LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Thursday, January 28, 2021

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Thursday, January 28, 2021

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk What’s at Stake in Venezuela Must Chief Corporate Affairs Officer, Grubhub Release Detained Joyce Chang Global Head of Research, Brazil’s Legislative Guyanese JPMorgan Chase & Co. Fishermen: OAS Paula Cifuentes Director of Economic & Fiscal Affairs, Leadership Vote? The Organization of American Latin America & Canada, States condemned what it called Philip Morris International Venezuela’s “illegal detention” Marlene Fernández of 12 Guyanese fishermen and Corporate Vice President for demanded their release. Government Relations, Arcos Dorados (McDonald’s) Page 2 Peter Hakim President Emeritus, ECONOMIC Inter-American Dialogue Donna Hrinak Peruvian Senior VP, Corporate Affairs, Royal Caribbean Group Lawmakers Jon E. Huenemann Advance Pension Former Corporate and Government Senior Executive System Reform James R. Jones A Peruvian congressional commit- Chairman, Brazilian lawmakers will select the presidents of both chambers of Congress next week. The tee approved legislation to replace Monarch Global Strategies National Congress building in Brasília is pictured above. // File Photo: Brazilian Congress. the country’s pension plans with a Craig A. Kelly Senior Director, Americas new government-run system. Int’l Gov’t Relations, Exxon Mobil Next week, both chambers of Brazil’s Congress will select Page 3 John Maisto their presidents. Incumbent Chamber of Deputies President Director, U.S. Education Finance Group Rodrigo Maia and incumbent Senate President Davi Alcolum- POLITICAL Nicolás Mariscal Q bre are unable to remain in those posts due to term limits. Brazil Ending Chairman, Grupo Marhnos Who are the lawmakers that are most likely to replace them, and what is Military Operation Thomas F. McLarty III driving their support? How is President Jair Bolsonaro influencing the to Curb Amazon Chairman, selections? How important will the change in legislative leadership be to McLarty Associates Deforestation Beatrice Rangel Bolsonaro’s efforts to advance his agenda? Director, Brazil’s government is ending AMLA Consulting LLC its military-led operation to fight Jaana Remes Anya Prusa, Slater family fellow and senior associate at the deforestation in the Amazon Partner, Brazil Institute of the Woodrow Wilson International Center rain forest, said Vice President McKinsey Global Institute Hamilton Mourão. Ernesto Revilla for Scholars: “Months of campaigning and speculation will Page 2 Head of Latin American culminate next week as members of the Brazilian Senate and Economics, Citi A Gustavo Roosen Chamber of Deputies vote for their new leaders. At the moment, President Chairman of the Board, Bolsonaro’s preferred candidates are favored to win: Arthur Lira in the Envases Venezolanos Andrés Rozental lower house and Rodrigo Pacheco in the Senate. Pacheco has a clear President, Rozental & path to victory over Simone Tebet, according to current vote counts, but Asociados Lira faces a tougher race. His main opponent, Baleia Rossi, is poised Shelly Shetty Managing Director, Sovereigns to secure enough votes in the first round to force a second. Leadership Fitch Ratings votes are by secret ballot, and party discipline is notoriously lax in Brazil. Therefore, Lira—and the Bolsonaro government that supports him—cannot afford to take anything for granted. For Bolsonaro, the result in the lower house is of particular political importance. Outgoing Chamber of Deputies President Rodrigo Maia, who backs Rossi as his replacement, is a power- Mourão // File Photo: ful critic of the president, despite a shared interest in economic reforms. @GeneralMourao via Twitter. Continued on page 2

POLITICAL NEWS years, in large part due to oil discoveries made NEWS BRIEFS offshore Guyana in 2015. Guyana has taken Venezuela Must the issue to the International Court of Justice, Mexico’s Slim Remains and the court said last December that it would Hospitalized With Covid Release Guyanese hear the case, Agence France-Presse reported. However, Venezuela has said the court has no Mexican billionaire Carlos Slim, one of the Fishermen: OAS jurisdiction in the matter and will not recognize world’s richest men, remains hospitalized its decision. with Covid-19, spokesman Arturo Elías said The Organization of American States on Wednesday, Reuters reported. Slim, 80, a Wednesday issued a statement condemning