LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Wednesday, May 23, 2018

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Wednesday, May 23, 2018

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Can Cuba’s New Nicaragua’s Cargill Joyce Chang Ortega Violated Global Head of Research, President Attract Human Rights: JPMorgan Chase & Co. Dirk Donath Commission Senior Partner, Nicaraguan President Daniel Catterton Aimara Foreign Investors? Ortega’s government violated Marlene Fernández human rights in its crackdown on Corporate Vice President for Government Relations, protests, said the Inter-American Arcos Dorados Commission on Human Rights. Peter Hakim Page 2 President Emeritus, Inter-American Dialogue Donna Hrinak ECONOMIC President, Boeing Latin America Jamaica’s Poverty Jon Huenemann Vice President, U.S. & Int’l Affairs, Rate Falls to Philip Morris International Six-Year Low James R. Jones Chairman, The Caribbean nation’s poverty Monarch Global Strategies Cuba’s new president, Miguel Díaz-Canel, is reportedly stepping up efforts to attract more rate fell to 17.1 percent. Rising Craig A. Kelly foreign investment to the Caribbean nation. // File Photo: Radio Rebelde. employment, higher agricultural Director, Americas International output and lower consumer prices Gov’t Relations, Exxon Mobil Under new President Miguel Díaz-Canel, Cuba is boosting have reportedly helped. John Maisto Director, U.S. Education its efforts to attract foreign investment and strengthen the Page 2 Finance Group island nation’s languishing economy, the Financial Times Nicolás Mariscal POLITICAL Chairman, Q reported on May 8. Among the projects, France’s Total and Grupo Marhnos Germany’s Siemens are working to open a new gas-fired power plant in Temer Drops Thomas F. McLarty III Chairman, Cuba, and Guernsey-incorporated Ceiba Investments recently an- Out of Brazil McLarty Associates nounced $150 million in investment to upgrade four hotels and build a Presidential Race Carl Meacham Associate VP for Latin America fifth one with Spain-based Club Meliá and Cuban partner Cubanacan. To Brazilian President Michel Temer, Int’l Advocacy Division, PhRMA what extent will foreign investments materialize, and how far will they whose approval ratings have Carlos Paz-Soldan go in solving Cuba’s economic problems? How will tighter U.S. restric- consistently been in the single Partner, digits, withdrew from the country’s DTB Associates, LLP tions under the Trump administration affect investment, tourism and presidential race and endorsed his Beatrice Rangel other commerce in Cuba? Is new Cuban President Miguel Díaz-Canel former finance minister, Henrique Director, AMLA Consulting LLC significantly changing course from six decades of Castro rule by seeking Meirelles. Page 2 Gustavo Roosen these new investments? Chairman of the Board, Envases Venezolanos Andrés Rozental Matthew Aho, special advisor on Cuba for the corporate President, Rozental & Asociados and Senior practice group of Akerman LLP in New York: “Former Policy Advisor, Chatham House President Raúl Castro for years extolled the virtues of foreign Roberto Sifon-Arevalo Managing Director, Americas direct investment as a pillar of his efforts to ‘update’ his Sovereign & Public Finance Ratings, A Standard & Poor’s country’s economy and achieve a more prosperous version of Cuban socialism. Yet, despite years-long efforts to charm investors with fancy trade ministry brochures containing glossy photos of potential business opportunities and countless government-sponsored industry fairs, the long-promised annual $2 billion flood of foreign capital has never amounted to more than a trickle. Spanish involvement in hotels, Canadian investments in mining and energy, and French companies’ worldwide Temer // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS may have been involved in the laundering of NEWS BRIEFS illicit money, including through the purchase Brazil’s Temer of real estate, the AP reported. Authorities are Ortega Violated Human investigating whether he used his young son Rights in Crackdown: Drops Out of and other family members in the alleged money laundering. Temer has strongly denied wrong- Commission Presidential Race doing and has called the investigation “criminal The Inter-American Commission on Human persecution.” [Editor’s note: See related Q&A in Rights said Monday that Nicaraguan president Brazilian President Michel Temer, whose the May 8 issue of the Advisor.] Daniel Ortega’s government gravely