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LATIN AMERICA ADVISOR www.thedialogue.org BOARD OF ADVISORS Diego Arria Director, Columbus Group Devry Boughner Vorwerk Corporate VP, Global Corporate Affairs Cargill Joyce Chang Global Head of Research, JPMorgan Chase & Co. W. Bowman Cutter Former Partner, E.M. Warburg Pincus

A DAILY PUBLICATION OF THE DIALOGUE

FEATURED Q&A

TODAY’S NEWS

Will the Trade in Services Agreement Move Forward?

Dirk Donath Senior Partner, Catterton Aimara Barry Featherman Senior Director, International Government Affairs, Gilead Sciences

James R. Jones Chairman, ManattJones Global Strategies Craig A. Kelly Director, Americas International Gov’t Relations, Exxon Mobil John Maisto Director, U.S. Education Finance Group Nicolás Mariscal Chairman, Grupo Marhnos Thomas F. McLarty III Chairman, McLarty Associates Carlos Paz-Soldan Partner, DTB Associates, LLP Beatrice Rangel Director, AMLA Consulting LLC Gustavo Roosen Chairman of the Board, Envases Venezolanos Andrés Rozental President, Rozental & Asociados and Senior Policy Advisor, Chatham House Shelly Shetty Head, Latin America Sovereign Ratings, Fitch Inc. Roberto Sifon-Arevalo Managing Director, Americas Sovereign & Public Finance Ratings, Standard & Poor’s

Venezuelan VP Blasts U.S. Over Sanctions Venezuelan Vice President Tareck El Aissami reacted angrily after the U.S. government slapped him with sanctions, accusing him of being an international drug kingpin.

BUSINESS

Mexico’s Alfa Planning to Sell Energy Assets

Peter Hakim President Emeritus, Inter-American Dialogue

Jon Huenemann Vice President, U.S. & Int’l Affairs, Philip Morris International

POLITICAL

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Marlene Fernández Corporate Vice President for Government Relations, Arcos Dorados

Donna Hrinak President, Boeing Latin America

Wednesday, February 15, 2017

The Trade in Services Agreement, or TiSA, aims to liberalize trade in areas such as banking, among others. // File Photo: U.S. Trade Representative’s Office.

Q

More than a year has passed since government ministers from countries that are part of the proposed Trade in Services Agreement (TiSA) met in Davos, Switzerland to reaffirm their commitment to concluding the pact. However, TiSA has come under criticism from opponents of multilateral trade deals, such as those who support President Donald Trump’s move to withdraw the United States from the Trans-Pacific Partnership and to renegotiate NAFTA. Will TiSA move ahead this year despite the change in administration in the United States? Why aren’t more than six countries in Latin America signed on to the pact? How would economies in Latin America benefit from such an agreement? How can digital trade and other services issues be addressed in global, regional or sub-regional trade agreements?

The conglomerate said it would sell some of its energy assets, including its share in the Eagle Ford Shale project in Texas. Page 2

POLITICAL

Argentine Cabinet Chief Seeks Audit Following Claims Against Macri The accusations against Argentine President Mauricio Macri involve a deal between the government and the country’s postal service, which at the time was owned by the president’s father, a real estate magnate. Page 2

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Javier A Gutiérrez, executive director of the Secretariat for the Economic Integration of Central America (SIECA) in Guatemala City: “As the U.S. administration revises its approach to trade policy, the Trade in Services Agreement (TiSA) has been wrongly compared to the Trans-Pacific Partnership (TPP) and the North American Free Trade Agreement (NAFTA), as one of the trade agreements lined up for revision. The United States makes up for 14.7 percent of global exports in services, and should the country step down, it would become a far less ambitious proposal. But as a plurilateral agreement, it can move forward despite any member’s reluctance to remain in it. Indeed, the other 22 partners in TiSA make up more than 55 percent of the worldwide services trade, and other emerging econoContinued on page 3

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Macri // File Photo: Argentine Government.

