LATIN AMERICA ADVISOR a DAILY PUBLICATION of the DIALOGUE Friday, November 13, 2015

LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Friday, November 13, 2015

BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group POLITICAL Genaro Arriagada Is Mexico Moving Nonresident Senior Fellow, Maduro’s Relatives Inter-American Dialogue Indicted on Drug Joyce Chang Global Head of Research, Toward Marijuana Charges JPMorgan Chase & Co. Two relatives of Venezuelan W. Bowman Cutter Former Partner, Legalization? President Nicolás Maduro were E.M. Warburg Pincus charged Thursday with conspiracy Dirk Donath to transport cocaine into the Senior Partner, United States. The men, who are Catterton Aimara nephews of Maduro’s wife, were Marlene Fernández ordered held without bond. Corporate Vice President for Page 2 Government Relations, Arcos Dorados

Peter Hakim BUSINESS President Emeritus, Inter-American Dialogue Pemex, Union Donna Hrinak President, Boeing Latin America Agree to Pension Jon Huenemann System Reforms Vice President, U.S. & Int’l Affairs, Philip Morris International A ruling last week by the Mexican Supreme Court’s criminal chamber could set a precedent Mexico’s Pemex and the country’s for challenging the country’s strict anti-drug laws. // File Photo: Miran Rijavec via Creative main oil workers’ union have James R. Jones Commons. Co-chair, Manatt Jones agreed to an overhaul of the Global Strategies LLC company’s pension system. The Mexican Supreme Court’s criminal chamber ruled on Craig A. Kelly Page 2 Director, Americas International Nov. 4 that individuals should have the right to grow and Gov’t Relations, Exxon Mobil distribute marijuana for personal use, a move that opens the John Maisto Q BUSINESS door to legal challenges to the country’s strict substance Director, U.S. Education Rousseff Slaps Finance Group abuse laws. How will the ruling change the future of Mexico’s drug leg- Nicolás Mariscal Mine With $66 Mn Chairman, islation? If the court does legalize the possession of marijuana, how will Grupo Marhnos the change affect drug traffi cking and those trying to combat the sale of Fine After Disaster Thomas F. McLarty III drugs in Mexico? How likely is it that this change will occur? Would le- Brazilian President Dilma Rous- President, seff on Thursday announced fi nes McLarty Associates galizing marijuana cut down on violence in the country? How should the of $66.2 million against Vale and Carlos Paz-Soldan United States, traditionally the primary destination of drugs that come BHP Billiton, the owners of a mine Partner, DTB Associates, LLP through Mexico, view the potential changes in drug laws? in Minas Gerais state where two Beatrice Rangel dams burst, killing at least nine Director, people and causing environmental AMLA Consulting LLC Melvyn Levitsky, professor of international policy and prac- damage. José Antonio Ríos tice at the University of Michigan’s Gerald R. Ford School of Page 2 Chief Executive Offi cer, Vadium Technology Inc. Public Policy and former member of the International Nar- Gustavo Roosen cotics Control Board: “The ruling by Mexico’s Supreme Court Chairman of the Board, A Envases Venezolanos does not legalize marijuana. Only the executive and legislative branches Andrés Rozental could do that. The court’s decision appears to be applicable only to the President, Rozental & Asociados and Senior four plaintiffs in the case who disputed the government’s right to ban Policy Advisor, Chatham House their personal use of marijuana. The court’s opinion is complex, even a bit Shelly Shetty Head, Latin America quirky in my view. Basically, it states that the ban on marijuana interferes Sovereign Ratings, Fitch Inc. with the plaintiffs’ ‘free development of personality,’ placing its decision Roberto Sifon-Arevalo in the realm of human rights, a curious and disturbing formulation. The Managing Director, Americas Sovereign & Public Finance Ratings, court goes on to say that the state cannot compel an individual to act Standard & Poor’s in accordance ‘with a particular model of virtue.’ The court, however, distinguishes between individual use and ‘commercial transactions’ Rousseff surveyed the damage by helicopter. // Photo: Brazilian Gov’t. Continued on page 3

