Development: At a meeting with her closest ministers on 9 August, Brazil’s President Dilma Rousseff decided to hold talks with the leaders of all her coalition allies this week in an attempt to avoid impeachment.
Significance: The political crisis in Brazil is deteriorating rapidly. Over the weekend (8-9 August), one economic consultancy, Arko Advice, put the chances of the President being impeached as high as 40%. Last week, one of the founders of the ruling Partido dos Trabalhadores (PT), José Dirceu, was accused of masterminding the Petrobras corruption scandal; the federal chamber of deputies, including over 50 deputies from the PT itself, voted against the President’s wishes on salary increases for the judiciary; two parties left the ruling coalition; and the vice-president, Michel Temer, said, ominously, that “someone needs to be found who can reunite Brazil”.
Looking Ahead: Today (10 August) Rousseff is due to receive a number of federal senators for lunch. The federal senate is less restive and more supportive of the President. It could block impeachment proceedings.
Development: On 7 August Colombia’s President Juan Manuel Santos gave a televised address to mark the end of the first year of his current four-year presidential term, in which he stated that while securing a peace deal with the country’s guerrillas remains the top priority for his government, “there are other issues” on which his administration is also looking to focus.
Significance: President Santos won re-election in last year’s presidential elections by promising to carry out to conclusion the current peace negotiations that his government has been advancing with the Fuerzas Armadas Revolucionarias de Colombia (Farc) guerrillas since 2012. But the peace process has recently been through a series of crises that have lost it public support. With economic growth on the slide this year as a result of lower international oil prices, Santos’s popularity has suffered and his administration is facing growing criticism for almost exclusively focusing on the peace negotiations at the expense of other issues. Santos sought to combat these criticisms in yesterday’s address by highlighting some of his government’s other priorities, particularly on the economic front.
Looking Ahead: Santos also sought to put a positive spin on the domestic economic difficulties. He said that the peso’s devaluation against the US dollar “produces more winners than losers... by giving us the opportunity to diversify our exports and substitute our imports, generating more jobs”.
Registration for legislative elections on 6 December got underway this week. While the government frontloaded its list of candidates with the First Lady Celia Flores, some cabinet heavyweights, singers and sportsmen, the national electoral council (CNE) rejected the application of María Corina Machado to run for the opposition coalition Mesa de la Unidad Democrática (MUD). Machado won more votes than any other candidate in the 2010 legislative elections and her exclusion is a major blow for the MUD. In a sign of the tension that is likely to build as the electoral campaign unfolds, a youth was shot dead in the midst of the looting of a supermarket in the city of Ciudad Guayana in the south-eastern state of Bolívar on 31 July.
President Nicolás Maduro announced the list of legislative candidates to drive forward the Bolivarian Revolution during a rally to mark the start of the five-day registration period on 3 August. Flores, a former president of the unicameral national assembly, leads the way as “the first combatant”, representing her native central state of Cojedes. Other big hitters on the list include Communes Minister Elías Jaua; Oil Minister Asdrúbal Chávez; Infrastructure Minister Haiman El Troudi; Education Minister Héctor Rodríguez; Indigenous Affairs Minister Aloha Nuñez and Housing Minister Ricardo Molina; singers Cristóbal Jiménez and Roque Valero; Olympic fencing champion Rubén Limardo; and TV presenter Érika Ortega.
Maduro maintained that the forthcoming electoral campaign would be “the toughest battle in the 16 years of the Bolivarian Revolution”. He said that this was due to the “economic war” being waged against his government, which would intensify as the elections approached with a planned wave of violence “sponsored by the Pentagon” to sow discord and chaos in Venezuela. Maduro described the killing of a youth in the looting of a supermarket in Ciudad Guayana, which led to 60 arrests, as a “planned” incident staged by the Right following orders from the US to undermine the Bolivarian Revolution. The governor of Bolívar, Francisco Rangel, maintained that the looters were “armed and induced”.
The MUD said the incident was evidence of the extremes to which many Venezuelans are pushed to acquire basic necessities amid scarcity of food and other essentials, and the rapid erosion of the value of the local currency amid hyperinflation. The MUD’s executive secretary, Jesús Torrealba, called for a day of national protest on 8 August “against hunger and crime and for freedom”, to take place in Caracas and all of the state capitals, to demand the immediate adoption of MUD proposals “to confront corruption and official ineptitude with common sense rather than bullets”.
