Argentina is on the brink of a financial crisis once again. Current leader Mauricio Macri’s loss to left-wing opponent Alberto Fernandez in the primary election has caused a swarm of financial repercussions. The S&P Merval, Argentina’s main stock market plunged 48% on Monday. It was then second largest drop of any major stock index since 1950. The Argentine peso dropped 15% versus the US dollar on Monday as well. These losses extended on Tuesday. The wide margin of Macri’s loss is what triggered the financial earthquake. Investors were expecting him to be defeated, yet not to the extent that he was.
Now the future appears uncertain. The looming probability of a sovereign default on the country’s IMF loans is sending investors scrambling for cover. The emerging political scenario is causing concern around South America and beyond. Should the Peronists return to power, Argentina will once again be ruled by a leftist government. Brazil’s right-wing President Jair Bolsonaro is publicly warning of a possible Argentine refugee crisis affecting his country in the future. Brazil is already contending with waves of Venezuelan immigrants streaming into the northern region of the country, fleeing the economic and political crises in their homeland. The possibility of a second refugee crisis at Brazil’s southern border is unpalatable to say the least.
After the downturn in global markets yesterday stemming from global recession fears, it would appear that the Argentine headache will add to the increasing concerns among investors about the health of the global economy, as well as the growing influence that the geopolitical climate has on markets and national economies this summer.
President Trump and other world leaders have arrived in Buenos Aires for the 2018 G20 Leaders’ Summit. As the summit starts, there are a number of subplots worth watching over the course of the next few days. The recent clash between Ukrainian and Russian ships in the Black Sea region, concerns about whether or not the US-China trade war will escalate, and the continuing blowback of the Khashoggi Murder are three of the issues G20 leaders will be contending with.
Kicking off the summit was an announcement that the United States, Canada, and Mexico have completed and signed a trade agreement. The United States, Mexico, and Canada Agreement (USMCA) will replace NAFTA. When President Trump took office restructuring or even replacing NAFTA was a top priority. After two years of negotiations, and some arm-twisting, the new agreement has become a reality.
The fate of President Trump’s planned meeting with Russian president Vladimir Putin in Buenos Aires is uncertain right now. Trump announced he was canceling the meeting in response to tensions between Russia and Ukraine. The Kremlin, however, has said nothing about the talk having been cancelled, leaving the fate of the meeting up in the air.
Interaction between Trump and Chinese leader Xi Jinping will be closely watched this weekend as well. The two leaders will meet during the summit, raising hopes that the ongoing trade war between the world’s two largest economies can be deescalated, and the souring relations between China and the United States reversed. A ceasefire on tariffs would be especially welcomed, although one is unlikely to be reached this weekend. Trump views tariffs as leverage and an effective weapon. He will not be prepared to give it up so easily. The US-China relationship is complex, and a prime example of economic and geopolitical interests clashing head on.
It would seem, for the moment, that Saudi Crown Prince Mohammed bin Salman will receive a pass on the Khashoggi murder. The G20’s attention this weekend will be on the global economy, climate and energy concerns, and other similar issues. Khashoggi’s murder by Saudi agents at the Saudi Arabian consulate in Istanbul is a topic to be avoided and understandably so. The G20 is an economic club at its heart. As a general rule, dubious political matters are avoided at all costs, even though the global media would love nothing more than for Salman, and Saudi Arabia to receive a comeuppance of sorts in Buenos Aires.
The fate of the Argentinian submarine ARA San Juan remains unknown this evening. The diesel sub has been missing for two days. The last communication between San Juan and higher headquarters was on Wednesday. She was in the area of San Jorge bay at the time. Although an Argentinian Navy spokesman told local television that the sub cannot be considered lost yet, the search was formally classified as a search and rescue operation earlier tonight. A NASA P-3C Orion that was in Argentina for an unrelated exercise was offered by the US to assist in the search. Buenos Aries accepted the offer and the Orion is actively taking part in the operation. Brazil, Uruguay, Chile, Peru, Britain and South Africa have also formally offered assistance. A Chilean patrol aircraft is on its way to join the search at the moment. It is unclear whether or not Argentina has accepted any other offers of assistance.
The search efforts are being hampered by high winds and rough seas in the area. Time is critical in an active search and rescue operation involving a sub potentially in danger. The longer the search drags out, the more likely it becomes that San Juan has suffered a catastrophic malfunction, or other type of emergency.
San Juan is a diesel-electric submarine built by Thyssen Nordseewerke in Germany. She was commissioned in 1985 and served without major issue. Her mid-life upgrade took place between 2008 and 2013. Since then San Juan has taken part in routine operations and exercises in the waters around Argentina. She has a compliment of 37 but was carrying a slightly larger crew of 44 during this cruise.
Democracy in Venezuela has been on life support for an extended period of time. The ruling and actions by its Supreme Court Wednesday night may have pulled the plug. The court ruled that the nation’s elected legislators are ‘operating outside the law’by defying previous court ruling. As a result, the legislature is to be dissolved. The Supreme Court will assume legislative duties for the time being. The judicial body is firmly in the camp of embattled President Nicolas Maduro and its latest actions are nothing short of a coup that all but assures the nation will be under One-Man rule.
Venezuela’s opposition-controlled National Assembly has been regarded by many as the last hope for democracy in that country. It was beginning to push back against Maduro and his United Socialist Party’s already tight grip on power. With the loss of the legislature, however, the opposition has been removed from the equation. The government is clearly operating outside of the constitution but now there is no system of checks and balances to repair the imbalance. The three branches of government will all be controlled by the United Socialist Party.
The nation is facing a nearly unprecedented humanitarian crisis, the result of the continuing economic meltdown Venezuela is enduring. Food, basic goods, and medicine are running dangerously short. Staggering inflation is making currency essentially useless and the bulk of Venezuela’s monetary reserves will go towards debt repayment.
Regional reaction was overwhelmingly negative. Peru reacted to the ruling by recalling its ambassador to Caracas and is considering the full suspension of diplomatic relations. Mexico, Colombia, Argentina and Chile all denounced Maduro’s government. The Organization of American States (OAS) also denounced the Supreme Court’s ruling. OAS Secretary General Luis Amalgro accused the Venezuelan government of attempting “a self-inflicted coup d’etat” The United States joined in by releasing a statement condemning the court’s “decision to usurp the powers of the democratically elected National Assembly. … We consider it a serious setback for democracy.”
How the opposition, and Venezuelan citizens respond will reveal much about the future of Venezuela. As the heartbeat of democracy there fades it becomes painfully clear that nothing short of a powerful, perhaps violent, jolt will keep it alive. Venezuelans need to act decisively and do it now. Otherwise, the nation will permanently fall into the dark peril of dictator rule.