POLITICAL NEWS destiny and that’s to win,” BBC News reported. NEWS BRIEFS The U.S. Treasury has listed nine Venezuelan Relatives of offi cials as “kingpins,” saying it considers them Colombia to Legalize suspects in drug traffi cking. Earlier this year, Marijuana for Maduro Indicted on The Wall Street Journal reported that Diosdado Cabello, the leader of Venezuela’s National Medical, Scientifi c Uses Drug Charges Assembly, was under investigation by U.S. Colombia will legalize the cultivation and sale authorities for alleged drug traffi cking. Cabello of marijuana for medical and scientifi c purpos- Two relatives of Venezuelan President Nicolás has denied wrongdoing and has said there is es, offi cials said Thursday in a surprise change Maduro were indicted late Thursday in New no proof linking him to any illicit activity. of policy for the longtime U.S. ally in the war York on drug traffi cking charges, CNN reported. on drugs, the Associated Press reported. Pres- Efraín Antonio Campo Flores and Francisco ident Juan Manuel Santos is expected to sign Flores de Freitas, who are nephews of Vene- BUSINESS NEWS the law as a presidential decree, joining other zuelan First Lady Cilia Flores, were charged Latin American countries like Mexico and Chile with conspiracy to import, manufacture and Rousseff Slaps Mine which have recently debated changes to strict distribute cocaine into the United States. The laws on marijuana. With $66 Million Fine The men, nephews of After Dams Burst Pemex, Union Agree to Venezuela’s fi rst lady, are Pension System Reforms accused of conspiring Brazilian President Dilma Rousseff on Thursday announced $66.2 million in fi nes against a to transport cocaine into Mexican state-owned oil company Pemex and mine owned by BHP Billiton and Vale, following the country’s oil workers’ union have agreed to the United States. an environmental disaster in which two dams an overhaul of the company’s pension program, burst, killing at least nine people on Nov. 5, The Wall Street Journal reported Wednesday. Reuters reported. Authorities say 19 people After diffi cult negotiations, the company and two men “participated in meetings in Venezue- are still missing. The fi nes come as federal the union agreed to increase the retirement age la, regarding a shipment of cocaine that was to prosecutors are investigating possible crimes by fi ve years to 60 for employees with fewer be sent to the United States, via Honduras,” the that may have contributed to the structural than 15 years of service. Also, new Pemex indictment alleges. Campo Flores and Flores instability of the dams. The top government employees will have defi ned-contribution plans de Freitas did not enter pleas during their court lawyer and Brazil’s environmental regulator, rather than the current defi ned benefi ts plan. appearance Thursday, and the judge in the case IBAMA, are together planning on suing the Pemex has some $90 billion in unfunded pen- ordered them to be held without bail. If con- mine owners for as much as $1 billion for sion liabilities, and the pension reform is seen victed, they face a maximum sentence of life in environmental damages. The fi nes are for river as a lifeline for the state-owned company. prison, CNN reported, citing the U.S. Attorney’s pollution and damages to urban areas and Offi ce for the Southern District of New York. could be followed by other penalties, Rousseff Local authorities in Haiti arrested the men as said. “We are determined to hold responsible they were allegedly about to fi nalize an agree- those who are responsible for this,” Rousseff Pope to Visit Three ment to transport 800 kilograms of cocaine told reporters. She added that the companies Mexican States, Capital into the United States, a Drug Enforcement are expected to pay for the rescue and cleanup Pope Francis will visit Mexico’s capital and Administration who participated in the men’s efforts, as well as for compensation for more three other states in early 2016, Mexican For- detention told CNN. The Haitian authorities than 500 people who were displaced after eign Relations Secretary Claudia Ruíz Massieu turned Campo Flores and Flores de Freitas over the environmental disaster. Rousseff’s moves announced Wednesday, the Associated Press to DEA agents who fl ew them to New York. come after mounting complaints that the reported. In addition to Mexico City, the pope Venezuela’s government has not responded national government had done little to respond will visit Chiapas, Chihuahua and Michoacán. to requests by CNN for comment. However, in the immediate aftermath of the dam bursts, During his visit to the latter three states, the in a posting on Twitter, Maduro said Thursday The Wall Street Journal reported. On Wednes- pontiff is expected to discuss issues he has without referring directly to the arrests that day, the chief executives of BHP and Vale held emphasized in the past, including poverty, mi- “the fatherland will continue on its path, neither a news conference in which they apologized gration and supporting indigenous populations, attacks nor imperialist ambushes can derail for the disaster and said they would meet their all of which are issues the states face. the people of the Liberators, we have only one obligations as the mine’s owners.

