percent of BIMO’s 89,000 accounts were associated with previously existing savings and checking accounts, while only 4 percent were new accounts created within BIMO. As of July 2020, BIMO had not reached 50,000 downloads on Google Play.

Table 1. Comparison between BIMO (as proposed in 2019) and DE (as of its end in 2017)

   BIMO  DE
Features
Technology requirements Internet  Yes  No
Smartphone  Yes  No
Other requirements Bank account Yes (basic accounts can be opened without documentation).   No
Transaction Limits   USD50 per transaction, USD100 per day, USD300 per month. No
Backing Backed by Private Banks deposit accounts BCE liquid assets
Redeemed by Private Banks BCE
Provider BANRED BCE
Settlement Real time gross Real time gross
Fees (USD) Transaction between participants (individuals, not firms)  USD 0.01 – 5.00 0.09 Free
 USD 5.01 – 10.00 0.09 0.02
USD 10.01 – 50.00 0.09 0.10
 USD 50.01 – 100.00 not available 0.10
USD 100.01 – 9000.01 not available 0.20
Redeeming in ATM 0.45 0.35

Criticisms: Surveillance and Dedollarization

Alejandro Salas, then the regional director for the Americas of Transparency International, when interviewed by The Guardian, stated: “This can become a huge invasion of privacy because with electronic banking you can follow, even detect where the person is, and how much the person is spending. It has the potential to be a surveillance program.”

DE was designed to be traceable due to regulatory requirements. All transfers automatically record the identities of the sender and receiver, so it would be easy to criminally investigate the origin and recipient of any transfer. Although all DE information was stored, it was handled automatically by the platform, requiring minimal human intervention. Thus, one can argue that there was no inherent surveillance problem associated with DE.

The same concerns regarding data exploitation apply to information used for Internet transfers, debit cards, credit cards, credit history, and so on. This is evident from recent discussions surrounding Facebook’s Libra/Diem and other local issues. Christine Lagarde, former IMF managing director, has made the case that the central bank is a better steward of payments data than a private corporation would be.

Some Ecuadorian analysts stated that DE was designed to be a parallel or sovereign currency that was intended to cover the fiscal shortfall and thus put dollarization at risk. Critics such as the local association of private banks challenged whether DE was backed 100 percent by cash, arguing that if it was not, then DE was a new form of sovereign currency.

DE Was Backed by Cash

Although DE was not legally fully backed by USD bills, it was fully backed by USD-denominated assets. According to article 101 of the Código Orgánico Monetario y Financiero (2014) — the monetary law — DE was fully backed by liquid assets of the Banco Central. This policy was reaffirmed in an official ruling: Resolución Nro. 274-2016 of the Junta de Política y Regulación Monetaria y Financiera (art. 5). Moreover, DE was readily convertible to USD bills on demand. The holder of DE had a direct claim on USD banknotes, which made DE distinct from a typical “sovereign” currency. Some critical analysts argued that because DE was a claim on the BCE’s holdings of US dollars, and not a digital representation of a domestic fiat currency, that DE was not devoid of credit risk, and this may have induced some consumers to perceive it as more risky than other means of payment. This perceived risk could have been a factor that led some consumers not to adopt DE.

At all moments in its lifespan, the BCE held actual USD banknotes that were more than sufficient to meet expected DE cash conversions.

Main Conclusions: Ecosystem and Banks’ Acquiescence

The initial deployment competed directly with banks’ incumbent businesses. BCE should not have deployed a one-to-one commercial transaction center designation strategy. It should have developed an API platform-based open innovation and business model. The number of cash-in/loading transaction centers was limited, and some of them required the user to wait in line. In contrast, there are thousands of points to top-up (i.e., buy) airtime for mobile phones nationwide, including small convenience stores, drug stores, and even individual sellers waiting at traffic lights and using their own cell phones to sell mobile airtime. A small number of companies control the system for mobile phone top-up. DE could have used the same scheme, as was originally designed for the 2011 version, through an agreement with wholesale top-up resellers. BCE, together with the government, should have first promoted DE adoption in younger demographics and the rural areas.

Additionally, given that there was no fee for small transactions, every DE user had the potential to be a DE top-up charge agent and arbitrageur: they could receive an amount in cash and transfer it by DE. This mechanism was not announced explicitly by the Banco Central, and many users did not realize it was feasible and convenient.

Ultimately, the banking sector’s opposition contributed significantly to DE’s demise, as admitted by the new government’s BCE general manager. The Ecuadorian experience suggests that the support or acquiescence of the private banking sector is crucial to the success of any CBDC initiative. Indeed, most advocates of CBDC do not seek to undermine their two-tier banking systems. Rather, they see CBDC as a potentially necessary evolution of their strategy to meet their existing mandate to provide payment services. Many countries are simultaneously working with their commercial banks to modernize their retail-payment systems, and at the same time they are contemplating CBDCs. As DE demonstrates, this could create a tension that will be difficult to manage if not properly addressed.

 

New statements about Bolivia’s 2019 elections, from an electoral authority who has previously been widely cited by proponents of an electoral fraud narrative, are reigniting calls for an investigation into the role that the Organization of American States (OAS) played in delegitimizing those elections and helping to pave the way for the November 2019 coup d’etat.

Antonio Costas Sitic is an expert in electoral matters, with a training in electronic systems engineering, who served twice in leadership roles in Bolivia’s top electoral body. In 2009, he was president of the National Electoral Court (CNE, by its Spanish initials), and from 2015 to 2019 he was vice president of the National Electoral Tribunal (TSE), which replaced the CNE when Bolivia’s 2009 constitution came into effect. He resigned from the TSE two days after the 2019 presidential elections, citing “the unwise decision of the Supreme Electoral Tribunal to suspend publication of the preliminary electoral results transmission system (known as the TREP).”

Costas’s resignation has been cited by the OAS in defense of its claims that the 2019 vote count had been manipulated. Yet in a July 12, 2021 interview, Costas focuses his criticism on the OAS and its report on the audit of the 2019 elections, which alleges that the vote count was manipulated, and which was used to justify the military coup that forced President Evo Morales out of office on November 11, 2019.  

In the interview, given to the Bolivian daily Página 7, Costas stated that the OAS report on the 2019 election audit was “an extremely superficial report, not technical at all. It’s not an audit.” Costas also questioned whether the auditors were in fact the authors of the report, hinting at the possibility of manipulation from higher up. He raised the question of whether OAS Secretary General Luis Almagro could be prosecuted for being behind a report that caused “such havoc” in Bolivia.

According to Costas, the audit cannot be considered an audit

… because it does not meet the minimum [requirements] of an audit. An audit must have a prior plan. I do not know the plan. The items to be analyzed should be specified… The field papers are not made public, neither are the experts’ reports; … or who came to do these analyses. It is not known if they are auditors, if they are certified to be auditors. On the matter of the computer audit, it is possible that people who are very skilled in this and not necessarily auditors have [been involved], but behind them there was an auditor, who is the one who has established the methodology.

In the interview, Costas also discussed how the head of the 2019 OAS electoral observation mission claimed, the day after the election, without evidence, that there had been a “drastic and hard-to-explain change in the trend” of the vote count. Costas noted that these unfounded claims (which have been debunked repeatedly by CEPR and in studies reported in The New York Times and The Washington Post) resulted in a predetermined bias in favor of these claims in the drafting of the OAS audit report. In addition, Costas suggested that the fraud allegations were “the trigger for [the events of] that night and the night of Tuesday [October 22, 2019] when the Departmental Electoral Tribunals were burned down, and that was the responsibility of the head of the OAS Observation Mission.”

Costas’s remarks will further discredit the OAS’s accusations that the 2019 Bolivian elections were fraudulent. The OAS has often presented Costas’s resignation as part of its evidence that the 2019 Bolivian elections were intentionally manipulated in favor of incumbent president Evo Morales.

On October 23, the day after Costas’s resignation, the OAS released the preliminary report of the Mission of Electoral Observation in Bolivia. The Report expressed that 

… it is especially alarming that on Tuesday, October 22, the Vice President of the Supreme Electoral Tribunal, Antonio José Iván Costas Sitic, resigned, giving as the grounds for his resignation: ‘the erroneous decision by the TSE to suspend publication of the results of the Preliminary Electoral Results Transmission system (TREP),’ which ‘triggered the discrediting of the entire electoral process, causing unnecessary social upheaval.’ Judge Costas’ resignation further debilitates Bolivia’s electoral institutions. It heightens already existing mistrust. It could also impair the Tribunal’s functions, now that it has to operate with two vacancies among its members, pending their replacement.

The argument that Costas’s resignation helped to validate the fraud claims was reiterated in the OAS’s final audit report on the Bolivian elections. It also featured prominently in Almagro’s long, somewhat unhinged, June 16, 2020 press release. In his statement, Almagro denounced the “bias” of the New York Times, which, on June 7, had called into question the OAS’s accusations of fraud in the 2019 Bolivian elections. “The NYT has a well-documented controversial history with truth in relation to dictatorships and totalitarianism. For example, in 1931 the New York Times correspondent in the Soviet Union, Walter Duranty, failed to identify and report the starvation of millions of Ukrainians caused by Stalin’s totalitarian regime,” Almagro’s press release claimed.

In this statement, Almagro highlighted again that “the vice president of the TSE, Antonio José Iván Costas Sitic, who was in charge of the TREP, presented his resignation, citing ‘the unwise decision of the Supreme Electoral Tribunal to suspend publication of the results of the [TREP],’ which ‘resulted in the discrediting of the entire electoral process, causing unnecessary social upheaval.’”

In its 2020 report on the OAS Audit of the Bolivian elections, CEPR’s Jake Johnston and David Rosnick established:

The same day [October 22], Antonio Costas, the vice president of the TSE, resigned, citing the suspension of the TREP and the resulting lack of confidence in the electoral process. On October 23, in an interview with local press, Costas explained that the audit company’s maximum alert was the product of ‘excessive zeal’ and that he did not view that as a valid reason to stop the TREP. ‘There is no fraud, there were imperfections,’ he said. Costas claimed to have argued for the TREP’s resumption, telling the other TSE officials that he had a ‘reliable engineer’ compare the TREP and Cómputo [official count] results and that they matched.

