LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, June 25, 2021

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, June 25, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Is Covid Changing Peru Election CEO, DevryBV Sustainable Strategies Joyce Chang Magistrate Quits Global Head of Research, JPMorgan Chase & Co. Food Supply Systems in Clash Over Paula Cifuentes Vote Counting Director of Economic & Fiscal Affairs, Latin America & Canada, in the Americas? One of the four magistrates over- Philip Morris International seeing the evaluation of votes in Marlene Fernández Peru’s contested election resigned Corporate Vice President for in protest. Government Relations, Page 2 Arcos Dorados (McDonald’s) Peter Hakim President Emeritus, POLITICAL Inter-American Dialogue Donna Hrinak Bolsonaro Gov’t Senior VP, Corporate Affairs, Royal Caribbean Group Committed Jon E. Huenemann ‘Crimes Against Council Member, GLG Inc. Life’: Senator James R. Jones An inquiry into President Jair Bol- Chairman, The food situation in Latin America is becoming “increasingly critical” amid the Covid-19 sonaro’s handling of the Covid-19 Monarch Global Strategies pandemic, Devry Boughner Vorwerk writes below. // File Photo: Mexican Government. pandemic showed widespread Craig A. Kelly negligence, said the senator Senior Director, Americas The U.S. Department of Agriculture announced June 8 that Int’l Gov’t Relations, Exxon Mobil leading the probe. Page 2 Barbara Kotschwar the United States would invest some $4 billion to strengthen Executive Director, Visa Economic the country’s food system and global supply chains as part Empowerment Institute Q of the Biden administration’s Build Back Better initiative. BUSINESS John Maisto Director, U.S. Education Amid the Covid-19 pandemic, a lack of labor and the limited availability Finance Group Mexico’s López and high price of agricultural inputs have had an impact on food produc- Nicolás Mariscal Obrador Demands Chairman, tion in Latin America, the U.N. Economic Commission for Latin America Names of Officials Grupo Marhnos and the Caribbean said in a report last July. How will the Biden admin- Thomas F. McLarty III in Bribery Scheme Chairman, istration’s investment affect U.S.-Latin America food supply dynamics? McLarty Associates Mexican President Andrés Manuel What bottlenecks and other problems exist in the food supply chain López Obrador said he wants Beatrice Rangel Director, in Latin America and the Caribbean, and how much has the Covid-19 Dutch company Vitol to reveal the AMLA Consulting LLC pandemic worsened them? What do governments in the region need to names of Pemex officials alleged- ly involved in a bribery scheme. Jaana Remes do now in order to bolster food supply chains and prevent shortages? Partner, Page 3 McKinsey Global Institute What problems with food supply chains between Latin America and other Ernesto Revilla parts of the world has the pandemic exposed, and what changes could Head of Latin American Economics, Citi be seen after the pandemic ends? Gustavo Roosen President, IESA Devry Boughner Vorwerk, member of the Advisor board Andrés Rozental and CEO of DevryBV Sustainable Strategies: “The Biden President, Rozental & Asociados administration’s investment of $4 billion is intended to make Shelly Shetty the U.S. food supply chain even more resilient. The ‘subsi- Managing Director, Sovereigns A Fitch Ratings dies’ pinpoint internal rebalancing of U.S. food production, processing, distribution and consumption. There is a view in the United States that consolidation and scale in the industry led to supply chain bottlenecks during Covid-19, which left some farmers and ranchers without a way to get their food processed and distributed to consumers in great need. The López Obrador // File Photo: Mexican Government-. Continued on page 3

POLITICAL NEWS conduct an audit of the election in a process NEWS BRIEFS similar to the organization’s audit of Bolivia’s Peru Magistrate 2019 election. However, the OAS said its mis- Honduras Opens sion to Peru found no problems with the way Embassy in Jerusalem Quits in Clash Peru conducted its election. “It is unlikely that claims of fraud will be seen as legitimate, given Honduras on Thursday opened its embassy Over Vote Counting the presence of international observers and the in Jerusalem, with President Juan Orlando electoral authorities being seen as impartial,” Hernández and new Israeli Prime Minister One of the four magistrates responsible for Nicolás Saldías, of The Economist Intelligence Naftali Bennett signing a handful of bilateral reviewing ballots in