Regional Pulse: 12 April 2023

Southern Pulse
12 min readApr 12, 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

  • Finance ministers to discuss food, energy, and earth minerals with US Senators
  • Pixart inaugurates computer, phone, and chip factory
  • Protesters assault Buenos Aires province’s security secretary

BRAZIL

  • Standstill between Senate and Lower Chamber over presidential decrees
  • President’s advisor meets Putin in Moscow
  • Government to cancel privatization of water and sanitation services

CHILE

  • Energy minister agenda shows foreign appetite for green hydrogen
  • Anglo American to research green hydrogen uses in the largest metropolitan areas
  • Central Bank indicates continued high interest rates

COLOMBIA

  • Mining strike in Bajo Cauca suspended
  • Inflation reaches 24-year high
  • Oil production dips by 2.15% due to unrest

ECUADOR

  • El Edén oil field reopened after agreement with protestors
  • Income from oil exports falls by 56%
  • Financing of fiscal deficit uncertain

MEXICO

  • Security operation prompts violent mobilizations and road blockades
  • Government purchases private power plants in new energy nationalization effort
  • Mexico inaugurates regional anti-inflation alliance in Latin America

PERU

  • State of emergency extended in Puno
  • Mining investment to fall by 18.5% in 2023
  • Scotiabank cuts GDP growth forecast to 1.9%

KEY DEVELOPMENTS IN FULL

ARGENTINA

Finance ministers to discuss food, energy, and earth minerals with US Senators

On 4 April 2023, Finance Minister Sergio Massa received a bipartisan delegation of US Senators. Newspaper Ámbito reported that Massa and the group of senators, led by John Cornyn of Texas, discussed how to increase bilateral cooperation on strategic resources such as food, energy, and earth minerals. Local analysts speculate that the Argentine government has been seeking support in Washington DC to negotiate better payment terms with the International Monetary Fund agreement and that discussions on commodities may be part of the negotiations.

Pixart inaugurates computer, phone, and chip factory

On 4 April 2023, the Argentine company Pixart inaugurated its factory for computers, phones, chips, and robots in the municipality of Escobar, in the metropolitan region of Buenos Aires. The USD8 million project started being built in 2019. The new factory will employ only 25 workers, none of them blue collar, as 90% of the operations will be executed by robots. Also, all of its energy will be supplied by solar panels, making it a cutting-edge project in the region. Pixart has 25 years in the market and has already had clients including the national government, local governments, the Argentine Army, and other governments in the region. The new plant will produce components for companies in the United States, Japan, and China.

Protesters assault Buenos Aires province’s security secretary

On 4 April 2023, Buenos Aires province’s public safety secretary, Sergio Berni, was physically assaulted by bus drivers protesting against insecurity, triggered by the murder of a bus driver at the hands of armed robbers. The demonstrators cut through a busy highway in the municipality of La Matanza, the most densely populated in the metropolitan area. The bus driver’s murder prompted conservative opposition politicians to call for greater police control, while the governor of Buenos Aires province, Axel Kiciloff, baselessly claimed that the opposition had provoked the bus robbery. Buenos Aires province is home to one of every four Argentine voters and will be key to the presidential elections this November.

BRAZIL

Standstill between Senate and Lower Chamber over presidential decrees

On 8 April 2023, Senate President Rodrigo Pacheco and Lower Chamber Speaker Arthur Lira published op-eds in Folha de São Paulo newspaper about the gridlock that is keeping Congress paralyzed. The dispute between the Senate and the Lower Chamber is about how presidential decrees are voted on in the legislative branch. These decrees have always been voted on by a committee with an equal number of senators and representatives, but in the pandemic this was changed due to in-person restrictions, and the Speaker now appoints a representative to be the rapporteur of the decrees. The Senate wants to go back to the old formula, but Speaker Lira is resistant, and as a result there is a standstill in the votes in Congress.

President’s advisor meets Putin in Moscow

On 7 April 2023, Russian President Vladimir Putin received the president’s foreign affairs advisor Celso Amorim in Moscow. Amorim’s trip was not announced in advance by the Brazilian government and was reported by the television channel CNN Brazil. In the same week, President Luis Inácio Lula da Silva suggested that the key to ending the war would be for Russia to withdraw from the Ukrainian territory invaded last year, while Ukraine should allow the annexation of Crimea, invaded by Russia in 2014. Local analysts noted that the trip may suggest that the Russians see the relationship with Brazil as strategic, as Amorim is not even a member of the ministerial cabinet and yet was received by head of state Putin.

Government to cancel privatization of water and sanitation services

On 5 April 2023, President Luiz Inácio Lula da Silva signed a decree undoing the 2020 legislation that facilitated private investment in the sanitation sector. The presidential decree allows state-owned water companies to operate the service without holding a bidding process. Local analysts and economists noted that the previous legislation had allowed dozens of bids and attracted USD17 billion in private investment for cities deprived of proper water and sewage systems. Lula’s left-wing Workers Party (PT) has long campaigned against the privatization of water and sanitation services.

