LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, June 16, 2020

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, June 16, 2020

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk How Is Uruguay U.S. Accuses CEO, DevryBV Sustainable Strategies Maduro of Trying Joyce Chang Global Head of Research, Avoiding the to Rig Venezuela’s JPMorgan Chase & Co. Legislative Vote Paula Cifuentes Director of Economic & Fiscal Affairs, Worst of Covid-19? U.S. Secretary of State Mike Latin America & Canada, Pompeo accused Venezuelan Philip Morris International President Nicolás Maduro of Marlene Fernández seeking to rig the country’s Corporate Vice President for legislative election, planned for Government Relations, Arcos Dorados later this year. Page 2 Peter Hakim President Emeritus, Inter-American Dialogue ECONOMIC Donna Hrinak President, Boeing Latin America Peru’s Economy Jon E. Huenemann Former Corporate and Contracts by More Government Senior Executive Than 40% in April James R. Jones Chairman, Uruguayan President Luis Lacalle Pou was faced with the coronavirus pandemic soon after he The Andean nation has been Monarch Global Strategies took office in March. // File Photo: Uruguayan Government. among the world’s hardest hit by Craig A. Kelly the coronavirus pandemic. The Director, Americas International Uruguay has stood out in Latin America for avoiding the mining industry in Peru shrank by Gov’t Relations, Exxon Mobil worst of the coronavirus pandemic—with no exponential more than 42 percent in April. John Maisto Page 2 Director, U.S. Education growth and a low death toll—while its neighbors are seeing Finance Group Q some of the highest levels of Covid-19 cases in the region Nicolás Mariscal ECONOMIC Chairman, and, in the case of Brazil, in the world. Why did Uruguay see lower levels Grupo Marhnos of coronavirus contagion than its neighbors? How well has the govern- Brazilian Treasury Thomas F. McLarty III Chairman, ment of President Luis Lacalle Pou responded to the health crisis and Secretary to Step McLarty Associates its economic consequences? To what extent will its neighbors’ economic Down by July Carlos Paz-Soldan Partner, woes affect Uruguay’s road to recovery? Brazilian Treasury Secretary DTB Associates, LLP Mansueto Almeida, seen as an Beatrice Rangel advocate for fiscal discipline, Director, Giovanni Escalante, PAHO/WHO representative in Uruguay: said he is stepping down. The AMLA Consulting LLC “Uruguay’s favorable results are a result of compliance with announcement led to a 3 percent Jaana Remes decline in Brazil’s currency. international health regulations. The country has demo- Partner, Page 2 McKinsey Global Institute graphic, geographical, economic and social characteristics Ernesto Revilla A Head of Latin American that have helped to cope with the arrival of Covid-19. Uruguay’s rapid Economics, Citi and timely response to the disease has as key ingredients: a national Gustavo Roosen Chairman of the Board, integrated health system of mainly public funding; a unique command Envases Venezolanos from the highest level of government, with the involvement of all social Andrés Rozental and productive sectors, the support of all key actors, including political President, Rozental & Asociados parties; and a population with responsible civic behaviors. Simultaneous- Shelly Shetty ly, the leadership of the health sector was remarkable, having implement- Managing Director, Sovereigns Fitch Ratings ed smart strategies, such as calling for national and international expert groups, activating digital innovation tools and e-government in health, as well as the extensive Internet network and a law on audiovisual media services to respond to the demand for assistance regarding Covid-19. Also, the country has well-developed care. It has an active epidemiolog- Almeida // File Photo: Brazilian Government. Continued on page 3

