LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, February 13, 2018

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, February 13, 2018

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Will Negotiators Haitian President Cargill Joyce Chang Condemns Oxfam Global Head of Research, Find Consensus on Over Scandal JPMorgan Chase & Co. Haitian President Jovenel Moïse Dirk Donath Senior Partner, condemned the British charity Catterton Aimara NAFTA This Year? following reports that its staff Marlene Fernández members hired prostitutes in Corporate Vice President for Haiti at the same time they were Government Relations, offering aid there following the Arcos Dorados country’s 2010 earthquake. Peter Hakim President Emeritus, Page 2 Inter-American Dialogue

Donna Hrinak ECONOMIC President, Boeing Latin America Jon Huenemann Peru’s Economy at Vice President, U.S. & Int’l Affairs, Philip Morris International ‘Grave Risk’ Due James R. Jones to Corruption: Chairman, Monarch Global Strategies Mexican Economy Minister Ildefonso Guajardo, Canadian Foreign Affairs Minister Chrystia Finance Minister Craig A. Kelly Freeland and U.S. Trade Representative Robert Lighthizer met last month in Montreal for the latest round of talks to renegotiate NAFTA. // Photo: Canadian Government. Investments tied to construction Director, Americas International companies that are accused of Gov’t Relations, Exxon Mobil Negotiators from Canada, the United States and Mexico met corruption amount to 4.2 percent John Maisto of Peru’s GDP, said Finance Minis- Director, U.S. Education in Montreal at the end of January to continue negotiations Finance Group ter Claudia Cooper. to revamp the North American Free Trade Agreement, or Nicolás Mariscal Page 2 Chairman, Q NAFTA. Though negotiators seemed cautiously optimistic Grupo Marhnos about the progress made during the sixth round of talks, industry exec- POLITICAL Thomas F. McLarty III Chairman, utives and others close to the negotiations said the three countries were Brazil Won’t McLarty Associates unlikely to meet the March 31 deadline for a new agreement, and that Carl Meacham Closer Border talks could even extend until next year. And during the talks, negotia- Associate VP for Latin America to Venezuelans: Int’l Advocacy Division, PhRMA tors from Mexico and Canada rejected a U.S. proposal to restructure a Carlos Paz-Soldan Temer Partner, corporate arbitration system that is a key component of NAFTA. How DTB Associates, LLP are negotiations going? Will the three countries be able to resolve larger Brazil will not shut its border to Venezuelans fleeing their Beatrice Rangel sticking points like the arbitration system? What will it take for all three Director, country’s crises, said Brazilian AMLA Consulting LLC sides to successfully reach a deal before Mexico’s presidential election President Michel Temer. Gustavo Roosen in July? Page 2 Chairman of the Board, Envases Venezolanos Andrés Rozental Andrés Rozental, member of the Advisor board, president of President, Rozental & Asociados and Senior Rozental & Asociados in Mexico City and senior policy advi- Policy Advisor, Chatham House sor at Chatham House: “Trade negotiations are long, drawn- Roberto Sifon-Arevalo Managing Director, Americas out affairs, often taking several years to conclude. Thinking Sovereign & Public Finance Ratings, A Standard & Poor’s that the NAFTA renegotiation could be finalized in several months was always a pipe dream, and the current state of play confirms the difficulties in finding common ground on the proposals put forward by the Trump administration. Even if negotiators had been able to agree by now on the new and revised texts covering dispute settlement, rules of origin, export seasonality and a sunset clause, 2018 is an election year in both Mexico and the United States. Trade agreements are highly sensitive politically, Temer // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS country director, Roland van Hauwermeiren, NEWS BRIEFS who was allowed to resign in 2011 instead of Haitian President being fired. However, the charity denies that it Abducted Mexican Agents engaged in a cover-up. Oxfam’s deputy chief Apparently Seen on Video Condemns Oxfam executive, Penny Lawrence, has resigned over the group’s handling of the scandal. Law- A video released over the weekend on social Over Scandal rence said she was “ashamed” and takes “full media shows two kneeling, bound men, who responsibility.” In a statement, she said, “Over are apparently Mexican intelligence agents, Haitian President Jovenel Moïse late Monday the last few days