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Wednesday, February 15, 2017

LATIN AMERICA ADVISOR POLITICAL NEWS

Venezuelan VP Blasts U.S. for Imposing Sanctions Venezuelan Vice President Tareck El Aissami on Tuesday blasted the United States, a day after the U.S. Treasury slapped sanctions on him and labeled him as a drug kingpin, Reuters reported. “We shall not be distracted by these miserable provocations,” said El Aissami. “We will see this vile aggression dispelled.” El Aissami, who took office last month and has

We will see this vile aggression dispelled.” — Tareck El Aissami

been given broad powers by President Nicolás Maduro, is the highest-ranking Venezuelan official to have been sanctioned by the United States. The United States previously sanctioned a half-dozen other officials or former officials of the Venezuelan government. In its “kingpin” designation, the Treasury Department accused El Aissami of facilitating drug shipments by air and sea, and also of having connections to drug gangs in Mexico and Colombia. In a live television address Tuesday, Maduro said he summoned the top U.S. diplomat in the South American country, Charge d’Affaires Lee McClenny, to explain the move. “Comrade Tareck has my full support,” said Maduro, who labeled the U.S. decision “illegal.” Maduro added that he will demand an apology from the United States. “Venezuela will respond, step by step, with balance and force,” said Maduro, The New York Times reported. “They will retract and apologize publicly to our vice president.” Maduro added that El Aissami has led battles against drug trafficking and that more than 100 drug kingpins have been caught during El Aissami’s time in the government. El Aissami has “delivered the strongest blows

against the heads of drug trafficking,” said Maduro. At the same time that the U.S. Treasury sanctioned El Aissami, it also imposed sanctions against Venezuelan businessman Samark López, whom the Treasury called El Aissami’s “primary frontman.” In a statement Tuesday, López said he was a “legitimate businessman,” adding that he has not “engaged in drug trafficking,” Reuters reported. The sanctions allow the Treasury to freeze any assets the men have in the United States and also prevent Americans from doing business with them. [Editor’s note: See Q&A about El Aissami in Monday’s Advisor.]

Cabinet Chief Seeks Audit Following Claims Against Macri Argentine Cabinet Chief Marcos Peña on Tuesday called for an independent audit of a deal to resolve debt that was struck between the country’s postal service and the government when the service was owned by current President Mauricio Macri’s father, Reuters reported. The deal, which was reached last year, has led some opposition politicians to allege that the deal represented a conflict of interest, after a federal prosecutor last week asked a court to block the agreement. The prosecutor character-

NEWS BRIEFS

Radio Journalists Killed During Live News Bulletin in Dominican Republic Two radio journalists were shot and killed while a news bulletin was being delivered over Facebook Live on Tuesday when two gunmen opened fire during the broadcast, The Guardian reported. Luís Manuel Medina, who was on the air at the time, and producer Leo Martínez were killed in the attack, which occurred in San Pedro de Macorís, 45 miles east of the capital, Santo Domingo. Three men have been arrested following the shooting, though none have been charged. Police have not identified a motive for the attack.

UnitedHealth’s Latin America Chairman Dies Edson de Godoy Bueno, the Latin America chairman of UnitedHealth, died Tuesday after suffering a heart attack, Reuters reported. Bueno, 73, had sold Amil Participações, which he founded nearly four decades ago, to the U.S.-based health care company for $4.9 billion in 2010. Bueno died in Buzios, a beach resort city in Rio de Janeiro state.

Mexico’s Alfa Planning to Sell Some Energy Assets

Peña // File Photo: Argentine Government.

ized the deal as a “forgiveness of debt” meant to benefit the president’s family. Following a cabinet meeting, Peña said nothing improper had occurred, but added that the government had decided to ask the independent National Auditor General to look into the details of the deal and make a judgment on the allegations levied by some opposition politicians. “We

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Mexican conglomerate Alfa plans to sell some of its energy assets, including its share in the Eagle Ford Shale project in Texas, as part of a decision to put the company’s energy sector expansion on hold, Chief Financial Officer Ramón Leal said Tuesday. “At Alfa, we’re focusing on our core businesses, and putting on hold our investments in energy,” he said. The company also plans to sell an exploration and production project in Peru, as well as to divest two oil service contracts in Mexico. The decision comes amid a less attractive outlook for the oil industry and global economic uncertainty and should improve the company’s financial position, Leal said. PAGE 2


Wednesday, February 15, 2017

LATIN AMERICA ADVISOR believe this is an extra assurance, because we are absolutely committed to transparent government,” Peña said. He added that the federal judiciary should name an independent panel of experts to the investigation to recommend a solution. Control of the postal service went to Grupo Macri in 1997 when then-President Carlos Menem decided to privatize the service. Grupo Macri was a conglomerate owned by real estate magnate Franco Macri, the father of the current president. Former President Néstor Kirchner re-nationalized the postal service in 2003, following the company’s declaration of bankruptcy in 2001.

