Americas Brief newsletter: 20-26 February 2019

The latest Americas Brief newsletter analyses a proposed pension reform in Brazil, a constitutional referendum in Cuba, and the ongoing crisis in Venezuela.

United States & Canada

• United States – Police arrest Coast Guard officer over terror plot
• United States & China – Trump delays imposition of latest tariffs

Mexico, Central America & Caribbean

• Cuba – Voters back new constitution featuring modest economic liberalisation
• Mexico & United States – U.S. agents find drugs in strawberry shipment

South America

• Brazil – President presents bill to overhaul pension system
• Colombia – Indefinite strike begins in south-western department
• Ecuador – Government creates expert commission to investigate corruption
• Venezuela & Colombia – Border closure heightens business, operational risk
• Venezuela & United States – U.S. imposes sanctions on governors


United States & Canada

US Flag

United States – Police arrest Coast Guard officer over terror plot
UNITED STATES – Terrorism risk: Minor
21 February: Media outlets reported that a U.S. Coast Guard lieutenant named Christopher Paul Hasson from Silver Spring, Maryland, was arrested on 15 February on suspicion of preparing a white nationalist terror plot. The suspect, who was reportedly inspired by Norwegian mass murderer Anders Breivik, was planning to attack high-profile Democratic Party politicians and news anchors from networks including CNN and MSNBC, according to court documents. Hasson was found to have at least a dozen weapons and some 1,000 rounds of ammunition at his home. Hasson had been serving at the Coast Guard’s headquarters in Washington, D.C., the U.S. capital.

Why it matters: The arrest follows a proliferation of white nationalist and far-right terror activity in the United States in recent years. In October 2018, pipe bombs were sent to addresses linked to numerous media outlets and high-profile Democrat politicians, although none of these exploded. In light of a growing trend of far-right activity, A2 Global advises organisations linked to centre-left political groups, particularly the Democratic Party, and liberal media outlets to review security measures. Security staff at these locations should monitor local updates, carefully inspect post and consider reducing building access to external individuals.

United States & China – Trump delays imposition of latest tariffs
UNITED STATES – Political risk: Low
CHINA – Political risk: Medium
24 February: The U.S. is to delay imposing further trade tariffs on China, President Donald Trump announced on 24 February. An increase of up to 25 per cent in duties on USD200 billion worth on certain Chinese goods was due to be introduced on 1 March. Trump said both sides had made ‘substantial progress’ in trade talks and revealed that he was planning a summit with Chinese President Xi Jinping in the southern U.S. state of Florida. China’s official news agency Xinhua stated that progress had been made on issues including intellectual property protection, technology transfer, and agricultural produce.

Why it matters: Trump’s announcement, following positive signals emerging from recent talks in the U.S. capital Washington, D.C. indicates that both sides are seeking to de-escalate the ongoing trade war. Existing tariffs remain in place. Businesses whose supply chains or customers link the U.S. and China should closely monitor announcements from Beijing and Washington and be prepared to amend strategic planning to reflect a further de-escalation in the trade war.


Mexico, Central America & Caribbean

Havana street

Cuba – Voters back new constitution featuring modest economic liberalisation
CUBA – Political risk: High
25 February: In a referendum on 24 February, voters overwhelmingly approved the ratification of a new constitution consolidating one-party communist rule. Approximately 87 per cent of voters supported the new constitution. The result of the vote was announced by the national electoral commission on 25 February.

Why it matters: The approval of the new constitution is significant, as it includes several references to markets, small businesses, the recognition of private property, and foreign investment. While moves towards a full-fledged market economy in Cuba are likely to be incremental, the new constitution signals a consolidation and formalisation of the communist government’s effort to modernise and partially open up the island’s economy. Furthermore, as 9 per cent of voters rejected the constitution, the vote signals an increasing competitive political environment and tolerance of opposition. A2 Global advises firms with business interests in Cuba to factor the constitution’s approval and its provisions on private enterprise into their strategic planning.

Mexico & United States – U.S. agents find drugs in strawberry shipment
MEXICO – Security risk: Elevated
UNITED STATES – Security risk: Medium
22 February: U.S. customs and border protection agents seized approximately 410kg of methamphetamine with a street value of USD12.7 million hidden among frozen strawberries being brought into the southern state of Texas from Mexico. Some 350 bricks of the drug – commonly known as ‘meth’ or ‘ice’ – were discovered over the weekend of 16-17 February in a truck crossing the Pharr-Reynosa International Bridge, the U.S. Customs and Border Protection (CPB) agency said on 21 February. The bridge over the Rio Grande crosses from Mexico at the city of Reynosa in Tamaulipas state, to south Texas between the cities of McAllen and Brownsville. The truck driver is being held by the CPB.

Why it matters: Mexico is reportedly the world’s largest producer of methamphetamine, with organised crime cartels producing and exporting the drug on a vast scale. The many ports of entry to the U.S. – the Pharr-Reynosa International Bridge is one of 29 official ports of entry into Texas – provide many options for smugglers. A2 Global advises logistics firms operating routes crossing the U.S.-Mexico border to conduct thorough checks on consignments to ensure no illegal substances are aboard vehicles and undertake comprehensive background checks on personnel.