In this recent interview, Costas goes so far as suggesting that the OAS audit report was not the fruit of the work of experts that were dispatched to Bolivia to carry out their technical work, but that it had been manipulated by others. “I refuse to believe, at least in the area of computer analysis and electoral process, that the experts I know, who came [to Bolivia], and they are very knowledgeable people about the subject, [said these things]… so the conclusions they reached are conclusions that… [laughter] I believe are not theirs,” said Costas [ellipses in the original].

Costas also denounced the OAS audit report’s lack of professionalism. He complained, in particular, that

the OAS report does not even… describe in an objective way the logic of the processing system of the Cómputo. It does not understand it and says that the manipulation of that system means the results must be rejected, but [the OAS auditors] didn’t know how many servers there were, they didn’t know what function these performed, where they were installed, none of that is known by the OAS, nothing. And regarding the TREP, for example, that server –there were actually two, I did not know about the second [server], I found out about it when they called a meeting, [and those servers] served as gateways [bridges]. From the preliminary data I have –I want to check it with the official database managed by the Prosecutor’s Office– there were no modifications [of the election data].

Regarding the transmission of the results, Costas said

… that in that 2019 electoral process, 98% of the tally sheets were transmitted from the voting precincts to the central system of the TREP on the first day and that had never happened before. Ninety five percent of the tally sheets were verified on the second day, and they were verified with a delay that was caused by the suspension of the TREP, because had the tally sheets been verified that night, we would have had 95% verified. If we calculate the votes that were received at the time of transmission [of the TREP on October 20], the difference between MAS and Comunidad Ciudadana was 10.36%… If we look at the difference at the moment of the verification with those hours of delay, the difference between MAS and Comunidad Ciudadana is 10.15 and, finally, if we look at the difference when the official count concluded, it is 10.56. And if I tell you that 98% of the tally sheets were transmitted on the first day, manipulating tally sheets would be very difficult because all the data was in the servers.

Though Costas was known to be critical of Evo Morales, in particular of the former president’s decision to run for reelection in 2019, he and other TSE officials were charged with election fraud and jailed by Bolivia’s de facto authorities. Costas was detained between November 2019 and January 2020, before being granted house arrest. Along with five other members of the TSE, Costas is still the subject of a pretrial investigation. No charges have yet been brought against him. In the last few months, Bolivian courts have dismissed all pending cases against former members of Bolivia’s Departmental Electoral Tribunals (TEDs), several of whom had also been jailed after the 2019 elections.

New statements about Bolivia’s 2019 elections, from an electoral authority who has previously been widely cited by proponents of an electoral fraud narrative, are reigniting calls for an investigation into the role that the Organization of American States (OAS) played in delegitimizing those elections and helping to pave the way for the November 2019 coup d’etat.

Antonio Costas Sitic is an expert in electoral matters, with a training in electronic systems engineering, who served twice in leadership roles in Bolivia’s top electoral body. In 2009, he was president of the National Electoral Court (CNE, by its Spanish initials), and from 2015 to 2019 he was vice president of the National Electoral Tribunal (TSE), which replaced the CNE when Bolivia’s 2009 constitution came into effect. He resigned from the TSE two days after the 2019 presidential elections, citing “the unwise decision of the Supreme Electoral Tribunal to suspend publication of the preliminary electoral results transmission system (known as the TREP).”

Costas’s resignation has been cited by the OAS in defense of its claims that the 2019 vote count had been manipulated. Yet in a July 12, 2021 interview, Costas focuses his criticism on the OAS and its report on the audit of the 2019 elections, which alleges that the vote count was manipulated, and which was used to justify the military coup that forced President Evo Morales out of office on November 11, 2019.  

In the interview, given to the Bolivian daily Página 7, Costas stated that the OAS report on the 2019 election audit was “an extremely superficial report, not technical at all. It’s not an audit.” Costas also questioned whether the auditors were in fact the authors of the report, hinting at the possibility of manipulation from higher up. He raised the question of whether OAS Secretary General Luis Almagro could be prosecuted for being behind a report that caused “such havoc” in Bolivia.

According to Costas, the audit cannot be considered an audit

… because it does not meet the minimum [requirements] of an audit. An audit must have a prior plan. I do not know the plan. The items to be analyzed should be specified… The field papers are not made public, neither are the experts’ reports; … or who came to do these analyses. It is not known if they are auditors, if they are certified to be auditors. On the matter of the computer audit, it is possible that people who are very skilled in this and not necessarily auditors have [been involved], but behind them there was an auditor, who is the one who has established the methodology.

In the interview, Costas also discussed how the head of the 2019 OAS electoral observation mission claimed, the day after the election, without evidence, that there had been a “drastic and hard-to-explain change in the trend” of the vote count. Costas noted that these unfounded claims (which have been debunked repeatedly by CEPR and in studies reported in The New York Times and The Washington Post) resulted in a predetermined bias in favor of these claims in the drafting of the OAS audit report. In addition, Costas suggested that the fraud allegations were “the trigger for [the events of] that night and the night of Tuesday [October 22, 2019] when the Departmental Electoral Tribunals were burned down, and that was the responsibility of the head of the OAS Observation Mission.”

Costas’s remarks will further discredit the OAS’s accusations that the 2019 Bolivian elections were fraudulent. The OAS has often presented Costas’s resignation as part of its evidence that the 2019 Bolivian elections were intentionally manipulated in favor of incumbent president Evo Morales.

On October 23, the day after Costas’s resignation, the OAS released the preliminary report of the Mission of Electoral Observation in Bolivia. The Report expressed that 

… it is especially alarming that on Tuesday, October 22, the Vice President of the Supreme Electoral Tribunal, Antonio José Iván Costas Sitic, resigned, giving as the grounds for his resignation: ‘the erroneous decision by the TSE to suspend publication of the results of the Preliminary Electoral Results Transmission system (TREP),’ which ‘triggered the discrediting of the entire electoral process, causing unnecessary social upheaval.’ Judge Costas’ resignation further debilitates Bolivia’s electoral institutions. It heightens already existing mistrust. It could also impair the Tribunal’s functions, now that it has to operate with two vacancies among its members, pending their replacement.

The argument that Costas’s resignation helped to validate the fraud claims was reiterated in the OAS’s final audit report on the Bolivian elections. It also featured prominently in Almagro’s long, somewhat unhinged, June 16, 2020 press release. In his statement, Almagro denounced the “bias” of the New York Times, which, on June 7, had called into question the OAS’s accusations of fraud in the 2019 Bolivian elections. “The NYT has a well-documented controversial history with truth in relation to dictatorships and totalitarianism. For example, in 1931 the New York Times correspondent in the Soviet Union, Walter Duranty, failed to identify and report the starvation of millions of Ukrainians caused by Stalin’s totalitarian regime,” Almagro’s press release claimed.

In this statement, Almagro highlighted again that “the vice president of the TSE, Antonio José Iván Costas Sitic, who was in charge of the TREP, presented his resignation, citing ‘the unwise decision of the Supreme Electoral Tribunal to suspend publication of the results of the [TREP],’ which ‘resulted in the discrediting of the entire electoral process, causing unnecessary social upheaval.’”

In its 2020 report on the OAS Audit of the Bolivian elections, CEPR’s Jake Johnston and David Rosnick established:

The same day [October 22], Antonio Costas, the vice president of the TSE, resigned, citing the suspension of the TREP and the resulting lack of confidence in the electoral process. On October 23, in an interview with local press, Costas explained that the audit company’s maximum alert was the product of ‘excessive zeal’ and that he did not view that as a valid reason to stop the TREP. ‘There is no fraud, there were imperfections,’ he said. Costas claimed to have argued for the TREP’s resumption, telling the other TSE officials that he had a ‘reliable engineer’ compare the TREP and Cómputo [official count] results and that they matched.

In this recent interview, Costas goes so far as suggesting that the OAS audit report was not the fruit of the work of experts that were dispatched to Bolivia to carry out their technical work, but that it had been manipulated by others. “I refuse to believe, at least in the area of computer analysis and electoral process, that the experts I know, who came [to Bolivia], and they are very knowledgeable people about the subject, [said these things]… so the conclusions they reached are conclusions that… [laughter] I believe are not theirs,” said Costas [ellipses in the original].

Costas also denounced the OAS audit report’s lack of professionalism. He complained, in particular, that

the OAS report does not even… describe in an objective way the logic of the processing system of the Cómputo. It does not understand it and says that the manipulation of that system means the results must be rejected, but [the OAS auditors] didn’t know how many servers there were, they didn’t know what function these performed, where they were installed, none of that is known by the OAS, nothing. And regarding the TREP, for example, that server –there were actually two, I did not know about the second [server], I found out about it when they called a meeting, [and those servers] served as gateways [bridges]. From the preliminary data I have –I want to check it with the official database managed by the Prosecutor’s Office– there were no modifications [of the election data].

Regarding the transmission of the results, Costas said

… that in that 2019 electoral process, 98% of the tally sheets were transmitted from the voting precincts to the central system of the TREP on the first day and that had never happened before. Ninety five percent of the tally sheets were verified on the second day, and they were verified with a delay that was caused by the suspension of the TREP, because had the tally sheets been verified that night, we would have had 95% verified. If we calculate the votes that were received at the time of transmission [of the TREP on October 20], the difference between MAS and Comunidad Ciudadana was 10.36%… If we look at the difference at the moment of the verification with those hours of delay, the difference between MAS and Comunidad Ciudadana is 10.15 and, finally, if we look at the difference when the official count concluded, it is 10.56. And if I tell you that 98% of the tally sheets were transmitted on the first day, manipulating tally sheets would be very difficult because all the data was in the servers.

Though Costas was known to be critical of Evo Morales, in particular of the former president’s decision to run for reelection in 2019, he and other TSE officials were charged with election fraud and jailed by Bolivia’s de facto authorities. Costas was detained between November 2019 and January 2020, before being granted house arrest. Along with five other members of the TSE, Costas is still the subject of a pretrial investigation. No charges have yet been brought against him. In the last few months, Bolivian courts have dismissed all pending cases against former members of Bolivia’s Departmental Electoral Tribunals (TEDs), several of whom had also been jailed after the 2019 elections.

The protests that erupted across Colombia in April 2021 were detonated by a tax reform bill presented by President Iván Duque. Duque claimed his proposal would raise 23.4 trillion pesos (6.4 billion dollars), which would help reduce Colombia’s fiscal deficit (set to reach 8.6 percent of GDP in 2021, from 7.6 percent in 2020), and lift 2.8 billion people out of poverty, enabling the creation of a fund to tackle the effects of climate change.

