Regional Pulse: 13 June 2023

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

We help businesses operate successfully in Latin America. Looking for something more tailored to your needs? Let’s chat.

You can also follow us on LinkedIn.

KEY DEVELOPMENTS

ARGENTINA

• Medusa hacker attack takes down securities regulator’s website
• Half of summer season’s soy has yet to sell
• Néstor Kirchner pipeline to open on 20 June

BRAZIL

• Congress and Supreme Court debating demarcation of indigenous lands
• Paraná lawmaker Dallagnol removed from office
• European Nuclear Research Organization (CERN) courts Brazilian Congress

CHILE

• Constitutional Council holds inaugural session
• Sanctioned Russian mining company explores opportunities in National Lithium Strategy
• Inter-American Development Bank approves USD400 million for hydrogen industry

COLOMBIA

• Government and ELN agree to six-month ceasefire
• Prosecutor’s office to investigate Petro’s electoral fraud allegations
• Exports fell 32% in April

ECUADOR

• No bids for USD332 million electricity project
• Indigenous confederation calls for national protests on 13 June 2023
• Rafael Correa outlines medium-term presidential ambitions

MEXICO

• Ruling party defines process to select presidential candidates
• Government approves new regulations for remote work
• Foreign secretary and Mexico City mayor to pursue presidential candidacy
• Organized crime blocked federal highway to steal luxury vans

PERU

• Renewable energy production to double within a year
• Mining investment falls by 19% in Q1 2023
• Oil tanker kidnapped in the Amazon

KEY DEVELOPMENTS IN FULL

ARGENTINA

Medusa hacker attack takes down securities regulator’s website

On 8 June 2023, hacking group Medusa carried out a ransomware attack on the National Securities Commission (CNV), taking down the regulator’s website. Medusa said that if the government did not pay USD 500,000 in bitcoin it would publicly release 1.5 terabytes of financial information. CNV said the attack was contained within a day and that it did not pay the ransom because the information was already public.

Half of summer season’s soy has yet to sell

On 8 June 2023, local news outlet Ámbito reported that more than half of the soy produced in Argentina during the 2022–2023 summer growing season has yet to sell. According to the Rosario Board of Trade, severe drought and the foreign currency market crisis may have wiped out an estimated USD20 billion from Argentina’s soy market. Despite lower than average yields, producers are still withholding crops. The National Secretariat of Agriculture reports soybean marketing is down seven points this year. Producers are stockpiling soybean yields, largely because of the discrepancy between the official and unofficial conversion rates of US dollars. The sales slump means Argentina is now at risk of losing its status as the world’s main soybean exporter to Brazil.

Néstor Kirchner pipeline to open on 20 June

On 9 June 2023, Secretary of Energy Flavia Royón confirmed that the Néstor Kirchner pipeline will start operations on 20 June. On its first day, plant operators will open a valve allowing natural gas to flow from the Vaca Muerta shale fields into the newly-completed pipeline. That pipeline will then take 20 days to fill to maximum capacity. Royón estimated that the project will reduce energy costs by USD4 billion in 2024, which refers to money saved by consumers and on energy subsidies the government currently pays out. The new pipeline will also reduce imports and even allow Argentina to become an energy exporter. Economy Minister Sergio Massa has put out tenders for the second stage of the project. Chinese company Power China has shown interest but has not signed a contract.

BRAZIL

Congress and Supreme Court debating demarcation of indigenous lands

On 7 June 2023, Supreme Court Justice André Mendonça postponed a judgment on the timeframe to demarcate indigenous lands in Brazil. The judgment would determine whether lands could only be demarcated as indigenous territory if they were occupied by indigenous communities when the 1988 Constitution was promulgated. Some analysts believe Mendonça deliberately delayed the judgment to help conservatives in Congress pass the so-called “time frame” bill, which would officially limit the demarcation of Indigenous territories. The Chamber of Deputies approved the bill last week, bringing it to the Senate for a vote. Brazil’s agribusiness caucus — the largest within Congress — supports the bill because it would limit the expropriation of land for demarcation as indigenous territory. However, the country’s indigenous populations and allies see the bill as a threat to indigenous communities and the environment.

