Regional Pulse: 16 January 2024
Southern Pulse’s weekly review of need-to-know events curated for people who work in Latin America.
We help businesses operate successfully in Latin America. Looking for something more tailored to your needs? Let’s chat.
KEY DEVELOPMENTS
ARGENTINA
Argentina secures USD4.65 billion from the IMF
US court rules against Argentina in YPF expropriation case
Government ends CEF import permit restrictions
BRAZIL
Thousands of illegal miners remain in the Amazon
Chinese companies invest billions in Brazilian infrastructure
Brazil supports South Africa’s genocide case against Israel
CHILE
Private healthcare providers push back against USD1 billion repayments
First fully electric trailers and trucks introduced in Chile
Controversy surrounds Viña del Mar music festival over headliner
COLOMBIA
Petro’s son formally indicted for money laundering allegations
Private companies warn against energy price controls
Colombia deploys military forces on the Ecuador border
ECUADOR
President Noboa declares internal armed conflict
Daniel Noboa proposes increasing VAT to 15% to finance security operations
FTA with China generates divisions in the National Assembly
GUATEMALA
Arévalo sworn in as Guatemala’s new president, following delays
MEXICO
Residents near Guatemala-Mexico border welcome alleged Sinaloa Cartel members
Supreme Court rules against mining companies’ water usage rights
More than 2,000 migrants threaten to form a new US-bound caravan
PERU
Peru reinforces border surveillance and declares state of emergency
New vice-minister of mines appointed
Talara refinery modernization project stays at USD5.5 billion
KEY DEVELOPMENTS IN FULL
ARGENTINA
Argentina secures USD4.65 billion from the IMF
On 10 January 2024, Argentina’s new government reached a USD4.65 billion agreement with the International Monetary Fund (IMF). Argentina will use the funds to pay off its previous debts to the IMF and other international financial institutions. The austerity measures laid out in President Javier Milei’s presidential decree and “Omnibus Law” were key to the agreement, as the IMF requires the government to commit to a fiscal surplus of 2% of GDP rather than the previous target of 0.9% of the deficit. Argentina needed to reach an agreement with the IMF due to having negative foreign currency reserves, but these funds offer only short-term relief. Milei must decide whether to continue with the program negotiated by the previous administration or pursue a new deal to secure additional financing in the future.
US court rules against Argentina in YPF expropriation case
On 11 January 2024, a US court ruled that vulture funds can now seize Argentine assets after the government lost an appeal to extend the deadline to repay USD16 billion to investors. These investors lost out during the renationalization of the state-owned oil company YPF in 2012. Burford Capital bought the right to litigate the case from Argentina’s Petersen Group, owned by the Eskenazi family. The family has strong links to former vice president Cristina Kirchner. Argentina had hoped to delay the compensation deadline while it appealed the September 2023 decision. However, the US court upheld the 10 January deadline, meaning plaintiffs like Burford Capital and Eton Park can now seek to seize assets. The judge has not yet specified which assets are up for seizure. The government claims the ruling puts it in an impossible position because it cannot pay the funds owed, and yet failure to comply will jeopardize any future attempts to secure loans from institutions like the IMF.
Government ends CEF import permit restrictions
On 10 January 2024, the government removed the Financial Economic Capacity (CEF) requirement on import permits to make the importation process easier for businesses. The CEF required that sworn statements from importers and third-party data be cross-referenced with revenue services, causing backlogs of paperwork. Former president Mauricio Macri introduced the much-criticized CEF to detect tax irregularities, but Alberto Fernández’s administration used it to limit the number of new import permits. Economy Minister Luis Caputo expects that removing the CEF requirement will provide importers with more freedom and less red tape.
BRAZIL
Thousands of illegal miners remain in the Amazon
On 10 January 2024, Folha de São Paulo accompanied Ministers Sônia Guajajara (Indigenous Peoples), Marina Silva (Environment), and Silvio Almeida (Human Rights) on a visit to the Yanomami territory in the Amazon to assess the damage caused by more than 3,000 illegal miners still active on protected indigenous territory. The three ministers visited indigenous communities affected by the environmental damage this illegal mining has caused. Open water pits left by the mining process caused a high of more than 6,900 malaria cases among Roraima state’s Yanomami population in 2023. Malnutrition cases are also rising as toxic chemicals like mercury (which is used to extract gold) contaminate the region. An estimated 20,000 illegal miners operated on Yanomami territory in Brazil’s Amazon region during former president Jair Bolsonaro’s government. Despite President Luiz Inácio Lula da Silva’s concerted effort to eradicate illegal gold mining, illegal mines operated by organized crime groups continue to destroy indigenous land and livelihoods.
