Updates on Brazil, Venezuela, Argentina, Central America, and US/LatAm policy

There has quite a bit of interesting and/or alarming US/Latin America-related news over the weekend:

Financial Times: Argentina creaks under extreme stress (Sept 7, 2018)

“if Mr Macri’s technocratic government, which heads the G20 and has followed economic orthodoxy while also enjoying full international support, cannot ride out fickle markets, who can?”

Trump’s strengthening of the US dollar, Turkey’s ongoing economic struggles and related contagion, and Argentina’s significant indebtedness have led to a significant devaluation of the Argentine peso and a rush to shore up the government’s coffers via a $50B IMF loan.

Unlike many Latin American leaders and Argentinian predecessors, Macri has mostly followed austerity-based economic orthodoxy and market-first principles in trying to assure investors and international markets of Argentina’s resilience. However, Marci’s upcoming reelection in 2019 is looming, and criticism levied by his political opposition is continuing to mount. Complicating matters further is general Argentine antipathy towards the IMF, who previously put the country into extreme austerty after it defaulted on a 2001 loan.

In the background, the Argentinian public sector, including former President Cristina Kirschner, have been implicated in upwards of “$36 billion”  in public contract graft and broader corruption reminiscent of to Brazil’s Lava Jato scandal. Per Macri, a longtime opponent of Kirschner and her populist agenda: “This beats watching Netflix.”

 

New York Times: Stable After Attack, Brazilian Candidate May See Political Fortunes Rise (Sept 7, 2018)

“This plays straight into his message: the security issues, the violence and the need to address those issues. There are still a lot of undecided voters. It might be that a number of them now say ‘Bolsonaro is our guy.’”

My Whatsapp feed, the ubiquitous social media app known in Brazil as “Zap,” blew up on Friday afternoon with live images of the stabbing of Brazilian presidential candidate Jair Bolsonaro. As the video clearly demonstrates, while Bolsonaro was being paraded through doting supporters, a man approached him and stabbed him in the abdomen.

For a reviled candidate who has been hugely critical of Brazil’s violence, and the inability of mainstream Brazilian politicians to adequately address the violence issue, the stabbing seems to play directly into Bolsonaro’s hands, and has led many to predict that this episode will further strengthen his lead ahead of the October 7th first-round Presidential election.

Following the Supreme Court’s judgment of Lula’s ineligibility to run in the election, Bolsonaro leads a crowded pack of aspiring Presidents in the low-20s, with several center-left/left wing candidates trailing him with 12% of the vote.

As the electoral hour of Presidential coverage has begun, one of the common discounts levied against Bolsonaro is the weakness of his political party, leaving him with under 8 seconds of television time for every 12.5 minute bloc of Presidential political coverage, far behind the leading 5 minutes, 30 seconds for Geraldo Alckmin. However, tv news has been transfixed on the stabbing and Bolsonaro’s recovery at São Paulo’s Albert Einstein hospital, effectively serving as a supplemental platform for Bolsonaro and his views.

Subsequent conversations with Brazilians has led me to believe that Brazilians are increasingly recognizing Bolsonaro as a more serious candidate, and to some a near-certainty to make it into the October 28 second round of elections. Defenders of Bolsonaro sexist, racist, and anti democratic past have become more vocal, as have the doubts from his detractors of his ability to win the second round (“what about the female vote?”), as well as his ability to govern and create a coalition post-election. Again and again, the similarities between Bolsonaro and Trump rear their head.

 

NYTimes: Trump Administration Discussed Coup Plans With Rebel Venezuelan Officers (Sept 8, 2018)

In a series of covert meetings abroad, which began last fall and continued this year, the military officers told the American government that they represented a few hundred members of the armed forces who had soured on Mr. Maduro’s authoritarianism.

Back in February, then-Secretary of State Rex Tillerson raised the prospect of a potential Venezuelan military-led response to the ongoing disaster in Venezuela, which has led millions to flee the country and has left the majority of those remaining subject to constant food shortages and hyperinflation. However, it appears as if Trump has been transfixed with the idea of military action in Venezuela for some time, raising the idea of a military “invasion” of Venezuela, first with his military and diplomatic advisors (the now-ousted Tillerson and McMaster), and then with Latin American leaders including Colombian President Juan Manuel Santos and others. Now, the NYTimes is reporting that a potential military-led coup in Venezuela is not just bluster: there has been US-Venezuela discussions via backchannels regarding a potential military-led rebellion.

