Welcome to the Latin America Risk Report - 19 December 2019
In today’s edition:
Peru - Vizcarra still above 50%, but falling as elections near
USMCA likely to pass; questions raised about concessions by Trump and AMLO
Argentina - President Fernandez launches initial economic measures
Corruption Corner
The “reading list” of links
Last week, I mentioned that I hope to publish four times per week by the end of 2020. Paying subscribers will receive the newsletter Monday through Thursday. I’ll still send out free weekly newsletters on Thursday plus make occasional other analysis free, so please sign up for the free weekly at the very least.
This week I previewed that four times per week plan with the following newsletters:
Monday: The CJNG expansion in Guanajuato causes a wave of violence (for paying subscribers)
Tuesday: Ten things keeping Maduro in power (open to everyone)
Wednesday: The Competition for Political Legitimacy in Venezuela (for paying subscribers)
Thursday: That’s what you’re reading now! It’s the usual free weekly newsletter.
If you found any of the content this week valuable, please consider subscribing and encouraging your friends and colleagues to sign up for at least the free weekly newsletter at https://boz.substack.com
Peru - Vizcarra still above 50%, but falling as elections near
President Martin Vizcarra ends the year at 56% approval and 33% disapproval. While this is better than every other president in South America (except Alberto Fernandez, who is just beginning his term), it is also well down from the 79% approval rating that same poll showed in October of this year. His boost in approval for removing the very unpopular Congress quickly returned to reality.
Vizcarra’s new prime minister (essentially the chief of the cabinet in Peru) only has 21% approval and 48% disapproval. That number is a strong representation of how Peruvians feel about the direction of the country at the moment. The president’s much higher approval shows that he has personally been able to tap into that anti-system sentiment for the moment, but the incumbent cannot count on that forever. At some point, the population will be looking to credit or blame him for the situation.
At the same time, Vizcarra’s political opponents and the other branches of government remain much weaker than the president. The judicial branch and Permanent Commission (the limited legislative branch that remains with the Congress’s dissolution) are incredibly unpopular, with only 25% and 20% supporting them while over 60% disapprove of both.
USMCA likely to pass; questions raised about concessions by Trump and AMLO
One day after a very partisan impeachment vote, the US House of Representatives is expected to approve the USMCA in a bipartisan vote.
In terms of the US and Canadian economies, the differences between NAFTA and USMCA are small. One estimate suggested the newer USMCA would provide perhaps a third of a percentage of additional growth for the US economy five years from now compared to the current NAFTA arrangement. Many businesses support the passage of USMCA because they see it as the most likely way to avoid Trump’s threat of withdrawing from NAFTA.
For Mexico, the concessions made by the AMLO government to get to the agreement have been significant. This week, Reuters covered how AMLO’s relationship with the business community has been generally positive. However, Mexico’s businesses are now questioning whether the country has given too much in these trade negotiations. AMLO’s own party quietly questioned whether the president’s concessions were creating the potential for a violation of Mexico’s sovereignty by the Trump administration. In response to criticisms, Jesus Seade, Mexico’s top negotiator, has been forced to carefully walk back discussions of independent labor inspectors at Mexican factories.
In the US, the Democratic Party appeared to win the battle over USMCA. Both the AMLO and Trump administrations, desperate for a deal, accepted terms that the Democratic Party and US labor movement never received under the Obama administration during its push for TPP or any previous administration during rounds of free trade negotiations. Several conservative Republicans believe that Trump gave too much to the Democrats in these negotiations, with Senator Pat Toomey announcing he will vote against the new agreement.
Argentina - President Fernandez launches initial economic measures
The Fernandez administration launched an opening bid on their economic measures. They include
A tourism tax of up to 30% on transactions made in US dollars
An increase in the export tax on agricultural goods
Higher severance packages for workers who lose their jobs
These proposals are likely opening bids that will be weakened by Congress as Fernandez searches for votes. For example, an original proposal that would have granted executive powers to restructure cabinet ministries has already been modified as part of the effort to seek compromise.
Argentina’s government has also announced they will attempt to continue making debt payments as they renegotiate the terms of a potential haircut or delay in payment of the debt with creditors. While default remains almost certain, it was seen as a positive sign that the government wanted to negotiate terms rather than impose them.
Corruption Corner
Nicaragua - The United States sanctioned Rafael Ortega, the son of the president, as well as Distribuidor Nicaraguense de Petroleo S.A. (DNP), a fuel company related to the ruling party’s corruption schemes and Servicio De Proteccion Y Vigilancia, S.A., a private security company used by Ortega to launder money. Following the sanctions, the Nicaraguan government nationalized DNP in an apparent effort to reroute some of the firm’s assets and evade the sanctions. A local investigative media report called DNP “a fraud from beginning to end.”
Brazil - Brazilian police conducted search warrants at the offices of Denmark’s Maersk, which is accused of paying over US$3 million in bribes to obtain shipping contracts from Odebrecht.
Reading List
Americas Quarterly: Latin America's Militaries Are Back. What Does it Mean?
NYT - Sebastián Piñera: A New Opportunity for Chile’s Future
Business Insider - 4 ways China is gaining ground in Latin America, according to the US's top military commander in the region
El Pais - 26 días de travesía en un narcosubmarino (The narco-sub traveled the entire length of the Amazon River before heading across the ocean to Europe.)
RPP (Peru) - ¿Quo vadis Latinoamérica?
NYT - He Was One of Mexico’s Deadliest Assassins. Then He Turned on His Cartel.
InSight Crime - Gulf of Mexico Oil Industry Reeling From Hundreds of Pirate Attacks in 2019
Associated Press - Brazil's role questioned after UN global warming meeting
Guardian - Brazil's Amazon deforestation this year nearly size of Puerto Rico, says agency
Miami Herald - Haiti wants to reform its energy sector. So police showed up to arrest power providers
AFP - Oxen and horses put back to work in Cuba
Bloomberg - Erik Prince Held Secret Talks in Caracas With Maduro’s No. 2
InSight Crime - Tankers Go Dark to Help Venezuela Evade Oil Sanctions
Reuters - The Hungry Generation: Malnutrition curses the children of Venezuela
LAHT - Venezuela’s Maduro to Relaunch Petrocaribe Program in 2020
Reuters - Costco in Caracas: how Florida goods flood Venezuelan stores
OneZero (Medium) - Uber Delivery Workers in Mexico Are Tracking Thieves Through Google Maps and WhatsApp Networks
Thanks for reading
The next two weeks are going to be lighter in terms newsletter content due to the holidays, but you’ll still get this free weekly in your inboxes. If you want to support this newsletter and its expansion in 2020, please consider subscribing (and thanks to everyone who has already subscribed!)