LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, May 19, 2020

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, May 19, 2020

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk Will a Failed Mexico Allows 300 CEO, DevryBV Sustainable Strategies Municipalities to Joyce Chang Global Head of Research, Plot in Venezuela Restart Activity JPMorgan Chase & Co. The Mexican government allowed Paula Cifuentes what it called “municipalities Director of Economic & Fiscal Affairs, Strengthen Maduro? of hope” to resume economic Latin America & Canada, Philip Morris International activities and begin loosening Marlene Fernández lockdowns. Corporate Vice President for Page 2 Government Relations, Arcos Dorados Peter Hakim BUSINESS President Emeritus, Inter-American Dialogue Flybondi Betting Donna Hrinak on Domestic President, Boeing Latin America Jon E. Huenemann Air Travel in Former Corporate and Argentina Government Senior Executive Argentine discount airline Fly- James R. Jones Earlier this month, Venezuelan President Nicolás Maduro showed the U.S. passports he said Chairman, bondi said it will bet on domestic were seized from men involved in a failed attempt to overthrow him. // Photo: Venezuelan Monarch Global Strategies Government. routes once air travel resumes. Craig A. Kelly Page 3 Director, Americas International Venezuelan forces killed eight people and arrested several Gov’t Relations, Exxon Mobil John Maisto others—including two former U.S. Green Berets—in a failed POLITICAL Director, U.S. Education attempt earlier this month to infiltrate the South American Finance Group Brazil Has World’s Q country by sea. Another former U.S. Green Beret purportedly Nicolás Mariscal Third-Highest Chairman, masterminded the attack, which its organizers code named “Operation Grupo Marhnos Number of Gideon,” while Venezuelan opposition leader Juan Guaidó and U.S. Pres- Thomas F. McLarty III Covid-19 Cases Chairman, ident Donald Trump denied involvement. How will the incident affect McLarty Associates support for Maduro and for Guaidó? How likely is the failed incursion Brazil, where President Jair Carlos Paz-Soldan Bolsonaro has repeatedly clashed Partner, to lead to Venezuelan government crackdowns on Maduro’s opponents? with health officials, overtook DTB Associates, LLP How does it affect the Venezuelan opposition’s efforts to unseat Madu- Britain as the country with the Beatrice Rangel ro? third-highest number of confirmed Director, Covid-19 cases in the world. Only AMLA Consulting LLC the United States and Russia have Jaana Remes Partner, Peter Hakim, member of the Advisor board and president more confirmed cases. McKinsey Global Institute emeritus of the Inter-American Dialogue: “Juan Guaidó and Page 3 Ernesto Revilla Head of Latin American his allies have suffered another sharp blow in their struggle to Economics, Citi wrest control of the Venezuelan government. But this, by no Gustavo Roosen A Chairman of the Board, means, should be viewed as the opposition’s last battle. Although ‘Opera- Envases Venezolanos tion Gideon’ was quickly stopped in its tracks, the Maduro regime remains Andrés Rozental feeble and unpopular. Indeed, it hardly governs at all. Mostly, it is just President, Rozental & Asociados cruelly holding on to power. With the economy already devastated and Shelly Shetty hunger and malnutrition widespread, Covid-19 has made life even more Managing Director, Sovereigns Fitch Ratings hellish for Venezuelans. But the opposition forces are badly fractured. Without a unified plan of action, a minimal strategy or a clear set of priori- ties, they appear simply to be pursuing whatever opportunities come their way. Sometimes they succeed, for example, when Guaidó was praised by Trump and applauded by the entire U.S. Congress during the State of the Bolsonaro // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS ECONOMIC NEWS NEWS BRIEFS