we have become aware that reading from what appears to be script and condemned British charity Oxfam following concerns were raised about the behavior of confessing to supposed rights violations while reports that its staff members hired prostitutes staff in Chad as well as Haiti that we failed to five masked men point machine guns and while delivering aid in the Caribbean nation in adequately act upon. It is now clear that these assault rifles at them, the Associated Press 2011, BBC News reported. “There is nothing allegations—involving the use of prostitutes reported Monday. A federal official said the more outrageous and dishonest than a sexual and which related to behavior of both the two men are apparently agents of the federal predator who uses his position as part of the country director and members of his team in Attorney General’s Office who went missing on humanitarian response to a natural disaster Chad—were raised before he moved to Haiti.” Feb. 5 in Nayarit State. The gunmen have no to exploit needy people in their moment of On Saturday, Oxfam was hit by new allegations identifying marks on their clothes, but Nayarit by former staff members that women believed State is dominated by the Jalisco New Genera- to be prostitutes were invited to the charity’s tion Cartel. team house in Chad, The Guardian reported. At the time, Van Hauwermeiren was the head of Oxfam in the African nation, before becoming Peru’s Economy at ‘Grave the charity’s country head in Haiti. He has admitted to spending time with prostitutes in Risk’ Due to Corruption: his residence in Haiti, the newspaper report- Finance Minister ed. The Charity Commission, a British charity A crisis within Peru’s construction sector watchdog, has launched an inquiry of Oxfam. Moïse // File Photo: Haitian Government. because of corruption investigations against Britain’s international development secretary, companies that may be forced to halt projects greatest vulnerability,” Moïse said in the Penny Mordant, has threatened to withdraw Ox- is posing a “grave risk” to the economy, posting. In a report last week in The Times of fam’s funding unless it fixes its problems and Finance Minister Claudia Cooper said Monday, London, Oxfam was accused of concealing displays moral leadership, and the European Reuters reported. Investments tied to compa- the conclusions of an inquiry that senior aid Commission has also said it is ready to “cease nies accused of graft amount to 4.2 percent of workers at Oxfam, including its national direc- funding any partner not living up to high ethical Peru’s GDP, Cooper told the country’s Congress. tor in Haiti, paid prostitutes for sex while they standards,” BBC News reported. were in the country offering relief, following its catastrophic 2010 earthquake that killed more than 200,000 people. Three sources told The Brazil Won’t Close Mexico’s Alfa Reports Times that they were concerned that some of Border to Fleeing Smaller Net Loss for Q4 the prostitutes involved were as young as 14. Mexican conglomerate Alfa, which works in Oxfam has said that allegations that underage Venezuelans: Temer sectors including petrochemicals, on Monday girls were exploited have been investigated reported a smaller net loss in the fourth quar- but “not proven,” the newspaper reported. In Brazil will not close its border to Venezue- ter year-over-year, but added that it was also his Twitter post on Monday, Moïse said the lans seeking refuge by crossing into Roraima hit by exchange rate losses, Reuters reported. reported actions were an “extremely serious State, but will launch a task force aimed at Alfa reported a 590 million peso, or $30 million, violation of human dignity.” A senior govern- organizing the influx of migrants and provid- loss in the period from October to December of ment source in Haiti told the BBC that the ing resources to cities and states taking in last year, up from a loss of 1.27 billion pesos country’s government will launch an investiga- refugees from the economic and political crisis during the same period a year earlier, Economía tion into foreign aid agencies operating there. in Venezuela, President Michel Temer said Hoy reported. Revenue increased by 6 percent Oxfam has confirmed that sexual misconduct Monday, Reuters reported. Over the past few to 81.3 billion pesos in the third quarter, due to occurred and that several staff members were months, thousands of Venezuelans have fled growth in the company’s petrochemicals unit either dismissed or resigned, including the the country and crossed into Brazil. The city of Alpek, among other units.

