Southern Pulse’s weekly review of need-to-know events curated for people who work in Latin America.
We help businesses operate successfully in Latin America. Looking for something more tailored to your needs? Let’s chat.
You can also follow us on LinkedIn.
- Argentina wants to renegotiate its agreement with the IMF
- Chinese Yuan to be used for imports
- Government seeks lithium agreement with the US
- Court order takes Telegram offline
- Environmental clause is a stalemate in Mercosur-EU free trade agreement talks
- Congress to start inquiry into Brasília attacks
- Mixed signs from the market about the government’s new lithium policy
- Research shows that Chileans see migrants as competitors for public services
- Mapuche guerrilla group attacks civilian targets in three regions
- New finance minister Bonilla: no new oil exploration contracts needed
- Coffee growers federation defies Petro with pick for new leader
- Coalition government splits
- Terrorism declared national emergency
- Credit Suisse to buy Ecuadorian debt using ‘blue bonds’
- Fuel imports grow 15% in Q1 2023
- Congress passes a series of controversial laws before going on leave
- Latest preliminary figures show GDP and exports growth
- Chihuahua residents demand payment from TC Energy to operate pipelines
- Government will ban new private oil concessions: Energy Secretary Nahle García
- Santiago Peña wins presidential election
- Foreign investment fell by 13% in Q1 2023
- Peru to expand lithium production
- Migration crisis with Chile disrupts Pan-American Highway border crossing
KEY DEVELOPMENTS IN FULL
Argentina wants to renegotiate its agreement with the IMF
On 27 April 2023, Economic Policy Secretary Gabriel Rubinstein traveled to Washington DC to seek a renegotiation of the agreement with the International Monetary Fund (IMF). Under the agreement, the Argentine government agreed not to use foreign currency reserves provided by the IMF to sell US dollars in the foreign exchange market. However, the Central Bank (BCRA) did precisely that in an attempt to curb the rapid devaluation of the Argentine peso. The government has little willingness to allow further currency devaluation, as this would have a negative impact on public opinion five months before the presidential elections. Local media outlets say that the IMF has been pushing for the government to use the devaluation of the Argentine peso as a tool to adjust the local economy.
Chinese Yuan to be used for imports
On 26 April 2023, Argentina started using yuan for imports of Chinese goods as a way to alleviate the shortage of dollars in the Central Bank’s (BCRA) reserves. The yuan needed for the operation was provided by a USD5 billion currency swap with the People’s Bank of China. Finance Minister Sergio Massa said the new system will allow the government to speed up the Chinese importation process to 90 days. Authorizing Chinese imports takes at least 180 days because the Argentine government uses a system designed to delay imports. It does this because Argentina does not have enough dollar currency in the BCRA to buy a significant amount of products from abroad at any given time.
Government seeks lithium agreement with the US
On 25 April 2023, the Buenos Aires Herald reported that Argentine and US officials are negotiating an agreement to subsidize Argentine lithium exports to the US. Under President Joe Biden’s Inflation Reduction Act (IRA), countries that have free trade agreements with the US are granted tax credits to import electric vehicles and lithium. Argentina does not have any such agreement, so its highest officials are seeking a diplomatic solution to help it exploit its significant lithium reserves. Finance Minister Sergio Massa, Argentine Ambassador Sergio Arguello and Foreign Affairs Minister Santiago Cafiero are participating in these talks.
Court order takes Telegram offline
On 29 April 2023, Telegram obtained a court injunction that made the app available again for Brazilian users. Earlier in the week, a judge decided to take down the encrypted messaging app after its parent company failed to comply with a judicial request to disclose the data of neo-Nazi groups. The investigation began in November 2022 when the Federal Police discovered that a school shooter in the state of Espírito Santo was a member of neo-Nazi groups on Telegram. The company said it is technically impossible to hand over the groups’ chat data and participants because those groups had already been deleted. Brazil’s Congress is currently discussing a bill to regulate social media platforms and instant messaging apps.