Brazil Has World’s Mexico Allows 300 Protesters Clash With Police Amid Citywide Third-Highest Total Municipalities to Lockdown in Santiago of Covid-19 Cases Restart Activity Protesters threw rocks and burned piles of wood on Monday as they clashed with police With an additional 674 confirmed cases The Mexican government on Monday is- in Chile’s capital, where the government has of coronavirus reported on Monday, Brazil sued guidelines to restart operations in the implemented a strict lockdown to fight the overtook Britain to become the country with automotive, mining and construction sectors, spread of coronavirus, Reuters reported. The the third-highest number of infections in the pushing ahead with the reopening of the clashes came as local officials warned of food world behind only the United States and Russia, economy despite a growing number of cases of shortages in one of Santiago’s poorest neigh- France 24 reported. As of this morning, Brazil Covid-19, Reuters reported. The country’s death borhoods. Police sprayed tear gas and fired had registered 255,368 cases of Covid-19. It toll has surpassed 5,300, and there are more water cannons in efforts to control the crowd. also had 16,853 related deaths, the sixth-high- than 51,600 confirmed cases of Covid-19, with est toll in the world. Experts believe that real its testing rate ranking among the lowest in the figures could be at least 15 times higher due to region, with just 0.4 tests per 1,000 people, The a lack of testing. Amazonas state had nearly Guardian reported. The government on Monday Bukele to Seek Gradual gave the green light to 300 municipalities Reopening of El Salvador’s The actual total across the country, dubbed the “municipalities Economy Starting June 6 of hope,” to restart economic activities and to Salvadoran President Nayib Bukele said number of cases may be begin loosening lockdown restrictions. The Monday that he would propose to lawmakers decision follows increasing pressure from the far higher due to a lack a gradual reopening of the economy starting United States to reopen factories that are key of testing. June 6, as strict measures to curb the spread to supply chains of U.S.-based businesses, of the novel coronavirus continue in the Central especially in the automotive sector. American country, Reuters reported. Bukele 21,000 confirmed Covid-19 cases on Monday. said he would abide by a Supreme Court deci- The number of infections has overwhelmed sion earlier on Monday to suspend the state the health system in Manaus, the state capital, Bank of Jamaica of emergency he declared over the weekend to where mass graves are being used to bury the Lowers Cash Reserve extend lockdown measures, a move that critics dead. Meanwhile, in São Paulo, Brazil’s largest said exceeded the president’s powers. city with a population of 12 million, is facing a Requirements collapse of its health care system within two weeks, Mayor Bruno Covas recently warned, Jamaica’s central bank on Friday announced BBC News reported. More than 3,000 people that it is lowering the cash reserve require- Area Residents Protest have died from Covid-19 in São Paulo, and ments of the country’s deposit-taking institu- Ecuador’s Move to Restart officials say most residents are not adhering tions by two percentage points. In a statement, Mining Operations to social-distancing measures. President Jair the Bank of Jamaica said it was lowering Bolsonaro has also publicly snubbed social the foreign currency cash requirement to 13 Ecuador has resumed mining operations that distancing, even attending some anti-lockdown percent and the domestic currency reserve re- were on hold for nearly two months due to rallies, and he has clashed with state governors quirement to 5 percent. “Both adjustments are the coronavirus pandemic, with residents of a and two health ministers who have since left therefore aimed at boosting liquidity levels in nearby community protesting the move, saying office over differences on how to approach the the financial system in the context of the strain restarting work could spread the virus, Reuters pandemic. The latest health minister, Nelson caused by the impact of Covid-19,” the central reported. Ecuador’s two largest mines, Fruta Teich, resigned on Friday, just four weeks after bank said in a statement. The lowering of the del Norte and Mirador, are preparing to reopen Bolsonaro fired Luiz Henrique Mandetta. Gen. foreign currency cash reserve requirement will gradually, while smaller gold miners have Eduardo Pazuello is serving as the interim return some $65 million to the country’s depos- already begun transporting minerals. Mining health chief, and Bolsonaro seems to be in no it-taking institutions and expand the volume activity has fallen by 60 percent due to lock- rush to choose his replacement, according to of foreign exchange that they have available down measures in the Andean nation, which sources, France 24 reported. to them, the central bank said. In addition, the saw some of the worst Covid-19 outbreaks in Latin America.

