Speakers: 

• Ram Bala Chandran, Senior Portfolio Manager, Emerging Markets Debt, Neuberger Berman
• Carlos Capistrán, Managing Director, Head of Canada and Mexico Economics, Bank of America Merrill Lynch
• Ariane Ortiz-Bollin, Assistant Vice President-Analyst, Sovereign Risk Group, Moody’s Investors Service
• Jose Enrique Arrioja, Editor, Latin America, Bloomberg News (moderator)

As Andrés Manuel López Obrador nears his first anniversary in Mexico’s presidency, AS/COA hosted a panel to explore the country’s economic outlook. Moderator Jose Enrique Arrioja asked financial experts for their views on prospects for growth, the financial health of state oil firm Pemex, and how rising perceptions of violence affect Mexico’s economic prospects.

Ariane Ortiz-Bollin forecasted limited economic growth due to inconsistent economic policies and mixed messaging, but concluded that we need to look ahead to 2021 to see the impact of the AMLO government’s measures, particularly as it will be a legislative election year. She also noted that weak rule of law has limited Mexico’s credit ratings for some time. Ram Bala Chandran predicted that the U.S. election will result in volatility for Mexico, saying GDP growth will bottom out in the first half of 2020 before recovering in the second half of the year. Carlos Capistrán spoke about the problem of weakening institutions, saying sharp wage cuts for government workers along with moves to limit their future employment in the private sector have meant a deterioration in the quality of management within the AMLO administration. He agreed that GDP growth will be below 1 percent in 2020, and that growth has been weak despite Mexico not facing any external shocks. He noted positive factors too, such as the Central Bank’s independence and NAFTA still being in place, while recommending that the AMLO government take a step back to let the private sector “do its job.”

Bianca Nobilo: If we could start with trying to get to the bottom of some of these disputed facts and what really happened here with the president’s resignation in Bolivia, [Evo] Morales is maintaining that this is some sort of coup, that it’s harkening back to the brutal military takeovers of years ago. But the opposition, the person who lost out to him to become president, is saying that this was very much a popular movement. What’s your assessment?

Eric Farnsworth: It’s really complicated and there’s history here. The short answer is that it’s not a coup in the traditional sense, certainly. President Morales did lose the support of the military and the police forces, and the head of the military did come out on Sunday and encourage President Morales to depart. Now, some people would say, “Well, what’s the difference?” There’s a nuance here and the nuance is that the head of the military asked him to depart so that they could restore calm to the streets. Now that really hasn’t happened, but it was really for public order and security.

President Morales said that he would step down so that Bolivia could recover—it was really on that basis. You also have to remember that just before that, on Sunday, the Organization of American States had come out with a really condemning report about the elections that Morales oversaw in October, which were clearly seen to be fraudulent and called for Bolivia to re-run those elections.
So, the political support for the president had been withering. He lost the support of the military, and he decided for his own good and the good of his country to depart. And now he’s in Mexico.

Nobilo: In terms of the political and almost biographical, psychological trajectory of Morales…he started [as] the first indigenous president of Bolivia. He was a llama farmer, I think, and he’s been in power for 13 years, so what happened here? How did he go from that to somebody who’s trying to really push the constitutional limits of power and then become embroiled in these accusations of fraudulent elections?

Farnsworth: This is really a shame in some ways because, had he left before this whole anti-constitutional effort to maintain power, his legacy would’ve been totally different. He was the first president elected as an indigenous person and you remember that the percentage of the population in Bolivia that’s indigenous is really quite large. It’s been downtrodden for years, it’s been overlooked, it’s clearly underprivileged, and to have a president who represents that segment of society is massive, not just in the Bolivian context, but also across Latin America. And we can celebrate that fact. He also brought some economic growth to the country. Certainly, he presided during a period of high commodities prices, he was the beneficiary of that. He did do some things which I think would cause people to say, “Well, indeed, he wasn’t like some of the other populist leaders around South America.” But he also exhibited a penchant to want to stay too long, and every leader is going to lose public support over time.

But he ran a referendum in 2016 that he lost, to allow him to continue in power, and he got the Supreme Court to issue a favorable ruling that somehow his human rights had been violated by not being allowed to run for the election and then the election that he ran was fraudulent. So, the people of Bolivia, even many of his supporters, really lost confidence in him and lost support and called out for change. So that’s where we are right now.

