LatinNews Daily - 09 December 2021

On 8 December the Organization of American States (OAS) held a special meeting in which it issued a new resolution on Nicaragua, which concluded that the country is not in compliance with its commitments under the Inter-American Democratic Charter.

Analysis:

This is the latest attempt by the international community to put pressure on the Nicaraguan government led by President Daniel Ortega, who was re-elected on 7 November in a vote widely slammed as a sham. It follows the 12 November OAS vote in favour of a resolution which found that the elections were “not free, fair or transparent and have no democratic legitimacy”. Ortega has shown little sign of bowing to this pressure, which has also included foreign sanctions. Instead he has opted to begin the process of withdrawing Nicaragua from the OAS, which is expected to take two years. The OAS resolution once again underlines Nicaragua’s growing isolation on the international stage and if its conditions are not met (which remains highly likely given Ortega’s stance to date), could result in the country’s eventual suspension from the hemispheric body and further diplomatic, political and economic sanctions.

• The OAS resolution urges the Ortega government to release all political prisoners (believed to number over 160) and accept “a high-level good offices mission” authorised by the OAS permanent council with a mandate to secure an agreement on a process that would lead to various outcomes. These include: the implementation of comprehensive electoral reforms; the repeal of all legislation that restricts political participation and limits human rights in a manner contrary to Nicaragua’s international human rights obligations; and a dialogue between all political parties and other actors in Nicaragua “with the objective of holding early presidential and parliamentary elections that are free, fair, and transparent, with credible international observation” – demands which Ortega has previously shown no indication of heeding.
• The OAS resolution also calls on the government to allow the immediate return of international human rights bodies, such as the Inter-American Commission on Human Rights (IACHR) and the Office of the United Nations High Commissioner for Human Rights – serving to illustrate continued concerns regarding the human rights situation in Nicaragua, which were recently highlighted by an IACHR-endorsed report.
• The OAS resolution was approved with 25 votes in favour and eight abstentions (Argentina, Belize, Bolivia, Honduras, Mexico, St. Lucia, St Kitts and Nevis, and St. Vincent and the Grenadines), while Nicaragua was the sole country to vote against it.
• Indicative of Nicaragua’s efforts to shore up ties with its few remaining allies (Cuba, Venezuela and Russia), on 6 December a Nicaraguan delegation which included two of Ortega’s sons – Laureano Ortega, a presidential adviser on investment, and Rafael Ortega, a presidential delegate – along with Finance Minister Iván Acosta, paid a visit to Russia. This produced various agreements such as the inauguration of an association for Russo-Nicaraguan economic cooperation and a cooperation agreement with Russia’s state-owned nuclear energy firm Rosatom with the objective of promoting the peaceful use of nuclear technology for the energy, agriculture and medicine sectors.
• The two countries also highlighted various other joint projects in the areas of health (such as the Mechnikov vaccine plant which was inaugurated in Managua in 2016); food security (the purchase of wheat from Russia); and public transport, (Nicaragua’s acquisition of Russian-manufactured buses).

Looking Ahead: The OAS resolution also mandates the OAS Secretary-General to “urgently seek a meeting” with the Nicaraguan government and secure its acceptance of a high-level good offices mission and requests that the OAS Secretary-General report on these diplomatic efforts to the permanent council no later than 17 December.

On 8 December, Ecuador’s President Guillermo Lasso announced that he would not testify to the national assembly on his tax arrangements, following the previous day’s failure of an impeachment motion against him in relation to the “Pandora Papers” scandal.

Analysis:

Lasso is attempting to put the saga of the Pandora Papers behind him, and will feel buoyed by the failure of an impeachment motion on 7 December. However, the scandal has wrought its toll on his administration, deepening divisions in his fragile legislative coalition with the indigenous Pachakutik and centre-left Izquierda Democrática. With his centre-right Movimiento Creo holding just 12 of 136 seats in the national assembly, Lasso may find that public anger at his tax arrangements has reduced his ability to build bridges in the legislature.

• The impeachment motion was rejected with 77 votes against, 51 votes in favour, and seven abstentions. That motion, presented by the leftist Unión por la Esperanza (Unes) coalition, accused Lasso of “causing a grave political crisis” following last month’s publication of a report by the legislature’s constitutional commission which determined he broke the law with his use of offshore accounts. 
• Whilst the impeachment motion failed, a second motion urging Lasso to appear for questioning by lawmakers was approved. Lasso is not obliged to testify – the motion was passed following the rejection of another which would have legally compelled Lasso to face questioning.
• Also on 7 December, the comptroller general’s office announced it would shelve its investigation into Lasso’s tax arrangements after finding no “objective proof that, when he registered his candidacy for the presidency… he was the direct or indirect owner of goods or capital in jurisdictions considered to be tax havens.” The comptroller general’s office added that the US state of South Dakota, where the Pandora Papers indicated that Lasso still held funds in October, “is not considered a tax haven” under Ecuadorean law.
• Lasso yesterday said that he would not comply with the motion requesting him to appear in front of the national assembly, saying instead that he “will send a letter with the report from the comptroller general’s office, which is clear and convincing.”