Boa Vista, Roraima’s capital, has been facing FEATURED Q&A / Continued from page 1 a humanitarian emergency as a result: local officials say 10 percent of the city’s population, and it was never going to be feasible to co and Canada have largely taken a hard line or approximately 40,000 people, is made up of conclude negotiations and send the results against the United States’ reluctance to sign Venezuelan refugees, putting a strain on public for the respective legislative approvals. As onto an ISDS mechanism. As a result, a deal services. Temer flew to Boa Vista on Monday presented, several U.S. proposals on the will depend on how the U.S. position evolves with some ministers and officials to hold meet- more difficult issues mentioned above are in the coming months. U.S. domestic politics ings with local authorities and assess what unacceptable to both Canada and Mexico, are likely to be a factor. NAFTA’s ISDS provi- is needed to help the situation. He promised both of which are trying to be constructive sion has attracted much criticism. Just re- local officials financial assistance for Roraima and understanding of the reasons behind cently, a number of high-profile U.S. senators state and offered the possibility of transport- them. Even in the United States, a convincing argued for the elimination of NAFTA’s ISDS ing some Venezuelans to other states. “I will private sector and political coalition is pres- not rest until we have solved the problems of suring the White House to limit overall dam- Roraima,” Temer said at the meeting. Defense age to NAFTA. This is especially true in the Minister Raúl Jungmann later said the armed case of the agricultural and automotive sec- A deal will depend forces would establish a field hospital at the tors, both of which are against the changes on how the U.S. border and work with local authorities to build proposed by the Trump administration. There position evolves in triage centers, GloboNews reported. is little chance of reaching a final agreement the coming months.” before the Mexican presidential election, or — Julissa Reynoso and Michael Fernández even before the November congressional BUSINESS NEWS midterms in the United States. For NAFTA to survive as a free-trade pact, with improve- ments and new agenda issues incorporated, Heineken Expects the United States will have to abandon the provisions altogether. Ultimately, for some Lower Profitability idea of replacing it with a managed trade version of ISDS to survive, negotiators will agreement whereby Mexico and Canada lose need to address the concern of ISDS’ critics After Brazil Unit Buy the existing benefits of tariff-free trade in that it lacks transparency and inappropriate- goods and service at the expense of an ab- ly impinges sovereignty. Absent agreement, Heineken, the world’s second-largest beer surd U.S. attempt to eliminate trade deficits U.S. businesses may very well face a future distributor, on Monday said its growth in prof- through obstacles to the established, highly with limited investment treaty protections itability would be lower this year as compared integrated, North American economy.” in Mexico and Canada. The short-term to last year, due to its acquisition of its Brazil consequences of this are important from an business, which it purchased from Japanese Julissa Reynoso, partner, and investment perspective, as U.S. investors brewer Kirin for $666 million, or 2.2 billion Michael Fernández, asso- have growing concerns over the outcome of reais, last year, the Financial Times reported. ciate, at Winston & Strawn: Mexico’s elections.” Analysts estimate that Brasil Kirin had seen a A “As the United States, Mexico sharp decline in profits under Kirin’s ownership and Canada continue their negotiations Pablo Heidrich, assistant and was operating at a loss when Heineken to revamp NAFTA, discussions about the professor at the Arthur Kroeger bought it in February of last year. Heineken on Chapter 11 investor-state dispute settlement College of Public Affairs at Monday said its profit margins would expand (ISDS) mechanism have come to a standstill. A Carleton University in Canada: this year by a quarter percentage point, down While Mexico and Canada are committed to “Negotiations are not going well, at least from last year’s 0.4 percentage point target, maintaining some form of ISDS agreement from a Canadian perspective, as the U.S. due to “a residual dilutive effect from the between themselves, the United States is proposals so far have been unacceptable. It acquisition of Brasil Kirin.” Despite Brasil Kirin’s seeking the right to opt out. Trump admin- is not only the demands made to restructure struggles, Heineken’s acquisition helps the istration officials have publicly criticized the corporate arbitration, but also the claims company challenge Anheuser-Busch InBev in Chapter 11 as an invasion of sovereignty and made regarding Canada having to dismantle one of its biggest markets, Brazil. Heineken as a measure that incentivizes companies its protectionism in dairy, poultry, retail, posted better-than-expected full-year revenues to outsource to Mexico. Thus, there is a real finance and media industries, plus the fact and profits Monday, especially in emerging possibility that a NAFTA revamp will end up the United States has not offered anything markets, which account for half its revenues with no ISDS provision. It appears that Mexi- in return for those concessions. Canada has and 55 percent of group operating profits. 