Qel Salvador's New Legislative Assembly

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, May 14, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Is El Salvador’s Venezuela to Hold Chief Corporate Affairs Officer, Grubhub Local, Regional Joyce Chang Global Head of Research, Bukele Undermining Elections Nov. 21 JPMorgan Chase & Co. Venezuela will hold regional and Paula Cifuentes local elections in November, said Director of Economic & Fiscal Affairs, the Rule of Law? Pedro Calzadilla, the president of Latin America & Canada, Philip Morris International the country’s electoral council. Marlene Fernández The announcement came after Corporate Vice President for Venezuela named two opposition Government Relations, members to the council. Arcos Dorados (McDonald’s) Page 2 Peter Hakim President Emeritus, Inter-American Dialogue ECONOMIC Donna Hrinak Senior VP, Corporate Affairs, Brazil Joins South Royal Caribbean Group American Effort Jon E. Huenemann Council Member, for Undersea Cable GLG Inc. Brazil has joined an effort to build James R. Jones Salvadoran President Nayib Bukele’s Nuevas Ideas party this month ousted the attorney Chairman, general and the five magistrates of the constitutional chamber of the country’s Supreme Court . an 8,200-mile undersea fiber optic Monarch Global Strategies // File Photo: Salvadoran Government. cable from South America to Asia. Officials are planning the project Craig A. Kelly El Salvador’s new Legislative Assembly, controlled by the Senior Director, Americas to improve Internet connectivity. Int’l Gov’t Relations, Exxon Mobil New Ideas party of President Nayib Bukele, in its first Page 2 John Maisto session on May 1 voted to remove the five magistrates of Director, U.S. Education Finance Group Q the constitutional chamber of the country’s Supreme Court. POLITICAL Nicolás Mariscal Hours later, it voted to fire the attorney general. The international com- Chairman, Colombian Grupo Marhnos munity—including U.S. administration officials and legislators, the U.N. Foreign Minister Thomas F. McLarty III human rights chief and the Organization of American States—quickly Chairman, Steps Down McLarty Associates blasted the moves as an attempt by Bukele to control the country’s Colombian Foreign Minister Clau- institutions. What are the most important consequences of the Legis- Beatrice Rangel dia Blum resigned amid deadly Director, lative Assembly’s sacking of the Constitutional Court magistrates? Will AMLA Consulting LLC protests in the Andean nation. Her departure followed that of Finance Jaana Remes Bukele’s moves, which some consider to be undermining the rule of law, Partner, significantly affect the country’s business environment, or are the pres- Minister Alberto Carrasquilla McKinsey Global Institute earlier this month. Ernesto Revilla ident’s pro-business policies enough to retain and attract investments? Page 2 Head of Latin American What explains the contrast between sharp criticism of Bukele abroad Economics, Citi and his high popularity at home? Gustavo Roosen President, IESA Andrés Rozental Ernesto Muyshondt, former mayor of San Salvador: “El President, Rozental & Salvador has been suffering a spectacular democratic and Asociados institutional regression since well before the past legislative Shelly Shetty Managing Director, Sovereigns and municipal elections. The use of government resources Fitch Ratings A and institutions for electoral purposes was coarse and shameless; not only to promote official candidates, but also to harass and even persecute political opponents (even using the police and army for political purposes). That was the main reason why Bukele won a majority in Congress and municipal governments. The illegal and unconstitutional removal of constitutional magistrates and the attorney general were the first moves Blum // File Photo: Colombian Government. Continued on page 3

POLITICAL NEWS conducive to the restoration of democracy and NEWS BRIEFS justice in Venezuela.” Almagro added, “These Venezuela to Hold recent moves only show the dictatorship’s Paris Club Reportedly determination to toy with the international com- Willing to Allow Argentina Regional, Local munity and trick it into thinking that it is acting in good faith.” to Delay Debt Payment Elections on Nov. 21 The Paris Club group of international creditors Colombian Foreign is willing to allow Argentina to delay a $2.4 Venezuela will hold regional and local elections billion debt payment due at the end of this on Nov. 21, the president of the country’s elec- Minister Resigns month if the country meets certain conditions, toral council, Pedro Calzadilla, said