Thanks, But No Thanks

Dear all,

We welcome you to the Greater Caribbean Monitor (GCaM).

In this issue, you will find:

• Bolsonaro’s Ally Turns Into His Liability

• Honduras Risks an Electoral Meltdown

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Best,

The GCaM Team

Trump is waging a political battle against the Brazilian government in defense of Bolsonaro—but the fallout could end up hurting his ally.

Panorama. Brazil has become one of Donald Trump’s primary geopolitical targets in recent months, with President Luiz Inácio Lula da Silva emerging as a personal adversary. The former U.S. president has sharply increased his focus on the country as Jair Bolsonaro faces mounting legal battles—proceedings that Trump dismisses as a “witch hunt.”

• As part of his so-called “Liberation Day” plan, Trump has placed Brazil on a list of nations subject to a 50% tariff.

• The rationale, however, appears tenuous: the United States runs a trade surplus with Brazil, which would normally place it outside the logic of punitive tariffs aimed at correcting trade imbalances.

• Rather than a corrective trade measure, the initiative has all the hallmarks of a politically motivated move.

Why It Matters. The impact of Trump’s announcement is already reverberating across Brazilian markets. The real has continued to weaken, trading above BRL 5.50 per U.S. dollar, while analysts warn that a 50% tariff threatens key segments of Brazil’s export economy.

• Coffee producers, orange juice exporters, and suppliers of mineral and agricultural commodities are among the most exposed.

• Brazil’s export basket also includes crude oil, beef, semi-processed aluminum, iron, and steel—sectors that form the backbone of its economy, particularly in the industrial states of São Paulo, Minas Gerais, Paraná, and Goiás, where they provide millions of jobs. The prospect of restricted access to the U.S. market could trigger supply chain disruptions for Brazil’s manufacturing sector.

• In agribusiness, the effects are already tangible: coffee and juice exporters report canceled contracts, and fear that long-term losses could follow unless alternative markets are secured quickly.

Between the Lines. President Lula has underscored that his administration has sought to defuse the confrontation through institutional channels.

• According to Brasília, Brazil has held up to ten rounds of talks with Washington since the tariffs were first threatened and sent a formal letter to the U.S. in May asking for an explanation—so far, with no reply.

• Beyond being one of America’s top trade partners, Brazil remains one of the largest liberal democracies in the hemisphere. Even as Lula’s policies raise concerns about the country’s political trajectory, its robust institutional framework makes Brazil a regional pillar for the West—an asset Washington risks undermining.

• The contrast is stark: authoritarian regimes such as Recep Tayyip Erdoğan’s Turkey—where the U.S. runs a trade deficit—face tariffs of just 10%.

Yes, But. The Brazilian response to the tariff threat has been to intensify legal and political pressure on Bolsonaro. Most recently, a federal judge ordered the freezing of assets belonging to one of Bolsonaro’s sons, who has been lobbying in Washington on his father’s behalf.

• As the judicial pursuit escalates, Trump is attempting to deter Lula through commercial barriers. Yet the strategy appears to be backfiring: rather than weakening Lula, it is deepening Bolsonaro’s legal troubles and eroding support within his own base.

• Among the sectors most exposed to a 50% tariff are Brazil’s cattle ranchers and coffee exporters—both traditional financial and electoral pillars of bolsonarismo. While the country’s business community once welcomed Bolsonaro’s close ties to Trump, the economic cost of this trade war has begun to sap enthusiasm for the former president.

• Instead of strengthening Bolsonaro, Trump’s approach is consolidating Lula’s position. Meanwhile, South America’s largest economy continues to move closer to China, further entrenching the BRICS’ economic alignment against the dollar.

Honduras is facing an unprecedented risk: the very real possibility that the elections scheduled for the end of the year may not take place.

• The recent resignation of a member of the National Electoral Council (CNE)—prompted by pressure linked to mounting political violence—has thrown the entire electoral process into jeopardy.

• The outcome of this crisis will shape not only the country’s immediate institutional stability but also public confidence in the viability of Honduras’s democratic system.

How It Works. The resignation directly disrupts the governance of the CNE and undermines its institutional capacity.

• By law, the council must operate with three commissioners and take decisions with the participation of at least two sitting members.

• The permanent absence of one of these commissioners creates an operational vacuum that prevents the adoption of critical resolutions: the official call for elections, the allocation of the budget, the hiring of temporary staff, and the approval of logistical arrangements.

• Without a fully constituted council, the CNE lacks functional legitimacy and risks collapsing the electoral timeline.

Between the Lines. The appointment of a new commissioner is the responsibility of the National Congress, which requires a two-thirds majority to approve the replacement.

• Neither the ruling party nor the opposition controls enough votes on their own to reach that threshold.

• The ruling party and its remaining commissioner oppose reopening additional processes to bolster electoral legitimacy and diverge from the opposition on key objectives.

• The opposition, for its part, lacks effective mechanisms to rally sufficient support from independent and minor party lawmakers, leaving it dependent on the political will of the ruling bloc.

What’s Next. The destabilization of the country’s electoral authority casts doubt on the legitimacy of the entire process.

• The CNE has become a last bastion of control for the ruling party following a series of corruption scandals that have severely weakened the administration.

• If the electoral process is viewed as illegitimate, that perception will be weaponized: any action taken by the opposition will be framed as an attempt at fraud.

• This narrative undermines confidence in both the new commissioner and the institution itself, eroding the quality of democracy.

Bottom Line. The paralysis of the electoral process deepens the country’s political polarization and pushes both sides toward a “political trade-off”: either the appointment of a commissioner aligned with the ruling party or approval of a major legislative initiative such as the Justice and Tax Reform Law, a fiscal overhaul that has sparked concern in the business sector.

• In this context, the appointment of a new commissioner has become a bargaining chip with profound implications for governance. Honduras’s democratic future now hangs by an exceedingly thin thread.

What We’re Watching 🔎 . . .

Pemex Is at a Crossroads [link]

José Ignacio Hernández, Americas Quarterly

Pemex, Mexico’s state-owned oil company, is teetering on the brink of financial and operational collapse, weighed down by a record 101 billion dollars in debt—the largest of any oil company in the world. Crude production has fallen sharply, from 2.27 million barrels per day in 2015 to just 1.64 million in 2025, leaving the company’s future in doubt despite government measures such as issuing pre-capitalized notes.

President Claudia Sheinbaum’s 2024 reform, which tightened political control over Pemex by restructuring it as a fully state-directed enterprise, has further discouraged private investment and deepened the company’s crisis—mirroring the downward spiral of Venezuela’s PDVSA.

Avoiding a similar fate will require Pemex to attract private capital, stabilize operations through transparent contracts, and adopt structural reforms that strengthen governance. Without such changes, Mexico could become a net importer of oil by 2030.