Networked Notes - 28 June 2016

By Southern Pulse Staff & Network

A slew of over-reaching analyses have been written about the impact of Brexit on Latin America specifically and on emerging markets in general. While the UK’s decision to leave the EU certainly impacts the region in a limited fashion, Latin American governments have taken note of the media attention and are prepared to make Brexit a great scapegoat for their ongoing economic problems for at least the next quarter. Mexico announced pre-planned budget cuts, including some controversial cuts in education, the day the UK voted to leave. Argentine officials are happy Brexit artificially weakened the peso. At least one official in Venezuela made the ridiculous suggestion that Brexit was part of the economic plot against the Maduro government. Expect to see additional Latin American governments in the coming weeks point their fingers at the UK and Europe.

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Among the very real impacts of Brexit occurred in Ecuador, where the government delayed a new bond issuance because they knew Brexit would (fairly or not) increase the perception of risk and the premiums demanded by investors. It’s a subtle reminder that in spite of the ideological similarities, Ecuador is run by an economics PhD, while Venezuela is run by people who are far less qualified to manage an economy.

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Clashes between protesting teachers and government forces in Mexico have left several dead in the state of Oaxaca and disrupted several other cities in the country, including the capital and Monterrey. Southern Pulse sources have pointed to the potential infiltration of the protests by more radical groups. Those groups are making plans to keep the disruptions ongoing through 2018.

Intentional or not, the protests have specifically hit the political future of Education Minister Aurelio Nuño. The rising PRI star has been singled out by opposition leader Andres Manuel Lopez Obrador as at fault for the recent clashes and chaos.

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The government of the state of Rio has warned of a crisis during the upcoming Olympics if more funding is not provided by the federal government. Groups of firefighters and police officers protested at the airport this week saying Rio would not be secure because paychecks were not being paid (which they haven’t). Sources inside Brazil insist that Brazil will do what it takes to find the funding to pull off a safe and successful Olympics. However, once the international attention moves on, the months after the Olympics could see these disputes flare up in a much worse form, as police fail to receive their salaries and other basic services provided by the state of Rio de Janeiro close down.