COPYRIGHT © 2020, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Tuesday, May 19, 2020 domestic cash reserve requirement change FEATURED Q&A / Continued from page 1 will release approximately 14 billion Jamaican dollars ($95.2 million) to the institutions. The Union—a clear diplomatic victory but without even those favoring a military solution are last time that the Bank of Jamaica adjusted its consequential follow-up. Failures have been criticizing the use of foreign mercenaries. foreign currency cash reserve requirement was more frequent, each leaving Maduro a bit In the fourth place, the plan envisioned one in April 2017 when it boosted the requirement stronger, while the opposition appears weak- of two scenarios, one naïve and the other by one percentage point to 15 percent. As er and more disorganized. After the Gideon questionable on ethical grounds. The choice a consequence of the central bank’s action, episode, the countries that recognize Guaidó of Macuto, with a strong navy presence liquid asset requirements will also fall. Banks’ as Venezuela’s legitimate leader have reason nearby, for landing implied that the Vene- foreign currency liquid asset requirement will to be concerned about his judgment and zuelan armed forces would spontaneously decline to 27 percent, while the domestic cur- leadership. What comes next? Probably turn against Maduro, contrary to its behavior rency cash reserve requirement will lead to a more of the same, unless the United States throughout 2019. The contract implied a reduction of 19 percent in the overall domestic unexpectedly revises its Venezuela policy, possible drawn-out bloody confrontation currency liquid asset requirement. which today is fixated on ousting Maduro, with specified human targets including those using tactics that have left an impoverished close to Maduro and Diosdado Cabello. The population worse off. The opposition too, Los Angeles Times reported that the incident BUSINESS NEWS needs to change course, to demonstrate has ‘buoyed’ Maduro. During his rule, Chávez greater realism and patience. It needs to counted on the backing of a sizable majority develop its own strategy and not depend on of voters. It is unlikely that most of them Argentina’s Flybondi the United States for direction and initia- would support an opposition that incident to Focus on Domestic tive. The United States has little interest in after incident becomes branded ’Made in the Venezuela, aside from showing off its power USA.’ Some of this sentiment gets translated After Ban Is Lifted and winning votes in Florida. The opposition into support for Maduro, even among Vene- needs to shift focus from quickly getting rid zuelans who fervently oppose his policies.” Argentine discount airline Flybondi will focus of Maduro to building a more unified, more on domestic air service after the South potent political movement.” Charles Shapiro, president American country’s government lifts its flight of the World Affairs Council ban, which is meant to fight the spread of Steve Ellner, associate man- of Atlanta and former U.S. coronavirus, the airline’s chief commercial aging editor of Latin Ameri- A ambassador to Venezuela: “In officer told Bloomberg News Monday. “The bet can Perspectives and retired Season 2 of ‘Jack Ryan,’ six Americans on for regional growth in 2020 is canceled,” said A professor of the Universidad de a boat set in motion events that bring down the executive, Mauricio Sana. “As foreign travel Oriente in Venezuela: “Every aspect of the the ruthless Venezuelan dictator. While reduces, much of tourism will turn to whatever recent attempt to topple the Maduro govern- entertaining, ‘Jack Ryan’ is fiction. Nonethe- domestic options come up. Local markets will ment points to Juan Guaidó’s lack of lead- less, the perpetrators of this incident appear recover faster.” Amid the pandemic, Argenti- ership capacity. The incident cuts into his to have used a TV script as their plan to na’s government has implemented one of the support among both the radical opposition depose Maduro. The reality is that Venezu- world’s strictest travel bans. On April 27, it that backs the use of force and the majority ela is a huge country, the military is thus far prohibited all air domestic and international of Venezuelans, who, according to polls, loyal to Maduro and Cuban intelligence is commercial flights until Sept. 1. Sana called favor concrete proposals to solve pressing very good. The 2002 ‘coup’ against Chávez the length of the ban “an exaggeration” and immediate problems over regime-change weakened the opposition for a decade while said he hopes the government will decide to strategies. In the first place, Guaidó’s signa- Chávez entrenched a system that destroyed allow air travel before then. Even before the ture on the contract with the Florida-based the nation’s economy and the remaining pandemic hit, airlines in Argentina were hurting Silvercorp USA disregards the history of vestiges of its democratic institutions. It due to the country’s economic slowdown, a 30 operations of this sort, in which planners go should not surprise anyone that Maduro, percent tax on foreign travel and inflation in to length to ensure the credibility of a Plan B who proclaimed himself Chávez’s ‘hijo the double digits, Bloomberg News reported. consisting of denial of involvement in case político’ is trying to use this goofy incident From mid-March until September, airlines in of failure. In the second place, Guaidó’s to maintain himself in Miraflores while the Argentina are expected to lose as much as $80 commitment of $213 million to Silvercorp country is ravaged by Covid-19, the economy million just on canceled domestic flights, said raises questions about the origins of such requires last rites, oil production at 622,000 Sana. Flybondi began operations in 2018. a large sum of money. In the third place, barrels per day has dropped to 1944 levels 