July 12, 2021: Latin America Advisor

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Monday, July 12, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Why Is Bolivia Police Arrest CEO, DevryBV Sustainable Strategies Joyce Chang Suspected Leader Global Head of Research, JPMorgan Chase & Co. Pursuing a Former of Moïse Plot Paula Cifuentes Haitian police said they arrested Director of Economic & Fiscal Affairs, an alleged mastermind of last Latin America & Canada, Treasury Official? week’s assassination of President Philip Morris International Jovenel Moïse. Marlene Fernández Corporate Vice President for Page 2 Government Relations, Arcos Dorados (McDonald’s) ECONOMIC Peter Hakim President Emeritus, Inter-American Dialogue ECLAC Predicts Donna Hrinak 5.2% Growth in Senior VP, Corporate Affairs, Royal Caribbean Group Region This Year Jon E. Huenemann The U.N. Economic Commission Council Member, for Latin America and the Carib- GLG Inc. bean predicted 5.2 percent growth James R. Jones this year but warned of continuing Chairman, Former Bolivian Treasury Ministry official Carlos Schlink was arrested last month in connection Monarch Global Strategies with the negotiation of a loan during the government of former interim President Jeanine Áñez. economic effects of the Covid-19 // File Photo: Bolivian Government. pandemic. Craig A. Kelly Senior Director, Americas Bolivian authorities on June 29 arrested former Treasury Page 3 Int’l Gov’t Relations, Exxon Mobil Barbara Kotschwar Ministry official Carlos Schlink in connection with the POLITICAL Executive Director, Visa Economic negotiation of a more than $300 million loan that the country Empowerment Institute Q received during the government of former interim President Cubans Take to John Maisto Director, U.S. Education Jeanine Áñez, funds that the government of current President Luis Arce Streets in Large Finance Group returned. Arce denounced the loan, saying it imposed onerous financial Protests Against Nicolás Mariscal Chairman, conditions on the country, a claim the IMF rejected. Is Bolivia’s return Government Grupo Marhnos of the money rooted more in economics or in political ideology? What Thousands of Cubans partici- Thomas F. McLarty III Chairman, will be the impact of Bolivia’s pursuit of charges against Schlink and pated in the country’s largest McLarty Associates potentially other former economic officials? What is Bolivia’s current anti-government protests in Beatrice Rangel decades. Demonstrators called Director, relationship with the IMF and other financial institutions, and how much on President Miguel Díaz-Canel to AMLA Consulting LLC does Bolivia need them for its economic recovery? step down. Jaana Remes Page 2 Partner, McKinsey Global Institute Jaime Aparicio-Otero, former Bolivian ambassador to the Ernesto Revilla Head of Latin American United States and the Organization of American States: Economics, Citi “During Jeanine Áñez’s government, the IMF approved Gustavo Roosen President, Bolivia’s request for $327 million in emergency financial as- IESA A sistance under the Rapid Financing Instrument (RFI) to ‘help the country Andrés Rozental meet the balance of payments need stemming from the outbreak of the President, Rozental & Asociados Covid-19 pandemic, and support urgently required medical spending and Shelly Shetty relief measures to protect the well-being of the population.’ In February, Managing Director, Sovereigns Fitch Ratings the new government returned the $327 million plus $19 million in interest to the IMF, claiming the loan jeopardized ‘the country’s sovereignty and economic interests.’ The arbitrary imprisonment of the former vice minister of the treasury, Carlos Schlink, in connection with this operation, which did not require authorization from the Legislative Assembly because it Díaz-Canel // File Photo: Cuban Government. Continued on page 3

POLITICAL NEWS venel Moïse, CNN reported. The man arrested, NEWS BRIEFS Christian Emmanuel Sanon, 63, entered Haiti Cubans Take to last month on a private jet, Police Chief Léon Clashes Between Charles said at a news conference. Charles did Police, Gang in Caracas Streets in Large not say what charges would be leveled against Sanon, but he added that Sanon arrived in Haiti Leave 26 People Dead Anti-Gov’t Protests with “political intentions.” Charles added that Clashes between police officers and a gang Sanon entered the country accompanied by in northwestern Caracas left 26 people dead, Thousands of Cubans took to the streets in private security guards and wanted to take over including four agents, and 38 wounded, cities across the country on Sunday in the big- as Haiti’s president, Reuters reported. Sanon Venezuelan Interior Minister Carmen Melendez gest anti-government protests on the island in allegedly was in contact with