Political Climate Report

POLITICAL CLIMATE REPORT anything, this year’s G20 proved that the signing nations can at least sit down on the same agree to and same table the on down sit least at can nations signing the that proved G20 year’s this anything, crises economic global tackle min to mechanism in keeping especially important, is This of continuation the G20 as a venue for dialogue and a degree of certain cooperation t relating multilateral institutions, migration, and climate change sections in vague especially document. and G 30 and APEC November the of on outcome Aires Buenos of City the over consensus in prioritizes 1, December place took which summit, leaders’ G20 The final, 31 All things considered considered. things all leaders, for weekend and productive inclusive an be out to turned what but missteps, organizational or diplomatic any major without can these While Buenos in Aires. summit aG20 for expectations set had muted tensions global rising the of disaster The logistical Argentina holds successful G20 summit approaches. year electoral as its the strategy unifying to closer seems opposition Peronist themoderate Meanwhile, outst consider to December in to take place sessions extraordinary of series for a called has now government the recess, congressional the before proposal budget the2019 passing one for a after strike general off a called confederation labor counter summit, the run immediate the in concerns security there were Although event on the sealed d bilateral several communiqué, soft) (through on a final consensus reached state of The heads measures. byvarious success a declared safely be can that summit a leaders’ with December early Argentina December 5 Political Climate República República Argentina (C1 Ciudad de Autónoma 950 Esmeralda Torre Bellini +1 (11)+54 0991 5238 www.cefeidas.com [email protected] CONTACT INFORMATION (646) 233 3204 233 (646) 007 take some of the credit of the some take A low expectations expectations low BL )

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which remains firm in their decision to leave the agenda between the two countries for the Paris Agreement). the next five years in matters of trade and

investment. The successful diplomatic ARGENTINA

Perhaps more heartening was the interventions between Argentina and – news of a 90-day truce on the U.S.- major world economies — themselves

PCR PCR China trade war, or the signing of the often in conflict — show the success USMCA trade agreement on the with which the Macri administration sidelines. Though the truce is contingent managed to navigate geopolitical

on a revision of terms and could fall tensions to pragmatically advance through, it is a short-term win for both Argentina’s interests. countries and for the global economy. Indeed, following the summit’s two-day Other notable bilateral encounters for proceedings and various bilateral meetings, Argentina included meetings with India’s very few countries will feel that they left Narendra Modi and Japan’s Shinzo Abe. empty-handed, with nothing to show Macri hosted a breakfast for Prime Minister audiences at home, or somehow on the Modi, where both leaders discussed losing side. opportunities for cooperation between their countries, while his meeting with Prime In the opening address, President Mauricio Minister Abe yielded the signing of an Macri stated about the potential outcome of investment promotion agreement two years the summit: “I am an optimist.” At the time, in the making. Meanwhile, on December 3, and given the events leading up to the Macri admitted to the delay of negotiations summit (see below), this statement seemed regarding a Mercosur-EU trade agreement, excessively hopeful. In retrospect, Macri’s but stated that his talks with leaders of EU optimism may have been warranted. nations had been positive regarding the Though it remains to be seen whether deal (participants will wait until Brazil’s the results of the summit and the many president-elect Jair Bolsonaro takes office bilateral meetings surrounding it yield before furthering discussion). Stalled long-term benefits, the short-term relations with the EU contrast with outcome seems positive. In the end Argentina’s growing engagement with everything went according to plan and the Asian countries, as the South American host can claim responsibility for the nation seeks to capitalize on greater summit’s success, to a certain extent. trade complementarities. Macri’s administration, for one, is sure to paint the international meeting as a Following weeks of growing tensions, both resounding success. nationally in Argentina as well as internationally (with political instability in What is in it for Argentina? Ukraine and Syria, growing migration crises, trade spats, and failure to come to As the host, Argentina aimed to make the an agreement in other recent summits), it most out of the many bilateral meetings it is hard to see the outcome of the G20 as had scheduled with other world leaders. something other than positive. As for President Macri’s most noteworthy Argentina, and particularly for the Macri one-on-one meetings were with administration, the success of this event Chinese leader Xi Jinping, U.S. gives it some much-needed breathing President Donald Trump, and Russian space following months of economic President Vladimir Putin, as well as struggles. Indeed, the administration will with Prime Minister Theresa May, who look to capitalize on its success as much as became the first UK prime minister to visit it can. The reputational consequences Argentina since the Malvinas War. Notably, of the summit’s success could help the meeting between Macri and Xi Jinping position the Macri administration for a proved fruitful: over 30 agreements were good start to electoral year 2019, signed between the two leaders, delineating

especially in the absence of any extraordinary events. “Cuaderno-gate” probe reaches top business leader