ECONOMIC NEWS

Brazil’s Retail Sales See Sharp Decline Retail sales in Brazil dropped dramatically in December, amid the country’s struggle with its severe recession, The Wall Street Journal reported Tuesday. Retail sales fell by 2 percent in December from the month before, and 4.9 percent from the same month year-over-year, according to the Brazilian Institute of Geography and Statistics, or IBGE. Retail sales dropped a total of 6.2 percent for the year, following a 4.3 percent decline in retail sales in 2015. Last year saw the worst annual performance since 2001, the year that IBGE began to compile retail performance figures under the currently used methodology. Though all retail categories saw a contraction last year, the main decline in sales came from durable goods like furniture and household appliances, which fell by 12.6 percent during that period. Brazil’s retail sector had seen rapid growth over the past decade, as the government provided easy credit as a means of spurring economic growth. The country’s crippling recession since 2015, however, has caused the retail sector to falter. In 2015, the economy contracted by 3.8 percent and the following year it shrank by another 3.5 percent, according to the finance ministry. The economy is expected to grow by 0.5 percent this year.

Copper Prices Ease Amid Hopes for End to Chile Strike Copper prices have eased amid signs that a workers’ strike in Chile could soon be over, CNBC reported. Benchmark three-month copper futures in the London metals exchange had risen 0.3 percent to $6,063.50 per metric ton in Wednesday morning trading in Asia. The price of the metal had been at a 20-month high of $6,204 per metric ton on Monday. Striking workers at the Escondida copper mine in Chile and the mine’s operator, BHP Billiton, said

they had agreed to resume talks today. Carlos Allendes, the leader of the main workers’ union at Escondida, the world’s largest copper mine, said the union had accepted an invitation from the Chilean government’s labor directorate to meet with company officials, Reuters reported. BHP Billiton also confirmed that it would return to the negotiating table. “We hope that the procedure ... allows the parties to come closer and for the strike to be resolved as soon as possible,” Paula Narvaez, a government spokeswoman, told reporters in Santiago. Copper prices still were elevated in part due to a disruption in supply at the Grasberg mine of Freeport-McMoRan in Indonesia, Reuters reported.

F E A T U R E D Q & A / Continued from page 1

mies could enter the scheme—Brazil and Argentina are two large service economies that could boost the agreement’s level of ambition. Latin America could reap greater benefits from taking a more active role in

Trade governance needs to focus more strongly on the service sector.” — Javier A Gutiérrez

TiSA, rising its participation from six current members—Chile, Costa Rica, Colombia, Mexico, Panama and Peru—and including special and differentiated treatment to encourage the adherence of a wider range of economies. To further encourage support for TiSA and other initiatives aimed at promoting trade in services, it is of the utmost importance to demonstrate the substantial contribution of services to the economy—it is the fastest-growing sector of trade and the quickest sector to recover following the global financial crisis. Because of this, trade governance needs to focus more strongly on the service sector. TiSA is just the first of many steps to be taken in that direction.”

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Richard Eglin, senior trade policy analyst at White & Case: “Negotiations on a Trade in Services Agreement (TiSA) are aiming to open up new markets, break down regulatory trade barriers and create a comprehensive legal framework for digital trade. The 50 countries negotiating the TiSA (including six from Latin America) have been reluctant to broaden participation until they have locked in a high level of ambition, but the intention is to open it up to others with a similarly liberal outlook once agreement has been reached. A push for further liberalization through TiSA would help expand Latin America’s footprint in the global services trade. Digital trade and e-commerce hold huge potential for growth, particularly for medium and small-scale enterprises. To thrive, they need access to modern communications networks and regulatory frameworks that facilitate electronic transactions and payments and cross-border data flows. These are core TiSA provisions that could work strongly to benefit trade growth in the region. Negotiators had hoped to conclude TiSA in 2016. A halt was called when doubts arose about the willingness of President Trump to finalize the deal, although TiSA would not seem to pose the kind of perceived threat to U.S. jobs that has led to the demise of the Trans-Pacific Partnership Continued on page 4

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Wednesday, February 15, 2017

LATIN AMERICA ADVISOR

LATIN AMERICA ADVISOR

F E A T U R E D Q & A / Continued from page 3

(TPP) or demands on Mexico to renegotiate NAFTA. TiSA negotiators will meet within the next months to decide whether to carry on, with or without the United States. Other countries, notably China, will be keen to step in, if given the opportunity.”