telecommunications magnate, has been under what it called “the illegal detention by the Ven- Brazil Ending treatment at the National Institute of Nutrition ezuelan dictatorship” of two Guyana-registered Military Operation to in Mexico City. However, Elías said Slim is vessels and their crew. Twelve Guyanese fisher- “doing very, very well,” and that he is in the men were arrested by the Venezuelan navy last Curb Deforestation hospital for “analysis and monitoring.” Slim’s week in waters that both countries claim as family controls América Móvil, Mexico’s largest their own, but which are generally recognized Brazil’s government is ending its military-led telecoms provider. as part of Guyana’s exclusive economic zone. operation to fight deforestation in the Amazon “The General Secretariat demands that the rain forest, Vice President Hamilton Mourão Guyanese citizens are released promptly and said Wednesday at the World Economic Forum, Brazil’s BTG Pactual safely to Guyanese authorities, as well as the the Associated Press reported. The govern- Planning Expansion two detained vessels,” the OAS said. “The reso- ment launched the effort, called Operation lution of the territorial dispute between Venezu- Green Brazil 2, last May. It included the deploy- Into Retail Banking ela and Guyana is a matter that lies under ment of thousands of soldiers in the Amazon. Brazil’s Banco BTG Pactual, Latin Ameri- international jurisdiction and cannot be settled Between July 2019 and August 2020, just ca’s largest investment bank, is planning to by unilateral actions. Any attempt to derail this over 11,000 square kilometers of forest were expand into retail banking, launching products international legal process, such as the decree destroyed, a 9.5 percent increase as compared including credit cards and mortgages, said issued by the Maduro regime, is contrary to to the same period the previous year, according Rodrigo Cury, the head of BTG’s digital retail international law and standards, and has no le- to government data. That level of deforestation unit, Reuters reported today. Cury said the bank gal bearing or significance,” it added, referring was also the highest since 2008. Mourão, who began offering checking accounts to consum- to Venezuelan President Nicolás Maduro. The leads the government’s Amazon Council to ers who are not already BTG clients using its incident is the latest in a century-old territo- fight deforestation, said the end of the military BTG+ retail brand. Cury added that the bank is rial dispute that has gained traction in recent operation will mean environmental agencies preparing to launch payroll loans, home equity and mortgages by the end of the year. FEATURED Q&A / Continued from page 1

Lira, in contrast, represents the ‘Centrão,’ a Tabata Amaral, Democratic coalition of conservative parties far more Labor Party member of Brazil’s BBVA Partners amendable to cutting deals with the gov- Chamber of Deputies: “The With Chile’s Bci for ernment—especially once Bolsonaro began A upcoming elections in both Cash Management to engage in the traditional horse-trading chambers of the Brazilian Congress are of Brazilian coalition politics. A partner- critical and will determine the future of our Spanish multinational bank BBVA has selected ship based more on interest than ideology, nation, especially considering the many Chilean bank Bci to provide payment and however, carries its own risks, particularly if projects that must be approved in order for collection services, a move that will allow Bolsonaro’s popularity crumbles further amid Brazil to control the pandemic and recover BBVA clients that have a presence in Chile a rising Covid-19 death toll and economic its economy. My vote will be to ensure that to carry out transactions with Bci, BBVA said woes. If Pacheco and Lira are elected, the we maintain the legislative branch indepen- Wednesday in a statement. “In order to offer government will have demonstrated a certain dent and as a productive counterpower to our clients the widest possible coverage for ability to enact its preferences in Congress. the many threats presented by President their cash management operations at BBVA, The challenge of maintaining that influence Bolsonaro, including his disastrous handling we are creating alliances with leading banks in to pass its agenda still remains.” of the pandemic, which has cost hundreds countries where we do not have a presence,” said Eva Rubio, the head of global transaction Continued on page 4 banking at BBVA.

