LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Thursday, June 28, 2018

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Thursday, June 28, 2018

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs What Will Come of Mexico’s May Cargill Trade Balance Joyce Chang Global Head of Research, Canada Legalizing Deteriorates JPMorgan Chase & Co. A $40 million surplus in Dirk Donath Senior Partner, Recreational Pot? nonpetroleum goods only partly Catterton Aimara compensated for the $1.63 billion Marlene Fernández defi cit in petroleum trade. Corporate Vice President for Page 2 Government Relations, Arcos Dorados Peter Hakim BUSINESS President Emeritus, Inter-American Dialogue Grupo Copetrol Donna Hrinak Buys Paraguay President, Boeing Latin America Jon Huenemann Fuel Stations Vice President, U.S. & Int’l Affairs, Brazilian state oil company Petro- Philip Morris International bras has signed an agreement James R. Jones Chairman, to sell its network of 197 fuel stations in Paraguay to Grupo Monarch Global Strategies Advocates calling for legalizing marijuana organized a Vancouver march in 2015. // File Craig A. Kelly Photo: Jeremiah Vandermeer via Creative Commons license 2.0. Copetrol for about $384 million. Director, Americas International Page 2 Gov’t Relations, Exxon Mobil Canada’s Senate on June 19 approved the nationwide legal- John Maisto Director, U.S. Education ization of recreational marijuana, making Canada the second POLITICAL Finance Group country in the world to allow a legal cannabis industry. In the Pence Continues Nicolás Mariscal Q Chairman, United States, nine states and the District of Columbia have to Press Venezuela Grupo Marhnos passed legislation permitting the recreational use of marijuana, and 30 Thomas F. McLarty III on Regional Tour Chairman, states allow medical use. However, the drug remains illegal under fed- U.S. Vice President Mike Pence McLarty Associates eral law, and the Trump administration has doubled down on anti-drug arrived in Quito Wednesday. He Carl Meacham is expected to discuss trade ties Associate VP for Latin America efforts. What does legalization and regulation of marijuana mean for with President Lenín Moreno Int’l Advocacy Division, PhRMA Canadians? Does it indicate an inevitable march toward legalization today and to continue to try to Carlos Paz-Soldan Partner, in the United States and other countries such as Mexico, which is also boost regional pressure against DTB Associates, LLP exploring changes to marijuana laws? What effects does Canada’s new the rule of Venezuelan President Beatrice Rangel legislation have on North American cooperation on anti-drug efforts? Nicolás Maduro, who had been Director, an ally to Ecuador under Moreno’s AMLA Consulting LLC predecessor, Rafael Correa. Ernesto Revilla Page 2 Head of Latin American Barry McCaffrey, president of BR McCaffrey Associates, Economics, Citi retired U.S. four-star general and former director of the Gustavo Roosen White House Offi ce of National Drug Control Policy: “Canada Chairman of the Board, Envases Venezolanos A will legalize pot effective October 17 for those over age Andrés Rozental 18. Canadians will be able to home grow four plants and possess 1.1 President, Rozental & Asociados and Senior ounces. They become the second nation to do so. The decision is widely Policy Advisor, Chatham House supported by the people of Canada. In the United States, 61 percent agree Roberto Sifon-Arevalo Managing Director, Americas the drug should be legal. A very clever and long-term political effort to Sovereign & Public Finance Ratings, Standard & Poor’s normalize marijuana is now producing sweeping changes in the availabil- ity, perceived threat, and legal acceptance of pot. In the United States, adolescent pot use is now sharply up. Stoned driving with coincident alcohol use has become the leading cause of traffi c fatalities in many states. Big money and market incentives will sharply increase drug use. Moreno // File Photo: Government of Ecuador. Continued on page 3

POLITICAL NEWS on Wednesday, Pence told migrants in a speech NEWS BRIEFS that there was a difference between being a Pence Continues to Venezuelan migrant in Brazil versus a migrant United Nations Takes on the U.S. border. “Back in our country we Belize Barrier Reef Press Venezuela on face a crisis on our southern border as many seek to come into America for a better life,” Off Endangered List Latin America Tour Pence said. “The families ... who have fl ed UNESCO has removed the Belize Barrier Reef from Venezuela came here to Brazil not to seek from its list of “endangered” World Heritage U.S. Vice President Mike Pence arrived in Ecua- a better life; they came here to live, to survive.” Sites after nine years, BBC News reported dor on Wednesday evening, visiting the second Wednesday. The Paris-based agency of the country in his