CHILE

Energy minister agenda shows foreign appetite for green hydrogen

On 6 April 2023, newspaper La Tercera disclosed the list of meetings that Energy Minister Diego Pardow held with foreign investors interested in exploring green hydrogen in the country. Minister Pardow was sworn in in September 2022. Since then, he met executives of Australia’s Fortescue Future Industries (FFI), which has a partnership with the Energy Ministry and the state-run development agency CORFO to allocate public land to green hydrogen projects. Another meeting took place with France’s Total Energie, whose local subsidiary company is in the research phase of the largest nationwide project of green hydrogen, which aims to produce 800,000 tons each year in the southern Magallanes region. Other meetings included the Foundation of the Green Hydrogen Organisation, based in Switzerland, and the Copenhagen Infrastructure Service Company, which still has no projects in the country.

Anglo American to research green hydrogen uses in the largest metropolitan areas

On 5 April 2023, website Reporte Minero reported that the mining giant Anglo American and the Catholic University of Santiago started a joint research project about the uses of green hydrogen fuels in Chile’s largest metropolitan areas. Anglo American sees a potential for consumption of clean fuel in the area of 8 million people that comprises the Santiago and the Valparaíso regions, as Chile tries to decarbonize. A previous study by consulting firm McKinsey, sponsored by the Energy Ministry, found that the country has the potential to produce the world’s cheapest green hydrogen by 2030 and that this new industry might increase the country’s overall economy output by 10%.

Central Bank indicates continued high interest rates

On 5 April 2023, Central Bank President Rosanna Costa appeared before the Senate economics committee and signaled that persistently high inflation will delay the interest rate drop. Costa said that her outlook for economic activity has improved somewhat in recent months and the final result for the year should be in the range of a 0.5% recession to 0.5% growth. Costa insisted that her main concern is to bring inflation, which is at about 10%, to the 3% target by the end of the next two years.

COLOMBIA

Mining strike in Bajo Cauca suspended

On 5 April 2023, miners in the Bajo Cauca region of Antioquia suspended their strike, which had been ongoing since 2 March 2023 in protest at the government’s crackdown on illegal mining. The announcement came after President Gustavo Petro agreed to establish a technical council to tend to the needs of protestors, revise landownership in the area to ascertain exploitation rights, and seek technological and commercial alternatives that would benefit gold mining in the region. The strike had paralyzed the region for over a month, isolating around 250,000 inhabitants and provoking clashes between the government and the armed group Clan del Golfo, whom the former accused of being behind the disruption. This led to a breakdown in the ceasefire between the government and the Clan del Golfo on 13 March 2023.

Inflation reaches 24-year high

On 5 April 2023, the Department of Statistics (DANE) reported that inflation grew by 1.05% in March 2023, making the inflation rate for the year (until March 2022) stand at 13.34%. According to DANE’s figures, inflation is being mainly driven by increases in food and beverages, followed by water, gas, electricity, and transport. Inflation is now at the highest it has been since March 1999, when it reached 13.51%. It has outpaced that of similar economies in the region, and the projections of 18 economists surveyed by Bloomberg. The Central Bank had increased its interest rate to 13% on 30 March 2023 and further increases are now expected. They estimate, however, that inflation will return to its intended range of 2% to 4% in March 2024. According to Central Bank estimates, the economy will grow by 0.8% in 2023, compared to 7.5% in 2022.

Oil production dips by 2.15% due to unrest

On 5 April 2023, the National Hydrocarbon Agency (ANH) reported that oil production in February 2023 had dipped by 2.15% when compared to January 2023 (from 773,565 average daily barrels to 757,339 daily barrels), mainly due to production cuts in oil fields in the regions of Arauca and Meta. According to economic newspaper Portafolio, these cuts are explained by recent protests and strikes in those regions. However, production had increased by 2.29% compared to February 2022. The outlook for gas was more positive, with production in February 2023 increasing by 5.98% when compared to January 2023, and by 0.22% compared to February 2022.

ECUADOR

El Edén oil field reopened after agreement with protestors

On 5 April 2023, protestors from the Kichwa community of El Edén, in the Ecuadorian Amazon, reached an agreement with state oil company Petroecuador to resume oil production in the area. The oil field had been paralyzed by protestors since 21 February 2023, after the local community argued that a series of concessions by Petroecuador to the community agreed in June 2021 had not been fulfilled. El Edén oil field produces around 12,000 daily barrels of oil, while national output sits at an average of 459,757 barrels per day.

Income from oil exports falls by 56%

On 4 April 2023, the Finance Ministry revealed that income from oil exports in the first term of 2023 had fallen by 56% when compared to the same period of 2022 (from USD678 million to USD301 million). Furthermore, according to a former finance minister, it is unlikely that Ecuador will reach its budgeted income of USD3.8 billion in oil exports in 2023. As mining minister Fernando Santos revealed, Ecuador had failed to reach the intended level of oil production for 2023, and the average barrel price had fallen below the projected USD65. As a result, Ecuador’s fiscal deficit has grown beyond what was expected, at a time when its risk rating is at a high, meaning that financing will be increasingly costly.

