AP:
Argentina's economy minister has resigned in the first major departure from President Cristina Fernandez's four-month-old administration, a government official said Friday.

Martin Lousteau, a 36-year-old wunderkind and former head of a state-run bank, reportedly had run-ins with other Fernandez aides over inflation and the direction of the economy after a bitter 21-day farm strike....

Asked what prompted the resignation, the source said he could not provide additional information. But he said the president and top officials were meeting overnight and had designated Argentina's tax chief, Carlos Fernandez, as his successor.
Local coverage from Clarin and La Nacion. La Nacion also has a profile of the new minister.

Two points of note. First, this could be the president's way of telling the population that she is trying to do something about the strikes, shortages, inflation and other economic problems that are slowly increasing in Argentine's daily lives. Second, they got rid of one of the few new faces in the government and replaced it with a long time Kirchner loyalist. This means the president will hear fewer dissenting views within her circle of advisors.
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  1. I created this blog in September 2004 with no particular purpose other than to write a bit about Latin America and foreign policy. I'm writing more at Substack, World Politics Review and elsewhere these days.

    If anyone checks in on this blog at all, thanks for reading. It's still here.

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  2.  Reuters:

    A collapse in Colombia's tax collection is setting off alarm bells for the market, which says the government will need to contend with an estimated budget shortfall of some 27 trillion pesos, about $6.9 billion, this year....

    ...Tax collection fell 40.9% in April to $4.83 billion, taking the overall shortfall to about $2.85 billion in the first four months of the year compared to the target.

    Bloomberg:

    Even with some runway left, Ecopetrol sees an 8% gap between the gas supply and total demand beginning next year, widening to around 25% in 2026 and 30% the year after. The firm’s forecasts imply shortfalls will continue above that level until around 2030 when underwater deposits begin to meet demand.

    Three comments:

    1) Both of these issues go well beyond 2024. This is a threat to Colombia's economy that gets worse, not better, going into 2025 and 2026, even if they fix the problems for this year's budget and energy demand.

    2) Petro's approval rating will not improve with these issues sitting out there. And that means his plans for a constituent assembly would lose in a vote.

    3) Import gas from Venezuela? Forget the politics of it. From a basic "is this possible?" point of view, Venezuela can't ramp up production and faces infrastructure problems that make Ecopetrol look like a model of efficiency. Colombia should not be banking its hopes on Venezuela getting its energy situation working in a way that allow it to export enough gas to meet Colombian demand.

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  3. I used last week's World Politics Review column to call for a regional response to Ecuador's security crisis. ICG asks about the impact of a war on crime. InSight Crime provides a map of the criminal landscape.

    Across many of the things I've read, there is a common theme that a mano dura approach is bound to fail. I think I agree, though I've been reassessing it a bit in recent weeks. Among the questions I have:

    • What are the other options? I'm all in favor of an approach that goes after root causes and an approach that demands rethinking the "drug war" logic. However, neither of those two options deals with the violent gangs in the short term. Ecuador needs to deal with its security situation today as it is. It can't say, "well if we had decriminalized cocaine a decade ago, this wouldn't have happened." or "if we invest in education, this will look better in ten years." This isn't to suggest we shouldn't do those things, but it doesn't answer how Ecuador should secure itself this month. If there is a list of options, what are they?
    • Is a mano dura approach doomed to fail? The literature suggests lots and lots of failures across time. But does that guarantee it will fail? El Salvador is sort of a piece of evidence to the contrary, but analysts also know the Bukele's backroom deals with gangs are also playing an important role in creating an image of mano dura success that isn't completely real. 
    • Should Noboa consider a backroom deal? It's ugly, but that is something that is working in El Salvador. 
    No solutions in this post. Just questions I'm considering.


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  4. The point of shock therapy is to "rip the band-aid off." Cause a lot of pain quickly so that the country can get past the worst of the economic situation and move on to recovery.  That's why this chart from Bloomberg about Argentina's inflation rate looks the way it does.


    Subsidies have been removed and the peso is free-floating, causing all sorts of pricing difficulties and an inflation surge. It's worse now than it was at the end of the Fernandez administration.

    Javier Milei is engaging in shock therapy and some of the same people who helped Carlos Menem at the beginning of his administration in 1989. The bet is that a new administration can use its political capital to get away with a few months of pain and that the country will begin recovery before the economy pain causes political unrest.

    One challenge in Argentina is that Milei's opponents understand the shock therapy playbook. They are getting protests organized quickly and mobilizing opposition to the president. This will be a test for the new Milei administration. It was easier to run against an unpopular Peronist government than it is to maintain support when there is no election or unpopular opponent to pin the blame on.

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  5.  Will Freeman makes two big arguments that I agree with in his column in Time Magazine.

    1. The surge of immigration is caused by push rather than pull factors and there isn't much that can be done in terms of border security to halt it.

    2. Efforts to block the US-Mexico border or block migrants along the route are generating incentives for organized crime to become more involved in the whole process. It's profitable.

    Part of the solution needs to be reducing the push factors, but there is no quick win on that front. Another part of the solution is that the US should be putting appropriate resources towards managing the issue rather than trying to stop it. Processing asylum applications quicker is both more humane and a smarter process that would change the incentives for many of the migrants. 

    There is certainly a role for combatting criminal groups. Better rule of law, particularly in Mexico, would help. But there isn't a magic wand solution set that defeats the criminals and causes the migration to stop.

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  6. I started writing today's newsletter about Ecuador last night. Continued early this morning. But then I had things to do and didn't get around to finishing it around 3pm. And as I wrote, more news broke. Gunmen stormed a television station. Gangs took over a university. The president issued what amounts to a declaration of war.

