LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, May 3, 2019

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, May 3, 2019

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk Will U.S. Sanctions First Lawsuits Corporate VP, Global Corporate Affairs Cargill Filed Over Seized Joyce Chang Global Head of Research, Force Ortega From Property in Cuba JPMorgan Chase & Co. The first of many lawsuits Marlene Fernández expected by U.S. citizens over Corporate Vice President for Power in Nicaragua? property confiscated during the Government Relations, Arcos Dorados Cuban Revolution were filed in a Peter Hakim U.S. court. President Emeritus, Page 2 Inter-American Dialogue Donna Hrinak President, Boeing Latin America BUSINESS Jon Huenemann Heineken Acquires Retired VP, U.S. & Int’l Affairs, Philip Morris International Majority Stake James R. Jones Chairman, in Ecuador’s Monarch Global Strategies Biela y Bebidas Craig A. Kelly The Dutch brewer acquired the Director, Americas International Large-scale anti-government demonstrations began more than a year ago in Nicaragua. A Gov’t Relations, Exxon Mobil stake in the Ecuadorean company demonstration last August is pictured above. // File Photo: Civic Alliance for Justice and John Maisto Democracy. from a group of investors. The Director, U.S. Education country’s economic growth and Finance Group Protesters in Nicaragua recently marked the one-year demographics led to the purchase, Nicolás Mariscal anniversary of large-scale demonstrations against the gov- a company executive said. Chairman, Page 2 Grupo Marhnos ernment of President Daniel Ortega. The administration of Thomas F. McLarty III Q U.S. President Donald Trump has imposed multiple rounds Chairman, POLITICAL McLarty Associates of sanctions against Ortega’s government, and U.S. National Security Carlos Paz-Soldan Advisor John Bolton included Nicaragua, along with Cuba and Venezue- Maduro Gov’t Partner, DTB Associates, LLP la, as part of what he calls the “troika of tyranny.” To what extent will the Begins Pursuing Beatrice Rangel U.S. sanctions succeed in forcing Ortega from power? What is the Trump Opponents Director, AMLA Consulting LLC administration’s strategy in applying the sanctions against the Ortega Venezuelan President Nicolás Maduro’s government began Jaana Remes government? What do the actions mean for investment in Nicaragua Partner, pursuing opposition leaders, in- McKinsey Global Institute and businesses operating there? What unintended consequences could cluding Leopoldo López, who were Ernesto Revilla result from the sanctions, and how might the United States need to shift involved in this week’s violent Head of Latin American its approach as circumstances change? protests. Economics, Citi Page 2 Gustavo Roosen Chairman of the Board, Envases Venezolanos Marion Smith, executive director of the Victims of Com- Andrés Rozental munism Memorial Foundation in Washington: “The Ortega President, Rozental & Asociados and Senior regime has been using false promises of electoral reform, di- Policy Advisor, Chatham House alogue, the release of political prisoners and the pretense of Shelly Shetty A negotiations to manipulate the opposition and the international communi- Head of Sovereign Ratings, Latin America, Fitch ty. We were concerned when the United States gave Ortega an ultimatum Roberto Sifon-Arevalo and froze the sanctions for some months to promote the failed dialogue. Managing Director, Americas Sovereign & Public Finance Ratings, Since the regime has ignored this opportunity, continued the repression Standard & Poor’s and failed to start Nicaragua’s return to democracy, it is appropriate for the U.S. government to issue new sanctions. The United States has added Laureano Ortega Murillo, the son of Daniel Ortega and Rosario Murillo, to the list of sanctioned individuals. The sanctions also included a continu- Maduro // File Photo: Venezuelan Government. Continued on page 3

POLITICAL NEWS on Wednesday Maduro said his government NEWS BRIEFS would pursue those who participated in what Venezuela’s Maduro he has called an attempted coup. “Justice is HSBC Reports Higher looking for them, and sooner or later they will Revenues From Latin Pursues Opposition pay in prison for their treason and crime,” he said. Among those marching alongside Maduro America, Beats Estimates Following Protests on Thursday was Defense Minister Vladimir Global banking giant HSBC reported first-quar- Padrino, who reiterated his loyalty to Maduro. ter earnings today that beat market expecta- Venezuelan President Nicolás Maduro’s govern- Venezuela’s opposition and U.S. officials have tions, in part due to increased revenues from ment on Thursday began pursuing opposition said Padrino participated in secret discussions Latin America, CNBC