LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, December 13, 2019

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, December 13, 2019

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk What Will Alberto Argentina to Grant CEO, DevryBV Sustainable Strategies Bolivia’s Morales Joyce Chang Global Head of Research, Fernández’s Gov’t Refugee Status JPMorgan Chase & Co. Former Bolivian President Evo Mo- Paula Cifuentes rales arrived in Argentina, which Director of Economic & Fiscal Affairs, Bring Argentina? is giving him refugee status. His Latin America & Canada, Philip Morris International arrival came two days after Pero- Marlene Fernández nist Alberto Fernández took office Corporate Vice President for as Argentina’s president. Government Relations, Page 2 Arcos Dorados Peter Hakim President Emeritus, ECONOMIC Inter-American Dialogue Donna Hrinak Peru’s Central President, Boeing Latin America Bank Holds Key Jon E. Huenemann Former Corporate and Rate Unchanged Government Senior Executive Policymakers kept their bench- James R. Jones mark interest rate steady at Chairman, Argentina’s new president, Alberto Fernández, received the presidential sash and baton at his Monarch Global Strategies swearing-in on Tuesday from outgoing President Mauricio Macri (L-R). // Photo: Argentine 2.25 percent, maintaining it at a Government. nine-year low. Craig A. Kelly Director, Americas International Alberto Fernández on Tuesday took office as Argentina’s Page 3 Gov’t Relations, Exxon Mobil John Maisto president, bringing Peronism back to power in Argentina. POLITICAL Director, U.S. Education What can Argentines expect from Fernández’s government? Finance Group Q What do his cabinet picks say about the direction his gov- Wreckage of Chile Nicolás Mariscal Chairman, ernment is likely to take? How much will his policies differ from those of Plane Found, No Grupo Marhnos the previous administration, and does Fernández have the right plans to Hope of Survivors Thomas F. McLarty III Chairman, address Argentina’s economic woes? Search crews discovered wreck- McLarty Associates age from the Chilean C-130 cargo Carlos Paz-Soldan plane that crashed earlier this Partner, Andrés Malamud, senior research fellow at the University week with 38 people on board, DTB Associates, LLP of Lisbon’s Institute of Social Science: “In the last 36 years, and military officials said there Beatrice Rangel was no hope of finding survivors. Director, Argentina boasted eight presidents and 21 economy minis- AMLA Consulting LLC President Sebastián Piñera said ters. These figures convey one success and one failure. The his government would work to Jaana Remes A Partner, success is democracy: Argentine presidents, whom generals used to oust determine the cause of the crash. McKinsey Global Institute at gunpoint, are now ousted by the people at the ballot box. The failure is, Page 2 Ernesto Revilla Head of Latin American well, the economy: with poverty rate of more than 35 percent and inflation Economics, Citi at 55 percent, growth prospects look dim, and development, illusory. The Gustavo Roosen Chairman of the Board, combination of success and failure makes up for a sort of Argentine Envases Venezolanos miracle: how is it possible that such a dismal economic performance has Andrés Rozental not eroded democratic stability? A possible, worrying answer is: not yet. President, Rozental & Asociados Fernández’s cabinet picks show how aware he is of the ticking bomb he Shelly Shetty has sat upon. His most urgent task is to renegotiate an unpayable foreign Head of Sovereign Ratings, Latin America, Fitch debt, lest there should be another sovereign default. Fittingly, he appoint- Roberto Sifon-Arevalo ed as minister of the economy a young expert in debt restructuring that Managing Director, Americas Sovereign & Public Finance Ratings, has worked closely to Joseph Stiglitz. Also, he must prevent a social Standard & Poor’s explosion by rapidly restarting growth or, at least, domestic consumption. To this end, he has appointed his closest economic aide as minister of Piñera // File Photo: Chilean Government. Continued on page 3

