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September 8, 2020

Latam

Latam Pulse

BY Nicholas Watson, Mario Marconini

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( 4 mins)

This week, Mexico’s 2021 budget will be unveiled. Brazil could see moves to get Congress working more normally, though preparations for November’s municipal elections will occupy most attention. Peru’s well-regarded finance minister is in Congress’s sights. In Venezuela, opposition divisions persist. Finally, in Ecuador, former president Rafael Correa’s legal difficulties mean he will not be on the ballot in next year’s presidential vote.

Mexico

Finance Minister Arturo Herrera will today, 8 September, unveil the draft 2021 budget to Congress. The sharp economic contraction expected this year will clearly impact the 2021 budget and is likely to see overall government spending come in lower than this year. President Andres Manuel Lopez Obrador (AMLO) continues to rule out any major fiscal reform or new debt issuance. Nor are the rainy-day funds bottomless, as Herrera has warned. While austerity may be the overriding feature of the 2021 budget, AMLO insists that his flagship infrastructure projects and social programs are the key to economic reactivation, as well as the 2021 mid-term elections. Both chambers must approve the income side of the budget by the end of October, and the whole package must be passed by mid-November.

Brazil

There will be no sessions in Congress this week. Following the Independence Day holiday yesterday, 7 September, the short political week will mostly see party conventions for the November municipal elections. A significant share of Congress is involved in the elections, with a great number of representatives running for mayor in state capitals and major cities throughout the country. Engagement by representatives and senators in mid-term elections can be explained by the fact that they can keep their federal mandates in case of defeat at the local level – contrary to presidential and gubernatorial elections which coincide with those for the whole of the House and one or two-thirds of the Senate.

In parallel, the House may in any case approve this week a resolution to allow the return to work of four committees: Constitution and Justice (CCJ), Ethics and Parliamentary Decorum (CEDP), Finance and Taxation (CFT), and Financial Supervision and Control (CFFC). Both the House and the Senate have been working remotely since March but only at the plenary level. The resumption of activities at the CCJ could unblock the approval of, among others, the proposal for a constitutional amendment for an administrative reform sent to Congress on 3 September. It is not yet clear whether it will take precedence over tax reform, favored by House Speaker Rodrigo Maia.

Peru

Finance Minister Maria Antonieta Alva faces a censure vote in the coming days after four opposition parties moved to seek her dismissal. The four parties, led by the Union for Peru (UPP), have the votes to table the motion but at this stage do not have the 66 votes in Congress that would be necessary to force Alva out. The parties have criticized Alva for supposedly directing bailout funds to the corporate sector and accuse the minister of exacerbating the health crisis with a flawed economic reactivation plan. Under Alva’s direction, Peru has put in place one of the largest countercyclical stimulus programs in the region, though the economy has also suffered one of the deepest contractions: -30.2% in Q2 compared to a year earlier. Even if the bid to oust Alva fails, congressional truculence will persist.

Venezuela

Opposition divisions continue to look unreconcilable following Juan Guaido’s unveiling yesterday, 7 September, of a new “unity pact” backed by 37 opposition groups. Guaido needs to regain the political initiative after former presidential candidate Henrique Capriles Radonski confirmed last week that he would be backing candidates in the 6 December legislative elections, which Guaido is boycotting. Guaido yesterday reconfirmed the election boycott and promised to organize a public referendum to demonstrate public support for free elections. A referendum could be a way to inject fresh legitimacy into Guaido’s flagging leadership – from early January 2021, he will no longer be National Assembly president – but would be logistically difficult to carry out.

Ecuador

The National Court of Justice (CNJ) yesterday, 7 September, struck down former president Rafael Correa (2007-2017)’s final appeal against his conviction and eight-year sentence for bribery in the so-called Sobornos case, part of a public works kickback scheme. Correa cannot now run for VP in the 2021 elections as initially planned. However, Correa had lined up an alternative – the journalist Carlos Rabascall – to run as VP alongside Andres Arauz at the front of the Union for Hope (UNES) coalition. Arauz is not well known, and with Correa unwilling to return to Ecuador from exile, the UNES ticket will struggle to gain traction, though the former president will look to win support by claiming he is a victim of deliberate persecution.

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