reported. The bank said leaders involved in this week’s violent protests earlier in the week on ousting Maduro. Howev- its profit before tax in the first quarter was and calls for the military to overthrow his er, an unnamed person familiar with the talks $6.21 billion overall, a 30.7 percent jump government, The Wall Street Journal reported. told The Wall Street Journal that Padrino ap- from last year’s $4.75 billion. Adjusted profit A court in Caracas ordered the jailing of oppo- peared to remain loyal to Maduro and informed from Latin America rose to $387 million in the sition leader Leopoldo López, who appeared him about the talks. [Editor’s note: See related quarter ending March 31, up from $148 million early Tuesday morning alongside National Q&A in the Feb. 21 issue of the Advisor.] the quarter before, which was helped from a Assembly President Juan Guaidó at an air disposal gain of $24 million in the region. base, and joined Guaidó in calling for a military uprising. López, whom the court ordered to be ECONOMIC NEWS locked up in Venezuela’s Ramo Verde prison, had been on house arrest for two years and Heineken Acquires said Tuesday that sympathetic members of the First Lawsuits Filed Majority Stake in country’s intelligence services had freed him. Over Expropriated Ecuador’s Biela y Bebidas López had previously been imprisoned in Ramo Amsterdam-based Heineken said Thursday Verde for three and a half years. On Tuesday, Property in Cuba it had acquired a majority stake in Guaya- López took refuge in the Spanish Embassy in quil-based brewer Biela y Bebidas del Ecuador Caracas. Spain’s government said Thursday The first of an expected avalanche of lawsuits from a group of mainly local investors. In a that it will not allow Venezuelan authorities to from U.S. citizens against companies doing statement, Heineken’s president for the Amer- enter the embassy to arrest López, BBC News business in Cuba was filed Thursday, as a new icas, Marc Busain, said Ecuador’s favorable reported. At the embassy, López told reporters, U.S. policy took effect allowing claims on prop- demographics and economic growth pros- “This dictatorship is going to end,” The Wall erty confiscated by the Castro regime, The Wall pects led the company to make the purchase. Street Journal reported. He added, “We can’t Street Journal reported. The filings in the U.S. Ecuador’s beer market currently has a relatively lose hope. That is what the dictatorship wants.” District Court in Miami targeted cruise ship low consumption per capita of 39 liters when Hours after López was ordered to be jailed, operator Carnival Corp. Javier Garcia-Bengo- compared to other South American countries, Venezuela’s chief prosecutor filed criminal chea, of Jacksonville, Fla., is seeking redress according to Busain. The companies did not charges against National Assembly Vice Presi- for his family’s 82.5 percent stake in commer- disclose financial terms of the deal. dent Edgar Zambrano, accusing him of treason, cial waterfront property in the port of Santi- conspiracy and insurrection, among other ago de Cuba, which the Cuban government crimes. The whereabouts of Guaidó, whom confiscated in 1960, and Mickael Behn, based dozens of countries recognize as Venezuela’s in Lexington, Ky., filed his suit over property he Brazil’s Azul Registers legitimate interim president, were unclear on said Castro expropriated and Carnival used for for Avianca Brasil’s Thursday. It was also unclear where several embarking and disembarking its passengers in Bankruptcy Auction of Guaidó’s top aides were located. Nearly a Havana, according to the report. Last month, dozen aides to Guaidó, including his chief of U.S. President Donald Trump followed through Azul Linhas Aéreas Brasileiras has registered staff, have been jailed in recent months. In a on pledges to end a two-decade-old waiver on to participate in an auction that will result in march that was billed as a display of loyalty, provisions of the 1996 Helms-Burton Act, in the distribution of assets of Avianca Brasil, Re- Maduro on Thursday strode with military offi- a bid to add more economic pressure on the uters reported Thursday. The auction is sched- cers at the main Caracas military base. At the struggling Communist island, which has been uled for next week, and Azul previously said it march, Maduro called on Venezuelans to fight seeking billions of dollars in foreign invest- would not participate. Avianca Brasil filed for and defeat “coup plotters who sell themselves ment. The Justice Department has certified bankruptcy protection in December and said it to Washington’s dollars.” In a televised address nearly 6,000 claims for property confiscated in would auction some of the slots that allow it to operate flights from crowded airports.

