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Latin America’s Moment

Latin America’s Moment analyzes economic, political, and social issues and trends throughout the Western Hemisphere.

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Drug Traffickers Launder Millions Through Remittances. Here’s How to Stop Them.

Four steps Congress and U.S. embassies can take to safeguard remittances from abuse. 

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Mexico
Mexico's Female Legislators Are No Silver Bullet for Gender Inequality
Despite achieving near equal representation in congress, Mexico's new female lawmakers will need to force women's issues onto the legislative agenda. Here are a few reasons why. 
Corruption
Latin America Needs Better Judges
Latin America’s judiciaries are engulfed in corruption scandals. In Colombia a former Supreme Court member was arrested on charges of corruption and bribery. In Peru multiple judges stand accused of trading favorable rulings and shortened sentences for money and perks. In Guatemala, lawyers and justices face charges of rigging Supreme Court appointments. And in Mexico the attorney general's office fired one of its own for delving too deep into alleged bribes to the former head of the national oil company Pemex, a close confidant of President Enrique Pena Nieto. These acts, more than similar crimes by dirty politicians, undermine the region’s fragile rule of law, revealing deep-seated corruption among those responsible for holding others to account. They show that the widespread legal reforms of the last two decades, while necessary, weren’t enough. The next essential step is professionalizing the judiciary itself. Argentina, Chile, Colombia, Mexico, Peru, Uruguay, and others have overhauled their legal systems, introducing oral trials, arbitration, and mediation alternatives, and strengthening due process and the presumption of innocence. As part of larger shifts from inquisitorial to adversarial systems, these efforts have begun to make justice more transparent, effective, and fair. Many Latin American countries have also passed specific anticorruption measures. Brazil criminalized bid-rigging, bribery, and fraud in public procurement. Argentina outlawed nepotism, and along with Peru and Colombia upped the penalties for corporate bribery. Mexico created a new national anti-corruption system, explicitly outlawing bribes, embezzlement, and the failure to disclose conflicts of interest, and creating a dedicated prosecutor to go after perpetrators. Legislators also gave prosecutors new corruption-fighting tools. Brazil’s successful Lava Jato (Carwash) investigations, leading to more than 200 convictions of politicians and business leaders for bribery and kickbacks, including former president Luiz Inacio Lula da Silva, have hinged on plea bargaining, introduced to the fight against organized crime by a 2013 law. Nearly a dozen nations in the region claim similar statutes that enable court officials to ease sentences in exchange for information on accomplices and higher-ups. Yet as the ongoing wave of scandals attests, beyond new laws Latin American nations need judges and lawyers able and willing to wield them. This in turn requires a professional legal bureaucracy. Although harder to conjure than legislation, a qualified civil service is possible to build. Look, for instance, at Chile and Brazil. Chile has a long history of meritocratic public hiring, drawing on credentials and examinations rather than party links. Attesting to the respect afforded their profession, judges, like other bureaucrats, often come from well-heeled families and elite schools. In the wake of Chile's own corruption scandals, one involving former president Michelle Bachelet's son and daughter-in-law, the government expanded efforts to inculcate legal impartiality and professionalism beyond just the courtroom, introducing civic and ethics education to elementary schools nationally. Brazil’s merit-based system for choosing most judges and prosecutors was inscribed in its 1988 Constitution. Over the last 30 years its judicial core has evolved, the politically appointed judges of the past retiring and their replacements rising up through the new technocratic process. Judge Sergio Moro of Lava Jato fame is but one of these new professionals, respected and well remunerated for their technical acumen and political autonomy. Throughout the region citizen anger over corruption is growing. Promises to take on widespread graft helped to catapult Mexico’s president-elect Andres Manuel Lopez Obrador to a historic victory. Corruption preoccupied Colombians heading to polls last spring, and ranks high among voter concerns in Brazil’s upcoming presidential race. In Peru it brought down the previous president and threatens the current head of state, Martin Vizcarra, if he can’t harness the momentum to his cause through a pending referendum. Yet what Latin American leaders must now do is to change career incentives, ensuring that judicial robes aren’t bought but earned, and that merit trumps connections. They need to create respected and rewarding professional paths, enticing the talented and ambitious to the fight against corruption rather than succumb to its temptations. Brazil and Chile show that changing the makeup of the justice system is possible. But a process that takes a generation will surely test the patience of Latin America's voters. View article originally published on Bloomberg.
