Regional Pulse: 22 August 2023

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.

KEY DEVELOPMENTS

ARGENTINA

• Milei outlines dollarization plan
• Petrol prices frozen until November after 12.5% increase
• Canadian firm accelerates drilling for Salta lithium project

BRAZIL

• Investigation into Bolsonaro’s jewelry advances
• Former Air Force personnel and gang members accused of illegal mining
• Investigators still seeking cause of nationwide blackout

CHILE

• ECLAC rates Chile as top Latin American country for AI development
• Boric reshuffles cabinet for third time in 18 months
• SQM signals price fall could mean an end to the lithium boom

COLOMBIA

• Economy slows down
• Petro seeks to renegotiate Colombia-US free trade agreement

ECUADOR

• González and Noboa head to presidential runoff in October
• Ecuadorians vote to halt oil extraction in the Yasuní
• Voters ban mining in Chocó Andino national park

GUATEMALA

• Anti-corruption champion wins presidential election

MEXICO

• US-Mexico dispute over non-GMO corn escalates to international panel
• Government announces new tariffs
• Mexico’s vulnerability to cyber attacks revealed in latest report

PERU

• Chancay port to have free trade zone
• Oil and mining companies want to reform environmental licensing agency

KEY DEVELOPMENTS IN FULL

ARGENTINA

Milei outlines dollarization plan

On 16 August 2023, Javier Milei — winner of last week’s primary elections — outlined a proposal to dollarize the Argentine economy within a window of 9 to 24 months if he were to become president. Pro-dollarization economist Emilio Ocampo also tweeted that he would be joining Milei’s team. Both have discussed how they would switch Argentina’s national currency from the peso to dollars in recent days, including how they would control the peso’s value during the changeover. Milei has also pledged to cut government spending and privatize state-run companies.

Petrol prices frozen until November after 12.5% increase

On 18 August 2023, state oil company YPF increased petrol prices by 12.5% after the government implemented a depreciation of the official exchange rate that caused a subsequent rise in the “blue dollar” value. Axion Energy, Puma and Raízen had already increased prices. On 17 August, Economy Minister Sergio Massa met with petrol companies to avoid further price hikes and secure a price freeze. The price freeze will last until 31 October.

Canadian firm accelerates drilling for Salta lithium project

On 16 August 2023, Canadian-based NOA Lithium Brines mobilized a second drilling platform for its Río Grande project in the province of Salta. NOA has accelerated drilling operations as part of its plan to begin producing lithium at Río Grande in 2024. In the same week, experts at the Diggers and Dealers Mining Forum in Australia said that Argentina and China are the countries with the highest number of new lithium projects on track to produce the mineral in the next three years.

BRAZIL

Investigation into Bolsonaro’s jewelry advances

On 18 August 2023, the Federal Supreme Court authorized the disclosure of Jair and Michelle Bolsonaro’s private tax and banking information. The banks will now have to hand over the couple’s private tax and banking information to authorities, which represents a major milestone in the investigation. Authorities are investigating the couple over the resale of luxury jewelry gifted to the former president by foreign heads of state. Under Brazilian law, the gifts are national patrimony and cannot be passed on for personal gain. On 17 August, Jair Bolsonaro’s former aide Mauro Cid — who is in preventative custody on separate fraud charges — admitted via his lawyer that the former president ordered him to resell the jewelry and then pass him the profits.

Former Air Force personnel and gang members accused of illegal mining

On 17 August 2023, the Federal Police force revealed it was investigating two former members of the Brazilian Air Force and a member of the organized crime group First Command of the Capital (PCC) for participating in illegal mining in indigenous Amazonian territories. On 17 August, the police launched Operation Buruburu to destroy equipment used to clear forests and dig the illegal mines. Authorities also seized aircraft and vehicles used for the illegal operations. According to authorities, the former FAB soldiers and the PCC member were part of a group controlled by a businessman who owns 10 airplanes and had previously filed ten solicitations for mining authorizations with the National Mining Agency.

Investigators still seeking cause of nationwide blackout

On 15 August 2023, a possible fault in transmission lines caused a blackout that interrupted 20% of the country’s electricity consumption. The morning blackout affected nearly every state in the North, Northeast and Southeast regions, including the country’s largest metropolitan areas of São Paulo and Rio de Janeiro. An investigation into the cause of the incident is underway.

