LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Tuesday, July 7, 2020

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Tuesday, July 7, 2020

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Devry Boughner Vorwerk Are Big Changes Authorities Arrest CEO, DevryBV Sustainable Strategies Two Sons of Joyce Chang Global Head of Research, in Store for the DR Ex-Panamanian JPMorgan Chase & Co. President Paula Cifuentes Director of Economic & Fiscal Affairs, Under Abinader? Authorities in Guatemala arrested Latin America & Canada, Luis Enrique Martinelli and Philip Morris International Ricardo Alberto Martinelli, sons Marlene Fernández of former Panamanian President Corporate Vice President for Ricardo Martinelli, on money Government Relations, Arcos Dorados laundering charges. Page 2 Peter Hakim President Emeritus, Inter-American Dialogue ECONOMIC Donna Hrinak President, Boeing Latin America Ecuador Reaches Jon E. Huenemann Former Corporate and Debt Deal With Government Senior Executive Bondholders James R. Jones Chairman, Ecuador has reached a provisional Monarch Global Strategies debt-restructuring deal with hold- Luis Abinader won a first-round victory in Sunday’s presidential election in the Dominican Craig A. Kelly Republic, putting an end to 16 years of rule by the Dominican Liberation Party. // File Photo: ers of approximately half of its Senior Director, Americas Abinader Campaign. sovereign bonds. The agreement Int’l Gov’t Relations, Exxon Mobil Opposition candidate Luis Abinader won the Dominican would still have to win approval John Maisto from remaining creditors. Director, U.S. Education Republic’s presidential election on Sunday, ending the cen- Finance Group Page 3 ter-left Dominican Liberation Party’s (PLD) 16-year control in Nicolás Mariscal Chairman, Q the Caribbean nation. Outgoing President Daniel Medina and POLITICAL Grupo Marhnos ruling party candidate Gonzalo Castillo both congratulated Abinader on Thomas F. McLarty III Brazil’s Bolsonaro Chairman, his triumph. What does Abinader’s victory suggest about the Dominican Gets Fourth Test McLarty Associates Republic’s direction, and to what extent will it differ from the policies of Carlos Paz-Soldan for Covid-19 Partner, the PLD? What were the most important factors driving voters’ prefer- DTB Associates, LLP ences this election cycle? What challenges will Abinader face as the Brazilian President Jair Bolsonaro Beatrice Rangel expects to receive the results of Director, country’s next president, and what sort of cabinet will he select? his fourth Covid-19 test today. He AMLA Consulting LLC recently began having symptoms, Jaana Remes including a fever. Ernesto Sagás, professor in the Department of Ethnic Stud- Partner, Page 2 McKinsey Global Institute ies at Colorado State University: “The victory of opposition Ernesto Revilla Head of Latin American presidential candidate Luis Abinader of the Partido Revolucio- Economics, Citi nario Moderno (PRM) marks a new chapter in the recent polit- Gustavo Roosen A Chairman of the Board, ical history of the Dominican Republic. The ruling Partido de la Liberación Envases Venezolanos Dominicana (PLD), which a year ago seemed invincible, fell victim to its Andrés Rozental own hubris. First, President Danilo Medina unsuccessfully maneuvered President, Rozental & Asociados to modify the constitution in order to become eligible for a third term, Shelly Shetty and afterwards he pushed for the nomination of his anointed presidential Managing Director, Sovereigns Fitch Ratings candidate (Gonzalo Castillo). As a result, former President Leonel Fernán- dez left the PLD to form his own presidential movement, splitting the party in the process. Second, after so many years in power, the PLD was undermined by corruption scandals (such as in relation to Odebrecht), Bolsonaro // File Photo: Brazilian its use of extended patronage networks and its inability to present fresh Government. Continued on page 2

