LAA130627:Latin America Advisor.Qxd

www.thedialogue.org Thursday, June 27, 2013

FEATURED Q&A BOARD OF ADVISORS Are Chances Improving for Better Business Ties With Cuba? Diego Arria James R. Jones Director, Co-chair, U.S. and Cuban diplomats plan to all, and both parties appear to have con- Columbus Group Manatt Jones resume bilateral talks on migra- cluded that three more years of non-dia- Global Strategies LLC tion issues during a meeting in logue is unacceptable, notwithstanding Mr. Genaro Arriagada Washington on July 17. News of Gross. This is welcome news. But real Nonresident Senior Craig A. Kelly Q the migration talks came after the two progress will require political will at the Fellow, Director, Americas Inter-American International Gov't countries held a round of discussions on White House, of which there is little evi- Dialogue Relations resuming direct mail service. How much dence. Since 2009, Cuba has released polit- Joyce Chang Exxon Mobil progress are the old Cold War foes making ical prisoners; granted its citizens greater on rapprochement? Can any significant freedom of movement; liberalized rules on Global Head of John Maisto Emerging Markets Director, thaw happen while Alan Gross and four car and home sales; allowed greater private Research, JPMorgan U.S. Education Finance members of the "Cuban Five" remain in economic activity; and announced term Chase & Co. Group prison? What is at stake for businesses in limits on political offices, including the W. Bowman Cutter Nicolás Mariscal the United States and elsewhere? presidency—all steps consistent with U.S. Former Partner, Chairman, E.M. Warburg Continued on page 3 Grupo Marhnos Matthew Aho, consultant with Pincus Akerman Senterfitt LLP in New Thomas F. Dirk Donath McLarty III York: "It speaks volumes about Managing Director, President, the dismal state of U.S.-Cuba Eton Park Capital McLarty Associates A Management relations when, nearly a quarter century Carlos Paz-Soldan after the end of the Cold War, talks on the Jane Eddy Partner, resumption of postal service is considered Managing Director, DTB Associates, LLP 'progress.' Yet the tone of June talks on pre- Corporate & Govt. Ratings Group, Beatrice Rangel cisely this issue was described as a 'sea Standard & Poor's Director, change' by U.S. officials and appears to AMLA Consulting LLC have laid groundwork for further discus- Marlene Fernández sions on more complicated issues. Talking Corporate Vice José Antonio Ríos Chilean Student Protest President for Chief Executive Officer, about mail may not sound like much, but Demonstrations Turn Violent Government Relations, Vadium Technology Inc. contact between similarly high-ranking Arcos Dorados officials hasn't occurred since before the A peaceful nationwide demonstration by Gustavo Roosen Peter Hakim 2009 arrest of Alan Gross when they were more than 100,000 students demanding Chairman of the Board, also discussing (you guessed it) mail. Since education reform on Wednesday turned President Emeritus, Envases Venezolanos Inter-American 2010, Cuba has insisted it will only release violent, with hooded protesters hurling Dialogue Andrés Rozental Mr. Gross via a quid pro quo exchange Molotov cocktails at a police station in President, involving one or more of the 'Cuban Five', the capital city of Santiago. See brief on Donna Hrinak Rozental & Asociados President, and Senior Fellow, a prospect Washington has rejected, result- page 2. Boeing Brazil Brookings Institution ing in stalemate. So the scheduled talks are Photo: AFP. significant because they are happening at Jon Huenemann Everett Santos Vice President, President, U.S. & Int'l Affairs, DALEC LLC Inside This Issue Philip Morris Int'l Shelly Shetty FEATURED Q&A: Are Chances Improving General Motors to Invest $691 Million Head, Latin America for Better Business Ties With Cuba?...... 1 in Mexico Plant Upgrades ...... 3 Sovereign Ratings, Fitch Inc.-Start Content- U.S. Increases Pressure on Ecuador Uruguay Teachers Vote for Over Snowden Asylum Case...... 2 National Strike on Friday...... 3 Repsol Board Rejects $5 Billion Investment Flows to Latin America Offer From Argentina for YPF Seizure ...... 2 Remain High But Weakened in 2012...... 3

NEWS BRIEFS Political News under the Generalized System of Preferences which is presently before the Chilean Student Protest Congress for renewal." "Trade preferences Demonstrations Turn Violent U.S. Increases Pressure on Ecuador are a privilege granted to nations, not a A peaceful nationwide demonstra- Over Snowden Asylum Case right," Menendez said. "I urge President tion by more than 100,000 Chilean Correa to do the right thing by the United students demanding education Ecuadorean government officials on States and Ecuador, and deny Snowden's Wednesday signaled to Washington that request for asylum." Even before the reform on Wednesday turned vio- they may deliberate slowly on the asylum Snowden controversy, however, some lent, with hooded protesters hurling application from Edward J. Snowden, 30, analysts expressed doubt that the prefer- Molotov cocktails at a police station the former security contractor wanted in ences would be renewed next month. in the capital city of Santiago and the United States, The New York Times [Editor's note: See Q&A on the Ecuador's