CHILE

ECLAC rates Chile as top Latin American country for AI development

On 16 August 2023, the Economic Commission for Latin America and the Caribbean (ECLAC) put Chile at the top of its first Artificial Intelligence Index for Latin America. The list features countries with the highest potential for AI innovation and development based on five factors: good governance, a developed research environment, social and public interest in AI, academic trends and a strong sense of AI’s future impact. While Chile stands out in its region for AI innovation, the ECLAC report warns that “brain drain” is the biggest threat to AI across Latin America. In Chile’s case, tech workers are leaving the country to work in Argentina, the US, and Spain.

Boric reshuffles cabinet for third time in 18 months

On 16 August 2023, President Gabriel Boric shuffled his cabinet for the third time since taking office 18 months ago. Five ministries will have new leaders, — none of whom are from Boric’s own Social Convergence Party. Of the replacements, only Aurora Williams (mining) and Nicolás Cataldo (education) have prior cabinet experience. Three ministers are from the traditional center-left. The reshuffle is a likely attempt to bring more experienced members into a government that has yet to deliver on many election promises. It also brings an opportunity to foster cooperation with the largest opposition coalition, right-wing Chile Vamos.

SQM signals price fall could mean an end to the lithium boom

On 17 August 2023, Chilean chemical and mining company SQM warned that falling lithium prices could mean the end of the lithium boom. SQM sold lithium for an average price of USD34,000 per ton in Q2 2023. The price has been falling steadily since peaking at USD59,000 per ton in June 2022. SQM also worries its revenues could fall due to an ongoing tax dispute with the Chilean Internal Revenue Service. SQM’s publicly-traded shares account for 31% of all shares on the Chilean stock exchange. SQM is the world’s primary producer of lithium and Chile’s largest private company. It is jointly owned by Chilean investment firm Pampa Calichera and Chinese mining company Tianqi Lithium.

COLOMBIA

Economy slows down

On 16 August 2023, the national statistics office (DANE) reported that GDP growth fell by 1% in Q2 compared with Q1. GDP contracted in key sectors including manufacturing (-4%) and agriculture (-1.4%), experts consulted by El Espectador said. Meanwhile, mining activity grew by 3.8%. President Gustavo Petro said that government spending had increased economic growth. However, experts argue that his administration’s expenses are not sustainable, and pointed to a worrying 24% drop in private investment. Household expenditures also decreased, alleviating inflationary concerns. However, a 14.5% drop in imports has worried experts because Colombia mainly imports machinery to produce goods and services. So, this drop reveals a broader fall in economic activity.

Petro seeks to renegotiate Colombia-US free trade agreement

On 16 August 2023, President Gustavo Petro announced plans to renegotiate Colombia’s free trade agreement (FTA) with the US. Petro told an audience of agricultural producers that if Colombia consumed its own corn — instead of importing it from the US — it would create “1.2 million new jobs.” Experts have argued against revising the 2012 treaty, saying that the US would retaliate by adding new tariffs on Colombian products such as coffee or bananas. Furthermore, any negotiated agreement would have to be approved by the legislative chambers of both countries. Canceling the treaty outright would not require legislative approval. Colombia exported goods worth about USD14.8 billion to the US in 2022.

ECUADOR

González and Noboa head to presidential runoff in October

On 20 August 2023, leftist candidate Luisa González won the highest share of votes in the country’s presidential election and will face Daniel Noboa in an October 15 runoff vote. González, who won 33% of the votes, is running under the Revolución Ciudadana (RC) party tied to former president Rafael Correa. Daniel Noboa, candidate for the conservative Acción Democrática Nacional (ADN) coalition, came in second with 23%. González rose to prominence as Correa’s chief of staff in 2015, and then served as a pro-life congresswoman between 2021 and 2023. Noboa is the heir to his family’s banana conglomerate and served as a congressman between 2021 and 2023. During that time, he created a Parliamentary Friendship Group with Russia — the main client for his family company’s banana exports.

Ecuadorians vote to halt oil extraction in the Yasuní

On 20 August 2023, Ecuadorians voted to ban the Yasuní oil fields in the Amazon from extracting more oil to preserve the area’s biodiversity. About 59% voted in favor of banning oil during a referendum vote, while the remaining 41% supported further extraction. The Yasuní oil field produces about 55,000 daily oil barrels (about 11% of the country’s total), and has proven reserves of 458 million barrels. The referendum’s result is legally binding, and the Supreme Court has ordered the government to enforce it within a year. However, some experts suggest that it may take up to five years to shut down all of Yasuní’s existing oil wells.