three-nation tour of Latin Amer- United Nations praised Belize for taking ica this week, the Associated Press reported. ECONOMIC NEWS “visionary” steps to preserve the reef, which is Pence is scheduled to discuss trade ties with second only in size to Australia’s Great Barrier President Lenín Moreno today in Quito, where Mexico’s May Trade Reef. Last December, local lawmakers passed he is expected to continue to try to boost an indefi nite moratorium on oil exploration regional pressure against the rule of Venezu- Balance Deteriorates in Belize waters, citing a desire to protect a elan President Nicolás Maduro, who had been growing tourism industry. an ally to Ecuador under Moreno’s predeces- Mexico’s trade defi cit worsened in May, grow- sor, Rafael Correa. Earlier on Wednesday, in ing to $1.59 billion as higher oil prices pushed Manaus, Brazil, Pence visited a shelter that up the value of petroleum imports, The Wall Grupo Copetrol Buys houses Venezuelans who have fl ed deteriorat- Street Journal reported Wednesday, citing data ing economic and political conditions at home. Paraguay Fuel Station from the national statistics institute, INEGI. “Under Nicolás Maduro, Venezuela’s great Exports last month grew by 10.9 percent from Network for $384 Million democracy has been reduced by a brutal dicta- a year before to $39.18 billion, while imports Brazilian state oil company Petrobras said on torship,” Pence told migrants in Manaus. “And were up 11.5 percent at $40.76 billion. Higher Wednesday that it has signed an agreement the deprivation that has followed has been oil prices increased the cost of energy imports, to sell its network of 197 fuel stations in Para- a consequence of that failed leadership,” he including gasoline and diesel, which rose 51.3 guay to Grupo Copetrol for about $384 million, added, according to a White House transcript. percent to $4.46 billion. A $40 million surplus Reuters reported. The Paraguay-based gas Maduro recently won a second six-year term as in nonpetroleum goods only partly compen- station operator will pay Petrobras an initial president in elections the opposition boy- sated for the $1.63 billion defi cit in petroleum deposit of $49 million for the assets, followed cotted and numerous states and multilateral trade. Exports of steel products rose nearly 40 by an additional $334 million when the deal is groups have called illegitimate. Maduro insists percent from a year earlier. May was the last closed. Earlier this week, Petrobras named Ra- the United States is trying to overthrow his month before the U.S. began applying tariffs on fael Salvador Grisolia to serve as chief fi nancial socialist government. “Every time the poison- steel and aluminum imports from Mexico, Can- offi cer, replacing now-CEO Ivan Monteiro. ous viper Mike Pence opens his mouth, I feel ada and the European Union. As the trade spat stronger,” Maduro said in a televised speech escalates and talks continue over the North Wednesday. Ecuador-U.S. relations were more American Free Trade Agreement, offi cials are strained under leftist Correa than Moreno, but wary of changes in the terms and conditions Argentine Stocks Fall it remains unclear whether Pence today will under which Mexican exporters have access to Most Since 2014 bring up Julian Assange, the WikiLeaks founder the U.S. market. Offi cials in Mexico have also to whom Ecuador has granted asylum at its Argentina’s benchmark MerVal stock index been watching U.S. policy shifts that might embassy in London and given Ecuadorean plunged 8.8 percent on Wednesday amid con- affect massive fl ows of remittances that have citizenship while he is wanted by U.S. offi cials. cerns about emerging market economies and come into the country since the election of U.S. Ten U.S. senators from the Democratic Party trade tensions between the United States and President Donald Trump, who has pledged to sent Pence a letter Wednesday urging him to China, Reuters reported. It is the index’s worst crack down on migrants in the United States press Moreno on Assange, Reuters reported. daily performance since early 2014. The drop without proper documentation. In the month After his talks in Ecuador, Pence is scheduled erased last week’s gains, when stocks rose of April alone, Mexicans working abroad sent to fl y to Guatemala for a meeting this evening as MSCI upgraded Argentina to its emerging home a record $2.72 billion, up nearly 18 per- with the leaders of Honduras, El Salvador and markets category. Bank stocks were among the cent from the same month last year. [Editor’s Guatemala to discuss immigration policy under hardest hit, as pressure on Argentina’s central note: See related Q&A in the June 13 issue of President Donald Trump. Speaking in Manaus bank to stabilize the peso currency continue to the Financial Services Advisor.] worry investors, Reuters reported.

