Southern Pulse’s weekly review of need-to-know events curated for people who work in Latin America.
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- Neuquen and Rio Negro provincial elections
- Finance Minister seeks IMF support to avoid a currency crisis
- France’s lithium company to get easier access to US dollars
- President Lula meets Xi Jinping in Beijing
- Government to regulate social media platforms amid school shootings
- Former President Bolsonaro to face trial over election fraud claims
- European Union seeks lithium and diplomatic support
- Far-right and populists predicted to have a boost in next elections
- 40-hour work week becomes law
- President Petro pressures government coalition to pass health reform
- Oil production predicted to fall in 2023 due to unrest
- Ecopetrol appoints Petro ally as new CEO
- National security secretary resigns after massacre
- New CEO of Petroecuador
- Massacre in fishing port linked to drug trafficking
- Five killed in confrontation between local fuel theft gangs
- Security delegation travels to Washington to discuss drug trafficking control
- President withdraws proposal permitting foreign airlines to enter domestic air market
- Northern oil duct to reopen after 14-month closure
- Chinese state companies could control 70% of Peru’s electricity
- Government aims to increase copper production by 15% in 2023
KEY DEVELOPMENTS IN FULL
Neuquen and Rio Negro provincial elections
On 16 April, 2023, voters in the Patagonian provinces of Neuquen and Río Negro elected their next governors. These provinces are known for having rich natural resources including oil, gas, lithium and potentially green hydrogen. Elected Governors are Rolando Figueroa in Neuquen and Alberto Weretilneck in Río Negro. Both politicians are pro-business and expected to continue with policies favoring oil, gas and lithium exploration in their respective provinces. Local analysts highlight the fact that in Neuquen, the regional party Movimiento Popular Neuquino (MPN) lost after ruling for 62 years. This may suggest a general anti-incumbent sentiment simmering in society. Candidates supported by the far-right Libertarian Javier Milei, the third-place candidate in presidential opinion polls nationwide, had less than 10% of the vote in both provinces. This raises doubts about Milei’s ability to win voters away from the largest cities.
Finance Minister seeks IMF support to avoid a currency crisis
On 13 April 2023, Finance Minister Sergio Massa visited Washington DC to seek political support in the ongoing negotiations to ease the financing conditions of the USD5.4 billion disbursement Argentina owes to the International Monetary Fund (IMF). This is part of the IMF’s USD44.5 billion loan to Argentina. Under the rules of the agreement signed in 2021, the IMF makes quarterly disbursements to Argentina. These are conditional upon the country meeting targets related to public spending, the level of foreign currency in its Central Bank reserves and how much money the Central Bank can print. This year, Argentina failed to meet international reserve targets amid the peso’s 104% annual inflation. Massa argues that the drought in agricultural areas will decrease grain exports by 30%, furthering the decreasing inflow of international reserves into government coffers. Massa plans to tell the IMF that without more favorable conditions, Argentina may experience an even worse economic crisis in the coming months, local media outlets reported. This would cause an abrupt devaluation of the Argentine peso, he argues.
France’s lithium company to get easier access to US dollars
On 12 April 2023, Massa announced that French mining company Eramet will be included in the government-controlled regime to access foreign currency. As Argentina faces an endemic shortage of foreign reserves, the current Peronist government set up a series of mechanisms to make US dollar purchases more difficult for both individuals and companies. Eramet’s local Argentine subsidiary, Eramine, will now be able to access US dollars more easily after negotiations with the Argentinian government. Eramet already extracts lithium in the northern province of Salta from the Centenario Ratones mine.
President Lula meets Xi Jinping in Beijing
On 14 April 2023, president Luiz Inácio Lula da Silva met with Chinese president Xi Jinping on a state visit. Brazil and China signed 15 bilateral agreements during the visit. These agreements focused on topics including the construction of the sixth joint space satellite, cooperation between universities and state-run TV stations and measures to help Brazilian agricultural products enter the Chinese market. Lula made friendly statements about China during the trip and criticized the US dollar’s global hegemony. More than 100 government officials, politicians, business people and lobbyists took the opportunity of the presidential visit, flying to Beijing to meet with local officials and take part in business meetings. Many were seeking Chinese investments, mainly in the agricultural, infrastructure, and industrial areas.
Government to regulate social media platforms amid school shootings
Former President Bolsonaro to face trial over election fraud claims
On 12 April 2023, Brazil’s electoral prosecution service (MPE) requested that former President Jair Bolsonaro be convicted for abusing his power. The request centers on a July 2022 episode in which Bolsonaro summoned foreign diplomats to the presidential palace to spread baseless claims that presidential elections would be rigged. The next step is for the electoral court (TSE) to try the case, which should occur in coming months. Local media outlets speculate that the majority of TSE judges are expected to vote against Bolsonaro. If found guilty, Bolsonaro would not be able to run in any elections for the next eight years.
