LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, July 11, 2017

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, July 11, 2017

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Is Piñera a Shoo-in U.N. Security Cargill Council Creates Joyce Chang Global Head of Research, to Return to Colombia Mission JPMorgan Chase & Co. The U.N. Veriﬁ cation Mission W. Bowman Cutter Former Partner, Chile’s Presidency? in Colombia will work to help E.M. Warburg Pincus integrate former FARC rebels into Dirk Donath Colombian society. It will replace Senior Partner, a current mission that has been Catterton Aimara supervising the cease-ﬁ re and Barry Featherman disarmament process. Senior Director, Page 2 International Government Affairs, Gilead Sciences

Marlene Fernández ECONOMIC Corporate Vice President for Government Relations, Mexico’s Car Arcos Dorados Peter Hakim Exports to U.S. President Emeritus, Inter-American Dialogue Rise in Year’s Donna Hrinak First Half Former President Sebastián Piñera is leading polls ahead of Chile’s November presidential President, Boeing Latin America election. // File Photo: Sebastián Piñera Campaign. Mexican vehicle exports to the Jon Huenemann United States rose 15.6 percent Vice President, U.S. & Int’l Affairs, Philip Morris International Sebastián Piñera on July 2 coasted to victory in the primary year-over-year. Page 2 James R. Jones of the center-right Chile Vamos coalition, cementing the Chairman, ManattJones Global Strategies former president’s status as the frontrunner ahead of Chile’s Q POLITICAL Craig A. Kelly November presidential election. Is Piñera a shoo-in to Director, Americas International Rapporteur Gov’t Relations, Exxon Mobil return to the presidency? To what extent do his rivals, such as Alejandro John Maisto Guillier of the New Majority coalition, pose a threat to Piñera’s candida- Recommends Director, U.S. Education cy? Which issues are driving the presidential race? What inﬂ uence will Finance Group Trial of Brazilian Nicolás Mariscal outgoing President Michelle Bachelet have on the election? President Chairman, Grupo Marhnos Lawmaker Sergio Zveiter, who was appointed to study and report Thomas F. McLarty III Peter DeShazo, visiting professor of Latin American, Latino back on the corruption case of Chairman, and Caribbean Studies at Dartmouth College and former McLarty Associates President Michel Temer, recom- Carlos Paz-Soldan deputy assistant secretary of state for Western Hemisphere mended that the chamber put the Partner, affairs: “While the candidate of the center-right Chile Vamos president on trial. DTB Associates, LLP A Page 2 Beatrice Rangel coalition, former President Sebastián Piñera, was energized by his Director, showing in the July 2 presidential primary, the campaign ahead will be AMLA Consulting LLC hard-fought and the result is anything but decided. Tradition and polling Gustavo Roosen Chairman of the Board, point to a race between Piñera and the New Majority center-left coalition, Envases Venezolanos headed by Senator Alejandro Guillier, but with several other candidates Andrés Rozental President, Rozental & potentially inﬂ uencing the result. Piñera says he will campaign hard for Asociados and Senior Policy Advisor, Chatham House centrist votes—where most Chileans claim to be ideologically. He has the Shelly Shetty advantage of being free to criticize the record of the unpopular Bachelet Head, Latin America administration. Guillier faces the challenge of forging an effective Sovereign Ratings, Fitch Inc. Roberto Sifon-Arevalo campaign from the disparate elements of his coalition and in balancing Managing Director, Americas a need to attract votes in the political center with concern about losing Sovereign & Public Finance Ratings, Standard & Poor’s votes to the Broad Front on the left. The decision by the Christian Demo- crats (PDC) to run their own presidential candidate further complicates Zveiter // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS Automobile Industry Association shows that NEWS BRIEFS Mexico exported 1.16 million vehicles to the U.N. Security Council United States in the fi rst half of 2017, up 15.6 Rapporteur Recommends percent year-over-year. The United States has Trial for Brazil’s Temer Creates Colombia also taken a greater percentage of vehicles exported from Mexico compared to other A Brazilian Chamber of Deputies member who Political Mission countries to which Mexico exports vehicles was appointed a special rapporteur to study manufactured in the country. Meantime, U.S. the graft case of