Regional Pulse: 11 July 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
- Vaca Muerta reserve to provide Argentine gas to mining projects
- Mercosur talks with EU on trade deal stalled
- Argentina and Egypt discuss IMF negotiations
BRAZIL
- Chinese firm BYD to build electric vehicles in Brazil
- Paramilitaries involved in drug kingpin’s escape
- Lower chamber approves tax reform
CHILE
- Government modifies electricity rationing decree after heavy rains
- BHP Billiton starts closing Cerro Colorado mine
- Corruption investigation hits Boric’s coalition
COLOMBIA
- Dissident FARC leader Iván Márquez presumed dead
- Security crisis in Buenaventura
- One miner dead, 15 injured in alleged ELN bombing
ECUADOR
- Ecuador’s largest wind farm will come online in 2025
- Indigenous confederation CONAIE will not back any presidential candidate
- Ecuador needs 460MW of electricity before October dry season begins
MEXICO
- Major oil platform explosion affects gas production
- Authorities mobilize in Estado de México after finding cartel messages
- Tamaulipas interior secretary suffers armed attack
PERU
- Agriculture GDP fell by 20% in April
- Telefónica sells fiber optic cable in Peru
KEY DEVELOPMENTS IN FULL
ARGENTINA
Vaca Muerta reserve to provide Argentine gas to mining projects
On 4 July 2023, Argentine oil and gas company TGN finalized the first stage of reversing the flow of its northern pipeline. This will allow it to supply Argentine mines with gas from the Vaca Muerta shale gas reserve in northern Patagonia, instead of gas currently coming from neighboring Bolivia. This will allow mining companies to cut an estimated USD23 million in monthly costs and reduce the circulation of trucks transporting gas. The project will focus primarily on supplying the lithium sector in the provinces of Jujuy, Salta, and Catamarca. This is a further boost for Argentina’s lithium industry after the US firm Livent Corp announced last week that they would begin lithium battery production in Argentina in September.
Mercosur talks with EU on trade deal stalled
On 4 July 2023, Argentina hosted a summit with leaders from the Mercosur trade bloc in Puerto Iguazú on the Argentina-Brazil-Paraguay border. The four Mercosur leaders discussed the 2019 Mercosur-European Union trade deal, which has yet to be signed due to tensions over EU demands that Brazil do more to tackle deforestation. Argentina and Brazil have also been dragging their heels over already-negotiated issues such as public procurement. It is unlikely the agreement will be finalized before the end of this year.
Argentina and Egypt discuss IMF negotiations
On 6 July 2023, Argentina’s Economy Minister Sergio Massa held a teleconference with his Egyptian counterpart, Mohamed Maait. They discussed, among other things, how to better coordinate as the countries both face International Monetary Fund (IMF) repayments. Argentina and Egypt are the two largest IMF loan programs. The call comes as negotiations between Argentina and the IMF have taken a turn for the worse. Argentina is struggling with repayments, and has delayed paying its debt until the end of the month. Meanwhile, the IMF has only committed to a further loan of USD1 billion — far less than what the Argentine government asks.
BRAZIL
Chinese firm BYD to build electric vehicles in Brazil
On 4 July 2023, Chinese manufacturing conglomerate BYD announced it had bought a former Ford plant in Camaçari, Bahia to develop its first electric vehicle plant outside of Asia. BYD will invest USD624 million in the site to build electric cars, vans, buses, and process lithium and iron phosphate cells. The factories, which should be fully operational by the second half of 2024, could generate more than 5,000 jobs directly and indirectly.
Paramilitaries involved in drug kingpin’s escape
On 4 July 2023, Brazilian Federal Police revealed the identities of 11 men believed to be part of a paramilitary group controlled by Antônio Joaquim Mota, a drug trafficking boss who escaped arrest last week. Among those named were a police officer, army reservist, neo-Nazi, politician and shooting club owner. Six men were arrested during a raid on the Paraguayan border, but Mota and five of the men staged a spectacular escape by helicopter. Brazilian investigators have accused the Paraguayan police of sabotaging the operation, but the police force denied the allegations and claimed Brazilian authorities were acting on bad intelligence.
Lower chamber approves tax reform
On 7 July 2023, the lower chamber of Congress voted 375 to 113 in favor of the government’s proposed tax reform. If approved by the Senate, the reform would simplify the tax system and bring national, state and municipal taxes under one system. The reform also seeks to reduce bureaucracy in the tax system, aligning its standards with those of OECD countries. Brazil has one of the highest tax rates in the world, but offers some of the lowest rates of return for citizens. A recent study showed that the average Brazilian’s taxes are equivalent to nearly five months of work per year.
