Regional Pulse: 1 August 2023

Southern Pulse’s weekly review of need-to-know events curated for people who work in Latin America.

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KEY DEVELOPMENTS

ARGENTINA

• Burford Capital takes Argentina to court over YPF privatization
• Dollar and import restrictions could prompt fuel shortage
• China hosts seminar on Argentine renewable energies
• Argentina reaches USD7.5 billion deal with IMF
• Rosario grain inspectors end strike after government order

BRAZIL

• UK courts extend deadline for Mariana dam compensation claims
• Petrobras announces dividend policy reforms
• Fitch Ratings raises Brazil’s credit rating

CHILE

• Enel Chile sells Arcadia Generación Solar for USD550 million
• Albemarle reaches agreement with unions to avoid strike
• Chile reports lowest poverty levels on record

COLOMBIA

• Petro’s son arrested for alleged money laundering
• Nine vice ministers have quit in less than a year
• New energy minister is an engineer, former FARC party member

ECUADOR

• Gas field Amistad to begin bidding process in coming weeks
• 31 dead in prison riot
• State of emergency declared in coastal provinces

MEXICO

• Gunmen assassinate presidential contender’s political operator in Guerrero
• Worker blockade jeopardizes largest steel company’s future
• State-owned oil company will review its Moody’s contract

PERU

• Farmers threaten national strike
• Controversial new Congressional president elected
• Protests paralyze road connection with Bolivia

KEY DEVELOPMENTS IN FULL

ARGENTINA

Burford Capital takes Argentina to court over YPF privatization

On 28 July 2023, a two-day trial to determine how much Argentina owes to Burford Capital investors over the privatization of energy company YPF concluded in New York City. While the final amount Argentina owes will not be revealed until after August’s primary elections, its new government could be saddled with a USD16 billion payout. However, Argentina argues it should only owe investors USD4.9 billion. In a March 2023 ruling, New York judge Loretta Preska found that Argentina unlawfully expropriated YPF shares in 2012 without making the required compensation offers to investors.

Dollar and import restrictions could prompt fuel shortage

On 28 July 2023, the federation of shipping companies (FENA) sent a memo warning energy and trade secretaries that the sector could face a nationwide fuel shortage if limited dollar access and import restrictions persist. FENA represents a wide array of shipping interests. These include companies that transport hydrocarbons from oil platforms in the Argentine Sea, as well as between the country’s southern oilfields and its refineries.

China hosts seminar on Argentine renewable energies

On 23 July 2023, Changsha, China hosted a renewable energy seminar where representatives from the province of Formosa sought collaboration on renewable energy projects in Argentina’s northern region. Representatives from China’s Trade Ministry and Power China Zhongnan Engineering Corporation attended the meeting, as well as several Argentine delegations.

Argentina reaches USD7.5 billion deal with IMF

On 28 July 2023, the International Monetary Fund (IMF) announced it had reached a USD7.5 billion agreement with Argentina after approving two revisions to a refinancing deal signed in January 2022. However, the funds will not be released until the board of directors reviews the agreement in late August. The deal is good news for the current administration, which faces primary elections in August and general elections in October. Argentina is still seeking loans from other international organizations, such as CAF Development Bank. The IMF has acknowledged that a severe drought contributed to the country’s falling exports and its fiscal deficit.

Rosario grain inspectors end strike after government order

On 31 July 2023, grain inspectors in Rosario asking for higher wages ended an unannounced, hours-long strike following a government order to negotiate with the companies responsible for handling shipment quality control for grain buyers. These parties have 15 days to reach an agreement, Reuters reported, adding that grain shipments from Rosario’s port have normalized.

BRAZIL

UK courts extend deadline for Mariana dam compensation claims

On 28 July 2023, the London High Court extended the deadline for 720,000 Brazilians to present documentation for compensation claims against Anglo-Australian firm BHP Group over the 2015 Mariana dam disaster. This is the largest group claim in the UK’s history. The extension from 16 June to 8 September 2023 will allow plaintiffs more time to prepare information as they seek USD44 billion from BHP. In 2015, the Fundão dam near the city of Mariana burst, killing 19 and leaving thousands homeless. The disaster buried villages and left a 600-kilometer radius of environmental destruction that continues to affect residents’ health and livelihoods.

Petrobras announces dividend policy reforms

On 28 July 2023, state-owned oil and gas company Petrobras announced it will reduce the percentage of dividends and share buybacks shareholders receive in an expected move. The government and company directors hope that the changes, which could be implemented as early as Q2 2023, will increase the company’s investments.

