LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, August 5, 2016

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, August 5, 2016

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Should Mexico Senior Policy Advisor U.S. Sends 1,000 Akin Gump Strauss Hauer & Feld, LLP Spies to Rio to Joyce Chang Global Head of Research, Do More to Keep Help Protect JPMorgan Chase & Co. Olympics W. Bowman Cutter Former Partner, its Mayors Safe? The U.S. intelligence community E.M. Warburg Pincus has sent analysts, law enforce- Dirk Donath ment offi cers and other personnel Senior Partner, to Rio de Janeiro to help protect Catterton Aimara the Games, which open today. Marlene Fernández Corporate Vice President for Page 2 Government Relations, Arcos Dorados BUSINESS Peter Hakim President Emeritus, Inter-American Dialogue Citi Creates Donna Hrinak $3.5 Bn Credit President, Boeing Latin America Line for Argentine Jon Huenemann Vice President, U.S. & Int’l Affairs, Clients Philip Morris International Among the local Mexican offi cials murdered in recent weeks was Ambrosio Soto, the mayor of the town of Pungarabato, in Guerrero State. // File Photo: Town of Pungarabato. The fi nancing will be available to James R. Jones corporate and institutional clients, Chairman, ManattJones Global Strategies said the New York-based bank. Following separate attacks July 23 that resulted in the Craig A. Kelly Page 3 Director, Americas International deaths of two mayors, Mexico’s National Association of Gov’t Relations, Exxon Mobil Mayors demanded that the federal government take action to POLITICAL John Maisto Q Director, U.S. Education help protect public offi cials, especially in areas identifi ed as Finance Group Brazilian Senate high-risk zones. The group noted that 40 acting mayors have been killed Committee Votes Nicolás Mariscal in the last decade and that many offi cials have received death threats. Chairman, to Proceed With Grupo Marhnos As the Mexican government reforms political institutions, is security of Thomas F. McLarty III local public servants being seriously considered? What should Mexico’s Impeachment Chairman, McLarty Associates federal government be doing to protect mayors and local offi cials from A committee of the Brazilian Senate voted 14-5 to proceed Carlos Paz-Soldan organized crime? To what degree have criminal elements been able to Partner, with a trial that could result DTB Associates, LLP erode Mexico’s rule of law and democratic institutions through their in suspended President Dilma Beatrice Rangel tactics? How bad is Mexico’s situation compared to peer countries within Rousseff’s permanent removal Director, from offi ce. AMLA Consulting LLC the region and around the world? Page 2 José Antonio Ríos Chief Executive Offi cer, Vadium Technology Inc. Cristina Díaz Salazar, PRI member of the Mexican Senate Gustavo Roosen and president of the Senate’s Commission on Government: Chairman of the Board, Envases Venezolanos “In the initiative that he presented relating to security and jus- Andrés Rozental tice, President Enrique Peña Nieto reaffi rmed the urgency of President, Rozental & A Asociados and Senior revising the distribution of powers in the fi eld of public security, in particu- Policy Advisor, Chatham House lar the need to rethink the formation of the country’s policing institutions. Shelly Shetty Head, Latin America Undoubtedly, the exponential growth of organized crime has increased Sovereign Ratings, Fitch Inc. corruption and violence. With this, a heightened security risk for the pop- Roberto Sifon-Arevalo ulation becomes more likely. Despite the success of diverse strategies to Managing Director, Americas Sovereign & Public Finance Ratings, combat these criminal groups, they have modifi ed, proportioned and di- Standard & Poor’s versifi ed their illegal activities. Faced with these circumstances, our vari- ous levels of government have not had adequate measures to combat this Rousseff // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS and last approximately a week. Brazilian media NEWS BRIEFS surveys indicate that more than two-thirds of Brazilian Senate senators want to permanently remove Rousseff Earl Moves West Across from offi ce. If Rousseff is convicted, Temer Mexico After Raking Committee Votes to would serve out the rest of her term, through 2018. The Senate suspended Rousseff on May Belize, Guatemala Put Rousseff on Trial 