Latin America Risk Report - 2 May 2019
AMLO vs Data; Hernandez vs Honduran protesters; Guaido vs Maduro
In this edition:
AMLO faces new economic and security challenges
Honduras protests lead to temporary defeat for Hernandez
Venezuela update
Data trends show AMLO faces new economic and security challenges
Mexico’s economy shrank slightly in the first quarter of 2019. Whether or not it is fair to blame that economic loss on the brand new AMLO government, it does defy AMLO’s promises that he will hit 2% growth this year and 4% growth over the course of his term. Most economists’ estimates are now well below 2% growth in 2019.
In addition to official data showing record high homicides in the first quarter of 2019, new statistics in the capital show extortion and kidnapping increased in Mexico City over the first three months of 2019 compared to 2018. As Alejandro Hope writes, the city’s police and judicial institutions are poorly adapted to the recent increases in crime.
Mexico City was long protected from the worst of Mexico’s violent crime. Increases in criminal activity and violent acts in the capital will have a much stronger impact on the national security narrative than similar increases in other cities in the country.
AMLO’s popularity will have a hard time surviving a weak economy and rising insecurity. While he cherry picked his facts during his first 100 days, the real data coming in does not match his generally optimistic narrative.
Honduras protests lead to temporary defeat for Hernandez
Protests in Honduras against education and healthcare reform forced the Congress to place those reforms on hold. During Tuesday’s protest, buildings including the city hall of Tegucigalpa were burnt. Government media highlighted the violence and destruction caused by protesters. Human rights organizations were critical of how President Hernandez repressed the protests.
Protests continued Wednesday with a mix of specific demands regarding legislation, general May Day unrest, and demands that Hernandez resign.
Hernandez’s opponents celebrated their ability to stall the legislation. There are two potential analyses here which are not mutually exclusive.
Hernandez is not invincible. Protests can force him to back down. The opposition retains some power.
Hernandez is flexible enough to understand when to have his allies in Congress strategically retreat. Continuing to push the bills through Congress would increase tension and put his administration at risk. It is much better to attempt to pass these bills again when the protests weaken.
While the current round of protests is likely to subside, the protesters are likely to return when Hernandez and Congress once again attempt to push for these reforms.
Venezuela update
For all newsletter subscribers, I published an update on the situation in Venezuela yesterday, describing why Maduro is likely to lose power this year.
Key point: Hxagon remains at 70% probability that Maduro will lose power in 2019. The pressure against Maduro is significant and rising in line with a transition in the coming months. That expectation of a transition before the end of the year could force a quicker transition, but even if Maduro continues in power through this month, his hold on power is significantly weaker than it was at the start of the year and appears likely to continue to weaken.
The protests on 1 May were large around the country, but those in Caracas were quickly halted by security forces. Guaido announced there will be protests on a daily basis leading to an eventual general strike that will include public sector workers.
The WSJ and several other outlets reported on backroom negotiations between Guaido and key Maduro officials including Vladimir Padrino Lopez that occurred prior to the events of this week. With those talks now publicly revealed and with the Guaido side feeling betrayed, it will be harder to restart new private talks. This may push negotiations into the public sphere.
Maduro appeared late in the night on 1 May and early morning on 2 May at Fuerte Tiuna attempting to demonstrate the loyalty of the military. Both Padrino Lopez and Ivan Hernandez Dala were present. The event was a necessary step for Maduro to show he has control of the security forces after the events of this week.
Corruption Corner
Mexico - In an interview with El Economista, the head of customs for Mexico’s Tax Administration Service (SAT) discussed using technology to eliminate fraud. That includes installing additional scanners to stop contraband at land and sea ports.
Panama - At the last moment, the country’s top electoral court forbid former President Martinelli from running for mayor of Panama City as well as a seat in Congress. The decision technically related to Martinelli’s failure to meet residency requirements, but the bigger issue remains a judicial case against the former president for spying and embezzling funds. Martinelli responded by promising he will return to the presidency in 2024.
Peru - At Americas Quarterly, Simeon Tegal looks at how the government’s plea bargain with Odebrecht has been a critical tool for prosecuting corrupt politicians.
Reading List
Bloomberg - The NAFTA renegotiation may lead to labor reform in Mexico
The Guardian - US fentanyl crisis could end opium era in Mexico: 'the only crop that paid’
Proceso - En 50 municipios se concentra el infierno de la violencia: Tijuana, Ciudad Juárez, Acapulco.
InSight Crime - Special report on extortion in Central America
Francisco Toro, Washington Post - Caught between Washington and Moscow, Venezuelans can’t see the end to this crisis
FT - Investors in Argentina perplexed by policy U-turns
Techcrunch - Softbank makes a huge bet on Latin America
Thanks for reading!
Thank you for reading during this busy week and welcome to all new subscribers!