This week’s edition of the Americas Brief newsletter analyses the US’s imposition of tariffs on Mexican tomatoes, insecurity in western Jamaica, and tax developments in Peru.
United States & Canada
- Canada & China – Second Canadian national sentenced to death in China
- United States – Strikes by drivers of ride-hailing services heighten travel risk
- United States & Mexico – Washington imposes tariffs on Mexican tomatoes
Mexico, Central America & Caribbean
- Cuba, US & EU – Cruise operator faces lawsuit under US embargo act
- Jamaica – State of emergency declared for west, after rise in serious crime
- Panama – Murder of New Zealander highlights maritime crime, security risks
- Peru – Government approves law tackling corporate tax avoidance
- Venezuela – Opposition leader announces escalating public sector strikes
United States & Canada
Canada & China – Second Canadian national sentenced to death in China
CANADA – Political risk: Minor
CHINA – Political risk: Medium
30 April: A second Canadian national was sentenced to death over drug trafficking, according to media reports on 30 April. In response, Ottawa accused Beijing of arbitrarily applying capital punishment, and requested clemency for the accused.
Why it matters: The sentence follows a similar capital punishment sentencing of a Canadian national in January over drugs-related charges, in what may constitute further retaliation for Canada’s arrest of Huawei Technologies’ CFO Meng Wanzhou in December 2018. Previous reprisals against Canada have included the detention and deportation of Canadians, as well as bans on Canadian rapeseed exporters.
A2 Global notes that drugs-related crimes are punishable by death in China, and that foreigners of other nationalities have previously been sentenced on similar charges. A2 Global reiterates its advice to US and Canadian companies operating in China to factor in the possibility of reprisals. These could include delays in granting licences, processing shipments, and approving visas, as well as the detention of Canadian or American citizens in China. A2 Global advises US and Canadian business executives and travellers to assess whether their business activities or relations with Chinese regulatory authorities might provide a pretext for detention or increased regulatory scrutiny.
United States – Strikes by drivers of ride-hailing services heighten travel risk
UNITED STATES – Travel risk: Medium
7 May: A significant number of drivers at ride-hailing services Uber and Lyft have called a strike on 8 May to demand a minimum wage and greater job security. The strike, which involves the suspension of services, is set to coincide with Uber’s planned initial public offering (IPO).
In New York City, drivers will strike from 0700 to 0900 local time. Strikes of 12- or 24-hour duration are likely in other major cities, including Boston, Los Angeles, Philadelphia, and San Francisco.
Why it matters: The strikes are likely to significantly reduce the availability of Uber and Lyft services in affected cities. Despite this, services will remain available, albeit with a reduced number of vehicles, as drivers are independently contracted and some will choose to work. Individuals who regularly use Uber and Lyft should consider alternative methods of transport, such as conventional or hotel-booked taxi services, or public transport, throughout 8 May. Business travellers should allow additional time for travel and avoid any gatherings related to the strike.
United States & Mexico – Washington imposes tariffs on Mexican tomatoes
UNITED STATES – Political risk: Low
MEXICO – Political risk: Medium
6 May: A Mexican government source announced that the US will impose a 17.5 per cent tariff on tomato exports from Mexico as of 7 May, following the countries’ failure to renew the 2013 suspension of a US anti-dumping investigation.
Why it matters: The tariffs are set to be in place until a new suspension agreement is reached, according to a Mexican government source. Tomatoes constitute Mexico’s third-largest commodity export at a value of USD2.11 billion annually. Mexico accounted for 25 per cent of the world’s total tomato exports in 2016, and the US is the world’s top tomato importer, taking USD2 billion of Mexico’s annual exports. As such, the US suspension is likely to adversely impact Mexican tomato exporters over the next few weeks and months. A2 Global advises businesses to assess how the tariffs will impact operations and factor higher prices into their purchasing strategies. A2 Global advises logistics managers sourcing tomatoes from Mexico to assess the impact of the tariffs on their supply chain, and, if necessary, seek alternative suppliers.
Mexico, Central America & Caribbean
Cuba, US & EU – Cruise operator faces lawsuit under US embargo act
CUBA, UNITED STATES & EUROPEAN UNION
2 May: A lawsuit was filed in a US federal court in Miami against British-American cruise operator Carnival Corporation & PLC for allegedly profiting from expropriated property in Cuba. The lawsuit, filed by two owners of Cuban port titles, is the first to be brought under Title III of the 1996 Helms-Burton Act, which took effect yesterday. The EU threatened to take ‘measures’ against the US in response to this.