Looking Ahead: Lasso may still face some problems from the attorney general’s office, which reportedly opened an investigation into him in October, and has not since publicly commented on the matter.

* Peru’s association of exporters (Adex) has announced that timber exports totalled US$97.6m between January and October 2021, representing a 32.2% increase on the same period in 2020. However, Adex noted that timber exports remain 3.9% lower than the same period in 2019, suggesting that the sector has not yet fully recovered from the impacts of the coronavirus (Covid-19) pandemic. In the first ten months of this year, the bulk of timber exports went to China (US$30.1m), followed by France (US$16.0m), the US (US$11.2m), Mexico (US$6.9m), and the Dominican Republic (US$6.2m).

On 8 December, the governor of Brazil’s São Paulo state, João Doria, said that his government would start requiring proof of vaccination against the coronavirus (Covid-19) from incoming travellers if the federal executive led by President Jair Bolsonaro failed to implement such a measure.  

Analysis:

Doria rode Bolsonaro’s coattails to election victory in 2018, but the two have been political rivals ever since. They are both expected to run in next October’s presidential election, with Doria recently winning the nomination for his party, the Partido da Social Democracia Brasileira (PSDB). It is in his response to the Covid-19 pandemic that Doria has tried to make his mark and distance himself from Bolsonaro; he played a key role in getting the first Covid-19 vaccines to Brazil and has always been a vocal critic of Bolsonaro’s denialist response to Covid-19.  

• Bolsonaro has been digging in his heels against vaccine mandates, which he claims are an affront to freedom, as he faced growing calls from both public health officials and local authorities for travellers to Brazil to be required to show proof of vaccination. Anvisa, the federal healthcare regulator, has expressed concern that Brazil might become a destination of choice for unvaccinated tourists due to its lax rules. 
• The federal government eventually announced on 7 December that unvaccinated travellers will be required to quarantine for five days on arrival, while all travellers must take a PCR (polymerase chain reaction) test within 72 hours of travelling, as was already the case. The new rules, which vary for entrance by land, sea, or air, were published in the official gazette today (9 December). 
• Doria has taken a stand against the federal government. “São Paulo will not become a paradise for denialists”, he said, adding that state authorities will start requesting proof of vaccination from international arrivals by 15 December if the federal government is not doing so. São Paulo state is home to Brazil’s largest international airport and maritime port. 

Looking Ahead: Although Doria’s support for vaccine mandates is in line with scientific recommendations, his latest comments may be nothing more than political grandstanding: international transport is the federal, not local, government’s remit, and the new rules on quarantine for the unvaccinated effectively amount to a vaccine passport, even though the Bolsonaro executive remains fiercely opposed to the measure.

* The monetary policy committee (Copom) in Brazil’s central bank (BCB) has unanimously agreed to raise the country’s benchmark interest rate, the Selic, by 150 basis points to 9.25%. The Selic, which stood at 2% at the beginning of 2021, is now at its highest point since 2017. The Copom has indicated that it expects to enact another rate hike of the same magnitude when it next meets in early 2022, saying that it will stand by its policy of monetary tightening until both “the process of disinflation and the anchoring of forecasts surrounding [inflation] targets” are consolidated. The BCB has adopted an aggressive monetary tightening policy in the face of soaring inflation in Brazil – inflation currently stands at 10.67% – but its successive rate hikes are now being criticised by representatives from the business sector, such as the lobby Confederação Nacional das Indústrias (CNI), which worry that the high cost of credit and slower demand will further hurt businesses which are still struggling to recover.

* International credit ratings agency Moody’s has changed Costa Rica’s outlook from negative to stable, while affirming the country’s long-term issuer and senior unsecured bond ratings. According to a Moody’s press release, the change reflects 1): a gradual deficit reduction and lower funding needs resulting from a recovering economy; and 2) expectations that the current US$1.8bn International Monetary Fund (IMF) financial programme, which was approved by Costa Rica’s congress in July, will support structural policy changes by the next administration (general elections are due in February 2022). Moody's predicts that Costa Rica's fiscal deficit this year will be 5.8% of GDP, down from 8.1% of GDP in 2020 and the 7% initially forecast by Moody’s in early 2021. The credit ratings agency attributes the lower deficits to faster economic growth (it predicts GDP growth of 5% this year as the economy recovers from the coronavirus [Covid-19]-induced recession) and increased revenues. As regards the IMF programme, Moody’s highlights that its main goal is “gradual fiscal consolidation, aiming for a 1% primary surplus by 2023”. According to Moody’s, while “some slippage is likely” and it forecasts “a smaller but still positive primary result of 0.7% of GDP”, it expects that Costa Rica will continue to gradually reduce its deficits as stated under the IMF programme even with a change of government.

