LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Monday, August 31, 2015

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Monday, August 31, 2015

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Genaro Arriagada Has Peru Gone too Nonresident Senior Fellow, Brazil’s Economy Inter-American Dialogue Tumbles Into Joyce Chang Global Head of Research, Far in Granting Recession in Q2 JPMorgan Chase & Co. The gross domestic product of W. Bowman Cutter Former Partner, Cell Data Access? Latin America’s largest economy E.M. Warburg Pincus contracted 1.9 percent in the sec- Dirk Donath ond quarter after falling a revised Senior Partner, 0.7 percent in the fi rst quarter. Catterton Aimara Economists are forecasting a GDP Marlene Fernández contraction of as much as 2.1 Corporate Vice President for percent this year. Government Relations, Arcos Dorados Page 2 Peter Hakim President Emeritus, POLITICAL Inter-American Dialogue Donna Hrinak Colombia to President, Boeing Latin America Off er Citizenship Jon Huenemann Vice President, U.S. & Int’l Affairs, to Venezuelans in Philip Morris International Peru’s government has said the measure is needed to fi ght organized crime in the South Ameri- Border Crisis James R. Jones can country. // File Photo: Victorgrigas. Co-chair, Manatt Jones Colombia is offering citizenship Global Strategies LLC Peru’s government last month issued a legislative decree to some Venezuelans along the Craig A. Kelly border after a mass deportation. Director, Americas International that requires telecommunications companies to grant police Page 2 Gov’t Relations, Exxon Mobil warrantless access to geolocation and other call data from John Maisto Q cellphones in real time and requires companies to store that Director, U.S. Education POLITICAL Finance Group data for three years, a measure the government has said is necessary to Nicolás Mariscal Scioli Widens Lead Chairman, fi ght organized crime in the country, adding that a warrant must retroac- Grupo Marhnos tively be obtained to use that data in court. Is the new measure neces- in Argentina’s Thomas F. McLarty III sary to fi ght crime and corruption, or does it go too far and undermine Presidential Race President, McLarty Associates parts of Peru’s 2011 law that established protections for personal data? Ruling party candidate Daniel Carlos Paz-Soldan Does it impose an unnecessary burden on businesses? What are the best Scioli widened his lead over rival Partner, Mauricio Macri, according to a DTB Associates, LLP practices for balancing privacy concerns with the need to fi ght crime? new survey. Scioli’s lead, however, Beatrice Rangel would not be enough to avoid a Director, second round of voting. AMLA Consulting LLC Peter T. Knight, founding partner, researcher and member of Page 3 José Antonio Ríos the board of the Fernand Braudel Institute of World Econom- Chief Executive Offi cer, Vadium Technology Inc. ics in São Paulo: “The balance between privacy and security Gustavo Roosen is a delicate one involving serious trade-offs. It is no accident Chairman of the Board, A Envases Venezolanos that this balance was, together with the principle of net neutrality, the Andrés Rozental most actively debated in the elaboration of Brazil’s Internet Bill of Rights President, Rozental & Asociados and Senior that became law on April 23, 2014. In the last analysis the choice just Policy Advisor, Chatham House how much privacy can be compromised to protect society from criminal Shelly Shetty Head, Latin America activity is a political one. In a democratic society, that choice will be Sovereign Ratings, Fitch Inc. determined by the nature of the threats facing the country. This trade- Roberto Sifon-Arevalo off has been the subject of intense debate in the United States, Brazil Managing Director, Americas Sovereign & Public Finance Ratings, and other countries, provoked by the Snowden revelations and growing Standard & Poor’s cyber-security threats involving both state and non-state actors. In Brazil’s case, the legal requirement is for Internet service providers to keep logs Scioli // File Photo: Scioli Cam- paign. Continued on page 3

