1. BOTCHED VOTE IN ARGENTINA REFLECTS TROUBLE IN SOUTH AMERICA (The New York Times)
2. ARGENTINE GOLD MINER PRAISES MACRI FOR SCRAPPING GOLD TAX (Financial Times)
3. ANALYTICAL GUIDANCE: HOW ARGENTINA’S NEW PRESIDENT WILL REVIVE THE ECONOMY (Stratfor Global Intellinge)
4. MACRI-ECONOMICS IN ARGENTINA (Council on Foreign Relations)
5. MERCOSUR-EU TRADE TALKS COULD ADVANCE SLOWLY NEXT YEAR (Oxford Analytica)
1. BOTCHED VOTE IN ARGENTINA REFLECTS TROUBLE IN SOUTH AMERICA (The New York Times)
By Jonathan Gilbert
Dec. 22, 2015
BUENOS AIRES — Seventy-five team directors had placed their votes in envelopes, and Argentine soccer was moments from electing its first new leader after 35 years under the rule of Julio Grondona, a strongman of Latin American soccer politics who died in 2014. But hope quickly turned to despair: The 75 votes somehow produced a 38-38 tie, a stunning rejection of basic mathematics.
The botched election for the presidency of the Argentine soccer federation this month was viewed by many Argentines as a national disgrace. But in its dysfunction, it offered a view into the perils faced by the new figures battling to control the region’s influential soccer organizations in the wake of a sweeping corruption scandal, and how difficult it will be to coax leaders whom fans can trust out of what many consider a tainted talent pool.
Sepp Blatter during a news conference in which he said the FIFA ethics committee that suspended him “has no right.”
“I can’t trust any of them now — they’re all sullied,” said Patricia Rodríguez, 55, a travel agent, referring to Luis Segura and Marcelo Tinelli, the two candidates in the tied vote. “It’s such a shame, because I had great hopes.”
Ms. Rodriguez’s comments could be repeated all over South America. Of the more than 40 defendants charged in the United States Justice Department’s broad investigation of corruption in world soccer, more than half hail from South America. Every country in the continent’s 10-member confederation, Conmebol, has had at least one senior soccer official charged in the case. The defendants include the past three Conmebol presidents, three former presidents of the Brazilian national federation and the current or former presidents of the federations of Bolivia, Chile, Colombia, Ecuador, Peru and Venezuela.
In Argentina, the federation’s presidential election was rescheduled for last Friday, but in a turn that further exasperated the country’s fans, Mr. Tinelli won a court order postponing the vote indefinitely. For the moment, talks are reportedly underway between the candidates about forming a crisis committee to lead the federation until a new president can be selected.
Mr. Segura, 73, has been the interim president since Mr. Grondona’s death. But because he had been a vice president at the federation for more than a decade, he is largely viewed as a fusty continuation of Mr. Grondona’s leadership. Mr. Tinelli, 55, a popular television host and a relative outsider at the federation, has been proposing increased transparency. But the chaotic election process left many in Argentina skeptical that either man could realistically carry through needed reforms.
“They learned in Grondona’s shadow,” Javier Cantero, a former president of Independiente, one of Argentina’s so-called big-five teams, said of figures like Mr. Segura and some of the voters. Calling for overhauls that would make the federation’s dealings more open, Mr. Cantero added, “It’s a closed door locking in a putrid smell.”
Mr. Grondona cemented power by negotiating lucrative TV and advertising contracts for the federation, then used its financial clout to exert influence over club directors, said Hernán Castillo, who has written a book about Mr. Grondona. After rising to the presidency in 1979, during a military dictatorship, Mr. Grondona was re-elected eight times. Only one candidate, Teodoro Nitti, a former referee, ever officially stood against him; Mr. Nitti won just a single vote.
Allegations of corruption shadowed Mr. Grondona for years, but he was never convicted of a crime. Now, two of his closest aides are under house arrest — accused by the Justice Department of receiving kickbacks worth hundreds of thousands of dollars at a time from sports marketing executives in exchange for rights to the Copa Libertadores, South America’s premier club competition.
The charges against the men, the former Conmebol general secretaries José Luis Meiszner, 69, and Eduardo Deluca, 75, emerged on the day of the fumbled election. To those in favor of reform, the tied vote was a perfect symbol of a resistance to change that they fear will thwart even the most basic reforms.
“It’s a joke that they expect us to believe it was a mistake,” said Brenda Aznar, 26, a secretary for an accounting firm.
In neighboring Brazil, the federation president, Marco Polo del Nero, and two of his predecessors, Ricardo Teixeira and José Maria Marin, have been indicted.
Mr. Marin, who was detained in Switzerland in May, agreed to be extradited to the United States. But after Mr. del Nero — who is accused of receiving kickbacks from sports marketing executives — took a leave of absence to defend himself in the case, there have been calls in Brazil for his resignation and a new election to replace him.
There will also be elections at Conmebol next month; the organization sank into disarray when Juan Ángel Napout, 57, its Paraguayan president, resigned after his arrest in Switzerland and extradition to the United States this month. Mr. Napout has denied receiving millions of dollars in the kickback scheme. His two predecessors in the post, Paraguay’s Nicolás Leoz and Uruguay’s Eugenio Figueredo, had been indicted in May.
