Regional Pulse: 15 November 2022
Southern Pulse’s weekly review of need-to-know events curated for people who do business in Latin America.
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- Mexico opens its market to Argentine beef imports
- Government launches national price control program
- French mining company to invest millions in lithium expansion
- Profits triple for state-owned oil company during Q3
- Senate president signs off on Lula-backed USD31 billion welfare bill
- Markets plummet following president-elect’s remarks
- Military sees pro-Bolsonaro protests as legitimate
- Boric launches land rights commission for indigenous population
- Separatist Mapuche attacks spread northwards
- State of emergency extended for eleventh time
- Ecopetrol dropped from Morgan Stanley’s investment index
- Petro’s approval ratings remain strong after 100 days in office
- Ecopetrol suspends fracking test projects amid widespread opposition
- Media “Gag Law” replaced by new Communications Law
- Correa was allegedly aware of corruption in Petroecuador
- Former VP acquitted of corruption charges
- Senate passes major constitutional security reform
- More than have 107,000 people have been disappeared since 2007
- Prosecutor’s Office wants 35-year jail term for former president
- PM calls for confidence vote in clash with Congress
- Political instability and lower commodity demand dampens GDP growth
KEY DEVELOPMENTS IN FULL
Mexico opens its market to Argentine beef imports
On 11 November 2022, the Ministry of Agriculture, Livestock and Fisheries, announced the opening of beef exports to Mexico after eight years of negotiations. Last year, Mexico ranked fifth in terms of worldwide meat consumption, or around 15 kilograms of beef per person.
Government launches national price control program
On 11 November 2022, Economy Minister Sergio Massa launched a price control program aimed at freezing prices for over 1,700 consumer products amid skyrocketing inflation. Over 100 companies have agreed to the program that is meant to last until March of next year. Local governments which have signed an agreement with the Secretary of Commerce will assist in controlling prices in local stores in return for 25% of the proceeds made from fines given to non-compliant companies. The program is being rolled out as inflation hits 83%.
French mining company to invest millions in lithium expansion
On 10 November 2022, French mining company Eramet released plans to invest more than USD700 million at the Centenario Ratones lithium deposit in the province of Salta. Production is set to begin in 2024, with an estimated yearly output of 24,000 tons of lithium carbonate. Eramet expects to generate around 2,000 indirect and direct jobs through the project. The news comes less than two weeks after a Chinese company announced a USD2.2 billion lithium investment in Salta.
Profits tripled for state-owned oil company during Q3
On 9 November 2022, YPF, the country’s national oil company, almost tripled its third-quarter net profit when compared to last year. Net profit was up 186%, or USD678 million. Sources within the company cite increased production and the rise of natural gas and diesel prices for the strong result.
Senate president signs off on Lula-backed USD31 billion welfare bill
On 12 November 2022, the President of the Senate, Rodrgio Pacheco, said he would exempt welfare support program Auxilio Brasil from the federal debt ceiling adopted in 2016, paving the way an extra BRL160 billion (USD31 billion) in yearly spending. The development comes after president-elect Luiz Inácio Lula da Silva proposed a constitutional amendment to fasttrack the change.
Markets plummet following president-elect’s remarks
On 10 November 2022, president-elect Luiz Inácio Lula da Silva said his new government would focus on ending hunger and more social spending, while criticizing the markets’ “excessive focus” on fiscal responsibility. This caused an immediate negative reaction from the markets, with the São Paulo Stock Exchange Index (IBOVESPA) dropping 3.35% and the Brazilian Real losing 4% of its value against the US Dollar in three hours. These remarks, coupled with the fact that no Finance Minister has been named by the incoming administration, have led some investors to worry Lula will expand government spending irresponsibly.
Military sees pro-Bolsonaro protests as legitimate
On 11 November 2022, the commanders of the three branches of the Armed Forces issued a rare press release saying ongoing protests in front of military bases by pro-Bolsonaro demonstrators were legitimate, if they were peaceful and did not affect the circulation of people, goods and services. This runs counter to the opinion of Supreme Federal Court (STF) minister Alexandre de Moraes, who ruled that the demonstrations were illegal because they were calling for a military coup to prevent president-elect Luiz Inácio Lula da Silva from taking power. Protests by pro-Bolsonaro demonstrators have occurred since the election results were called on 30 October. This position by the military, according to some analysts, may incentivize more protests.
Boric launches land rights commission for indigenous population
On 11 November 2022, President Gabriel Boric announced the creation of the Peace and Understanding Comision to reach agreements over land disputes with indigenous Mapuche communities, some of whom have radicalized and turned to sabotage. During a visit to the La Araucanía region, the hotbed of Mapuche conflict, Boric called for land concessions to be made, but acknowledged not all land claims could be reinstated. The commission will begin work in March 2023.
Separatist Mapuche attacks spread northwards
On 9 November 2022, the indigenous Mapuche revolutionary group Coordinadora Arauco-Malleco burned two pieces of construction machinery in the Gran Concepción region of central Chile. A banner was left at the scene on which CAM claimed responsibility for the attack. The incident points to a spillover of CAM attacks beyond the southern Bío Bío and La Araucanía regions. The private sector and opposition politicians blame the government for allowing attacks to move closer to larger urban centers in the middle of the country.
