LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, March 16, 2021

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, March 16, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk How Quickly Will Bolsonaro Names Chief Corporate Affairs Officer, Grubhub Fourth Health Joyce Chang Global Head of Research, Colombia See an Minister Since JPMorgan Chase & Co. Start of Pandemic Paula Cifuentes Director of Economic & Fiscal Affairs, Economic Recovery? Brazilian President Jair Bolsonaro Latin America & Canada, named Marcelo Queiroga as the Philip Morris International country’s health minister, the Marlene Fernández fourth person to occupy that Corporate Vice President for post since the beginning of the Government Relations, Arcos Dorados (McDonald’s) Covid-19 pandemic a year ago. Page 2 Peter Hakim President Emeritus, Inter-American Dialogue BUSINESS Donna Hrinak Senior VP, Corporate Affairs, Colombia-Based Royal Caribbean Group Jon E. Huenemann Procaps in Talks to Council Member, GLG Inc. Go Public: Report James R. Jones Colombian softgel maker Procaps Chairman, Colombia’s economy sharply contracted last year amid the pandemic, but it is expected to is reportedly in talks to go public Monarch Global Strategies bounce back this year, potentially with construction leading growth. // File Photo: Camacol. on Nasdaq through a merger with Craig A. Kelly a U.S.-based company. Senior Director, Americas Page 3 Int’l Gov’t Relations, Exxon Mobil Colombia’s economy shrank 6.8 percent last year amid John Maisto the Covid-19 pandemic, Colombia’s statistics agency said Director, U.S. Education ECONOMIC Finance Group last month, in line with an earlier government forecast and Nicolás Mariscal Q slightly less severe than private analysts had expected. Venezuela’s Chairman, Grupo Marhnos Construction was among the sectors hardest hit last year, contracting Maduro Pushing Thomas F. McLarty III 27.7 percent. However, the president of the Colombian Chamber of Banks on Digital Chairman, McLarty Associates Construction, or Camacol, recently said the sector is poised to lead the Payments Beatrice Rangel country’s economic recovery. How soon and how robustly will Colombia’s Venezuelan President Nicolás Director, economy bounce back from the pandemic? Will the construction sector Maduro is pushing banks to im- AMLA Consulting LLC indeed be among the top drivers of growth this year in Colombia? Which plement digital payment systems Jaana Remes as the country’s banknotes have Partner, other sectors will help lead Colombia’s economic recovery, and which McKinsey Global Institute become scarce amid hyperinfla- Ernesto Revilla will struggle? tion. Head of Latin American Page 2 Economics, Citi Gustavo Roosen Renzo Merino, vice president and senior analyst in the Sov- Chairman of the Board, ereign Risk Group at Moody’s Investors Service: “Colombia’s Envases Venezolanos Andrés Rozental economic contraction of 6.8 percent in 2020 was slightly President, Rozental & better than Moody’s estimate of 7.2 percent. In part, this Asociados A reflected a stronger-than-expected performance of the economy in the Shelly Shetty Managing Director, Sovereigns last quarter of the year as various sectors’ activities reopened. Moody’s Fitch Ratings forecasts growth in 2021 of about 4.5 percent to 5 percent, driven by a re- bound from last year’s low base and the beginnings of a stronger recovery toward the second half of 2021 as the vaccination process progresses in the country. Prior to the pandemic, Moody’s had expected Colombia to maintain trend growth of about 3.5 percent over the coming years Maduro // File Photo: supported by robust domestic demand, and in particular higher invest- @NicolasMaduro via Twitter. Continued on page 2

POLITICAL NEWS has said Bolsonaro has been making the main NEWS BRIEFS decisions at the health ministry. “It’s simple: Bolsonaro Names one gives the orders, and the other obeys,” Tens of Thousands Protest Pazuello said last October after Bolsonaro Áñez’s Arrest in Bolivia Fourth Health overruled Pazuello’s attempt to buy 46 million doses of China’s CoronaVac vaccine, The Tens of thousands of Bolivians on Monday took Minister in a Year Guardian reported. Earlier this year, an investi- to the streets in protest over the arrest of for- gation of Pazuello began over his potential role mer interim President Jeanine Áñez on charges Brazilian President Jair Bolsonaro on Monday