LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Monday, November 30, 2020

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Monday, November 30, 2020

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Are Mexico and the Mexican Officials CEO, DevryBV Sustainable Strategies Seek Prosecution Joyce Chang Global Head of Research, U.S. Putting Politics of García Luna JPMorgan Chase & Co. Mexican officials are seeking the Paula Cifuentes prosecution in Mexico of former Director of Economic & Fiscal Affairs, Above the Law? Public Security Secretary Genaro Latin America & Canada, Philip Morris International García Luna, who currently stands Marlene Fernández charged in the United States. Corporate Vice President for Page 2 Government Relations, Arcos Dorados (McDonald’s) Peter Hakim ECONOMIC President Emeritus, Inter-American Dialogue Chilean Senate Donna Hrinak Approves Piñera’s Senior VP, Corporate Affairs, Royal Caribbean Group Pension Measure Jon E. Huenemann Chile’s Senate approved a Former Corporate and measure that President Sebastián Government Senior Executive Gen. Salvador Cienfuegos Zepeda (L) walks alongside then-President Enrique Peña Nieto at a Piñera proposed that would allow James R. Jones military parade in 2012. // File Photo: Mexican Government. Chairman, a second withdrawal from pension Monarch Global Strategies funds. The Senate rejected competing opposition-backed Craig A. Kelly The U.S. Justice Department on Nov. 17 announced it had Senior Director, Americas legislation. Int’l Gov’t Relations, Exxon Mobil agreed to drop criminal charges against former Mexican Page 2 John Maisto Defense Minister Gen. Salvador Cienfuegos Zepeda, who Director, U.S. Education Finance Group Q was arrested in Los Angeles in mid-October on accusations POLITICAL Nicolás Mariscal of conspiracy to manufacture, import and distribute narcotics into Chairman, Brazil’s Bolsonaro Grupo Marhnos the United States and money laundering. The government of Mexican Suffers Big Defeats Thomas F. McLarty III President Andrés Manuel López Obrador reportedly saw Cienfuegos’ Chairman, in Local Elections McLarty Associates detainment as a violation of the country’s sovereignty, and Mexican Candidates supported by Brazilian officials have not committed to putting Cienfuegos on trial when he re- Beatrice Rangel President Jair Bolsonaro were Director, turns to his home country. What is behind the U.S. Justice Department’s AMLA Consulting LLC defeated in the country’s local elections, which concluded Sun- Jaana Remes decision to drop the charges? What implications does the move have for Partner, Cienfuegos’ case and for future foreign corruption investigations or tri- day. Bolsonaro-backed candidates McKinsey Global Institute lost in the country’s major cities. Ernesto Revilla als carried out by the U.S. government? How well are U.S. and Mexican Page 2 Head of Latin American authorities working together on anti-drug efforts? Economics, Citi Gustavo Roosen Chairman of the Board, Barry McCaffrey, retired U.S. army four-star general and Envases Venezolanos Andrés Rozental former director of the White House Office of National Drug President, Rozental & Control Policy: “The arrest of Gen. Cienfuegos at Los Angeles Asociados International Airport on Oct. 15 and his subsequent release Shelly Shetty Managing Director, Sovereigns A without U.S. charges on Nov. 18 was a needlessly provocative, bone- Fitch Ratings headed Trump administration action. This uncoordinated arrest of the former Mexican defense minister two years after he retired (on a sealed 2019 indictment that he was the ‘Padrino’ of the H-2 Cartel) imperiled our shaky relations with President López Obrador and his government. The army was outraged. AMLO’s government was surprised and humiliated. They immediately threatened expulsion of the incredibly effective small Bolsonaro // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS Texas. He has pleaded not guilty to the charges NEWS BRIEFS against him. Earlier this month, U.S. authorities Brazil’s Bolsonaro agreed to drop charges against another former Argentine Authorities Mexican official, ex-Defense Minister Gen. Search Home of Suffers Big Defeats Salvador Cienfuegos Zepeda, and return him to Mexico. Maradona’s Doctor in Local Elections Argentine authorities have searched the house and office of Diego Maradona’s doctor as part Brazilian President Jair Bolsonaro suffered ECONOMIC NEWS of an investigation into the death of the soccer huge setbacks in Brazil’s municipal elections legend, who died of heart failure last week at that concluded