Peru’s contested election Unit, told the Advisor in a Q&A published June cooperation deals to mark the occasion, the resigned on Thursday in a clash with the other 8. [Editor’s note: See the Advisor’s interview Associated Press reported. Honduras is the officials over requests to void votes, Reuters on the election with Cynthia McClintock of The fourth country to follow the decision by the reported. The resignation of the magistrate, George Washington University.] administration of former U.S. President Donald Luis Arce, threw the razor-thin June 6 election Trump to move the chief diplomatic mission into further disarray. Leftist Pedro Castillo is in Israel from Tel Aviv. Jerusalem is a point of leading his rival, conservative Keiko Fujimori, Bolsonaro Gov’t contention in the Arab-Israeli conflict, with Isra- 50.13 percent to 49.88 percent, a margin of Committed ‘Crimes el viewing the entire city as its unified capital, only about 44,000 votes, according to the while Palestinians want east Jerusalem as the country’s ONPE election authority. Fujimori Against Life’: Senator capital of their state, according to the report. has claimed fraud, though she has shown little evidence of it, and has sought to nullify A congressional inquiry into Brazil’s response votes that were cast in favor of Castillo. Arce to Covid-19 has found evidence that Presi- Colombia Could See announced his resignation from the jury that dent Jair Bolsonaro’s government committed Bigger Anti-Government is reviewing votes after it rejected the first 10 “crimes against life,” The Guardian reported requests to annul ballots that Fujimori had today, citing Senator Omar Aziz, who is leading Protests: Union Leader presented, Reuters reported. In his resigna- Colombia could see even bigger anti-govern- tion letter, Arce alleged that the panel was ment protests in the second half of the year if biased, saying “decisions were already made.” The most shocking neither the government nor Congress meets The panel, known as the JNE, rejected Arce’s thing is the realization demonstrators’ economic and social demands, allegation in a tweet, calling it “offensive.” The of how negligent a Colombian union leader told Reuters in panel added that a magistrate was barred from the government an interview on Thursday. “[There will be] a resigning during the review of ballots, so the has been—on so great national strike in the second semes- jury said it would suspend him instead and that many issues.” ter,” said Francisco Maltés, president of the he would be replaced with another official “to — Omar Aziz Central Union of Workers. Protests against the avoid delayng our work.” The panel added that government of President Iván Duque erupted it would “safeguard democracy and prevent this in late April and continued for weeks, at times from affecting the culmination of the elector- the nationally televised investigation. The sparking violence and clashes between police al process,” Bloomberg News reported. In a inquiry was launched in April to investigate and demonstrators. statement Thursday, Castillo’s Free Peru party Bolsonaro’s handling of the health crisis. Brazil said Arce’s departure was aimed at “preventing earlier this week surpassed 500,000 deaths the proclamation of Pedro Castillo, thereby from the disease, the Associated Press report- ignoring the popular vote, breaking democracy ed. It has recorded more deaths than any other Ecuador Expects Jump and installing a coup d’état with silk gloves.” country except the United States, according to in Mining Exports Election observers have said the vote was con- Johns Hopkins University. Bolsonaro has come Ecuador’s mining exports could reach $1.6 ducted cleanly, and the U.S. State Department under tough criticism throughout the pandemic billion this year, a 74 percent increase from called it a “model of democracy.” Fujimori’s for dismissing the novel coronavirus as a “little last year, due to mining companies’ plans to Popular Force party has filed hundreds of ap- flu,” eschewing social-distancing measures and increase processing of gold and copper, the peals, with at least 200,000 votes at issue. An at times not wearing a mask in public despite Energy and Nonrenewable Natural Resources attorney for Popular Force said that following health experts’ recommendation. “The most Ministry said Thursday, Reuters reported. The Arce’s resignation, Peru’s government should shocking thing is the realization of how neg- optimism comes as copper prices are at record ask the Organization of American States to ligent the government has been—on so many high levels.

COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Friday, June 25, 2021 issues,” Aziz told The Guardian. Testimony FEATURED Q&A / Continued from page 1 from officials and newly revealed documents show the government scorned offers to pur- mismatch of supply and demand created of global agricultural supply chains became chase vaccines as early as last year and failed a rallying cry to address systemic food more apparent than ever. While most of the to respond quickly to reports of shortages justice issues in the country. There is much commentary surrounding this issue has of oxygen supplies in the Amazonian city of focus on diversifying the U.S. meatpacking focused on the failures of these entwined Manaus, which was hit hard by the Covid-19 industry, which is heavily consolidated. The supply chains, the benefits of a profoundly outbreak. There is also mounting evidence program is set to provide grants, loans and connected and highly efficient global food of irregularities in the acquisition of Indian innovative financing to smaller operations. system that leverages competitive advan- vaccine Covaxin, and the inquiry is reportedly Also, emphasis is placed on healthy eating tages across different links of the value focusing on Bolsonaro’s specific role in the since those with lack of access to healthy, chain has been largely overlooked. That said, incident, according to the report. Government affordable food options are more vulnerable there is clearly an opportunity to use the officials have denied any irregularity in the to succumbing to the virus. This specific pandemic experience to improve the food contract for Covaxin doses. program is likely to have minimal impact on system. For decades, food supply chains in food imports from Latin America and the Ca- Latin America and around the globe have ribbean and food production and availability worked off increasingly slim buffer stocks. BUSINESS NEWS in those countries. According to the U.S. De- Though this strategy has delivered important partment of Agriculture, horticultural items cost savings to consumers, it has resulted such as fruits and vegetables comprise in supply chains that can be more fragile Mexican President about 50 percent of LAC’s exports to the and less versatile. Looking forward, we Demands Names of United States, which are important revenue must weigh the true costs of operating with generators for the region. Of the top 14 food such a narrow margin for error and consider Officials in Scheme exporters to the United States, five are from the benefits of shifting our strategy to hold the region: Mexico, Chile, Brazil, Colombia larger inventories across the chain. In ad- Mexican President Andrés Manuel López and Peru. As a side note, Brazilian-owned dition, some of the largest hiccups in Latin Obrador said on Thursday that he wants meatpackers in the United States could American food supply chains came at the Dutch energy firm Vitol to reveal the names of face some competitive pressure as more hand of labor issues as employees under- state oil company officials with whom it was local processing facilities come online with standably expressed concerns over working involved in a bribery scheme, Reuters reported. support from the new initiative. As Covid-19 conditions. Resolving these concerns, and Mexican state oil firm Pemex’s contracts with continues to rage across LAC, the food situ- preventing similar issues in a future crisis, Vitol are currently under review in search of ation is becoming increasingly critical, with will require collaboration between govern- better terms after the European firm admitted hunger on the rise and devastating reports ment and industry, in order to arrive at clear to paying bribes in Mexico in exchange for surfacing in Brazil, Venezuela and across guidance that protects the interests of both business contracts. Vitol, the world’s largest Central America. The Biden administra- employees and employers.” independent oil trader, has offered Pemex $30 tion’s approach to using targeted domestic million as compensation for damages as part interventions is something that could be Diana Chavez, executive of the case. “Hopefully, they will stop trying deployed across LAC. The investments are director of the Private Sector to solve the problem without saying who the less about food self-sufficiency and more Regional Centre for the Support official was who asked them for money,” López about taking localized approaches to domes- A of U.N. Sustainable Devel- Obrador said during his daily news conference. tic food security.” opment Goals: “Covid-19 has drastically “We want the name of the person who suppos- changed the operating environment for the edly received the money,” he added. Reuters Monica Ganley, principal at agriculture and food sectors. The pandemic could not immediately reach a Vitol representa- Quarterra: “The Covid-19 pan- has emphasized that in order to strengthen tive for comment. Vitol’s business with Pemex demic brought unprecedented supply chains, it is critical to address exter- was suspended late last year after it paid A challenges to Latin America, and nal factors, including market regulations, more than $160 million to settle charges that the region’s food and agriculture sector was consumer preferences and climate change. it conspired to pay bribes in several countries certainly not immune to these difficulties. As Before the pandemic, 70 percent of rural in Latin America, including Brazil, Mexico and demand shifted dramatically and countries employment was informal, and 37 percent of Ecuador, as recently as last year, Bloomberg scrambled to shore up food supplies for their Latin America’s rural population had access News reported, citing a deferred prosecution populations, the deep interconnectedness to the digital world. The pandemic showed agreement. 