Financing of fiscal deficit uncertain

On 4 April 2023, following a downfall in oil exports, Ecuador’s state deficit will now be larger than predicted (USD2.8 billion instead of USD2.6 billion) and will need to seek additional financing. However, due to recent political and economic unrest, Ecuador’s risk rating has sky-rocketed above 1,900 points, translating into interest rates of around 22%. Furthermore, loans from multilateral institutions could only cover around USD400 million, meaning that the government might have to resort to loans from other governments, such as China, according to experts consulted by digital news outlet Primicias. An alternative is to delay payments to service providers, states, and institutions. As of April 2023, Ecuador is behind on USD802 million in payments to institutions and suppliers.

MEXICO

Security operation prompts violent mobilizations and road blockades

On 9 April 2023, members of the Armed Forces seized a ton of drugs from a pick-up truck in Nayarit, which prompted shootings, road blockades, and the burning of at least six vehicles. Local inhabitants reported the burning of tyres, which prevented security forces getting through to exert control. The government of Nayarit issued a statement in which it clarified that the operation aimed at combating crime in the area and that there were no deaths or injuries reported among the inhabitants. Nayarit is a state occupied by organized crime leaders as a center of operations for money laundering, especially in the tourist areas bordering Jalisco and Sinaloa, where criminal groups are waging a turf war.

Government purchases private power plants in new energy nationalization effort

On 5 April 2023, President Andrés Manuel López Obrador announced an agreement with Spanish electricity company Ibedrola to acquire from it 13 power plants, which will be operated by the state-owned Federal Electricity Commission (CFE). The acquisition will cost the government around USD6 billion with which CFE will go from generating 39.6% to 55.5% of all energy in the country, making it the leading company in its sector. Iberdrola has been the target of attacks from López Obrador’s administration since he took office, despite the fact that it has been the largest private company in the business of energy production. Members of the manufacturing sector favor the announcement, while private enterprises seem to be more cautious. President López Obrador expects that by the end of his six-year term, which ends in September next year, CFE will be generating around 65% of all electricity in the country.

Mexico inaugurates regional anti-inflation alliance in Latin America

On 5 April 2023, President Andrés Manuel López Obrador led a virtual meeting with 11 Latin American leaders and presidents, in which they agreed to carry out nine joint actions with the aim of containing inflation and food prices in the region. Agreements include the creation of a technical working group to determine regional cooperation mechanisms for commodities and inputs, particularly fertilizers, as well as the adoption of trade facilitation measures including technology transfer and capacity building cooperation. Analysts argue that though the message was given along economic lines, it had a strong political and diplomatic component: Mexico wanting to show its muscle in continental leadership, underpinned by its main allies and the new government of Brazil, Latin America’s largest economic giant, which was largely absent from regional mechanisms during the past Bolsonaro administration. The group, formed by Argentina, Belize, Bolivia, Brazil, Chile, Colombia, Cuba, Honduras, Mexico, Saint Vincent and the Grenadines, and Venezuela will congregate at the beginning of May in Cancun, where different members of the business sectors, as well as high-level authorities from participating countries, will be invited.

PERU

State of emergency extended in Puno

On 6 April 2023, President Dina Boluarte decided to extend the state of emergency in the southern region of Puno, which has been in place since February 2023, by another 60 days. The new state of emergency, however, allows police to participate alongside the army in maintaining control. The original state of emergency decree of February 2023 had tasked public order exclusively to the army. A curfew and restrictions on the rights of movement and assembly will remain in place until June 2023. While protests in much of Peru have abated, unrest continues in Puno.

Mining investment to fall by 18.5% in 2023

On 6 April 2023, Scotiabank predicted that mining investment will fall by 18.5% in 2023. According to Scotiabank, this drop is mainly due to a reluctance by investors to initiate new projects amid social and political unrest. However, the Mining Ministry (MINEM) hopes that companies will invest in extending the operational life of currently active mines. According to MINEM, these extensions could allow Peru to remain on course to receive around USD53 billion in investment by 2030. The minister of energy and mining, Óscar Vera, was optimistic about the prospects of copper, expecting demand to grow, particularly in China, and production to reach new highs.

Scotiabank cuts GDP growth forecast to 1.9%

On 4 April 2023, Scotiabank downgraded its forecast on Peru’s annual GDP growth to 1.9%. In October 2022, this prediction stood at 2.4%, which was reduced to 2.1% in February 2023. According to the bank, these changes are due to adverse weather, as well as to the social and political unrest that have shaken the country since December 2022, when former president Pedro Castillo attempted a self-coup and was impeached. Scotiabank expects growth to pick up in the rest of the year, as long as further disruptions are avoided. While protests seem to have abated in certain parts of the country, the southern region of Puno, with a large mining industry, will remain under a state of emergency until June 2023.

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Southern Pulse

Southern Pulse provides strategic advisory services to help businesses operate successfully in Latin America.