LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Wednesday, February 28, 2018

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Wednesday, February 28, 2018

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Did Peru Make Brazil’s Jobless Cargill Joyce Chang Rate Increases Global Head of Research, the Right Call by in January JPMorgan Chase & Co. The country’s unemployment rate Dirk Donath Senior Partner, ticked up to 12.5 percent in Jan- Catterton Aimara Excluding Maduro? uary, a level higher than analysts Marlene Fernández had expected. Corporate Vice President for Page 2 Government Relations, Arcos Dorados Peter Hakim BUSINESS President Emeritus, Inter-American Dialogue Scotiabank Sees Donna Hrinak Record Earnings President, Boeing Latin America Jon Huenemann From Int’l Unit Vice President, U.S. & Int’l Affairs, Bank of Nova Scotia said it had Philip Morris International earned a record $571 million from James R. Jones Chairman, its international unit in its fiscal Monarch Global Strategies Host country Peru disinvited Venezuelan President Nicolás Maduro from the Summit of the first quarter. Craig A. Kelly Americas, but Maduro has vowed to attend anyway. // File Photo: Venezuelan Government. Page 3 Director, Americas International Gov’t Relations, Exxon Mobil Peru’s government on Feb. 13 withdrew its invitation to POLITICAL John Maisto Director, U.S. Education Venezuelan President Nicolás Maduro to attend the Summit Finance Group Falcón to of the Americas in April. Peru’s move followed Venezuela’s Nicolás Mariscal Challenge Maduro Chairman, Q decision to schedule a presidential election on April 22 in Venezuela’s Grupo Marhnos without first reaching an agreement with the country’s opposition on how Thomas F. McLarty III Presidential Race Chairman, to conduct the vote freely and fairly. Did Peru make the right decision in Henri Falcón, a former gover- McLarty Associates withdrawing Maduro’s invitation? How might Venezuela’s absence from Carl Meacham nor of Venezuela’s Lara State, Associate VP for Latin America the summit change the event? Is any progress on solving Venezuela’s announced he would challenge Int’l Advocacy Division, PhRMA political and economic crises likely to come out of the Summit of the President Nicolás Maduro in Carlos Paz-Soldan Americas? the country’s April presidential Partner, election. His move defies the DTB Associates, LLP main opposition alliance, which is Beatrice Rangel boycotting the vote, saying it will Director, Mariano de Alba, associate director of the Adrienne Arsht be rigged. AMLA Consulting LLC Latin America Center at the Atlantic Council: “The Peruvian Page 2 Gustavo Roosen Chairman of the Board, government made the right decision. For a long time, Latin Envases Venezolanos American countries have been trying to engage with the Andrés Rozental A Maduro regime, promoting a negotiated solution. But there is no will to President, Rozental & Asociados and Senior provide the guarantees for the Venezuelan people to decide under fair Policy Advisor, Chatham House conditions. There is also no will to accept international aid to help the Roberto Sifon-Arevalo Managing Director, Americas many who are suffering from the lack of food and medicine. What hap- Sovereign & Public Finance Ratings, Standard & Poor’s pened in the Dominican Republic negotiation was the latest example. So there is no option but to take measures that demonstrate the government that its authoritarian drift will have repercussions in the international sphere. The withdrawal of the invitation by Peru, discussed within the Lima Group, is one of those consequences. Now the Venezuelan government will be absent, but its crisis still will be under discussion, at least informally. Increasingly, Latin American countries are feeling the effects Falcón // File Photo: Venezuelan Government. Continued on page 3

