LatinNews Daily - 12 August 2020

On 11 August Chile’s foreign minister, Andrés Allamand, criticised the “aggressive” remarks made against Argentina by Mauricio Claver-Carone, the US government’s candidate for leading the Inter-American Development Bank (IDB), saying that they show why his candidacy is “inadequate” and why the IDB election should be postponed.

Analysis: 

Traditionally Chile has been a strong US ally in Latin America. But Allamand’s comments show that the centre-right government led by President Sebastián Piñera is opposed to the attempt by the Donald Trump administration in the US to exert control over the IDB. This has also been rejected by various of other Latin American countries including Argentina, which has presented its own candidate. Chile’s decision to oppose Claver-Carone's bid may help to consolidate relations with Argentina, but it could produce diplomatic tensions with the US.

• The IDB has been led by a Latin American since its creation. But back in June the Trump administration took the unprecedented step of nominating US national Claver-Carone, senior director for Western Hemisphere Affairs at the US National Security Council and special advisor to President Trump, to the post. 
• The IDB president is elected by the organisation’s stakeholders with a candidate needing to secure at least 15 votes from 28 member countries. While Claver-Carone’s candidacy has been backed by some Latin American countries, a group led by Argentina complained that his nomination is at odds with an unwritten rule that the IDB would not be controlled by the US. 
• The Argentine government also objected to Claver-Carone’s bid on political grounds, expressing concerns that as a close Trump ally, Claver-Carone would make IDB loan decisions based on political rather than purely technical considerations. Amid these concerns Argentina called for the suspension of the election, due to take place in September, until next year in order for IDB stakeholders to discuss candidacies and what the bank’s role should be.
• Mexico, Costa Rica, and Chile have backed Argentina’s proposal to delay the election. However, yesterday in a press conference Claver-Carone accused Argentina of trying to ‘hijack’ the election. “We are seeing a minority effort led by the government of Argentina…to obstruct the election because they have not been able to present or have not wanted to present a competitive vision”, Claver-Carone said. He complained that the suspension of the election will only paralyse the IDB. 
• Allamand deplored Claver-Carone’s comments during an appearance before Chile’s congress. “The aggressive remarks by Mr Claver-Carone confirm that his election would be very inadequate…the IDB must remain a technical organisation devoid of political controversies”,  Allamand complained. He also defended suspending the election, insisting that Claver-Carone’s bid breaks “the golden rule” that the IDB must have a Latin American president and a US vice president. “It is prudent to suspend the election…and debate the role of the bank in helping member countries with the post [coronavirus] Covid-19 recovery free from [political] tensions”, Allamand concluded. 

 Looking Ahead: The US has yet to respond to Allamand’s comments, but with Claver-Carone warning that “the US will confront” any attempts to obstruct the IDB election, an angry response is likely. 

On 11 August Peru’s congress granted a vote of confidence in President Martín Vizcarra’s chosen Prime Minister Walter Martos, a retired army general, and his cabinet.

Analysis:

Martos won the backing of congress after deputies rejected the previous choice of prime minister, Pedro Cateriano, last week just 19 days after he had been appointed to the position. Martos presented much the same programme as Cateriano but his tone was more conciliatory and he moved the emphasis away from the mining sector and private sector investment to drive Peru’s economic recovery to the priority of overcoming the coronavirus (Covid-19) pandemic. 

• “My priority, without any doubt, is fighting the pandemic. The strategy will be prevention, comprising containment and mitigation measures, and optimising the readiness of hospitals”, Martos said during a presentation of his plans to congress ahead of the vote. “We either win together or we will be defeated impassively by this silent enemy”, he added in an appeal for unity of purpose beyond political differences to overcome the pandemic and to rebuild the shattered economy.
• In another long session, congress voted overwhelmingly, by 115 votes to five with four abstentions, to grant a vote of confidence in Martos and his cabinet. Only a handful of opposition legislators from the left-wing Frente Amplio (FA) and the ultra-nationalist Unión por el Perú (UPP) opposed his appointment. 
• If congress had rejected Martos and his cabinet as well it would have created a crisis of governability in Peru and deputies would have faced charges of irresponsibility in the midst of a pandemic. The constitution expressly precludes the dissolution of congress during the final year of a presidential term.

Looking Ahead: Granting its backing for Martos does not mean congress will suddenly start working cooperatively with the Vizcarra administration. The vote was really an expression of broad support for Martos to lead the cabinet at such a challenging juncture, with Covid-19 rampant. Deputies are still likely to go after individual ministers, starting with a move to censure the education minister, Martín Benavides, and then the economy minister, María Antonieta Alva.