Cuba holding a value, with interest, of roughly FEATURED Q&A / Continued from page 1 $8 billion. Officials in the European Union and Canada vowed to oppose the change in U.S. ation of the July 5 sanction against the cor- productive infrastructure and help reduce policy, potentially through the World Trade Or- rupt Venezuela-Nicaragua business Albanisa poverty. Blocking them affects the poorest ganization. George Fowler, one of Carnival’s at- and Nicaraguan state-run bank, Bancorp. Nicaraguans. Any external sanction cer- torneys and vice-chairman of the Cuban-Ameri- The United States needs to sanction more tainly generates a climate of insecurity for can National Foundation, told the Miami Herald bad-acting businesses if it wants a real investors, hitting the private sector directly. that the lawsuits would go nowhere because impact. So far, the sanctions have been spo- Therefore, the government and the opposi- the Helms-Burton law excludes liabilities for radic and without a strategic approach; only tion have agreed at the negotiating table that commercial activities related to authorized seven individuals have been sanctioned and they will take steps before the international travel to Cuba. Both plaintiffs are seeking a some undisclosed visa cancellations have community ‘to suspend all sanctions against jury trial. [Editor’s note: See related Q&A in the occurred since December 2007. Sanctions the Nicaraguan people, to facilitate the right March 18 issue of the Advisor.] are only good with a strategy, which should to human, economic and social development include additional measures that show a of Nicaragua, favoring the most vulnerable credible threat to the regime. Without other sectors of the population.’ The decision on Mexico Won’t Ratify high-profile designations—Ortega himself, what should be done corresponds to the U.S. USMCA Until U.S. active and retired military officials, and busi- government. Evidently, Nicaragua’s govern- ness leaders close to Ortega—the impact will ment will continue rejecting any sanction Drops Tariffs: Official be diluted. More measures are necessary, and pressure, proclaiming the defense of but additional countries, particularly from independence and national sovereignty and A top Mexican trade negotiator said his country the European Union and Latin America, need qualifying any such action as inappropri- will be unable to ratify a new North American to actively engage so that sufficient pressure ate, inconsistent, disrespectful, false and trade pact unless the United States drops is placed on the regime, forcing a transition illegitimate.” the aluminum tariffs it imposed last year, the that will guarantee free elections. We must Financial Times reported Thursday. Jesús avoid supporting false negotiations and Samantha Sultoon, visiting Seade, the Foreign Ministry’s undersecretary prevent the OAS from falling into another senior fellow at the Atlantic for North America, told the newspaper that “it trap of Ortega’s disingenuous promises of Council’s Scowcroft Center for may be inevitable to delay” ratification of the electoral reform. Ultimately, Nicaraguans A Strategy and Security: “Despite new United States-Mexico-Canada Agreement, will not be free until Ortega steps down. early attention by the Trump administration which was negotiated last year to replace the Stronger U.S. action can allow Nicaraguans to the deteriorating situation in Nicaragua North American Free Trade Agreement. Seade to secure their freedom. Anything less and with the December 2017 sanctions on is in Washington this week for meetings with Nicaragua will likely collapse into an even Roberto José Rivas Reyes, then-president the United States Trade Representative, Robert worse dictatorship and Cuban domination, of Nicaragua’s Supreme Electoral Council, Lighthizer. In related news, Sen. Rob Portman as in Venezuela.” attention to the political turmoil in Nicaragua (R-Ohio) cautioned President Donald Trump remains sporadic. While U.S. messaging— in a meeting with other lawmakers Thursday Adolfo Pastrán, director of when it is offered—indicates a clear desire to that steel and aluminum tariffs imposed last digital news media at Informe pressure the Ortegas and their supporters, year would make it more difficult for Congress Pastrán: “Any type of sanction the lack of consistent attention coupled to approve the deal. “These tariffs were put in A directly affects the people of with the overwhelming focus on Venezuela place using a national security trade remedy Nicaragua with lower employment and lower blunts the impact. The most recent sanc- and these countries are our allies, not national quality of life and torpedoes the negotiations tions on Laureano Ortega Murillo, as well security threats,” Portman said in a statement between the government and the opposition, as on Nicaraguan bank Banco Corporativo released before meeting with Trump, The Day- which should continue until a basic agree- (Bancorp), were a significant step, but if the ton Daily News reported. Other Republicans, ment that satisfies all is reached. So far, Trump administration is intent on regime such as Senate Finance Committee Chairman none of the external pressures have had the change as previous actions and messaging Charles Grassley of Iowa, have said the trade expected