Six stories - 24 October 2024
Ecuador, Cuba, Mexico, Venezuela, Brazil, Guatemala
I’m trying out a different format this morning, providing brief comments about six items in the news. Feel free to respond to this email with comments and questions.
Electricity shortages continue in Ecuador and it’s a drain on the country’s economy. The country’s GDP has been hit, never good in an election year. The country needs to spend somewhere between $3 billion and $4.5 billion in additional generation and transmission in the coming years to meet demand and deal with the failures that have brought about the current crisis.
One short term proposal floating around is a “pico y placa eléctrico,” taking the idea used in many LatAm capitals of limiting the license plates of cars on specific days to reduce traffic and pollution and applying it to businesses that consume significant electricity, changing their schedules to manage demand. If this happens, it impacts the workers and those workers will expect to be paid more for longer shifts.
Cuba suffered a major power outage last weekend and is struggling to get the system back online. Outages aren’t uncommon, but this one is big and seems to be the cascading failure the country feared for some time. Schools and businesses are shut down. Protesters have taken to the streets to complain, leading the government to threaten repression if they continue. China isn’t helping. Venezuela has practically stopped delivering free oil. Russia is nowhere to be seen. It’s notable how little help Cuba is receiving from its own allies.
The one ally who may step in is Mexico. President Claudia Sheinbaum is said to be preparing an aid package for Cuba. While some may argue that it is an early sign that Sheinbaum is splitting with the US, it’s better seen as a continuation of Mexico’s long-term Cuba policy over the past six decades. What is notable is not the support for Cuba but the fact that it is real money. At a time Sheinbaum is supposed to seriously address Mexico’s (and specifically Pemex’s) finances, a big assistance package to Cuba seems to be a diversion of funds. Then again, maybe the rumors of Mexico’s monetary and oil support for Cuba never materialize for that exact reason.
Speaking of US relations with Mexico, Shannon O’Neil wrote an article for Foreign Affairs article on that very topic. Despite the optimistic final line that “whoever wins November’s election will have opportunities for détente, and even partnership.” the piece as a whole outlines the reasons that the US and Mexico seem on a collision course. Mexico is facing budget challenges and is undermining the rule of law with some of its judicial reforms, the US is in an anti-trade and anti-immigration mood, and the renegotiation of USMCA is going to be rough. I have little doubt that the two countries should work together, but plenty of doubt as to whether they will in the coming 4-6 years.
Sheinbaum has continued AMLO’s mañanera tradition, speaking each morning and setting the agenda for the day. It’s been a busy three weeks of implementing the reforms that AMLO left behind. There has been no break from the former president yet and even some signs he continues pulling many strings behind the scenes. But it’s Sheinbaum’s presidency and she is benefitting from AMLO’s legacy to consolidate control of the executive branch. It’s a strong start politically despite the weak starting hand economically.
Venezuela replaced over two dozen top military officers and the heads of SEBIN and DGCIM. Those personnel shifts seemed to benefit Diosdado Cabello, though Defense Minister Padrino Lopez remains in his post and was publicly backed by Maduro.
Then Maduro named Alex Saab as Minister of Industry. It’s odd and potentially unconstitutional given that Saab is not really Venezuelan (he was born in Colombia and his Venezuelan citizenship was given to him in a less than traditional manner). Saab’s appointment is also a sign that Maduro sees sanctions evasion as being important to his government and economy in the coming year.
Then Maduro ordered the detention of yet another former oil minister due to corruption. Despite the government's attempts to show unified support for Maduro, detentions like these suggest internal tensions over the elections and continuing corruption that is not lining everyone’s pockets evenly.
Cabello has announced the detention of multiple US citizens. They are taking hostages to use as leverage when they negotiate with the next US president in 2025.
Lula fell and hit his head, meaning he could not travel to the BRICS Summit in Russia. Given how awkward that Summit could have been for Lula, that’s likely a good thing. In general, showing up in Russia, ruled by a wanted war criminal who has invaded a neighboring country, is generally frowned upon. More specifically, Venezuelan President Maduro is in Russia and received Putin’s support to enter the BRICS alliance, though Brazil’s government says they don’t support Venezuela’s entry. Brazil has not backed Maduro’s fraudulent reelection and is generally unhappy with its waning influence within the BRICS group after enlargement. With the G20 meeting in Brazil on the horizon, Lula wants to maintain his image of neutrality.
Lula did make a video appearance to support alternatives to the US dollar, a basic concept that his government and Putin agree on though they have strong disagreements on the mechanics of such a non-dollar instrument. Brazil is currently in the process of deploying DREX, the highly anticipated digital Brazilian Real that is building on the runaway success of the Pix payments platform. (Hxagon has been researching DREX. If it’s an issue that your company cares about, email me to schedule a call.)
Some good news: After over two years in prison, journalist José Rubén Zamora was released to house arrest. Zamora was detained due to an investigation by corrupt political elite networks that wanted to shut down his reporting. There is no reason that he should be detained at all, but house arrest is far better than stuck in prison when he is not a flight risk and presents no risk to society. President Arevalo (edited, had the wrong name before) visited Zamora in his home and celebrated a rare win for the good side of the political spectrum in the country.
Thanks for reading.