LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, August 25, 2017

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, August 25, 2017

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs What’s at Stake Mexico’s Inﬂ ation Cargill Hits Highest Joyce Chang Global Head of Research, in Argentina’s Level Since 2001 JPMorgan Chase & Co. A spike in gasoline prices at the W. Bowman Cutter Former Partner, Midterm Elections? beginning of the year and the pe- E.M. Warburg Pincus so’s depreciation since late 2014 Dirk Donath were seen as the causes. Senior Partner, Page 2 Catterton Aimara Barry Featherman Senior Director, ECONOMIC International Government Affairs, Gilead Sciences Head of Marlene Fernández Colombian Corporate Vice President for Government Relations, Infrastructure Arcos Dorados Agency Resigns Peter Hakim President Emeritus, Luis Fernando Andrade is Inter-American Dialogue currently under investigation in Donna Hrinak Senate candidate Esteban Bullrich’s strong showing in Argentina’s Aug. 13 primary election connection with the Odebrecht President, Boeing Latin America was seen as a sign of strength for the country’s ruling party. // File Photo: Argentine Govern- ment. corruption scandal. Jon Huenemann Page 2 Vice President, U.S. & Int’l Affairs, Philip Morris International Former Argentine President Cristina Fernández de Kirchner

James R. Jones had been widely expected to defeat Esteban Bullrich, the POLITICAL Chairman, Monarch Global Strategies Q candidate of current President Mauricio Macri’s Cambiemos Venezuelan Gov’t Craig A. Kelly coalition in the country’s Aug. 13 primary election. Howev- Pulls Plug on Director, Americas International er, Bullrich virtually tied Fernández in the Senate race. The results in Gov’t Relations, Exxon Mobil Colombian TV the primary boosted Argentine stocks as investors saw the result as a John Maisto Networks Director, U.S. Education strong showing for Macri’s coalition. What do the results of the primary Finance Group portend for Argentina’s Oct. 22 legislative election? What’s at stake as Venezuela ordered cable providers Nicolás Mariscal to remove RCN and Caracol from Chairman, voters choose a third of Argentina’s Senate and half of its lower house? Grupo Marhnos their lineups, accusing them of What would Fernández’s election as a senator mean for corruption broadcasting what it said was a Thomas F. McLarty III Chairman, charges pending against her, and how will power dynamics in Argentina’s message from former Mexican McLarty Associates President Vicente Fox that incited Congress affect Macri’s agenda? Carlos Paz-Soldan President Nicolás Maduro’s Partner, murder. DTB Associates, LLP Page 2 Beatrice Rangel Mariano Vila, senior director for operations and corporate Director, affairs at Llorente & Cuenca Argentina: “The Aug. 13 election AMLA Consulting LLC served as a referendum on President Macri’s administration Gustavo Roosen Chairman of the Board, and Cambiemos, his governing coalition in Congress. As a Envases Venezolanos A snapshot of voting intentions come October, Cambiemos strengthened its Andrés Rozental President, Rozental & position nationwide, winning in 11 of the 24 districts, despite expecta- Asociados and Senior Policy Advisor, Chatham House tions to the contrary. The clearest example was evidenced in the Province Shelly Shetty of Buenos Aires, which pitted Esteban Bullrich against former President Head, Latin America Cristina Kirchner. With Governor María Eugenia Vidal throwing her full Sovereign Ratings, Fitch Inc. Roberto Sifon-Arevalo weight behind Bullrich, the contest became a clear referendum between Managing Director, Americas her and Kirchner. Defying expectations, Bullrich won within the margin Sovereign & Public Finance Ratings, Standard & Poor’s of error, triggering a recount. If these intentions hold in October, Cam- biemos could go from 89 to more than 100 deputies, and from 15 to 24 Maduro // File Photo: Venezuelan Government. Continued on page 3

