Americas Brief newsletter: 30 January 2019 – 5 February 2019

This week’s Americas Brief newsletter analyses the political crisis in Venezuela, Nayib Bukele’s election as El Salvador’s next president, and ongoing strikes on Mexico’s northern border.

United States & Canada

• Canada – Severe winter storm causes power outages in western province
• United States & China – Soybean order signals trade war rapprochement

Mexico, Central America & Caribbean

• Cuba – Canada halves embassy staff numbers after another diplomat falls ill
• El Salvador – Anti-corruption candidate claims victory in presidential election
• Jamaica – Dengue fever outbreak posing greater public health safety risk
• Mexico – Ongoing border area strikes prompt companies to leave country

South America

• Bolivia – Floods and landslides impacting travel and supply chain
• Brazil – Arrests made over dam collapse as company plans to cut production
• Colombia – Mining firm alleges fraud against former subsidiary management
• Venezuela – E.U. countries recognise opposition leader as president


United States & Canada

Snowstorm

Canada – Severe winter storm causes power outages in western province
CANADA – Travel risk: Minor
4 February: Electric utility BC Hydro reported that strong winds and freezing temperatures in the eastern Fraser Valley region, in the west coast province of British Columbia, disrupted power distribution, which affected nearly 8,000 homes. The city of Chilliwack, approximately 102km east of business and cultural hub Vancouver, was the worst-affected, with more than 1,000 homes left without power. Other impacted areas include the municipalities of Abbotsford, Langley and the District of Kent.

Why it matters: The situation is likely to worsen over the next 24-48 hours as Environment Canada issued an ‘Arctic outflow warning’ for the Fraser Valley. Anticipate strong winds capable of felling trees and power lines, as well as freezing temperatures that pose risk to personal safety. The risk of disruption to travel and operations in the affected areas is elevated. A2 Global advises managers to closely monitor the situation for any developments that may impact operations. Advise personnel to limit travel to business-critical journeys and anticipate severe delays. If possible, postpone meetings and deliveries until travel conditions improve.

United States & China – Soybean order signals trade war rapprochement
UNITED STATES – Political risk: Low
CHINA – Political risk: Medium
1 February: China and the U.S. have signalled optimism following the latest round of talks aimed at ending an ongoing trade war. The Chinese trade delegation said it had made ‘important progress’ in the two-day meeting in the U.S. capital Washington, D.C., that ended on 31 January. While no deal was reached, Beijing bought 1.13 million tonnes of U.S. soybeans immediately after the talks, and pledged to buy 5 million tonnes. Trump said he hoped to meet with China’s President Xi Jinping to reach an agreement before a 1 March deadline when U.S. tariffs on Chinese products are due to increase.

Why it matters: The positive signals which emerged from the talks indicate that both sides are seeking to de-escalate the current trade war; a positive development towards the normalisation of trade relations. China’s decision to increase U.S. soybean imports could be interpreted as an appeal to the Trump administration, as many soya farmers – who in 2017 exported 30 million tonnes of their crop to China – form part of Trump’s support base. However, if a deal is struck in the coming weeks it is likely that China would prefer it not to include structural changes affecting its economy – such as more stringent intellectual property laws – that U.S. trade negotiators are demanding. 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 plans to reflect a further de-escalation in the trade war.


Mexico, Central America & Caribbean

Cuba flag

Cuba – Canada halves embassy staff numbers after another diplomat falls ill
CUBA – Health risk: Medium
30 January: Canada’s foreign ministry announced that it will reduce by up to half the number of Canadian staff at its embassy in the capital Havana, after another diplomat reported unusual health symptoms. Since spring of 2017, a total of 14 Canadian diplomats, partners and dependents have reported symptoms including dizziness, insomnia, hearing loss and nausea, particularly when using computers. Diplomats at the U.S. embassy in Havana, located approximately 6km east of Canada’s embassy, have experienced similar symptoms.

