LatinNews Daily - 05 August 2020

On 4 August, Peru’s national congress denied a vote of confidence in President Martín Vizcarra’s new cabinet, forcing the resignation of all 19 ministers, including prime minister Pedro Cateriano.

Analysis:

Cateriano lasted just 20 days in the job, following a major cabinet reshuffle on 15 July at the strat of Vizcarra’s final year in office. The deepening divisions between congress and the Vizcarra executive have brought Peruvian politics to a stalemate, which now threatens to become a full-scale constitutional crisis. A vote of confidence in the previous cabinet on 28 May was narrowly approved, based on Vizcarra’s public support and legislators’ fears that the president might dissolve congress for the second time in under a year. But with popular approval fading in light of the country’s worsening health and economic emergencies, and the constitution preventing the dissolution of congress in  the final year of a presidential term, the balance of power has now shifted. With Peru in urgent need of a functioning government, Vizcarra will now face significant pressure to cede to congress’s demands.

• As per the constitution, Cateriano presented the new cabinet to congress on 3 August, and outlined the government’s agenda for its final year. After more than 20 hours of debate, at 7:00am the next morning, just 37 legislators voted to approve the cabinet, well short of the 66 required, while 54 voted against, and 34 abstained.
• Cateriano had been expected to face opposition from a number of smaller parties, but the loss of support of the two largest parties in congress – the centrist Acción Popular (AP), with just four out of 25 deputies backing the cabinet, and centre-right Alianza para el Progreso, with all 22 abstaining – ultimately proved decisive.
• Legislators from various parties offered a range of explanations for their rejection of the cabinet, citing the policy agenda presented by Cateriano – said to have provided insufficient detail on Peru’s response to the coronavirus (Covid-19) health emergency, and to have over-emphasised the role of mining and private sector investment in the country’s future economic recovery – as well as objections to a number of ministers included in the cabinet.
• Cateriano himself claimed that the president of congress, Manuel Merino of the AP, had privately offered him the party’s support if Education Minister Martín Benavides was replaced. Benavides is currently facing a vote of censure from congress, over the government’s unpopular university reform plan. 
• Other cabinet members facing criticism are Labour Minister Martín Ruggiero, thought to be too inexperienced, and Economy Minister María Antonieta Alva, who is facing scrutiny over a consultancy contract awarded in November 2019 to a company in which her father and brother are shareholders.
• Vizcarra responded angrily to the rejection of the cabinet, accusing congress of “playing with the country’s destiny” at a time of crisis, in the name of “private interests”. He insisted that “we are not going to give up defending the interests of Peruvians, nor are we going to enter into negotiations behind the backs of citizens”.

Looking Ahead: Vizcarra has just 72 hours to name a new cabinet, although all ministers except Cateriano are allowed to be reselected. However, with congress now protected from dissolution, some level of compromise is needed to break this deadlock, and to avoid adding a constitutional crisis to the ongoing health and economic emergencies.

* Colombia’s President Iván Duque has announced a US$30bn investment programme called ‘Commitment to Colombia’, intended to generate 1m jobs over the next two years to replace those lost as a result of the coronavirus (Covid-19) pandemic. Duque outlined plans to invest in a range of public and private sector projects, including port and airport development, industry and mining projects, 17 digital transformation projects, 22 creative and cultural industries projects, and 25 renewable energy projects. The president emphasised that investment plans would be complemented by similarly generous social protection measures for the most vulnerable, such as the expansion of the ‘solidarity income’ subsidy programme.

On 4 August, a magistrate in Brazil’s supreme court (STF), Cármen Lúcia Antunes Rocha, gave the justice ministry 48 hours to explain the supposed existence of a file containing information on public security officials who are politically opposed to the government.

Analysis:

The existence of such a file was revealed in a report by news site UOL, published on 24 July. According to UOL’s report, the Secretaria de Operações Integradas (Seopi) in the federal justice & public security ministry has compiled information on almost 600 officials in the federal and state police forces who are identified as members of the anti-fascist movement (which opposes President Jair Bolsonaro and his supporters’ anti-democratic demands). Justice Minister André Mendonça has for the moment evaded giving clarifications about the Seopi’s work and this alleged file, prompting the STF to intervene amid concerns that the information gathered could be used for political persecution.

• According to UOL, throughout the month of June the Seopi gathered information (including names and in some cases addresses and photographs) on 579 security officers, as well as three academics from state-run universities. This followed a 5 June manifesto entitled ‘Antifascist police officers in defence of popular democracy’, signed by 503 active and retired officers from different federal and state police forces. The file was then shared internally between a number of government security and intelligence bodies. 
• Antunes Rocha’s order responds to a petition filed by the opposition Rede Sustentabilidade party for the justice ministry’s actions to be investigated, and the collection of data to be suspended. If the government has indeed been collecting such information on public servants, the situation “opens the door to behaviour which is incompatible with the most basic democratic principles of the rule of law” , the judge outlined in her decision, adding that more information on the Seopi, a little-known government secretariat, is needed.

