Regional Pulse: 27 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
Court backs Chubut province’s threat to withhold oil and gas royalties
Government appeals YPF expropriation case
Security Minister praises Bukele at CPAC
BRAZIL
Bolsonaro rallies supporters for São Paulo march
Agricultural insurance payouts rise as cattle price falls
Lula’s Israel comments cause controversy
Vale signs USD160 million deal to disinvest from Indonesia
CHILE
Venezuelan dissident kidnapped in Chile
Right-wing opposition faces upset as leader Kast loses support
Anglo American plans to open underground mine at Los Bronces
COLOMBIA
Damaged pipeline could delay Colombia's plan to import gas from Venezuela
Criminal groups reportedly using Colombia’s music industry to launder money
ELN peace talks to resume in April after impasse over parallel dialogue
ECUADOR
Ecuador to increase VAT to 15% in April to combat insecurity and El Niño
Government sends 2024 budget proposal to Congress
Human rights groups challenge internal armed conflict decree over alleged abuses
MEXICO
Government nationalizes country’s largest salt mine
Oil production decreases to 2022 levels
President reveals phone number of New York Times reporter
PERU
Illegal Peruvian coal disguised in large quantities of exports
Finance minister calls for austerity measures to reduce fiscal deficit
Prime minister confirms interest in replicating El Salvador’s prison model
KEY DEVELOPMENTS IN FULL
ARGENTINA
Court backs Chubut province’s threat to withhold oil and gas royalties
On 27 February 2024, a court in Chubut province ordered the national government to restart discretionary provincial funding. The national government said it would appeal the decision. On 26 February, the Chubut provincial legislature backed Governor Ignacio Torres’ threat to withhold oil and gas royalties from the national government if President Javier Milei does not reinstate funding to the province by 28 February. Although Chubut is a small province of about 600,000 people and accounts for just 4% of Argentine exports, governors from the other Patagonian provinces of Neuquén, Río Negro, Santa Cruz, and Tierra del Fuego are likely to follow Torres’ example. Combined, the Patagonia region produces over 12% of the country’s exports, 52% in the petrol and petrochemical sector. Milei’s decision to stop discretionary funding to provincial governments was a measure to cut state spending and reduce the fiscal deficit. However, the decision angered provincial governments who argue their provinces rely on the funding for social welfare programs.
Government appeals YPF expropriation case
On 22 February 2024, lawyers representing the Argentine government in the YPF expropriation case argued that the YPF expropriation is an Argentine matter – not a US one. The government appealed a judge’s decision to award USD16 billion in compensation to vulture funds Burford Capital and Eton Park. The government’s lawyers also argued the sale of Spanish company Repsol’s shares to Grupo Peterson (GP) was irregular due to the close relationship between GP’s owners (the Eskenazi family) and then-president Cristina Fernández de Kirchner. President Carlos Menem began privatizing the state oil and gas company YPF in 1992, but Kirchner renationalized the firm in 2012. The New York court is expected to decide on the appeal sometime between September and December 2024.
Security Minister praises Bukele at CPAC
On 21 February 2024, Security Minister Patricia Bullrich attended the Conservative Political Action Conference (CPAC) in Washington DC in hopes of fostering closer security collaborations between Latin American states. At the conference, Bullrich told El Salvador’s President Nayib Bukele she wanted to follow his model of tackling crime. Bukele’s crackdown on criminal gangs in 2022 led to the arrests of more than 1% of the population, garnering criticism from human rights organizations. Bullrich also used the conference to speak about the anti-picketing protocol she introduced in December to stop disruptive protests, calling on other Latin American countries to become “partners in security” with the US. Bullrich is now serving her second term as security minister under President Javier Milei after having the same role under former president Mauricio Macri between 2015 and 2019. She presents herself as being tough on crime and sought to foster collaboration on security matters with the US during her previous term.
BRAZIL
Bolsonaro rallies supporters for São Paulo march
On 25 February 2024, former president Jair Bolsonaro held a march for an estimated 185,000 supporters on São Paulo’s main avenue in light of an ongoing Federal Police investigation. Four state governors — including Tarcísio de Freitas from the country’s most populous state of São Paulo — joined the rally. Federal Police agents who are investigating the former president for allegedly planning a 2022 coup also attended. Those agents are evaluating whether the speech he made denying he attempted a coup could form part of their investigation. Police found video footage of Bolsonaro allegedly planning a coup with members of his cabinet and the armed forces. Bolsonaro is also banned from running for reelection until after 2030 due to his comments questioning the reliability of Brazil’s electronic voting system.
