From Buenos Aires to Brasilia, and Caracas to Mexico City, ULABA's Regional Analysis Committee brings you the latest headlines in news, entertainment and culture in Latin America for the month of February.
- Headlines -
Coronavirus (COVID-19) reaches Latin America
The coronavirus outbreak which originated in Wuhan, China has now had its first cases in Brazil, Mexico, Dominican Republic, and Ecuador. The virus has seen slower infection rates in China but outside cases have begun to pick up speed especially in Iran, Korea, and. The spread outside China has deeply affected global financial markets, with the S&P500 and the Dow Jones Indices both experiencing massive losses unseen since the 2008 recession.
Cases continue to rise in Latin America, with new confirmed cases appearing in Argentina, Chile, Costa Rica, and Colombia. In the rest of the world recorded cases have reached past the 100,000 mark.
Coronavirus Outbreak Cases in Latin America (as of 02/29/20):
The Challenges of Argentina's Debt Renegotiation
On February 11th, Argentina’s Peronist government led by President Alberto Fernandez announced a delay on a $1.47 billion payment on its AF20 bonds originally due February 13th. Fernandez’s Minister of the Treasury, Martin Guzman, has also affirmed that the public-sector debt is now unsustainable.
Following both announcements, an IMF team of economic advisors landed in Buenos Aires, hoping to assist with critical steps to resolve the country’s long-running crisis. Many experts blame the current state of affairs on the massive accumulation of debt that took place under former President Macri. A period during which the government’s debt skyrocketed from $241 billion to $321 billion in two years.
The current debt crisis also reflects a broader loss of confidence among both external creditors and domestic agents following Fernandez’s election. In retrospect, however, the IMF clearly made a major mistake by approving a huge $50 billion loan to Argentina under Macri- the biggest in the country’s history. The loan generated a short-lived boom that brought hardly any benefits, followed by a bust that inflicted significant pain.
Looking ahead, the most immediate task is to ensure a sustainable and orderly resolution of the debt crisis. This will require a collaborative process with creditors to ensure an acceptable restructuring. Most importantly, to avoid another default similar to that of 2001, which sank the country to its biggest recession to date and left millions unemployed and in poverty.
A Month of Natural Disasters
From late January to mid-February 2020, South America experienced a flurry of natural disasters that caused millions of dollars in damages to homes, businesses, and public centers. Below, we briefly describe some of the natural catastrophes across each country:
In late January, Brazil’s heavy rains caused floods that affected southeastern states Minas Gerais, and Espirito Santo killing 44 people.
In Chile, half a million people have no access to water and reservoirs are drying up because of a recent drought. Farmers' crops are drying up and animals are dying due to a lack of water. It is now the longest drought Chile has experienced in its history. However, water-intensive farming is still being done and there has been no action taken in the capital of Santiago to reduce water consumption.
In Bolivia, heavy rain and mudslides have hit the country killing 8 people and destroying 50 homes in La Paz, Santa Cruz, Potosi, Beni, Cochabamba, and Tarija. Heavy rain caused rivers and fields to flood which then triggered a mudslide. Citizens affected by the mudslides were unhappy with the lack of action taken by the government. Emergency services did not start helping people until the morning after the initial mudslide.
- Stories -
The Dollarization of Venezuela
In 2003, president Hugo Chavez imposed currency exchange ban in Venezuela, as a means of strengthening a declining bolívar and to ensure firms would continue to invest in the country. Gradually, these currency limitations led to the creation of a black market for dollars, where the price is imposed by the market, characterized by high instability and sensitivity to sociopolitical circumstances.
Since then, the bolívar has consistently lost purchasing power, catalyzing a rising inflation during the first fifteen years of the Bolivarian Revolution. However, it was in 2016, when prices started to skyrocket. The bolívar lost value by the hour, restaurants stopped printing menus, people ran to supermarkets to avoid devaluation of their wages, and many firms went out of business.
However, an unpredicted turn of events in late 2019, encouraged an implicit dollarization. US sanctions, along with the bankrupted national industry, created the perfect storm for the normalization of foreign currencies as payment methods in the country. Government officials halted the prosecution of those who traded foreign currency, turning a blind eye to this underground economy while tip-toeing around the unaddressed issue. The widespread practice of using dollars soon became more popular than anticipated. The cash circulating on the streets is part of families’ lifetime savings in foreign banks or family remittances; it was not long until businesses started accepting Venmo or Zelle. Ecoanalítica, a Venezuelan-based firm of strategic planning and macroeconomic trends monitoring, claimed that over 53% of transactions are in dollars.
The bolívar has completely lost its power. During the last months, the strong economic decline has created an unrealistic feeling of economic bonanza where dollars are the common currency, but the not-so-privileged communities are paid in bolívares. The discrepancy between the market and people’s income, has aggravated the crisis. “Bodegones,” markets that sell imported foods and alcohol, started popping in the major cities. Now, it is easier to find Lucky Charms than nationally produced Kelloggs.