Nobilo: And Eric, Morales was the last of the original leaders of the “Pink Tide” in Latin America. Do you think that the pressure on him, and then his subsequent resignation, heralds the end or marks a repudiation of that? Do you think it’s the end of that movement as it were? Or its resonance in the region.

Farnsworth: It’s really hard to say. Every country is different, and the voters of each country react to their own personal and individual circumstances, but one thing that we can say is that the Pink Tide, as you referred to it, really did seem to mirror the commodities super cycle. When commodities prices were high, the populist leaders in the region were elected, they were popular, they ruled with a lot of money sloshing around. As commodities prices over the last couple of years have gone down, there’s been a lot less money to circulate. And issues like corruption, issues like anti-democratic governance become much more relevant to the voters. And that’s where, I think we’ve seen country after country try to turn a different direction. What we see quite clearly is that the leaders from the “Pink Tide” were all South American leaders and all of those countries are commodities exporters, so I think that has to be part of the discussion. It probably doesn’t explain all of it, but it’s certainly a large percentage of it.

Guillermo Zubillaga, the head of AS/COA's Venezuela Working Group, spoke to Business Insider Today about the humanitarian crisis in Venezuela.

"The economic situation has gotten worse—the repression, extrajudicial killings, use of torture, the censoring of the press—all those things have gotten worse," he said. "The other thing of course is the deterioration of public services like electricity or water."

Due to Venezuelans moving away in large numbers, the fiscal standings of neighboring countries such as Colombia, Ecuador, and Peru have been compromised because they cannot sustain the size or rapid increase of the migration flow.

"The Venezuelan exodus is only second largest to Syria and it's projected to be even bigger," he said.

Zubillaga also stated that Venezuelans do not have access to cash and experience difficulty when procuring necessities.

"The average Venezuelan goes to a market, goes to a store and they see prices that they cannot afford," he said. "They see prices of a deodorant that is equivalent to their monthly minimum wage."

When asked why Juan Guaidó's opposition movement, which earlier this year inspired protests and calls to oust President Nicolás Maduro, lost momentum, Zubillaga explained that it is difficult for people to simultaneously protest and provide for themselves.

"It's really hard for a big portion of the population to maintain themselves in the streets, to stay in the streets, actively engaged in trying to find a political solution to a brutal dictatorship that has lately increased, and strategically, the numbers of extrajudicial killings."

Watch the full interview.

Carin Zissis, editor-in-chief of AS/COA Online, spoke with Univision News about the nine people killed in Mexico on November 4th. Mexican authorities said today that the weapons used in the attack were American-made.

“Mexican authorities have, for a long time, been asking for the United States to do more to prevent these guns from coming into Mexico,” said Zissis. “Assault weapons actually go for more than they go for in the United States. That’s the economics driving it, plus the smuggling driving it, and it’s feeding the violence here.”

Zissis provided a contrast between the two countries, stating that there is only one, heavily guarded gun shop in Mexico, while there are over 60,000 gun shops and dealers in the United States. She also cited the lax gun laws in the southwest border, explaining that there are limited checks coming into Mexico on the southern border.

“After what happened in Culiacán with El Chapo’s son, the botched arrest of Ovidio Guzmán, the U.S. government, in particular the U.S. Embassy here in Mexico, talked about increasing surveillance at the southern border in order to prevent some of that smuggling,” said Zissis.

“Some of that’s still developing and we’ll see if it comes to fruition. It’s been years that the Mexican government has been asking for this to be attended to.”

When asked if people in Mexico, or even the United States, can expect any kind of justice, Zissis said, “more work to get a handle on impunity, improvement of rule of law, reforms in the police forces” are what can be done to see change.

AS/COA Vice President Eric Farnsworth spoke to Bloomberg’s Balance of Power about recent events in Latin America and the United States-Mexico-Canada Agreement (USMCA).

"It does seem to be like a season of discontent across much of South America," Farnsworth said. He called what is occurring in Chile “essentially a middle-class protest,” adding that with commodity prices low, there are less resources, and people are beginning to get frustrated.

“Many of us have used Chile as an example of what many in Latin America could aspire to be,” he said. “But what the problem is, is that those high expectations haven’t been met.”

Regarding USMCA, Farnsworth expressed optimism: “This is a moving target, but there is a certain optimism coming out of Congress.” He added: “I’m optimistic that they can move this forward, but they have to want to.”