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November 23, 2020



BY Nicholas Watson, Mario Marconini

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This week, the challenge facing Peru’s new caretaker president is to build congressional support for his new cabinet, though the signs that he can appear positive. Two crucial spending rules in Brazil could come up for congressional votes. Chile’s second pension withdrawal faces a crucial few days ahead. In Colombia, the government faces fresh protests exactly a year after an outbreak of serious unrest. Economic data will be released in Mexico, though a fresh spike in Covid-19 cases could take the shine off the hesitant recovery. Finally, Cuba faces new constraints accessing hard currency – though they may not last long.


A date for Congress to approve the new cabinet should be settled early this week, potentially by today, 23 November. New caretaker President Francisco Sagasti appointed a well-balanced new cabinet last week to be led by lawyer Violeta Bermudez as prime minister. Two important portfolios have been well received: the experienced Waldo Mendoza as finance minister, while another veteran, Pilar Mazzetti, returns to the health ministry, the position she occupied under Martin Vizcarra’s recent administration. New cabinets must be approved by Congress within 30 days of their appointment; the eventual vote should pass as most parties will seek to project an image of responsibility after the crisis of recent weeks.

In parallel, some parties will hold primary votes on 29 November ahead of the 2021 elections. Manuel Merino on 22 November issued his first video since he was ousted on 15 November, saying that the Purple Party (PM) should withdraw from the 2021 race because Sagasti, who was originally slated to run on Julio Guzman’s ticket, should separate his role as caretaker president from electioneering. Merino, who is entirely discredited, is likely to be ignored. However, the PM has said that Sagasti himself will not participate in the 2021 race. According to the latest Ipsos poll, Guzman enjoyed a small bounce in November, rising to 7%, which put him second to George Forsyth, who is on 16% at this early stage of the race.


There is growing optimism that at least a so-called “emergency” constitutional amendment (PEC) will be approved in December despite signs to the contrary. It is widely expected that elections of presiding officers in both chambers of Congress may delay the reform agenda until February, but the emergency PEC cannot wait as it deals with two crucial spending rules: the spending ceiling that limits spending growth to inflation and the golden rule that bars borrowing to pay for mandatory expenditures. Following more than a month of obstruction, the governing coalition gave in last week and Congress resumed activity.

However, with the exception of measures addressing Covid-19 or the continuing blackout in the northern state of Amapá, Congress is unlikely to resume voting on much. Even the new cabotage regime that has cleared the Senate and is now in the House, or the autonomy of the Central Bank that has been submitted for presidential sanction may be put aside temporarily. It is expected that government, Congress and the Federal Audit Court (TCU) will soon reach an agreement on allowing infrastructure funds earmarked for 2020 to be executed next year.


President Sebastian Pinera will be hoping to head off a bill that would allow people to tap their pensions for a second time since the outbreak of the Covid-19 pandemic. The bill continues to be debated in the Senate and could be ready for a plenary vote on 25 November. However, the government confirmed yesterday that it was filing a challenge against the initiative with the Constitutional Court (TC), while it also looks to press ahead with its own initiative that envisages greater restrictions and conditions to reduce the impact of another withdrawal from the private pension system.


Protests are scheduled for today and 25 November, following demonstrations – some of them violent – over the weekend and last week. The protests are being organized to rally against the excessive use of force by police and against gender violence. Both events risk becoming outlets for an expression of wider discontent with the government, and against labor and pension reform proposals, privatization plans, and resurgent violence, all of which drove the 2019 unrest and which remain unaddressed. Notably, President Ivan Duque’s “national conversation” to address protestors’ demands has failed to defuse tensions.


Q3/2020’s growth figure will be released on 26 November alongside September’s IGAE economic activity index. Both indicators are expected to confirm an economic rebound after the Q2 nadir, when Covid-19 restrictions were strictest. The data is likely to show that there is still a long way to go before the economy returns to pre-pandemic levels, while there are concerns that rising caseloads and a re-tightening of restrictions in some areas risk choking off economic reactivation. Two states are now back at the “red” level in the government’s Covid-19 traffic light system, with a further six (including the capital) on alert for a return to “red” amid rising hospitalization rates.


After today, 23 November, Western Union – the largest USD remittance handler in Cuba – will no longer offer remittance operations. The move comes in response to new US sanctions targeting subsidiaries of the military’s GAESA holding company, one of which – Fincimex – has been Western Union’s local partner. Whether the measure ends up being lifted when Joe Biden takes office in January is unclear; travel and remittances are seen as the two most likely areas for a Biden administration to loosen current Cuba-related restrictions. Amid serious economic pressures, the regime has announced new market reforms affecting food production and distribution, while a promised end to the highly distortionary dual currency regime remains pending. Havana airport was also re-opened on 15 November as authorities hope to reactivate the tourism sector ahead of the approaching high season.