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LatinNews Daily - 02 July 2020

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Main Briefing

On 1 July Uruguay’s foreign minister, Ernesto Talvi, announced his resignation.

Analysis:

Talvi is a key political figure in the ‘multicolour coalition’ government led by President Luis Alberto Lacalle Pou. Although he had earlier in June mooted his departure before the end of the year, Talvi’s sudden decision to resign a day ahead of Uruguay assuming the pro-tempore presidency of the Southern Common Market (Mercosur) has been interpreted as a sign of internal divisions within the multicolour coalition. Should Talvi now withdraw his political support for the government, this could create governability problems for Lacalle Pou.

  • Talvi is the leader of the Ciudadanos faction of the right-of-centre Partido Colorado (PC), and ran for the presidency in last year’s general election on the PC ticket. After finishing third in the first round of the election, Talvi endorsed Lacalle Pou’s presidential bid for the centre-right Partido Nacional (PN, Blancos). This helped to seal the unprecedented electoral alliance between the PC and the PN, traditional rivals, which was critical for securing Lacalle Pou’s electoral victory.
  • Talvi’s appointment to the foreign ministry was designed to underpin the PC’s political support for the Lacalle Pou executive and the loose multicolour coalition on which it relies to have a congressional majority. But there were signs that the relationship between Talvi and Lacalle Pou was tense, with Talvi himself recently revealing that he didn’t see himself remaining in the post of foreign minister in the medium term. Talvi said that he was prepared to resign but would only do so by common accord with Lacalle Pou.
  • However, after presenting the issues that Uruguay intends to advance after it receives the Mercosur pro-tempore from Paraguay, due to take place today (2 July), Talvi publicly announced his resignation. Hours after taking part in the virtual Mercosur meeting, Talvi published his resignation letter on Twitter. In the letter, Talvi says that his intention was to remain as foreign minister until the end of the year, but that he “understands that the timings of the cabinet are determined by the president… it is not my intention to be an obstacle for his desire to name a foreign minister he considers appropriate”.
  • Talvi’s remarks sparked intense speculation that he was unhappy with some of Lacalle Pou’s recent decisions. According to local media reports, Talvi clashed with Lacalle Pou over foreign policy objectives and some ambassadorial appointments. But reports that Lacalle Pou had chosen Francisco Carlos Bustillo Bonasso, Uruguay’s ambassador to Spain, as Talvi’s replacement, have been identified as the catalyst for Talvi’s sudden resignation.
  • It is speculated that Talvi wanted to have a say in who his successor should be and that he was hoping that the portfolio would remain in the PC’s hands. However, Bustillo is a career diplomat with no known party affiliations.

Looking Ahead: Following Talvi’s departure from the cabinet, there are questions over whether the PC will continue to wholly support the Lacalle Pou government in congress. Without the PC’s full support, the Lacalle Pou executive could struggle to advance its legislative agenda.  

Andean

On 1 July, Bolivia’s Movimiento al Socialismo (MAS) opposition party issued a statement accusing the interim government of seeking to exclude MAS presidential candidate, Luis Arce, from competing in the upcoming general election.

Analysis:

Before the election was suspended in response to the coronavirus (Covid-19) pandemic, the MAS had repeatedly accused the interim government led by Jeanine Áñez (herself a presidential candidate) of using judicial persecution as a strategy to exclude MAS candidates, including Arce. Ongoing judicial processes have also been suspended during the pandemic, but with the election date rescheduled for 6 September (despite Áñez’s resistance), the interim government has appealed for these cases to be reopened, and filed a new corruption complaint against Arce. Tensions are still high following the resolution of the election date debate, and any genuine attempt to exclude Arce from the electoral process would unquestionably lead to renewed protests.

  • As well as requesting the reopening of a previous embezzlement investigation relating to Arce’s work with the country’s indigenous development fund while serving as economy minister (2006-2019), interim justice minister Álvaro Coimbra filed a new complaint on 30 June, regarding alleged irregularities in the procurement of a US$10m computer programme for the country’s pensions system.
  • Arce yesterday called a press conference in response, at which he repeated his claim that the previous complaint had been fabricated. Regarding the new complaint, he confirmed that the contract in question had indeed been breached by the suppliers, but claimed that a legal process to retrieve the money had been underway when the interim government took over from the MAS in November 2019.
  • He then read a statement on behalf of the MAS, saying “we denounce to national and international public opinion that the de facto government intends to disable our candidate for the presidency, Luis Arce”, calling for the attorney general’s office to act impartially, and for the electoral tribunal (TSE) to intervene to protect his candidacy.

