LAA131010V7:Latin America Advisor.Qxd

www.thedialogue.org Thursday, October 10, 2013

FEATURED Q&A BOARD OF ADVISORS Has the Government Shutdown Eroded U.S. Credibility? Diego Arria James R. Jones Director, Co-chair, Approximately 450,000 U.S. gov- impossible to understand. This could not Columbus Group Manatt Jones ernment employees remain fur- come at a worse time, amid the Brazil spy- Global Strategies LLC loughed as the U.S. government ing scandal, the embattled new government Genaro Arriagada shutdown enters its tenth day in Venezuela and the historic opportunity Nonresident Senior Craig A. Kelly Q amid Congress' failure to reach agreement we have to build a stronger relationship Fellow, Director, Americas Inter-American International Gov't on a spending bill. How might the shut- with the new president of Mexico, Enrique Dialogue Relations, down affect trade and other cross-border Peña Nieto. As a Republican and former Joyce Chang Exxon Mobil transactions between the United States business leader before serving as secretary and Latin American countries? What types of commerce, I am alarmed by the lack of a Global Head of John Maisto Emerging Markets Director, of U.S. negotiations, forums, visits or meet- coherent strategy by my party. No institu- Research, JPMorgan U.S. Education Finance ings with counterparts in Latin America tion can be managed by emotion and tac- Chase & Co. Group will be disrupted? Has Washington's polit- tics, let alone a $4 trillion federal govern- W. Bowman Cutter Nicolás Mariscal ical paralysis eroded U.S. credibility ment. However, this is precisely what is Former Partner, Chairman, among the Latin Americans who have E.M. Warburg Continued on page 3 Grupo Marhnos looked to the United States as a model of Pincus democratic governance? Thomas F. Dirk Donath McLarty III Senior Partner, President, Carlos Gutierrez, vice chair of Aimara Capital LLC McLarty Associates Albright Stonebridge Group in Jane Eddy Carlos Paz-Soldan Washington and former U.S. sec- Managing Director, Partner, retary of commerce: "As an Corporate & Govt. A DTB Associates, LLP American citizen, I am frustrated and dis- Ratings Group, Standard & Poor's Beatrice Rangel appointed by the government shutdown; it Director, is a failure, and I blame both parties. I can Marlene Fernández AMLA Consulting LLC only imagine the utter confusion among Corporate Vice those who covet our system of government President for José Antonio Ríos Brazil Boosts Interest Rate Government Relations, Chief Executive Officer, in countries around the world. The confu- for Fifth Consecutive Time Arcos Dorados Vadium Technology Inc. sion regarding our system of government will hit hardest in Latin America where Brazil's central bank, led by Alexandre Peter Hakim Gustavo Roosen President Emeritus, countries are divided as never before. The Tombini, on Wednesday raised its bench- Chairman of the Board, autocratic, anti-American far left (Cuba, mark Selic interest rate to 9.5 percent. Inter-American Envases Venezolanos Dialogue Venezuela, Nicaragua, Ecuador and The decision marked the fifth consecu- Andrés Rozental Donna Hrinak Bolivia) must be very pleased. They will use tive time that policymakers have President, the shutdown to justify their system of increased the interest rate. See story on President, Rozental & Asociados Boeing Brazil and Senior Fellow, repressive government. Our pro-American page 2. allies will have the difficult task of defend- Jon Huenemann Brookings Institution File Photo: Brazilian Government. ing a government shutdown that is almost Vice President, Everett Santos U.S. & Int'l Affairs, President, Philip Morris Int'l DALEC LLC Inside This Issue

Shelly Shetty FEATURED Q&A: Has the Government Argentina's Fernández Recovering Head, Latin America Shutdown Eroded U.S. Credibility?...... 1 Without Complications: Official ...... 2 Sovereign Ratings, Fitch Inc.-Start Content- Brazil Boosts Key Interest Mexico's Banco del Bajío Rate for Fifth Consecutive Time...... 2 Considering Initial Public Offering...... 3 United Nations Sued Over Brazil's Insurance Industry Expands Haiti Cholera Outbreak ...... 2 16.5 Percent Annually From 2001-12 ...... 3