results. The resolution to the Nica- indicate, then tougher sanctions are obvious pact is “dead” in the U.S. Congress unless ragua situation must be worked out in Mana- ways to ramp up the pressure. Rather than Trump drops the tariffs. [Editor’s note See relat- gua and among Nicaraguans. International pursuing unilateral sanctions, however, the ed Q&A in the April 19 issue of the Advisor.] loans support health, free education, water Trump administration would be wise to rally and sanitation, electricity coverage, new likeminded allies. Specifically, efforts to 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 © 2019 harness the support of the 50-plus countries U.S. sanctions were imposed, and a process that have recognized interim Venezuelan is ongoing at the Organization of American Erik Brand President Guaidó should be made to coor- States that could mean the potential sepa- Publisher [email protected] dinate policy and messaging on Nicaragua. ration of Nicaragua from the organization, Without regional and key international allies, with drastic consequences for new capital Gene Kuleta Editor the unilateral U.S. sanctions are unlikely to flows from multilateral organizations. The [email protected] prove effective in the near term—and even uncertain outcome of this negotiation, plus Anastasia Chacón González less likely to facilitate the timely changes the turmoil that has affected the country Reporter needed to ease the economic downturn since April of last year, has taken a heavy [email protected] that is hurting Nicaraguans. The political toll on the economy. Growth is expected instability has already led to a decline in

private consumption and exports. Since the Michael Shifter, President Nicaraguan economy is largely dollarized, The uncertain Genaro Arriagada, Nonresident Senior Fellow diligent investors have cut or limited their outcome of this Sergio Bitar, Nonresident Senior Fellow engagement, particularly as U.S. sanctions negotiation, plus the Joan Caivano, Director, Special Projects on Nicaragua increase. The designation of turmoil that has af- Michael Camilleri, Director, Peter D. Bell Rule of Law Bancorp, which the Ortega regime reportedly fected the country ... Program uses to launder and hide assets subject has taken a heavy toll Kevin Casas-Zamora, Nonresident Senior Fellow to U.S. sanctions, increased the need for on the economy.” Ariel Fiszbein, Director, Education Program thorough due diligence of Nicaragua-related Peter Hakim, President Emeritus — Mario Arana business and transactions by those subject Claudio Loser, Senior Fellow to U.S. jurisdiction.” Nora Lustig, Nonresident Senior Fellow to fall between 7 and 11 percent this year, Margaret Myers, Director, Asia and Latin America Program Mario Arana, director of the depending on whether the political crisis is Manuel Orozco, Director, Migration, Nicaraguan Foundation for So- resolved, from a drop of 4 percent in 2018. Remittances & Development cial and Economic Development This environment has negatively affected Jeffrey Puryear, Senior Fellow A and former Nicaraguan minister direct foreign investment, and flows have Tamar Solnik, Director, Finance & Administration of finance and central bank president: “The been cut in half from last year’s estimates. Lisa Viscidi, Director, Energy Program Nicaraguan government, in part influenced The government is likely to accept elec- Denisse Yanovich, Director of Development and by the U.S. sanctions, initiated a second toral reforms sponsored by the OAS, but External Relations round of dialogue in February. An under- it is not clear whether it will agree to have Latin America Advisor is published every standing with the Civic Alliance for Justice early elections and no re-election. Thus, business day, except for major U.S. holidays, and Democracy was expected on democratic potential sanctions will affect individuals by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 reforms, including early new elections; and the economy as a whole, as the U.S. Washington, DC 20005 no re-election; justice and civil liberties, government will be encouraged to harden www.thedialogue.org including freeing all political prisoners; and sanctions against Nicaragua. A more direct ISSN 2163-7962 the return of exiles. The Ortega regime, and personalized diplomatic effort would be Subscription inquiries are welcomed at while agreeing to restore civil liberties and desirable to accomplish the objectives that [email protected] free all political prisoners, has lagged on could avoid an otherwise bleak economic fulfilling what has been agreed on, and no outlook for the country, which would ensue The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily understanding has yet been reached on as a result of sanctions.” represent those of the publisher. The analysis is the sole justice and democratic reforms. The window view of each commentator and does not necessarily represent the views of their respective employers or firms. to reach results is closing, as this was not The Advisor welcomes comments on its Q&A The information in this report has been obtained from expected to be a long negotiation. This has 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 meant that, during the negotiations, new 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.