BUSINESS NEWS FEATURED Q&A / Continued from page 1

Canadian entrepreneurs are assembling U.S., the attraction of a cross-border fl ow of Pemex Makes Push the capital and industry to make a fortune. young Americans getting high without con- for Deals Ahead of Smoked marijuana will now be joined by sequence in a Canadian marijuana Mecca edibles of maple syrup, lollipops and jelly could very well become a negative factor in Change in Gov’t treats. Fun times. Good luck to Canada with the relationship. Some Canadians have also all that. Bad health policy. Bad labor policy. expressed concern about the consequences Mexican state oil company Pemex has been Bad criminal justice policy. Currently avail- of wider spread use among young people accelerating efforts to bring on partners before able pot frequently has THC levels 40 times resulting from commercialization of marijua- Sunday’s national elections, fearing the results higher than the 1970s. The impact of heavy could slow foreign investment in the country’s pot use on adolescents can be devastating recently liberalized oil sector, Bloomberg News to include loss of IQ. Data seems to show For the time being, reported Wednesday. Last week, the company’s that one in six teens may become addicted. Canada’s marijuana board named a new head of joint ventures It is very important that Canada collects policy will have little to choose partners in at least seven onshore realistic science data on the health, labor, effect on drug policies oil fi elds. Jorge Lomelín Delgadillo, a 15-year criminal justice and adolescent effects of in the United States veteran with the company, faces a busy year, this unsound policy in the coming fi ve years.” and Mexico.” as Pemex seeks to secure as much investment — Melvyn Levitsky as it can ahead of a new government taking Melvyn Levitsky, professor at offi ce in December. Pemex expects to make the University of Michigan, an announcement late next month on three former assistant secretary of na products. Scientifi c studies have shown refi nery joint-venture agreements, according to A state for international narcot- consistently that the most vulnerable individ- the report, and Mexico will auction 37 onshore ics matters and an elected member of the uals for the onset of a variety of current and areas and nine areas in the shale gas-rich International Narcotics Control Board of the eventual mental illnesses from marijuana Burgos Basin on September 27. The presiden- United Nations: “Both Canada and the Unit- use are those aged 12-24. In addition, stud- tial front-runner, Andrés Manuel López Obrador, ed States (and Uruguay, the other country ies by a federal task force in Colorado show or AMLO, has said he will dial back energy re- to legalize) are in violation of their inter- that since legalization of marijuana in 2013, forms that investors see as crucial to reversing national treaty obligations under the 1961 teenage use has risen substantially, as have years of declines in oil output. “The anxiety in Single Convention on Narcotic Drugs. That automobile accidents and fatalities in which the business community in Mexico and abroad Convention and two others state that drugs marijuana was judged to be a factor. For is warranted,” Amanda Mattingly, senior direc- should be legal only for medical or scientifi c the time being, Canada’s marijuana policy tor at The Arkin Group in New York, told the purposes. Marijuana is listed as a drug with will have little effect on drug policies in the Advisor earlier this month. “If elected, López neither of these attributes. Although the U.S. United States and Mexico because imple- Obrador will introduce a level of uncertainty government has stated that marijuana is menting legislation and details of the policy into the Mexican economy, business climate, illegal in federal law, it has allowed individual in Canada’s provinces still have to be worked fi nancial markets and NAFTA negotiations that states to legalize its cultivation, sale and out and because the results of the change in will no doubt lead to slower economic growth, use, despite Article VI of the Constitution, policy will not be known for several years.” a cooling of foreign investment, higher infl ation which makes federal law supreme over state and a weaker peso,” she added. Others see law. I don’t believe the Trump Administration Paul Armentano, deputy direc- López Obrador as being less damaging. “AMLO will make a fuss about Canadian legalization tor at the National Organization is a pragmatist,” James R. Jones, a former U.S. because despite its words, it has taken no for the Reform of Marijuana ambassador to Mexico and chairman of Mon- action against the growing trend toward A Laws (NORML): “It remains to arch Global Strategies, told the Advisor. “He legalization here. However, a bilateral irritant be seen whether Canada’s move to regulate recognizes that in order for him to be able to could develop as a result of the fact that the the marijuana market will infl uence U.S. help his constituency, the poor and disadvan- Canadian legislation draws the legal age for policymakers to similarly rethink and amend taged, he must grow the economy. He knows marijuana possession and use at 18, where- America’s archaic and failed