LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Thursday, April 20, 2017

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Thursday, April 20, 2017

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Will Mounting At Least Three Cargill Killed in Violent Joyce Chang Global Head of Research, Scandals Topple Venezuela Protests JPMorgan Chase & Co. Hundreds of thousands of people W. Bowman Cutter Former Partner, Temer in Brazil? took part in demonstrations E.M. Warburg Pincus across Venezuela in protest Dirk Donath of President Nicolás Maduro’s Senior Partner, government. Catterton Aimara Page 2 Barry Featherman Senior Director, International Government Affairs, BUSINESS Gilead Sciences Marlene Fernández Brazilian Police Corporate Vice President for Government Relations, Probing Banco Arcos Dorados Panamericano Peter Hakim President Emeritus, Deal Inter-American Dialogue Authorities opened an investiga- Donna Hrinak Nearly a third of Brazilian President Michel Temer’s cabinet, along with dozens of members of tion into the purchase of Banco President, Boeing Latin America Congress, are under investigation on corruption allegations. // File Photo: Brazilian Govern- Panamericano shares by the ment. Jon Huenemann state-owned parent company of Vice President, U.S. & Int’l Affairs, Philip Morris International A Brazilian Supreme Court justice this month approved 74 Caixa Econômica Federal. Page 3 James R. Jones new corruption investigations into the activities of dozens Chairman, ManattJones Global Strategies of politicians, encompassing nearly a third of President Q POLITICAL Craig A. Kelly Michel Temer’s cabinet and the leaders of both chambers Director, Americas International Haiti to Rebuild Gov’t Relations, Exxon Mobil of Congress, including 60 sitting members of Congress and Temer’s John Maisto powerful chief of staff, Eliseu Padilha. Later the same week, a former National Palace Director, U.S. Education executive of Brazilian construction conglomerate Odebrecht testiﬁ ed Haiti’s government said it would Finance Group rebuild the country’s National Pal- Nicolás Mariscal that Temer took part in a 2010 deal to arrange a $40 million bribe to his ace, which was severely damaged Chairman, Brazilian Democratic Movement Party, or PMDB, which Temer denies. Grupo Marhnos in the country’s catastrophic 2010 Will Temer’s government be able to survive the allegations? What will the Thomas F. McLarty III earthquake. President Jovenel Chairman, new investigations mean for Temer’s political agenda? What might the Moïse said a new reconstruction McLarty Associates investigations mean for Brazil’s presidential election, set to take place commission includes Haitian Carlos Paz-Soldan architects and historians. Partner, next year? Page 2 DTB Associates, LLP Beatrice Rangel Director, Cláudio Gonçalves Couto, professor in the Department of AMLA Consulting LLC Public Management at the Getúlio Vargas Foundation “The Gustavo Roosen Chairman of the Board, problem of corruption and the confusion between political Envases Venezolanos agents and private interests is not the privilege of a sin- Andrés Rozental A President, Rozental & gle party, but rather a hallmark of the modus operandi of the Brazilian Asociados and Senior Policy Advisor, Chatham House political system and its ﬁ nancing model. Therefore, in addition to parties Shelly Shetty and leaders of the government coalitions of the Workers’ Party presiden- Head, Latin America cies, prominent members of the opposition stand out among those who Sovereign Ratings, Fitch Inc. Roberto Sifon-Arevalo worked diligently for former President Dilma Rousseff’s impeachment: Managing Director, Americas PSDB, DEM and PPS. It is also important to note that the bosses are Sovereign & Public Finance Ratings, Standard & Poor’s the ones who are indicted, not those of lower rank. That is why—without even mentioning the ministers and governors—the proportion of senators Moïse // File Photo: Haitian Government. Continued on page 3