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Frank Samolis, partner and co-chair of the International Trade Group at Squire Patton Boggs in Washington: “Can TiSA move ahead this year? Maybe. On the one hand, the business community, in particular the business community in the United States, has an incredible interest in seeing a conclusion to the negotiations. Services account for around 80 percent of our private sector GDP and employment. On the other hand, you have a leader in President Trump who was so critical of multilateral trade agreements during the campaign, and a trade community whose bandwidth over the next year will be occupied by a renegotiation on NAFTA and potentially by the start of negotiations of bilateral trade deals with the United Kingdom, Japan and others. Until we know more about President Trump’s trade priorities, it is simply too early to tell if TiSA can move this year. As Latin American countries assess their trade priorities for 2017, TiSA should certainly be on the list in order to bolster their services trade. Despite this uncertainty, there is general agreement that we need to set and normalize rules related to the services industry. TiSA seems to be addressing the issue in the right way. However, the multilateral approach of TiSA fits the world into which it was launched (2012), and not the world today, which is radically different. If this specific agreement is not politically possible, we need to reset and look for other opportunities to install these disciplines in bilateral, multilateral and regional agreements going forward. Latin American countries, and others not a part of

the current negotiations, can use this reset as an opportunity to get their priorities for the services sector on the table.”

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Gary Horlick, Washington-based international trade lawyer: “President Trump and his advisors have been clear that trade agreements should all be bilateral, so it is difficult to see the United States participating in TiSA in the near future. However, it is possible the TiSA parties would decide to move forward without the United States in the hope that it later joins (this may be happening with the TPP). That would likely require at least the European Union and Japan.

is published every business day by the Inter-American Dialogue, Copyright © 2017 Erik Brand Publisher ebrand@thedialogue.org Gene Kuleta Editor gkuleta@thedialogue.org Nicole Wasson Reporter, Assistant Editor nwasson@thedialogue.org

Michael Shifter, President Genaro Arriagada, Nonresident Senior Fellow Sergio Bitar, Nonresident Senior Fellow Joan Caivano, Director, Special Projects Kevin Casas-Zamora, Nonresident Senior Fellow Ramón Espinasa, Nonresident Senior Fellow

It is possible the TiSA parties would decide to move forward without the United States in the hope that it later joins.” — Gary Horlick

Ariel Fiszbein, Director, Education Program Alejandro Ganimian, Nonresident Fellow Peter Hakim, President Emeritus Claudio Loser, Senior Fellow Nora Lustig, Nonresident Senior Fellow Margaret Myers, Director, China and Latin America Program Manuel Orozco, Director, Migration, Remittances & Development Jeffrey Puryear, Senior Fellow

It would be interesting if China negotiates its way into TiSA now. Latin American countries can derive a lot of benefits from the digital economy. All a digital entrepreneur needs is free broadband (from school or home) and free room and board (from family). You can invent and sell a killer app with no need for expensive travel or marketing or bricks and mortar. Lots of people from developing countries have done this. So the historic disadvantages for some Latin American businesses can disappear online. Trade agreements can ensure that legal barriers do not strangle those opportunities.” The Advisor welcomes comments on its Q&A section. Readers can write editor Gene Kuleta at gkuleta@thedialogue.org.

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Tamar Solnik, Director, Finance & Administration Lisa Viscidi, Director, Energy Program Latin America Advisor is published every business day, except for major U.S. holidays, by the Inter-American Dialogue at 1155 15th Street NW, Suite 800 Washington, DC 20005 www.thedialogue.org ISSN 2163-7962 Subscription inquiries are welcomed at freetrial@thedialogue.org 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.

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Director Ejecutivo Javier Gutiérrez en Latin America Advisor  

Latin America Advisor (Miércoles 15 de febrero de 2017) destaca un Q&A sobre las perspectivas para el Acuerdo sobre Comercio de Servicios (T...

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