As the article recounts, following news leaks of President Trump’s comments on a military option in Venezuela, rebel officers reached out to Washington (again, it seems), seemingly curious whether Trump’s endorsement could lead to concrete support by the Americans. However, the US did not provide a definitive response and many of the plotting officers were detains, and suspected to have been subsequently tortured for their role in the potential plot.

The article also mentions previous attempts by President Obama and his administration to weigh the potential benefit of allowing the Venezuelan military to unseat the Maduro administration against the potential backlash associated with another in a longstanding record of US-supported anti democratic interventions in Latin America, as well as the US’ low opinion of the Venezuelan military, seen as corrupt and complicit in the illegal drug trade in the region. The article presents division within the Obama White House, with some believing in the military’s ability to transition to democracy in the country, and others highly skeptical.

With the aerial drone-based assassination attempt of Maduro last month and the subsequent crackdown on his opposition, and the now-confirmation of the US’ potential role in a military coup, it is likely that Maduro will feel empowered to act with further impunity, creating even-worse conditions in the already beleaguered country.

 

NYTimes: U.S. Recalls Top Diplomats From Latin America as Worries Rise Over China’s Influence (Sept 8, 2018)

“Trump has openly and systematically offended Latin American countries and their people. He labels us as rapists and criminals, has never traveled to the region as president, has deported and separated families, and threatened to cut all sort of aid. China comes with an offer of friendship and economic development (albeit one that I don’t think will pan out). Why the surprise?”

As recounted back in March, China is quietly and effectively asserting itself across the world in an attempt to unseat (or join) the US as leaders on the international stage. Through its belt and road initiative and infrastructure investments across Africa (mostly built by imported Chinese workers), China has been building physical infrastructure across the world in an attempt to increase trade and Chinese exports to these regions, use “soft power” to build Chinese goodwill around the world, and to develop surveillance, intelligence, and military capabilities around the globe (as in the frightening case of the Chinese space station in Chile).

To finance these projects, the governments often sign convoluted deals with the Chinese construction and infrastructure banks that are oftentimes “junk” at signing, i.e., highly unlikely to be repaid. Clauses inserted in these financing contracts allow for Chinese possession of sovereign assets in case of non-payment.

In Zambia, the national power utility ZESCO, as well as the state-owned TV and radio news channel ZNBC are either at risk or already Chinese-owned due to the government’s default on more than $8B in loans. In Sri Lanka, who is more than $3B in debt to the Chinese, the Hambantota Port has been taken over by the state-owned China Merchants Port, creating the awkward situation whereby China now has land and sea access in a sovereign nation.

In an letter written by members from both parties of the US Senate addressed to Secretary of State Mike Pompeo and Treasury Secretary Steve Mnuchin, the Senators call Chinese loan efforts to poor countries ‘debt-trap diplomacy’ and ‘predatory Chinese infrastructure financing’.

Rather than previous liberalist attempts by the US and its allies to tie foreign direct investment to democratic elections and press freedoms, China has made little requests of the sovereign nation/debtors, to the delight of the oftentimes democratically elected leaders. However, one fairly consistent request from China has unwavering and consistent: an adherence to its One China policy, and a subsequent severing of diplomatic ties and recognition for Taiwan.

As the Senators write in their letter, “Beijing’s attempts to weaponize capital is not just limited to Asia and Africa, but extends to Europe,” before citing ties via the Belt and Road initiative to countries in the Balkans such as Montenegro and Serbia. It appears as if the Senators, like Trump so many times over in the first years of his Presidency, overlooked even closer neighbors to the South.

Now, the United States has taken the dramatic action of removing diplomats from three Central American countries with historically warm ties: Dominican Republic, El Salvador and Panama, after each of the countries have severed diplomatic ties with Taiwan, no doubt in an attempt to appease their Chinese benefactors. Due in part to Trump’s indifference, these leaders see the entrance of China and the few strings attached to Chinese capital as a counterbalance to the longstanding US-led hegemony in the region. As the article recounts, there are further fears that the four Central American nations that still recognize Taiwan (Belize, Guatemala, Honduras and Nicaragua) could soon disavow Taiwan as well, complicating matters even further not only for Trump and his administration, but for longstanding ties and goodwill in the region.