Paraná lawmaker Dallagnol removed from office

On 6 June 2023, a committee in the lower chamber of Congress confirmed the Superior Electoral Court’s decision to overturn the election of Paraná lawmaker Deltan Dallagnol. The decision removes him from his position as federal deputy. Dallagnol rose to prominence as one of the lead prosecutors of Operation Lava Jato, a corruption investigation centered on the former Lula and Rousseff administrations. He was found to have violated an act requiring candidates to either have a clean record or to have at least eight years since a prior conviction. Dallagnol had several pending investigations and was dismissed from his previous role as a prosecutor. Dallagnol has the right to appeal the decision, and many of his allies on the right claim that the ruling is part of a vendetta led by President Lula and his supporters in the judiciary. However, Dallagnol is legally required to stand down from his role in the meantime.

European Nuclear Research Organization (CERN) courts Brazilian Congress

On 9 June 2023, Science and Technology Minister Luciana Santos visited the European Organization for Nuclear Research (CERN) with a delegation of federal deputies. The world’s largest particle physics laboratory seeks to replace Russian scientists and technologists. To begin working with CERN, Brazil would need to become an associate member and make a yearly contribution of USD12 million. The Minister’s visit was part of CERN’s effort to convince the Brazilian government to ratify associate membership. The research organization has already extended Brazil’s ratification deadline by a year. Up to USD500 million in technological supplies contracts with CERN is up for grabs.

CHILE

Constitutional Council holds inaugural session

On 7 June 2023, the Constitutional Council responsible for drafting Chile’s new constitution was inaugurated. It elected lawyer and economic advisor Beatriz Hevia as its new council president. The Constitutional Council will draft a new constitution to replace the Pinochet-era version. A previous redraft failed to obtain enough votes in September 2022, as conservative voters disagreed with its many progressive elements. The council is made up primarily of right-wing Republican party members, including Hevia. Hevia believes that the new constitution should not differ much from the current version. Chilean President Gabriel Boric has promised to stay within the margins of the drafting process and will not continue to seek changes to the country’s constitution if the council’s new draft does not pass.

Sanctioned Russian mining company explores opportunities in National Lithium Strategy

On 6 June 2023, Chilean news outlet La Tercera reported that representatives of Russian metals company Nornickel met with mining chief Willy Kracht in mid-May. Nornickel’s representatives inquired about the requirements to participate in the Chilean lithium business under the new National Lithium Strategy. Nornickel is owned by the oligarch Vladimir Potanin, one of Russia’s richest men. He has been under US-imposed sanctions since the 2022 Russia-led invasion of Ukraine. Nornickel, which reported revenues of USD16.9 billion in 2022, produces 219,000 tons of nickel, 2.79 million ounces of palladium and 433,000 tons of copper annually. It aims to enter the lithium sector and start producing 45,000 tons of lithium per year by 2030.

Inter-American Development Bank approves USD400 million for hydrogen industry

On 7 June 2023, the Inter-American Development Bank approved a USD400 million loan to boost Chile’s hydrogen industry. The loan will be available to institutions, companies, enterprises and workers in the hydrogen production supply chain to help finance new projects, develop internal demand, hire workers and create intermediate goods and services that contribute to the growth of the sector. The money will also go towards developing innovative technologies and promoting entrepreneurship in the hydrogen industry. Chile currently has the highest carbon emissions per capita in Latin America — double that of other major economies in the region, including Brazil.

