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June 22, 2020

LATAM PULSE

BY Nicholas Watson, Mario Marconini

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( 6 mins)

The number of confirmed Covid-19 cases in the Latin American region now exceeds 2mn (half of them in Brazil). In this context, a return to tighter restrictions is under consideration in Argentina; separately, the government’s expropriation move against a leading agribusiness company is back under scrutiny. In Mexico, preparations for new trade arrangements have been delayed, while security headaches continue. Brazil’s President Jair Bolsonaro remains under pressure. In Ecuador, a leading putative contender for the 2021 presidential race should confirm whether he will run. Finally, in Colombia, health restrictions remain a source of friction between President Ivan Duque and the Bogota mayor Claudia Lopez.

Argentina

President Alberto Fernandez is meeting with the Buenos Aires provincial governor Axel Kicillof and the Buenos Aires city mayor Horacio Rodriguez Larreta today, 22 June, to discuss a possible tightening of the Covid-19 lockdown after the current measures expire on 28 June. The urban area that straddles both districts (also known as the Buenos Aires Metropolitan Area, or AMBA) accounts for 90% of Covid-19 cases in the country. With new daily cases rising by around 2,000 in recent days, Kicillof is in favor of a return to the strictest form of quarantine, while Rodriguez Larreta argues that public patience is already fraying and that a stricter quarantine will not work anyway given expanding community transmission. Fernandez will make the final decision.

Separately, the government has in recent days backed away from an outright expropriation of the troubled agro-export company Vicentin. The move follows a court ruling late last week that effectively puts Vicentin’s management back at the helm of the company, while demoting government-appointed administrators to a supervisory role. The Santa Fe provincial governor (Vicentin is headquartered in Santa Fe), Omar Perotti, has come up with an alternative plan that Fernandez has apparently accepted; details are vague and the plan would still appear to displace the current owners. The retreat also reflects opposition in the lower house of Congress and follows a series of country-wide demonstrations against the expropriation held on 20 June.

Mexico

Extraordinary congressional sessions arranged to pass secondary legislation required for the United States-Mexico-Canada trade agreement (USMCA, or T-MEC as it is known in Mexico) have been postponed to next week because Mexico City remains at “red” level in the Covid-19 traffic light system. The sessions will now take place 29-30 June, just in time for 1 July, when the USMCA comes into effect. US Trade Representative Robert Lighthizer on 17 June said that he expects the US to bring cases against Mexico on labor rights and biotech issues once the USMCA takes effect; Lighthizer also confirmed that the US has set up a rapid response mechanism to handle violations.

Separately, the security situation in Guanajuato state is likely to remain delicate this week and act as a reminder of how security problems persist despite the Covid-19 crisis. Over the weekend, the mother of Jose Antonio Yepez (alias “El Marro”), leader of the Santa Rosa de Lima cartel, was arrested in Celaya (Guanajuato). The arrest triggered a wave of retaliatory attacks in the local area, while El Marro threatened further reprisals. El Marro’s capture would be a victory for the government after a similar wave of cartel attacks last October led the government to release another drug target, Ovidio Guzman, in Culiacan (Sinaloa).

Brazil

Brazil has reached one million confirmed cases and more than 50,000 deaths from Covid-19. This week, discussions on the renewal of the so-called corona voucher will continue with Congress still favoring maintaining conditions that applied for the first three months: BRL 600 per unemployed or self-employed worker for three additional months. As the first wave is still active, there is talk of extending it until the end of the year when the current calamity state formally expires.

The ongoing investigations against the president (undue interference in the Federal Police), the presidency (fake news), and his supporters (financing of anti-democratic protests) will continue to exert significant pressure on the government. The arrest on 18 June of a long-sought former aide to the president’s son, Senator Flavio Bolsonaro, who is key in an investigation against him for an alleged employee corruption scheme, will dominate the media and set the tone of all politics this week. The aide was found after hiding in a house owned by a lawyer close to the president, thus potentially implicating Bolsonaro in a plan to obstruct justice.

Ecuador

The former mayor of Guayaquil, Jaime Nebot, has said that this week he will announce whether he will run for president in the February 2021 elections. Nebot ran for president twice in the 1990s before a 19-year stint as Guayaquil’s mayor, which ended last year. Assuming he confirms that he will run, Nebot will play up his experience (he will be 74 by the time of the election) and his record of infrastructure improvements in Guayaquil. The city was the epicenter of Ecuador’s Covid-19 outbreak but the city administration is now looking to highlight how it has managed to turn around the public health crisis; local authorities reported an average of only one Covid-19 death per day in the city over the last month. However, a corruption case centered on the Guayas prefect Carlos Luis Morales, who was elected with the support of Nebot’s Social Christian Party (PSC), poses an awkward early challenge.

Colombia

The political fallout from the VAT-free day held on 19 June is likely to continue this week. The 24-hour VAT holiday – the first of three such events that were scheduled before the Covid-19 outbreak – prompted crowds and lines as shoppers sought to take advantage of the tax break. The mayor of the capital Bogota, Claudia Lopez, said the event made no economic or health sense, dubbing it “Covid Friday”, while the leftist Senator Gustavo Petro accused President Ivan Duque of staging the VAT-free days to benefit key campaign donors. Whether there is any uptick in Covid-19 cases as a result of the large gatherings will take two or three weeks to become apparent. The case count is already tracking steadily upwards, with the number of daily cases well above 2,000 on almost every day in the last week.

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