POLITICAL NEWS from the United States, Argentina and Uruguay, NEWS BRIEFS along with Chile, were involved in the search. Wreckage of Chile A Brazilian navy vessel also recovered some U.S. Slaps Sanctions on wreckage, approximately 280 nautical miles Son of Nicaragua’s Ortega Plane Crash Found, from the Argentine port of Ushuaia, Brazilian President Jair Bolsonaro said in a tweet. Also The United States on Thursday slapped sanc- No Hope of Survivors on Thursday, the Vatican said Pope Francis tions on another son of Nicaraguan President was closely following the developing events Daniel Ortega, Rafael, accusing him of money Rescue crews on Thursday found the wreckage and keeping the family members of the missing laundering and corruption, Reuters reported. of the Chilean military C-130 Hercules cargo personnel in his prayers. The administration of U.S. President Donald plane that went missing Monday off the south- Trump has accused the Nicaraguan govern- ern tip of South America with 38 people on ment of concentrating power in the hands of board, and the head of the country’s air force Argentina to Grant Daniel Ortega and his wife, Rosario Murillo, said there was no hope of finding any survivors, Refugee Status to who is also the country’s vice president. Rafael Agence France-Presse reported. “The condition Ortega was blacklisted for providing support of the plane wreckage that was found makes it Bolivia’s Morales to Murillo, who was already subject to U.S. practically impossible that there are survivors sanctions, the Treasury Department said. from this air accident,” Air Force head Arturo Former Bolivian President Evo Morales arrived Merino told reporters in Punta Arenas. Remains on Thursday in Argentina, where he will be recovered in the ocean were “most likely to be granted refugee status, new Argentine Foreign Bolivian Protest Leader’s body parts of those traveling on the C-130,” Minister Felipe Solá said, Reuters reported. Mo- Appearance Leads to he said. Among the debris that search crews rales was granted asylum to travel to Argentina found were portions of the plane’s landing gear, and had made the request for refugee status in Scuffles at Dialogue Office its fuel system, a wing, a wheel, two bags, a order to stay, Solá said, adding that four other Minor scuffles broke out Thursday between backpack and a shoe. The plane was headed people had also requested asylum. Morales supporters and opponents of former Bolivian to a Chilean base on Antarctica for a routine had fled last month to Mexico, where he was President Evo Morales during an event at mission when controllers on the ground lost granted asylum following his resignation in the Inter-American Dialogue featuring Luis contact with it. The 38 people on board—21 Fernando Camacho, the leader of the anti-Mo- passengers and 17 crew members—were rales Comité de Santa Cruz. Police were called headed to the Eduardo Frei base across the to the think tank to restore order as protesters Drake Passage, which separates South Amer- repeatedly disrupted a question-and-answer ica from Antarctica. In a posting on Twitter, session between Camacho and the Dialogue’s Chilean President Sebastián Piñera said his president, Michael Shifter. One person request- government would do “everything possible to ed an ambulance for a minor facial injury, find answers to this tragedy.” The area is known Washington Metropolitan Police public affairs for some of the worst weather in the world, specialist Elaina Girtz told the Advisor. and conditions can rapidly change. However, Morales // File Photo: Bolivian Government. the plane emitted no emergency signal before it vanished, indicating that the circumstances the wake of a contested election, which the that caused its crash were likely to be sudden. Organization of American States has said was Scheer Resigns as Head Chilean military authorities said they were marred by fraud, The Guardian reported. “My of Canada’s Conservatives committed to determining what had happened. eternal thanks to [Mexican] President [Andrés Andrew Scheer, the leader of Canada’s Conser- “When 38 of your compatriots die, the least Manuel López Obrador] and the government vative Party, resigned on Thursday after reports that can be done is to find the truth” said of Mexico for saving my life and for sheltering surfaced that he used party funds to help pay Defense Minister Alberto Espina, AFP reported. me. I felt at home with Mexican sisters and for his children’s private school education, The plane was built in 1978, so due to its age, brothers for a month,” Morales said in a tweet. Global News reported, citing party sources. its maintenance history will likely be under He also thanked Argentina for its “support Only a small circle within the party knew that intense scrutiny as investigators seek to deter- and solidarity.” Morales served as president the party was reimbursing Scheer, who came in mine the cause of the crash, Stephen Wright, of Bolivia for nearly 14 years, running for a second to Prime Minister Justin Trudeau in the an air industry specialist at Finland’s Tampere fourth time in the October presidential election, October federal elections, for the cost of his University, told the wire service. Search vessels despite a 2016 referendum in which Bolivians children’s schooling.