Hewing to pleas for reform, Wilmar Valdez, 50, the Uruguayan who was named Mr. Napout’s interim replacement until the elections, in which he will run, told the Argentine newspaper La Nación, “I want true change for South American soccer.”
Fans on the continent have little faith in such pledges, pointing to a tainted generation of soccer leaders.
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“The possibility for change is there,” said Nicolás Lobos, 28, who manages a restaurant in Buenos Aires. “But it’s difficult to frame it from the perspective of officials, who often veer away from the hopes of fans.”
Still, some observers said Argentines should be optimistic, highlighting the fact that there was a competitive election at all, even if it produced a comical result and will have to be repeated.
“Soccer is the people’s sport, but the discussion was always a closed one,” said Ezequiel Fernández Moores, a sports columnist for La Nación. “At last, after 35 years of monopoly power, there’s a public debate.”
2. ARGENTINE GOLD MINER PRAISES MACRI FOR SCRAPPING GOLD TAX (Financial Times)
December 23, 2015
Argentina’s new president, Mauricio Macri, has extended his move to scrap taxes on agricultural exports to the mining sector, eliciting purrs of approval from gold miner Patagonia Gold.
The company said on Wednesday:
This measure coupled with the recent announcement removing exchange controls and the import restrictions continues to improve the overall economic environment in Argentina and opens new opportunities for Patagonia Gold.
Mr Macri was elected on a reform platform in last month’s elections, and he has wasted no time in giving Argentina’s economy a full-on makeover.
Last week he lifted capital controls, allowing the Argentine peso to plummet more than 36 per cent against the dollar.
Patagonia Gold said earlier in the week that this move would result in an “improvement in margins”.
It also praised Mr Macri’s move to abolish “restrictive and complicated” regulations on imports, which, it says:
will expedite the process of importing necessary machinery and spare parts as well as services for the Company, which is expected to improve efficiencies and have a positive impact on production.
Andes Energia, a London-listed but Argentina and Colombia-focused oil and gas explorer, recently said it is excited about the prospects for Argentina’s shale oil industry under Mr Macri.
3. ANALYTICAL GUIDANCE: HOW ARGENTINA’S NEW PRESIDENT WILL REVIVE THE ECONOMY (Stratfor Global Intellinge)
December 22, 2015
Summary
Eager to dismantle his predecessor’s economic policies, Argentine President Mauricio Macri marked his first week in office by taking aggressive steps to liberalize the Argentine economy. So far, the new president has managed to slash taxes on agricultural exports and lift currency controls, causing the value of the Argentine peso to plunge by 30 percent.
Macri’s “shock therapy” policy will undoubtedly hike the country’s already-high inflation even further, putting additional strain on the struggling economy, at least at first. And as Argentines begin to feel the potentially painful side effects, resistance to the president’s approach will build.
Analysis
In Argentina, December is often a month of conflict. Soaring heat, intermittent blackouts, high spending levels and salary negotiations for the coming year push societal tensions to their peak. With Macri’s rapid and dramatic adjustments to the economy, this December is shaping up to be no exception. Since assuming his post on Dec. 10 Macri has focused the bulk of his efforts on reversing Argentina’s economic deterioration. After more than a decade of the protectionist policies and a heavily regulated foreign currency exchange system put in place by the previous adminsitrations, the country is in dire need of a new — and according to Macri, drastic — approach.
Macri’s efforts to shock the economy out of its stupor began on Dec. 14, when he announced his intention to remove the export taxes in place on some of Argentina’s most competitive agricultural products, including beef, wheat and corn. He also plans to reduce the export taxes on soybeans from 35 to 30 percent. The move marks a significant change in Argentine policy: Beginning in 2008, former President Cristina Fernandez de Kirchner maintained high taxes despite farmers’ complaints to fund her energy subsidies and price-control programs.
While Macri’s move may win the support of Argentine farmers, he runs the risk of making enemies elsewhere. The decision to reduce export taxes comes alongside his declaration of a state of emergency within Argentina’s electricity sector as part of a plan to raise tariffs on electricity and natural gas starting in early January. The Kirchner-Fernandez clan’s energy subsidies were among its most popular social policies; by undercutting them, Macri could risk inciting protests by the former leaders’ power bases.
Still, the more pressing concern will be the rapid impact Macri’s policies will have on inflation. After he lifted capital controls, the value of the Argentine peso fell by 30 percent, dropping from 9.8 pesos to the U.S. dollar to 15 pesos. (It has now settled at 14 pesos to the dollar.) As a result, inflation is expected to surge by the end of the month, potentially rising even further in 2016.
Compared with Fernandez’s sudden devaluation of the peso in 2014, Macri’s removal of capital controls was widely expected. Argentina’s private banks have promised to lend about $7 billion to the country’s central bank to help combat the climbing inflation rate. This will offer much-needed relief to the government, whose international reserves are dwindling. Alfonso Prat-Gray, the country’s recently appointed finance minister, is also seeking $10 billion from Wall Street firms to help Argentina settle its debt with foreign bondholders, which currently exceeds $7 billion. Additionally, Argentina has managed to secure $5 billion with the help of the Inter-American Bank and $3.1 billion worth of yuan through a currency swap with China.
Who to Watch
In the coming weeks, Stratfor will be closely monitoring the reactions of the actors who play an important role in Argentine politics:
◾Members of the former administration: Members of the former ruling party, including Fernandez herself, have already begun to criticize Macri’s plans to liberalize the economy. It will be particularly important to monitor figures such as Hugo Moyano, Hector Recalde, Carlos Kunkel and Hugo Yasky, who have enough clout within the labor unions and the legislative branch to slow Macri’s progress.