POLITICAL NEWS to a ProPublica investigation into a 2011 NEWS BRIEFS massacre by the Zetas cartel in the Mexican Falcón to Run Against state of Coahuila that was triggered after ‘Dirty War’ General sensitive information that the DEA shared with Menéndez Dies at 90 Maduro, Defying a vetted police unit in Mexico wound up in the hands of cartel leaders, who ordered a wave Former Argentine General Luciano Benjamín Opposition of retaliation against suspected traitors. The Menéndez, who had been sentenced to 13 letter also cited a 2010 incident in which Zetas life prison terms for crimes against humanity, Henri Falcón, a former governor of Venezu- members stormed a Holiday Inn in Monterrey stemming from the country’s “Dirty War,” died ela’s Lara State, on Tuesday defied his own and took hostage five individuals who have Tuesday at age 90, Clarín reported. Menéndez opposition coalition by announcing he would not been seen since. At the time, the DEA and was the military commander of 10 provinces in run against President Nicolás Maduro in the Mexican agents were carrying out an operation Argentina between 1975 and 1979. Menéndez, country’s presidential election, planned for from the hotel but switched to a different hotel who had served time in prison and was most April, El Universal reported. The Democratic the night before the attack. Four hotel guests recently on house arrest, died in the city of Unity Roundtable, or MUD, opposition alliance and a hotel manager were reportedly mistaken Córdoba. previously announced it would boycott the elec- as government agents and kidnapped. tion, saying it would be rigged. In a statement Tuesday, it blasted Falcón’s decision to enter U.S. Ambassador to the race. “We can not validate a fraudulent ECONOMIC NEWS electoral system,” the opposition alliance said U.N. Pledges More Focus in a tweet. In announcing his candidacy, Falcón Brazil’s Jobless Rate on Drug Trafficking called Maduro the “hunger candidate,” referring Nikki Haley, the U.S. ambassador to the United to the severe economic problems, including Increases in January Nations, vowed Tuesday while visiting Hondu- shortages of basic foods and medicines, that ras to place more focus on the issue of drug have worsened during Maduro’s presidency. Brazil’s unemployment rate stood at 12.2 per- trafficking, Reuters reported. “It is a conversa- “The government promised a paradise to cent in the quarter from November to January, tion that needs to be taking place internation- millions of Venezuelans, but they gave them a state statistics agency IBGE said Tuesday. ally,” Haley said in Tegucigalpa, where she met hell,” Falcón told reporters, Reuters reported. There are now 12.7 million idle workers in with President Juan Orlando Hernández. “We Brazil, down slightly from 12.9 million people can’t just focus on the countries producing it, U.S. Lawmakers Seek in the same quarter last year. The figure was we do have to focus on the countries moving stable as compared to the previous quarter, it and are we doing enough in the international Probe of DEA Actions but January saw unemployment tick up slightly community to stop it.” Haley’s trip to the region to 12.5 percent, a rate higher than market this week also includes a stop in Guatemala. in Mexico, Honduras analysts had expected, according to a research note this morning from Goldman Sachs. The U.S. Rep. Eliot Engel (N.Y.) on Tuesday led a firm also pointed out that the composition of Grupo Sura Reports 13% group of Democratic lawmakers calling for an job growth deteriorated somewhat in the most investigation into alleged U.S. Drug Enforce- recent quarter, with formal salaried employ- Decline in Net Profit ment Administration actions in Mexico and ment in the private sector contracting 1.7 per- Colombian holding company Grupo Sura on Honduras in 2010 and 2011 that may have cent, while employment in the informal private Tuesday said its net profit fell 13 percent in caused up to 300 civilian deaths. In a letter sector increased. Average real wages rose by 2017 as compared to the year before, to $508.7 to the inspectors general of the Departments 1.6 percent in January, year-on-year. Economic million, Reuters reported. The company cited of Justice and State, the legislators urged activity in Brazil expanded at a faster-than-ex- higher interest charges, nonrecurring costs the departments to open an investigation pected pace in December, capping the first and exchange rate variations for the drop, into operations carried out by DEA-trained annual increase in four years following the according to a regulatory filing. Total income and -funded units that were vetted in Mexico. deepest recession in decades. On Tuesday, Bra- rose 12 percent, while costs grew 14.5 percent. “These operations raise serious questions zilian Finance Minister Henrique Meirelles said The company posted stronger fourth quarter about the practices of DEA-trained and funded the country’s economy would grow by more results, however, with net profit more than Special Investigative Units and point to the than the 2.8 percent rate currently forecast by doubling. Headquartered in Medellín, Sura need for greater accountability for these vetted economists, also predicting 2019 growth would generates more than $23 billion in annual units,” the lawmakers wrote. The letter refers be greater than 2.5 percent, Reuters reported. revenues.

BUSINESS NEWS FEATURED Q&A / Continued from page 1

of what is happening, primarily because of the scenes’ discussions brokered by those Scotiabank Sees migration. So there is a need to think about countries that have a more neutral position Record Earnings what can be done. Moreover, Venezuela’s ab- than the crippling partiality of OAS head Luis sence decreases the possibility of diplomat- Almagro. There are few venues for this kind From Int’l Unit ic confrontations, allowing Peru to promote of engagement with Venezuela, particularly its anti-corruption agenda more comfortably. since the breakdown of dialogue efforts Canada’s Bank of Nova Scotia on Tuesday in the Dominican Republic. The summit is announced it had earned a record $571 million unlikely to produce anything on Venezuela from its international unit in its first fiscal The Peruvian other than ongoing OAS hand-wringing and quarter, up 14 percent from a year earlier, government made angry statements from Almagro, which does Bloomberg News reported. Net income overall the right decision.” not concretely help Venezuelan residents. at the bank, which operates in 50 countries, The summit may provide a (belated) logisti- — Mariano de Alba rose 16 percent. “The strong momentum in our cal response to the exodus of Venezuelans business was driven by double-digit growth in and address impacts on neighboring coun- loans in the Pacific Alliance countries, positive tries. But that is an optimistic assumption. operating leverage and good credit quality,” But it is still unlikely that any real progress The OAS, the Lima Group and now Peru have chief executive Brian Porter said in an earnings concerning Venezuela will emerge. The shown a paucity of skill and capacity to han- release, referring to holdings in Mexico, Peru, current scenario is still one under which it dle this crisis, and this latest move indicates Chile and Colombia. “Growing our market pres- is difficult for members of the OAS to agree that is set to continue.” ence in Chile and Colombia, and building out on joint measures, so the response to the our asset and wealth management capabilities Venezuelan crisis will keep coming from the David Smilde, Charles A. and here in Canada, will provide a stronger platform Lima Group and the unilateral actions some Leo M. Favrot Professor of to grow and expand our business,” he said. countries could take.” Human Relations at Tulane Uni- Scotiabank recently acquired a controlling A versity and senior fellow at the stake in Spain’s BBVA unit in Chile for $2.9 bil- Julia Buxton, professor of com- Washington Office on Latin America: “Peru’s parative politics at the School withdrawal of Venezuela’s invitation to the of Public Policy of Central Eu- summit is a stinging rebuke that clearly A ropean University in Budapest: hurts the Maduro government. However, it “Peru’s decision is regrettable. It adds to the also removes an important opportunity to litany of interventions (sanctions, high level engage Venezuela. Having the 14 countries criticism) that are intended to force Maduro involved in the Lima group publicly rebuke down a consensual and democratic path, Venezuela would have been just as effective. but which have had the opposite effect. The While not all should be tolerated in multi- move plays to Maduro’s unending themes lateral institutions, there should be some