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 requested changes in U.S. protectionism of trust and desire to conclude determine the its lumber and hi-tech industries, as well as outcome. When I was in Congress, these Erik Brand federal rules to limit states’ legislation dis- attributes existed among both Republicans Publisher [email protected] criminating against international services or and Democrats, and as a result, things were goods providers, but so far Canada has not accomplished. That doesn’t exist today. Gene Kuleta Editor received a positive response. It is unlikely Whether these traits truly exist among the [email protected] that the three countries can resolve larger Nicole Wasson sticking points like the arbitration system, Reporter, Assistant Editor given that there are other issues on the [email protected] table. The arbitration system is of a ‘larger’ I still give no significance only for the United States, better than 50-50 not for its partners. U.S. sector-specific odds of a successful Michael Shifter, President protectionism and states’ discriminatory conclusion this year.” laws and practices are indeed more relevant Genaro Arriagada, Nonresident Senior Fellow — James R. Jones for Canada and Mexico. Without a resolution Sergio Bitar, Nonresident Senior Fellow Joan Caivano, Director, Special Projects of at least part of latter, no change can be Michael Camilleri, Director, Peter D. Bell Rule of Law expected. In order for the three countries Program to reach a deal before the election, they will Kevin Casas-Zamora, Nonresident Senior Fellow need either a change of strategy on the part Ariel Fiszbein, Director, Education Program of the United States, who would have to give trilateral negotiators remain to be seen. One Alejandro Ganimian, Nonresident Fellow up in at least some of issues relevant to possibility to be considered is bifurcating Peter Hakim, President Emeritus its partners in exchange for advancing its the process and approving the roughly half Claudio Loser, Senior Fellow agenda, or to find a face-saving compromise of NAFTA upon which there can be agree- Nora Lustig, Nonresident Senior Fellow among all three countries where the status ment within the next month. Then come Margaret Myers, Director, China and quo is not radically modified, but perhaps back after the U.S. midterm elections and Latin America Program the spectrum of the agreement would be the Mexican national elections to resume Manuel Orozco, Director, Migration, Remittances & Development enlarged to cover trade issues not yet in- negotiating the modernization of the rest of Jeffrey Puryear, Senior Fellow cluded. But neither of these are very unlikely NAFTA. That would give the beneficiaries Tamar Solnik, Director, Finance & Administration outcomes in the short term. The United of NAFTA, such as the farm interests, the Lisa Viscidi, Director, Energy Program States indeed might be seeking to terminate six million Americans whose jobs depend Denisse Yanovich, Director of Development and NAFTA in time for the Trump presidency to on NAFTA, the energy industry and others a External Relations deliver better results to the Republican Party focused chance to be heard, perhaps for the in the 2018 midterm elections.” first time. That our negotiators are trying to Latin America Advisor is published every business day, except for major U.S. holidays, rid the corporate arbitration protections is by the Inter-American Dialogue at James R. Jones, member of baffling to me. These provisions protect U.S. 1155 15th Street NW, Suite 800 Washington, DC 20005 the Advisor board, chairman business from less developed and trusted www.thedialogue.org of Monarch Global Strategies legal systems. I believe there have been ISSN 2163-7962 and former U.S. ambassador to eight cases filed by U.S. businesses, and we A Subscription inquiries are welcomed at Mexico: “From my outsider’s vantage point, have won them all. Why would our govern- [email protected] it seems that the climate for a successful ment disregard America’s businesses and negotiation improved after the last round of so aggressively go against their interests? The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily talks in Montreal. But I still give no better Elections do matter. They send messages represent those of the publisher. The analysis is the sole than 50-50 odds of a successful conclusion to policymakers. That may be the best way view of each commentator and does not necessarily this year. It appears that in addition to the to break the impasse on what remains to be represent the views of their respective employers or firms. The information in this report has been obtained from three completed NAFTA chapters, another negotiated.” reliable sources, but neither its accuracy and completeness, dozen or more are 90 percent complete. As nor the opinions based thereon, are guaranteed. If you have any questions relating to the contents of this publication, with many things in negotiation, whether it’s The Advisor welcomes comments on its Q&A contact the editorial offices of the Inter-American Dialogue. congressional reconciliation or labor-man- section. Readers can write editor Gene Kuleta Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permis- agement issues, a sense of good will, at [email protected]. sion from the publisher.