LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, November 13, 2018

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, November 13, 2018

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Will Bolsonaro Make ‘El Chapo’ Trial Cargill Gets Underway Joyce Chang Global Head of Research, Good on His Law & in Brooklyn JPMorgan Chase & Co. The trial for alleged Mexican Dirk Donath Senior Partner, Order Promises? drug kingpin Joaquín “El Chapo” Catterton Aimara Guzmán is scheduled to begin Marlene Fernández today in Brooklyn with security Corporate Vice President for measures city offi cials have Government Relations, described as unprecedented. Arcos Dorados Page 2 Peter Hakim President Emeritus, Inter-American Dialogue ECONOMIC Donna Hrinak President, Boeing Latin America López Obrador Jon Huenemann Vice President, U.S. & Int’l Affairs, Puts Train Project Philip Morris International to Referendum James R. Jones Chairman, Mexico’s president-elect will hold Monarch Global Strategies Brazilian police offi cers reinforce security after a shooting in Rocinha, the largest favela in Rio a referendum later this month on Craig A. Kelly de Janeiro. // File Photo: Brazilian Government. his proposal for an extensive rail- Director, Americas International way to connect the main tourist Gov’t Relations, Exxon Mobil attractions spanning fi ve states During his campaign, Brazilian President-elect Jair Bolsona- John Maisto across the Yucatán peninsula. Director, U.S. Education ro frequently vowed to crack down on criminals, promising to Page 2 Finance Group allow police more latitude in the use of force, make it easier Nicolás Mariscal Q Chairman, for Brazilians to own guns and reduce the age at which de- POLITICAL Grupo Marhnos fendants can be tried as adults to 16. How much of Bolsonaro’s pledges Thomas F. McLarty III Brazil’s Senate Set Chairman, on crime will become policy? Will his tactics to reduce crime succeed? to Pass Key Oil Bill McLarty Associates Will Bolsonaro expand the use of the military in civilian policing beyond Carl Meacham Brazilian Mines and Energy Min- Associate VP for Latin America Rio de Janeiro state, where troops have been operating for months? ister Wellington Moreira Franco Int’l Advocacy Division, PhRMA says he is confi dent that the Sen- Carlos Paz-Soldan ate will approve the long-debated Partner, Vanda Felbab-Brown, foreign policy senior fellow at the “transfer-of-rights” bill this week, DTB Associates, LLP Brookings Institution: “President-elect Bolsonaro has a key step in opening up oil-rich Beatrice Rangel Director, embraced tough-on-crime measures that egregiously violate areas offshore Brazil to foreign AMLA Consulting LLC basic human rights and eviscerate the rule of law. Respond- investors. Ernesto Revilla A Page 2 Head of Latin American ing to Brazil’s 63,880 homicides in 2017, Bolsonaro calls for increasing Economics, Citi protection for police offi cers who kill alleged criminals and arming Gustavo Roosen citizens. He calls for further militarizing urban policing, reducing the age Chairman of the Board, Envases Venezolanos of criminal liability from 18 to 16, reinstating the death penalty, autho- Andrés Rozental rizing torture in interrogations and imprisoning more people. Riding his President, Rozental & Asociados and Senior anti-crime coattails, the new governor of Rio de Janeiro, Wilson Witzel, Policy Advisor, Chatham House suggests deploying snipers to favelas to kill anyone with a gun. Brazil’s Shelly Shetty Head of Sovereigns Ratings, public identifi es reducing crime as its priority. With support of his ‘beef, Latin America, Fitch bullets and Bible coalition’ of the agribusiness, evangelical and anti-crime Roberto Sifon-Arevalo Managing Director, Americas bloc, Bolsonaro may get legislative approvals. But he can simply induce Sovereign & Public Finance Ratings, Brazil’s police and military to adopt such approaches and shield them Standard & Poor’s with impunity. Brazil’s police are already notorious for being one of the world’s deadliest in the use of force. In many favelas, Brazil’s retired and Moreira Franco // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS Yucatán state capital, López Obrador said the NEWS BRIEFS public will be able to vote on the train and nine ‘El Chapo’ Trial Gets other proposed projects and programs within Owens-Illinois Spends weeks, before he takes offi ce on Dec. 1, as with $119 Million for Stake in Underway in U.S. a referendum he pushed for last month that ended up canceling a $13 billion airport project Glass Manufacturer With High Security in Mexico City that was already one-third com- Ohio-based glass container maker Owens-Illi- pleted. Another project on the ballot will be the nois on Monday announced that it has spent The trial for