violated approval ratings have languished in the single human rights in a crackdown on mass protests digits, on Tuesday withdrew from the country’s against the government last month, Nica- presidential race and endorsed his former ECONOMIC NEWS raguan newspaper La Prensa reported. The finance minister, Henrique Meirelles, Globo TV commission’s preliminary report listed torture, reported. “Meirelles is the best of the best,” Te- Jamaica’s Poverty inhumane treatment, censorship of and attacks mer said standing next to Meirelles at an event against the press and illegal detention as some in Brasília hosted by the Brazilian Democratic Rate at Six-Year Low of these violations, according to BBC News. The commission also counted 76 deaths and Jamaican Finance Minister Nigel Clarke said 868 injured. Meirelles is the Tuesday that the island’s poverty rate had fallen to 17.1 percent, a six-year low, the Jamai- best of the best.” ca Gleaner reported. A combination of rising — Michel Temer All Survive Crash of employment, higher agricultural output and Private Jet in Honduras lower consumer prices has brought the poverty rate down 19 percent since 2015, according to There were no fatalities in the crash of a the report. Data from the Planning Institute of private jet in Honduras on Tuesday morning, Jamaica, or PIOJ, indicated that poverty in rural Honduran daily newspaper La Prensa reported. Movement Party. In the speech, which Globo Jamaica has fallen by 30 percent. “This is great The plane, which carried four passengers and televised, Temer acknowledged his slim chanc- news for the people of Jamaica, as it speaks to two crew members and was traveling from es of being re-elected. “I am realistic. I know the fact that economic opportunity is expand- Austin, Tex., veered off the runway and split in what I did and what I did not do [in office],” ing for more and more of our fellow citizens,” half when the pilot was attempting to land at Temer said. Meirelles stepped down as finance Clarke said, speaking in the House of Repre- Toncontín International Airport in Tegucigalpa. minister in order to run for president. He also sentatives. Jamaica’s economy expanded 1.2 Preliminary reviews suggest the crash was a served as central bank president during the percent in the first three months of this year, result of human error and not aircraft malfunc- administration of former President Luiz Inácio with the mining and quarrying industry growing tion. Lula da Silva, who was jailed last month after by 25.5 percent, according to preliminary data being convicted on corruption charges. Temer, released by PIOJ on Tuesday. For fiscal year who took office in 2016 after the impeachment 2017-18, however, the growth rate was lower, of his predecessor, Dilma Rousseff, has seen Fourteen Chilean expanding by just 0.8 percent. Bank of Jamaica his approval ratings consistently in the single Governor Brian Wynter said earlier this week Priests Suspended digits. At one point, it was as low as 3 percent, that Jamaica’s market interest rates are at Amid Investigation the Associated Press reported. Corruption record lows and “still falling,” while the govern- allegations against him have also frequently Catholic Church officials in the Chilean city of ment’s fiscal performance remains strong, the diverted attention away from his government’s Rancagua on Tuesday suspended 14 priests state-run Jamaica Information Service report- reform agenda. Brazil’s attorney general has who are under investigation on allegations ed. Wynter said he expects a modest acceler- charged Temer in two corruption cases. The of “improper conduct,” Reuters reported. The ation in economic growth ranging between 1.5 lower house of Brazil’s Congress, which must development could worsen a sexual abuse and 2.5 percent per quarter over the next two approve any prosecution of a current president, scandal involving Catholic priests in the South years, with inflation contained at the lower end voted twice last year against allowing his pros- American country. Earlier on Tuesday, the Vat- of the bank’s target of 4-6 percent. A strong ecution. He still could face trial after leaving ican announced that Pope Francis would host economy in the United States, a top source office at the end of this year. Recently, Brazil’s a second group of victims who had suffered of tourism and trade for the island, is helping federal police have investigated whether Temer abuse at the hands of priests. boost the bank’s projections, Wynter said.