* Ecuador’s central bank (BCE) has announced that it is launching a 'sustainable finance' initiative in response to the damage that the coronavirus (Covid-19) pandemic has wrought on the country’s economy. The scheme will encourage cooperation between the public and private sectors and universities, with the aim of attracting “sustainable” international investment. According to the BCE, this investment will then be channelled into social and environmental initiatives, with the objective of attaining the United Nations Sustainable Development Goals (SDGs). The scheme was devised with the participation of the national banking association (Asobanca), the Quito stock exchange (BVQ), the national association of stockbrokers (Asocaval), and major players in the private sector including the Ecuadorean-American Chamber of Commerce, SMS-Latinoamérica (an international network of auditing, accounting, management consulting and finance professionals) and accounting firm Deloitte. BVQ President Gilberto Pazmiño said that capturing sustainable investments would allow the “adoption of ethical criteria in the everyday analysis of risk, profitability and industrial interest, including social and environmental factors".

On 11 August, Brazil’s Economy Minister Paulo Guedes confirmed that two key members of his ministerial team, privatisations secretary Salim Mattar and debureaucratisation secretary Paulo Uebel, had resigned.

Analysis:

Mattar’s and Uebel’s resignation, over dissatisfaction with the slow progress of reforms making it impossible to get their work done, further whittles down the economic team put together by Guedes before he took office in January 2019. This weakens Guedes’ hand at a sensitive time, as the economy minister tries to defend before congress his version of a reform to Brazil’s complex tax system, and faces discussions on the constitutional spending cap ahead of presenting next year’s budget.

• “There was a stampede today”, Guedes admitted during a press conference yesterday after confirming that Mattar and Uebel had both resigned. In the wake of their departure, José Ziebarth, the economy ministry’s director of the privatisations programme, also tendered his resignation.
• Guedes said that Mattar was unhappy with the slow progress of privatisations, while Uebel’s grievance was with the lack of advance in the long-promised administrative reform. “[Mattar] said that it’s very difficult to privatise, that the establishment doesn’t let it happen”, Guedes said, comments which Mattar repeated in an interview with CNN Brasil. “When you start privatising, you’re shaking up the game of [political] interests”, he said. “The political class has no interest in privatising. So that is why the process is slow”.
• Guedes has sought to minimise the significance of these resignations by implying that Mattar and Uebel gave up. “We’re going to insist on this path [of privatisations]. At least we’re going to fight”, Guedes said.  
• With Mattar and Uebel leaving government, Guedes has already lost five key members of his economic team as well as the heads of two state banks since January 2019. Three left in July alone: Mansueto Almeida, previously national treasury secretary; Caio Megale, who was programmes director in the finance secretariat; and Rubem Novaes, who had been named by President Jair Bolsonaro as CEO of the state-run Banco do Brasil (BB). 

Looking Ahead: Mattar and Uebel’s replacements are yet to be announced, but Guedes said that his reaction to these defections would be to “accelerate the reforms” and “unblock investments”.

* Brazil’s national statistics institute (IBGE) has predicted that Brazilian grain production will reach record highs in 2020. The IBGE estimates that 250.5m tonnes of grains will be produced this year – a 3.8% increase on 2019, when the current production record was set. Rice, soya, and maize crops are forecast to make up 92.2% of the yield. Of these, rice production is expected to increase by 7.3% compared with last year and soya by 5.9%, whilst maize production is predicted to decline by 0.8% compared with the 2019 harvest. The grain industry has largely avoided the damage caused to other sectors by the coronavirus (Covid-19) pandemic, and the current IBGE forecast represents a 1.3% increase on its previous estimate for the 2020 grain harvest, made in June.

On 11 August Costa Rica’s attorney general’s office launched an investigation into President Carlos Alvarado for alleged illicit enrichment.

Analysis:

The investigation relates to a holiday Alvarado took from 7-10 August, travelling by helicopter to a luxury hotel in Nandayure canton, Guanacaste province, together with coordination and productive sector minister, André Garnier, their wives and Alvarado’s child. Alvarado maintains he did nothing wrong and it was not paid for with public funds. However, the question marks over the trip, which has attracted particular public anger due to it taking place amid the coronavirus (Covid-19) pandemic, come as his government’s pandemic response continues to draw criticism.

• The attorney general’s office said the investigation’s aim is to determine the possible existence of a “crime of conduct”, although it failed to give further details.
• President Alvarado tweeted that “there was no crime to investigate” and described the investigation as “excessive”. A statement by the presidency, circulated in the local media, said Alvarado took the holiday respecting all “sanitary protocols”. In Costa Rica hotels are permitted to operate with sanitary protocols in place and at 50% capacity although the local media report that the hotel in question, Punta Islita, has been closed to the public since 1 April.
• The trip has been slammed by figures such as Albino Vargas, the secretary of the Asociación Nacional de Empleados Públicos y Privados (Anep) union. Vargas tweeted that the “presidential…holiday” was a “toxic mixture of half-truths”, involving “personal, public and private funds”. He also complained of “a total lack of respect for the suffering of pandemic victims” and “inconsistencies in explanations which foment mistrust”. 
• The controversy over the trip comes as Alvarado continues to face criticism over his government’s pandemic response – with unions demanding more economic relief and the private sector pushing for the economy to be opened further. 