South America

Bolsonaro

Brazil – President presents bill to overhaul pension system
BRAZIL – Political risk: Medium
20 February: President Jair Bolsonaro presented his government’s long-awaited proposal to overhaul the country’s expensive pension system. The proposed reform, which seeks to save more than BRL1 trillion (USD270 billion) over the next decade, features an increase in the minimum retirement age to 65 for men and 62 for women. The proposal, which includes a constitutional amendment, requires the approval of three-fifths of both chambers of congress to be enacted.

Why it matters: Brazil spends approximately a third of federal tax revenue on pensions. This has contributed to the country’s large budget deficit, which in 2018 stood at approximately 7 per cent of GDP. As such, shrinking spending on the pension system is an urgent priority both for Bolsonaro’s government and investors concerned about the country’s unsustainable debt level.

A2 Global considers it unlikely that the proposal will pass in its current form, in part due to divisions within Bolsonaro’s large multi-party coalition. Firms with operations in Brazil should monitor the passage of the proposal through congress, adjusting financial and operational planning to reflect changes to the minimum retirement age and other aspects of the system. As the proposal is likely to attract significant opposition throughout the country due to the increase in the minimum retirement age, business travellers in the two-week outlook should exercise heightened caution over possible protests.

Colombia – Indefinite strike begins in south-western department
COLOMBIA – Travel risk: High
25 February: Several organisations, including ANUC – a trade union representing teachers – have called on members to begin an indefinite strike on 25 February in the south-western department of Cauca. A large-scale rally, which will also include members of local indigenous communities, is set to take place on 10 March. Groups are protesting over a range of grievances, including claims that the government has failed to protect social leaders and human rights figures, who are being murdered across the country.

Why it matters: Prolonged industrial action and associated protests will heighten the travel risk across Cauca, as well as hampering operations for businesses with interests in the department. There is a moderate probability that striking workers will stage blockades on sections of the Pan-American Highway, a key motorway crossing the Americas. A2 Global advises business travellers with plans to travel to Cauca to anticipate possible travel disruption due to the strike. Logistics managers with operations in the country should assess how the industrial action will impact operations.

Ecuador – Government creates expert commission to investigate corruption
ECUADOR – Corruption risk: Extreme
19 February: The government announced the creation of an expert commission, which will include representatives from international organisations and civil society groups, to investigate allegations of corruption during the past decade. The body, which will be advised by representatives from the U.N., the Organization of American States and Transparency International, will function until the conclusion of President Lenín Moreno’s term of office in 2021.

Why it matters: The committee has been established to investigate allegations of corruption during the administration of previous president Rafael Correa, who is under investigation from the Ecuadorian authorities over alleged influence peddling and procedural fraud. Correa, who is in self-exile in Belgium, disputes these allegations. Acts of corruption related to the Odebrecht scandal led to the prosecution and imprisonment of Correa’s former vice-president Jorge Glas in October 2017. A2 Global advises firms who have operated in Ecuador in the past ten years to monitor the committee’s work, ensure all financial transactions are accounted for, and self-report any irregularities to local anti-corruption bodies.

Venezuela & Colombia – Border closure heightens business, operational risk
VENEZUELA – Political risk: Extreme
COLOMBIA – Political risk: Minor
24 February: Following violent confrontations between soldiers loyal to Venezuela’s de facto President Nicolás Maduro and anti-government protesters along the Venezuela-Colombia border on 23 February, Venezuelan officials said the area returned to calm on 24 February. On 23 February, Maduro said the border was partly closed to prevent the delivery of humanitarian aid to the country, which he claims is a part of a U.S. government effort to invade the country.

Why it matters: The closure of the Venezuela-Colombia border follows Caracas’ decision to close the country’s border with Brazil and the neighbouring island territories of Aruba, Curaçao, and Bonaire. As A2 Global noted, the Venezuela-Colombia border closure has far more significant implications on trade and logistics, as it will severely impact cross-border trade. There is a strong possibility of further opposition-led protests, which will likely result in confrontations with police or the military. A2 Global reiterates it advice to all non-essential foreign staff currently in Venezuela to leave the country, while business travellers with plans to visit to consider postponing travel. Logistics managers with interests in the country should also assess how a prolonged closure of the Venezuela-Colombia border would impact operations and consider alternative means to transport goods, such as air cargo.

Venezuela & United States – U.S. imposes sanctions on governors
VENEZUELA – Political risk: Extreme
UNITED STATES – Political risk: Low
26 February: The U.S. treasury announced sanctions against four Venezuelan border and coastal state governors yesterday (25 February). This comes as international pressure grows on the government of de facto president Nicolás Maduro amid the ongoing political, economic and humanitarian crisis in the country.

The governors targeted by sanctions are Apure state’s Ramón Carrizalez, Carabobo state’s Rafael Lacava, Vargas state’s Jorge Luis García Carneiro, and Zulia state’s Omar José Prieto, all members of the ruling PSUV party. The treasury department accuses them of corruption and failing to allow humanitarian aid to enter Venezuela. Separately, Canada and Germany’s foreign ministries announced their support for further sanctions against members of Maduro’s inner circle.

Why it matters: The four governors’ assets in the U.S. have been frozen, while U.S. entities are prohibited from carrying out financial transactions with the four individuals. The sanctions are likely to be followed by similar moves from Canada, Germany, and probably other E.U. countries, such as France. These would likely also target individuals close to Maduro. A2 Global advises compliance officers to incorporate the names into their compliance programmes to mitigate the risk of sanctions violations.

Back