LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Wednesday, March 20, 2019

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Wednesday, March 20, 2019

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Can the FBI Help Trump Expresses Corporate VP, Global Corporate Affairs Cargill Support for Joyce Chang Global Head of Research, Build Rule of Law Brazil Joining JPMorgan Chase & Co. NATO, OECD Marlene Fernández Corporate Vice President for in Latin America? U.S. President Donald Trump Government Relations, voiced support for Brazil becom- Arcos Dorados ing a major non-NATO ally or a Peter Hakim NATO ally and also said it should President Emeritus, be allowed to join the Organisa- Inter-American Dialogue tion for Economic Cooperation Donna Hrinak and Development. His statements President, Boeing Latin America came as Brazilian President Jair Jon Huenemann Vice President, U.S. & Int’l Affairs, Bolsonaro visited Washington. Philip Morris International Page 2 James R. Jones Chairman, Monarch Global Strategies ECONOMIC Craig A. Kelly U.S. Sanctions Director, Americas International A new law enforcement team, based in Miami (pictured above), will focus on fighting crimes Gov’t Relations, Exxon Mobil related to South America. // File Photo: City of Miami. Venezuela State John Maisto Director, U.S. Education Gold Company Finance Group The FBI is adding a new squad to its international corruption The U.S. Treasury said state gold Nicolás Mariscal unit to specifically focus on South America. The team will miner Minerven is propping up Chairman, Nicolás Maduro’s “illegitimate Grupo Marhnos be based in South Florida, where the real estate sector has regime.” Thomas F. McLarty III Q been increasingly linked to money laundering. Among other Page 3 Chairman, McLarty Associates objectives, it will seek to identify bribes made to foreign officials, as Carlos Paz-Soldan well as carry out an outreach strategy to teach companies in the region POLITICAL Partner, DTB Associates, LLP about corruption red flags and encourage them to self-report improper Haitian President Beatrice Rangel conduct to authorities. How big of a problem is the Miami-based squad Director, to Select New AMLA Consulting LLC facing, and to what extent will the initiative help strengthen the rule of Prime Minister Jaana Remes law in South America? Which countries, illegal practices and business Partner, President Jovenel Moïse said McKinsey Global Institute sectors should be the unit’s main priorities? What else can be done to he would choose a new prime Ernesto Revilla deter international money laundering in the Americas? minister after Congress censured Head of Latin American Jean-Henry Céant. Economics, Citi Page 2 Gustavo Roosen Gene M. Smith, president of Smith Brandon Internation- Chairman of the Board, Envases Venezolanos al, Inc. and a former operations officer serving in South Andrés Rozental America with the U.S. Central Intelligence Agency: “Miami President, Rozental & Asociados and Senior has long been the playground for wealthy South Americans, Policy Advisor, Chatham House A whatever their source of funds. What better place to install the newly Shelly Shetty established Miami International Corruption Squad, targeting all forms of Head of Sovereign Ratings, Latin America, Fitch corruption with at least one foot in the United States. Targeting corruption Roberto Sifon-Arevalo linked to Miami, local real estate or other worthy targets means consider- Managing Director, Americas Sovereign & Public Finance Ratings, ing several factors: volume of funds involved, likelihood of foreign cooper- Standard & Poor’s ation and track record of prior success. In brief, what issues point toward the likelihood of success in pursuing the usual suspects? All fingers point to Brazil. Brazil is the largest economy in South America and the ninth largest in the world. That’s a lot of money that might be in play. Brazil has Moïse // File Photo: Haitian Government. Continued on page 3

