Regional Pulse: 15 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

• Far-right Milei wins presidential primaries
• Primary election results suggest fragmented Congress
• Above-average winter temperatures drive down gas prices
• Argentina’s lithium industry plans for USD7 billion in investments

BRAZIL

• Amazon countries eye financing to strengthen Amazon protections
• Lula launches growth acceleration program pledging USD343 billion in investments
• Police probe Bolsonaro administration over gifted jewelry sales

CHILE

• Owners of Dominga mining project take their case to environmental court
• Boric rejects tax break for lithium producers
• President Boric’s key ally resigns

COLOMBIA

• Ecopetrol CEO investigated for electoral irregularities
• Petro negotiates exit of Glencore coal mine from La Guajira
• New energy minister hints at possibility of new oil contracts

ECUADOR

• Presidential candidate murdered
• Violence plagues campaign trail
• Government wants to overturn environmental license suspensions

MEXICO

• Official latest figures show poverty decrease, but access to benefits is lacking
• Government and opposition parties clash over mining regulations
• Mexico becomes top US trading partner

PERU

• Government to hand over Talara oil blocks to state company
• Mining investment reached new high in June 2023
• Keiko Fujimori investigated for illegal funding, belonging to a criminal organization

KEY DEVELOPMENTS IN FULL

ARGENTINA

Far-right Milei wins presidential primaries

On 14 August 2023, far-right libertarian Javier Milei Argentina won the largest share of votes in the country’s primary presidential elections. He received more than 30% of the vote. Candidates from the largest opposition coalition Juntos por el Cambio (JxC) came in second with a 28.3% share, while those from the ruling Peronist coalition came in third with 27.3%. Former security minister Patricia Bullrich won JxC’s primaries, and Finance Minister Sergio Massa won the Peronist nomination. The next round of elections will be on 22 October.

Primary election results suggest fragmented Congress

On 14 August 2023, Argentina’s largest opposition coalition, the center-right Juntos por el Cambio (JxC), received the highest share of votes in the nationwide legislative primary elections. If that trend continues in the 22 October general elections, JxC would control 107 of the lower chamber’s 257 seats. Meanwhile, the ruling Peronist bloc would have 94 seats, and the far-right La Libertad Avanza led by presidential candidate Javier Milei would have 40 seats. The constitutional threshold to pass legislation is 129 seats in the lower house. Thus, the primary results suggest there could be a fragmented Congress without any single coalition having a majority.

Above-average winter temperatures drive down gas prices

On 11 August 2023, state oil and gas company Enarsa canceled contracts for liquid natural gas (LNG) vessels, and companies closed wells as gas prices collapsed. Above-average winter temperatures have caused a sharp drop in Argentina’s demand for gas. After the fall in global gas prices in late 2022, Enarsa changed its contracting policies under the assumption that future prices would rebound. However, it did not foresee a further fall in gas prices. Now, Enarsa is negotiating the cancellation of a British Petroleum shipment scheduled for 15 August. It also canceled a contract for a TotalEnergies vessel, paying the French petroleum company compensation of USD5 million for breaking the contract.

Argentina’s lithium industry plans for USD7 billion in investments

During an event on 9 August 2023, Argentine Chamber of Mining Entrepreneurs (CAEM) President Franco Mignacco said an expected USD7 billion would be invested in Argentina’s lithium sector by 2030. Mignacco did not disclose any investors. The investment would make Argentina one of the world’s leading lithium producers. The country already has three projects in operation, five under construction, and a further 15 in advanced feasibility stages. The lithium industry has grown 56% in the last year and the sector directly employs over 4000 people.

BRAZIL

Amazon countries eye financing to strengthen Amazon protections

On 8 August 2023, Brazil hosted the Amazon Cooperation Treaty Organization summit. The organization’s eight member countries signed the Belém Declaration, which aims to promote sustainable development while protecting the rainforest from illegal mining and deforestation. While the declaration includes environmental and social protections, it does not include the commitment to stop deforestation by 2030 that Colombia’s President Gustavo Petro and environmentalists have been pushing for, nor would it halt oil drilling. The Inter-American Development Bank and Brazilian National Development Bank have both pledged to finance small green businesses in the Amazon region via the Green Coalition, with commitments of USD900 million and USD4.5 billion respectively.

Lula launches growth acceleration program pledging USD343 billion in investments

On 11 August 2023, President Luis Inácio Lula da Silva launched the Growth Acceleration Program (PAC for its name in Portuguese), which pledges to invest USD343 billion over the next seven years from public and private sources. The PAC includes a set of projects related to energy, infrastructure, transportation and climate change. State-run oil giant Petrobras could be a significant source for those investments, raising questions about the sustainability of the company’s finances. While Brazil does need to upgrade much of its infrastructure, experts have asked whether the country currently has the fiscal capacity for the planned investment. Lula launched PAC in 2007 during his second term, and it became a flagship initiative of his second term.

