Latin America Risk Report - 18 June 2020

The World Bank predicts a slow economic recovery in 2021

Jun 18, 2020

In this edition:

Region - A slow recovery predicted
Bolivia - Añez threatens to delay election again
Chile - Coronavirus challenge for the Piñera government

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Region - A slow recovery predicted

The World Bank published a new set of forecasts for 2020 and 2021 economics in Latin America and the Caribbean. Key points:

Every country except Guyana will see a decline in 2020.
Though every country is predicted to see an increase in GDP in 2021, most will not regain the GDP they lost in 2020. This will be a painfully slow recovery in a region that already faced stagnant growth over the past decade.
Unfortunately, the sectors that might provide a surprise boost to Latin America’s economies are all facing challenges. Commodity prices are likely to remain low and Chinese demand for commodities is unlikely to fully return for months to come. Tourism and business travel will be limited by legal restrictions and people deciding they are not worth the health risks. Remittances will be slow to bounce back due to the global nature of the recession and families living abroad being hit hard by the economic crash.

Source: World Bank, June 2020. Note: The dataset excludes Venezuela because Venezuela’s economy is too screwed up to count correctly at this point.

Bolivia - Añez threatens to delay election again

President Añez suggested that the September election should be delayed again due to rising coronavirus cases. The independent TSE and multiple political opponents criticized her comments and are demanding the election be held in September as scheduled.

Given the controversy Bolivia has been through over the past year, there are legitimate concerns about Añez extending her time further in power, even as she runs in the presidential election. Holding an election during a pandemic will be challenging, but postponing an election that all sides agree is needed will further damage the country’s institutions.

Chile - Coronavirus challenge for the Piñera government

Jaime Mañalich, Chile’s health minister, resigned as Covid-19 cases increased and the government apparently mismanaged the public data on cases and deaths. In recent weeks, Mañalich admitted that the Piñera government failed to understand how the urban poor in the country would manage under lockdown. As multiple analysts and media outlets stated in recent weeks, the disconnect between Piñera and the Chilean population that drove the protests in late 2019 also contributed to the failed coronavirus response in early 2020.

Like many other leaders around the hemisphere, Piñera’s poll numbers initially bounced upwards when coronavirus struck. But Piñera’s numbers started from a very low point, and never topped 30% during the current crisis. That’s a big contrast to his counterparts in Argentina, Peru or Colombia, all of whom received much larger boosts in their public opinion and remain at or above the 50% mark today.

Above: Piñera approval ratings from Cadem

The Piñera government faces the same crisis as many of its neighbors, but lacks the political capital and the trust of the population as it responds. It’s a downward spiral that will further hamper its response moving forward. The declining ratings for Piñera also make it more likely that Chileans will vote for large structural change whenever their postponed constitutional referendum is finally held.

Corruption Corner

Mexico - Jorge Torres, the former governor of Coahuila, pleaded guilty in the US to money laundering charges. Torres is among several PRI governors in the early 2010s who used kickbacks and unfairly awarded state government construction contracts to steal money.

Honduras - Two Guatemalans - Otto and Ronald Salguero - turned themselves in to US authorities. The cousins are accused of assisting the Sinaloa Cartel traffic cocaine through Central America. The case could have significant regional repercussions as the two men are believed to have been present at a 2013 meeting where Chapo Guzman gave $1 million dollars to Tony Hernandez, the brother of President Juan Orlando Hernandez.

Brazil - Authorities arrested Fabricio Queiroz, a driver for Flavio Bolsonaro, who was involved with suspicious movements of money while the president’s son was working in the Rio de Janeiro state legislature.

United States - Univision reported that the US Treasury Department diverted over US$600 million in funds seized from corrupt Venezuelan officials to pay for the wall Trump wants built on the US-Mexico border. The Guaido government is attempting to obtain access to the seized money as part of rebuilding Venezuela, but the Trump administration is fighting in US court to keep access to the funds that it has seized.

Venezuela - Alex Saab, a Colombian who is deeply involved in Nicolas Maduro’s corruption networks, was detained in Cape Verde. Armando.Info has been covering Saab’s corruption networks for years and published an article looking at his recent travels. Maduro and his allies are contesting Saab’s potential extradition to the US or deportation to Colombia, claiming Saab is a Venezuelan citizen traveling on a diplomatic passport as part of arranging humanitarian aid. CSIS will hold a webcast event on Friday morning to discuss the case.