Regional Pulse: 29 August 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
- BRICS invites Argentina to join bloc in 2024
- Sergio Massa announces new IMF disbursements
- Argentina hit by a spate of looting incidents
BRAZIL
- Brazil is the slowest-growing BRICS country
- Brazilian petrochemical firms among hardest-hit by falling prices
- Mining firm Mineração Morro do Ipê to open new iron mine in October
CHILE
- Indigenous groups lose appeal against Collahuasi mine expansion
- SQM violated terms of government contract, documents show
- Government files fraud complaint in corruption scandal
COLOMBIA
- Guerilla leader leverages power over Amazon deforestation
- Petro’s labor reform presented again
- Murder rate drops to 10-year low
ECUADOR
- Claro gets extension for mobile network concession
- Cartel de Sinaloa cocaine seized in Durán
MEXICO
- Government seeks greater biotech market access for private companies
- Supreme Court minister presents ruling over oil market access
- Meat processing companies want Mexico to become the world’s fifth-largest exporter
PANAMA
- Restrictions and delays plague drought stricken Panama Canal
PERU
- Private investment fell by 8.3% in Q2 2023
- Congressional president under investigation for mishandling public funds
KEY DEVELOPMENTS IN FULL
ARGENTINA
BRICS invites Argentina to join bloc in 2024
On 24 August 2023, the BRICS bloc of emerging economies invited Argentina and six other countries to join the bloc at its 15th summit in Johannesburg. BRICS, comprising Brazil, Russia, India, China, and South Africa, represents 36% of the world’s GDP and 46% of its population. The bloc wants to promote the use of local currencies for trade. Argentina would become a BRICS member on 1 January 2024 if it accepts the bloc’s invitation. Egypt, Iran, Ethiopia, Saudi Arabia and the UAE have also been invited to join. Opposition presidential candidates Patricia Bullrich (Juntos por el Cambio) and Javier Milei (La Libertad Avanza) have said they would remove Argentina from BRICS if either were to win the presidential election.
Sergio Massa announces new IMF disbursements
On 23 August 2023, Economy Minister Sergio Massa announced Argentina had secured a disbursement of USD7.5 billion. Another USD2.75 billion payment may follow in November. The USD7.5 billion disbursement is part of an agreement between Argentina and the IMF that will allow Argentina to intervene in exchange rates via Argentina’s central bank. The intervention will prevent rapid devaluations of the Argentinian peso via a band system known only to the IMF and the Argentine Economy Ministry. The government also plans to use the loan to avoid more devaluations of the peso in a bid to counteract inflation as well as pay back previous loans from the Latin American Development Bank (CAF), China, and Qatar.
Argentina hit by a spate of looting incidents
On 22 August 2023, 56 people were arrested in Buenos Aires in connection with a spate of looting incidents across the country. Businesses in the greater Buenos Aires area and provinces of Córdoba, Mendoza, Chaco, Río Negro and Neuquén were the hardest hit. There is little clarity over why so many looting events took place in such a short amount of time. The government was quick to blame supporters of the right-wing presidential candidate Javier Milei. Juntos por el Cambio candidate Patricia Bullrich — known for her tough-on-crime stance — blamed the government’s disarray for the attacks. Argentina has seen looting events happen during periods of economic turmoil, most notably during the crises of 1989 and 2001.
BRAZIL
Brazil is the slowest-growing BRICS country
On 22 August 2023, members of the BRICS bloc of economies met at a summit in Johannesburg. While these economies are predicted to grow exponentially over the next few decades, Brazil’s economic performance lags behind that of its fellow member states. When BRICS was first defined in 2003, its four original members — Brazil, Russia, India, and China — were predicted to overtake the G7’s share of the world economy by 2050. India and China’s economies have already surpassed their predicted growth rates by 62% and 282%, respectively. Meanwhile, Brazil’s growth curve resembles that of Russia, which has faltered under international sanctions after its 2014 annexation of Crimea and 2022 invasion of Ukraine. Brazil’s weak growth hampers its global relevance, thus diminishing the country’s decision-making powers within the bloc.
Brazilian petrochemical firms among hardest-hit by falling prices
On 26 August 2023, new data showed that Brazilian petrochemical firm Braskem experienced the biggest drop in revenue from plummeting oil prices compared with any of its global peers. Across the six largest companies, profits have fallen by between 37% and 126% when comparing the first half of 2022 with the first half of 2023. Falling revenue is driven by a post-pandemic fall in prices for products like ethane (-53%), propane (-41%), thermoplastic resins (-31%), and naphtha (-26%). Braskem recorded a net loss of USD121 million in the first half of 2023.