POLITICAL NEWS uro said, “You are the head of the coup. Later NEWS BRIEFS don’t complain when the law comes after you.” At Least Three Killed Counter-demonstrators and security forces Haiti Announces blocked anti-government marchers from reach- Plans to Rebuild in Violent Protests ing some parts of Caracas, and authorities shot tear gas and water cannons at protesters, Presidential Palace in Venezuela CNN reported. In Washington, U.S. Secretary Haiti’s government said Wednesday that it of State Rex Tillerson expressed concerns will rebuild the country’s National Palace, At least three people were killed Wednesday as about Venezuela in a statement to reporters. which was severely damaged in the country’s anti-government demonstrators marched in a Maduro’s government “is violating its own devastating 2010 earthquake, the Associated dozen cities across the country, clashing with Constitution and is not allowing the opposition Press reported. A new palace will “make the authorities and supporters of President Nicolás to have their voices heard, nor allowing them to connection between the history, culture and Maduro. Hundreds of thousands of people took organize in a way that expresses the views of future of the Haitian nation,” said President to the streets in what organizers dubbed the the Venezuelan people,” he said. In Colombia, Jovenel Moïse. A new reconstruction commis- “mother of all marches” in protest of Maduro’s President Juan Manuel Santos said on Twitter sion includes Haitian historians and architects, government, which opponents blame for the that he had instructed the country’s interior said Moïse. The government is likely to open ministry to ask U.N. Secretary General António a competitive bidding process for the project Guterres to address what Santos called the this year. The ruins of the earthquake-damaged “worrying militarization of Venezuelan society.” palace were demolished in 2012. Also in Venezuela, U.S.-based automaker Gen- eral Motors today said it had halted all of its operations in the South American country after Venezuelan authorities unexpectedly seized its Peru’s Government factory in the city of Valencia on Wednesday, Expecting 4.5 Percent UPI reported. The company’s Venezuelan unit, Economic Growth in 2018 General Motors Venezolana, called the seizure Authorities launched tear gas at protesters Wednesday in Peruvian Finance Minister Alfredo Thorne said Caracas. // Photo: MUD Coalition. “improper, absurd, outside of legal logic and Wednesday that the country’s economy will re- due process.” GM told its workers, suppliers, cover in the coming years thanks to investment country’s economic and political crises. During dealers and other associates to refrain from in construction following recent fl ooding, Re- the march in Caracas, a 17-year-old boy was reporting to work until the move is reversed. A uters reported. “The shock will be temporary,” fatally shot in the head, CNN reported, citing court in Zulia state said it imposed an embargo Thorne said. He estimated that the economy Venezuela’s public ministry. The public ministry on the company, and GM Venezolana said its will grow by 4.5 percent next year and by 5 also said it was investigating the shooting bank accounts were likely out of its control, percent in 2019, up from a previous projected 3 death of a 23-year-old woman in San Cristóbal meaning it could not pay employees or make percent in 2018 and 3.8 percent in 2019. in Táchira state. Also, the public prosecutor’s other payments. The action was likely related offi ce said a National Guard sergeant was fa- to a lawsuit fi led by a former landowner in tally shot late Wednesday in the municipality of Maracaibo against the company, El Universal Los Salias, south of Caracas. Anti-government reported. [Editor’s note: See Q&A on Venezuela El Salvador’s Coff ee protests have intensifi ed in the weeks following in the April 12 issue of the Advisor.] Exports Grow 29 Percent the Venezuelan Supreme Court’s effective dissolution of the country’s National Assembly, El Salvador’s coffee exports increased by 29 a move the high court later reversed amid wide- At Least 17 Killed in percent in March year-over-year as the crop spread condemnation and concerns that the Colombia Landslides recovered from an outbreak of the roya leaf country was becoming a dictatorship. During fungus that destroyed the harvest last year, the several days of marches, Maduro deployed the Salvadoran Coffee Council said Wednes- At least 17 people are dead in Colombia after the armed forces to the streets on Sunday night day, Reuters reported. The country shipped heavy rains caused landslides that destroyed amid the boiling tensions. In a fi ery speech 66,819 132-pound bags of coffee in March, homes and fi lled the streets with mud in Wednesday, Maduro accused opposition as compared to 51,813 bags during the same the city of Manizales in the western part of leaders of spurring violence. In a statement month a year earlier. El Salvador has been one the country, the Associated Press reported directed at Julio Borges, the president of the of the hardest-hit countries by roya, also known Wednesday. Hillsides in Manizales gave way opposition-controlled National Assembly, Mad- as coffee leaf rust, in the Central America and after the city experienced the equivalent of one Mexico region.

