LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, March 30, 2021

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, March 30, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk Are Bolivian Politics Argentine Bank Chief Corporate Affairs Officer, Grubhub Groups Seek Joyce Chang Global Head of Research, Focused on Unity Eased Regulations JPMorgan Chase & Co. Officials from Argentina’s four Paula Cifuentes largest banking industry groups Director of Economic & Fiscal Affairs, or Retribution? have reportedly asked the govern- Latin America & Canada, Philip Morris International ment to ease some regulations. Marlene Fernández Page 2 Corporate Vice President for Government Relations, Arcos Dorados (McDonald’s) BUSINESS Peter Hakim President Emeritus, Brazil’s Raízen Inter-American Dialogue Taps Banks Donna Hrinak Senior VP, Corporate Affairs, to Manage IPO Royal Caribbean Group Brazilian energy company Raízen, Jon E. Huenemann a joint venture between Cosan and Council Member, Royal Dutch Shell, has reportedly GLG Inc. tapped four investment banks to James R. Jones Former interim Bolivian President Jeanine Áñez’s interior minister sought to imprison leftist Chairman, former President Evo Morales. Now, an ally of Morales is president, and Áñez is behind bars. // manage its initial public offering. Monarch Global Strategies Photo: @JeanineAnez via Twitter. Page 3 Craig A. Kelly Upon taking office, leftist Bolivian President Luis Arce Senior Director, Americas Int’l Gov’t Relations, Exxon Mobil vowed to unite the politically divided country, as did his POLITICAL John Maisto predecessor, conservative Jeanine Áñez. However, shortly Bolsonaro Shuffles Director, U.S. Education Finance Group Q after Áñez’s government took over in November 2019, her in- Cabinet Amid Nicolás Mariscal terior minister sought to imprison leftist former President Evo Morales. Chairman, Intense Criticism Grupo Marhnos Now, four months after taking office, Arce’s government has arrested Over Pandemic Thomas F. McLarty III Áñez and some of her cabinet members. Is Bolivia facing continued Brazilian President Jair Bolsonaro, Chairman, McLarty Associates cycles of retribution, with leftists in power pursuing conservatives, and who is facing intense criticism Beatrice Rangel conservatives in power seeking to jail leftists? What will such actions over his handling of the Covid-19 Director, mean for Bolivia’s political stability going forward? What does Bolivia’s pandemic, which has been killing AMLA Consulting LLC more than 100 people an hour Jaana Remes political situation mean for businesses with interests and operations in in Brazil, shuffled his cabinet. Partner, the Andean nation? Among those out is Foreign McKinsey Global Institute Minister Ernesto Araújo. Ernesto Revilla Page 2 Head of Latin American Daniel E. Moreno, senior researcher at Ciudadanía, Comuni- Economics, Citi Gustavo Roosen dad de Estudios Sociales y Acción Pública in Cochabamba, Chairman of the Board, Bolivia: “What is happening now in Bolivia is a clear example Envases Venezolanos Andrés Rozental of what can happen when the integrity and independence President, Rozental & A of the institutions that are supposed to guarantee democracy’s checks Asociados and balances are compromised. New examples of corrupt and politically Shelly Shetty Managing Director, Sovereigns dependent judges and public prosecutors come to light almost daily, Fitch Ratings further eroding citizens’ trust of these institutions and in the rule of law in the country. According to LAPOP data for 2019, the share of Bolivians who think that the courts guarantee a free trial is among the lowest in the region, and it has been declining sharply over the last decade. Under a polarized political scenario, a weak judicial system works as a throwaway weapon for those in control of the executive branch. If Bolivian judicial in- Araújo // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS Netto, CNN reported. Bolsonaro also sacked NEWS BRIEFS Attorney General José Levi do Amaral, replac- Brazil’s Bolsonaro ing him with Justice Minister André Mendonça. Number of Children Federal Police Chief Anderson Torres will Transiting Darién Gap Shuffles Cabinet as replace Mendonça as justice minister. Bolson- aro also tapped Government Secretary Luiz Surges: UNICEF Covid Deaths Soar Eduardo Ramos as his chief of staff, replacing The number of migrant children transiting the Souza Braga Netto in that position. Bolsonaro dangerous Darién Gap between Colombia and Brazilian President Jair Bolsonaro shuffled sev- named lawmaker Flávia Arruda as government Panama has surged over the past year, the eral members of his cabinet on Monday as he secretary. U.N. child welfare