embattled President Michel The U.N. Security Council on Monday unani- auto sales fell during the fi rst half of this year Temer on Monday recommended that the mously approved a resolution to establish a by 2.1 percent. Six days after his inauguration chamber put the president on trial, Reuters new political mission to help integrate former on Jan. 20, Trump tweeted that “the U.S. has reported. The recommendation of the legisla- rebels of the Revolutionary Armed Forces of a 60 billion dollar trade defi cit with Mexico. It tor, Sergio Zveiter, had been widely expected. Colombia, or FARC, into the country’s society, has been one-sided deal from the beginning Temer would stand trial if two-thirds of the CBS News and the Associated Press reported. of NAFTA with massive numbers of jobs lower house votes to proceed and the Supreme The United Nations Verifi cation Mission in and companies lost.” Earlier this year, Trump Court accepts the charges. Colombia was created for an initial one-year was able to pressure U.S. automaker Ford to period starting Sept. 17. The new mission will stop the building of a vehicle assembly plant replace a current mission that has been moni- in Mexico, but his efforts to dissuade other Peru Recalls Ambassador toring the FARC’s cease-fi re and disarmament automakers from moving operations to Mexico to Ecuador Amid process. Last month, the FARC handed over all have not seen widespread success. When 7,000 of its registered weapons to that U.N. asked by CNBC whether there were plans to Border Wall Dispute mission, BBC News reported. The resolution stop the building of a BMW assembly plant in The Peruvian government has recalled its approved Monday asks U.N. Secretary General Mexico, the chairman of BMW said no changes ambassador to Ecuador after the Ecuadorean Antonio Guterres to make recommendations were planned, and that the plant is scheduled government refused to stop building a border about the new mission’s size, operational to open in 2019. wall along a canal separating the two coun- aspects and mandate, CBS News and the AP tries, the Peruvian Foreign Affairs Ministry said reported. In January 2016, months before Co- Monday, Reuters reported. The wall, which is lombia’s government and the FARC signed their BUSINESS NEWS part of an urban revival project, comes as both peace accord, both sides had asked the United countries have expressed concerns over fl ood Nations to monitor any cease-fi re and disarma- Reinsurer IRB Brasil risks in the area. Peru said the wall violates a ment. Last month, Colombian President Juan peace treaty, while Ecuador said that it lament- Manuel Santos asked the Security Council to Files for Secondary ed Peru’s decision but added that Peru had not establish a new political mission for a three- responded to a request last week the discuss year period, “renewable if necessary.” Share Off ering the dispute in a high-level meeting.

Reinsurance company IRB Brasil Resseguros ECONOMIC NEWS on Friday fi led for an initial public offering of shares, Reuters reported. The share sale will Workers at Chile’s Zaldivar Mexico’s Car be a secondary offering, with shareholders Copper Mine Vote to Strike including Fundo de Garantia de Operações de Workers at the Zaldivar copper mine in Chile, Exports to U.S. Rise Crédito Educativo, BB Seguros Participações, owned by Antofagasta and Barrick Gold, voted Bradesco Seguros and Itaú Seguros selling Monday to go on strike after talks with the in Year’s First Half some of their stakes as part of the offering, company failed, a union leader said, Reu- according to a prospectus on the Web site of ters reported Monday. Antofagasta, which The number of car exports from Mexico to the securities regulator CVM. Banco Bradesco’s manages labor relations at the mine, declined United States increased in the fi rst six months investment-banking unit will underwrite the of- to comment on the vote from the workers’ of this year, despite U.S. President Donald fering, alongside several other banks, including union, but said it would continue to work within Trump’s warnings that he would penalize car Banco do Brasil and JP Morgan Chase & Co. legal guidelines. There will be an at least fi ve companies that import cars and trucks from The reinsurer is backed by Brazil’s government, day-long government mediation period before Mexico to sell in the United States, CNBC which owns a stake of 27 percent, according to workers at the Zaldivar mine will walk off the reported Monday. Data from the Mexican Reinsurance News. ITB Brasil Re was formed work site.

