LATIN AMERICA ADVISOR A DAILY PUBLICATION OF THE DIALOGUE www.thedialogue.org Thursday, December 10, 2015 BOARD OF ADVISORS FEATURED Q&A TODAY’S NEWS Diego Arria Director, Columbus Group ECONOMIC Genaro Arriagada What Challenges Nonresident Senior Fellow, Moody’s Puts Inter-American Dialogue Brazil on Review Joyce Chang Global Head of Research, Face Argentina’s for Possible Junk JPMorgan Chase & Co. Status W. Bowman Cutter Former Partner, New President? If Moody’s strips Brazil of its E.M. Warburg Pincus investment-grade credit rating, it Dirk Donath would be the second of the three Senior Partner, major ratings agencies to do so. Catterton Aimara Such a move would likely cause Marlene Fernández Corporate Vice President for investors to drain money from the Government Relations, country. Arcos Dorados Page 2 Peter Hakim President Emeritus, Inter-American Dialogue BUSINESS Donna Hrinak President, Boeing Latin America Mexico Approves Jon Huenemann Sanofi ’s Dengue Vice President, U.S. & Int’l Affairs, Philip Morris International Vaccine Mauricio Macri is only the third non-Peronist candidate to have won Argentina’s presidency James R. Jones since military rule ended in 1983. // File Photo: Facebook page of Mauricio Macri. Mexico became the fi rst country Co-chair, Manatt Jones to approve a dengue vaccine for Global Strategies LLC Mauricio Macri, who takes offi ce today as Argentina’s pres- sale, however the approval does Craig A. Kelly not allow for the vaccine to be Director, Americas International ident, has signaled big policy shifts away from those of his Gov’t Relations, Exxon Mobil given to children under nine or predecessor, Cristina Fernández de Kirchner. They include tourists. John Maisto Q Director, U.S. Education optimism about reaching a debt settlement next year with Page 2 Finance Group U.S. “holdout” creditors, and lifting capital controls, a move that could Nicolás Mariscal POLITICAL Chairman, devalue the peso. How diffi cult will it be for Macri to make sweeping Grupo Marhnos changes in policy? What do these early moves say about his focus for Guatemala’s Pérez Thomas F. McLarty III the early stages of his presidency? What do Macri’s cabinet picks fore- President, Molina Formally McLarty Associates tell about his priorities for his fi rst months in offi ce? Accused of Graft Carlos Paz-Soldan Partner, Prosecutors formally accused DTB Associates, LLP Juan E. Santarcángelo, senior researcher at the Conse- former Guatemalan President Otto Beatrice Rangel jo Nacional de Investigaciones Económicas y Técnicas Pérez Molina, who stepped down Director, in September, of corruption. AMLA Consulting LLC (CONICET) and the Universidad Nacional de Quilmes in Page 2 José Antonio Ríos Buenos Aires: “The negotiation policy with the vulture funds Chief Executive Offi cer, A Vadium Technology Inc. is one of the most important economic policies that Kirchnerism has Gustavo Roosen left Argentina. The refusal to pay the holdouts at any cost, going against Chairman of the Board, Envases Venezolanos Judge Thomas P. Griesa’s ruling, as well as the highly successful rally for Andrés Rozental support put on by the Argentine government at the United Nations, have President, Rozental & Asociados and Senior both been very important in terms of strengthening Argentina’s national Policy Advisor, Chatham House sovereignty against speculative interests. President-elect Macri’s plan to Shelly Shetty Head, Latin America pay vulture funds on their terms, especially at a time when the U.S. court Sovereign Ratings, Fitch Inc. is beginning to rule in favor of Argentina, is a true defeat to the Argentine Roberto Sifon-Arevalo people and a victory for the capitalist speculators. It is an error for which Managing Director, Americas Sovereign & Public Finance Ratings, generations of Argentines will pay. Macri also seems to indicate that he Standard & Poor’s will be eliminating the fi xed exchange rate, which will severely decrease the value of the peso and will lead to high infl ation and a sharp decline Pérez Molina // File Photo: Guate- malan Government. Continued on page 3 COPYRIGHT © 2015, INTER-AMERICAN DIALOGUE PAGE 1 LATIN AMERICA ADVISOR Thursday, December 10, 2015 ECONOMIC NEWS said. Last week, Brazil’s government statistics NEWS BRIEFS agency announced that Latin America’s largest Moody’s Warns economy had shrunk 4.5 percent in the third Guatemalan Prosecutors quarter as compared to the same quarter last Formally Accuse Pérez of Possible Brazil year. The announcement marked the third con- secutive quarter of contraction and confi rmed Molina of Corruption Downgrade to Junk that Brazil is in its worst recession in 25 years. Prosecutors in Guatemala on Wednesday The country’s rate of infl ation has also risen formally accused former President Otto Pérez Moody’s Investors Service on Wednesday put above 10 percent. Also on Wednesday, Moody’s Molina of corruption and urged that he be put its credit rating for Brazil on review for a possi- downgraded its ratings for Brazil’s embattled