COPYRIGHT © 2019, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Friday, December 13, 2019 voted against his re-election and a constitu- BUSINESS NEWS to attend throughout the year,” BBVA said. “It tional ban. New center-left Argentine President also allows for entrepreneurs to be in close Alberto Fernández, who took office Tuesday, contact with each other, enabling the sharing said there had been a “coup” against Morales BBVA Launches New of ideas, tactics, learnings, etc.” The space in when he resigned, Reuters reported. [Editor’s ‘Open Space’ in the Colombian capital is the bank’s third such note: See related Q&A in the Nov. 21 issue of effort. It previously launched such initiatives in the Advisor.] Colombian Capital Madrid and Mexico City. Jaime Espinosa, the director of BBVA Open Innovation in Colom- Spanish multinational bank BBVA announced bia, said the new office will welcome several ECONOMIC NEWS Thursday that it has launched a new “open start-ups and will offer them “several initiatives space,” an effort to connect with entrepreneurs, and events to support collaboration.” Last in Bogotá. The concept aims to allow greater week, BBVA’s new open space office in Bogotá Peru’s Central Bank collaboration with entrepreneurs, the bank said hosted its first event on digital transformation Keeps Key Interest in a statement. “The spaces provides a source in Latin America with discussions on areas of inspiration and knowledge for both the start- including how companies can better deploy Rate Unchanged ups based there and employees of the bank, technology within their organizations, BBVA with lectures, courses and workshops available said in its statement. Peru’s central bank on Thursday voted to keep its benchmark lending rate unchanged at 2.25 FEATURED Q&A / Continued from page 1 percent, in line with analysts’ forecasts, state- run Agencia Andina reported. The rate remains production, while at the same time estab- be resolved, thinking next of the necessary at a nine-year low amid delays to public works lishing cushion networks with churches policies to reactivate the economic cycle spending and sluggish global growth. The and social organizations. Finally, he must and renegotiate the external debt. The bank expects Peru’s inflation rate to remain walk the tight rope of Peronist politics, current situation is one of virtual default. around its goal of 2 percent, and its inflation simultaneously satisfying his powerful vice It is not possible to deal with interest and forecast has a “moderate downward bias,” president—who nominated him as presi- capital payments within the agreed terms, given the possibility of slower-than-expected dential candidate in the first place—and the much less given the country’s economic and growth in domestic demand, the board said in provincial governors that are always eager a statement. The board also said it will monitor for federal resources. May the force be with “new information about inflation and its deter- him, for the Empire might not.” The current minant to consider changes to the monetary situation is one policy position,” Bloomberg News reported. Agustín Crivelli, economist, of virtual default.” The central bank had unexpectedly cut the rate professor and researcher at — Agustín Crivelli last month, the second time this year, with pol- the University of Buenos Aires: icymakers describing the move as preventive A “The return of Peronism to the given concern that the economy is growing at presidency, and in particular its union behind social crises. Undoubtedly, the government a slower pace than expected. The central bank the figures of President Alberto Fernández will focus on addressing the external debt last week released its economic forecast for and Vice President Cristina Fernández de problem, but first it must focus on achieving this year, with GDP now expected to expand 2.5 Kirchner, means a drastic change in the the reactivation of the economic-productive percent, down from a forecast of 2.7 percent economic, political and social course, and cycle. In order to reach an agreement, the in September and 4 percent in March. Julio Ve- in the strategy of Argentina’s international International Monetary Fund will have to larde, who heads the central bank, said growth insertion. In his speech, Alberto Fernández get out of its traditional adjustment recipes, is expected to rebound to 3.8 percent in 2020, explained in detail the difficult inheritance, allowing a change in the dynamics of driven by fiscal and monetary stimulus. With in terms of economic matters, that Mauricio adjustments, which now translate into higher the real interest rate close to zero, the current Macri’s government left, and in this context, levels of recession and indebtedness, into monetary stance is “very expansive,” Velarde he established a clear order of priorities a virtuous dynamic in which it is possible to said, Bloomberg News reported. [Editor’s note: summarized with the phrase ‘start with reach a path of sustainable growth that will See related Q&A on Peru’s economy in the the last ones in order to reach everyone.’ allow Argentina to meet its commitments Sept. 11 issue of the Advisor.] First, the urgent problem of hunger must with external creditors.”