NEWS BRIEFS Economic News quarter. Industrial production was unchanged in August after a 2.4 percent Argentina's Fernández Recovering decline in July. Also, Brazil's economic Without Complications: Official Brazil Boosts Key Interest Rate activity declined 0.3 percent in July. The Argentine President Cristina for Fifth Consecutive Time International Monetary Fund this week Fernández de Kirchner, who under- lowered its 2014 growth outlook for Brazil went surgery on Tuesday to remove Brazil's central bank on Wednesday hiked to 2.5 percent from 3.2 percent, adding its benchmark interest rate for the fifth that it expects the country's economic a blood clot from her brain, is consecutive time, marking the world's growth to slow in this year's second half. "recovering well and without com- longest current stretch of rate increases, [Editor's note: See related Q&A in plications," a presidential Bloomberg News reported. The central Tuesday's Advisor.] spokesman said Wednesday, accord- bank's board, led by Alexandre Tombini, ing to BBC News. The blood clot unanimously backed the increase of the Political News was discovered last weekend and attributed to a head injury Fernández suffered two months ago. There are still risks from United Nations Sued Over “ Haiti Cholera Outbreak Before the clot was discovered, a weaker real, which can Fernández was told by doctors to rest for 30 days, which has left Vice pressure inflation in Human rights lawyers on Wednesday filed President Amado Boudou in charge a class action lawsuit in U.S federal court the next few months. accusing the United Nations of "gross neg- and forced her off the electoral ” — Luciano Rostango ligence and misconduct" on behalf of vic- campaign ahead of the country's tims of a cholera outbreak in Haiti in Oct. 27 elections. 2010, CNN reported. The lethal strain of Pan-American Energy Seeking Selic rate, raising it to 9.5 percent from 9 cholera bacteria, indigenous only to some $1.49 Billion From Bolivia percent. All 49 economists in a recent parts of Asia, ultimately killed an estimat- Bloomberg survey had expected the move. ed 8,300 people and sparked riots in sever- Argentina-based Pan American The central bank said that boosting the al cities and towns. "The claims are that Energy has asked Bolivia to pay it interest rate will help curb inflation next the U.N. engaged in reckless and gross $1.49 billion for the January 2009 year. Since April, the bank has increased negligence and misconduct bringing expropriation of its Bolivian sub- the Selic by 225 basis points. From last cholera to Haiti," said Ira Kurzban, a sidiary, natural gas producer Chaco, October until April, the central bank had lawyer and board member with the Reuters reported Wednesday. Pan kept borrowing costs at a record low. Boston-based Institute for Justice and American Energy filed a request for Inflation in Latin America's largest econo- Development in Haiti. The group is compensation with the World my has remained above 4.5 percent, the demanding unspecified financial compen- midpoint of policymakers' target, for the sation for the Haitians who died as a result Bank's International Centre for past three years. "Inflation is elevated and of the epidemic as Settlement on Investment Disputes well above target," Luciano Rostango, well as some 650,000 in late September. Chaco is now a chief strategist at Banco Mizuho do more survivors. The unit of Bolivia's state-owned YPFB. Brasil, told Bloomberg News. "There are lawsuit also seeks still risks from a weaker real, which can more than $1.25 bil- Colombia to Consider State-Run Company to Manage Cell Towers pressure inflation in the next few months." lion for improve- Brazil's IPCA index, which measures con- ments to Haiti's Colombia's Senate will consider a sumer prices, increased 5.86 percent last water infrastructure, proposal to establish a state-run month, the country's national statistics The Guardian telecommunications company to agency said Wednesday. That marked the reported. A U.N. Ban manage the country's network of slowest increase in nine months. The official told CNN in File Photo: United cellphone towers, Reuters reported monthly inflation rate also accelerated to response to the suit Nations. Thursday. Sen. Juan Mario Laserna 0.35 percent, the sharpest increase in four that "it is not the is planning to formally present legis- months. The government of President United Nations' practice to discuss in pub- Dilma Rousseff has proposed spending lic claims filed against the organization." lation on the matter next week. 1.04 trillion reais next year, a 12 percent Earlier this year, however, Secretary Nationalizing Colombia's cell tower increase from this year's budget. Brazil's General Ban Ki-moon argued that the network would increase competition level of economic growth exceeded expec- organization had legal immunity in the and improve mobile coverage, he tations in the second quarter, but it case due to an international convention. said. appears that growth slowed in the third An independent investigation has con-

