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- Strike at Vaca Muerta oil fields called off after negotiations
- Molinos Agro to access USD250 million loan
- Oiltanking to expand Argentine operations
- Environmental agency rejects Petrobras’ plans for oil exploration in Amazon basin
- Senate Economic Affairs Committee working on bill to relax entrepreneurship regulations
- Petrobras announces end of import parity policy
- Congress approves new extension to southern state of emergency
- Codelco creates two new companies to facilitate lithium mining
- SQM lithium remains higher than average after drop
- Government suspends ceasefire with FARC dissidents in four departments
- Droughts could bring higher electricity prices
- Two dead and 14 wounded in gold mine attack
- Oil reserves expected to have decreased
- Investors forecast period of political uncertainty
- Lasso dissolves Congress, calls for presidential and legislative elections
- Three killed in attack against Durán mayor
- President faces further pushback on classifying construction information
- President López Obrador expropriates railroads to build interoceanic corridor
- Government threatens to file international trade complaints against Texas for inspections
- Government reverses state control increase in Talara oil fields
- Unrest in mining regions drives down private investment
- IMF approves USD5.3 billion loan
KEY DEVELOPMENTS IN FULL
Strike at Vaca Muerta oil fields called off after negotiations
On 21 May 2023, leaders of the oil tanker union Sindicato de Petroleros Privados called a surprise widespread strike with no warning, disrupting oil fields across the province of Neuquén. According to union leader Marcelo Rucci, the strike was called in protest against an accident involving a worker at a Capsa-Capex-owned oil and gas deposit. However, local sources reported that the disruption came amid Rucci trying to reposition himself after the defeat of his political ally, the Neuquén Popular Movement (MPN) party, in last month’s gubernatorial elections. The leader of Sindicato Petroleros Privados met with the government in Buenos Aires on 22 May. The strike was resolved and called off with the condition of implementing a new health protocol. The strike did not affect production.
Molinos Agro to access USD250 million loan
On 19 May 2023, the Inter-American Development (IDB) bank granted a USD250 million loan to Argentine agricultural company Molinos Agro, while Santander and Rabobank together will loan the company USD200 million. The funding will help finance the processing and export of oilseeds and cereals in a bid to increase food security. The loan is part of a scheme that intends to invest USD1 billion in Argentina’s key sectors to close development gaps.
Oiltanking to expand Argentine operations
On 17 May 2023, German petroleum logistics services provider Oiltanking announced plans to expand its Puerto Rosales dock in Bahía Blanca between 2024 and 2026. The upgrades will support the export of oil from Vaca Muerta to the Atlantic, requiring an investment of USD498 million to increase storage capacity to 300,000 cubic meters. The project faces challenges related to the high cost of imported products, permits and recruiting personnel as Argentina imposes import controls.
Environmental agency rejects Petrobras’ plans for oil exploration in Amazon basin
On 17 May 2023, Brazil’s environmental protection agency (Ibama) rejected Petrobras’ request to study the feasibility of exploratory drilling in an area along 2,200km of coastline in the Amazon river basin. The drilling would take place between the states of Amapá and Rio Grande do Norte. Neighboring French Guyana has already begun drilling in the area. Ibama rejected the request over technical inconsistencies in Petrobras’ request.
Senate Economic Affairs Committee working on bill to relax entrepreneurship regulations
On 23 May 2023, Economic Affairs Committee senators will vote on a bill that would strip regulations hampering entrepreneurship. The bill is sponsored by Senator Alan Rich of the conservative União Brasil party. The text proposes creating a digital platform to access paperwork more easily, among other things. If passed, the bill would go to the Constitution and Justice Committee for approval before the president could sign it into law. Small business institute Sebrae recently reported that the country is seeing the lowest rate of new startups in ten years.
Petrobras announces end of import parity policy
On 16 May 2023, state-run oil company Petrobras announced the end of an international price parity (PPI) policy for diesel and petrol. PPI will be replaced by a new commercial strategy aimed at making gas cheaper for Brazilian consumers. Critics of the new policy argue that oil prices are already closely tied to the international market, and that misalignment with international prices could affect imports in Brazil. About 30% of the country’s diesel comes from overseas.
Congress approves new extension to southern state of emergency
On 17 May 2023, Congress approved a new extension to the state of emergency in the southern regions of Bío Bío and Araucania. The measure addresses the violent clashes between the region’s indigenous Mapuche communities and the agricultural industry, which the government has said constitute terrorism. The vote comes after a state of emergency declared in May of last year — since renewed multiple times — that reduced violent events by 31%. The right-wing opposition party Independent Democratic Union (UDI) voted against the extension. The UDI announced they would refuse to back the measures unless the national government declared martial law in the affected provinces.
