This week, Colombia’s government is on the ropes amid violent protests and the threat of a ratings downgrade if no tax reform can be passed. Brazil’s Senate enquiry into the government’s handling of the Covid-19 pandemic gets underway. In Peru, Pedro Castillo is still ahead of Keiko Fujimori in the polls, though the impact of a rowdy, impromptu debate held over the weekend has yet to be measured. Argentina continues to see tensions arising from the government’s awkward power dynamic, while the government’s vaccine procurement comes under scrutiny. Finally, in Venezuela, politics is revolving around the regime-controlled National Electoral Council (CNE) yet again.
The coming days will be a crucial test of whether President Ivan Duque can muster any support in Congress for some limited tax reforms. Duque withdrew his original USD 6.4bn package on 2 May; the announcement was followed by the resignation of Finance Minister Alberto Carrasquilla, who has been replaced by Jose Manuel Restrepo. This follows days of strikes and protests, which have included violent episodes centered on the city of Cali. Last week’s publication of poverty statistics for 2020 underline how difficult any tax reforms will be to pass: 3.6mn people have fallen into poverty as a result of the pandemic, leaving the poverty rate at 42.5%. Recall too that social pressures pre-date the Covid-19 crisis. In this context, no legislator will be keen to back tax rises so close to the congressional elections scheduled for March 2022.
The Senate parliamentary inquiry (CPI) into the handling of the Covid-19 pandemic starts today, 4 May, with the presence of President Jair Bolsonaro's first health minister, Luiz Henrique Mandetta, who left the government publicly abhorring his boss's denialism last year and has since been elevated to potential presidential contender. This comes at a time when Brazil has surpassed 400,000 deaths from the coronavirus and only 15% of the population has received a first and 7.5% a second jab of any coronavirus vaccine. The CPI is certain to expose the blunt mishandling of the pandemic by the Bolsonaro administration and thus weaken the government’s capacity to drive a consistent agenda in Congress. Reforms, including on taxation, have thus become unfeasible for the remainder of the current mandate (until 2022), which does not prevent initiatives that might at least simplify Brazil’s complex tax regime.
The latest Ipsos presidential voting poll carried out on 30 April indicates that Keiko Fujimori is on 34%, having reduced her anti-vote slightly. Fujimori’s leftist rival Pedro Castillo remains in first place on 43% and broadly stable. The results echo a Datum poll carried earlier last week; while Datum pointed to a stronger rise in support for Fujimori to 34% (from 26% previously), it had Castillo on 44% (up from 40% previously). Both polls took place before the impromptu 2 May debate between the two candidates in Castillo’s home district of Chota (Cajamarca), which Castillo challenged Fujimori to attend. In front of a broadly partisan crowd, Castillo reverted to some of his more radical rhetoric. The JNE electoral authority is organizing two further debates on the final two Sundays in May.
President Alberto Fernandez appears to have staved off the loss of Finance Minister Martin Guzman after he threatened resignation over the weekend. Guzman wanted an under-secretary at the finance ministry, Federico Basualdo, removed from his post for failing to come up with a plan to raise utility tariffs – part of Guzman’s bid to lower costly state subsidies. Basualdo, who ultimately answers to VP Cristina Fernandez (CFK), resisted, presumably on orders from CFK and/or her son Maximo Kirchner. Both are highly reluctant to reduce populist subsidies in the run-up to the October mid-terms. Basualdo remains in post for now but is expected to depart soon. The whole episode highlights how much power CFK exercises, while pointing to Guzman’s growing frustration with the awkward political arrangement between the president and the Kirchner-led La Camporagroup. Guzman’s departure would probably entail an even more heterodox approach to economic policy and unsettle slow-burn talks with the International Monetary Fund (IMF).
In parallel, the government’s vaccine procurement policies will be under scrutiny this week as Health Minister Carla Vizzotti is called for questioning on 7 May as part of an investigation into the government’s contract (for 22.4mn doses) with AstraZeneca (AZ), which has been subject to delays. Vizzotti is allowed to submit written answers, so the political impact should not be exaggerated. However, the investigation could raise awkward questions for the government; one line of enquiry is that negotiations with Pfizer broke down due to pressure from the laboratory that is producing the AZ vaccine locally. Negotiations with Pfizer have since restarted, while Vizzotti is reportedly pushing AZ to allow entirely local production of its vaccine, a change from the current arrangement whereby production is finished in Mexico. Argentina’s official Covid-19 caseload exceeded 3mn cases on 2 May.
The next few days are likely to see intensified negotiations over the make-up of the National Electoral Council (CNE). A more politically balanced CNE could pave the way for gubernatorial, mayoral, and municipal elections later this year with greater participation than was the case in the 2020 legislative elections, which most opposition parties boycotted. A new CNE could also represent an important marker to the US, where the Joe Biden administration is reviewing its approach to the Nicolas Maduro regime. The 30 April release to house arrest of six jailed oil executives, five of whom are US-Venezuelan citizens, combined with Maduro’s recent acceptance of UN World Food Program aid, suggests the regime is looking to improve relations with the US; that likely reflects the desperate state of the economy. Even so, the regime is highly unlikely to cede control of the CNE, and any thawing of US-Venezuelan relations is likely to be very cautious.