Latin and Central America: Country Risk

Latin and Central America Regional Overview

During the last quarter, Brazil experienced a period of relative stability with no major significant events. President Lula has maintained his position of authority, while the opposition forces remain comparatively subdued. Some changes in the cabinet were made to accommodate Congress appointees in a known manoeuvre to gather support. However, some criticism has been directed at Lula for maintaining a 'neutral' stance regarding the Ukraine conflict. Striving for a balanced approach, Lula attempts to navigate between the main Western powers and BRICS allies, particularly China and Russia. Notably, Lula has affirmed that despite an imprisonment order from the International Criminal Court, if Putin were to visit Brazil next year, he would likely not be subject to arrest. Moreover, Brazil has now assumed the Presidency of the G20.

On the domestic front, tensions have emerged between the branches of power. The Senate proposed a project granting Congress the power to review decisions made by the Supreme Court. This measure is largely seen as a symbolic gesture aimed at addressing specific Supreme Court rulings, particularly regarding drug offenses and indigenous properties. It is expected that the Supreme Court will refrain from contentious decisions involving legislation, rendering this project unlikely to be converted into law.

Shifting our focus to Mexico, attention is increasingly drawn to the upcoming Presidential election scheduled for June 2024. The traditional parties, PAN and PRI, are poised to unite against President Lopez-Obrador's party, MORENA. As re-elections are prohibited in Mexico, MORENA will nominate a different candidate. Although, both parties have announced their intention to hold primaries, it is highly probable that the current Mexico City mayor, Claudia Scheinbaum, will be the MORENA candidate, while the unified front of PAN and PRI will present Xotchil Galvez. This suggests that Mexico is poised to potentially elect its first female President in 2024. The clear frontrunner is the MORENA candidate, who is likely to leverage Lopez-Obrador's high popularity, indicating minimal changes in the country's political landscape.

In Argentina, all eyes are fixated on the forthcoming general election scheduled for October. Although the run-off contenders have yet to be determined, current polls indicate a lead for the far-right candidate, Javier Milei. Given Argentina's economic challenges, a shift towards populism remains a likely prospect. Following closely is the center-left candidate Sergio Massa, the incumbent Minister of the Economy, representing the ruling coalition. Trailing behind is the traditional center-right opposition figure, Patricia Bullricht. The winner of the election will face the daunting task of reviving the Argentine economy, with the likelihood of engaging in fresh rounds of negotiations. Our analysis suggests that if the election proceeds to a run-off, the ruling coalition is likely to lose to either Patricia Bullricht or Javier Milei, whereas a run-off between Milei and Bullricht remains unpredictable.

In the Andean region, Peru has experienced a period of relative calm in recent quarters, following intense protests against the imprisonment of former President Pedro Castillo. Although rural representatives have pledged to launch a fresh wave of protests, the lack of substantial support has subdued these efforts. While the political situation in Peru remains fluid and subject to sudden changes, Dina Boluarte is expected to maintain her position as the President until the next Presidential election. However, the stagnating Peruvian economy poses a risk to Boluarte's leadership.

In Ecuador, President Guillermo Lasso invoked the "Cross-Death" mechanism, dissolving the Congress and calling for new general elections for both the President and the Congress. In a surprising turn, the favoured candidate, Luisa Gonzalez, aligned with former center-left President Rafael Correa, was defeated by the center-right candidate Daniel Noboa. Noboa, the son of Ecuador's wealthiest individual, marks a departure from traditional political figures. Although Noboa's specific governing agenda remains unclear, his center-right perspective indicates continuity with the policies of former President Guillermo Lasso's administration. Noboa is expected to serve until May 2025, completing the remainder of Lasso's shortened term. Notably, he is eligible to run again in 2025 for a four-year term, governing amidst a backdrop of violence and instability.

In Colombia, President Gustavo Petro continues to witness a decline in popularity, confronting an institutional crises involving both the justice system and Congress. While Petro managed to enact significant reforms, such as the tax reform, the likelihood of further major reforms appears minimal. Simultaneously, the justice system is investigating allegations of illegal campaign financing during Gustavo Petro's presidential campaign. In response, Petro has mobilized his main supporters to participate in local protests supporting his reform agenda and opposing the ongoing investigations. Political uncertainty is on the rise in Colombia and is anticipated to persist in the coming months, with no substantial changes in the legal landscape expected in the near future. Petro is expected to fiercely contend to retain his position, as impeachment procedures loom over his presidency.

Finally, in El Salvador, the exceptional regime approved by the legislative chamber remains in force. Implemented to curb violence perpetrated by criminal organizations known as "Los Pandilleros," this measure has contributed to a decline in official homicide rates. However, human rights organizations have raised concerns regarding approximately 60 deaths occurring under the custody of the army and police, underscoring the diminished capacity of state institutions to investigate these incidents. President Nayib Bukele continues to enjoy significant popularity in El Salvador and exercises considerable control over the legislative house. The exceptional regime is slated to continue indefinitely. Recently, Bukele approved a reduction in the number of municipalities from 262 to 44 and decreased the number of Deputies in the legislative house from 84 to 60, consolidating his position for potential re-election in the 2024 elections and further solidifying his power.