agency said Monday, the faces intensifying criticism of his government’s Associated Press reported. While underage mi- handling of the Covid-19 pandemic amid soar- grants were only 2 percent of those using the ing numbers of cases and deaths from the dis- ECONOMIC NEWS jungle corridor in 2017, the number of children ease, The Wall Street Journal reported. Among passing through in 2020 jumped to 25 percent the officials moved out of their positions was Argentine Bank of migrants making the journey on foot, UNICEF Foreign Minister Ernesto Araújo, who had faced said in a report. The Darién Gap is a 60-mile sharp criticism from opposition lawmakers Groups Seek stretch of jungle with no clear track and little who blamed him for delays in shipments of food and shelter. It is the only land route north vaccine inputs from China, the newspaper re- Eased Regulations out of South America. ported. In a blog post last year, Araújo blamed the Covid-19 pandemic on what he character- Officials from Argentina’s four largest banking ized as a communist plot. “Using the pretext of industry groups have held several calls and Argentina Suspends Meat the pandemic, this new communism is trying meetings in recent weeks with central bank to create a world without nations, and without chief Miguel Ángel Pesce and Production Exporters for Avoiding freedom,” he wrote, The Wall Street Journal Minister Matías Kulfas, asking them to ease Industry Regulations reported. Araújo is also considered an obstacle some regulations, the Buenos Aires Times Argentina announced Monday it had sus- in Brazil’s efforts to obtain surplus doses of reported Saturday, citing unnamed people with pended 15 meat exporters who reportedly Covid-19 vaccines from the United States. Bol- knowledge of the matter. Amid the pandemic, avoided industry regulations, Reuters reported. sonaro said late Monday that diplomat Carlos commercial banks were required last year to The move derailed at least 40 metric tons of Alberto Franco França would succeed Araújo. defer some loan payments, give out loans with meat shipments from one of the world’s most Bolsonaro, who has downplayed the threat of interest rates below the rate of inflation and renowned beef producers, though the country’s Covid-19 and had said Brazilians should “stop eliminate commissions for some services. agriculture ministry did not list the names of whining” about it, has recently started wearing However, the government is now reluctant to the companies involved. The ministry said it a face mask more frequently in public and has end these measures as it tries to revive the had discovered several meat export operations said vaccination is important, the newspaper economy ahead of the country’s midterm elec- that had undercut competitors and evaded tax- reported. Brazil has recorded more than 12.5 tions, the sources told the Buenos Aires Times. es by not properly registering their businesses million cases of Covid-19 and more than A spokesman at the central bank declined to with the state, Reuters reported. 313,000 deaths from it since the pandemic confirm the meetings to the newspaper, but a began a year ago, according to Johns Hopkins Production Ministry spokesman said talks are University. Only the United States has record- ongoing. Argentine bank chambers ABA, ABE, ed more cases and deaths from the disease, Adeba and Abappra declined to comment. In Payment Infrastructure though Mexico’s health ministry acknowledged 2020, Argentina’s bank sector had its lowest Provider Dapi Launches on Saturday that its actual number of Covid-19 return on equity since 2007, according to data Service in Mexico deaths may be higher than Brazil’s. In Brazil, a from the central bank. Last year, the country’s highly contagious variant of the novel corona- banks lost more than 50 billion pesos ($546 Global payment infrastructure provider Dapi, virus has led to Brazil accounting for as much million). During the meetings, bankers report- which is based in San Francisco and Abu as a third of global deaths from the disease edly urged Pesce to eliminate or lower the Dhabi, on Friday announced the launch of its even though it has less than 3 percent of the minimum interest rate on certificate deposits. permission-based bank payment initiation and world’s population. On Monday, Bolsonaro also Despite last year’s economic challenges for account data aggregation services in Mexico. replaced Defense Minister Fernando Azevedo Argentina’s banks, the sector remained “rela- Dapi said the move makes it among the first e Silva with Army General Walter Souza Braga tively resilient, thanks to conservative policies companies to offer integrated bank transfer payments to fintechs in Mexico.

COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Tuesday, March 30, 2021 and regulations, which have resulted in a low FEATURED Q&A / Continued from page 1 credit penetration,” Cynthia Cohen Freue, senior director and sector lead for financial institu- stitutions are not amended—if, for instance, will diminish the administration’s ability to tions ratings at S&P Global Ratings, told the the popular election of high judges is not do so. This means operational and economic Dialogue’s Financial Services Advisor in a Q&A replaced by a more meritocratic way of ap- risks will be high. Not only are the risks of published March 10. “Profitability weakened pointing them—the political use of justice is strikes and blockades more elevated, even last year due to higher provisions and lower likely to continue and become more evident by Bolivia’s standards, but if Arce is unable margins but remained relatively healthy with under circumstances of political polariza- to undertake gradual reforms, there is a risk a return-on-equity for the banking system at tion. At this particular moment, courts are that the administration will consider more around 15 percent,” she said. “However, we being used to impose the government’s capital control measures, higher taxes on expect profitability to weaken due to the infla- ‘coup’ narrative on the hotly debated topic businesses or even a currency devaluation, tion adjustment and continuing need to raise of what happened in 2019, attempting to though for now these are unlikely. Ultimately, provisions due to the challenging economic victimize Morales and clear MAS of any even if Arce wants to be more moderate and environment.” responsibility in and after the failed election undertake reforms, polarization and party that triggered the political crisis that year. challenges will limit his ability to do so, Bolivia’s political stability might be reached raising the risks of an economic crisis.” BUSINESS NEWS by means of heavy-handed control of judicial and electoral institutions, limiting opposition Robert Albro, research asso- and restricting political rights, as is the case ciate professor in the Center Brazil’s Raízen Taps in other nations worldwide. But Bolivians for Latin American and Latino Banks to Manage aspire and deserve a more democratic form A Studies at American University: of political stability, and that depends on the “The Arce administration’s decision to indict Initial Public Offering now-absent independent performance of the Jeanine Áñez has been understood as tit- justice system and its institutions.” for-tat revenge justice, with democratic due Brazilian energy company Raízen, a joint process the victim—Arce persecuting Áñez venture between Cosan and Royal Dutch Shell, Filipe Carvalho, analyst at the because she did the same to his party while has tapped four investment banks to manage Eurasia Group: “Political interfer- in power. Favored by international media, its initial public offering, expected to be one of ence in Bolivia’s prosecutor’s the OAS and Áñez’s supporters, this is a lazy the largest this year with funding of as much A office is not something new, nor account that plays up long-standing depic- as 13 billion reais ($2.25 billion), Reuters something that will change soon. But going tions of Bolivian democracy as thin, fragile, reported Monday, citing four unnamed sources forward, Bolivia’s instability will grow as a personalistic and corruptible. Charged with familiar with the matter. The banks, reportedly consequence not only of polarization, but fomenting a coup then leading an interim Banco BTG Pactual, Bank of America, Citi and also of a more divided MAS and growing government following the disputed October Credit Suisse AG, are expected to manage the economic challenges. First, more vocal and 2019 national election that saw Morales transaction, with sources adding that Raízen radical opposition has gained traction in re- give up the presidency and flee to Mexico, is expected to add others to the group this cent years, increasing the risk of small-scale Áñez faces years in prison. I will leave it to week. Raízen, Citi and Credit Suisse declined but more frequent political violence. Second, the political scientists to debate whether to comment on the matter to Reuters, and a more divided MAS will constrain what Arce what happened in 2019 was a coup, ouster BTG and Bank of America did not immediately can do, even if he does want to be a moder- or resignation under pressure. But to review, respond to the wire service’s request. The joint ate. Not only does Arce not control the MAS, Áñez’s actions while president were not venture is the world’s largest sugar maker, and but with economic woes in coming years, those of a caretaker. She used the machin- it controls a massive fuel distribution network. he will have less pork and patronage to dole ery of the state to harass and detain MAS It is also Brazil’s fourth-largest company by out to allies, as Evo Morales did. Third and officials and supporters, encouraged secu- revenue, behind only renowned firms such crucial will be the country’s economic chal- rity forces to commit human rights abuses state oil producer Petrobras, iron ore miner lenges. Bolivia’s economy faces fiscal and and kill scores of protesters, and attempted Vale and meatpacker JBS, Reuters reported. current account imbalances amid reduced to consolidate the power of a minority right- Cosan Chief Financial Officer Marcelo Martins demand for natural gas exports. Rapidly wing cabal in government. Yes, the end of said earlier this month that Raízen’s IPO was declining international reserves mean Arce the Morales era was characterized by some forthcoming, saying “this is the ideal timing” may need to make economic adjustments democratic backsliding. Certainly, the Arce for the joint venture to raise capital and finance soon, yet polarization and party constraints administration has no love for Áñez. Yes, the growth, Reuters reported. Continued on page 4