POLITICAL NEWS in March. Mining output in Peru, one of the NEWS BRIEFS world’s largest producers of copper, gold and U.S. Accuses Maduro silver, shrank by more than 42 percent in April. Brazilian Treasury Overall, economic activity dropped nearly 50 Secretary Announces of Seeking to Rig percent, according to the national statistics institute. The plunge in April “reflects the unde- Departure, Markets Roiled Legislative Election performance of most productive sectors, with Brazilian financial markets were turbulent Mon- an impact on trade, production, construction, day following news that the country’s treasury The U.S. government on Monday accused mining, hydrocarbons, transportation, hotels secretary, Mansueto Almeida, is to step down, Venezuelan President Nicolás Maduro of and business services,” the institute said. The Reuters reported. Almeida is seen as an ad- seeking to rig the country’s legislative election, vocate for fiscal discipline. Economy Minister planned for later this year, Reuters reported. Paulo Guedes told Reuters on Monday that The accusation followed a move last Friday by Bruno Funchal, currently the ministry’s director Venezuela’s Supreme Court to install members of programs, will succeed Almeida by the end of the country’s electoral council, a task Madu- of July. On Monday, Brazil’s real fell as much as ro’s opponents say is reserved for the National 3 percent against the U.S. dollar. Assembly. Earlier this month, the Supreme Court, which is loyal to Maduro, ruled that the National Assembly, which the opposition controls, failed to name members of the panel Bolivian Villagers Destroy Vizcarra // File Photo: Peruvian Government. on time. In a statement on Monday, U.S. Sec- Several Telecom Masts retary of State Mike Pompeo accused Maduro economy had already contracted by more than Over Coronavirus Fears of manipulating Venezuela’s constitution and 16 percent in March, after having previously Bolivian villagers on Monday destroyed several said the electoral council it seated would not recorded 127 months of consecutive growth. telecommunications masts over fears that 5G implement conditions needed for free and fair President Martín Vizcarra’s government on technology could transmit the coronavirus, elections. “Without following this process, Monday announced a public investment plan Agence France-Presse reported. The Andean elections that represent the will of the people dubbed “Arranca, Perú,” or “Get Off the Ground, nation does not yet have 5G wireless infrastruc- are impossible,” said Pompeo, Reuters report- Peru,” in a bid to create more than one million ture, which conspiracy theories on social media ed. “This step by the regime and its Supreme jobs in the second half of the year, state-run have linked to spreading the virus, a notion Court takes Venezuela even further away from news agency Andina reported. It will invest that scientists have debunked. The villagers a democratic transition.” National Assembly nearly $1.9 billion in four sectors, including destroyed four communication towers in Yap- President and opposition leader Juan Guaidó transport and communications, housing and acaní, near the city of Santa Cruz, according to has called the electoral panel “false,” adding construction, agriculture, and labor and em- the local police chief. that the opposition would not recognize it. ployment promotion. [Editor’s note: See related Q&A in the June 11 issue of the Advisor.]

ECONOMIC NEWS ExxonMobil Reduces BUSINESS NEWS Crude Output at Guyana Peru’s Economy Project to Avoid Flaring WhatsApp Launches Contracts by More ExxonMobil has reduced crude output at its Payments Feature for project off Guyana’s coast due to problems Than 40% in April with gas reinjection equipment in an effort Users in Brazil to avoid excessive gas flaring, the Guyanese Peru’s economy contracted by more than 40 environmental regulator said Monday, Reuters percent year-on-year in April, the government WhatsApp, which is owned by Facebook, on reported. Output at the Liza field, which Exxon said Monday, Agence France-Presse report- Monday launched a payments feature in Brazil, operates alongside partners Hess Corp. and ed. The Andean nation has been among the Bloomberg News reported. It will be free for CNOOC, has dropped to between 25,000 and hardest hit by the coronavirus pandemic in users to make payments using the messaging 30,000 barrels per day (bpd) within the past Latin America, despite being one of the first platform, whether they send to other people or week following an issue with the gas rein- to implement strict quarantine measures to businesses to pay for goods and services. jection equipment. Production had been at between 75,000 and 80,000 bpd in early May.

