- Macroeconomic Events -
General elections took place on October 7th where the favorites were leftist Workers’ Party candidate Fernando Haddad, who is backed by the same party that backed impeached President Dilma Rousseff and former President Lula da Silva who was found guilty of corruption, and right-wing Social Liberal Party’s Jair Bolsonaro, who has served seven terms in Brazil’s federal congress and is known to have said multiple controversial remarks.
In the first round, Jair Bolsonaro led with 46% of the votes while Haddad finished with 29%.
In the second round, which took place last Sunday, October 28th, Bolsonaro took 55.1% of the votes while Haddad came in with 44.9%. Bolsonaro is now the next president of Brazil.
After suffering from a deep recession which started in 2016 that was followed by a massive corruption scandal at the highest levels of government and business in the country, Brazil looks towards Bolsonaro to deliver economic and legal stability throughout Brazil.
Bolsonaro promises to fix Brazil’s high violent crime rates, improve the economy, and increase regulation against corruption.
Sources: NYT 1 | NYT 2
After a short-lived economic boom and the election of market-friendly President Macri in 2015, economists had rosy expectations for Argentina at the beginning of this year. However, a run on the peso currency has shown Argentines and investors that the country’s history of financial volatility is far from over.
Many had long argued that Argentina’s peso currency was overvalued, but no one expected a 52% plunge against the dollar for 2018, mostly due to investor concerns about the government’s ability to control inflation and interest rate hikes by the U.S. Federal Reserve.
The peso’s depreciation has made Argentina’s dollar debts more expensive for the government, prompting Macri to plea to the IMF for an additional $57 billion loan, causing the peso to reach a record low.
The government now plans to reduce infrastructure spending to cut its budget deficit, keep interest rates at 60% (highest in the world), and sell billions of foreign exchange reserves to protect the peso.
With inflation at 26%, GDP contracting at 7%, soaring unemployment, and the worst national drought in decades, this could mean trouble as Macri prepares to seek re-election in 2019.
1.5 million is the approximate number of Venezuelans that have migrated out of the country since the Bolivarian revolution. Colombia has been the most active participant by receiving an influx of 1.1 million throughout this time. These immigrants have mainly moved to Bogotá and its surrounding area (236,000), but the border area has also been permeated, centered in La Guajira and Santander (105,000).
In total, nearly 3 million citizens reside out of the country. The main centers of immigration are Colombia, Peru, and United States.
The issue has created diplomatic tension between Colombia and Venezuela. Nicolas Maduro denies the crisis and states that the information has been altered by the United Nations to justify an invasion. On the contrary, Ivan Duque has acknowledged the situation and sent a message of fraternity and support.
The phenomenon is a reverse of the trend that occurred in the 1970’s and 1980’s when the immigration wave emerged from Colombia as a response to the cartel and guerrilla crisis and massive insecurity.
The response from Colombian citizens has been strongly divided. Many artists and public figures have created campaigns for support and cooperation with the incoming Venezuelans. However, the Trumpian speech that criticizes the effect on crime rates and unemployment of the migrants has been gaining momentum and led to stronger polarization.
Sources: El Tiempo | NYT
Since April of this year, there has been 320 deaths, 2000 injured, and 500 arrested citizens reported in protests and political mobilizations.
Daniel Ortega, the current president, has established an authoritarian regime that has led to movement, mainly from the students and rest of the youth.
The second strongest driver is poverty, as the country was named the second poorest country in the hemisphere after Haiti. The socialist policies and the lack of involvement in international trade are the main causes identified.
The United States is planning on imposing sanctions as Senator Ted Cruz has proposed a strong economic and diplomatic confrontation against authoritarian regimes. The relationship with the US has been tense since the 1979 Revolution, as the country has been tied with the former USSR and Cuba.
Costa Rica has shown support by welcoming incoming immigrants and president Carlos Alvarado has expressed his full intent to help resolve the situation.
Sources: BBC | Stanford
USMCA (United States-Mexico-Canada) is the new name given to the NAFTA agreement after a year of tough deliberation given Trump’s disagreements with the existing trade conditions between the nations.
Cars and the auto industry are the most relevant stakeholders of the new agreement. One of the new rule dictates that 75% of the car components has to been manufactured in North America in order to apply to the zero tariff policy. This is a substantial increase from the existing 62.5% requirement.
The second main point regarding the auto industry is that a bigger percentage of the manufacturing process has to be executed by workers who earn at least 16 dollars an hour. This is 3 times higher than the average Mexican worker wage in the industry. The consequence can be greater employment for the US workforce, but in the long run it may backfire as the high prices can lead to finding car suppliers elsewhere besides North America.
The United States focused their agenda on the Canadian Dairy Industry that has strict policies on national production and percentage of imports. The negotiations were successful for the US, as class 7 dairy products like powders and concentrates were liberated from the existing pricing scheme.
Labor and environmental policies were also established to assure a sustainable growth in the 3 nations.
Source: Washington Post
- Culture & Markets -