month’s rainfall in the span of fi ve hours, lead- FEATURED Q&A / Continued from page 1 ing to 40 to 50 avalanches of mud and rocks. Among the dead are a police offi cer and at implicated is far larger than that of deputies: If it is the third scenario, the government is least three children, with rescuers looking for 30 percent of the Senate, compared to only most likely to walk in lethargy to its end after several other missing people. President Juan 8 percent of the lower house. This creates the 2018 elections. As for the presidential Manuel Santos said Manizales residents are a second-order problem: leaders organize elections, the scenario is one of great still at risk of evacuation, and national agen- parties, set agendas and vote. If their work uncertainty. Space is opening up, whether cies are assisting in the recovery. “It rained is hampered, then the chance of approv- in the most important parties or outside, for in Manizales like it has never rained before,” ing legislation on controversial issues, beginners or outsiders. It is impossible at Santos said. The incident comes as Colombia such as the reforms under consideration this moment to predict what will come.” is still recovering from a fl ood in the southern by Congress today, is reduced. There are city of Mocoa that killed more than 300 people three possible developments. One is the Melvyn Levitsky, professor of last month. assumption of a positive agenda that seeks international policy and practice at the University of Michigan’s A Gerald R. Ford School of Public BUSINESS NEWS Space is opening up, Policy and former U.S. ambassador to whether in the most Brazil: “Since the ‘Mensalão’ (vote-buying) scandal during the Lula administration, there important parties or Brazilian Police have been so many ‘operations,’ the most outside, for beginners Investigating Banco prominent being Operation Car Wash, that or outsiders.” one might assume the patient is dying. Brazil Panamericano Deal — Cláudio Gonçalves Couto has an abundance of natural and human capital that give it resilience during such Brazil’s federal police on Wednesday launched times, but this resilience is being tested an investigation into the purchase of shares mightily as one revelation after another of Banco Panamericano by state-owned Caixa substantive legitimacy, demonstrating that indicates that corruption has kidnapped Participações, the parent company of national even troubled politicians care about the the political system. Despite the energetic savings bank Caixa Econômica Federal, The country. Another, a reactive agenda is aimed efforts of some outstanding and courageous at ‘stopping the bleeding’ of investigations Brazilian judges, prosecutors and federal by approving self-indulgent laws. The third police investigators, it is not clear at this is, simply, paralysis: the solution of pressing point that the political class has the desire problems is left for the future. But betting on or the resolve to press forward with the kind a single scenario would be inconsequential of reform that is necessary to root out this futurology. The Temer government can still endemic corruption, nor does there seem to survive and direct much of its agenda if the be a group of dedicated politicians willing fi rst scenario is confi rmed, but it will face to tackle the tough, grinding work of reform considerable corporate resistance and likely through legislation. I continue to believe that street mobilization. If it is the second, there single-member districts binding legislators are chances of government survival, but at to specifi c constituencies, rather than party Esteves // File Photo: Harvard Business School. serious risk of producing a new wave of pop- lists that tend to generalize responsibility, Wall Street Journal reported. The investiga- ular dissatisfaction caused by the scandal. along with reform of the party system that tion is into whether Caixa Econômica Federal Continued on page 4 managers committed fraud that would have led Panamaericano. Approximately 200 federal in 2009 of a 35.5 percent stake in Banco to their clients losing money, the police said, police conducted raids following the court Panamericano. When BTG in 2011 bought a Reuters reported. Caixa said it is cooperating order, which also froze bank accounts holding controlling stake of Banco Panamericano, with the investigation. The shares were later a combined 1.5 billion reais, or $480 million. which is now called Banco Pan, Caixa retained sold to investment bank BTG Pactual, The Wall BTG was ordered to provide documents about its stake in the bank. Banco Pan posted a loss Street Journal reported. The former CEO of the deal. Both the investment bank and Esteves of 237.2 million reais in 2016, fi nishing the year BTG, André Esteves, is also being investigated deny wrongdoing. BTG said it did not play a with a credit portfolio of 19.2 billion reais, The as part of the probe, because he oversaw BTG’s role in Caixa Econômica Federal’s purchase Wall Street Journal reported. 2011 purchase of a controlling stake in Banco

