1. AP quotes me about Honduras's election this weekend:
    “Hernandez is not just trying to win presidential re-election, he’s trying to expand his power from top to bottom, including in the legislature and at the mayoral level.”
    Hernandez is the strong favorite to win. The polls have him up. The economy and the security situation have both improved over the past four years. His margin of victory and how the National Party candidates do in the Congressional and municipal elections will determine how much power he will retain.

    As I told the reporter, some investors are likely to be initially pleased with the Hernandez victory. The president's policies are more pro-business (low tax, low regulation, pro foreign investment) in the traditional sense than his opponents. However, undermining the checks and balances of power as well as personalizing power over the constitution and institutions of government is negative. Additionally, the National Party has failed to crack down on corruption and has actively tried to hold back certain investigations. Hernandez's actions are weakening the country's institutions in a way that harms it long term.
  2. Watching Robert Mugabe lose his claim to power after decades in office, here are some quick thoughts about what happened that apply to government stability in Latin America.

    Leaders can last longer in power than expected, even amid dire economic and political situations…. Mugabe managed to remain in power for years beyond economic catastrophe, hyperinflation and stolen elections. His end was predicted a hundred times over and never seemed to come.

    ….And then fall swiftly. One month ago, the odds of Mugabe being forced out in 2017 were quite low. Though people have been predicting his fall from power for years (decades?), very few of them had November 2017 in the betting pool. The crisis that forced the president from power moved very swiftly once it began.

    The ruling coalition often presents a bigger threat than the disorganized opposition. It was Mugabe’s own party that forced him from power, not any bloc of opposition politicians inside or outside the country. All presidents, even dictators, have a key constituency within their own circle of power they must respect and maintain.

    Vice presidents (or whoever is next in the line of succession) matter for stability. That’s particularly true when the next in line has ambition or an agenda that rivals the president..

    Lose the military and lose power. Militaries have the guns and ultimately have a major say in whether or not a president can stay in power. They don’t have total control over the situation, but their choices are among the most significant.

    Quasi-democratic (but not really) institutional threats are needed today. Even in a coup, the coup leaders can’t just execute the country’s leader these days. In Zimbabwe’s case, after days of trying to hold on, the threat of an impeachment process was what helped push Mugabe to formally resign. Tracking these democratic-sounding institutional threats is important, even when dealing with an authoritarian leader who doesn’t seem like he or she would respond to them.

    Leave power as a hero or stay long enough to become a villain. Leaders who overstay their welcome ruin their legacies and harm their countries and citizens. That is especially true for leaders who do something revolutionary to change the system.

    I realize that many readers think my above comments are directly referencing a certain country that just defaulted on its loans, but I really mean the above items to apply to the political stability of many countries and leaders in the Western Hemisphere including those who are far more democratic than Mugabe.
  3. The US government has ended TPS for 60,000 Haitians and approximately 2,500 Nicaraguans. They appear likely to do so for 57,000 Hondurans after the current six month delay and the 200,000 Salvadorans whose status is to be decided early next year. Many of these migrants have children who are US citizens and own businesses and homes in the US. It’s a serious upending of their lives.

    Haiti has a strong case for extending TPS status given the continuing challenges from the devastating earthquake in 2010. Almost eight years later, there is still a lot of rebuilding to do. If they are cancelling for Haiti, they are almost certainly also going to cancel TPS for Honduras and El Salvador.

    The US Congress should work on a comprehensive immigration reform package that provides a long term legal status to the DACA and TPS recipients as well as other migrants who are currently at risk of deportation but should be allowed to remain. Members of Congress who are angry at the executive branch for these actions should be putting forward and prioritizing legislation to fix the problem. That legislation should be the top item on the agenda as there is a deadline that could upend the lives of thousands of families.

  4. Former President Sebastian Piñera won 36.6% of the vote in yesterday’s first round presidential election in Chile. In second place is Alejandro Guillier of the Nueva Mayoria with 22.7%, placing him only narrowly ahead of the Frente Amplio’s Beatriz Sanchez who won over 20% of the vote. Piñera will face Guillier in a second round on 17 December.

