Regional Pulse: 6 June 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 New Development Bank to vote on Argentina’s membership
• Argentina to develop Yuan cash markets
• Ganfeng lithium company confirms multi-billion investment in Argentina

BRAZIL

• Brazil and Venezuela discuss plans to repay debts with energy
• Brazilian and Russian foreign ministers discuss Russia-Ukraine war
• Petrobras CEO: Amazon oil exploration will go ahead

CHILE

• Chile follows global decline in M&A
• Women make history at Codelco and Sofofa
• French mining group Eramet opens in Chile

COLOMBIA

• Petro’s 2022 presidential campaign under investigation over leaked audio files
• Chief of Staff resigns amid illegal phone tapping allegations
• Mining exports reach 14-year high
• Security concerns reduce investment in gold mining
• President of National Hydrocarbons Agency forced to resign

ECUADOR

• President Lasso will not seek re-election in August
• Attorney General receives death threats

MEXICO

• State elections results show ruling MORENA party’s strength
• Government seeks infrastructure investment from Arab countries
• Turf war sparks violence in southern Chiapas state

PERU

• Congo surpasses Peru as world’s second-largest copper exporter
• Peru issues sustainable bonds
• Dengue cases reach new high

KEY DEVELOPMENTS IN FULL

ARGENTINA

BRICS New Development Bank to vote on Argentina’s membership

On 1 June 2023, New Development Bank (NDB) President Dilma Rouseff promised Argentina it would vote on whether to make it a bank member in August. The NDB is a bank established by the BRICS alliance of developing countries including Brazil, Russia, India, China, and South Africa. Argentina has previously sought financial support from the New Development Bank (NDB), but the bank’s charter forbids loans to non-members. Argentina would have to make a capital contribution of US$250 million in sovereign bonds to become a member. The NDB will also vote on whether to add Saudi Arabia, Egypt and Zimbabwe as members.

Argentina to develop Yuan cash markets

On 2 June 2023, a delegation from Argentina’s Central Bank met with representatives of Chinese financial institutions to discuss the development of Argentina’s Yuan cash market. The Central Bank and the People’s Bank of China have had a currency swap agreement in place since 2009, which they renewed for another three years just this week. A better-developed Yuan cash market in Argentina could benefit the country’s capital market, and also complement the currency swap by supporting businesses wanting to pay for Chinese imports in Yuan. The deal will also benefit China by strengthening the Yuan as a global commercial currency, boosting its role as a counterweight to the US in the world economy.

Ganfeng lithium company confirms multi-billion investment in Argentina

On 31 May 2023, Chinese lithium company Ganfeng said it would invest USD2.7 billion in its Argentina-based sites during a meeting with Argentina’s Finance Minister, Sergio Massa. The company expects to yield 74,000 tons of lithium per year with the investment. Ganfeng will begin extracting lithium from its Llullaillaco salt flats in Salta province next year. It is also an investor in the Cauchari-Olaroz project in Jujuy alongside Canada’s Lithium Americas and Argentina’s Jemse. Massa also met with Tibet Summit Resources, the company controlling the Salar Arizaro and Salar de Diablillos lithium projects in Salta province. With an expected USD1.7 billion investment, Tibet Summit plans to produce 50,000 tons per annum of lithium carbonate suitable for batteries in Salar de Diablillos and between 50,000 and 100,000 tons in Salar Arizaro by 2024.

BRAZIL

Brazil and Venezuela discuss plans to repay debts with energy

On 30 May 2023, Brazilian Finance Minister Fernando Haddad met with Venezuelan President Nicolás Maduro to discuss the repayment of a USD260 million debt. Haddad and Maduro discussed the possibility of Venezuela repaying its defaults on Brazilian exports by supplying energy to the Brazilian state of Roraima, via the Linhão de Guri line.

Brazilian and Russian foreign ministers discuss Russia-Ukraine war

On 2 June 2023, Brazilian Foreign Minister Mauro Vieira and his Russian counterpart Sergei Lavrov met in Cape Town to discuss the war in Ukraine. The meeting was part of a wider summit between members of the BRICS (Brazil, Russia, India, China, and South Africa) bloc of developing countries this week. The ministers displayed warm relations. This is the second meeting between Vieira and Lavrov since Vieira took office in January.

Petrobras CEO: Amazon oil exploration will go ahead

On 30 May 2023, Petrobras CEO Jean Paul Prates reportedly told board members that the company would start oil exploration in the Amazon within six months, despite opposition from the environmental agency Ibama. On 17 May, Ibama denied Petrobras a license to explore an area 175 kilometers off the coast of Amapá state — 500 kilometers from the mouth of the Amazon River. Prates has the backing of Mines and Energy Minister Alexandre Silveira, who called Ibama’s decision “absurd” and asked for it to be revised.