12, at which time Rousseff’s vice president, Tropical Storm Earl traveled across Mexico’s Michel Temer, became interim president. southern Gulf coast early Friday, after pounding A Brazilian Senate committee on Thursday Since then, Brazil’s stock market and currency Belize and northern Guatemala with torrential voted to put suspended President Dilma have strengthened amid Temer’s pro-business rains, the Associated Press reported. Some Rousseff on trial in the full chamber on charges policies. earlier forecasts had said Earl would weaken of breaking the country’s budgetary laws, into a tropical depression overnight, but new Reuters reported. The 21-member impeach- Pessimism Rises predictions late Thursday night said it would maintain its strength as a tropical storm Among Chileans: through Friday. Earl hit the coast of Belize It is a coup by the Thursday morning as a Category 1 hurricane Brazilian elite against Surveys with 80 mile-an-hour winds, according to the the working class.” U.S. National Hurricane Center. The number of Chileans who are optimistic —Senator Lindbergh Farias about the country’s future has fallen drastically, with many expressing a pessimistic view of U.S. Sends More Than the government and any potential successors, ment committee voted 14-5 to proceed with two polls showed Thursday, Reuters reported. 1,000 Spies to Rio to the impeachment process. “The committee The number of Chileans polled who answered Help Protect Olympics vote confi rms not only that Rousseff knowingly that their country was going “in the correct The U.S. intelligence community has sent more broke fi scal laws, but also that she was a dis- direction” fell to 18 percent from 41 percent a than 1,000 spies to Rio de Janeiro as part of honest administrator,“ Senator Ricardo Ferraço, year and a half ago, according to a CERC-Mori Olympic security to protect spectators, U.S. one of the members of the committee, told poll. The government’s approval rating was athletes and staff at the Games, which open reporters, according to Reuters. Rousseff is at 25 percent, according to the poll, which today, NBC News reported today. Hundreds of accused of manipulating government accounts is the lowest rating since March 2014, when analysts, law enforcement and special opera- in an effort to boost public spending ahead of tions personnel are already in Rio de Janeiro, her re-election in 2014. She denies the charges. according to a highly classifi ed report on U.S. On Thursday, Rousseff’s backers expressed intelligence efforts, viewed by NBC News. More their disapproval of the process. “It is a coup than a dozen Navy and Marine Corps comman- by the Brazilian elite against the working class,” dos from the U.S. Special Operations Com- said Senator Lindbergh Farias, a member of mand are also in Brazil, working with Brazil’s Rousseff’s Workers’ Party, The Wall Street federal police and navy, according to senior Journal reported. The full Senate is expected to military offi cials. vote on Tuesday whether to accept the charges against Rousseff, which would then lead to a Bachelet // File Photo: Chilean Government. trial that could produce a verdict by the end of August or early September. The Senate President Michelle Bachelet began her second Colombians May Vote on committee’s vote came as world attention is non-consecutive term. Bachelet had been Peace Deal Before Formal focused on Brazil; the Summer Olympics open elected on the promise of raising taxes and Signing: Santos today in Rio de Janeiro. Last week, Olympic or- overhauling education, pensions, the electoral ganizers had expected some 50 heads of state system and labor relations. A drop in copper Colombia’s government may ask voters to ap- to attend the Games, but as of Wednesday, only prices, however, hindered investment in Chile, prove a peace deal with the FARC rebels before 28 had confi rmed their attendance, Reuters while corruption scandals in the government accords are signed, President Juan Manuel reported. Chief Justice Ricardo Lewandowski left Chileans disillusioned with the political and Santos said Thursday, Reuters reported. After would preside over an impeachment trial. His business elite. Bachelet’s plans have been crit- negotiators reach an agreement on all points of offi ce has said the trial could begin Aug. 26 icized on both ends of the political spectrum, peace deal, a vote could be scheduled, Santos said.