Looking Ahead: The statement also called on MAS-aligned social organisations and indigenous groups “to remain vigilant in the face of these attempts to suppress our rights”, seemingly raising the threat of renewed protests if Arce is excluded from the presidential contest.

* Ecuador’s central bank (BCE) has reported that the country’s economy contracted by 2.4% year-on-year in the first quarter of 2020. The BCE attributed this decline primarily to reduced investment (reporting a 6% fall in gross fixed capital formation) and public consumption (down by 0.6%). These results suggest that Ecuador’s economic difficulties preceded the coronavirus (Covid-19) pandemic, the impact of which only began to be fully felt in March, at the end of the quarter. The quarterly economic contraction, despite being the largest recorded since President Lenín Moreno took office in 2017, is likely to be just the tip of the iceberg; the all-important oil sector, which has been hit particularly hard in recent months, even reported 1.9% year-on-year growth in the first quarter. The BCE currently anticipates that the economy will contract by up to 9.6% in 2020.

Brazil

On 1 July, Brazil’s federal chamber of deputies held two rounds of voting, in which it approved a constitutional amendment (PEC) for the postponement of the country’s municipal elections, previously due to be held in October this year.

Analysis:

The possibility of delaying this year’s municipal elections due to the coronavirus (Covid-19) pandemic had largely been rejected by Brazil’s political representatives in the early days of the pandemic. But as the local Covid-19 outbreak has relentlessly worsened, effectively paralysing campaigning, which would have been expected to (unofficially) begin in May, and raising concerns over the public health implications of holding country-wide elections in October, political and electoral authorities have come round to the necessity of delaying the elections, and succeeded in reaching a broad consensus to achieve this. 

  • This year’s municipal elections were due to be held on 4 October, with a second round scheduled for 25 October. These dates have now been pushed back by six weeks, with the first round scheduled for 15 November and the second for 29 November. Municipalities which continue to face a sanitary emergency could delay elections further still, to as late as 27 December.
  • The chamber of deputies held both rounds of voting necessary to approve the PEC yesterday, maintaining the text approved by the senate on 23 June. The postponement of the elections had been expected to face more resistance in the chamber than in the senate, as deputies are more susceptible than senators to pressure from local mayors (some of whom might have worried about a delay in the vote affecting their re-election chances), but in the end only two minority parties ordered their members to vote against the PEC.
  • Davi Alcolumbre and Rodrigo Maia, the presidents of the senate and chamber respectively, both celebrated the approval of the postponement of the elections as the result of dialogue and consensus between the two chambers of congress, mayors and municipal councillors, electoral authorities, and scientists.

Looking Ahead: A PEC does not require presidential sanction, and congress is expected to promulgate the amendment today (2 July), after which the supreme electoral court (TSE) will update the electoral calendar.

* Brazil has recorded its highest trade surplus for the month of June since the historical series began in 1989, as a strong US dollar and the economic crisis caused by the coronavirus (Covid-19) pandemic have led to a particularly sharp fall in imports. Brazil’s trade balance saw a positive result of US$7.46bn in June, with the value of exports totalling US$17.91bn (down 12% on June 2019), while imports totalled US$10.45bn (down 27.4% on June 2019). The economy ministry has now revised its trade projections for 2020, expecting the overall trade balance this year to be lower than was forecast in April (US$349.6bn, down from US$353bn), but now forecasting a higher surplus, of US$55.4bn (up from US$46.6bn in the previous forecast).

Central America & Caribbean

On 1 July Costa Rica’s health minister, Daniel Salas, announced that due to a surge in coronavirus (Covid-19) cases, restrictions would be re-imposed in the greater San José metropolitan area.

Analysis:

With the government led by President Carlos Alvarado due to announce the details of these restrictions today (2 July), the announcement regarding San José, the largest urban agglomeration in the country, came as a record 294 new Covid-19 cases were registered in the previous 24 hours, bringing the country’s total to 3,753 cases, with 17 fatalities. This exceeded the previous daily record of 190 cases, set the day before. President Alvarado said this was the first time the government had to re-impose restrictions since it began easing lockdown measures at the start of May. The difficulties facing the Costa Rican government attracted particular attention given that the country has previously received plaudits from figures such as United Nations resident coordinator in Costa Rica Alice Shackleford and World Health Organization (WHO) representative María Dolores Pérez-Rosales for its handling of the pandemic.

