Latin America Risk Report - 30 April 2020

Early political winners from the coronavirus response may still lose

Apr 30, 2020

Welcome to the last Latin America Risk Report in April. In this edition:

Early political winners from the coronavirus response may still lose
Mexico and Brazil face the coronavirus crisis

Francisco Toro and I have an op-ed in the Washington Post about Brazil in which we describe how Bolsonaro is much weaker than other populist politicians to whom he is sometimes compared. He lacks party infrastructure and public support. Today’s reading list includes a number of additional articles about the political situation in Brazil.

This week I published reports for paying subscribers on the political situation in Brazil and El Salvador. This free weekly newsletter is delivered every Thursday. If you want to support this newsletter and receive additional analysis, you can subscribe for $9 per month or $90 per year.

Early political winners from the coronavirus response may still lose

The current conventional wisdom in Latin American politics: the presidents that have responded to coronavirus responsibly have improved their public image while those who have responded poorly or been in denial about the seriousness of the virus have been punished with lower approval ratings.

That conventional wisdom is mostly accurate today. Many of the leaders who moved swiftly to implement social distancing policies prevented their hospital systems from being overwhelmed and likely saved thousands of lives. Latin American publics have shown themselves largely in favor of strict quarantine and public health measures, boosting leaders who have acted aggressively.

However, for the presidents who have gained in popularity - including Martin Vizcarra of Peru, Ivan Duque of Colombia and Alberto Fernandez of Argentina - there are already warning signs that their political gains could be overturned in the coming months. Those same leaders who made decisive opening moves to combat coronavirus have struggled in recent weeks to define their next steps.

Among the competing pressures they face:

Pressure from poor urban populations, many of whom work in the informal sector and are struggling to afford food.
Pressure from the business community to allow at least partial reopenings.
Pressure from governors and mayors who want greater control over responses.
Pressure from opportunistic political movements who sense an opportunity to criticize without offering alternate solutions.
Pressure from the general public to keep coronavirus cases low.

It’s an unenviable situation. Though coronavirus cases have not accelerated in Peru, Colombia or Argentina at the same pace as in Brazil, Mexico, the US or Italy, the numbers of cases continue to rise while recoveries are slow. Any reopening of businesses, if not managed carefully, could cause a spike in cases. However, the current strict quarantine measures are economically unsustainable and will lose support if maintained. This situation requires flexible and creative leadership that is more difficult than the mano dura quarantine policies of the opening weeks of this crisis.

Even if leaders do their best, it may not be enough. No country in Latin America has the capacity to prevent a recession, no matter how large the stimulus package or how intelligent the response. Building up resilient health systems can’t be done in the space of a few weeks.

Politically, the early winners in the coronavirus crisis are not guaranteed to end up winning the next election. The same public that rallied around quick action and quarantine may turn on leaders who fail to pivot and deliver economic gains in the coming months. “What have you done for me lately?” is a question in any democracy. Saving lives from a hypothetical health system crash today may not win support or votes from economically desperate citizens in the years to come. Opposition politicians are going to benefit from an extension and deepening of the already existing anti-incumbent moment.

That is a pessimistic view of the political situation and perhaps unfair to those presidents who are doing their best to respond to the crisis. However, it’s likely to be the political reality that shapes Latin America in the coming years.

Mexico and Brazil face the coronavirus crisis

Above: Graphic from Our World in Data

Last week I wrote that many countries in Latin America are entering a long plateau of coronavirus crisis. New cases continue to appear, but they are no longer growing exponentially.

While true for most of the region, the growth of cases in the region’s two largest countries is still accelerating. In the past week, Mexico and Brazil have seen significant increases in cases, hospitalizations and deaths. Hospitals in various locations are running out of ICU beds and ventilators. While cases are undercounted in every country in the world, there is good reason to believe that the lack of testing in Brazil and Mexico has made it harder for those countries to detect where the next severe outbreak will occur.

Neither Brazil nor Mexico have peaked in terms of their cases and the situation is likely to continue getting worse in the coming week.

Regarding the graphic above, Peru’s growth in cases is troubling, but is at least partially explained by their increase in testing, which has gone far beyond their neighbors and continues to increase every week.

Corruption Corner

Mexico - President Lopez Obrador appears increasingly likely to prosecute former President Peña Nieto for corruption. Officials are investigating bank accounts controlled by the former president and his family members. An article in Americas Quarterly looks at the politics of anti-money laundering efforts in Mexico and Brazil and points out that the number of accounts frozen by Mexico’s Financial Intelligence Unit has soared since Lopez Obrador was inaugurated.

Mexico, Venezuela - The US government is investigating two Mexican firms - Libre Abordo and Schlager Business Group - for their roles in coordinating oil for food deals with the Maduro regime. The businesses insist that the the deals were structured in a way to not violate sanctions.

Venezuela - Nicolas Maduro named Tareck el-Aissami as Minister of Oil and Asdrubal Chavez as the head of PDVSA. As I wrote on Twitter, putting El Aissami and Asdrubal Chavez in charge of a failing oil industry hoping to turn it around makes no sense. However, putting them in charge of a corruption network that launders money through oil contracts is evil and brilliant. These are two of the most corrupt individuals within the regime, each having allegedly stolen billions during the decades the Chavistas have been in power.