In December 2019, Maduro announced imports were exempt from tariffs and taxes, further encouraging the dollarization of the market. While many rejoice at this idea, the government is slowly crippling the national industry. Now, a 6-pack of Stella Artois is cheaper than the Polarcita. The negligent policies will eventually lead to an industry decline, exacerbating the crisis by adding more unemployment to the mix. Now, it is easier to find Andrew Jackson in than Simón Bolívar in a bill.
Ex-Cop Linked to Marielle Franco's Murder Killed by Police
Adriano Magalhães da Nobrega was killed on February 9th in Bahia, Brazil, by police officers. Nobrega was an ex-special forces officer and was the alleged leader of the “Escritório do Crime” paramilitary gang, responsible for dozens of killings. According to police investigations, this militia is the principle suspect of Marielle Franco’s murder. Police had already issued an arrest warrant, but Nobrega was on the run.
To grasp the significance of Adriano Nobrega’s death, we must understand who Marielle Franco was, and look into Nobrega’s relationship with President Bolsonaro’s family.
Marielle Franco was an active member and councilwoman for Brazil’s Socialist Party (PSOL), a human rights activist and strong critic of Rio de Janeiro’s security forces. She was murdered in March 2018 under mysterious circumstances. Police investigations point to the involvement of paramilitary gangs (groups made up of current and former police officers that control the state of Rio), including Nobrega’s militia. PSOL members are questioning the nature of the killing and accuse police forces of witness elimination and obstruction of justice.
Another key aspect of this event is Nobrega’s link to President Bolsonaro’s family. Nobrega, his wife and his mother are all named in a criminal investigation into allegations of embezzlement, money laundering and racketeering involving Flavio Bolsonaro, the President’s son. Both women are employed in Flavio’s office, and are seen as “ghost employees” in the corruption scheme. Flavio had previously praised Nobrega and was also instrumental in Nobrega being awarded a medal by the assembly while he was imprisoned under allegations of homicide.
Ongoing investigations are looking into who ordered Adriano Nobrega’s death in order to understand if there is, indeed, a plausible link to Franco’s murder. The Bolsonaro family are also under pressure to explain the ties to Nobrega, his family and the indirect links to the councilwoman’s murder.
- Entertainment -
2020 Academy Awards
Joker star Joaquin Phoenix, originally from Puerto Rico, has won the best actor award at the 92nd Academy Awards. Phoenix also won most of the major awards for the role, including best actor at the Baftas, the Critics’ Choice and Screen Actors Guild awards, and best actor in a drama at the Golden Globes.
In his speech, Phoenix called for peace and protection of the Earth’s natural resources, quoting his late brother, River, “Run to the rescue with love and peace will follow.”
Parasite’s widespread victory also marked the Oscars. The South Korean film took home four Academy Awards including Best Picture, Directing, International Feature Film and Original Screenplay.
- Music -
Last Friday, Bad Bunny released his new album “Yo Hago Lo Que Me Da La Gana”. It is the singer’s third album, highlighting its impressive collaborations with many pioneers of the industry like Daddy Yankee, Sech, Mora, Nengo Flow, Jowell & Randy, Anuel AA, Myke Towers, Arcangel and more. Bad Bunny’s unique style is evident in his newest tracks, having recorded the album “on a very happy moment of [his] life.” JBalvin also released his new single “Rojo”, part of what fans expect to be his newest album, “Colores”.
- Sports -
Caribbean Series 2020
The 2020 Caribbean Series (Serie del Caribe), also called Caribbean World Series, is the highest tournament for professional baseball for teams in Latin America. This year's edition took place from February 1st to 7th at Hiram Bithorn Stadium in San Juan, Puerto Rico.
The 2020 edition marked the first-ever appearance of Colombia in the Series, and therefore featured six teams for the second consecutive year. They replaced Cuba in the circuit, who was unable to compete due to an inability to secure travel visas in time for the competition.
The Toros del Este of the Dominican Professional Baseball League won the tournament, which was their first Series championship and the 20th overall for the Dominican Republic.
- Travel -
February Edition's Destination: Canaima, Venezuela
Nestled in the forests of Venezuela, Campamento Canaima is a development of four hotels surrounding the waterfalls of Salto El Sapo. Located in La Gran Sabana, Canaima is a National Park southeast of Venezuela. Its location sits a five-hour boat ride away from Angel Falls, the highest waterfalls in the world. The Kamaratas and Wareipas are the local tribes who preserve the park, as it has been their home for generations. The camp continues to attract tourists from all over the world who wish to dip their toes in the banks of the falls.
Markets: February Performance
Latin America Market Indices
Latin America Exchange Rates
U.S. Market Indices
S&P 500: -5.49%
U.S. Treasury Bond Yields