Thursday, Bloomberg News reported today, citing three Reuters reported. The country’s opposition, Amid Deadly Protests people with direct knowledge of the discus- including Juan Guaidó, whom the United States sions. The creditors will reportedly allow Argen- and several other countries recognize as Ven- Colombian Foreign Minister Claudia Blum has tina to avoid default if it misses the payment. ezuela’s legitimate interim president, has also resigned amid international condemnation Argentine President Alberto Fernández spent called for presidential and legislative elections. of Colombian authorities’ reported use of this week in Europe to hold talks on the matter. The country’s new electoral council, which was excessive force against protesters in recent named earlier this month, will oversee the re- weeks, Agence France-Presse reported. “I am gional and local elections, said Calzadilla. The sure that ... the country will continue on the Cuba Begins Inoculations new board consists of three members close to path of sustainable development, social and President Nicolás Maduro’s Socialist Party and economic recovery from the effects of the pan- With Locally Produced two members linked to the opposition. “This demic, and consolidation of the consensus that Covid-19 Vaccine [electoral council] is the result of a national dia- confirms the unity and strength of our nation,” Cuba on Wednesday began mass inoculation logue,” said Calzadilla, Reuters reported. “It is Blum wrote in her resignation letter, which was of its population with two locally manufactured with active and hopeful electoral participation signed May 11 but made public on Thursday. Covid-19 vaccines, even though late-stage that the Venezuelan people have expressed Blum’s resignation followed that of Finance clinical trials are still underway, NBC News their clear mandate. Our differences should be Minister Alberto Carrasquilla on May 3. reported. The Cuban government had planned resolved peacefully.” Previous electoral boards for vaccinations in June following authoriza- have consisted entirely of Maduro loyalists. tion from its health regulator, but the Health The inclusion of the opposition members on ECONOMIC NEWS Ministry announced it would inoculate 1.7 mil- the board have led some opposition leaders to lion residents of Havana, and additional people support participation in the elections after they from other provinces, in the next three months. boycotted presidential and legislative elections Brazil Joins South Havana is at the center of the island’s current in recent years, saying the votes were rigged. American Effort to coronavirus outbreak. Some have seen Maduro’s appointment of the opposition members and other recent actions, Build Undersea Cable such as granting house arrest to six former executives of Citgo, as conciliatory signals to Brazil has joined South American efforts to Mexico’s Grupo Comercial the administration of U.S. President Joe Biden. build the first submarine fiber optic cable Chedraui Agrees to Buy “While President Maduro’s recent moves will connecting the continent to Asia, Chilean U.S.-Based Smart & Final not by themselves bring an end to the conflict, Foreign Minister Andrés Allamand announced I believe that these gestures from Caracas Thursday, Reuters reported. Allamand told re- Mexican retailer Grupo Comercial Chedraui has send a signal to Washington that there’s a porters that Brazil had decided to formally join reached a deal to buy California-based grocer willingness to open conversations toward the initiative, which is to build an 8,200-mile Smart & Final Stores for more than $600 mil- reaching a negotiated solution in Venezuela,” cable that is expected to strengthen connec- lion, The Wall Street Journal reported Thursday, U.S. Rep. Gregory Meeks (D-N.Y.) told the tivity for 270 million people in South America. citing people familiar with the matter. The Advisor in a Q&A published Thursday. However, The project is expected to incur an investment move would expand the Mexican company’s in the same issue, Organization of American of $388 million. “The incorporation of Brazil presence in the U.S. supermarket business, States Secretary General Luis Almagro told the to this project gives it a definitive economic which soared during the Covid-19 pandemic. Advisor that the designation of an “illegitimate viability, and at the same time a definitive politi- The sources said private equity firm Apollo National Electoral Council” is not “significant or cal viability as well,” Allamand said. Chile and Global Management is selling Smart & Final to Bodega Latina, a subsidiary of Chedraui.

