LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, September 5, 2017

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, September 5, 2017

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Will Infrastructure Macron Meets Cargill With Venezuelan Joyce Chang Global Head of Research, Investments Pay Opposition JPMorgan Chase & Co. W. Bowman Cutter Leaders Former Partner, Off in Bolivia? French President Emmanuel E.M. Warburg Pincus Macron met in Paris with leaders Dirk Donath of Venezuela’s opposition. Absent Senior Partner, Catterton Aimara from the meeting was Lilian Tintori, the wife of opposition Barry Featherman Senior Director, leader Leopoldo López, who was International Government Affairs, prevented from leaving Venezuela. Gilead Sciences Page 2 Marlene Fernández Corporate Vice President for Government Relations, BUSINESS Arcos Dorados Peter Hakim Banco do Brasil President Emeritus, Inter-American Dialogue Seeks to Sell Stake Donna Hrinak in Neoenergia Bolivian President Evo Morales on Aug. 13 enacted a law to allow the construction of a road President, Boeing Latin America through the Isiboro Sécure Indigenous Territory and National Park, known as TIPNIS. // File The state-controlled bank has a Jon Huenemann Photo: Bolivian Government. 9 percent stake in the Brazilian Vice President, U.S. & Int’l Affairs, Philip Morris International Bolivian President Evo Morales last month gave the green power utility. Page 2 James R. Jones light to build a controversial highway that will cut through Chairman, Monarch Global Strategies the Amazon, with the aim of opening the TIPNIS park to Q POLITICAL Craig A. Kelly timber and minerals companies. Morales also recently Director, Americas International Colombian Gov’t, Gov’t Relations, Exxon Mobil inaugurated the country’s fi rst electric train, a $500 million project that John Maisto will connect the fi ve municipalities of Cochabamba. Is Bolivia making ELN Rebels Sign Director, U.S. Education the right kinds of investments to modernize its transportation infra- Finance Group Cease-Fire Nicolás Mariscal structure? Will the country’s efforts to boost infrastructure bring the The government of Colombian Chairman, promised levels of economic growth? Which sectors and constituencies President Juan Manuel Santos Grupo Marhnos have the most to gain from these infrastructure investments, and which and the National Liberation Army, Thomas F. McLarty III or ELN rebels, signed a temporary Chairman, are being left out? cease-fi re that takes effect Oct McLarty Associates 1. The deal came ahead of Pope Carlos Paz-Soldan Francis’ visit to Colombia. Partner, Iván Rebolledo, managing partner at TerraNova Strategic DTB Associates, LLP Page 2 Beatrice Rangel Partners LLC and president of the Bolivian-American Cham- Director, ber of Commerce: “Bolivia clearly is headed in the right direc- AMLA Consulting LLC tion in expanding its infrastructure network, especially in the Gustavo Roosen A Chairman of the Board, area of transportation. Unfortunately, the TIPNIS initiative has been rid- Envases Venezolanos dled with problems since its inception. After historic marches and armed Andrés Rozental President, Rozental & confrontation, the government passed Law 180, which put a stop to Asociados and Senior Policy Advisor, Chatham House further infrastructure projects in this unique ecosystem. In 2012, after a Shelly Shetty ‘Consulta Previa’ process (which is unusual, since the decision to proceed Head, Latin America with the road construction had already been approved), the government Sovereign Ratings, Fitch Inc. Roberto Sifon-Arevalo revoked Law 180, arguing that the road project would bring needed health Managing Director, Americas care, education and development to the region. It is important to point out Sovereign & Public Finance Ratings, Standard & Poor’s that this road initiative will clearly benefi t the coca-producing inhabitants of TIPNIS, since it passes directly through their communities and is actu- Santos // Photo: Colombian Government. Continued on page 3