But Duque’s tax reform was not progressive; it would have expanded the scope of value-added tax (VAT); taxed people that had previously been considered to be earning too little to pay; and abolished many exemptions for middle class households, already hard hit by the COVID-19 crisis. Colombia’s biggest trade union, the Central Unitaria de Trabajadores (CUT), called for a national strike on April 28, which was supported by a broad coalition of social movements.

Even centrist political factions — the Partido de la U (PU) of former president Juan Manuel Santos (2010–18), and the Partido Liberal (PL) — agreed that the bill would affect Colombians worst hit by the pandemic. Some international critics exposed the bill as “a regressive tax reform designed to finance the repayment of Colombia’s foreign debt obligations and maintain its credit rating.” Significantly, Standard & Poor’s announced on May 19 that it was downgrading Colombia’s long-term foreign currency sovereign credit rating from BBB- to BB+.

The strike soon morphed into large protests fueled by years of pent-up grievances. In April, a report from Colombia’s national statistical unit (DANE) showed that 42.5 percent of Colombians were living below the poverty line, with 15.1 percent in extreme poverty.

Under unprecedented pressure, President Duque finally withdrew the bill in a May 2 televised presidential address. This was followed by the resignation of his finance minister, Alberto Carrasquilla, a day later. But significantly, neither gesture succeeded in quelling a new wave of nationwide protests against Duque’s government, following previous social unrest in September 2020 and between November 2019 and February 2020. The tax bill had merely detonated simmering unrest.

This third wave of protests was also met by a combative police force that unleashed a lethal wave of repression. Popular discontent was soon directed against police brutality and state-sponsored violence, which added to the general upheaval.

Pedro Piedrahita, a political scientist at the University of Medellín, said, “Colombia’s public security [organizations] are still operating under the anachronistic doctrines of anti-communism, of an internal enemy, and as such protestors aren’t seen as citizens but as legitimate military targets.” Social media networks circulated images of the anti-riot squad Esmad (Escuadrón Móvil Anti Disturbios) violently attacking demonstrators. By May 12, Colombia’s highly reputed Institute of Studies for Development and Peace (Indepaz) recorded 39 killings by police, 1,055 people arbitrarily detained, and 16 cases of police engaging in sexual violence. By June 15, Indepaz claimed that the protests and its repression, not all resulting from police brutality, had claimed a total of 70 fatal victims.

These violations provoked a flurry of international condemnations, including the UN High Commissioner on Human Rights spokesperson on May 4, who was “deeply alarmed” by events. By contrast, a US State Department deputy spokesperson referred to “violence and vandalism” as an abuse of the right to peaceful protest, but urged the “utmost restraint by the public forces to prevent additional loss of life.” At the 51st annual Washington Conference on the Americas on May 4, US Secretary of State Antony Blinken denounced Venezuela, Cuba, Nicaragua, and even Haiti as problem countries for democracy or human rights, but made no mention of Colombia. A few weeks later, when Congressman Joaquín Castro asked Blinken whether he would “consider using the security assistance to Colombia as leverage to stop these human rights violations,” the secretary of state failed to mention any concrete measure to exert such pressure.

President Joe Biden made it clear from the start that his administration would continue to regard Colombia as a “keystone of US policy in Latin America and the Caribbean.” During his presidential campaign, he had curried favor with Latino voters in Florida, including Colombian Americans, by declaring his support for the continuation of a hawkish, conservative, security-driven policy in Colombia. In the Fort Lauderdale-based newspaper Sun Sentinel, he wrote: “I championed Plan Colombia from the very beginning and secured bipartisan support for its passage through Congress. (…) All told, it is one of the most successful — and bipartisan — foreign policy undertakings of the last half century.”

As it turns out, this was no exaggeration. Plan Colombia was inaugurated under the Clinton administration in 1999, expanded under President George W. Bush, and continued under Presidents Barack Obama and Donald Trump. The 22-year-old Plan Colombia, which was rechristened “Plan Paz” in 2016, is therefore one of Washington’s strongest and longest enduring, bipartisan security-based bilateral relationships. For decades, Colombia has been a major recipient of US military aid and one of the largest buyers of US military equipment in the world. Plan Colombia’s greatest success is the expansion of a powerful military alliance between the Colombian and US militaries, which includes joint military operations; the presence of US military ‘advisors’ and contractors in Colombia; US-made GPS guidance kits installed on Colombian munitions (turning them into smart bombs that allow guerrilla leaders to be targeted); and National Security Agency (NSA) signal intercepts to feed intelligence to Colombian troops on the ground. Colombia is still NATO’s only partner in the region.

Over two decades of intimate bipartisan security relations between the United States and Colombia, Joe Biden frequently exalted the virtues of Plan Colombia and often highlighted his role in cementing them. He has been less outspoken on some of the consequences of those relations and the consolidation of a security apparatus that has been detrimental to both democracy and human rights in Colombia.

Now that he is president, Biden’s declared intention to break with Trump-era policies and his pledge to bring back democracy and human rights as driving forces of US foreign policy suddenly appear incompatible with the current status quo in Colombia. This includes Biden’s explicit support for the Colombian government’s 2016 peace accords with the Revolutionary Armed Forces of Colombia (FARC), a pledge that also clashes with Duque’s incessant attempts to sabotage the deal.

Iván Duque, a protégé of former president Álvaro Uribe (2002–10), was opposed to the peace accords long before he became president. He campaigned aggressively against the deal in the weeks preceding the 2016 referendum on the Peace Accords, and after he was elected in 2018, Duque was able to make the most of Donald Trump’s total disinterest in Colombia’s peace. This gave the new Colombian president carte blanche, especially as he could soon capitalize on his contribution to several US attempts to overthrow President Nicolás Maduro in Venezuela, a top priority for the Trump administration.

Duque found numerous ways to undermine the agreements contained in the 2016 Peace Accords. One of the most effective was his decision to underfund its most fundamental components, including the institutions responsible for transitional justice, truth, and reconciliation: the Special Jurisdiction for Peace (JEP), and the Truth Commission. Duque’s supporters in the Colombian Congress have consistently attempted to abolish the JEP or limit its mandate. Duque’s mentor, former president Uribe, even proposed a 14-question referendum seeking to abolish or significantly reform the JEP. But the JEP enjoys significant legislative backing in Colombia and diplomatic support abroad. The International Criminal Court has also been very vocal, with its deputy prosecutor James Stewart calling the JEP a “pioneering system, which can be a model for the world.” Despite Uribe’s onslaught, the JEP has endured.

As for Biden’s concern for human rights, Colombia is an emblematic case: over the last year alone, Indepaz calculated a total of 91 massacres, which claimed 384 lives. In March 2021, the UN Verification Mission in Colombia reported that 262 former FARC combatants, signatories to the peace deal, had been killed after signing the 2016 accords, despite the fact that one of the deal’s key government commitments is the duty to provide security protection to former combatants.The JEP has reiterated its serious concern that “the efforts of the Government and other state entities to avoid new assassinations of ex combatants of the FARC-EP are insufficient.”

In addition, and in order to appear tough on drugs for domestic audiences, Trump pressured Colombia to step up its efforts to eradicate coca growing by whatever means. “You’re going to have to spray,” he said, referring to the resumption of aerial spraying of glyphosate (considered potentially carcinogenic by the World Health Organization in 2015). Duque would have been more than happy to oblige, but was constrained by Colombia’s constitutional court, which refused to reverse the partial ban on glyphosate until certain conditions had been met. Many political and social actors are opposed to aerial spraying, which would also violate a key part of the 2016 peace accord. On April 12 , despite protests by dozens of organizations, Duque finally issued a decree allowing spraying to resume, while promising to keep it within the limits set by the constitutional court.

Duque’s strategy has been to try and convince the US government that the recent increase in drug production in Colombia is a result of the permissiveness of the peace deal. But if criminal organizations, including Mexican drug cartels, have made important inroads into Colombia, it is largely due to the Colombian government’s own failure to fill the vacuum left by the guerrillas. Duque’s insistence on forced coca eradication, which encourages producers to seek protection from criminal organizations, and the government’s neglect of the crop substitution program agreed to in the peace deal have also been major factors in the failure to reduce illicit coca production.

Duque also pushed for an end to negotiations with the Ejército de Liberación Nacional (ELN), for a peace deal with the guerrillas that his predecessor had not yet managed to seal. Duque had first refused to send emissaries to attend talks in Havana. Then, in January 2019, the ELN carried out the biggest attack in Bogota since 2003, when it bombed a police academy, causing 23 deaths. The resulting national outrage offered Duque the motive he was waiting for to put an end to the talks. He demanded that Cuba, the host country for the negotiations, hand over members of the ELN delegation so that they could be tried for terrorism in Colombia. Cuba refused on the grounds that this would violate the negotiation protocol signed by all parties. But Cuba’s refusal, which was backed by Norway, a guarantor of the peace talks, prompted Trump to put the island back on the US list of state sponsors of terrorism (Obama had removed Cuba from the list in 2015). Duque’s extradition request thus played into Trump’s hands for his presidential campaign in Florida, where many voters still endorse harsh measures against the Cuban government.

The Duque-Trump relationship ran deep. Duque’s Centro Democrático party overtly supported Trump’s reelection bid. Former president Uribe participated in campaign events, drilling the message of the threat of spreading “Castro-Chavismo.” while Florida Republicans warned that the US could fall prey to “socialism.” This prompted the US ambassador in Bogotá, Philip Goldberg, to Tweet: “The success of US-Colombia relations over many years has been based on bipartisan support … I urge all Colombian politicians to refrain from involvement in US elections.” (Fresh from its success in Florida, the Colombian far right would later intervene in the 2021 Ecuadorian presidential elections to prevent leftwing contender Andrés Arauz from securing a victory.)

Some of Biden’s natural allies, such as mainstream human rights organizations and think tanks critical of Duque’s erosion of peace and his brutal response to the recent social protests, will push him to change course in Colombia. Various Democrats in the US Congress are also increasingly active. In July 2020, 94 Democratic members of the House of Representatives signed an open letter to then secretary of state Mike Pompeo expressing their great concern for the state of Colombia’s peace process. Some of them have publicly denounced the repression of the recent protests, including Representative Jim McGovern (D-MA), who refused to treat the anti-protest violence as a new and isolated phenomenon, denouncing instead an ongoing and “disturbing pattern of excessive use of force, killings and human rights violations against protestors in Nov 2019, Sept 2020 & April-May 2021.”