Mexico
The Coming U.S.-Mexico Blow-Up
On the eve of Mexico’s election, even before the National Electoral Institute called the results, President Donald Trump tweeted congratulations to the presumptive victor Andres Manuel Lopez Obrador. The two leaders followed up the next day with a congenial phone call. The following week three U.S. cabinet secretaries, along with senior White House adviser Jared Kushner, headed to Mexico City to meet their counterparts and the president-elect. The press and markets have taken these gestures as signs of more positive relations ahead. Don’t be too sure. These initial niceties paper over deep chasms in priorities, positions, and domestic politics. A blow-up may not be far away. Lopez Obrador’s recent letter to Trump shows how different his take is on what a promising bilateral relationship entails. The seven-page missive lays out his economic development plans for Mexico, in minute detail, and reflects his view that the solutions to bilateral challenges of migration, security, and commerce depend on Mexico’s economic advancement. It is safe to say President Trump has little interest in ambitious plans to plant 1 million hectares of trees in Mexico’s most poverty-ridden states, much less any inclination to help finance this venture. The same goes for Lopez Obrador’s infrastructure goals: refineries in Tabasco and Campeche, a bullet train from Cancun to Palenque, or a rail corridor connecting the Pacific to the Atlantic across the southern Isthmus of Tehuantepec in a bid to rival the Panama Canal. This U.S. administration isn’t big on partnering on economic development. Look for Lopez Obrador to be turned down or ignored on the economic issues that matter most to him. Likewise, he is unlikely to be the NAFTA partner Trump is looking for. The incoming president supports keeping the 25-year-old free trade agreement, recognizing the benefits for investment. His designated trade lead, Jesus Seade, is working with the current Mexican negotiating team to prepare to pick up the mantle, joining them in Washington talks. Despite Trump’s demand and veiled threats to quickly reach an agreement, Lopez Obrador and his team aren’t deviating from Mexico’s current redlines — including the sunset clause, dispute settlement mechanisms, and auto content rules — or showing any interest in bilateral talks, something Trump has also been encouraging. There is also little common ground on Central American migration. Led by Department of Homeland Security Secretary Kirstjen Nielsen and Customs and Border Protection Commissioner Kevin McAleenan, the U.S. has pushed for a safe third-country agreement, which would force Central Americans passing through Mexico to apply there for asylum. While this would largely solve the U.S. problem — border agents could turn back every man, woman, and child seeking refuge — there is less than nothing in it for Mexico. The new government would struggle to process tens if not hundreds of thousands of refugee applications and to build the infrastructure and camps required to house desperate Central Americans — a crisis potentially overwhelming Lopez Obrador’s young presidency. And the Trump administration looks unwilling to provide the billions of dollars Europe has used to gain Turkey’s acquiescence to a similar deal. Instead, it is still fighting Congress for billions for a border wall. The two leaders are equally at odds about how to lessen these migration flows over time. Lopez Obrador calls for a comprehensive regional economic development plan to attack the root causes of migration. Trump has proposed cutting such aid to Central America by nearly $200 million, or 30 percent each of the last two years. Security cooperation, too, looks to be interrupted. Every change in administration brings something of a pause. Yet this halt will be prolonged by Mexico’s plans to create a new Public Security Secretariat, National Guard, and intelligence agency; setting up these new bureaucracies will delay the start of a yet to be defined domestic security strategy. And even once it is up and running, it won’t be headed in the same direction as the U.S. Lopez Obrador’s ministerial appointees are talking about legalizing marijuana, providing amnesty for illicit crop farmers and expanding scholarships as ways to reduce violence. This doesn’t jibe with the Trump administration’s hard-line approach to regional security. Diplomatically, cooperation on an imploding Venezuela (let alone Nicaragua or Cuba) is also about to fade, as Mexico’s new leadership reverts to a more traditional hands-off international approach. Washington won’t be pleased. Of course, few traditional allies have remained in the U.S. president’s good graces. Just ask Canada’s Justin Trudeau, Germany’s Angela Merkel, Japan’s Shinzo Abe and France’s Emmanuel Macron. As the 2020 elections approach, Trump will be tempted once again to demonize Mexico. With his own base to feed, Lopez Obrador will be hard pressed not to respond in kind. Lopez Obrador closes his letter to Trump by talking about how they both overthrew the “establishment” in their rise to office. What he misses is that this establishment actually cared about NAFTA, the Dreamers, and Mexico more broadly. True, the deepening partnership of the last 25 years has been more an anomaly than a norm. Yet even during past disagreements, despite mutual suspicions and distrust, the two nations found ways to work together. If a standoff between presidents leads back to a more institutional relationship, away from the personalization of the last year and a half between Jared Kushner and outgoing foreign minister Luis Videgaray, that, too, may set the relationship on a steadier path. Just don’t expect it to be better. View article originally published on Bloomberg.