Sunday, with only five of the Chile’s Senate the age of 60 in the town of Tigre, Argentina, mayoral candidates he backed winning their CNN reported. Police have seized documents races, and none of them in the country’s Approves Piñera- and cell phones from Dr. Leopoldo Luque, who major cities, the Associated Press reported. has maintained his innocence and said he Bolsonaro’s worst loss was in Rio de Janeiro, Backed Pension Bill would cooperate with authorities in the wrong- where center-right former Mayor Eduardo Paes ful death probe, according to local media. No overwhelmingly won over Bolsonaro-allied May- Chile’s Senate on Thursday approved legis- charges have been filed against anyone in or Marcelo Crivella, an evangelical pastor, by 64 lation backed by President Sebastián Piñera connection with Maradona’s death. percent to 34 percent. In Fortaleza, Bolsona- that would allow holders of pension accounts ro-backed candidate Wagner Gomes also lost, to tap some of their savings as an emergency 51.5 percent to 48.5 percent to center-left can- measure amid the Covid-19 crisis, Bloomberg Mexican Authorities Arrest didate Sarto Nogueira. Bolsonaro’s candidates News reported. In a vote of 35-1, the Senate also suffered big defeats in the local vote’s approved Piñera’s legislation while rejecting Alleged Planner in first round two weeks ago. In Belo Horizonte, a competing bill that opposition lawmakers Mormon Family Massacre Brazil’s third-largest city, Bolsonaro-backed introduced. Piñera’s legislation is more limited Mexican authorities have captured the man mayoral candidate Bruno Engler lost to Alexan- than the opposition’s, Reuters reported. Piñera who allegedly plotted a massacre that killed dre Kalil, who won more than 63 percent of the vowed last week to present a challenge to the nine members of a Mexican-American Mormon vote, The Guardian reported. In São Paulo, Bol- opposition’s legislation in the constitutional family last year, The Wall Street Journal report- sonaro-endorsed candidate Celso Russomanno court. In July, lawmakers approved a measure ed Thursday. The suspect, Roberto González, didn’t even make it to the runoff. Center-right to allow pension holders to withdraw as much is also known as “The 32” and is considered São Paulo Mayor Bruno Covas won re-election as 10 percent of their accounts, saying the one of the leaders of Mexican gang La Línea, on Sunday. [Editor’s note: See related Q&A in move was needed to help Chileans through an armed wing of the Juárez drug cartel. the Nov. 6 issue of the Advisor.] the economic fallout of the pandemic. Piñera González and two other members of his gang reluctantly approved the measure, which led were detained last week in the northern state to $17 billion in pension fund withdrawals. of Chihuahua, authorities said. Seventeen Mexican Officials Piñera’s legislation for the second withdrawal people have been arrested in connection with caps at about $5,700 the amount that Chileans Want to Prosecute the case. can take out, and some withdrawals will be García Luna subject to taxation, Bloomberg News reported. Chile’s pension funds, known as AFPs, will have Mexican officials want authorities in Mexico to up to 30 business days to deliver the money Itaú Board Approves prosecute the country’s former public security to account holders after the withdrawal is Spinoff of Stake in XP secretary, Genaro García Luna, who stands requested. The measure is expected to lead The board of Brazil’s Itaú Unibanco Holding charged with drug-trafficking crimes in the to an additional $15 billion in withdrawals. has approved the spinoff of the bank’s stake in United States, the Associated Press reported. Chilean pension funds hold approximately $200 brokerage XP, Reuters reported Thursday, citing An unnamed Mexican official told the wire ser- billion in investments. Protesters have recently a securities filing. Itaú Unibanco had previously vice that Mexico’s attorney general’s office had targeted the pension system, which dates from said it was considering a plan to spin off ap- issued an arrest warrant on Friday for García the dictatorship of Augusto Pinochet, because proximately 90 percent of its 46 percent stake Luna, adding that officials “are assessing the of its low payouts to retirees. The first round of in the brokerage. In its latest filing, Itaú said viability of starting an extradition process.” withdrawals went to pay down debt and for the the spun-off entity would represent a stake of García Luna was arrested last December in purchases of electronics and other consumer 41.05 percent in XP.

COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Monday, November 30, 2020 goods, as well as for down payments on new FEATURED Q&A / Continued from page 1 homes, Bloomberg News reported. The pension system is expected to be a major point of de- footprint of 50 Drug Enforcement Adminis- final stages of investigations, as the United bate as Chile redrafts its constitution. Chileans tration agents in Mexico. AMLO began his States has realized that its interests might voted overwhelmingly last month to rewrite the term with a call for ‘hugs not bullets’—naïve. be put at risk if it doesn’t involve Mexico. charter. [Editor’s note: See the Advisor’s inter- Violence spiraled out of control. The cartels For Mexicans, it is unfortunate to think that view on the constitutional rewrite with former in many states dominate local government justice in our country should depend on the Chilean President Ricardo Lagos.] and the police through gruesome torture, United States. Yet, deep down, we fear that murder and corruption. López Obrador has the Attorney General’s Office will investigate rapidly learned that the Mexican army and the case because, despite important reforms BUSINESS NEWS marines (360,000 active personnel) were the only institutions that had the courage to follow orders and support his objectives. For Mexicans, it is un- Six Executives of The army is extremely effective and has a fortunate to think that Citgo Sentenced very strong sense of discipline. The army is justice in our country the most respected institution in Mexico, al- should depend on the in Venezuela though it is clearly vulnerable to corruption. United States.” I have no reason to disbelieve that U.S. law — Ana Lorena Delgadillo Six U.S. oil executives were convicted and enforcement had the goods on Cienfuegos. sentenced to prison in Venezuela last Thursday However, his arrest was bound to infuriate nearly two years after the Andean nation’s the army. Its cooperation is key to U.S. in 2014, this institution has not been trans- military intelligence arrested them on embez- counterdrug efforts. Why not forewarn the formed. It has proven to be neither efficient zlement charges during what they thought was government and neutralize Cienfuegos by a nor autonomous, and it is not reliable. The a business meeting in Caracas, NPR reported. public indictment and presentation of evi- Cienfuegos case could be its great opportu- Known as the Citgo 6, the men were all employ- dence in private? The U.S. attorney general nity for justice—especially in the face of cor- ees of Venezuelan state oil company PDVSA’s has no judgment. It was another action of a ruption and human rights violations—or the U.S.-based refiner Citgo. Five of the men, clueless administration.” continuation of a history of impunity for the Gustavo Cárdenas, Jorge Toledo, Jose Luis military in Mexico. With regard to transna- Zambrano, Alirio Zambrano and Tomeu Vadell, Ana Lorena Delgadillo, founder tional crime, both countries require effective who are all U.S. citizens, were sentenced to and executive director of the and reliable judicial collaboration channels eight years and 10 months, while Jose Pereira, Foundation for Justice and a that are not bureaucratic and that prioritize a permanent resident of the United States, was A Democratic Rule of Law (FJEDD) the advancement of the rule of law. Mexico’s sentenced to 13 years in prison, the Associ- in Mexico: “The U.S. government prioritized attorney general’s office must demonstrate ated Press reported. The executives, who all its diplomatic relationship with Mexico that it is up to the task of investigating this maintain their innocence, were charged with over evidence it claimed to have in order case and, based on the results, consolidate embezzlement in connection with a proposal to to prosecute Gen. Cienfuegos. It seems a relationship of trust that is based on judi- refinance around $4 billion of Citgo bonds by that a political decision was made over a cial cooperation.” offering a 50 percent stake in the company as legal one, which puts at the center of the collateral, a move that was never actually im- debate the need to strengthen the autonomy Earl Anthony Wayne, co-chair of plemented. In a statement to CNN, Citgo said of prosecutors in every democracy. One the Mexico Institute Advisory it was “distressed to read about this outcome” wonders what interests benefited from the Board at the Wilson Center and hopes “for a resolution that will lead to [the decision, both in Mexico and in the United A and former U.S. ambassador men’s] prompt release.” Family members say States, and whether this implies a change in to Mexico: “The U.S. arrest and release the men are being held in inhumane conditions. the cooperation between the two countries to Mexico of retired Mexican Defense On Nov. 21, Secretary of State Mike Pompeo for future criminal investigations. Histori- Secretary Salvador Cienfuegos on charges said the administration of U.S. President cally, we have seen that if the United States of supporting a drug-smuggling group has Donald Trump would “continue to pursue our wants to investigate in any of our countries, set up a high-profile test for Mexico’s justice mission to secure the release of the Citgo 6,” it does so, without even consulting them. system. Many questions swirl around the calling on Venezuelan President Nicolás Mad- Given the Cienfuegos case, hopefully in the general’s arrest, release and future treat- uro to “put politics aside and let these families future Mexico will at least be involved in the ment in Mexico, especially the chances for be reunited.” 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 © 2020 a credible Mexican prosecution. Mexico’s claim. Therefore, no wonder charges against handling of General Cienfuegos’ case will Gen. Cienfuegos were dropped because Erik Brand have a significant impact on U.S.-Mexican of fear of his disclosure of sources and Publisher [email protected] cooperation against deadly cross-border or- methods, including ‘naming names’ in both ganized crime. Most important to watch for countries. Quid pro quo and back channels Gene Kuleta Editor the long term will be how the management are the core of the negotiations that took [email protected] of the case strengthens or weakens bilateral place. The moving of Gen. Cienfuegos’ case Anastasia Chacón González collaboration against drug-trafficking groups to Mexico’s law enforcement has profound Reporter & Associate Editor that cause tens of thousands of deaths in implications for combating drug-financed [email protected] the United States and Mexico. We must corruption and anti-drug efforts in which keep the real costs of trafficking in focus. Mexico and the United States are involved.