alleged Mexican drug kingpin construction of an oil refi nery in his home state $119 million to acquire 49.7 percent interest Joaquín “El Chapo” Guzmán is scheduled to of Tabasco, as well as social programs such in Empresas Comegua from Fabricación de begin today in Brooklyn with security measures as scholarships to students and pensions for Máquinas, a wholly owned subsidiary of Mex- city offi cials have described as unprecedented, seniors. “I’m very confi dent that the people are ico’s Vitro. Empresas Comegua manufactures The Wall Street Journal reported. Guzmán, 61, going to vote to build the Mayan train, because glass containers for the Central American and faces a 17 count indictment that covers nearly it won’t hurt anyone. On the contrary, it will ben- Caribbean markets, with one factory in Costa three decades of alleged criminal activities in- efi t a lot of people,” López Obrador said. Major Rica and another in Guatemala. The transac- cluding murder. His accomplices have success- developers such as Grupo Vidanta have backed tion is expected to be accretive to earnings and fully engineered his escape from two maximum the ambitious plan, saying it could double the cash fl ow in the fi rst year, the company said. security prisons previously. Police have been amount of foreign currency brought into the taking extraordinary precautions for months, country, El Financiero reported last month. closing the entire Brooklyn Bridge whenever Nicaragua Protests Caused Guzmán needed to be transported across it. High-tech scanners were installed in the federal Brazil’s Senate Set $1 Billion in Economic courthouse where the hearings take place, and to Pass Key Oil Bill: Harm: Gov’t Estimates Guzmán will be held in a specially designed cell Nicaragua’s government said on Monday that within the courthouse itself, so that offi cials Energy Minister the economic damages resulting from deadly will no longer need to transport him from his protests against President Daniel Ortega’s current downtown holding facility in Man- Brazilian Mines and Energy Minister Wellington administration between April and July amount- hattan. Snipers and helicopters will monitor Moreira Franco said on Monday he is confi dent ed to almost $1 billion and that 120,000 jobs the area from above throughout the trial, and that the Senate will approve the long-debated were lost during the period, Reuters reported. bomb-sniffi ng dogs are expected to patrol the “transfer-of-rights” bill this week, a key step The unexpectedly violent clashes over several courthouse grounds. The identities of jurors in opening up oil-rich areas offshore Brazil months between government forces and pro- has been kept secret for their protection. to foreign investors, Reuters reported. The testers left more than 300 people dead, human transfer-of-rights area is part of Brazil’s giant rights groups say. pre-salt reserves in the Atlantic Ocean. In 2010, ECONOMIC NEWS with oil prices high and Brazil in the protec- tionist hands of the leftist Workers’ Party, the López Obrador Puts government transferred 5 billion barrels of S&P Warns of Weaker those deposits to state oil company Petrobras, Outlook in Argentina effectively keeping out foreign players. But Massive Train Project New York-based Standard & Poor’s said the country’s oil regulator later declared the Tuesday it was lowering Argentina’s long-term Up for Referendum area holds more crude than initially estimated. foreign and local currency ratings by one notch, The bill authorizing the sale aims to remove from B+ to B, citing an “erosion” in the South Mexican President-elect Andrés Manuel López the obligation for Petrobras to develop the American country’s debt, economic growth Obrador said Monday he will hold a public offshore region only by itself. The surplus that and infl ation profi les, Reuters reported. The referendum later this month on his proposal would be offered to international oil companies ratings agency said in a statement that the for an extensive passenger railway network to could amount to as much as 15 billion barrels, government’s austere budget plan has helped connect the main tourist attractions spanning Bloomberg News reported last month. If such stabilize the market, but that it has also led the fi ve states across the Yucatán peninsula, the volumes turn out to be commercially recover- fi rm’s analysts to expect a worse forecast for Associated Press reported. López Obrador able, it would represent about twice the proved the country’s fi nancial profi le over the next two previously said it would cost between $6 billion reserves of Mexico or Norway, according to the years. The IMF said this week it expects Argen- and $8 billion. During a trip to Mérida, the report. tina to emerge from recession in early 2019.