Joe Biden may find that he has spelled out irreconcilable policies. If democracy and human rights are indeed the pillars of his administration’s new relationship with Latin America, then it is clear that the current US relationship with Colombia cannot remain intact.

Duque’s government, meanwhile, will continue to portray protests as part of an international conspiracy. Colombia’s foreign minister Claudia Blum, who has since resigned, released an English language video in which she claimed “Senator [Gustavo] Petro [a likely presidential candidate in 2022] with the help of Venezuelan president Nicolás Maduro and narco-terrorist groups have taken advantage of this situation and have organized these premeditated urban terrorist attacks, paying people to go to the streets to terrorize and vandalize the cities.”

Duque will want to convince Biden that he is the US’s most committed and dependable asset where it matters: overthrowing Maduro and fighting “narco-guerrillas.” He will also fiercely resist any negotiated outcome to the Venezuelan crisis.

The protests that erupted across Colombia in April 2021 were detonated by a tax reform bill presented by President Iván Duque. Duque claimed his proposal would raise 23.4 trillion pesos (6.4 billion dollars), which would help reduce Colombia’s fiscal deficit (set to reach 8.6 percent of GDP in 2021, from 7.6 percent in 2020), and lift 2.8 billion people out of poverty, enabling the creation of a fund to tackle the effects of climate change.

But Duque’s tax reform was not progressive; it would have expanded the scope of value-added tax (VAT); taxed people that had previously been considered to be earning too little to pay; and abolished many exemptions for middle class households, already hard hit by the COVID-19 crisis. Colombia’s biggest trade union, the Central Unitaria de Trabajadores (CUT), called for a national strike on April 28, which was supported by a broad coalition of social movements.

Even centrist political factions — the Partido de la U (PU) of former president Juan Manuel Santos (2010–18), and the Partido Liberal (PL) — agreed that the bill would affect Colombians worst hit by the pandemic. Some international critics exposed the bill as “a regressive tax reform designed to finance the repayment of Colombia’s foreign debt obligations and maintain its credit rating.” Significantly, Standard & Poor’s announced on May 19 that it was downgrading Colombia’s long-term foreign currency sovereign credit rating from BBB- to BB+.

The strike soon morphed into large protests fueled by years of pent-up grievances. In April, a report from Colombia’s national statistical unit (DANE) showed that 42.5 percent of Colombians were living below the poverty line, with 15.1 percent in extreme poverty.

Under unprecedented pressure, President Duque finally withdrew the bill in a May 2 televised presidential address. This was followed by the resignation of his finance minister, Alberto Carrasquilla, a day later. But significantly, neither gesture succeeded in quelling a new wave of nationwide protests against Duque’s government, following previous social unrest in September 2020 and between November 2019 and February 2020. The tax bill had merely detonated simmering unrest.

This third wave of protests was also met by a combative police force that unleashed a lethal wave of repression. Popular discontent was soon directed against police brutality and state-sponsored violence, which added to the general upheaval.

Pedro Piedrahita, a political scientist at the University of Medellín, said, “Colombia’s public security [organizations] are still operating under the anachronistic doctrines of anti-communism, of an internal enemy, and as such protestors aren’t seen as citizens but as legitimate military targets.” Social media networks circulated images of the anti-riot squad Esmad (Escuadrón Móvil Anti Disturbios) violently attacking demonstrators. By May 12, Colombia’s highly reputed Institute of Studies for Development and Peace (Indepaz) recorded 39 killings by police, 1,055 people arbitrarily detained, and 16 cases of police engaging in sexual violence. By June 15, Indepaz claimed that the protests and its repression, not all resulting from police brutality, had claimed a total of 70 fatal victims.

These violations provoked a flurry of international condemnations, including the UN High Commissioner on Human Rights spokesperson on May 4, who was “deeply alarmed” by events. By contrast, a US State Department deputy spokesperson referred to “violence and vandalism” as an abuse of the right to peaceful protest, but urged the “utmost restraint by the public forces to prevent additional loss of life.” At the 51st annual Washington Conference on the Americas on May 4, US Secretary of State Antony Blinken denounced Venezuela, Cuba, Nicaragua, and even Haiti as problem countries for democracy or human rights, but made no mention of Colombia. A few weeks later, when Congressman Joaquín Castro asked Blinken whether he would “consider using the security assistance to Colombia as leverage to stop these human rights violations,” the secretary of state failed to mention any concrete measure to exert such pressure.

President Joe Biden made it clear from the start that his administration would continue to regard Colombia as a “keystone of US policy in Latin America and the Caribbean.” During his presidential campaign, he had curried favor with Latino voters in Florida, including Colombian Americans, by declaring his support for the continuation of a hawkish, conservative, security-driven policy in Colombia. In the Fort Lauderdale-based newspaper Sun Sentinel, he wrote: “I championed Plan Colombia from the very beginning and secured bipartisan support for its passage through Congress. (…) All told, it is one of the most successful — and bipartisan — foreign policy undertakings of the last half century.”

As it turns out, this was no exaggeration. Plan Colombia was inaugurated under the Clinton administration in 1999, expanded under President George W. Bush, and continued under Presidents Barack Obama and Donald Trump. The 22-year-old Plan Colombia, which was rechristened “Plan Paz” in 2016, is therefore one of Washington’s strongest and longest enduring, bipartisan security-based bilateral relationships. For decades, Colombia has been a major recipient of US military aid and one of the largest buyers of US military equipment in the world. Plan Colombia’s greatest success is the expansion of a powerful military alliance between the Colombian and US militaries, which includes joint military operations; the presence of US military ‘advisors’ and contractors in Colombia; US-made GPS guidance kits installed on Colombian munitions (turning them into smart bombs that allow guerrilla leaders to be targeted); and National Security Agency (NSA) signal intercepts to feed intelligence to Colombian troops on the ground. Colombia is still NATO’s only partner in the region.

Over two decades of intimate bipartisan security relations between the United States and Colombia, Joe Biden frequently exalted the virtues of Plan Colombia and often highlighted his role in cementing them. He has been less outspoken on some of the consequences of those relations and the consolidation of a security apparatus that has been detrimental to both democracy and human rights in Colombia.

Now that he is president, Biden’s declared intention to break with Trump-era policies and his pledge to bring back democracy and human rights as driving forces of US foreign policy suddenly appear incompatible with the current status quo in Colombia. This includes Biden’s explicit support for the Colombian government’s 2016 peace accords with the Revolutionary Armed Forces of Colombia (FARC), a pledge that also clashes with Duque’s incessant attempts to sabotage the deal.

Iván Duque, a protégé of former president Álvaro Uribe (2002–10), was opposed to the peace accords long before he became president. He campaigned aggressively against the deal in the weeks preceding the 2016 referendum on the Peace Accords, and after he was elected in 2018, Duque was able to make the most of Donald Trump’s total disinterest in Colombia’s peace. This gave the new Colombian president carte blanche, especially as he could soon capitalize on his contribution to several US attempts to overthrow President Nicolás Maduro in Venezuela, a top priority for the Trump administration.

Duque found numerous ways to undermine the agreements contained in the 2016 Peace Accords. One of the most effective was his decision to underfund its most fundamental components, including the institutions responsible for transitional justice, truth, and reconciliation: the Special Jurisdiction for Peace (JEP), and the Truth Commission. Duque’s supporters in the Colombian Congress have consistently attempted to abolish the JEP or limit its mandate. Duque’s mentor, former president Uribe, even proposed a 14-question referendum seeking to abolish or significantly reform the JEP. But the JEP enjoys significant legislative backing in Colombia and diplomatic support abroad. The International Criminal Court has also been very vocal, with its deputy prosecutor James Stewart calling the JEP a “pioneering system, which can be a model for the world.” Despite Uribe’s onslaught, the JEP has endured.

As for Biden’s concern for human rights, Colombia is an emblematic case: over the last year alone, Indepaz calculated a total of 91 massacres, which claimed 384 lives. In March 2021, the UN Verification Mission in Colombia reported that 262 former FARC combatants, signatories to the peace deal, had been killed after signing the 2016 accords, despite the fact that one of the deal’s key government commitments is the duty to provide security protection to former combatants.The JEP has reiterated its serious concern that “the efforts of the Government and other state entities to avoid new assassinations of ex combatants of the FARC-EP are insufficient.”

In addition, and in order to appear tough on drugs for domestic audiences, Trump pressured Colombia to step up its efforts to eradicate coca growing by whatever means. “You’re going to have to spray,” he said, referring to the resumption of aerial spraying of glyphosate (considered potentially carcinogenic by the World Health Organization in 2015). Duque would have been more than happy to oblige, but was constrained by Colombia’s constitutional court, which refused to reverse the partial ban on glyphosate until certain conditions had been met. Many political and social actors are opposed to aerial spraying, which would also violate a key part of the 2016 peace accord. On April 12 , despite protests by dozens of organizations, Duque finally issued a decree allowing spraying to resume, while promising to keep it within the limits set by the constitutional court.

Duque’s strategy has been to try and convince the US government that the recent increase in drug production in Colombia is a result of the permissiveness of the peace deal. But if criminal organizations, including Mexican drug cartels, have made important inroads into Colombia, it is largely due to the Colombian government’s own failure to fill the vacuum left by the guerrillas. Duque’s insistence on forced coca eradication, which encourages producers to seek protection from criminal organizations, and the government’s neglect of the crop substitution program agreed to in the peace deal have also been major factors in the failure to reduce illicit coca production.

Duque also pushed for an end to negotiations with the Ejército de Liberación Nacional (ELN), for a peace deal with the guerrillas that his predecessor had not yet managed to seal. Duque had first refused to send emissaries to attend talks in Havana. Then, in January 2019, the ELN carried out the biggest attack in Bogota since 2003, when it bombed a police academy, causing 23 deaths. The resulting national outrage offered Duque the motive he was waiting for to put an end to the talks. He demanded that Cuba, the host country for the negotiations, hand over members of the ELN delegation so that they could be tried for terrorism in Colombia. Cuba refused on the grounds that this would violate the negotiation protocol signed by all parties. But Cuba’s refusal, which was backed by Norway, a guarantor of the peace talks, prompted Trump to put the island back on the US list of state sponsors of terrorism (Obama had removed Cuba from the list in 2015). Duque’s extradition request thus played into Trump’s hands for his presidential campaign in Florida, where many voters still endorse harsh measures against the Cuban government.

