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LatinNews Daily - 10 February 2022

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Main Briefing

On 9 February, US Special Presidential Envoy for Climate John Kerry visited Mexico amid rising international tensions surrounding President Andrés Manuel López Obrador’s contentious electricity sector reform.

Analysis:

Tensions between the US and Mexico have been building over the proposed electricity reform, which is currently being debated in Mexico’s congress, and seeks to prioritise the state-run electricity firm Comisión Federal de Electricidad (CFE) over private renewable energy providers. Concerns raised by Kerry add to recent comments from US Energy Secretary Jennifer Granholm, US ambassador to Mexico Ken Salazar and the American Chamber of Commerce (Amcham), which groups US firms operating in Mexico. The reform also indirectly strained relations between Mexico and Spain on 9 February, indicating that the fallout from the reform, which López Obrador is trying to push through congress, could well be wide reaching.

  • Kerry and Salazar met with López Obrador, along with Mexico’s foreign and finance ministers, Marcelo Ebrard and Rogelio Ramirez de la O, respectively, to discuss bilateral efforts to fight climate change. The two governments launched a US-Mexico climate and clean energy working group, which will focus on developing renewable energy, tackling methane emissions, electrifying transport, and eliminating deforestation.
  • López Obrador said that he and Kerry had spoken “with honesty and respect”. Kerry stressed that the US “totally respects Mexican sovereignty” and acknowledged the reform was important to López Obrador.
  • However, despite the conciliatory tone, Kerry and Salazar said they raised the “significant concerns” that the US administration of President Joe Biden has about the energy sector reform. Speaking to Reuters news agency, Kerry said it was important the reform did not “run up against” the US-Mexico-Canada Agreement (USMCA) on regional trade and did not “act as a hindrance to an open and competitive market”.
  • The concerns add to those raised by Granholm after her visit to Mexico on 20 January.
  • Speaking in Mexico’s congress on 8 February, Amcham Director Ana López Mestre said the reform would affect investor confidence, contradict promises made in the USMCA and compromise the transition to clean energy.
  • In a press conference on 9 February, when responding to a journalist’s question about US concerns over the reform, President López Obrador criticised Spanish firms including energy companies, Iberdrola and Repsol, which he claimed previous Mexican energy policies had unfairly favoured. López Obrador said relations with Spanish businesses “were not good” and that he “would like to have a pause in relations until things normalise”.
  • Spain’s foreign minister, José Manuel Albares, expressed surprise at the comments, saying he had received no official communication regarding a break in relations and sought to downplay them, saying they were made in an “informal context”, in response to a journalist’s question.

Looking Ahead: The congressional debate on the reform will conclude on 15 February. It is unlikely that the reform will pass in the lower chamber of congress without significant changes, given that the ruling Movimiento Regeneración Nacional (Morena) party is 56 seats short of the two-thirds majority needed for a passing vote. Opposition parties have repeatedly expressed concerns over the reform, with the Partido Revolucionario Institucional (PRI) representing the president’s most likely potential source of support.

Andean

On 9 February the vice president of Venezuela’s ruling Partido Socialista Unido de Venezuela (PSUV), Diosdado Cabello, demanded further compensation from national daily El Nacional following a much-criticised court ruling which handed him the paper’s headquarters in response to a defamation claim.

Analysis:

El Nacional is one of the last major Venezuelan media outlets that regularly and openly criticises President Nicolás Maduro’s administration. Its headquarters were seized by the national guard last May following a widely-condemned supreme court (TSJ) ruling that ordered the paper to pay Cabello 237,000 petros (a cryptocurrency introduced in 2018), equivalent to US$13.2m, in damages for an article linking Cabello to drug trafficking.

  • The handover of El Nacional’s offices to Cabello, which took place on 7 February, was part of a US$13.2m damages claim that Cabello won in April 2021. The case stems from an article that El Nacional printed in 2015, which was republished from Spanish newspaper ABC, in which a former bodyguard of Cabello accused him of drug trafficking. The paper’s offices were seized by the national guard in May last year in response to the court ruling, and have remained in state hands ever since.
  • Yesterday, Cabello claimed on his weekly television programme ‘Con el Mazo Dando’ that El Nacional still owes him more money to reach the US$13.2m figure. Cabello said that “because you still owe me… I think I will now go after [El Nacional’s] website.” The newspaper has been online-only since 2018 due to ink and paper shortages in Venezuela.
  • The transfer of the paper’s offices to Castillo was denounced by international press freedom lobbies, with Jorge Canahuati, the president of the Inter-American Press Association (IAPA), slamming it on 7 February as “the robbery of the century from independent journalism.” Yesterday, Scott Griffen, deputy director of the Vienna-based International Press Institute (IPI), said that “the transfer of El Nacional’s headquarters to Diosdado Cabello is a ridiculous and shocking conclusion to years of harassment and persecution against this newspaper.”