On 8 December, Mexico’s President Andrés Manuel López Obrador ordered investigations into federal Attorney General Alejandro Gertz Manero and the former head of Mexico’s financial intelligence unit (UIF), Santiago Nieto, following separate allegations of financial irregularities.

Analysis:

López Obrador stressed that he does not believe either man to be dishonest, but highlighted his Movimiento Regeneración Nacional (Morena) government’s dedication to fighting corruption, stating “there is no tolerance for anyone [who breaks the law]”. The investigations, which will be carried out by the ministry of public administration (SFP), the federal oversight body, will look into the allegations of illicit enrichment surrounding both men.

• Earlier this week Mexican newspaper El Universal reported that the UIF was investigating Gertz for alleged illicit enrichment – claims that the UIF has denied. El Universal alleged the investigation centred around Gertz’s purchase of 122 luxury cars, for a total of over M$109m (US$5.2m), between 2014 and 2015. The newspaper also detailed large international bank transfers made by Gertz to accounts in the US and Spain and the handling of “millions in cheques and cash”.
• On 8 December, Senator Ricardo Monreal, Morena’s leader in the senate, announced that Gertz would appear before the upper house to explain the origin of this wealth, following requests from the opposition. Monreal asserted on Twitter that Morena, which holds a legislative majority, considered Gertz’s work to have been “in line with the principle of legality and the rule of law.” A date has yet to be set for this appearance.
• Allegations have also emerged concerning the wealth of Nieto, who resigned as UIF head following a separate scandal surrounding his extravagant Guatemalan wedding last month. Newspaper Reforma reported on an “anonymous complaint” that had allegedly been presented before the attorney general’s office, indicating that Nieto, in his two years as UIF head, accumulated properties and a vehicle valued at M$40m. Nieto tweeted that he had “nothing to hide”, stating he purchased the items on credit and “they increased my debt, not my assets”.

Looking Ahead: As serving attorney general, Gertz has a lot more to lose than Nieto. His upcoming appearance before the senate and the SFP investigation will shed light on his future in the role. If allegations ring true, they will prove to be another blow to López Obrador’s claim that corruption “stopped” when he took office.

* Mexico’s central bank (Banxico) has reported that the country’s financial system, and in particular its banking sector, is solid and resilient almost two years on from the start of the coronavirus (Covid-19) pandemic. In a recent report on financial stability, Banxico also noted that Mexico’s economic recovery from the pandemic will continue in 2022, but at a more “moderate” rate and with “a certain degree of uncertainty”. The report added that the granting of loans has not recovered in line with economic activity, indicating ongoing caution on the part of those supplying and receiving loans. It noted that risks include a tightening of global financial conditions, the potential for a less robust global economic recovery, a prolonged and more pronounced weakness in domestic consumption and investment, and possible increases in sovereign risk premiums, as well as those of state-owned oil company Pemex.  

Uruguay’s electoral court (Corte Electoral – CE) said on 8 December that a referendum on President Luis Alberto Lacalle Pou’s omnibus reform bill, known as the Ley de Urgente Consideración (LUC) will go ahead, and will be held on 27 March 2022.

Analysis:

The left-wing opposition Frente Amplio (FA) coalition wants to repeal 135 of the 476 articles in the LUC. To trigger a referendum on the issue, it needed to gather the signatures of 25% of the registered electorate. The CE said that after verifying 672,631 signatures, just beyond the minimum needed, it had stopped counting. It has set 27 March next year as the date for the referendum. Those who support repeal will vote ‘Yes’ and use pink ballots; those against will vote ‘No’ and use blue ballots.

• The LUC was approved in congress in July last year, backed by Lacalle Pou’s coalition of mainly centre-right political parties. It is a wide-ranging text which includes reform of the penal code and sets out wide-ranging changes to health, education, labour relations, and economic activity.
• The FA has described the 135 articles it opposes as likely to cause “more inequality, poverty, exclusion, falling income for workers and pensioners, and increasing concentration of power and wealth”.
• Changes the FA opposes include tighter regulation of the right to strike and the banning of pickets that “affect the free movement of peoples, goods or services”. Also controversial is an expansion of police powers of search and arrest and tougher sentences.
• On economic issues, the LUC encourages greater private sector activity and places some limits on the public sector.
• Lacalle Pou remains popular and the early indications are that the attempt to repeal the 135 articles will fail. That said, there are still numerous undecided voters who could tip the balance one way or the other.

Looking Ahead: As political activity tends to dip during the southern hemisphere summer holiday season (December to early March), it is likely that much of the campaigning will be concentrated in March. Both the government and opposition are likely to target undecided voters.

* Chile’s central bank (BCCh) has released new figures which show that Chile’s copper exports totalled US$4.92bn in November, up from US$3.98bn in November 2020, reflecting high international copper prices. Meanwhile Chile’s total exports amounted to US$8.4bn in November 2021, up from US$7.4bn in the same month previous year, while imports totalled US$7.58bn, up from US$4.57bn in November 2020. This enabled the country to post a trade surplus of some US$830m in November 2021.