marijuana that economic growth doesn’t come from as the age limit in every American state that prohibition laws. U.S. voters strongly government.” [Editor’s note: See related Q&A in has legalized is 21. While it’s still relatively endorse such a policy change. According the June 13 issue of the Advisor.] easy for teenagers to get marijuana in the to polling data compiled by the Center for 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 American Progress, 68 percent of registered which the drug is untested for contaminants voters—including majorities of Democrats and potency. Our approach to legalization Erik Brand (77 percent), Independents (62 percent), and strict regulation is designed to tackle Publisher [email protected] and Republicans (57 percent)—‘support the these troubling problems head-on, including legalization of marijuana.’ However, unlike a new emphasis on public education and Gene Kuleta Editor in Canada, voters’ sentiments have yet to harm reduction. This is a cautious approach [email protected] be translated into political will. Despite pos- which reﬂ ects learning from the experience Anastasia Chacón González sessing bipartisan public support, legislation of several U.S. states—particularly in the Reporter to signiﬁ cantly reform U.S. marijuana policy area of cannabis advertising and promotions [email protected] languishes in Congressional committees. where Canada’s restrictions are considerably One potential exception is the recently tighter than those in place for tobacco and

introduced STATES Act, which creates an Michael Shifter, President exemption to the Controlled Substances Act Genaro Arriagada, Nonresident Senior Fellow for states that regulate either the medical It is clear that 95 Sergio Bitar, Nonresident Senior Fellow use or the adult use and distribution of years of prohibition Joan Caivano, Director, Special Projects marijuana, and has received public support has failed terribly.” Michael Camilleri, Director, Peter D. Bell Rule of Law from the president. But while the STATES Program — Tony Dean Act is a welcome step in the right direction, Kevin Casas-Zamora, Nonresident Senior Fellow its proposed changes are relatively modest Ariel Fiszbein, Director, Education Program compared to the sort of sweeping reforms Alejandro Ganimian, Nonresident Fellow enacted by our northern neighbor. If history Peter Hakim, President Emeritus is any example, U.S. politicians will likely alcohol. Every jurisdiction makes decisions Claudio Loser, Senior Fellow continue to take a ‘wait and see’ approach on major health and social policies based Nora Lustig, Nonresident Senior Fellow before expressing a willingness to seriously on its own circumstances, and cannabis Margaret Myers, Director, China and Latin America Program consider such broader federal changes, such reforms are no different. Many countries Manuel Orozco, Director, Migration, as removing marijuana from the Controlled now have extensive experience with medical Remittances & Development Substances Act altogether. But they should cannabis regimes and, if the pattern seen Jeffrey Puryear, Senior Fellow not expect to voters to sit idly by. The longer in U.S. states is an indicator, this might Tamar Solnik, Director, Finance & Administration American politicians delay, and the more be seen as a precursor to the legalization Lisa Viscidi, Director, Energy Program lawmakers elsewhere act, the greater the of recreational cannabis in some jurisdic- Denisse Yanovich, Director of Development and pressure both political parties will inevitably tions. Canada has been an active partner External Relations face from an electorate that has made up its with North American drug enforcement Latin America Advisor is published every mind and is running out of patience.” and intelligence agencies in combating the business day, except for major U.S. holidays, production and traffi cking of illegal drugs. by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 Tony Dean, independent Cana- This collaboration will continue, including a Washington, DC 20005 dian senator from Ontario and focus on illegal traffi cking of cannabis and www.thedialogue.org sponsor of Canada’s marijuana other drugs across borders. The legalization ISSN 2163-7962 A legalization bill: “Canada has and strict regulation of cannabis in Canada Subscription inquiries are welcomed at major and long-standing problems with can- is arguably a new approach to better con- [email protected] nabis. It is clear that 95 years of prohibition trolling cannabis within our own borders.” The opinions expressed by the members of the Board of has failed terribly. Our country has a globally Advisors and by guest commentators do not necessarily high rate of youth consumption, a long histo- The Advisor welcomes comments on its Q&A represent those of the publisher. The analysis is the sole ry of criminalization for simple possession, section. Readers can write editor Gene Kuleta view of each commentator and does not necessarily represent the views of their respective employers or fi rms. and a burgeoning $7 billion illegal market in 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 offi ces of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permis- sion from the publisher.