Argentina are already part of the initiative, and FEATURED Q&A / Continued from page 1 Allamand said he expected Paraguay, Uruguay and Bolivia to join. Brazil’s foreign and commu- in a series of atrocities, such as a law to able details. Bukele and Nuevas Ideas rose nications ministries said in a joint statement shield corrupt actions and purchases by to power on the failures of traditional parties on Thursday that the countries that signed on government officials during the pandemic. to make a difference in the lives of ordinary would soon begin talks around financing and The clear undermining of the rule of law, as people, break the control of criminal gangs technical details, Reuters reported. well as the flagrant deterioration of relations and rein in government corruption. Critical with the United States, the European Union and other democratic governments and BUSINESS NEWS institutions, will bring disastrous conse- Charismatic and quences for our country and for Salvadorans self-absorbed, Bukele Kansas City Southern living here and abroad. Bukele’s popularity has no real policy is due to hundreds of millions of dollars in agenda other than the Accepts Deal From government handouts that are not sustain- accrual of power.” able, as well as to an impressive government — Jim McGovern Canadian National control of media, communications and the social media apparatus, which promotes a U.S. railway operator Kansas City Southern cult of personality, and spending millions now is what happens next to rule of law and announced Thursday that it had accepted an of dollars in government funds to promote basic rights and freedoms. Whether or not acquisition offer of $33.6 billion from Canadian Bukele’s image.” Bukele and his party deliver enough change National Railway, which had outbid rival Cana- that Salvadorans will continue to embrace dian Pacific Railway’s $29 billion merger deal, Jim McGovern, member of the his whims and corrupt designs, I only hope Reuters reported. Canadian Pacific now has U.S. House of Representatives that enough of El Salvador’s democracy five business days to make a counteroffer, a (D-Mass.): “The U.S. Congress remains intact when the time arrives for the move that could prompt a bidding war between A needs to recognize what is hap- people to decide to change leaders again.” the two Canadian firms. Canadian Pacific in pening in El Salvador for what it is: shocking March announced a deal to buy Kansas City and dangerous. It was expected that Presi- Christine Wade, professor of Southern, but Canadian National submitted a dent Bukele and his new majority in the Na- political science and interna- higher bid the following month, also offering tional Assembly would move to consolidate tional studies at Washington to cover the $700 million break-up fee Kansas power. What was appalling was the sheer A College in Chestertown, Md.: City Southern would owe Canadian Pacific if it speed, disdain for due process, contempt for “Bukele’s May 1 power grab, which resulted dissolved their agreement, Reuters reported. rule of law and brute exercise of the new main the removal of all five magistrates of the Canadian National would also pay the U.S. jority’s power. In scarcely 48 hours, Bukele’s constitutional chamber and the attorney gen- company $1 billion if the U.S. Surface Trans- Congress dismissed the Constitutional eral, should be of little surprise. During his portation Board (STB) rejects a voting trust Court magistrates and Attorney General first two years in power, Bukele has demon- structure for the deal. The agreement between Melara, deployed police units to physically strated a lack of respect for democratic Canadian Pacific and Kansas City Southern had remove them, confirmed and installed their norms, rule of law and press freedoms—iron- made headlines because it paved the way for replacements and passed a law granting ically in the name of fighting corruption. The the first freight rail network connecting Canada, officials blanket immunity from criminal swiftness and irregularity with which the the United States and Mexico. However, U.S. acts. Charismatic and self-absorbed, Bukele magistrates were deposed and replaced is regulators would have had to approve the has no real policy agenda other than the certainly a matter of serious concern. With merger, and the STB has rejected similar accrual of power. He consistently demon- Bukele and his supporters now dominating agreements in the past over antitrust con- strates that he doesn’t like to be criticized all three branches of government, there will cerns. “Should it come to fruition after pending and that he doesn’t like to be crossed, be no effective checks on his power. Still, regulatory reviews, the North American rail whether by judges or journalists. He crushes I would be very surprised if these actions network could be a game changer for regional dissent and dominates most channels of are sufficient to thwart investors if the right competitiveness,” Antonio Ortiz-Mena, senior communication, especially social media. opportunities are there. Bukele’s popularity vice president at Albright Stonebridge Group, Like the typical autocrat, he hides behind the stems, in part, from his ability to give voice told the Advisor in a Q&A published April 1, in constitution, embracing articles that work to to decades of anger, frustration and unmet reference to the original deal between Kansas his advantage and ignoring more uncomfort- expectations. Salvadorans are understand- City Southern and Canadian Pacific. Continued on page 4

