Regional Pulse: January 2022

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A monthly review of need-to-know events curated by the Southern Pulse team for people who work in Latin America. Looking for something more tailored to your needs? Let’s chat.

Key Events

• Across Latin America, venture capital funding reached record values in 2021.
• Argentina faces a key deadline to repay USD730 million to the International Monetary Fund and restructure USD44.5 billion.
• Brazilian far right idealogue, Olavo de Carvalho, passed away.
• A China-based company, BYD, was awarded a contract to extract up to 80,000 tons of metallic lithium in Chile.
• Russia hints at the possibility of sending military assets to Cuba and/or Venezuela.
• Íngrid Betancourt announced she is joining Colombia’s presidential race.
• Evidence emerges of the surveillance of journalists and civil society in El Salvador via Pegasus spyware.
• Honduras has a new president, Xiomara Castro, was sworn in amid a Congressional crisis.
• Two journalists exposing Mexico’s corruption and drug violence were murdered within one week.
• An ongoing oil spill in Peru is labeled an “ecological disaster”.

Event: Venture capital funding reached record values in 2021 in Latin America.

Summary

The annual total of investment in 2021 was more than triple the previous record set in 2019, according to the Association for Private Capital Investment in Latin America, a group tracking PE and VC funding in Latin America. Nearly USD20 billion of venture capital went into nearly 1,000 deals in 2021. A significant portion of the VC funding flooded the tech industry. Moreover, the region now hosts 27 unicorns, a major jump from just four in 2018. Most activity is occurring in Argentina, Colombia, and Mexico.

Why it matters

Despite significant growth, there is even greater potential. According to The Economist, “The total market capitalization of tech firms as a proportion of GDP is still just under 4%, compared with 14% in India and 30% in China.” Countries that are friendly to these investments over time could see significant economic benefits, like attracting additional non-tech investment, local economic growth, and an increasingly diverse and skilled worker pool.

Event: Argentina agrees a deal with the IMF to restructure USD44.5 billion debt.

Summary

Argentina has finally come to an agreement with the IMF to repay USD730 million and refinance USD44.5 billion of debt, just part of the USD57 billion the country borrowed in 2018 under the center-right Macrii.

Under the terms of the agreement, Argentina will gradually reduce its primary fiscal deficit from 2.5% of GDP in 2022 to 0.9 percent in 2024. The government has also agreed to slow Central Bank money printing to finance the deficit, which would slow to 1% of GDP in 2022, and then “close to zero” in 2024. That’s down from 3.7% in 2021.

Ongoing efforts to restructure Argentina’s foreign debt come nearly two years after it defaulted on an IMF loan granted in 2019. The government blamed IMF-mandated spending cuts, the pandemic and different political values for its decision to default.

High levels of national debt have contributed to chronically high rates of inflation in Argentina — nearly 50% a year for the past few years. The country also faces significant differences in official and unofficial exchange rates, and dwindling foreign reserves due to pandemic handouts.

Why it matters

Fernández’s Peronist government had been critical of the original IMF bailout, saying it financed capital flight and should never have been granted. It vowed never to accept a new agreement that would involve spending cuts, an objective Martin Guzmán, Minister of the Economy, said he had achieved in the talks.

A full agreement with the Washington, DC-based lender on a debt restructuring deal still needs to be approved by the IMF’s board of directors and ratified by Argentina’s congress, where the opposition made big gains in elections last year.

Event: Brazilian far-right ideologue, Olavo de Carvalho passed away

Summary

Olavo de Carvalho was a conservative icon who moved to the US in 2005 from Brazil and gained a significant internet following from a new wave of right-wing activists in his home country. He did this via online courses and communities as well as social media.

Carvalho, who was 74 at the time of his death, garnered many followers in the early days of social media, particularly while the Brazil’s Workers’ Party (PT) governed. He argued that leftists were spreading “cultural Marxism” throughout Brazil and aimed to implement a “new socialist world order” globally. He called for Brazilians to mobilize and defeat the global left by diminishing their influence and reach. Carvalho also fed conspiracy theories, including those about COVID-19, which was reported to be the cause of his death.

Why it matters

Carvalho and Brazilian President Jair Bolsonaro oversaw the country’s recent and significant far-right expansion. His death temporarily leaves Brazil’s far-right without an ideological figurehead, but this certainly will be filled by other popular icons like Allan dos Santos, Sara Fernanda Giromini (Sara Winter), or Roberto Jefferson.

Event: Íngrid Betancourt announced she will join Colombia’s presidential race.

Summary

Betancourt is well known for spending six years as a hostage of the Revolutionary Armed Forces of Colombia (FARC) after being abducted during her last presidential run in 2002. She’s currently one of the few women in the race, and is running for the Green Oxygen Party (PVO).

She is the 13th person to confirm they are running for office, four months ahead of the elections.

Why it matters

Betancourt, who is not closely aligned with the political left or right, says she aims to be a candidate of reconciliation. She will compete in an upcoming March primary alongside several centrist candidates who have thus far failed to excite voters.

