Latin America Risk Report - 14 June 2019

Argentina political alliances reshape the election

Jun 14, 2019

In this edition

Argentina’s election alliances and polls
Guatemala election this Sunday
Venezuela Update

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Argentina election update

Ongoing polling wars

There are a lot of polls in Argentina. Some are from established firms and others from brand new names that have no reputation. Some attempt unbiased analysis for the media, some are propaganda for various candidates. There are also an increasing number of political polls done for private sector firms that are leaked (strategically or accidentally). Adding to the confusion, the field is still shaking out in terms of candidates and alliances, meaning the polls often ask about different candidates. The polling should become clearer in the coming weeks with the alliances firming up.

Key points from the recent polls:

Nearly every poll agrees that neither Macri nor Kirchner have majority support and both have higher disapproval ratings than approval ratings. There is space for a centrist alternative. Macri and Fernandez-Fernandez benefit by keeping the debate polarized between the two sides rather than allowing that centrist alternative to rise.
Over the past week, Macri-friendly media outlets have published polls showing slight improvements for Macri relative to the Fernandez-Fernandez ticket. In those polls, the president has a statistical tie or even a narrow lead over Kirchner.
Pro-Kirchner media have highlighted polls that have shown a significant lead by the former president’s ticket, with one poll even suggesting she could win in the first round.

Macri fights to regain momentum

Following former President Kirchner’s unorthodox choice to run as the vice presidential candidate, President Macri found himself reacting to negative media coverage questioning the viability of his campaign.

This week, Macri fired back by choosing Senator Miguel Pichetto as his running mate. The dissident Peronist politician represents a fairly right-wing and orthodox set of economic policies that stand in stark contrast to the more statist wing of the Peronists led by Kirchner and her allies. If Macri wins, Pichetto brings an ability to win over legislative coalitions in the next term.

Macri’s choice aims to strengthen the divide between CFK and the dissident Peronists who have split from the former president. It is also a message to markets that Macri will remain a serious politician aimed at governability and pragmatic economics, a needed signal following more populist moves such as price controls.

Pichetto is a surprising yet pragmatic choice. He was an ally of Kirchner when she was president and was an ally of Sergio Massa during the early years of the Macri administration. Pichetto represents elite-level politics, bringing deep political networks within the legislature and various political parties outside of Cambiemos. One downside is that Pichetto is not well known among the general public and doesn’t have a strong personal following that will bring voters to the polls.

Other alliances take shape

An agreement between Sergio Massa and Kirchner to form an alliance may have one-upped President Macri’s moves this week. Massa’s centrist run in 2015 at times threatened to take one of the top two spots, so having him inside the ticket should help Kirchner. At the same time, there is speculation Massa could force a nomination battle for the presidential spot against Alberto Fernandez in the August PASO primary election. We should know whether that will happen in the coming week.

Both Juan Manuel Urtubey and Roberto Lavanga have been considered potential contenders for this year’s third place upstart that could threaten to take a spot in the second round. Their announcement of an alliance could help avoid dividing the vote for a centrist alternative.

Guatemala election this Sunday

The polls in Guatemala are inconclusive. Sandra Torres is the leading presidential candidate but a very large number of voters are undecided. A strongly contested race for mayor in Guatemala City should increase turnout in the capital, which is likely to help candidates Giammattei and Arzu as well as deny Torres a first round win. The second round election would be held in August.

Oscar Shaad, the country’s top electoral crimes prosecutor, took a leave of absence and fled the country after threats against his life. That happening the week before the first round is another sign of the difficult conditions authorities face during this election.

International coverage of the election has focused on corruption and candidates’ ties to drug trafficking. VOA broke a story this week on the US attempting to convince the Morales government to sign a safe third country agreement the week before the election.

Venezuela update

Oil production: OPEC secondary sources suggest Venezuelan oil production in May was 741,000 barrels per day. That is a decline of 35,000 bpd from April. The Maduro regime’s inability to restart oil production following major declines this year remains a key source of financial problems for them.

Negotiations: Low level attempts at promoting negotiations continue by international actors. Sources suggest the negotiation effort in Norway created significant tensions within Maduro’s inner circle of power, with several top civilian and military officials arguing in favor of having Maduro offer his resignation as a possible bargaining chip, but with the de facto president rejecting that option. Maduro wants to avoid negotiations for the moment due to those tensions. Guaido has said that the exit of Maduro is a non-negotiable point and he will only send a delegation to another round of negotiations if Maduro’s exit is on the table.

Colombia-Venezuela border: Maduro ordered the reopening of the Venezuela-Colombia border. The border had been closed since February as a way of preventing Guaido from moving humanitarian aid into the country. Closing the border had humanitarian implications and harmed the economies of both countries.

Gasoline shortage: Multiple media outlets and sources on the ground suggest gasoline shortages are worsening. A secondary impact of those gasoline shortages is that it will impact the logistics of food distribution.

Sanctions: Geoff Ramsey has a good analysis on US sanctions in Venezuela.

Corruption Corner

Brazil - The Intercept published what it claimed to be private conversations between then Judge Sergio Moro and Deltan Dallagnol, the local prosecutor on the Lava Jato case, that suggested they discussed some of the case strategy and evidence. The Lava Jato related case against Lula da Silva prevented him from running for president and kept a media focus on corruption under the PT, likely contributing to a Bolsonaro victory. Moro is now the Minister of Justice under President Bolsonaro. The Intercept and supporters of former President Lula claim the report confirms their belief that the system was rigged against Lula. Bolsonaro supporters suggest the evidence in The Intercept report does not match the hype they have built around the article and that nothing written undermines the actual evidence of corruption against the former administration.

Brazil - An investigative report by Reuters detailed a 2012 Petrobras internal probe that showed traders overpaying for oil. The probe led to a debate in 2013 about ending its trading relationship with Seaview Shipbroking Ltd, but key executives argued in favor of continuing to trade with Seaview. The documents viewed by Reuters suggest top management at Petrobras were aware of the problem long before anti-corruption investigators and prosecutors moved on it, undermining the company claim they were caught unaware as victims of corruption.

Haiti - A two day strike shut down much of the capital this week as anti-corruption protests strengthened in Haiti following the publication of a report showing the president stole millions of dollars in Petrocaribe funds. Protests over corruption have been ongoing for months. The report’s specific naming of President Moïse appeared to increase the number of people in the streets demanding his resignation. The president denies being corrupt and has promised to prosecute anyone who stole money from the Petrocaribe program.

Mexico - An investigation by Mexicanos Contra la Corrupción shows how a lawyer for Altos Hornos de Mexico purchased a beach house for former Pemex CEO Emilio Lozoya.