Police probe Bolsonaro administration over gifted jewelry sales

On 11 August 2023, the Federal Police raided the homes and offices of former President Jair Bolsonaro’s top aides and their families over the reselling of luxury jewelry Bolsonaro received as gifts from Saudi Arabian government officials. Police said Bolsonaro made USD70,000 after his aide Mauro Cid resold two luxury watches. Police believe Cid deposited the money in his father’s account. The police have also said that they will be questioning Bolsonaro and former first lady Michelle Bolsonaro over their involvement in reselling the gifts.

CHILE

Owners of Dominga mining project take their case to environmental court

On 10 August 2023, Dominiga mining project owner Andes Iron appealed the Antofagasta Environmental Court’s decision to reject the project. A ministerial committee unanimously rejected the USD2.5 billion mining and port project in January 2023, citing concerns that its proximity to a nature reserve would adversely affect sea life. The project is also controversial because former president Sebatián Piñera — who narrowly escaped impeachment in 2021 — tried to loosen environmental restrictions to clear the project while his family held a 56% stake.

Boric rejects tax break for lithium producers

On 11 August 2023, President Boric rejected calls from opposition politicians and the Chilean Chamber of Lithium to provide tax breaks on lithium revenues. The Chamber of Lithium represents the small and medium-sized lithium producers that control an estimated 60% of Chile’s lithium reserves. Chamber president Luis Gallardo warned that lithium policies are making small and medium-sized lithium producers think twice before making any investments.

President Boric’s key ally resigns

On 11 August 2023, former Minister of Social Development Giorgio Jackson resigned in relation to the “Agreements Case” corruption allegations against members of President Gabriel Boric’s ruling coalition. Jackson resigned as a Republican Party-led impeachment process against him was gaining traction. The corruption scandal erupted in June 2023 when reports surfaced that Jackson’s party, Democratic Revolution, had been making payments to non-governmental organizations using state funds. Two months later, prosecutors are now investigating 53 foundations that may have received an estimated USD500,000 in unsanctioned, state-funded payments. Jackson was Boric’s close personal friend and one of his last remaining supporters in government.

COLOMBIA

Ecopetrol CEO investigated for electoral irregularities

On 10 August 2023, the national electoral authority asked the national tax agency to provide fiscal information about Gustavo Roa, CEO of state oil company Ecopetrol. Roa is being investigated for his role as President Gustavo Petro’s presidential campaign finance manager in 2022. According to recent revelations by Petro’s son, the campaign received undeclared funding from dubious sources linked to organized crime that also exceeded electoral law limits. As finance manager, Roa would be criminally responsible for any campaign irregularities. The national electoral authority has been investigating Petro’s presidential campaign since February 2023.

Petro negotiates exit of Glencore coal mine from La Guajira

On 10 August 2023, President Gustavo Petro met with his Swiss counterpart to discuss the closure of Glencore’s Cerrejón coal mine in the northeastern state of La Guajira. The mine is the second-largest coal producer in the country, producing 19.7 million tons in 2022. Petro has argued that the region’s mines are diverting water away from local communities. The government enacted a decree in August 2023 that banned the expansion of current mines or new contracts, while also pledging to respect current contracts. Cerrejón pays about USD917 million in annual taxes and royalties to the state, and employs an estimated 12,000 people directly and indirectly.

New energy minister hints at possibility of new oil contracts

On 8 August 2023, the new Energy and Mines minister, Omar Andrés Camacho, told Congress that he intends to resume oil and gas exploration. In January 2023, his predecessor Irene Vélez announced the end of new oil and gas exploration contracts. Camacho’s policy turn was justified by the need to build up the country’s energy reserves before undertaking a transition to cleaner fuels. Estimates about Colombia’s oil and gas reserves have varied in previous months, with estimates forecasting a need to import foreign fuels sometime between 2024 and 2027.

ECUADOR

Presidential candidate murdered

On 9 August 2023, presidential candidate Fernando Villavicencio was murdered in Quito. Villavicencio, who was leading the electoral coalition Construye, was leaving an electoral meeting when he was shot by an assailant. Nine others were injured in the attack, including Congressional candidate Gisela Molina. The assailant was shot by security forces and later died. Six Colombian citizens have been arrested in relation to the case, but the responsible party has yet to be identified. Villavicencio rose to prominence as an anti-corruption campaigner, proposing to purge corruption. The electoral campaign has been riddled with more violence in recent days.

Violence plagues campaign trail

On 14 August 2023, local Revolución Ciudadana leader Pedro Briones was murdered in a small municipality near the coastal city of Esmeraldas. Revolución Ciudadana is the party of former president Rafael Correa. This is the latest assassination in an electoral campaign riddled with violence.