Agricultural insurance payouts rise as cattle price falls
On 23 February 2024, the National Confederation of Insurers said the amount agricultural insurers paid out to cattle farmers increased thirteen-fold in 2023 due to the price of cattle decreasing. In 2023, agricultural insurers paid out nearly USD33 million to cattle farmers, 13 —times more than the amount paid in 2022. Agriculture is Brazil’s main growth driver, and in 2021 the beef industry contributed more than USD180 billion to the Brazilian economy.
Lula’s Israel comments cause controversy
On 20 February 2024, President Luiz Inácio Lula da Silva compared Israel’s offensive in the Gaza Strip to the Holocaust, provoking outrage both in Brazil and abroad. Israel’s Foreign Minister Israel Katz directly addressed Lula on X (Twitter). Former president Jair Bolsonaro’s loyalist lawmaker Carla Zambelli filed for Lula’s impeachment, which lower chamber speaker Artur Lira denied. Local analyst Alberto Carlos Almeida pointed out that by doing this, Lira increased his leverage over the Lula administration in federal budget negotiations. Speaking with Valor Econômico on 25 February, political scientists Matias Spektor and Felippe Ramos both said that Lula risks alienating the West by aligning Brazil with countries in the Global South and fostering closer links with China and Russia — both fellow members of the Chinese-dominated BRICS bloc of developing nations.
Vale signs USD160 million deal to disinvest from Indonesia
On 26 February 2024, Brazilian multinational mining and logistics company Vale signed a USD160 million deal so that it can disinvest from Indonesia. In November 2023, the Indonesian government announced foreign companies could no longer hold majority shares in Indonesian mining companies, requiring Vale to sell off 14% of its shares in PT Vale Indonesia before its operating license expires in 2025. Vale is the world’s largest producer of nickel and intends to continue exploring regional opportunities for nickel production. Vale’s Canadian subsidiary will retain 33.9% of PT Vale Indonesia shares, with Indonesia’s Mind ID and Japan’s Sumitomo Mining together holding 45.5%. The Jakarta Stock Exchange will control the remaining 20.6%.
CHILE
Venezuelan dissident kidnapped in Chile
On 21 February 2024, retired Lieutenant Ronald Ojeda was kidnapped from his home in Santiago. No group has claimed responsibility for kidnapping Ojeda, a Venezuelan political dissident and refugee in Chile. The kidnappers were reportedly disguised as Chilean investigative police (PDI). The Chilean government has increased security on the Bolivian and Peruvian borders in an attempt to prevent the kidnappers from leaving the country with Ojeda. The news of Ojeda’s kidnapping will be cause for concern for the 68 Venezuelan political dissidents who have found asylum in Chile since 2010.
Right-wing opposition faces upset as leader Kast loses support
On 25 February 2024, a Panel Ciudadano survey showed Providencia Mayor Evelyn Matthei would be the leading opposition candidate to face President Gabriel Boric in Chile’s 2025 elections, rather than former presidential candidate José Antonio Kast. Kast leads the far-right Republican party that won the first round of the 2021 presidential elections before subsequently losing in the second round to Boric. Matthei, meanwhile, is a member of former President Sebastián Piñera’s center-right Chile Vamos coalition. She is seen as his political successor. The survey asked respondents who they would vote for if the elections were held on 25 February. Kast would only receive 16% of the vote, while Matthei would receive 30%. In a similar poll held in November 2023, 22% of respondents said they would vote for Kast and 20% for Matthei. Ex-Ante reported that Kast’s unsuccessful campaign to have Chile approve a new, more conservative constitution may have reduced his popularity.
Anglo American plans to open underground mine at Los Bronces
On 23 February 2024, Diario Financiero reported that British multinational mining company Anglo American was planning to convert the Los Bronces open pit mine about 60 kilometers from Santiago into an underground operation by the middle of 2025. Los Bronces is one of the company’s most important assets, yielding 2% of the world’s copper production. The firm also announced that the smallest processing plant at Los Bronces would be closed for care and maintenance in mid-2024 to reduce operating costs. Anglo American is looking to cut costs this year after the profits shareholders received fell 94% in 2023 from USD4.5 billion in 2022 to USD 283 million.
COLOMBIA
Damaged pipeline could delay Colombia's plan to import gas from Venezuela
On February 22, Luz Stella Murgas, president of the Colombian natural gas association Naturgas, said that the country would not meet its goal of importing natural gas from Venezuela by December 2024 because the pipeline connecting the two countries needs to be repaired. The government is looking to diversify gas supply sources since the country’s demand for gas could exceed supply by 2028, and President Gustavo Petro is promoting a platform to cut Colombian carbon emissions. Colombia’s state-owned Ecopetrol and Venezuela’s state-owned PDVSA signed a contract in 2007 valid until 2027 to buy and sell gas through the binational Antonio Ricaurte gas pipeline. The first phase of the contract required gas exports from Colombia to Venezuela which were fulfilled through the pipeline until 2015. The second phase required Venezuela to export to Colombia starting in 2016, but Venezuela suspended the export plan to meet internal demand. The countries renewed talks in 2023.