COLOMBIA

Government and ELN agree to six-month ceasefire

On 9 June 2023, the government and ELN guerrillas agreed to a six-month ceasefire. They reached the agreement after 39 days of negotiations in Havana, Cuba. Both sides agreed to a number of monitoring mechanisms to ensure they adhere to the ceasefire, with 3 August 2023 outlined as the date when the agreement will come into full effect. On 31 December 2022, President Gustavo Petro prematurely announced a ceasefire that the ELN denied. Further rounds of negotiations to reach a complete peace agreement are expected to take place in Venezuela in coming months.

Prosecutor’s office to investigate Petro’s electoral fraud allegations

On 9 June 2023, the prosecutor’s office announced it would open an investigation into President Gustavo Petro’s campaign financing during the August 2022 presidential elections. Petro’s party, Pacto Histórico, has been under investigation by the electoral council (CNE) since February 2023 following allegations that it exceeded legal campaign budget limits. But new allegations have surfaced in recent weeks, prompted by audio recordings of Petro’s then-campaign manager Armando Benedetti allegedly stating “we will all go to prison” if the money’s origin were revealed. Unlike the CNE, the Prosecutor’s office can call witnesses to testify and prosecute. Breaching campaign financing rules is a criminal offense punishable by several years of jail time.

Exports fell 32% in April

On 6 June 2023, the national statistics office (DANE) reported that the value of exports fell 31.5% year-over-year April 2023. Exports fell to USD3.7 billion, while the figure for the previous three-month period in 2022 was USD5.4 billion. The fall was mainly driven by a 43% drop in the value of hydrocarbon exports. The US is the main destination of Colombian goods, purchasing 23.6% of its exports. Trade with the US fell by 34%, driven by a 66% drop in the value of oil exports and a 42% drop in the value of coffee.

ECUADOR

No bids for USD332 million electricity project

On 8 June 2023, energy minister Fernando Santos told digital outlet Primicias that a project to connect Amazonian oil-producing areas to the electricity supply network had failed to attract any bidders. The project, valued at USD332 million, sought to supply oil fields with electricity produced at the Coca Codo Sinclair hydroelectric plant. The 290km electrical connection was intended to decrease oil fields’ reliance on diesel-powered generators. State oil company Petroecuador spends USD355 million annually on diesel for electricity generators. Bidders were dissuaded by the uncertainty surrounding the largest oil block in the Amazon, the Yasuni. Ecuadorians will hold a referendum about whether to continue exploiting the block in August 2023.

Indigenous confederation calls for national protests on 13 June 2023

On 7 June 2023, the national indigenous confederation (CONAIE) announced it will hold nationwide demonstrations on 13 June 2023. That date marks the one-year anniversary of the general strike that brought the country to a standstill. CONAIE seeks to protest extractivism in Ecuador, arguing that the government had reneged on its promise to submit new exploitation projects for referendum votes. The confederation also announced its support for stopping the exploitation of the Yasuni oil-field, which will be decided during an August 2023 referendum. The referendum will coincide with the country’s legislative and presidential elections.

Rafael Correa outlines medium-term presidential ambitions

On 7 June 2023, former president Rafael Correa told Spanish newspaper El País he plans to return to Ecuador from Belgium to run for president in 2027 if his party Revolución Ciudadana (RC) wins in the August 2023 presidential elections. Correa moved to Belgium after being sentenced to an eight-year jail sentence in Ecuador for corruption and is barred from running for office there. Despite this, Correa argued that the RC would eventually let him run if they win in the upcoming elections. RC won the popular vote in the February 2023 local elections, including the main cities of Quito and Guayaquil.

MEXICO

Ruling party defines process to select presidential candidates

On 11 June 2023, political leaders of the ruling MORENA party announced the selection process to define their candidate for the June 2024 presidential elections. The process, which will last 76 days, will begin on 12 June and conclude on Friday, 16 June. Candidates must resign from any public office on the day of their registration. At most, six candidates will be able to participate in the process. For the remaining 69 days (19 June to 27 August), candidates will hold meetings and tours across the country in “austere” assemblies. Results will be announced on 6 September after polling by MORENA’s Polling Committee and private pollsters concludes.

