In this edition, I provide a brief preview of Guatemala’s and Argentina’s elections this weekend as well as comments on the recent Venezuela “embargo” announcement. Paying subscribers received an analysis of the CJNG’s current position in Mexico.
Guatemala election this weekend
The best polling available shows a slim lead for Alejandro Giammattei, the former minister of prisons, over former first lady Sandra Torres. However, with low voter turnout expected and the difficulties of polling the rural voters that favor Torres, there is significant uncertainty in the models that favor Giammattei.
Given the current climate of distrust regarding the entire political system, whichever side loses is quite likely to claim some sort of fraud occurred.
The candidate that wins will not have a mandate for his or her policies. In fact, it is likely that the candidate who wins faces immediate opposition and criticism from the large portion of the public that feels this election has been unfair and that the candidates are both corrupt. Additionally, the new president will need to deal with a legacy of corruption creating significant political challenges as well as an unpopular migration pact with the US. It is a challenging environment that will represent a new phase of the political crisis faced by the incumbent Morales administration rather than create a new beginning.
Three questions about Argentina’s PASO election this weekend
Who wins and by how much? Officially, it does not matter whether Macri or Fernandez wins more votes this Sunday. They aren’t formally running against each other and the primaries for their parties are not contested. But the political reality is that everyone is watching the number and percentage of voters who turn out for each side and treat the final totals as a type of poll measuring the state of this election.
A big win by either candidate will shift the narrative in the media and could push the idea that one side’s win is “inevitable.” Both of the top campaigns are spending a lot of resources organizing their supporters on the ground to make sure they do not end up on the losing side of a landslide.
How does the peso react? The symbolic election will have a very important real world impact in the financial markets.
If Fernandez receives the most votes, particularly by a wide margin, it will send the peso crashing, harming Argentina’s economy and damaging Macri’s chances in October.
A surprise win by Macri could strengthen the peso and create a positive feedback loop, something that the incumbent could really benefit from in the final months of the campaign.
How does the third place candidate do? The PASO is the true test of whether polls are correct in that this campaign has consolidated into a two-way race or if there is space for a third candidate to make a run for one of the top two spots in October. The leading third party pair has not topped 15% in the polls and is expected to win between 10% and 15% in the PASO.
Beating expectations would shake up the race, creating the possibility of an alternative second round matchup OR a potential first round victory if the vote begins to split in a way that creates a wider margin between first and second place. If every third party pairing receives below 10%, it will drive voters away from unviable candidates to an earlier decision on which of the top two candidates they should support or oppose. Additionally, any candidate pairing that receives fewer than 1.5% of the vote will be dropped from the ballot in October.
Venezuela Update: Sanctions Focus
The United States announced an increased level of sanctions against the Maduro regime that freezes Venezuelan property in the US and prohibits all businesses from working directly with Maduro.
This action (which some called an “embargo”) gives the US government the authority to sanction foreign businesses that are helping Maduro; restricting their ability to do business with the US or conduct dollar transactions. If the US begins actively enforcing the secondary sanctions in the coming weeks, it will damage the Venezuelan economy and put additional political pressure on Maduro. These sanctions could have a real impact on Maduro’s stability, but it will depend on enforcement.
If the US acts against Chinese businesses, particularly the oil majors that cooperate with Maduro, it will turn Venezuela into another chess piece of the global US-China trade war. While China has said it will not be pressured to change its Venezuela policy, they may be forced to move away from Maduro as the global tariff battle continues.
Conversations I’ve had with US private sector actors still operating in and through Venezuela raised concerns about how the sanctions may impact their operations. While there is a general belief that the Trump administration does not intend to prosecute well-meaning US companies caught in the crossfire, the vagueness of the executive order and OFAC licenses creates a general fear that the sanctions enforcement could be arbitrarily applied. These conversations match comments by several international actors that there is a risk of “over-compliance” by businesses that will hit average Venezuelans.
While left-leaning think tanks have long been against sanctions, this “embargo” announcement also has been opposed by conservative institutions including the Heritage Foundation who are concerned that by freezing Citgo’s assets, the Trump administration is harming court cases about property rights.
Maduro used the sanctions as an excuse to try to drop out of the negotiations in Barbados. While only a temporary withdrawal, it demonstrates an eagerness for Maduro to try to escape a negotiation process in which he is likely to be forced to give up power.
Corruption Corner
Honduras - A high ranking National Party politician who was also heavily involved in drug trafficking accused President Juan Orlando Hernandez and former President Pepe Lobo of accepting drug money. Specifically, JOH is accused of accepting $1.5 million for his 2013 campaign. Documents related to the US prosecution of Tony Hernandez mentioned co-conspirator 4, “elected President of Honduras in late 2013,” leaving little doubt as to whom they were referring. Meanwhile, a Univision investigation demonstrated “systematic embezzlement of public funds by politicians using nonprofits to launder money.”
Ongoing protests against corruption in Honduras strengthened this week given the recent news. President Hernandez has lost support among his party in Congress. He appears to retain the support of the military. He also still has control over the local prosecutors and the judicial branch, meaning investigations of the corruption from within Honduras are unlikely.
Colombia - A court ordered the Colombian government to pay a combined $61 million to seven banks involved in shuttered Odebrecht projects. The court ruled that the banks were not involved in bribery and the government did not follow due process when it cancelled contracts due to the controversy.
Reading List
InSight Crime - Why Are More People Being Killed in Mexico in 2019?
Washington Post - Kimberly Breier resigns as assistant secretary of state for Western Hemisphere
Texas Tribune - University of Texas researchers aiding Salvadoran teen were threatened with arrest by Mexican authorities
Miami Herald - Haiti adrift as president faces impeachment hearing, prime minister in Twitter scandal
Washington Post - Nicaragua’s Ortega is strangling La Prensa, one of Latin America’s most storied newspapers
Americas Quarterly - This Brazilian State Seems to Have Turned a Corner on Violence. But Can It Last?
Michael Shifter, NYT op-ed - More Sanctions Will Only Hurt the Venezuelan People
Financial Times - Russia’s Rosneft last major petrol supplier to Venezuela
Bloomberg - China Comes to the Rescue of Venezuela’s Run-Down Oil Refineries
Yonhap - S. Korea's trade deal with 5 Central American nations ready to take effect in Oct.
Guardian - Bolsonaro has blessed ‘brutal' assault on Amazon, sacked scientist warns
Thanks for reading!
This time next week the long road trip will be over and I’ll be in Colombia.