August 12, 2021: Latin America Advisor

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Thursday, August 12, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk What Does Castillo’s Brazil’s Congress CEO, DevryBV Sustainable Strategies Joyce Chang OKs Future Global Head of Research, JPMorgan Chase & Co. Cabinet Mean for Vaccine Patent Paula Cifuentes Suspensions Director of Economic & Fiscal Affairs, Latin America & Canada, Peru’s Direction? Brazil’s Senate approved a mea- Philip Morris International sure, which the lower chamber Marlene Fernández previously passed, to tempo- Corporate Vice President for rarily suspend some patents on Government Relations, vaccines in emergency situations. Arcos Dorados (McDonald’s) President Jair Bolsonaro has Peter Hakim criticized the legislation. President Emeritus, Inter-American Dialogue Page 2 Donna Hrinak Senior VP, Corporate Affairs, Royal Caribbean Group BUSINESS Jon E. Huenemann Uber to Allow Council Member, GLG Inc. Taxis in Colombia James R. Jones to Access Platform Chairman, Peru’s new president, Pedro Castillo (R), swore in his prime minister, Guido Bellido (L), on July Monarch Global Strategies 29. // Photo: Peruvian Government. Uber Technologies announced Craig A. Kelly that it would allow taxi drivers in Senior Director, Americas New Peruvian President Pedro Castillo’s selection on July Colombia to access its platform Int’l Gov’t Relations, Exxon Mobil 29 of far-leftist Guido Bellido as his prime minister dashed through a partnership with Colom- Barbara Kotschwar bia-based TaxExpress. Executive Director, Visa Economic the hopes of some centrists that Castillo would name a Empowerment Institute Page 3 Q moderate to lead his cabinet. The next day, Castillo named John Maisto Director, U.S. Education center-leftist Pedro Francke, a former World Bank economist, as his POLITICAL Finance Group finance minister. What do Castillo’s selections of Bellido and Francke, Nicolás Mariscal El Salvador Eyes Chairman, and other cabinet members, say about how the new president intends Constitutional Grupo Marhnos to govern and his priorities in office? What are the main actions Bellido Thomas F. McLarty III Reform Proposal Chairman, and Francke are expected to take? To what extent will Castillo’s cabinet McLarty Associates selections make it easier, or more difficult, for him to work with Peru’s El Salvador’s government has Beatrice Rangel finalized a plan for constitutional Director, Congress? reforms that would include length- AMLA Consulting LLC ening the president’s term, Vice Jaana Remes President Félix Ulloa announced. Julio Carrión, associate professor and associate chair of the Partner, Page 2 McKinsey Global Institute Department of Political Science and International Relations Ernesto Revilla Head of Latin American at the University of Delaware: “President Castillo’s cabinet Economics, Citi is split on a range of issues. Ministers coming from his party Gustavo Roosen A President, have been questioned for their radicalism and thin resumes and tend to IESA be socially conservative. Ministers representing Juntos por el Perú and Andrés Rozental Frente Amplio, two left-wing parties supportive of Castillo in the runoff, President, Rozental & Asociados defend women’s and LGBTQ rights. Prime Minister Guido Bellido is on Shelly Shetty record as holding homophobic and misogynistic views. While Bellido Managing Director, Sovereigns Fitch Ratings now disavows them, he argues that Peruvians are not ready for ‘shock- ing’ cultural change. The cabinet also harbors serious dissent over the issue of constitutional change and economic policy. Bellido and Vladimir Cerrón, the ruling party’s general secretary, want to collect signatures to convoke a constitutional referendum, a legally dubious move. Finance Ulloa // File Photo: Salvadoran Government. Continued on page 3

POLITICAL NEWS The country’s Senate gave its approval to the NEWS BRIEFS measure, which the lower house previously El Salvador Eyes passed. The bill now goes to President Jair Salazar Confirmed as Bolsonaro, who has previously criticized the U.S. Ambassador to Mexico Constitutional proposal. Bolsonaro has said breaking patents on vaccines could hurt the country’s relation- The U.S. Senate on Wednesday unanimously Reform Proposal ships with vaccine manufacturers, and he has voted to confirm former U.S. Senator (D-Co- said that even if the government breaks pat- lo.) and Interior Secretary Ken Salazar as the El Salvador’s government has finalized a draft ents on vaccines, Brazil lacks the technology United States’ new ambassador to Mexico, The proposal for constitutional changes that in- to produce vaccines on its own. The Chamber Denver Post reported. Salazar is the first of clude extending the presidential term from five of Deputies had removed some provisions of President Joe Biden’s ambassador nominees to six years as well as nonconsecutive presi- the legislation, including ones that would have to be confirmed. Salazar, 66, served as interior dential re-election, Vice President Félix Ulloa required the holders of patents to share ingre- secretary under then-President Barack Obama announced Wednesday in an interview on local dients necessary to produce vaccines as well and was a senator before that. The United radio, Bloomberg News reported. The proposal as information on their production if they do States and Mexico have been working together includes 215 changes to the constitution and not comply with the law. The Senate restored in a bid to handle a large influx of migrants is expected to be presented in full to the public those provisions to the bill, Reuters reported. In passing through the U.S.-Mexico border. and to the diplomatic corps next week. Ulloa May, the administration of U.S. President Joe said President Nayib Bukele is set to review Biden announced its support for suspending the reforms in September before they are intellectual property protections on Covid-19 Panama, Colombia submitted to the Legislative Assembly. Among vaccines. A proposal at the World Trade Organi- the suggested reforms, the president could be zation would suspend some of the protections. Agree to Receive 650 re-elected after one term out of office versus “Waiving [intellectual property] rights is one Migrants Per Day two terms currently, while legislators and step in the right direction, but it might be The governments of Panama and Colombia mayors would be allowed to run for immediate too late for it to have a meaningful effect,” agreed Wednesday to receive as many as 650 re-election and serve a maximum of three, Núria Homedes, executive director of Salud y migrants per day, an agreement that came as three-year terms, according to the report. More- Fármacos, told the Advisor in a Q&A published thousands of migrants are stranded at the over, presidential and congressional elections May 19. In the same issue, Rolf Hoenger, area countries’ border, waiting to continue heading would be held at the same time, instead of hav- head for Latin America at Roche Pharma, said toward the United States, Reuters reported. The ing a midterm legislative vote, and the attorney waiving patent protections would be counter- migrants, mostly from Haiti, are stranded in the general’s term would be extended from three to productive. “Waiving patent protections for Colombian resort town of Necoclí. six years. Other changes include the creation difficult-to-make pharmaceutical products in of a new electoral authority as well as a new a scenario of strained supply chains can lead constitutional court to replace the current high to a disrupted, rather than increased, supply of court in what Ulloa said was an effort to boost safe products,” he said. Argentina Planning efficiency. The vice president’s team said ear- to Open Borders lier this year that it would propose the country With Chile, Uruguay hold a referendum to vote on the suggested ECONOMIC NEWS reforms, El Diario de Hoy reported. Argentina’s government is planning to reopen its borders with Chile and Uruguay starting Mexico May Use Sept. 6, Florencia Carignano, the director of Brazil’s Congress IMF Reserves to Pay Argentina’s Immigration Department, said in a OKs Future Vaccine statement, the Buenos Aires Times reported Down Debt: AMLO Wednesday. She added that in the next several Patent Suspensions weeks the government might increase the daily cap of 1,700 passengers allowed to enter the Mexico may use recently approved reserves country through the Ezeiza International Air- Brazil’s Congress has approved legislation from the International Monetary Fund to pay port. However, she warned that the highly con- that would allow the county’s president to down debt, President Andrés Manuel López tagious Delta variant of the novel coronavirus temporarily break patents for vaccines and Obrador said Wednesday at his daily press “has shown us that it might all be scrapped.” their ingredients in cases of emergency, such conference, Bloomberg News reported. [Editor’s note: See related Q&A in the Aug. 6 as the Covid-19 pandemic, Reuters reported. Mexico should receive some $12 billion from issue of the Advisor.]

COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Thursday, August 12, 2021 the IMF as part of a $650 billion allocation FEATURED Q&A / Continued from page 1 of Special Drawing Rights that the lender ‘s board approved on Aug. 2. The amount was Minister Pedro Francke and Justice Minister nating such contentious far-left candidates: the largest-ever allocation of Special Drawing Aníbal Torres endorse Castillo’s original Congress will need to approve Castillo’s Rights in the IMF’s history and “will particularly position to work with Congress on any cabinet, but two ‘no’ votes could open a path help our most vulnerable countries struggling constitutional reform. While Bellido talks for Castillo to dissolve what is likely to be an to cope with the impact of the Covid-19 crisis,” of creating new state-owned enterprises, antagonistic Congress, potentially facilitat- IMF Managing Director Kristalina Georgieva Francke stresses the need to close the fiscal ing conditions for him to pursue rewriting said at the time. Bank of Mexico board member deficit. These tensions result in a perception the Constitution through a constituent as- Gerardo Esquivel rejected López Obrador’s that Castillo is a weak president who is sembly—a goal he barely budged on, even as proposal to use the allocation to pay down not quite in charge of his own government. he seemed to moderate his stance ahead of debt, Reuters reported. “In Mexico, by law, To confront such perceptions, Castillo has the June runoffs. If that is the case, Castillo international reserve assets cannot be used to concluded that open conflict with Congress is playing a dangerous game; key actors (in- pay debt,” he said in a tweet. is his best strategy (especially when some cluding the business community, media and right-wing forces are already strategizing his the armed forces) are not on his side, and removal from the presidency). Castillo hopes his popular support is limited. Recent polls BUSINESS NEWS Congress will reject his cabinet and deny suggest he is starting his presidency with Bellido a vote of confidence. If Congress a modest 39 percent approval rating. This puts forward a vote of no confidence, it will could put his political future at risk. As we Uber to Allow Taxis no doubt be in a weaker position, since any have seen in recent years, the threshold for in Colombia to future no-confidence vote will bring its own impeaching a president in Peru is low. Either dissolution. This is a risky strategy that way, these developments further heighten Access Platform could backfire on Castillo. If Congress votes tensions between the legislature and the to confirm, it preserves its strength and Cas- president. We can expect significant political Uber Technologies will allow taxi drivers in tillo ends up with a problematic cabinet. If turmoil during Castillo’s initial months in of- Colombia to access its platform, the company Congress rejects the cabinet, the perception fice, with risks of a governability crisis rising said Wednesday, a similar plan to what it has of Castillo’s weakness as president could considerably if Castillo stays on this path.” already rolled out in other countries in Latin become reality as an emboldened Congress America and Europe since last year, Reuters may emerge.” Katrina R. Heimark, assistant reported. The ride-hailing app launched Uber professor and researcher at the Taxi in alliance with TaxExpress. The service, Mariana Zepeda, Latin America University of Lima: “During the to begin “in the coming months,” will initially analyst at FrontierView: “Pedro A 2021 presidential campaign, be offered in Bogotá and Cali, according to Castillo’s term is off to a chaotic Pedro Castillo faced enormous opposition the company’s website. Users will be able to A start; his controversial cabinet from some of the country’s most power- choose on the app whether to hail a regular picks, particularly Guido Bellido, a presumed ful political and economic actors. Rather taxi or an Uber-affiliated driver. The company Shining Path apologist and admirer of the than perform goodwill gestures toward the has faced serious challenges in Colombia over Cuba regime, sent shockwaves through centrist and center-left political leaders allegations of unfair competition and amid markets, toppling Peruvian stocks and who helped Castillo moderate his image in uncertain regulation for ride-hailing apps. pushing the sol to near-record lows. Pedro the wake of the first round of the election, While authorities in 2019 ordered Uber to cease Francke’s nomination as finance minister is which arguably contributed to his victory in operations, a decision that a court overturned a positive signal, particularly now that Julio the runoff, Castillo’s cabinet nominations— last year, other firms such as China’s Didi and Velarde, Peru’s longstanding central bank particularly that of Guido Bellido as prime Spain’s Cabify operate in the country. Howev- head, has agreed to stay on. Castillo’s other minister—are a defiant message that this is a er, some drivers have faced fines and other cabinet selections will weigh on his political strongly leftist administration. The Peruvian sanctions, as well as hostility from taxi drivers, future. These nominations have already lost press has been largely alarmist regarding Reuters reported. “Having taxis on the platform him the support of key actors, including Bellido’s nomination as a sign that Castillo is is a show of reconciliation … it offers different Partido Morado, even though Castillo will controlled by extremist elements within Perú alternatives for users,” Marcela Torres, Uber’s need the center-left to pass any policies in Libre. However, Pedro Francke’s nomination general manager in Colombia, said during an opposition-dominated Congress. Some as finance minister is a sign that Castillo a virtual press conference, the wire service think Castillo has ulterior motives in nomi- is aware of the importance of moderation. 