Regional Pulse: 20 February 2024
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
Various industries call for strikes across Argentina
Soup kitchens struggle with rising demand
Energy Secretary and leading executives plan new biofuels decree
Possible pact between LLA and PRO
BRAZIL
Government declares two states of emergency in Amazon region
Brazil logged record exports to Africa in 2023
Justice ministry suspends prison visitation rights after escape
CHILE
Chile holds public consultation on green hydrogen and sustainable transportation
Experts warn Chilean wine industry faces a tough 2024
Boric ally accused of omitting key information in corruption scandal
COLOMBIA
Colombia's 2023 economic growth missed forecasts by up to half
Armed groups strengthen during the peace process
Government inaugurates country’s largest solar park
Interim attorney general accused of protecting prosecutor allegedly linked to drug trafficking
ECUADOR
Ecuador cancels Russian arms swap with US after Russia lifts ban on bananas
Ecuador sets date for constitutional referendum on security
Albanian mafia in Ecuador laundered USD49 million from Europe-bound cocaine
MEXICO
Thousands protest against violence and irregularities during elections
Transportation workers block US-bound exports
President waives billions in taxes to state-owned oil company
PERU
Boluarte shuffles cabinet in key sectors amid recession and low approval rating
Pataz and Trujillo under state of emergency due to illegal mining and crime
Peru’s automotive lobby calls for electric vehicle tax incentives
KEY DEVELOPMENTS IN FULL
ARGENTINA
Various industries call for strikes across Argentina
On 16 February 2024, the train workers union La Fraternidad called for a 21 February strike to protest pay rates and rising inflation. The 24-hour strike will disrupt passenger travel and freight transportation across the country. On 14 February, the Chubut Petrol Workers Union (Petroleros de Chubut) called a 22 February strike to protest against a decision by state oil and gas company YPF to focus its resources on the Vaca Muerta shale fields, which they say would put their conventional drilling jobs at risk. Meanwhile, strikes by the construction workers union (UOCRA) have disrupted work on the Néstor Kirchner Hydroelectric Complex in Santa Cruz province. The government-led project is funded with investments from the China Development Bank, the Industrial and Commercial Bank of China Limited (ICBC), and the Bank of China. The project was originally supposed to be done in April 2024, but the deadline has now been pushed back to 2025 and is only about 20% complete. Argentina would owe China USD2 billion if it abandons the project, as the two countries agreed that Argentina would repay the debt via energy generated.
Soup kitchens struggle with rising demand
On 14 February 2024, Reuters reported that soup kitchens across Argentina are facing food shortages in light of surging demand and the government’s difficulties in assigning resources to soup kitchens. The country’s annual inflation rate of 257% has left many families unable to afford food. Basic food prices rose by about 50%. The price of polenta rose 54%, flour prices were up 43.5% and milk cost 41.4% more. On 5 February, the government suspended payments and the delivery of food parcels to community kitchens. Ten days later, the Human Capital Ministry designated USD18 million towards a community food program coordinated by the government, the United Nations Development Program and the Organization of Ibero-American States (OEI). However, that same day the ministry signed an agreement with the Alliance of Evangelical Churches allowing their soup kitchens to receive direct help without intermediaries. The government intends to clamp down on intermediaries between the state and community kitchens, as it claims many fail to properly account for the food they send out of the state-owned warehouses.
Energy Secretary and leading executives plan new biofuels decree
On 16 February 2024, La Política Online reported that Energy Secretary Eduardo Rodríguez Chirillo and some of Argentina’s wealthiest business executives were negotiating a draft presidential decree to regulate the biofuels market. The group includes former Tecpetrol CEO Luis de Ridder, biofuel company Explora’s director Hilarion del Olmo, and Erik Bazarian, the nephew of President Javier Milei’s former boss Eduardo Eurnekian. The decree is intended to introduce regulations originally included in the Omnibus Law that failed to pass in Congress on 6 February. Introducing the new regulations via presidential decree would allow Milei to bypass congressional scrutiny. Small and medium-sized biofuel businesses have expressed concerns that the newly negotiated decree will favor large companies owned by some of Argentina’s richest business owners, including Eurnekian.