Voters ban mining in Chocó Andino national park

On 20 August 2023, residents of Quito’s metropolitan district voted to ban mining in the Chocó Andino national park. However, the government said the referendum vote will not shut down the park’s 12 active mining concessions because its effects are not retroactive. However the government cannot sign any new mining concessions in the area. Chocó Andino is known to hold a still-unknown amount of gold, silver and copper reserves.

GUATEMALA

Anti-corruption champion wins presidential election

On 20 August, former diplomat and opposition candidate Bernardo Arevalo won the presidential election with 58% of the vote. His contender, former first lady Sandra Torres, trailed with 37%. Arevalo heads the Semilla party and is recognized for denouncing corruption among political and business elites. When Arevalo unexpectedly made it to the August runoff election after a first phase in June, election results were suspended for a few days due to a judicial decision. Defeated candidate Torres has not yet conceded, although President Alejandro Giammattei already recognized Arevalo as the winner. Arevalo will be sworn in on 14 January 2024.

MEXICO

US-Mexico dispute over non-GMO corn escalates to international panel

On 17 August 2023, US Trade Representative Katherine Tai announced that the US government will challenge Mexico’s ban on genetically modified (GM) corn before a dispute settlement panel under the USMCA free-trade agreement. President Andrés Manuel López Obrador’s administration prohibited the commercialization of GM crops for human consumption in February, arguing that they endanger native crops despite Mexico importing about USD3 billion of corn from the US annually. Mexico’s Economy Ministry must now appoint panel representatives, and it expects a ruling by 2024.

Government announces new import tariffs

On 16 August 2023, the Economy Ministry announced new import tariffs on products from countries that do not have a free-trade agreement with Mexico. The tariffs ranging from 15–25% will be effective until 31 July 2025, and apply to industries related to footwear, plastics, glass, ceramics and others. Essential food and health products are excluded from the tariffs, as are goods critical to the performance of larger production chains. The Economy Ministry says the measure is meant to compensate for national companies’ losses during the COVID-19 pandemic, and to help more than 200,000 small- and medium-sized companies displaced by larger corporations. Experts warn that the tariffs will negatively impact commerce with important countries including China, South Korea, and India. These countries have become some of Mexico’s main trading partners despite not having a formal trade agreement.

Mexico’s vulnerability to cyber attacks revealed in latest report

On 15 August 2023, global cybersecurity company Fortinet reported that Mexico had the second-highest amount of cyberattacks in the region behind Brazil, with more than 14 billion incidents in the first half of 2023. It announced that figure in the latest version of its Global Threat Landscape Report. According to the report, the Latin America and Caribbean region suffered more than 63 billion attempted cyberattacks in the first half of 2023. Brazil topped the list with 23 billion. Venezuela came in third with 10 billion attacks, followed by Colombia (5 billion) and Chile (4 billion). A significant uptick in the sophistication of malicious actors is seen largely in domains, where threats have escalated in frequency and complexity. This is characterized by a rise in highly-targeted attacks across various sectors, including intricate ransomware campaigns and substantial data breaches. Fortinet largely credits the large number of attacks to the sophistication of cybercriminals, who can quickly design and adapt their techniques to exploit vulnerabilities across industries. It also cites sophisticated cybercrime organizations and nation-state cyber offensive groups.

PERU

Chancay port to have free trade zone

On 17 August 2023, the Chinese state company Cosco Shipping Chancay said the government will grant free-trade zone (FTZ) status to the Chancay port in 2023. Cosco is constructing the Chancay port, which lies 63 kilometers north of Lima. It is expected to be Latin America’s largest port when completed in 2024. Cosco said the FTZ will lower income tax from the current 30% rate to somewhere between 18% and 20% in order to attract big technology companies such as Samsung, LG and Huawei. Chancay is designed to be the third-largest port in the world, with a cargo capacity larger than the combined capacity of US ports in Los Angeles, Long Beach, Savannah and New York.

Oil and mining companies want to reform environmental licensing agency

On 16 August 2023, the oil and mining employers association (SNMPE) proposed consolidating environmental licensing activities to a single institution that would be controlled by the presidential cabinet office. SNMPE said the move — which Prime Minister Alberto Otárola supports — would speed up the environmental licensing process. Several independent bodies are responsible for granting environmental licenses today, including water and forest authorities. However, critics argue that the move would politicize the licensing process. The proposal would first need a broader consensus in both the executive and legislative branches.

Wherever you do business in Latin America, Southern Pulse has the expertise, the network, and the relationships to help solve your toughest operational challenges.

Want to learn more? Let’s chat.

CC BY-ND