Chinese companies invest billions in Brazilian infrastructure
On 10 January 2023, Chinese company CRCC expressed its intention to bid for up to USD2.5 billion in Brazilian public infrastructure contracts. CRCC said it will participate in upcoming bids to build roads in the states of São Paulo, Minas Gerais, and Rio de Janeiro as it expands international operations amid a contraction in China’s construction sector. CRCC, a Chinese state-owned Fortune 500 company that made USD160 billion in 2022, is already engaged in Brazilian infrastructure projects. Among them is a bridge between Salvador and Itaparica Island in Bahia, a state in northeastern Brazil. Another major Chinese state-owned construction firm, CREC, has shown interest in bidding for projects using funding from the USD350 billion growth and acceleration package the government introduced in August 2023.
Brazil supports South Africa’s genocide case against Israel
On 10 January 2024, President Luiz Inácio Lula da Silva announced that Brazil would support South Africa’s case against Israel in the International Court of Justice (ICJ) in The Hague, Netherlands. South Africa has accused Israel of committing genocide in Gaza and requested the ICJ to immediately order Israel to halt activities in the strip. Brazil is supporting South Africa, its co-member of the BRICS bloc of the Global South’s largest economies. Meanwhile, many Western countries including the US, Canada, and Germany have rejected South Africa’s accusation, including Israel.
CHILE
Private healthcare providers push back against USD1 billion repayments
On 12 January 2024, a trade association of private healthcare providers (known as Isapres in Chile) sent a letter to the Senate Health Committee explaining that members would have to cease operating if obliged to repay USD1.18 billion to customers. In November 2022, the Supreme Court ruled that Isapres had overcharged thousands of patients due to discriminatory billing practices adversely affecting women, the elderly, and those with pre-existing conditions. In that same ruling, the court ordered that Isapres must repay customers. About 250,000 patients switched to the public healthcare service in 2022 due to the private sector’s excessive costs. In May 2023, President Gabriel Boric’s government proposed a law to uphold the Supreme Court’s ruling, which the Senate Health Committee is discussing this week. Isapres provides private healthcare to about 3 million of Chile’s 19 million people, and a total collapse of the private healthcare system would add pressure onto the public healthcare system.
First fully electric trailers and trucks introduced in Chile
On 12 January 2024, Chilean petrochemical and mining giant SQM rolled out the first fully electric trailers and trucks developed especially for the mining industry. The vehicles were introduced as part of a joint venture between Brazilian manufacturer Randon and SQM. The exclusive Hybrid R trucks will be used in the lithium industry in Chile’s Antofagasta region. Among the new vehicles is an electric tanker developed to transport lithium brine and a tipper trailer designed to transport minerals, which can be used with a combustion engine truck to greatly reduce fuel consumption.
Controversy surrounds Viña del Mar music festival over headliner
On 11 January 2024, Viña del Mar Festival organizers confirmed that regional Mexican performer Peso Pluma will remain as a headline act, despite critics’ calls to remove him from the lineup for having songs that glorify narco culture. The Viña del Mar International Song Festival is the largest in Chile and the longest-running music event in Latin America, and Peso Pluma was one of the most streamed artists in the world in 2023. Mayor Macarena Ripamonti, who belongs to President Gabriel Boric’s Broad Front coalition, defended her city’s decision to maintain Peso Pluma’s participation, accusing critics of censorship, classism, and “cancel culture.” But sociologist Alberto Mayol describes Peso Pluma’s lyrics as “apologist,” equating the decision with state support for gang violence and narco culture.
COLOMBIA
Petro’s son formally indicted for money laundering allegations
On 11 January 2024, the Attorney General’s office formally indicted President Gustavo Petro’s son Nicolás Petro for allegations of illicit enrichment and money laundering related to his father's presidential campaign. The office argued that Nicolás Petro had illegal financial gains, exceeding his salary as a lawmaker for the Atlántico department. The Attorney General argued that Nicolás Petro lacked evidence to support the USD270,000 enrichment in 2022, ruling that the funds were allegedly intended for President Petro's campaign. The hearing is scheduled for April 29-30. President Petro is under investigation by a congressional committee for campaign financing allegations.
