LatinNews Daily - 15 November 2021

On 14 November Argentina’s opposition right-of-centre Juntos por el Cambio (JxC) claimed victory in the mid-term congressional elections which took place the same day.

Analysis:

With over 90% of votes counted, the elections, for 24 seats in the 72-member senate and 127 seats in the 257-member chamber of deputies, have delivered a heavy defeat for President Alberto Fernández’s ruling left-of-centre Frente de Todos (FdT) coalition whose driving force is the Partido Justicialista (PJ, Peronists). Peronists look to have lost their majority in the senate for the first time in almost four decades. In the lower chamber vote, the FdT lost key provinces such as Buenos Aires, a traditional Peronist stronghold. The result, which follows FdT’s shock defeat in the September congressional primaries (Paso), makes it much harder for President Fernández to govern ahead of the 2023 presidential election, not only because he lost the senate majority, but because the poor showing is likely to deepen a rift within the Peronists. Vice President Cristina Fernández (who was president from 2007-2015) blames Fernández for not being interventionist enough. She may now demand more unorthodox policies to combat high inflation and poverty.

• According to preliminary results, the FdT’s presence in the senate looks to drop from 41 seats to 35, two votes short of the 37 needed to form a majority and approve legislation on its own. The JxC looks to have won in six of the eight provincial races (Corrientes, Córdoba, Santa Fe, Chubut, La Pampa, and Mendoza) with Catamarca and Tucumán going to the FdT.
• There was less significant change in the lower chamber where the FdT looks to have lost two seats but remains the strongest force with 118 seats against 116 for JxC, although it narrowly lost in the PJ bastion of Buenos Aires province and other traditional strongholds.
• Nationally, with 98.84% of the votes counted, the media is reporting that JxC won 41.97% of the vote to 33.57% for FdT. Yet the government still maintained victory claiming that this was still an improvement on the 32.43% won in the Paso vote. “I ask you, next Wednesday when we remember the day of the activists, let’s fill the Plaza de Mayo and celebrate this victory the way it should be,” President Fernández told supporters at FdT headquarters.
• He also called on the opposition to engage in dialogue and said he would announce an economic programme next month that would seek to put public finances in order. However, he signaled that this would not include austerity measures that would cause hardship or inequality.
• Finding a solution to the US$44bn owed to the International Monetary Fund (IMF) is one of the top priorities, he said. “This is the biggest obstacle we face to continue the path of economic recovery.” He cautioned that talks require patience and that “negotiating doesn’t mean obeying.”
• Fernández had increased social welfare spending and froze prices on 1,432 basic products in an effort to ease rising discontent ahead of the elections. Still confidence in economic policy dropped, with the Argentine peso losing half its value in two months to trade at Ar$198 to the US dollar on the black market.

Looking Ahead: Analysts will be closely monitoring Cristina Fernández, who many consider to hold the real power in government, for any signs that she is pushing for more populist economic measures in response to the electoral defeat. Her position will dictate the tone of the pending economic plan and will have implications for negotiations with the IMF, which will be closely watched by investors.

On 12 November, 68 inmates were killed in violence which erupted at Penitenciaría del Litoral, the main prison in Guyaquil (Guyas province).

Analysis:

The Penitenciaría del Litoral has seen numerous massacres over the last year, including the worst in Ecuador’s history in September, when 116 inmates were killed. This led President Guillermo Lasso to declare a 60-day state of exception in the prison system, which was watered down by the constitutional court (CC) in early November. Lasso turned on the CC on 13 November, accusing it of interfering in his efforts to restore order. That received a sharp response from the court, which accused Lasso of failing to address the root causes of the violence.

• Guayas governor Pablo Arosemena said on 12 November that the latest outbreak of violence at the prison began when an imprisoned gang leader was released, leaving a power vacuum that another gang exploited to attempt to “vanquish” its rivals in a “total massacre”. Arosemena did not name the gangs involved, although previous killings at the prison have been the result of tensions between Los Lobos and Los Choneros, which are allied to rival Mexican drug trafficking organisations seeking control of the port at Guayaquil.
• The massacre triggered a public spat between President Lasso and the CC, with Lasso tweeting on 13 November that “we need better constitutional tools to protect the population [and] restore order in prisons,” and warning that “the security forces are unable to act.” This statement relates to the CC’s decision on 4 November to water down the state of exception that Lasso declared in the prison system following the September massacre (reducing it from 60 days to 30 days), and its imposition of conditions on a broader state of exception decreed on 18 October to tackle mounting crime.
• The CC in turn accused Lasso of “seeking to evade his own responsibilities” and stated that prison violence “requires concrete and structural actions, different to those adopted under a state of exception.”  
• The director of Ecuador’s prisons authority (SNAI), Bolívar Fernando Garzón, and the head of the army’s joint command, Jorge Cabrera, both resigned following the massacre.