Looking Ahead: Mendonça cancelled an appearance before congress planned for yesterday, but is now due to appear remotely before the joint congressional committee of control over the intelligence services’ activities on 7 August, to give explanations on this file and the Seopi’s work.

* Brazil’s national statistics institute (Ibge) has released the latest figures for industrial production, which has recorded a positive result for the second month running. Industrial production grew by 8.9% month-on-month in June, with an improvement in 24 of the 26 categories surveyed, and a notable 70% monthly increase in vehicle production. However, this remains insufficient to reverse the deep 26.6% drop in activity recorded in March and April, a direct consequence of the coronavirus (Covid-19) pandemic and measures taken to contain it: industrial production has accumulated losses of 10.9% in the first six months of 2020, and seen -5.6% variation in the 12 months to June 2020. Year-on-year production in June fell by 9%.

On 4 August Suriname’s President Chandrikapersad Santokhi said that the country has accumulated debts in excess of US$3bn.

Analysis:

Santokhi took office on 13 July after Desi Bouterse relinquished power nearly a month early, his10-year tenure marked by allegations of cronyism and corruption on a grand scale, bequeathing his successor a legacy of debt compounded by the coronavirus (Covid-19) pandemic.

• On the same day Santokhi took office, the international ratings agencies Fitch and Standard & Poor’s (S&P) downgraded Suriname to 'selective default' when the country failed to pay the principal on a US$125m loan after its 10-day grace period expired on 10 July. Santokhi said Suriname was “on the brink of a financial abyss”, with the treasury “virtually empty”. 
• Santokhi has now revealed the scale of the debt his government has inherited from Bouterse’s populist government, which he said was a “financial catastrophe”, equivalent to US$5,000 for every Surinamese citizen. Santokhi said it beggared belief that a government could rack up so much debt, which he said could not be explained by the financing of infrastructure works as these were paid for by funds from China. He accused the Bouterse administration of “inadequate management” of public finances, telling the media that it had spent more than US$60m employing 3,600 government officials, for instance, in the six months leading up to elections on 25 May. 
• Depleted public finances will be further ravaged by Covid-19. Fitch predicts that the debt burden will surpass 100% of GDP by the end of the year from 80% in 2019, with S&P saying that Covid-19 will provide “unprecedented challenges”. Santokhi did not reveal precisely what his government intends to do but a painful period of austerity would seem to await Suriname. 

Looking Ahead: Santokhi will need to preserve unity within a disparate political coalition to push through unpopular reforms to restore Suriname’s economic stability. His Vooruitstrevende Hervormingspartij (VHP) secured 20 of the 51 seats in the national assembly, necessitating the formation of a governing alliance with the Maroon nationalist Algemene Bevrijdings-en Ontwikkelingspartij (Abop), the centre-left Nationale Partij Suriname (NPS), and the Javanese Pertjajah Luhur (PL), to reach 33 seats.

* The Instituto Hondureño del Café (Ihcafe), the body in charge of promoting Honduran coffee, says that the value of the country’s coffee exports totalled US$856.6m from October 2019 to July 2020, 3.3% less than the US$886m sold during the comparable period last year. Ihcafe attributed the fall to an unfavourable climate which reduced production. It added that so far in the current harvest, the price of a quintal of coffee (100kg) averaged US$125.4, while in the 2018-2019 harvest the price was US$107.09. Honduras, Central America’s largest coffee producer, expects to export 8.5m quintals of coffee in the 2019-2020 harvest, earning US$900m. In the 2018-2019 harvest, Honduras collected US$950m from 8.9 quintals of coffee, making up 5% of the country’s GDP. 

On 4 August a memo sent by Mexico’s President Andrés Manuel López Obrador to officials in the country’s energy sector regulatory bodies, asking them to “adjust” to his government’s energy policy, became public. 

Analysis:

The emergence of the memo has heightened concerns over López Obrador’s apparent intention to in effect revert Mexico’s 2012-2013 energy sector reform. The reform opened Mexico’s energy sector to increased private participation in a bid to attract more investment to revive a flagging industry. López Obrador is a staunch critic of the reform, which he says is not in the national interest and has been adamant that his administration’s objective is to strengthen the state-owned energy firms and protect them from private competition. The worry is that the systematic attempts to undermine the reform will discourage private investment not just in the energy sector but in Mexico in general. 