The MUD released a statement saying that, “We condemn the intolerable and unprecedented situation of collapse which the Venezuelan people endure today due to the government’s destruction of the economy”. It blamed the “destruction of the productive apparatus” and “the massive theft of dollars from oil” as the principal causes of this collapse, aggravated by recent measures, such as restricting foreign exchange for importers, which it said was simply “throwing fuel on the fire of scarcity”. The MUD concluded that this “absurd conduct seems designed to generate a social revolt with the aim of creating the pretext of suspending or postponing the legislative elections which it knows are lost”.
The MUD has tried to capitalise on public discontent with food shortages and rampant inflation in the past without the desired success. The loss of Machado will only make its task tougher. Machado received an administrative sanction from the comptroller general’s office on 14 July barring her from standing for election for one year so the CNE’s decision to deny her registration was not unexpected. Machado said that neither of the two bodies had the legal standing to deny her registration, and that “the regime” had not forgiven her for speaking out against the presence of Cuban soldiers in the Venezuelan armed forces as well as denouncing official corruption. She had a ready-made replacement by her side to stand in her place for the MUD: Isabel Pereira, a director of the liberal thinktank Centro de Divulgación del Conocimiento Económico para la Libertad (Cedice).
On 4 August the US State Department released a statement expressing “concern” at the decisions to block the candidacy of Machado and other opposition politicians which “clearly have the intention of complicating the ability of the opposition to run candidates for the legislative elections, and limiting the range of candidates that can be presented to the Venezuelan people.” It went on to argue that “democracy must be inclusive”, and urged “all relevant Venezuelan authorities to reconsider the ban imposed on candidates”. The Venezuelan government responded with a statement of its own accusing the US of “interfering in internal constitutional matters”.
Meanwhile, Maduro ruled out monitoring of the electoral process by the Organization of American States (OAS), insisting that “Venezuela will not be monitored by anyone”. He claimed that the political opposition would denounce irregularities and fraud with or without monitoring.
The looting of the supermarket in Bolívar came a day after the government sent in troops to seize (not for the first time) the Caracas warehouse of Venezuela’s largest food distributor, Polar, which President Maduro has accused of seeking “to sabotage the economy”. “This is our principal dispatch centre,” Polar director, Manuel Larrazábal, said, from which the company sends out 12,000 tonnes of food and 6m litres of drink per month. Larrazábal said that expropriating the warehouse at a time of food supply problems was “irrational”, and urged the government to reconsider its action.
Development: On 5 August Chuck Rosenberg, the acting head of the US Drug Enforcement Administration (DEA), said that the escaped leader of the Sinaloa drug trafficking organisation (DTO), Joaquín ‘El Chapo’ Guzmán, was probably still in Mexico, and that the agency was stepping up its attempts to bring him to justice.
Significance: A key issue in the attempt to control Mexican DTOs is the quality of the collaboration between Mexican and US law enforcement agencies. Rosenberg’s comments at a press briefing show that despite US reservations about drug gang infiltration of the Mexican police, the two governments maintain a degree of security collaboration.
Looking Ahead: The major question is whether after two arrests (1993 and 2014) and two escapes (2001 and 2015) over the last two decades, there will be a “third time lucky” for the authorities trying to capture El Chapo. Most Mexican analysts believe, for the moment at least, that the answer is “no”: he has the power and resources in Sinaloa and elsewhere to continue to escape arrest for a number of years.
The fatal shooting of a young woman and two children last month by the Nicaragua’s national police (PN) in a botched counter-narcotics operation is only the latest incident to reignite concerns regarding the PN – previously one of Nicaragua’s most trusted institutions. With its response to protests against the government’s US$50bn ‘Gran Canal’ project already subjecting it to criticism at the end of last year, the PN’s handling of recent anti-government protesters have also fanned opposition complaints regarding its lack of independence and subjugation to the Frente Sandinista de Liberación Nacional (FSLN) government led by President Daniel Ortega.
The incident, which also left two other children injured, occurred on 11 July in Las Jagüitas, an area in south-eastern Managua, when PN officials reportedly mistook the family’s vehicle for that of suspected criminals. According to a PN statement, the driver, Milton Antonio Reyes Martínez, failed to obey orders to pull over. However, the local media cited Reyes and his wife, Leyka Ramirez Delgadillo, as saying that they did not see a sign for them to stop, only groups of men shooting at their vehicle from both sides of the road. Two days later the PN announced the arrest of 14 police officials in connection with the case while on 30 July a judge issued nine of the PN officials with prison sentences ranging from two to eleven years.