Fitch Ratings raises Brazil’s credit rating

On 26 July 2023, ratings agency Fitch raised Brazil’s credit rating from BB- to BB with a stable outlook. Fitch attributes the new rating to Brazil’s better-than-expected macroeconomic and fiscal performance. Brazil’s rating was downgraded in 2018 due to “persistent political tensions,” but Fitch improved the rating in part due to the current administration’s recent tax reforms. Fitch also projected a real growth rate of 2.3% for Brazil’s GDP this year.

CHILE

Enel Chile sells Arcadia Generación Solar for USD550 million

On 28 July 2023, Enel’s Chilean branch sold its photovoltaic generation business Arcadia Generación Solar to Sonnedix for USD550 million. Arcadia’s four plants in the Atacama and Antofagasta regions have a combined capacity of 416 MW. Arcadia Generación Solar will continue to supply energy to Enel through a sales contract after the Sonnedix acquisition. Sonnedix is one of Europe’s largest photovoltaic energy companies.

Albemarle reaches agreement with unions to avoid strike

On 28 July 2023, US lithium producer Albemarle announced it reached a preliminary agreement with the supervisors’ union at its three Chilean sites to avoid a strike. The agreement will establish new conditions, rights, and responsibilities for Albemarle and the union starting in June 2024. Albemarle and local firm SQM are the only two lithium producers operating in Chile.

Chile reports lowest poverty levels on record

On 27 July 2023, an important socioeconomic survey (Casen) announced that Chile’s income poverty levels have dropped from 10.7% in 2020 to a record low of 6.5% in 2022. Experts had expected poverty levels to increase due to inflation, but the opposite was true. The survey attributes the fall in poverty to state cash transfer programs for low-income families.

COLOMBIA

Petro’s son arrested for alleged money laundering

On 29 July 2023, Nicolás Petro, President Gustavo Petro’s son and a congressional lawmaker, was arrested for alleged money laundering and illicit enrichment. Nicolás Petro had been under investigation by the prosecutor’s office since March 2023, following allegations that he was pocketing bribes from organized crime organizations intended to fund his father’s presidential campaign. The prosecutor’s office is investigating whether any illicit money made its way into President Petro’s campaign. The arrest is a blow for President Petro, who has made anti-corruption one of his main causes throughout his political career.

Nine vice ministers have quit in less than a year

On 26 July 2023, newspaper El Espectador reported that nine vice ministers have resigned in the first 11 months of President Gustavo Petro’s term. This is in addition to the 11 ministers that Petro replaced in the same period. Two vice ministers have resigned from both the mining and energy ministry and education ministry. Departures have also affected ministries dedicated to labor, culture, finance, defense and foreign affairs. Six vice ministers quit over differences with their ministers, El Espectador reported, while two others opposed government reforms in pensions and education. The high turnover of officials threatens to undo President Petro’s reforms, especially considering he was also prone to reshuffling his cabinet as Bogotá’s mayor between 2012 and 2015.

New energy minister is an engineer, former FARC party member

On 25 July 2023, Omar Andrés Camacho, a former member of the far-left FARC political party, was appointed minister of mines and energy. Camacho has a background both in engineering and energy, and is closely aligned with President Petro’s Pacto Histórico party. He served as an advisor to former energy minister Irene Vélez. According to ministry insiders consulted by La Silla Vacía, Camacho has a more technical profile than Vélez,and is more knowledgeable of the energy and mining sector. In policy terms, Camacho similarly backs Vélez and President Petro’s policy of decarbonization.

ECUADOR

Gas field Amistad to begin bidding process in coming weeks

On 28 July 2023, state energy company Petroecuador announced that the Amistad gas field off the Pacific coast will begin its bidding process to international investors, most likely in the second week of August 2023. The project had been delayed for more than a year. Petroecuador postponed the bidding process after requesting further economic studies about its viability. Energy minister Fernando Santos also recognized that gas importers had some resistance to the project. Processing gas from Amistad would be substantially cheaper than imported gas, but the government has drafted an executive decree that would benefit gas importers if enacted.

31 dead in prison riot

On 25 July 2023, a prison riot in the coastal city of Guayaquil ended with 31 prisoners dead after three days of fighting. According to eyewitnesses interviewed by digital outlet Primicias, the violence began when members of the Los Lobos gang attacked rival organization Los Tiguerones. Both organizations were allies, joined under a broader collaboration with the Mexican cartel Jalisco Nueva Generación. But in recent weeks, Los Tiguerones broke the pact and united with their former rivals against Los Lobos. Los Lobos is one of the largest gangs in Ecuador (with an estimated 8,000 members) and engages in cocaine trafficking as well as illegal gold mining in the northern province of Imbabura. This is the latest massacre within Guayaquil’s prison, where 220 inmates have been murdered in the past two years.