Mining firm Mineração Morro do Ipê to open new iron mine in October
On 23 August 2023, mining firm Mineração Morro do Ipê announced it had invested USD266 million in its Tico Tico iron mine in Brumadinho, Minas Gerais. Morro do Ipê acquired the mine in 2016 and will start operations there in October 2023. Morro do Ipê is majority-owned by Singaporean firm Trafigura and the Emirati state-owned holding company Mubadala. In February 2023, Morro do Ipê became the target of a government inquiry into the emergency status of its Brumadinho dam. According to the company, a low-risk fault was found during the decommissioning of the dam. Morro do Ipê released a statement at the time assuring the Brumadinho Environmental Prosecutor’s Office that the dam is structurally sound.
CHILE
Indigenous groups lose appeal against Collahuasi mine expansion
On 25 August 2023, the Environmental Evaluation Service announced it had rejected appeals from two indigenous associations against plans to expand the Doña Inés de Collahuasi copper mine in the Atacama desert. Collahuasi, one of the world’s largest copper mines, is majority-owned by Glencore and Anglo American.The two companies plan to invest USD3.2 billion to expand the mine in the next five years. The two indigenous communities of Chanavaya maintain that the mine’s owners have not done due diligence about how the mine’s expansion would affect the local population.
SQM violated terms of government contract, documents show
On 25 August 2023, the Chamber of Deputies requested documents from the Chilean state-run development agency (Corfo) showing that mining company SQM allegedly violated the terms of its government contract. According to those documents, SQM allegedly failed to invest an agreed-upon portion of mining revenues into Salar de Atacama’s indigenous communities. SQM is 49% owned by Chinese mining company Tianqi Lithium, with its remaining shares owned by Chilean companies. It is one of only two companies with lithium mining rights in Chile. In 2017, the Chilean government negotiated an agreement requiring SQM to invest a percentage of its revenue into local indigenous communities. But since 2021, it has only distributed USD14.2 million of the estimated USD63.5 million it needs to pay out. SQM says that it has honored its agreement with Corfo, arguing that it is paying to develop indigenous projects in installments instead of in single, lump sums.
Government files fraud complaint in corruption scandal
On 26 August 2023, the Chilean government opened a criminal investigation into the Democracia Viva foundation for its alleged involvement in the so-called “Agreements Case” corruption scandal. This is the first organization to be implicated in the case, which has rocked President Gabriel Boric’s Frente Amplio coalition. On 16 June 2023, prosecutors began investigating Democracia Viva for allegedly diverting public funds. The most recent investigation will focus on fraud charges. The case is ongoing as more foundations face accusations of having misappropriated public funds.
COLOMBIA
Guerilla leader leverages power over Amazon deforestation
On 26 August 2023, financial newspaper Portafolio reported that deforestation in the Amazon had fallen by 76% in Q1 2023 year-over-year. It attributes the drop to efforts by guerrilla leader “Iván Mordisco,” whose real name is Néstor Vera. “Mordisco,” who leads the dissident FARC group Estado Mayor Central (EMC), is enforcing a logging ban in the regions he controls after a request by President Gustavo Petro. In the past he had sponsored deforestation in environmentally protected areas. He now appears to be enforcing the ban to show his power to the government, with a view of gaining leverage in future truce negotiations. Environmentalists argue that these deforestation efforts would need broader institutional support to be sustainable in the long-term, rather than depend on the tactics of a guerrilla leader. The EMC has been negotiating a truce with the government since January 2023.
Petro’s labor reform presented again
On 24 August 2023, Labor Minister Gloria Inés Ramírez presented a new labor reform to Congress. This is the second time the government will try to pass the bill after lawmakers rejected it in June 2023. The new reform includes some slight changes to assuage opponents, such as removing the obligation to update salaries according to inflation and allowing delivery apps to hire workers on flexible contracts. The proposed legislation also empowers trade unions by granting union leaders greater protections from being fired. The current bill, which was reintroduced discreetly, has caught some legislators by surprise.
Murder rate drops to 10-year low
On 23 August 2023, Defense Minister Iván Velásquez said that the murder rate had fallen to its lowest level in 10 years based on data recorded in the first half of 2023. The murder rate now sits at 14.6 murders per 100,000 inhabitants — a significant decrease from 32.6 in 2013. Velásquez also reported a decrease of 51% in the number of police and soldiers killed on duty. However, he reported a rise in petty theft and worryingly high murder rates for social leaders. The government is attempting to negotiate a broad “Total Peace” agreement with all armed organizations in the country (including guerrillas and drug cartels).