◾Pro-Kirchner groups and labor unions: Groups that support the previous administration, such as La Campora, will be important to watch because they will heed any encouragement by the former president to launch protests against Macri’s moves to reduce social spending, especially ahead of the next midterm and presidential elections. Meanwhile, the General Confederation of Labor, the Central Argentinean Workers Union and the Transportation Union — all of which are led by opposition figures — are calling for protests in the coming week to obtain 5,000-peso bonuses in response to the currency’s recent depreciation. Though these unions do not have the power to completely derail Macri’s liberalization plan, they could use their influence among transportation and manufacturing workers to instigate strikes and protests among the low- and middle-income classes.
◾Sergio Massa and Daniel Scioli: Massa, the leader of the dissident faction of the Peronist movement Front for Renewal Dissident Peronist Party (the third-largest faction in the lower house of parliament), has refrained from commenting on Macri’s policies so far. However, because Massa’s party has 27 seats in the lower house, its support will be crucial to Macri’s coalition (92 seats) as it looks to push through new legislation. Scioli, the presidential candidate for the former ruling party who warned against Macri’s “neoliberal” plans for Argentina during the recent campaign, represents a powerful Kirchernist faction and will likely try to persuade Massa to join the opposition, which currently holds 109 seats.
◾Macri’s allies: The Radical Civic Union Party is the biggest ally of the new ruling party, Let’s Change. Together, the two control 92 seats in the lower house of parliament. With both houses politically fragmented, Macri will need the support of the party and its leaders, including Ernesto Sanz, Mario Negro, Angel Rozas and Jose Corral, to successfully push toward further economic liberalization. In exchange, Macri may need to yield to their requests for particular appointments to the Supreme Court and the Cabinet, as well as to their policy preferences more generally.
◾Residents of Buenos Aires province: December heat and the possibility of blackouts mean street protests unrelated to Kirchnerist politics could occur.
What to Expect
Since Argentines typically travel in January, the country will likely remain tense but relatively calm for the first month of 2016. However, teachers’ unions and others may start demanding higher salaries in response to Macri’s policies come February, which could lead to protests and/or strikes. If protests occur, demonstrators will probably focus their demands on increased salaries, not on calls for the president’s resignation.
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4. MACRI-ECONOMICS IN ARGENTINA (Council on Foreign Relations)
By Robert Kahn and Ted Liu
December 22, 2015
While markets have focused attention on China as the primary source of market risk in 2016, Latin America has provided the more significant headlines in recent weeks. Political turmoil in Brazil has resulted in the resignation of a market-friendly finance minister, and default looms in Venezuela. But perhaps nowhere in Latin America is more at stake than with the economic revolution now underway in Argentina.
As the first non-Peronist president in more than a decade, Mauricio Macri has promised to roll back populist policies of his predecessors and implement market-friendly measures in Argentina. Following his election, his administration moved quickly to lift currency controls, resulting in a substantial devaluation of the official exchange rate, reduced trade taxes, installed a new central bank president, and raised $5 billion in financing from a group of international banks. He has also promised to settle the country’s decade long legal battle with creditors, normalizing the country’s economic relations and turning Argentina outward. At a time when populism is constraining economic reform across the industrial and emerging world, many in markets see Argentina as a bright spot in the region.
Markets have responded quite positively to this big-bang approach. After dropping over 25 percent, the currency has stabilized and a number of banks have raised their recommendation on Argentine assets. Still, the economic challenge is daunting. Diminishing foreign exchange reserves raise uncertainty in Argentina’s ability to defend peso’s value should crises occur (Figure 1). Inflation is rampant, over 25 percent as of October. The expansionist fiscal policy has also created a deficit that private estimates by companies including Goldman Sachs place between 6 and 7 percent. The sharply weaker currency will exacerbate these challenges, at least temporarily, even as it sets the basis for competitiveness in the longer term. Without much room to maneuver in collecting revenue, Macri’s fiscal consolidation will most likely rely on cutting expenditure, including popular energy subsidies instituted by his predecessors. Finding alternative sources of expenditure cut and revenue increases will be a difficult though critical task.
The broader question is whether this time is different, and whether Argentina can break out of its history of populist economic cycles. While all these measures are necessary, they will be painful and likely induce economic contraction in the short term. Accustomed to years of economic populism, the Argentine people will now need to support policies previously deeply unpopular. Meanwhile, his party lacks a majority in the Argentine congress. Historically, investors would have done well from buying Argentina after default and selling on efforts at normalization. There’s a danger of political and social backlash, and perhaps this is not the end of populism for Argentina.
Against a weak global economic backdrop, the country will face challenging fiscal outlook and likely economic contraction. Getting the sequencing and coordination of reforms right will require a delicate balance between economic change and disruption. Macri’s shock therapy is rare in Latin America, and the track record of shock programs (including notably in post-Soviet Eastern Europe) is mixed. A critical question will be his ability to sustain support until reform produces material improvement in growth prospects. Populist pressure could return quickly if the program falters. There is a lot riding on the outcome.