State of emergency declared in coastal provinces

On 24 July 2023, President Guillermo Lasso declared a state of emergency in several areas following the violent prison riot in the city of Guayaquil between 22 and 25 July. The coastal provinces of Manabí and Los Ríos were under a state of emergency, as well as the canton of Durán near Guayaquil. These areas will have a curfew in place until 20 September. The number of police in Durán (population 315,000) will more than double to 1,200. President Lasso highlighted that the country’s homicides have risen by 55% in the first half of the year compared with 2022, despite having enacted 15 states of emergency since taking office in 2021.

MEXICO

Gunmen assassinate presidential contender’s political operator in Guerrero

On 29 July, a group of gunmen in the southern state of Guerrero assassinated José Guadalupe Fuentes Brito, a political operator for Marcelo Ebrard’s campaign. Ebrard is one of the four aspiring candidates hoping to represent the ruling MORENA party in the 2024 presidential elections. As a businessman, Fuentes Brito was the liaison between Ebrard and other business representatives in the region. The assassination took place when the gunmen attempted to rob his vehicle on the state’s main federal highway (CF95). The gunmen also assassinated his wife, his son and a witness driving nearby. State authorities said they will investigate, but the crime has not been tied to the victim’s political work thus far. Guerrero ranks seventh among all Mexican states for assassinations, official figures show. Two weeks ago, criminal gangs turned capital Chilpancingo city into a hotbed for violence against local authorities after the apprehension of an alleged criminal leader.

Worker blockade jeopardizes largest steel company’s future

On 28 July, Mexico’s largest steel processing company, Altos Hornos de México (AHMSA), reported that a group of miners blocked one of the plant entrances at its Monclova iron complex in northern Coahuila state. The workers were protesting missed wage payments as the company faces a financial crisis. The blockade prevents the supply of liquefying gas. The move jeopardized a compromise between the mine’s owner Argentem Creek and investors from the Kickapoo community, which was designed to save AHMSA from bankruptcy. Meanwhile, AHMSA’s debts exceed USD 650 million. AHMSA has generated more than 17,000 direct jobs in Coahuila over the past 80 years, but the firm has been in decline after it lost a government contract following the imprisonment of former owner Alonso Ancira Elizondo in 2019 for money laundering and corruption. This has prompted blockades, marches and street protests.

State-owned oil company will review its Moody’s contract

On 31 July, Energy Secretary Rocío Nahle revealed that the state-owned oil enterprise Pemex will analyze its contract with ratings agency Moody’s for its grading decisions and credit outlook performance. Pemex officials have expressed disagreement with Moody’s decisions, but so far the company has ruled out canceling the contract. Moody’s changed its outlook on Pemex from positive to negative on 21 July, claiming it has not sufficiently changed its business strategy to ameliorate debt. The agency also removed Pemex’s investment-grade rating in 2020 after three downgrades — all during President Andrés Manuel López Obrador’s administration.

PERU

Farmers threaten national strike

On 30 July 2023, national farming association president Pedro Orellano complained that the government is falling short of expectations when it comes to supporting farmers facing severe droughts and poor harvests. In April 2023, the sector registered a record 20% fall in GDP due to a combination of droughts and floods across the country. While the government pledged some financial support to affected farmers, Orellano complained that they have yet to receive much of the promised assistance, such as new machinery. Orellano warned that farmers will strike nationwide if their demands are not met. The government recently announced plans to construct Peru’s first fertilizer plant to supply farmers with cheap fertilizers.

Controversial new Congressional president elected

On 26 July 2023, controversial politician Alejandro Soto was elected congressional president for the 2023–2024 term. Soto, part of the Alianza Para el Progreso (APP) party, had support from Keiko Fujimori’s party Fuerza Popular (FP) and former president Pedro Castillo’s party, Perú Libre (PL). This represented a striking alliance between the two parties that ran head-to-head in the last presidential election in 2021. Soto, a former TV news anchor, is under investigation for his alleged membership in a criminal organization after APP faced accusations of influence peddling, embezzlement, and collusion. According to newspaper El Comercio, Soto is currently under investigation in 17 other cases, and has denied any wrongdoing.

Protests paralyze road connection with Bolivia

On 25 July 2023, demonstrations paralyzed the southern region of Puno as protestors demanded the resignation of President Dina Boluarte and new elections. One group of protestors blocked the road that connects the region with neighboring Bolivia — a move they plan to sustain indefinitely until President Boluarte resigns. This region has been at the forefront of protests against the current government ever since former president Pedro Castillo was arrested in December 2022 following a failed self-coup. Disrupting the road with Bolivia usually translates into higher food prices in the region, as Puno imports much of its foodstuff from its neighbor.

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