CHILE
Government modifies electricity rationing decree after heavy rains
On 4 July 2023, the Energy Ministry announced it will modify the 2021 electricity rationing decree after intense rainfall caused overflows at key hydroelectric dams across south and central Chile. The original decree, which became effective in August 2021 when the country was facing severe droughts, aimed to maintain water levels to prevent electricity rationing which could result in power outages. But after June’s heavy rains, overflowing reservoirs caused damage to vital infrastructure such as roads and homes. The modifications will roll back the 2021 controls to help relieve pressure on the system and prevent dams from overflowing.
BHP Billiton starts closing Cerro Colorado mine
On 3 July 2023, Australian mining firm BHP Billiton began winding down operations at its Cerro Colorado copper mine in Chile’s northern Tarapacá region, following government restrictions on its use of the local water supply. In 2021, local indigenous communities filed a lawsuit claiming that the mine’s heavy water use was disrupting local agriculture. The Supreme Court ruled in the residents’ favor. In 2022, the government ordered Cerro Colorado to stop using water from the nearby Lagunillas aquifer, leaving BHP with no choice but to close it. Operations will cease completely on 31 December 2023, although BHP hopes to resume operations in the future.
Corruption investigation hits Boric’s coalition
On 6 July 2023, the Public Prosecutor’s Office disclosed that eight investigations around the country are looking into alleged corruption by members of Boric’s ruling coalition government. The corruption case concerns the movement of money between former Antofagasta regional secretary Carlos Contreras and the charitable arm of the Democratic Revolution (RD), a party within Boric’s ruling coalition. Democratic Revolution lawmaker Catalina Pérez was ousted over her alleged role in the scandal, and several other members are suspected of having been involved. Now, authorities revealed that they are investigating nearly USD18 million worth of unexplained payments across eight regions of the country. The case has severely damaged Boric’s reputation.
COLOMBIA
Dissident FARC leader Iván Márquez presumed dead
On 6 July 2023, Segunda Marquetalia leader Iván Márquez was reported dead according to TV news show CM& — a claim that government officials have yet to confirm or deny as they verify the information. Márquez was a former leader of the armed group FARC, which in 2016 agreed to a peace deal with the government of then-President Juan Manuel Santos. However Márquez broke with the FARC to create the dissident armed organization Segunda Marquetalia in 2019. In June 2022, he suffered severe injuries from a bomb attack while hiding out in Venezuela. According to CM&, Márquez died of complications from this attack after a year of recovery. Segunda Marquetalia has been negotiating with the government to secure a peace agreement since October 2022, and adhered to a ceasefire in January 2023 despite those talks stalling.
Security crisis in Buenaventura
On 6 July 2023, defense minister Iván Velásquez arrived in the coastal city of Buenaventura to supervise a special security meeting focused on a recent upsurge in gang violence there. Valle del Cauca’s governor previously asked the federal government to intervene. The request came after the criminal gang “Los Roberts” issued a threat to rival gang “Los Jalisco” over a dispute to control drug routes to Mexico. In response, Velásquez announced that police and military forces would increase their surveillance of the city. Buenaventura, which has a large port on Colombia’s remote Pacific Coast, has become a key transit point in the drug supply chain from the interior of Colombia to Mexico and the United States.
One miner dead, 15 injured in alleged ELN bombing
On 4 July 2023, a miner in the department of North Santander near the Venezuela border died in a bomb attack, the Colombian Mining Association (ACM) reported. The victim, who worked for the company MINEX, was traveling with a convoy of 16 workers — all of whom were injured in the attack. According to newspaper El Espectador, the ELN is allegedly responsible. A rise in violence targeting miners is driving a 4% fall in mineral exploration investment and a 33% reduction in mining budgets, the Colombian Chamber of Oil, Gas and Energy (CAMPETROL) estimates. The ELN agreed a truce with the government that went into effect on 6 July 2023.
ECUADOR
Ecuador’s largest wind farm will come online in 2025
On 6 July 2023, President Guillermo Lasso announced that Spanish conglomerate Cobra plans to construct a USD181 million wind farm in the northern province of Loja. The Villonaco III project will come online in 2025 and intends to generate 110 megawatts (MW) of electricity, which would make it the largest wind farm in the country. Energy Minister Fernando Santos said the government hopes to sign more contracts with private companies in coming weeks to secure renewable energy projects amounting to about 500MW. Ecuador has been looking to increase its electric supply in recent months after hydroelectric power shortages forced electric plants to resume their use of expensive diesel fuel. The country’s energy demand increased by 10% between May 2022–2023.