European Union seeks lithium and diplomatic support
On 13 April 2023, news outlet Ex-Ante reported that European Commission (EC) president Ursula Von der Leyen will visit Chile in June. Von der Leyen is seeking to help European companies position themselves in the lithium industry as the Chilean government drafts a new regulatory framework for this sector. Von der Leyen will also visit Argentina and Brazil, seeking to counterbalance growing Chinese influence in those countries and bring diplomatic support to Ukraine in the war against Russia.
Far-right and populists predicted to have a boost in next elections
On 12 April 2023, news outlet Ex-Ante reported that consulting firm Imaginación predicted growth for the far-right Republicans and the anti-establishment Partido de la Gente (PDG) in the May 7 constituent assembly elections. According to the Imaginación firm, opinion polls show that citizens’ greatest concern has to do with security. Republicans perform best in opinion polls regarding security, while the leftist governing coalition parties perform worst. A legislative change making voting mandatory is a main driver of getting conservative and apolitical voters to the polls, Imaginación said. It expects this change will be positive for the PDG.
40-hour work week becomes law
On 11 April 2023, the House of Representatives approved a bill that reduces Chile’s workweek from 45 to 40 hours. Lawmakers negotiated the bill for nearly a year, finally deciding on a gradual approach to introduce the 40-hour workweek in 2029. The bill had wide support with the exception of the Republican party — the most right-wing force in Congress. This legislation is an old project developed by the Communist Party, a key ally of president Gabriel Boric.
President Petro pressures government coalition to pass health reform
On 14 April 2023, President Gustavo Petro requested the resignation of six vice-ministers in his government. All belong to coalition partners refusing to support his proposed health reform. Negotiations between President Petro and the Liberal, Conservative and Partido de la U parties have recently soured after the coalition partners proposed a number of amendments that Petro seems unwilling to accept. Congress will debate the reform between 17 and 21 April 2023. The reform is a key legislative priority for Petro’s government. Petro’s proposed political reform failed to pass earlier this year, and a large part of the governing coalition’s future depends on whether the proposed health reform passes.
Oil production predicted to fall in 2023 due to unrest
On 12 April 2023, the chamber of oil service providers (CAMPETROL) worsened its predictions for the country’s oil production this year. The chamber expects oil production to fall by 7% in 2023 to a yearly average of 700,000 daily barrels. This contrasts with its previous estimate from March 2023, which forecasted the drop in production to bottom out at an average of 735,000 barrels per day. CAMPETROL argues that increased social unrest in oil-producing regions is prompting companies to request that their contracts be suspended. Illegal armed groups have targeted key oil infrastructure in recent weeks; unknown actors sabotaged the Limón-Coveñas pipeline with explosives last week.
Ecopetrol appoints Petro ally as new CEO
On 11 April 2023, state oil company Ecopetrol named Ricardo Roa as its new CEO. Roa is understood to be a close ally of President Gustavo Petro, as Petro appointed him to lead Bogota’s electric company in 2016 during his tenure as Bogotá’s mayor. Roa later worked as Petro’s campaign manager in 2022. Roa’s lack of experience in the oil sector and history of political appointments allegedly raised some eyebrows within Ecopetrol’s board of directors, news outlet La Silla Vacía reported. Some analysts fear he will use his position to advance the Petro administration’s agenda rather than the company’s. One of the Petro administration’s key objectives is to transition from fossil fuels to renewable energies.
National security secretary resigns after massacre
On 12 April 2023, national security secretary Diego Ordóñez resigned after an organized criminal group murdered nine people on the northern fishing port of Esmeraldas. Ordóñez had held the position since its creation on 2 August 2022. The role of the national security secretariat is to coordinate state agencies in the fight against criminal groups. While Ordóñez highlighted the effectiveness of the new organization, he resigned amid a specially violent week in Ecuador. Along with the Esmeraldas attack, six men were found hanged in a Guayaquil penitentiary. Five workers were injured in another armed attack against fishermen in a coastal town also near Guayaquil. The Zone 8 region where these attacks happened, which includes Guayaquil, has been under a state of emergency due to spiraling violence since 1 April 2023. The province of Esmeraldas has also been under a state of emergency since 3 March 2023.
New CEO of Petroecuador
On 12 April 2023, state oil company Petroecuador announced Ramón Correa as its new CEO. Correa, who has a background in oil and gas, worked for the Mining Ministry for three months in 2022 before moving on to a managerial position within Petroecuador. He is the seventh CEO of Petroecuador since President Guillermo Lasso took office in May 2021. Correa faces a number of challenges at the helm of the company. One of the most pressing issues is its record low levels of oil production. This has brought Ecuador’s oil output — 459,757 average daily barrels — to a 20 year low. Much of this loss in productivity is due to social unrest in oil-producing areas and damage to infrastructure due to adverse weather phenomena.