ECUADOR
Claro gets extension for mobile network concession
On 22 August 2023, the government announced it would extend Claro’s mobile network concession to guarantee cellular coverage throughout the country while contract negotiations continue. Claro will pay USD 3.37 million monthly during this period, which could last another six months as talks continue. The concession, which the telecommunications company has had since 2008, was due to expire on 26 August. However, negotiations to renew it have stalled. Claro is the largest mobile operator, accounting for 52% of Ecuadorian mobile lines. Telefónica, which controls 30.5% of mobile lines, has yet to renew its own concession set to expire on 30 November 2023.
Cartel de Sinaloa cocaine seized in Durán
On 22 August 2023, police in the canton of Durán (in Guayaquil’s metropolitan area) seized almost two tons of cocaine branded with symbols from the Mexican Sinaloa Cartel. According to police investigations, the drugs were on the way to Guayaquil for onward shipment to Central America, the US and Europe. In recent years, Ecuador has become an important transit point in the smuggling of cocaine from Colombia to the US and Europe. Mexican cartels such as the Sinaloa Cartel and the Cartel Jalisco Nueva Generación (CJNG) have gained a foothold in the country and have contributed to a spike in violence.
MEXICO
Government seeks greater biotech market access for private companies
On 25 August 2023, the Federal Commission for the Protection against Health Risks (COFEPRIS) promoted modifying a health regulation that seeks greater market access for private, foreign biotech drug companies. Biotech medicine refers to cutting-edge drugs used to treat certain types of cancer, rare diseases and genetic disorders, among others. COFEPRIS proposes eliminating the Mexican Certificate of Good Manufacturing Practices (GPM). Instead, it would recognize GPMs issued by other health authorities, including the World Health Organization (WHO), the Pan American Health Organization (PAHO) and the Pharmaceutical Inspection Cooperation Scheme (PIC/S).
Supreme Court minister presents ruling over oil market access
On 23 August 2023, Supreme Court Minister Javier Laynez proposed a new ruling that would require state-owned oil company PEMEX to give up its predominance over the hydrocarbons sector. Minister Laynez’s ruling recognizes multiple protection lawsuits launched by private companies in response to a May 2021 presidential reform to the national Hydrocarbons Law. The reform obliged the Energy Regulatory Commission (CRE) to grant a greater share of the oil market to PEMEX. However, various companies legally challenged this decision. The Supreme Court ruled in favor of the companies, despite complaints from Congress and the President. Minister Laynez’s ruling would require CRE to issue fair market regulatory measures.
Meat processing companies want Mexico to become the world’s fifth-largest exporter
On 23 August 2023, meat processing industry organization United Animal Protein (MUPA) announced a strategy to make Mexico the world’s fifth-largest meat producer. The strategy consists of strengthening the country’s meat production through new technologies and pork advertising campaigns. Mexico produced 7.7 million tons of meat in 2022 (including chicken, beef, and pork), data from the Mexican Meat Council (COMECARNE) shows. That makes Mexico the world’s sixth-largest meat producer behind Russia (9.9 million tons).
PANAMA
Restrictions and delays plague drought stricken Panama Canal
On 24 August, Reuters reported that the Panama Canal is keeping the weight restriction that entered into force on 20 August for cargo vessels due to low water levels, provoked by a prolonged drought. As a result of the restrictions on vessel’s transit, more than 200 ships were reportedly stuck in the canal, causing a traffic jam that might disrupt supply chains. Vessel owners are reserving slots ahead of time or diverting to other routes. The restrictions are designed to keep sufficient water levels in the canal. The canal’s authority said the restrictions will likely continue for at least 10 more months.
PERU
Private investment fell by 8.3% in Q2 2023
On 25 August 2023, the central bank revealed that private investment had fallen by 8.3% year-over-year in Q2 2023. Private investment, now totaling about USD7.1 billion, has shrunk for four consecutive quarters. According to the central bank, investment is falling due to social conflicts, environmental catastrophes and a decrease in construction rates. Peru faced severe social unrest in Q1 2023 and several natural disasters in Q2, including widespread floods and droughts. As a result, several key sectors such as construction and agriculture shrank in the first half of 2023.
Congressional president under investigation for mishandling public funds
On 23 August 2023, the prosecutor’s office launched an investigation into Congressional President Alejandro Soto for allegedly mishandling public funds in 2022 during his time as a congressman. Soto is suspected of having used public money to pay aides who posed as anonymous supporters of his legislative work. Some of his aides called into radio shows to defend Soto’s record without acknowledging that they were members of his team, and defended Soto through fake social media accounts. Soto, who was elected congressional president in July 2023, can count on the support of the two largest congressional parties: far-left Perú Libre (PL) and right-wing Fuerza Popular (FP). Both said they would refuse to support any motion against Soto.
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