Indigenous confederation CONAIE will not back any presidential candidate
On 5 July 2023, influential indigenous confederation CONAIE announced it will not back any presidential candidate in the 20 August 2023 elections. The country’s largest civil society organization has previously worked with its political arm, the Pachakutik (PK) party, to present these candidates in years’ past. However, CONAIE and PK have grown apart in recent months over political differences. PK will endorse candidate Yaku Pérez, who CONAIE refuses to support. CONAIE mobilized a large general strike in the summer of 2022 that brought the country to a standstill. Now, it is calling for a reorganization of PK to take place in the coming months.
Ecuador needs 460MW of electricity before October dry season begins
On 4 July 2023, digital outlet Primicias announced that the country will face energy shortages unless it can find 460 additional megawatts (MW) of electric supply by the dry season starting this October. National electricity corporation CELEC expects the droughts to be the worst the country has seen in seven years, mainly due to El Niño. Ecuador will not be able to import the necessary electricity from Colombia as it has in previous years, since the latter country is also preparing for droughts. One solution Ecuador has proposed is hiring Turkish company Karpowership, which would provide between 30 and 470 MW from ships acting as floating power plants. While the government has hoped to expand its electric supply through new renewable energy projects, progress has been slow. An additional 500MW in future projects have yet to secure signed contracts.
MEXICO
Major oil platform explosion affects gas production
On 7 July, the Nohoch-Alfa oil platform registered a major explosion that killed two people, injured eight and left one missing. The platform is part of Cantarell, the oil complex in the Gulf of Mexico belonging to state-owned oil enterprise Pemex. The offshore explosion east of Campeche State occurred while workers were maintaining gas lines. The company later reported the loss amounted to about 450,000 oil barrels and more than 560 million cubic feet of gas — about 11% of Pemex’s daily natural gas production. Cantarell, one of the largest oil fields in the world, produced more than two million barrels of oil a day last year — about 65% of Pemex’s yearly production. Pemex Director Octavio Romero Oropeza said it took 10 fire-fighting ships and five helicopters to completely extinguish the fire, and that crude oil and gas production will be affected by several thousand barrels.
Authorities mobilize in Estado de México after finding cartel messages
On 5 July, security authorities found bags with human remains hanging from a pedestrian bridge in central Estado de México’s capital, Toluca. Two pieces of cardboard with intimidating messages for a local newspaper owner accompanied the body parts, which were allegedly sent by criminal group “La Familia Michoacana.” The incident takes place only days after authorities found a similar message in the neighboring city of Metepec. The finding prompted heavy police mobilization from both local and state authorities. Estado de México has territories close to Mexico’s Tierra Caliente, a region including parts of Michoacán and Guerrero where a dispute between Familia and the rival Jalisco Cartel New Generation (CJNG) is playing out. Some 30 local cartels linked to national drug trafficking are also expanding in the area.
Tamaulipas interior secretary suffers armed attack
On 3 July, national security authorities informed the country that Héctor Joel Villegas González, the interior secretary of northern Tamaulipas state, survived an armed attack as he was traveling along the Reynosa-San Fernando federal highway. The attack took place in the territory under dispute between groups of the Gulf Cartel and the Northeast Cartel. Tamaulipas Governor Américo Villarreal Anaya said he would file a police report with the local Attorney General’s Office. Separately, President Andrés Manuel López Obrador said he would deploy 100 soldiers to patrol the area, and instructed Navy Secretary Rafael Ojeda to travel to the state to reiterate the federal government’s support. Civil society and business representatives are concerned that this attack could signal a heightened period of violence.
PERU
Agriculture GDP fell by 20% in April
On 6 July 2023, Finance Minister Álex Contreras announced that the agricultural sector’s GDP had experienced its biggest-ever fall of 20% in April 2023 compared with the same month of 2022. Contreras attributed the fall to adverse weather, droughts and floods. Among the affected crops were wheat (with a 49.9% fall in planted hectares), quinoa (- 34.4%), corn (- 23.2%), and potatoes (- 18.6%). The ranching sector was also affected, with about 44,000 animals becoming “lost” as a consequence of adverse climate conditions, Contreras said. However, the minister expects GDP levels to significantly recover in Q3 and Q4 of 2023 due to congressional support measures, such as a scheme that compensates farmers with USD222 per hectare of damaged crops.
Telefónica sells fiber optic cable in Peru
On 6 July 2023, Spanish telecommunications company Telefónica announced it sold 64% of its affiliate controlling fiber optic cable service in Peru to US investment fund KKR and the Peruvian affiliate of Chilean telecommunications company, Entel. Telefónica did not disclose the sale price, but said the move would reduce its debt by USD220 million. In 2021, Telefónica also sold its fiber optic cable service in Chile and Colombia to KKR. KKR seeks to expand service in Peru, scaling the service from 2 million homes to an expected 5.2 million by 2026. The company hopes to establish itself as a leading provider along the Andes mountain chain.
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