The Duque-Trump relationship ran deep. Duque’s Centro Democrático party overtly supported Trump’s reelection bid. Former president Uribe participated in campaign events, drilling the message of the threat of spreading “Castro-Chavismo.” while Florida Republicans warned that the US could fall prey to “socialism.” This prompted the US ambassador in Bogotá, Philip Goldberg, to Tweet: “The success of US-Colombia relations over many years has been based on bipartisan support … I urge all Colombian politicians to refrain from involvement in US elections.” (Fresh from its success in Florida, the Colombian far right would later intervene in the 2021 Ecuadorian presidential elections to prevent leftwing contender Andrés Arauz from securing a victory.)

Some of Biden’s natural allies, such as mainstream human rights organizations and think tanks critical of Duque’s erosion of peace and his brutal response to the recent social protests, will push him to change course in Colombia. Various Democrats in the US Congress are also increasingly active. In July 2020, 94 Democratic members of the House of Representatives signed an open letter to then secretary of state Mike Pompeo expressing their great concern for the state of Colombia’s peace process. Some of them have publicly denounced the repression of the recent protests, including Representative Jim McGovern (D-MA), who refused to treat the anti-protest violence as a new and isolated phenomenon, denouncing instead an ongoing and “disturbing pattern of excessive use of force, killings and human rights violations against protestors in Nov 2019, Sept 2020 & April-May 2021.”

Joe Biden may find that he has spelled out irreconcilable policies. If democracy and human rights are indeed the pillars of his administration’s new relationship with Latin America, then it is clear that the current US relationship with Colombia cannot remain intact.

Duque’s government, meanwhile, will continue to portray protests as part of an international conspiracy. Colombia’s foreign minister Claudia Blum, who has since resigned, released an English language video in which she claimed “Senator [Gustavo] Petro [a likely presidential candidate in 2022] with the help of Venezuelan president Nicolás Maduro and narco-terrorist groups have taken advantage of this situation and have organized these premeditated urban terrorist attacks, paying people to go to the streets to terrorize and vandalize the cities.”

Duque will want to convince Biden that he is the US’s most committed and dependable asset where it matters: overthrowing Maduro and fighting “narco-guerrillas.” He will also fiercely resist any negotiated outcome to the Venezuelan crisis.

On June 5, President Nayib Bukele announced his plans to make El Salvador the world’s first country to accept Bitcoin, a popular digital cryptocurrency, as a form of legal tender. The nation’s legislative assembly, under the majority control of Bukele’s New Ideas party, passed the bill just three days later. Under the new legislation, Bitcoin must be accepted as payment by all private firms and by the nation’s tax authorities. The move puts El Salvador into uncharted territory, posing serious risks that likely outweigh any potential benefits. However, prudent economic policy does not seem to be the purpose of the decision. Instead, Bitcoinization has in part been a successful publicity stunt, expanding the massive online following that President Bukele himself acknowledges is vital to his political power.

Elected in 2019, Bukele frames himself as an opponent of the traditional Salvadoran elite. He maintains an approval rating of roughly 90 percent, in large part by attributing a recent drop in the homicide rate (which began before he took office) to his harsh anti-crime policies. Another key to his popularity is his highly active presence on Twitter. Bukele, who previously worked at his father’s public relations firm, uses his Twitter profile to share news, memes, and posts supportive of his leadership with his 2.7 million followers — one of the largest Twitter followings of any national head of state when weighted by population.

Bukele’s carefully crafted public image, bolstered by paid trolls and lobbyists defending him, allows him to obscure the ways in which his rule has been similar to the corrupt Salvadoran elites he claims to oppose. In 2020, when the legislature objected to his proposal for a loan that would fund further police militarization, he sent soldiers to Congress to intimidate the lawmakers. This May, immediately after his party won a supermajority of the legislature’s seats, he replaced the attorney general and five judges on the Supreme Court in a move that the court itself declared unconstitutional. Most have recognized the move as a power grab; Bukele has termed it a “house cleaning.” While he claims these moves are necessary for fighting entrenched corruption, the US State Department has accused a number of Bukele’s close associates of being corrupt.

Enter Bitcoin. Advocates of the popular online asset argue that its digital and decentralized nature make it an ideal alternative to traditional currencies like the US dollar (USD). El Salvador, which uses the USD as its primary currency, will now serve as a case study in whether the cryptocurrency can live up to its promise.

Despite Bukele’s claim that the plan “looks bulletproof,” there are several reasons to doubt the wisdom of Bitcoinization as an economic policy. While one argument in support has been that this new payment method could expand remittances from Salvadorans working abroad — a financial flow that makes up a fifth of the Salvadoran economy — the benefits may be overstated. According to a survey by the national Chamber of Commerce and Industry, 82.5 percent of Salvadorans say they have no interest in receiving remittances through Bitcoin. Small Bitcoin transfers to the country did jump after the law’s introduction, but El Salvador’s limited Internet access and low remittance prices suggest they’ll continue to struggle to compete with USD transfers. Bitcoin ATMs, meant to help solve this issue, can charge fees which make them no better than regular banks to many Salvadorans. 

Others argue that the law could grant the Salvadoran economy more autonomy from the USD by introducing a secondary currency, allowing the government more room for independent policy-making. But, despite the term “cryptocurrency,” studies suggest Bitcoin “does not work as a currency due to its excess volatility” — often 10 times higher than major exchange rates. Indeed, the use of Bitcoin to dodge capital controls may even weaken the Salvadoran government’s options in deciding economic policy.

The risks, on the other hand, are significant. The law obligates the government to provide “automatic and instant convertibility from Bitcoin to USD,” meaning they must provide USD in exchange for Bitcoin out of their own currency reserves. Bitcoin is too unstable to function as a reserve asset, so each swap will appear on the books as a reduction in the nation’s reserves. The IMF has raised some concerns amid their negotiations with El Salvador for a new loan agreement; more worryingly, this system may also tie the nation’s macroeconomic stability to the value of Bitcoin. In addition, cryptocurrency has the potential to massively accelerate money laundering (a problem that Bukele is allegedly familiar with).

Bukele has argued, “If 1% of [Bitcoin’s market cap] is invested in El Salvador, that would increase our GDP by 25%.” However, this would only be the case if 1 percent of Bitcoin’s value were invested in the country without any increase in the country’s Bitcoin production, an extremely energy-intensive process. On the day Bukele made this argument, shifting just 1 percent of Bitcoin’s energy costs to El Salvador would increase the country’s 2019 energy use by over 17 percent. Bukele plans to meet this new demand through the country’s state-owned geothermal power company. Though he claims at least one new well has already been dug for the task, the scale of new energy demand prompted by new Bitcoin production raises the prospect that higher energy prices may ultimately be shifted on to the public.

Only about 10 percent of adults in El Salvador are on Twitter, but Salvadoran journalists have noted that the country’s non-digital media often amplifies Bukele’s statements and spreads them widely among the population. As Bukele himself put it: “You put it on Twitter, and then media takes it from there…” This makes his Twitter account a powerful platform for him to communicate to voters, translating a stronger presence online into greater media coverage. Regardless of Bukele’s intentions behind Bitcoinization, the effect on his social media presence is undeniable. In the week following the Bitcoin law’s introduction, Bukele gained over 120,000 new Twitter followers — more than he had gained over the prior 10 weeks combined.

In the four days between the law’s announcement and its passage, Bukele Tweeted or Retweeted over 160 posts referencing his decision, many of which were praise for him from Bitcoin fans. One Retweeted user called him “the smartest president in existence right now.” After Retweeting a popular Bitcoin blogger who suggested that Bukele add laser eyes to his profile picture (a meme signifying that a user is a fan of Bitcoin), he did so, twice; the President of the Legislative Assembly joined in as well. Alongside the more substantial effects that may result from Bitcoinization, it has brought a major new wave of positive publicity to Bukele’s presidency.

The content of the social media response was at least as important as the scale: Bitcoinization strengthens Bukele’s attempts to sell El Salvador as a tax haven for wealthy foreign investors. Justin Sun, a Bitcoin multi-millionaire with 2.9 million followers, Tweeted that “Crypto investors and entrepreneur [sic] will start to move to El Salvador!” Bukele responded to Sun with a list of what he considers some of the country’s main draws: “Great weather, world class surfing beaches, beach front properties for sale,” “no property tax,” the new law’s exemption of Bitcoin profits from capital gains taxes, and “immediate permanent residence for crypto entrepreneurs” — the second time that day he offered to provide “help” to cryptocurrency investors seeking residency. Sun replied: “Amazing! Packing Now!”

Reading the language used in some of the posts that Bukele chose to share on his Twitter is revealing: “If I could buy stock in a country, I am buying El Salvador,” “Entrepreneurs and investors will be on the next flights to El Salvador,” “This is how a country is sold. This is how foreign investment is attracted,” and so on. One Retweet showed off a spike in Google searches for “El Salvador Real Estate.” US conservative commentator Avik Roy, whom Bukele Retweeted multiple times, argued,“if [Bukele] is successful, El Salvador may become best known as a destination of emigrants *from* the United States.” Perhaps the most interesting Retweet didn’t explicitly praise the move: “Doesn’t this El Salvador News also create a tax haven…[?]” 

Bitcoin’s large and dedicated online following is perfect for generating press coverage — a fact likely known to a tech-savvy former publicist like Bukele. Even better, the fact that much of the community identifies as self-styled entrepreneurs and investors supports a narrative of Bukele being the first world leader to tap a new market for foreign investment, strengthening the image of his party as a source of “New Ideas.”

Of course, the Bitcoin law is unlikely to attract a large new wave of foreign investment, which is generally driven by factors unrelated to online fads and nice beaches. Even if it were successful, this investors-first model tends to do little to address the fundamentals of economic development: basic social services, employment opportunities, the distribution of national income, and investments that help shift production from lower to higher productivity activities. But if there’s one thing a Twitter-era head of state understands, it’s to not let truth stand in the way of a good story.