Why it matters: Despite the reduction in personnel, Canada has stated that it’s embassy will continue to run full consular services, although some embassy projects in Cuba may be impacted. The embassy has stressed, however, that there is no evidence that Canadian citizens visiting Cuba are at risk. A2 Global assesses that Cuba remains a safe destination for business travellers and tourists, and that the health risk posed by the unknown illness is limited to embassy and consulate buildings. In light of recent incidents, however, visitors should minimise time spent at the Canadian and U.S. embassies, and consult a medical professional immediately if they exhibit symptoms.

El Salvador – Anti-corruption candidate claims victory in presidential election
El SALVADOR – Political risk: Minor
3 February: Anti-corruption candidate Nayib Bukele claimed outright victory in El Salvador’s presidential election, which was held on 3 February. With most votes counted, the former mayor of the capital San Salvador, who represents the small centre-right GANA party, had nearly 53 per cent of the vote. His closest rival, on 32 per cent, was Carlos Calleja of the conservative ARENA party. Hugo Martinez, the candidate of the incumbent left-wing FMLN took 14 per cent. As Bukele polled more than 50 per cent of the vote, there will be no run-off election later this month. Calleja and Martinez recognised Bukele’s victory.

Why it matters: Bukele has vowed to tackle corruption and take on the criminal gangs who are responsible for El Salvador having one of the world’s highest murder rates. Other challenges include a sluggish economy and widespread poverty. He has pledged to set up a U.N.-backed anti-corruption commission and increase investment in education. However, A2 Global questions to what extent Bukele will be able to pursue his agenda. As his party does not have a majority in congress, he will have to rely on the support of right-wing parties – particularly ARENA. Nonetheless, foreign businesses should conduct thorough due diligence and ensure that all financial transactions are accounted for. If companies find signs of financial irregularities, they should self-report to the local financial and anti-corruption authorities.

Jamaica – Dengue fever outbreak posing greater public health safety risk
JAMAICA – Health risk: Medium
5 February: The Pan American Health Organization and World Health Organization reported on 4 February that confirmed dengue fever cases reached 339, including six fatalities, from 1 to 21 January. The worst-affected area was identified as Saint Catherine parish, which lies on the western border with the capital Kingston

Why it matters: The mounting number of cases from December 2018 prompted the Jamaican Ministry of Health to declare an outbreak on 3 January. As the number of confirmed cases grow, there are legitimate concerns that the island state could witness a similar outbreak to the one that occurred in 2016, when there were 2,297 cases and two fatalities. In January 2019, other Caribbean countries and territories, including Guadeloupe, Martinique, and Saint Martin, reported an increase in dengue cases. On 23 January, the U.K. Foreign and Commonwealth Office issued a travel warning for visitors to the British Overseas Territory of Montserrat.

There is no specific treatment for dengue; therefore, prevention is paramount. A2 Global advises managers to inspect their office and facilities environment for any potential breeding grounds, such as stagnant pools of water, and remove them. Personal protective measures should include clothing that minimises exposure to mosquito bites. Further details are available on the U.S. Centers for Disease Control and Prevention’s website.

Mexico – Ongoing border area strikes prompt companies to leave country
MEXICO – Political risk: Medium
30 January: Severe strikes at manufacturing plants in the northern border city of Matamoros have prompted 15 companies to cease their Mexico-based operations, the president of the manufacturers’ industry business organisation told local media on 30 January. Approximately 70,000 workers have been on strike in the city since 17 January, demanding a new collective labour agreement, including a 20 per cent wage hike and an annual bonus. The companies which plan to leave Mexico have not been named.

Why it matters: Manufacturing plants in the city are major producers of auto parts and electronics, and two weeks of strike action has led to daily loses of approximately USD50 million for companies which cannot fulfil international contracts. The strikes have impacted operations at 45 companies with facilities in Matamoros. As of 30 January, 27 of these had resolved the pay dispute with workers. Companies which source products from Matamoros’ manufacturing plants should contact local stakeholders to gauge the impact of strike action on manufacturer’s operations, and adjust operational planning accordingly.


South America

Bolivia high road

Bolivia – Floods and landslides impacting travel and supply chain
BOLIVIA – Travel risk: Elevated
4 February: The Bolivian Highway Administration announced the closure of eight roads, including ones in the El Choro and Caranavi areas, north of the capital La Paz. At least 15 people have died in recent accidents due to degraded road conditions. Over the weekend of 2-3 February, there was a deadly landslide near Choro in Caranavi department, on Highway 3 between La Paz and Caranavi.