Event: China-based company, BYD, was awarded a contract to extract up to 80,000 tons of metallic lithium in Chile.

Summary

BYD won one of two contracts awarded by the Mining Ministry with an offer of USD61 million.

The second contract, also for 80,000 tons, was awarded to Chile-based Servicios y Operaciones Mineras del Norte with its USD60 million offer. The Mining Ministry said that both offers were significantly higher than the other bids. US-based Albemarle, which produces 19% of global lithium and 17% of Chile’s market share, was one of the losing bidders.

Why it matters

Prior to 2016, Chile was the world’s largest producer of lithium with a 37% global share of the market. That share has since dropped to 31%, as production in Australia and other lithium producing countries like China and Argentina increased. Its position is likely to fall to 17% by 2030 if it fails to increase output. Chile’s 2050 National Mining Policy seeks to reverse this course and has a goal to increase production to 380,000 tons by 2030.

The contracts were awarded despite president-elect Gabriel Boric’s request to postpone the tenders.

Event: Russia hints at sending military assets to Cuba and/or Venezuela.

Summary

In response to tensions with the US over Ukraine, Russia suggested it might send military assets to Latin America. Russian military assets have been occasionally seen in Venezuela in recent years, particularly in Caracas.Yet, it has been difficult to prove they have a consistent presence.

Although this threat is likely overblown, Russia has other methods to harm US interests in the region through its existing disinformation capabilities and cyber attacks. These soft forms of influence have proven to have significant influence. Viewership has grown significantly on social media for Russian-government owned outlets RT en Español and Actualidad RT, as well as popular programs like Ahí les Va.

Why it matters

Some of the Russian government strategies regionally include engaging with the youth, criticizing the US, and distracting from the harsh realities of life in allied countries like Cuba, Nicaragua, and Venezuela. Its veiled threat of sending military assets is an effort to counterbalance US activity in Eastern Europe, but does not reflect any plan for armed intervention.

Event: Surveillance of journalists and civil society in El Salvador

Summary

According to a recently released report by Citizen Lab out of the University of Toronto, 35 journalists and civil society activists in El Salvador have been monitored via spyware. The Bukele government is likely behind the espionage.

Of those 35, 22 are investigative journalists at El Faro, a digital newspaper based in El Salvador that is often critical of the government.

The other spyware targets have not been named publicly.

Why it matters

Bukele is referred to by some jokingly as “Latin America’s Favorite Dictator.” He has populist tendencies and exercises significant control via executive and legislative branches. His administration’s use of surveillance is almost certainly to gather information against those who do not support him. In this case, investigative journalism outlet El Faro being a major target makes it clear that Bukele is likely trying to scare opponents into silence.

Event: New Honduran President Xiomara Castro is sworn in amid crisis within the Libre political party

Summary

Members of Castro’s own party, Libre, split to support Jorge Calix (Libre) for the presidency of Congress. This move was the result of private maneuvering on the part of Calix and others to reject her promise to name Luis Redondo of the Partido Salvador de Honduras (PSH) as Congress President, as per a coalition agreement made between Castro and PSH leader Salvador Nasralla during the campaign.

Castro expelled her breakaway colleagues from her party. It was Redondo who presided over her swearing in on 21 January 2022.

Why it matters

The development exposes two key areas of concern: the long term lack of governability of the country as a whole; and the lack of control Castro exercises over her party.

Castro’s arrival in office comes at a pivotal time, with former president Juan Orlando Hernández facing extradition to the US over drugs charges. She’s certainly keen to be viewed as tough on corruption and as someone with control over her own party.

Event: Two journalists exposing Mexico’s corruption and drug violence murdered within the same week.

Summary

Margarito Martínez Esquivel, a crime reporter and photographer who often collaborated with members of the foreign media, was shot dead outside his home in the northern city of Tijuana.

Martínez’s death came a week after another journalist, José Luis Gamboa, was fatally stabbed in the eastern state of Veracruz.

Why it matters

Margarito Martínez Esquivel and José Luis Gamboa are the latest casualties in the world’s most dangerous country for reporters outside war zones.

Nine journalists were killed in Mexico in 2021 and 29 have been killed since Mexico’s president, Andrés Manuel López Obrador, took power in December 2018 promising to pacify the country “through hugs, not bullets.”

Event: Oil spill in Peru after a volcanic eruption in Tonga

Summary

The Peruvian government says Repsol spilled some 6,000 barrels of oil into the ocean last week near its La Pampilla refinery, which the company blamed on unusual waves triggered by a volcanic eruption in Tonga.

Peru’s environmental agency OEFA said on Thursday about 1.7 million square meters of soil and 1.2 million square meters of ocean had been affected by the spill. Peruvian President Pedro Castillo described it as the biggest “ecological disaster” to affect the Andean nation in recent years.

Why it matters

The Pacific Ocean off Peru is a significant source of marine life and seafood for Peruvians. Dead seals, fish and birds have washed up on the shore covered in oil, while fishing activities in the area have been suspended, the government has said. As climate change becomes a greater source of concern for citizens and governments alike, natural resource companies must be better prepared to respond to emerging threats and accidents alike.