On June 5, President Nayib Bukele announced his plans to make El Salvador the world’s first country to accept Bitcoin, a popular digital cryptocurrency, as a form of legal tender. The nation’s legislative assembly, under the majority control of Bukele’s New Ideas party, passed the bill just three days later. Under the new legislation, Bitcoin must be accepted as payment by all private firms and by the nation’s tax authorities. The move puts El Salvador into uncharted territory, posing serious risks that likely outweigh any potential benefits. However, prudent economic policy does not seem to be the purpose of the decision. Instead, Bitcoinization has in part been a successful publicity stunt, expanding the massive online following that President Bukele himself acknowledges is vital to his political power.

Elected in 2019, Bukele frames himself as an opponent of the traditional Salvadoran elite. He maintains an approval rating of roughly 90 percent, in large part by attributing a recent drop in the homicide rate (which began before he took office) to his harsh anti-crime policies. Another key to his popularity is his highly active presence on Twitter. Bukele, who previously worked at his father’s public relations firm, uses his Twitter profile to share news, memes, and posts supportive of his leadership with his 2.7 million followers — one of the largest Twitter followings of any national head of state when weighted by population.

Bukele’s carefully crafted public image, bolstered by paid trolls and lobbyists defending him, allows him to obscure the ways in which his rule has been similar to the corrupt Salvadoran elites he claims to oppose. In 2020, when the legislature objected to his proposal for a loan that would fund further police militarization, he sent soldiers to Congress to intimidate the lawmakers. This May, immediately after his party won a supermajority of the legislature’s seats, he replaced the attorney general and five judges on the Supreme Court in a move that the court itself declared unconstitutional. Most have recognized the move as a power grab; Bukele has termed it a “house cleaning.” While he claims these moves are necessary for fighting entrenched corruption, the US State Department has accused a number of Bukele’s close associates of being corrupt.

Enter Bitcoin. Advocates of the popular online asset argue that its digital and decentralized nature make it an ideal alternative to traditional currencies like the US dollar (USD). El Salvador, which uses the USD as its primary currency, will now serve as a case study in whether the cryptocurrency can live up to its promise.

Despite Bukele’s claim that the plan “looks bulletproof,” there are several reasons to doubt the wisdom of Bitcoinization as an economic policy. While one argument in support has been that this new payment method could expand remittances from Salvadorans working abroad — a financial flow that makes up a fifth of the Salvadoran economy — the benefits may be overstated. According to a survey by the national Chamber of Commerce and Industry, 82.5 percent of Salvadorans say they have no interest in receiving remittances through Bitcoin. Small Bitcoin transfers to the country did jump after the law’s introduction, but El Salvador’s limited Internet access and low remittance prices suggest they’ll continue to struggle to compete with USD transfers. Bitcoin ATMs, meant to help solve this issue, can charge fees which make them no better than regular banks to many Salvadorans. 

Others argue that the law could grant the Salvadoran economy more autonomy from the USD by introducing a secondary currency, allowing the government more room for independent policy-making. But, despite the term “cryptocurrency,” studies suggest Bitcoin “does not work as a currency due to its excess volatility” — often 10 times higher than major exchange rates. Indeed, the use of Bitcoin to dodge capital controls may even weaken the Salvadoran government’s options in deciding economic policy.

The risks, on the other hand, are significant. The law obligates the government to provide “automatic and instant convertibility from Bitcoin to USD,” meaning they must provide USD in exchange for Bitcoin out of their own currency reserves. Bitcoin is too unstable to function as a reserve asset, so each swap will appear on the books as a reduction in the nation’s reserves. The IMF has raised some concerns amid their negotiations with El Salvador for a new loan agreement; more worryingly, this system may also tie the nation’s macroeconomic stability to the value of Bitcoin. In addition, cryptocurrency has the potential to massively accelerate money laundering (a problem that Bukele is allegedly familiar with).

Bukele has argued, “If 1% of [Bitcoin’s market cap] is invested in El Salvador, that would increase our GDP by 25%.” However, this would only be the case if 1 percent of Bitcoin’s value were invested in the country without any increase in the country’s Bitcoin production, an extremely energy-intensive process. On the day Bukele made this argument, shifting just 1 percent of Bitcoin’s energy costs to El Salvador would increase the country’s 2019 energy use by over 17 percent. Bukele plans to meet this new demand through the country’s state-owned geothermal power company. Though he claims at least one new well has already been dug for the task, the scale of new energy demand prompted by new Bitcoin production raises the prospect that higher energy prices may ultimately be shifted on to the public.

Only about 10 percent of adults in El Salvador are on Twitter, but Salvadoran journalists have noted that the country’s non-digital media often amplifies Bukele’s statements and spreads them widely among the population. As Bukele himself put it: “You put it on Twitter, and then media takes it from there…” This makes his Twitter account a powerful platform for him to communicate to voters, translating a stronger presence online into greater media coverage. Regardless of Bukele’s intentions behind Bitcoinization, the effect on his social media presence is undeniable. In the week following the Bitcoin law’s introduction, Bukele gained over 120,000 new Twitter followers — more than he had gained over the prior 10 weeks combined.

In the four days between the law’s announcement and its passage, Bukele Tweeted or Retweeted over 160 posts referencing his decision, many of which were praise for him from Bitcoin fans. One Retweeted user called him “the smartest president in existence right now.” After Retweeting a popular Bitcoin blogger who suggested that Bukele add laser eyes to his profile picture (a meme signifying that a user is a fan of Bitcoin), he did so, twice; the President of the Legislative Assembly joined in as well. Alongside the more substantial effects that may result from Bitcoinization, it has brought a major new wave of positive publicity to Bukele’s presidency.

The content of the social media response was at least as important as the scale: Bitcoinization strengthens Bukele’s attempts to sell El Salvador as a tax haven for wealthy foreign investors. Justin Sun, a Bitcoin multi-millionaire with 2.9 million followers, Tweeted that “Crypto investors and entrepreneur [sic] will start to move to El Salvador!” Bukele responded to Sun with a list of what he considers some of the country’s main draws: “Great weather, world class surfing beaches, beach front properties for sale,” “no property tax,” the new law’s exemption of Bitcoin profits from capital gains taxes, and “immediate permanent residence for crypto entrepreneurs” — the second time that day he offered to provide “help” to cryptocurrency investors seeking residency. Sun replied: “Amazing! Packing Now!”

Reading the language used in some of the posts that Bukele chose to share on his Twitter is revealing: “If I could buy stock in a country, I am buying El Salvador,” “Entrepreneurs and investors will be on the next flights to El Salvador,” “This is how a country is sold. This is how foreign investment is attracted,” and so on. One Retweet showed off a spike in Google searches for “El Salvador Real Estate.” US conservative commentator Avik Roy, whom Bukele Retweeted multiple times, argued,“if [Bukele] is successful, El Salvador may become best known as a destination of emigrants *from* the United States.” Perhaps the most interesting Retweet didn’t explicitly praise the move: “Doesn’t this El Salvador News also create a tax haven…[?]” 

Bitcoin’s large and dedicated online following is perfect for generating press coverage — a fact likely known to a tech-savvy former publicist like Bukele. Even better, the fact that much of the community identifies as self-styled entrepreneurs and investors supports a narrative of Bukele being the first world leader to tap a new market for foreign investment, strengthening the image of his party as a source of “New Ideas.”

Of course, the Bitcoin law is unlikely to attract a large new wave of foreign investment, which is generally driven by factors unrelated to online fads and nice beaches. Even if it were successful, this investors-first model tends to do little to address the fundamentals of economic development: basic social services, employment opportunities, the distribution of national income, and investments that help shift production from lower to higher productivity activities. But if there’s one thing a Twitter-era head of state understands, it’s to not let truth stand in the way of a good story.

Artículo del (CEPR) Centro de Investigación para la Economía y la Política por sus siglas en inglés; escrito por Jake Johnston y publicado el 31 de Marzo del 2021.

Traducido al español por Ana Roldán.

En marzo de 2017, antes de la segunda vuelta de las elecciones presidenciales de Ecuador, el CEPR informó de que empresas fantasma con sede en Florida y vinculadas al entonces candidato Guillermo Lasso poseían 144 propiedades en los condados de Broward y Miami-Dade con un valor de más de 30 millones de dólares. En esas elecciones, los votantes aprobaron un referéndum que prohibía a los políticos y funcionarios públicos tener activos en paraísos fiscales y les daba un año para desprenderse de ellos o transferirlos. Aunque Florida no está incluida en la lista de paraísos fiscales, se considera una “jurisdicción de baja tributación”, que las autoridades tratarán caso por caso.

Cuatro años después, Ecuador se dirige de nuevo a una segunda vuelta de las elecciones presidenciales, con Lasso en la papeleta. Si bien se han introducido capas adicionales de anonimato para ocultar aún más la propiedad, una revisión de los registros corporativos e inmobiliarios en Florida muestra que las participaciones de las empresas fantasma vinculadas a Lasso han aumentado desde 2017, lo que plantea dudas sobre la legalidad de la candidatura de Lasso. Irónicamente, Lasso compite en la segunda vuelta del 11 de abril contra Andrés Arauz, uno de los arquitectos originales de las reformas que se realizaron en Ecuador en el área de los paraísos fiscales.  

Del artículo publicado en 2017 por CEPR:

En 2009, según la División de Corporaciones de Florida, Guillermo E. Lasso -el hijo del candidato- registró una LLC [limited liability company, o empresa de responsabilidad limitada] en Florida llamada Nora Investment US. Entre junio de 2009 y diciembre de 2010, la sociedad de cartera compró 59 propiedades, que todavía posee hoy, en el condado de Broward de Florida, según los registros disponibles públicamente. Las compras, en su mayoría condominios, ascendieron a 5,7 millones de dólares.

Pero esto fue sólo el comienzo. En 2011, se incorporaron dos nuevos directores a Nora Investment US: Miguel Macías y Euvenia Touriz. Ambos fueron anteriormente funcionarios del Banco Guayaquil, y ambos figuran actualmente como directores en el banco Banisi de Panamá que es propiedad de Lasso. Entre 2011 y 2013, Lasso (hijo del candidato), Macías y Touriz registraron 10 LLC en Florida en las que todos figuran como directores. Las LLC adicionales también se utilizaron para comprar propiedades en Florida.