ECONOMIC NEWS in emerging-market debt at Aberdeen Asset NEWS BRIEFS Management, told the newspaper. Economists Brazil Falls Into believe Brazil’s economy will contract by as At Least 20 Killed as much as 2.1 percent this year and by 0.2 Storm Rakes Dominica Recession as GDP percent next year. Such an outcome would mark the fi rst time that the country’s economy At least 20 people were killed as Tropical Storm Contracts in Q2 has contracted for two consecutive years Erika pummeled Dominica, the Associated since 1930-1931. The downturn is a major Press reported Saturday, citing authorities on Brazil offi cially entered a recession in the year’s disappointment for Brazil, which experienced the Caribbean island. Another 31 were missing, second quarter as the country’s gross domes- average annual growth of 4 percent between offi cials added. The storm then drenched Haiti tic product contracted for the second consecu- 2002 and 2013. “What we’re seeing now is and the Dominican Republic early Saturday. tive quarter, according to offi cial data released a real reality check for Brazil, because we’re Friday, The Wall Street Journal reported. GDP seeing how it managed to sustain such high shrank 1.9 percent between April and June as rates of growth during the commodities boom,” Guatemala’s Congress Eye compared, in seasonally adjusted terms, to the Edward Glossup, emerging-markets economist Vote Tuesday on Stripping previous three-month period, according to the at London-based Capital Economics, told The Brazilian Institute of Geography and Statistics. Wall Street Journal. “Now those props have President’s Immunity been taken away. We’re getting to the stage The head of Guatemala’s Congress, Luis Rabbe, Brazil’s rate of infl ation where Brazil will have growth of a very modest, announced that lawmakers would decide on low rate in the long term.” is more than twice the Tuesday whether or not to strip President Otto Pérez Molina of his presidential immunity so central bank’s target de- that he can be tried on corruption charges, the spite interest rate hikes. POLITICAL NEWS Associated Press reported today. This proposal would need two-thirds majority support in order Colombia to Off er to pass. On Saturday, a legislative commission In the fi rst quarter, GDP shrank a revised 0.7 recommended that Congress lift Pérez Molina’s percent. A recession in Latin America’s largest Citizenship Amid immunity from prosecution. This same corrup- economy has long been expected. Falling tion case led to the resignation and charges demand for vehicles and other durable goods Border Crisis against Pérez Molina’s vice president, while led the country’s industrial production to drop many other cabinet members have resigned. sharply in the fi rst half of this year after stag- Colombia’s government will offer citizenship nating for years. A massive corruption scandal to Venezuelan family members of Colombians at state-run oil company Petrobras implicated who have been deported from the neighbor- some of the largest companies in the country’s ing country, BBC News reported today. The Rolls-Royce Cooperating construction sector, paralyzing that industry. government of Venezuelan President Nicolás With Brazilian Authorities Consumer confi dence has dried up, leading re- Maduro recently deported more than 1,000 in Petrobras Graft Case tail sales to fall. Unemployment has also been Colombians living on the Venezuela side of British engineering group Rolls-Royce said it rising, and the annual rate of infl ation is above the countries’ border amid a crackdown om is cooperating with Brazilian offi cials as they 9 percent, more than double the government’s smuggling in the area. The situation led to look into the company’s possible bribery of target, despite interest rate hikes that have put complaints that families were being split apart. Petrobras, Brazil’s state-owned oil company, the benchmark Selic rate at 14.25 percent, BBC Colombia’s foreign minister, María Ángela the Guardian reported on Sunday. The develop- News reported. Per capita incomes in Brazil Holguín, said her country’s government wants ment is part of the massive corruption scandal have been declining since 2014, and prices to help Venezuelans who married Colombians that has implicated many top Brazilian public for Brazil’s commodities have been falling move to Colombia. “We’re going to give them offi cials. The bribery allegations are not the amid slower global growth. However, ana- Colombian citizenship, we want families to live fi rst for the British company, which is cur- lysts told The Wall Street Journal that Brazil’s together, not to break them apart,” she told a rently facing bribery charges in Asia, as well. biggest economic wounds were self-infl icted. Colombian radio station on Sunday. Maduro’s Word fi rst came out of Rolls-Royce’s possible “The vast majority of Brazil’s problems were government indefi nitely closed a major border involvement with the scandal in February, when created at home, with the interventionist policy, crossing following an incident earlier this a former Petrobras executive testifi ed that the the growth of the state, the lack of reform,” month in which a civilian and three Venezuelan British company had given bribes to politicians Edwin Gutierrez, a manager of $483 billion soldiers were wounded by smugglers. and staff of the national oil company.