POLITICAL NEWS priest who is a member of Francis’ Jesuit order, NEWS BRIEFS has helped broker the negotiations between Colombian Gov’t, Colombia’s government and the ELN, The Irma Strengthens to Washington Post reported. The rebel group for Category 5 Hurricane, ELN Rebels Sign years was led by Catholic priests, but de Roux has called on the rebels to end its violence. Takes Aim at Caribbean Cease-Fire “Kidnapping doesn’t destroy capitalism, nor Hurricane Irma this morning strengthened to an does it destroy imperialism. It destroys the kid- “extremely dangerous” Category 5 hurricane, Colombia’s government and the country’s Na- napper and the kidnapped,” de Roux previously with sustained winds of 175 miles an hour, the tional Liberation Army, or ELN, rebels on Mon- said. The cease-fi re with the ELN came nine U.S. National Hurricane Center said. As of 8 day signed a temporary cease-fi re agreement, months after the government signed a peace a.m. Eastern Time, the storm was located 270 The Washington Post reported. The agreement accord with the larger Revolutionary Armed miles east of the island of Antigua, moving was Colombia’s fi rst cease-fi re with the ELN Forces of Colombia, or FARC, rebels. west at 14 miles an hour. Hurricane warnings and came just ahead of a visit by Pope Francis are in effect for parts of the Dominican Repub- Macron Meets lic as well as Puerto Rico and other islands. The pope will arrive at With Venezuelan a unique moment in our history, when we Opposition Leaders Trump Expected to Revoke are turning the page Program for Immigrants of an absurd confl ict French President Emmanuel Macron met Who Migrated as Children Monday with Venezuelan opposition leaders and we are looking U.S. President Donald Trump is expected to discuss the country’s humanitarian and toward the future.” today to revoke a program that shields some political crisis, the Associated Press report- — Juan Manuel Santos immigrants who came to the United States as ed. The meeting happened two days after children from deportation, leaving their fate in Venezuela’s government barred the activist the country to Congress, which would have six to the South American country. The cease-fi re, and wife of opposition leader Leopoldo López, months to design a new program addressing which was signed in Quito, is set to begin on Lilian Tintori, from leaving the country in order the policy, Reuters reported. The expected Oct. 1 and last until Jan. 12. Under the deal, to attend the meeting in Paris. Venezuelan decision would mean a six-month extension of the rebels, who have for decades engaged in Foreign Minister Jorge Arreaza on Monday said the Deferred Action for Childhood Arrivals, or attacks on civilians and oil pipelines, as well as he fi led complaints with the ambassadors of DACA program, while Congress works on cre- kidnappings and extortion, agreed to halt those four countries, saying they were intervening in ating a replacement. DACA was created under activities. In return, Colombia’s government former President Barack Obama in 2012 after agreed to provide improved conditions to jailed Congress failed to pass legislation that would ELN rebels and as well as bolstered security provide a path to citizenship for undocumented for leftist community leaders, the newspaper youth. reported. Colombian President Juan Manuel Santos announced the cease-fi re on Monday, saying the deal came together in part to honor Pope Francis, who arrives Wednesday after- Banco do Brasil Plans noon in Colombia for a fi ve-day visit. “The pope to Sell Stake in Neoenergia will arrive at a unique moment in our history, State-controlled Banco do Brasil plans to sell when we are turning the page of an absurd con- Venezuelan National Assembly President Julio Borges met fl ict and we are looking toward the future,” said Monday with French President Emmanuel Macron (L-R) in its 9 percent stake in Brazilian power utility Paris. // Photo: @JulioBorges. Santos. The Catholic Church under Francis, the Neoenergia, which is working on an initial public offering in the coming months, Reuters fi rst Latin American pope, has increased its Venezuela’s affairs. Tintori tweeted a photo of reported Sept. 1. In a securities fi ling on Sept. diplomatic efforts in the region. The Vatican the Spanish, German and Italian ambassador 1, Banco do Brasil said both management and helped the thaw in relations between the United to Venezuela at the airport, saying they had board members have authorized Neoenergia to States and Cuba in 2015 and has also tried to accompanied her, Reuters reported. “These begin the procedures for the IPO. The IPO could bring together Venezuela’s government and types of expressions are absurd and offensive value the company at approximately 35 billion the country’s opposition. Francisco de Roux, a to the functioning of Venezuelan democracy reais, Reuters reported in July.