ARGENTINA On November 27, Federal Judge Claudio Bonadio

– G20 goes off without incidents in the streets indicted one of Argentina’s most prominent business leaders, Techint Chairman Paolo Rocca,

PCR PCR for alleged involvement in the “notebooks In addition to celebrating the summit’s scandal.” Bonadio is heading the so-called diplomatic success, come Sunday, the “cuaderno-gate” investigation, which accuses former presidents Néstor and Cristina Kirchner of Argentine government could breathe a sigh receiving illicit cash payments from companies in of relief that the G20 ended with no major exchange for public works contracts. Techint’s incidents in the streets, and protests were Rocca had previously testified that a company largely peaceful. The government had executive paid officials in the CFK administration to speed up a compensation package for the hoped to avoid a repeat of the 2017 summit Venezuelan government’s expropriation of in Hamburg — where large-scale protests Techint-owned Sidor. Rocca claimed he did not were marred by riots — and it was know of the monthly instalments at the time of successful. This was achieved through both their payment, but Bonadio’s indictment claims that Rocca had to be aware. The news resonated a well-organized security effort and in the business community, showing the deft negotiation with opposition unprecedented potential reach of these corruption forces, including the Kirchnerist investigations, and Techint’s shares in Italy movement, that allowed the summit’s plunged 7.1 percent on the news. Bonadio also simultaneously indicted several former high-level diplomatic efforts — and not images of officials from the Kirchner administrations, violence or police repression — to be although the case against CFK herself seem to the headlining story. have stalled due to insufficient evidence from the investigation to build a strong case. On December 5, prosecutors appealed the judge's indictment The government’s ability to handle the and called for Rocca's indictment to also include event’s security was called into question in preventative detention. They made the same the lead-up to the summit by a debacle request for several other individuals indicted in ahead of a major regional soccer the case, including CFK’s former cabinet chief, Juan Manuel Abal Medina. championship between Argentina’s two main rivals — River Plate and Boca Juniors. River Plate ultra-fanatics attacked Boca Juniors’ team bus, injuring players and public transportation closures, and causing the match to be postponed. The coordination with international incident was attributed to poor planning governments to identify and block the entry (allowing the bus to get so close to fans), of potential instigators. The national and although security for this event was government also declared a holiday in the organized exclusively by the city city on the Friday of the summit, greatly government (meanwhile, G20 security reducing chaos generated by roadblocks involved significant national participation), and transportation closures. onlookers wondered if the incident was a bad omen. Several other incidents, Coordination with social movements was including an unrelated explosion of a device another key factor in ensuring that protest at the popular tourist attraction, Recoleta did not become a confrontation with Cemetery, also exacerbated nerves in the security forces. In contrast with last year’s lead up. summit in Europe, which was attended by organizations from around the continent, These concerns turned out to be largely the organizers of the anti-G20 efforts unfounded. Despite some minor snafus, the in Buenos Aires were domestic social event went by smoothly. The massive organizations and human rights security effort involved more than 22,000 groups. This facilitated dialogue agents from various security forces, nearly between the government and 3,000 city traffic inspectors, the cordoning demonstration organizers, including off of large swatches of Buenos Aires City, Nobel Peace Prize Winner Adolfo Pérez

Esquivel, which agreed on a route for their anti-G20 march with the government and Latest figures show continued stagflation

also committed to encouraging participants ARGENTINA

to not cover their faces or encourage Argentina’s economy continues to suffer the – violence. Ultimately, several thousand effects of stagflation. Month-on-month inflation in October hit 5.4 percent, the second-highest

