LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Monday, March 26, 2018

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Monday, March 26, 2018

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs What Can Peruvians Peru’s Vizcarra Cargill Joyce Chang Takes Office, Vows Global Head of Research, Expect of Their to Fight Graft JPMorgan Chase & Co. Peruvian President Martín Dirk Donath Senior Partner, Vizcarra was sworn in as Peru’s Catterton Aimara New President? president, vowing to fight corrup- Marlene Fernández tion. His predecessor, Pedro Pablo Corporate Vice President for Kuczynski, resigned amid graft Government Relations, allegations that he denies. Arcos Dorados Page 2 Peter Hakim President Emeritus, Inter-American Dialogue ECONOMIC Donna Hrinak President, Boeing Latin America Group Behind Jon Huenemann Vice President, U.S. & Int’l Affairs, Planned Mexico Philip Morris International City Airport James R. Jones Chairman, Raises $1.6 Bn Monarch Global Strategies Martín Vizcarra was sworn in Friday as Peru’s president, following the resignation of his prede- Grupo Aeroportuario de la Ciudad Craig A. Kelly cessor, Pedro Pablo Kuczynski. // Photo: Peruvian Government. de México reportedly raised the Director, Americas International funding through an initial public Gov’t Relations, Exxon Mobil Martín Vizcarra was sworn in as Peru’s president on Friday, offering of shares. John Maisto Director, U.S. Education after the country’s Congress accepted the resignation of his Page 3 Finance Group predecessor, Pedro Pablo Kuczynski, who was brought down Nicolás Mariscal POLITICAL Chairman, Q amid graft allegations and accusations that his supporters Grupo Marhnos tried to buy the loyalty of a lawmaker in an earlier impeachment attempt Temer Signals Thomas F. McLarty III Chairman, against him. Kuczynski, widely known as PPK, has repeatedly denied Intent for New McLarty Associates wrongdoing. What does Kuczynski’s exit after just a year and eight Term in Brazil Carl Meacham Associate VP for Latin America months in office mean for Peru’s politics and institutions? What can Brazilian President Michel Temer Int’l Advocacy Division, PhRMA Peruvians expect of Vizcarra? What messages should businesses and signaled in a magazine interview Carlos Paz-Soldan foreign investors in Peru take from the episode? published over the weekend that Partner, he intends to seek a new term in DTB Associates, LLP the country’s presidential election Beatrice Rangel in October. Temer’s approval Director, Cynthia McClintock, professor of political science and ratings are in the single digits. AMLA Consulting LLC international affairs at The George Washington University: Page 2 Gustavo Roosen Chairman of the Board, “The good news for Peru is that the government of Pedro Envases Venezolanos Pablo Kuczynski will not be limping through three more years, Andrés Rozental A bereft of popular support and unable to advance its agenda through a President, Rozental & Asociados and Senior recalcitrant legislature dominated by the Fujimorista party. PPK was Policy Advisor, Chatham House elected because he had been considered an honest democrat. However, Roberto Sifon-Arevalo Managing Director, Americas he was increasingly perceived as blind to the conflicts of interest involv- Sovereign & Public Finance Ratings, Standard & Poor’s ing Odebrecht and to have bartered the pardon of authoritarian president Alberto Fujimori for his survival of a December impeachment vote. And it is also good news for Peru that the succession to Martín Vizcarra was orderly and constitutional and that Vizcarra’s reputation as governor of Moquegua was excellent. As PPK’s first transportation minister, Viz- carra was faulted for problematic provisions in an airport contract, but political analysts consider him to be honest. The hope is that Vizcarra will Temer // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS Fujimori’s estranged brother, lawmaker Kenji NEWS BRIEFS Fujimori, apparently trying to offer favors to Vizcarra Sworn in another lawmaker in exchange for his support Twelve Killed as Bus of Kuczynski when he was facing an earlier Careens From Road as Peru’s President impeachment attempt in December. Kuczynski tendered his resignation the following day, in Western Ecuador Martín Vizcarra was sworn in Friday as Peru’s reiterating his denial of any wrongdoing and Twelve people were killed and 25 others were president, succeeding Pedro Pablo Kuczynski, saying that his political opponents had made it injured Saturday when the bus they were after Congress accepted Kuczynski’s resigna- impossible for him to govern. After Vizcarra’s riding in slid off a road in western