FEATURED Q&A / Continued from page 1 and its institutions,” said Arreaza, the AP reported. Julio Borges, the president of the ally on the other side of the TIPNIS territory, benefi ts. If they are pushed through anyway, opposition-led National Assembly, and Freddy which is where most of the indigenous com- the project winners will be timber exporters, Guevara, the fi rst vice president of the legisla- munities who have the most to gain from agribusiness, coca growers and mining ture, plan to continue with meetings scheduled the development that this road would bring products. The losers may be the communi- this week with European leaders. The meetings are living. In mid-2016, Morales promulgated ties of the Amazon, civil society in general, are aimed at increasing pressure on President Law 266, which now opens the area for road the environment and prospects for long-term Nicolás Maduro to hold elections, respect the construction and other projects. There is economic growth.” balance of power in the government and allow an alternative option to this needed road, humanitarian aid into the country. “Dozens of connecting Cochabamba to Beni, via another Linda Farthing, La Paz-based countries have offered free food and medicine route that would clearly benefi t the majority researcher and writer: “Presi- and it’s unbelievable that the main obstacle is of the indigenous communities inhabiting dent Evo Morales’ government’s [the] government, the one that is supposed to that area and sustaining the eco-sustainabil- A recent decisions to remove defend the rights of the Venezuelan people,” ity integrity of the area. China has become protected status from an indigenous Borges said. Following the meeting with oppo- a key and strategic partner for Bolivia in reserve and national park and to build an sition leaders, Macron’s offi ce in a statement infrastructure, with close to 100 state-owned electric train for Bolivia’s fourth-largest city, condemned what he called the repression of enterprises operating there. Over the past Cochabamba, speaks to the predicament at the opposition, and said that he was ready few years, China has pledged a $10 billion the heart of his 11-year-old government. The to push for European sanctions against the line of credit for government projects, which quandary pits an oft-stated commitment to Maduro administration. included nine major roads; the creation of a environmental and indigenous rights against massive hydroelectric plant; the expansion the constant pressure for the country to of the Santa Cruz international airport; and ECONOMIC NEWS the construction and expansion of the El Mutún steel plant. The issue to consider in The expansion of this relationship is the exposure it brings what was an almost Negotiators Seek to to the country through increased indebt- nonexistent road in- Enshrine Mexico’s edness with China and reliance on foreign frastructure is critical capital that serves its creditor’s excessive to the government’s Energy Reforms in extraction resources needs.” development plans.” Renegotiated NAFTA — Linda Farthing Kevin P. Gallagher, professor of global development policy and U.S., Canadian and Mexican NAFTA negotiators director of the Global Eco- are looking for ways to make sure Mexico’s re- A nomic Governance Initiative at catch up after 500 years of underdevelop- forms to its energy sector, which were enacted Boston University: “Bolivia is facing a major ment and poverty. Under Morales, Bolivia in 2014, are preserved in the updated North infrastructure gap and still has a signifi cant rode the 2000s commodity boom to a America Free Trade Agreement, Mexico’s top number of people living in poverty, although tripling of both its economy and government, negotiator, Kenneth Smith, said Saturday, Reu- under Evo Morales poverty and inequality leading to a 10 percent spike in the middle ters reported. Mexico’s energy reforms opened indicators have improved. Infrastructure class and one of the region’s highest drops up the sector to private investment, and nego- has the potential to bring economic growth. in poverty and inequality. In 2017, Bolivia tiators are hoping to preserve the changes by However, it is not clear that Bolivia has has one of the region’s top growth rates. But incorporating them into the agreement, protect- adequate safeguards to prevent and mitigate while these remarkable achievements show ing the reforms from any reversals by future the social and environmental risks associ- that the government’s model has proven administrations. “We’re working in this sense, ated with projects such as TIPNIS. Without largely successful in the short term, the analyzing all of the elements that need to be adequate safeguards and attention to prior approach is grounded in perpetuating and included in the energy discussion to refl ect the informed consent of the communities, intensifying historic patterns of exploiting reform Mexico established,” Smith said, fol- and without serious environmental impact the country’s abundant natural resources. lowing a bargaining session during the second assessments, the risks associated with The expansion of what was an almost non- round of renegotiation talks. When NAFTA was projects like these may be greater than the existent road infrastructure is critical to the fi rst enacted in 1994, Mexico’s energy sector Continued on page 4 was closed to outside investors.