FEATURED Q&A / Continued from page 1 Head of Bradesco’s such as distribution, sale and transfer of police corruption, violence and criminality the substance. The court refers to the fact linked to retail purchases by consumers may Insurance Unit Killed that the United States continues to consider all diminish, enhancing human security in in Plane Crash marijuana as illegal under federal law, but the process. But unless Mexico seriously that the Obama administration has decided commits itself to radically improving the rule Marco Antonio Rossi, the head of Banco Brad- not to apply federal law—and international of law and strengthening justice institutions, esco’s insurance unit, was among four people treaty obligations—to states like Colorado legalization—in a nation like Mexico—will killed earlier this week in a plane crash, the and Washington that have legalized it. only broaden the horizon for criminality. bank said Wednesday in a statement, Reuters Since the latest poll in Mexico shows about Transnational criminal organizations operate reported. Rossi, 54, was traveling from Brasília three quarters of the population against much like corporations: they seek vertical back to São Paulo in the bank-owned Cessna legalization, it’s not likely that there will be integration of their businesses and conduct Citation VII when the plane went down late a groundswell to legalize ‘recreational’ mar- hostile takeovers and mergers and acquisi- ijuana for all. In fact, legalizing marijuana tions. If income from cannabis diminishes, would not decrease violence since marijuana they will muscle their way into other illicit is not widely abused in Mexico and is not activities, whether it’s heroin production or the largest money earner for the major human traffi cking, kidnapping and extortion, Mexican criminal organizations. If anything, or siphoned gasoline and pirated DVDs. The violence could increase as the cartels fi ght decision by the Supreme Court is nonethe- for a smaller share of the U.S. market where less a welcome one, as has been the Obama increase in marijuana abuse has spurred the administration’s position so far, underscor- growth of both ‘legal’ and illegal domestic ing that this is Mexico’s call. No global Rossi // File Photo: Banco Bradesco. U.S. production. Given its own self-contra- public policy has failed so miserably in the dictory position on marijuana and its new past decades than the prohibition of drugs, Tuesday. Rossi had been in the Brazilian capital doctrine of ‘fl exible interpretation’ of the particularly of marijuana. We cannot solve to meet with several government offi cials on international drug conventions, the United the problems we have created with the same Tuesday, sources told Reuters. Lúcio Flávio de States will have little standing to complain thinking we used in creating them. Mexico’s Oliveira, the leader of Bradesco Seguros’ life about Mexican moves toward legalization Supreme Court ruling last week could be a insurance and retirement business, and the two should that occur.” fi rst step in the right direction. But in taking pilots were also killed in the crash, Bradesco the next steps, the blinders have to come said in the statement. “They were recognized Arturo Sarukhan, board member off, and Mexicans of all persuasions need for their talent, competence and enthusiasm at of the Inter-American Dialogue to understand that there are no shortcuts work, fraternal relations with their teams and and former Mexican ambassa- around the imperious need to revamp the total dedication to their families, having carried A dor to the United States: “The rule of law.” out brilliant careers,” the bank said. The Cessna Supreme Court decision does not entail an vanished from radar near the border dividing across-the-board decriminalization of recre- Roderic Ai Camp, professor Goias and Minas Gerais states and likely ational cannabis. For the moment, it applies of government at Claremont crashed at about 8 p.m. local time, according only to the group that sought permission to McKenna College: “Mexico’s to Brazil’s Air Force. Rossi had been seen as a operate as a users’ club via a court ruling, A Supreme Court decision to likely successor to Luiz Carlos Trabuco, Brad- but it could eventually lead to full-fl edged allow ordinary citizens to grow marijuana esco’s chief executive offi cer, Reuters reported. decriminalization or even legalization. for personal use is notable for two reasons. Rossi succeeded Trabuco as head of Brad- However, there is a fl aw in the argumentation In general legal terms, it points once again esco’s insurance unit in 2009 when Trabuco articulated by some in the United States and to the court taking the initiative to set in became CEO. The bank requires its executives those in Mexico who claim that legalization motion important legislative action linked to retire at age 65, and Trabuco reaches that will impact and defang organized crime to civil rights, which in turn strengthens the age next October. Rossi, who had worked for and reduce violence; they are smoking too court’s institutional prerogative in Mexican the bank for 34 years, had been working on a much of the product that they are seeking to governance. The specifi c decision is linked possible sale of Bradesco’s high-risk insurance legalize. If the road ahead does eventually to early legislation passed by Mexico’s portfolio, sources told Reuters. He is survived lead to legalization, it is indeed likely that Congress in 2009 to decriminalize personal by his wife and four children. 