Regional Pulse: 7 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
Shooters target supermarket owned by soccer star Messi’s in-laws
On 2 March 2023, two gunmen on a motorcycle fired 14 shots at the supermarket owned by the in-laws of soccer star Lionel Messi in the city of Rosario. The crime happened during the night, leaving no casualties, and the perpetrators left a written message that connected the city mayor to narco gangs. The case’s prosecutor said that narco gangs, hooligans, or even political groups could be behind the crime. Perfil newspaper noted that the involvement of police officers cannot be ruled out, given a record of collusion with organized crime in the city, and that Messi was not the direct target of the criminals, but rather they used him to attract public attention. Rosario is Argentina’s most violent city and saw 56 homicides this year.
Blackout leaves 40% of the country powerless
On 1 March 2023, a failure in the national power grid provoked a giant blackout, leaving 40% of households powerless countrywide for hours. A brush fire below a high-voltage line in Buenos Aires province cut the energy transmission from power plants, including the Atucha I nuclear plant. The blackout came amid a heat wave and stopped the metropolitan train service of Buenos Aires. The electricity was only fully reestablished by the end of the night. Econojournal noted that the national electricity system has been lacking investment for the past ten years.
China’s Tsingshan to set up a lithium carbonate plant in Jujuy
On 28 February 2023, China’s Tsingshan Holding Group signed a USD120 million deal to set up a lithium carbonate plant in the highlands of Jujuy province. The local government secured the energy supply for the project, which will employ 1,000 workers during the construction. The plant is scheduled to start its operations in 2025. Tsingshan is the world-leading producer of stainless steel and nickel and is currently operating in Argentina in association with France’s Eramet, which also produces lithium carbonate in neighboring Salta province at a project called Centenario Ratones.
BRAZIL
New vaccine against dengue fever approved by the federal health agency
On 2 March 2023, the federal health and drug agency (Anvisa) authorized a new dengue fever vaccine that was developed by privately owned Takeda Pharma. The new vaccine is made from four types of inoculated virus and it has 95% efficacy in treating severe cases of dengue and 80.2% in treating mild cases. O Globo newspaper reported that the new vaccine is likely to be distributed by the national health service SUS. Last year, Brazil recorded 1.4 million infections and 992 deaths from dengue, a common disease in tropical developing nations that causes intense fatigue, migraines, and body pain.
Lula’s party calls for Petrobras to alter dividend payouts to stakeholders
On 2 March 2023, state-owned oil giant Petrobras announced a record profit of USD36.1 billion and a dividend payment of USD6.9 billion for its stakeholders. The figures come after a 43% increase in the international price of oil last year. The new federal administration, led by President Luiz Inácio da Silva’s left-wing Workers’ Party (PT), wants Petrobras to reinvest more of its profits in research, development, and public work projects in order to play a key role in an economic strategy of reindustrialization. PT’s leadership also wants Petrobras to subsidize the price that consumers pay for oil rather than charging the international price, although it remains unclear if such a subsidy would be paid by Petrobras or by the federal government’s Treasury. In 2022, Petrobras recorded the world’s third-largest profit in the oil sector, just behind Exxon Mobil and Shell, and the second-largest dividend payment, behind Saudi Aramco.
Economic activity to slow down
On 2 March 2023, the government statistics bureau (IBGE) reported that GDP fell 0.2% in 2022 Q4, marking a decline in economic activity, after the yearly GDP had grown 2.9%. In 2022, economic growth was led by the definitive lifting of all Covid-related restrictions, which boosted service sectors such as tourism and restaurants, as well as by the federal government's spending in cash-transfer programs and fuel subsidies. However, a drought had a negative effect on agriculture, harming the harvest of soybeans, one of Brazil’s most important export commodities. Looking ahead, higher interest rates are increasing borrowing costs, and investors’ worries over the new left-wing administration’s policy agenda create an outlook of weak growth this year. The latest Central Bank survey of local financial institutions showed an expected 0.8% GDP growth for 2023.
CHILE
Santiago Chamber of Commerce criticizes tax increase for small firms
On 2 March 2023, the Santiago Chamber of Commerce (CCS) criticized a proposal to raise the corporate income tax that was made by the largest pro-business lobby in the country, the Confederation of Production and Trade (CPC). CPC’s initiative was a counterproposal to a tax reform draft presented by the left-wing Gabriel Boric administration, which sought to raise income taxes on the richest individuals. CPC instead proposed that corporate income taxes grow to 28% from the current 27% level. CCS, for its part, says that the counterproposal is unfair as small and medium businesses will end up carrying the burden of more taxes. The government wants to foster revenues to finance more generous social policies. Tax reform has yet to be discussed in Congress.
