LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Monday, June 17, 2019

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Monday, June 17, 2019

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Devry Boughner Vorwerk How Can Tech Power Mainly Corporate VP, Global Corporate Affairs Cargill Restored After Joyce Chang Global Head of Research, Help in the Fight Massive Blackout JPMorgan Chase & Co. Electricity was reportedly restored Marlene Fernández to some 44 million people by this Corporate Vice President for Against Corruption? morning after a massive blackout Government Relations, Arcos Dorados on Sunday plunged nearly all of Peter Hakim Argentina and Uruguay and parts President Emeritus, of Paraguay into darkness. Inter-American Dialogue Page 2 Donna Hrinak President, Boeing Latin America ECONOMIC Jon Huenemann Retired VP, U.S. & Int’l Affairs, Philip Morris International Head of Brazilian James R. Jones Development Bank Chairman, Monarch Global Strategies Steps Down Craig A. Kelly Joaquim Levy, the head of Bra- Director, Americas International zilian development bank BNDES, Gov’t Relations, Exxon Mobil Technology holds “remarkable” potential to promote trust between citizens and governments and reduce corruption, Ashley Friedman writes below. // File Photo: Pixnio. resigned amid tensions with John Maisto President Jair Bolsonaro. Director, U.S. Education Finance Group Smartphones, combined with the use of social media, are Page 2 Nicolás Mariscal Chairman, being used on a growing scale in Latin America and else- POLITICAL Grupo Marhnos where to gather evidence of corruption and other illegal acts Thomas F. McLarty III Q and demand accountability, according to a new report by the Torres Appears Chairman, McLarty Associates Inter-American Dialogue and the Adrienne Arsht Latin America Center to Emerge as Top Carlos Paz-Soldan at the Atlantic Council. How has technology been used most effectively Vote-Getter in Partner, DTB Associates, LLP to combat corruption, and what are the most promising ways that it can Guatemala Beatrice Rangel be employed in the fight against graft in the future? Which countries in Former Guatemalan First Lady Director, AMLA Consulting LLC the region are making the best use of technology to promote clean and Sandra Torres appeared to emerge as the top vote-getter in the coun- Jaana Remes transparent government? What are the biggest obstacles that stand in Partner, try’s presidential election. Partial McKinsey Global Institute the way of wider use of technology to fight corruption? results showed that a runoff Ernesto Revilla between Torres and Alejandro Head of Latin American Giammattei is likely in August. Ashley Friedman, senior director of policy at the Information Economics, Citi Page 2 Gustavo Roosen Technology Industry Council: “Technology has remarkable Chairman of the Board, Envases Venezolanos potential to spur economic growth, promote trust between Andrés Rozental citizens and their government, and reduce crime and President, Rozental & A Asociados and Senior corruption. Governments all over the world have deployed technology to Policy Advisor, Chatham House enhance transparency of government proceedings and establish more Shelly Shetty direct communication channels between citizens and governments. For Head of Sovereign Ratings, Latin America, Fitch example, governments have made federal records and data accessible Roberto Sifon-Arevalo to citizens in order to increase visibility into government activities. They Managing Director, Americas Sovereign & Public Finance Ratings, have created repositories of public data containing key information about Standard & Poor’s their countries in areas such as infrastructure, health, climate, finance and education. Such public databases are important ways in which governments can leverage technology to increase access to knowledge and awareness of the current state of the country among citizens. Addition- Torres // File Photo: Torres Campaign. Continued on page 3

ECONOMIC NEWS POLITICAL NEWS NEWS BRIEFS

Power Mainly Torres Appears to Thousands of Venezuelans Seek to Enter Peru Ahead Restored Following Top Guatemala Vote, of New Visa Requirements Massive Blackout Runoff Likely Thousands of Venezuelans, many of them children, rushed to the Peruvian border on A massive power blackout left nearly all of Former Guatemalan First Lady Sandra Torres Friday in hopes of entering Peru before tougher Argentina and Uruguay, and parts of Paraguay, took an early lead in Guatemala’s presidential immigration requirements came into effect at in the dark on Sunday following a regionwide election Sunday, but no candidate appeared to midnight, Reuters reported. Starting Saturday, electrical failure at around 7 a.m. local time, win more than 50 percent of the vote, setting all migrants coming into Peru were required power companies said, Clarín reported. Power up a likely runoff on Aug. 11, Reuters report- to