POLITICAL NEWS federal court in Brooklyn, N.Y., did not identify NEWS BRIEFS the official, but it called the men “close rela- Authorities Arrest tives” of the official. The brothers have denied Brazil’s Bolsonaro Gets wrongdoing, the AP reported. “We trust that Fourth Covid-19 Test After Two Sons of the legal situation of the Martinelli brothers in the Guatemalan republic will be resolved as Experiencing Symptoms Panama’s Martinelli soon as possible so that they may continue Brazilian President Jair Bolsonaro expects the process of their return to Panama to attend to get results of another Covid-19 test today, Authorities in Guatemala on Monday arrested to the processes for which they have been after showing symptoms, including a fever, the two sons of former Panamanian President cited,” the Martinelli family said Monday in a Voice of America reported. Bolsonaro, who has Ricardo Martinelli as they attempted to board statement. In 2018, the brothers were detained previously called the disease a “little flu,” told a private plane out of the country, the Asso- in Miami for immigration-related reasons, but supporters that an X-ray had found his lungs ciated Press reported. The arrests of Luis they were each released on $1 million bond. were “clean.” Bolsonaro reportedly tested nega- Enrique Martinelli and Ricardo Alberto Marti- After leaving office, Ricardo Martinelli was tive for Covid-19 three times after several aides nelli followed the issuance by Interpol of an detained for more than two years in Panama were infected with the virus in March following international order for their arrests on money and the United States on accusations of a meeting with U.S. President Donald Trump in laundering charges, said Vinicio Pacheco, a misuse of public money and political espio- Florida, the Associated Press reported. spokesman at the Guatemalan Interior Ministry. nage. He was acquitted and released last year. At the time of their arrests, the two men were Last week, Martinelli and his successor as attempting to travel to Panama, with stops in president, Juan Carlos Varela, were banned El Salvador and Nicaragua, said Pacheco. Pan- from leaving Panama while under investigation Power Outages Reported ama’s government first sought their arrests in in connection with separate money laundering in Several Locations 2017. They are facing extradition to the United cases, Reuters reported, citing Panamanian Across Venezuela States, Reuters reported. In a statement, the government authorities. Martinelli called the Erratic power outages were reported in Venezu- U.S. Department of Justice said the two men charges “political persecution” and accused ela’s capital and several other states on Mon- are accused of acting as intermediaries for the Panama’s judicial system of failing to follow day evening, with the country’s state electrical payment of approximately $28 million in bribes due process. “They want to involve me because company, Corpoelec, saying on Twitter that “an from Brazilian construction giant Odebrecht they want to destroy me,” he said. Varela, who event in the electrical system” had hit power to a high-ranking Panamanian official between was the Central American country’s president in parts of Caracas and states to the west, the 2009 and 2014, the period of time in which from 2014 to 2019, has denied wrongdoing and Associated Press reported. Corpoelec did not their father was the country’s president. The has said all of his campaigns were financed provide further details. Venezuelans on social criminal complaint, which was filed June 27 in with private funds. media said the lights had flickered on and off repeatedly while other areas were still experi- FEATURED Q&A / Continued from page 1 encing blackouts. Corpoelec later said power had been restored in 90 percent of Caracas. alternatives to voters. Dominicans—and in health crisis, an ongoing crime wave and the particular the emerging middle class—were demands of thousands of followers eager to increasingly dissatisfied with the status enjoy the perks of power as he tries to battle quo and wanted change. Third, the Covid-19 corruption.” Brazil’s Itaú Names pandemic exposed the ineffectiveness of New Head of Operations the administration and rolled back economic Mary Fernández Rodríguez, growth in the midst of a contested electoral founding partner at Headrick for Three Countries campaign. And fourth, it was but a matter Rizik Álvarez & Fernández in Brazilian banking giant Itaú Unibanco Hold- of time before the political pendulum would A Santo Domingo: “The Dominican ing has named Álvaro Pimentel as its new swing back. Dominican electoral politics general elections were a cry for change. Luis head of operations for Argentina, Paraguay has been characterized by its competitive Abinader of the PRM won with a comfortable and Uruguay, the bank said Monday, Reuters nature, and the PLD could no longer hold on margin to win the election outright, which reported. Pimentel was the chief executive of to power. But for Abinader, governing will came as a surprise to many. The PLD has the Brazil-based lender’s Colombia unit. In his be a tall order, as he faces an implosion of been in power—both at the presidential and new position, he replaces César Blaquier, Itaú the tourism industry amid a major public congressional levels—for 16 years. Many Unibanco said in a statement, the wire service Continued on page 4 reported.