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Tesla and Albemarle hold talks with government about lithium
On 1 March 2023, newspaper La Tercera reported that executives of the electric vehicle firm Tesla and mining firm Albemarle held meetings with government officials to discuss the country’s plans regarding the regulation of the lithium industry. Tesla and Albermarle met with the vice president of the development agency (Corfo); the director of the International Economic Relations Subsecretariat (Subrei); and the officer in charge of international affairs within the Mining Ministry. The government plans to establish a state-owned lithium company next week, although it is still unclear whether it will work in partnership with private investors. Lawmakers from the left of president Gabriel Boric’s coalition publicly advocate for 100% government control over the new lithium company.
Mining sector grows while remainder of the economy is stagnant
On 1 March 2023, the Central Bank revealed its data for economic activity in January, showing that the mining sector grew 4% in that period, while the rest of the economy shrank 0.2%. Local financial institutions forecast a recession for this year, with GDP declining from 1% to 0.2%. The job market has been stagnant for six months. La Tercera notes that the stubbornly high inflation of 12.8% in the last 12 months makes it less likely that the Central Bank reduces its interest rate, which also brings a negative effect on economic growth.
COLOMBIA
Supreme Court suspends executive decree to regulate utilities
On 2 March 2023, the Supreme Court announced it was suspending an executive decree whereby President Gustavo Petro assumed control of utilities. The decree, issued on 27 February 2023, granted control to the executive over the regulatory agencies tasked with overseeing the provision of water, energy, and gas services, for a period of three months. The Supreme Court is investigating a number of questions surrounding its constitutionality and implementation. Until they are resolved, the decree has been suspended.
Mining vice minister resigns
On 2 March 2023, Mining Vice Minister Giovanni Franco tendered his resignation. According to finance newspaper Portafolio, Franco had been pressured to resign by legislators of government party Pacto Histórico, following alleged meetings between Franco and mining company executives. These accusations implied a conflict of interest and noted that Franco’s support for new mining projects was at odds with the government’s anti-extractivist commitment. Newspaper El Espectador reported that these meetings were within his remit. This is the latest reshuffle within the ministry after Energy Vice Minister Belizza Ruiz resigned in January 2023. Energy Minister Irene Vélez is currently the target of an impeachment motion by opposition senators for her handling of the ministry and recent decision to halt all new oil and gas exploration.
Cabinet reshuffle undermines health reform prospects
On 27 February 2023, President Gustavo Petro replaced three ministers in a cabinet reshuffle, including the education, culture, and sports ministers. The reason for the reshuffle, according to investigative outlet La Silla Vacía, was to fire Education Minister Alejandro Gaviria, who had been openly critical of the government's planned health reform. Gaviria is a member of the Partido Liberal, a key component of President Petro's ruling coalition, and the party has requested changes to the health reform bill that if not fulfilled will see them voting against it. The viability of the health reform is now in question, as the other historically dominant party, the Partido Conservador, has also recently changed its position from being a coalition partner to rejecting the bill.
ECUADOR
Congress recommends impeachment of President Guillermo Lasso
On 4 March 2023, a Congress committee tasked with investigating a series of corruption cases surrounding President Guillermo Lasso and his entourage recommended initiating impeachment proceedings against the president. This recommendation will be followed in the coming days with a formal request in Congress. The committee has accused President Lasso of committing crimes against the security of the state, as well as of potentially being complicit in acts of bribery, embezzlement, and extortion through omission. For impeachment proceedings to succeed, it needs the approval of six supreme court judges (out of nine) and the votes of at least 92 legislators. The committee report was approved in Congress by 104 deputies.
State of emergency declared in Esmeraldas
On 3 March 2023, President Guillermo Lasso declared a state of emergency in the northern province of Esmeraldas due to an escalation of violence caused by organized crime in the region. Esmeraldas is the country's most violent province (with 66 murders per 100,000 inhabitants) and a key nexus in international drug trafficking routes. This is the third time in less than a year that Esmeraldas has been subject to a state of emergency. The state of emergency will last for 60 days and will impose a curfew, as well as restrict the rights to freedom of movement, association, assembly, and the inviolability of the home.