a security firm said Saturday, Reuters reported. Her remarks decades, Reuters reported. Chanting “freedom,” based in Florida in order to recruit 26 Colom- came after several days of gunfire battles in demonstrators called on President Miguel Díaz- bian mercenaries and two Haitian-Americans, the capital forced residents to flee their homes. Canel to step down as the country struggles CNN reported. Their mission was originally to Analysts have said gangs are attempting to under its worst economic crisis since the fall protect Sanon, but it allegedly changed over expand the territory under their control in Cara- of the Soviet Union and Covid-19 continues to time, CNN reported. Haitian police previously cas, moving from beyond slums in the outskirts rattle the island. Protesters expressed anger said that at least 28 people are suspected of of the city. over a lack of basic goods, restrictions on involvement in Moïse’s killing at his home last civil liberties and authorities’ management of Wednesday at about 1 a.m. At least 20 people the pandemic, according to the report. In the have been arrested so far. Police have killed center of Havana, anti-government protesters three suspects, and they are searching for five Majority of Brazilians shouted “Díaz-Canel step down,” drowning out who are still at large. Haitian police raided Sa- Support Impeaching supporters who were waving the Cuban flag non’s home and found 20 boxes of ammunition, Bolsonaro: Poll and chanting “Fidel,” referring to Fidel Castro. rifle and pistol holders, 24 unused firearms Fifty-four percent of respondents in a poll Police presence was heavy in Havana, with of- targets, a cap labeled “DEA,” two vehicles released Saturday by Datafolha said they ficers driving special forces jeeps and carrying and four license plates from the Dominican supported impeaching President Jair Bolson- machine guns, even after most demonstrators Republic, CNN reported. Police also said they aro, Reuters reported. The poll followed graft had left at around the 9 p.m. curfew in place discovered correspondence “with different allegations related to the procurement of due to the pandemic. Activists and analysts sectors of the country” but did not release any Covid-19 vaccine doses and a Senate investiga- called Sunday’s protests the first time that so details of that correspondence. Sanon has not tion into Bolsonaro’s handling of the pandemic. many people had publicly protested the Com- publicly commented on the allegations that On Sunday, Brazilian newspaper O Estado de munist government since the “Maleconazo” he was involved in Moïse’s killing, and it was S.Paulo called for Bolsonaro’s removal. uprising in the summer of 1994, The New York unclear whether he had legal representation. Times reported. Díaz-Canel appeared on na- Haiti’s government has asked both the United tional television on Sunday, calling on the army States and the United Nations to send troops to confront protesters, NBC News. “The order to help stabilize the Caribbean nation, but the Brazilian Prosecutors to fight has been given,” he said, also telling White House has shown little inclination to act Seek Settlement in “all the revolutionaries in the country, all the on that request, NPR reported. “There are no communists, to take to the streets and go to plans to provide U.S. military assistance at this 2015 Dam Collapse the places where these provocations are going time,” a senior Biden administration official told Federal prosecutors in Brazil are seeking a to take place,” according to the report. the radio network. However, the United States definitive settlement with mining company will be sending senior FBI and Department of Samarco and its shareholders, BHP Group Homeland Security officials to Port-au-Prince and Vale, for damages instigated by a tailings Suspected Leader of “as soon as possible to assess the situation dam that collapsed in 2015, said Carlos Bruno Assassination Plot and how we may be able to assist,” the official Ferreira da Silva, a lead prosecutor, Reuters added. Also over the weekend, an audio reported Friday. Ferreira said prosecutors Arrested in Haiti statement lasting more than two minutes found a previous deal in which the companies was posted to the verified Twitter account of agreed to pay around 20 billion reais ($3.8 bil- Haitii’s police chief said Sunday that authorities Moïse’s wife Martine, who was wounded in the lion) had not been effective enough. Nineteen had arrested one of the alleged masterminds attack and is now hospitalized in Florida. “In people were killed in the Mariana dam disaster. of last week’s assassination of President Jo- the blink of an eye, the mercenaries ran into Another dam failure, in 2019 near the town of my house and killed my husband with bullets,” Brumadinho, killed 270 people.

COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Monday, July 12, 2021 she said. “We cannot let the blood on President FEATURED Q&A / Continued from page 1 Jovenel Moïse, my husband—the president you love and who loves you too—shed in vain. I am was not a loan but rather an agreement to Yet, Arce is a shrewd economic planner, girding my strength, because the battle he led purchase Special Drawing Rights (SDR), and Bolivia’s economy has begun to show wasn’t his, he led this battle for us. We must portrays the reality of a country where signs of economic recovery as energy prices not give up.” [Editor’s note: See Q&A on the ideological motivations are above the law. increase. The return of the IMF loan that was assassination in Friday’s Advisor.] Political motives interfered in this financial granted to Áñez does not break off commu- transaction. The Legislative Assembly, nication with or preclude future loans with dominated by Evo Morales, blocked approval fair terms with the IMF in a crisis. However, ECONOMIC NEWS on the grounds that the IMF imposed harsh this is unlikely. In contrast, the relationship conditions, which was not true. The evident with the Inter-American Development Bank conclusion is that there is currently no rule is far worse, due to the strong support of its ECLAC Predicts 5.2% of law in Bolivia. The judiciary is extremely president, Mauricio Claver-Carone, for the Growth, Warns on dysfunctional due to endemic corruption, Áñez government and his close ties to her a lack of resources and a lack of indepen- former interior minister, Arturo Murillo, who Covid-19’s Impact dence. Schlink’s arrest is an abuse of power is currently in pre-trial detention in a Miami and a sign of political persecution. He has federal detention center on charges of con- Projected economic growth for this year in the right to the constitutional guarantees spiracy to commit money laundering.” Latin America and the Caribbean will not of due process and to defend himself in reverse the adverse effects of the pandemic, freedom. The widespread use of preventive Miguel Centellas, Croft instruc- the U.N. Economic Commission for Latin detention in Bolivia as an instrument of tional assistant professor of America and the Caribbean, or ECLAC, said in political intimidation constitutes a violation sociology and international a report published last week. Though ECLAC of the International Covenants on Human A studies at the University of raised its average growth outlook for the region Rights.” Mississippi: “The situation in Bolivia is in- to 5.2 percent, up from a previous estimate of creasingly confusing and uncertain. Because 3.7 percent, the commission has warned that Kathryn Ledebur, director of the of deepening polarization, it is difficult to the social impacts of the crisis are worsening Andean Information Network objectively evaluate competing narratives. and will continue as the economy picks up fol- in Cochabamba: “Although the Certainly, the widening scope of arrests lowing a stark 6.8 percent contraction in 2020. A Morales government did not and prosecutions of anyone connected with ECLAC expects Panama, Peru and Chile to see rely on IMF loans during its 14-year tenure, the Jeanine Áñez government suggests a po- the best economic performances this year, with and in spite of the nation’s long history of litically motivated purge. At the same time, expansions of 12 percent, 9.5 percent and 8 disastrous structural adjustments, it did credible accusations of corruption continue percent, respectively, Reuters reported. Mean- not have an acrimonious relationship with to emerge, such as those against former while, Brazil, the region’s largest economy, is the institution. In fact, the IMF repeatedly Interior Minister Sergio Rodrigo Méndez projected to grow by 4.5 percent, and Mexico praised the government’s macroeconomic Mendizábal. Méndez and others were arrest- and Argentina to expand 5.8 percent and 6.3 policies. The current head of the central ed and are being processed in U.S. courts on percent, respectively. However, “this expansion bank acted as the country’s representative to charges of money laundering. Yes, attacks … will not manage to ensure sustained growth, the IMF before Áñez’s takeover and has the on Áñez administration officials are political- because the social impacts of the crisis and experience necessary to evaluate the terms ly motivated. But it’s also true that at least the structural problems in the region have of the massive loan granted to the interim some of those targeted were involved in deepened and will continue to do so during government. During a period of acute politi- very real corruption schemes. The problem the recovery,” the U.N. organization said in the cal repression, paired with a pandemic, there for Bolivia’s relationship with international report. “We need policies for transformative is a strong possibility that the IMF, like the organizations, such as the IMF, is growing recovery with an emphasis on investment. European Union, failed to carry out feasibility uncertainty about the political and economic Industrial policies and technologies to drive studies of debt capacity, balance of payment landscapes. When economic policy becomes growth in sectors that are more technology and clear public policies required to extend politicized, it becomes difficult to distinguish intensive and that generate quality jobs. Re- the credit. Undoubtedly, the February return fact from fiction. An egregious example of structure health and education systems,” Alicia of the loan made a clear political statement, this is what happened to Argentina a decade Bárcena, the head of ECLAC, said in presenting as Arce intended, but it occurred at time ago when it became clear that the country the report during a virtual conference. when