  • The announcement regarding the restrictions came after most of the country had entered the third phase of the easing of restrictions on 27 June, whereby (among other measures) hotels, restaurants, shopping centres, cinemas, and theatres are able to operate with limited capacity, provided social distancing measures are in place. However, areas with high transmission rates were exempt, including some districts in San José province and a district in Heredia municipality, the capital of the eponymous province.
  • Yesterday the executive president of Costa Rica’s national social security institute (CCSS), Román Macaya Hayes, warned that if the number of people admitted to hospital with the virus continues to rise, the specialised centre set up to deal with Covid-19 patients (Ceaco) would be saturated in a week. With a total of 56 patients currently hospitalised with the virus, of which 39 are being treated in Ceaco, Macaya said that a further five were in the process of being admitted. He said that a week ago Ceaco had 20 patients, and if the current figure doubles again within a week, Ceaco would be at its limit.

Looking Ahead: President Alvarado said that the new restrictions would take effect tomorrow (3 July), and last “at least” a week.

* El Salvador’s central bank (BCR) has announced that the country’s GDP grew by 0.8% year-on-year in the first quarter of 2020, attributing this growth to stability in the financial sector, as lockdown measures to counter the spread of coronavirus (Covid-19) caused contractions in most other sectors. The BCR also announced that it is forecasting that El Salvador’s GDP will contract by a total of between 6.5%-8.5% in 2020, down from the 2%-4% decline forecast in April.

Mexico

On 1 July, healthcare workers staged a protest in front of the headquarters of Mexico’s social security institute (IMSS) in Mexico City, continuing to demand better working conditions amid the coronavirus (Covid-19) emergency.

Analysis:

Workers in Mexico’s public healthcare sector have been protesting over the authorities’ response to the pandemic and notably demanding more personal protective equipment (PPE) since the beginning of the outbreak in the country. That this remains an issue almost four months on belies the claims made by President Andrés Manuel López Obrador’s government that its strategy to combat the coronavirus has been satisfactory and successful.

  • Members of the Unión de Trabajadores por la Salud de México (UTSM) healthcare workers’ union called yesterday’s demonstration, to demand more PPE and also denounce that the IMSS had dismissed workers for making these demands in the past. Speaking to local media, UTSM spokesperson and nurse, Rafael Soto, said that the IMSS had threatened to sanction workers who took part in yesterday’s demonstrations.
  • These criticisms came as Mexico overtook Spain to become the country with the sixth highest number of Covid-19 fatalities globally. According to the John Hopkins University Coronavirus Resources Center, Mexico has now recorded 28,510 deaths from the disease; Spain has 28,364.
  • Mexico’s case-load totals 231,770, the tenth highest in the world, but underdetection of the disease is understood to be particularly widespread in the country, which has the world’s highest testing positivity rate, with 66.9% of Covid-19 tests coming back positive according to the 25 June seven-day rolling average – a sign of a lack of testing.   
  • President López Obrador glossed over the public health impacts of Covid-19 yesterday in a speech to mark the two-year anniversary of his election as president, in which he sought to stress his administration’s victories so far. “The country [...] has almost always followed the recommendations of experts, and together we are now overcoming this difficult conjuncture”, López Obrador said of the health emergency.

Looking Ahead: Whether it was optimism on Mexico’s economic outlook, assurances that the worst of the pandemic has passed or the assertion that his government’s security policy has delivered results, López Obrador’s claims in his speech rang hollow – portending the growing criticism that his government is likely to continue facing on many fronts.

* Mexico’s central bank (Banxico) has released new figures which show that remittance inflows to Mexico totalled US$15.5bn in the first five months of 2020. This represents an increase of 10.4% compared with the same period in 2019, despite the effects of the coronavirus (Covid-19) pandemic. The figures show that the highest level of remittances so far this year was registered in March, with inflows totalling US$4bn.

Southern Cone

* International credit ratings agency Standard & Poor’s (S&P) has downgraded seven Argentine US dollar-denominated bonds to ‘D’ (default) due to missed interest payments, in the midst of rising tensions in the country’s debt-restructuring negotiations with foreign bondholders. In a statement, S&P specified that at the end of June, Argentina failed to meet interest payments of approximately US$837m on four Argentine-law bonds, and of approximately US$582m on three foreign-law bonds. S&P noted that it already downgraded similar bonds to ‘D’ following missed payments on 22 May, and stated that all such D-ratings will remain in place pending the conclusion of the debt talks. S&P added that it expects Argentina to meet an impending Japanese-law yen-denominated bond repayment, as this is not part of the ongoing negotiations.