Regional Pulse: 28 March 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
BRAZIL
CHILE
COLOMBIA
ECUADOR
MEXICO
PERU
KEY DEVELOPMENTS IN FULL
ARGENTINA
Government drafts bill to industrialize lithium
On 20 March 2023, website Reporte Minero reported that the national government is preparing a bill to industrialize lithium extracted in the country. According to the proposal, there would be a quota of between 5% and 20% of lithium that would have to be sold compulsorily to the domestic market in order to develop the local lithium battery industry, with priority given to state-run companies. The official text of the proposal will be presented in April by the director of the Secretariat of Strategic Affairs, Mercedes Marcó del Pont, and will have to be approved by the governors of the producing provinces – Jujuy, Catamarca, and Salta. The only chance the government, with a minority in Congress, has to approve the project is with the support of governors.
Government to intervene in Italian-owned Edesur
On 20 March 2023, Economy Minister Sergio Massa announced a 180-day intervention in power distributor Edesur, a subsidiary of Italy's Enel, due to constant power cuts in the Buenos Aires metropolitan area. The frequent blackouts occurred during the worst heat wave in years. The government's chosen ombudsman is the mayor of Avellaneda municipality, Jorge Ferraresi, of the Peronist Party, who will fulfill both functions. The director of the electricity regulator (ENRE), Walter Martello, has also asked the courts to ban the company's executives from leaving the country. Local media and analysts say that the lack of investment in electrical infrastructure and the government's policy of subsidizing cheap energy has led to financial difficulties for Edesur and companies operating in the country.?
Grain exports to reduce 35% due to ongoing drought
On 20 March 2023, the television network La Nación+ reported that the Rosario Grains Exchange estimates a 35% inter-annual drop in the country's grain harvest as a consequence of the drought affecting the grain-producing regions. Soybeans, the main grain planted in the country, are down 18% and corn is down 16% compared to last year's harvest. The impact on exports will be a reduction of 48%, or USD20.8 billion, putting great pressure on the national government, as the agricultural sector is responsible for 65% of foreign currency coming into the country.
BRAZIL
Petrobras’ CEO wants to invest more in renewables
On 24 March 2023, state-owned oil giant Petrobras’ CEO Jean Paul Prattes said that his vision is for Petrobras to invest in more renewable energy. Prattes said that oil extraction in the pre-salt layer of the Brazilian coast will finance energy transition initiatives. Earlier this month, Petrobras announced a partnership with Norwegian-state-owned Equinor to develop offshore wind energy projects in the states of Piauí, Ceará, and Rio Grande do Sul, totaling 14.5 gigawatts of power. Petrobras is the world leader in carbon capture in the oil/gas sector, having registered 10.6 million tons of CO2 reinjected, which is equivalent to 25% of the total CO2 reinjected by the entire oil/gas industry in the world in 2022.
Central Bank holds interest rates at 13.75%
On 22 March 2023, the Central Bank kept interest rates at 13.75%, marking a contrast to calls by President Luis Inácio Lula da Silva and other members of the ministerial cabinet who have publicly complained about high interest rates. The Monetary Policy Committee (Copom) statement said that inflation is expected to accelerate in 2023 and into next year and that the lack of a government proposal on fiscal policy worsens expectations about public debt and inflation. Economy Minister Fernando Haddad said he was disappointed with the Central Bank's decision because the interest paid by the Brazilian state to finance its debt is the federal government's biggest expense. It was the fifth time in a row that the Central Bank has kept interest rates at the current level. Local press noted that the Copom statement was a message from the Central Bank that it will not let political decisions drive monetary policy.
Criminal organization PCC had planned to assassinate Senator Sergio Moro
On 22 March 2023, the Federal Police arrested 15 individuals from the criminal organization Primeiro Comando da Capital (PCC) who are accused of planning to assassinate Senator Sergio Moro, a leading opposition figure. Investigators say the PCC was monitoring residences of Moro and his family, as well as other law-enforcement officials who might be killed or kidnapped. Moro was justice minister between 2019 and 2020, when he ordered PCC chief Marcos William Camacho, alias Marcola, to be transferred to a federal penitentiary, isolating him from contact with other criminal faction leaders. After the Federal Police operation, President Luis Inácio Lula da Silva made the unsubstantiated claim that the assassination threat was a scam by Moro, an adversary of Lula’s, who sentenced him to prison in 2018 during Operation Car Wash.
CHILE
Lower chamber rules out new withdrawals from private pension funds
On 22 March 2023, the Chamber of Deputies rejected, in a 96 to 39 vote, a bill to allow withdrawals from private pension funds. Gabriel Boric's government strongly opposed the bill, which was seen as lacking economic sustainability and as a threat to the economy's savings level. The initiative came from a group of leftist deputies not aligned with Boric's government, together with deputies from the anti-establishment Partido de la Gente (PDG). The vote was a rare display of consensus between members of the left-wing ruling coalition and the conservative opposition.