Copyright © 2013, Inter-American Dialogue Page 2 of 4 Inter-American Dialogue’s Latin America Advisor Thursday, October 10, 2013 cluded that one of the likely sources of the Featured Q&A outbreak was sewage leaking from a U.N. Continued from page 1 base housing Nepalese peacekeepers in happening: attack and threaten—a few one way or another will be negatively Haiti to help with post-earthquake disas- days before a deadline—and figure out affected by this situation. The shutdown ter relief efforts. At least 182 Haitians died the endgame later. This could have been a will not only affect U.S. trade with Latin of cholera between April and August 2013, moment of Republican wisdom and America, but all U.S. trading partners according to World Health Organization around the world, putting additional data, CNN reported. pressure on a weak economic recovery “ I can only imagine the under way in the United States. In addi- Company News utter confusion among tion to the economic impact of the shutdown, more important is the message those who covet our system that this situation sends to the rest of the Mexico's Banco del Bajío world, which until now has looked up to of government in countries Considering Initial Public Offering the United States as a key trading partner around the world. and beacon of hope. Just this week, Japan Mexico's eighth-largest bank, Banco del ” and China were expressing their views — Carlos Gutierrez Bajío, is considering an initial public about this unfortunate situation and offering, Bloomberg News reported how it would affect their investments in Wednesday, citing two people familiar foresight. Instead, we have made the the United States and exchange rates, with the matter. The bank has requested 'Republican shutdown' the issue, not respectively. It's important for the ruling that investment banks work on proposals Obamacare. I agree that the Affordable political elites not only in the United for the offering, said the sources, who Care Act is bad policy. It will hurt the States, but also around the world, to be were unnamed because the deal is in pre- quality of our health care, and it will hurt aware that the population no longer tol- liminary stages. Also, details of the poten- our economy. As often happens with far erates such behavior. I hope that this sit- tial IPO, including its size and timing, left policies, those with the least resources uation and the debt limit debate reach a have not yet been decided. An offering of will be hurt the most. However, to go to satisfactory conclusion very soon. If not, Banco del Bajío stock would be the latest war over an impossible objective—the they could have devastating conse- of several IPOs in Mexico's financial sec- repeal of Obamacare—is not only woe- quences to the already fragile world tor. Grupo Financiero Santander Mexico, fully ineffective, it is political suicide." economy." a unit of Spain's Banco Santander, raised $4.1 billion in an offering last year. Grupo Joaquín Jácome Diez, senior Christopher Sabatini, editor- Financiero Interacciones is planning to partner at Jácome & Jácome in-chief of Americas Quarterly offer shares worth about $350 million in Panama City and former and senior director of policy later this year. Also, Banregio Grupo A trade minister of Panama: A for the Americas Society and Financiero, a small-business financier "The political impasse in the United Council of the Americas: "Just as it's dif- had its IPO two years ago and was includ- States that caused the government shut- ficult to quantify the impact of the shut- ed in September for the first time in down will have a negative impact in down on the economy—particularly for Mexico's benchmark stock index. A repre- many areas of trade, especially ones that families who indirectly rely on the gov- sentative for BanBajío, which is headquar- involve health and food inspections, fur- ernment—it's impossible to measure tered in the city of León, declined to com- ther delaying the free flow of goods and and evaluate the impact on U.S. diplo- ment to Bloomberg News on the possibil- services. Most areas of the economy in macy and leadership in the region. At ity of an offering. The bank, which was Continued on page 4 established in 1994, focuses on providing loans to small- and medium-sized busi- study from the country's insurance regu- and related services to insure the collec- nesses. It also helps finance Mexico's agri- lator, SUSEP. Premiums during the period tions of a growing Brazilian art market. culture industry. The bank has nearly grew even faster during the first half of The company is working with New York- 350,000 clients and 284 locations in 28 2013, at a rate of 19.5 percent to $33.29 based AXA Art on the product. "It's states, the bank said in June. billion, according to the report. Along booming. Brazilian art is booming," with that growth the sector has consoli- Brazilian photographer Claudio Edinger Brazil's Insurance Industry Expands dated somewhat, however. The top 10 told National Public Radio last month for 16.5 Percent Annually From 2001-12 insurers made up 67 percent of the market a story about the country's art scene. in 2012, up from 60 percent in 2001. The Despite a slower economy since 2012, a Brazil's insurance industry expanded at a market has also diversified its product burgeoning middle class and easier access compound annual growth rate of 16.5 offerings. Earlier this week, Brazilian to credit continues to fuel record prices percent between 2001 and 2012, Business insurer SulAmérica said it had launched a for artwork in the South American nation, Insurance reported Wednesday, citing a new plan to offer art insurance products according to the report.