FEATURED Q&A / Continued from page 1 Brazil Eyes Cutting distribution of Cuban rum and cigars are trade partner that mattered. Now, Vene- Diesel Taxes to a proverbial drop in the bucket relative to zuelan largesse is drying up, and Cuba is End Truckers’ Strike the country’s needs. A major infrastructure negotiating again with the European Union. project like the gas-powered plant would be Many substantial problems exist. Import- In an attempt to bring a two-day truck driver a big step in the right direction (assuming ant sectors such as agriculture, financial strike to an end, Brazil Finance Minister it ever breaks ground and amounts to more services and retail remain closed to foreign Eduardo Guardia announced an agreement with than a flurry of good press). Average Cubans investment. Investors must still employ Congress for the government to cut special like to talk about two ‘blockades.’ The first is taxes on diesel, Folha de S. Paulo reported imposed by the United States from afar. The on Wednesday. The agreement is subject to second is the so-called ‘internal blockade’ Important sectors congressional approval of the government’s and refers to bureaucratic bottlenecks, lack such as agriculture, payroll project. The statement came after truck of transparency and outmoded mindsets financial services drivers blocked highways and other roads on among many Cuban officials. If he wants to and retail Monday and Tuesday in protest of rising fuel succeed where his predecessors failed, Mr. remain closed to Díaz-Canel should focus first and foremost prices, threatening to hurt the country’s econ- foreign investment.” on the latter, where he exercises greater omy, which relies heavily on transportation. —Paul Webster Hare More than 200,000 truck drivers are calling control. The U.S. embargo is inarguably a de- for Petrobras, Brazil’s state-owned oil giant, to terrent to investment. But risk-tolerant global untie its prices from international oil prices, capital would almost certainly flow by the said a national truckers association represen- needed billions if European, Asian and Mid- only those chosen by the state and pay their tative on Tuesday, according to The Wall Street dle Eastern investors could only figure out a salaries through the state. These policies Journal. Diesel prices, which make up the place to put their money where it would truly are to reward loyalty and limit the inequality bulk of truckers’ costs, have increased by 16 be protected by the rule of law and generate that foreign investment stimulates. Beyond percent in comparison to the same period last adequate annual returns on investment.” the direct impact of the investments, other year, the newspaper reported. They are also challenges must be resolved. How far will demanding a reduction in fuel taxes. The strike Paul Webster Hare, senior foreign investors in areas like tourism be has disrupted traffic in at least 17 of 26 Bra- lecturer at the Frederick S. permitted to compete directly with the zilian states and may continue throughout the Pardee School of Global Studies military-owned conglomerates? And will week, Reuters reported. On Monday, Guardia A at Boston University and former Cuban-Americans and self-employed Cubans told reporters that ‘‘[the government] cannot British ambassador to Cuba: “The European be able to partner with overseas investors? afford to have a reduction in tax revenue at this Union has a long foreign investment history Meanwhile, the recent project announce- moment,’’ according to Reuters. with Cuba. Indeed, 20 years ago it was the ments will remind Cuba watchers that many source of more than 70 percent of all foreign get the green light but few actually happen. investment. Then Fidel Castro closed the Bureaucracy is often Cuba’s answer to over- door, and most existing investors left or zealous entrepreneurs. If Díaz-Canel wants BUSINESS NEWS saw their property expropriated. Some were to signal change, he must address these imprisoned without charge. Thereafter, points. I doubt that new U.S. restrictions will Vista, Jaguar Venezuela became the only investment and now deter investors. The United States has Announce Venture Continued on page 4 onshore blocks to Vista for $37.5 million, plus oil regulator, the National Hydrocarbons Com- on Mexico Projects additional payments based on the future price mission, still must approve the joint venture in of oil, Bloomberg News reported. Vista will order for it to take effect. Last year, Vista be- Vista Oil & Gas and Jaguar Exploration and Pro- operate the two blocks that are already under came the first publicly traded oil firm in Mexico, duction on Tuesday announced a joint venture production, while Jaguar will operate the third four years after the country’s landmark energy on three onshore oil projects, two in Tabasco area, an exploratory block. Jaguar, an upstart reforms, which ended decades of monopoly State and one in Veracruz, Mexican daily news- Monterrey-based oil company that Mexico’s control of the sector by state-owned energy paper El Financiero reported. Under the deal, Grupo Topaz owns, won the three projects at company Pemex. Vista has also eyed assets in Jaguar is selling a 50 percent stake in the three auctions last year, Reuters reported. Mexico’s Brazil and elsewhere for possible acquisition.