Criminal groups reportedly using Colombia’s music industry to launder money
On February 22, InsightCrime reported that criminal groups are using Colombia’s music and events industry to launder money from illegal activities. Infolaft Academy Director Sergio Reyes Díaz, an anti-money laundering expert, explained that the industry manages large sums of money and has a supply chain made up of many actors who may not have anti-money laundering practices in place. This presents an opportunity for criminal groups to report inflated sales. The report highlights the January 2024 arrest of Pedro Pablo Guzmán (aka Pelomono), a Gulf Clan financial leader who used the facade of legitimate companies to produce international music events in northern Colombia. The Gulf Clan or AGC (Autodefensas Gaitanistas de Colombia) is the largest criminal organization in the country involved in illegal mining, extortion, migrant smuggling, and drug trafficking.
ELN peace talks to resume in April after impasse over parallel dialogue
On February 26, the Colombian government and the Ejército de Liberación Nacional (ELN) confirmed they will resume a seventh round of peace talks in Venezuela between 8-22 April 2024. Both parties have agreed to continue the negotiations despite ELN's warning last February 20 that the national peace talks could be “frozen” after the government began supporting a parallel regional dialogue with local ELN fronts and other armed organizations without allegedly consulting the official ELN delegation. According to Center for Popular Research and Education (CINEP) researchers, the Colombian government is supporting the local dialogue because of the challenges of guaranteeing compliance with the current ELN ceasefire. While the armed group has a central leadership, individual fronts operate with a degree of independence, complicating negotiations with the group, which has an estimated 5,800 fighters. The ELN openly disavowed a parallel regional dialogue in the department of Nariño in Colombia’s southwestern Pacific region, which local governor Luis Alfonso Escobar will lead in early March with the support of the Office of the High Commissioner for Peace government agency.
ECUADOR
Ecuador to increase VAT to 15% in April to combat insecurity and El Niño
On February 23, President Daniel Noboa confirmed that the value-added tax (VAT) on certain products will increase from 12% to 15% on 1 April. The government plans to raise an additional USD1.3 billion per year through the measure and will use the funds to address insecurity, cover arrears, and mitigate the economic impact of the recent flooding caused by El Niño. Noboa said that the tax would be reviewed every six months and that there would be no increase for most basic market basket items, medicines, public transport, and education. However, 21 out of 115 basic market basket items will be affected, including soft drinks and snacks. The fuel industry, restaurants, internet services, financial services, clothing, telecommunications, airline tickets, and vehicle sales will all be impacted by the increase. Digital platforms such as Uber and Netflix will also be affected. The taxes will help cover the increased costs of the security forces dealing with the “internal armed conflict.”
Government sends 2024 budget proposal to Congress
On February 20, the Ecuadorian government presented its USD35.5 billion budget proposal to the National Assembly, which proposes a 13% year-over-year spending increase. The proposal allocates USD3.5 billion for security, USD4.4 billion to improve health care, and USD4.6 billion to strengthen the education system. The Noboa administration is proposing a USD214 million increase in security spending for 2024 compared to 2023, as part of its crackdown on criminal groups. On the other hand, the budget for the national agency in charge of addressing natural disasters would be reduced to USD19 million — a 60% decrease from 2023 despite the El Niño weather phenomenon. The proposed budget estimated the country’s fiscal deficit to be USD4.8 billion, which does not take into account any possible International Monetary Fund (IMF) financing or any savings from targeted reductions to fuel subsidies. The National Assembly has 30 days to approve the proposal.
Human rights groups challenge internal armed conflict decree over alleged abuses
On February 20, local news outlet Primicias reported that human rights organizations have submitted at least 10 amicus curiae legal briefs to the Constitutional Court to review whether President Daniel Noboa’s declaration of an internal armed conflict against 22 criminal groups is legal. The government’s January decree classified the gangs as terrorist groups and non-belligerent state actors. Human rights groups have questioned the government's justification for declaring the armed conflict and have documented cases of torture and cruel treatment in prisons controlled by the armed forces. The groups also denounced alleged cases of extrajudicial killings without providing further details. Since the declaration, 10,134 people were arrested in 48 days. The Constitutional Court has yet to rule on the constitutionality of the state of emergency.