Why it matters: Continual rainfall has created hazardous conditions in this part of Bolivia, impacting travel and the supply chain. Roads are damaged due to landslides and flooding, and the situation is unlikely to improve over the next three to four weeks. A2 Global advises companies exporting and importing products by road through Caranavi department to seek alternative routes or consider flying shipments. Individuals should avoid the area until the authorities have deemed it safe to travel there. Monitor local media for any updates that impact travel and operations.

Brazil – Arrests made over dam collapse as company plans to cut production
BRAZIL – Political risk: Medium
29 January: Authorities in the south-eastern state of Minas Gerais, where a dam owned by Brazilian mining company Vale S.A. collapsed on 25 January, arrested five people as part of an investigation into the disaster. The collapse has caused at least 134 fatalities, while 200 people are missing. The arrests included two contractors from TÜV SÜD, a Germany-based industrial testing company which carried out inspections of the dam in September. Vale said on 29 January that it was co-operating with the authorities.

In a separate but related development, Vale announced plans to halt the production of 40 million tonnes of iron ore in order to upgrade dams similar to the one in Minas Gerais which burst. Production will be halted at 10 mining complexes, including the Vargem Grande and Carajás mines.

Why it matters: The halt in production represents around 10 per cent of Vale’s annual iron ore output, and the decision is likely to impact businesses whose supply chains are reliant on the company. A2 Global advises companies to consider using alternative suppliers to ensure minimal disruption to their supply chains. There is a strong possibility that the government will undertake a review of similar projects across the country. Businesses with interests in infrastructure projects, which include dams, should assess the impact such a measure will have on operations.

Colombia – Mining firm alleges fraud against former subsidiary management
COLOMBIA – Corruption risk: Extreme
30 January: Canadian copper and gold miner Cordoba Minerals Corp. released a statement alleging that fraud and other crimes were committed by former executives at its Colombia-based subsidiary, Minerales Cordoba. According to the statement, in late 2018 and January 2019 Cordoba Minerals filed lawsuits with Colombian prosecutors against nine former managers at its subsidiary, alleging breach of fiduciary obligations, abuse of trust, theft and fraud. In total, the allegations relate to approximately USD500,000 of transactions. The subsidiary is developing the San Matías copper-gold mine in the northern Córdoba department.

Why it matters: The case, which has not impacted Cordoba Minerals’ operations in Colombia, highlights the business and corruption risks facing multinational extractives firms operating in the country. Firms working in the sector should conduct thorough due diligence on employees, and ensure that all financial transactions are accounted for. If companies find signs of financial irregularities, they should self-report to the local competent financial and anti-corruption authorities immediately.

Venezuela – E.U. countries recognise opposition leader as president
VENEZUELA – Travel risk: Extreme
4 February: President Nicolás Maduro said that he did not rule out the possibility of a civil war following a weekend of large-scale anti-government protests across the country. Maduro also rejected a 3 February deadline set by the E.U. to announce plans for snap elections, saying that the government does not ‘accept ultimatums from anyone’. In response, several E.U. countries, including France, Spain, and the U.K. recognised Juan Guaidó, an opposition leader who has declared himself the country’s interim president and organised protests against Maduro. During a televised interview on 3 February, U.S. President Donald Trump said that intervening militarily in Venezuela is ‘an option’. On 29 January, the U.S. government raised its travel warning for Venezuela to Level 4 – the highest – and advised citizens to avoid travelling to the country.

Why it matters: Maduro’s defiant stance towards the anti-government protesters and growing international pressure for him to step down means that the risk of further, widespread social unrest will remain high. There is a strong likelihood of violent confrontations involving pro-Maduro groups, anti-government protesters and police, which pose a risk to bystanders. There is a strong possibility that spontaneous anti-government protests will take place in the two-week outlook, including in central areas of the capital Caracas. Businesses travellers in the country should avoid any rallies as a precaution. Flashpoints for future protests include Plaza Alfredo Sadel, a public square in Caracas, and the Cotiza area of the city.

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