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 Francke is likely to maintain prior macro- cial policies within broader fiscal spending. economic policies and therefore promote While Francke should have a fluid rela- Erik Brand economic stability. But he also aims to tionship with Congress, Bellido, unless he Publisher [email protected] reduce inequality through increased state moderates substantially, might be a burden investment in social programs, health care for the president if he is confirmed.” Gene Kuleta Editor and education. Unfortunately, the makeup of [email protected] Castillo’s cabinet reflects his lack of political Francisco Durand, professor of Anastasia Chacón González experience—a more moderate nomination political science at the Catholic Reporter & Associate Editor for the premiership may have fostered some University of Peru: “Prime [email protected] goodwill for his administration, whose prin- A Minister Bellido and Finance Leticia Chacón cipal aims are to tackle the rampant social Minister Francke are the leading figures of Reporter and economic inequality that plagues Peru. a cabinet that expresses a balance between [email protected] Bellido’s nomination surely portends further the main forces of the Castillo coalition. Its political instability, as Congress must for- composition shows the importance of Perú mally approve his cabinet, which is unlikely. Libre, the party led by Vladimir Cerrón, a Michael Shifter, President A lack of political allies could prove fatal for power factor compensated by Castillo’s own Rebecca Bill Chavez, Nonresident Senior Fellow Castillo, who faces an opposition Congress appointments and those of Juntos por el Bruno Binetti, Nonresident Fellow that may be set on impeachment.” Perú. Thus, the government’s first priority is Sergio Bitar, Nonresident Senior Fellow to keep together this rather fragile alliance Joan Caivano, Senior Advisor Jose E. Gonzales, managing and demonstrate that ‘new faces’ who were Santiago Cantón, Director, Rule of Law Program partner at GCG Advisors: “Pedro before marginalized from power are now in Kevin Casas-Zamora, Nonresident Senior Fellow Castillo’s proclamation as Peru’s charge. The cabinet needs congressional Julia Dias Leite, Nonresident Senior Fellow Ariel Fiszbein, Director, Education Program president took six weeks from approval. More than policy initiatives, today A Sandra García Jaramillo, Nonresident Senior Fellow election day on June 6 due to unproven the main issue is whether various conser- Selina Ho, Nonresident Senior Fellow ‘fraud’ allegations, which forced a political vative parliamentary forces in Congress will Edison Lanza, Nonresident Senior Fellow transition of just eight days. Due to the provide the Bellido cabinet with a confidence Nora Lustig, Nonresident Senior Fellow intense pressure of those weeks, Castillo vote. This will be a major political test for Margaret Myers, Director, Asia Program was quite shy in taking any initiatives that those forces, which must decide whether Manuel Orozco, Senior Fellow assumed he won the presidency. That, to give the president and the cabinet some Xiaoyu Pu, Nonresident Senior Fellow his obvious inexperience in matters of initial breathing space or start an early con- Jeffrey Puryear, Senior Fellow state and his now-evident reservedness frontation that will eventually lead to an im- Tamar Solnik, Director, Finance & Administration made the appointment of his cabinet a peachment process. Most of the corporate Lisa Viscidi, Director, Energy Program convoluted two-day process. Seventy-one media and the elite social media associated Denisse Yanovich, Director of Development percent of Castillo’s ministers were born in with these forces see Castillo as unfit for the Peru’s regions, not Lima. That compares presidency. So the question is whether Cas- Latin America Advisor is published every business day, except for major U.S. holidays, to an average of 26 percent in the previous tillo can govern and for how long. Politics by the Inter-American Dialogue at seven administrations. Guido Bellido was prevails over policies, except in the econom- 1155 15th Street NW, Suite 800 born and educated in Cuzco, developing ic arena. Both Bellido and Francke had a first Washington, DC 20005 all his professional and political career round of talks with Chinese investors and www.thedialogue.org there. A founding member of Perú Libre, Roque Benavides, a mining tycoon closely Subscription inquiries are welcomed at [email protected] Bellido is allegedly who proposed Castillo associated with multinational corporations. as the party’s ideal candidate for president. The talks complement Francke’s goals to The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily Francke’s appointment was a concession to stabilize the markets and control capital represent those of the publisher. The analysis is the sole an alliance with Juntos por el Perú and the flight and currency instability. Another two view of each commentator and does not necessarily represent the views of their respective employers or firms. liberal left, which has three ministers in the important economic goals are to increase The information in this report has been obtained from cabinet. Bellido should focus on President tax collection and to negotiate with mining reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have Castillo’s proposed constitutional assembly, investors, hoping to extract more revenues any questions relating to the contents of this publication, while Francke should keep the economy on in order to finance social goals now that contact the editorial offices of the Inter-American Dialogue. its 30-year stability track, implementing so- mineral prices are on the rise.” Contents of this report may not be reproduced, stored in a retrieval system, or transmitted without prior written permission from the publisher.