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Colombia’s Uribe on Venezuela: ‘Tyranny has established itself’

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During his two terms as president of Colombia, Álvaro Uribe was the US’s closest ally in Latin America, railing against the revolutionary socialist government in neighbouring Venezuela. 

Now, with the Venezuelan opposition in disarray and its leader, Juan Guaidó, having failed to unseat Nicolás Maduro as president, Mr Uribe said that US sanctions against Caracas have not worked and he fears Venezuela is fast becoming another Cuba.

“Tyranny has established itself,” Mr Uribe told the Financial Times in a video interview from his wife’s family ranch near Medellín.

“When my generation was young, every year we’d say ‘this year the Cuban revolution will fall’ and it never fell,” said Mr Uribe, still Colombia’s most powerful politician at the age of 68. “It stabilised and we’ve lost three generations. It pains me to think history might repeat itself in Venezuela.”

Mr Uribe said at one point he believed Venezuela’s military might abandon Mr Maduro and support Mr Guaidó. “But the problem is that a lot of top people in the armed forces have been bribed by the government,” he said.

Mr Uribe said there are many reasons why the Maduro regime has proved so resilient, not least because “the economic sanctions [imposed by the US] haven’t worked”. 

“While Russia and China are giving financial support it’s very difficult [to have change]”, he added.

US officials believe Venezuela’s leaders have diversified their sources of foreign exchange to make up for the loss of dollars from oil exports, exporting illegally mined gold to the Middle East and facilitating drug shipments to the United States. The once-wealthy economy, having cratered over the past five years, has plunged to subsistence level for most of the population. 

“Unfortunately the dictatorship in Venezuela has stabilised,” Mr Uribe said. “I see a very worrying future for Venezuela and a lot of risks for Colombia.”

Since leaving the presidency, Mr Uribe has remained centre stage and still dominates Colombia’s political landscape with a personality that polarises the country. He led a successful referendum campaign against the 2016 peace agreement which his successor, Juan Manuel Santos, signed with the Farc, saying it was too generous to the guerrillas. In 2018, he was instrumental in propelling Colombia’s current leader, Iván Duque, to the presidency.

Malcolm Deas, a historian and expert on Colombia who taught Mr Uribe at Oxford university in the 1990s, says Colombian opinion is divided “over the provisions of the peace accord, over Duque, even over Uribe”.

“Uribe left office in 2010 with extraordinary ratings in the polls, of 70 per cent and above,” Mr Deas said. “Since then his popularity has fallen . . . his reputation has suffered from the scandals inherent in eight years of government, his feud with President Santos and prolonged legal vendettas.”

In 2022, Colombia will choose a new president. Conservatives — along with many foreign investors — fear that if the left wins it could turn the country into the next Venezuela.

That may seem unlikely. Colombians have witnessed Venezuela’s collapse at close quarters and suffered its consequences, including the arrival of nearly 2m poor and hungry migrants. Some 93 per cent of Colombians have an unfavourable view of Mr Maduro, one recent poll found. 

But radical leftist candidate Gustavo Petro, who finished second in the 2018 election, is determined to run again. He is polling consistently well in a country that has suffered from the wave of discontent that swept through the Andean region late last year, which has been subdued in 2020 only because of the pandemic.

Mr Uribe warns that the far-left could take power and wreck Colombia’s economy which, before coronavirus, was among the fastest growing in the region.

“The extreme left doesn’t threaten expropriation, but then neither did [late Venezuelan president Hugo] Chávez,” he said. “But when they get into power, they either expropriate companies or they asphyxiate them with taxes and regulations.”

He acknowledged Colombia will end this year “with worrying levels of debt, deficit, poverty and unemployment” and advocated modest tax hikes to raise money to help the poor. At the same time, he said, “the important thing is not to lose investment grade status or the confidence of investors”.

Where Mr Uribe will be in 2022 is a matter of debate. His most vociferous opponents want him behind bars, having long accused him of links to far-right paramilitary death squads, charges he vehemently denies. He is under investigation for alleged witness-tampering and bribery and recently spent two months under house arrest on the orders of a judge.

That decision caused uproar in Colombia, testament to the strength of feeling Mr Uribe still arouses. Thousands of people took to the streets in protest. Others did so in celebration.

With 18 months to go before the election, Mr Uribe was reluctant to say whom he will back, but whoever wins his support is likely to be a leading contender.

“A consummate politician and communicator, Uribe is by no means a spent force,” Mr Deas said.



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Bolsonaro faces investigation over election fraud claims

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Brazilian politics updates

Brazilian president Jair Bolsonaro’s legal problems have multiplied after a court opened an investigation into his unsubstantiated warnings of voter fraud in presidential elections next year, a probe which could lead to him being disqualified from running.

