Regional Pulse: 18 July 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

• China’s Zijin Mining Group to build new lithium plant in Catamarca
• City of Buenos Aires sues national government over unpaid debt
• Liquefied natural gas bill gets bipartisan backing

BRAZIL

• Intelligence agency links illegal mining to attempted coup
• Brazil starts forgiving debts of 70 million people
• Belo Horizonte to turn mining waste into construction materials

CHILE

• Poll shows 45% of Chileans want to keep the current constitution
• Chilean governments limits Tianqi’s role in SQM
• Boric seeks European investment in lithium industry

COLOMBIA

• Roadblocks affect land transportation
• Territorial dispute with Nicaragua settled in Colombia’s favor
• 77 social activists murdered in 2023 so far

ECUADOR

• Ecuador must extend gas subsidy to foreign vehicles
• Security crisis in Guayaquil metropolitan area
• Cars assembled in Ecuador increase market share

MEXICO

• President announces return of the Mexico-Queretaro railway project
• Automotive chamber warns negative impact on exports due to port delays
• Violence breaks out in southern Guerrero state

PERU

• 1160MW in new wind farms projected for 2024
• Customs workers threaten strike, international airport closure
• State of emergency declared on main roads before protests

KEY DEVELOPMENTS IN FULL

ARGENTINA

China’s Zijin Mining Group to build new lithium plant in Catamarca

On 11 July 2023, the Chinese firm Zijin Mining Group announced it will be building a new lithium processing plant in Catamarca province. The plant will produce 50,000 tons a year of iron phosphate and lithium for batteries — forming part of Argentina’s plan to create jobs and evolve beyond an economy dependent primarily on exporting raw materials. The joint project involves the Zijin group, Catamarca’s provincial mining company Camyen and national state energy company, YPF. The lithium will be supplied by Zijin’s Tres Quebradas mine.

City of Buenos Aires sues national government over unpaid debt

On 15 July 2023, the attorney general for the city of Buenos Aires went to the Supreme Court to demand that the national government comply with an order to repay a USD561 million debt. In 2020, the Peronist national government led by President Alberto Fernández slashed funding for the city’s government led by current presidential candidate Horacio Rodríguez Larreta. Larreta’s government then took Fernández’s government to court, and the Supreme Court unanimously ruled in favor of the city. A December 2022 court ruling established a repayment rate of 2.95%, but the city’s government claimed in its latest petition that the national government is failing to comply.

Liquefied natural gas bill gets bipartisan backing

On 11 July 2023, Energy Minister Flavia Royón presented a national government bill to promote the liquefied natural gas (LNG) market to lawmakers, gaining support across the Chamber of Deputies. If approved, the bill could greenlight an LNG project between state oil company YPF and Malaysian firm Petronas. The YPF-Petronas project is expected to generate USD15 billion in exports and will seek an investment of USD10 billion. The bidding process would start before the end of the year if the bill is approved. Juntos por el Cambio, the largest opposition bloc, agreed to cooperate and present suggestions for the bill in a rare showcase of bipartisanship.

BRAZIL

Intelligence agency links illegal mining to attempted coup

On 16 July 2023, the Brazilian Intelligence Agency (ABIN) circulated documents linking illegal mining to an attempted coup against President Lula’s government on 8 January 2023. According to the ABIN reports, many who had participated in the attack on Congress in Brasília arrived by truck in the days leading up to 8 January. Most of the 272 trucks that entered the city — and whose drivers later participated in the attempted-coup — were owned by companies previously linked to illegal mining in indigenous Amazon territories. The remaining trucks were registered to individuals with links to the agricultural sector.

Brazil starts forgiving debts of 70 million people

On 17 May 2023, the Brazilian government rolled out its debt forgiveness program, Desenrola Brasil. The program will forgive USD15 billion worth of debt and benefit about 70 million people. The program, a campaign promise made last year by President Lula Inácio da Silva, will be rolled out in various phases. The first phase, which starts this week, targets those who had debts before the beginning of this year and earn less than USD4,000 a month. About 1.5 million people with debts of less than USD20 will have their debts canceled immediately. The first stage, which will cost the government USD9 billion, is expected to last about a year and help about 30 million Brazilians emerge from debt.

Belo Horizonte to turn mining waste into construction materials

On 13 July 2023, Belo Horizonte Mayor Fuad Noman passed a law to help turn solid mining waste into masonry blocks, bricks, interlocking floors, tiles and asphalt. Belo Horizonte, the capital of Minas Gerais state, is one of the biggest and wealthiest cities in Brazil. Mayor Noman has argued that any project costs will be justified due to its public benefits. A health and safety inquiry will be carried out before the materials are used in public works.

CHILE

Poll shows 45% of Chileans want to keep the current constitution

On 10 July 2023, Diego Portales University released the results of a poll showing 45% of Chileans want to keep the current constitution. Only 27% think the rewriting process is important. The Constitutional Council, responsible for rewriting the constitution, has so far been concentrating on administrative tasks. This period ended on 17 July, when members had to present their recommended amendments so that the drafting process could officially begin. During the presentation, it became apparent that a pact between right-wing party Partido Republicano and coalition Chile Vamos was complicating the process and weakening the left’s position. Despite the ongoing process, nearly half of the population thinks redrafting the constitution is unimportant or of little importance. Boric has signaled that if the population does not accept the revised draft during a December referendum, he will no longer pursue the issue.

