Regional Pulse: 8 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

• Juntos por el Cambio leads polls for Sunday’s presidential primaries
• ExxonMobil looking to sell Vaca Muerta assets
• Bolivian authorities warn vulnerable populations as water contamination reaches Salta

BRAZIL

• Stellantis to start developing hybrid and electric cars in Brazil
• Police operations kill 45 in six days
• São Paulo begins privatization of water company with USD14 billion investment

CHILE

• Nearly one-third of Santiago’s buses are electric
• Energy giant CGE takes Transbank to court over commission charges
• Boric enacts new mining royalties law

COLOMBIA

• Colombia unveils decarbonization roadmap
• President Petro’s campaign was illegally financed, according to son’s testimony
• New decree bans renewal of La Guajira mining contracts

ECUADOR

• Ecuador now has second-highest risk rating in Latin America
• IDB approves USD500 million loan to face El Niño

MEXICO

• Nuevo León governor announces new investment from Indian companies
• State electricity company acquires debt to modernize hydropower plants
• State oil company suspends operations at largest export terminal

PERU

• Unlikely alliance between Fuerza Popular and Peru Libre cemented in Congress
• Petroperu’s revenues fall by 41% in Q2 2023
• Electricity shortages pit government against gas exporters

KEY DEVELOPMENTS IN FULL

ARGENTINA

Juntos por el Cambio leads polls for Sunday’s presidential primaries

On 7 August 2023, poll aggregator La Política Online showed the center-right opposition coalition Juntos por el Cambio (JxC) leading presidential primary polls with a predicted 32.9% of the vote. The ruling Peronist camp followed with 30%. In third place was far-right lawmaker Javier Milei, with 19.3%. El Cronista’s poll aggregators showed that July polling averages gave 33.1% for JxC, 29.6% for Peronism and 19.8% for Milei. Economy Minister Sergio Massa is the favorite to win the Peronist vote. Polls say JxC lawmaker Patricia Bullrich should beat Buenos Aires Mayor Horacio Rodríguez Larreta. Various polls differ significantly, and there were many errors in polling predictions ahead of provincial elections earlier this year.

ExxonMobil looking to sell Vaca Muerta assets

On 3 August 2023, US investment bank Jefferies revealed that ExxonMobil had requested its services to find a buyer for their onshore assets at the Vaca Muerta oil fields in Neuquen, Argentina. Interested companies must submit a non-binding offer for ExxonMobil’s assets by the end of August, although ExxonMobil estimates a final sale could take several months. ExxonMobil stressed that the sale does not signal its departure from Argentina. The company added that it does not plan to sell its nearby offshore assets, close its Buenos Aires offices or terminate jobs.

Bolivian authorities warn vulnerable populations as water contamination reaches Salta

On 4 August 2023, Bolivian health officials warned vulnerable populations in the northern Argentine province of Salta that the Pilcomayo River’s contamination levels have reached dangerous highs. Vulnerable populations at higher risk of side effects from heavy metal contamination include women of childbearing age, pregnant women, nursing mothers and young children. Bolivian authorities have linked the high levels of mercury and lead in the river to local mining activities.

BRAZIL

Stellantis to start developing hybrid and electric cars in Brazil

On 1 August 2023, automotive multinational Stellantis announced plans to begin developing three hybrid car models and one electric model in Brazil for domestic consumption. Stellantis, which owns Citröen, Fiat, Peugeot and Jeep, already has three Brazilian plants equipped to produce the new models. It expects the new cars to go on sale in 2024. The development of hybrid and electric technologies is part of Stellantis’ decarbonization goals. The company plans to reduce its carbon emissions by 50% before 2030, and 100% by 2038.

Police operations kill 45 in six days

On 3 August 2023, police operations killed 45 people in six days, including two police officers. The operations targeted drug traffickers and organized crime members in the states of São Paulo (16 deaths), Rio de Janeiro (10 deaths) and Bahia (19 deaths). Brazilian civil society groups have pointed out that the killings occurred in predominantly Black neighborhoods. State governments justified the violence, saying the officers were under attack. Brazil has the world’s second-highest rate of extrajudicial police killings so far this year.

São Paulo begins privatization of water company with USD14 billion investment

On 1 August 2023, São Paulo Governor Tarcísio de Freitas announced the privatization of the state’s sanitation company, Sabesp. The state government will continue to invest USD14 billion into its operations until 2029, which it will fund by selling shares. The state of São Paulo currently owns a 50.3% stake in Sabesp, but plans to sell shares via a follow-on public officer. The government would maintain decision-making powers after giving up its majority stake.