POLITICAL NEWS America reported. During their meeting, Trump NEWS BRIEFS and Bolsonaro discussed their support for Trump Expresses Venezuelan National Assembly President Juan General Motors to Guaidó, who has been recognized internation- Invest $2.7 Billion in Support for Brazil ally as the country’s acting president. When asked if U.S. military intervention in Venezuela Two Brazil Factories Joining NATO, OECD is a possibility, Trump responded, “All options General Motors will invest $2.7 billion in two are open.” Nicolás Maduro remains in power Brazilian factories over the next five years, U.S. President Donald Trump and Brazilian as Venezuela’s president and has the backing reversing a decision to close the plants last President Jair Bolsonaro met for the first of the country’s military, and the United States December, São Paulo State Governor João time Tuesday at the White House, with Trump has imposed increasingly tougher sanctions on Doria said Tuesday in a joint news conference suggesting that the South American country Caracas. “People are starving to death” in Ven- with GM executives, Reuters reported. The U.S. should be able to join the North Atlantic Treaty ezuela, Bolsonaro said. “We need to put an end automaker had planned to shutter its plants in Alliance and the Organisation for Economic to this.” Ahead of the meeting between Trump São Caetano do Sul and São José dos Campos, Cooperation and Development, The Wall Street and Bolsonaro, the United States and Brazil but the new governor convinced executives Journal reported. “I intend to designate Brazil signed an agreement that supports launches not to, he said, adding that the decision saved as a major non-NATO ally, or even possibly, if of U.S. spacecraft from Brazil. The agreement some 65,000 jobs. you start thinking about it, maybe a NATO ally,” will ensure that sensitive U.S. technology is Trump said during a joint press conference handled properly, consistent with the U.S. non- with Bolsonaro in the White House Rose Gar- proliferation policy, among other regulations, den. “Have to talk to a lot of people, but maybe the State Department said. Before the meeting, Haiti’s President to Select a NATO ally, which will greatly advance security Brazil also eliminated visa requirements for New Prime Minister and cooperation between our countries.” visitors from the United States and several oth- Following Censure Vote Trump’s comments highlighted the warming er countries, The Wall Street Journal reported. Haitian President Jovenel Moïse told lawmak- relationship between the United States and When asked about any reciprocal move from ers in a letter that he would soon begin the Brazil. Bolsonaro has expressed admiration the United States, Trump said his government process of selecting a new prime minister fol- for the U.S. president and is frequently called is “working on visas.” Trump and Bolsonaro lowing a censure vote in the lower chamber to the “Trump of the Tropics.” Designating Brazil also “agreed to take the steps necessary to oust current Prime Minister Jean-Henry Céant, as a major non-NATO ally would allow Brazil enable Brazil to participate in the Department the Jamaica Observer reported Tuesday. Céant, preferential treatment for the purchase of of Homeland Security’s Trusted Traveler Global who came into office just six months ago, says U.S. military equipment, give Brazil access to Entry Program,” according to a joint written he does not recognize Congress’ decision, surplus military equipment and would open statement released after the press conference. calling it “illegal and unconstitutional.” Moïse up new training opportunities for Brazilian has been facing pressure from the opposition military members with the United States, to step down over his handling of domestic The Wall Street Journal reported. Currently, Guatemalan Judge affairs and corruption allegations. Argentina is the only Latin American country Issues Warrant for with this designation. There are currently 17 major non-NATO allies. Also on Tuesday, Trump Candidate’s Arrest expressed support for Brazil’s effort to become Trump Taps Landau for a member of the Organisation for Economic A Guatemalan judge has issued an arrest Ambassador to Mexico Cooperation and Development, a move that warrant for former attorney general and current U.S. President Donald Trump has nominated would likely attract more foreign investment presidential candidate Thema Aldana, a court Christopher Landau, a lawyer, as his ambassa- into the country, which endured its worst reces- said Tuesday, but her candidacy gives her im- dor to Mexico, Agence France-Presse reported sion ever from 2014 to 2016. The 36-member munity from prosecution, Prensa Libre report- Tuesday. Landau previously was a clerk for two OECD includes most of the world’s highly ed. A spokeswoman for Guatemala’s Supreme conservative Supreme Court justices before developed economies. Bolsonaro told reporters Court said the warrant is related to a corruption beginning work as an attorney focused on at the joint press conference that his visit to investigation alleging some form of embezzle- appeals. Landau has no experience as a diplo- Washington heralded a new era in U.S.-Brazil ment, but authorities have not provided further mat, but he speaks Spanish and studied Latin relations. “Brazil has a president who is not details, the Associated Press reported. Aldana, America as a student at Harvard University, anti-American, which is unprecedented in 63, who is running with the relatively new Seed the wire service reported. His father, George recent decades,” said Bolsonaro, the Voice of Movement party and is polling in second place, Landau, was a longtime diplomat.

