Regional Pulse: 7 May 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
Chamber of Deputies approves revised ‘omnibus bill’
Trade unions back down from transport strike
Argentina slips in press freedom ranking
BRAZIL
Rio Grande do Sul faces major climate disaster
Palm oil plantation workers report poor conditions
Moody’s gives Brazil’s credit rating a positive outlook
CHILE
Government proposes solution to USD1.6 billion healthcare compensation payout
Spanish firm Naturgy Group to invest USD65 million in solar energy
José Antonio Kast mirrors global far-right
COLOMBIA
Colombia breaks diplomatic relations with Israel
Missing ammunition comments strain government relationship with military
Interest rate cut reveals distance between central bank and government
ECUADOR
Government distances itself from contractor with potential organized crime links
China trade agreement comes into effect
Noboa declares new state of emergency in five coastal provinces
MEXICO
Supreme Court approves hydrocarbons law
BMW starts building USD861 million car battery center
Candidates present fiscal projects in second presidential debate
PERU
Organized crime members allegedly attacked mayor of Lima suburb
Finance Ministry estimates economy will grow 3.1% in 2024
Petroperú to submit oil wells to private tender process
KEY DEVELOPMENTS IN FULL
ARGENTINA
Chamber of Deputies approves revised ‘omnibus bill’
On 30 April 2024, lawmakers in the lower chamber of Congress voted in favor of a revised version of President Javier Milei’s “omnibus bill” legislative package. The so-called “omnibus bill” includes hundreds of economic and political reforms, including changes to legislative powers and labor reform. It would also allow the government to privatize nine state companies, reduced from the 40 originally proposed. Lawmakers voted 142 to 106 in favor of moving the bill forward, with five abstentions. The lower chamber debated the original version of the bill in February 2024, but rejected several articles. The new version, revised down from 664 articles to 232, maintains many original proposals. These include giving the president additional emergency powers, allowing state companies including airline Aerolíneas Argentinas and energy company Enarsa to be privatized, and labor reforms weakening certain labor rights such as maternity leave. The bill passed to the Senate on 2 May, and the upper chamber’s verdict on the bill is expected towards the end of the month.
Trade unions back down from transport strike
On 2 May 2024, transport trade union CATT confirmed the planned total shutdown of buses, trains, metro lines, aircraft, and shipping on 6 May would be canceled due to its proximity to a planned 9 May general strike. Instead, the union held assemblies for trade union members in preparation for the general strike. The assemblies delayed and disrupted some underground metro services and delayed 20 flights. CATT General Secretary Juan Carlos Schmid originally announced the strike on 30 April as a protest against tax reforms proposed in President Javier Milei’s “omnibus” legislative package. The reforms, which the lower house of Congress approved on 30 April, would lower the minimum taxable wage if approved by the Senate. The president’s spokesperson, Manuel Adorni, warned the government would take measures against striking workers, including deploying security services to prevent roads from being blocked by protestors.
Argentina slips in press freedom ranking
On 3 May 2024, Reporters Without Borders (RSF) released their 2024 press freedom ranking, revealing that Argentina has slipped 26 places to 66th since President Javier Milei took office in December 2023. RSF criticized Milei’s decision to suspend news agency Télam and close its Buenos Aires office in March 2024. On 3 May, the same day the report was released, Milei began shutting Télam’s provincial offices across the country. Neighboring Chile, meanwhile, moved up 31 places to 52nd. Chile is now ahead of the US, which dropped 10 places to 55th.