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue ISSN 2163-7962 ably fed up with corruption, impunity, vio- that relies on international bonds and loans lence, dislocation and the lack of prosperity. and remittances from the United States. Erik Brand These are the things they have grown to In addition, Bukele is becoming isolated Publisher [email protected] associate with democracy—and peace more internationally, which might force the Organi- broadly. For many Salvadorans, ‘rule of law’ zation of American States to be tougher on Gene Kuleta Editor was an abstraction long before May 1. The him. These challenges will make El Salvador [email protected] gap between the criticism from abroad and less attractive to foreign investment and Anastasia Chacón González his popularity at home speaks to a broader tourism. Also, it might cause a larger flow of Reporter & Associate Editor myopia about Salvadoran reality and the con- migrants toward the United States. Bukele is [email protected] sequences of policies that the United States popular due to a low homicide rate and the Diana Roy and others have promoted in El Salvador. implosion of the old bipartisan system that Editorial Intern Bukele’s ascension to political dominance, failed to transform El Salvador into a more [email protected] which was aided by these policies, should equal, fair and prosperous nation. Through a cause the international community to reflect strong populist campaign, Bukele capitalized on how we could have better supported on those grievances and packaged them into Michael Shifter, President democracy, human rights and rule of law in a political platform. The future is bleak for El Rebecca Bill Chavez, Nonresident Senior Fellow the post-war period.” Salvador: debt is on the way to reaching 100 Bruno Binetti, Nonresident Fellow percent of the country’s GDP, the economy is Sergio Bitar, Nonresident Senior Fellow Ricardo Valencia, assistant in recession after Covid-19, and more social Joan Caivano, Senior Advisor professor at California State mobilization is on the horizon. Military and Kevin Casas-Zamora, Nonresident Senior Fellow University, Fullerton: “President police repression—which rests on Bukele’s Julia Dias Leite, Nonresident Senior Fellow Nayib Bukele is close to becom- tight grip of the three branches of the gov- Ariel Fiszbein, Director, Education Program A Sandra García Jaramillo, Nonresident Senior Fellow ing an autocrat. One of the first consequenc- ernment—might deepen with more protests. Selina Ho, Nonresident Senior Fellow es of this status would be the United States Also, corruption might become more blatant, Edison Lanza, Nonresident Senior Fellow freezing Salvadoran requests for loans from especially after the approval of a law that Nora Lustig, Nonresident Senior Fellow international financial institutions such as gives immunity from judicial oversight and Margaret Myers, Director, Asia Program the IMF, the World Bank and the Inter-Amer- enforcement to any purchases using public Manuel Orozco, Senior Fellow ican Development Bank. Also, the United funds during the pandemic.” Xiaoyu Pu, Nonresident Senior Fellow States can push for harder conditions or Jeffrey Puryear, Senior Fellow delays. The chair of the U.S. Senate Commit- [Editor’s note: The Latin America Advisor Tamar Solnik, Director, Finance & Administration tee on Foreign Relations, Robert Menendez, requested a commentary from El Salvador’s Lisa Viscidi, Director, Energy Program and the chair of the U.S. Senate Appropria- Embassy in Washington as well as from Denisse Yanovich, Director of Development tions Committee, Patrick Leahy, suggested Nuevas Ideas legislators Ricardo Ayala and these drastic steps in a joint statement. If Suecy Callejas but did not receive a response Latin America Advisor is published every this happens, it might trigger a trust crisis from any of them.] business day, except for major U.S. holidays, by the Inter-American Dialogue at that would negatively affect an economy 1155 15th Street NW, Suite 800 Washington, DC 20005 www.thedialogue.org Subscription inquiries are welcomed at [email protected]

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