POLITICAL NEWS decision to remove the Colombian networks NEWS BRIEFS from cable systems. “One more channel off the Venezuelan Gov’t airwaves! Has that made crime go down? Is At Least 22 Killed in infl ation any lower? Is there more food? More Capsizing of Ferry Orders Colombian medicine? Has any problem been solved?” Ven- ezuelan opposition leader Henrique Capriles off Brazilian Coast Networks Off Cable said Thursday, Reuters reported. Santos said A ferry carrying approximately 130 passengers the move its latest crackdown on its people. capsized off the coast of Brazil’s Bahia state Venezuela’s government on Thursday ordered “It’s another demonstration of a regime that on Thursday, killing at least 22 people, Reuters cable television providers to remove two doesn’t like freedoms, a regime that is restrict- reported. The incident was the country’s Colombian networks from their lineups, a ing the freedoms of citizens,” the Colombian second maritime accident this week in which move that opponents of President Nicolás president said. Maduro’s opponents also say passengers were killed. In a separate incident Maduro said amounted to a crackdown on free his government has sought to limit coverage in Pará state, 21 people died and fi ve remain of Venezuela’s severe political and economic missing after a boat that was not legally autho- problems, including crackdowns on opposition rized to transport passengers sank on Tuesday. It’s another politicians, soaring infl ation and shortages of demonstration of a food, medicine and other basic goods. Earlier this year, the Venezuelan telecommunications regime that doesn’t regulator, Conatel, suspended three television At Least 16 U.S. Gov’t like freedoms, a stations, including CNN’s Spanish-language Employees Treated After regime that is service, accusing them of distorting the truth Sonic Attacks in Cuba restricting the in their broadcasts. The government also At least 16 employees of the U.S. government freedoms of citizens.” removed Colombia-based network NTN24 have been treated for symptoms including — Juan Manuel Santos in 2014 after it reported on violent anti-gov- hearing loss following attacks with a sound ernment protests, and it blocked Argentine device in Cuba, U.S. State Department spokes- news site Infobae. Also on Thursday, pro-gov- woman Heather Nauert said Thursday, NPR re- speech, Reuters reported. The government’s ernment lawmakers said Venezuela’s future ported. The odd medical symptoms began late telecommunications regulator called for the constitution, which the country’s new powerful last year, and Cuba’s government has denied RCN and Caracol networks to be removed constituent assembly is to write, will be put to involvement. At last one Canadian diplomat from cable systems for broadcasting what it a referendum, Agence France-Presse reported. has also experienced similar symptoms. said was a message inciting Maduro’s murder. “From next week, we will write the chapters of The message at issue was a comment from the new constitution,” said Delcy Rodríguez, the former Mexican President Vicente Fox who head of the new assembly, which this month said, “Maduro, resign or you will die,” the wire declared itself superior to all other government Head of Colombian service reported. Venezuela’s government said institutions and gave itself the power to make Infrastructure Agency it was within its rights to pull the plug on the laws, usurping the main function of the elected Resigns Amid Probe networks. “The measure is within the bounds National Assembly. of the law, given that those stations over The head of Colombia’s national infrastruc- several months attacked Venezuela and [its] ture agency, Luis Fernando Andrade, who is institutionality and now are openly calling for a ECONOMIC NEWS being investigated in the Odebrecht corruption magnicide,” said the government’s statement. scandal, has resigned from his post, Reuters Maduro has frequently criticized Colombia, ac- reported Thursday. Andrade ran the agency, cusing it of being part of a right-wing conspira- Mexico’s Infl ation which was responsible for awarding contracts cy to topple his government. Earlier this week, Rate Hits Highest to build roads, bridges and other infrastructure, Colombian President Juan Manuel Santos said for six years. He is being investigated in con- that former Venezuelan Attorney General Luisa Level Since 2001 nection with a fi ve trillion peso, or approximate- Ortega Díaz, who fl ed to Colombia and then ly $1.67 billion, contract the agency awarded to Brazil after breaking with Maduro’s government, Mexico’s annual rate of infl ation reached 6.59 an Odebrecht-led consortium to build the Ruta would be granted asylum in Colombia if she re- percent for the fi rst two weeks of August, del Sol II highway. Odebrecht employees have quested it. Santos and Venezuelan opposition higher than the expected rate of 6.49 percent admitted to paying bribes in connection to the leaders denounced the Maduro’ government’s and reaching its highest level since mid-2001, project.

