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September 1, 2020


Latam Pulse

BY Nicholas Watson, Mario Marconini

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( 5 mins)

This week, new Covid-19 cases remain stubbornly high across much of the region. Meanwhile, Mexico’s Andres Manuel Lopez Obrador (AMLO) is likely to offer a rose-tinted view of the economy in an annual set-piece speech. Brazil will see renewed efforts to expand Covid-19 emergency assistance spending. In Argentina, President Alberto Fernandez is hoping the resolution of the long-running foreign law debt problem will inject fresh impetus into his administration. In Venezuela, the regime continues its efforts to neutralize the opposition. Finally, this week could see signs that Chile’s economic predicament may be less deep than originally feared.


Argentina and Colombia continue to see rising Covid-19 caseloads – in a sign that most of the region remains firmly in its “first wave” outbreak. Brazil, Mexico, Peru, Colombia, and Argentina are all in the global top ten for Covid-19 cases – the latter three despite lengthy lockdowns (which in Colombia’s case eases from today). Chile, which has operated a more dynamic, geographically-differentiated lockdown strategy, has a high caseload but is finally succeeding in flattening the curve; there were 56,059 cases in August versus 355,667 in July. However, in a reminder that flare-ups remain a risk even in a country regarded as a Covid-19 success story, Cuban authorities are imposing a strict curfew and other restrictions today, 1 September, in Havana, following a rise in cases.


President Andres Manuel Lopez Obrador (AMLO) will deliver his annual state-of-the-nation address today, 1 September – the second of his presidency. Expect polarizing rhetoric as AMLO increasingly moves into campaign mode ahead of the 2021 mid-term legislative elections, as well as a heavy emphasis on past governments’ corruption. AMLO is also likely to repeat last year’s mantra that there is a “technocratic obsession” with one-dimensional economic growth measures as he largely sidesteps the grim economic situation. Instead, AMLO will continue to extol the benefits of his flagship infrastructure projects. Despite the economic crisis and his government’s poor handling of the Covid-19 pandemic (599,560 cases and 64,414 deaths), AMLO’s approval ratings remain in the mid- to high-fifties.


President Jair Bolsonaro will have a meeting today, 1 September, with allied congressional leaders to discuss the extension of the Covid-19 emergency assistance until the end of this year and the creation of a new cash transfer program – “Renda Brasil” – beyond the pandemic. The government aims to include 15.2mn families in the program in 2021, compared to 13.2mn currently covered by the existing Bolsa Familia program. Renda Brasil aims to combine current emergency assistance and Bolsa Familia. It was left out of the 2021 Annual Budget Bill sent to Congress yesterday, 31 August, so that efforts to find resources to pay for it will necessarily continue.

In parallel, pressure to spend above the official inflation-limited budget ceiling is mounting as the government wants to approve a BRL 6.5bn infrastructure package. Related negotiations with Congress on allocations for senators and house representatives will also continue this week. These negotiations should also influence a renewed push by both Senate Chairman Davi Alcolumbre and House Speaker Rodrigo Maia towards their re-election for the top posts in Congress in February 2021.


President Alberto Fernandez will be hoping the successful foreign law debt restructuring, which was confirmed yesterday, 31 August, allows for a policy relaunch. Fernandez, alongside his powerful VP Cristina Fernandez (CFK) and Finance Minister Martin Guzman, announced an acceptance rate of 93.5%, which allows for a restructuring of 99% of eligible bonds. A package of economic support measures could be announced this week as a prelude to the 2021 budget, which will be unveiled in mid-September. The budget will be the closest the government comes to a macroeconomic plan. Guzman yesterday revealed that the budget will include a primary fiscal deficit target of 4.5% of GDP – this year’s deficit is expected to reach as high as 8% amid the economic crisis.


The reaction to the regime’s announcement yesterday, 31 August, of a pardon for over 100 political prisoners and dissidents is likely to remain cautious. The regime claims the motive for the pardon is to build “national reconciliation”, though many of those pardoned have never actually been charged or convicted. The move is likely aimed at dividing the opposition, which already faces internal ructions over its election boycott strategy. President Nicolas Maduro also wants to boost voter turnout in the December legislative vote and make the election appear more competitive in an effort to claw back international legitimacy.


The Central Bank (BCCh) will release its quarterly monetary policy report (IPoM) on 2 September, with expectations that there could be an upwards correction to this year’s growth forecast. June’s IPoM forecast a GDP contraction in the -5.5% to -7.5% range. However, the BCCh could this week alter its new worst case to -6%. This reflects a combination of government fiscal stimulus packages; a consumption boost brought about by the initiative to allow people to tap their retirement savings; a slow but steady relaxation of lockdowns (which are continuing this week); and a recovery in the copper price thanks to improved demand from China. If the revision is confirmed, it would be a tonic for the government, even if other indicators make for grim reading: the unemployment rate for the three months to July was 13.1%.


( 5 mins) This week, Argentina has a new cabinet after Vice-President Cristina Fernandez (CFK) flexed her political muscles in the wake of the 12 September mid-term primaries. In Brazil, a report from the Senate inquiry into the

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( 4 mins) This week, Argentina‘s governing coalition is reeling from a heavy setback in yesterday’s obligatory primary voting which will be difficult to reverse in November’s mid-terms. Ecuador will see union-led protests against government reform proposals. This

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ARGENTINA: Mid-term primary takeaways

( 3 mins) The governing Front for All (FdT) suffered a major setback in the party primaries held yesterday ahead of the partial mid-term legislative elections scheduled for 14 November – as we previously anticipated. Since voting is

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( 6 mins) This week, in Brazil, President Jair Bolsonaro is aiming for a show of force in a day of protests. Argentina holds its primaries ahead of November’s mid-terms. In Colombia, the new tax reform – the

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( 5 mins) This week, a new congressional session opens in Mexico. Brazil gears up for potentially stormy protests next week. In Chile, another pension withdrawal is under consideration but faces a more difficult path than previous withdrawal

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