in failing to prevent a collapse of the health of terrorism, sedition and conspiracy for her al- named his fourth health minister since the system in Manaus, where hospitals ran out of leged role in what her political opponents have Covid-19 pandemic struck the country a year medical oxygen. A dangerous variant of the called a coup d’état against former President ago, tapping Marcelo Queiroga, the president novel coronavirus emerged in Brazil’s Amazon Evo Morales, Agence France-Presse reported. of the Brazilian Society of Cardiology, to fill the and has spread in Brazil and to other countries. Áñez was placed on pre-trial detention on Sun- post, the Associated Press reported. Queiroga Colombia on Saturday confirmed its first death day. Protesters carried a sign saying, “It wasn’t replaces Eduardo Pazuello, an active-duty army from the Brazilian variant, known as P.1, Reu- a coup, it was fraud.” Morales was pressured general who has been health minister since ters reported. The World Health Organization to resign in November 2019 over allegations last May. Bolsonaro’s first choice to replace has said that Brazil’s outbreak of the variant is of fraud in the previous month’s presidential Pazuello, cardiologist Ludhmila Hajjar, rejected putting other countries at risk. election. the position, the AP reported. Pazuello’s two predecessors since the pandemic began left the post amid disagreements with Bolson- ECONOMIC NEWS West African Court aro on how to handle Covid-19. Bolsonaro, Orders Release who himself contracted the disease before recovering last year, has routinely downplayed Venezuela’s Maduro of Maduro Associate Covid-19. Brazil has more than 11.5 million Pushing Banks on A regional court in West Africa on Monday or- reported cases of the disease and more than dered the immediate release of Colombia-born 279,000 recorded deaths from it, second in Digital Payments businessman Alex Saab, who is closely tied both only to the United States. Bolsonaro has to Venezuelan President Nicolás Maduro and criticized social-distancing and lockdown Venezuelan President Nicolás Maduro is push- who was arrested last year in the African island measures and earlier this month said Brazilians ing the country’s banks to implement digital nation of Cape Verde on U.S. money laundering should stop “whining” about the disease. Pazu- payment systems as the country’s hyperinfla- charges, the Associated Press reported. The ello, who has no background in public health, tion has made its banknotes all but obsolete, court, which belongs to the Economic Com- munity of West African States, ruled the arrest FEATURED Q&A / Continued from page 1 was unlawful and also ordered Cape Verde to stop all extradition proceedings against Saab ment. These dynamics will likely restart in process that will start next year. Ensuring and compensate him $200,000 for damages, late 2021 and into 2022 as the government that changes to the government’s revenue the AP reported. implements its economic recovery plan, and expenditure structure supports inclusive which hinges on higher public investment. growth will be key to address rising social If private investment restarts as well, we tensions. Additional measures that could expect it could boost construction activity support higher potential growth by enhanc- Mexico’s Fondeadora in the country and lead to still-strong growth ing Colombia’s productivity and competitive- Extends Funding Round in 2022, when Moody’s forecasts 4 percent ness would be important as well.” Mexican financial technology start-up Fondea- growth. Strong economic growth in 2021 dora has extended its Series A funding round, and future years would be very important to Alberto J. Bernal, chief emerg- adding $14 million to an additional investment allow Colombia to revert some of the dete- ing market and global strategist of the same amount, Tech Crunch reported rioration that the pandemic caused in the at XP Investments: “Colombia Monday. Among the investors in the extended government’s fiscal profile. A fiscal reform will show strong growth in 2021. A funding round is Portag3. Also, Google’s Gradi- and other policy announcements this year Our team at XP Investments expects the ent Ventures, an existing investor in Fondea- will set the conditions for the consolidation economy to expand 5.5 percent this year. dora, invested more money in the extended Continued on page 4 funding round.

