LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, June 1, 2018

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, June 1, 2018

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Is Bolsonaro the Trump Slaps Cargill Joyce Chang Tariffs on Mexico, Global Head of Research, Candidate to Canada, E.U. JPMorgan Chase & Co. Dirk Donath U.S. President Donald Trump’s Senior Partner, administration removed exemp- Catterton Aimara Beat in Brazil? tions for Mexico, Canada and the Marlene Fernández European Union that had shielded Corporate Vice President for them from steel and aluminum Government Relations, Arcos Dorados tariffs. Officials in the countries affected vowed to retaliate. Peter Hakim President Emeritus, Page 2 Inter-American Dialogue Donna Hrinak BUSINESS President, Boeing Latin America Jon Huenemann Colombia Vice President, U.S. & Int’l Affairs, Philip Morris International Investigating Top James R. Jones Ecopetrol Officials Chairman, Monarch Global Strategies Colombian prosecutors are investigating the CEO and other Craig A. Kelly Right-wing candidate Jair Bolsonaro has been topping opinion polls ahead of Brazil’s presiden- Director, Americas International tial race. // File Photo: Bolsonaro Campaign. top officials of state oil company Gov’t Relations, Exxon Mobil Ecopetrol on allegations of John Maisto neglect following an oil spill last Director, U.S. Education Brazilian President Michel Temer on May 22 withdrew from March. Finance Group the country’s presidential race and endorsed his former fi- Page 3 Nicolás Mariscal Chairman, nance minister, Henrique Meirelles. Recent polls show right- Grupo Marhnos Q wing candidate Jair Bolsonaro in the lead with 18.3 percent POLITICAL Thomas F. McLarty III Chairman, support, and environmentalist Marina Silva and leftist Ciro Gomes Assange Can Stay McLarty Associates battling for second place with 11.2 percent and 9 percent, respectively. Carl Meacham in Embassy With Associate VP for Latin America Former president Luiz Inácio Lula da Silva has been the race’s front-run- Rules: Moreno Int’l Advocacy Division, PhRMA ner, but he was jailed in April and has been all but formally barred from Carlos Paz-Soldan Ecuadorean President Lenín Partner, running. With four months until election day on Oct. 7, how is Brazil’s Moreno said WikiLeaks founder DTB Associates, LLP presidential race shaping up? Will Bolsonaro maintain his lead? Which Julian Assange can remain in the Beatrice Rangel factors will most affect the race between now and October? country’s embassy in London as Director, long as he adheres to the condi- AMLA Consulting LLC tions of his asylum. Gustavo Roosen Page 2 Chairman of the Board, Peter Hakim, member of the Advisor board and president Envases Venezolanos emeritus of the Inter-American Dialogue: “The truckers’ Andrés Rozental President, Rozental & strike, the government’s inept response and the public Asociados and Senior reaction to both have increased the prospect that extreme Policy Advisor, Chatham House A right-wing populist Jair Bolsonaro will be Brazil’s next president. Once Roberto Sifon-Arevalo Managing Director, Americas again, Brazilians are showing how little they trust the country’s leadership. Sovereign & Public Finance Ratings, Standard & Poor’s Despite its brutal economic damage and disruption, polls report that nine in 10 Brazilians think the strike is justified. The same percentage feel the official response was bungled. The now frighteningly commonplace calls for military intervention also points to the mounting scorn for politics and politicians. Brazil’s political center continues to shrink. The center’s prime representative in this October’s election, former São Paulo Governor Ger- Assange // File Photo: Ecuadorean aldo Alckmin, is the preferred candidate of only 5 to 8 percent of voters in Government. Continued on page 2

