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September 14, 2020

Latam

Latam Pulse

BY Nicholas Watson, Mario Marconini

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( 5 mins)

This week, social tensions in Colombia are back at front and center of the domestic political agenda. In Peru, President Martin Vizcarra faces the threat of impeachment amid yet another confrontation with Congress. Brazilwill see congressional discussions over the new cash transfer program and tax reforms. The draft budget for 2021 will be unveiled in Argentina. And finally, regional divisions are in focus following disagreements over who should lead the Inter-American Development Bank (IDB).

Colombia

The fallout from last week’s outbreak of rioting and violence will continue this week. At least 14 people were killed and dozens more injured in a wave of protests that broke out following the death on 9 September of an unarmed man, Javier Ordonez, at the hands of the Bogota police, allegedly for a violation of Covid-19 social distancing rules. Protests quickly spread to other cities, though the most serious incidents were seen in Bogota, where dozens of neighborhood police stations were destroyed. The government claims that guerrilla groups infiltrated the protests. Be that as it may, it is increasingly clear that the social tensions that led to 2019’s protests persist and that it only takes a spark to set off serious unrest. Opposition Senator Gustavo Petro’s provocations and the strained relations between President Ivan Duque and Bogota mayor Claudia Lopez will also keep tensions high.

Peru

President Martin Vizcarra faces an impeachment vote on 18 September. Congress late last week voted to start impeachment proceedings after a leak of audio tapes involving Vizcarra and senior staffers purportedly discussing how to cover up the alleged misuse of public funds (USD 50,000) paid to a local singer for a series of motivational talks. However, the vote to start proceedings fell short of the 87 votes that will be required to impeach Vizcarra. Over the weekend, Cesar Acuna, leader of the Alliance for Progress (APP) party that voted in favor of proceedings going ahead, backed away from the impeachment bid. The executive has also countered with a legal challenge filed with the Constitutional Court, and revealed that the president of Congress, Manuel Merino, who would succeed Vizcarra in case of his removal, attempted to lobby the heads of the armed forces to support the impeachment bid.

Brazil

This week the option to include the new long-awaited cash transfer program Renda Brasil in the federative fact proposal should be scrapped in favor of a less ambitious inclusion into the constitutional amendment on spending cap triggers. The value of the cash transfer will therefore be left to a later stage once there is clarity as to how much fiscal space will exist to justify the program. The administrative reform may also move this week in Congress, depending on whether the House will reach an agreement to reinstall the Constitution and Justice Committee (CCJ). Discussions on a tax reform will also continue with a focus on a controversial fund demanded by states and municipalities to cover transitional costs from the current to the new regime – which is strongly opposed by the government.

In parallel, this week the government should also decide on whether to question a decision by a Supreme Court (STF) judge to require President Jair Bolsonaro to testify personally, not in writing, in the case where he is investigated for interference in the Federal Police – a charge made by former justice minister Sergio Moro in his departure speech on 24 April.

Argentina

The draft budget for 2021 will be unveiled on 15 September. The budget will represent the clearest chance yet for Finance Minister Martin Guzman to provide a roadmap for how he intends to stabilize the economy and enact a post-default recovery. Guzman has already talked about a primary fiscal deficit of 4.5% of GDP next year, down from an estimated 8% by the end of 2020. The fiscal path beyond 2020 is less clear, though in February, Guzman announced that fiscal balance would only be achievable in 2023, which the International Monetary Fund (IMF) could have trouble accepting. Unofficially, other key numbers in the budget will apparently include growth of 5.5% next year (following a contraction as significant as -12% this year), and an inflation target of 28%; the latter looks especially unrealistic.

Region

Intra-regional political divisions and US-China sparring in Latin America are unlikely to end following the election of Mauricio Claver-Carone as the new president of the Inter-American Development Bank (IDB) on 12 September. Claver-Carone, who as Director for Western Hemisphere Affairs on the US National Security Council has sealed his reputation as a Cuba and Venezuela hawk, was voted in despite a campaign led by Argentina to block his candidacy because he is from the US; according to unwritten tradition, the IDB is led by a Latin American. Despite abstentions from the likes of Mexico and Chile, as well as Argentina, the vote went ahead in Claver-Carone’s favor. The result was a particular setback for Argentina, which cannot afford to alienate US authorities ahead of tough talks with the IMF. Claver-Carone wants to raise the IDB’s role in the region to counter Chinese influence.

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