Massacre in fishing port linked to drug trafficking
On 11 April 2023, nine people were killed in an attack on the fishing port of Esmeraldas in the north of Ecuador. An armed group, estimated to be made up of about 30 people, is responsible for the attack. According to reports, the attackers landed on the port and began shooting indiscriminately. Experts cited by digital news outlet Primicias said the port of Esmeraldas is a key stop on the route cocaine takes when traveling from Colombia to Mexico, and rival gangs Los Patones and Los Tiguerones are fighting to control the area. The province of Esmeraldas has been under a state of emergency since 3 March 2023.
Five killed in confrontation between local fuel theft gangs
On 13 April 2023, five people were killed in an armed confrontation between gangs dedicated to fuel theft in the city of Tula, Hidalgo. The Hidalgo Public Security Secretariat (SSPH) said the confrontation took place between two criminal groups currently disputing control over pipelines belonging to state-owned oil enterprise Petróleos Mexicanos (PEMEX), with the intent of illegally extracting fuel. However, SSPH did not give more information. Intelligence from Mexico’s federal Public Security Secretariat (SSPC) revealed that the city of Tula is being disputed by a local group dedicated to fuel theft, and another linked to the Jalisco New Generation Cartel. Hidalgo is the state with the most clandestine pipeline connections in the country. Several regions face territorial fights between organizations that steal hydrocarbons from pipelines and control the illegal trade. These include the Mezquital Valley in central Mexico, which contains Tula and its oil refinery. Another key region where these fights happen is the Tulancingo Valley, a region that borders the state of Puebla.
Security delegation travels to Washington to discuss drug trafficking control
On 12 April 2023, a delegation of high-level officials led by Foreign Secretary Marcelo Ebrard Casaubón and Secretary of Security & Citizen Protection Rosa Icela Rodríguez arrived in Washington, DC. They met their US and Canadian counterparts to discuss multilateral security. The delegation asked these counterparts to help create a task force dedicated to identifying the US-Mexico border crossing points for arms and fentanyl traffickers. The Mexican delegation pledged to increase seizures of weapons and drugs and continue to arrest leaders of criminal organizations. It also pledged to prioritize attacks on drug supply networks and efforts to combat the Sinaloa and Jalisco New Generation cartels. Fentanyl has monopolized the latest chapters of the confrontation between Mexico and the US, as Republican legislators have called for military intervention in Mexico to mitigate the chemical responsible for thousands of deaths in the US.
President withdraws proposal permitting foreign airlines to enter domestic air market
On 12 April 2023, President Andrés Manuel López Obrador announced the withdrawal of a legislative proposal that would have allowed foreign carriers to fly domestically. He cited the lack of an in-depth analysis of the reform’s potential implications for the private sector, as well as a lack of support from airline workers. While the initiative sought to increase competition in Mexico’s domestic airline industry and improve air fares, the practice would have allowed foreign airlines to transfer passengers between Mexican cities — a relatively uncommon practice worldwide. This raised alarms among domestic airlines and organizations representing the airline industry. In late 2022, the López Obrador government sent a proposed initiative to Congress’ lower house to reform laws overseeing civil aviation and airports, which included a new agreement on domestic operations in the country.
Northern oil duct to reopen after 14-month closure
On 12 April 2023, energy minister Óscar Vera announced the reopening of the Oleoducto Norperuano (ONP). The pipeline had been closed since February 2022 after an attack by local communities. The reopened pipeline is built to connect a number of Amazon oil fields that have also been reactivated in recent weeks. The newly-opened Talara refinery will process the crude from these locations. State oil company Petroperu operates the refinery, reopened oil fields and ONP pipeline. These actions are part of a state-driven attempt to increase the vertical integration of Petroperu and secure enough revenues to pay for the expensive Talara refinery.
Chinese state companies could control 70% of Peru’s electricity
On 11 April 2023, industrial business association National Society of Industries (SNI) warned that Chinese state companies will own about 70% of Peru’s electricity market if China Southern Power Grid (CSPG) receives regulatory approval to acquire a key electricity company. CSPG announced on 7 April that it intended to acquire the Peruvian affiliate of Italian electricity company Enel for an estimated USD2.9 billion. In 2020, China Three Gorges Corporation bought Luz del Sur. Together, the Chinese companies would control 70% of Peru’s electricity market and 100% of the market in the capital of Lima. According to experts consulted by newspaper La República, the regulator is expected to approve the acquisition because the tie-up does not infringe upon current regulations.
Government aims to increase copper production by 15% in 2023
On 11 April 2023, Energy Minister Óscar Vera announced plans to increase national copper production by 15% in 2023 — a yearly total of 2.8 million tons. Copper production here has remained largely stagnant since 2016, growing from 2.3 million tons to 2.4 million in 2022. Vera was optimistic about this year’s outlook. He argued that most of the unrest that had shaken the country between December 2022 and March 2023 is now over, allowing mining production to resume in full capacity. Vera also highlighted recent government efforts to speed up the approval of new mining projects — particularly for lithium — from an average of two years to six months.