ECONOMIC NEWS THE DIALOGUE CONTINUES Ecuadorean Gov’t What Will Economic Recovery Reaches Deal to Look Like in Latin America? Restructure Debt The International Monetary must include a ‘dramatic cultural change,’ Ecuador has reached a provisional deal to Fund last month updated its from excessive analysis on matters such restructure its debt with holders of around half economic forecasts for Latin as improvement in public services, energy, of its sovereign bonds, the government an- Q America and the Caribbean, now education, health, infrastructure and natural nounced Monday, the Financial Times reported. expecting a 9.4 percent contraction this resources to a hands-on approach to rebuild The announcement came as Ecuador continues year. Mexico has the worst outlook among in a new environment that very rapidly is ca- talks with the International Monetary Fund emerging markets and developing econ- pable of showing results. Governments can and Chinese banks to expand financing, as the omies included in the report, with a 10.5 no longer wait years to implement plans. The country deals with a total debt of $58.4 billion, percent contraction. Brazil is close behind role of the private sector in leading socially more than half of annual GDP. Almost a third of with negative 9.1 percent growth. However, by example will imply changes in the way it that, $17.4 billion, is owed to bondholders. The the IMF expects the regional economy to views profits and in the manner it is to inter- deal announced Monday would give Ecuador rebound next year. What are the most sig- act with governments. This ‘solidarity,’ which partial debt relief on $10 billion over the next nificant long-term effects of the Covid-19 was a typical component of post-war efforts, four years and an additional $6 billion between pandemic on Latin American and Caribbean may now become the norm. International 2025 and 2020. The plan would still need to be economies? What can governments in the organizations must focus on institutional approved by the remaining creditors, but funds region do to withstand such a sharp reces- capacity building throughout the region. managed or advised by AllianceBernstein, sion, and what implications will taking on Each country must rapidly put in place mea- Ashmore Group, BlackRock, BlueBay Asset huge debts have for their societies? What sures that increase job creation. This must Management and Wellington Management will recovery look like in the region next be accompanied by supporting networks Company are among those supporting the year, and what new roles could govern- that allow sustainable economic growth to deal, the finance ministry said in a statement, ments, the private sector, foreign powers advance within new environmental, social Bloomberg News reported. and international organizations take on in and health models. The recovery of private post-pandemic reconstruction? rights that have been significantly impaired when addressing the severity of the health BUSINESS NEWS José Zapata, partner at Holland crisis is essential. Assistance during the & Knight: “Addressing the pandemic period cannot result in increased Mexico Fines recession scenario will require a levels of taxation, the traditional approach to A significant change in the manner recover in Latin America. Sustained growth Company Owned by in which Latin America has traditionally within the new paradigm is what will allow addressed its growth. What in many in- Latin America to recover.” Son of AMLO Ally stances has been viewed as procrastinating on sustainable development targets, now Mexico has fined a company owned by the requires an effective and urgent change EDITOR’S NOTE: The comment above is a son of an ally of President Andrés Manuel toward addressing and implementing im- continuation of the Q&A published in Mon- López Obrador more than $90,000, saying it mediate measures to reactivate economies day’s issue of the Advisor. sold overpriced ventilators to the government, that address human needs. This change and banned it from doing business with the public sector for two years, the country’s Public Hidalgo state. The 20 ventilators were “old, care for Covid-19 patients. Around the same Administration Ministry, or SFP, said Monday, used and in a bad state,” did not arrive on time time, the IMSS made a similar purchase for a Reuters reported. The government bought and had an inflated price of 31 million pesos ventilator for about half the price, according the equipment from Cyber Robotic Solutions, ($1.3 million), the SFP said, El País reported. to an investigation by anti-corruption group a business owned by León Bartlett, the son The branch of the government’s social security Mexicanos Contra la Corrupción y la Impuni- of Manuel Bartlett, who is the director of the institute, or IMSS, that made the April purchase dad. León Bartlett has denied any wrongdoing, Federal Commission of Electricity, as part of justified it saying there was an urgent need to Reuters reported. its response to the coronavirus pandemic in