Reuters reported, citing three unnamed people familiar with the matter. The country’s annual THE DIALOGUE CONTINUES rate of inflation is approximately 2,665 percent, the wire service reported. Long lines frequent- ly form outside the country’s banks so that How Should Latin America residents can withdraw a maximum of 400,000 Regulate New Technologies? bolívars, the equivalent of 20 U.S. cents, just to pay for round-trip transit fare to commute to Brazilian legislator Eduardo verely affected Brazil, so it’s not surprising to work, Reuters reported. About three-quarters of Bismarck last month introduced see a push for delayed LGPD enforcement. all circulating bolívars are spent in the transit a proposal to delay until 2022 Still, there are several red flags. First is the system. Many Venezuelans have stopped using Q the enforcement of fines for fact that many companies have begun col- the country’s currency altogether for food noncompliance with data protection regula- lecting more personal information than ever and other basic purchases. It would take 40 tions included in the country’s General Data before, particularly health data for Covid-19 banknotes of 50,000 bolívars each just to buy Protection Law, or LGPD, which came into screening. This type of information is highly one kilogram of rice. Instead, they have been force in September. Bismarck argues that sensitive, and employees need to be able to using U.S. dollars or debit cards backed by the Covid-19 pandemic is a major barrier trust that their employer is equipped to pro- dollar accounts in local banks. However, many for compliance and that the postponement tect it. Second, with many employees work- poor Venezuelans lack bank accounts, and is needed to avoid further “burdening coming remotely via likely unsecured personal some services, including public transit, are un- panies,” ZDNet reported. What would a de- or public likely networks, applications and able to process electronic payments. Maduro, lay in the enforcement of these fines mean devices, most organizations are at a higher who has said he wants the country to move to for adequate data protection in Brazil? How risk of experiencing a data breach—poten- an all-digital economy this year, has focused well are Brazil and other countries in Latin tially exposing data subjects. Third, as we’ve on public transit as the first stage of what he America and the Caribbean enforcing data seen in other jurisdictions, the threat of a has called “the digital bolívar” plan. In January, privacy amid the Covid-19 pandemic? In fine often serves as a useful forcing function Maduro reportedly asked banks to provide what ways is the acceleration of technolo- for companies to implement safeguards for Caracas’ subway system and bus drivers with gies such as artificial intelligence changing their data. In effect, a delay in enforcement point-of-sale terminals. Earlier this month, Ven- how regulators in the region approach data is likely to stall any progress organizations ezuela’s central bank announced that it would protection and other regulatory concerns? are making toward improving data privacy start issuing banknotes with denominations and adequately protecting their custom- as large as 1 million bolívars, Bloomberg News Louise Rains Gomez, managing ers, partners and employees. A proactive reported. That largest note would be worth only director in FTI Consulting’s approach is always the most effective way 53 U.S. cents. technology segment: “These is- to mitigate risk. Even if the proposed delay A sues in Brazil mirror what we’ve is approved, I would encourage companies in seen across the globe, particularly in Europe, the region to continue moving forward with BUSINESS NEWS around GDPR. Data privacy compliance has their data privacy programs.” become increasingly difficult over the last Colombia’s Procaps year, with most companies being forced to change overnight the way they operate and EDITOR’S NOTE: The comment above is a Reportedly in struggling to cope with a tremendous strain continuation of the Q&A published in the on their infrastructure. Covid fatigue has March 10 issue of the Advisor. Talks to Go Public started to set in, and the pandemic has se-

Colombian softgel maker Procaps is report- sources said. These funds would then be used respond to the wire service’s request for edly in talks to go public on Nasdaq through a in addition to $200 million Union Acquisition comment. Union Acquisition Corp. II gained merger with U.S. blank-check company Union Corp. II raised in October 2019 through an 1.5 percent following the news, according to Acquisition Corp. II, a deal worth more than $1 initial public offering on Nasdaq, according to Seeking Alpha. Earlier this year, Procaps, which billion, Reuters reported Monday, citing people the report. The deal could be announced as develops and manufactures pharmaceutical familiar with the matter. Union Acquisition soon as this month, the sources said, though products and advanced technology for medical Corp. II is at the stage of engaging potential they warned that the agreement could still supplies, reached a loan agreement with BID investors to raise a $100 million private invest- possibly fall through. A spokesman for Union Invest, which is aimed at helping support the ment in public equity, or PIPE, which would Acquisition Corp. II declined to comment for company’s international growth plan, Global provide additional financing to Procaps, the Reuters, and Procaps did not immediately Legal Chronicle reported last month.