Argentina
Source: Central Bank of Argentina
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5. MERCOSUR-EU TRADE TALKS COULD ADVANCE SLOWLY NEXT YEAR (Oxford Analytica)
December 22, 2015
Venezuela’s domestic woes and the loosening of Argentine trade restrictions may help languishing EU talks along
Argentine President Mauricio Macri and Venezuelan Foreign Minister Delcy Rodriguez clashed at the Mercosur summit in Asuncion yesterday, with Macri calling for the bloc to press for the release of political prisoners in Venezuela and Rodriguez accusing him of interference in Venezuela’s internal affairs. However, following Venezuela’s National Assembly elections Macri has desisted from earlier plans to seek to apply Mercosur’s democratic clause to Caracas. Summit participants signed a declaration in support of human rights, but made no progress on issues such as the long-stalled free-trade talks with the EU. Taking over the pro tempore presidency of the bloc, Uruguayan President Tabare Vazquez promised to give new impetus to economic integration projects.
Our judgement
Difficulties in advancing with EU trade talks have not been overcome, although recent Argentine moves to end foreign trade curbs may help in this direction. Tensions between Buenos Aires and Caracas are set to rise, but Venezuela’s crisis is likely to reduce its influence in Mercosur and also the activities of competing integration efforts such as the Bolivarian Alliance for the Peoples of Our America (ALBA).
THURSDAY
1. ARGENTINA ECONOMY: PRESSING FISCAL CHALLENGES AWAIT (Economist Intelligence Unit – ViewsWire)
2. CAN ARGENTINA RISE ABOVE ECONOMIC POPULISM? (The National Interest)
3. NEW POLITICAL REALITY IN POPE’S NATIVE COUNTRY (National Catholic Register)
4. THE UNITED STATES: PROGRESS AND PROMISE IN LATIN AMERICA (Stratfor Global Intelligence)
1. ARGENTINA ECONOMY: PRESSING FISCAL CHALLENGES AWAIT (Economist Intelligence Unit – ViewsWire)
23 December 2015
The fiscal imbalance, which has climbed to peaks not seen since the late 1980s, will be a huge challenge for the new president, Maurcio Macri. Fiscal tightening will be difficult. Financing the deficit and meeting growing debt-service commitments will also be challenging, and will require the new government to negotiate with “holdout” creditors in order to exit default and potentially access international capital markets. A deal with holdouts would ease fiscal and financing pressures enormously, but securing such a deal will be difficult politically, and in the meantime expenditure cuts will need to be made.
Data on the public finances are available for the first ten months of 2015 and show a dramatic deterioration of the fiscal position. The overall non-financial public-sector deficit doubled as total expenditure grew by 36%, while revenue grew by 29% (barely positive in real, inflation-adjusted terms). The deterioration came despite a deceleration of current transfers to the private sector during the year reflecting the impact of lower oil prices on energy subsidies. But other important expenditure items, including social security expenditure and wages, have not shown any signs of slowdown, while capital transfers to provinces have actually accelerated, driven by the electoral calendar.
Growing debt-service burden
Reflecting election-related spending pressures, the then president, Cristina Fernández de Kirchner, signed a series of decrees over the course of 2015 increasing the budget and providing for the issuance of new debt, including Ps11.1bn (US$804m) in promissory notes falling due in March 2016. These new liabilities add to an already burdensome debt-service schedule in 2016. According to the latest official data, peso-denominated debt-service climbs to Ps99.5bn (US$7.2bn) in 2016, with capital repayment accounting for Ps83.8bn and interest payments Ps15.7bn. A significant portion of this debt is held by government agencies and domestic institutional investors, and is extremely likely to be rolled over. However, US-dollar-denominated debt service is also expected to rise, to nearly US$8bn, of which U$4.3bn reflects capital repayments, mainly to bondholders of restructured debt, as well as some liabilities with multilateral organisations and Paris Club creditors.
With the foreign reserves cushion remaining extremely thin as the government seeks to meet demand for dollars following the removal of controls, financing these dollar amortisations will be tricky. To help to reverse capital flight and ease its financing requirements for 2016, the Macri administration is considering the implementation of a new tax amnesty for repatriated capital. A similar amnesty was introduced by the Fernández government in 2013, but failed to attract dollar inflows amid growing economic distortions and devaluation pressures. The Macri government’s efforts to improve confidence in the policymaking framework (it has already removed foreign-exchange controls and allowed the peso to devalue) could help a fresh tax amnesty to produce better results.
Difficult holdout negotiations on the way
However, the crucial determinant of the sovereign’s access to dollars to finance amortisations will be the effort to exit default. The Fernández government swore never to repay holdout creditors who are seeking payment in full of defaulted debt bought at distressed prices, choosing to fall into technical default rather than negotiate a settlement with these creditors in the aftermath of an unfavourable US court ruling in mid-2014. But this position, and Argentina’s exclusion from international capital markets, has become increasingly untenable amid a drop in the foreign reserves to below US$25bn in recent weeks. A deal with holdouts that allows the sovereign to exit default and reduces risk of attachment of Argentinian assets abroad would pave the way for a return to external debt issuance; an agreement could potentially even involve new credits as part of a settlement. The Macri administration began formal negotiations with the mediator assigned by US courts in late December, with the debt in question (including debts owed to some “me too” creditors who have joined the suit in the past year) estimated at US$10bn.