BUSINESS NEWS FEATURED Q&A / Continued from page 1

current police offi cers operate illegal militias that the rule of law will be respected. In an Court Releases JBS that extort and control local communities, interview with the BBC, Mourão sounded like Executives Held murdering those who oppose them and the Brazilian Thomas Jefferson in his sup- engaging in warfare with Brazil’s highly-vio- port for democratic rule and for civil rights in Graft Probe lent gangs and in social cleansing. Bolson- of all Brazilians. Finally, Bolsonaro’s PSL aro is simply threatening to turn the rest party gained seats in the Brazilian Congress Brazil’s highest appeals court on Monday or- of the police into state-sanctioned thugs. but still has only 10 percent representation dered the release of two of the top executives The Philippines provides a grisly preview in the Chamber of Deputies. He will have of Brazilian meatpacking giant JBS who were of such egregious and disastrous policies: to build a coalition to pass legislation, arrested last week in connection to a graft since President Rodrigo Duterte unleashed and there will not be enough support for probe, Reuters reported. Former JBS chairman his murderous war on drugs in 2016, over the far-right security agenda he promised and controlling shareholder Joesley Batista 12,000 alleged drug users have been killed during the campaign. That said, Bolsonaro and Ricardo Saud, a former offi cial at the hold- by the police or militias that operate with will have suffi cient authority—and public ing company that controls JBS, were detained state acquiescence. With Duterte’s public support—to expand the use of the military Friday as part of an investigation into alleged backing of extrajudicial killings, at least 34 against organized crime, especially in areas illegal campaign contributions and bribery of lawyers and 11 mayors have been murdered. like Rio’s favelas where criminal gangs have government workers in exchange for regulation Tens of thousands have been imprisoned. had near sovereign control, and to appoint that favored the meat processor and helped it Opposition politicians have been intimidat- some military offi cers to civilian positions. eliminate competition, the Associated Press re- ed and arrested and foreign human rights I believe the bluster of the campaign will be ported. Fourteen other people, including former activists expelled. ‘Loitering,’ drinking beer mugged by reality in the security area, and agriculture ministers under ex-President Dilma in the street or not wearing a shirt in public that even a fractious Congress will constrain Rousseff, Neri Geller and Antonio Andrade, can land one in jail. The anti-crime campaign the most extreme tendencies of Bolsonaro now hides increasing authoritarianism, al- and his closest supporters. Ultimately, he Batista’s attorney ex- ready bloodier than the Marcos dictatorship. will be judged on expanding the fi ght against Brazil would be wise not to emulate it.” corruption and restoring economic growth pressed “bewilderment” to Brazil.” over the former execu- Melvyn Levitsky, professor of tive’s arrest. international policy and practice Helder Fonseca, corporate and at the University of Michi- M&A co-head at Guimarães & A gan’s Gerald R. Ford School of Vieira de Mello Advogados in were also arrested on Friday. JBS has been at Public Policy and former U.S. ambassador A Brazil: “There is a consensus the center of the investigation into the massive to Brazil: “From 1963 to 1985, Brazil was that President-elect Bolsonaro’s government Lava Jato, or Car Wash, corruption scandal ruled by its military through ‘institutional will effectively adopt his promises to go hard in Brazil, with several of the food company’s acts’ (essentially executive orders) and on organized crime and violence in Brazil executives, including Batista, admitting their legislation from a rubber-stamp Congress. in order to fulfi ll the desires of a signifi cant involvement in bribery schemes and providing President-elect Bolsonaro has expressed part of our population. Since some of those evidence in exchange for plea bargain deals, nostalgia for that period. The chances for a measures require modifying existing laws in the AP reported. Prosecutors now claim Batis- return to such a system are nil. In the fi rst our House of Representatives and his party ta withheld information and revoked his plea place, it is clear that the Brazilian military is aligning itself with the majority of other agreement. In a statement, Batista’s attorney would not want to be saddled with ruling the parties, we believe they can pass the mea- expressed “bewilderment” over the former country again. Secondly, despite widespread sures during his administration’s fi rst year. executive’s arrest since he has been “a collabo- dissatisfaction with executive performance Right now, it is too early to say if his tactics rator with the justice system,” Reuters reported. over the past several years, support for will succeed, since the roots of organized Also last week, JBS signed a three-year deal democracy is strong. Bolsonaro and his crime in Brazil go beyond favelas and have worth approximately $1.5 billion with Alibaba’s vice-presidential candidate General Mourão ramifi cations in political corruption. Putting Win-Chain to increase the Brazilian company’s have both pulled back on election rhetoric the army and national security troops on the beef, poultry and pork exports to China. JBS is and have gone to lengths to assure Brazilian streets seems unlikely to happen because scheduled to begin supplying Win-Chain within society that the Constitution is supreme and not all major cities face the violence and the next month. 