PCR PCR individuals participated in protest events increase in 2018 (September’s inflation reached and the march to national congress to reject 6.5 percent). Year-on-year inflation reached 45.9 the G20 and IMF agreement. percent and a total of 39.5 percent in 2018. This increase is mostly explained by the rise in prices for transportation, food and non-alcoholic Threat of general strike defused as beverages, and housing. Meanwhile, the latest gov’t mandates bonuses monthly economic activity indicator — which serves as a early sign about the direction of GDP growth - decreased 5.8 percent in September The weeks and days leading up to the G20 year-on-year and 1.9 percent compared to summit saw increased strike action and August. The latest OECD report estimates that mobilization from unions, which expressed Argentina’s GDP will contract by 2.8 percent in 2018, and by 1.9 percent in 2019, and the latest discontent with Macri administration IMF prediction is for a 1.6 percent contraction in policies and called to reopen salary 2019. This suggests that next year’s contraction negotiations due to higher-than-anticipated may be deeper than originally forecast (the 2019 inflation. The G20 summit provided a budget forecasts a .5 percent contraction).

strategic opportunity for unions to increase In recent days, the Argentine peso has fluctuated pressure on the government to meet its somewhat (see graph). However, the new demands: the government was willing exchange-rate band policy implemented by to make concessions as it prioritized Central Bank President Guido Sandleris in October has efficiently stabilized the peso, and fluctuations ensuring the international event went have remained well within the given range. In off smoothly and avoiding negative fact, on December 4 the Central Bank announced images in international media. the removal of the 60 percent interest rate floor implemented in August, as well as the decrease of monthly adjustments made to the exchange rate Transportation unions also flexed their band (previously, the band was going to increase muscles. On Tuesday, November 27, the its upper and lower bounds by 3 percent every CATT transportation confederation halted month to keep up with devaluation, but this has public transit for three hours in the early been revised down to 2 percent). Due to the competitive exchange rate and a decrease in morning to protest income tax (in recent imports as a result of the weakening economy, years, the increase in the minimum income Argentina registered a commercial surplus of 277 subject to the tax has not kept pace with million USD for the second consecutive month in either inflation or salary increases, October.

Exchange Rate - Argentine Pesos per USD 40

10 Source: BCRA

effectively widening the tax base; a campaign promise of Macri was that most ARA San Juan located a year after disappearance

workers would not pay this tax). The CATT ARGENTINA

strike was shortened following a meeting On November 16, exactly one year and one day – with the union in which the government after the ARA San Juan submarine went missing off Argentina’s southern coast, the government

PCR PCR committed to open a roundtable on the announced that a search mission had located the sector and look at the possibility of missing vessel approximately 500 kilometers off exempting some bonuses from taxes. the coast at 907 meters underwater. The high-

profile disappearance of the submarine sparked a A day earlier, on November 26, all flights multinational search and rescue effort in late 2017. The multilateral search effort largely ended operated by state-run Aerolíneas by early 2018, but families of the missing 44 crew Argentinas were cancelled due to strikes members pushed for the search to continue. The organized by air workers’ unions. The strike ARA San Juan was located by the company Ocean Infinity, which had been contracted by Argentina action was the fourth organized against to continue searching for the submarine in August. Aerolíneas in November by these groups. Unions are upset about sector-wide policy Pictures of the vessel and ocean floor seem to be such as allowing low-cost airlines to begin consistent with the theory that a battery failure contributed to an explosion onboard and allowed operating in Argentina. They are also water to leak in. Defense Minister Oscár Aguad protesting reductions in subsidies to the appeared before a bicameral congressional airline, which are resulting in service cuts, committee this week to answer questions about and calling for wage negotiations. There has the issue. He suggested that much of the responsibility for the incident was due to poor been progress made this week toward upkeep under the previous Kirchner resolving the dispute as the company administration and human error in the response agreed to open salary negotiations and to the explosion. The submarine’s disappearance suspended sanctions it had levied against has drawn attention to the lack of funding for Argentina’s armed forces, and several high-level several hundred workers that went on officials, including the head of Argentina’s navy, strike in early November. were dismissed last year in the wake of the incident. However, notwithstanding the activism of the transportation sector, the advance of any dismissal without cause of government successfully defused the an employee with an indefinite contract.1 specter of a G20-timed general strike raised by the CGT labor confederation These stop-gap measures were intended to in October, with an agreement reached avoid the immediate risk of a general strike in early November for a one-time bono in the days preceding the G20, and also to (bonus) for workers at the end of the year give some breathing room in the coming and a measure to halt layoffs through March weeks. The government hopes that the 31, 2019. In mid-November, the economic contraction will begin to reverse government issued a decree which formally by mid next-year, helping to allay concerns mandates the payment of an ARS 5000 about layoffs. Nevertheless, although the bonus to all private-sector employees (to measures had some immediate impact, be paid in two equal installments with unions will likely continue to agitate November and January salaries) and also for re-opening of wage discussions and requires that the Production and Labor the risk of mobilization will remain ministry be notified at least ten days in elevated; many unions that agreed to 15