  • Trade
    Latin America Looks Past the United States on Trade
    This weekend a beleaguered Argentina hosted the G-20 finance ministers to work out the agenda for their leaders’ December conclave in Buenos Aires. While officially focused on infrastructure and the future of work, these more technical discussions were overshadowed by U.S. tariff threats and President Donald Trump’s belligerence toward allies and the World Trade Organization. The U.S. attack on the global trading system comes as Latin America is finally embracing free trade. In a resurgence of market-friendly leaders, politicians from the left and right are seeking to expand their nations’ global commercial footprint through a flurry of free-trade and investment agreements. In normal times, they might have turned to the U.S., a top investor and trading partner for most every nation. Yet Trump’s obstinacy throughout the NAFTA negotiations suggests few deals are to be had to the north. As a result, a marked shift is now underway. The European Union (EU) has become a favored partner: Mexico advanced the renegotiation of its 2000 agreement in April, opening up the agricultural, services, and digital goods sectors, simplifying customs and harmonizing regulations to make it easier to sell across borders. Mercosur, the trading bloc founded by Brazil, Argentina, Uruguay, and Paraguay, is pushing to complete an EU agreement that has been marinating for almost two decades. Latin American free traders are also taking their cause to Asia. Mexico, Peru, and Chile were founding partners of the Trans-Pacific Partnership, now the Comprehensive and Progressive Agreement for Trans-Pacific Partnership after the U.S. withdrawal, and neighboring Colombia is among the nations clamoring to join. Mercosur is eyeing negotiations with South Korea, following a path laid out by Costa Rica, El Salvador, Honduras, Nicaragua, and Panama, which all signed bilateral deals this year. Panama has begun negotiations with China, while Colombia and Mercosur are flirting with the idea. And the South American trading bloc has started talks with Canada and reached out to New Zealand and Australia to gauge interest in boosting trade ties. The main Latin American economies are also moving to make real the long elusive dream of regional economic integration — in which it lags every region but Africa. This week, leaders of the Pacific Alliance, a comprehensive free-trade agreement begun by Mexico, Colombia, Peru, and Chile, will meet their Mercosur counterparts in Puerto Vallarta to discuss collaboration and even a potential merger. An agreement would bring together 80 percent of the region’s gross domestic product, creating a $4.3 trillion dollar market. While not as large a prize as the EU or China, this preferential agreement could be more important for Latin America’s future prosperity. Intra-regional trade and investment lean toward medium to higher technology sectors — including chemicals, cars, and pharmaceuticals — and higher value-added industries that bring in technology, enhance productivity, and create better jobs. If Latin American nations want to prosper from global supply chains, they must develop regional production to the point where they can compete with the integrated enterprises of Asia, Europe, and North America. Of course, Latin America’s current free-trade fervor could wane. After Argentine president Mauricio Macri plays host at the end of the year, the G-20 mantle will move on to Japan. Mexico’s president-elect Andres Manuel Lopez Obrador’s NAFTA-friendly comments sit uneasily with his more protectionist calls for self-sufficiency in food and energy. And in Brazil, the next president, who will take the helm in January, could reaffirm or discard the nation’s newfound trade enthusiasm. In that respect, the concrete results of the agreements now on the verge of completion will be critical. Yet even if there is an ebb and flow in sentiment, Latin America’s trade horizons have broadened. While geography remains in large part destiny, Latin America for now is moving on without the United States. After the NATO summit, Germany’s foreign minister proclaimed that the European Union can “no longer completely rely on the White House.” At least on trade, that lesson is one Latin America has already learned. View article originally published on Bloomberg.