ECONOMIC NEWS with their own tariffs on U.S. products includ- NEWS BRIEFS ing pork bellies, grapes, apples and flat steel, Trump Slaps Tariffs Reuters reported. Canada’s list of countermea- Strikes by Brazilian sures would include tariffs on U.S. metals and Oil Workers, Truckers food products such as yogurt, pizza and cu- on Mexico, Canada, Wind Down European Union After 11 days of paralyzing transportation blockades and fresh oil worker strikes this Effective today, the administration of U.S. Pres- week, Brazil showed signs of returning to ident Donald Trump has removed an exemption normal on Thursday, Reuters reported. The oil that had shielded allies Canada, Mexico and workers union, FUP, unexpectedly called off the European Union from 25 percent tariffs on a 72-hour strike it began on Wednesday after steel imports and 10 percent tariffs on alumi- defying a court order against it. Meanwhile, num imports, the Associated Press reported. Brazil’s minister of institutional security, U.S. Commerce Secretary Wilbur Ross, who as Trump // File Photo: White House. Sérgio Etchegoyen, said all roadblocks put up a businessman in the early 2000s purchased by truckers seeking lower diesel fuel prices and then sold distressed U.S. steel companies, cumbers, as well as household products such from the government had been removed. Only said the United States will place quotas or vol- as mattresses and refrigerators. The United isolated groups of truckers were still causing ume limits instead of tariffs on other countries States argues that protecting the steel industry problems, according to the report. such as Argentina, Australia, Brazil and South is in the country’s national security interest, a Korea, CNBC reported. As the peso fell to its classification that World Trade Organization lowest level in almost 15 months Thursday on rules allow member countries to determine the news, Mexican officials vowed to retaliate for themselves. “The WTO language is pretty Thousands Still Without Power in Puerto Rico as FEATURED Q&A / Continued from page 1 Hurricane Season Begins recent polls, compared to nearly 20 percent upend Brazil’s political system. This is what Hurricane season begins today, and more than for Bolsonaro. Alckmin’s badly divided party Bolsonaro represents. This is his declared 11,000 people are still without power in Puerto has been shamed by revelations of exten- ambition—an ambition which Brazilians Rico, more than eight months after Hurricane sive corruption, just like most other parties. these days are demonstrating an escalating Maria pummeled the U.S. territory, CBS News Another centrist candidate is Henrique readiness to support.” reported. It could still take another two months Meirelles, who until last month served as before electricity is completely restored, Brazil’s very capable finance minister and is João Feres Júnior, director according to the Puerto Rico Electric Power Au- trying to run on his record. But the econom- of the Institute of Social and thority. In the municipality of Yabucoa, where ic continuity is not an attractive electoral Political Studies (IESP) of the Maria made landfall, 38 percent of residents platform these days. Without currently jailed State University of Rio de Janei- A still remain without electricity. Luiz Inácio Lula da Silva, who will almost ro: “This election so far has been the most certainly be declared ineligible to run, Bol- unpredictable in the last four decades. This sonaro leads in every poll, but Marina Silva is mostly due to the devaluation of politics and Ciro Gomes are within striking distance. and political institutions produced by their Expelled Venezuelan Both are experienced in politics. They have unrelenting association with corruption. Diplomat Still in U.S. each held high office and have sought the Brazilian big media has played a major role presidency before, although neither has won in this process, lambasting the elected A career Venezuelan diplomat who was enough votes to participate in the runoff powers (legislative and executive) while expelled last week from the United States fol- stage. Their political parties are small and glorifying the judicial branches of govern- lowing Venezuelan President Nicolás Maduro’s weak, although Ciro is in position to gain ment (judiciary and prosecutor general). As move to expel the top U.S. diplomat in Caracas Lula’s support, which could give him a po- a result, established parties and politicians is still in the United States even though he had tentially important boost. The major liability are having trouble increasing their electoral been given 48 hours to leave, the Associated of both Marina and Ciro, however, is that base for the presidential race. In this sce- Press reported. Jarlet Sánchez, who had been Brazilian voters are unlikely to see either as nario, candidates who present themselves Venezuela’s deputy consul general in Houston, having the capacity or will to challenge and as outsiders have an advantage. This is is attempting to seek legal permanent residen- cy under a provision that some Eastern Bloc Continued on page 4 diplomats used during the Cold War to defect.