The violence sparked national outrage, with prominent opposition figures like Dora María Téllez of the FSLN dissident Movimiento Renovador Sandinista (MRS) party calling for PN director, Aminta Granera, to step down while local human rights organisations like Centro Nicaragüense de Derechos Humanos (Cenidh) demanded a full investigation. The main political opposition party, Partido Liberal Independiente (PLI), led by Eduardo Montealegre, also released a statement accusing the FSLN government of having destroyed the institutionality of the police and using it for its own purposes.
The incident took place just a week after the PN was accused of alleged brutality against government opponents – including Montealegre. The clashes took place on 9 July during demos against the recent election of a supreme electoral court (CSE) magistrate (see box) and more general concerns about the CSE. As well as Montealegre, eight other opposition national deputies were detained (all of whom were subsequently released), some of whom claimed to have been attacked by the police. Also arrested (and released) were two photographers, Jorge Torres, of the leading national daily, La Prensa, and Esteban Félix of the Associated Press, whose camera equipment was reportedly destroyed. As well as concerns from local human rights groups like Cenidh and the main private sector lobby, Cacif, the violence also prompted a response from the US embassy which on 9 July released a statement expressing “concern by the reports of violence surrounding scheduled demonstrations in front of the Consejo Supremo Electoral (CSE) in Managua”.
New CSE magistrate
The clashes over the ten-member CSE were triggered by the 3 July selection of Judith Silva as a new magistrate by the FSLN-controlled 91-seat unicameral national legislature. Silva, who is FSLN-aligned, was appointed for a five-year term to fill a vacancy left by José Marenco Cardenal, who died of a heart attack on 11 June. Marenco had been appointed to the court in 2005 by the Partido Liberal Constitucionalista (PLC) of disgraced former president, Arnoldo Alemán (1997-2002), although he later broke with that party. Silva was selected with 64 votes in favour – all from the FSLN – to two against. The concerns regarding the CSE’s independence come ahead of the November 2016 general elections in which President Ortega is expected to run and win a third consecutive victory.
Nominated by President Daniel Ortega, the new supreme electoral court (CSE) magistrate, Judith Silva, defeated two other candidates to take up the post - one put forward by the main opposition Partido Liberal Independiente (PLI) and the other, by an independent deputy, Mauricio Montealegre. She had previously served as the executive president of the government’s urban and rural housing institute (Invur).
Development: On 4 August allegations of murder and drug trafficking – along with the management of currency exchange rates – dominated Argentina’s political scene, with just five days to go ahead of the national primaries.
Significance: Almost everything Argentine politicians do for the rest of this week will be about gaining or losing votes in the national, open, mandatory and simultaneous party primaries (Paso) ahead of the October general elections, due to be held on 9 August. Two strategies seem to have been deployed: sensational revelations over government corruption on the one hand, and an attempt to reassure floating voters over economic policy on the other.
Looking Ahead: As a presidential hopeful Scioli is trying to maintain the loyalty of the government’s core supporters – including traditional hard liners and ‘machine’ politicians represented by the likes of Aníbal Fernández – while also reaching out to middle class voters interested in more market friendly policies. While he stands a reasonable chance of balancing the two ahead of Sunday’s Paso, the tension between them is likely to persist for much longer.
Development: On 3 August José Dirceu, the former cabinet chief of Brazil’s former president Lula da Silva (2003-2010), was arrested, accused of being the mastermind behind the corruption scandal at state-owned oil company Petrobras.
Significance: Dirceu’s arrest puts Lula, the ruling Partido dos Trabalhadores (PT) and, by extension, President Dilma Rousseff back in the firing line, ahead of nationwide protests called for 16 August. Dirceu was the mastermind of the ‘mensalão’ scheme, the cash-for-votes scandal that operated in 2003-2005 and badly damaged the Lula government. Already under house arrest in Brasília as he completes the final years of his sentence over the mensalão, Dirceu now faces being transferred to a prison in Curitiba, in the southern state of Paraná, where ‘Operation Car Wash’, the official investigations into corruption at Petrobras is based. The question now is whether Dirceu will implicate Lula in return for a lighter sentence.
Looking Ahead: In recent weeks, Lula had jokingly told reporters that he expected to be the next to be arrested by ‘Operation Car Wash’. Now that comment is starting to look like a prediction. There are rumours that should that happen Lula might take advantage of his Italian citizenship, acquired through marriage, to flee the country.
Development: On 3 August HSBC Plc announced that it had sold its Brazilian division to Bradesco for US$5.2bn.