1 It is worth noting that the scope of these measures governments have negotiated bonuses with public- is less widespread than it may seem. For one, the sector employees. Additionally, the notification of bono only applies to formal, private-sector workers intention to dismiss a worker does not automatically nationwide, and additionally leaves space for SMEs to imply mediation; calling a hearing is at the ministry’s determine whether payment is feasible according to discretion and appears to be intended to serve their circumstances. Public-sector workers are not primarily as a disincentive for laying-off workers. included, although many national and provincial

percent wage increases at the start of the during the debate reflected the position of year have sought to re-activate many moderate Peronists. He characterized

renegotiation clauses. it as a “bad” budget that “needed to be ARGENTINA

voted [through] because it is the lesser of – Shortly after the agreement about the two evils,” but argued that not approving

PCR PCR bonus and layoffs was publicly the budget would have sent a bad signal to announced, Labor Secretary Jorge the international community. His support Triaca announced his resignation reflects the general position of his bloc,

(though it was not made effective until this which criticizes the Macri government but week, after the G20). Rumors that Triaca also accompanies many of its initiatives in would leave due to increasing tensions with an effort to ensure governance. Meanwhile, Production Minister Dante Sica had FpV’s more oppositional stance can be circulated for weeks. His negotiating summed up in former President Cristina position had been weakened when the labor Fernández de Kirchner’s harsh criticism of portfolio was subsumed into the Production the document. Her 50-minute remarks Ministry, and this move consolidates Sica’s focused on how this budget would “deepen growing importance in the government. No the suffering of Argentine society” and how announcement for Triaca was named, and no one in the Senate “has the moral Sica is handling the labor portfolio. Triaca’s authority to tell the people that they need ability to negotiate with unions has played to make a sacrifice.” a key role in alleviating social conflict thus far in Macri’s government, and it remains to In tandem with the 2019 budget, the be seen if and how the approach to the Senate also debated bills regarding labor movement changes moving forward. changes to the personal assets tax3 and a reduction in the tax on credit Senate approves 2019 budget unions and financial cooperatives from 6 percent to 3 percent of taxable assets. On November 15, the Senate approved These two will require a final vote in the Argentina’s final 2019 budget and the Fiscal Chamber of Deputies before they are Pact Addendum,2 which had previously finalized. passed through the lower house (see October PCR for more details). After a 14- Extraordinary sessions called up as hour long session, the final 45-for, 24- bills pile up in Congress against, 1-abstention vote showed support from ruling political coalition With congressional recess starting just after Cambiemos and some moderate the 2019 budget was passed and scheduled Peronists, while hardline opponents to last until March, the Macri (such as members of Frente para la administration has called for Victoria — FpV, CFK’s political party) extraordinary sessions in Congress to voted against. As expected, the vote discuss pending bills, from December showed a rift in the Peronist Partido 3-21. Priorities include the income tax Justicialista (PJ), the opposition bloc with modification mentioned above and the most representatives in Senate; nine of discussion of a proposal to change the 22 legislators of the Argentina Federal political party financing system. The interbloc voted against the budget. Senate former is likely to pass as it complements PJ leader Miguel Ángel Pichetto voted to the budget and has wide approval from approve the document, though his remarks provincial governments, which would also

2 This also finalized the decision to postpone the 3 An additional modification to the personal assets gradual reduction of the stamp tax by a calendar year tax to exempt households worth less than 18 million (it initially looked to eliminate the tax by 2022), pesos was made. which was included in the Fiscal Pact Addendum.

benefit from modifications. The latter was one of Macri’s 2015 campaign promises; Government loses influence in judicial oversight body

the draft under consideration was initially ARGENTINA

presented by the government July 2018 A series of changes recently took place in the – and could allow private-sector contributions Consejo de la Magistratura, an organism responsible for approving judicial candidates and