FEATURED Q&A / Continued from page 1 The Wall Street Journal reported Thursday. The country’s consumer-price index (CPI) increased senators—still short of a majority, but with a it means that the splits in opposition groups by 0.31 percent during the same period, higher stronger public mandate and more room to left the government with the largest share of than the expected 0.21 percent increase. A maneuver. This could help pave the way for the vote. Nevertheless, this ‘symbolic victory’ spike in gasoline prices at the beginning of the Macri’s legislative agenda, including tax and positions the government well to build on year and the effect of the peso’s depreciation labor reforms. As we approach the October the momentum generated by achieving the since late 2014 were the main causes of the elections, three factors will play a key role: largest vote count of any electoral front, and increase in the infl ation rate. Though the annu- First, voters are likely to redirect their vote to more broadly, legitimizes the government’s al rate is likely to stay above 6 percent for the candidates topping the list, such as Bullrich reform agenda. Short of a major upset, the next few months, it appears to have reached its or Kirchner. While it is likely that Kirchner primary showing should translate into a peak, Mexico’s central bank said. Earlier this will earn a seat, her base is fi xed around 30 similar result in October, which will put the month, the Bank of Mexico kept its overnight percent, so the high volatility could have government in good stead moving forward interest rate unchanged at 7 percent, pausing an impact on the outcome. Second, voter into the next congressional cycle. Assum- after seven consecutive hikes. The central bank participation reached 75 percent during the ing a carry-through result, Cambiemos will says it expects infl ation to reach its target 3 primary, but could increase to 80 percent remain a minority alliance in both houses of percent by the end of next year. in October. The extra votes may infl uence Congress, but its negotiating position will the general result. Third, if the economy signifi cantly strengthen, improving outlook keeps improving, the governing coalition will for the government’s reform program and BUSINESS NEWS benefi t.” overall governability. That said, skillful political maneuvering will continue to be key to Heidi Lough, lead political risk success in the legislature, particularly with Raízen Nears Deal specialist, and Megan Cook, contentious issues such as labor and tax for Shell’s Argentine political risk specialist, both at reform on the horizon.” A Cefeidas Group in Buenos Aires: Gas Station Network “The Macri government’s performance in the Charles H. Blake, professor primaries exceeded all expectations. As well of political science at James Brazil-based energy company Raízen Energia as seeing off a decisive victory from former Madison University’s School is close to purchasing parent Royal Dutch President Kirchner (CFK) in the Senate race A of Public & International Shell’s Argentina gas station network for in Buenos Aires province, the governing Affairs: “Most polls projected that Cristina more than $1 billion, two people familiar with coalition made major territorial gains across Fernández de Kirchner’s list would win the the bidding said, Reuters reported Thursday. the country. This demonstrates the strength primaries in the Province of Buenos Aires by Raízen controls Brazil’s second-largest chain of of the Cambiemos brand and discourse of 3 to 7 percentage points. Mauricio Macri’s gasoline stations, and the company’s non-bind- ‘change,’ refl ected in wins in key voting dis- supporters claim that their ticket outper- ing bid beat out rival offers for the gas station tricts as well as traditional Peronist strong- formed the polls in the battleground province network, including Argentina’s state-run energy holds. Although CFK did suffi ciently well to that is home to one-third of the Argentine company YPF, Chile’s Quinenco and China Na- show she remains a potent political force, electorate; those polls also fuel kirchneri- tional Petroleum Corp’s Petrochina. Shell said and will become a senator, her performance sta allegations of electoral fraud. Moving in a statement that it would not comment on was not strong enough to position her as the forward, the kirchnerista ticket will attempt any potential deals, and Raízen also declined undisputed leader of the Peronist party or to do better in winning over supporters of to comment. Interest in Argentine assets has for a presidential run in 2019. Given that the Peronist alternatives than they did in the increased since President Mauricio Macri took former president’s run was likely motivated 2015 elections. The central political asset office in 2015. So far this year, the value of more by the leadership vacuum in the oppo- of the Macri government with an eye toward announced mergers in Argentina has totaled sition than by a desire to seek congressional the 2017 (and 2019) elections is a divided $10.847 billion, 15 times the amount for the immunity from corruption charges, her weak- opposition. Like Macri himself, Fernández de same period in 2015. Shell put its network of er-than-expected performance in the primary Kirchner has high positive and high negative 630 Argentine gas stations up for sale earlier casts uncertainty over her political future. approval ratings. Accordingly, elections can this year as part of a $30 billion divestment That said, the primary result does not mean turn on what voters who dislike both leaders program as it looks to lower its debt levels that the Cambiemos ideology is now the do with their votes. In these October mid- following the company’s acquisition of BG last dominant force in Argentine politics—rather, term elections, there are far more kirchneris- year. The gas station network Raízen owns in Continued on page 4 Brazil currently uses Shell gasoline.