Significance: By purchasing HSBC, Bradesco now rivals Itaú Unibanco as the largest bank in Brazil. Its assets are now valued at R$1.193trn (US$348bn), compared with R$1.295trn for Itaú. Taking over HSBC means that Bradesco has taken on 5m extra customers, R$168bn in assets, and 851 bank branches in 529 cities across the country. HSBC, which is shifting resources to Asian markets, will continue to maintain a small presence in Brazil to attend to its business clients.
Looking Ahead: Brazil’s banking sector is proving resilient even as the domestic economy faces a recession, high inflation and a weakening currency. Bradesco announced last week that it earned R$4.5bn in the second quarter, its best quarterly results ever.
Sierra Oil Wins Round 1 Licences: Mexico’s Sierra Oil and Gas led the only consortium to win licences in the first phase of the country’s Round 1 hydrocarbons licensing auction, announced on 15 July. Sierra, in partnership with Talos Energy of the US and Premier Oil of the UK, was declared the winner of the shallow water Blocks 2 and 7 in the Gulf of Mexico. Under the bidding rules, companies were required to offer a share of profits to the government and a minimum level of investment in developing the blocks. Mexico’s regulator, Comisión Nacional de Hidrocarburos (CNH), said that the consortium had offered the government 74%-86% of the profits from Block 2 (off the coast of Veracruz) and 83%-88% of the profits on Block 7 (facing the coast of Tabasco). The CNH estimated that investment in each block would be around US$1.3bn over the next five years. Each licence has a 30-year term. Contracts will be signed in August.
Falabella subsidiary boosts Colombia investment: Department store Sodimac Colombia, in which Chile’s Falabella has a 49% holding, says it is boosting its 2015 investment by 46.7% to US$81.8m. The chain, which is 51% controlled by Colombia’s Corona, said the money would be spent on opening new stores, refurbishing existing outlets and offering new online services. General Manager Miguel Pardo said the company had opened a new Homecentre-branded store early this year, and planned at least one more. First quarter sales in Colombia had grown by 10.7% year-on-year. Sodimac also operates retail chains in Peru, Argentina, Brazil and Uruguay.
Grupo Alfa fails in takeover bid for Pacific Rubiales: In early July Alfa SAB of Mexico and Habour Energy of the US dropped their US$1.7bn takeover bid for Pacific Rubiales, the Colombia and Canada-listed oil company. The bid was seen as a key move to develop a multinational Latin American oil company but faced resistance from a Venezuelan-based group of minority shareholders, who with a 20% stake in the company were able to reject the combined offer of 6.50 Canadian dollars a share as insufficient. The O’Hara group that blocked the takeover is also known as ‘Bolichicos’ because of its claimed proximity to the Venezuelan government. According to press reports, the Bolichicos managed to postpone a special shareholders’ meeting to consider the Alfa-Harbour offer to 28 July. In advance of the meeting, Alfa-Harbour improved the offer to C$7.00, but this was insufficient to meet the Bolichicos’ demand for C$9.0. Analysts said that Pacific Rubiales, which has been impacted by low oil prices and the ending of its licence to operate a key production field in Colombia, will now have to reconsider its strategy. As far as Alfa is concerned, Andrés Bezamilla, an analyst at Mexican brokers Valmex, said, “There are two scenarios. In the first, the company will look for other partners to bid in Mexico’s licensing rounds. In the second, it will give Pacific some time to think it over and then come back with a new offer. The positive thing is that it hasn’t allowed itself to be pushed by O’Hara into increasing the offer price.”
Profits down for the top 500: According to Chile-based AmericaEconomía Intelligence, profits at Latin America’s top 500 private sector companies dropped for the second year running in 2014, falling by 41% to US$2.48bn. There hadn’t been a two-year consecutive fall in earnings since 2001-2002. The fall was attributed to a number of factors, including the end of the commodities boom, the depreciation of local currencies against the US dollar and the fact that many of the companies are based in economies that experienced slow growth. Of the top 500, 203 companies are based in Brazil, 119 in Mexico, 65 in Chile, 44 in Argentina, 30 in Peru and 24 in Colombia. Brazil and Argentina – together home to about half the Latin American total – experienced economic stagnation last year. Andrés Almeida, head of the team that wrote the report, noted, “This is a new and less prosperous era. The commodities super-cycle is over. Profits and sales growth experienced from the 1990s to now cannot be maintained. Then, there was explosive growth in the commodities sector. Now prices have fallen and are stabilising.”
