March 8, 2019


1. Standard & Poor’s revises credit rating outlook of public and private companies to negative

The credit rating agency Standard & Poor’s revised its outlook of public and private companies to negative. The state-owned oil and electric companies, PEMEX and the Federal Electricity Commission (CFE); and private companies América Móvil and Coca-Cola FEMSA are among the companies affected by this decision.

Standard & Poor’s analyst Luis Manuel Martínez assured that PEMEX will not lose its investment grade rating any time soon.

El Economista: S&P cambia a Negativa perspectiva de Pemex, la CFE, bancos y empresas

2. Morena submits bill that would slash political party funding by 50%

Congressional leaders from the Morena party Mario Delgado and Tatiana Clouthier submitted a law that would slash political party funding by 50%.

The reduction of funding would only cut back on day-to-day activities and could save the government up to MXN $2.5 billion (USD $128.2 million) this year alone. Political campaign budgets will not be affected by the measure.

Milenio: Morena propone bajar 50% financiamiento a partidos

3. 26 state legislatures approve creation of National Guard

26 Mexican state legislatures approved a constitutional amendment that would create the National Guard. Among the states that voted in favor are: Guerrero, Campeche, Tabasco, Chiapas, Nuevo León, Colima, Zacatecas, Querétaro, Hidalgo, Estado de México, Baja California Sur, Tlaxcala, Durango, Tamaulipas and Quintana Roo.

Currently, President López Obrador is waiting on the remaining six legislatures to approve the measure next week.

Excélsior: Guardia Nacional quedaría aprobada la próxima semana

4. State legislators in Nuevo León approve a bill banning abortion

State legislators in Nuevo León approved a bill stating that personhood begins at conception.

The State of Nuevo León now recognizes life from the moment of conception, and those carrying out abortions will face penalties and/or arrest.

El Financiero: Avalan en NL ley contra el aborto

5. Mexican Senate ratifies shortlist of candidates for the Supreme Court of Justice

The Mexican Senate’s Justice Commission ratified a shortlist of candidates to occupy the vacant position in the Supreme Court of Justice left by ex-Associate Justice Margarita Luna Ramos.

The PAN and PRI political parties opposed the list claiming they didn’t fit the ideal profile and are too close to Morena.

El Universal: Comisiones avalan terna para la Corte

1. Bolsonaro criticized for video posted to social media

Last week’s edition detailed three major political challenges facing Bolsonaro as he attempts to pass retirement reform: his relationship with Congress, pressure from corporations and unions, as well as the opposition. A fourth challenge – Bolsonaro’s social media etiquette – has stirred up additional controversy. The President posted a pornographic video on Twitter taken at Carnival, while also inviting Brazilians to reflect on the future of the country’s most popular festival. Although Bolsonaro was reaching out to his conservative base with a moral stance condemning the video, it was not well-received as he came under fire from national and international media, social groups and the opposition. However, Bolsonaro’s supporters – especially the more pragmatic ones – remained silent. Inappropriate comments made online by the president can have catastrophic effects on the government. The digital environment also naturally amplifies key issues and can significantly increase the political stakes of negotiations in Congress, including the retirement reform.

Valor Econômico: Imprensa internacional critica Bolsonaro por vídeo postado no Twitter
G1: Bolsonaro posta vídeo com pornografia, e conteúdo tem acesso restringido

2. OECD lowers economic growth projection for 2019

The Organization for Economic Co-operation and Development (OECD) released a report lowering economic growth expectations for the Brazilian economy. The OECD forecasts GDP growth of 1.9% in 2019, 0.2% lower than the figure released last November. Analysts cited last week’s report by the Brazilian statistical agency revealing lower-than-expected growth in 2018 as the leading cause for the downgrade – Brazil’s GDP in 2018 grew 1.1% instead of the expected 1.2%. However, the OECD also reported that the Brazilian economy is headed in the right direction: job growth, better entrepreneurial prospects and lessened political uncertainty led the organization to predict 2.2% growth in 2020. Further economic growth could be seen with initiatives such as the proposed retirement reform, which will save the Brazilian government money and offer a more stable financial basis in the long-run.

O Globo: OCDE reduz para 1,9% previsão de crescimento da economia brasileira em 2019
Valor Econômico: OCDE reduz projeção para crescimento do PIB brasileiro em 2019

3. U.S. dollar reaches highest price of the year

At the end of the Carnival holiday, the exchange rate for the U.S. dollar reached its highest value to the Brazilian real since December 2018. The uptick in value can be explained by natural market changes, compounded by domestic and international political uncertainty. Domestically, the government’s inability to approve measures such as the retirement reform, which would foster investment and halt growing public debt, can be cited as a cause for the drop in the real’s value. President Jair Bolsonaro has been accused of not promoting the retirement reform through his social media platforms, reinforcing the financial market’s fear that the reform will not be approved. Internationally, the U.S. dollar has seen an increase in value in relation to almost every currency in developing countries. This is due to a positive perception of the American economy, which is not seen to be as fragile as economists had suggested in the past.