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2017 ta seats up for election than macrista seats. facing trial would still remain subject to Yet, while Macri’s Cambiemos coalition prosecution and arrest by the courts, which Erik Brand aspires to build a legislative majority, the have thus become a feature of Argentine pol- Publisher [email protected] projected results are not overwhelming. itics. A few days ahead of the new Congress Even if the razor-thin primary margin holds that comes into session on Dec. 10, and by Gene Kuleta Editor in Buenos Aires province, Cambiemos is constitutional mandate, the chambers meet [email protected] projected to control just one-third of Senate separately to examine the credentials of the Nicole Wasson seats and two-fi fths of the lower house, senators and deputies-elect. Once approved, Reporter, Assistant Editor with the biggest change being one that was they receive their parliamentary immunity, [email protected] already widely forecast: the kirchneristas instituted to preserve the separation of will lose their ability to control the quorum in powers. It can later only be lifted under de- the Senate. While the kirchneristas managed termined circumstances by special sessions to garner near-majority and majority levels of of their respective chambers.” Michael Shifter, President legislative seats during their recent presiden- Genaro Arriagada, Nonresident Senior Fellow cies, Mauricio Macri will need to reverse Carlos Fara, president of Carlos Sergio Bitar, Nonresident Senior Fellow Joan Caivano, Director, Special Projects his climbing disapproval ratings to further Fara & Asociados in Buenos Michael Camilleri, Director, Peter D. Bell Rule of Law improve his ability to govern.” Aires: “There is no doubt that Program A the result of the primaries in the Kevin Casas-Zamora, Nonresident Senior Fellow Santos Goñi, board member Province of Buenos Aires (which represents Ariel Fiszbein, Director, Education Program of the World Affairs Council 38 percent of the national electorate) allows Alejandro Ganimian, Nonresident Fellow of Greater Miami and retired us to project a probable triumph of the ruling Peter Hakim, President Emeritus A Argentine career ambassador: party in the October general election, since Claudio Loser, Senior Fellow “The Cambiemos coalition has achieved a the majority rejects Cristina Fernández de Nora Lustig, Nonresident Senior Fellow clear national majority in the recent primary, Kirchner. What is at stake is the consoli- Margaret Myers, Director, China and which has strengthened President Mac- dation of the direction of the government, Latin America Program ri’s ability to pursue political reform and beyond the concrete results that have been Manuel Orozco, Director, Migration, Remittances & Development economic renewal. Indications are that the verifi ed so far. That is why the primary Jeffrey Puryear, Senior Fellow result will be confi rmed on Oct. 22, reaffi rm- elections have been, above all, of confi dence Tamar Solnik, Director, Finance & Administration ing the electorate’s preference for a policy and expectation. Even if Cristina Kirchner Lisa Viscidi, Director, Energy Program of ‘gradual change.’ Only complacency on obtains the seat by the minority, that will Denisse Yanovich, Director of Development and the part of Cambiemos’ supporters could not prevent the judicial proceedings against External Relations offer the divided Peronists an opportunity her from progressing, although the fact that to unite and undo its present chance at she has parliamentary privileges makes it Latin America Advisor is published every business day, except for major U.S. holidays, consolidation as a national party. Polls show diffi cult to imagine her being imprisoned. by the Inter-American Dialogue at that the number of seats held in Congress The government will be strengthened in its 1155 15th Street NW, Suite 800 Washington, DC 20005 today by the different parties will remain parliamentary presence in both chambers of www.thedialogue.org approximately the same. Nevertheless, the Congress as of December when the new leg- ISSN 2163-7962 generational handover already evident in islators take over. However, it will continue Subscription inquiries are welcomed at President Macri’s Cambiemos coalition and to depend on negotiations in order to be able [email protected] the coming replacement of older opposition to approve the laws it seeks. In any case, the party members with younger candidates, political impact of a victory in October on The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily should have a clear impact within their the opposing actors will be important, and represent those of the publisher. The analysis is the sole parliamentary groupings. Confronting such their way forward would be paved.” view of each commentator and does not necessarily a new Congress with a second national represent the views of their respective employers or fi rms. The information in this report has been obtained from electoral victory would enhance the admin- The Advisor welcomes comments on its Q&A reliable sources, but neither its accuracy and completeness, istration’s chances of passing its pending section. Readers can write editor Gene Kuleta nor the opinions based thereon, are guaranteed. If you have any questions relating to the contents of this publication, education, labor, tax and other reform bills. at [email protected]. contact the editorial offi ces of the Inter-American Dialogue. Once elected and until sworn in, candidates Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permis- sion from the publisher.