FEATURED Q&A / Continued from page 2 LATIN AMERICA ADVISOR is published every business day by the Inter-American Dialogue, Copyright © 2020 Dominicans have never lived under the a shift in power from the ruling PLD party, administration of another party. Allegations which has controlled the presidency, the Sen- Erik Brand of widespread corruption and the absence of ate and key positions throughout the country Publisher [email protected] accountability weighed heavily against the for nearly two decades. The election was candidate—at all levels—for the PLD. In ac- significant in that the electorate determined Gene Kuleta Editor cordance with recent polls, Dominicans see the outcome without interference, solidifying [email protected] corruption, absence of enforcement of the the stability of democracy in the Dominican Anastasia Chacón González rule of law and a lack of jobs as the main ar- Republic. The two main challengers and the Reporter & Associate Editor eas of concern. Voters were seduced by the current president congratulated the presi- [email protected] hope of change that the now president-elect advertised, as well as his promise to govern

in favor of all Dominicans—not only for The election was Michael Shifter, President those who favor the party in power. The significant in that Rebecca Bill Chavez, Nonresident Senior Fellow new government faces serious challenges, the electorate Sergio Bitar, Nonresident Senior Fellow not only due to the Covid-19 crisis and the determined the Joan Caivano, Director, Special Projects ensuing economic problems deriving from it, outcome without Michael Camilleri, Director, Rule of Law Program but also from the outcry for an independent interference...” Kevin Casas-Zamora, Nonresident Senior Fellow judicial system, with an attorney general Héctor Castro Vizcarra, Nonresident Senior Fellow — James “Wally” Brewster that will prosecute corruption cases—past Julia Dias Leite, Nonresident Senior Fellow and present—and to promote government Ariel Fiszbein, Director, Education Program procurement contracts that strictly abide dent-elect publicly. The PRM and Abinader Peter Hakim, President Emeritus by the law. However, above all, the greatest ran on a platform of increased focus on Nora Lustig, Nonresident Senior Fellow challenge the new government faces is how the health of the nation during the Covid-19 Margaret Myers, Director, Asia and Latin America Program to deal with the serious economic crisis and pandemic, anti-corruption, human rights, Manuel Orozco, Director, Migration, the absence of jobs, as well as the percep- diversity and strengthening of institutions. Remittances & Development tion of low salaries earned by the great The election came at a time when the Do- Xiaoyu Pu, Nonresident Senior Fellow majority of the population.” minican Republic is challenged not just with Jeffrey Puryear, Senior Fellow Covid-19, but also by the negative impact on Mateo Samper, Nonresident Senior Fellow James “Wally” Brewster, the economy from lack of tourism, reduction Tamar Solnik, Director, Finance & Administration former U.S. ambassador to the in remittances, reduced foreign investment Lisa Viscidi, Director, Energy Program Dominican Republic and CEO of and other issues facing the country during Denisse Yanovich, Director of Development and A Insignias Global: “Luis Abinad- this pandemic. As with many nations, the External Relations er, leader of the PRM party, became the historical turnout was led by a motivation for Latin America Advisor is published every president-elect of the Dominican Republic change from the young voter. President-elect business day, except for major U.S. holidays, with more than 50 percent of the votes cast. Abinader has the opportunity to establish a by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 Based on preliminary results, it appears the diverse cabinet and government based on Washington, DC 20005 PRM also obtained the majority of the seats the promises of his campaign.” www.thedialogue.org in the Senate. Senator-elect Faride Raful of ISSN 2163-7962 Santo Domingo and recently elected Santo The Advisor welcomes comments on its Q&A Subscription inquiries are welcomed at Domingo Mayor Carolina Mejía are also section. Readers can write editor Gene Kuleta [email protected]

members of the PRM. The election denotes at [email protected]. The opinions expressed by the members of the Board of Advisors and by guest commentators do not necessarily represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily represent the views of their respective employers or firms. The information in this report has been obtained from reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are guaranteed. If you have 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 permission from the publisher.