VEJA: Dólar volta a subir e bate novo recorde do ano
Valor Econômico: Dólar retoma escalada e passa de R$ 3,90; Ibovespa oscila

4. Tourism Minister is accused of electoral fraud during campaign

Tourism Minister Marcelo Álvaro Antônio has been accused of fraud during his campaign for state representative in Minas Gerais, where he received the most votes of any candidate. The allegation was made by a member of his own party, state representative candidate Zuleide Oliveira. In a formal accusation registered at the Regional Electoral Court in Minas Gerais, Oliveira claims the minister asked her to be a candidate with the purpose of diverting money from the party fund reserved for female candidates. Following the charge, Minas Gerais’ Public Prosecutor’s Office will take Oliveira’s deposition and investigate the case. The minister denies any wrongdoing. Antônio was president of the PSL party at the time and had the power to decide candidacies in each state. The Federal Police will also hear Oliveira.

Folha de S.Paulo: Ministro me chamou para ser laranja e desviar dinheiro, diz candidata do PSL
G1: Denúncia contra ministro do Turismo será investigada pelo MP eleitoral e pela polícia
O Globo: Procuradoria pede investigação sobre candidata-laranja de ministro do Turismo

5. Operation Car Wash makes agreement with road administration company

Prosecutors for Operation Car Wash reached a leniency agreement with the road administration company ParanáRodoNorte, part of the CCR group. The company will have to pay R$ 750 million (USD $194 million) back to the people after being accused of corruption. The payment will be made in three installments. The first installment will be made through a 30% discount on tolls in roads managed by the company until it reaches R$ 350 million (USD $90.6 million). The second installment, worth R$ 365 million (USD $94.4 million), will be paidthrough infrastructure projects, specifically works that were not executed during the company’s contract with the local government. The last installment will be a R$ 35 million (USD $9.1 million) fine, determined by the Administrative Misconduct Law. The agreement still needs to be approved by the Justice Department. The deal caused CCR’s shares to dropon the stock market. EcoRodovias, another company being investigated by Operation Car Wash, also saw a drop in its share value.

Valor Econômico: CCR fecha acordo de leniência no PR e pagará R$ 750 milhões por corrupção
Folha de S. Paulo: Com acordo, CCR reconhece propina em pedágio e vai reduzir tarifa em 30% no PR

1. OECD softens negative economic projections for Argentina

According to a report released twice annually by the Organization for Economic Cooperation and Development (OECD), the Argentine economy will continue its recession over the course of the year at a rate of -1.5% as opposed to the -1.9% projected last November. Additionally, the OECD projects 2.3% growth in 2020, spurred by increased exports and agricultural production.

La Nación: La OCDE mejoró la proyección para la Argentina: seguirá en recesión, pero con una contracción de 1,5%

2. Industrial production grows 4.6%, construction 4.4% in January

The Argentine statistical agency released its industrial production report for January, revealing a 4.6% uptick in industrial activity compared to last month – although falling 10.8% compared to January last year. The construction sector saw a similar monthly increase of 4.4%, but again uncovers a 15.7% drop compared to January of 2018 – indicative of Argentina’s continuing economic woes.

Perfil : La industria creció 4,6% y la construcción subió 4,4% en enero de 2019

3. U.S. Dollar, Country Risk indicator continue to climb

Following the carnival festivities on Thursday, the Argentine Peso reached a value of ARS $43.60 compared to the U.S. Dollar, due to a sustained capital flight out of emerging markets and into China. To control the spiral, the Argentine Central Bank began to offer dollar futures, a tool to buy and sell currencies at a pre-determined future price and quantity, with a set expiration date. Since the year began, the U.S. Dollar has increased 7.7% to the Argentine Peso. On the same token, J.P. Morgan’s Country Risk indicator rose 0.8% to 753 points, due to a decrease in the value of Argentine bonds in foreign markets. The indicator rolls together several variables relating to treasury bonds issued by the U.S. and another country to gauge that country’s attractiveness to investors.

Clarín: Dólar hoy: supera los $ 42 y el Central trata de controlarlo vendiendo futuros

4. IADB to loan USD $750M for public administration initiatives

The Inter-American Development Bank approved two loans of a total of USD $750 million to finance the strengthening of provincial administration and the digital agenda. The first disbursement of USD $150 million will directly benefit the provinces of Chaco, Entre Ríos, Jujuy, Misiones, Río Negro and Tierra del Fuego. The second loan will inject USD $300 million into the Secretariat of National Modernization to strengthen Argentina’s digital agenda, which includes connectivity, electronic governance and productive digital transformation.

El Cronista: Préstamo del BID para gestión pública

5. Four provinces under agricultural state of emergency

The government declared a “state of emergency and/or agricultural disaster” for the provinces of Mendoza, Santa Fe, Tucumán and Santiago del Estero, following floods, low temperatures and hail which have greatly affected infrastructure and productive capacities. The National Commission of Emergencies and Agricultural Disasters recommended the measure following the climatic events.

El Cronista: Cuatro distritos en emergencia por el agro