Guatemala: Presidential Mystery
After a political campaign without formal discussions of his plans for governing, President-elect Jimmy Morales has not yet clearly communicated his priorities.Morales' task won’t be easy. He was invited to lead his party as a candidate, but was neither a party leader nor a politician – and so he lacks a strong structure below him, to help him carry out his responsibilities. His party also lacks significant representation in the new Congress, meaning that he’ll be obliged to negotiate continuously, in order to advance his initiatives. The advantage of being an outsider of the political system, so useful during the campaign, will now be a clear disadvantage for him.
On the positive side, Guatemala has been able to muddle through the political crisis, without major damage to stability and growth. The private sector confidence index as of October stood at 47.12, slightly above that of September.The Monthly Index of Economic Activity (IMAE), trend cycle, was up 4.1% y/y as of September, and the flow of dollars in the exchange market forced Bank of Guatemala to intervene twice in October, when it purchased $40 million.
In Costa Rica, the consumer confidence index improved in November, from August, but the general mood is still pessimistic.A recent survey indicated that the index rose to 36.5 (on a scale of 0 to 100), up from 31.6 in August.Still, the index is at its second lowest level since February 2009, when the country was dealing with the effects of the Great Recession.
Recent economic indicators were marginally better than in previous months.The IMAE trend cycle was up 2.6% y/y as of September, the highest rate of the year.Inflation continued in negative territory; the exchange rate has been relatively stable; and interest rates are lower. The question is: will stability continue? We think not. But, under reasonable assumptions, we don’t expect major economic instability, either.
Talks over the Salvadorian fiscal situation continued on two fronts:First, there was the approval of "security" taxes, to finance the cost of reducing violence.Second, there was the intention to modify the pension system, the main contributor to the fiscal deficit.As expected, ANEP, the private sector umbrella organization, expressed strong opposition to the new taxes, arguing that such actions don’t help the domestic business climate, needed to accelerate economic growth. The private pension sector also opposed the idea of shifting some of the pensions, now managed by private AFPs, to the public sector.
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