The judicial inquiry comes as the far-right leader’s ratings are on the slide following accusations of his incompetent handling of the Covid-19 pandemic, which has claimed the lives of more than half a million Brazilians.

Rising living costs and allegations of corruption in vaccine procurement within his administration have damaged Bolsonaro’s standing further.

With political pressure building, the populist has increased attacks on the electronic voting system in recent weeks, reiterating calls for the adoption of printed paper receipts in order to avoid manipulation.

Opponents fear the former army captain is seeking to cast doubt on the legitimacy of the vote, in preparation for refusing to recognise a potential defeat. A group of 18 current and former Supreme Court justices have defended the current ballot system, which was introduced in 1996, insisting that Brazil had eliminated election fraud.

The Superior Electoral Court this week opened an administrative probe into Bolsonaro over his claims, for which he has provided no evidence. It also asked the Supreme Court to investigate whether the president had committed a crime by disseminating fake news about the voting system.

The president hit back on Tuesday. “I will not accept intimidation. I will continue to exercise my right as a citizen, to freedom of expression, criticism, to listen, and to meet, above all, the popular will,” Bolsonaro told supporters in Brasília.

The electoral court’s intervention showed the judiciary was striking back against Bolsonaro’s attacks, said Carlos Melo, a political scientist at Insper in São Paulo. “He [Bolsonaro] is harming the rules of the game, of democracy and the institutions,” he added. “It’s not different to what [Donald] Trump did, and demagogues in other countries. His intention is to question the electoral process without proof.”

Both moves by the electoral court could in theory eventually pave the way for Bolsonaro being barred from standing in the 2022 poll.

“There is a long way until this can bring actual legal consequences against the president which might affect his eligibility,” said Rogério Taffarello, a partner in criminal law at Mattos Filho and professor at the Getúlio Vargas Foundation. “[This] does not mean, of course, that the existence of such investigations cannot generate political consequences”.

The president is already the subject of a criminal investigation into whether he failed to act on warnings about alleged irregularities by public officials in negotiations over vaccine purchases. Bolsonaro and the government deny any wrongdoing.

Protesters have taken to the streets in cities over the past two months calling for the impeachment of Bolsonaro, who in polls is trailing former leftwing president Luiz Inácio Lula da Silva, also a likely frontrunner in next year’s election.

Bolsonaro had long promised to present evidence of cheating in elections, even claiming that the 2018 ballot he won was tampered with. Yet last week he admitted to not holding any proof, only “indications”.

Despite his falling popularity, Bolsonaro retains backing in Congress from an amorphous grouping of centre-right political parties known as the Centrão, or “Big Centre”. Analysts said for now this support appeared to be holding.

Additional reporting by Carolina Pulice



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South Korea looks to fintech as household debt balloons to $1.6tn

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South Korea Economy updates

After her family business of ferrying drunk people home was hit by closures of bars due to Covid-19 curfews and social distancing, Lee Young-mi* found herself juggling personal debts of about Won30m ($26,000).

The 56-year-old resident of Suncheon in South Korea was already struggling to pay off or refinance four credit cards, but now faces the prospect of those debts rapidly multiplying after her husband was diagnosed with cancer.

“We’ve had little income for more than a year as not many people are out drinking until late into the night,” said Lee. “Now my husband won’t be able to work at all for the next three months after his surgery.”

Lee’s story is playing out across Asia’s fourth-largest economy as self-employed workers, who make up nearly a third of the labour force, have seen their incomes reduced sharply due to coronavirus restrictions. Now, after struggling for years to keep a lid on household debts that hit a record Won1,765tn ($1.6tn) in March, Seoul is looking to fintech companies and peer-to-peer lenders for answers. 

Chart showing increase in South Korea's household debt

Among them is PeopleFund, which touts tech-based investment products backed by machine learning that allow borrowers to refinance their higher-interest loans from banks and credit card companies.

The company has loaned at least $1bn to more than 7,500 customers since it was established in 2015. Its products allow borrowers to switch their debts to fixed-rate, amortised loans at annual interest rates of about 11 per cent, a change from the riskier floating rate, interest-only loans common in South Korea. 

PeopleFund has received about Won96.7bn in financing from brokerage CLSA, and along with Lendit and 8Percent is one of the first among the country’s 250 shadow banks to win a peer-to-peer lending licence. 

“The country’s most serious household debt problem is with unsecured non-bank loans, whose pricing has been too high. We can offer more affordable loans to ordinary people unable to receive bank loans,” Joey Kim, chief executive of PeopleFund, told the Financial Times.

The proliferation of digital lenders and fintechs in South Korea, where higher-risk borrowers are often cut off from bank financing, has been encouraged by the country’s government.

“We hope that P2P lenders will help resolve the dichotomy in the credit market by increasing the access of low-income people to mid-interest loans,” said an official at the Financial Supervisory Service.

