Six stories - 3 April 2025

Brazil vs. Paraguay; Panama vs. Nicaragua; and more conflicting narratives

Happy Thursday. I focus on US-LatAm relations on Mondays and then use the Thursday newsletter to highlight stories that aren’t directly about the US.

Today, the first story is for everyone, and the other five are behind the paywall.

In today’s newsletter:

1. Brazil vs. Paraguay

2. Panama vs. Nicaragua

3. Venezuela vs. Guyana

4. Venezuela vs. El Salvador

5. Mexico vs. Pemex debt

6. Argentina vs. the UK

Feel free to respond to this email with feedback, comments, and questions.

Brazil’s government publicly admitted this week that during the Bolsonaro administration, the country’s intelligence service hacked into Paraguayan government computer systems to spy on that country’s side of the Itaipu negotiations. Lula’s government says they stopped the spying in early 2024 as soon as they became aware of it. The two countries are supposed to regularly negotiate the price of electricity that Brazil pays Paraguay, though those negotiations have not been progressing well, even before this scandal.

The debate over the hydroelectric plant at Itaipu is a minor sideshow in Brazil but absolutely central to Paraguay’s politics and economy. Paraguay has taken great offense at the news that they were spied on and have withdrawn their ambassador and paused all negotiations until further notice (the fact that negotiations seemed to have been on hold before notwithstanding).

The politics on this is awkward because President Peña is likely closer to Bolsonaro than Lula on the political spectrum. Peña does not want to blame Bolsonaro for this, he wants to blame Brazil.

One reason this scandal has resonance is that it’s generally a faux pas to use intelligence gathering to gain an economic advantage in negotiations (though China does it all the time!). This was not about Brazil’s national security or some sort of threat that the military might need to counter.

Meanwhile, the political opposition in Paraguay claims that the government there purchased spying software from a company close to President Peña and then used that spyware to spy on the political opposition. And there are additional claims from Peña’s opponents that somehow this is also linked to US counternarcotics and the DEA, though I haven’t seen good evidence of that.

So now we have Brazil spying on Paraguay’s government, Paraguay’s government spying on its political opponents, a corruption and procurement scandal asking how companies close to Peña won multiple government contracts handling sensitive information, and potential mystery US involvement.

Meanwhile, the scandal also plays into the narrative of the growing use of spyware by governments. The state spying on its own people is a story that happens far more often in Latin America than controversies about state vs state spying. And that domestic scandal inconveniently comes at the exact same time as the Brazil news. It makes Peña’s job arguing against Brazil much harder. To take a conspiratorial mindset, it would have been a brilliant move for Brazil’s spies to leak that story about the Peña-connected spyware at just the correct moment to neutralize the damage of their own scandal. But, of course, nobody will ever be able to prove it.

Former President Ricardo Martinelli was the early favorite for Panama’s 2024 election. Then the court system went to prosecute him, so Martinelli fled to the Nicaraguan embassy to claim political asylum. Jose Raul Mulino, Martinelli’s VP candidate, took his place on the ballot and won the presidency.

This left Mulino with a problem: If he interfered with the Martinelli case, it would look like a political benefit to his patron. Also, having Martinelli in political limbo was probably good for the president to consolidate his control of the political system. So Martinelli sat in the Nicaraguan embassy for months waiting for a judicial ruling.

This past week, Martinelli was granted safe passage for 72 hours so he could leave the embassy and travel to political asylum in Managua. Immediately after, the Ortega government announced, “Haha, just kidding. We don’t want him here.”