on trial in connection with a bribery scandal in- ble downgrade to junk status, Reuters reported. state oil company Petrobras, the Financial volving the country’s customs agency, Agence If Moody’s downgrades Brazil to junk status Times reported. In the move, Moody’s lowered France-Presse reported. Guatemala’s public after its typical three-month review period, it its ratings for the company to Ba3 from Ba2 ministry presented a “conclusive declaration” would become the second of the three major and placed them on review for another possible against Pérez Molina, special prosecutor Juan ratings agencies to do so. Standard & Poor’s downgrade. “These rating actions refl ect Sandoval told reporters. Judge Miguel Angel Petrobras’ elevated refi nancing risks in the face Gálvez is expected to decide in January wheth- of deteriorating industry conditions that make er to put the former president on trial. Pérez it more diffi cult to raise cash through asset Molina denies wrongdoing. sales,” Moody’s said. [Editor’s note: See related Q&A on the Nov. 2 issue of the Advisor.] U.S. Warns it Won’t BUSINESS NEWS Replace Venezuela’s Petrocaribe Program Rousseff // File Photo: Brazilian Government. Mexico Approves If Venezuela’s newly-elected National Assembly votes to end Petrocaribe, its subsidized oil took that action in September. A second down- Sanofi ’s Dengue program for Caribbean and Central American grade to junk would likely trigger large capital nations, the United States will not be able to outfl ows as large foreign investors such as Fever Vaccine provide subsidized oil to the region in Vene- pension funds are required to keep their assets zuela’s place, U.S. Deputy National Security in countries rated investment grade by two of Mexico on Wednesday became the fi rst country Advisor Ben Rhodes said Wednesday, the the three agencies. In October, Fitch Ratings to approve the sale of the world’s fi rst dengue Miami Herald reported. downgraded its sovereign credit rating for Bra- fever vaccine, which is produced by French zil, but left it one notch above junk status. In drugmaker Sanofi , Reuters reported. The its move Wednesday to put its rating for Brazil vaccine, called Dengvaxia, has been approved on watch, Moody’s said it made the decision Brazilian Court Orders due to the country’s deep severe recession, Bank Secrecy Protection failed efforts at austerity measures and a Dengvaxia has been Lifted for Lula’s Son growing risk of political paralysis, Reuters approved only for reported. The ratings agency added that Brazil A Brazilian court ordered that bank-secrecy is facing “worsening governability conditions” patients between the protection be lifted on a company controlled after lawmakers last week moved ahead with ages of nine and 45 who by former President Luiz Inácio Lula da Silva’s impeachment proceedings against President live in areas where son, as part of a larger investigation into Dilma Rousseff. Also, Brazil’s economic and whether companies bribed Brazilian tax offi - fi scal situation is unlikely to improve beginning Dengue fever is endemic. cials, The Wall Street Journal reported today. in 2017, as analysts had expected, because The court’s order is part of an investigation into the effort to unseat Rousseff has diverted whether sports marketing fi rm LFT Marketing attention away from debate on needed eco- only for patients between the ages of nine and Esportivo, controlled by Luis Claudio Lula da nomic measures, said Samar Maziad, a senior 45, who live in areas where Dengue fever is Silva, received bribes from a consulting fi rm analyst at Moody’s. “It makes a complicated endemic, Sanofi said. The vaccine does not yet that lobbied for tax benefi ts for car makers in political dynamic even more complicated,” he have approval from Mexico for patients under Brazil. The younger Lula da Silva through his lawyer has denied wrongdoing. COPYRIGHT © 2015, INTER-AMERICAN DIALOGUE PAGE 2 LATIN AMERICA ADVISOR Thursday, December 10, 2015 FEATURED Q&A / Continued from page 1 the age of nine or for tourists, which are two of the groups that are most vulnerable to the mos- quito-spread disease, Reuters reported. The in real wages. What’s more, redistributive of others, they can do a good job. However, company will soon seek to roll out the vaccine policies will be abandoned, which will lead the task ahead is daunting. A large oppo- in Brazil and Colombia, said Olivier Charmeil, to acute economic recession and eventu- sition in Congress will force them to move head of Sanofi Pasteur, the group’s vaccines ally inequality, poverty and low levels of carefully. The central bank’s cash position division, the Financial Times reported. The de- production. The cabinet Macri has chosen is, is critical, with very low liquid reserves and cision to seek approval in Latin American and as expected, comprised of individuals with with future dollar contract obligations for Asian countries fi rst represents a departure extremely orthodox economic ideals and yet-unknown amounts.