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 that rural workers in the region cannot across the Southern Cone, soy plantations telework and face barriers such us inconsis- have displaced fresh food farms, increasing Erik Brand tent electricity supply, land rights regimes ‘food miles’ and forcing migration to cities. Publisher [email protected] that prevent or discourage ownership for As small farms disappear, cities including Indigenous women, poor digital literacy Córdoba and Rosario in Argentina and Belo Gene Kuleta Editor and market access challenges. Investment Horizonte and Cuiabá in Brazil are imple- [email protected] and sound policies play a critical role in the menting policies to safeguard food security. Anastasia Chacón González effective operation of global markets and Reporter & Associate Editor creation of responsible local development Agriculture [email protected] practices. Another Latin American lost partnerships in the decade could be avoidable in the agricultural Southern Cone sector. The 2030 Agenda, SDG 17, can serve show mixed results.” as a road map to leverage this $4 billion Michael Shifter, President — Adrian H. Hearn investment announced by the U.S. Depart- Rebecca Bill Chavez, Nonresident Senior Fellow ment of Agriculture—and articulate efforts Bruno Binetti, Nonresident Fellow toward long-term objectives for a more These policies are supporting organic urban Sergio Bitar, Nonresident Senior Fellow inclusive economy and flexible regulation farms and ‘green belts’ that harness the Joan Caivano, Senior Advisor that incorporates small producers to formal expertise of rural migrants. Covid-19 has Kevin Casas-Zamora, Nonresident Senior Fellow supply chains. The planning of the next sev- revealed the importance of this work as Julia Dias Leite, Nonresident Senior Fellow eral months, in both the private and public food shortages intensify in disadvantaged Ariel Fiszbein, Director, Education Program sectors, is crucial and requires a transparent suburbs. Organic food consumption in Brazil Sandra García Jaramillo, Nonresident Senior Fellow and innovative implementation process to is growing 15 percent annually, worth $815 Selina Ho, Nonresident Senior Fellow get ahead of trends and tackle rural devel- million in 2020. Aided by proactive policies Edison Lanza, Nonresident Senior Fellow opment challenges. This will also require and procurement for public schools and Nora Lustig, Nonresident Senior Fellow consumer education to promote awareness hospitals, the sector harbors opportunities Margaret Myers, Director, Asia Program of challenges that producers face and foster for foreign partners. Partnerships in sus- Manuel Orozco, Senior Fellow support for sustainable agriculture policies.” tainable agriculture mean supporting local Xiaoyu Pu, Nonresident Senior Fellow suppliers (of goods such as farm equipment Jeffrey Puryear, Senior Fellow Adrian H. Hearn, professor and organic fertilizers), hiring socially Tamar Solnik, Director, Finance & Administration of Latin American studies at representative work forces and dedicating Lisa Viscidi, Director, Energy Program the University of Melbourne: a percentage of outputs to local markets. Denisse Yanovich, Director of Development “Covid-19 has exposed short- Many U.S. firms are already exercising such A Latin America Advisor is published every comings that were already compromising practices under Fair Trade Licensing. Biden’s business day, except for major U.S. holidays, food security for several Latin American plan could leverage U.S. leadership in the by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 countries. Creative local responses to these organics space to expand this engagement. Washington, DC 20005 shortcomings are generating opportunities Industry grants and tax relief to promote www.thedialogue.org for partnerships that align with the Build joint ventures with Latin American organic Subscription inquiries are welcomed at Back Better Plan. Agriculture partnerships producers could stimulate a fresh approach [email protected]

in the Southern Cone show mixed results. In to a long-term challenge.” The opinions expressed by the members of the Board of Brazil, soybean production expanded from Advisors and by guest commentators do not necessarily represent those of the publisher. The analysis is the sole 24 million to 38 million hectares between The Advisor welcomes comments on its Q&A view of each commentator and does not necessarily 2010 and 2020 to meet growing Chinese section. Readers can write editor Gene Kuleta represent the views of their respective employers or firms. demand, generating $26 billion in 2020. But 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. If you have any questions relating to the contents of this publication, contact the editorial offices of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permission from the publisher.