Possible pact between LLA and PRO
On 15 February 2024, El Economista reported that President Javier Milei’s La Libertad Avanza (LLA) party was close to an official coalition agreement with the Propuesta Repúblicana (PRO) party of former President Mauricio Macri. Macri’s support was crucial to Milei winning the November 2023 elections. But relations between the LLA and PRO have been fraught since then, partly due to a reported rift between Macri and PRO President and Security Minister Patricia Bullrich. A coalition between the two parties brings risks. The LLA could look weak if it accepts support, while PRO would tie its reputation to a political newcomer. But there are benefits for LLA, which only holds a minority of 38 seats out of 257 in the lower chamber and 7 out of 72 in the Senate. Therefore, Milei’s party needs PRO’s votes to pass legislation in Congress, while PRO would gain power in government.
BRAZIL
Government declares two states of emergency in Amazon region
On 13 February, the government declared two states of emergency in the Amazonian state of Acre, where extreme temperatures have provoked widespread forest fires. A paper published on 14 February in the scientific journal Nature warned that up to 47% of the Amazon rainforest system — more than half of which is within Brazilian territory — could be at risk of collapse by 2050 if rising global temperatures and the destruction of habitats continue at their current pace. Warming temperatures, drought, deforestation and forest fires could cause ecosystem transition, which would further threaten the existence of unique life forms and the release of excess carbon into the atmosphere. President Luiz Inácio Lula da Silva promised to eradicate illegal deforestation by 2030. However, this will be challenging. The forest has already lost 54,600 square kilometers of territory — an area larger than Costa Rica. Much of this loss occurred under former president Jair Bolsonaro.
Brazil logged record exports to Africa in 2023
On 15 February 2024, new government exportation figures showed that Brazil logged record exports to Africa in 2023. Local outlets reported the figures during President Luiz Inácio Lula da Silva’s state visit to Egypt and Ethiopia. In 2023, Brazilian sugar, corn, meat, soybean, and coffee exports to African countries were worth USD9.8 billion. Algeria, Egypt, Nigeria, and Morocco were the principal importers of Brazilian foodstuffs. The previous week, Brazilian state oil and gas company Petrobras announced that it would return to Africa after ending operations there in 2020. Petrobras announced that it had closed a deal to buy three exploratory sites in the island nation of São Tomé and Príncipe. Trade and investment are accompanied by closer political ties. Last year, Brazil opened new embassies across the African continent. The BRICS bloc of developing countries, which includes Brazil and South Africa, recently expanded its membership to other Arab and African states.
Justice ministry suspends prison visitation rights after escape
On 14 February 2024, the Ministry of Justice suspended visits and sunbathing rights in all five federal prisons after two inmates escaped the maximum security Mossoró Federal Prison in the northern state of Rio Grande do Norte. Both escaped inmates are leaders of the Red Command (CV) drug trafficking organization. CV was founded in Rio de Janeiro in the 1980s but now has a national reach, as the two escaped convicts are from the northwestern state of Acre. The incident marked the first recorded escape from a federal prison since Brazil inaugurated its federal system in 2006. Since all five federal facilities have the same design, the escape has provoked fears of copycat attempts. Security is a major concern for Brazilian voters, and tough-on-crime politicians from right-wing parties are expected to capitalize on this in 2024’s upcoming municipal elections.
CHILE
Chile holds public consultation on green hydrogen and sustainable transportation
On 13 February 2024, a public consultation about decarbonizing the country’s transportation industries concluded. The consultation aims to find ways to decarbonize industries that rely heavily on fossil fuels, including rail, long-distance buses and aviation. Chile’s green hydrogen program is Latin America’s most developed, putting it in a favorable position in terms of attracting investment. Of all the measures suggested under the government’s 2023-2030 Green Hydrogen Action Plan, two stood out as particularly viable for helping reduce the country’s fossil fuel reliance by 50% before 2060. One measure involves creating demand for green hydrogen in the rail and air transport sectors, while another proposal centers on retrofitting locomotives with hydrogen engines. Another suggestion is to convert long- and short-haul public buses to hydrogen. The public’s suggestions will be analyzed and added to the final Green Hydrogen Action Plan report.