Carrefour does well in Brazil: Despite the slowdown in the Brazilian economy, sales by the French retailer Carrefour rose by 7.1% year-on-year in the second quarter, company executives said. Carrefour was doing better in the Brazilian recession than its also French-owned rival Casino, because a greater proportion of its sales were food or food-related, and spending on food items tends to be inelastic in a downturn, officials commented. Globally, Carrefour said that sales growth had slowed because of competition in France and a fall in consumer spending in China. Second quarter sales were EUR21.4bn (US$23.2bn). Excluding energy and forex fluctuations, sales grew by 2.6% in the period, down from 3.2% in the first quarter. Sales in Spain and Brazil were the bright spots. Brazil is the company’s second largest market after the home market in France. Carrefour’s Financial Director Pierre-Jaen Sivignon said that a global EBIT of EUR2.51bn-EUR2.53bn seemed a “reasonable” forecast for this year. Carrefour was considering listing its Brazilian subsidiary, but short-term capital market conditions in Brazil were not appropriate for an IPO. In any case, he noted, “we don’t need an IPO to support our growth in Brazil”.
A damning report on the parlous state of Caracas hospitals broadcast on 29 July by the UK’s award-winning Channel 4 News, not exactly known for its sympathies with the Right, doubtless would be received with scorn by President Nicolás Maduro as part of the international conspiracy against the country with the largest oil reserves in the world after Saudi Arabia. It is difficult to know how his revered late predecessor, Hugo Chávez (1999-2013), who on 28 July would have turned 61, would have responded to such damaging global images of his homeland. Harder still is to guess at how Venezuelan voters will act in the forthcoming midterm legislative elections on 6 December next.
A new Venebarómetro poll released this week put support for the Maduro government at just under a quarter of national voters (24.7%), while a full 84% said the domestic situation was negative (aggregating ‘regular/bad’, ‘bad’ and ‘very bad’). Three quarters of the 1,200 respondents, interviewed in their homes between 28 May and 11 June, said that supply shortages and insecurity were the main problems facing the country, followed by the high cost of living (cited by 43%), unemployment (20%) and the health service (8%) – notably these were cited as issues by similar proportions of opposition and government supporters across the country and with little variation by income decile. In other words, these are problems running across the country and throughout all households, albeit with lower-income households the worst affected.
Over four fifths (82%) of respondents said their household budget was insufficient to cover food, medicine, clothing, transport, and other basic costs in the previous month. Over half – 57.6% – blamed the Maduro government for the continuing shortages of basic goods, while 31.5% blamed retailers and/or producers. Meanwhile 71.2% rated the government’s performance negatively (again aggregating ‘regular/bad’, ‘bad’ and ‘very bad’). Over three quarters (76.1%) said they felt that Maduro government was “removed” (‘alejada’) from them.
Given the domestic economic crisis, these findings are hardly all that surprising. The government regularly contests the impartiality of polling companies, and there is a longstanding trend of certain companies finding very much in favour of the government and others coming up with a strong pro-opposition bias. However, IVAD, which carries out the Venebarómetro survey and might be considered more pro-opposition, found that support for main opposition alliance, Mesa de la Unidad Democrática (MUD) was middling at best; 48% rated it positively and 46% negatively, hardly a ringing endorsement. Interestingly, the student movement was considered the group working best ‘for the wellbeing of the country’ by 72.8% of respondents, followed by the Catholic Church (64.4%). Again, the MUD was well down at 40%, while the national assembly was second to last, with only 32.1% saying it was acting positively; 62.8% negatively (In last place was the ruling Partido Socialista Unido de Venezuela [PSUV] with 27.6%).
Ahead of the mid-term legislative elections, 67.4% said they intended to vote, (down a little from 68% in May). Of these, 40.5% were inclined towards opposition candidates, 22.2% towards government candidates and a not-insignificant 27.6% towards independent candidates. This is interesting, as there are not many independent candidates/parties in this bitterly polarised country, and it suggests that people would like ‘a third way’ option, if one were available. Voter apathy thus may become a serious issue for both sides. Moreover, when asked to self-define their political leanings, 36% said they were independent, up from 24% in April, while 36% said they were MUD-leaning, down from 40% in April (government supporters fell to less than 30%). These numbers simply are not going to get the MUD the congressional majority it is aiming for.
The Mesa de la Unidad Democrática (MUD)’s message is either not appealing, or – as is more likely – is simply too ill defined to have any resonance. Venezuelan voters want more than to simply lodge a protest vote against the Maduro government and the ruling Partido Socialista Unido de Venezuela (PSUV), they want hope. As yet, the MUD is not offering that.