Porter // Photo: Scotiabank. of imperialism, U.S. interference and the sort of institutional and democratic process hypocrisy of Venezuela’s regional neighbors. for excluding a country. Application of the lion, and in a separate deal bought Citigroup’s Given the recent contentious pardon of Democratic Charter in the case of Venezuela consumer and small business operations in Co- former Peruvian President Alberto Fujimori, failed because of the Caribbean countries’ lombia. At home, the bank’s Canadian business and the lack of OAS engagement with the gratitude for Venezuela’s support over the reported a strong quarter with earnings exceed- situation in Honduras, these are unfortu- years, and their perception that it is being ing $1 billion. Porter was also upbeat about the nately salient claims. Following on the heels unfairly treated. That failure should have bank’s outlook in Mexico. In spite of uncertain- of Rex Tillerson’s multi-country tour and led to more negotiation, more diplomacy ty about the tense negotiations underway over some of his contentious remarks, Peru’s and ever more rigorous application of OAS the North American Free Trade Agreement, decision has the ring of a lap dog response, standards. Instead, what we have seen is or NAFTA, he said that Mexico’s other trade further inflaming suspicion of the OAS held double standards. The November election relationships leave the country “well positioned by Venezuela and sympathetic countries. in Honduras clearly did not meet acceptable to adjust to any NAFTA outcome,” The Globe & Venezuela’s attendance could have been an standards, and the OAS secretary general Mail reported. opportunity for quiet diplomacy and ‘behind appropriately demanded new elections. Continued on page 4

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2018 However, the United States recognized the James Bosworth, founder of election, and that undermined OAS efforts. Hxagon, LLC and author of Erik Brand And while Venezuela has been disinvited Bloggings by Boz: “Whether or Publisher [email protected] from the summit, Honduras is still welcome. not Maduro attends doesn’t real- A Gene Kuleta The United States and other countries need ly matter. This hemisphere wastes too much Editor to understand that this kind of hypocrisy time every Summit of the Americas debating [email protected] undermines the effectiveness of pressure who is or isn’t invited and not enough time

talking substance. Attendance and a speech by Nicolás Maduro wouldn’t legitimize his Michael Shifter, President authoritarian rule or his undemocratic elec- Genaro Arriagada, Nonresident Senior Fellow tion plans. Peru’s rescinding of the invitation While Venezuela has Sergio Bitar, Nonresident Senior Fellow doesn’t feed any hungry Venezuelans, assist been disinvited from Joan Caivano, Director, Special Projects refugees or speed up a transition back to Michael Camilleri, Director, Peter D. Bell Rule of Law the summit, Honduras democracy. The summit should be discuss- Program is still welcome.” ing real measures to place pressure on Kevin Casas-Zamora, Nonresident Senior Fellow — David Smilde Venezuela’s undemocratic government and Ariel Fiszbein, Director, Education Program ease the largest humanitarian crisis in this Alejandro Ganimian, Nonresident Fellow hemisphere. Those measures should include Peter Hakim, President Emeritus more coordinated sanctions on individuals Claudio Loser, Senior Fellow as well as aid delivery options that under- Nora Lustig, Nonresident Senior Fellow on Venezuela. Unsurprisingly, last week’s mine the Venezuelan government’s current Margaret Myers, Director, China and Latin America Program effort to pass a resolution in the Permanent blockade of food and medical assistance to Manuel Orozco, Director, Migration, Council actually fared worse than a similar its own population. On the issue of Venezu- Remittances & Development resolution in June 2017. Thus, disinviting ela and beyond, the summit’s big challenge Jeffrey Puryear, Senior Fellow Venezuela will provide a momentary rebuke, remains moving past arguing over symbolic Tamar Solnik, Director, Finance & Administration but will not likely contribute to what is need- initiatives to discussing and implementing Lisa Viscidi, Director, Energy Program ed: an ever-broader coalition to pressure and real policies that affect the lives of people in Denisse Yanovich, Director of Development and External Relations engage Venezuela.” this hemisphere.”

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