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 © 2015 consumption of many illegal drugs, including spective is based on the liberal stance that, marijuana, in specifi c, small quantities. A as long as you are not causing harm to oth- Erik Brand national survey of consumption last year in- ers, one can decide what to consume, even if Publisher [email protected] dicated that 17 percent of Mexicans smoked it causes damage to one’s own health, as is marijuana while 9 percent used other drugs. the case with any number of legal products Gene Kuleta Editor circulating in today’s market that, when [email protected] consumed in excess, can cause harm and The impact on Nicole Wasson even death. This is relevant because many Reporter, Assistant Editor criminal violence, if believe that decriminalization of marijuana [email protected] such legislation were should be a majority decision made by a to be passed, is likely plebiscite or by the Congress. But let us re- to be minimal in the member that when it comes to human rights, foreseeable future....” sometimes the majority does not make the Michael Shifter, President best decisions. The idea falls into the same Genaro Arriagada, Nonresident Senior Fellow — Roderic Ai Camp stance that the patriarchal state should not Sergio Bitar, Nonresident Senior Fellow decide what we can or cannot consume. But Joan Caivano, Director, Special Projects then, why should the majority then make this Kevin Casas-Zamora, Director, Peter D. Bell Rule of Law Program Approximately a third of Mexicans believed decision, especially since most are probably Maria Darie, Director, Finance & Administration drug policies should be treated as an issue Ramón Espinasa, Nonresident Senior Fellow of public security while an equal number Ariel Fiszbein, Director, Education Program believed it to be a public health issue. The approach Alejandro Ganimian, Nonresident Fellow Two weeks ago, eight out of 10 Mexicans the Supreme Court Peter Hakim, President Emeritus opposed legalizing recreational marijuana, Claudio Loser, Senior Fellow and only 4 percent claimed they would use took toward legalizing Nora Lustig, Nonresident Senior Fellow it if legalized. However, an equally large marijuana was from Margaret Myers, Director, China and number favored legalizing it for medicinal a human rights Latin America Program use. The impact on criminal violence, if such perspective.” Manuel Orozco, Senior Fellow Jeffrey Puryear, Senior Fellow legislation were to be passed, is likely to be — José Antonio Crespo minimal in the foreseeable future because Lisa Viscidi, Director, Energy Program the overwhelming percentage of violence Latin America Advisor is published every is linked to United States’, not Mexico’s, business day, except for major U.S. holidays, demand, and criminal organizations have not in favor of the substance? The court is by the Inter-American Dialogue at: focused their attention in Mexico on other, not a legislative body, this is true, but it does 1211 Connecticut Avenue NW, Suite 510 Washington, DC 20036 equally economically attractive crimes at defend human rights against the tyranny of Phone: 202-822-9002 lower risks, such as kidnapping and extor- the majority. The majority can be prejudiced, Fax: 202-822-9553 tion. While the U.S. government has strongly intolerant and ignorant, as it has been in www.thedialogue.org opposed such legislation in the past, it can the past over race, social status, customs, ISSN 2163-7962 hardly make a convincing argument today sexual orientation and other issues. When Subscription Inquiries are welcomed at in light of our individual state legislation dealing with human rights, as is the case [email protected] legalizing recreational marijuana leading the in this instance, it is best to let the courts The opinions expressed by the members of the Board of way.” decide. The Congress, certainly, should also Advisors and by guest commentators do not necessarily approve the legislation apart from the court, represent those of the publisher. The analysis is the sole view of each commentator and does not necessarily José Antonio Crespo, profes- at least once there is jurisprudence on the represent the views of their respective employers or fi rms. sor and researcher of political subject.” The information in this report has been obtained from science at CIDE in Mexico City: reliable sources, but neither its accuracy and completeness, nor the opinions based thereon, are A “The approach the Supreme The Advisor welcomes comments on its Q&A guaranteed. If you have any questions relating to the con- Court took toward legalizing marijuana was section. Readers can write editor Gene Kuleta tents of this publication, contact the editorial offi ces of the Inter-American Dialogue. Contents of this report may not be from a human rights perspective. The per- at [email protected]. reproduced, stored in a retrieval system, or transmitted without prior written permission from the publisher.