Regional Pulse: 25 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
- Total Energies to invest more than USD100 million in methane reduction
- Argentina makes lithium battery breakthrough
- Argentina to open new consulate in China
BRAZIL
- 2024 Budget to include tax on the super-rich
- Mining company Vale boasts record production
- Bolsonaro administration made USD42 billion in accounting errors
CHILE
- Chile issues bonds to promote ESG goals
- Lawmakers propose amendments to new cybersecurity law
- Codelco creates shortlist for next CEO
COLOMBIA
- Household expenditures fall 4% in June
- Figures on energy self-sufficiency announced
- Energy Minister resigns
ECUADOR
- Violence spreads to Quito
- Emergency measures to import electricity
- Politicians murdered in run-up to elections
LATIN AMERICA
- EU pledges USD49 billion in public and private investments for Latin America
MEXICO
- Finance authorities evaluate tax benefits to incentivize nearshoring
- Economy grows 4% in June
- Three North American companies file complaints against Mexico in two days
PERU
- Price of Peruvian copper falls
- Economy enters recession
- “Lima Takeover” protest largely peaceful
KEY DEVELOPMENTS IN FULL
ARGENTINA
Total Energies to invest more than USD100 million in methane reduction
On 21 July 2023, French energy and petroleum company Total Energies announced it would invest more than USD100 million over the next three years to reduce its methane emissions in Argentina by 80%. To reduce emissions, Total will replace pneumatic pumps with solar panels, invest in leak detection technologies and build wind farms to supply decarbonized electricity to its treatment plant in Río Cullen. The project is part of the company’s drive toward zero-methane emissions by 2050.
Argentina makes lithium battery breakthrough
On 21 July 2023, the National Atomic Energy Commission (CNEA) announced it had synthesized a crucial input for the electrolytes of lithium-ion batteries for the first time at CNEA’s Pilcaniyeu Technological Complex in Patagonia. A consortium of public institutions and the companies Chlorar Ingeniería and YPF Tecnología commissioned the research, which was financed by the Ministry of Science, Technology and Innovation. Lithium hexafluorophosphate is an important component for manufacturing lithium-ion cells and batteries. Argentina hopes to begin battery production at a La Plata industrial plant in September.
Argentina to open new consulate in China
On 21 July 2023, Argentina announced it would open a new consulate in Chengdu. Located 1,500km southwest of Beijing, Chengdu is a city of 20 million people and serves as a technology and biomedical hub. This will be Argentina’s fifth diplomatic headquarters in China. The new consulate will serve a growing number of Argentine expats in China and provide new opportunities for commercial and cultural exchange, Argentina’s government said.
BRAZIL
2024 Budget to include tax on the super-rich
On 19 July 2023, Finance Minister Fernando Haddad announced the government’s 2024 budget proposal will include a tax on the investment funds of the super-rich — those with more than USD2 million in investments. The tax could earn the government an extra USD2.1 billion in two years. The government estimates the measure would affect about 2,500 investors with assets totalling USD158 billion. Both the 2024 budget and tax reforms will be presented to Congress for debate in August.
Mining company Vale boasts record production
On 18 July 2023, Brazilian mining giant Vale announced record iron ore and copper production driven by high yields at mines in Pará and Minas Gerais states. Vale’s iron ore production is up 6% in Q2 2023 compared with the same quarter last year, largely due to record production growth at its mine in Carajás, Pará. That mine produced 2.9 million metric tons more in Q2 2023 than it did in 2022. Copper production increased by 41%, which was greater than expected.
Bolsonaro administration made USD42 billion in accounting errors
On 19 July 2023, the Comptroller-General of the Union (CGU) published audits showing USD42 billion of accounting errors for five ministries under former President Jair Bolsonaro’s tenure. These include ministries related to agriculture, infrastructure, education, health and citizenship. The largest discrepancy of USD30 billion was found in accounts for the Ministry of Agriculture, which the Bolsonaro administration prioritized to focus on agricultural reform and development in the Amazon. Audits also found that the Ministry of Health, which played an important role during the COVID-19 pandemic, showed a USD3 billion discrepancy due to a series of inconsistencies in recording medicine and vaccine stocks. CGU’s audits could be used in lawsuits against former members of the Bolsonaro administration.
CHILE
Chile issues bonds to promote ESG goals
On 18 July 2023, legal news outlet LexLatin reported that Chile plans to issue sovereign bonds and exchange offers in a bid to reduce carbon emissions and increase female leadership of finance companies. Chilean firm Morales & Besa and US firm Linklaters advised the government on the scheme, which was announced late last month. The Chilean government is offering bonds of USD2.25 billion and €750 million (USD827 million). The money will finance projects to limit CO2 emissions to 95 metric tons, as well as an initiative to appoint women in 40% of leadership roles at major public and private finance companies by the end of 2030.