Government wants to overturn environmental license suspensions

On 7 August 2023, the government appealed the Constitutional Court’s decision to stop granting environmental licenses for new construction projects. These range from mining ventures to infrastructure projects and tourist facilities. On 1 August 2023, the court suspended all new environmental licenses — effectively paralyzing as many as 176 projects. The court was acting on a lawsuit by the indigenous confederation CONAIE. Relations between the court and the government have been tense since May. After President Lasso dissolved Congress in May 2023, he now needs court approval to carry out any economic decree he signs.

MEXICO

Official latest figures show poverty decrease, but access to benefits is lacking

On 10 August 2023, the decentralized government organization National Council for the Evaluation of Social Development Policy (CONEVAL) published its latest statistics on poverty. The figures show Mexico reduced the percentage of people living in poverty to 36.3% of the population (46.8 million people) in 2022 compared to 2020. According to the World Bank, 33.2% of Mexico’s population was under the poverty line (USD6.95 per day) in 2020. While poverty indicators decreased, the data revealed a 10% increase in the number of people lacking access to health services (14.7 million). It also showed that 50.2% of the population (64.7 million) lacked access to benefits such as health care, pensions and unemployment. CONEVAL figures also revealed a great social divide between the north and south regions. South-central states had the highest proportion of poverty, including Chiapas (67.4%), Guerrero (60.4%), Oaxaca (58.4%), Puebla (54%) and Tlaxcala (52.5%).The northern states of Baja California Sur (13.3%), Baja California (13.4%), Nuevo León (16%), Chihuahua (17.6%), and Coahuila (18.2%) had the lowest poverty rates.

Government and opposition parties clash over mining regulations

On 10 August 2023, the Legal Counsel of the Federal Executive (CJEF) clashed with lawmakers from opposition parties over changes to a new mining law approved in April 2023. In a press statement, the CJFE questioned a judicial review of opposition parties’ latest reform of the mining law, which they submitted to the Supreme Court in June. The mining law reform includes factors such as social consultations and the nationalization of lithium. It was approved in a legislative package that opened a legal confrontation between opposition party members and President Andrés Manuel López Obrador this year. The Supreme Court must now resolve the issue.

Mexico becomes top US trading partner

On 9 August 2023, the US Bureau of Labor Statistics reported that Mexico became the United States’ top trading partner with a 15.7% share, placing the country above Canada (15.7%) and China (10.9%). According to the report, trade between Mexico and the US reached USD396.6 billion during the first half of 2023, registering 3.1% in growth compared to the same period last year. Economic analysts attribute the ranking to the countries’ continued efforts to strengthen their economic bilateral relationship, which has prompted “nearshoring’’ in Mexico. According to analysts, the two countries’ complementary production chains also helped Mexico remain in the top spot.

PERU

Government to hand over Talara oil blocks to state company

On 13 August 2023, newspaper La República reported that the government resolved to grant four blocks in the northern Talara oil fields to state-owned oil company Petroperu. The allotted blocks, which have proven reserves of 80 million barrels, are valued at about USD5.9 billion (at a price of USD70 per barrel). Talara holds more than half of Peru’s oil reserves. Private companies have been responsible for operating Talara’s oil fields since the 1990s. Experts cited by La República point out that the facility’s production has fallen by 66% since its privatization. The four blocs have contracts with private companies due to expire between October 2023 and May 2024. Private companies have protested the government’s intentions, arguing that the move would infringe upon competition laws. The private sector has also raised doubts over whether Petroperu has enough capital to exploit the oil fields after reporting serious losses in August 2023.

Mining investment reached new high in June 2023

On 9 August 2023, the mining ministry reported that June 2023 mining investments reached USD378 million — the highest monthly figure recorded so far this year. The figure represents an increase of 9.6% from the previous month. In the first six months of 2023, mining investment amounted to USD1.9 billion. Leading this increase were two international companies: the Antamina consortium operating a copper mine of the same name in the northern Ancash department, and Anglo American. The latter operates the Quellaveco copper mine in the southern department of Moquegua. The energy and mines ministry hopes mining investments will reach USD4.7 billion by the end of 2023.

Keiko Fujimori investigated for illegal funding, belonging to a criminal organization

On 7 August 2023, prosecutors opened an investigation against former presidential candidate Keiko Fujimori for alleged asset laundering and participation in a criminal organization. The prosecutor accused Fujimori of having raised undeclared money for her party Fuerza Popular (FP) between March and July 2021. This would constitute a crime of illegal political funding. Fujimori allegedly used this money to stage a campaign against Pedro Castillo, her successful opponent in the presidential election of 2021. Fujimori, who lost against Castillo, argued that the election had been fraudulent but failed to provide conclusive evidence. According to the prosecutor, Fujimori allegedly used illicit funds to finance a disinformation campaign designed to manipulate Peruvian democracy — justifying the charges of belonging to a criminal organization. Fujimori will have to testify in court on 28 August 2023.

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