WhatsApp will charge businesses a fee for pur- FEATURED Q&A / Continued from page 1 chases. The Facebook unit is partnering with Brazilian payments company Cielo to process ical surveillance system that allowed it to see a V-shaped recovery from the pandemic. the transactions, Bloomberg News reported. activate all the necessary containment and The biggest threat to reverse these gains is Over the past two years, WhatsApp has tested response barriers at all levels of care of the complacency and an unforgiving winter.” a payments feature in several countries, in- public and private health services networks. cluding Mexico and India. However, the rollout To date, the cumulative incidence curve Ignacio Bartesaghi, dean of the in Brazil, where Facebook began testing the shows a stable pattern, indicating disease business studies department at feature a month ago, marks the first location containment in the country. According to the Catholic University of Uru- where the service will be fully offered. Brazil is official reports, as of June 9, no new positive A guay: “As time goes on, it is con- among the top countries in which customers cases were reported for two consecutive firmed that Uruguay is one of global refer- use WhatsApp to interact with merchants, days, and there were only four Covid-19 ences in managing the health crisis caused the unit’s chief operating officer, Matt Idema, patients in intensive care units.” by Covid-19, especially considering that its neighboring countries face enormous crisis Nicolás Saldías, senior re- management challenges. Many wonder WhatsApp is heavily searcher at the Wilson Center’s which factors explain the country’s success- used [in Brazil], both Latin America Program and ful response to such an unprecedented cri- by people and A Argentina Project and a Ph.D sis, one that even exceeded the ability of the small businesses.” candidate at the University of Toronto: — Matt Idema “Uruguay has the lowest number of Covid-19 cases in Latin America and, at the time of It is worth noting writing, it has recorded no new cases for two the presidential told Bloomberg News. More than five million days in a row. The low numbers are not due leadership of Luis merchants worldwide use a business version to a lack of testing—Uruguay’s per capita Lacalle Pou...” of WhatsApp, and the messaging application testing rate is more than three times higher — Ignacio Bartesaghi is the main, or only, online presence for many than in Argentina. It is not clear why Uruguay small retailers in some countries including avoided the fate of its neighbors, but there Brazil. In Brazil, more than 120 million people are some likely reasons. Uruguay has the world’s most powerful players to react. First, use WhatsApp, Reuters reported. “WhatsApp lowest poverty rate in the region, and com- it is worth noting the presidential leadership is heavily used there, both by people and small paratively few Uruguayans live in the dense of Luis Lacalle Pou, who did not hesitate businesses,” Idema told the wire service. “We informal settlements that surround other to take the necessary measures to prevent think we can help grow digital payments, help Latin American cities. Uruguay’s urbanized the spread of the virus at the national level, grow the digital economy with small busi- core is surrounded by a sparsely populated while seeking the delicate balance between nesses and help support financial inclusion.” interior that acts as a barrier to spread, the health, economic and social factors. WhatsApp hopes the rollout in Brazil benefits especially from Brazil, which has an uncon- This whole process was carried out with an customers who are quarantined at home during trolled outbreak. An outbreak in the border intelligent communication strategy and with the coronavirus pandemic, Idema added. “We city of Rivera earlier this month is, so far, the involvement of the entire political system can’t have the kind of interactions with each under control. President Lacalle Pou has, by and academia. Second is that, beyond some other that we normally would, if you want to Uruguayan standards, unprecedented popu- minor political opportunisms that soon lost lend someone cash or if you want to buy some- lar support. Polling shows that his approval force, the country again showed strong thing from a local business,” he told Reuters. rating has hovered above 60 percent since institutions, which responded adequately Initially, holders of debit and credit cards from he took office in March, which translates to a to the challenge. The seriousness that the Banco do Brasil, Nubank and Sicredi will be high level of trust in the authorities. Lacalle government portrayed, with very loaded able to use the payments service, Reuters Pou did not impose a strict quarantine to definitions and rationality, encouraged con- reported. In a statement, Visa said it is working balance the economic and epidemiological servative Uruguayans