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- Companies pay millions in fines over inflation-tackling regulations
- Economy Minister to visit China
- Customs authority to investigate fintech dLocal
- Cabinet Chief Rossi launches presidential bid
- Congress’ lower chamber approves new fiscal framework
- Criminal group uses Evangelical churches to launder money
- President Lula has phone call with Putin
- Codelco to begin lithium production negotiations with mining companies
- AES Andes to reduce CO2 emissions by 1 million tons
- Comptroller General Rodríguez recalled
- Energy minister: No need for new oil and gas exploration despite fall in reserves’ life index
- GEA and Grupo Gilinski reach agreement
- Chinese imports fall 8% in Q1 2023
- President Lasso signs executive decree to promote free trade zones
- Yasuni oil field referendum will happen on election day
- Organizations defend the Supreme Court against presidential attacks
- Citibanamex sale canceled due to uncertainty
- President expropriates land to build train terminal with airport connection
- President Boluarte to testify over protestor deaths
- AMLO refuses to hand over Pacific Alliance presidency
- Congress tables bill to increase Petroperú control over oil fields
KEY DEVELOPMENTS IN FULL
Companies pay millions in fines over inflation-tackling regulations
On 27 May 2023, the Secretariat of Trade revealed companies had paid more than USD14 million in fines for noncompliance with the inflation-tackling official initiative known as Precios Justos (Fair Prices). The measures, introduced in November and December 2022, aim to tackle high inflation by fixing prices for products such as clothing, small electronics, educational materials and medicines. Multinational companies including Nestle, Grupo Cencosud, Carrefour and Día are among those who have paid fines.
Economy Minister to visit China
On 30 May 2023, Economy Minister Sergio Massa arrived in China for a five-day visit. On the first day in Shanghai, Massa secured nearly USD1 billion in Chinese investments. Construction and engineering company Ghezouba Group has invested USD600 million to fund works related to the Jorge Cepernic dam in Santa Cruz and water treatment plants in Buenos Aires. China’s state-owned electric utility corporation will invest USD330 million into Buenos Aires’ electricity distribution in hopes of curbing blackouts across the city. Massa will discuss mining and lithium extraction with Chinese mining companies Tibet Summit Resources, Ganfeng Lithium, and Tsingshan Holding Group. He will also meet with the New Development Bank’s Dilma Rousseff to discuss a credit line for the bank to finance Brazilian exports to Argentina. Massa will then spend two days in Beijing discussing Argentine exports to China, bilateral funding for Argentine infrastructure projects, the signing of the Belt and Road Initiative and the expansion of a currency swap operated by the People’s Bank of China.
Customs authority to investigate fintech dLocal
On 26 May 2023, news outlet Infobae reported that the Argentine customs authority (AFIP) is investigating Uruguayan fintech dLocal over alleged financial fraud of USD400 million. The Argentine government says dLocal took advantage of the multiple exchange rate regime to make hundreds of suspicious transactions to foreign companies. dLocal issued a statement denying the article, Reuters reported.
Cabinet Chief Rossi launches presidential bid
On 29 May 2023, Cabinet Chief Agustín Rossi announced his candidacy for the first round of voting in this year’s presidential elections under the ruling Frente de Todos coalition. Rossi does not have support from Vice-President Cristina Kirchner, which would be crucial for any Frente de Todos candidate. The only other Frente de Todos candidate to announce his candidacy is the Argentine Ambassador to Brazil, Daniel Scioli. Local media outlets speculate that several others could still run for president. These include Finance Minister Sergio Massa, Interior Minister Eduardo “Wado” de Pedro, Buenos Aires province governor Axel Kiciloff and even Kirchner herself (although she has said she will not run). It is unclear whether the ruling coalition will choose its candidate in a closed-door decision or in August’s primary vote.
Congress’ lower chamber approves new fiscal framework
On 24 May 2023, Congress’ lower chamber approved a new fiscal framework designed to control government spending. Under the framework, a complex formula would link expenditure to government revenues while allowing greater flexibility than the spending ceiling enforced in 2017. The bill will now go to the Senate for corrections before reaching the president’s desk for final approval. For ordinary Brazilians, the new framework is expected to stabilize inflation and lower the 13.75% interest rate. It is also expected to moderate prices for goods and services, which is expected to impact purchasing power and incomes.
Criminal group uses Evangelical churches to launder money
On 28 May 2023, authorities revealed that a cell of Evangelical pastors had been working for the organized crime group PCC (First Command of the Capital) for 18 years between 2003 and 2021. The PCC used the pastors’ churches in the state of Rio Grande do Norte to launder more than USD40 million of suspected drug-trafficking money. The cell’s leader, Valdeci Alves dos Santos, has been arrested and is currently under custody in the Brasília Federal Penitentiary.
President Lula has phone call with Putin
On 26 May 2023, President Lula spoke to Russian President Vladimir Putin over the phone. Lula later tweeted that he had turned down an invitation to the annual International Economic Forum in Saint Petersburg, but urged the Russian leader to engage in peace talks brokered by Brazil, India, Indonesia and China. The phone call has global repercussions, as Lula previously garnered international criticism for suggesting Ukraine shared responsibility for last year’s invasion of Ukraine and that US lethal aid was a factor prolonging the conflict.
