Report Contents

July 6, 2021

Latam

LATAM PULSE

BY Mario Marconini, Nicholas Watson

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( 5 mins)

This week, Chile‘s constituent assembly has got off to an inauspicious start. Brazil‘s vaccine procurement probes will continue. It is one month since Peru‘s presidential run-off vote with no official winner, though the leftist Pedro Castillo has already announced controversial plans for when he is sworn in later this month. In Mexico, a controversial decision in the oil sector could result in litigation. Argentina‘s Finance Minister Martin Guzman wants to show that talks with the International Monetary Fund (IMF) are on track; at the same time, this week will see anti-government protests. Finally, in Colombia, the government is gearing up for another attempt at a fiscal reform.

Chile

The constituent assembly will continue to work out various practical arrangements this week after it was officially inaugurated on 4 July. Issues to iron out include the exact competencies of the newly elected assembly president, the Mapuche indigenous academic Elisa Loncon, and her deputy Jaime Bassa, as well as the creation of thematic committees and how to go about holding sessions outside the capital Santiago. To judge from yesterday’s chaotic first session, finalizing practical arrangements risks becoming a time-consuming distraction; the assembly has up to 12 months to write the constitution. The assembly opening was marred by protests and clashes with police which briefly saw proceedings paused, while yesterday’s session was suspended amid technical problems.

Brazil

Attention will continue to center on the Senate inquiry into the pandemic following last week’s testimonies and news about irregularities in the purchase of a second vaccine against Covid-19. President Jair Bolsonaro has already been implicated in the scandal involving the Covaxin vaccine for allegedly knowing that there were irregularities but not taking action against it (the crime of prevarication). A related criminal complaint has been sent by the Senate committee overseeing the inquiry to the Supreme Court and the court has authorized the start of investigations against the president by the Prosecutor’s Office. The week will see a probe into purchases of 400 million doses of the AstraZeneca (AZ) vaccine (enough to fully immunize close to the whole of the Brazilian population) through the intervention of a dubious intermediary company and for the highest value per dose (USD 15) of all other vaccines negotiated by the government.

Peru

The JNE electoral board has said that it aims to have concluded its review of vote annulment requests filed by Keiko Fujimori’s legal team by 15 July at the latest. In principle, that is likely to mean that Pedro Castillo should be officially proclaimed president within the next ten days. Fujimori may still hope that new illegal campaign financing allegations against Castillo’s Peru Libre (PL) party stick. Castillo announced over the weekend that he intends to push ahead with a bid to change the constitution as soon as he is sworn in as president on 28 July, even though he lacks the necessary support in Congress to do so. A leading congressman-elect from the PL, Guillermo Bermejo, announced last week that he was starting a signature drive for a petition to get the constitution changed.

Mexico

This week is likely to see continued fallout from the controversial decision to grant state oil company Pemex operatorship of the Zama field. The private consortium led by US company Talos has said that it intends to “explore all legal and strategic options” to challenge the award by the Energy Ministry (SENER). This could presumably involve legal challenges under the United States-Mexico-Canada trade agreement (USMCA) based on equal treatment provisions given that Talos has already invested in the Zama field, which straddles two blocs, while Pemex has not. Pemex has never operated a reservoir of this depth before, while there are questions over the company’s technical and investment capacities.

Argentina

Finance Minister Martin Guzman should meet the International Monetary Fund (IMF)’s Kristalina Georgieva on the sidelines of the meeting of G20 Finance Ministers in Italy on 9-10 July. Guzman will be hoping to demonstrate that slow-burn talks to renegotiate Argentina’s USD 44bn debt to the IMF are on track, even if more substantive discussions are only likely to materialize after the November mid-terms. The terms of Guzman’s recent agreement with the Paris Club to defer payment of an outstanding USD 2.4bn debt – on condition that Argentina makes two partial payments totaling USD 430mn – effectively means that a deal with the IMF must be reached before the end of March 2022.

Separately, the upcoming 9 July national holiday will see a series of anti- government protests. The agricultural sector plans to hold demonstrations against the government’s restrictions on beef exports. Meanwhile, people expressing their frustration with various aspects of government policy are planning demonstrations in several provincial capitals. Rising inflation is a major grievance. So too are Covid-19-related restrictions, including the recent imposition of strict daily quotas on arrivals from abroad, which have left many Argentines stranded outside the country. Even if the coronavirus caseload is on the decline, the total death toll is approaching 100,000.

Colombia

President Ivan Duque yesterday, 5 July, reiterated his plan for a revised fiscal reform that will be sent to Congress when congressional sessions resume from 20 July; Duque says the new reform – which will look to raise revenues of up to COP 15tn – will not affect middle-class sectors. Even so, it is unlikely to enjoy a straightforward ride through Congress given the proximity of legislative elections. Duque’s announcement came too late to avoid the loss of Colombia’s investment grade status after Fitch last week downgraded Colombia’s rating (following S&P’s earlier downgrade). The medium-term fiscal framework that the government presented in June suggests that debt-to-GDP is unlikely to drop much below 60% over the next decade.