COPYRIGHT © 2021, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Thursday, January 28, 2021 will again be responsible for monitoring deforestation in the Amazon. “We have been THE DIALOGUE CONTINUES working on a plan ... for our environmental agencies to resume, at the best of their capac- ity, operations and incursions into the forest,” Do Social Media Platforms he said, the AP reported. Mourão also called on Have Too Much Power? Wednesday for “vital” investments from private interests and international actors. Under In the wake of the deadly riot at could potentially be confronted with similar President Jair Bolsonaro, Brazil’s government the U.S. Capitol on Jan. 6, so- incidents. Most Latin American countries do is proposing the smallest budget in at least 13 cial media platforms including not have an intermediary liability framework years for environmental protection, Reuters re- Q Twitter and Facebook respec- (with the exception of the Brazilian ‘Marco ported earlier this week, citing nonprofit group tively adopted permanent and temporary Civil’), so there is no general principle on Contas Abertas. bans of former President Donald Trump companies’ liability. There also continues from their sites over concerns that his posts to be a tendency toward the criminalization were inciting violence. Critics including of expression, despite progress made in the ECONOMIC NEWS Mexican President Andrés Manuel López past two decades. In many places, lawmak- Obrador have blasted the social media ers are pushing short-sighted legislative companies, calling their actions censorship. ‘solutions,’ such as demanding increas- Peruvian Lawmakers Other countries, including Brazil, have also ingly swift removal of content. Instead of Advance Pension grappled with politically charged misinfor- protecting speech, these measures are more mation circulating on social media. To what likely to restrict it, while politicians abuse System Reform extent can—and should—social media sites platforms in order to mislead and divide take action against political figures in Latin the people they govern. In the pursuit of the A congressional committee in Peru on Tuesday America and the Caribbean? What differen- protection of the public interest and dem- approved legislation that would replace the tiates free speech, the spread of misinfor- ocratic rights, we must remember that the country’s private and public pension plans with mation and incitement of violence? Do big most powerful in society are not the victims a government-run system, Bloomberg News re- tech companies have too much power to of the current dynamic. As such, the solution ported. The pension reform committee passed censor speech and shape political debates to these sets of issues will not come from the measure on a vote of 6-2, sending it to the in the region? How much are social media a debate solely defined by the voices of pri- floor of the unicameral Congress. The legis- sites subject to government regulation in vate interests and political elites. Instead, it lation has caused alarm among the country’s Latin America, and is the level of regulation must include civil society advocates, smaller private pension fund managers, called AFPs, they currently face appropriate? companies and experts in a wide range of the news service reported. The pension fund fields, and it must be defined by principles managers say the $45 billion that they have un- Gabriela Hadid, principal of transparency and accountability to better der management could be prone to government for investments, and Felipe diagnose the problem and devise viable interference and seizure. “The AFPs want to Estefan, Latin America director, solutions.” keep improving—with performance-based fees, A both at Luminate: “Social media higher returns and greater competition—but by platforms are at the center of the discussion no means should that mean destroying what’s for fomenting hatred, spreading misinforma- EDITOR’S NOTE: The comment above is already there and starting from zero,” Giovan- tion and distorting political outcomes. While a continuation of the Q&A published in na Priale, who heads an industry group, told measures were taken to address online Wednesday’s Advisor. Bloomberg News. She said the plan amounts to violence in the United States, Latin America a “nationalization” of account holders’ savings. The reform would be the largest overhaul since to take on the reform, following last year’s po- ability to manage pension savings in an effort the country’s current pension system was litical turmoil and as the country currently has to reduce costs. In a series of votes last year, created in 1993. At that time, a new govern- an interim government ahead of a presidential Peru’s Congress allowed pension account ment-run fund and the AFP system replaced a election in April. Under the proposed legisla- holders to make partial withdrawals from their bankrupt national system. Some lawmakers in tion, a new government body would assume the plans in efforts to cushion the economic im- favor of reforming the pension system say the administrative functions of the AFPs, making pact of the Covid-19 pandemic. [Editor’s note: current system is too concentrated. However, them solely fund managers. The government See related Q&A in the Sept. 24-Oct. 7 issue critics of the overhaul plan, including several would also invite other local and international of the Dialogue’s biweekly Financial Services former finance ministers, say now is a bad time fund management companies to bid for the Advisor.]