Experts warn Chilean wine industry faces a tough 2024
On 16 February, newspaper La Tercera reported that Ewine Manager Andrés Dougnac warned he expects Chilean wine sales to fall in 2024. Chilean wine exports were down 31.9% in 2023 compared with 2022. Dougnac cites changing tastes and a tendency for younger people to opt for low-alcohol or alcohol-free alternatives. The principal destinations for Chilean wine all imported less in 2023 than in 2022, partly due to post-pandemic inflation. Wine export volumes to China were down 33.5%, as the Chinese government continues to incentivize the consumption of local Chinese produce. Chile’s other principal wine export markets also imported lesser volumes. Consumption of Chilean wine in Brazil and the UK dropped 13.2% and 42%, respectively. Chile’s wine exports are worth about USD1.8 billion per year.
Boric ally accused of omitting key information in corruption scandal
On 17 February 2024, former Antofagasta housing ministry chief Carlos Contreras told local newspaper La Tercera from jail that former regional development undersecretary Miguel Crispi allegedly failed to alert President Gabriel Boric about public funds being diverted via the Democracia Viva charitable foundation. The scheme first exposed in the city of Antofagasta has become a national scandal, damaging the Boric administration’s reputation as being composed of young politicians untouched by previous corruption cases. While Crispi has yet to comment, both government spokesperson Camila Vallejo and RD party president Diego Vela have defended Cripi against Contreras’ allegations.
COLOMBIA
Colombia's 2023 economic growth missed forecasts by up to half
On 15 February, the National Administrative Department of Statistics (DANE) announced that Colombia’s GDP growth for 2023 was only 0.6% — half of the most optimistic growth figure that analysts had estimated. The latest figures represent the lowest annual growth in a decade except for 2020, which was impacted by the COVID-19 pandemic. The industries most affected were construction, manufacturing, and retail. Construction was the hardest-hit sector with a 4.2% decrease compared to 2022, followed by the manufacturing industry with a 3.8% drop. Investment also contracted sharply to 17.6%, the lowest level since 2005. Finance Minister Ricardo Bonilla blames the low GDP growth on the central bank’s high interest rate of 12.75%. However, critics of President Gustavo Petro’s administration argue that the government is mainly to blame for the sluggish economy. Economist Martin Jaramillo said that the government’s tax reform scared investors. Former Finance Minister Jose Antonio Ocampo also cited the need for increasing exports and more efficient government investment to boost the economy.
Armed groups strengthen during the peace process
On 13 February, W Radio revealed a police intelligence report that found the Ejército de Liberación Nacional (ELN) has used the peace process to strengthen its military capabilities to reorganize and consolidate. The ELN and government are now recognizing a six-month cease-fire extension. Additionally, the police have identified an increase in ELN attacks against public and private infrastructure, selective assassinations, drug trafficking, and extortion activities. In parallel, the think tank Fundación Ideas para la Paz (FIP) found that armed groups participating in the peace process with the government have strengthened in some areas of the country, consolidating their social control through taxation. Disputes among groups for territorial control have also increased by 54%. Last week, clashes erupted between the ELN and Clan del Golfo criminal group after a faction of the ELN lifted an armed strike in the western Chocó department.
Government inaugurates country’s largest solar park
On 13 February, the government and utility Enel Colombia inaugurated the country’s largest solar park in the César department. The USD126 million project is expected to reduce CO2 emissions by 200,000 tons, which would be the equivalent of taking 44,506 cars off the road throughout its lifespan. The park is expected to provide energy to 600,000 people through more than 400,000 solar panels. On 16 February, Energy and Mines Minister Andrés Camacho announced that 33 new energy projects had been assigned through a recent auction supporting Colombia’s energy transition, including 30 solar projects and three related to thermal energy. Camacho estimated that solar and wind energy sources in the country would expand from 3% to 26% by 2027.
Interim attorney general accused of protecting prosecutor allegedly linked to drug trafficking
On 13 February, Deputy Attorney General Marta Mancera assumed the role of interim attorney general after the Supreme Court failed to select a replacement for former attorney general Francisco Barbosa. A Cambio magazine investigation accused Mancera of protecting a prosecutor allegedly linked to drug trafficking. Mancera denied the allegations, telling journalist Daniel Coronell that she had no obligation to investigate the complaints. Local magazine Raya reported that Mancera refrained from investigating a former agent in the Buenaventura attorney general’s office, Francisco Javier Martínez (aka Pacho Malo), despite receiving briefings in 2021 about an investigation into his alleged involvement with drug trafficking. Undercover agents told Mancera that Martínez had been leading a network to “contaminate” cargo containers with cocaine at Buenavista’s port on the Pacific coast, which were destined for Mexico, Guatemala, Spain, and France. The Supreme Court scheduled a new vote to choose the next attorney general on 22 February, but it may not reach an agreement that day. Mancera has been critical of President Gustavo Petro’s administration. Some pro-Petro organizations are considering whether to organize more protests, urging lawmakers to vote for someone else to fill the attorney general role.
