Qpedro Pierluisi Took Office Jan. 2 As Governor of Puerto

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Thursday, January 14, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk What Challenges Mexico to Invoke CEO, DevryBV Sustainable Strategies USMCA to Ensure Joyce Chang Global Head of Research, Face Puerto Rico’s Vaccinations: JPMorgan Chase & Co. Foreign Minister Paula Cifuentes Director of Economic & Fiscal Affairs, New Governor? Mexico will invoke the labor Latin America & Canada, section of its trade agreement Philip Morris International with the United States in order to Marlene Fernández ensure that Mexican immigrants Corporate Vice President for in the United States can be Government Relations, Arcos Dorados (McDonald’s) vaccinated against Covid-19, regardless of immigration status, Peter Hakim President Emeritus, said the foreign minister. Inter-American Dialogue Page 2 Donna Hrinak Senior VP, Corporate Affairs, Royal Caribbean Group BUSINESS Jon E. Huenemann Former Corporate and Banco do Brasil Government Senior Executive CEO Reportedly Puerto Rico’s new governor, Pedro Pierluisi, faces a divided legislature and won election with James R. Jones just a third of the vote. // File Photo: Facebook page of Pedro Pierluisi. Chairman, Steps Down Monarch Global Strategies The bank’s new CEO, André Craig A. Kelly Pedro Pierluisi took office Jan. 2 as governor of Puerto Rico, Brandão, reportedly resigned after Senior Director, Americas angering President Jair Bolsonaro Int’l Gov’t Relations, Exxon Mobil promising to help the U.S. territory become a state and also with a restructuring plan. John Maisto fight poverty, corruption and Covid-19. What are the biggest Director, U.S. Education Page 3 Finance Group Q challenges facing Pierluisi? Will he succeed in achieving his

Nicolás Mariscal stated goals, particularly given a politically divided legislature and an POLITICAL Chairman, Grupo Marhnos election victory with just 33 percent of the vote? How well will Pierlu- Bolsonaro Has Thomas F. McLarty III isi be able to navigate the territory through its debt restructuring and Tried to Sabotage Chairman, efforts to attract investment? McLarty Associates Efforts to Fight Beatrice Rangel Director, Covid: Report AMLA Consulting LLC Sila M. Calderón, president of Inter-American Global Links Brazilian President Jair Bolsonaro and former governor of Puerto Rico: “The recently sworn-in Jaana Remes has tried to sabotage efforts to Partner, McKinsey Global Institute governor of Puerto Rico, Pedro Pierluisi, has endless chal- fight Covid-19, Human Rights Ernesto Revilla lenges ahead. His stated objectives to fight Covid-19, poverty Watch said in a report. Head of Latin American A Page 2 and corruption are right on target. In addition, the new governor has cho- Economics, Citi Gustavo Roosen sen an excellent group as members of his new cabinet in order to achieve Chairman of the Board, his goals. However, getting our island out of bankruptcy is a priority that Envases Venezolanos Andrés Rozental must also be tackled immediately, so that our good financial credit is President, Rozental & restored and so we can go back to the markets. Our debt must be restruc- Asociados tured in a fair way to the bondholders and our citizens. Governor Pierluisi, Shelly Shetty Managing Director, Sovereigns the leader of the New Progressive Party, won with just a 33 percent of the Fitch Ratings vote. In addition, both chambers of the legislature are led by the oppos- ing Popular Democratic Party. In order to navigate the difficult agenda in the near future, he will need a large dose of negotiating skills. Most importantly, Pierluisi should not follow his announced path of advancing statehood for Puerto Rico. This is an enormously divisive issue on our island that will overshadow and disrupt his other public efforts. The im- Bolsonaro // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS less of their legal status in the United States, NEWS BRIEFS Mexican Foreign Minister Marcelo Ebrard said Bolsonaro Has Tried Wednesday, the Associated Press reported. “It Cuba Shuts Down Schools, is a responsibility of each of the countries to Public Transport Amid to Sabotage Efforts to guarantee that all workers, independently of their immigration status, receive the vaccine,” Surge in Covid Infections Fight Covid: Report said Ebrard. Exclusion of Mexican workers The Cuban government has again shut down from receiving the vaccine would violate the schools, public transport and cultural activities Brazil’s Supreme Court and other democratic U.S.