This week, in Brazil, President Jair Bolsonaro is aiming for a show of force in a day of protests. Argentina holds its primaries ahead of November’s mid-terms. In Colombia, the new tax reform – the third such initiative under President Ivan Duque – goes to congressional votes this week. Ecuador is also gearing up for a difficult tax reform debate as a new deal with the International Monetary Fund (IMF) is apparently close. Chile‘s government continues its rear-guard action against opposition-tabled tax and pension measures. Lastly, in Mexico, it might be difficult to prevent a bilateral dialogue process with the US from being dominated by migration.
Protests against the Supreme Court (STF) and Congress will take place today, 7 September, Brazil’s Independence Day. President Jair Bolsonaro will deliver a speech in both Brasilia and Sao Paulo where the two biggest crowds are expected. The protests should look much better for the president than current polling numbers suggest, with the government facing a 63% rejection rating. There is no guarantee that the demonstrations will be peaceful. As a precautionary measure, there will be no sessions this week of the House or Senate plenaries, or of the Senate inquiry committee (CPI) into the government’s handling of the pandemic. The STF will, however, resume deliberations already on 8 September on whether land claims by indigenous people should have a cut-off date.
Party primaries (known as the Open, Simultaneous and Obligatory Primaries, or PASO) take place on 12 September. Since voting is obligatory, the PASO provide a snapshot of public opinion ahead of the 14 November partial legislative mid- term elections, in which half of the lower house and one-third of the Senate will be renewed. The governing Front for All (FdT) coalition goes into the primaries battered by the economic crisis and scandals; how the coalition performs in Buenos Aires province – which encompasses its electoral bastion – will be important to watch. The opposition Together for Change (JxC) is looking to climb back into public favor following the heavy defeat of 2019. Both the two main coalitions also face challenges from dissidents and fringe parties that are hoping for a political opening amid public fatigue and frustration with the twin health and economic crises.
The government’s revised tax reform initiative is ready to go to plenary votes in both congressional chambers from today, 7 September. The new USD 3.95bn package was extensively reworked by Finance Minister Jose Manuel Restrepo after the original version triggered a public backlash and weeks of violent protests, which forced the resignation of Restrepo’s predecessor, Alberto Carrasquilla. Not only is this reform more modest, but it also shifts the burden onto business, with nearly half of new revenues coming from a four- point increase in corporate income tax. VAT and income tax are untouched in the new reform, which should help ensure its passage in Congress. Approval would help patch a looming fiscal hole next year but the next government, which will take office in August 2022, will be under immediate pressure to undertake its own tax reform.
President Guillermo Lasso’s political honeymoon is reaching its end, while his weakness in the legislature is likely to become more apparent in the coming days and weeks. The governing National Agreement Bloc (BAN) only has 25 out of 137 seats in the National Assembly. The 2021 budget revision, a presidential veto of an economic reactivation bill for two provinces hit by an earthquake five years ago, and looming tax and labor reforms all represent challenges for executive-legislative relations. Lasso’s announcement that he would consider putting major reforms to a public referendum if the National Assembly blocks them has added to tensions. In parallel, a reworked IMF deal could be confirmed this week.
The lower house’s constitutional commission should review the proposal to allow people to withdraw up to 10% of their savings from the private pension (AFP) system – the fourth such initiative since the outbreak of the pandemic – tomorrow, 8 September. That would then allow for a lower house plenary vote on 9 September. However, for the measure to pass, 93 votes are needed; the opposition has 84, so it will need some legislators from the governing Chile Vamos ( CV) coalition to break ranks. In a bid to keep defections to a minimum, President Sebastian Pinera yesterday unveiled an initiative to improve pensions, which opposition parties said was insufficient. The issue also represents a test for the CV’s presidential candidate Sebastian Sichel, who has called on the coalition to vote against a fourth withdrawal.
In parallel, some CV senators are pushing the government to present its own mining royalty proposal in a bid to counter the opposition-tabled initiative that is awaiting a Senate vote (lower house approval was reached in May). A government initiative would see levies on mining companies rise but in such a way that mining competitiveness is not damaged so severely; it would also make a potentially difficult and controversial constitutional court challenge against the opposition proposal unnecessary. To pass in the Senate, the opposition proposal needs just four CV votes.
The US-Mexico High-Level Economic Dialogue (HLED), a bilateral forum set up in 2013 but which has not met since 2016, returns to action on 9 September. Foreign Minister Marcelo Ebrard and Economy Minister Tatiana Clouthier will be the government’s most senior attendees at the meeting in Washington DC. Clouthier will be hoping to advance Mexico’s looser interpretation of auto rules of origin requirements contained in the USMCA. Energy issues are also likely to be discussed, especially as the government presses ahead with electricity sector reforms that would privilege the state-run CFE utility. Migration could rise to the top of the agenda after President Andres Manuel Lopez Obrador (AMLO) last week said he would make the case for the US to increase economic support for Central America. However, with the applicability of the US “Remain in Mexico” migrant program still uncertain amid legal wrangles, concrete advances on such a complex issue are unlikely.