FEATURED Q&A / Continued from page 2 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2021 of thousands of Brazilian lives and has risk to the Bolsonaro reform agenda may be given rise to several impeachment efforts, Bolsonaro himself. Last week’s Datafolha Erik Brand and also his constant attempts to corrupt poll revealed a rise in his rejection rate to 40 Publisher [email protected] and weaken our very democratic structures percent and decline in approval ratings to and his negligence in the face of increasing 31 percent over his management of Covid. Gene Kuleta Editor poverty and inequality.” Over the weekend, Brazil’s major cities saw [email protected] caravans of protesters from the left and Anastasia Chacón González Gabrielle Trebat, managing right calling for Bolsonaro’s impeachment. Reporter & Associate Editor director for Brazil and the The president’s political standing may be a [email protected] Southern Cone at McLarty better barometer of the reform agenda than Associates: “The early February a change in congressional leadership.” A congressional leadership elections have Michael Shifter, President been dominating the narrative in Brasília in Gilberto M. A. Rodrigues, pro- Rebecca Bill Chavez, Nonresident Senior Fellow recent months with the lower house divided fessor of international relations Sergio Bitar, Nonresident Senior Fellow between President Bolsonaro’s candidate, at the Federal University of ABC Joan Caivano, Senior Advisor centrist Congressman Arthur Lira (of the A in Brazil: “Brazil is in the middle Michael Camilleri, Director, Rule of Law Program Progressives Party, or PP) and Congressman of the most serious crisis in its recent Kevin Casas-Zamora, Nonresident Senior Fellow Baleia Rossi (of the Brazilian Democratic history. The mismanagement of the Covid-19 Héctor Castro Vizcarra, Nonresident Senior Fellow Movement party, or MDB) who enjoys pandemic by President Bolsonaro–due to Julia Dias Leite, Nonresident Senior Fellow support from left-of-center parties as well his denial of science and his criminal lack Ariel Fiszbein, Director, Education Program as outgoing lower house President Rodrigo of support of states and municipalities in Peter Hakim, President Emeritus Maia. While both candidates are pro-reform, dealing with the pandemic—has led to a Nora Lustig, Nonresident Senior Fellow the difference is the degree of coordina- health catastrophe with millions infected Margaret Myers, Director, Asia and Latin America Program tion with the Bolsonaro administration on and thousands dead. More than 50 claims Manuel Orozco, Senior Fellow the president’s legislative priorities. While of impeachment against Bolsonaro are Xiaoyu Pu, Nonresident Senior Fellow Rossi is the author of a comprehensive waiting for an evaluation by the president Jeffrey Puryear, Senior Fellow tax reform bill, Lira favors a streamlined of the lower chamber. Having lost his main Mateo Samper, Nonresident Senior Fellow tax reform aligned with Economy Minister source of foreign ideological support—the Tamar Solnik, Director, Finance & Administration Guedes. Congressman Lira is favored to defeated President Trump—Bolsonaro will Lisa Viscidi, Director, Energy Program win; hailing from the Centrão, his alignment face growing public support in favor of his Denisse Yanovich, Director of Development, with Bolsonaro will likely come at a price, impeachment in the coming months due to External Relations & Special Projects namely cabinet appointments. Should Rossi the lack of vaccines and emergency assis- be elected, his alignment with left-of-center tance for the vulnerable. In this scenario, Latin America Advisor is published every business day, except for major U.S. holidays, parties could tilt the lower house’s agen- the election of a new president of the lower by the Inter-American Dialogue at da toward fiscal spending. In the Senate, chamber has become a fight between those 1155 15th Street NW, Suite 800 Washington, DC 20005 Senator Rodrigo Pacheco (DEM) is favored opposing the president–represented by the www.thedialogue.org to win with support from Bolsonaro and centrist candidate Baleia Rossi (MDB), who ISSN 2163-7962 the Workers’ Party, which prefers to have has the support of incumbent Chamber of Subscription inquiries are welcomed at different parties at the helm of each house. Deputies President Rodrigo Maia–and those [email protected] Running opposite is Senator Simone Tebet backing the government through right-wing The opinions expressed by the members of the Board of (MDB), who has positioned herself as an candidate Arthur Lira (PP). Both candidates Advisors and by guest commentators do not necessarily independent candidate. Both Pacheco and claim having sufficient support to win but, represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily Tebet support economic reforms and share because the vote is secret, betrayals may represent the views of their respective employers or firms. similar voting records; the Senate race is happen. In the Senate, candidate Rodrigo The information in this report has been obtained from about parties’ political strategies (for ex- Pacheco (DEM), a self-declared independent reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have ample, committee assignments) more than who does not oppose Bolsonaro, is likely any questions relating to the contents of this publication, ideology, which explains how Pacheco can to win with support from incumbent Davi contact the editorial offices of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in enjoy support from both President Bolsonaro Alcolumbre and the major parties.” a retrieval system, or transmitted without prior written and the Workers’ Party. Ironically, the biggest permission from the publisher.