Networked Notes - 19 October 2016

By Southern Pulse Staff & Network

Brazil

Eduardo's Cunha's preventive arrest represents a potential problem for the Temer Government and the Brazilian political system as a whole. In the past week, plea deals involving Temer's close confidants and cabinet members --Eliseu Padilha, Moreira Franco and Romero Jucá-- for receiving bribes from Odebretch were leaked. Cunha's arrest puts additional pressure on these key government members, who Cunha now views as political enemies responsible for his downfall. A Cunha plea deal will draw the Temer Government into a slow burning fire before crumbling, where leaks will slowly undermine the administration's credibility and, more importantly, political support in Congress, as congressmen are also involved in a likely Cunha plea deal. Chances for the worst case scenario above are 50/50. The other possibility is that Cunha will not collaborate with investigators and he will accept whatever punishment he is likely to receive.

Venezuela

The Venezuelan government saw a sharp change in rhetoric this week as officials went from “We’ll always make the bond payments,” to “We might not be able to pay if the swap is unsuccessful.” Threats don’t usually work in the bond market. Further, due to a lack of a collective action clause, there is little incentive for bond holders to join the swap and the threat of potential future default disincentives joining.

Mexico

Stories from around Mexico, including Monterrey, Juarez, Guadalajara, Tijuana, and Mexico City, suggest violence is trending upwards in major urban areas. The collection of anecdotal reporting combined with some statistical work being done by local analysts is troubling. Various criminal organizations are at war with each other or facing internal leadership control battles and the battle lines are not as clear as they once were. While the reasons for increased violence in each city or region of Mexico can and should be treated individually, the fact that so many major urban areas are heating up at the same time is a trend that should not be overlooked either.