Regional Pulse: 15 June, 2022
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Key developments:
ARGENTINA: Diesel shortages threaten 19 Argentine provinces
ARGENTINA: Government proposes Ukraine war windfall tax
CHILE: Minority private sector role for lithium extraction confirmed
CHILE: Boric’s approval ratings improve
COLOMBIA: Presidential frontrunners separated by one percentage point
COLOMBIA: World Bank forecasts second fastest GDP growth in the region
ECUADOR: Lasso renews calls for a “Plan Ecuador” to fight rising crime
MEXICO: Storm clouds ahead after strong 2021 FDI performance
MEXICO: Country likely to be among hardest hit by inflation in LatAm
MEXICO: MORENA makes gains in gubernatorial elections
PERU: Properties linked to ruling party leader raided
PERU: Center-right candidate leads voter intention for Lima mayor
ARGENTINA
Diesel shortages threaten 19 Argentine provinces
On 7 June 2022, the president of national business group CAME, Alfredo González, warned ongoing diesel shortages could have dire economic consequences in 19 provinces. Seasonal crops like sugarcane and citrus fruit are already suffering because farmers cannot power their agricultural machinery. The northern provinces of Chaco, Corrientes, Formosa, and Misiones also face energy shortages because they rely on diesel trucks delivering LPG for supply.
Government proposes Ukraine war windfall tax
On 7 June 2022, the government submitted a bill to Congress that would tax companies which profit due to commodity shortages caused by the war in Ukraine. The one-time, 15% tax would apply to businesses that report profits of more than ARS1 billion (USD8.2 million) in 2022. These companies will only be hit by the tax if their profit margin in 2022 is more than 10%, or at least 20% higher than in 2021. Big commodity exporters are likely to be hit hardest.
CHILE
Minority private sector role for lithium extraction confirmed
On 8 June 2022, Mining Minister Marcela Hernando confirmed private companies would play a minority role in future lithium mining while announcing the creation of a lithium institute to coordinate associated policy. The announcement comes after the former Piñera administration failed to get two large-scale lithium projects started due to opposition from native communities and the judiciary. Like his counterpart in Mexico, President Gabriel Boric has recently said a state-owned mining company should be responsible for the metal’s extraction.
Boric’s approval ratings improve
On 5 June 2022, pollster Cadem found President Gabriel Boric’s approval ratings had risen by 8% to 44%, while disapproval fell by 10% to 47% after his first annual public address to Congress. Approval ratings for the Constitutional Convention also rose, but remained in negative territory. About 42% of Chileans would vote in favor of a new constitution while 45% would vote against it.
COLOMBIA
Presidential frontrunners separated by one percentage point
On 10 June 2022, pollster Invamer found a technical tie for the second round of presidential elections. Unorthodox newcomer Rodolfo Hernández led with 48.2% of the vote, while left-wing candidate Gustavo Petro held 47.2%. The 1% difference falls within the 2.69% margin of error.
World Bank forecasts second fastest GDP growth in the region
On 7 June 2022, the World Bank’s Global Economic Prospects report increased GDP growth estimates from 4.4% to 5.4% for 2022, making Colombia the second fastest growing economy in Latin America and the Caribbean after Guyana (47.9%). The World Bank warns of significantly lower growth rates across the region for 2023.
ECUADOR
Lasso renews calls for a “Plan Ecuador” to fight rising crime
On 8 June, President Guillermo Lasso said he would ask the Biden administration for increased security aid while at the Summit of the Americas, which was held in Los Angeles last week. Lasso believes greater assistance is necessary due to a sustained uptick in violence and drug trafficking. He first mooted the need for a “Plan Ecuador” last year. The name alludes to Plan Colombia, a massive US military aid package designed to fight organized crime in Colombia during the 2000s.
MEXICO
Storm clouds ahead after strong 2021 FDI performance
On 9 June 2022, the UN’s annual Conference on Trade and Development report placed Mexico as the country with the tenth highest foreign direct investment (FDI) in the world. Retaining last year’s place, FDI increased from USD$2.8 billion in 2020 to US$3.8 billion in 2021. The increase was led by the extractive and automotive sectors as well as the completion of a Huawei cloud data center, worth USD$4.5 billion. However, the report warns of a decrease in FDI in 2022 due to the war in Ukraine and rising inflation.
Country likely to be among hardest hit by inflation in LatAm
On 6 June 2022, a report by the UN’s Economic Commission for Latin America and the Caribbean warned that high inflation and low economic growth would increase poverty in Mexico, Colombia, Brazil, and Paraguay the most. Low income families will be impacted heavily by lower wages and rising food costs, exacerbated by both COVID-19 and the war in Ukraine. As many as 2.5 million more people could fall under the poverty line in Mexico. The report urges countries to increase energy and food subsidies for the poor.
MORENA makes gains in gubernatorial elections
On 6 June 2022, gubernatorial elections saw the MORENA party win Hidalgo, Oaxaca, Quintana Roo and Tamaulipas, while the opposition coalition Va por México won Aguascalientes and Durango. President Andrés Manuel López Obrador’s MORENA Party now governs 20 out of 32 states. Its electoral victories are welcome news after the party lost its congressional majority in the 2021 legislative elections.
PERU
Properties linked to ruling party leader raided
On 10 June 2022, authorities raided 17 properties linked to Vladimir Cerrón, leader of the ruling Perú Libre party, amid corruption allegations. The operation, which was led by the public prosecutor’s office, relates to alleged wrongdoing committed during his time as regional governor of Junín. Cerrón was a close ally of President Pedro Castillo during his 2021 presidential bid.
Center-right candidate leads voter intention for Lima mayor
On 6 June, pollster CPI found Podemos Perú candidate Daniel Urresti is voters’ top preference for mayor of Lima ahead of elections scheduled for 2 October. Urresti, a center-right politician who previously served as interior minister, leads with 17.1% of the predicted vote. He is followed by Renovación Popular’s Rafael López Aliaga, with 15.2% of the vote. The latter rose to prominence in the country’s 2021 election and sits on the far-right of Peruvian politics.