Codelco to begin lithium production negotiations with mining companies
On 24 May 2023, state development agency Corfo mandated that state-owned copper company Codelco begin renegotiations with two lithium producers. The companies include Chilean-owned SQM and US-owned Albemarle. The Chilean state will become the majority shareholder in the mining and processing of lithium under the country’s new National Lithium Strategy. Codelco announced the negotiations as President Boric officially launched his National Lithium Strategy. Talks between Codelco and SQM will start in the coming days. Codelco CEO Máximo Pacheco hopes negotiations will conclude before the end of the year.
AES Andes to reduce CO2 emissions by 1 million tons
On 25 May 2023, electricity producer and distributor AES Andes announced plans to close two coal-fired thermoelectric units. This would cut 276MW of coal power equivalent to 1 million tons of CO2 emissions. The closure of the two plants in Tocopilla, Antofagasta is part of AES’s commitment to decarbonize 1,693MW of its portfolio by 2025. The company, a subsidiary of US-owned AES Corporation, is developing strategies to convert all its power plants to emission-free technologies by the end of 2025.
Comptroller General Rodríguez recalled
On 25 May 2023, the Council of State (the supreme court for administrative matters) recalled Comptroller General Carlos Hernán Rodríguez for election irregularities in August 2022. The court argued that the election had breached a number of rules and would have to be repeated. Until then, Rodríguez has to step down and will be replaced by an interim comptroller. Congress will choose his replacement from a list of 10 finalists. The comptroller general is tasked with overseeing public expenditure, managing a budget of about USD289 million. Who will replace Rodriguez is largely unknown, as the Petro administration has lost key support in Congress and the Senate in recent months. In April, the ruling coalition fell apart. Then, in early May, the Council of State forced Senate President Roy Barreras — a key Petro ally — to step down.
Energy minister: No need for new oil and gas exploration despite fall in reserves’ life index
On 24 May 2023, the National Agency of Hydrocarbons (ANH) published its long-awaited report on the state of Colombia’s oil and gas reserves, revealing that the life index for both had decreased. This downward trend is worrisome, according to experts consulted by newspaper El Espectador. Gas reserves’ life index fell from 8 years in 2021 to 7.2 years in 2022. The life index for oil fell from 7.6 years to 7.5 years. Despite this, energy minister Irene Vélez has rejected the possibility of signing new exploration contracts, calling instead for improving the efficiency of current reserves. In March 2023, the energy, finance and trade ministers agreed to make a decision regarding exploration based on the results of the ANH report, but didn’t give any more details. Oil represents 5% of Colombia’s GDP, while gas makes up 1%.
GEA and Grupo Gilinski reach agreement
On 24 May 2023 rival business groups Grupo Gilinski and Grupo Empresarial Antioqueño (GEA) reached an agreement to settle a dispute stemming from an attempted hostile takeover. The companies are among the largest private conglomerates in Colombia. Grupo Gilinski will acquire 87% of food manufacturer Nutresa in exchange for selling its participation in cement company Argos and financial conglomerate Sura. The GEA controlled these three companies, and Grupo Gilinski has been attempting to perform a hostile takeover since November 2021. Grupo Gilinski, backed by Abu Dhabi’s royal family, had spent about USD2.9 billion attempting to purchase controlling stakes of Nutresa, Argos and Sura. According to analysis from La Silla Vacía, both sides face losses with the deal. GEA has been forced to sell one of its companies — precisely what the group set out to avoid when it was founded. Meanwhile, Grupo Gilinski has failed to take control of its main target, the financial group Sura. Nutresa reported USD3.7 billion in 2022 revenues, while Argos and Sura reported USD4.6 billion and USD6.8 billion, respectively.
Chinese imports fall 8% in Q1 2023
On 25 May 2023, digital outlet Primicias reported that the volume of imported Chinese goods had fallen by 8% year-over-year in Q1 2023. This reflects a 16% drop from about USD1.6 billion to USD1.4 billion. Felipe Ribadeneira, president of the exporters’ federation (FEDEXPOR), said the fall revealed a loss of confidence in the Ecuadorian economy. In his view, political uncertainty stemming from attempts to impeach President Guillermo Lasso — dating back to last year — is precluding companies from investing in Ecuador. China is the country’s main non-oil commercial partner. The two countries recently signed a free trade agreement whose ratification will be delayed by several months following the call for early elections.
President Lasso signs executive decree to promote free trade zones
On 23 May 2023, President Guillermo Lasso signed an executive decree to promote the creation of free trade zones (FTZs) in the country. The decree allows private investors to create the FTZs, which until now only the government could initiate. FTZs exempt companies from paying taxes on their activities in the given area. Lasso has been ruling by executive decree since he dissolved Congress and called for presidential elections on 17 May 2023. This decree, and any other concerning the economy, would have to be approved by the Constitutional Court.