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue ISSN 2163-7962 accusation that Áñez was involved in a coup This would certainly be an unpopular attempt is contentious. But Áñez’s indict- decision and would seem to violate the Erik Brand ment is also consistent with other efforts principle of accountability. But it may be Publisher [email protected] by the Bolivian government in recent years that stability and democratic governance to bring to justice former presidents acting are more important—at least in the short or Gene Kuleta Editor outside the law, such as Gonzalo Sánchez de medium term.” [email protected] Lozada, whose administration also carried Anastasia Chacón González out extrajudicial killings against opposition Roberta Lajous, former Mexican Reporter & Associate Editor protesters.” ambassador to Bolivia: “When [email protected] Evo Morales was first elected Diana Roy Miguel Centellas, Croft instruc- president of Bolivia in 2005, Editorial Intern A [email protected] tional assistant professor of the country had experienced more heads sociology and international of state than years of independence from studies at the University of Mis- Spain. Constant political turmoil and spasms A Michael Shifter, President sissippi: “This is a complicated issue with of violence had been Bolivia’s history. In the no easy answers. On the one hand, the Áñez 19th century, Bolivia lost its Pacific coast to Rebecca Bill Chavez, Nonresident Senior Fellow government (like the government of Evo Chile, becoming the poorest country in the Bruno Binetti, Nonresident Fellow Morales) was involved in questionable and Americas during the 20th century. Morales’ Sergio Bitar, Nonresident Senior Fellow problematic behavior. In the aftermath of extended tenure, until 2019, gave Bolivia Joan Caivano, Senior Advisor Morales’ constitutionally dubious re-election peace and stability. Also, the country peace- Michael Camilleri, Director, Rule of Law Program campaign and credible allegations of fraud fully overcame the caste system that had Kevin Casas-Zamora, Nonresident Senior Fellow aimed at keeping him in power, there were survived since colonial times, giving dignity Julia Dias Leite, Nonresident Senior Fellow Ariel Fiszbein, Director, Education Program calls from anti-Morales circles to prosecute to Indigenous communities, the majority Sandra García Jaramillo, Nonresident Senior Fellow members of his government. Meanwhile, of the population. Unfortunately, Morales Selina Ho, Nonresident Senior Fellow Morales supporters saw themselves as overstayed his welcome and had to go into Edison Lanza, Nonresident Senior Fellow resisting a ‘coup,’ leading to confrontations exile in Mexico in order to avoid further Nora Lustig, Nonresident Senior Fellow with security forces. Now that MAS is back catastrophe. However, elections were later Margaret Myers, Director, Asia Program in power, Arce is under pressure to prose- held, giving a clear majority to Luis Arce. The Manuel Orozco, Senior Fellow cute Áñez and members of her government new president was Morales’ finance minister Xiaoyu Pu, Nonresident Senior Fellow for their alleged abuses. Unfortunately, in a and distinguished himself as a fine econo- Jeffrey Puryear, Senior Fellow highly polarized political context, prosecu- mist who controlled expenditures during the Tamar Solnik, Director, Finance & Administration tion looks too much like persecution. This commodity boom that allowed millions to Lisa Viscidi, Director, Energy Program makes it difficult for new governments to escape extreme poverty and malnutrition. Denisse Yanovich, Director of Development hold previous governments accountable for Past Arce’s harsh initial show of force amid past misdeeds (real or imagined). In the multiple political threats, there is reason to Latin America Advisor is published every business day, except for major U.S. holidays, 13 years that Morales was in power, there believe that he will continue to manage well by the Inter-American Dialogue at were numerous corruption scandals, violent the economy and raise the living standard of 1155 15th Street NW, Suite 800 repression of protests and politically moti- all Bolivians, as he has already proven able Washington, DC 20005 vated prosecutions of rivals. But corruption, to do. Vice president David Choquehuanca www.thedialogue.org repression and political persecution did not an Indigenous leader of conciliatory nature, Subscription inquiries are welcomed at [email protected] end when Áñez became president. Without will be most helpful in soothing grievances. a trusted, credible and independent judicial He has proven ample negotiating capacity The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily system, politically motivated prosecutions with the social movements that brought Mo- represent those of the publisher. The analysis is the sole will likely continue. Perhaps the only exit rales to power, while serving in his cabinet.” view of each commentator and does not necessarily represent the views of their respective employers or firms. is one that was commonly used in post-au- The information in this report has been obtained from thoritarian transitions. Bolivia’s rival political The Advisor welcomes comments on its Q&A reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have forces may have to sit down and agree to section. Readers can write editor Gene Kuleta any questions relating to the contents of this publication, some sort of ‘immunity’ for past abuses. at [email protected]. contact the editorial offices 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.