En agosto de 2014, tras la implementación de nuevas regulaciones en Ecuador sobre los activos en el extranjero, el nombre del hijo de Lasso fue sistemáticamente eliminado como director de las 10 empresas, según muestran los registros públicos. Sin embargo, Macías y Touriz continuaron abriendo más sociedades holding. Es importante tener en cuenta que, aunque las sociedades de responsabilidad limitada incluya a los administradores, el llamado beneficiario efectivo -o verdadero propietario- queda oculto.

En junio de 2017, Macías y Touriz -asociados de Lasso de anteriores empresas fantasma y bancos- figuran como directivos en una empresa fantasma de nueva creación, DEBLEN USA 1, LLC. Dos meses después, la empresa compró una casa de lujo en Miami por 1,475 millones de dólares. No hay registro de una hipoteca, lo que sugiere que la compra probablemente se hizo en efectivo. A partir de 2018, sin embargo, tanto Macías como Touriz parecieron ser eliminados sistemáticamente como funcionarios de la gran mayoría de los registros corporativos de las empresas fantasma.

En 2020, la mayoría de las empresas fantasma previamente identificadas sufrieron innumerables cambios: desactivaciones, reactivaciones, renuncias de directores, cambios de nombre, fusiones y disoluciones. A muchas de las empresas se les cambió el nombre una semana después de su disolución. Todas las sociedades patrimoniales asociadas a Lasso, salvo cuatro, se han fusionado en nuevas entidades. En total, hemos identificado 23 empresas activas registradas en Florida, incluida DEBLEN USA 1, mencionada anteriormente, asociada a los socios comerciales de Lasso.

Tabla 1. Participaciones inmobiliarias actuales de las sociedades ficticias vinculadas a Lasso
Nombre de la Entidad Fecha de Registro Número de Propiedades Inmobiliarias Valor de la Propiedad en Florida
BROWARD TWO LLC 1/8/18 45 $8,229,770
BROWARD ONE LLC 1/8/18 50 $6,913,150
BRICKELL TWO LLC 1/8/18 6 $5,472,758
BRICKELL ONE LLC 1/8/18 5 $3,848,943
LOCAL EQUITY THREE LLC 1/8/18 4 $3,629,950
NORA INVESTMENT UNO US 3/29/11 14 $2,740,000
DORAL LLC 1/8/18 10 $1,452,370
MALENA UNO US LLC 7/29/13 1 $683,636
MALENA US LLC 7/29/13 1 $680,288
Total   136 $33,650,865
Notes: Nora Investment Uno US ya no es una empresa activa, a pesar de seguir figurando como propietaria de 14 propiedades. Otras 15 empresas están actualmente activas, pero no parecen ser propietarias directas de bienes inmuebles en los condados de Miami-Dade o Broward.

Por ejemplo, en 2016, “BILL INVESTMENT CINCO US, LLC”, con Macías y Touriz que figuran como directores, compró una casa en Fort Lauderdale, Florida, por 2,2 millones de dólares. El propietario de esa casa figura ahora como “LOCAL EQUITY THREE LLC”. Los registros corporativos muestran que Macías firmó el papeleo que autorizaba la fusión de una serie de empresas fantasma más antiguas en LOCAL EQUITY THREE LLC y un puñado de otras corporaciones. Pero en lugar de Macías, el administrador de la empresa figura como “DIRECT MANAGEMENT LLC”. En algunas de las otras empresas, el gerente figura como “FREEDOM MANAGEMENT LLC”. En lugar de personas físicas, los únicos responsables de estas empresas recién creadas son otras empresas fantasma. En todas las empresas fusionadas figura ahora una de estas dos empresas como gerente.

Tanto “DIRECT MANAGEMENT LLC” como “FREEDOM MANAGEMENT LLC” están registradas en Delaware, otra jurisdicción tristemente célebre por su secreto empresarial. Curiosamente, los registros corporativos de Delaware revelan que ambas empresas fueron creadas en la misma fecha: el 18 de diciembre de 2017. La remodelación corporativa de Florida comenzó poco después.

Aunque los socios de Lasso ya no aparecen en los registros corporativos, no cabe duda de que el propietario real de las propiedades no ha cambiado. De las 144 propiedades que poseían las empresas en 2017, 10 fueron vendidas y en 16 sigue figurando la empresa fantasma original como propietaria. En el caso de las propiedades restantes, aunque el nombre del propietario cambió, el propietario real no lo hizo. Aquí, es importante aclarar que, como es la naturaleza de las empresas fantasma, el “beneficiario real” del activo sigue siendo totalmente secreto.

Dos de las sociedades fantasma vinculadas a Lasso realizaron nuevas compras de bienes inmuebles en 2020: BRICKELL ONE LLC y BRICKELL TWO LLC. Los registros inmobiliarios de Florida muestran que la primera, BRICKELL ONE, es a su vez el resultado de una fusión de cuatro empresas ficticias diferentes: NORA INVESTMENT CINCO, NORA INVESTMENT SEIS, NORA INVESTMENT SIETE y NORA INVESTMENT NUEVE. La primera compra fue de un condominio de 665.000 dólares en abril de 2020. La segunda tuvo lugar en octubre de 2020.

La empresa fantasma BRICKELL ONE LLC pagó 1,25 millones de dólares a finales del otoño pasado por un apartamento en Coral Gables. El tasador de propiedades de Miami-Dade evaluó la casa con un valor de sólo 734.894 dólares en 2020. Curiosamente, el vendedor de esa vivienda era Miguel Macías, que había comprado la casa en enero de 2016 por 900.000 dólares. Eso plantea preguntas adicionales. Por ejemplo, ¿por qué una empresa fantasma que Macías había gestionado anteriormente le compraría entonces una vivienda por un precio muy superior al aparente valor de mercado?

La operación inmobiliaria más significativa, sin embargo, implicó la compra en 2017 de la casa de lujo en Miami por parte de DEBLEN USA 1 LLC. En agosto de 2020, apenas tres años después de la compra, la vivienda se vendió por 5 millones de dólares. Curiosamente, la empresa fantasma proporcionó al comprador una hipoteca de 2,25 millones de dólares. DEBLEN no es la única empresa que se ha metido en el negocio hipotecario. GLOBAL EQUITY SEVEN LLC, según los registros de Florida, es actualmente el prestamista de siete hipotecas por un total de 1,2 millones de dólares. Parece que las empresas fantasma han pasado de ser simples propietarias de bienes inmuebles a actuar como prestamistas directos en el estado de Florida.

En general, como puede verse en la Tabla 1, hemos identificado 136 propiedades de empresas fantasma asociadas a Lasso. Sin duda es posible que haya otras que permanezcan ocultas. En conjunto, las que hemos identificado tienen un valor de mercado actual de 33 millones de dólares, según los registros de propiedad de los condados de Miami-Dade y Broward. Además, las empresas fantasma actualmente activas poseen los 3,45 millones de dólares en hipotecas.

Aunque el nombre de Guillermo Lasso no aparece directamente en ninguno de los registros corporativos o inmobiliarios del sur de Florida, la implicación de miembros de la familia y socios comerciales cercanos, así como los recientes movimientos hacia un anonimato aún mayor, ciertamente plantean preguntas sobre la implicación del candidato. Sin embargo, las conexiones que Lasso puede tener con las empresas fantasma de Florida están lejos de ser las únicas preguntas sobre sus actividades financieras en el exterior.

El otoño pasado, el partido Unión por la Esperanza (UNES) de Arauz impugnó la legalidad de la candidatura de Lasso basándose en la legislación implementada tras el referéndum sobre el paraíso fiscal de 2017. La ley electoral actualizada impide que cualquier persona que tenga activos en un paraíso fiscal se presente como candidato a un cargo público. La denuncia citaba una investigación de 2017 del diario argentino Página/12 que documentaba los vínculos de Lasso con decenas de empresas pantalla y un banco panameño.

En 2017, Lasso admitió que era dueño del banco panameño, Banisi S.A. Sin embargo, el CNE rechazó la denuncia. El banco sigue operando en la actualidad con Macías y Touriz que figuran como directores, así como dos de los hijos de Lasso. Banisi tiene un capital que asciende a 60,4 millones de dólares, según la Superintendencia de Bancos de Panamá.

Una cosa no ha cambiado desde 2017: los medios de comunicación -tanto internacionales como ecuatorianos- han decidido ignorar por completo las posesiones financieras en el extranjero de Lasso. En abril de 2017, la Superintendencia de Información y Comunicación de Ecuador multó a siete medios de comunicación con 3.750 dólares cada uno por no informar sobre la investigación de Página/12. En los años posteriores, el actual presidente de Ecuador, Lenín Moreno, también ha sido implicado en el uso de paraísos fiscales en el llamado escándalo de los Papeles del INA. Moreno ha negado cualquier delito. Aunque Moreno se había presentado contra Lasso en 2017, ha parecido favorecer al banquero frente a Arauz en 2021.

Descargo de responsabilidad: Andrés Arauz ha trabajado anteriormente como investigador principal en el CEPR.

Artículo del (CEPR) Centro de Investigación para la Economía y la Política por sus siglas en inglés; escrito por Jake Johnston y publicado el 31 de Marzo del 2021.

Traducido al español por Ana Roldán.

En marzo de 2017, antes de la segunda vuelta de las elecciones presidenciales de Ecuador, el CEPR informó de que empresas fantasma con sede en Florida y vinculadas al entonces candidato Guillermo Lasso poseían 144 propiedades en los condados de Broward y Miami-Dade con un valor de más de 30 millones de dólares. En esas elecciones, los votantes aprobaron un referéndum que prohibía a los políticos y funcionarios públicos tener activos en paraísos fiscales y les daba un año para desprenderse de ellos o transferirlos. Aunque Florida no está incluida en la lista de paraísos fiscales, se considera una “jurisdicción de baja tributación”, que las autoridades tratarán caso por caso.

Cuatro años después, Ecuador se dirige de nuevo a una segunda vuelta de las elecciones presidenciales, con Lasso en la papeleta. Si bien se han introducido capas adicionales de anonimato para ocultar aún más la propiedad, una revisión de los registros corporativos e inmobiliarios en Florida muestra que las participaciones de las empresas fantasma vinculadas a Lasso han aumentado desde 2017, lo que plantea dudas sobre la legalidad de la candidatura de Lasso. Irónicamente, Lasso compite en la segunda vuelta del 11 de abril contra Andrés Arauz, uno de los arquitectos originales de las reformas que se realizaron en Ecuador en el área de los paraísos fiscales.  