exchange rates were unfavorable. was falsifying economic data. Once trust 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 and confidence in basic economic indicators by overdrawing from the Treasury an amount was lost, Argentina’s ability to secure loans of about $2.7 billion when he was minister Erik Brand and investments suffered, compounding of finance under Mr. Morales, and that the Publisher [email protected] the country’s economic woes. Bolivia’s money was wasted without records of how it political leaders—both those in government was spent. If true, this would be a sad legacy Gene Kuleta Editor and those in the opposition—need to come for Mr. Arce to overcome.” [email protected] together and find a way to end the ‘scorched Anastasia Chacón González earth’ approach that has characterized Nelson Altamirano, professor Reporter & Associate Editor the country’s politics since the rise of Evo of economics at the School of [email protected] Morales. Politicizing issues ranging from Business and Management at macroeconomic policy to the response to A National University: “It was esti- Covid-19 damages Bolivian society. It’s mated that the $327 million IMF emergency

high time governance took precedence over financial assistance loan was just half of Michael Shifter, President settling scores.” what Bolivia needed to support its balance Rebecca Bill Chavez, Nonresident Senior Fellow of payment and fiscal gaps in 2020. To get Bruno Binetti, Nonresident Fellow Claudio M. Loser, visiting senior the loan, the previous government included Sergio Bitar, Nonresident Senior Fellow fellow at the Inter-American Di- in its April 2020 letter of intent the com- Joan Caivano, Senior Advisor alogue, president of Centennial mitment to keep the fiscal deficit at around Kevin Casas-Zamora, Nonresident Senior Fellow A Group Latin America and former 7.3 percent of GDP for 2020 by increasing Julia Dias Leite, Nonresident Senior Fellow head of the Western Hemisphere Depart- spending on Covid-19 health-related and Ariel Fiszbein, Director, Education Program ment of the International Monetary Fund: social safety net programs and reducing it Sandra García Jaramillo, Nonresident Senior Fellow “The arrest of Carlos Schlink seems to be a on other nonpriority programs. The letter Selina Ho, Nonresident Senior Fellow political vendetta, embellished by ideological also mentions the commitment to eliminate Edison Lanza, Nonresident Senior Fellow differences. There are no economic reasons macro-fiscal imbalances over the medium Nora Lustig, Nonresident Senior Fellow for President Arce’s action. In April 2020, term and keep the fixed exchange rate in Margaret Myers, Director, Asia Program the IMF granted Bolivia an emergency loan the short run, but to gradually shift toward Manuel Orozco, Senior Fellow of $327 million under the Rapid Financing a flexible exchange rate in the medium Xiaoyu Pu, Nonresident Senior Fellow Instrument, on concessional terms, to help term. Long-term goals for macroeconomic Jeffrey Puryear, Senior Fellow combat the Covid-19 pandemic, in support stability and sustainable debt are reason- Tamar Solnik, Director, Finance & Administration of urgent medical and social relief spending. able. More importantly, the IMF is currently Lisa Viscidi, Director, Energy Program At the time, Mr. Schlink was deputy minister allowing for social expenditure, supporting Denisse Yanovich, Director of Development of finance and public credit. The IMF praised post-pandemic economic recoveries based Latin America Advisor is published every the government’s actions in circumstances on green strategies, technological innova- business day, except for major U.S. holidays, when the economy was in free fall, and the tions and higher taxes for the rich. This IMF by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 pandemic was hitting Bolivia hard. When Mr. seems to have shifted from the Washington Washington, DC 20005 Arce became president, he sought to re-em- Consensus to the left. It is even considering www.thedialogue.org phasize the ideological line of ex-President a debt condonation for poor countries. Rath- Subscription inquiries are welcomed at Evo Morales, rejecting any involvement of er than being practical, the new government [email protected]

the IMF, prepaying the loan this year by mak- preferred to cancel the loan and pay $24.3 The opinions expressed by the members of the Board of ing use of its reserves and losing financing million over the principal in interest and a Advisors and by guest commentators do not necessarily represent those of the publisher. The analysis is the sole at very low interest rates, at a time when variation in exchange rate. The government view of each commentator and does not necessarily Bolivia is well behind in overcoming its cri- could have waited for the IMF condonation, represent the views of their respective employers or firms. sis. Furthermore, the accusation of onerous used the loan to transform the economy or The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, conditionality certainly did not apply to this it could have waited for a recovery in the nor the opinions based thereon, are guaranteed. If you have loan. The most likely cause for the arrest is exchange rate to minimize the cost of the any questions relating to the contents of this publication, contact the editorial offices of the Inter-American Dialogue. that in July 2020, just before resigning, Mr. loan. The government has instead chosen Contents of this report may not be reproduced, stored in Schlink accused Mr. Arce—then a presiden- to maximize the cost of the loan and accuse a retrieval system, or transmitted without prior written permission from the publisher. tial candidate—to have abused his position the previous government of wrongdoing.”