-Mexico-Canada Agreement, or USMCA, across the island as it undergoes the worst out- institutions have been forced to step up to said Ebrard. Immigrant workers’ access to the break of the novel coronavirus since the pan- slow the spread of Covid-19 and help protect vaccine became an issue following remarks demic began, Reuters reported. The Caribbean human rights as President Jair Bolsonaro has last week by Nebraska Governor Pete Ricketts. nation has registered new daily records for the pursued policies that undermine them, Human “You’re supposed to be a legal resident of the last six days, including 550 new official cases Rights Watch said in the Brazil chapter of its country to be working in those plants, so I do on Wednesday. In the first 12 days of the year, yearly report, published Wednesday. “Presi- not expect that illegal immigrants will be part Cuba has already recorded more infections dent Bolsonaro has put the lives and health of of the vaccine with that program,” Ricketts than in the entire month of December. The Brazilians at great risk by trying to sabotage ef- said when asked whether undocumented government has also reduced incoming flights forts to protect against the spread of Covid-19,” immigrants in Nebraska’s meat packing plants and introduced testing requirements before Anna Livia Arida, Brazil associate director at would be vaccinated. An aide to Ricketts later traveling to Cuba. Human Rights Watch, said in a statement. “The clarified, saying that immigrants would still Supreme Court and other institutions have qualify for receiving the vaccine, adding that helped to protect Brazilians and to block many, those who are undocumented would receive although not all, of Bolsonaro’s anti-rights poli- it after people who are in the country legally, November Hurricanes cies. They need to remain vigilant,” she added. The Washington Post reported last week. Cost Guatemala Among the detrimental moves by the Bolsonaro “Nebraska is going to prioritize citizens and $770 Mn in Losses: Gov’t administration that Human Rights Watch refers legal residents ahead of illegal immigrants,” Guatemala estimates that losses from back- to in its report are anti-rights policies on wom- Ricketts’ communications director, Taylor Gage, to-back Hurricanes Eta and Iota last November en’s rights and disability rights, harsh criticism said in a tweet. Many undocumented workers totaled more than 6 billion quetzals ($770 of reporters and civil society groups and the are employed in high-risk facilities that are million), the government said Wednesday, Reu- weakening of environmental law enforcement, essential to U.S. food supply, say advocates ters reported. The storms, which also ravaged the statement said. It also mentions the federal for immigrants. “This virus isn’t discriminating through neighboring Honduras and Nicaragua, government’s response to Covid-19, with based on immigration status,” Dulce Castañe- left at least 61 people dead, 30 others injured Bolsonaro repeatedly downplaying the severity da, an organizer with the activist group Chil- and 99 missing in Guatemala, the government of the virus, calling it a “little flu” and refusing dren of Smithfield, told The Washington Post in said. More than 310,000 people were evacuat- to order lockdowns and social-distancing mea- an interview. “It doesn’t ask people if they’re a ed in the Central American nation. sures, Reuters reported. The president’s office citizen, if they’re a resident, if they’re on a visa. did not immediately reply to Reuters’ request So why would we ask that for vaccines?” for comment. Bolsonaro has claimed that coronavirus-related lockdowns hurt the Brazilian Colombia Extending economy and leave many unemployed. ECONOMIC NEWS ‘Selective’ Quarantine Until End of February Mexico to Invoke Venezuela to Expand Colombia will extend a “selective” quarantine USMCA Provision to Use of Bank Accounts until the end of February, President Iván Duque said during a nightly address on Wednesday, Ensure Vaccinations in Foreign Currency Reuters reported. The government imposed strict lockdowns for the first five months of the Mexico will invoke the labor section of the free Venezuela will allow expanded use of bank ac- pandemic before moving toward a much looser trade agreement that it signed with the United counts in foreign currencies, President Nicolás selective quarantine at the start of Septem- States to ensure that its workers in that country Maduro announced Wednesday in an annual ber, with restaurants open and resumption of can be vaccinated against Covid-19, regard- address, Bloomberg News reported. “The open- international flights. The selective isolation measure was due to expire on Jan. 16.

COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Thursday, January 14, 2021 ing of bank accounts at all levels in convertible FEATURED Q&A / Continued from page 1 currencies, in dollars, is being authorized,” he said. The move is the country’s latest step mense responsibility of steering Puerto Rico of the Central Office for Recovery, Recon- toward dollarization, as the use of the U.S. through its intricate way to health, reconstruction and Resiliency (COR3) and, in the dollar has become increasingly common in the struction, economic development and good Department of Economic Development and South American country. Venezuela’s level of credit standing is extremely complicated. Commerce, an experienced and respected inflation is estimated at 1,858 percent over the The hurdles before the new governor should businessman. One of the administration’s past 12 months, during which time the local not be negatively affected by ideological objectives has been maintaining continuity bolívar notes have become virtually worthless. preferences. This is a time to unite Puerto in these key areas. The Puerto Rico resident The hyperinflation has led to an increasing Ricans behind a common endeavor and not commissioner’s strong support for Donald need for hard currency and more use of digital to provoke ruptures among them.” Trump won’t help in a Democratic Congress payments. Venezuelan banks can already offer and Biden administration, but this is offset bank accounts in U.S. dollars, but transactions José J. Villamil, chairman of by the fact that the governor is a Democrat have been limited because there is no clearing the board of Estudios Técnicos with excellent relations in Congress.” system to allow banks to transfer money in San Juan: “Puerto Rico is among themselves by wire, Bloomberg News A not only struggling with the Sergio M. Marxuach, policy reported. Maduro’s latest proposal would allow pandemic, but also with an economy that director at the Center for a New debit cards connected to those accounts to has gone through a prolonged economic Economy in San Juan: “Governor be used more widely. Venezuelans would also contraction, a seriously eroded institutional A Pierluisi begins his four-year be able to make payments in bolívars through framework and, of course, the many strings term under the most difficult conditions debit cards linked to dollar accounts. attached to PROMESA. Governor Pierluisi faced by a commonwealth governor in 45 is facing those challenges while facing a years. The first challenge will be to han- not particularly friendly legislature. The fact dle the Covid-19 pandemic, including the BUSINESS NEWS that he won the governorship with just 33 vaccination of at least two million people, percent of the vote will require an effort to create alliances along various fronts, and Banco do Brasil CEO the governor is aggressively doing so. In the Things get complicat- Reportedly Resigns short run, Puerto Rico’s economic prospects ed, though, when will depend, more than anything else, on we get to the After Closures being able to achieve disbursement of the restructuring of obligated reconstruction funds, particularly Puerto Rico’s debt.” The recently arrived chief executive officer CDBG-DR and the CDBG-MIT funds. This — Sergio M. Marxuach of state-controlled Banco do Brasil, André process has been very slow for two reasons; Brandão, has reportedly stepped down after the lack of capacity to absorb the available announcing an employee buyout program as funds in Puerto Rico and the very restrictive and the pandemic’s economic fallout. At the well as a plan to close hundreds of branches, conditions that the Department of Housing same time, Pierluisi will have to work hard moves that angered President Jair Bolsonaro, and Urban Development has placed on the in Washington to unlock funding for the re- Reuters reported Wednesday, citing television disbursement of both funds. Biden’s election construction of the damages caused by the channel Bandnews. Shares in the bank fell 4.7 could remedy the latter by introducing more 2017 hurricanes and the 2020 earthquakes. percent Wednesday after reports that Bolsona- flexibility in HUD requirements and by Gov- In general, the political opposition should ro was considering a replacement for Brandão, ernor Pierluisi insisting on revisions to the support these efforts. Things get complicat- who became the bank’s CEO last September. action plan that guides the use of CDBG-DR ed, though, when we get to the restructuring The bank hopes that the buyouts and branch funds. His administration starts out with a of Puerto Rico’s debt. PROMESA requires the closures will save it 2.7 billion reais ($512 mil- major advantage over previous administra- filing of a Plan of Adjustment that, among lion) by 2025, Reuters reported. In a statement tions. That is, his economic and reconstruc- other things, guarantees