FEATURED Q&A / Continued from page 1 in 1939 in order to offer reinsurance to local insurance companies. It later became the coun- matters for a center-left that has always employment. Michelle Bachelet is leaving a try’s largest domestic reinsurance fi rm. counted the PDC within its ranks and implies legacy of structural reforms and is imposing both risks and possible rewards for the PDC an agenda of continuity in the New Majority itself. It is unlikely that either leading candi- coalition. Added to this is the degree of PDVSA Vows date will obtain an absolute majority on Nov. government approval that translates to a ‘Security’ for Foreign 9, triggering a runoff election that could be minimum level of support for the New Major- more favorable to the center-left. The mood ity candidate.” Energy Companies of the electorate is deep dissatisfaction with the status quo. Although polls show crime Peter M. Siavelis, professor Venezuelan state-run oil company PDVSA said as the key concern of Chileans, voters will and chair of the Politics and in a statement Monday that it is guaranteeing likely opt for the candidate they think will International Affairs Depart- “legal security” to all foreign companies operat- be an agent of overall change, but within a A ment at Wake Forest University: ing in the country’s energy sector, amid political framework of stability.” “Sebastián Piñera appears to be a shoo-in, upheaval and economic uncertainty, Reuters barring an electoral bombshell of the type reported. The statement rejected an earlier Guillermo Holzmann, professor that dramatically derailed the candidacy of suggestion from a government advisor that for- at the University of Valparaíso, the right’s Pablo Longueira in 2013. To begin eign companies operating in Venezuela could Chile and CEO of Analytyka with, outgoing center-left president Michelle A Consulting: “The primaries Bachelet’s sagging poll numbers suggest consolidate Piñera’s best option to advance that Chile is ready for a change of political to the second round. The risk is that the New course in line with a region-wide shift to Majority coalition is divided. In August, the the right. Much higher-than-expected voter negotiation of the government’s agenda, the turnout in the primary provides additional design of campaign strategies and the fi nal evidence of such a trend, as do its results. selections of presidential and legislative candidates will be fi nalized. In September, the content of the campaigns will be known, The fracturing of the Maduro // File Photo: Venezuelan Government. in which the criteria of analysis will be: the center-left has put degree of polarization in proposals and additional wind in the be nationalized. The statement was distributed speeches and voters’ motivation, bearing in former president’s to the country’s joint venture partners after mind that the expected abstention rate is electoral sails.” government-allied lawyer Hermann Escarrá told about 60 percent. A win by Piñera depends PDVSA workers on July 4 that joint ventures — Peter M. Siavelis on whether New Majority has a single presi- with the oil company should be revised by a dential candidate and whether the Christian new “constituent assembly” so that the state Democrats remain in the coalition. If not owns 100 percent of PDVSA’s assets. The and the candidates are Alejandro Guillier As the standard bearer for the right-wing constituent assembly would supersede other and Carolina Goic, it portends a scenario of Chile Vamos coalition, Piñera received government institutions to rewrite the country’s polarization and increases the probability almost half of the 1.7 million votes cast, Constitution. The statement distributed on that Piñera wins in the fi rst round and the suggesting a large base of support. Poll Monday, however, sought to assuage fears Broad Front becomes an option whose numbers consistently show Piñera with a from foreign companies that a more radical challenge is mobilizing voters by increasing healthy lead, against his nearest rival, the wing of President Nicolás Maduro’s administra- turnout. If Guillier is the candidate of the New Majority’s Alejandro Guillier—at times tion could seek to nationalize the companies, New Majority, he will be assured a spot in approaching double digits. The fracturing as former President Hugo Chávez did in 2007. the second round and compete with Piñera. of the center-left has put additional wind The statement said the state oil company The most relevant and strategic issues in the former president’s electoral sails. “guarantees legal security to investors, are the defi nitions regarding a constituent The threatened departure of the Christian partners, and others,” the statement read. “In assembly, as well as education, labor, tax Democrats from the New Majority coalition the case of joint ventures, PDVSA has honored and pension reforms. All this is defi ned and the formation of a new alternative leftist and will continue to honor the legal norms that by achieving economic growth and quality coalition, the Broad Front, paints a picture allow the possibility of doing business with Continued on page 4 private companies.”