领英推荐
Gang leader funeral forces schools and universities to shut down in Valparaíso
On 22 March 2023, the funeral of local gang leader Camilo Rojas Chepulich, alias El ?aju, forced schools and two universities in Valparaíso to cancel classes due to the risk posed to students’ safety. Local media reported that recent funerals of drug traffickers have been followed by rallies involving the display of firearms and the blockading of streets. The national congress is located in Valparaíso, which is the main city in the country's second-largest metropolitan region. The episode led to a new wave of criticism from politicians opposed to President Gabriel Boric's government, which has a low score in public safety according to public opinion polls.
Discussion over mining royalties to resume in the Senate
On 21 March 2023, the Senate economic affairs committee restarted discussions on increasing royalties to mining. Economy Minister Mario Marcel is sponsoring the initiative that sets a 1% royalty on sales that surpass 50,000 tons. For his part, the vice president of the pro-business group Sociedad Nacional Minera (Sonami) Cristián Argando?a said that the way the bill is written leads to the risk of greatly increasing taxes for the sector, diminishing its competitiveness. The bill has already been approved in the mining committee, but still needs to pass through senators and deputies to become law.
COLOMBIA
President Petro’s political reform fails
On 23 March 2023, President Gustavo Petro suffered a significant defeat in Congress when his political reform proposal was blocked by lawmakers. The reform had faced significant opposition due to its requirement for closed lists, concerns that it would promote political clientelism, and for allowing politicians to move between legislative and executive roles with ease. The government is now facing mounting challenges, including opposition to its health reform proposals, and the loss of support by some coalition partners.
Business confidence in the economy falls to 2020 levels
On 22 March 2023, Fedesarrollo, an economic think tank, reported that the Retail Confidence Index (RCI, a measure of businesses’ perception of the current economic situation, stock performance, and expectations for the near future) had dropped in February 2023 to 12.7%, from 29.7% in January 2023. According to Fedesarrollo, this is a “significant” drop, driven by a negative appraisal of current economic conditions, with the index reaching its lowest level since July 2020. According to OECD estimates, the Colombian economy will drastically slow its GDP growth, from 8.1% in 2022 to an estimated 1.2% in 2023 due to high inflation, high interest rates, and uncertainty regarding economic policy.
Ceasefire with Clan del Golfo suspended
On 21 March 2023, newspaper El Espectador reported that the government had officially suspended the bilateral ceasefire with the Clan del Golfo and ordered the resumption of military operations against it. The ceasefire had been in place since December 2022 and was a key component of the government’s “total peace” agenda, which seeks to dismantle various armed groups through dialogue and agreements. Only three of the five armed groups with whom President Gustavo Petro announced bilateral ceasefire agreements on 31 December, 2022, are still upholding the commitment.
ECUADOR
US Senate bill proposes cutting tariffs to nearly 50% of Ecuadorian imports
On 23 March 2023, US Senators Bob Menéndez and Jim Risch introduced the Innovation and Development in Ecuador (IDEA) Act, which aims to make Ecuador eligible for designation as a beneficiary country under the Caribbean Basin Economic Recovery Act. The legislation would reduce US tariffs on nearly 50% of Ecuadorian exports, encourage “market-based economic policies” to reduce illegal migration, and “provide support to a democratic partner under extreme pressure from Chinese and other malign influences”. The senators believe this new bill will expand the economic and commercial ties between the US and Ecuador. Ecuador exported goods worth around USD4 billion to the US in 2022.
Oil production falls 11% in five days
On 22 March 2023, news outlet Primicias reported that oil production had dropped by 11% in just five days, after indigenous communities in four Amazonian oil fields occupied installations. These protests have mainly affected state oil company Petroecuador, which has been forced to shut down at least 40 oil wells. This is the second significant decline in oil production in 2023, and the country's energy minister has acknowledged that the production target of 514,759 barrels per day is unlikely to be met. The financing of 2023’s budget is now at risk, since the Finance Ministry was counting with 12% of its income to come from oil being sold at at least USD65 per barrel, above its current selling price.
Non-traditional exports fall 16.8% in January 2023
On 22 March 2023, the Central Bank reported a decline of 16.8% in volume and 10% in value for exports of non-traditional products in January 2023, compared to the previous year. The mining sector, the largest among non-traditional exports, has experienced a sharp decline in exports, reducing its quantity by 27%, and its value by 23%.This decline has also been particularly severe in the wood, leather, plastic and rubber, paper and cardboard, and textiles subsectors. One of the reasons for the decrease is the slowdown in growth expectations in regional economies such as Colombia and Peru, which reduces their demand for imported products. In addition, the depreciation of the currencies of these countries against the dollar makes Ecuadorian products more expensive.