Negotiations will not be easy: holdouts are aware of Argentina’s desperate need for dollars, while the government will need to get congressional approval to remove the so-called lock law, which currently prevents the executive from offering better terms to holdouts than it offered in the 2005 and 2010 debt restructurings. Although our forecasts assume that a deal will occur at some point in 2016, it is uncertain therefore whether this will happen quickly enough to meet the public sector’s most pressing financing needs. In this context, and also considering the government’s desire to tackle rampant inflation by tightening policy, it is clear that fiscal adjustment will need to take place in 2016.
Fiscal adjustments on the cards
Although the government has emphasised that it will need to take time to review and revise the unrealistic budget for 2016 presented by the Fernández government, it has already given hints of the likely drivers of fiscal adjustment. First, there are plans to raise electricity and natural gas tariffs, which are especially low for households in the metropolitan area of Buenos Aires. This rise aims to reduce energy subsidies, a major driver of public expenditure in the past decade. The government is also expected to review the rise in public employment-and wage costs-of recent years, and seems all but certain to implement some sort of restructuring that involves a reduction in public-sector employment (Mr Macri undertook such a restructuring as mayor of the capital. Buenos Aires).
Both moves will have political costs, and although the president is attempting to emphasise that short-term adjustments will produce long-term benefits in the form of more solid, sustainable growth that boosts employment, they will not be easy to push through. Nevertheless, given the primary importance of reducing inflation and boosting external competitiveness to avoid economic crisis, and of reducing public-sector financial pressures, the Macri administration appears to have little alternative, and appears committed to adjustment. This forms the basis for our forecast that the non-financial public-sector (NFPS) deficit will narrow from an estimated 5.1% of GDP to 3.5% of GDP in 2016. More broadly, it supports our assumption that successful macroeconomic adjustment will pave the way for a recovery in the growth outlook in the medium term.
2. CAN ARGENTINA RISE ABOVE ECONOMIC POPULISM? (The National Interest)
By Robert Kahn and Ted Liu
December 23, 2015
While markets have focused attention on China as the primary source of market risk in 2016, Latin America has provided the more significant headlines in recent weeks. Political turmoil in Brazil has resulted in the resignation of a market-friendly finance minister, and default looms in Venezuela. But perhaps nowhere in Latin America is more at stake than with the economic revolution now underway in Argentina.
As the first non-Peronist president in more than a decade, Mauricio Macri has promised to roll back populist policies of his predecessors and implement market-friendly measures in Argentina. Following his election, his administration moved quickly to lift currency controls, resulting in a substantial devaluation of the official exchange rate, reduced trade taxes, installed a new central bank president, and raised $5 billion in financing from a group of international banks. He has also promised to settle the country’s decade long legal battle with creditors, normalizing the country’s economic relations and turning Argentina outward. At a time when populism is constraining economic reform across the industrial and emerging world, many in markets see Argentina as a bright spot in the region.
Markets have responded quite positively to this big-bang approach. After dropping over 25 percent, the currency has stabilized and a number of banks have raised their recommendation on Argentine assets. Still, the economic challenge is daunting. Diminishing foreign exchange reserves raise uncertainty in Argentina’s ability to defend peso’s value should crises occur. Inflation is rampant, over 25 percent as of October. The expansionist fiscal policy has also created a deficit that private estimates by companies including Goldman Sachs place between 6 and 7 percent. The sharply weaker currency will exacerbate these challenges, at least temporarily, even as it sets the basis for competitiveness in the longer term. Without much room to maneuver in collecting revenue, Macri’s fiscal consolidation will most likely rely on cutting expenditure, including popular energy subsidies instituted by his predecessors. Finding alternative sources of expenditure cut and revenue increases will be a difficult though critical task.
The broader question is whether this time is different, and whether Argentina can break out of its history of populist economic cycles. While all these measures are necessary, they will be painful and likely induce economic contraction in the short term. Accustomed to years of economic populism, the Argentine people will now need to support policies previously deeply unpopular. Meanwhile, his party lacks a majority in the Argentine congress. Historically, investors would have done well from buying Argentina after default and selling on efforts at normalization. There’s a danger of political and social backlash, and perhaps this is not the end of populism for Argentina.
Against a weak global economic backdrop, the country will face challenging fiscal outlook and likely economic contraction. Getting the sequencing and coordination of reforms right will require a delicate balance between economic change and disruption. Macri’s shock therapy is rare in Latin America, and the track record of shock programs (including notably in post-Soviet Eastern Europe) is mixed. A critical question will be his ability to sustain support until reform produces material improvement in growth prospects. Populist pressure could return quickly if the program falters. There is a lot riding on the outcome.
3. NEW POLITICAL REALITY IN POPE’S NATIVE COUNTRY (National Catholic Register)
By Jorge Rouillon
December 23, 2015
NEWS ANALYSIS: Argentinian journalist Jorge Rouillon assesses the triangular relationship between Pope Francis and the country’s incoming and outgoing presidents.
BUENOS AIRES — Mauricio Macri became the new president of Argentina on Dec. 10, succeeding Cristina Fernández de Kirchner ceased holding the political office. The relationship between the two was so tense that they did not meet face to face, as political power was exchanged in Pope Francis’ native country.
In fact, Macri’s accession to the presidency is just the most recent development in the complex triangular relationship among the trio of famous Argentinians.
Macri took the oath in Congress, then went to the Pink House or Government House where the provisional leader of the Senate officially handed to him the emblems of power, with, at his side, the chief justice of Argentina. Several South American presidents and the King of Spain were in attendance.