Private companies warn against energy price controls
On 12 January 2023, the Colombian Association of Large Industrial and Commercial Energy Consumers (ASOENERGIA) warned that energy tariffs could increase up to 30% nationwide if the energy and gas regulator CREG moves forward with its plan to set a fixed price for hydroelectricity generation. CREG’s draft resolution sets the wholesale energy price for hydropower at USD0.13 per kilowatt-hour in an attempt to avoid steep increases in energy costs ahead of possible droughts provoked by the El Niño weather phenomenon. ASOENERGIA and other business associations claim that the government-established price could have the opposite effect, raising the cost of energy if the free market price is lower than the new price established by the regulator. In that case, hydropower plants would have an incentive to produce more energy, which could lower the water level in reservoirs that are already under pressure due to unusually hot weather.
Colombia deploys military forces on the Ecuador border
On 10 January 2024, the government reinforced its military presence on the border with Ecuador at the Rumichaca International Bridge to prevent fugitives and criminals from entering Colombia. The action is in response to a surge of violence in Ecuador. Colombia’s military commander announced an extensive military deployment with intensified controls in the department of Nariño. Ecuadorian gangs and Colombian cartels collaborate in the region to produce illicit crops and control cocaine smuggling routes.
ECUADOR
President Noboa declares internal armed conflict
On 9 January 2024, President Daniel Noboa declared an internal armed conflict via executive decree. This declaration grants the armed forces the power to carry out nationwide military operations against groups the government identified as terrorist organizations. Noboa declared a state of emergency and then an internal armed conflict after Ecuador’s most influential organized crime leader, José Adolfo Macías Villamar (aka Fito) escaped prison. This sparked prison riots, while criminals set fire to cars, bridges and gas stations countrywide. Armed men also threatened TC Television journalists and workers on air.
Daniel Noboa proposes increasing VAT to 15% to finance security operations
On 11 January 2024, President Daniel Noboa sent lawmakers an urgent economic bill to finance increased security spending. The bill proposes raising the value-added tax (VAT) from 12% to 15% on certain products such as instant coffee, soft drinks, and snacks. There would also be tax increases on alcoholic beverages, clothes, home appliances, fuel, and mobile phones. This proposal aims to provide additional resources to strengthen security, improve prison infrastructure, and adopt fiscal measures to avoid accumulating long-term debt. The Internal Revenue Service (SRI) estimates show the VAT increase is expected to have a positive impact of USD1.3 billion per year. However, different political parties such as the left-wing Citizen Revolution Movement (RC) and the right-wing Social Christian Party (PSC) opposed the proposal. The National Assembly has 30 days to review the proposal, which would become effective as soon as March 1, 2024 if approved.
FTA with China generates divisions in the National Assembly
On 11 January 2024, a National Assembly debate about Ecuador’s Free Trade Agreement (FTA) with China was suspended after four hours of discussion. The house speaker ended the session after seeing the agreement was not receiving the support he expected. Former president Guillermo Lasso already signed off on the agreement, which the Supreme Court also approved. Now Congress must approve the agreement, but no new debate session has been scheduled. During the debate, members of the Citizen Revolution Movement (RC), Pachakutik, and Union for Hope (UNES) actively rejected the FTA. They emphasized the country's restricted ability to compete in the market and underscored the lack of participation from the people and peasant organizations in the process. The Confederation of Indigenous Nationalities of Ecuador (CONAIE) argued that the FTA favors Chinese companies and affects indigenous communities with extractive activities, putting environmental standards at risk. However, Industrial and exporting associations, such as the Ecuadorian Federation of Exporters (FEDEXPOR) and the Corporation of Exporting Associations of Ecuador (CORDEX), supported the agreement, arguing it will provide economic benefits such as tariff savings of up to USD140 million. This treaty with China would allow preferential access for 99.6% of Ecuador's current exports to China, to enter the Asian country with 0% tariffs. Exports benefiting most from this would be shrimp, bananas, roses, flowers, cocoa, and coffee.
GUATEMALA
Arévalo sworn in as Guatemala’s new president, following delays
On 15 January 2024, reformist Bernardo Arévalo was sworn in as Guatemala’s new president just after midnight following hours of delays during his Sunday inauguration. The Associated Press reported that the drawn-out inauguration stemmed from lawmakers arguing over who to recognize as part of a congressional delegation attending the ceremony. Reuters reported that Arévalo’s inauguration delays were a “last-ditch attempt by Congress opponents to weaken his authority.” El País noted that Arévalo, who is dedicated to fighting corruption, has “repeatedly faced attempts by a sector of the judiciary to derail the transition of power” in the last five months. He overwhelmingly won the August presidential election against National Unity of Hope (UNE) candidate Sandra Torres. Arévalo, 65, is a sociologist and former diplomat. He is the son of former president Juan José Arévalo and helped found the Seed Movement (Semilla) political party.