Environmental clause is a stalemate in Mercosur-EU free trade agreement talks
On 27 April 2023, website UOL reported that the Brazilian government will not accept the European Union (EU)’s demand to require new, stricter environmental targets as a condition for finalizing the free trade agreement with South American bloc Mercosur. The EU wants to include a mandatory clause in the agreement to reduce deforestation 50% by 2025. The Brazilian government sees the measure as additional pressure from the more protectionist countries of the EU, as the two blocs had already agreed on the agreement’s rules in 2020.
Congress to start inquiry into Brasília attacks
On 26 April 2023, Senate President Senator Rodrigo Pacheco created a joint commission of senators and representatives to inquire about the January 8th incident in which supporters of former president Jair Bolsonaro stormed the presidential palace, Congress and the Supreme Court. The commission will have 32 members, most of whom belong to the conservative caucus Big Center. This caucus is led by Speaker Arthur Lira in the Chamber of Deputies and by Pacheco in the Senate. Lawmakers aligned with the left-wing Luiz Inácio Lula da Silva administration will try to prove that pro-Bolsonaro politicians and businesspeople coordinated the Brasilia attacks, while far-right lawmakers will claim that infiltrated leftists stormed the public buildings.
Mixed signs from the market about the government’s new lithium policy
On 27 April 2023, the director of government agency InvestChile Karla Flores told DF newspaper that she has held meetings with 46 companies from 12 countries interested in investing in Chilean lithium exploration since President Gabriel Boric announced a national lithium strategy. Meanwhile, El Mostrador reported that petrochemical giant SQM is optimistic about renegotiating its lithium exploration stake in the Salar de Atacama salt flat with state-owned mining company Codelco. SQM’s concession expires in 2030 and SQM is interested in renewing it — even if it has to cede a stake to the government. Website Ex Ante reported US investor Joe Lowry saying that Chile’s new, national lithium strategy left too many unanswered questions that prompted uncertainty and anxiety for investors.
Research shows that Chileans see migrants as competitors for public services
On 26 April 2023, polling firm Tu Influye published results of a survey showing that immigration is a significant concern for the majority of Chileans. It followed conversations on Facebook groups that were unrelated to politics. The research detected a widespread, negative sentiment about immigration. The majority of members belonging to the Facebook groups monitored believed that immigrants take jobs and public services from Chileans. Company director Alex Cellis claims that the far-right party Republicanos and the anti-establishment Partido de la Gente (PDG) have platforms that connect most strongly with this opinion. Website Ex Ante also reported that these two parties will likely be the most popular with voters in the upcoming elections for constitutional assembly representatives on 7 May.
Mapuche guerrilla group attacks civilian targets in three regions
On 25 April 2023, dozens of hooded men with heavy weapons from the radical indigenous group Movimiento de Liberación Nacional Mapuche (MLNM) carried out simultaneous civilian attacks in the regions of La Araucania, Bio Bio and Los Ríos. In La Araucania, the MLNM took an agricultural businessman hostage. The guerrilla group released the victim, who is also a local politician, after setting fire to his grain silos and house. The group also set fire to a Catholic chapel in the rural Bio Bio region. The guerrillas left messages claiming responsibility for all attacks. Last year, the MLNM attacked the farm belonging to the chairman of CPC, Chile’s largest pro-business lobby group.
New finance minister Bonilla: no new oil exploration contracts needed
On 27 April 2023, new Finance Minister Ricardo Bonilla said he doesn’t see the need to sign new oil exploration contracts. This contradicts the position of his predecessor, José Antonio Ocampo. Bonilla replaced Ocampo in a cabinet-wide reshuffle on 26 April 2023. Oil exploration has been a very contentious topic within the cabinet in the past few months. In January 2023, Mines and Energy Minister Irene Vélez declared a halt on all new contracts, which then-Finance Minister José Antonio Ocampo quickly overturned. Minister Velez, an environmentalist, advocates for banning all new oil explorations. Former minister Ocampo, however, wanted to continue new exploration projects for economic reasons. President Gustavo Petro’s government is due to announce its new position on oil exploration sometime this month.