    Instead of trying to keep up with events, I tried to provide some strategic framework. My goal was to highlight:

    • The fact numerous gangs are fighting each other makes the situation more complicated than if this was simply the government taking on one bad actor.
    • The gangs' incentives are to commit violent acts against strategic and political targets. The government's incentives are to go to war with the gangs. That is why the situation will escalate. 
    Today was particularly rough and there might be a lull at some point in the coming days. But for the reasons above and those in the newsletter, this is a situation that doesn't have a simple ending. Noboa, having declared war, must now find a way to get some tactical victories in the short term, even if strategic security is a long way off.

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  7. Maduro's opponents in Venezuela extended a committee to oversee foreign assets. It's an interesting exercise that provides them some leverage over bonds, Citgo, and a bunch of gold held in the Bank of England.

    On top of the financial implications, what caught my eye was this paragraph:

    The opposition national assembly's session was transmitted over Zoom, which it says is due to the majority of its members living in exile due to harassment from the government. The meeting of the ruling party-dominated assembly in Venezuela took place in central Caracas.

    Venezuela still has dueling legislatures claiming legitimacy! Juan Guaido is no longer serving as the de jure president of the country, creating a narrative of two presidents. But the fact that the opposition still claims to have the legitimate Congress means that there are two Congresses operating at the same time. If one Congress passes a bill and the other rejects it, how should foreign companies or governments choose to recognize what is true?

    The de facto Congress in Caracas clearly has the power, though as a rubber stamp for Maduro, they aren't doing much with it other than backing the president. But the de jure Congress could cause legal messes abroad with debt or company ownership.

    Latin America is a president-focused continent and Venezuela is more focused on the executive branch (given that it's a dictatorship, etc) than most. Regional bodies such as the OAS, Summit of the America, and CELAC are too often a club of presidents where other branches of government don't get enough say. But if we take separation of powers seriously, then the fact dueling legislatures remain in Venezuela should be treated as a big deal.

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  8. There is little doubt that Argentina's new president is engaged in economic "shock therapy." I'm having a hard time managing any sort of easy summary of all the measures that have been issued in recent weeks, but the three issues from this week that seem most important are the proposed debt swap, the labor reform that has been halted by the courts, and the potential for an IMF deal. 

    Looking forward, this becomes about Milei's clashes with four groups:

    • Congress
    • Courts
    • Protesters
    • Public
    Milei will get a congressional coalition together to support some of his policies, but there will be a line that Congress will not cross. They will demand moderations and then the president will need to decide whether he moderates or works around them. The clash with the court over labor reform is critical because it will set the tone for whether or not Milei will accept institutional restraints in the early part of his term when he has the most political capital and mandate. He almost certainly knows he will lose that capital over time.

    The protests will happen. Milei has occasionally used over the top rhetoric for how he would repress the protests and all out repression would not go over well. But the size and organization of the protests will determine their success.

    Ultimately, it's about how long the Argentine public gives Milei the benefit of the doubt. I've seen suggestions the public has already turned on him due to his measures and the potential for 200% inflation or higher this month (because of the devaluation and the damage that has done to incomes and prices). I don't think that's accurate yet, but he's really playing with about 100 days here, meaning he only has a bit more than two months left before that public tolerance for his shock therapy goes away. 

    The moment this turns from four groups to three because the public and the protesters merge into one and the same, that is the moment Milei's government is at risk and something he needs to avoid.

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  9. Brazil will vaccinate 150,000 people in Mato Grosso do Sul against dengue, the start of what the country hopes is over five million people to be vaccinated this year. We should all be excited by the prospect that there is an effective vaccine against dengue and that Latin American governments can begin distributing it now.

    According to PAHO, there were 4.2 million cases of dengue in 2023 in Latin America resulting in 2,000 deaths. It's an awful disease and the sooner the number of annual cases can be reduced, the better it will be for the region.

    Vaccine drives were low key prior to the COVID pandemic, but hopefully governments have learned how to do them better and people are still eager to get vaccines against non-cataclysmic events. Because there is no reason that these currently regular diseases need to be routine in the future.

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  10.  Experimenting with some formats for sharing info. Here are some notes from today's news sweep.

    AMLO will run a large deficit in the final year of his administration in the hopes of boosting the economy and his party's election chances. To do so, Mexico issued $7.5 billion in bonds. https://www.bloomberg.com/news/articles/2024-01-02/mexico-taps-debt-markets-kicking-off-latin-america-s-2024-sales

    The Zapatistas marked 30 years of not winning with a march that had 1,500 members. One point is that they are facing challenges given the encroachment of criminal groups into Chiapas. My other comment: 1,500 is enormous. That's a real insurgency size. It's amazing the group is as low impact as it is if it can get that many people organized. https://www.pbs.org/newshour/world/zapatista-indigenous-rebel-movement-marks-30-years-since-its-armed-uprising-in-southern-mexico

    Over a dozen priests have been detained in recent weeks in Nicaragua in a new crackdown against the Church.

    Good articles on Brazil's economy and political situation:

    “The Fund sees us as heroes." This quote from Milei is a wild shift in Argentina's politics as the IMF visits the country for meetings. https://www.bloomberg.com/news/articles/2024-01-02/argentina-says-imf-to-visit-thursday-to-restart-44-billion-deal

    Mercosur and the EU may engage in one more try to get a free trade deal. Argentina's former president blocked the deal at the last minute, but Milei's government now seems eager to push it across the finish line. That would leave France as the big last holdout.
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