Regional Pulse: 2 August 2022
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Our weekly review of need-to-know events curated by the Southern Pulse team for people who work in Latin America. Looking for something more tailored to your needs? Let’s chat.
Key developments
ARGENTINA
- Third Economy Minister appointed in a month
- Interest rates increase to 60%
- IDB disburses first tranche of USD1.1 billion energy transition loan
- Better USD exchange rate offered to soy producers
BRAZIL
- Voters unlikely to change their vote in the upcoming elections
- Largest monthly government surplus in over 10 years recorded in June
- Petrobras’ board to set fuel prices following Bolsonaro intervention
- US Defense Secretary reaffirms faith in electoral system
CHILE
- Voters still want a new constitution if current draft fails
- Machinery, not civilians, are targets, says militant group
COLOMBIA
- Gulf Clan guns down eleventh policeman
ECUADOR
- CONAIE talks find some common ground on fuel subsidies
- Cotopaxi Governor arrested for corruption
MEXICO
- AMLO spooked by US energy dispute, reports Reuters
- Human trafficking on the rise, finds NGO
- Moody’s says recession is imminent
PERU
- GDP grows more than expected
- China to invest USD3.2 billion in massive Chancay port upgrade
- Former presidential staffer makes fresh Castillo corruption claims
ARGENTINA
Third Economy Minister appointed in one month
On 28 July 2022, President Alberto Fernández announced the unification of the ministries of Economy, Productive Development, and Agriculture, Livestock and Fisheries, creating a new “superministry” that will be led by Peronist politician Sergio Massa. His appointment comes less than a month after Silvina Batakis replaced Martín Guzmán as economy minister amid party infighting. Batakis will now become the head of state-run lender Banco Nación.
Interest rate increases to 60%
On 28 July 2022, the Central Bank announced its seventh interest rate hike this year, raising it eight percentage points to 60%. This measure seeks to tame the rampant inflation, currently projected at 90% for 2022 year-end inflation.
IDB disburses first tranche of USD1.1 billion energy transition loan
On 27 July 2022, the Inter-American Development Bank disbursed the first USD200 million tranche of a USD1.1 billion credit line for decarbonization projects. This first disbursement will be used to increase the efficiency of the electric sector by eliminating electric generation from diesel as well as expanding and modernizing electric public transport.
Better USD exchange rate offered to soy producers
On 26 July 2022, the Central Bank announced the creation of a special USD exchange regime to encourage soy export. The measure allows soy producers to exchange the USD they earn from exports at USD1=ARS160, which is higher than the official exchange rate of ARS137, but significantly lower than the black market exchange rate at ARS323. Last week, President Alberto Fernández accused soy producers of halting the inflow of USD and damaging the national economy by withholding the export of USD2 billion worth of soy produce over price speculation. President of Sociedad Rural Argentina Nicolás Pinos dismissed the accusation, saying that producers are exporting at their usual rate, having sold 64% of the harvest by 13 July.
BRAZIL
Voters unlikely to change their vote in the upcoming elections
On 29 July 2022, national pollster Datafolha published an opinion poll which found 71% of potential voters had already made their final decision about how they will vote in the upcoming presidential elections. The poll also found the voters who were most likely to change their minds at election time were those who currently say they will vote for left-leaning candidate Ciro Gomes (Democratic Workers Party-PDT) or for centrist candidate Simone Tebet (Brazilian Democratic Movement Party — MDB).
Largest monthly government surplus in over 10 years recorded in June
On 28 July 2022, the Treasury Secretariat announced the government accounts had registered a surplus of BRL14.43 billion (USD2.78 billion) in June 2022. That is the highest monthly government surplus since 2011. This surplus was largely due to an increase in government tax revenue.
Petrobras’ board to set fuel prices following Bolsonaro intervention
On 27 July 2022, it was decided that the governing board of Petrobras, the state controlled oil giant, will have final say on fuel prices, not the company’s President.. The change comes after President Jair Bolsonaro called on board members, the majority of whom are nominated by the government, to reduce fuel costs amid rising inflation. This is seen by some analysts as a shift from the hands-off approach the government has had on fuel prices since 2016. Petrobras has a monopoly in the exploration and distribution of petroleum and its derivatives in the country, dictating the general price of gasoline and diesel as a result.
US Defense Secretary reaffirms faith in electoral system
On 27 July 2022, US Defense Secretary, Llyod Austin, expressed his confidence that Brazil will maintain its tradition of holding free and fair elections in a bilateral meeting in Brasilia with his counterpart Paulo Sérgio Nogueira. Some analysts see this statement as a diplomatic way for the US government to show a degree of concern for the integrity of the upcoming October general elections.