South Korea’s household debt situation has become more pressing since the onset of the pandemic, with increases in borrowing for mortgages, to cover stagnating wages and to invest in the booming stock market. South Korean households are among the world’s most heavily indebted, with the average debt equal to 171.5 per cent of annual income.

South Korea’s household debt-to-GDP ratio stood at 103.8 per cent at the end of last year, compared with an average 62.1 per cent of 43 countries surveyed by the Bank for International Settlements.

Much of the new debt has been risky. Unsecured household loans from non-bank financial institutions were Won116.9tn as of March, up 33 per cent from four years ago, according to the Bank of Korea, much of it high interest loans taken out by poorer borrowers.

Getting on top of the problem has taken on national importance. In a rare warning in June, the central bank said the combination of high asset prices and excessive borrowing risked triggering a sell-off in markets and a rapid debt deleveraging.

“If financial imbalances increase further, this could dent our mid-to-long-term economic growth prospects,” BoK governor Lee Ju-yeol said in July.

The country’s economic planners, however, are struggling to contain debt-fuelled asset bubbles without undermining South Korea’s fragile economic recovery.

The government has attempted to address the danger by tightening lending rules. Regulators in July lowered the country’s maximum legal interest rate that private lenders can charge their customers from 24 to 20 per cent.

Economists caution that rising debt levels increase South Korea’s vulnerability to an economic shock. 

They also warn that the asset quality of financial institutions could be hit by a jump in distressed loans when the BoK rolls back monetary easing, expected in the fourth quarter.

“Monetary tightening is needed to curb asset bubbles but this will increase the household debt burden, holding back consumption further,” said Park Chong-hoon, head of research at Standard Chartered in Seoul. “The government is facing a dilemma.”

For Lee Young-mi, however, the 11 per cent rate offered by the PeopleFund is still too high. “I am not sure how to pay back the debt.”

*The name has been changed



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European and Chinese stocks rise after calming words from Beijing

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Chinese equities updates

European shares chased gains in China after calls from Beijing for greater co-operation with Washington helped sooth jitters over a regulatory crackdown in the world’s biggest emerging market.

Europe’s Stoxx 600 index rose 0.7 per cent on Monday to hit new all-time highs, while the UK’s FTSE 100 rose 1 per cent led by economically sensitive stocks including banks and energy groups. London-listed lender HSBC gained 1 per cent after it reported second-quarter figures that easily beat analysts’ expectations.

The gains came after the China Securities Regulatory Commission, Beijing’s market regulator, called on Sunday for closer co-operation with Washington, stressing the country’s efforts to improve transparency and predictability after a crackdown on tutoring groups obliterated the market value of the $100bn sector’s biggest companies.

Chinese listings in the US have become a geopolitical flashpoint as Beijing has sought to exert greater control over the country’s powerful tech sector. The US Securities and Exchange Commission said on Friday that Chinese groups that sought to sell shares in America would be subject to stricter disclosures.

Shares in China rebounded after their worst month in almost three years, with China’s CSI 300 benchmark of Shanghai- and Shenzhen-listed blue-chips rose 2.6 per cent on Monday, while Hong Kong’s Hang Seng index added 1.1 per cent. The city’s Hang Seng Tech index, which tracks big internet groups including Tencent and Alibaba, reversed early losses to rise 1 per cent. Futures tracking Wall Street’s benchmark S&P 500 index climbed 0.6 per cent.

Last month, China’s cyber-security regulator announced plans to review all foreign listings by companies with data on more than 1m users after top leaders in Beijing called for an overhaul of how the country regulates initial public offerings in the US. The crackdown came just days after the $4.4bn listing of ride-hailing group Didi Chuxing.

The intensifying scrutiny of how Chinese groups access capital markets has pummelled stocks, delivering the worst month for China tech groups listed in the US since the global financial crisis. The Hang Seng Tech index fell 17 per cent last month.

“While we do not consider it prudent to completely avoid investments in China, further volatility can be expected until the first quarter of 2022, by which time we believe most regulatory changes may already be in place,” analysts at Credit Suisse wrote in a note on Monday.

Meanwhile, data released by China at the weekend showed that factory activity grew at the slowest pace in 15 months in July as demand contracted for the first time in more than a year.

Government bonds were steady with the yield on the benchmark German 10-year Bund, which moves inversely to its price, gaining 0.01 percentage points to minus 0.45. The equivalent US 10-year yield was steady at 1.234 per cent.

Bond yields have been falling in recent weeks, despite higher than expected inflation readings in the US and indications from the US federal Reserve last week that it was moving a step closer to the day when it would start tapering its $120bn in monthly asset purchases.

The euro rose 0.1 per cent against the dollar to $1.1885, while the pound gained 0.1 per cent to purchase $1.3924. Prices for global oil benchmark Brent crude fell 1 per cent to $74.66.

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