Government approves new regulations for remote work

On 09 June 2023, the Secretariat of Labor and Social Security (STPS) published a new official norm establishing safety and health conditions for remote workers The new norm demands all employers to proportionally pay for work supplies and services, such as internet, electricity, computers, tablets, mobile phones and printers. Under the new rules, an employee cannot be forced to work from their home if it is not secure or has issues with lighting and ventilation. Additionally, employers must honor a “right to disconnection” for employees working from home at least 40% of the time.

Foreign secretary and Mexico City mayor to pursue presidential candidacy

On 06 June 2023, Secretary of Foreign Affairs Marcelo Ebard Casaubón announced he would resign from his position on 12 June to seek the ruling MORENA party’s presidential candidacy. Similarly, Claudia Sheinbaum announced that she would step down as Mexico City’s mayor on 16 June to pursue the same candidacy. Other hopeful candidates immediately followed, including legislators Manuel Velasco (Green), Ricardo Monreal (MORENA) and Gerardo Fernández Noroña (Labor Party). Other likely candidates, such as Interior Secretary Adán Augusto López, decided to wait until MORENA officially requires hopeful candidates to resign from public office on 15 June.

Organized crime blocked federal highway to steal luxury vans

On 09 June 2023, a group of gunmen closed both sides of the central Aguascalientes-León federal highway (CF43D) near Lagos de Moreno City. The gunmen, allegedly part of an organized crime group, intercepted a tractor trailer to steal at least three luxury vans. The driver of the stolen trailer said that a late-model vehicle blocked his path, and several individuals armed with AK-47s got out and threatened him and his co-pilot. Cargo theft continues to be one of the main risks for business transportation in central Mexico. This theft is a more common activity for small armed gangs than a secondary activity for larger drug trafficking organizations.

PERU

Renewable energy production to double within a year

On 11 June 2023, newspaper El Comercio reported that renewable energy will account for 10% of Peru’s total electricity production by 2024. Right now, that figure sits at about 5%. According to a spokesperson from Spanish energy company Acciona Energía, Peru produces about 700MW from renewable energy and expects that to increase by 720MW within the coming months. Acciona is building a wind farm that would produce an estimated 1357MW, while energy companies Engie and Enel are building additional wind and solar farms to reach the total 720MW. The Peruvian Society of Renewable Energies said that renewables will account for 20% of Peru’s electricity by 2030 if Congress passes a bill to promote solar energy.

Mining investment falls by 19% in Q1 2023

On 11 June 2023, the mining ministry (MINEM) published quarterly data revealing a 19.1% drop in the value of mining investments during Q1 2023 compared with the same period of 2022. Between January and April 2023, companies had invested USD1.17 billion into the country’s mining industry, compared with USD1.45 billion in 2022. MINEM had expected mining investments to increase by 6.4% in 2023. However, data so far seem to align closer with projections by the Central Bank, which forecasts a 16.7% fall by the end of the year. Mining regions were particularly affected by the protests that rocked Peru between December 2022 and March 2023. Despite certain improvements to supply chain security, investors remain cautious.

Oil tanker kidnapped in the Amazon

On 7 June 2023, members of the indigenous association Bajo Puinahua (Aidecobap) allegedly kidnapped two ships in the Amazonian department of Loreto. One of the ships transported 40,000 oil barrels, according to Canadian oil company PetroTal. PetroTal, which operates oil Block 95 in Loreto, further stated that Aidecobap had attacked a Peruvian navy vessel and severely injured an officer. According to PetroTal, the seizure of the ships forms part of an ongoing dispute with Aidecobap over royalty payments to residents in oil-producing areas.

Wherever you do business in Latin America, Southern Pulse has the expertise, the network, and the relationships to help solve your toughest operational challenges.

Want to learn more? Let’s chat.

CC BY-ND