  • Mexico
    Mexico’s Next Crisis Will Arrive From the South
    In the wake of Andres Manuel Lopez Obrador’s historic victory, the markets are focused on Mexico’s economic prospects, keenly sniffing for any whiff of either pragmatic promise or populist calamity. Yet while a financial crisis is possible, Central American migration may prove the new administration’s biggest first challenge. Since 2014, hundreds of thousands of Central American men, women, and children, mostly from Guatemala, Honduras, and El Salvador, have fled their homes. Driven by violence, extortion, poverty, and a drought that has decimated subsistence farming, and pulled by family connections and the hope of safe haven, they mostly head north. This desperate exodus brought some 280,000 migrants to the southern U.S. border in 2014, driving a media storm and political reckoning. Images of young children spurred churches into action, political demonstrations across the country, and even conservative talk show host Glenn Beck to drive to the border with a truckload of teddy bears and soccer balls. Congress doled out extra money to care for more than 50,000 Central American “unaccompanied alien children,” or UACs in the Department of Homeland Security’s parlance; the Obama administration worked with the presidents of El Salvador, Guatemala, and Honduras to launch the Alliance for Prosperity, a two-year $1.4 billion dollar plan to spur better governance and economic development. In 2015 the massive migrant wave to the U.S. border diminished, and the cameras largely turned away. Yet the precipitous decline wasn’t because Central Americans stopped leaving their homes. It was because Mexico stopped letting them through. Backed by more than $150 million in U.S. funding, Mexico tightened its southern border, expanding checkpoints, boosting manpower, and using fingerprinting and facial-scanning to identify and detain crossers. The government even cracked down on the infamous La Bestia (“the beast”) freight trains that carried thousands from the southern border city of Tapachula north. That year, Mexico apprehended and deported more Central Americans than its northern neighbor. This status quo of Mexico stopping tens of thousands of families each year may soon end. On the campaign trail, Lopez Obrador promised to loosen Peña Nieto’s southern border defense, refusing to “continue the dirty work” of the United States by detaining Central American migrants who are fleeing violence. As Mexico looks to ease up on its southern border, the U.S. is strengthening enforcement. President Trump’s pullback from separating young children from their parents at the border — spurred by negative media coverage — is just a brief hiatus from an ever-hardening position toward Central American migrants and asylum seekers. The Department of Justice has rewritten the asylum guidelines, raising the credible fear bar asylum seekers must reach, and all but disqualifying those fleeing criminal and domestic violence, thereby denying most Central American claims. The administration has slashed refugee spots by more than half, and tinkered with rules to deny many their day in court. And the U.S. is threatening to impose its own version of the European Union’s Dublin Regulation, under which those seeking asylum must generally do so in their first country of arrival, thereby rendering moot the asylum claims of Central Americans crossing through Mexico. The net result: Tens, if not hundreds, of thousands of Central Americans will likely get stuck in Mexico. There, these migrants will have expansive protections — at least on paper. A 2011 legislative reform guarantees asylum seekers quick and comprehensive consideration, legal representation, and an appeal. While in Mexico they have the right to apply for access to medical care and education. In reality, these rights are at best uneven. Amnesty International found that three out of every four migrants weren’t informed of their right to seek asylum, as the law requires. Although the process has slightly improved, many asylees were detained for months, also in violation of the law. One of the problems is that Mexico’s Commission for Refugee Assistance has two offices outside of the capital; its skeletal staff was able to process fewer than 5,000 cases last year. Another is the widespread corruption and violence targeting migrants, often from the agencies and officials mandated to protect them. And Mexican society isn’t ready for the influx. Not unlike the United States, some Mexicans worry immigrants will take their jobs, depress wages, or commit crimes. Violence against these newcomers has been on the rise: In 2016 alone, the Mexican government found more than 5,000 cases of crimes against migrants, nearly 20 percent at the hands of government officials. In short, Lopez Obrador may well be caught between his promises to be more open and humane to those fleeing and the desire to no longer do president Trump’s bidding, and the huge potential costs this shift could entail for his larger domestic agenda. With Mexico’s migratory agencies and services so ill-equipped, absorbing an influx would take away resources away from his efforts to lift up Mexico’s poor. On the other hand, if Lopez Obrador allows more Central Americans to flow north, Trump could well respond by clamping down further, creating a greater burden for states in northern Mexico. Mexico has long been a sending country, with millions of its citizens living abroad, mostly in the United States. It is now increasingly a receiving nation, caught between desperation to the south and xenophobia to the north, with few tools to safely manage these inflows. Lopez Obrador’s team already faces the burden of realizing his expansive campaign promises. Resolving a migration crisis on its southern border may not have been high on its list. But part of governing, of course, is preparing for unpleasant surprises. View article originally published on Bloomberg.