• The López Obrador government has set back the expansion of private sector participation in the energy sector through the cancellation of contracts, the suspension of scheduled tenders for hydrocarbon concessions, and more recently through the adoption of controversial new regulations for the electricity market. Various legal challenges have been raised against these actions, with the supreme court (SCJN) currently reviewing the constitutionality of the electricity market regulations.
• However, López Obrador insists that his government will continue to pursue its objectives of defending Mexico’s energy sovereignty by reinforcing the state-run oil firm (Pemex) and the state-run electricity firm (CFE). In the memo dated 22 July but made public yesterday, the president urges officials in the national hydrocarbons commission (CNH), the national energy commission (CRE), and the national centre for electricity control (Cenace) to follow his government’s energy policy and stop the “privatisation of the energy sector”. 
• The CNH, the CRE, and Cenace are independent federal government entities. Nevertheless, in his memo López Obrador says that these “must adjust to the new energy policy and that their mission should be to join forces with the energy ministry, Pemex and the CFE to rescue the oil and electricity industries”. 

Looking Ahead: In the memo López Obrador does say that regulators must act within the existing legal framework, but he does not rule out promoting new “constitutional reforms” to achieve his government’s energy policy objectives if necessary.  

* Mexico’s national hydrocarbons commission (CNH) has reported that as of 1 January 2020, Mexico’s ‘3P’ (proven, probable, and possible) crude oil reserves had fallen by 6.9% (a decline of 1.32bn barrels) compared with the previous year, while natural gas reserves fell by 8.2% (down 2.66trn cubic feet). As well as extraction, CNH commissioner Sergio Pimentel attributed this decline to a reduction in exploratory activities. Pimentel noted that there are areas owned or leased by state-owned oil firm Pemex that are yet to be explored, which could lead to further discoveries; he emphasised the importance of increased exploration, stating that “we are in a desirable scenario of energy transition, and the wealth that we fail to take advantage of in the coming years will become useless”.

On 4 July Jan Jarab, the South American representative of the Office of the United Nations High Commissioner for Human Rights (OHCHR), called for dialogue following the violent escalation of tensions between the Chilean authorities and the Mapuche indigenous people.

Analysis:

Jarab’s comments, which came after government buildings were set alight in La Araucanía Region last week, warned against a repressive response to the arson attacks, and called on President Sebastián Piñera’s government to instead address the root causes of the conflict. United Nations (UN) scrutiny of the government’s response will increase pressure on the Piñera administration to seek peaceful solutions to the long-running Mapuche conflict, as well as to investigate and crack down on allegations of excessive use of force by the Carabineros militarised police.

• Jarab warned that “a response that is based purely on public security would feed what is already a chronic process of tension, distrust, and conflict, which has involved human rights violations”, adding that the UN “remains ready to assist in finding solutions that are grounded in human rights”. Jarab also voiced concern at rising civilian hostility towards the Mapuche, which he said has involved a higher incidence of hate speech, discrimination, and violence against the indigenous people.
• Also yesterday, the director of Chile’s Instituto Nacional de Derechos Humanos (INDH), Sergio Micco, met with government ministers to discuss the situation in La Araucanía. Micco echoed Jarab’s warnings against a militarised response, and said that “as a country, we have made agreements for peace and for the development of La Araucanía that have not been carried out, which has been very damaging”.
• Lawmakers from the opposition Partido por la Democracia (PPD) wrote to the head of the OHCHR, Michelle Bachelet, calling on her to send UN observers to La Araucanía, name a special rapporteur to the region, and bring all parties to the negotiating table.

Looking Ahead: Following a meeting with deputy justice minister Sebastián Valenzuela yesterday, Mapuche leader Rodrigo Curipan said that “we’re a long way from finding a solution”, but that he was hopeful that this would be the first of many such discussions.

* The managing director of the International Monetary Fund (IMF), Kristalina Georgieva, has praised the “agreement in principle” that Argentina has struck with bondholders for the restructuring of some US$66bn of sovereign debt issued under international law. In a tweet, Georgieva congratulated President Alberto Fernández and his economy minister Martín Guzmán on taking a “very significant step” to resolve Argentina’s debt problems, after the conclusion of a high-stakes negotiation that had been ongoing since Fernández took office in December 2019. The deal reduces Argentina’s debt burden by some US$42.5bn over the next five years, according to Guzmán. The government expects to formally conclude the agreement before a 24 August deadline. In a press conference following the accord, Guzmán announced that the next step is for Argentina to restructure the outstanding US$44bn debt it has with the IMF, which was contracted in 2018 under the government led by former president Mauricio Macri (2015-2019).