State oil company blamed for murder of indigenous leader
On 26 February 2023, Eduardo Mendúa Vargas, leader of the indigenous confederation CONAIE, was murdered in his home in the Amazonian province of Sucumbíos. Mendúa had been CONAIE’s international relations director since 2021. He had also been involved in recent years in a dispute with state oil company Petroecuador over the latter’s right to extract oil in the region. CONAIE President Leónidas Iza has claimed Petroecuador is responsible for the murder. This incident has further strained relations between CONAIE and the government, which have been fragile since 24 February 2023 when the former announced its decision to break ties with the latter.
Indigenous confederation breaks with government and demands resignation of president
On 24 February 2023, the confederation of indigenous communities CONAIE voted in an assembly to break ties with the government and demand the resignation of President Guillermo Lasso. CONAIE argued that the agreements reached in 2022, after a national strike in June of that year, have not been respected by the executive. The organization has called for a protest on 8 March 2023 in support of women’s rights, against extractivism, and to protest the government. A CONAIE general strike in June 2022 brought the country to a standstill. Following their announcement, Ecuador’s risk rating skyrocketed to 1,709 points, its highest figure in the year so far, according to JP Morgan.
MEXICO
President López Obrador announces a new anti-inflationary plan for Latin America
On 2 March 2023, President Andrés Manuel López Obrador announced a new anti-inflationary plan of mutual economic aid for growth and economic and commercial exchange with other Latin American countries, which will include the elimination of tariffs and trade barriers for food. President López Obrador said that Argentina, Bolivia, Brazil, Chile, Colombia, Cuba, and Honduras would be among the countries that could participate in the initiative; however, he added that there would be a video conference call between the leaders, ministers of economy and foreign ministers on 5 April to discuss strategies around the initiative.
Unprecedented number of appeals expected with publication of new electoral laws
On 2 March 2023, President Andrés Manuel López Obrador published in the Official Gazette of the Federation the bills package on political-electoral affairs approved by Congress last week, making the changes official. The so-called “Plan B” is controversial in many aspects, but the main controversy has centered on the restructuring of the National Electoral Institute (INE) via reductions of staff in charge of organizing elections. INE, opposition parties, civil organizations, and individual citizens have filed legal appeals against the laws. The Supreme Court expects “a cascade of appeals” in the coming days, possibly turning this reform into the most controversial package of laws in constitutional history.
Tesla announces new plant in Nuevo León
On 28 February 2023, President Andrés Manuel López Obrador announced that Tesla’s CEO Elon Musk has chosen northern Nuevo León state to start up a new electronic car factory with an investment worth between USD5 and USD10 billion. Musk later announced that the new factory will be built in Santa Catarina municipality, near the city capital Monterrey, and will be capable of producing up to one million electric cars per year. The announcements took place after weeks of political debate and competition between states to attract Musk’s business, and were well received by the business community.
PERU
South America’s largest tin mine reopens
On 1 March 2023, newspaper La República reported that the San Rafael tin mine, the largest in South America, had reopened after 50 days paralyzed due to unrest in the region. The mine, located in the southern region of Puno and operated by Minsur, was able to restart operations following an agreement with protestors. The company expects to return to full production by the end of March. San Rafael produces around 10% of the world’s tin supply, and had been closed since 12 January 2023. It is estimated that in the period it remained closed the mine recorded USD124 million in lost revenue.
US government encourages early elections
On 28 February 2023, US Assistant Secretary of State for Western Hemisphere Affairs Brian Nichols encouraged the Peruvian government to reach an agreement on the holding of early elections. Speaking at an event hosted by the George Washington University, Nichols “hoped” that President Dina Boluarte and Congress could agree on a date for early elections. Despite calls by President Boluarte to hold elections in the coming months, Congress rejected four bills on the issue in February 2023. President Boluarte could trigger an immediate election if she resigned, something she has refused to do. Nichols was US ambassador to Peru between 2014 and 2017.
Oil production to restart in Amazon fields
On 28 February 2023, state oil company Petroperu announced that it would restart operations in the oil fields of Loreto, near the border with Ecuador, after two years of inactivity. The company seeks to extract around 10,000 barrels per day (Peru currently produces a total of 40,000 bpd) and will invest USD630 million in the operation. The extracted crude will be processed at the new refinery of Talara, which was opened in February 2023 after delays in its construction. Originally budgeted to cost USD1.2 billion, the total cost of the refinery ballooned to almost USD5.3 billion.
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