MEXICO
Supreme Court halts executive’s electoral reforms?
On 24 March 2023, Supreme Court Justice Javier Laynez Postiek granted a suspension filed by the National Electoral Institute (INE) against the electoral reforms known as “Plan B” promoted by President Andrés Manuel López Obrador. The new ruling would force prospective presidential candidates to follow pre-existing norms on campaign timing, budget, and sanctions ahead of the 2024 race. It also stops the reduction of INE departments and personnel. Justice Laynez Postiek asked both Congress and the Executive to submit any challenges to this ruling within 30 days if they wish to do so. President López Obrador said he will challenge the court’s decision. ‘Plan B’ seeks to modify electoral rules ahead of the 2024 presidential elections and modify INE by drastically reducing its budget.
Legislators in the US accuse the Mexican military of illegal seizure?
On 23 March 2023, US congressmen and senators from the state of Alabama sent a letter to the Mexican ambassador to the US, Esteban Moctezuma, in which they allege that the incursion of marines and state police officers into the Calizas del Carmen (Calica) maritime terminal – a subsidiary of the US company Vulcan Materials – is “illegal”. The letter said that the maritime dock was seized to benefit the Mexican cement company CEMEX, but President Andrés Manuel López Obrador claims that it was because of an “ecocide” in the area caused by Vulcan Materials. The company filed a demand before the Tribunal of the International Centre for Settlement of Investment Disputes (ICSID), which is now the highest authority to resolve the issue. President López Obrador has previously accused the company of being behind the injunctions against his infrastructure project “the Mayan Train”, and has denounced the environmental devastation caused by its limestone mining in Punta Venado, Playa del Carmen. Last May, the government shut down the mine with soldiers from the Navy Ministry (SEMAR), alleging damage to ecosystems.
US commits to increase renewable energy investments?
On 22 March 2023, US Climate Change Envoy John Kerry made his 7th official visit to Mexico, where he made the public commitment that the US will increase investment for “a number of new wind and photovoltaic fields”. Kerry added that both governments are ready to talk to companies and potential investors. Separately, Foreign Affairs Secretary Marcelo Ebrard reported that more than 10 plants would be involved but provided no further details on how or when they would be ready. US Ambassador to Mexico Ken Salazar invited the Federal Electricity Commission (CFE) Director Manuel Bartlett and other authorities to Washington to “put the action plan in place”.
PERU
Congo to surpass Peru as world’s second-largest copper producer
On 23 March 2023, newspaper El Comercio reported that Peru is in danger of losing its position as the world's second-largest producer of copper to the Democratic Republic of Congo (DRC), according to reports by the IMF. DRC's copper production has tripled in recent years (producing 2.3 million tonnes in 2022, from 846,000 tonnes in 2016), while Peru's has remained largely static (producing 2.4 million tons in 2022, compared to 2.3 million tonnes in 2016). Mining analyst Iván Arenas has pointed to a “war” against the mining industry, fueled by opposition from “an active, mobilized and extremely ideologically-driven minority”, as a cause of Peru's sluggish growth. Conversely, DRC is investing in infrastructure and energy to develop its mining industry. The growth in the DRC's copper mining is led by US-based Ivanhoe Mines, which aims to double production there by 2024.
Manufacturing to grow 1.5% in 2023
On 22 March 2023, Scotiabank’s research department estimated that the manufacturing sector is expected to grow by 1.5% in 2023, with primary manufacturing (meaning the processing of raw materials into goods) being the main driver, with a growth rate of 3.2%. However, non-primary manufacturing (meaning manufacturing which employs already-processed raw materials) is expected to slow down to a growth rate of 1%. According to El Comercio, this projection could have a “downward bias” due to the effects of social unrest in the first months of 2023 and recent weather events that may continue to affect the industry in the short term. By contrast, the manufacturing sector grew by approximately 1% in 2022, with non-primary manufacturing driving growth at a rate of 2.3%, while primary manufacturing decreased by 3%.
Agricultural exports to grow by 7.4% in 2023
On 21 March 2023, the exporters’ association ADEX projected a growth in agricultural exports of 7.4% from 2022, at a total of USD10.6 billion in value. ADEX noted, however, that recent weather phenomena have damaged thousands of hectares of crops across the country. ADEX president Julio Pérez Alván “exhorted” the government to continue supporting affected farmers and, on 24 March 2023, the government announced that it would invest around USD1 billion in measures to mitigate the effects of recent floods and heavy rains. According to the agriculture ministry, the sector has registered an average annual growth of 4% for the past two decades.
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