Del artículo publicado en 2017 por CEPR:

En 2009, según la División de Corporaciones de Florida, Guillermo E. Lasso -el hijo del candidato- registró una LLC [limited liability company, o empresa de responsabilidad limitada] en Florida llamada Nora Investment US. Entre junio de 2009 y diciembre de 2010, la sociedad de cartera compró 59 propiedades, que todavía posee hoy, en el condado de Broward de Florida, según los registros disponibles públicamente. Las compras, en su mayoría condominios, ascendieron a 5,7 millones de dólares.

Pero esto fue sólo el comienzo. En 2011, se incorporaron dos nuevos directores a Nora Investment US: Miguel Macías y Euvenia Touriz. Ambos fueron anteriormente funcionarios del Banco Guayaquil, y ambos figuran actualmente como directores en el banco Banisi de Panamá que es propiedad de Lasso. Entre 2011 y 2013, Lasso (hijo del candidato), Macías y Touriz registraron 10 LLC en Florida en las que todos figuran como directores. Las LLC adicionales también se utilizaron para comprar propiedades en Florida.

En agosto de 2014, tras la implementación de nuevas regulaciones en Ecuador sobre los activos en el extranjero, el nombre del hijo de Lasso fue sistemáticamente eliminado como director de las 10 empresas, según muestran los registros públicos. Sin embargo, Macías y Touriz continuaron abriendo más sociedades holding. Es importante tener en cuenta que, aunque las sociedades de responsabilidad limitada incluya a los administradores, el llamado beneficiario efectivo -o verdadero propietario- queda oculto.

En junio de 2017, Macías y Touriz -asociados de Lasso de anteriores empresas fantasma y bancos- figuran como directivos en una empresa fantasma de nueva creación, DEBLEN USA 1, LLC. Dos meses después, la empresa compró una casa de lujo en Miami por 1,475 millones de dólares. No hay registro de una hipoteca, lo que sugiere que la compra probablemente se hizo en efectivo. A partir de 2018, sin embargo, tanto Macías como Touriz parecieron ser eliminados sistemáticamente como funcionarios de la gran mayoría de los registros corporativos de las empresas fantasma.

En 2020, la mayoría de las empresas fantasma previamente identificadas sufrieron innumerables cambios: desactivaciones, reactivaciones, renuncias de directores, cambios de nombre, fusiones y disoluciones. A muchas de las empresas se les cambió el nombre una semana después de su disolución. Todas las sociedades patrimoniales asociadas a Lasso, salvo cuatro, se han fusionado en nuevas entidades. En total, hemos identificado 23 empresas activas registradas en Florida, incluida DEBLEN USA 1, mencionada anteriormente, asociada a los socios comerciales de Lasso.

Tabla 1. Participaciones inmobiliarias actuales de las sociedades ficticias vinculadas a Lasso
Nombre de la Entidad Fecha de Registro Número de Propiedades Inmobiliarias Valor de la Propiedad en Florida
BROWARD TWO LLC 1/8/18 45 $8,229,770
BROWARD ONE LLC 1/8/18 50 $6,913,150
BRICKELL TWO LLC 1/8/18 6 $5,472,758
BRICKELL ONE LLC 1/8/18 5 $3,848,943
LOCAL EQUITY THREE LLC 1/8/18 4 $3,629,950
NORA INVESTMENT UNO US 3/29/11 14 $2,740,000
DORAL LLC 1/8/18 10 $1,452,370
MALENA UNO US LLC 7/29/13 1 $683,636
MALENA US LLC 7/29/13 1 $680,288
Total   136 $33,650,865
Notes: Nora Investment Uno US ya no es una empresa activa, a pesar de seguir figurando como propietaria de 14 propiedades. Otras 15 empresas están actualmente activas, pero no parecen ser propietarias directas de bienes inmuebles en los condados de Miami-Dade o Broward.

Por ejemplo, en 2016, “BILL INVESTMENT CINCO US, LLC”, con Macías y Touriz que figuran como directores, compró una casa en Fort Lauderdale, Florida, por 2,2 millones de dólares. El propietario de esa casa figura ahora como “LOCAL EQUITY THREE LLC”. Los registros corporativos muestran que Macías firmó el papeleo que autorizaba la fusión de una serie de empresas fantasma más antiguas en LOCAL EQUITY THREE LLC y un puñado de otras corporaciones. Pero en lugar de Macías, el administrador de la empresa figura como “DIRECT MANAGEMENT LLC”. En algunas de las otras empresas, el gerente figura como “FREEDOM MANAGEMENT LLC”. En lugar de personas físicas, los únicos responsables de estas empresas recién creadas son otras empresas fantasma. En todas las empresas fusionadas figura ahora una de estas dos empresas como gerente.

Tanto “DIRECT MANAGEMENT LLC” como “FREEDOM MANAGEMENT LLC” están registradas en Delaware, otra jurisdicción tristemente célebre por su secreto empresarial. Curiosamente, los registros corporativos de Delaware revelan que ambas empresas fueron creadas en la misma fecha: el 18 de diciembre de 2017. La remodelación corporativa de Florida comenzó poco después.

Aunque los socios de Lasso ya no aparecen en los registros corporativos, no cabe duda de que el propietario real de las propiedades no ha cambiado. De las 144 propiedades que poseían las empresas en 2017, 10 fueron vendidas y en 16 sigue figurando la empresa fantasma original como propietaria. En el caso de las propiedades restantes, aunque el nombre del propietario cambió, el propietario real no lo hizo. Aquí, es importante aclarar que, como es la naturaleza de las empresas fantasma, el “beneficiario real” del activo sigue siendo totalmente secreto.

Dos de las sociedades fantasma vinculadas a Lasso realizaron nuevas compras de bienes inmuebles en 2020: BRICKELL ONE LLC y BRICKELL TWO LLC. Los registros inmobiliarios de Florida muestran que la primera, BRICKELL ONE, es a su vez el resultado de una fusión de cuatro empresas ficticias diferentes: NORA INVESTMENT CINCO, NORA INVESTMENT SEIS, NORA INVESTMENT SIETE y NORA INVESTMENT NUEVE. La primera compra fue de un condominio de 665.000 dólares en abril de 2020. La segunda tuvo lugar en octubre de 2020.

La empresa fantasma BRICKELL ONE LLC pagó 1,25 millones de dólares a finales del otoño pasado por un apartamento en Coral Gables. El tasador de propiedades de Miami-Dade evaluó la casa con un valor de sólo 734.894 dólares en 2020. Curiosamente, el vendedor de esa vivienda era Miguel Macías, que había comprado la casa en enero de 2016 por 900.000 dólares. Eso plantea preguntas adicionales. Por ejemplo, ¿por qué una empresa fantasma que Macías había gestionado anteriormente le compraría entonces una vivienda por un precio muy superior al aparente valor de mercado?

La operación inmobiliaria más significativa, sin embargo, implicó la compra en 2017 de la casa de lujo en Miami por parte de DEBLEN USA 1 LLC. En agosto de 2020, apenas tres años después de la compra, la vivienda se vendió por 5 millones de dólares. Curiosamente, la empresa fantasma proporcionó al comprador una hipoteca de 2,25 millones de dólares. DEBLEN no es la única empresa que se ha metido en el negocio hipotecario. GLOBAL EQUITY SEVEN LLC, según los registros de Florida, es actualmente el prestamista de siete hipotecas por un total de 1,2 millones de dólares. Parece que las empresas fantasma han pasado de ser simples propietarias de bienes inmuebles a actuar como prestamistas directos en el estado de Florida.

En general, como puede verse en la Tabla 1, hemos identificado 136 propiedades de empresas fantasma asociadas a Lasso. Sin duda es posible que haya otras que permanezcan ocultas. En conjunto, las que hemos identificado tienen un valor de mercado actual de 33 millones de dólares, según los registros de propiedad de los condados de Miami-Dade y Broward. Además, las empresas fantasma actualmente activas poseen los 3,45 millones de dólares en hipotecas.

Aunque el nombre de Guillermo Lasso no aparece directamente en ninguno de los registros corporativos o inmobiliarios del sur de Florida, la implicación de miembros de la familia y socios comerciales cercanos, así como los recientes movimientos hacia un anonimato aún mayor, ciertamente plantean preguntas sobre la implicación del candidato. Sin embargo, las conexiones que Lasso puede tener con las empresas fantasma de Florida están lejos de ser las únicas preguntas sobre sus actividades financieras en el exterior.

El otoño pasado, el partido Unión por la Esperanza (UNES) de Arauz impugnó la legalidad de la candidatura de Lasso basándose en la legislación implementada tras el referéndum sobre el paraíso fiscal de 2017. La ley electoral actualizada impide que cualquier persona que tenga activos en un paraíso fiscal se presente como candidato a un cargo público. La denuncia citaba una investigación de 2017 del diario argentino Página/12 que documentaba los vínculos de Lasso con decenas de empresas pantalla y un banco panameño.

En 2017, Lasso admitió que era dueño del banco panameño, Banisi S.A. Sin embargo, el CNE rechazó la denuncia. El banco sigue operando en la actualidad con Macías y Touriz que figuran como directores, así como dos de los hijos de Lasso. Banisi tiene un capital que asciende a 60,4 millones de dólares, según la Superintendencia de Bancos de Panamá.

Una cosa no ha cambiado desde 2017: los medios de comunicación -tanto internacionales como ecuatorianos- han decidido ignorar por completo las posesiones financieras en el extranjero de Lasso. En abril de 2017, la Superintendencia de Información y Comunicación de Ecuador multó a siete medios de comunicación con 3.750 dólares cada uno por no informar sobre la investigación de Página/12. En los años posteriores, el actual presidente de Ecuador, Lenín Moreno, también ha sido implicado en el uso de paraísos fiscales en el llamado escándalo de los Papeles del INA. Moreno ha negado cualquier delito. Aunque Moreno se había presentado contra Lasso en 2017, ha parecido favorecer al banquero frente a Arauz en 2021.

Descargo de responsabilidad: Andrés Arauz ha trabajado anteriormente como investigador principal en el CEPR.

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