🗳️ Ballots, banks, and blessings

Hello, and welcome to the Latin America Weekly newsletter! In this issue: Referendum in Ecuador throws some ambivalent results. Pope Francis sides with peasants against Peru’s Catholic clergy. And fintechs fight for Mexico’s giant market. 

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Ecuador backs cartel crackdown, rejects economic reforms

Ecuador President Daniel Noboa celebrated victory after voters said yes to a series of referendum proposals looking to toughen up the fight against crime, but results were more nuanced than analysts expected, as the two questions focusing on economic matters were rejected en masse. 

Why it matters. As the rise of cartel violence turned a country that was once relatively peaceful into the new Latin American crime hotbed, Ecuadorians have been desperately seeking answers, and warmed up to the recently elected Mr. Noboa when he declared war on drug cartels earlier this year.

• The win will empower Mr. Noboa in his goal to secure re-election after his special shortened term ends in 2025. But the electorate’s pickiness shows that he is still far from the catch-all popularity that El Salvador’s Nayib Bukele achieved through his iron-fist policies.

Thumbs up. Nine out of the referendum’s 11 questions focused on crime and judiciary matters, including extradition, gun control, troop deployment, higher penalties, and money laundering, and “yes” won overwhelmingly in all of them, securing at least 60 percent of the vote in each category. 

Thumbs down. But an impressive 68 percent of Ecuadorians also said “no” to a labor reform proposal that would have allowed for temporary and by-the-hour working contracts, imposing more flexible conditions in imitation of norms that exist in the U.S. and Spain but are not common in Latin America. 

• Voters also rejected a question on whether international arbitration from organizations such as the World Bank’s International Center for Settlement of Investment Disputes (ICSID) — often criticized by the left for ruling in favor of corporations — should be used “as a method to resolve investment, contractual or commercial disputes.”

Everybody wins. The results gave everyone at least some reason to celebrate. President Noboa thanked Ecuadorians for their “ample support to a security and anti-corruption policy that is already yielding results,” boasting about the capture of an alleged criminal on the same day of the vote.

• But opposition leaders like left-wing former President Rafael Correa, the indigenous Pachakutik party, labor unions, and others also claimed victory, as the two proposals they more vehemently opposed were clearly defeated.

• Still, analysts argue that Mr. Noboa himself was not as interested in these questions, which he did not originally include on the ballot but were added by minority parties in Congress. 

What next. Mr. Noboa will have to deliver on a clear mandate for a safer Ecuador, which witnessed dramatic scenes of violence even on the day of the vote, including the assassination of a prison director in the western province of Manabí and a new prison riot in Los Ríos. 

• Stats are so far on his side, as crime figures have shown a decline since the emergency measures he adopted after last year’s unprecedented crisis. 

Yes, but … While crime is clearly priority one, a massive energy crisis last week proved that Mr. Noboa will have to keep a broader view. Emergency measures were also imposed in this area, declaring two non-working days in the build-up to the vote as a drought forced blackouts across the country, adding to the already tense atmosphere around the election. 

Pope Francis sides with peasants in clash with Peruvian clergy

“Defend your land; don’t let it be stolen.” These unexpected remarks came from Pope Francis, backing a group of rural Peruvian families in a land dispute against a powerful but highly questioned group of clergymen from his own Catholic Church. 

The case. The conflict takes us to Catacaos, a small town of just 70,000 inhabitants in Northern Peru, where the influence of the church is massive. Here, a controversial religious group known as the Sodalitium of Christian Life launched a judicial fight through proxy companies to claim lands from local peasants. 

• The group looked for legal loopholes in property ownership titling to claim rights over nearly 2,000 hectares, opening dozens of lawsuits that could deprive over 200 families of their ancestral territory — a common drama in the region. 

Why it matters. As the first non-European man to lead the Catholic Church since the Middle Ages, Francis has tried to appeal to the Third World throughout his Papacy, while his stances on social matters have put him at odds with conservative groups within the institution. 

Sodalitium. Created in 1971, the Sodalitium conquered notoriety beyond Peruvian borders after being endorsed by then-pontiff John Paul II in 1997. That blessing allowed it to extend its influence through the creation of religious schools, nursing homes, and educational centers, among other initiatives. 

• But the group also delved into the world of business, investing in mining, construction, and real estate, and facing investigations over money laundering and tax evasion.

Child abuse. These, however, were far from the biggest questions that the Sodalitium would face. Much more alarming was the biggest sexual abuse case in the history of the Peruvian Church, a gigantic plot that involved minors and resembled similar scandals seen in Bolivia, Chile, and Mexico.

• At the center of the case was Sodalitium’s founder, Luis Fernando Figari, who is currently secluded in Rome after the Vatican banned him from appearing in public, talking to his Sodalitium colleagues, and even returning to Peru.  

• Peruvian prosecutors dismissed the case against Mr. Figari in 2017 despite multiple testimonies against him, claiming that the crimes had been covered by a statute of limitations.

The Vatican. Critics saw the Vatican’s reaction as a cover-up of Mr. Figari’s crimes, leading Pope Francis to launch a takeover of the group while continuing to push for an internal investigation by one of its top child abuse investigators, who traveled to Peru and spoke to victims.

Land grabs. Investigation of Sodalitium has now moved on to land grabs, as local villagers accuse the group of using legal subterfuge to steal multigenerational property. The complaint is backed by the UN, which once stated that peasants’ rights “have been violated.” 