State of emergency extended for eleventh time
On 8 November 2022, Congress approved the eleventh extension of the state of emergency covering the southern Macro Zone comprising the Biobío, Arauco, Malleco and La Araucanía regions. The state of exemption, first introduced on 16 May 2022, will be extended another 15 days and allows the military to aid police in security operations. It is in response to attacks by indigenous Mapuche activists, organized crime, and lumber theft.
Ecopetrol dropped from Morgan Stanley’s investment index
On 12 November 2022, Ecopetrol, the national O&G company, was removed from Morgan Stanley’s MSCI Global Index, which tracks companies the bank advises people to invest in. No reason was cited, but most analysts expect foreign holders to sell their stocks as a result. The news comes despite Ecopetrol reporting a return to pre-pandemic production levels and a healthy profit of around USD5.6 billion in the first 9 months of the year. The back and forth between President Gustavo Petro’s oil and gas campaign promises and policy announcements may have contributed to its delisting.
Petro’s approval ratings remain strong after 100 days in office
On 11 November 2022, Invamer and CNC pollsters released President Gustavo Petro’s approval ratings after 100 days in government, suggesting significantly better performance than his predecessor. According to Invamer, 49.7% approve of Petro while 42.7% disapprove. According to CNC, 62% approve of Petro while 26% don’t. Former president Iván Duque was polling at around 27% approval after his first 100 days in office.
Ecopetrol suspends fracking test projects amid widespread opposition
On 9 November 2022, Ecopetrol suspended oil fracking pilot projects in the northern region of Santander and halted associated exploitation contracts with ExxonMobil after community and government opposition. The previous government of Iván Duque had pushed for oil fracking despite fierce community and environmentalist opposition, leading to the installation of the two test sites. However, President Gustavo Petro campaign promises included siding with environmentalists to stop fracking.
Media “Gag Law” replaced by new Communications Law
On 11 November 2022, President Guillermo Lasso signed into effect the Communications Law, which revokes a 2013 law enacted by former-president Rafael Correa nicknamed the “Gag Law”. The new law ends restrictions on the media involving the denouncement of politicians and eliminates state censorship boards for delicate topics. The law’s passage was seen as a top priority for the Lasso administration.
Correa was allegedly aware of corruption in Petroecuador
On 9 November 2022, a former energy minister under president Rafael Correa’s administration (2007–2017), Carlos Pareja Yannuzzelli, testified in Congress about an alleged corruption network that existed at state-owned oil company Petroecuador during his tenure as minister and claimed Correa was aware of the problem as early as August 2008. Yannuzelli gave Congress a list of 20 former employees who allegedly cost Petroecuador USD5 billion in losses due to corruption.
Former VP acquitted of corruption charges
On 10 November 2022, the Appellate Court unanimously declared void all corruption convictions against former vice president Jorge Glas, who has been jailed since January 2021 on a eight year sentence. According to the court, the former vice president under then president Lenin Moreno, was not given due process during his trial. The National Prosecutor’s Office issued a statement calling the ruling “concerning”. The statement says the judgment may free other high ranking politicians accused of corruption from their sentences.
Senate passes major constitutional security reform
On 11 November 2022, the Senate passed a constitutional reform that keeps the military in public security until 2028, and merges the National Guard into the Defense Ministry. The government has pushed for this measure despite various national and international human right organizations warning against the militarization of public safety. These organizations cite the high number of human rights violations committed by the military and the low levels of accountability soldiers have faced in military tribunals.
More than have 107,000 people have been disappeared since 2007
On 8 November 2022, the government’s National Search Commission reported that 107,295 people had disappeared since 2007. Most disappeared persons are men. The disappearance of people has become a normalized practice in the drug-related Mexican conflict and is reaching unprecedented levels with no effective policy plan to stop it.
Prosecutor’s Office wants 35-year jail term for former president
On 11 November 2022, the National Prosecutor’s Office requested that former president Alejandro Toledo be sentenced to 35 years for corruption. Toledo was allegedly involved in the cash-for-contracts “Car Wash” kickback scheme that centered on Brazilian construction company Odebrecht. He is accused of accepting bribes for approving the Interoceanic highway project between Brazil and Peru. The final sentence has yet to be handed down.
PM calls for confidence vote in clash with Congress
On 8 November 2022, Prime Minister Anibal Torres demanded Congress conduct a confidence vote in the executive, raising tensions between the two branches of government in an already unstable political environment. President Pedro Castillo has been at odds with the opposition-led legislature since assuming power last year. Some analysts see this development as an attempt to force legislative elections and change the composition of Congress in Castillo’s favor. This is because if two confidence votes are called, and confidence in the government is rejected twice, Congress is constitutionally forced to hold legislative elections.
Political instability and lower commodity demand dampens GDP growth
On 9 November 2022, Central Bank President Julio Velarde forecast the economy to grow slightly less than expected at 3% this year — below the 3.1% previously announced. This is likely a result of domestic political instability, mining protests and lower global demand for local commodities, such as copper. The country is the world’s second biggest producer of the metal after Chile.