CHILE

Chile follows global decline in M&A

On 2 June 2023, accounting firm PwC published figures revealing that mergers and acquisitions were down 30% in Chile during Q1 2023. This represents a USD3 billion decline year-over-year. Mergers and acquisitions have fallen by 44% globally, but Chile is worse off compared with its Latin American neighbors. The region’s mergers and acquisitions fell 16.7%. The mining sector is one of the few industries still performing well.

Women make history at Codelco and Sofofa

On 1 June 2023, Claudia Cabrera took over the Gabriela Mistral Division of Chile’s state copper company, Codelco. She is the first woman to lead a branch in the company’s history. Cabrera’s appointment is part of Codelco’s effort to increase women in management positions. Codelco aims to reach a quota of 35% in the next few years. The powerful Sofofa trade union, which represents more than 160 industrial companies, appointed Rosario Navarro as president on 31 May. She is the first woman to hold this role in the organization’s 140-year history.

French mining group Eramet opens in Chile

On 5 June 2023, French mining group Eramet announced it would open a subsidiary in Chile. The group, 27% owned by the French state, is already operational in Argentina and the first European firm to develop sustainable lithium production on an industrial scale. The Eramet Chile office will focus on lithium exploration, with the ultimate goal of supplying battery makers. Eramet has annual revenues of USD5 billion and operates in 15 countries.

COLOMBIA

Petro’s 2022 presidential campaign under investigation over leaked audio files

On 5 June 2023, the National Electoral Council (CNE) called on two of President Gustavo Petro’s key allies to testify in the case of alleged financial irregularities during the 2022 presidential campaign. On 4 June, a leaked recording from Petro’s campaign manager Armando Benedetti to Chief of Staff Laura Sarabia suggested that Benedetti acknowledged exceeding campaign finance limits and threatened to reveal where the funds came from. The CNE had been investigating the case since February 2023. The allegations of illegal campaign financing have paralyzed Petro’s Congressional reforms, with Congressional president David Rancero saying that the reforms would be “frozen” to avoid their being “disturbed” by the scandal.

Chief of Staff resigns amid illegal phone tapping allegations

On 2 June 2023, Chief of Staff Laura Sarabia tendered her resignation following allegations that she illegally tapped several of her domestic employees’ phones. Attorney General Francisco Barbosa revealed that the names of Sarabia’s employees had been added to lists of suspected cartel members after about USD7,000 in cash was reportedly stolen from Sarabia’s home. Armando Benedetti, Colombia’s ambassador to Venezuela and a key ally of President Gustavo Petro, was also allegedly involved and tendered his resignation. This is the latest incident pointing toward deteriorating relations between the Petro government and the attorney general appointed by the previous administration. The exit of Sarabia and Benedetti also represents a blow to Petro, as they were two of his closest allies.

Mining exports reach 14-year high

On 1 June 2023, the Colombian Mining Association (ACM) reported that Q1 2023 mining exports reached nearly USD5 billion. This represents a 32% increase compared with 2022 — the highest figure in 14 years. Coal, largely destined to Europe, made up almost two-thirds of all exports (64%).

Security concerns reduce investment in gold mining

On 1 June 2023, the Colombian Mining Association (ACM) warned that gold production (20% of mineral exports) is expected to fall this year due to an increase in insecurity. The ACM said that gold mining companies Fortescue Metals, Royal Road, Agnico Eagle and Barrick Gold were suspending their investments in Colombia until security improves in mining regions. These companies operate in the region controlled by the organized crime group Cartel del Golfo.

President of National Hydrocarbons Agency forced to resign

On 31 May 2023, energy minister Irene Vélez demanded that National Hydrocarbons Agency (ANH) President Clara Guatame resign, financial newspaper Portafolio reported. According to Portafolio, Vélez argued that Guateme lacked experience in the hydrocarbon sector. The energy ministry had highlighted Guatame’s 25 years of mining experience when she was appointed in December 2022, digital outlet Infobae pointed out. Last week, the ANH released a report showing that the life index of Colombia’s oil and gas reserves were decreasing, undermining Vélez’s proposal to ban hydrocarbon exploration. In January 2023, Vélez fired energy vice minister Belizza Ruiz over policy disagreements.

ECUADOR

President Lasso will not seek re-election in August

On 2 June 2023, President Guillermo Lasso announced he will not seek re-election in the August 2023 presidential elections. He will serve the rest of his term until November 2023. Lasso had called for snap presidential and legislative elections in May 2023 to escape from Congressional impeachment proceedings. Lasso’s current approval rating sits at 14%.