PCR PCR to campaigns. Though proponents of the providing oversight of the judiciary, which may law see it as necessary in the face of impact the future course of corruption cases. In illegitimate financing and other “cuaderno- an unexpected move, Kirchnerist and non-

gate” ramifications — as it would limit cash Kirchnerist Peronists joined forces to appoint two donations—lack of consensus amongst the of the three members selected by the Chamber of Deputies in the Consejo, leaving ruling coalition government coalition about the bill’s details Cambiemos only one spot. Peronists also hold two may prevent its passage before year’s end. of the three spots selected by the Senate. This A possible alternative to the law would be gives the opposition control of the six council members chosen by Congress (of 13 total). This to limit, by presidential decree, the could slow progress in case against past amounts received through cash government officials, while cases against the contributions, though this could be deemed current administration may become more likely. unconstitutional. These extraordinary This comes on the verge of an electoral year in which corruption is expected to play a role in sessions will also include discussion of a law electoral races. to increase penalties for violence committed by barras bravas (soccer fanatics), which has gained relevance little political will to discuss new laws, the following the violence ahead of the River- call for extraordinary sessions grants the Boca match. government greater influence over which projects get to be discussed. With little Two initiatives that seemed likely to be time to advance their agenda after the included in these extraordinary sessions congressional recess, which ends in were left out due to their contentious March, and before the general nature. Discussion of a new tenancy law elections in October 2019, the current (see October PCR) and a bill to modify law administration will have to be strategic 26,628, abolishing income tax exemptions about which reforms it chooses to for all judges, will have to wait at least until pursue. March. This bill, which was briefly discussed alongside the budget but then postponed, Peronists plan possible primaries could capitalize on a recent November 27 Supreme Court decision. The Court ruled The ruling Cambiemos coalition currently that judges who took office since 2017 seems well-positioned for a bid at next would not be exempt from income year’s presidency in large part due to the taxes, as determined by a 2016 law which lack of a unified opposition. Knowing this, had been stalled for precautionary members of the opposition have measures. Advocates for requiring judges sought to create a unified Peronist to pay income taxes had also been looking platform that could provide a strong to leverage the current economic context as opponent to a Cambiemos candidate, the Argentine government looks to close as is the case with new alliances such as the fiscal deficit. Alternativa Argentina (see September PCR) and Red por Argentina (see October PCR). Other than finalizing law projects before the Unsurprisingly, support or opposition to congressional recess, the move to call for former president CFK and her potential extraordinary sessions also serves a electoral bid seems to be the main political purpose. Following a week were a difference between these factions. surprise move by opposition deputies left the ruling coalition with one less seat in the In what was portrayed as a fruitful Consejo de la Magistratura (see sidebar) Alternativa Argentina meeting on and proximity to G20 left legislators with

November 21 between nine provincial discussion about convincing Catamarca governors,4 Senate PJ leader Miguel Ángel Governor Lucía Corpacci and San Juan

Pichetto, and Frente Renovador leader Governor Sergio Uñac to join the front. ARGENTINA

Sergio Massa, the anti-CFK Peronist front Furthermore, attendees mentioned unifying – seems to have taken shape. Primaries for the Argentina Federal and Massa’s Frente

PCR PCR this front will likely include Salta Governor Renovador blocs in the national lower Juan Manuel Urtubey, Massa, and Pichetto, house, a strategy which would give them a though there is still time for others to throw combined 45 seats in the Chamber of

in their name. Deputies.

In the meeting, attendees committed, Finally, there was also talk about first and foremost, to support leaving CFK out of the Peronist whomever won the primaries for this primaries. On the subject, Salta governor front in the 2019 elections. In addition, and likely presidential candidate Urtubey they devised strategies for the remarked that “a primary with Cristina upcoming electoral year: there was Kirchner in the PJ would be a scam. This, general agreement to hold however, may generate dispute for control gubernatorial elections earlier in the of the formal national PJ party structure year,5 as a wave of Peronist wins in the (charged with organizing the party’s provinces could create momentum for the primaries), which is under the leadership of October general elections. There was sectors aligned with CFK.

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4 These included Juan Manuel Urtubey (Salta), Juan (La Rioja), Hugo Passalacqua (Misiones), and Mariano Schiaretti (Córdoba), Juan Manzur (Tucumán), Arcioni (Chubut). Rosana Bertone (Tierra del Fuego), Gustavo Bordet 5 Provinces in Argentina can choose to hold their (Entre Ríos), Domingo Peppo (Chaco), Sergio Casas elections parallel to the general elections or earlier.