FEATURED Q&A / Continued from page 2 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue ISSN 2163-7962 The sources of positive growth are various. the pandemic, and for social cohesion to re- To start, growth in 2021 will be a function main in place, jobs need to be created fast.” Erik Brand of simple mathematics. The country was Publisher [email protected] practically shut down in last year’s second Daniel E. Velandia O., direc- quarter, and for some months in the first and tor and chief economist for Gene Kuleta Editor third quarters, so because the country will research at Credicorp Capital in [email protected] no longer be closed in those same periods in Bogotá: “Although the Colom- A Anastasia Chacón González 2021, growth will necessarily print very high bian economy in 2020 posted its worst Reporter & Associate Editor numbers. For example, industrial production recession of at least the last 120 years, [email protected] fell 35.8 percent and 26.2 percent year-on- activity gained nonnegligible traction during Diana Roy year in April and May 2020, respectively. the last quarter last year amid the easing of Editorial Intern With very high certainty, industrial produc- mobility restrictions, with leading indicators [email protected] tion will show an expansion rate north of such as cement deliveries and credit/debit 50 percent year-on-year in April and north card transactions, as well as retail, car and of 35 percent in May of 2021. Besides, the housing sales, showing performance that Michael Shifter, President Colombian economy is heavily dependent was stronger than previously expected. We Rebecca Bill Chavez, Nonresident Senior Fellow on international commodity prices, as expect a gradual recovery to continue ahead Bruno Binetti, Nonresident Fellow those materially affect the country’s terms amid a better external backdrop, higher oil Sergio Bitar, Nonresident Senior Fellow of trade. With Brent prices flirting with the prices and the vaccine rollouts globally. All Joan Caivano, Senior Advisor critical $70 mark, U.S. dollar inflows will in, we expect GDP to grow 4.8 percent in Michael Camilleri, Director, Rule of Law Program be materially higher in 2021 as compared 2021. The construction sector is likely to be Kevin Casas-Zamora, Nonresident Senior Fellow to 2020, and those flows will generate very one of the leaders of the recovery as new Julia Dias Leite, Nonresident Senior Fellow positive ripple effects through the economy. home sales managed to reach their highest Ariel Fiszbein, Director, Education Program Also, the fact that the vaccination process in level on record in 2020 due to households’ Sandra García Jaramillo, Nonresident Senior Fellow Selina Ho, Nonresident Senior Fellow the United States is advancing much faster higher saving rates and a large public sub- Edison Lanza, Nonresident Senior Fellow than expected probably means that vac- sidy program. This has led to a significant Nora Lustig, Nonresident Senior Fellow cines will flow south faster, likely allowing correction of home inventories to levels not Margaret Myers, Director, Asia Program Colombia to have a chance to vaccinate its seen since 2014, and thus to an improve- Manuel Orozco, Senior Fellow vulnerable population faster than initially ment in housing starts from -15 percent by Xiaoyu Pu, Nonresident Senior Fellow expected by the local authorities, society mid-2020 to +5 percent in January. Likewise, Jeffrey Puryear, Senior Fellow and the markets in general. Construction will the government approved in February a Tamar Solnik, Director, Finance & Administration be a key component of the 2021 economic reactivation plan with investments for 13 Lisa Viscidi, Director, Energy Program reactivation strategy. Despite the pandemic, percent of GDP to be executed in the next Denisse Yanovich, Director of Development 2020 was a banner year for home sales (the five years, which would be a joint effort with best year ever in terms of total units sold). the private sector. According to the plan, Latin America Advisor is published every Stay-at-home policies and low-interest rates 7.2 percent of the resources will be directed business day, except for major U.S. holidays, by the Inter-American Dialogue at likely helped to support sales. I expect 2021 to housing construction. In any case, the 1155 15th Street NW, Suite 800 to prove to be a year of inventory buildup, dynamic of housing investment in the next Washington, DC 20005 and the housing sector will not be impervi- quarters will be influenced by the discussion www.thedialogue.org ous to such forces. In addition, the Duque of the expected tax reform and the start of Subscription inquiries are welcomed at [email protected] administration has already made it very clear the presidential campaign later in the year.” via the publication of its 2021 fiscal plan The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily that this year will see a massive push for The Advisor welcomes comments on its Q&A represent those of the publisher. The analysis is the sole infrastructure investment. The reasoning is section. Readers can write editor Gene Kuleta view of each commentator and does not necessarily represent the views of their respective employers or firms. very simple: millions of jobs were lost during at [email protected]. The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. 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