Why it matters: US President Donald Trump’s recent decision not to waive the act’s Title III, unlike his three predecessors, is an effort to increase financial and legal constraints on Cuba and foreign companies operating on the island. The decision came as the US seeks to increase pressure on Cuba’s communist government to cut its security ties to Venezuela’s President Nicolás Maduro. According to media reports, further lawsuits are likely to be filed against other international cruise liners operating in Cuba in the short- and medium term, while European construction firms with interests on the island could also face legal challenges. Foreign firms operating in Cuba should assess their vulnerability to lawsuits under Title III and adjust legal and operational processes accordingly.
Jamaica – State of emergency declared for west, after rise in serious crime
JAMAICA – Security risk: Medium
30 April: The government declared a 14-day state of emergency (SOE) for the western parishes of St James, Westmoreland, and Hanover, according to media reports on 1 May. This is due to a sharp increase in serious crimes, including murder, in these areas that span popular tourist destinations, such as Negril and Montego Bay.
Why it matters: Although the SOE has been declared for 14 days initially, the government may extend this by three-month periods. Authorities have warned that the SOE could lead to travel delays, road closures, and curfews. A2 Global notes a heightened security presence may be expected throughout the affected areas, including at Sangster International Airport (MBJ), which serves Montego Bay. These factors are likely to cause significant travel disruption. A2 Global advises against non-essential travel to the areas in which the SOE has been declared, due to elevated security risks, as highlighted by murders of expatriates. If travel is necessary, travellers are advised to factor the travel disruption into their planning, allow for additional journey time, exercise heightened situational awareness, use trusted local private drivers, and limit travel to daylight hours if possible. Security managers responsible for staff in western Jamaica should consider enforcing strict security protocols for staff journeys, and brief staff on the security threats.
Panama – Murder of New Zealander highlights maritime crime, security risks
PANAMA – Maritime risk: Low
4 May: Panamanian prosecutors charged two local men with the murder of a New Zealand national who was shot dead on his boat, allegedly by criminals, in the early hours of 2 May. Alan Culverwell was killed when three hooded men reportedly entered his family’s boat, docked off Morodub Island in the eastern province of Guna Yala. His wife and 11-year-old daughter were injured in the attack. The attackers reportedly also stole an engine.
Why it matters: The incident highlights the risk of maritime crime in Panama, which despite being home to the Panama Canal, one of the world’s busiest maritime trading routes, has low crime levels overall. While the motive for the attack may initially have been robbery, such incidents can quickly escalate into armed confrontation. Firms which regularly use the Panama Canal, or travel elsewhere in Panama’s territorial waters, should ensure that vessels adhere to guidelines set out in Best Management Practices 5.
Peru – Government approves law tackling corporate tax avoidance
PERU – Political risk: Minor
6 May: The government approved a new law which seeks to clamp down on loopholes for corporate tax avoidance. In particular, the law targets corporate reorganisations and contracts which either defer earnings or bring forward spending to reduce corporates’ tax liability. The law, which had already received congressional approval, came into force on 7 May. Companies that do not comply are liable to sanctions imposed by Peru’s national superintendency of tax administration (SUNAT).
Why it matters: The law is likely to impact numerous corporations involved in the country’s extensive mining sector; Peru is the world’s second-largest producer of copper. Compliance and tax officers of firms which operate in Peru should ensure that practices comply with the law. Further information on the law is available on the ministry of economy and finance’s website.
Venezuela – Opposition leader announces escalating public sector strikes
VENEZUELA – Travel risk: Extreme
1 May: National Assembly head and self-declared interim president Juan Guaidó called for a series of escalating strikes by public sector workers to begin on 2 May. In a Twitter post, Guaidó called for strikes to progressively grow, after which a general strike is to be called.
On 1 May, large anti-government protests were held in major cities across the country to coincide with May Day. Rallies supportive of de facto president Nicolás Maduro also took place, particularly in the capital Caracas. According to media reports, a 27-year-old woman was fatally shot at an anti-government rally in Altamira district, a stronghold of the opposition in the east of Caracas.
Why it matters: Venezuela has a very large public sector, particularly in the petroleum industry, and as such strike action has the capability to further disrupt the country’s devasted economy, which is marked by hyperinflation and shortages of key goods, including many medicines. Firms with interests in Venezuela, particularly those which often collaborate with the public sector, should factor the strike action into operational planning, anticipate disruption to business operations, and adjust service delivery and staffing accordingly. Monitor updates on the strikes and developing political situation in the local and international press, ensuring that information is credible and vetted before being used to inform critical decisions.