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 © 2020 and oil prices have cratered. Maduro should political challenge to the Maduro govern- be panicking. Instead, this incident has given ment. At this point, the only way the current Erik Brand him a lifeline while increasing the centrifugal tragic equilibrium could be altered would be Publisher [email protected] force pulling at the fractious opposition a change in the geopolitical interests and coalition. What is bad for Guaidó is good pressures at play. A negotiation between the Gene Kuleta Editor for Maduro. Net result: this incident was an United States and Russia, designation of a [email protected] own goal. As for the fictional Venezuela of special representative by the United Nations Anastasia Chacón González ‘Jack Ryan,’ President Nicolás Reyes is not or robust engagement by the European Reporter & Associate Editor nearly as ruthless or as corrupt as Maduro, Union could reorganize the conflict.” [email protected] the fictional economy is not nearly as bad as the real Venezuelan economy and the Maria Velez de Berliner, manag-

fictional military hesitates to shoot Venezu- ing director of RTG-Red Team Michael Shifter, President elan citizens while the real security forces Group, Inc.: “Covert actions Rebecca Bill Chavez, Nonresident Senior Fellow have no compunction about repressing their A to execute regime change are Sergio Bitar, Nonresident Senior Fellow countrymen.” the task and responsibility of professional Joan Caivano, Director, Special Projects operatives, not of civilian amateurs such as Michael Camilleri, Director, Rule of Law Program David Smilde, senior fellow the incompetent mercenaries of ‘Operation Kevin Casas-Zamora, Nonresident Senior Fellow at the Washington Office on Gideon.’ As Sean McFate’s work demon- Héctor Castro Vizcarra, Nonresident Senior Fellow Latin America and professor of strates, ‘mercenaries are the future of war.’ Julia Dias Leite, Nonresident Senior Fellow A sociology at Tulane University: But those mercenaries require training, reli- Ariel Fiszbein, Director, Education Program “It is important to remember that in the past able equipment, tactical support and must Peter Hakim, President Emeritus three years since the Maduro government have proven ability to carry out their mission; Nora Lustig, Nonresident Senior Fellow moved from electoral authoritarianism to and whoever sponsors them must have Margaret Myers, Director, Asia and hegemonic authoritarianism, the opposi- credible, plausible deniability. None of these Latin America Program Manuel Orozco, Director, Migration, tion has tried street mobilization, going to conditions existed in ‘Operation Gideon.’ Few Remittances & Development elections, international pressure and nego- believe the United States and Guaidó had no Xiaoyu Pu, Nonresident Senior Fellow tiations, all without results. Thus, this type previous knowledge of the action. Its failure Jeffrey Puryear, Senior Fellow of desperate measure should not surprise. resulted in a risible fiasco that narrowed the Mateo Samper, Nonresident Senior Fellow Most damaging is Juan Guaidó’s failure to range of options of the United States and Tamar Solnik, Director, Finance & Administration assume responsibility and clearly pivot to gave Maduro a public relations coup. With Lisa Viscidi, Director, Energy Program trace out a new strategy. This has produced its support of ‘Operation Gideon,’ Venezue- Denisse Yanovich, Director of Development and a malaise within Venezuela and cast a shad- la’s opposition, led by Guaidó, demonstrated External Relations ow on his leadership among international it is ill advised, naïve and woefully ignorant Latin America Advisor is published every allies. The opposition is hopelessly divided of the deleterious repercussions that failed business day, except for major U.S. holidays, between those who think a strategy based actions such as ‘Operation Gideon’ have. by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 on political mobilization and negotiation is It also shows the miscalculation of the Washington, DC 20005 the way forward and those who think that United States regarding Maduro’s support. www.thedialogue.org is naïve and just postpones foreign military To execute regime change in Venezuela, ISSN 2163-7962 intervention. Behind this, of course, is the the United States will need to: 1.) negotiate Subscription inquiries are welcomed at Trump administration’s frequent statements with Venezuelan Defense Minister Vladimir [email protected]

that ‘all options are on the table.’ Few people Padrino, because deposing Maduro must The opinions expressed by the members of the Board of close to the U.S. government think there ac- have the army’s support; 2.) know what to do Advisors and by guest commentators do not necessarily tually is a military option, but it has captured with Venezuela’s colectivos, militias, guerril- represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily the imagination of wide swaths of Vene- las and sundry nonstate criminal actors; 3.) represent the views of their respective employers or firms. zuelans in the country and in the diaspora. know the pros and cons of whoever takes The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, Combined with a population being ground power, from the Venezuelans’ perspective; nor the opinions based thereon, are guaranteed. If you have down by a humanitarian crisis exacerbated and 4.) do all this professionally and, hope- any questions relating to the contents of this publication, contact the editorial offices of the Inter-American Dialogue. by U.S. sanctions, there is little chance fully legally, not through amateurish, wishful Contents of this report may not be reproduced, stored in the opposition will be able to mount a real actions such as ‘Operation Gideon.’ ” a retrieval system, or transmitted without prior written permission from the publisher.