Chilean governments limits Tianqi’s role in SQM

On 14 July 2023, newspaper La Tercera reported that the national economic district attorney (FNE) had blocked Chinese firm Tianqi Lithium from assuming greater control over petrochemical and mining company SQM. Tianq is a minority shareholder in SQM. Since acquiring SQM shares worth USD4 billion in 2018, Tianqi has faced 11 restrictive measures aimed at limiting its governance of SQM. Due to the restrictions, Tianqi cannot elect SQM’s directors, nor executives. It cannot access the company’s sensitive information, either. The Chinese firm recently commissioned two reports demonstrating how the restrictions have prevented significant efficiencies and limited competitiveness. Nevertheless, the FNE has maintained a position limiting Tianqi’s governance of SQM.

Boric seeks European investment in lithium industry

On 14 July 2023, President Boric arrived in Spain to begin a weeklong tour of Europe aimed at attracting European investors to the Chilean lithium sector. Boric met with representatives of the Spanish Confederation of Business Organizations, speaking to them about his National Lithium Strategy and Green Hydrogen Committee. Boric will also visit France, Switzerland and Belgium.

COLOMBIA

Roadblocks affect land transportation

On 12 July 2023, cargo transportation trade association COLFECAR reported there have been 360 roadblocks across the country since January 2023. That translates into 5,975 hours lost due to blockades. According to COLFECAR data, January was the month with the most incidents (81), followed by May (71) and June (60). By region, the Caribbean coastal departments of Magdalena (42), and Bolívar (30) saw the most roadblocks, followed by the Pacific coastal department of Valle del Cauca (30). The organization complained that the roadblocks, often established by protestors, delay the flow of goods and increase logistical uncertainty in Colombia. These incidents also tend to translate into higher insurance rates for transporters, meaning higher prices for the merchandise they move and higher inflation.

Territorial dispute with Nicaragua settled in Colombia’s favor

On 13 July 2023, the International Court of Justice (ICJ) ruled in favor of Colombia in a territorial dispute with Nicaragua. The latter country argued that its 200-mile maritime rights in the Caribbean Sea overlap with the Colombian islands of San Andrés and Providencia. Nicaragua has long argued that these islands were within its territorial rights, but the ICJ ruled that a state’s territorial rights cannot overlap and encroach upon those of another state. Therefore, the islands will remain part of Colombia, which will retain its fishing rights in the area. Nicaragua has disputed the sovereignty of these islands for the past 22 years. This final decision from the ICJ cannot be appealed, putting an end to the legal question.

77 social activists murdered in 2023 so far

On 14 July 2023, investigative news outlet La Silla Vacía reported that 77 social activists have been murdered in 2023 so far, according to data from state and non-state organizations. The figure is slightly lower than that of 2022, when 103 activists were killed in the first half of the year. Cauca, in the southwest, was the deadliest state with 20 registered assassinations. Antioquia, whose capital is Medellín, followed with ten murders. Nariño, on the border with Ecuador, registered six. According to experts consulted by La Silla Vacía, a large proportion of activists are allegedly killed by dissident FARC guerrillas that have turned to organized crime groups, drug trade organizations or the National Liberation Army (ELN). The majority of targeted victims are indigenous community leaders. The government recently signed a ceasefire with the ELN, and has negotiated several truces with dissident FARC groups in hopes of establishing “total peace” with all armed groups in the country.

ECUADOR

Ecuador must extend gas subsidy to foreign vehicles

On 10 July 2023, the Court of Justice of the Andean Community ruled that Ecuador must extend its gas subsidies to vehicles with foreign license plates circulating in the country. Foreign vehicles have not been able to purchase diesel at the subsidized rate of USD1.75 per gallon until now, instead having to pay the market rate of USD2.56 per gallon. The Peruvian government sued its Ecuadorian counterpart to modify the rule. From now on, all vehicles in Ecuador will benefit from gas subsidies, which will lower transportation costs for Peruvian, Bolivian and Colombian freight passing through the country. The government projects it will spend USD2.7 billion in 2023 on financing the subsidy, up from USD1.9 billion in 2018. The Ecuadorian government has 90 days to appeal the ruling.

Security crisis in Guayaquil metropolitan area

On 11 July 2023, digital news outlet Primicias reported that violence returned to the city of Durán (in the Guayaquil metropolitan area) after an inter-gang truce broke down. According to data accessed by Primicias, the city has seen a surge of murders in the past two weeks. Thirty-one people have been killed between June and July. Since January 2023, authorities have registered 85 murders. The Latin Kings and Chone Killers gangs, which dispute the local territory to extort inhabitants and export drugs through the port of Guayaquil, broke their truce in late June 2023 following the murder of a Latin Kings leader. The government announced it will deploy police and military forces to the city. In February 2023, Durán mayor Luis Chonillo was targeted in a failed assassination attempt.