present valid visas and passports, both had been restored to about 44 million people ed. With ballots counted from 42 percent of of which are hard to get in crisis-stricken in Argentina, Uruguay and Paraguay by early polling stations, Torres had 24 percent of the Venezuela. On Thursday alone, one day before morning today. The outage left streets de- vote, with rival Alejandro Giammattei in second the deadline, 5,849 Venezuelans entered Peru, place with 15 percent, according to the election compared to a daily average of between 1,500 tribunal. Election officials said late Sunday that and 2,000, according to the Peruvian immigra- it could take two weeks to have final results tion office. The blackout affected from the first round. Torres, of the center-left some 50 million people National Unity of Hope party, is a business- woman and the former wife of ex-President in Argentina, Uruguay Álvaro Colom. Giammattei, of the center-right Mercosur, E.U. ‘Very and Paraguay. Vamos party, is a former director of the coun- Close’ to Trade Accord: try’s prison system and has run three times Brazilian Foreign Minister before for president. South America trade bloc Mercosur, which includes Brazil and Argentina as well as Uru- serted, shut down public transport and forced guay and Paraguay, is “very close” to reaching businesses to close on Father’s Day. Almost Mexico’s Migration a free trade accord with the European Union, 50 million people were affected. Buenos Aires’ Chief Steps Down according to Brazilian Foreign Minister Ernesto two airports remained opened, and hospitals in Araújo, the Financial Times reported Sunday. A the capital and in other provinces were running Mexican immigration chief Tonatiuh Guillén deal could be signed as early as July, he said. on generators. Argentines in the provinces of resigned on Friday, and the country’s prisons di- The agreement would be the largest-ever nego- Santa Fe, San Luis and Formosa had to use rector, Francisco Garduño, was quickly tapped tiated by the European Union in terms of tariff lights on their cellphones to cast their votes to replace him, the Associated Press reported. reductions. However, Jean-Claude Juncker, the in regional elections. Argentine President The changes came as Mexico’s government re- president of the European Commission, last Mauricio Macri said Sunday afternoon that sponds to U.S. pressure to curb the number of week said the talks on the deal were “difficult.” authorities would investigate the “unprecedent- migrants traveling through its territory to enter ed case,” adding that the blackout originated in the United States. In a brief statement released “a failure in the coastal transport system, the by Mexico’s National Immigration Institute, causes of which we cannot yet determine,” The Guillén thanked President Andrés Manuel Head of Brazilian Wall Street Journal reported. Energy Secretary López Obrador but did not provide a reason Development Bank Gustavo Lopetegui said authorities weren’t for his resignation. “I thank Tonatiuh very “ruling anything out,” including a possible Resigns Amid Tensions much,” López Obrador said, “He helped in the cyberattack, but said he didn’t believe that was The head of Brazilian state development bank beginning of this government.” The president the cause, NPR reported. One theory is that a BNDES has resigned amid strain with Presi- had reportedly asked Guillén to step down. power line at a regional hydroelectric dam went dent Jair Bolsonaro, Reuters reported Sunday. The shakeup comes after Mexico scrambled down. Lopetegui said the outage “shouldn’t Joaquim Levy, a former finance minister, to reach a deal with the United States to avoid have happened” because “the Argentine sys- submitted his letter of resignation, which said tariffs on all Mexican exports to the neigh- tem is pretty robust.” Energy officials said the he is grateful for the “loyalty, dedication and boring country. U.S. President Donald Trump cause could take two weeks to determine. determination of BNDES executives.” had threatened to impose a 5 percent blanket

COPYRIGHT © 2019, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Monday, June 17, 2019 tariff, which would gradually increase to 25 FEATURED Q&A / Continued from page 1 percent, if Mexico did not significantly reduce the number of migrants crossing its border into ally, many governments use e-services to and when as it is what they actually say. 2.) the United States. On Friday, Mexico released create more direct channels of feedback Analyzing relevant structured data (such as the details of a side agreement that it made and communication between citizens accounting data and telephone records) to with the United States that describes additional and government, reducing the opacity of identify unusual patterns, relationships or measures it will take if it does not successfully government transactions and promoting records or to prove or disprove