MEXICO
Government nationalizes country’s largest salt mine
On 25 February 2024, the government nationalized the company Exportadora de Sal (ESSA) after buying 49% of the company’s shares for USD87.6 million from the Japanese company Mitsubishi. The state was already the largest shareholder of the salt mine in northern Baja California Sur state, with 51% of the shares. However, it consolidated full ownership after purchasing the rest of the royalties. The deal is part of President Andrés Manuel López Obrador's campaign to secure the country's national resources by putting much of them in state hands. ESSA owns the country's largest salt mine and is one of the largest producers in Latin America along with Chile, with an output of more than 8 million tons per year. In February 2023, President López Obrador signed a decree to nationalize lithium. In May 2023, the military seized part of conglomerate Grupo Mexico's unit in the “Isthmus of Tehuantepec” railway system to nationalize it. Earlier this month, the president authorized the purchase of a majority stake in Spanish company Iberdrola's energy assets.
Oil production decreases to 2022 levels
On 24 February 2024, the National Hydrocarbons Commission (CNH) released a report showing that the country produced an average of 1.88 million barrels of crude oil per day in January. The country had not reported such a low figure since December 2022. The report shows that national oil extraction by both state-owned oil company PEMEX and private companies fell during the first month of the year, adding up to a 2.6% decrease compared to the same period in 2023. CNH’s report notes that PEMEX leads the country’s oil production with an average extraction of 1.78 million barrels per day. Extraction declined at the Quesqui, Maloon and Maloob oil fields. The indebted, state-owned oil company extracts 95% of national production, while private oil companies extract the rest. The report comes after President Andrés Manuel López Obrador eliminated taxes for PEMEX in an attempt to support the company and incentivize oil production.
President reveals phone number of New York Times reporter
On 22 February 2024, President Andrés Manuel López Obrador revealed the phone number of a New York Times reporter during his morning press conference. He claimed the outlet was preparing a report accusing him of having links with the Sinaloa Cartel to finance his 2018 presidential campaign. The action referred to as “doxxing” drew criticism from not only the New York Times, but press freedom activists, the Federal Institute for Access to Public Information and Data Protection (INAI), the White House, and even YouTube, which removed the press conference from its online platform. But President López Obrador said he would do it again in any case he considers necessary, and recommended that the journalist change her phone number. Several political figures in Mexico have dealt with doxxing recently, including presidential candidates Claudia Sheinbaum and Xóchitl Gálvez and even the president’s own family. Nobody has been held responsible for those actions yet.
PERU
Illegal Peruvian coal disguised in large quantities of exports
On February 18, local news outlet Ojo Publico reported that, according to local authorities, 22,000 tons of illegal anthracite coal are exported each month from the northern coastal region of La Libertad. The region exports 90% of the country’s coal production. The mineral is illegally mined in the provinces of Gran Chimú, Otuzco, and Santiago de Chuco and later incorporated into the formal market. The report identified a significant gap between the quantities of coal produced that are formally declared and those that are ultimately exported. While 104,000 metric tons of anthracite were declared to the Ministry of Energy and Mines in 2022, the government registered more than 1 million metric tons of exports of the mineral that same year. The main countries importing the mineral are Brazil, South Korea, China, and the Netherlands. The top companies importing anthracite are Spain's Global Atac, Switzerland's Bulk Trading, and Britain's Javelin Global Commodities UK. Anthracite is used in steel production and power generation.
Finance minister calls for austerity measures to reduce fiscal deficit
On February 19, recently appointed Economy and Finance Minister Jose Arista announced he would support a rule to reduce non-essential public spending over the coming months to meet this year’s 2% fiscal deficit goal. Think tank Peruvian Institute of Economy (IPE) expects Peru could have a 2.9% budget deficit this year if the government does not take action. Minister Arista aims to reduce public spending in some sectors, which would affect vehicle and gasoline purchases as well as consulting contracts. In addition to that, Minister Arista plans to establish a “fiscal pact” with Congress to avoid lawmakers presenting bills that would create even further disbursements. According to Gestion, the Ministry of Economy and Finance could aim to cut up to 10% in public expenditure.
Prime minister confirms interest in replicating El Salvador’s prison model
On February 22, Peruvian Prime Minister Alberto Otárola confirmed Dina Boluarte’s administration intends to “replicate” El Salvador's prison model. In recent years, El Salvador has reduced crime through a heavy-handed approach targeting suspected gang members and incarcerating them in mass quantities without due process. The country has constructed a mega-prison that has allegedly allowed widespread human rights violations. Minister Otárola confirmed that Justice Minister Eduardo Arana has been authorized by the government to travel to El Salvador to inspect the prison's logistics, which include "adequate, modern and efficient" infrastructure. Justice Minister Arana is expected to meet with his counterparts in El Salvador. Peru has a prison population of 100,000, half of whom are in pre-trial detention. Otarola said the prison would be built for inmates who were imprisoned for violent crimes and continue to conduct illegal activities such as extortion and leading criminal groups from jail. The government is expected to announce a new prison policy in the coming weeks.
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