COPYRIGHT © 2018, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Friday, June 1, 2018 clear that on issues of national security; it’s A year ago, Swedish prosecutors dropped their ANH, over a March oil spill, El Tiempo reported. up to each member to decide,” former General investigation into rape allegations against More than 500 barrels of oil spilled into local Electric trade attorney R. Michael Gadbaw told Assange; however, he would still likely be rivers from the Lizama field in Barrancaberme- NPR this week. Other countries affected said arrested if he leaves the embassy and could be ja, polluting 24 kilometers of waterways, dis- Thursday they are planning retaliatory tariffs on extradited to the United States to face charges placing 23 families and killing 2,000 animals. U.S. goods, as well. over the release of classified documents Felipe Bayón Pardo, who has been Ecopetrol’s through WikiLeaks. top executive since last September, and his predecessor, Juan Carlos Echeverry, are among POLITICAL NEWS the 12 under investigation. Investigators allege BUSINESS NEWS the company failed to carry out standard main- Assange Can Remain tenance procedures and took weeks to respond Colombia Probing to the spill. Company executives allegedly lied in Embassy With to the public about controlling the oil spill one Top Ecopetrol day after a pipe broke on an abandoned project Conditions: Moreno on March 3, according to Colombia Reports. Officials Over Spill The investigation will determine the degree of WikiLeaks founder Julian Assange can remain responsibility among the individuals, as well in Ecuador’s embassy in London as long as he Colombia’s attorney general on Thursday as who could be dismissed from their job and adheres to the conditions on his asylum there, opened a disciplinary investigation targeting a even disqualified from holding public office. which include Assange not using Twitter to dozen officials at state oil company Ecopetrol Echeverry had served as Colombia’s finance voice his political views, Ecuadorean Presi- and the National Hydrocarbons Agency, or minister from 2010-12. dent Lenín Moreno told German broadcaster Deutsche Welle in an interview. The asylum of THE DIALOGUE CONTINUES Assange, who has lived in the embassy since 2012, “continues being a problem, but Ecuador will respect his right to asylum if Assange Will Chile Be Latin America’s respects the limits,” said Moreno. “Don’t forget that a condition of his asylum is that he not First Developed Country? talk about politics or intervene in the politics of friendly countries. This is why we have cut Chile’s economic activity rose generated a fiscal deficit of more than $5 off his communication.” If Assange violates 4.6 percent in March, year- billion. Second, in the political economy, the terms of his asylum in the embassy, “At over-year, the sharpest gain in the government is looking for agreements Q five years. Rising consumption across the spectrum of political parties, that moment, we will make a decision,” Moreno added. In March, Ecuador cut off Assange’s and a stronger mining sector helped boost trying to build consensus and obtaining Internet access, saying he had put at risk the growth, the central bank said. Are condi- approval for new decrees and laws that “good relations” Ecuador maintains with the tions right for Chile’s economy to surge allow the government to increase economic United Kingdom and other countries. Ecuador ahead? What tailwinds support the adminis- efficiency and productivity and increase made the move after Assange posted a tweet tration of Sebastián Piñera, who took office society’s welfare. Finally, in order to achieve questioning an accusation by Britain that in March, and what challenges lie ahead? these goals, the government is trying a mix Russia was to blame for the poisoning of a Is Chile on track to become Latin America’s of policies between austerity and greater Russian former double agent and his daughter first developed country by 2025, as Piñera levels of economic growth. In sum, if the earlier in March in the English city of Salisbury, told Miami Herald columnist Andrés Oppen- government can maintain these objectives, it The Guardian reported. Over more than five heimer earlier this year? is probable that Chile will experience growth years, Ecuador spent at least $5 million on a and remain among Latin America’s most secret intelligence budget to protect him. How- Luis E. Gonzales Carrasco, developed countries by 2025.” ever, Moreno last month withdrew additional senior economist at Clapes security at the embassy. In his interview with UC in Santiago: “The new Deutsche Welle, Moreno said the decision to A administration in Chile is taking EDITOR’S NOTE: The comment above is a grant Assange Ecuadorean citizenship last De- the challenge in the correct way. First, it is continuation of the Q&A published in the cember was the idea of Foreign Minister María ordering and strengthening fiscal policy after May 25 issue of the Advisor. Fernanda Espinosa. He said he had delegated a significant expansion of spending, which decisions related to the Assange case to her.