a hypothesis. decrease the number of Central Americans trust. Technological advancements have Again, it is beneficial not just to look at the migrating through its territory toward the also enabled citizens to observe the speed United States. As part of the deal, Mexico will and status of government transactions, require migrants to first seek asylum there, The decreasing opportunities for corruption to Data is the lifeblood Wall Street Journal reported. The “safe third surface. Automating key services or creating of most modern-day country” designation was a key part of the deal ‘paperless’ systems reduces opportunities organizations...” between Mexico and the United States that for individual bribes or influence. To fully — Richard Fogarty & Phil Beckett averted Trump’s threatened tariffs on Mexican embrace these changes, governments must imports, according to the supplementary agree- prioritize necessary up-front investments to ment that Mexico released, The Wall Street develop these systems, including measures records themselves, but also the associated Journal reported. Mexico had long avoided the to safeguard citizens’ privacy and security, metadata—for example when the record was “safe third country” designation, saying it lacks which will save significant resources over entered and who approved it. The use of the necessary resources. time, and increase access to technology and smartphones and social media means that connectivity so that these benefits spread to when considering the above, it is necessary all communities throughout their countries.” to cast the net appropriately to capture BUSINESS NEWS relevant devices and accounts and also Richard Fogarty and Phil consider Internet investigation techniques Beckett, managing directors at to legally gather data from publicly available Venezuela’s Guaidó the disputes and investigations data related to social media accounts. It is Asks Jamaica Not to A practice at Alvarez & Marsal: essential that data is central to the investi- “Data is the lifeblood of most modern-day or- gative process and not viewed as a separate, Seize Refinery Shares ganizations: this is no less true for an inves- stand-alone task.” tigator looking at potential corruption in Lat- The ad-hoc board of Venezuelan state oil com- in America and elsewhere around the globe. Beatrice Rangel, member of pany PDVSA, which was appointed by opposi- Although not the only source of information the Advisor board and direc- tion leader Juan Guaidó, has asked Jamaica’s relevant to an investigation, data can provide tor of AMLA Consulting in government not to seize the firm’s shares in the an unbiased, unaltered and accurate reflec- A Miami Beach: “While I believe Petrojam oil refinery on the Caribbean island, tion of historic events unlike other sources. technology to be the best ally in the fight the board said, Reuters reported. Jamaica’s The distinction between work and personal against corruption, its effectiveness will Senate in February passed legislation paving with respect to technology is decreasing as largely depend upon the presence or lack the way for the government to acquire PDVSA’s we see work conversations being carried out of three conditions. First, of course, is rule 49-percent stake in the Petrojam refinery, which on messaging systems such as WhatsApp of law. Except for Chile, Costa Rica and it acquired in 2006. The board also warned (quite popular as a work and personal tool Uruguay, rule of law is absent from most Jamaica’s government against maintaining ties in Latin America, as are other apps such Latin American nations, where judiciaries with the government of Venezuelan President as Signal, Telegram and Silent Phone) and lack independence from executive branches Nicolás Maduro. Guaidó, who invoked the networks being managed on social media and from rich and influential people. Second Constitution to declared himself Venezuela’s sites such as LinkedIn. Regardless, data can is enforcement which, again in Latin Amer- interim president in January, has also person- aid an investigation by: 1.) Analyzing com- ica, largely depends on who you are. If you ally asked Jamaican Prime Minister Andrew munication and document data to look for are among the elite, chances are that law Holness to suspend the expropriation process. evidence and intelligence contained within enforcement agents will be less harsh and Neither Holness’ office nor Jamaica’s foreign either the content or the metadata of those demanding with you than with an unknown. ministry responded to Reuters’ requests for documents. Sometimes, it can be as import- Then comes institutional consistency. Weak comment. ant to establish who is speaking to whom institutional frameworks can easily be 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 penetrated by affluent people, who include services, be easy to use and not take years criminals. Technology can thus facilitate ex- to implement. I