Mexico’s foreign minister and president have The U.S. Justice Department does not, most Michael Shifter, President spoken positively about Mexico’s ability to Rebecca Bill Chavez, Nonresident Senior Fellow carry out a serious investigation of Cien- Sergio Bitar, Nonresident Senior Fellow fuegos. Other experts are skeptical, given Whether guilty as Joan Caivano, Senior Advisor the poor record of Mexico’s justice system accused or not, Gen. Michael Camilleri, Director, Rule of Law Program on cases involving high-profile individuals. Cienfuegos can name Kevin Casas-Zamora, Nonresident Senior Fellow In this case, electronic evidence collected by names on both sides Héctor Castro Vizcarra, Nonresident Senior Fellow U.S. authorities without a Mexican judge’s of the border...” Julia Dias Leite, Nonresident Senior Fellow approval may not be admissible in Mexican Ariel Fiszbein, Director, Education Program — Maria Velez de Berliner courts. If the case falters, a bright spotlight Peter Hakim, President Emeritus will shine on still-existing flaws in Mexico’s Nora Lustig, Nonresident Senior Fellow judicial system. A poorly handled case will often, file charges without evidence that Margaret Myers, Director, Asia and further erode confidence among U.S. law en- could sustain adversarial scrutiny in a court Latin America Program Manuel Orozco, Senior Fellow forcement officials in their Mexican partners of law in the United States. Mexico is differ- Xiaoyu Pu, Nonresident Senior Fellow and will erode confidence among honest ent: its law enforcement system is stacked Jeffrey Puryear, Senior Fellow Mexican officials in their system. To bolster against lower-placed criminals or the Mateo Samper, Nonresident Senior Fellow trust, the two governments must build new unlucky, while those at the top get off scot- Tamar Solnik, Director, Finance & Administration mechanisms to help prevent corruption of free—they know too much. Gen. Cienfuegos’ Lisa Viscidi, Director, Energy Program officials from either country, as part of work case demonstrates the constant, watchful Denisse Yanovich, Director of Development, to strengthen and expand effective coopera- approach U.S. intelligence agencies must External Relations & Special Projects tion against cross-border trafficking.” exercise in intelligence sharing and collaboration with Mexico. The U.S. intelligence and Latin America Advisor is published every business day, except for major U.S. holidays, Maria Velez de Berliner, law enforcement communities must accept by the Inter-American Dialogue at managing director of RTG-Red that corruption, collusion and faithlessness 1155 15th Street NW, Suite 800 Washington, DC 20005 Team Group, Inc.: “The higher are characteristic of a large segment of their www.thedialogue.org the position, the more valuable Mexican counterparts, and amend collabora- A ISSN 2163-7962 the intelligence an accused person has to tion and sharing agreements as changing or Subscription inquiries are welcomed at trade in his favor. Whether guilty as accused changed circumstances make mandatory.” [email protected] or not, Gen. Cienfuegos can name names The opinions expressed by the members of the Board of on both sides of the border, based on his Editor’s note: The Advisor invited Mexico’s Advisors and by guest commentators do not necessarily direct knowledge of anti-drug intelligence embassy in Washington to comment on this represent those of the publisher. The analysis is the sole shared between and among agencies of the topic but did not receive a response. view of each commentator and does not necessarily represent the views of their respective employers or firms. United States and Mexico. It is no secret that The information in this report has been obtained from drug-financed corruption is widespread in The Advisor welcomes comments on its Q&A reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have Mexico and that many in influential and pow- section. Readers can write editor Gene Kuleta any questions relating to the contents of this publication, erful positions are not as innocent as they at [email protected]. contact the editorial offices of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permission from the publisher.