CHILE
Voters still want a new constitution if current draft fails
On 26 July 2022, a Cadem poll found 71% of voters agree that if the constitution draft fails to pass the referendum in September, a new assembly should be called to draft a new constitution to be voted on. With the referendum just six weeks away, 14% of voters are undecided, 39% approve, up 2% from last month, and 47% disapprove, down 5% from last month.
Machinery, not civilians, are targets, says militant group
On 25 July 2022, Héctor Llaitul, leader of the radical militant indigenous group Coordinadora Arauco-Malleco (CAM), said CAM would focus its attacks on sabotaging machinery and supplies rather than workers and civilians. The group says its sabotage efforts are meant to expel the logging industry from the Araucanía region in central Chile and to create an autonomous state for the indigenous Mapuche community. Their area of operations was recently remilitarized by the Boric administration after a spate of attacks.
COLOMBIA
Gulf Clan guns down eleventh policeman
On 27 July 2022, the Gulf Clan, a criminal group with paramilitary origins, murdered an eleventh police officer after declaring a policy to target and murder police on 22 June 2022. This is the second show of force by the group, which forcefully locked down large sections of the country in May. A total of 36 police officers have now been killed by the Gulf Clan and other armed groups in 2022 — up from last year. The northwest region of the country is now on high alert as state forces target high-value targets in an attempt to fight back.
ECUADOR
Protestor talks find some common ground on fuel subsidies
On 28 July 2022, Hydrocarbons Ministry announced the government had agreed in principle to four of the eight demands from the National Confederation of Indigenous Peoples of Ecuador (CONAIE) on fuel subsidies, one of its main grievances during June’s civil unrest. The main points of agreement were the efficient management of the subsidies, a focus on sectors most in need of support, and increased anti-contraband efforts.
Cotopaxi Governor arrested for corruption
On 28 July 2022, the provincial governor of Cotopaxi, Jorge Guamán, was arrested by the National Prosecutors Office for corruption and being the alleged leader of a criminal organization. G. is also the leader of the Cotopaxi Indigenous Movement, which is affiliated to the powerful National Confederation of Indigenous Peoples of Ecuador (CONAIE) — the group which organized mass protests in June. CONAIE has requested the investigation be conducted fairly and independently of any political pressure.
MEXICO
AMLO spooked by US-Canada energy dispute, reports Reuters
On 29 July 2022, Reuters, citing insider sources, reported that President Andrés Manuel López Obrador’s recalcitrant attitude to a US-Canada energy complaint hid serious concerns in the Palacio Nacional. López Obrador has dismissed claims his government’s pricing policies and regulations favor Mexican state-owned companies and harm foreign competitors, but is said to have been negotiating behind the scenes to avoid a USMCA trade dispute.
Human trafficking on the rise, finds NGO
On 27 July 2022, NGO Causa en Común reported a 24% increase in human trafficking between the first half of 2021 and 2022. Using official data, the organization has reported a consistent increase in human trafficking victims since 2019, when 679 victims were identified compared to the 744 victims of 2021. Many believe cases like these are heavily underreported.
Moody’s says recession is imminent
On 25 July 2022, credit rating agency Moody’s Analytics reported that Mexico will enter a recession in 2023. The agency predicts GDP growth will amount to 1.8% for 2022, but shrink by 1.7% for 2023. Reasons cited are high interest rates in the US, high inflation, and supply shocks in the global economy.
PERU
GDP grows more than expected
On 28 July 2022, President Pedro Castillo, in his address to the nation, announced the country’s GDP had grown 3.5% over the past year, which is 1 percentage point higher than what the Peruvian Central Bank (BCP) had predicted. President Castillo also announced that 309,000 Peruvians had been raised from extreme poverty in the same period. The president’s figures come from a recent report by the National Institute of Statistics and Informatics (INEI).
China to invest USD3.2 billion in massive Chancay port upgrade
On 28 July 2022, President Pedro Castillo, in his address to the nation, said the government, in partnership with China, would invest USD3.2 billion in the port of Chancay (just north of the capital Lima), making it one of the largest infrastructure projects in the South Pacific. He added these investments would increase trade between Peru and the Asia-Pacific economic corridor.
Former presidential staffer makes fresh Castillo corruption claims
On 27 July 2022, a former assistant to President Pedro Castillo, Bruno Pacheco, continued to speak with prosecutors, making new allegations against his former boss. According to Pacheco, President Castillo controls a group of 12 congressmen called “Los Niños”, who act on the chief executive’s personal interests in parliament. Pacheco also claimed that he acted as a middle-man for Castillo’s nephews, receiving payments from police officers who wished to be promoted to a higher rank. Each reportedly officer paid USD20,000 to Pacheco. Pacheco turned himself in to police on 23 July 2022 on corruption charges.