COPYRIGHT © 2016, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Friday, August 5, 2016 as well. The right-leaning opposition, which FEATURED Q&A / Continued from page 1 includes some from her own political party, says that her reforms are hurting the country’s threat to Mexico and inhibit its growth. The are diffi cult to overstate. Mexico has spent economy, while the political left says her re- lack of adequate measures is seen through more than a decade approving reforms pro- forms do not go far enough. Former President transportation conditions, equipment, moting rule of law, though impunity remains Ricardo Lagos called the current state of the weapons and coordination. The conditions its core problem, as there is still systemic government the worst institutional crisis Chile have been most evident in municipalities, in mechanisms lacking to bring criminals to had seen since the 1973-1990 dictatorship. the governments closest to the people and “In no moment since 1990 has there been a which are most often violently affected by conjunction of such negative economic and crime. This has worsened in states such as Security of public political perceptions as there is at this time,” Guerrero, Jalisco, Michoacán and Tamauli- servants has not been said the CERC-Mori poll. pas, where authorities have had to intensify seriously addressed, efforts to stop the growth of these organiza- and there are no tions. Given the above, the Senate approved real policies to BUSINESS NEWS the Constitutional Reform of Security and protect authorities. Justice with the aim of restoring strength — Octavio Rodríguez Ferreira & David Shirk to police institutions in all three levels of Citi Creates $3.5 Bn government. Undoubtedly, events like the Credit Line for deaths of the mayors of San Juan Chamula and Pungarabato highlight the urgency of justice, and to prevent and punish pervasive Argentine Clients the constitutional reform in question and corruption. Such threats to governance can the need for us to continue working for the only be addressed by promoting accountabil- New York-based fi nancial services corporation security of our country’s population.” ity and continued progress on security and Citigroup created a $3.5 billion credit line for justice reform. Particularly, security of public corporate and institutional clients in Argen- Octavio Rodríguez Ferreira, servants has not been seriously addressed, tina, in order to support President Mauricio program coordinator, and David and there are no real policies to protect au- Macri’s plan to bolster the country’s economy Shirk, principal investigator of thorities, especially at the local level. Indeed, by providing fi nancing to the public sector and A the Justice in Mexico Program violence is relatively lower in Mexico than in underwriting bonds in international capital at the University of San Diego: “The assassi- several other countries in the Americas, and markets for Argentine companies, Citigroup nation of current and former mayors as well average for the Western Hemisphere; though, CEO Michael Corbat said in a statement. “We as mayoral candidates in Mexico is a serious no other country in the hemisphere has seen concern that affects governance, threatens such a large increase in the number or rate the democratic process and undermines the of homicides over the last decade. Thus, rule of law. However, Mexico faces justice as the fi ght against organized crime is far and security challenges on several fronts, in- from over, improvements in law enforcement cluding the poor performance of the criminal are necessary. There is much work to be justice system and the inability to deal ef- done, and sustained efforts to evaluate the fectively with impunity, as well as corruption problem and a sincere commitment are and inequality. The severity of these chal- necessary to reduce the impact of Mexico’s lenges and the urgency of their resolution justice and security challenges.” Continued on page 4 Corbat // File Photo: Citigroup. to France, the United Kingdom and Germany his early economic decisions, which have been are committed to supporting the growth of in the hopes of drumming up foreign invest- seen as “business-friendly.” He cut subsidies Argentina and our clients in a country where ment after fi ve years of little foreign direct for utilities and ended a 15-year standoff with we have had a presence for over 100 years,” investment in the South American country. The international holders of Argentina’s defaulted Corbat said. “We expect sustained growth in Argentine government is holding a three-day debt, among other measures. Despite his the coming years and look forward to putting conference in September to unveil plans for as efforts, the economy has entered a recession our global network to work on behalf of our much as $160 billion in infrastructure projects. in the fi rst quarter, and infl ation rose to 15 institutional clients.” Since he took offi ce at the The international opinion toward Argentina has percent following his move to allow the peso end of last year, Macri has been seeking the been bolstered since Macri took offi ce, due to to fl oat. support of international companies, traveling