Codelco creates two new companies to facilitate lithium mining
On 19 May 2023, state-owned copper mining company Codelco created two new branches for lithium exploration and exploitation. Salares de Chile and Minera Tarar will pave the way for the government’s National Lithium Strategy announced last month. Salares will provide the framework for Codelco’s future exploitation of salt flats. Minera Tarar will be Codelco’s first subsidiary, fostering public-private relations with area companies. Chile contains 40% of the world’s lithium reserves.
SQM lithium remains higher than average after drop
On 17 May 2023, Chilean chemical company SQM announced a dip in lithium sales prices from a record peak. However, prices remain higher than the average of USD38,000 per ton. The company (which is 23% Chinese-owned) announced last week that prices had fallen to USD51,000, which it attributes to a dip in demand after a change in subsidies for electric vehicles in China. The company reported record prices in the final quarter of 2022, with lithium prices reaching USD59,000 per ton.
Government suspends ceasefire with FARC dissidents in four departments
On 21 May 2023, the government suspended the ceasefire with FARC dissidents in the departments of Putumayo, Caquetá, Guaviare and Meta. The decision was taken after an extraordinary security council meeting headed by President Gustavo Petro. The government has decided to end the ceasefire after FARC dissidents killed four indigenous minors in the department of Putumayo. Despite this, the government and the guerrilla group continue with ceasefires in other departments, where peace negotiation meetings are still scheduled to go ahead as planned.
Droughts could bring higher electricity prices
On 18 May 2023, Energy Minister Irene Vélez declared there was no cause for alarm in the electricity market due to upcoming drought forecasts. The US National Oceanic and Atmospheric Agency (NOAA) predicts an 80% chance of a medium-level El Niño phenomenon this year. This would lead to rising temperatures in the Pacific Ocean and unseasonably hot temperatures and droughts. Some investors worry hydroelectric capacity will be severely undermined, potentially leading to electricity rationing. The price of electricity is expected to increase in case of drought, which would increase already-high inflation.
Two dead and 14 wounded in gold mine attack
On 17 May 2023, two people died and 14 were injured after a pipe bomb exploded in the Buriticá gold mine in the department of Antioquia. According to financial newspaper Portafolio, those attacked were trying to combat illegal mining in the region. Antioquia’s Bajo Cauca region has seen widespread unrest in recent months, with illegal miners striking for recognition and protection. The Chinese company Zijin Continental Gold, which owns the Buriticá mine, has decided to suspend operations. The Buriticá mine has contributed more than USD53.1 million in royalties and accumulated USD663.4 million in tax payments over its 14 years of operation.
Oil reserves expected to have decreased
On 16 May 2023, investment firm Corficolombiana published a report predicting that official figures will show a decline in national oil reserves. The National Hydrocarbons Agency is due to publish official figures on oil reserves later this month. Corficolombiana expects these numbers to reveal a contraction compared with previous estimates of 7.6 years for crude oil and eight years for natural gas production. This is putting pressure on President Gustavo Petro to reconsider his ban on new fossil fuel contracts. Despite higher international oil prices last year, the best-case scenario is that crude oil reserves remain flat, BTG Pactual analyst Daniel Guardiola told Bloomberg Línea. While Petro’s administration initially rejected issuing new oil exploration licenses, the energy, finance, and trade ministries indicated in March 2023 that the reserve report would be crucial in shaping future policy.
Investors forecast period of political uncertainty
On 20 May 2023, digital news outlet Primicias reported that international investors fear a period of political uncertainty in the country. Investors are particularly concerned over the possibility of an “outsider” candidate winning the August 2023 presidential elections and reneging on Ecuador’s foreign debt. The government is due to pay almost USD6 billion in debt repayments in 2026. Several free trade agreements negotiated in the past few months — namely with China and Costa Rica — are now suspended until a new Congress takes office in late August. This will delay the enactment of these treaties by several months.
Lasso dissolves Congress, calls for presidential and legislative elections
On 17 May 2023, President Guillermo Lasso dissolved Congress in a constitutional maneuver known as “muerte cruzada,” calling for presidential and legislative elections in a move to keep from being impeached. Lasso started a political impeachment trial on 16 May 2023, following accusations of tolerating embezzlement in state companies. Rather than face the possibility of removal, Lasso has called for elections in late August 2023. Until then, Lasso will remain in his post, ruling by executive decree. Any decree concerning the economy has to be approved by the Constitutional Court.
