FACTBOX-Key political risks to watch in Latin America

ARGENTINE ELECTIONS

President Cristina Fernandez has not said whether she will
run for a second term at the presidential election in October.
Her husband and predecessor, Nestor Kirchner, had been expected
to run but his death in late October turned Argentine politics
on its head and there is considerable uncertainty over which
candidates will emerge.

Kirchner’s death also robbed Fernandez of her closest ally
and drove Argentine bond and stock prices higher as investors
bet it would eventually put an end to the couple’s
interventionist economic policies.

Several recent announcements, such as a surprise overture
to the International Monetary Fund (IMF) on the country’s
discredited inflation data, suggest Fernandez is taking a more
pragmatic approach. [ID:nN26268496]

But with a record soy and corn harvest swelling state
coffers and the economy booming, Fernandez is expected to
maintain brisk social spending as the election draws nearer,
prioritizing growth despite inflation risks. [ID:RISKAR]

What to watch:

— Fernandez’s decision on whether to run for re-election
or not.

— Other candidates emerging, especially if there are
challengers to Fernandez inside ruling Peronist party.

— Government moves to ensure access to billions in foreign
currency reserves to pay debt next year.

— Any sign the Senate could approve a bill to reform the
questioned INDEC national statistics agency when Congress
reconvenes in March.

— Any labor unrest when wage talks start in March or April
and social protests linked to skyrocketing prices.

COLOMBIAN REFORM AGENDA

President Juan Manuel Santos’ ambitious reform agenda, the
guerrilla and drugs war, measures to tame the soaring peso and
still delicate relations with neighboring Venezuela and Ecuador
are key issues to watch in Colombia in 2011.

Since coming to office in August, Santos has pushed an
ambitious set of reforms ranging from the management of oil
royalties to overhauling the health system and a tax system
adjustment. The success of the reforms are seen as essential
for Colombia to tackle its fiscal deficit and regain the
investment grade it lost in a 1990s fiscal crisis.

Key to watch will be the royalties reform [ID:nN31245717],
tax overhaul and a fiscal regulation proposal [ID:nN07144747]
that seeks to lower debt and better savings.

Santos has a strong majority in Congress and has managed to
make significant progress on the reforms. But several proposals
already must have to wait to a second legislative session start
in March. Under Santos, Colombia has improved strained ties
with left-wing leaders in Ecuador and Venezuela. But underlying
political differences linger.

While it has made big inroads against FARC rebels involved
in the country’s cocaine trade, Colombia still faces security
risks from guerrillas and new militias. [ID:nRISKCO]

— Urban attacks by FARC to show presence.

— Details on how royalty reform will share out cash.

ECUADOR

Political stability will be the key issue in Ecuador in
2011 after recent violence revived memories of the coups and
street protests that have hounded the OPEC member nation.
[ID:nN30130945]

Hundreds of police officers mutinied on Sept 30, causing
deadly riots and surrounding leftist President Rafael Correa
for hours in a Quito hospital where he had taken refuge.

The mutiny was finally ended when the military rescued
Correa, and the country has since calmed down, but it raised
fresh concerns about the government’s dependence on support
from army chiefs.

A struggling dollarized economy, a possible bid to re-enter
the international capital markets with a new bond issue, which
would be the country’s first since defaulting on its global
debt in 2008, and a possible move by Correa to dissolve
Congress and call elections are all points to watch in 2011.
[ID:nRISKEC]

What to watch for:

— Renewed political instability.

— Efforts to lift oil production.

CUBAN REFORMS

The success or failure of Cuba’s economic reforms will be
the key issue to watch in the next year as the government moves
to strengthen the economy and ensure survival of the island’s
communist system once the current aging leadership is gone.

The cash-strapped government is looking for ways to cut
spending while increasing income, and could get long-term help
if offshore oil exploration slated to begin in 2011 is
successful. [ID:nN05129084]

All this occurs against a backdrop of only slightly
tempered hostility with the United States, including an ongoing
dispute over a U.S. contractor held by the Cubans on suspicion
of spying. [ID:nRISKCU]

What to watch for:

— Fate of detainee Alan Gross.

— Better or worse economic performance.

— U.S. and EU reaction to Cuban reforms.
(Editing by Kieran Murray)

FACTBOX-Key political risks to watch in Latin America