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2016 Maria Velez de Berliner, presi- turn the tide of impunity. This will require a dent of Latin Intelligence Cor- complete change in legal and social culture Erik Brand Publisher poration: “Impunity undermines that would take years, and which the New [email protected] Mexico’s reforms. The Center Code cannot accomplish by itself. The same A Gene Kuleta for Impunity and Justice Studies’ (CESIJ) can be said for the rest of Latin America, Editor 2016 Global Impunity Index rates Mexico’s excluding Brazil, where legal changes have [email protected] impunity as the world’s second-highest. Im- not dented impunity.” Nicole Wasson punity underlies the lack of trust Mexicans Reporter, Assistant Editor have in their law enforcement, legal system Ruben Olmos, managing partner [email protected] and other institutions of government. When of Global Nexus in Washington: Jen Wagman “So far this year, at least eight Editorial Intern A mayors have been killed across Mexico—presumably by organized crime— an alarming number. It is important to note Michael Shifter, President Impunity undermines though, that the killings of local authorities, Genaro Arriagada, Nonresident Senior Fellow Mexico’s reforms.” particularly mayors and heads of local se- Sergio Bitar, Nonresident Senior Fellow curity agencies, has increased over the last Joan Caivano, Director, Special Projects — Maria Velez de Berliner decade given the level of corruption found Kevin Casas-Zamora, Director, in these areas of government, low wages, Peter D. Bell Rule of Law Program which became a driver for drug cartels to Ramón Espinasa, Nonresident Senior Fellow bribe public offi cials; and by law changes Ariel Fiszbein, Director, Education Program made at the federal level. In recent years, Alejandro Ganimian, Nonresident Fellow Peter Hakim, President Emeritus 75 percent of the police in Sinaloa, Veracruz, mayors and governors were given more Claudio Loser, Senior Fellow Guerrero, Mexico and Michoacán states can- federal funds to combat cells distributing Nora Lustig, Nonresident Senior Fellow not pass an honesty test, confi dence erodes. and selling drugs at the local level. With Margaret Myers, Director, China and When the full force of Mexico’s government this, mayors became targets as they had to Latin America Program cannot bring to justice the perpetrators of negotiate with criminal groups. The recent Manuel Orozco, Director, Migration, the forced disappearance of 43 students, trend of killings highlights the need to push Remittances & Development trust in law and justice tanks. This is why for additional security reforms to protect Jeffrey Puryear, Senior Fellow only seven of every 100 crimes are reported, Mexico’s more than 2,000 mayors, especially Tamar Solnik, Director, Finance & Administration with witnesses becoming suspects. The those in critical areas. Currently, a special Lisa Viscidi, Director, Energy Program Mexican government can take all the precau- program called the Programa de Fortalec- Latin America Advisor is published every tions it wants to protect its offi cials. How- imiento para la Seguridad (FORTASEG), is led business day, except for major U.S. holidays, ever, when criminals know that, from police by the Ministry of the Interior and benefi ts by the Inter-American Dialogue at 1211 Connecticut Avenue NW, Suite 510 to witnesses to judges, all have a price that just 285 municipalities, less than 10 percent Washington, DC 20036 can be paid to skirt the law, no precaution of the total municipalities nationwide. There www.thedialogue.org can hold. When there are only 3.5 judges per is no doubt that the government has a big ISSN 2163-7962 100,000 citizens, an overburdened legal sys- responsibility in strengthening the rule of Subscription inquiries are welcomed at tem cannot cope with its load. This is why law in Mexico, but is it important to note [email protected] excluding payments, threats and extortion, that civil society and the business sector fewer than 2 percent of Mexican criminals have their parts too. I believe this is already The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily can expect to be caught; 28 percent of ar- happening, which speaks to the country’s represent those of the publisher. The analysis is the sole restees go to trial; only 4.4 percent are con- openness.” view of each commentator and does not necessarily represent the views of their respective employers or fi rms. victed; and fewer than 1 percent go to jail, The information in this report has been obtained from where many buy special considerations. The The Advisor welcomes comments on its Q&A reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are laudable New Code of Criminal Procedure, section. Readers can write editor Gene Kuleta guaranteed. If you have any questions relating to the con- one of Mexico’s main reforms, will do little to at [email protected]. tents 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 permission from the publisher.