    It’s not often that my pre-election analysis from six months earlier works as the post-election analysis the day after, but here’s what I wrote in May:
    First, there are a high number of undecideds and a high number of people who are dissatisfied with the major political parties. That feeling of dissatisfaction is why a candidate like Sanchez can surge. Second, Piñera is a weak frontrunner candidate at the moment. The former president is only pulling a third of the vote and it isn't as if voters don't know him or are undecided about him. He's just not that popular, which means he will need to rely on a negative campaign against his opponents in order to win.
    Five more points:

    1. The expectation was that Piñera would win over 40% in this first round. His failure to meet expectations gives an opening for Guillier to rally the center and left by showing a plausible path to victory. In 2009, Piñera won 44% in the first round and only narrowly won in the second round with 51.6% against Eduardo Frei. They hypothetical polling prior to the first round showed Piñera with a solid second round lead over any opponent, but that will almost certainly narrow in the coming weeks now that the second round is no longer hypothetical.

    2. A big story from this election is the rise of Beatriz Sanchez and Chile’s left outside of the Nueva Mayoria coalition. Sanchez’s results in the first round mean she has significant leverage with Guillier, who needs her support to win. The parties of the Frente Amplio went from three to 21 seats in the expanded lower house, giving them a significant presence that could be the key to a majority coalition with Nueva Mayoria on certain issues.

    3. Analysts are now trying to figure out where votes go. Do Sanchez’s and MEO’s (5.7%) voters go vote in the second round for Guillier or stay home? Do Kast’s (7.9%) voters go to Piñera or stay home? How do the voters for Carolina Goic (5.9%), the underperforming centrist in the race, split in the second round? If the same voters turn out as in the first round and vote their preferences, the back of the envelope math says the decisions by Goic’s voters are likely to be the key that pushes one of the candidates over 50%.

    4. Voter turnout was below 50% in every region of the country. That low turnout is a bad sign for Chile’s democracy. It also creates a second round prediction challenge. There are questions about whether first round voters will now stay home, but there are also a significant number of citizens who could show up in the second round who didn’t vote in the first round because they didn’t view it as decisive.

    5. The parties that make up Piñera’s Chile Vamos coalition gained significant ground in both the lower and upper house, but they failed to reach a majority in either. The Chile Vamos coalition will have 71 out of 155 seats (up from 120 total seats) in the expanded lower house. It will also fall just short of a majority in the Senate. This means that even if Piñera wins the presidency, his agenda will require significant compromise to push through the legislature.
  5. The Miami Herald’s Jacqueline Charles writes that a Haiti Senate commission is investigating corruption from two billion dollars loaned from Venezuela to Haiti as part of Petrocaribe. The two billion appears to never have produced any significant projects in Haiti and the Senate report accuses several local politicians of having embezzled the money.

    That article reminds me of a report out of Confidencial in July that Nicaragua owes Venezuela approximately three billion dollars (the numbers are a bit murky) in Petrocaribe and Albanisa funding. This funding has produced some limited results in Nicaragua, but certainly not three billion worth. It is likely that Ortega and his family along with other FSLN officials have benefited from it.

    A few billion here and there starts to really add up for Venezuela and its creditors. As the country sinks into default and its government loses regional influence, there is little incentive for the governments of Haiti or Nicaragua or El Salvador to pay Venezuela the money owed. The poorly designed nature of the Petrocaribe and other funding deals means that their status will be unclear if those allied governments decide to never pay while Venezuela defaults.

    Meanwhile, in Jamaica, the government says that the refinery it jointly owns with PDVSA is facing payment and loan problems due to the sanctions on the Venezuelan firm. The government is looking at options including buying out the PDVSA portion of the ownership. Given that all of PDVSA’s international assets could become part of a high stakes default case, they should probably move on that quickly.
  6. Brazil will raise the Venezuela issue at the Paris Club to try to pressure the country into repaying $262.5 million that it owes under a regional credit swap agreement.

    There has been a lot of Venezuelan economic news this week (and it’s only Tuesday!), but this small piece of info should not slip through the cracks. While smaller than the debts owed to US bondholders or the Chinese or Russian governments, Venezuela actually owes several billion dollars to various parties in South America including companies in Colombia, Argentina, Uruguay and Brazil. If Venezuela is going to default and restructure its repayments globally, those neighboring countries and companies are going to want a serious voice in that debate about who gets paid and when.