CHILE

Nearly one-third of Santiago’s buses are electric

On 3 August 2023, transportation minister Juan Carlos Muñoz announced that 31% of Santiago’s public buses are electric. The capital city has the largest number of electric buses of any city outside of China. Residents say they have noticed the electric buses create less noise and environmental pollution.

Energy giant CGE takes Transbank to court over commission charges

On 4 August 2023, Diario Financiero reported that Chile’s biggest electricity supplier, CGE, took digital payments processor Transbank to court over commission charges. CGE, now majority owned by the Chinese state, alleged that Transbank misappropriated at least USD500,000 in commission fees by charging more than the contractual amount. The case will now be heard by the Santiago Appeals Court. The Supreme Court dismissed the accusations against Transbank in June.

Boric enacts new mining royalties law

On 3 August 2023, President Gabriel Boric enacted a new mining royalties scheme designed to deliver USD450 million by taxing large-scale mining projects to promote development programs in Chile. Starting in 2024, the scheme will target large-scale copper mining companies with yields of 50,000 metric tons per year or more. Of that USD450 million, USD225 million will help promote regional development and scientific and technological investments. Meanwhile, USD170 million will go directly to the 302 poorest municipalities in the country, and USD55 million will go to 32 municipalities with infrastructure directly linked to the mining industry.

COLOMBIA

Colombia unveils decarbonization roadmap

On 3 August, the Energy Ministry published a roadmap toward decarbonization drafted by former minister Irene Vélez. However, some experts have raised questions about the report, which predicts the country will become a net importer of gas by 2027 and of oil by 2028. The plan, which predicts falling fuel consumption in coming years, contradicts other reports from government planning units that forecast rising demand. Vélez, known for her policy to halt new oil and gas exploration, was accused of misrepresenting data in another report earlier this year. Minister Omar Andrés Camacho stepped into the energy minister role after Vélez resigned from her post on 19 July 2023.

President Petro’s campaign was illegally financed, according to son’s testimony

On 3 August 2023, President Gustavo Petro’s son, Nicolás Petro, admitted to have channeled illegal funds from former drug traffickers to his father’s 2022 presidential campaign. Nicolás, a regional lawmaker, was arrested on 31 July under illicit enrichment charges. He admitted to having pocketed a part of the money, while funneling the rest to the presidential campaign without declaring it to electoral authorities. Without specifying the amounts, Nicolás said the money exceeded campaign financing limits imposed by electoral law. This is the latest allegation of financial irregularities levied against President Petro’s 2022 presidential campaign, which prosecutors are investigating. Petro’s former presidential campaign financing director, Ricardo Roa, is now the CEO of state-owned oil company Ecopetrol.

New decree bans renewal of La Guajira mining contracts

On 2 August 2023, the government published a decree banning the renewal of mining concessions in La Guajira due to water scarcity concerns. In early July, the federal government declared a social emergency in the region bordering Venezuela. Coal mines such as Glencore’s Cerrejón (which produced nearly 20 million tons of coal in 2022), cannot renew their concessions or sign new ones. The government plans to halt all mining in the department until it can outline a set of exclusive mining zones. A timeline for this has not been announced. Another government decree ordered gas companies to cancel their long-term contracts with energy providers. Instead, they must sell their energy at either market rates or the terms stipulated in those contracts — whichever is lower.

ECUADOR

Ecuador now has second-highest risk rating in Latin America

On 4 August 2023, Ecuador’s risk rating reached 2,035 points — its highest level in 36 months. This is the highest rating the country’s central bank has recorded since President Guillermo Lasso took office in May 2021. Ecuador overtook Argentina (2,011 points) to have the second-highest risk rating in Latin America, behind Venezuela. Factors driving this rise include ungovernability and political uncertainty, according to foreign investors cited by digital news outlet Primicias. Congress has been blocking Lasso’s laws. Meanwhile, the president has been clashing with the Constitutional Court in recent weeks due to the body’s unwillingness to approve some of his economic decrees. On the other hand, the possibility of Rafael Correa’s party returning to the presidency after the 20 August 2023 general elections is dissuading investors. On the same date, Ecuadorians will cast referendum votes on whether to stop exploiting one of the country’s largest oil fields, the Yasuni.

