LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, September 18, 2020
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LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, September 18, 2020 BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Is Mexico Setting Bolivia’s Áñez CEO, DevryBV Sustainable Strategies Drops Out of Joyce Chang Global Head of Research, the Right Priorities Presidential Race JPMorgan Chase & Co. Bolivia’s interim president, Paula Cifuentes Jeanine Áñez, said she is with- Director of Economic & Fiscal Affairs, in its 2021 Budget? drawing from the presidential race Latin America & Canada, Philip Morris International a month before the vote. Áñez Marlene Fernández said she is dropping out in order Corporate Vice President for to help unite conservative voters Government Relations, against MAS candidate Luis Arce. Arcos Dorados Page 2 Peter Hakim President Emeritus, Inter-American Dialogue BUSINESS Donna Hrinak Senior VP, Corporate Affairs, Itaú Has Laid Off Royal Caribbean Group at Least 270 in Jon E. Huenemann Former Corporate and September: Union Government Senior Executive Mexico’s Finance Ministry, led by Arturo Herrera, has proposed a budget that projects econom- Brazilian lender Itaú Unibanco has James R. Jones ic growth of 4.6 percent next year. // File Photo: Mexican Government. Chairman, laid off at least 270 employees Monarch Global Strategies since the beginning of September, according to the leader of bank Craig A. Kelly Mexico’s Finance Ministry on Sept. 9 presented to Congress Senior Director, Americas employees’ union Contraf. Int’l Gov’t Relations, Exxon Mobil its 2021 budget, which features austerity measures and an Page 3 John Maisto increase in support for hospitals, pensioners and infra- Director, U.S. Education Finance Group Q structure. The proposal forecasts the economy will contract ECONOMIC Nicolás Mariscal 8 percent this year and grow 4.6 percent next year. What are the most Chairman, Costa Rica’s Grupo Marhnos important aspects of Mexico’s 2021 budget plan? Are the proposals Alvarado Unveils Thomas F. McLarty III economically sound? What does the plan signal about the government’s New Taxes Ahead Chairman, priorities in the coming year? McLarty Associates of Talks With IMF Beatrice Rangel Director, Costa Rica will enter talks with the AMLA Consulting LLC Ariane Ortiz-Bolin, vice president–senior analyst in the International Monetary Fund next Jaana Remes sovereign risk group at Moody’s Investors Service: “The gov- month on an economic plan that Partner, includes four new taxes, President McKinsey Global Institute ernment has set a small primary surplus target, in line with its Carlos Alvarado announced. 2019 and 2020 budgets, which implies the continuation of an Ernesto Revilla Page 2 Head of Latin American A austere fiscal stance despite the economic shock due to the coronavirus Economics, Citi Gustavo Roosen crisis. Given relatively optimistic GDP growth and oil production assump- Chairman of the Board, tions, we believe the authorities are overstating next year’s government Envases Venezolanos Andrés Rozental revenue. The government assumes a contraction of 8 percent in 2020 and President, Rozental & a recovery of 4.6 percent next year, which contrasts with our assumptions Asociados of a 10 percent contraction this year and a 3.7 percent recovery in 2021. Shelly Shetty Managing Director, Sovereigns The government is assuming that oil production will increase by 6.5 Fitch Ratings percent next year to 1.86 million barrels per day, which we consider to be optimistic given the historical trend of declining production. Similar to previous years, the 2021 budget underestimates the financial support that Petróleos Mexicanos (Pemex) will likely require, which we estimate could be close to $18 billion next year (1.7 percent of GDP in the 2021 fiscal year). While we expect the government will try to adhere as much Alvarado // Photo: @CarlosAlvQ via Twitter. Continued on page 3 COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 1 LATIN AMERICA ADVISOR Friday, September 18, 2020 POLITICAL NEWS The New York Times reported. “I’m doing this NEWS BRIEFS because of a risk that the vote gets divided Bolivia’s Áñez between various candidates,” she said in the Peru’s Vizcarra Faces video. “It’s not a sacrifice, it’s an honor.” The Impeachment Vote Withdraws From election is a re-do of last October’s vote, which was marred by accusations of fraud and result- Today in Congress Presidential Race ed in the resignation of Morales, who now lives Peruvian President Martín Vizcarra is facing an in exile in Argentina. impeachment vote in Congress today as oppo- Jeanine Áñez, Bolivia’s interim president, on sition lawmakers push for his ouster, the As- Thursday announced she was dropping