• “We have occupied these lands for more than a hundred years, and now they want to take them from us,” resident Maza Juárez said during demonstrations held in 2022. “When protests and deaths come, it will be the judges’ fault.” 

• Villagers have also denounced being invaded by armed men working for businesses linked to Sodalitium, raising alarms that the dispute might end in bloodshed. 

What next. While Peruvian courts deal with land grab complaints, press reports say the Vatican could also be about to take action, removing the status granted by John Paul in 1997 and dissolving the Sodalitium altogether. 

How Mexico became the new battleground for fintechs

Fintechs see Mexico as a market filled with potential. The country comprises a vast mass of unbanked adults who use cash for most purchases, with only one out of three even holding a credit card. It is the West’s largest remittance corridor and one of the fastest-growing e-commerce markets in Latin America.

State of play. As Mexico’s economic activity continues to beat analysts’ expectations, Latin American fintechs still see opportunities for growth if they beat a series of challenges to make Mexico a more digital economy. 

• This month, Europe’s biggest neobank and wannabe super-app Revolut was granted a bank license to operate in Mexico. The company pledged to put over USD 100 million into its new operation in 2024 alone, eyeing the country’s colossal remittance market with the U.S. through its global account solutions.

• Days earlier, Nu Holdings announced that it was increasing Nu México’s equity by USD 100 million to USD 1.4 billion, transforming it into the country’s largest Sofipo (a type of regulated financial institution). The company, which has also applied for a bank license, ended January with 5.5 million customers.

• In recent years, traditional retailers with high penetration in the country, such as OXXO and Walmart, have also launched their own fintech apps.

Why it matters. Digitization is key to enhancing economic growth and promoting financial inclusion, as the post-pandemic boom has already proven. For Revolut Mexico CEO Juan Miguel Guerra Dávila, the country has the perfect combination of market potential and relatively low competition — as long as firms adapt to local conditions. 

• “It’s totally up for grabs. I think fintechs have been naive or dishonest about inclusion when they say they are going to turn about 40 million people into bank users because of their shiny app. It’s ridiculous [to say that in Mexico] if you don’t even take cash. Having cash moving on and off ramps, I am confident that a bunch of them will start to use the app for other purposes too,” Mr. Dávila tells The Brazilian Report. 

• “On top of that, the population is young: 2 million new adults will enter the market in the next 20 years, so I don’t even have to compete with the traditional institutions for clients [to grow].” 

What it takes. Players are increasingly realizing the importance of moving money to win Mexicans over. A few weeks ago, Nu Mexico announced a partnership with retail chain Soriana for users to deposit cash at supermarket registers and convenience stores, and more alliances are soon to be announced as well, Nu’s spokespeople told The Brazilian Report.

Competition. Market players are now trying to compete by offering better yields in their savings accounts. Argentina’s Ualá recently reached the top in this regard, offering 15 percent yearly interest rates in Mexico. 

• Yields are also central to drawing users into keeping their money with these fintechs and turning them into loyal digital economy customers. 

A regulatory push. If Brazil’s instant payment system Pix was instrumental in digitalization, Mexico’s new push towards real-time transfers could do the same for Latin America’s second-largest economy. 

• Launched in March 2023 by the Mexican Central Bank, Dinero Móvil or DiMo enables users to make instant bank transfers through the country’s real-time gross settlement system — known by the acronym SPEI — by using only a recipient’s phone number. 

• Unlike in Brazil’s Pix, banks are not obliged to participate in DiMo, but many have already integrated with the scheme, and industry experts think its user-friendly interface will inevitably result in more adoption. 

Quick catch up

Massive crowds of Colombians demonstrated against Gustavo Petro across the country, looking to halt the left-winger’s reform agenda. 

Argentina’s Javier Milei faced the largest protest rally since taking office, as hundreds of thousands demanded inflation-adjusted university funds.

 Argentina apologized to Chile (but not to Bolivia) after Security Minister Patricia Bullrich claimed the presence of the Iranian-linked Hezbollah militia at these countries’ borders. 

The U.S. reinstalled sanctions on Venezuela’s energy sector as President Nicolás Maduro failed to comply with demands for free and fair elections. 

With this in mind, Venezuela is preparing to delve deeper into cryptocurrencies in order to dodge sanctions, Reuters reports.

Unknown masked men stopped Claudia Sheinbaum’s car as Mexico’s presidential favorite traveled the crime-hit state of Chiapas, demanding better state response to political violence.

Haunted by multiple scandals, President Dina Boluarte of Peru completed 500 days in office with an approval rating of just 7, the worst in 20 years. 

A woman who suffered from an incurable degenerative disease became the first person in Peru to die by legal euthanasia, ending years of efforts to seek her right to a dignified death. 

Costa Rica is stepping away from its green agenda, as non-renewable energy sources jumped from 0.5 to 17 percent in 2024. 

President Luis Lacalle Pou inaugurated a train linking central Uruguay to the port of Montevideo, retooling a line left abandoned for decades.

Uruguay’s biggest union reached a constitutionally established minimum of 270,000 signatures to hold a referendum to lower the retirement age to 60. 

Unicef director Catherine Russell denounced that Haitian gangs recruit children as soldiers. Armed groups control over half of the capital, Port-au-Prince.

The post 🗳️ Ballots, banks, and blessings appeared first on The Brazilian Report.