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 © 2018 crime seen in Rio de Janeiro, but we expect President Michel Temer. At the very least, new governments, both at the federal and Bolsonaro and Mourão can be expected to Erik Brand state level, to extend the information-sharing work closely with the military. Satisfying the Publisher [email protected] system already adopted in Rio in a preemp- military will likely be a top priority.” tive way and to strike harder on organized Gene Kuleta Editor crime, especially the war on drugs.” Joel Korn, president of WKI Bra- [email protected] sil and senior international part- Anastasia Chacón González Gene Smith, president of Smith ner at UPITE Consulting in Rio Reporter Brandon International and a A de Janeiro: “Security is defi nitely [email protected] former Ops Offi cer serving in a top priority for President-elect Bolsonaro A Brazil with the U.S. Central and, as such, he is expected to vigorously Intelligence Agency: “Bolsonaro assumes pursue and carry out his campaign promises Michael Shifter, President the presidency on Jan. 1 following his to fi ght crime in compliance with Brazil’s Genaro Arriagada, Nonresident Senior Fellow second-round victory in late October. With a Constitution and applicable legislation. To Bruno Binetti, Nonresident Fellow struggling economy, a long-standing corrup- this end, Congress is likely to be called upon Sergio Bitar, Nonresident Senior Fellow tion investigation pointing to corruption at to vote on a constitutional amendment that Joan Caivano, Director, Special Projects the highest levels and crime rates perceived will contemplate a broader set of circum- Michael Camilleri, Director, Peter D. Bell Rule of Law by the average Brazilian as out of control, stances than those passed by the Lower Program Brazilians are fed up and ready for change. House in 2015, under which defendants may Kevin Casas-Zamora, Nonresident Senior Fellow Bolsonaro, a former army captain, and his be tried as adults at the age of 16 instead of Ariel Fiszbein, Director, Education Program vice president-elect, Hamilton Mourão, a 18. Moreover, the incoming administration is Peter Hakim, President Emeritus retired army general, may be the ticket to expected to push for more fl exible legisla- Claudio Loser, Senior Fellow bring order through a crackdown on crime. tion in relation to ownership and portability Nora Lustig, Nonresident Senior Fellow Bolsonaro’s platform on public safety includ- of weapons, a highly controversial topic. The Margaret Myers, Director, Asia and Latin America Program ed increased police authority for the use of recent appointment of Judge Sérgio Moro Manuel Orozco, Director, Migration, arms (proceeding without forewarning for as Minister of Justice reinforces Presi- Remittances & Development criminals caught in the act), expanded legal dent-elect Bolsonaro’s zero-tolerance toward Jeffrey Puryear, Senior Fellow search and seizure provisions, an increase in corruption and commitment to dismantle Tamar Solnik, Director, Finance & Administration the development and use of technology (and organized crime, in close alignment with Lisa Viscidi, Director, Energy Program the funds to support it), increased fl exibility the Attorney General’s offi ce. The role of Denisse Yanovich, Director of Development and in the right to carry arms (with a requirement the judiciary will be further strengthened, External Relations for proper training) and a special elite cadre and the police force will be fully backed and Latin America Advisor is published every to work in prisons. The question is: will there equipped to carry out its mission to combat business day, except for major U.S. holidays, be reasonable implementation of these crime and urban violence, a long-awaited by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 policies or abuse and further corruption in stance by the population and an important Washington, DC 20005 the Brazilian legal system? The appointment step to help improve the country’s image and www.thedialogue.org of Sérgio Moro, famous for his leadership in business conditions. Military forces will not ISSN 2163-7962 Operation Car Wash, as Minister of Justice is be mobilized except in extreme situations Subscription inquiries are welcomed at moving in the right direction. Bolsonaro has for a limited length of time that may require [email protected] been a proponent of conservative attitudes planning or logistic support. The task of The opinions expressed by the members of the Board of on a wide range of social issues, but he has dealing with organized crime and urban vio- Advisors and by guest commentators do not necessarily also shown some inclination to modify his lence, along with the associated intelligence, represent those of the publisher. The analysis is the sole position, as demonstrated by his jump from will be incumbent upon the municipal, state view of each commentator and does not necessarily represent the views of their respective employers or fi rms. the Social Christian Party (PSC) to the Social and federal police.” The information in this report has been obtained from Liberal Party (PSL), both minor players in reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have the Brazilian political landscape, in the very The Advisor welcomes comments on its Q&A any questions relating to the contents of this publication, year of the election. There were whispers in section. Readers can write editor Gene Kuleta contact the editorial offi ces of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in a the past year of military intervention under at [email protected]. retrieval system, or transmitted without prior written permis- sion from the publisher.