Coffee growers federation defies Petro with pick for new leader
On 27 April 2023, the coffee growers federation (FNC) went against President Gustavo Petro’s wishes by electing Germán Bahamón as its new leader. Petro fired the previous FNC leader in November 2022. Petro had hoped to replace him with an ally that would shift the FNC’s balance of power to favor the southern regions, which tend to favor his Pacto Histórico party. However, then-Finance Minister José Antonio Ocampo refused to endorse Petro’s candidate for the position. Ocampo was fired on 26 April, and the FNC election took place the following day before Petro’s new finance minister could take office. Petro unsuccessfully asked the FNC to postpone their election. Petro has responded by criticizing Barahón, and has also threatened to bypass his leadership to deal directly with grassroots coffee-growing organizations. The FNC is one of the main guild organizations in the country, representing a sector that employs about 2 million people. Coffee is Colombia’s main agricultural export, valued at around USD3.7 billion as of 2022.
Coalition government splits
On 26 April 2023, President Gustavo Petro reshuffled his cabinet. This ended the coalition government Petro has led since August 2022 between his own party Pacto Histórico, Partido Liberal, Partido Conservador and Partido de la U. Petro moved to change the cabinet after coalition partners refused to support his health reform. José Antonio Ocampo, one of the ministers Petro replaced, was one of the most senior figures in the cabinet and a member of the Partido Liberal. Ocampo had earned a reputation for his moderating influence on the government, and his departure has prompted some uncertainty in economic markets. The price of the US dollar has increased vis-à-vis the Colombian peso. Petro replaced Ocampo and six other ministers (interior, agriculture, health, science, technology, and transport) with loyalists from his own party. Many of these officials worked with Petro during his tenure as Bogota mayor (2012–2015).
Terrorism declared national emergency
On 27 April 2023, the State and Public Security Council (COSEPE) declared organized crime violence as “terrorism” posing a national emergency. In a meeting headed by President Guillermo Lasso, COSEPE recommended that the executive branch allow lethal force to confront “terrorism.” If Lasso approves COSEPE’s recommendations, the army will be allowed to take on policing duties outside of areas under a state of emergency. The meeting took place shortly after nine people were killed by an organized crime group at a port in Esmeraldas. The northern province of Esmeraldas and the southern city of Guayaquil are currently under a state of emergency.
Credit Suisse to buy Ecuadorian debt using ‘blue bonds’
On 26 April 2023, Credit Suisse offered to purchase about USD800 million of Ecuador’s debt. The move is part of a government plan to repurchase debt using “blue bonds’’ linked to the environmental protection of the Galapagos Islands. The government agreed to use the funds it gains from the arrangement to invest in protecting the Galapagos Islands. The price of Ecuador’s bonds increased on news of Credit Suisse’s investment, with its risk rating falling by 81 points. Ecuador’s total foreign debt is valued at about USD17.7 billion.
Fuel imports grow 15% in Q1 2023
On 26 April 2023, digital outlet Primicias reported that fuel imports grew 15% in the first three months of 2023 compared with the same period of 2022. Ecuador imported fuel valued at about USD1.6 billion, compared with USD1.3 billion in the same three months of 2022. According to data from state oil company Petroecuador, both the volume and price of imported fuel has increased. The main cause of this growth is its increased use in electricity generation, as explained by Primicias. The government has recently outlined intentions to use imported gas in its thermoelectric plants, as opposed to diesel fuel.
Congress passes a series of controversial laws before going on leave
On 28 April 2023, Congress quickly approved a series of controversial law reforms before entering legislative recess in May. Three law changes stand out. The first is an aerospace reform permitting the government to revive the defunct Mexicana de Aviación airline, as well as permission for the military to operate its own airline and the airport it would fly into. Another important change is a mining reform that reduces the length of time a company can hold a land concession from 100 to 30 years. Third, a stock market reform streamlines regulations for qualifying companies for debt and equity issuance. That reform also allows dual-class shares, encouraging family-controlled companies to go public. The reforms were first approved by the lower house and Senate in the same week, and now just need to appear in the Official Gazette of the Federation (DOF) to become official. This will likely happen in the first days of May. Another important reform would have been a law to reduce the national workweek from 48 to 40 hours, but lawmakers failed to approve it before legislative recess.