Ecuador, tion and ended his presidency, which lasted inauguration, Keiko Fujimori said it was time to Agence France-Presse reported. The incident just a year and eight months. Kuczynski had be unified and optimistic about the country’s happened at about 2 p.m. local time in the future, The Wall Street Journal reported. “We Jipijapa highway in the Las Américas region of wish success to President Vizcarra,” she said Manibi province, according to the Ecuadorean in a posting on Twitter. A relative unknown to The moment Traffic Commission. The previous week, two most Peruvians, Vizcarra was a one-term gov- has arrived to buses collided in neighboring Guayas province, ernor of Moquegua, Peru’s second-least pop- leaving 11 dead and 54 injured. say ‘enough.’ ” ulated province, from 2011 to 2014. He also — Martín Vizcarra served as transportation and communications minister under Kuczynski before becoming the country’s ambassador to Canada. He served in Bolivians Demonstrate been facing his second impeachment proceed- the ministerial and diplomatic roles while also for Access to Ocean ing on corruption charges, which he has repeat- in office as vice president. In a poll this month Bolivians took to the streets in demonstrations edly denied. Vizcarra, who had been serving as by Ipsos, 81 percent of Peruvians did not rec- across the country on Friday to demand access the country’s vice president and ambassador ognize Vizcarra’s name, the Associated Press to the Pacific Ocean for the landlocked nation, to Canada, flew back to Peru from Toronto on reported. Vizcarra’s first major appearance on the Associated Press reported. Bolivia’s gov- Thursday, his 55th birthday, and arrived in Lima the world stage will be next month when Peru ernment last week petitioned the International in the early-morning hours on Friday. Vizcarra holds the Summit of the Americas, hosting Court of Justice in The Hague, asking it to was draped with the presidential sash before heads of state including U.S. President Donald force Chile to enter negotiations over the issue. members of Congress on Friday and called on Trump. Vizcarra did not mention the summit in Chile then argued before the court that it has them to work together, while he also vowed to his inaugural address, but state news agency no obligation to do so and that the matter was crack down on corruption, La República report- Andina reported on Friday that he has instruct- settled in a treaty more than a century ago. On ed. “The moment has arrived to say ‘enough,’” ed the country’s foreign ministry to continue Friday, Bolivians waving the country’s flag and Vizcarra said in his inaugural address, The preparations for the gathering. holding banners flooded the streets of La Paz Wall Street Journal reported. “We are a country and other cities in the demonstrations. with a future, but that future depends on our Brazil’s Temer behavior.” In the speech, Vizcarra did not outline how exactly he plans to crack down on Signals Run Coca-Cola FEMSA corruption, and he discussed few specifics, other than saying he would form a completely for New Term Closes Plant Amid new cabinet, the Associated Press reported. Threats, Attacks Brazilian President Michel Temer signaled in He also said that he would work to ensure the Coca-Cola FEMSA, the world’s largest Co- an interview published over the weekend that strength of the country’s institutions. “Don’t ca-Cola bottler, announced on Friday that it is he intends to run for a full term in the country’s lose faith in our institutions,” he said. “Let us closing one of its facilities indefinitely due to October presidential election. “It would be cow- show you that Peru is bigger than its prob- persistent attacks. Citing consistent violent ardly not to be a candidate,” Temer told weekly lems.” Vizcarra’s success in office could hinge attacks and a failure of rule of law, the com- news magazine IstoÉ. The statement is a rever- largely on the position of Keiko Fujimori, the pany announced in a statement that it would sal from Temer’s stance when he became presi- leader of right-wing opposition party Popular immediately cease operations at its Altamirano dent following the impeachment and removal Force, which has the largest number of seats plant in Guerrero State. The decision followed from office of his predecessor, Dilma Rousseff, in Peru’s Congress, The Wall Street Journal two separate attacks on workers at the plant, Folha de S.Paulo reported. At the time, he said reported. The party last week released videos where workers have been receiving threats he would only serve for the remaining two and showing allies of Kuczynski, including Keiko since January.