COPYRIGHT © 2019, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Wednesday, March 20, 2019 has denied wrongdoing. She was the Central FEATURED Q&A / Continued from page 1 American country’s top prosecutor from 2014 to 2018 and led some of the country’s most a new minister of justice and public security, at risk. However, tackling corruption in Latin prominent investigations. Among them was the Sérgio Moro, who has a strong reputation America is not a small task. As highlighted case against former President Otto Pérez Moli- for taking on complex investigations and by the recently released Corruption Percep- na who, along with other politicians, was jailed prominent, powerful figures—including tions Index, countries in this region simply former Brazilian President Lula da Silva continue to ‘fail in making any serious in- (now serving a 12-year sentence, stemming roads against corruption.’ In the short term, from the Operation ‘Lava Jato’ investigation, the new FBI squad will likely concentrate its which Moro himself spearheaded). Brazil investigations on countries that are already has been the home base of multinational under the U.S. government’s scrutiny, such corruption scandals, and later enforcement as Venezuela and Nicaragua. Later on, it will efforts, that have involved the oil industry, possibly move to investigations into other as reflected in the settlement with Petrobras countries that, based on reports issued by (to the tune of approximately $1.8 billion) in international organizations, reflect systemic 2018; the construction industry, as reflected and persistent corruption, such as Guate- Aldana // File Photo: Guatemalan Government. in the court-ordered fine of approximately mala, Honduras and Mexico. Against this for corruption. Aldana worked closely with the $2.6 billion against Odebrecht in 2017; and backdrop, the Miami-based unit will likely U.N.-backed International Commission Against the meatpacking industry, with an agreed prosecute cases that fall under the jurisdic- Impunity in Guatemala, or CICIG, to try to lift fine of approximately $3.2 billion in 2017 tional scope of the Foreign Corrupt Practices President Jimmy Morales’ immunity to start levied against JBS. At the World Economic Act or the Money Laundering Control Act. a probe into his alleged involvement in illicit Forum, Moro said, ‘Brazil is probably the Critically, the FBI will continue to investigate campaign financing in 2015. The president has country [that] did more [to fight] corruption in financial transactions either originating denied wrongdoing, and attempts to remove the last four years … than any other country.’ or ending in the United States, including his immunity have failed in Congress. Morales, Working closely with Brazilian authorities transfers of funds for the purchase of real who claims the anti-graft agency has over- would likely prove to be to the advantage of estate and luxury items. To counteract inter- stepped its bounds, in January said he would the United States and Brazil, while fostering national money laundering, the new squad shutter CICIG, at the time hailing criticism from the rule of law across the Americas.” should team up with the Miami field offices U.N. Secretary General António Guterres. CICIG of other U.S. law enforcement agencies with has uncovered more than 80 criminal networks Javier Coronado, associate experience in tracing the proceeds of cor- in Guatemala that involve more than 1,000 attorney at Diaz, Reus & Targ: ruption in Latin America, such as the IRS-CI, people, the Financial Times reported. [Editor’s “The Miami-based squad’s ICE-HSI and U.S. Immigration and Customs note: See related Q&A in the Sept. 20 issue of A actions could certainly help Enforcement. It should also establish a fluid the Advisor.] strengthen the rule of law in Latin Amer- communication channel with law enforce- ica. Corruption undermines the faith that ment agencies and financial intelligence citizens have in their government and puts units from Latin American countries.” ECONOMIC NEWS constitutional principles and property rights Continued on page 4 U.S. Slaps Sanctions and assets and prohibits U.S. citizens from sectors that he controls. The United States dealing with Minerven or Perdomo. “Treasury has sought to pressure Maduro to step down on Venezuelan is targeting gold processor Minerven and its or at least convince those still loyal to him, president for propping up the inner circle of especially in the military, to back internationally State Gold Company the corrupt Maduro regime,” Treasury Secretary recognized interim President Juan Guaidó, Steven Mnuchin said in the statement. “We Bloomberg News reported. “The regime has The U.S. Treasury on Tuesday imposed will aggressively pursue those involved with apportioned responsibility for oversight of sanctions on Venezuelan state gold mining Maduro’s reckless illicit gold trade, which is gold extraction to select military officers who company Minerven and its president, Adrián contributing to this financial, humanitarian and take their cut,” Marshall Billingslea, assistant Antonio Perdomo Mata, saying they have environmental crisis,” he added. Since January, secretary for terrorist financing at the Treasury, “continued to prop up the illegitimate regime this is the sixth round of U.S. sanctions against told Bloomberg News. of former President Nicolás Maduro.” The officials close to Maduro and Venezuelan measure blocks the company’s U.S. properties

