Latin America Risk Report - 16 May 2019

Candidates banned in Guatemala; Mexican cartels may be refining cocaine

May 16, 2019

In this edition

Guatemala candidates thrown out
Venezuela update
Colombian police claim Mexican cartels are producing cocaine in Mexico

Paying subscribers received a report about AMLO’s energy policies six months into his administration.

Guatemala candidates thrown out

Both Zury Rios and Thelma Aldana have been banned from running in the Guatemalan presidential election this year. Rios, currently running in second place, was banned because she is the daughter of the former military dictator. Aldana, the former Attorney General, was officially banned due to an open corruption investigation on her. Unofficially, it is widely believed Aldana was banned because she would have cracked down on corruption by the current ruling political elite if she were elected president.

Aldana was the only candidate promising to maintain the UN-backed CICIG in Guatemala, meaning that organization will almost certainly go away in the next administration.

Current frontrunner Sandra Torres, the ex-wife of a former president, also faces questions about her candidacy related to previous campaign finance violations. Given her backroom ties to President Morales, local sources expect the courts to rule that she will be allowed to run. If Torres runs, the remaining candidates will compete for a chance to face her in the second round, with Alejandro Giammattei being the best known of the group all polling under 10%.

However, if Torres is also kicked off the ballot, it would create a wide open race in which any number of minor candidates could rise to the second round. This scenario would be a major opportunity for corruption networks to finance their favored candidates and for Jimmy Morales and those who back him to extend influence into the next administration.

Removing two of the three leading candidates also shakes up the concurrent legislative elections. Aldana’s Semilla party is not likely to do as well without her name at the top of the ticket. The Valor party of Zury Rios is more organized than Semilla, but will face similar challenges. The loss of voters for these opposition parties is likely to strengthen the parties that remain including allies of the current president.

The entire process is a blow to Guatemalan democracy. One reporter who interviewed Guatemalans last week told Hxagon that even voters who did not support Rios or Aldana have serious doubts about a process that appears to be rigged by the ruling elite. The questionable process, obscure campaign financing, weak parties and low name recognition among the remaining presidential candidates mean that the next government will start with a limited mandate.

My previous report on the Guatemalan election published on 10 April highlighted the potential that candidates may be banned from running.

Venezuela update

This past week saw a gradually increasing repression against the members of Venezuela’s National Assembly by the Maduro regime. The repression served multiple overlapping purposes:

Punishing those who participated in the 30 April uprising.
Targeting several of the moderates among Maduro’s opponents in order to force polarization.
Demonstrating loyalty among the individuals and organizations (Sebin, the Supreme Court) who were backchannel negotiating with Guaido.
Deflate the potential of the International Contact Group, which plans to visit Caracas in the coming days to push for a peaceful negotiated solution.

In addition to the International Contact Group meetings in Caracas, reports have emerged that Guaido and Maduro have sent representatives to Norway to begin negotiations. Maduro believes the negotiations can help buy his regime time and breathing room. He also hopes to divide Guaido’s team, many of whom believe dialogue is hopeless. However, with so many reports of key Maduro allies engaging in talks behind his back in recent months, Maduro must also question whether every person he sends to negotiate will do so in the de facto president’s best interest.

Air Force General Ramon Rangel posted a video calling on the military to rise up against Maduro. He specifically pointed to concerns about Cuban influence in the military. Rangel’s defection is significant as he was one of the officers who joined in the 1992 coup with then lieutenant colonel Chavez. Rangel did not mention Juan Guaido or the National Assembly.

Amnesty International published a new report regarding the crimes against humanity committed by the Maduro regime in the early part of 2019. While Amnesty has previously documented abuses by security forces, this is the first time it has accused the regime of “crimes against humanity,” an accusation that has been made at the International Criminal Court too.

Multiple sources report that Venezuela’s oil production remained poor in April and has fallen even further in May. The fall in production and exports in 2019 appears to be a combination of power outages, general mismanagement and the effects of sanctions. It builds on multiple years of mismanagement. The reduction in oil revenue creates serious pressure on Maduro and forces the regime to find additional illicit ways to pay off allies and stakeholders.

Colombian police claim Mexican cartels are producing cocaine in Mexico

Colombian police claim traffickers are moving unrefined coca base to labs outside the country, likely in Mexico, where it is processed to pure cocaine before moving to the US.

There are four potential reasons this may be true.

First, with drug seizures up in Colombia and between Colombia and Mexico, it makes sense to ship higher quantities of a cheap product rather than the expensive pure cocaine. Seizures of cocaine in Mexico have always been very low.

Second, Colombia has stronger and better enforced controls on precursor chemicals than Mexico. This could mean that getting the necessary chemicals in Mexico is easier.

Third, Mexican criminal groups have looked for ways to consolidate control over more parts of the drug trafficking supply chain. Controlling the refining process in Mexico would be one way to significantly lower their downstream costs and increase their profit margins.

Fourth, Mexico’s cartels have improved their chemistry labs. They have perfected the bulk production of meth and are increasingly working on fentanyl. Refining cocaine would be a logical step for groups that have gone to the trouble of figuring out other drug processing efforts.

Corruption Corner

Mexico - The Attorney General made a formal request to Brazil’s Minister of Justice Sergio Moro for help in prosecuting Odebrecht-related corruption. Mexico has done far less to investigate the corruption than many of its Latin American neighbors. While the request to Brazil was positive, it is not clear if AMLO will act on any investigations that come in.

Peru - Susana Villaran, the former mayor of Lima, was sentenced to preventative prison over the Odebrecht case. She is accused of receiving US$10 million in bribes and kickbacks from the Brazilian company.

Brazil - Documents show Flavio Bolsonaro bought 19 properties from 2010-2017 and made nearly a million dollar profit on them. Prosecutors believe there may have been money laundering.

Region - The Inter-American Dialogue will hold an event on 23 May about how the anti-corruption wave is impacting the region’s politics.