Three killed in attack against Durán mayor
On 15 May 2023, alleged members of the Chone Killers organized crime group (linked to Los Choneros, one of the country’s largest criminal organizations) attacked the mayor of the southern canton Durán. The attack, just outside Guayaquil, killed two security agents and a bystander. The attackers used armor-piercing munitions. The target, mayor Luis Chonillo, survived the ambush unscathed. The Chone Killers attacked Chonillo the day after taking office as mayor, in what experts see as a warning sign to assert dominance over Durán and the broader Guayas province. The Chone Killers have been disputing control over the region with rivals Los Águilas, prompting the government to place the province under a state of emergency.
President faces further pushback on classifying construction information
On 22 May 2023, the Supreme Court of Justice (SCJN) ruled that President Andrés Manuel López Obrador’s executive order classifying all federal government construction works as national security priorities is invalid. This classification impedes the right to access public information, SCJN argued. The executive order, signed in 2021, shielded details about public contracts for key construction projects including the Mayan Train, the new Mexico City International Airport, the Interoceanic Corridor of the Isthmus of Tehuantepec and the Dos Bocas refinery. With this decision, the SCJN agrees with the National Transparency Institute (INAI). The president assured in his morning press conference that he has already given instructions not to answer the phone from the Supreme Court, addressing a situation that has been escalating intensely since January.
President López Obrador expropriates railroads to build interoceanic corridor
On 19 May 2023, President Andrés Manuel López Obrador expropriated three sections of privately owned railroad lines in the cities of Coatzacoalcos and Cosoleacaque in eastern Veracruz state. The railroads belonged to Grupo México, one of the largest railroad companies in North America. The executive branch ordered marines from the Navy Secretariat (SEMAR) to occupy the railroads and give them to the state-owned company Train of the Isthmus of Tehuantepec (Ferrotismo). The president expects these railroads to connect the Pacific Ocean and Gulf of Mexico in an interoceanic business corridor. President López Obrador said all railroad installations making up the Interoceanic Corridor of the Isthmus of Tehuantepec (CIIT) are strategic, and therefore important to national security. Compensation to Grupo México will consist of economic payments for the railroads at market value. Separately, Grupo México said the government’s decision was a “surprise to investors” and said the company would be taking legal action.
Government threatens to file international trade complaints against Texas for inspections
On 15 May 2023, the Economy Secretariat (SE) threatened to file formal complaints against Texas — Mexico’s largest trading partner — before the North American Committee on Trade Facilitation (FAC). The action focuses on alleged unnecessarily rigorous inspections of cargo transports in the Matamoros-Brownsville border crossing, which SE argues it had caused considerable economic losses. The FAC is a trade-facilitating mechanism part of the United States-Mexico-Canada Agreement (USMCA) formerly known as the North American Free Trade Agreement.
Government reverses state control increase in Talara oil fields
On 18 May 2023, Perupetro opened the bidding process for two oil blocks in the Talara basin, in the northern department of Piura. President Dina Boluarte and Minister of Energy and Mines Óscar Vera had initially guaranteed that all Talara lots would return to state oil company Petroperú once their current contracts expired (the last one runs until 2028). They later clarified that only two blocks would be given to private operators, while two others would go to Petroperú. The government recently changed its stance once more, limiting Petroperú’s participation to a minority partner in the latter two operations. The blocks being offered to private investors produced about 1,150 barrels per day in 2022, while those under state participation produced about 8,100 barrels per day.
Unrest in mining regions drives down private investment
On 18 May 2023, the central bank reported that private investment had fallen by 12% year-over-year in Q1 2023. The fall is mainly driven by a 23.2% reduction in mining investment. This is due to recent unrest in southern mining regions, particularly in the departments of Arequipa, Cusco and Puno. Mining investment amounted to USD835 million in Q1 2023, a decrease of USD198 million when compared to Q1 2022.
IMF approves USD5.3 billion loan
On 17 May 2023, the Ministry of Economy and Finance announced that the International Monetary Fund (IMF) has reaffirmed Peru’s access to a Flexible Credit Line (FCL) of up to USD5.3 billion. The IMF praised Peru for maintaining strong institutional policy frameworks and solid macroeconomic fundamentals over the past two decades. Peru’s inflation-targeting regime, credible fiscal policies, and robust financial system supervision were highlighted as key factors supporting economic growth and stability. The FCL, requested on a precautionary basis, can be activated in response to external risks. It does not require specific policy targets for disbursements.