Looking Ahead: Lasso will meet today (15 November) with the presidents of Ecuador’s high courts, national assembly president Guadalupe Llori, military commanders, and Attorney General Diana Salazar to discuss a joint strategy to reduce prison violence.

* Colombia’s President Iván Duque has promulgated the national budget for 2022, which allows for Col$350.39trn (US$90.2bn) in spending. That expenditure is 5.26% higher than that in the 2021 budget, which was previously the largest in Colombia’s history. Operating expenses are set at Col$210.13trn (3.13% higher than the 2021 budget), debt servicing at Col$78.01trn (+10.62%), and public investment at Col$62.24trn (+6.18%). Beyond debt servicing, the biggest expenses will be in education (Col$49.45trn; +4%), healthcare (Col$41.88trn; +16%), labour (Col$34.68trn; +27%), and defence (Col$29.07trn; +9%).

On 15 November, Brazil’s President Jair Bolsonaro told investors in the United Arab Emirates (UAE) that the Brazilian Amazon remains a practically untouched “paradise” which does not catch fire as it is a “humid forest”. 

Analysis:

Bolsonaro is on a six-day trip to drum up investment in the Middle East, where he will also visit Bahrain and Qatar. The tone he and his ministers have adopted suggests that the government is trying to project a green and sustainable image, as it had sought to do at the recent United Nations Conference on Climate Change (COP26) in Scotland. But Bolsonaro’s denialist discourse on the reality of deforestation, coming on the back of worrying deforestation figures for October, indicate that he has not changed his views on environmental issues and protection, confirming the doubts of those who looked upon Brazil’s COP26 pledges with scepticism. 

• Speaking during the launch of the Invest in Brazil forum in Dubai today, Bolsonaro and several of his ministers – including Agriculture Minister Tereza Cristina da Costa Dias and Mines & Energy Minister Bento Albuquerque – bigged up Brazil’s environmental credentials. Bolsonaro also fell back upon a well-worn discourse, that of arguing that Brazil is unfairly represented and criticised over its Amazon policies. 
• “The attacks Brazil suffers when we speak about the Amazon are not fair…[the forest] is almost exactly the same as when it was discovered in 1500”, Bolsonaro said. Scientists estimate that around 17% of the overall Amazon’s surface has been lost to deforestation. 
• Three days prior to Bolsonaro’s comments in Dubai, the government’s national space research institute (Inpe) released preliminary deforestation data for October, which show forest loss soaring that month. According to the Inpe’s deforestation alert system (Deter), some 877km² were deforested in October, a 5% increase on last year and the highest figure for the month in the last six years. 
• Brazil’s environment minister Joaquim Leite has yet to comment on these latest deforestation figures. When they were released on 12 November, Leite told journalists that he was not aware of the latest data as he was focused on the final COP26 negotiations. 

Looking Ahead: At the COP26, Brazil pledged to end deforestation by 2028 – an unconvincing pledge given the current reality of Amazon destruction and the lack of political will to tackle the situation. 

* Brazil’s national council of coffee exporters (Cecafé) has released its latest statistics for October, which show that coffee exports continue to fall, while revenue from coffee exports grows. Brazil exported 3.43m sacks of coffee in October (one sack = 60kg), down 23.8% on exports a year earlier, in October 2020. However, revenue for the month has risen 11.3% year-on-year to US$628.5m. Over the course of 2021 so far (January to October), Brazil’s coffee exports fell 6.3% year-on-year, but the revenue these exports generated was up 7%. The Cecafé president, Nicolas Rueda, attributed the drop in exports to logistical bottlenecks in maritime trade globally. “The scenario is concerning because [...] these obstacles will drag on into 2022, due to the large volume of Brazilian agricultural products accumulated in ports”, Rueda said, also citing concern with high costs. Rueda cites a strong US dollar and high coffee prices internationally as explaining the strong financial performance of Brazil’s coffee exports this year so far. 

On 12 November the Organization of American States (OAS) voted in favour of a resolution which found the 7 November general elections in Nicaragua were “not free, fair or transparent and have no democratic legitimacy”.