    Nearly every analyst agrees that Venezuela’s neighbors could do more to pressure the Maduro government. One reason they haven’t has been fear of economic blowback, in part due to the amount of money Venezuela owed around the region. But at some point, the money owed outweighs the political and economic repercussions of angering the Venezuelan government. Brazil’s use of the Paris Club may just be the first shot fired in what may turn into a difficult repayment debate taking place inside of South America that will occur concurrent to Venezuela’s negotiations with Wall Street, Russia and China. That repayment debate in South America could overlap with some real political and economic pressure options that countries have chosen to avoid so far. That makes this payment at the Paris Club worth watching, even if it’s only a small portion of all the money owed by Venezuela globally.

  7. The NYT article on Colombia’s debate over a sugar tax highlights continued weaknesses in Colombia’s democracy. There are problematic but non-violent pressure tactics such as calls to editors, leverage on media outlets via advertising and lawsuits to censor ads. Then there are instances physical harassment, threatening phone calls and alleged hacking of computers and tapping of phone lines.

    A threatening phone call or a tapped phone cannot be brushed off in a country that faced decades of violent political conflict including assassinations of various political leaders. It’s important that these campaigners reported the instances to the police and the Colombian government officials should take their investigation into the allegations seriously.

    This quote nails the hope for Colombia in the article:
    “For the first time in our lives, we thought we might become a normal country and be able to deal with issues other than violence,” said Diana Guarnizo, a lawyer with Dejusticia, a rights group that helped promote the soda tax. “Here we were, an organization that had dealt with peace, violence, land reform and gross injustice, and suddenly we had the luxury to talk about what mothers are putting in their children’s lunchboxes.”
    Regardless of where people stand on the specific sugar tax issue, there is hope for Colombia to move from a country known for violent conflict to one that debates boring tax policy details. Getting past the truly dirty tricks that place people’s lives at risk is important for making that happen.
  8. Years ago, when the FARC were an actor in a conflict, some of us were quite concerned about the FARC’s presence in Venezuela. Even as the peace process went on, I indicated that the FARC’s presence in Venezuela was one of the tough issues that could cause problems post-demobilization.

    This weekend, the now demobilized FARC met as an unarmed organization in Venezuela and announced their plans to expand the political party into Venezuela. It’s an interesting twist in the FARC-V narrative for both countries.

    As a political party competing in elections, the FARC will have even less of an impact in Venezuela than in Colombia in the short term. It’s still worth monitoring for how the FARC evolve in Venezuela as both an armed criminal group and unarmed political organization.
  9. The US will propose restrictions on Mexican truck drivers at the next round of NAFTA negotiations. For those monitoring NAFTA, it’s another sign that the US is negotiating with the plan to leave the agreement. I’d also argue that this specific issue is a sign that the trade negotiations are still trapped in a 20th century mindset. 

    Automation to trucks is coming quickly and some version of self-driving trucks will be on the road in the next ten years. While still hypothetical, trade negotiators should start to think about all the questions this will raise. What are the cross-border standards on the code used by automated vehicles on the road? How do trucks from different North American countries communicate with each other as they drive? How do trucks without driver navigate borders and customs?

    The technological shift in the trucking industry (along with manufacturing and farming and services) is going to disrupt significant portions of the economies of North America. All three NAFTA governments should be in a bit of a panic over how their countries will adapt to this new economic reality. Instead, the NAFTA re-negotiations feel as if they’re a redo of 1990’s with some 2005-era technology thrown in.

    The NAFTA renegotiation shouldn’t waste time relitigating the debate over the nationalities of truck drivers when the trucks on their way to being operated by robots anyway. The US is most to blame on this, but all three countries should be pushing to get ahead of the curve on trade issues.

  10. Brazil President Michel Temer survived a recent vote in the Congress for two reasons:

    1. He paid off a lot of legislators with promises of projects for their districts and friends
    2. Some members of Brazil’s Congress want economic “stability” and support Temer’s vision for economic reform, even if they don’t support the president.

    However, the fight over Temer’s corruption indictment used up much of the president’s political capital (and ability to hand out pork), making it even harder to pass economic reforms through the Congress. Those members of Congress who agreed to compromise with corruption and voted to save the president to save his economic agenda now find a lame duck who can’t get that agenda passed.

    The Congress is watering down the administration’s original economic reform bill trying to find the votes to pass something. If they can’t pass anything in the coming month, there is a concern they will be too close to the election.

    While there has been some suggestion of postponing the reforms to the next administration, with Lula in the lead and the rest of the 2018 campaign up in the air, markets are not happy about the possibility that reform does not get done now.