The Pink House is in Buenos Aires’ Plaza de Mayo, an iconic square that is highly symbolic for Argentina. There the locals met when the first autonomous Argentine government was formed in May of 1810. There a mass of workers demanded the freedom of their arrested political leader Col. Juan Perón in 1945; he was elected president the following year and ruled till he was ousted by the military in 1955. There from 1977 on the Mothers of Plaza de Mayo perseveringly cried out for their “disappeared” children.
And there, in the last decade, a triangular game — of political, symbolic, economic and spiritual power — was played out by Buenos Aires Archbishop Jorge Bergoglio,1998-2013, now Pope Francis; the couple Néstor (president 2003-2007) and Cristina Kirchner (elected in 2007 and 2011), and Mauricio Macri, mayor of Buenos Aires 2007-2015.
Three landmarks face this historic plaza: the Pink House, where the president works, the cathedral and chancery of the Buenos Aires Archdiocese, and city hall. Although separated from each other by only 500 feet, communication among the highest occupants of the three has not been fluid recently. At times a certain distance has been kept and on occasion they’ve even collided.
Néstor Kirchner
When Néstor Kirchner took office the country was returning to stability after the grave economic and social crisis of 2001. Cardinal Bergoglio presided over the thanksgiving ceremony or Te Deum, in the Metropolitan Cathedral on May 25, 2003. In the following year’s Te Deum, the cardinal criticized “those who find themselves so included that they exclude the others, so clear-sighted that they have become blind,” and he reflected on intolerance.
So, Kirchner decided to no longer attend a Te Deum officiated by Cardinal Bergoglio and in the following years he went to similar ceremonies in different provincial cities; his wife continued that tradition when she became president. Néstor Kirchner and the cardinal did not see each other again, except in 2006 at a religious ceremony for three Pallotine priests and two Pallotine seminarians killed in 1976 during the military dictatorship. The archbishop invited the president on that 30th anniversary occasion. That event, coordinated by the Community of Sant’Egidio, also honored Christians killed under Communism, Nazism and other totalitarian regimes, as well as during the Spanish civil war and the Mexican Cristero War.
Néstor Kirchner let it be known at least once that he saw Cardinal Bergoglio as the leader of the opposition. “To consider me an opponent seems to me to be a manifestation of misinformation,” the cardinal told journalists Francesca Ambrogetti and Sergio Rubin in their book-long interview, when Kirchner still lived. And he added that people knew “my effort and that of the whole Church to build bridges, but with dignity.”
Yet more than once signs pasted by government sympathizers reviled the cardinal, and some declarations made by politicians or articles written by journalists close to the government did so too.
Cristina Kirchner
In fact, when Bergoglio became Pope on March 13, 2013, President Cristina Kirchner (whose husband had died of a heart attack in 2010) did not rejoice. At the tail end of a long speech she mentioned in passing that a “Latin American” Pope had been elected, not using the adjective “Argentinian” nor calling him by his name — and yet giving him advice.
Also at that time, government legislators refused to congratulate the new pope, and some prominent voices linked to the government — among them, Estela Carlotto, the head of the Grandmothers of Plaza de Mayo, who nevertheless a month later would travel to St. Peter’s Square — accused him of being a dark figure of the Church.
But a few days later, realizing there was generalized jubilation in the country due to the election of the Argentinian pope — who as archbishop had taken the subway as merely one more passenger and had frequently visited Buenos Aires slums — the government and its allies changed their tune. Presidenta Kirchner, for whom 200 meters seemed too long a distance to go to visit Cardinal Bergoglio, traveled thousands of miles on several occasions to see Pope Francis, who received her pleasantly, without alluding to previous snubs or differences of opinion.
She journeyed seven times to see the Pope. Four audiences took place in Rome and three in Latin America: the latter were informal, non-exclusive meetings on occasion of papal visits, to Brazil for World Youth Day, and to Paraguay and Cuba this year.
Cristina was nervous at her first meeting with Francis, five days after his election. Not so a year later, on March 17, 2014, at a private and friendly Vatican encounter, where they had lunch and talked for four hours.
On Sept. 19, 2014, Francis again received Cristina at the St. Martha residence. And on June 7, 2015, she was received by the Holy Father in the audience room of the Paul VI hall, in a more formal style.
When, in July of 2013, Cristina went, with other heads of state, to the Rio World Youth Day, she took her party’s candidate for first deputy for the Buenos Aires Province, Martín Insaurralde, with her. It was two weeks before the election primaries, and the photograph of both politicians with the Pope was reproduced in thousands of posters. Despite that marketing, Isaurralde lost. On that occasion, Pope Francis, always attentive to details of affection and courtesy, gifted Cristina with little white shoes and socks for her newborn grandson. He had similar warm gestures for the little daughter of Mauricio Macri, when he greeted the Pope that same year at the Vatican.
The Bergoglio-Macri Relationship
The Bergoglio-Macri relationship in Buenos Aires was probably more fluid: Macri often attended the Masses for educators that the cardinal celebrated each year in the cathedral; and more than once they were together at events with students in Plaza de Mayo. Yet there was friction too.