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2017 of the once-unifi ed center-left in a state of ocratic Party, the New Majority’s largest par- disarray. The only likely hope for Piñera’s ty, is threatening to have its own candidate, Erik Brand competitors is some sort of dramatic twist Senator Carolina Goic. It remains to be seen Publisher [email protected] of electoral fate that would provide an if New Majority will fi nally agree on a single opening for a centrist or leftist candidate candidate and a unifi ed slate of legislative Gene Kuleta Editor to squeak by in a second-round victory, [email protected] should Piñera fail to garner a majority in the The race in November Nicole Wasson fi rst round. This would also require that the will turn into a con- Reporter, Assistant Editor entire center-left coalesces around a single [email protected] unifying candidate. In this sense, for Piñera’s test for second-place competitors, the race currently boils down to and the opportunity a contest for second place in the hopes for to challenge Piñera in this type of scenario.” the December runoff.” Michael Shifter, President Genaro Arriagada, Nonresident Senior Fellow — Patricio Navia Patricio Navia, clinical (full) Sergio Bitar, Nonresident Senior Fellow Joan Caivano, Director, Special Projects professor of liberal studies at Michael Camilleri, Director, Peter D. Bell Rule of Law New York University: “Chileans candidates or if it will break up when the Program A seem to be on their way to deadline to register candidates expires on Kevin Casas-Zamora, Nonresident Senior Fellow returning Sebastián Piñera to power only Aug. 21. Either way, neither Guillier nor Goic Ariel Fiszbein, Director, Education Program four years after he ended his presidency seem strong enough to challenge Piñera. Alejandro Ganimian, Nonresident Fellow as the most unpopular president since the The race in November will turn into a contest Peter Hakim, President Emeritus return of democracy. When he won in 2010, for second-place and the opportunity to Claudio Loser, Senior Fellow he replaced leftist Michelle Bachelet. When challenge Piñera in the December runoff. Nora Lustig, Nonresident Senior Fellow he left, he turned power over to Bachelet, Since Piñera has a comfortable lead but his Margaret Myers, Director, China and who was re-elected with the widest margin in negatives are high, whomever makes it to Latin America Program any runoff since the end of Chile’s dictator- the runoff will have a chance to unite the Manuel Orozco, Director, Migration, Remittances & Development ship. Now Bachelet is the most unpopular left and turn the election into a plebiscite on Jeffrey Puryear, Senior Fellow president since the return of democracy and Piñera. Polls are now predicting that Piñera Tamar Solnik, Director, Finance & Administration Piñera’s four-year term does not look to bad would win the runoff against Guillier, Goic or Lisa Viscidi, Director, Energy Program to Chileans. If Piñera wins in the fi rst-round far left Broad Front candidate Beatriz Sán- Denisse Yanovich, Director of Development and vote in November or the runoff in December, chez. Yet, if any of those candidates—or any External Relations Chile will have completed an unprecedented other leftist that might emerge in the coming 16 years with Bachelet and Piñera alternat- weeks—manages to campaign on moderate Latin America Advisor is published every business day, except for major U.S. holidays, ing in power. Though elections are always market-friendly reforms, rather than the old by the Inter-American Dialogue at competitive in Chile, Bachelet’s unpopularity public sector and state-oriented left-wing 1155 15th Street NW, Suite 800 Washington, DC 20005 is not helping the New Majority candidate, discourse, the left will have a chance against www.thedialogue.org Alejandro Guillier. In fact, The Christian Dem- Piñera in the runoff in December.” ISSN 2163-7962 Subscription inquiries are welcomed at [email protected] LATIN AMERICA ADVISOR 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 Financial represent the views of their respective employers or fi rms. 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 Services Advisor any questions relating to the contents of this publication, contact the editorial offi ces of the Inter-American Dialogue. The answers to questions that informed Contents of this report may not be reproduced, stored in a SUBSCRIBE retrieval system, or transmitted without prior written permis- executives are asking. sion from the publisher.