Analysis:

The OAS resolution came out of the 10-12 November OAS General Assembly and echoes similar conclusions drawn by the US and European Union (EU) regarding the election, which produced a victory for President Daniel Ortega but was widely slammed as a sham. With countries such as the US having already announced new sanctions since the election, the resolution by the OAS, whose previously efforts to pressure the Ortega government over democracy-related concerns failed to have any impact, states that further (unspecified) action will be taken, suggesting that sanctions could be on the cards.

• The OAS resolution resolves: “to conclude that, based on the principles set out in the Charter of the OAS and the Inter-American Democratic Charter, democratic institutions in Nicaragua have been seriously undermined by the Government”. Reiterating previous calls for the release of political prisoners, the OAS resolution highlights “the arbitrary imprisonment of nearly 40 opposition figures since May, including seven potential presidential candidates, and the blocking of political parties from participation,” among other things.
• Only Nicaragua voted against the resolution while 25 countries voted in favour, with seven abstentions which included Bolivia, Honduras, and Mexico.
• Mexico’s representative at the OAS, Luz Elena Baños, said Mexico “has expressed to the Nicaraguan government our concerns regarding the political process” but said it “has been Mexico’s consistent position not to support any decision within the OAS that is aimed at isolating, intervening in, or imposing any type of sanction on a member state.”
• In one sign of dwindling international support for Ortega, Argentina, which has abstained from previous OAS votes condemning the situation in Nicaragua, voted in favour of the resolution.
• On 10 November US President Joe Biden signed into law the Renacer Act which was recently approved by the House of Representatives and will “dramatically increase” US diplomatic engagement with regard to Nicaragua.

Looking Ahead: The OAS resolution instructs its permanent council to undertake an immediate collective assessment of the situation, in accordance with the Charter of the OAS and the Inter-American Democratic Charter, to be completed no later than 30 November, and to take appropriate action.

* Nicaragua’s central bank (BCN) has released new figures which show that remittance inflows in the third quarter of 2021 totalled US$527m, up 9.3% on the same quarter in 2020. Of the total, 63.6% came from the US, followed by Spain (14.1%), Costa Rica (12.3%), and Panama (3.2%). The same figures show that remittances to Nicaragua in the first nine months of 2021 totalled US$1.56bn, up 16% on the same period in 2020.

On 14 November, Mexico’s national electoral institute (INE) announced that it will present a legal challenge against a reduction in its funding under the 2022 federal budget.

Analysis:

The 2022 federal budget, which was approved in full by the lower chamber of deputies on 14 November, would cut the INE’s budget by approximately 20% in a year in which the electoral body is likely to need increased funding to conduct a recall election sought by President Andrés Manuel López Obrador. The INE is now warning that the budget cut could jeopardise that recall vote, with INE president Lorenzo Córdova declaring that it will take legal actions to protect its funding. This dispute is the latest twist in long-running tensions between López Obrador and Mexico’s electoral authorities, whose overhaul the government has previously mooted.

• Córdova stated on 14 November that the INE will “take the legal actions to which we have recourse” against the 2022 federal budget, which would slash the INE’s funding by nearly M$5bn (US$243.8m). Córdova warned that “this is a reduction of nearly a quarter of the operating budget for which the INE had planned.” He added that“it is the fourth consecutive year that the chamber of deputies has reduced the resources needed by the INE, without having presented technical or financial evidence to explain the cuts.”
• Córdova said the budget cut “jeopardises the recall [presidential] election” that President López Obrador is seeking. López Obrador believes that a successful recall vote would enable him to shore up his popular mandate in the final three years of his six-year term, after suffering setbacks in the midterm federal elections.
• The López Obrador government has long been accused of seeking to undermine the INE, calling for a sweeping overhaul of the electoral body. Those tensions escalated further in October, when the INE was authorised to investigate the president’s brother, Pío López Obrador, in relation to alleged illegal financing on behalf of the ruling left-wing Movimiento Regeneración Nacional (Morena).

Looking Ahead: A legal ruling forcing the government to increase the INE’s funding could amplify existing tensions between the executive and the country’s electoral institutions.

* Mexico’s national social security institute (IMSS) has released a new report which shows that as of 31 October it had registered a total of 20.77m jobs, exceeding the number observed before the start of the coronavirus (Covid-19) pandemic in March 2020. According to the same report, in October 172,688 new jobs were created in the formal sector, representing a monthly increase of 0.8%. According to the IMSS, this is the first time in the country’s history that over 170,000 new jobs have been created in two consecutive months.