the provision of that Banco do Brasil sent to investors, the bank tion teams include experienced individuals essential government services, reduces the said it would close 361 branches and other of- who have recently been in government. This debt to a sustainable level and provides ade- fices and offer voluntary severance packages, includes the treasury secretary, the head of quate funding for public pensions. Achieving actions that are expected to lower its number the Fiscal Agency and Financial Advisory a balance among these objectives that is of employees by 5,000, The Rio Times reported. Authority, the secretary of housing, the head also acceptable to all political factions in 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 © 2021 Puerto Rico will be difficult. Finally, with where his party lost the majority. Seilhamer, respect to status, there is no agreement as a largely respected pragmatic pro-environ- Erik Brand to the path forward. The governor wants ment and pro-renewables legislator who Publisher [email protected] Congress to abide by the results of the No- recently retired, will be an asset in negoti- vember 2020 referendum, which statehood ations with lawmakers. Precisely because Gene Kuleta Editor won by a slim margin. Other political leaders he does not have a clear mandate, Pierluisi [email protected] want to call for a constitutional status Anastasia Chacón González assembly. Thus, it is unlikely we will see Reporter & Associate Editor much progress on this front, not only due Precisely because [email protected] to the lack of political agreement, but also he does not have a because we will spend much of 2021 getting clear mandate, Pierlu-

vaccinated against Covid-19 and negotiating isi will need to govern Michael Shifter, President with bondholders, while concurrently jump- from the center.” Rebecca Bill Chavez, Nonresident Senior Fellow starting both hurricane reconstruction work — Jennice Fuentes Sergio Bitar, Nonresident Senior Fellow and a lethargic economy.” Joan Caivano, Senior Advisor Michael Camilleri, Director, Rule of Law Program Jennice Fuentes, founder and will need to govern from the center—so far, Kevin Casas-Zamora, Nonresident Senior Fellow managing partner of Fuentes so good. The newly appointed House and Héctor Castro Vizcarra, Nonresident Senior Fellow Strategies: “Great things are Senate leadership have agreed to publicly Julia Dias Leite, Nonresident Senior Fellow A expected from newly installed commit to legislate by consensus and to Ariel Fiszbein, Director, Education Program pro-statehood Governor Pedro Pierluisi. join the fight against corruption and for Peter Hakim, President Emeritus His immediate challenge will be to address transparency. His well-known competence, Nora Lustig, Nonresident Senior Fellow urgent domestic needs in multiple areas, work ethic and engaging personality, a far Margaret Myers, Director, Asia and including a fiscal and economic crisis made cry from his predecessor, should go a long Latin America Program Manuel Orozco, Senior Fellow worse by the Covid-19 pandemic. He must way to making inroads in his first 100 days Xiaoyu Pu, Nonresident Senior Fellow balance these priorities with his fervent and, as a stateside Democrat and former Jeffrey Puryear, Senior Fellow wish to bring statehood to Puerto Rico in a member of Congress as Puerto Rico’s resi- Mateo Samper, Nonresident Senior Fellow Congress that is exhausted by developments dent commissioner, he is also well-connect- Tamar Solnik, Director, Finance & Administration following last week’s bloody attack. On ed in DC circles, which doesn’t hurt. How Lisa Viscidi, Director, Energy Program the Island, the governor is making his own soon Pierluisi can pivot from the domestic Denisse Yanovich, Director of Development, luck from the get-go. His cabinet decisions priorities—including debt restructuring and External Relations & Special Projects have demonstrated his intention to build a economic development—to the federal will team that departs from the expected norm. require teamwork, focus and a plan of action Latin America Advisor is published every business day, except for major U.S. holidays, For example, his decision to name former that is committed to the long game.” by the Inter-American Dialogue at Senator Larry Seilhamer as his secretary of 1155 15th Street NW, Suite 800 Washington, DC 20005 state (and to be his lieutenant governor) was The Advisor welcomes comments on its Q&A www.thedialogue.org applauded on both sides of the aisle and section. Readers can write editor Gene Kuleta ISSN 2163-7962 sends a strong message to the legislature, at [email protected]. Subscription inquiries are welcomed at [email protected]

The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily represent the views of their respective employers or firms. 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.