IDB approves USD500 million loan to face El Niño

On 2 August 2023, the Inter-American Development Bank (IDB) approved a USD500 million loan to help Ecuador face challenges related to El Niño, a climate phenomenon prompting floods and droughts. The loan’s interest rate is fixed and set to be repaid within the next 19 years. The government predicts losses of up to USD4 billion due to El Niño, which is happening at a time when falling oil prices are forcing the government to revise its budget. While the loan is supposed to help the country prepare for El Niño, President Lasso has struggled to execute on the government’s public investment plans. As of July 2023, only 28% of projected investments for the year have taken place.

MEXICO

Nuevo León governor announces new investment from Indian companies

On 3 August 2023, Nuevo León Governor Samuel García announced he was able to attract foreign investment to the northern state from leading Indian conglomerate Tata Group, digital services firm Infosys and information technology company HLC. He expects those firms to announce the investment amounts in the coming days. The state government also announced that Italian auto parts manufacturer Vimercati will invest USD200 million in Nuevo León, which will help it become an international center for electric transportation products.

State electricity company acquires debt to modernize hydropower plants

On 3 August 2023, state-owned electricity company Federal Electricity Commission (CFE) acquired a 15-year, USD333.6 million loan to modernize seven hydroelectric plants in six states. J.P. Morgan Chase Bank and HSBC Limited granted the loan with the World Bank Group’s Multilateral Investment Guarantee Agency (MIGA) serving as guarantor. CFE said the loan will help modernize hydropower generation plants in Chiapas, Guerrero, Hidalgo, Michoacán, Puebla, and Sinaloa. The move is expected to increase power generation as well as improve efficiency by 6%.

State oil company suspends operations at largest export terminal

On 1 August 2023, state-owned oil company Petróleos Mexicanos (Pemex) suspended operations at the country’s largest oil export terminal, Yúum K’ak’ Nàab, due to a hose leak. The floating, offshore platform in the Gulf of Mexico near Campeche is expected to resume operations during the week of 7 August 2023, along with the nearby terminal Salina Cruz. The incident led to a backlog of seven ships expected to load 8 million barrels of oil for the US, South Korea, China, and Indian markets. The incident adds to a series of major operational headaches for state-owned Pemex as the summer driving season increases demand for gas. Last month, Pemex suspended operations at the Salina Cruz terminal after an explosion killed at least two workers.

PERU

Unlikely alliance between Fuerza Popular and Peru Libre cemented in Congress

On 3 August 2023, Congress’ two largest parties negotiated the makeup of congressional committees for the next legislative term (2023–2024). These include Keijo Fujimori’s right-wing Fuerza Popular (FP) and the far-left Peru Libre (PL). FP retained control over the constitutional, economic, and agricultural committees. Meanwhile, the FP took leadership of the foreign affairs committee from Acción Popular (AP). FP also ceded control over the audit and comptroller committee tasked with investigating a number of corruption cases to Pedro Castillo’s PL. The shift will happen at a time when the committee is investigating cases related both to former president Castillo’s administration and current government members (which PL opposes). PL will control the audit, justice, and housing committees. The energy and mines committee will be headed by a PL offshoot, the Bloque Magisterial, which concerns some local investors.

Petroperu’s revenues fall by 41% in Q2 2023

On 3 August 2023, Petroperu’s financial statements revealed that the company’s Q2 2023 revenues decreased 41% year-over-year to USD813 million. The company said the fall was due to infrastructure blockades in the interior of the country, floods in several regions and a fall in refinery demand. It also highlighted a price advantage from competitors, which were able to drop prices further than Petroperu. Domestic sales fell by 42% year-over-year, and exports fell by 36%. Petroperu hopes it can increase revenues in Q3 2023 when its new, nearly-completed Talara refinery comes online in the coming weeks.

Electricity shortages pit government against gas exporters

On 1 August 2023, newspaper La República reported that the government plans to divert gas from southern Cusco’s Camisea field to generate domestic electricity. While droughts threaten to reduce the country’s hydroelectric output, private gas exporters oppose the move. The government argued that without the gas, electric plants will be forced to use diesel — a switch that could quintuple electricity prices. The private sector, represented by the Peruvian Society of Hydrocarbons (SPH), countered that Camisea’s gas is already linked to long-term contracts that cannot be renegotiated. The government declared a state of emergency regarding the Camisea gas supply, which is currently undergoing maintenance. This means that the field will have to prioritize domestic demand over exports until 18 August.

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