out of sociated Press reported. Legislators launched the race for the presidency one month before ECONOMIC NEWS impeachment hearings last week after an audio the vote. In a video posted to Twitter, Áñez recording surfaced allegedly showing Vizcarra said she was “leaving her candidacy aside in Costa Rica’s Alvarado engaging in influencing peddling. Vizcarra has homage to freedom and democracy,” adding denied wrongdoing and said the audio was that what’s at stake in the election is “no small Unveils New Taxes manipulated. Opponents appear to be short thing.” She reiterated, “what’s at stake is Boliv- of the two-thirds majority needed to remove Ahead of IMF Talks Vizcarra from office. Costa Rica will begin talks next month with the International Monetary Fund on an economic Maduro Rejects E.U. plan that includes four new taxes, President Carlos Alvarado announced Thursday in a video Proposal to Delay posted to Twitter. “The next few months will be Venezuela Legislative Vote decisive for the country’s well-being,” Alvarado Venezuelan President Nicolás Maduro said said. “With the plan to surpass the pandem- Thursday that it would be “impossible” to ic’s fiscal impact, we will negotiate a deal Áñez // File Photo: Bolivian Government. postpone legislative elections planned for Dec. with the IMF to maintain economic stability 6, following the European Union’s proposal to ia’s democracy.” The announcement came after delay the vote to meet conditions for the bloc a poll published Wednesday showed her trailing to send an observer mission, Reuters reported. behind Luis Arce, who is running with leftist The next few months “It is impossible because there is a very clear former President Evo Morales’ MAS party. In will be decisive for the constitutional mandate,” Maduro said. Part of the well-regarded Jubilee Foundation poll, near- country’s well-being.” the opposition is calling for a boycott of the ly 40 percent of those included said they would — Carlos Alvarado vote, citing concerns that Maduro’s government vote for Arce in the Oct. 18 election, while will rig in its favor. [Editor’s note: See related just 10.6 percent said the same for Áñez, who in the country,” he added. The government is Q&A in Monday’s issue of the Advisor.] came in fourth in the poll. Former President seeking $2.25 billion in financing from the IMF, Carlos Mesa came in second after Arce in the according to local newspaper La Nación. Under poll, with 26.2 percent support. If that scenario the plan, the government will raise taxes on plays out on election day, Arce would win the individuals and businesses at higher income Pompeo Begins Four- election without the need of a runoff. Áñez said levels and introduce a new tax on financial Nation Tour With Visits she was abandoning her election campaign to transactions, according to Bloomberg Tax. It to Suriname, Guyana help unite conservative voters against Arce, has also proposed the sale of national liquor company Fanal and the state-owned Interna- U.S. Secretary of State Mike Pompeo on Thurs- tional Bank of Costa Rica. At least one faction day started a visit to South America with stops CORRECTION of opposition lawmakers has already said it in Suriname and Guyana to meet with those In Thursday’s Featured Q&A on Jamaica’s would not support the plan. Legislators from countries’ new presidents, Agence France-Pres- recent election, Alan Zamayoa’s commen- the Social-Christian Unity Party, or PUSC, said se reported. In Suriname, Pompeo told Pres- tary incorrectly said that Peter Phillips it rejected the government’s intention of hiking ident Chan Santokhi that the United States is lost re-election and represents Manches- taxes. “Any regressive tax that comes to hurt “eager to partner” with his country and warned ter Central. In fact, Phillips was re-elected Costa Ricans’ pockets or diminish investment of the risks of accepting investments from and represents St. Andrew East Central. incentives for new employment will not count China. He then flew to Guyana where President Irfaan Ali held a dinner in his honor. COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Friday, September 18, 2020 with the votes of [PUSC’s legislative faction],” FEATURED Q&A / Continued from page 1 said Rodolfo Peña, who heads the party in Congress, CR Hoy reported. as possible to its fiscal targets, we expect investment schemes is to ‘seek financing deviations mostly driven by the need to alternatives outside the government balance support Pemex to meet its negative free sheet, in such a way as to avoid the con- BUSINESS NEWS cash flow and upcoming debt obligations, tracting of public debt.’ And, of course, also which will likely lead to an increase in debt on his agenda is the paramount mission of at the federal government level higher than obtaining