FEATURED Q&A / Continued from page 1 Scioli Widens Lead of their customers’ online activity in a secure the United States can afford considering Ahead of Argentina’s environment for one year, but ‘In any cir- its more than 300 million citizens and over Presidential Election cumstance, the disclosure to the requesting $50,000 GDP per capita. But we doubt that party of the logs referred to in this article Peru’s 30 million citizens and just-under Leftist Argentine presidential candidate must be preceded by a court order,’ that is, $7,000 GDP per capita can absorb this, even Daniel Scioli saw an improvement in his poll a warrant. ‘The administrative or police au- numbers for August, though his margin over thority or the public prosecutor may require the second-most-popular candidate, Mauricio precautionary keeping of connection records There is a post-9/11 Macri, is not wide enough to avoid a runoff for longer periods…’ But this also requires a view that no invest- election, Reuters reported Sunday. A presiden- court order. The Peruvian requirements for ment is too large, no tial candidate must receive either 45 percent warrantless access to telephone records invasion of privacy too of the vote, or 40 percent of the vote with a 10 that have to be held for three years seems extreme in the cause percentage point margin over the runner-up in excessive, but mid-2013 Brazilian legislation of fi ghting terrorism requiring operators to maintain telephone order to avoid a runoff in November. Scioli is and organized crime.” a member of President Cristina Fernández’s call records for fi ve years with warrantless — Wally Swain Front for Victory party, but unlike Fernandez, access seem contradictory to the Internet Scioli supports a more pro-market approach law’s stricter requirements. The consti- to policy and has vowed to make gradual tutionality of these earlier laws has been challenged.” if the government sends the bill to the mo- Wally Swain, senior vice pres- bile operators. That is without touching the ident for emerging markets at moral/legal/privacy argument. Even Batman 451 Research Mobility Team decided he had gone too far.” A in Bogotá: “One wonders if Peruvian legislators have been spending Dardo López Dolz, president of too much time on Netfl ix. In the 2008 PKS Consultores in Lima and comic-book movie, The Dark Knight, Batman former deputy interior minister orders Lucius Fox to tap every cell phone in of Peru: “Peruvian intelligence Macri // File Photo: Macri Campaign. A Gotham City, turning on their microphones to services have been dedicating resources changes to move away from Fernández’s more listen into all conversations, not just phone to monitoring the fi nancial and private lives unpopular policies if he is elected. Macri is calls. Fox reluctantly builds the system and of the government’s political adversaries. considered a more business-friendly candidate the Joker’s evil plans are thwarted, but both Nobody went to prison after a leak with a and supports more economically orthodox he and Caped Crusader have an attack of large list of illegal searches was made public policies. According to the poll released Sunday conscience and the machine is destroyed. (I myself have been illegally followed and by Management & Fit, Scioli and his vice There is a post-9/11 view that no invest- investigated 12 times.) That said, it is highly presidential running mate, Carlos Zannini, have ment is too large, no invasion of privacy too dangerous to provide unrestricted access to 39.3 percent support, while Macri and his vice extreme in the cause of fi ghting terrorism a largely corrupt police force. Data could end presidential running mate, Gabriela Michetti, and organized crime. Terrorism seems a up in the hands of criminals or be used for are favored by 31.2 percent of voters. The third remote threat in Latin America, but orga- political intentions by government agents. place candidate and member of the Peronist nized crime is an often crippling menace, as A legally protected right to data privacy is party, Sergio Massa, has support from 18.3 events in Mexico are unfortunately demon- not only about what we say, it´s also about percent of voters polled. The survey of 2,400 strating. But real-time capture and storage of with whom we speak and where we are or people was conducted between Aug. 20 and 26 geolocation data is a huge task. Did anyone have been before. A smart balance could and has a margin of error of plus or minus two do the math? Where will it be stored? Who be obtained if access to this data is clearly percentage points. The fi rst round of balloting will pay for it? The U.S. National Security limited by law to a single specialized police is set for Oct. 25. [Editor’s note: See Q&A on Agency is suspected of processing every unit with strict external control, working the election in the Aug. 3 issue of the Advisor.] e-mail sent anywhere in the world in massive under dedicated judges and prosecutors. Ad- datacenters. That is an expense that maybe ditionally, this kind of access would provide Continued on page 4

FEATURED Q&A / Continued from page 3 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2015 telecommunications companies highly valu- not considered private. Your call information able data about behavior of its clients, giving will be stored for 12 months and telecom- Erik Brand them a tremendously unfair advantage over munications providers will have to store the Publisher [email protected] other companies.” metadata for 12 months, to be required at Gene Kuleta Editor Erick Iriarte, principal part- [email protected] ner and chief of information It is highly dangerous Nicole Wasson technology law at Iriarte & to provide unrestrict- Reporter, Assistant Editor A Asociados in Lima: “This is a ed access to a largely [email protected] regulation that will have dramatic effects, corrupt police force.” but unfortunately it’s one that will not be effective, and even potentially a step back — Dardo López Dolz when considering respect for human rights. Michael Shifter, President In simple terms, geo-location data under Peter Hakim, President Emeritus the new regulations can be obtained with any time by the police. The police have the Genaro Arriagada, Nonresident Senior Fellow no control under a prosecutor or judge, and discretion to decide when it is appropriate Sergio Bitar, Nonresident Senior Fellow data may be accessed through a simple to use the data for investigations, in many Joan Caivano, Director, Special Projects request. However, the judge may revoke cases. The telecommunications providers Maria Darie, Director, Finance & Administration the use of the data but the data will already are not the problem at this point; they just Ariel Fiszbein, Director, Education Program be in possession of the police. And what want to avoid being sued afterwards for Alejandro Ganimian, Nonresident Fellow will they fi nally do with the unauthorized taking action without an order provided by Claudio Loser, Senior Fellow data? Who will store the data? What be the a judicial or prosecution authority. If the Nora Lustig, Nonresident Senior Fellow deletion log protocol? Who will have access government really wanted to do something Margaret Myers, Director, to it? Not only to your smartphone, but any useful about this issue, they would improve China and Latin America Program device connected to the telecom network the procedures regarding coordination and Manuel Orozco, Senior Fellow that is geo-localizable, will be considered in communication between the police, the Jeffrey Puryear, Senior Fellow this regulation. It is said that there will be prosecutor’s offi ce and the judiciary.” Lisa Viscidi, Director, Energy Program a liaison unit to obtain the data, but there is no information on who will be authorized The Advisor welcomes Latin America Advisor is published every business day, except for major U.S. holidays, to access the data once it is delivered. The comments on its Q&A section. Readers by the Inter-American Dialogue at: traffi c data (who called, where did you call can write editor Gene Kuleta at 1211 Connecticut Avenue NW, Suite 510 to, at what time, from which location) are [email protected]. Washington, DC 20036 Phone: 202-822-9002 Fax: 202-822-9553 www.thedialogue.org ISSN 2163-7962 Subscription Inquiries are welcomed at LATIN AMERICA ADVISOR [email protected]

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