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2019 Ana Maria Belotto, consultant in America has the potential of playing an foreign law at Feldens Madruga important role in that movement. Under- Erik Brand in Brasília: “The success of the standing different local realities and working Publisher [email protected] FBI squad will likely depend on with local authorities may be an important A Gene Kuleta the level of cooperation with South Amer- tool for such purposes.” Editor ican local authorities. In that sense, it is [email protected] difficult to refer to South America as a unit, Richard K. Gordon, professor of Anastasia Chacón González considering the different realities of each law and director of the Financial Reporter South American country. Certain countries Integrity Institute at Case West- [email protected] have well-established and functional police A ern Reserve University: “The and prosecutorial authorities, while others initiative could prove crucial to helping fight

are facing their own local institutional crisis. corruption, particularly corrupt payments in Michael Shifter, President The question of self-reporting improper con- breach of the U.S. Foreign Corrupt Practic- Genaro Arriagada, Nonresident Senior Fellow duct to authorities, for example, is one that es Act. Anti-money laundering standards Sergio Bitar, Nonresident Senior Fellow varies according to local procedures and already require financial institutions to pay Joan Caivano, Director, Special Projects authorities. In Brazil, changes in local laws greater attention to accounts held by polit- Michael Camilleri, Director, Peter D. Bell Rule of Law and regulations and new procedures adopt- ically exposed people, such as government Program ed by local authorities have increasingly led officials and relatives who are in a position Kevin Casas-Zamora, Nonresident Senior Fellow companies and individuals to self-report to award contracts or make other payments Ariel Fiszbein, Director, Education Program criminal activities. Self-reporting and plea from the public fisc. However, it is likely that Peter Hakim, President Emeritus agreements were in fact groundbreaking in such officials who are corrupt will not open Claudio Loser, Senior Fellow Operation Car Wash, which in recent years or maintain accounts in their own name Nora Lustig, Nonresident Senior Fellow has unveiled an enormous corruption and (see, for example, Lula), which means that Margaret Myers, Director, Asia and Latin America Program money laundering scheme involving some financial institutions need help in deter- Manuel Orozco, Director, Migration, of the country’s top politicians and busi- mining if an account holder is a politically Remittances & Development nessmen. Other South American countries, exposed person. The Miami-based squad Jeffrey Puryear, Senior Fellow however, may not have formal incentives should be able to help with this. Also, they Tamar Solnik, Director, Finance & Administration or even a proper legal procedure for such should be able to help financial institutions Lisa Viscidi, Director, Energy Program reporting to take place. The strengthening whose account holders are paying bribes to Denisse Yanovich, Director of Development and of local authorities and cooperation with more effectively monitor those transactions External Relations foreign institutions, such as the FBI and the to financial institutions in Latin America for Latin America Advisor is published every DOJ in the Unites States, has demonstrated any illicit payments.” business day, except for major U.S. holidays, to be a major movement to deter internation- by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 al money laundering in the Americas and will The Advisor welcomes comments on its Q&A Washington, DC 20005 likely continue to do so. The new FBI squad section. Readers can write editor Gene Kuleta www.thedialogue.org in South Florida and its proximity with South at [email protected]. ISSN 2163-7962 Subscription inquiries are welcomed at [email protected]

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