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2017 would decrease the number of parties and candidacy. If he were to run, he would prob- ban overnight party switching in return for ably be defeated in a second round. Given Erik Brand favors, could help to diminish corrupt prac- the painful costs of the current economic Publisher [email protected] tices among politicians. I’m not sanguine crisis in Brazil, and the public revulsion that this can be accomplished until a new, over corruption, people are going to look at Gene Kuleta Editor untarnished group of politicians emerges. [email protected] Given the number of legislators, cabinet The traditional Nicole Wasson members and prominent businessmen being Reporter, Assistant Editor investigated or involved in plea bargains (for political class appears [email protected] example, Odebrecht executives), it doesn’t to have dug its own seem possible for Temer to pursue success- grave with the public.” fully his political agenda. Sadly, I think Brazil — Riordan Roett will have to muddle through the next 18 Michael Shifter, President months with the hope that new elections will Genaro Arriagada, Nonresident Senior Fellow both purge and renew the political system.” Sergio Bitar, Nonresident Senior Fellow alternative candidates to the usual list of Joan Caivano, Director, Special Projects Riordan Roett, director of contenders—among them Aécio Neves, Ciro Kevin Casas-Zamora, Nonresident Senior Fellow the Latin American Studies Gomes and Marina Silva. João Doria, the Ariel Fiszbein, Director, Education Program Alejandro Ganimian, Nonresident Fellow program at the Johns Hopkins mayor of São Paulo, is not a declared candi- Peter Hakim, President Emeritus University’s School of Advanced date, but his name is frequently mentioned A Claudio Loser, Senior Fellow International Studies: “Unless directly as a ‘non-political’ possibility in the style Nora Lustig, Nonresident Senior Fellow implicated in the ongoing series of scandals, of Donald Trump. He is a multimillionaire Margaret Myers, Director, China and President Michel Temer will probably limp media entrepreneur who once hosted a Bra- Latin America Program across the ﬁ nish line in 2018. Allegedly, zilian version of ‘The Apprentice.’ A second Manuel Orozco, Director, Migration, the judicial authorities will be reluctant to name that has widespread appeal is that of Remittances & Development overturn the election of Temer and Dilma Jair Bolsonaro, the Rio congressman of the Jeffrey Puryear, Senior Fellow Rousseff for fear of greater political and so- right-leaning Social Christian Party, or PSC. Tamar Solnik, Director, Finance & Administration cial instability. Key to the process will be the A retired Army captain, who has switched Lisa Viscidi, Director, Energy Program ability of Temer and his cabinet colleagues parties six times, he appeals to the ‘law and Latin America Advisor is published every to continue the reform process, particular- order’ constituency. The traditional political business day, except for major U.S. holidays, ly the pension reform, but also the labor class appears to have dug its own grave with by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 reform legislation and the state debt relief the public.” Washington, DC 20005 bill. Public opinion polls indicate that while www.thedialogue.org former President Luiz Inácio Lula da Silva is The Advisor welcomes comments on its Q&A ISSN 2163-7962 the frontrunner in the 2018 national election, section. Readers can write editor Gene Kuleta Subscription inquiries are welcomed at his legal problems will probably impede his at [email protected]. [email protected]

The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily LATIN AMERICA ADVISOR represent the views of their respective employers or ﬁ rms. The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have any questions relating to the contents of this publication, contact the editorial ofﬁ ces of the Inter-American Dialogue. Energy Advisor Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permis- sion from the publisher. The answers to questions that informed executives are asking ... every week. SUBSCRIBE