Yasuni oil field referendum will happen on election day
On 23 May 2023, the Constitutional Court approved a petition by the electoral council (CNE) to hold a referendum about the Yasuni oil field on 20 August 2023 — the same day as legislative and presidential elections. The CNE sought to concentrate the voting on a single day to save money. The Yasuni referendum will ask citizens whether they are in favor of continuing to exploit the oil field, which produced 55,000 barrels per day in 2022 and generated sales worth USD1.2 billion. Holding the referendum on the same day as the election might entail higher participation rates than it otherwise would, and could embed the question within broader electoral and partisan dynamics.
Organizations defend the Supreme Court against presidential attacks
On 28 May 2023, diverse civil organizations gathered across the country to support the Supreme Court of Justice (SCJN) after rising tensions with President Andrés Manuel López Obrador’s supporters. Tensions arose after the Court backtracked various reforms promoted by the president himself. The Court has continuously halted presidential initiatives on various issues such as national security, infrastructure, and electoral affairs. Just last month, the Court stopped a bill proposed by López Obrador that would have permitted public servants to disseminate political messages with public funding. The largest march took place in Mexico City, where about 2,000 protesters confronted supporters during a sit-in on the Court’s premises. A number of people linked to opposition parties attended, including former finance and foreign affairs secretary José Ángel Gurría. President López Obrador has continuously issued verbal attacks against the judiciary, which have ranged from assuring that it is “completely distorted” to comparing some Court ministers to “gangsters.”
Citibanamex sale canceled due to uncertainty
On 24 May 2023, investment banking firm Citigroup canceled the sale of bank Banamex to Grupo Mexico CEO German Larrea. It announced the initial public offering (IPO) of 49% of the bank’s shares in 2025. Grupo México, which owns Ferromex and Florida East Coast Railway, is the fourth-largest company in the country. After trying to sell the bank for more than a year, Citigroup recently managed to establish negotiations with Grupo México to sell Banamex. However, the deal failed to materialize after the government expropriated hundreds of kilometers of railroads from Grupo México to build an interoceanic business corridor. President Andrés Manuel López Obrador said he was “glad” that the transaction was canceled, as this would allow his government to purchase Banamex. The president is eager to purchase Banamex to create a public-private institution. Doing so would decrease the budget assigned to private banks for handling government workers’ payrolls.
President expropriates land to build train terminal with airport connection
On 22 May 2023, President Andrés Manuel López Obrador ordered the expropriation of more than 70 square miles of land to build a train terminal for Line 1 of the Suburban Train. The move aims to connect Mexico City with the recently-opened New Mexico City Airport Felipe Ángeles (AIFA). The expropriation includes all real estate within the land, which is located in the Estado de México municipalities of Tultitlán, Tultepec, and Nextlapan. The president has justified the move because it would connect the civil-military airport to the train system. The government said that compensation to landowners will consist of economic payments for their lands at market value. The extension of the Suburban Train is an essential part of connectivity with the new AIFA airport, which opened in March 2022. The government has opted for this means of transport to guarantee travelers a fast and cheap access route.
President Boluarte to testify over protestor deaths
On 25 May 2023, The Supreme Court called President Dina Boluarte to testify about the dozens of protestors killed in protests following former president Pedro Castillo’s impeachment in December 2022. Boluarte will testify on 1 June, 2023. The protests, which lasted for several months, were particularly active in the south of the country. They resulted in the deaths of an estimated 67 people, several of whom were allegedly killed by army and police forces. Earlier this month, the Inter-American Commission of Human Rights (IACHR) accused the Peruvian government of using excessive force in the handling of the protests. Several high-level army and police officers have been called to testify.
AMLO refuses to hand over Pacific Alliance presidency
On 25 May 2023, Mexican President Andrés Manuel López Obrador (AMLO) suggested he would hand over the rotating presidency of the Pacific Alliance to Chile instead of Peru — a move that would go against the organization’s rules. The bloc’s decision requires consensus. Therefore, the political gridlock could jeopardize further agreements over lower trade tariffs and investments among the four countries, whose stock exchange markets are integrated into the MILA index. AMLO’s move comes after he was declared persona non grata by the Peruvian legislature on 23 May 2023. AMLO had repeatedly questioned the legitimacy of President Dina Boluarte, who took office following Pedro Castillo’s impeachment in December 2022.
Congress tables bill to increase Petroperú control over oil fields
On 24 May 2023, Congress’ energy and mines commission passed a bill declaring the subscription of hydrocarbon contracts as a matter of national interest. It is also proposing that the state oil company, Petroperú, handle the allocation of all oil blocks at the end of the respective contracts. The bill also states that Petroperú will evaluate and determine, prior to the signing of contracts, which oil deposits are most suitable for its operations from a technical, economic, and socio-environmental standpoint. This is the latest move in an effort to vertically integrate Petroperú, which newspaper La República estimates will entail paying USD80 for an oil barrel that costs USD30 to produce. Last week, the energy ministry had reversed its initial plans to increase Petroperú’s participation in the Talara oil fields. But now, Congress is pressuring the ministry to commit to Petroperú’s expansion.