Looking Ahead: Following the court order, Venezuela’s opposition coalition Plataforma Unitaria has repeated its calls for a sweeping reform of the justice system, releasing a statement on 7 February denouncing the “judicial heist” and demanding that government-opposition negotiations resume in Mexico to discuss changes to the judiciary.

*Venezuela’s central bank (BCV) has published its monthly consumer price index, which shows that monthly inflation reached 6.7% in January, down from 7.6% in December and the fifth consecutive month of slowdown. Monthly inflation figures have been in single digits since September. The Observatorio Venezolano de Finanzas (OVF), an independent economic think tank established by the Venezuelan opposition put monthly inflation in January at 4.8%. The BCV did not provide a year-on-year rate but OVF put year-on-year inflation in January at 405%.

Brazil

On 9 February, the government led by President Jair Bolsonaro unveiled its legislative priorities for this year, which will be the administration’s final year in office as Brazil will hold a general election in October. 

Analysis:

With Bolsonaro expected to seek a second term, but polls currently indicating that his re-election chances do not look good, the government’s priorities for this year include a number of projects which clearly cater to Bolsonaro’s base, notably the agribusiness sector. But many of these projects elicit strong criticism from both the opposition and civil society. 

  • The Casa Civil chief-of-staff’s office published 45 priority projects in the official gazette yesterday, 39 of which are already under consideration in either the senate or the federal chamber of deputies, and which span a variety of areas including, inter alia, the economy, the reduction of the cost of doing business in Brazil, social issues, environmental issues, security & defence, agriculture, and mining.
  • “These are projects which have a clear line of action: to improve the functioning of the state; break down barriers to economic activity to modernise Brazil and create jobs; and simplify life for citizens,” Ricardo Barros, the government leader in the chamber of deputies, said. 
  • One of the projects listed, PL 6299/02 which revokes existing legislation regulating the use of pesticides, was approved in the chamber yesterday. Supporters of the bill say it will modernise Brazil’s agricultural sector; critics have dubbed the bill the ‘poison package’, with environmentalists and scientists warning of the risks that deregulating pesticides would pose to both the health of Brazilians and the environment. The bill must still be voted on in the senate. 
  • Other controversial measures listed in the government’s priorities include a bill which would change the rules on the demarcation of indigenous territories, to the detriment of the indigenous (PL 490/07); plans to open up indigenous land to commercial mining (PL 191/20); and the flexibilisation of gun laws. 

Looking Ahead: The government’s wish-list is a long and possibly unattainable one, particularly for an election year when members of congress are known to neglect their legislating duties to focus on their own election campaign. 

* Brazil’s national statistics institute (Ibge) has released the latest figures for inflation, which show that the consumer price index (IPCA) grew 0.54% in January this year, the highest figure for that month since 2016. This nevertheless represents a slowdown in inflation compared with the final months of 2021 – monthly inflation in December stood at 0.73%. January inflation was notably driven by an increase in the prices of household items (1.82%) and food & drink (1.11%), while the transport sector – which contributed to double-digit annual inflation last year due to rising fuel prices – saw deflation of -0.11%. Inflation in the 12 months to January stands at 10.38%. Economists surveyed weekly by the central bank (BCB) currently expect inflation to close 2022 at 5.44.%.

Central America & Caribbean

On 9 February Guatemala’s supreme court (CSJ) announced it had stripped Pablo Xitumul, a judge in a high-risk court, of his immunity from prosecution.

Analysis:

Xitumul is an internationally respected judge. The CSJ’s move against him, which relates to a traffic-related incident dating back to 2019, will reignite concerns that the discredited attorney general’s office, whose head María Consuelo Porras, was sanctioned last year by the US for obstructing investigations into corruption, and other institutions are targeting figures associated with the fight against corruption. It will subject the government led by President Alejandro Giammettei to further criticism for its perceived backsliding in anti-impunity efforts.

  • According to local press reports, in February 2019 police (PNC) officials stopped Xitumul’s car near his house and demanded to search it. A struggle then ensued after he refused, demanding to know why. He and a PNC officer subsequently reported each other to the authorities for abuse of authority.
  • Xitumul is president of one of Guatemala’s high-risk courts which were created in 2009 to ensure the personal safety of judicial actors involved in cases related to grave crimes. He was one of the judges who in 2013 convicted former dictator Efraín Ríos Montt (1982-1983) of genocide in relation to the country’s 1960-1996 civil war, (a conviction subsequently overturned) as well as four senior military officials in the Molina Theissen case in 2018 which also related to the civil war. In October 2018 he also sentenced former Vice President Roxana Baldetti (2012-2015) to 15 years in prison for corruption.
  • Xitumul has previously attributed efforts to lift his immunity as a reprisal for his work. In October 2021, in response to an earlier attempt to strip him of his immunity, over 400 individuals and organisations signed a letter in strong support of him, warning that judicial independence was at risk.
  • In August 2021 the Inter-American Commission on Human Rights (IACHR) expressed concern over ongoing criminalisation of judges in the country’s high-risk courts. It named Xitumul, along with Miguel Angel Gálvez, Iris Yassmín Barrios, and Erika Aifán, all of whom are beneficiaries of precautionary measures granted by the IACHR.