to make very good use with Facebook to power the new payments fea- concerns. Nevertheless, mobility data shows of their liberties, which made it unnecessary ture on WhatsApp. The payments on WhatsApp Uruguayans followed the rest of the region to implement mandatory lockdowns. All will use the capabilities of Visa Direct and Visa in reducing mobility. Economically, the IMF these factors, today considered successful Cloud Tokenization, the payment processor and private estimates show that Uruguay will in terms of health, will also be reflected in said. be one of the few countries in the region to the performance of the economy and social 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 © 2020 behavior. Without forgetting the fiscal deficit, very positive; on June 10, Montevideo tested which will obviously increase and will not be 900 people and found just three infections, Erik Brand able to meet the goals the new government and none were reported on June 11. Uruguay Publisher [email protected] had set, the country is expected to experi- was governed by a leftist coalition between ence a smaller drop in production relative 2005 and 2020, and while ideological polar- Gene Kuleta Editor to the region, achieving a more accelerated ization had been on the rise, it has dropped [email protected] recovery, and—thanks to the concept of good under the new government of Luis Lacalle Anastasia Chacón González use of freedom—once the pandemic is over, Pou as the country faces the Covid-19 crisis. Reporter & Associate Editor a new phase with higher levels of political Lacalle Pou had complained about the fiscal [email protected] and social cohesion will begin. All this will result in the continued strengthening of the Uruguay has taken good international image that the country Michael Shifter, President already has.” an independent Rebecca Bill Chavez, Nonresident Senior Fellow path in dealing with Sergio Bitar, Nonresident Senior Fellow Juan Andrés Moraes, faculty the pandemic.” Joan Caivano, Director, Special Projects member at Universidad de la — Juan Andrés Moraes & Scott Morgenstern Michael Camilleri, Director, Rule of Law Program República in Uruguay, and Scott Kevin Casas-Zamora, Nonresident Senior Fellow A Morgenstern, professor of Héctor Castro Vizcarra, Nonresident Senior Fellow political science and former director of the heritage left by his left-wing predecessors, Julia Dias Leite, Nonresident Senior Fellow Center for Latin American Studies at the but he has been proactive in containing Ariel Fiszbein, Director, Education Program University of Pittsburgh: “Although it is a the economic and social consequences of Peter Hakim, President Emeritus small country surrounded by and dependent coronavirus by ‘bringing the state back in,’ Nora Lustig, Nonresident Senior Fellow on two of the largest economies in Latin with more expenditures on social programs Margaret Myers, Director, Asia and America, Uruguay has taken an independent and unemployment. In contrast to his party’s Latin America Program Manuel Orozco, Director, Migration, path in dealing with the pandemic. Brazil historical positions, he has increased the Remittances & Development has one of the highest infection rates in spending based on debt and new taxes Xiaoyu Pu, Nonresident Senior Fellow the world, and its president has denied on public servants. The positive results in Jeffrey Puryear, Senior Fellow the seriousness of the issue and has not Uruguay (so far) may be the product of the Mateo Samper, Nonresident Senior Fellow attempted a serious response. Argentina, country’s history of a strong welfare state, Tamar Solnik, Director, Finance & Administration meanwhile, did attempt an early and restric- built across generations. Now more than Lisa Viscidi, Director, Energy Program tive quarantine, but without much success. ever, these institutions have shown their Denisse Yanovich, Director of Development and By contrast, Uruguay has taken advantage vitality by supporting the population with External Relations of its historically strong social welfare state food and health. Again, Uruguay’s unique Latin America Advisor is published every and high level of social capital to develop a history and strong welfare state system have business day, except for major U.S. holidays, highly effective strategy for dealing with the put this small country’s exceptionalism into by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 crisis. It has closed its borders (though its a positive light.” Washington, DC 20005 northern border is porous), enforced social www.thedialogue.org distancing and, in spite of it now having a The Advisor welcomes comments on its Q&A ISSN 2163-7962 center-right government, it has activated its section. Readers can write editor Gene Kuleta Subscription inquiries are welcomed at social-services sector. The result has been at [email protected]. [email protected]

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