Once, Macri walked past the columns of the cathedral to visit then-Archbishop Bergoglio to try to explain to him why he had not appealed a homosexual civil marriage that had been authorized by a city magistrate when there was, yet, no national law approving it. Macri’s explanation did not satisfy the cardinal, and much less did he like the official version of that meeting made known by city hall. Archbishop Bergoglio said at the time that Macri “gravely failed in his duty as ruler.” (Since 1994 the mayor of the “Autonomous” City of Buenos Aires is called the Chief of Government of the 3-million-strong city; a constitutional amendment made it a first-level district together with 23 provinces. Before then, the mayor was appointed by the Argentinian president.)
In other difficult topics, such as abortion, the position of the movement that has just won the national elections — with 51 % of the vote in a second round, against the candidate of the party of the Kirchners — is not clear, and it respects personal conscience positions. An adviser of Macri, the Ecuadorian pollster Jaime Durán Barba, said the day before the election that any woman who would like to have an abortion could do so, and minimized the value of what the Pope says on the subject — a comment which upset many Macri sympathizers.
Macri then distanced himself from his adviser, expressed his respect for Francis, and pointed out that personally he is pro-life. A few years earlier, in October of 2012, without being clear, he had declared that in a few days the first legal abortion would take place in the Autonomous City of Buenos Aires (CABA). “She is a 32-year-old woman, in a case that has gone through all legal instances,” he declared.
Even though Mrs. Kirchner had dissuaded her legislators from supporting abortion bills that they wished to introduce, in 2012 a Supreme Court decision gave a wide interpretation to the fact that there are abortions that are not punishable by law, favoring the procedure. It was a decision of questionable constitutional validity. Cristina’s last health minister established a protocol for public hospitals that makes abortion easy to obtain, since no violation of the law is denounced. In fact, it is a weak measure that can be easily taken to court because it establishes practical administrative guidelines that cannot have the force of law or go against the current law.
The runoff, held Nov. 22, gave 51% of the votes to Macri and 49% to Daniel Scioli, a moderate Peronist. When Scioli early on that night admitted electoral defeat, he twice asked God to enlighten the winner, Macri. The latter, a graduate of a Christian Brothers’ school, a wealthy businessman, and a former head of the soccer club Boca Juniors, also invoked God that night, asking him to illuminate him in his presidency.
This background of transcendence continues to be present in top-tier leaders in a nation where, over and above social behavior, of corruption, of much irregular conduct, faith continues to have force, and is present in the collective vision and in customs such as multitudinous pilgrimages to Marian shrines, like the Basilica of Our Lady of Luján.
On Dec. 2, the authorities of the bishops’ conference of Argentina, led by Santa Fe Archbishop José María Arancedo, who is very close to the Pope, issued a harsh statement pointing out that “drug trafficking is a national drama” and judging that its spread “is incomprehensible without the complicity of power in all its forms.” That same day, to soften the blow, the conference’s top bishops visited President Kirchner in her office “to transmit a formal greeting for the end of her mandate and anticipating a Christmas greeting.”
The Macri-Kirchner Relationship
How has the relation between the other two sides of the triangle been: Macri and Kirchnerism? Regular to bad, though often they have had to work together in certain policies. The Kirchners at the Pink House and Macri at city hall were opponents and did not have an easy relationship. Crime and traffic delays increased in Buenos Aires City under a certain ambiguity in the role of two police forces: Federal and Metropolitan (created by Macri). Because of the disagreements between the two jurisdictions it took several years to build a short section of the highway that now allows thousands of drivers to exit the city more rapidly.
Also, Macri — who obtained 64% of the votes of the city that he governed — was unable to build many miles of subway lines because the Kirchner government refused to provide security for international loans that Macri would have easily gotten.
Between Nov. 22 (runoff) and Dec. 10 (assumption of office) Cristina Kirchner and Macri met only once, briefly, to deal with formal aspects of the transfer of power. She also instructed her ministers to not pass on information to their successors until Dec. 9. Although that position was softened somewhat and several ministers did meet with their counterparts earlier than that.
Ultimately, Plaza de Mayo continued being a symbol. The presidenta left the house from where she and her late husband ruled before Macri arrived.
The Peronist movement has been in power in 25 of the last 32 years of democratic government. Cambiemos (“Let Us Change”), Macri’s coalition, is attempting to govern differently. Macri named several ministers and civil servants with business and managerial background, but he does not claim to be anti-statist in education, health, airlines, and so forth. He says he wants the government to be efficient and to manage well.
On Dec. 11, Macri and his cabinet participated in an interreligious service at the cathedral. Buenos Aires Archbishop Mario Poli asked Macri to “bow in front of the poor.” Macri began strolling before noon from the Pink House to the cathedral, together with several of his ministers, to take part in the Te Deum or thanksgiving ceremony, presided over by Cardinal Poli. He walked some 250 meters, greeting supporters.
During the liturgical ceremony Poli quoted Pope Francis, and a 1966 poem by famous poet Jorge Luis Borges which says that “nobody is the homeland, but we are all it.”
“To imitate the merciful God is to bow before the poor, looking at them from below, not from above. It is to listen to the voiceless, those who fall between the cracks of the system, God’s little privileged ones. Everything we can do for them we do it for him, and God does not let himself be outdone in generosity,” said the cardinal.
Then Macri committed himself before God to be an instrument of concord, peace and social friendship, and to fight against the afflictions of the most needy. Later on, leaders of other religions spoke.