COPYRIGHT © 2018, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Monday, March 26, 2018 a half years of Rousseff’s term. When asked FEATURED Q&A / Continued from page 1 about his low approval rating, Temer pointed out that his approval rating has doubled from continue the anti-corruption agenda that he his resignation was almost unanimously 3 percent to 6 percent and said with a laugh began at his inauguration, govern effectively, demanded prevented a more serious crisis. that a 50 percent increase would now put him and gain popular support—or, move toward The Vizcarra presidency has been received at 9 percent approval. Temer’s term so far has a new presidential election. Vizcarra has a with surprising goodwill, and there is a been tumultuous, as he has worked to fend off huge advantage over PPK: the weakening clear possibility that he will enjoy a healthy corruption and obstruction of justice charges. of the Fujimorista party. First, the party has Winning a new term would allow Temer to divided between the two siblings--Keiko and maintain a special legal standing that has so Kenji Fujimori, and now Kenji is weakened by Although Keiko far spared him from facing a criminal trial, the video showing him trying to bribe a legis- Fujimori is the short- The New York Times reported. Twice last year, lator. Further, the charges against Keiko for term winner, her Congress voted to protect him from a trial in her dealings with Odebrecht have resonated; party has split...” the country’s Supreme Court. In the interview and, she is widely perceived to have put her — Julio Carrión with IstoÉ, Temer said he has come to believe desire for revenge against PPK (for her nar- that he must defend is legacy. “I’ve fixed a row loss in the 2016 presidential election) country that was broken,” he told the magazine. ahead of the good of the country. There is honeymoon period. For now, the survival of “I’m proud of what I’ve done, and I need to bad news, too: a diminution of democracy. Peru’s democracy seems assured. Although show what’s being done. If I’m not in the fray, Every Peruvian president elected since 1985 Keiko Fujimori is the short-term winner, her what’s going to happen is that all the candi- has been tainted by credible charges of ille- party has split, and her strategic position dates will go after me.” The front-runner in gal campaign financing from Odebrecht. Of has weakened. The new government is in Brazil’s presidential race, former President Luiz these five leaders, only one (Ollanta Humala) place in great part due to the impeachment Inácio Lula da Silva, was convicted last year of is in jail, and, for most analysts, the reason process she advocated, and she cannot trading favors with construction company OAS. is political, not legal. The Fujimorista party confront Martín Vizcarra with the same ardor Last Thursday, Brazil’s highest court suspend- has been trying to dominate electoral and and intransigence she used to confront PPK. ed Lula’s 12-year prison sentence, preventing judicial institutions and has been altering Because of his lack of party affiliation and him from being detained until the high court’s rules in its favor. In a 2017 Latinobarómetro congressional representation, Vizcarra could justices meet again on April 4 to consider the poll, only 16 percent of Peruvians were ‘sat- create a broad-based government that is merits of the case against him. Lula denies isfied with the way democracy was working.’ able to generate significant popular support. wrongdoing and has vowed to continue appeal- If leaders’ misconduct continues, the call He has the potential to replicate the experi- ing his conviction. ‘Que se vayan todos’ (‘Kick them all out’) will ence of Valentín Paniagua, who led a popular become much louder.” caretaker government after the fall of the Fujimori regime, but Vizcarra needs to show ECONOMIC NEWS Julio Carrión, associate that he is serious about fighting corruption. professor of political science Peru’s democracy remains fragile and could Group Behind Plan and international relations at break if the hegemonic pretensions of the A the University of Delaware: congressional majority are not checked. To for New Mexico City “Many anticipated the fall of PPK, but hardly counteract this pressure, Vizcarra needs a anyone guessed that it would happen this broad governmental coalition. The prospects Airport Raises $1.6 Bn way. Even two days before the scheduled of Peru’s young democracy rest on his ability impeachment vote on Thursday, much to build such support.” The group behind the planned new airport uncertainty remained about its outcome. for Mexico City on Friday raised $1.6 billion Informed observers only knew that it was Francisco Durand, professor through an initial public offering of Fibra E going to be very close, one way or another. of political science at the shares, Bloomberg News reported. Grupo Aero- But in the wake of the videos exposing Catholic University of Peru: portuario de la Ciudad de México, also known vote-buying to save his presidency, the pres- A “When the party in office does as GACM, sold 300 million of the securities for sure for PPK to resign came like a tsunami. not control Congress, a government crisis 100 pesos apiece, raising 30 billion pesos, the By Tuesday evening, he was isolated, and follows (as occurred in 1968, 1992, 2000 news service reported. The sale included an even some prominent supporters called and now 2018). This time, Congress won and overallotment known as a greenshoe, accord- for his resignation. In a way, the fact that replaced the president, following the rules. ing to a person with knowledge of the matter. 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 © 2018 Keiko Fujimori is the great winner. A victory his chances may improve. In the meantime, against Kuczynski, involved in the Lava Jato given that the fundamentals of the Peruvian Erik Brand scandal for doing business with Odebrecht economy look good, businesses and inves- Publisher [email protected] while serving as Alejandro Toledo’s minister tors should not worry. Yet, If Vizcarra falls or right after. A big loser is Kenji Fujimori, and elections take place in a highly volatile Gene Kuleta Editor who prevented Kuczynski’s impeachment in environment, the markets will succumb to [email protected] December, but now will possibly be ousted political noise.”