ECUADOR
Ecuador cancels Russian arms swap with US after Russia lifts ban on bananas
On 19 February, Foreign Minister Gabriela Sommerfeld confirmed that Ecuador would not send Soviet-era military weapons to the US that were ultimately destined for Ukraine. The reversal came after Russia lifted a ban on bananas from five companies that account for more than 21% of Ecuador’s total banana exports. The ban was imposed over the alleged presence of the humpbacked fly plague in a banana shipment. Ecuador’s Foreign Ministry said dialogue between the countries helped reverse Russia’s decision. Last month, President Noboa classified old Russian military equipment as scrap metal and planned to ship it to the US in exchange for USD200 million worth of new equipment. The US has yet to respond to Ecuador’s decision.
Ecuador sets date for constitutional referendum on security
On 14 February, the National Electoral Council (CNE) set April 21 as the date to hold a popular consultation and referendum on whether to change the constitution to improve the country’s fraught security situation. The consultations focus on whether to allow armed forces to intervene in national internal security — a role usually reserved for the police under the constitution. The Ecuadorian Armed Forces began patrolling the streets last month after President Daniel Noboa signed a decree declaring internal armed conflict against the gangs. Last week, President Daniel Noboa signed executive decrees ordering the electoral authority to call for the plebiscite, with questions seeking to increase penalties for organized crime and tighten gun control. Ecuador experienced a wave of violence last month that prompted Noboa to declare an “internal armed conflict” in the country, designating criminal organizations as terrorist groups. Ecuador has held five referendums and popular consultations between 2011 and 2023.
Albanian mafia in Ecuador laundered USD49 million from Europe-bound cocaine
On 16 February, the Spanish Police reported that the Albanian Mafia, led by Albanian national Dritan Gjika, laundered approximately USD49 million from cocaine sent from Ecuador to Europe. Local news outlet Primicias reported that since 2019, authorities have seized 3.4 tons of Europe-bound cocaine hidden in fruit containers from the criminal organization. Last week, 32 Albanian mafia suspect affiliates were arrested across Ecuador, Spain, China, and the UK as part of Operation Pampa (aka Gran Fénix 13). The investigation lasted four years and was coordinated between Europol, Spain, Ecuador, Russia, Albania, Belgium, the Netherlands, and Turkey. The investigation began in 2020 when Spanish authorities noticed that an Italian-Argentine businessman had suspicious financial sources. The dual national had multiple companies, including one dedicated to exporting bananas from Ecuador to Spain. The Albanian Mafia was in the spotlight last year after local outlet La Posta accused former president Guillermo Lasso’s brother-in-law of having ties to the criminal group. Both denied the allegations, Americas Quarterly reported in April 2023.
MEXICO
Thousands protest against violence and irregularities during elections
On 18 February 2024, thousands gathered across Mexico’s main cities to participate in the nationwide March for Democracy protest. The demonstration focused on demanding safe elections and respect for democratic institutions. The protests happened only four months before the presidential elections on 2 June. Although organizers said it was a non-partisan mobilization, several politicians and leaders linked to opposition parties (PAN, PRI, and PRD) issued statements against President Andrés Manuel López Obrador. Organizers estimate 700,000 people participated, while government officials calculate only 90,000 attendees came. The protestors defended the need for checks and balances in government and criticized President López Obrador’s presidential power.
Transportation workers block US-bound exports
On 14 February 2024, a group of former workers from state-owned rail company Ferrocarriles Nacionales de México (FNM) blocked US-bound exports at one of the most important freight crossings in the US-Mexico border. The blockade caused millions of dollars in economic losses for assembly factories (maquiladoras) and transporters. The former railroad workers took over the Zaragoza-Ysleta international freight crossing in northern Chihuahua state. This border crossing is the most important customs passage in the country, with more than 40% of the country’s imports and exports crossing this border. The workers demanded that the government pay them USD1,290 per each year worked, which President Andrés Manuel López Obrador promised in 2022 as compensation related to the company’s 2001 dissolution. Since the company’s closure, about 30,000 people have been affected either by losing their jobs or not obtaining any compensation. National Guard officers arrested participants, which effectively ended the blockade after almost seven hours.