Papal Visit Speculation
Along with the change of political direction in Argentina, international attention was expected to focus on Argentina in 2016 courtesy of a rumored papal visit. However, the Argentine Catholic news agency AICA confirms that Pope Francis will not travel to the country in 2016. Nobody is expecting him. Sources close to the Pope say this, unofficially. And it has been officially denied that Francis would attend the Eucharistic Congress organized by the Argentine bishops for the bicentennial of the nation, in July, in Tucumán, where in 1816 the declaration of independence was made.
4. THE UNITED STATES: PROGRESS AND PROMISE IN LATIN AMERICA (Stratfor Global Intelligence)
December 23, 2015
Summary
This year has brought many foreign policy challenges for the United States, particularly throughout Eurasia and the Middle East as conflicts in Syria and Ukraine drag on. But Washington has also seen numerous gains closer to home. The United States has normalized its ties with Cuba, Venezuela’s anti-U.S. ruling party was defeated in parliamentary elections, and Latin American economies that are integrated with the United States generally performed better those that are not. As Washington seeks to advance its geopolitical position in the region even further in 2016, it will likely achieve some measure of success, though certain constraints will prevent it from being able to fully shape Latin America around its interests.
Analysis
Several significant developments occurred in Latin America in 2015 that had an important impact, whether direct or indirect, on the United States. Chief among them was the formal normalization of ties between the United States and Cuba on July 1. The two re-established diplomatic relations and put in place plans to eventually reopen their embassies in Havana and Washington. This diplomatic coup marked the culmination of a gradual warming of ties that had been taking place since late 2013, when U.S. President Barack Obama shook hands with his Cuban counterpart, Raul Castro, on the sidelines of Nelson Mandela’s funeral. Bilateral talks then began in 2014 on a variety of issues, including the release of political prisoners, the closure of Guantanamo Bay and the U.S. embargo on Cuba, while restrictions on travel and tourism began to ease.
One of the most important driving forces behind the U.S.-Cuba normalization was the political and economic evolution taking place in nearby Venezuela. Former Venezuelan President Hugo Chavez was one of Cuba’s biggest political and financial backers and a vocal critic of U.S. policies in the region. Under his rule, Venezuela began sending its oil to Cuba in exchange for the employment of tens of thousands of Cuban technical specialists, including security, intelligence and military advisers, as well as doctors and teachers. But Chavez’s death in 2013 and a subsequent, steep decline in global oil prices placed tremendous pressure on Venezuela. Chavez’s successor, President Nicolas Maduro, has struggled to maintain the country’s internal stability and external relationships ever since.
It is likely no coincidence that Cuba, a longtime dependent of Venezuela, began to more actively pursue a relationship with the United States as the fortunes of its primary patron worsened. Meanwhile, the downturn in Venezuela’s outlook has worked in the United States’ favor. Caracas is home to one of the few remaining anti-U.S. governments in Latin America, and its position has declined in the past few years, as shown by the ruling United Socialist Party of Venezuela’s stunning loss to an opposition umbrella group during the country’s Dec. 6 legislative elections. Though the party and Maduro still have a hold on the executive office for now, the embattled president could face a referendum against his rule in mid-2016. At the very least, he will be far more constrained than his openly anti-U.S. predecessor was in his ability to rule Venezuela.
The U.S. gains over the past year have not been limited to Cuba and Venezuela. For example, Argentina’s presidential election in late November replaced the leftist Cristina Fernandez de Kirchner with the pro-business Mauricio Macro. Though not strictly a move toward the United States, Macri’s victory will probably set Argentina on a more cooperative path with its foreign creditors during negotiations over defaulted bonds, and the new leader has already begun to pursue more open trade and investment policies.
Meanwhile, Colombia — a strong U.S. ally — made considerable progress in its negotiations with the leftist Revolutionary Armed Forces of Colombia, better known by its Spanish acronym, FARC. The United States has long supported these talks, though it has had some reservations on specific issues such as granting amnesty to FARC members, some of whom are currently in U.S. jails. All signs point to a formal deal between Bogota and the FARC being wrapped up in 2016, which would increase stability in the country.
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More broadly, Latin America’s economic performance over the past year has generally favored countries that are closely integrated with the United States, including Mexico, Central American states and Pacific Alliance members (Colombia, Peru and Chile). More left-leaning countries, such as Venezuela, Brazil, Argentina and Ecuador, have seen negative or negligible growth. These trends upset the political balance in many of these countries and made some Latin American states more willing to cooperate economically with the United States.
Greater Gains Lie Ahead
And so, in Latin America, 2015 proved to be a rewarding year for the United States in many respects, and several of its successes will likely see even further progress in the coming year. That said, not all news will be good news for Washington: Despite the formal normalization of ties with Cuba, the United States is unlikely to fully lift its embargo on the country in 2016 since the move would require congressional approval in an election year. At the same time, the Venezuelan opposition’s latest win will not mean that Caracas suddenly becomes friendly with the United States, though deeper economic cooperation between the two is a possibility if Venezuela’s financial climate continues to deteriorate. Elsewhere in Latin America, major powers such as Brazil and Argentina will seek closer trade ties with the United States to buoy their sluggish economies. Again, though, political constraints and cultural differences will keep this from translating into the full adoption of a U.S.-style open economic system.
Still, in spite of these potential roadblocks, the United States will likely strengthen its already advantageous position in Latin America in 2016, even as it encounters difficulties elsewhere in the world.
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