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2018 fought and lost those battles before. And alive, and even after he is gone, change in with possible new U.S. sanctions on Europe- Cuba will be slow and painful.” Erik Brand an investors in Iran, European governments Publisher [email protected] will not back down knowing they will have Vicki Huddleston, retired U.S. strong public and international support.” ambassador and former chief of Gene Kuleta Editor the U.S. Interests Section in Ha- [email protected] Jaime Suchlicki, director of the vana: “In 1823, U.S. Secretary of A Anastasia Chacón González Cuban Studies Institute at the State John Quincy Adams predicted that ‘if Reporter University of Miami: “Cuba has an apple severed from its native tree cannot [email protected] A had foreign investments from choose but to fall to the ground, Cuba....can European countries for decades. They have gravitate only towards the North American

done little to transform the Cuban econo- Union.’ Almost 200 years later, it may finally Michael Shifter, President my or to improve the lives of the average be said with some certainty that Adams’ Genaro Arriagada, Nonresident Senior Fellow Cuban. The Cuban government depends ‘ripe fruit theory’ has been proven wrong. Sergio Bitar, Nonresident Senior Fellow on the program to send physicians abroad, Even after the expropriation of U.S. property Joan Caivano, Director, Special Projects remittances from Cuban-Americans, drug valued at close to $2 billion by Cuba’s 1959 Michael Camilleri, Director, Peter D. Bell Rule of Law trafficking, tourism and nickel exports. Revolution and the United States’ imposition Program of a devastating unilateral embargo that is Kevin Casas-Zamora, Nonresident Senior Fellow almost 60 years old, it still seemed as if the Ariel Fiszbein, Director, Education Program Investors must deal geographic proximity and American capital Alejandro Ganimian, Nonresident Fellow with Cuba’s reality: would one day prove Adams’ ‘ripe fruit Peter Hakim, President Emeritus bureaucracy, corrup- theory’ true. Cuba’s successful transition to Claudio Loser, Senior Fellow tion and slowness in a new president who is welcoming foreign Nora Lustig, Nonresident Senior Fellow investment from major European firms, if Margaret Myers, Director, China and implementation.” Latin America Program continued and expanded, could allow the — Jaime Suchlicki Manuel Orozco, Director, Migration, island to diversify its traditional dependen- Remittances & Development cy on a single foreign state and slow its Jeffrey Puryear, Senior Fellow These are the key items for the economy. growing dependence on Russia and China. Tamar Solnik, Director, Finance & Administration Tourism has been dropping, in part because To sustain growth, Cuba’s antiquated and in- Lisa Viscidi, Director, Energy Program of Trump’s policies, and in part because efficient communist system will have to give Denisse Yanovich, Director of Development and tourists are not returning to the island for a way to rapid communications, technology External Relations second trip. The initial curiosity seems to and greater individual freedom. But the Unit- Latin America Advisor is published every be fading. Many of the investment projects ed States will not be part of that process. business day, except for major U.S. holidays, are only projects. Investors must deal with President Trump’s return to a punitive policy by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 Cuba’s reality: bureaucracy, corruption and has shattered promising American trade and Washington, DC 20005 slowness in implementation. The Díaz-Canel investment. In consequence, conservative www.thedialogue.org regime is nothing more than the Raúl Castro Cuban-Americans who imagined a return to ISSN 2163-7962 rule with a younger look. Raúl remains sec- the island may find that the longed-for apple Subscription inquiries are welcomed at retary general of the Communist Party, the has finally escaped their reach and that Cuba [email protected] maximum authority on the island. With little has found a path toward true independence.” The opinions expressed by the members of the Board of support within the military, the party and the Advisors and by guest commentators do not necessarily population, Díaz-Canel is a fearful, cautious The Advisor welcomes comments on its Q&A represent those of the publisher. The analysis is the sole and obedient bureaucrat unwilling to chart a section. Readers can write editor Gene Kuleta view of each commentator and does not necessarily represent the views of their respective employers or firms. new course for the Cuban regime. With Raúl 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 permis- sion from the publisher.