Attorney General receives death threats

On 1 June 2023, Attorney General Diana Salazar said she had been receiving death threats from organized crime groups. Salazar is overseeing corruption cases against prominent former politicians, including former president Lenín Moreno and former vice president Jorge Glas. This is the latest threat against a public figure in recent weeks. On 1 June 2023, unidentified gunmen assassinated the attorney general of Guayas province (which includes the city of Guayaquil).

MEXICO

State elections results show ruling MORENA party’s strength

On 04 June 2023, MORENA-PT-PVEM coalition candidate Delfina Gómez won gubernatorial elections held in central Estado de México, based on preliminary results released by the National Electoral Institute (INE). Gómez won over opposition alliance candidate Alejandra del Moral within an 8% margin of the total vote. Gómez’s success breaks with nearly 100 years of PRI party rule in the country’s most populous state of about 17 million. As a former education secretary, Gómez’s victory also represents a political triumph for the so-called “Fourth Transformation’’ movement led by President Andrés Manuel López Obrador (AMLO). Elections also took place in northern Coahuila state, where INE declared Manolo Jiménez of the opposition PAN-PRI-PRD alliance the winner.

Government seeks infrastructure investment from Arab countries

On 01 June 2023, a delegation of government officials visited the Arabian peninsula to invite countries to invest in the administration’s most emblematic infrastructure projects: the Maya Train, the Interoceanic Corridor (CIIT), the new Mexico City Airport (AIFA) and the Dos Bocas Refinery. Finance and Foreign Undersecretaries Gabriel Yorio and Carmen Moreno Toscano led the delegation with five member countries of the Cooperation Council for the Arab States of the Gulf (GCC): Kuwait, Saudi Arabia, Oman, Qatar and the United Arab Emirates. The delegation explained President Andrés Manuel López Obrador’s economic policy, which is focused on improving mobility, facilitating trade and energy sovereignty. Arab representatives highlighted business opportunities in fintech, startups, food distribution, and the automotive industry. Mexican government officials agreed to expedite trade agreements to improve economic cooperation with Mexico.

Turf war sparks violence in southern Chiapas state

On 30 May 2023, groups of gunmen allegedly belonging to the Jalisco Cartel New Generation (CJNG) and the Sinaloa Cartel (CDS) clashed over control of the Chiapas state bordering Guatemala. At least 3,000 people from a dozen communities in the southern municipalities of Frontera Comalapa and Chicomuselo were forcibly displaced from their homes, fleeing violence and forced recruitment. Meanwhile, indigenous communities in northern areas including Sabanilla established a curfew and formed their own self-defense force. Due to their vast distrust of authorities, the southern community of La Trinitaria and others have openly confronted security personnel. Other communities in the north, such as Pichucalco, attacked state police officials, the National Guard and the military in an effort to defend themselves from colluding hitmen. The government immediately responded by deploying 2,000 new security officers to openly confront criminal organizations. But representatives of indigenous organizations, such as the long-standing secessionist Zapatista Army of National Liberation (EZLN), claimed that “Chiapas is on the brink of a civil war.”

PERU

Congo surpasses Peru as world’s second-largest copper exporter

On 1 June 2023, newspaper El Comercio reported that the Democratic Republic of the Congo surpassed Peru as the world’s second-largest copper exporter in 2022. Social unrest and political uncertainties are restricting investment in Peru, Bloomberg Línea reported. Congo, on the other hand, has experienced rapid advancement. Copper exports there have more than doubled since 2018 to 2.4 million tons. This is due in part to Ivanhoe Mines’ Kamoa-Kakula high quality mineral, which is more sought after than its Peruvian equivalent. Both countries are roughly equal in terms of production, with Congo projected to surpass Peru by 2026 or 2027 according to consultancy group Wood Mackenzie.

Peru issues sustainable bonds

On 31 May 2023, the Economy and Finance Ministry announced Peru would issue USD2.5 billion in “sustainable” bonds denominated in the local sol currency. The bonds are set to mature in 2033, with a coupon of 7.3%. The bonds are considered “sustainable” because the money received will be used to finance investments in renewable energies and environmental protections, as well as to buy back debt in foreign currencies. Peru is the latest country to use “sustainable” bonds to buy back its foreign debt, after Ecuador sold USD1.6 billion in sustainable bonds in May 2023.

Dengue cases reach new high

On 30 May 2023, news outlets reported that dengue cases in Peru had reached a new peak. An estimated 86,000 people have become infected with the virus this year, Bloomberg Línea reported, leading to 121 deaths. The rise in cases is related to warming temperatures in the Pacific Ocean due to the recurring environmental phenomenon known as El Niño. However, this year’s cases are now almost double those seen during the last instance of El Niño in 2017. The country is experiencing a higher amount of deaths and overcrowded hospitals, Bloomberg reported. During the Covid-19 pandemic, Peru registered the highest per-capita death toll in the world. The country has the lowest public healthcare spending among Latin American countries.

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