Looking Ahead: The move against Xitumul is likely to be ill-received by the US government which has condemned recent requests to strip Aifán of her immunity from prosecution for crimes including alleged abuse of authority, and could place a further strain on bilateral relations.

*International credit ratings agency Fitch Ratings has downgraded El Salvador's Long-Term Foreign Currency Issuer Default Rating (IDR) to 'CCC' from 'B-'. It cites as reasons heightened financing risks stemming from increased reliance on short-term debt, an US$800m eurobond repayment due in January 2023, a still-high fiscal deficit (which Fitch expects to narrow marginally to 5.5% of GDP in 2022 from 5.7% in 2021), limited scope for additional local market financing, uncertain access to additional multilateral funding and external market financing given high borrowing costs. It also notes that debt to GDP is expected to rise to 86.9% in 2022 after modest improvement in 2021, increasing concerns around debt sustainability over the medium term. The credit ratings agency adds that in its view, a “weakening of institutions and concentration of power in the presidency have increased policy unpredictability”, while the adoption of cryptocurrency bitcoin as legal tender in September 2021 has “added uncertainty” about the potential for an International Monetary Fund (IMF) programme that would unlock financing for 2022-2023. Last month the IMF urged El Salvador’s government to remove bitcoin’s legal tender status.

Mexico

* Mexico’s national statistics institute (Inegi) has released its latest figures on the national consumer price index (INPC) which show that monthly inflation rose 0.59% in January 2022. This brings the annual rate to 7.07%, the lowest rate recorded since the first two weeks of November, when annual inflation stood at 7.05%, but still far above Banxico's 3% +/-1 inflation target range for 2022. In the same period of 2021, monthly inflation was 0.86% and the annual inflation rate stood at 3.54%. Mexico’s central bank (Banxico) will meet today (10 January) and decide whether to increase its benchmark interest rate for a sixth consecutive time in a bid to rein in inflation.

Southern Cone

On 9 February a group of eight members of Chile’s constituent convention (CC) proposed abolishing the three powers of state and replacing them with a ‘plurinational assembly of workers and peoples’.

Analysis:

Since it began its sessions last year, Chilean conservatives have feared that the 155-member CC will come up with radical far-left proposals for the country’s future. The proposal by a group of eight CC members, led by María Magdalena Rivera (independent), can be described as just that kind of fundamental rethink. However, it is extremely unlikely to attract the necessary two-thirds support within the convention and lacks the backing of president-elect Gabriel Boric.

  • The proposal describes the existing three powers of state as being functional to “bourgeoise domination”, allowing business groups to control all major institutions and the machinery of state. It says that instead there should be a single elected, 600-strong plurinational assembly with representatives of productive sectors, communities, indigenous groups, and sub-officers from the armed forces.
  • The plurinational assembly would grant all people the right to self-determination, in effect allowing secession from Chile. It would reject “the annexation of territories traditionally occupied by other peoples”.
  • Former CC vice president Jaime Bassa said that the proposal, like all ideas, was legitimate to discuss but had little chance of moving forward. Teresa Marinovic of the conservative Vamos Por Chile coalition said the proposal went beyond the “chavista dictatorship” in Venezuela to “emulate the totalitarianism of the former Soviet Union”.
  • CC member Constanza Schönhaut (Convergencia Social), a close adviser to Boric, tweeted that the proposal falls “outside the democratic framework that is being used to design the new constitution”.  She added there was no need to panic since it had the support of just eight CC members and would need to be voted on within the CC’s political system committee before any wider discussion in the plenary.  
  • Boric re-tweeted Schönhaut’s text with a one-word comment: “This”.

Looking Ahead: As suggested by Schönhaut, the proposal is unlikely to move beyond the political system committee. But it highlights the problem of a “saturation of parallel initiatives” as identified by the CC leadership, which has reminded CC members that time is limited, and a majority of two thirds is required for any proposals to advance.

*Uruguayan cryptocurrency firms InBierto and Urubit have announced plans to install a further three cryptocurrency ATMs in Uruguay following the “success” of the first one which was installed in Punta del Este, Maldonado department, in January and which registered over 10,000 transactions in a month. According to InBierto, in March three new ATMs will be installed in Uruguay’s capital Montevideo, as well as Colonia del Sacramento, the capital of Colonia department, and Chuy (Rocha department).

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