looting a restaurant, the Associated reported. Ricardo Patiño, Ecuador's for- trade preferences renewal in the June 13 Press reported. Police in riot gear eign minister, suggested to reporters issue of the Advisor.] Meanwhile, Efraín responded with water cannons and Wednesday at a news conference while Baus, the deputy chief of mission at tear gas. Police arrested 102 people, traveling in Malaysia that his government Ecuador's Embassy in Washington, on while four officers were injured. could take "a day, a week, or, as with Wednesday asked the United States for information in writing about the asylum Brazilian Congress, Supreme application, the Associated Press report- Court Respond to Protests ed. "The government of Ecuador has I urge President Correa to do Brazil's Congress and Supreme “ requested that the U.S. submit its position Court took new steps Wednesday to the right thing by the United regarding this applicant in writing so that it can be taken into consideration as part respond the county's ongoing public States and Ecuador. of our thorough review process." Other demonstrations, Folha de São Paulo ” — Sen. Robert Menendez left-leaning leaders in Latin America have reported. The Supreme Court expressed support for the fugitive. On ordered the arrest of a congressman Tuesday, Venezuela's President, Nicolas convicted of embezzlement in 2010, Assange, it could take 2 months," to Maduro, said his country would consider the first such arrest in decades. decide on the application. Patiño was an asylum application from Snowden if it Meanwhile, the country's Senate comparing the Snowden case to that of receives one. passed a bill that increases the Julian Assange, the founder of WikiLeaks, mandatory sentences for murder who has been given asylum in the Company News and corruption. The House of Ecuadorean Embassy in London. He Representatives will now consider added that his country's relations with the that bill, as well as a bill that would United States would be one of the factors Repsol Board Rejects $5 Billion Offer considered in the decision, according to From Argentina for YPF Seizure reduce the secrecy surrounding the the report. Wednesday was Snowden's impeachment of congressmen. fourth day holed up in a restricted inter- The board of Spain-based oil company [Editor's note: See Q&A on the national transit area of Moscow's Repsol on Wednesday unanimously protests in yesterday's Advisor.] Sheremetyevo airport, where he remains rejected Argentina's offer of compensa- in diplomatic limbo. Meanwhile, some tion for the 2011 expropriation of 51 per- Chinese Firm to Double Investment in Peru Copper Project members of the U.S. Congress have cent of its shares in YPF, Clarín reported. stepped up pressure on Ecuador over the In a press release, the board stated that the Peru's minister of energy and mines, case. U.S. Sen. Robert Menendez (D-N.J.), offer, which the Argentine government Jorge Merino, said Wednesday that Chairman of the Senate Foreign Relations valued at about $5 billion, was "unsatis- China's Chinalco plans to double its Committee, issued a press release factory for the interests of the company" investment in a copper project in Wednesday afternoon calling on Russia to and "does not have the minimum neces- the Andean country, state news "cease sheltering international fugitive sary legal and economic guarantees." The agency Andina reported. The firm Edward Snowden and release him imme- proposal would have given Repsol 47 per- plans to increase its investment in diately into the custody of the United cent ownership in a new company with States." Menendez also warned Ecuador's drilling rights to 6.4 percent of the Toromocho copper project from government, led by leftist President Rafael Argentina's Vaca Muerta shale-gas field $2.05 billion to $4.8 billion. The Correa, not to grant Snowden asylum, and $1.5 billion in cash and bonds that mine should produce about 300,000 adding that such a decision "would can only be invested in the project, Dow tons of copper per year and employ severely jeopardize the preferential trade Jones reported. Repsol, which has esti- 2,500 people. access provided to goods from Ecuador mated the value of the seized assets at

Copyright © 2013, Inter-American Dialogue Page 2 of 4 Inter-American Dialogue’s Latin America Advisor Thursday, June 27, 2013 more than $10 billion, has threatened school students begins. The unions, toric highs last year, falling just 2 percent legal action against companies that seek which are demanding higher wages, bet- to $244 billion, the United Nations to invest in any of YPF's assets. The dis- ter infrastructure and more support and Conference on Trade and Investment, or pute has also tainted Argentine relations administrative staff, are putting unusual- UNCTAD, said in a report released with the European Union over biofuels ly strong pressure on the government of Wednesday. The drop was due to a decline imports. left-leaning President José Mujica, which of flows to Central America and the is scheduled to submit its budget to Caribbean that was masked by an General Motors to Invest $691 Congress on June 30. The budget is cur- increase of 12 percent in South America, Million in Mexico Plant Upgrades rently slating a 3 percent wage increase where FDI inflows