Latest preliminary figures show GDP and exports growth
On 27 April 2023, the National Institute of Statistics and Geography (INEGI) reported 1.1% GDP growth in Q1 compared with Q4 2022, based on preliminary figures. This growth was mainly driven by domestic consumption of services including post-pandemic national tourism. The report also showed a record amount of exports totaling US$53.5 million in Q1 2023, based on their customs valuation. This means exports grew 3.2% compared to the same three-month period of 2022, mostly driven by extractive industries products such as minerals and manufactured goods such as cars.
Chihuahua residents demand payment from TC Energy to operate pipelines
On 27 April 2023, members of the Témoris community in the northern state of Chihuahua demanded that Canada’s TC Energy pay US$60 million over alleged grievances from installing and operating gas pipelines ending in the western, coastal state of Sinaloa. Community lawyer Martin Millanes explained that while TC Energy offered a one-off payment of US$25 million, the amount is “far short” of what the community plans to accept given alleged violations to agrarian, environmental and other civic laws. The community demanded the intervention of President Andrés Manuel López Obrador after it shut off the gas flow valve located on its property, and has pledged to keep it shut until the company pays. TC Energy Vice President Rafael García said the valve’s closure was illegal and has negatively impacted the company’s gas supply to state-owned electricity enterprise Federal Electricity Commission (CFE).
Government will ban new private oil concessions: Energy Secretary Nahle García
On 26 April 2023, during the National Petroleum Convention, Energy Secretary Rocío Nahle said that the government would not grant any more concessions to private oil companies in the country. However, it will continue to support already-signed contracts because the administration’s “energy policy is aimed at self-sufficiency,” Nahle said. Meanwhile, the Mexican Association of Hydrocarbon Companies (AMEXHI) warned that businesses will reduce their exploration activity in the country over the next 21 months to account for a reduction in the country’s private exploration activity. It reported that 20 exploration plants will shut down and seven will become nationalized for production.
Santiago Peña wins presidential election
On 30 April 2023, technocrat Santiago Peña won the Paraguayan presidential elections. Peña, a member of the incumbent Colorado party, received 42.74% of the votes. Meanwhile, 27.5% voted for the centrist lawmaker Efrain Alegre. The far-right lawmaker Payo Cubas came in third with 22.9%. Peña is the protégé of former President Horacio Cartes. Peña was Finance Minister during the Horacio Cartes presidency (2013–2018), and then worked as an executive for Cartes’ business conglomerate. Cartes is currently sanctioned by the US government for allegedly participating in corruption and illegal trade. Peña’s Colorado party also won most of the seats in the Senate and in the Chamber of Deputies. Peña will be sworn in on 15 August.
Foreign investment fell by 13% in Q1 2023
On 27 April 2023, Finance Minister Alex Contreras revealed that foreign investment had fallen 13% in the first quarter of 2023 due to social unrest and adverse weather phenomena such as floods and heavy rains. This is the largest decrease registered since 2009, Contreras said, excluding the impact of the COVID-19 pandemic. Despite this, Contreras was optimistic about the coming months. He estimates the country will see an increase of 0.7% in total investment for 2023.
Peru to expand lithium production
On 27 April 2023, Finance Minister Alex Contreras outlined intentions to attract foreign investment aimed at developing lithium deposits in the south of the country. The government is talking to American Lithium about the early-stage Falchani project in the department of Cuzco, which is valued at about USD587 million. The Peruvian government wants to attract lithium investment at a time when Chile has announced plans for an increased government role in lithium production. However, Peruvian deposits are located in a politically unstable region that has become the center of anti-government protests in recent months.
Migration crisis with Chile disrupts Pan-American Highway border crossing
On 26 April 2023, president Dina Boluarte sent the army to the Chilean border after a wave of migrants attempted to enter the country from this location. The move has prevented an undetermined number of migrants from leaving Chile. Chile has recently restricted migrants’ rights after four Venezuelan men killed a police officer. Both countries have exchanged diplomatic protests as migrants set up camp on the Pan-American highway connecting the border. An estimated 100 migrants have been blocking the highway intermittently in the past few weeks. Most migrants are assumed to be Venezuelans by the Peruvian and Chilean press. An estimated 450,000 Venezuelans live in Chile, while about 1.5 million live in Peru.