Lawmakers propose amendments to new cybersecurity law
On 21 July 2023, Chilean lawmakers proposed amendments to the country’s new cybersecurity law scheduled for debate later this week. The new law creates a governance model that promotes risk management and would implement national cybersecurity standards. Lawmakers from across the political spectrum have shown consensus on the law’s new measures, which include creating a reporting process for cybersecurity incidents. That tool would be available to public and private operators providing essential services in sectors such as telecommunications, energy, transport and banking.
Codelco creates shortlist for next CEO
On 19 July 2023, the board chairman of national copper company Codelco announced a shortlist of five candidates to replace outgoing CEO André Sougarret. Sougarret announced his resignation last month and will step down on 31 August. Two potential candidates already work at Codelco: Northern unit vice president Nicolás Rivera, and south central unit vice president Mauricio Barraza. Headhunting firm Egon Zehnder has also proposed three external candidates. These include Jorge Gómez, CEO of the Collahuasi mine; Daniel Malchuk, former BHP Americas president; and Christian Sandoval, BHP Pampa Norte president. The company will confirm the interview panel on July 27.
COLOMBIA
Household expenditures fall 4% in June
On 18 July 2023, market research company Raddar reported that average household expenditures fell 4% year-over-year in June 2023. The report attributes the decline to a weaker US dollar decreasing the purchasing power of remittances, and a drop in real wages caused by stubborn inflation for basic goods such as food, energy and public services. The latter is partly due to the impact of El Niño, a weather phenomenon affecting crops, hydroelectric plants and infrastructure. Another indicator of families’ constrained purchasing power is that most households will use their mid-year salary bonus to pay debts. Household expenditures reported a 3.3% drop year-over-year in Q2 2023.
Figures on energy self-sufficiency announced
On 18 July 2023, the government unit of mining and energy planning (UPME) reported that Colombia has enough gas reserves to address its domestic demand until 2024. Oil reserves should remain self-sufficient until 2027. These are the most likely projections from a range of UPME estimates. Gas demand sits at about 1 billion cubic feet per day, while the country currently produces an average of 400 million cubic feet per day. This means Colombia would need to start importing gas in 2024. For oil, Colombia currently refines about 450,000 daily barrels. When combined with estimated demand levels, this would drain reserves by late 2026 or early 2027. Figures on energy reserves became a controversial topic in January 2023, when former Energy Minister Irene Vélez announced the end of new oil and gas exploration based on unreliable data about reserves.
Energy Minister resigns
On 19 July 2023, Energy Minister Irene Vélez resigned. She was pressured by several scandals over her alleged abuse of power. Earlier this month, several news outlets reported that Vélez’s husband was awarded a state contract. While the opposition criticized the move, Vélez dismissed any wrongdoing because it was unrelated to her ministry’s remit. But shortly after, the customs workers union revealed that Vélez had pressured officials in January 2023 to allow her underage son to travel to Europe unaccompanied without a required permit. This latest scandal adds to Vélez’s controversial tenure at the Energy Ministry, where she faced charges of allegedly forging signatures and received heavy criticism from the vice energy minister. Vélez pursued a firm policy opposing oil and gas exploration, which met resistance within President Gustavo Petro’s cabinet. Who will succeed Vélez remains unclear.
ECUADOR
Violence spreads to Quito
On 19 July 2023, digital news outlet Primicias reported that violent crime had increased in the capital of Quito during the first half of 2023. Between January and June 2023, 134 people were murdered — a 72% increase when compared with the same period of 2022. Police sources told Primicias that most of these crimes (61%) were thought to be connected to organized crime instead of interpersonal violence, signaling a shift from previous years. While criminal organizations have mainly targeted the country’s coastal regions, experts believe they are now spreading violence to the capital.
Emergency measures to import electricity
On 19 July 2023, Energy Minister Fernando Vera announced that the government would initiate an emergency tender process to source 300 megawatts (MW) of electricity before the dry season starts in October. According to Vera, five companies showed interest. The government is considering whether to import natural gas to power the Machala thermoelectric plant in the south, or to contract a ship that would serve as a so-called “floating power plant” and provide electricity directly to the national grid. The government is expecting the droughts associated with El Niño to hit the interior of the country particularly hard, as most of its hydroelectric plants are located there.
Politicians murdered in run-up to elections
On 23 July 2023, Manta Mayor Agustín Intriago was assassinated while he visited a municipal construction site. A bystander was also killed in this coastal city of more than 300,000, and four others were injured. One of those injured was the suspected killer, who was arrested. Intriago was elected mayor in 2019, and reelected in February 2023 until 2027. He is the latest politician to have been killed in the months leading up to Ecuador’s August 20 general election. On 16 July 2023, congressional candidate Rider Sánchez was murdered in the coastal city of Esmeraldas. He was shot by a passing car while leaving a rally. Sánchez was running for the Actuemos coalition led by presidential candidate Otto Sonnenholzner.