am excited and optimistic Erik Brand posing, recording and building cases against to see governments at the local and federal Publisher [email protected] corruption but will not be able to overcome levels continue to use innovative tools to structural weaknesses that date from the lower transaction costs, increase revenue Gene Kuleta Editor times of Philip II of Spain. This monarch cre- collection, improve accountability and most [email protected] importantly, communicate more effectively Anastasia Chacón González with the people they represent. I hope coun- Weak institutional Reporter tries will share their success and failures frameworks can [email protected] along the way and commit to frameworks of easily be penetrated data ethics.” by affluent people...” Michael Shifter, President — Beatrice Rangel María Fernanda Pérez Argüello, Genaro Arriagada, Nonresident Senior Fellow associate director of the Atlantic Sergio Bitar, Nonresident Senior Fellow ated institutions that were and are corpora- Council’s Adrienne Arsht Latin Joan Caivano, Director, Special Projects tivist, monopolistic and obscure to perform America Center: “The solutions A Michael Camilleri, Director, Peter D. Bell Rule of Law rent extraction. All these conditions breathe to Latin America’s oldest problem are at Program life into corruption networks. Unless Latin our fingertips. International organizations Kevin Casas-Zamora, Nonresident Senior Fellow American nations dare to bring down that estimate corruption can cost Latin Amer- Ariel Fiszbein, Director, Education Program institutional framework to create one that ican countries as much as 10 percent of Peter Hakim, President Emeritus is nurtured by private property, competition their GDP. Breakthroughs in data technol- Claudio Loser, Senior Fellow and free enterprise, corruption will thrive in ogy provide invaluable tools to fight graft. Nora Lustig, Nonresident Senior Fellow the region.” Blockchain, for example, has great potential Margaret Myers, Director, Asia and Latin America Program to fight corruption on a large scale, as data Manuel Orozco, Director, Migration, Laura Gaviria Halaby, senior stored in blockchain is unalterable. When Remittances & Development innovation advisor at IDB Lab: blockchain technology is used for datasets Jeffrey Puryear, Senior Fellow “From localities using distribut- in public contracts, the space for alteration Tamar Solnik, Director, Finance & Administration A ed ledger technology to improve of numbers or other crucial information Lisa Viscidi, Director, Energy Program land registries when paper records fail, to is significantly reduced. A major obstacle Denisse Yanovich, Director of Development and biometrics providing additional payment today, however, lies in the quality of data. External Relations security, to machine learning identifying Even in countries such as Mexico, Brazil and Latin America Advisor is published every early signs of fraud from vast data sets, a Uruguay that are moving toward publishing business day, except for major U.S. holidays, wide range of technology solutions are being more open data, that data is many times by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 used to combat corruption. Chile, Costa Rica unreadable. Open data just for the sake of Washington, DC 20005 and Uruguay are the leaders in transparency, open data helps no one. In order to fully ben- www.thedialogue.org but we have also seen Argentina committing efit from the promise of immutable public ISSN 2163-7962 to becoming paperless, Mexico City using contracts, data provided by governments Subscription inquiries are welcomed at a fiscal transparency portal to disclose must be readable, verified and disaggregat- [email protected] its public contracts and Colombia testing ed. Another major cross-cutting obstacle is blockchain to restitute land. We are in the political will and multi-stakeholder collabora- The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily early stages of governments adopting these tion. The problem of corruption is multidi- represent those of the publisher. The analysis is the sole solutions due to procurement challenges, mensional and requires all hands on deck in view of each commentator and does not necessarily represent the views of their respective employers or firms. costs, legacy IT infrastructure and unaligned order to effectively disappear.” The information in this report has been obtained from incentives. I therefore believe it’s most reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have important that governments use open-archi- The Advisor welcomes comments on its Q&A any questions relating to the contents of this publication, tecture technology, so solutions can work 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 with existing systems, connect to future at [email protected]. retrieval system, or transmitted without prior written permis- sion from the publisher.