President waives billions in taxes to state-owned oil company
On 13 February 2024, President Andrés Manuel López Obrador issued a decree that waived about USD5 billion in taxes for state-owned oil company PEMEX. The tax credit is equivalent to 100% of the company’s shared utility right tax (DUC) and hydrocarbon extraction tax obligations over the past four months. President López Obrador issued the decree through the Ministry of Finance and Public Credit in an attempt to foster exploration and oil extraction in the country. Financial experts argue the decree represents a serious hit to public finances, as oil revenue decreases every year. Critics also argue that the move is a “de facto privatization,” since the company’s royalties are supposed to be state property but now belong to the companies and its union. The decree comes after Congress approved a 2024 budget that reduced PEMEX’s DUC tax obligation by up to 30%. For 2024, Congress also approved, for the first time, a transfer of USD8.5 billion to PEMEX for debt repayments. Just last weekend, credit rating agency Moody's downgraded PEMEX to B3 from B1. Moody’s report said PEMEX’s credit quality has deteriorated and that the company is just one notch away from falling into what it calls "high-risk speculation." Considered the most indebted oil company in the world, PEMEX had an estimated debt of more than USD105 billion in 2023.
PERU
Boluarte shuffles cabinet in key sectors amid recession and low approval rating
On 13 February, President Dina Boluarte unexpectedly made four cabinet changes, replacing ministers leading the defense, economy, energy mines, and environment ministries. Newly-appointed Economy Minister Jose Arista was deputy finance minister between 2006 and 2010 and agriculture minister in 2018 under former president Pedro Pablo Kuczynski. Arista faces an ongoing recession and the effects of the El Niño weather phenomenon. The new Energy and Mines Minister Romulo Mucho served as vice mining minister between 2005 and 2006 under former president Alejandro Toledo. Boluarte has made 45 ministerial changes since taking office in December 2022. This move comes amid her continued struggle for public support, with her approval rating hovering at 10% — the lowest in the region.
Pataz and Trujillo under state of emergency due to illegal mining and crime
On 12 February, the national government declared a 60-day state of emergency in Pataz province, located in the northern region of La Libertad. It implemented the measure to help authorities combat the presence of more than 20 organized crime groups dedicated to illegal gold mining in the area. Armed forces will intervene and residents must follow a curfew between midnight and 4 a.m. El Comercio reported that the illegal miners are using 22 dump trucks to remove the equivalent of more than 600 tons of gold. They are carrying out these operations in areas granted to formal mining companies Poderosa, Horizonte, and Marsa. The dump trucks transporting the alleged illegal gold do not belong to the aforementioned companies. La Libertad’s environmental prosecutor Patricia Ponce told El Comercio that transport companies obtained formal documentation through irregular means to justify their cargo. A state of emergency has also been declared in Trujillo, the third most populous city in the same region, due to the presence of organized crime groups dedicated to kidnapping, extortion, and contract killings. Last week, Peruvian national soccer player Paolo Guerrero withdrew from a contract with Trujillo-based club Universidad César Vallejo after receiving extortion threats against his mother. The threats allegedly came from the local criminal group Los Pulpos, which also operates in Chile.
Peru’s automotive lobby calls for electric vehicle tax incentives
On 15 February, the Automotive Association of Peru (AAP) reported that Peru’s electric and hybrid vehicle sales increased 67% in 2023 to 4,484 units. However, this is a small share when compared to the 164,485 internal combustion vehicles purchased during the same period. AAP argued that the country needs temporary tax breaks to encourage electric vehicle adoption. AAP's Economic Studies Manager Alberto Morisaki emphasized the need for a long-term government commitment to energy transition incentives, stressing the need for legislative support. Morisaki suggests temporary incentives such as reducing the general sales tax (IGV) to help consumers transition to electric vehicles, especially as they continue to have a higher upfront cost compared with gas-powered vehicles.
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