Cars assembled in Ecuador increase market share

On 11 July 2023, digital news outlet Primicias reported that cars assembled in Ecuador are increasing their market share at the expense of cars made in China. While Chinese-made cars dominate the Ecuadorian market with a 35% share in Q1 2023, the number has fallen by 5% when compared to the same period of 2022. This change is explained by a rise in cars assembled in Ecuador, whose market share has risen from 10% in Q1 2022 to 15% in the same period of 2023. Other actors in the market are cars assembled in Brazil (10%), Japan (6%) and Colombia (5%). While the number of Chinese-manufactured vehicles stagnated compared to 2022, sales of nationally-assembled cars rose by 69%. In May 2023, Ecuador signed a free trade agreement with China that has yet to be ratified.

MEXICO

President announces return of the Mexico-Queretaro railway project

On 14 July, President Andrés Manuel López Obrador revealed that his administration established an agreement with Canadian-US railway company Kansas City Southern (KCS) to construct a 247-kilometer (154-mile) passenger train railroad project between Mexico City and Querétaro. President López Obrador said KSC will first evaluate the viability of introducing the passenger train within the railroad network for which it already has concessions. The Mexico City-Querétaro train project was one of the Peña Nieto administration’s (2012–2018) emblematic works, but it was suspended in 2015 amid corruption scandals. The federal government estimated that the train would have cost more than USD 3 billion. The cancellation obligated the government to pay USD16 million in compensation to Chinese concessionary China Railway Construction Company (CRCC).

Automotive chamber warns negative impact on exports due to port delays

On 11 July, the Mexican Association of the Automotive Industry (AMIA) revealed that delays in port inspections are costing the sector hundreds of millions of dollars as rigorous revisions slow down exports of up to 20,000 vehicles each semester. AMIA’s General Director Odracir Barquera said three ports stand out for having delays: Lázaro Cárdenas on the Pacific coast, Tuxpan in the Gulf of Mexico and Altamira in the Atlantic Ocean. Barquera said the delays are due to the saturation of yards, long wait times for inspections, a lack of inspection technology, insufficient trucks for land transportation and administrative changes after President Andrés Manuel López Obrador passed a decree putting armed forces in charge of port operations. The automotive industry accounts for 4% of the country’s gross domestic product (GDP) and 18% of manufacturing GDP. This is equivalent to eight out of 10 Mexican exports.

Violence breaks out in southern Guerrero state

On 10 July, thousands of protesters violently clashed with southern Guerrero state police forces and the national guard as they demanded the release of two transportation leaders detained by the federal Attorney General’s Office (FGR). One group stole an armored vehicle from the police to break down the gates of the local Congressional building, while the rest blocked the Mexico-Acapulco federal highway and abducted a number of police officers. The protests happened a week after criminal group “Los Ardillos” allegedly murdered five drivers in Guerrero’s capital city of Chilpancingo and set several cars on fire. It also happened a week after a video leaked on social media showing Chilpancingo Mayor Norma Otilia Hernández meeting with the leader of the criminal group, allegedly agreeing to a peace pact. President Andrés Manuel López Obrador called on the inhabitants of Chilpancingo to not be manipulated by the criminal group “Los Ardillos,” and not to confront them. The protests lasted for two days, but violence continues as alleged organized crime members have assassinated a police chief and a journalist since the protests ended.

PERU

1160MW in new wind farms projected for 2024

On 11 July 2023, Energy Minister Fernando Vera announced two new wind farms will start producing an estimated 900 megawatts (MW) in 2024. The projects, known as Quercus and Violeta, are located in the northern provinces of Lambayeque and Piura, respectively. They are managed by Spanish company Ignis Energy. Each will produce an estimated 450MW. Vera announced the projects at the inauguration of another new wind farm called Punta Lomita — the largest yet — in the province of Ica. French company Engie manages this new wind farm, which produces about 260MW. The Inter-American Development Bank financed the USD300 million project, which will provide 100% green energy to the Quellaveco mine owned by Anglo American. The Peruvian government has been pushing to increase its renewable energy production in recent months.

Customs workers threaten strike, international airport closure

On 12 July 2023, newspaper La República reported that customs workers will launch an indefinite strike in the near future. This could potentially close the principal Jorge Chavez International Airport near Lima if government negotiations are not fruitful. Workers are protesting their labor conditions, arguing that a number of bonuses should be added to their salaries. The airport would be brought to a standstill if a strike occurs. That situation would generate estimated losses of USD10 million per day, according to the union’s calculations.

State of emergency declared on main roads before protests

On 12 July 2023, Prime Minister Alberto Otárola announced a state of emergency would be extended for 30 days on all major highways to avoid roadblocks before the projected 19 July 2023 national protest against the government. Between December 2022 and March 2023, a large number of protests blockaded several key roads across the country. This disrupted transport and supply chains across the country, forcing several large mines to suspend operations. Civil society organizations and unions were protesting the government and Congress, which are increasingly unpopular institutions. Since then, the government has renewed efforts to ensure the flow of goods across the country’s roads. A few weeks ago, the government announced it would maintain an army presence in the southern mining regions to protect the flow of minerals from the country’s interior to its ports for export.

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