Looking Ahead: In one sign of pressure from the private sector, the government was forced to relax restrictions announced on 29 July as part of its roadmap for a staggered reopening of the economy. Initially non-essential services in orange alert areas (where infections are high) were due to be shut from 10-21 August. However, under private sector pressure, the government has allowed them to remain open at 50% capacity during the week.

* Panama’s health ministry has announced that car dealers, beauty salons, and retailers will be permitted to reopen from 17 August onwards, after the reproduction rate of the coronavirus (Covid-19) dropped from 1.13 to 1.07. Barber shops and salons can open with appointments at 50% capacity, a move set to benefit 2,572 firms. Retailers can open for online shopping, and shoppers can pick up merchandise from stores, but they are not allowed inside. Private construction projects can resume, and Panamanians can return from abroad, observing quarantine on arrival. The country’s 164 NGOs can also reopen. Having suspended non-essential economic activity on 15 March, the government announced the phased reopening of the economy on 13 May. The latest forecast from the United Nations Economic Commission for Latin America & the Caribbean (Eclac) expects Panama’s GDP to contract 6.5% in 2020.

On 11 August Mexico’s President Andrés Manuel López Obrador confirmed that warrants had been issued for the arrest of 19 former federal police (PF) officials, including Jesús Orta Martínez who is also a former Mexico City (CDMX) security minister (2018-2019), in relation to allegations of corruption.

Analysis:

López Obrador is trumpeting the arrests as the latest sign of efforts by his Movimiento Regeneración Nacional (Morena) government to crack down on corruption. While these efforts and accusations have often targeted previous administrations (López Obrador recently accused former president Felipe Calderón Hinojosa [2006-2012], of having led a narco state), the fact that Orta was appointed by CMDX governor Claudia Sheinbaum, a member of Morena, will allow the government to insist that these anti-corruption efforts extend beyond party lines.

• In his daily press briefing López Obrador said the arrest orders, which were issued on 8 August, were the result of an investigation into the accounts of the interior ministry (Segob) under former president, Enrique Peña Nieto (2012-2018), which then controlled the PF. The PF has since been dissolved and absorbed into the national guard (GN), a new federal security force launched in June 2019. López Obrador did not provide further details.
• Orta, who was PF secretary general between December 2012-May 2014, was appointed CDMX security minister by Sheinbaum in December 2018. He served until his resignation last October when he quit for “personal reasons”. Sheinbaum has acknowledged that she knew of an investigation into Orta when she appointed him.
• In his press briefing yesterday López Obrador also noted that the federal government had fired some 30 officials linked to Calderón’s security minister Genaro García Luna, who is currently facing trial in the US over his suspected links to Mexican drug trafficking organisations (DTOs). Reiterating claims he made on 10 August regarding the existence of a ‘narco state’ under Calderón, López Obrador also alluded to the case of Emilio Lozoya, a former CEO (2012-2016) of the state-run oil firm Pemex, arrested in Spain in relation to the bribery scandal involving the Brazilian engineering firm Odebrecht.

Looking Ahead: López Obrador’s focus on the corruption of previous administrations has drawn criticism from figures such as Calderón who accuse him of diversionary tactics to distract from his government’s failings in the face of the coronavirus (Covid-19) pandemic.

* Mexico’s national statistics institute (Inegi) has released its latest index on industrial activity, which shows that industrial production in Mexico fell 14.1% year-on-year in the first six months of 2020. Activity in the construction sub-sector saw the biggest decrease, dropping 20.9%, followed by manufacturing industries (-16.2%), and electricity, water and gas generation and distribution (-5.1%). The mining sub-sector was the only one to record a positive result in in January-June, with a 0.1% year-on-year variation driven by a 2.5% increase in oil & gas extraction and 7.2% increase in services related to mining (metallic and non-metallic mining excluding oil & gas fell by 11.2%). The monthly industrial activity index (IMAI) saw a positive variation in June compared with May, growing 17.9% after the return to a ‘new normal’ and the reopening of the Mexican economy, following containment measures taken to tackle the coronavirus (Covid-19) pandemic. However, this year’s June IMAI fell by 17.5% compared with June 2019.

* Argentina’s Transport Minister Mario Meoni has said the suspension of commercial flights in the country could continue well beyond the 1 September resumption date proposed in March, due to a recent rise in coronavirus (Covid-19) infections. During a videoconference organised by Argentine think-tank Fundación Mediterránea, Meoni said that for now the outlook remains unclear. He added the government “hopes air transport will return within the next 60 days”, but that until a vaccine arrives it will be very difficult to create the necessary conditions, noting that many countries have reopened air travel and have subsequently suffered a resurgence of cases. Following the conference, the national civil aviation authority (Anac) confirmed that the decree banning international and domestic flights, as well as the sale of commercial airline tickets, remains in place and could be extended (although some international flight routes have been authorised in August). On 11 August, President Alberto Fernández said Argentina was suffering its “worst moment of the pandemic”, adding that while “people’s freedoms are not in discussion, the first condition of freedom is being alive”.