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In Chile this week, a defeat for the government on a key vote seems all but inevitable, while Covid-19 indicators show signs of improvement. Mexico’s Covid-19 traffic light system is mired in confusion. In Peru, the new cabinet named last week gets to work in earnest. Meanwhile, Brazil will see the first phase of a tax reform proposal unveiled. Argentina’s debt saga drags on amid signs that inflation is picking up. Finally, a new congressional session gets underway in Colombia.
A bill that would allow people to withdraw up to 10% of their savings from the private pension (AFP) system comes under Senate scrutiny this week, with a plenary vote expected as soon as 22 July. The government has already lost two consecutive votes on the bill in the lower house, with members of the governing Chile Vamos(CV) coalition in both votes defying orders to vote against the initiative. Five CV senators have said they intend to vote in favor of the bill; if they do, the bill would easily have the necessary three-fifths majority. Another legislative defeat would be a major blow for President Sebastian Pinera and his inner cabinet led by Interior Minister Gonzalo Blumel, as well as for the CV coalition, which looks increasingly divided. Pinera could still veto the initiative or file a challenge at the Constitutional Court but doing so would be unpopular and controversial.
Separately, a new Covid-19 re-opening plan comes into effect from this week. The Step by Step (Paso a Paso) plan introduces five stages of measures. The first phase is the strictest; 65 communes are currently at this level, including much of the Santiago Metropolitan Region (RM). Only two southern regions are at a relatively advanced phase of re-opening. The plan reflects not just improving indicators (the new case count has dropped 19% over the last seven days), but also the government’s more cautious, gradual approach to loosening restrictions after the premature move to lift restrictions in April.
The government’s Covid-19 traffic light system will remain a source of controversy and confusion as several state governors are refusing to recognize the health measures in place for this week. From today, 20 July, 18 states are at “red” (essential activities only) and 14 are at “orange” (partial restrictions). Controversially, nine states are supposed to return to “red”, having been at “orange”. However, at least five governors have said that their states will follow their own risk parameters and stay at the less stringent “orange” level. Jalisco governor Enrique Alfaro’s criticism of the government’s Covid-19 czar, Hugo Lopez-Gatell, has been the most pointed. As of yesterday, 19 July, the total number of confirmed cases of Covid-19 reached 344,224, which is likely to be a significant underestimate, while the official death toll stands at 39,184.
New Prime Minister (PCM) Pedro Cateriano will continue to meet parties in Congress at the beginning of this week as he looks to secure a congressional vote of confidence before Independence Day on 28 July. President Martin Vizcarra appointed the veteran Cateriano in a cabinet reshuffle last week. Vizcarra wants his new cabinet endorsed by Congress before he gives his annual address – the last of his presidency – to the legislature on 28 July. Cateriano is aiming to accelerate economic reactivation plans without prompting a spike in Covid-19 cases. Yesterday, 19 July, saw the biggest one-day rise in Covid-19 cases in over a month, taking the total number of cases to over 350,000, the sixth highest tally in the world.
This week negotiations on presidential vetoes should advance. Votes on the vetoes have been delayed by Senate Chairman Davi Alcolumbre for fear of a wholesale overturn by a necessary absolute majority of members in both chambers. Top priority for Congress will be to overturn the vetoes on the new sanitation regulatory framework and on the extension of payroll tax cuts until 2021, followed by those relating to the anti-crime package and the use of masks during the Covid-19 outbreak. Congress may continue to show independence despite the recent pork and patronage campaign by the government towards the 200-representative-strong “Big Center” (Centrao). On 21 July, Economy Minister Paulo Guedes should present the government’s proposal for the first phase of a tax reform focused on the unification of federal taxes, thus leaving state and municipal, income and a new financial tax for a later stage so as to allow the discussion to gain momentum.
President Alberto Fernandez will use the early part of this week to reinforce recent messaging that there can be no more changes to the debt offer that is currently on the table. The current deadline for bondholders to accept the offer is 4 August, though this could apparently be extended to 28 August. The government is also saying that regardless of the status of talks with bondholders, it will proceed to negotiate with the International Monetary Fund (IMF) over a refinancing deal. The latest debt moves come amid signs that inflation is picking up despite a potent combination of recession, a price freeze, and the demand-sapping lockdown.
The new congressional session gets underway from today, 20 July, albeit in virtual format. Congress has struggled to set, still less enact, any meaningful agenda during the Covid-19 crisis, which has prompted some legislators to express concern over the “hyper-presidentialism” that has come about over recent months. Judicial and electoral reforms will be on the agenda, and later in the year, the 2021 budget. There will also be votes to select two key oversight officials: the Inspector-General (Procurador) and Ombudsman (Defensor del Pueblo). Following previous agreements, the Radical Change (CR) party is set to preside over the Senate via the controversial Arturo Char, while a Conservative, German Blanco, is expected to be voted in as lower house president.