FEATURED Q&A / Continued from page 2 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2018 the case of Bolsonaro and Marina Silva. highest rejection rates, followed by Alckmin, However, electoral politics is not only about meaning their electoral support is unlikely Erik Brand image but also about party structure, and to grow. Both the leftist Ciro Gomes—a recur- Publisher [email protected] those outsiders are in very small parties with ring figure in the last several elections—and almost no machine, resources or TV time (in Henrique Meirelles, a relative newcomer to Gene Kuleta Editor Brazil free campaign advertising is manda- electoral politics, could surface as viable [email protected] tory and allotted according to the number opposition to Bolsonaro if they denounce Anastasia Chacón González of members each party has in Congress). corruption, promise to return to Lula-era Reporter Bolsonaro has the added problem of being social policies, and come off as intelligent, [email protected] too far on the extreme right and thus inca- policy-minded and stable individuals.” pable of attracting enough votes necessary

to win the election. He might be able to Gilberto M. A. Rodrigues, pro- Michael Shifter, President make it to the second round if he is able fessor of international relations Genaro Arriagada, Nonresident Senior Fellow and lucky enough to avoid grave mistakes at the Federal University of ABC Sergio Bitar, Nonresident Senior Fellow during the campaign. But in the runoff, he A in Brazil: “President Temer did Joan Caivano, Director, Special Projects will most likely lose to any contender. So, we not have any chance to be a competitive can- Michael Camilleri, Director, Peter D. Bell Rule of Law are left with Alckmin, the candidate of the didate, due to his very low support, and nei- Program center-right (PSDB) and Ciro Gomes, who is ther will his candidate, Henrique Meirelles. Kevin Casas-Zamora, Nonresident Senior Fellow placing himself quite well on the center-left, But it seems that the government needs to Ariel Fiszbein, Director, Education Program waiting for a massive transfer of voters from have someone running on its behalf in order Alejandro Ganimian, Nonresident Fellow the Workers’ Party electorate, after Lula, a to defend its projects and legacy. The suc- Peter Hakim, President Emeritus political prisoner, is definitively barred from cessful, huge national transportation strike Claudio Loser, Senior Fellow running by Brazil’s corrupted judiciary.” severely weakened the credibility of Temer’s Nora Lustig, Nonresident Senior Fellow government. The electoral race remains very Margaret Myers, Director, China and Latin America Program Jana Nelson, former Brazil desk unpredictable. Lula still retains considerable Manuel Orozco, Director, Migration, officer at the U.S. Department electoral capital, despite the fact that he Remittances & Development of State: “Not unlike other is in prison and his political future is still Jeffrey Puryear, Senior Fellow A elections this year, Brazil’s pres- unclear. Ciro Gomes is maneuvering to have Tamar Solnik, Director, Finance & Administration idential race is shaping up to be polarizing Lula’s blessing, offering to elect a Work- Lisa Viscidi, Director, Energy Program and about wedge issues. The front-runner, ers’ Party candidate in Ceará State, where Denisse Yanovich, Director of Development and External Relations Jair Bolsonaro, has been campaigning Gomes has had political control over the last

informally for more than a year and has built years. This could guarantee a state governor Latin America Advisor is published every a name for himself. Thirty percent of the for the Workers’ Party, which is at risk of business day, except for major U.S. holidays, population is still undecided, a number that losing political support without Lula in the by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 should decrease over the next four months. race. Gomes is trying to build a left-wing Washington, DC 20005 Bolsonaro’s 18.3 percent support might grow coalition with other parties, having Fernando www.thedialogue.org enough to get him to the second round, but Haddad as a potential candidate for vice ISSN 2163-7962 he is unlikely to win the election. Those who president and assembling a good team of Subscription inquiries are welcomed at support his brash ways and controversial collaborators. While the picture today shows [email protected] positions are a larger group than originally that Bolsonaro may have oxygen to go to the The opinions expressed by the members of the Board of expected, but not yet half the population. A second round, even he could lose backing if Advisors and by guest commentators do not necessarily few months ago, the challenge in Brazil was another centrist candidate captures people’s represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily a lack of candidates. Now, although none support, something that could still happen in represent the views of their respective employers or firms. galvanize the population nor engender much such a volatile scenario.” The information in this report has been obtained from passion on the part of the voter, at least reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have there are a few options beyond Bolsonaro. The Advisor welcomes comments on its Q&A any questions relating to the contents of this publication, Of all the candidates, according to the section. Readers can write editor Gene Kuleta contact the editorial offices of the Inter-American Dialogue. Contents of this report may not be reproduced, stored in a latest CNT/MDA poll, Marina Silva has the at [email protected]. retrieval system, or transmitted without prior written permis- sion from the publisher.