of $144 billion were a for teachers in 2015. Union leaders told mix of natural-resource-seeking and Michigan-based General Motors on local media that they cannot recall previ- market-seeking activity, such as automo- Wednesday announced it will invest $691 ous labor actions that involved occupying tive sector investments in Brazil. In 2012, million to upgrade some of its Mexican schools. President Mujica is facing hard for the first time ever, developing manufacturing operations. In a press choices in fighting inflation however. economies absorbed more FDI than release, the automaker said it is targeting Uruguay is likely to be the only country in developed countries, accounting for 52 the investments in its Silao, San Luis Latin America with a central bank that percent of global FDI flows, the report Potosí and Toluca facilities. Most of the sets inflation targets that will miss its tar- stated. Developing economies also gener- funds will go into technology needed to get in 2013, according to JP Morgan. ated almost one third of global FDI out- build higher performing, more fuel-effi- flows, continuing a steady upward trend. cient powertrains. Mexican President Investment Flows to Latin America The BRICS countries (Brazil, Russia, Enrique Peña Nieto joined company Remain High But Weaken in 2012 India, China and South Africa) continued executives in Mexico City to mark the to be the leading sources of FDI among announcement. The Silao and San Luis Latin America and the Caribbean saw for- emerging investor countries, rising from Potosí investments total $480 million, eign direct investment remain near his- $7 billion in 2000 to $145 billion in 2012. with the remaining funds slated for Toluca. The automotive sector makes up Featured Q&A more than 20 percent of manufacturing Continued from page 1 gross domestic product in Mexico, interests. The concurrent U.S. response in long-standing disputes, still manage to according to Reuters. has been chirping crickets. There are have postal relations and relations on clear incentives to stop talking past each protecting the lives of migrants. Economic News other during upcoming talks. The end of (Actually, people getting agitated about Cuban exit visas lends new urgency to mail service in this day and age seems migration issues; uncertainty regarding even more than misguided, it actually Uruguay Teachers Vote for Venezuelan oil subsidies arose the same seems kind of quaint.) The question is National Strike on Friday year that U.S.-Cuba remittance flows why have these diplomatic efforts topped $2 billion; Cuba bought $476 sparked opposition? Shouldn't promot- Teacher strikes and school occupations million of U.S. farm exports in 2012, ing communication and contact with an that sprouted up across Uruguay earlier which could double amidst more normal island long isolated from its relatives and this month appear headed to accelerate in relations. What's more, some confi- refugees in the U.S. be what policy the coming days and could affect the dence-building steps could finally should try to do? Shouldn't ensuring a most important exam period of the year remove the biggest stumbling block of rational system for immigration that for the country's secondary students. A the last few years: Mr. Gross' long-await- helps guarantee the safety of those who main teachers' union, Ademu, in the cap- ed release. But for now, it's 'Back to the want to leave Cuba be generally desir- ital city of Montevideo on Wednesday Future' on postal talks." able? As they started to do last week, the voted to call a strike of public secondary U.S. and Cuba need to work in narrower schools be extended through this Friday, Christopher Sabatini, senior parameters where there is a genuine El País reported. More than 1,000 union director of policy at the mutual interest that transcends history members turned out for the meeting, the Americas Society and Council and ideology. The sad thing is that legit- largest since a major education sector A of the Americas: "When it imate practical, workaday relations strike in 1989. Union leaders called for a comes to matters of policy change between the countries have been held "massive occupation" of schools starting between Cuba and the United States, we hostage to posturing and fear, real and Friday. They also called a new meeting on should never be too optimistic. imagined, and often upended by provo- Saturday to discuss whether to extend the Normally these initiatives would not cations by the Cuban regime (like the strikes and protests through the two-week spark outrage; countries in conflict, even brutal 1996 shootdown of the Brothers vacation starting July 1, when the main examination period of the year for high Continued on page 4