MEXICO
Residents near Guatemala-Mexico border welcome alleged Sinaloa Cartel members
On 13 January 2024, more than 100 residents of southern Chiapas state welcomed a caravan of pick-up trucks with armed men allegedly part of the Sinaloa Cartel crossing the region between the municipalities of Chicomuselo and Bella Vista. The residents appeared to shout “We want peace!” and “We want freedom!” in viral videos. A previous video emerged in September 2023, showing residents welcoming heavily armed men allegedly belonging to the same criminal organization. Since then, media reports have shown criminals pressuring locals to either join their ranks or suffer water and electricity cuts. The border between Chiapas and Guatemala is one of the main areas of dispute for the control of drug trafficking routes from Central and South America, which led to the displacement and clashes between the Sinaloa Cartel and Jalisco New Generation Cartel (CJNG) in the area.
Supreme Court rules against mining companies’ water usage rights
On 10 January 2024, the Supreme Court impeded US mining company Coeur Mexicana and Mexican El Fresnillo from using water from the Fuerte River in northern Chihuahua state until it can consult with an indigenous community on its usage. The Supreme Court argued that the nearby indigenous community of Rarámuri people should have been consulted before a permit was issued to the companies, given the river’s relevance as a source of food, water, and cultural importance for the community. The judiciary will invalidate the permits and allow the company to conduct the consultation with the indigenous community.
More than 2,000 migrants threaten to form a new US-bound caravan
On 9 January 2024, more than 2,000 migrants from various countries accused the Mexican government of refusing to give them documentation to move freely throughout the country as expected after agreeing to disband a caravan of 6,000 people. The migrants regrouped in southern Chiapas state, threatening to form another caravan to attempt to reach the US-Mexico border. More than 500,000 migrants, many of them Venezuelans, crossed the Darién Gap jungle on the Colombia-Panama border in 2023. Mexico detected more than 680,000 foreigners with an irregular migration status from January to November 2023, according to official figures. The region recorded an unprecedented migration flow in 2023 that could not be controlled, despite US attempts to open new channels for legal migration and toughening the consequences for irregular migrants.
PERU
Peru reinforces border surveillance and declares state of emergency
On 9 January 2024, the government increased police and military forces on Ecuador’s border in the department of Piura. The government aims to prevent Ecuadorian criminals from fleeing to Peru. It deployed 160 members of the Peruvian National Police (PNP) to the area, and police-operated drones are surveilling the region. Peru declared a state of emergency in five northern departments due to the violence in Ecuador. The region has a record of drug trafficking, human trafficking and illegal mining.
New vice-minister of mines appointed
On 12 January 2024, the government appointed Henry John Luna Córdova as the new vice minister of mines. Luna Córdova was a professor at the Pontificia Universidad Católica del Perú (PUCP) in 2006, and has held various positions in the mining sector. He most recently served as interim president of the Geological, Mining and Metallurgical Institute (INGEMMET). In mid-November 2023, the Public Ministry began an investigation against Córdova for allegations that he illegally granted a mining concession for the upper basin of the Nanay River. This river is a vital source of drinking water for residents of Iquitos, the largest city in Peru’s Amazon region. According to the Magazine Energiminas, investigations against Luna Córdova are expected to be finished by July 2024.
Talara refinery modernization project stays at USD5.5 billion
On 10 January 2024, newspaper La República reported that the expansion of Petroperu’s Talara refinery would cost USD6.5 billion, instead of the USD5.5 billion initially planned by the company. Although Petroperú claims that the final price of the project (which started in 2014) remains the same, experts quoted by the newspaper say that the state-run oil company is not adding the cost of capital to the project, a USD1 billion interest payment. The Talara refinery produces diesel and low-sulfur gasoline. Modernizing the refinery will boost its daily production from 50,000 to 95,000 barrels per day.
Wherever you do business in Latin America, Southern Pulse has the expertise, the network, and the relationships to help solve your toughest operational challenges.
Want to learn more? Let’s chat.
CC BY-ND