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2017 government’s development plans. Eliminat- of the investment spending. Health and ing protected status for a reserve so that the education are considered to be subsectors. Erik Brand long-isolated cattle-ranching northeast can Moreover, most of the transportation and Publisher [email protected] link to markets further west will strengthen electricity infrastructure construction public that region’s economy. But the road will also works were awarded to Chinese companies, Gene Kuleta Editor permit hydrocarbon and mining projects, [email protected] which throughout Bolivia’s history have Nicole Wasson harmed the environment and vulnerable This is not only about Reporter, Assistant Editor rural indigenous populations. Cochabamba, opening the park to [email protected] according to the World Health Organization, timber and mineral has among the region’s worst air quality, due companies, but to rapid population growth combined with an mainly a question Michael Shifter, President explosion in car ownership belonging to the related to coca...” burgeoning middle class. The government-fi - Genaro Arriagada, Nonresident Senior Fellow — Jaime Aparicio-Otero nanced investment in a nonpolluting train Sergio Bitar, Nonresident Senior Fellow Joan Caivano, Director, Special Projects will enhance air quality, particularly improv- Michael Camilleri, Director, Peter D. Bell Rule of Law ing the lives of poor residents, but fi nancing Program will come from mining and hydrocarbon without transparency. But even leaving aside Kevin Casas-Zamora, Nonresident Senior Fellow revenues. No easy solution exists to Bolivia’s the possibility of corruption and the risk of Ariel Fiszbein, Director, Education Program dilemma. Perpetuating the emphasis on mortgaging Bolivia’s future to China, most of Alejandro Ganimian, Nonresident Fellow resource extraction and pushing sustain- these projects have been also been plagued Peter Hakim, President Emeritus ability to the back burner is short-sighted. by delays and diffi culties. Concerning the Claudio Loser, Senior Fellow A strategy subject to great price volatility, it road through the TIPNIS park, it should be Nora Lustig, Nonresident Senior Fellow addresses pent-up demands, but fails to pro- said that this is not only about opening the Margaret Myers, Director, China and vide a sustainable development model for park to timber and mineral companies, but Latin America Program one of South America’s poorest countries.” mainly a question related to coca, to the Manuel Orozco, Director, Migration, Remittances & Development expansion of its crops, which will lead to Jeffrey Puryear, Senior Fellow Jaime Aparicio-Otero, former an increase in the production of cocaine. Tamar Solnik, Director, Finance & Administration Bolivian ambassador to the The construction of an international airport Lisa Viscidi, Director, Energy Program United States: “The great quan- in Chapare, an area where coca is culti- Denisse Yanovich, Director of Development and A dary into which public invest- vated and that has little feasibility for the External Relations ment in Bolivia has stumbled is due to poor commercial air business, is part of the same management. From the central government, strategy. The mere fact that it is catego- Latin America Advisor is published every business day, except for major U.S. holidays, works have been executed without short- or rized as an international airport (for 30,000 by the Inter-American Dialogue at long-term planning. In addition, cases of inhabitants) will make it diffi cult to recover 1155 15th Street NW, Suite 800 Washington, DC 20005 corruption in public works are rampant in the investment. As the journalist Mac Margo- www.thedialogue.org Bolivia. Since 2006, Morales has benefi ted lis rightly points out: Morales ‘sees the park ISSN 2163-7962 by being president during a time of high highway as a possible road to redemption, Subscription inquiries are welcomed at commodity prices, which have driven unprec- built by currying favor with bootleg loggers [email protected] edented economic growth in Bolivia. The bo- and one of his most faithful constituencies: nanza allowed the government to waste the Bolivia’s coca farmers.” The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily revenues gained in the commodities boom represent those of the publisher. The analysis is the sole through superfl uous spending. The fi ve The Advisor welcomes comments on its Q&A view of each commentator and does not necessarily sectors that are considered to be strategic section. Readers can write editor Gene Kuleta represent the views of their respective employers or fi rms. The information in this report has been obtained from to the Plurinational State absorb 62 percent at [email protected]. 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 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 permis- sion from the publisher.