-End Content- Featured Q&A Continued from page 3 Latin America Advisor to the Rescue planes and the 2009 arrest are asking that the United States admits it is published every business day by the Inter-American Dialogue, Copyright © 2013 of Alan Gross). None of these diplomatic was wrong and unilaterally lifts its efforts, even if they should come to embargo, stops funding the internal Erik Brand General Manager, Publishing fruition, should be seen as negating the opposition and undertakes to proactively [email protected] importance of human rights in Cuba. restrain the extremist elements in Gene Kuleta Quite the opposite. Where violations and Florida. This is a very high bar to jump Editor repression continue to exist, as they do over for Washington. What this means for [email protected] inside Cuba, the U.S. should continue to U.S. business is that business will be as raise them. But it can and should be able usual for the forseeable future and that Megan Cook Reporter, Assistant Editor to do so in the context of other much- means very little business for them, which [email protected] needed and humane policies. Diplomacy, is a pity because they will be missing out even over human rights, is not a zero- on a lot of expansion activity, especially Inter-American Dialogue sum game." in the areas of tourism, real estate development, infrastructure renewal, biofuels Michael Shifter, President Stephen Wilkinson, chairman and biotech." Peter Hakim, President Emeritus of the International Institute for the Study of Cuba: "There do Otto Reich, president of Otto Genaro Arriagada, Nonresident Senior Fellow A seem to be incremental signs of Reich Associates LLC and for- Sergio Bitar, Nonresident Senior Fellow a rapprochement between Washington mer U.S. assistant secretary of Joan Caivano, Director, Special Projects and Havana. These latest talks come after A state for Western Hemisphere Maria Darie, Director, Finance & Administration Affairs: a number of other cautious moves that "I haven't been commenting on Mary Ellen Flather, Senior Director point in a positive direction. They are Cuba much of late, mainly because there of Strategy and Development also exactly the kind of exchanges, on is no change and there will not be any Claudio Loser, Senior Fellow mutually beneficial topics, that experts until the two brothers are gone. Then and diplomats on both sides have sug- there will be profound change, sooner Nora Lustig, Nonresident Senior Fellow gested as being the best way for the two rather than later, led by people that the Margaret Myers, Director, countries to start to build trust. The anal- American 'commentariat' has not even China and Latin America Program ogy of porcupines making love carefully imagined. The current 'talks' are as lack- Manuel Orozco, Director, Remittances and Development Program has been used to describe the way they ing in long-term significance as all the should approach this process. It is a good previous ones. We've been hearing about Tamara Ortega Goodspeed, Senior Associate, Education one because both protagonists have a lot reform and change in Cuba ever since the of thorny issues to deal with. The cases of USSR ceased to exist in 1991. It is empty Jeffrey Puryear, Vice President, Social Policy Gross and the Cuban Five are the most talk promoted by the Castros to obtain, at prominent ones on a very long list and to no political cost to them, the two things Latin America Advisor is published every some degree are less problematic in they erroneously believe will save the business day, except for major U.S. holidays, by themselves than the greater problems regime: American tourists and American the Inter-American Dialogue at: they represent, namely the activities of credits (Cuba wants to buy American 1211 Connecticut Avenue NW, Suite 510 Washington, DC 20036 U.S.-sponsored agents in Cuba trying to products on credit, not cash as currently Phone: 202-822-9002 Fax: 202-822-9553 foment opposition and the activities of required by U.S. law, which they can www.thedialogue.org ISSN 2163-7962 Cuban agents inside the U.S. trying to eventually refuse to pay back, as they have prevent extremists in Florida from carry- with all the other countries that have Subscription Inquiries are welcomed at ing out various nefarious activities extended such credits to them.) First, that [email protected] against Cuba, including terrorist attacks. shows their ignorance of U.S. politics. The opinions expressed by the members of the It may be unpalatable to many in Second, it shows their ignorance of devel- Board of Advisors and by guest commentators do Washington and Florida but the Cuban opment economics. But then, the entire not necessarily represent those of the publisher. The analysis is the sole view of each commentator and side does have cause to regard any friend- island is an open air museum to the fail- does not necessarily represent the views of their ly moves by the U.S. with deep suspicion. ure of their development model." respective employers or firms. The information in I therefore do not see a huge change in this report has been obtained from reliable sources, but neither its accuracy and completeness, nor the the relationship as happening soon. As opinions based thereon, are guaranteed. If you have the Cuban side said after the recent mail The Advisor welcomes reactions to the any questions relating to the contents of this publica- talks, while the embargo remains it is dif- Q&A above. Readers can write editor tion, contact the editorial offices of the Inter- American Dialogue. Contents of this report may not ficult for them to see how a mail service Gene Kuleta at [email protected] be reproduced, stored in a retrieval system, or trans- could be resumed. Essentially, the Cubans with comments. mitted without prior written permission from the publisher.