This week, in Peru, a vote of confidence in the new cabinet promises another politically tumultuous few days ahead. Chile‘s line-up of presidential candidates will be settled by tomorrow; in parallel, the battle over the two-thirds rule in Chile’s constituent assembly continues. In Brazil, a number of important tax and spending moves could be ironed out this week. Mexico is being put to the test under the United States-Mexico- Canada trade agreement (USMCA). Venezuela‘s cabinet reshuffle will hardly move the political needle. Finally, Argentina‘s allocation of International Monetary Fund (IMF) Special Drawing Rights (SDRs) should give the government a little breathing space.
A congressional vote of confidence in President Pedro Castillo’s first cabinet is scheduled for 26 August. The cabinet must win a simple majority in Congress. The governing Peru Libre (PL) party and its main ally, Together for Peru (JPP), only have 42 out of 130 seats. If Congress votes against the cabinet, Castillo would have to reformulate his ministerial picks and resubmit them to Congress for another vote. Castillo’s pick for prime minister (PCM), Guido Bellido, remains the most controversial choice. The key question is whether Castillo decides to jettison Bellido before 26 August, and whether that would irrevocably divide the PL. If Bellido stays, the question is whether fractured opposition parties decide to postpone such an early confrontation with the new president.
Today, 23 August, is the deadline for registering candidacies to take part in the November/December presidential elections. The line-up has solidified over recent days. The two candidates leading the polls are Gabriel Boric of the radical left Apruebo Dignidad coalition and Sebastian Sichel of the center- right Chile Vamos (CV) coalition (which incidentally changed its name to Chile Podemos Mas (CPM) over the weekend). After an internal primary, the center-left Unidad Constituyente coalition selected Senate president Yasna Provoste of the centrist Christian Democrats (DC) as its candidate. Further to the right of Sichel will be the ultra-conservative Jose Antonio Kast (Republicans). The surprise candidate is Marco Enriquez-Ominami of the Progressive Party (PRO), who threatens to undermine Provoste’s pitch to the center-ground.
Separately, a bid to lower the threshold to approve the contents of the new constitution has suffered a setback but is not dead yet. Last week, a subcommittee of the Constituent Assembly rejected a proposal to alter the requirement that constitutional articles must obtain two-thirds approval; assembly members on the Left want to lower this threshold to 4/7, to make it easier to pass more radical initiatives. The two-thirds rule was introduced to ensure compromise and consensus. The 4/7 proposal still needs to go before a committee and plenary vote. Another proposal to put any issues that win a simple majority in the Constituent Assembly but do not reach two-thirds support to public referendums is also under discussion and will likely face strong resistance because it changes the basis on which the Assembly was established.
This week will be decisive since a draft annual budget law needs to be presented by 31 August and a number of significant items are still undefined. These include the value of a new cash transfer program ( Auxilio Brasil ) and a constitutional amendment on federal judicial debts ( precatorios ) that could free the necessary funds for the program – in addition to the overall budget itself. Changes in income tax may be approved in the House after a failed attempt last week. The institutional crisis across branches of government will continue as President Jair Bolsonaro vows to request the impeachment of a second Supreme Court judge this week.
In a landmark vote last week, a majority of workers at General Motors (GM)’s Silao (Guanajuato) pick-up plant voted to reject their collective labor contract and oust their existing union. The vote was seen as a test case for the new Rapid Response Labor Mechanism (RRLM) contained within the United States-Mexico-Canada trade agreement (USMCA) after the US government lodged a complaint about irregularities in a previous vote that took place in April that led to its invalidation. Whether the outcome prompts more labor disputes and challenges in other facilities that export to the US, and how President Andres Manuel Lopez Obrador (AMLO) reacts to increased external verification of labor contracts, will be issues to watch. In parallel, however, the AMLO government late last week signaled its willingness to continue discussions with the US over a separate dispute related to auto rules of origin requirements in the USMCA.
The cabinet reshuffle announced by President Nicolas Maduro on 19 August is unlikely to see any significant domestic political change. For years, reshuffles have tended to be inconsequential. Although talks with the opposition are set to get going in earnest in September, the reshuffle was prompted more by moves among senior Chavistas to participate in the gubernatorial, mayoral, and municipal elections scheduled for 21 November. The most significant change was that Jorge Arreaza moved from the foreign ministry to become Minister for Industries and Production. Arreaza’s replacement is Felix Plasencia, who has been serving as ambassador to China. Whether that presages a new outreach effort to China remains to be seen. The new Interior Minister is an unconditional Maduro supporter, the former chief of the military’s operational strategic command, Remigio Ceballos, whom the EU sanctioned last February for “undermining the opposition’s electoral rights” – hardly a positive sign ahead of the November voting.
Argentina should receive USD 4.35bn today, 23 August, as part of the allocation of International Monetary Fund (IMF) Special Drawing Rights (SDRs). The funds are especially opportune for the government given the Central Bank (BCRA)’s relatively low net reserves together with the fact that two debt payments to the IMF of USD 1.8bn each fall due in the final four months of this year, the first as soon as 22 September. Vice-President Cristina Fernandez (CFK) has seemingly given her blessing for some of the funds to be used for debt repayments after some of her allies initially called on the funds to be earmarked only for health and social spending. The money should also boost the BCRA’s firepower as it seeks to contain exchange rate pressures ahead of the November mid-terms.