-End Content- Featured Q&A Continued from page 3 Latin America Advisor best, it's just embarrassing. At worst, it Ronald Reagan's 'shining city on a hill' is published every business day by the Inter-American Dialogue, Copyright © 2013 will undermine U.S. status and power— has become the butt of jokes south of the symbolic and real—not just in these border. With deteriorating human rights Erik Brand General Manager, Publishing weeks, but for years to come. The ability conditions and the rise of social protests [email protected] of the United States to project its eco- Gene Kuleta nomic, political, moral and symbolic Editor leadership in the region has taken a seri- The ability of the United [email protected] ous hit; the reckless game of chicken only “ makes other countries (oddly, such as States to project its economic, Megan Cook Reporter, Assistant Editor China) look more like the world's eco- political, moral and symbolic [email protected] nomic future. At the same time, the political dysfunction that has prevented the leadership in the region has Inter-American Dialogue U.S. Congress from passing anything as taken a serious hit. basic as a budget undermines U.S. ” Michael Shifter, President — Christopher Sabatini authority to speak out over the troubling Peter Hakim, President Emeritus levels of political polarization in countries like Venezuela and Ecuador and the Genaro Arriagada, Nonresident Senior Fellow threat to democratic norms and institu- in several countries in the region, there is Sergio Bitar, Nonresident Senior Fellow tions. Even at the level of policy, the a real need for someone to defend demo- Joan Caivano, Director, Special Projects demands of the House Republicans to cratic norms and social inclusion. But Maria Darie, Director, Finance & Administration roll back efforts to extend health care to right now, that ain't coming from the Mary Ellen Flather, Senior Director the working poor stand in sad contrast to United States. Let's hope this will just be of Strategy and Development efforts in Colombia, Chile, Costa Rica an embarrassing road bump." Claudio Loser, Senior Fellow and Mexico to establish universal health care. As imperfect as these efforts may be, Nora Lustig, Nonresident Senior Fellow they are an unfortunate contrast to the The Advisor welcomes reactions to the Margaret Myers, Director, polarized, prolonged blood sport that has Q&A above. Readers can write editor China and Latin America Program become the discussion of extending Gene Kuleta at [email protected] Manuel Orozco, Director, Remittances and Development Program health care in the United States. President with comments. Tamara Ortega Goodspeed, Senior Associate, Education Tap Into the Archive Jeffrey Puryear, Vice President, Social Policy

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