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FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2019 Megan Cook, lead specialist the new administration moves into action, in the political and regulatory we will get a better sense of its priorities Erik Brand risk/strategic affairs practice at and capacity to govern. In any case, we can Publisher [email protected] Cefeidas Group in Buenos Aires: expect the coming months to be incredibly A Gene Kuleta “Fernández’s administration will meaning- challenging.” Editor fully shift priorities from those of the Macri [email protected] government, particularly in terms of social Mariano Vila, managing direc- Anastasia Chacón González and economic policy, but it will not represent tor, and Juan Ignacio di Meglio, Reporter a complete divergence. Fernández’s cabinet public affairs manager, both at [email protected] includes a mix of younger, fresh faces and A Llorente & Cuenca Argentina: longtime politicians. The cabinet shows “Alberto Fernández has the support of most

his strong imprint—most key roles were as- governors and trade unions and holds a Michael Shifter, President signed to close advisors—although positions majority in the House of Representatives and Rebecca Bill Chavez, Nonresident Senior Fellow were allotted with the recognition that he the Senate. However, the economic situation Sergio Bitar, Nonresident Senior Fellow governs in a coalition. Fernández’s immedi- facing this new government is not encourag- Joan Caivano, Director, Special Projects ate priorities will be renegotiating Argenti- ing at all. Indeed, with an annual inflation of Michael Camilleri, Director, Rule of Law Program na’s debt while seeking to revive the econo- Kevin Casas-Zamora, Nonresident Senior Fellow my and promote social development. In the The economic situa- Héctor Castro Vizcarra, Nonresident Senior Fellow short term, he will push for a multi-sectoral Julia Dias Leite, Nonresident Senior Fellow agreement on priority measures to address tion facing this new government is not Ariel Fiszbein, Director, Education Program the impact of the economic crisis. The cab- Peter Hakim, President Emeritus inet structure and his inaugural speech also encouraging at all.” Nora Lustig, Nonresident Senior Fellow suggest his administration will put renewed — Mariano Vila & Juan Ignacio di Meglio Margaret Myers, Director, Asia and emphasis on protecting vulnerable popula- Latin America Program tions and restarting consumption, as well 55 percent, poverty reaching 40 percent and Manuel Orozco, Director, Migration, Remittances & Development as prioritize the real economy and produc- 10.1 percent of unemployment, Argenti- Xiaoyu Pu, Nonresident Senior Fellow tive development over the financial sector. na’s economy is facing a critical situation. Jeffrey Puryear, Senior Fellow Fernández has reiterated his willingness to Moreover, the most pressing concern for the Mateo Samper, Nonresident Senior Fellow meet Argentina’s debt obligations, but he new administration is foreign debt, which Tamar Solnik, Director, Finance & Administration will want to negotiate a restructuring more now surpasses 81 percent of GDP. In light of Lisa Viscidi, Director, Energy Program aligned with his prioritization of economic this, it should not surprise us that President Denisse Yanovich, Director of Development and growth and social inclusion. In interna- Fernández appointed Martín Guzmán, an External Relations tional affairs, Fernández will likely realign expert in foreign debt, as the new minister Argentina with leftist governments on some of economy. According to Fernandéz’s Latin America Advisor is published every business day, except for major U.S. holidays, issues, such as Venezuela, but maintain statements to the press, Argentina will seek by the Inter-American Dialogue at strategic relationships, such as with the to restructure its debt payments with private 1155 15th Street NW, Suite 800 Washington, DC 20005 United States and China. Fernández begins creditors and the IMF. It is still too early to www.thedialogue.org his term with political capital and a strong know what Fernández’s economic plan will ISSN 2163-7962 position in Congress. However, it is too be, but it is expected that it will be based on Subscription inquiries are welcomed at early to assess how well he will be able to the increase of some specific taxes (such [email protected] advance his agenda or its impacts. Although as taxes on agricultural raw materials and The opinions expressed by the members of the Board of Fernández has demonstrated pragmatism, mining exports) and on economic recovery Advisors and by guest commentators do not necessarily it is unclear if he will be able to consolidate through the increase of private consump- represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily his leadership and sustain this approach tion.” represent the views of their respective employers or firms. while successfully navigating disagreements The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, within his ideologically and geographically The Advisor welcomes comments on its Q&A nor the opinions based thereon, are guaranteed. If you have diverse coalition. Additionally, the details section. Readers can write editor Gene Kuleta any questions relating to the contents of this publication, of many proposals are still unclear, and key at [email protected]. contact the editorial offices of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in posts in the government remain unfilled. As a retrieval system, or transmitted without prior written permission from the publisher.