LATIN AMERICA
EU pledges USD49 billion in public and private investment for Latin America
On 16 July 2023, the European Union (EU) pledged USD 49 billion in public and private investment for Latin America until 2027. It announced the move during a summit with the Community of Latin American and Caribbean States (CELAC), a 33-country bloc representing the region. The investments will focus on energy transition, infrastructure and adapting to climate change. Observers say this is an attempt by the EU to contest China’s growing diplomatic influence in developing countries through its Belt and Road Initiative, which focuses on building infrastructure worldwide.
MEXICO
Finance authorities evaluate tax benefits to incentivize nearshoring
On 21 July 2023, Undersecretary of Finance and Public Credit Gabriel Yorio said the government is studying the possibility of providing tax incentives in five sectors for companies engaging in “nearshoring.” The sectors will likely be electronics, transports, pharmaceuticals, microprocessors, and aerospace. Tax incentives would include, among other things, an exemption from income tax (ISR) during the first three years of operation and an exemption from value-added tax (VAT or IVA). Companies could also recover VAT paid outside of operational areas for up to four years. Undersecretary Yorio said the government agreed to these sectors with Canada and the US, in accordance with free trade agreements. Mexico’s government hopes that tax incentives will not only attract companies in these sectors, but also persuade them to install operations along the Isthmus of Tehuantepec. This is where the government is trying to construct a business corridor from the Pacific Ocean to the Gulf of Mexico.
Economy grows 4% in June
On 20 July 2023, the National Institute of Statistics and Geography (INEGI) released preliminary figures for Mexico’s monthly economic growth. In June, the country’s gross domestic product (GDP) would have increased 4% month-over-month based on those figures. This would be the highest increase since October 2022, when economic growth was 4.8%. Previous months indicated constant GDP increases, showing slow but steady national economic growth since the end of the COVID-19 pandemic. The government predicts the economy will show annual growth of more than 3% by the end of 2023, mostly due to the private sector’s optimism about manufacturing companies relocating to Mexico and the lower risk of a US recession.
Three North American companies file complaints against Mexico in two days
On 20–21 July 2023, world trade arbitration institute International Center for Settlement of Investment Disputes (ICSID) announced that US food company Arbor Confections and Canadian mining companies First Majestic Silver and Silver Bull Resources filed cases against Mexico. All of these companies have invoked clauses from the United States-Canada-Mexico (USMCA) free trade deal. According to ICSID’s statements, Arbor Confections disagrees with Mexico over an industrial warehouse lease in the border city of Juárez. First Majestic initiated a tax dispute with Mexico in 2021, but it is unclear whether the new lawsuit relates to that. Lastly, Silver Bull seeks reparation for the illegal blockade of its Sierra Mojada mining project in northern Coahuila state.
PERU
Price of Peruvian copper falls
On 19 July 2023, newspaper La República reported that the price of Peruvian copper fell in Q1. This has led to lower revenues, despite higher exports. Between January and April 2023, copper exports increased by 10.6% when compared to the same previous-year period. However, the country received 0.9% less income for those exports. In 2023, Peru exported 814,000 tons for USD6.38 billion, compared with 735,800 tons for USD6.44 billion in 2022. Think tank Instituto Peruano de Economía said the price decrease is motivated by dampened demand from China, which purchases 70% of Peru’s copper. Copper is Peru’s main mineral export, representing 31.1% of all mining exports.
Economy enters recession
On 19 July 2023, newspaper La República reported that Peru had entered a technical recession after two consecutive quarters of negative GDP growth. In Q4 2022, the economy shrunk by -0.4% of GDP, and in Q1 2023 it fell even further by -1.4% of GDP. Finance Minister Alex Contreras explained that the lower growth in early 2023 was motivated by the protests that rocked the country between December 2022 and March 2023, and later by adverse weather conditions that severely harmed crops between April and June 2023. Contreras predicts that growth will pick back up in Q3 and Q4 of 2023. Former Finance Minister Carlos Oliva estimates 1% GDP growth by the end of 2023.
‘Lima Takeover’ protest largely peaceful
On 19 July 2023, major labor and civil society organizations staged a largely peaceful and undisruptive national protest dubbed “The Takeover of Lima.” Thousands of protestors demanded the resignation of President Dina Boluarte, the dissolution of Congress and new general elections. The march ended with six people arrested and eight injured — a far cry from the dozens of protestors suspected of being killed between December 2022 — March 2023. Commerce chambers across the country reported a broad absence of disruption, with sources telling newspaper El Comercio that about 95% of companies maintained normal operations during the protests.
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