* Chile’s President Sebastián Piñera has said that Chile’s GDP is expected to expand by over 11% in 2021, while investment will expand 25% and “about 1.4m of the 2m jobs lost” during the coronavirus (Covid-19) pandemic will be recovered. Speaking at a conference of business representatives, Piñera said “We have already far exceeded the levels of pre-crisis, pre-pandemic activity, [something] that very few countries…can emulate”. His forecast is higher than the 9.5% GDP growth forecast made by finance minister Rodrigo Cerda when he presented the government’s budget proposal for 2022 in late-September. It follows the latest figures released earlier this month by Chile’s central bank (BCCh) for its monthly index of economic activity (Imacec), which serves as a proxy for GDP, which showed the September Imacec grew 1.7% compared with August and 15.6% year-on-year, exceeding market expectations.

Nicaragua: On 10 November US President Joe Biden signed into law the ‘Reinforcing Nicaragua’s Adherence to Conditions for Electoral Reform (Renacer) Act’ which would “dramatically increase US diplomatic engagement” in Nicaragua, according to a press release by the Senate Foreign Relations Committee. According to the communiqué the new legislation is “in response to the government of Daniel Ortega’s continued use of repressive tactics to intimidate, inhibit or arrest every aspiring opposition candidate ahead of the scheduled [general] elections in November”. Among other things it requires the US government to “increase sanctions on key actors in the Ortega regime that are undermining prospects for democratic elections in Nicaragua, and expand sanctions coordination with Canada and the European Union”.  It also calls for the US executive to open a formal review to determine whether Nicaragua should be allowed continued participation in the US-Central America Free Trade Agreement (Cafta). Additionally, the bill requires increased intelligence reporting on Russian activities in Nicaragua and a review of Russian arms sales to Nicaragua for potential sanctions under the Countering America’s Adversaries through Sanctions Act (CAATSA). His signing into law of the act follows the 7 November general election, which produced a victory for Ortega but was widely slammed by the international community as undemocratic.

Mexico: On 5 November the US Department of State announced reward offers of up to US$5m each for information leading to the arrest or conviction of four Mexican drug traffickers operating in the Mexican states of Chihuahua and Sinaloa. The four are: Aureliano Guzmán Loera, the brother of Joaquin Guzmán-Loera, former leader of the Sinaloa drug trafficking organisations; and brothers Ruperto, José and Heriberto Salgueiro Nevarez, who all operate under the umbrella of the Sinaloa Cartel federation. The four are charged in US indictments for violation of US drug laws, including international conspiracies to distribute marijuana, cocaine, methamphetamine, and fentanyl. This reward offer complements the US Department of Justice (DoJ)’s announcement of indictments charging the four men for violating international narcotics trafficking laws. One of the indictments alleges the trafficking of fentanyl.

Peru: On 10-11 November US Deputy Secretary of State Wendy Sherman travelled to Peru where she met virtually with Peru’s President Pedro Castillo from Lima, while the president was visiting rural communities in Ayacucho, Peru. According to a US State Department (DoS) press release the two “discussed issues important to the US-Peru bilateral relationship, including growing bilateral opportunities for trade and investment, advancing human rights, promoting inclusive economic growth, and combating the climate crisis.” While in Peru Sherman also met the president of congress, María del Carmen Alva Prieto, and Foreign Minister Óscar Maúrtua with whom she discussed “opportunities for progress under the Build Back Better World Initiative, how the US and Peru can work together to address the climate crisis, and the two countries’ shared commitment to human rights and democracy”. According to the DoS press release Sherman and Maúrtua also “exchanged diplomatic notes to officially implement the Aeronautical and Maritime Search and Rescue Agreement between the US and Peru” while Sherman also thanked Maúrtua for Peru’s welcoming of more than one million Venezuelan migrants.

Uruguay: On 7-9 November US Deputy Secretary of State Wendy Sherman travelled to Uruguay’s capital Montevideo, where she met senior government officials. On 9 November she met President Luis Lacalle Pou, with whom she discussed the importance of the “strong US-Uruguay bilateral relationship for promoting economic growth, regional security, and clean energy investment, among other areas”, according to a US State Department press release. According to the same source Sherman “expressed appreciation for Uruguay’s leadership on defending democracy and human rights in the region as well as Uruguay’s regional and global leadership on environmental protection and combating the climate crisis”. During Sherman’s visit she also met ministers of foreign affairs (Francisco Bustillo); economy (Azucena Arbeleche); and interior (Luis Heber), as well as private sector leaders from the renewable energy industry to discuss opportunities for bilateral cooperation on clean energy development in Latin America.