from Congress and unable to become a presidential candidate. The political crisis Carlos Arata, partner in the Michael Shifter, President corporate practice at Rubio Genaro Arriagada, Nonresident Senior Fellow Leguía Normand in Lima: Sergio Bitar, Nonresident Senior Fellow “These are very hard times for The new government A Joan Caivano, Director, Special Projects the country. Most of our politicians are in- Michael Camilleri, Director, Peter D. Bell Rule of Law is fragile, and it will volved in corruption scandals and members Program be difficult for Martín of Congress do not seem to acknowledge Kevin Casas-Zamora, Nonresident Senior Fellow Vizcarra to organize a how discredited they are now. Judges and Ariel Fiszbein, Director, Education Program broad-based govern- prosecutors appear to be on witch hunts that Alejandro Ganimian, Nonresident Fellow ment with credibility... are intended more to start political careers Peter Hakim, President Emeritus Claudio Loser, Senior Fellow — Francisco Durand than to pursue criminals and find the truth. Our institutions are not working, so we need Nora Lustig, Nonresident Senior Fellow to work on strengthening them. Unfortunate- Margaret Myers, Director, China and Latin America Program ly, that is a long-term task and not a very Manuel Orozco, Director, Migration, is not over. The new government is fragile, popular one. Vizcarra’s position is very weak Remittances & Development and it will be difficult for Martín Vizcarra so he will have to form alliances, especially Jeffrey Puryear, Senior Fellow to organize a broad-based government with Fuerza Popular, led by Keiko Fujimori, Tamar Solnik, Director, Finance & Administration with credibility, capable of dealing with and APRA, which won’t make many of PPK’s Lisa Viscidi, Director, Energy Program the corruption scandals that cut across all voters happy. Also, Vizcarra has a very Denisse Yanovich, Director of Development and External Relations major parties. The major parties are now difficult task on recovering economic growth

supporting Vizcarra, expecting to control the amid the instability we are experiencing, Latin America Advisor is published every ongoing investigations. Most likely, the left though this is a great opportunity for him. business day, except for major U.S. holidays, will be excluded and the government will tilt Reconstruction of the north of the country by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 to the right. At the same time, undeclared and all the stalled projects are a good start- Washington, DC 20005 campaign donations and shadow lobbying ing point. This can win him some support. www.thedialogue.org is perceived as a crime and may weaken The next six months are very important to ISSN 2163-7962 Vizcarra or end his term. That is, unless show investors—local and foreign—that Peru Subscription inquiries are welcomed at Vizcarra proves to be shrewd enough to is greater than its problems, that we respect [email protected] remain in office by building a coalition of rule of law and promote private investment The opinions expressed by the members of the Board of honest independents and manages to obtain and that our government has zero tolerance Advisors and by guest commentators do not necessarily popular support to counterbalance his lack of corruption.” represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily of a political base and confront bribe-hungry represent the views of their respective employers or firms. politicians. Additionally, if the economy The Advisor welcomes comments on its Q&A The information in this report has been obtained from improves along with public spending, and section. Readers can write editor Gene Kuleta reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have international mineral prices remain high, at [email protected]. any questions relating to the contents of this publication, 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 permis- sion from the publisher.