BRAZIL
Rio Grande do Sul faces major climate disaster
On 7 May 2024, authorities in the southern state of Rio Grande do Sul announced at least 90 people had been confirmed dead and more than 100 missing so far after storms caused widespread flooding. BBC Brasil reported that nearly 80,000 people have been displaced as 300 of Rio Grande do Sul’s 497 municipalities have been affected by waters rising as high as five meters in some places, overwhelming flood defenses. Collapsed bridges and roads washed away by floodwaters have hampered rescue efforts, while the state capital Porto Alegre’s international airport will remain closed for the rest of the month. Vast parts of the state capital and its metropolitan area, home to 4 million people, are without running water. Telecommunications have also been compromised. Meteorologists say the storms were caused by strong winds and a recent heatwave, aggravated by climate change. President Luiz Inácio Lula da Silva took leading officials for a visit to the affected areas. Lula asked Congress to fast-track an emergency financial package to the already cash-strapped state of Rio Grande do Sul, whose total debt is 180% of its annual revenues.
Palm oil plantation workers report poor conditions
On 2 May 2024, Repórter Brasil reported that Brazil’s principal palm oil companies are among the 10 employers with the highest number of complaints filed against them in the northern state of Pará’s Regional Labor Tribunal. Biovale, Tauá Brasil Palma, Belém Bionergia and Agropalma collectively have 1,697 complaints filed against them. The complaints lodged by former and current employees of palm oil plantations allege poor-quality food, a lack of water, and an absence of hygiene facilities. Pará state attorneys concluded inadequate working conditions are widespread in the palm oil industry, both on large-scale plantations such as the ones Repórter Brasil mentioned, as well as small-scale farms. Palm oil interest groups Sinolpa and Abrapalma dismissed the complaints, the Repórter Brasil article said. While palm oil is key to the food and cosmetics industries, the federal government considers the biofuel industry as pivotal for energy transition. Many palm oil-producing companies are exploring opportunities in the biofuels sector, specifically in aviation fuel.
Moody’s gives Brazil’s credit rating a positive outlook
On 1 May 2024, credit rating agency Moody’s announced that Brazil’s credit rating could improve to investment grade in the near future if there is strengthened economic growth and the government gets public debts under control. For now, Moody’s maintained Brazil’s credit rating at Ba2, a speculative grade with significant risks for foreign investors. If Brazil’s credit rating rises by one grading point to Baa3, it will fall within the investment category, which carries significantly less risk for outside investors. Brazil enjoyed an investment grade rating between 2009 and 2015, but it was downgraded after economic growth fell and public debts rose. Finance Minister Fernando Haddad met with Moody’s representatives on 23 April, although no official announcement was made directly after the meeting.
CHILE
Government proposes solution to USD1.6 billion healthcare compensation payout
On 6 May 2024, the government delivered its solution to a committee of lawmakers, legislating a USD1.6 billion compensation payout to private healthcare recipients overcharged by their insurers. The government’s plan to enforce a November 2022 Supreme Court ruling was delivered to the committee just six days before the 12 May deadline. If the ruling is enforced without additional legislation, the healthcare insurers known as Isapres would be forced to compensate customers in full. These insurers have claimed that they would cease to operate if forced to pay the full amount immediately, saying that the government would be forced to bail them out. The government’s proposal would freeze health insurance price increases at 10%, prohibit Isapres profit distribution until all debts are repaid, and give the Isapres a 10-year window to compensate overcharged clients. Congress now has until 12 May to pass the bill into law, which local newspaper La Tercera says will be a difficult task due to opposition politicians’ critical stance.
Spanish firm Naturgy Group to invest USD65 million in solar energy
On 3 May 2024, Spanish natural gas and electrical energy company Naturgy Group announced it would invest USD65 million in a solar plant near the city of Copiapó in northern Chile. Reporte Minero reported that Naturgy will develop the project alongside the Kuwait Investment Authority’s subsidiary Wren House Infrastructure, which is based in London and New York. Chile’s environmental agency SEA approved the project to build a 46.33 megawatt peak (MWp) capacity photovoltaic plant. The plant will be connected to the existing Carrera Pinto Central Interconnected System Substation. The plant is expected to enter into commercial operation this year, Power Technology reported, and the company estimates the project will generate about 500 jobs in its first six months.
José Antonio Kast mirrors global far-right
On 2 May 2024, far-right opposition politician José Antonio Kast – who ran against President Gabriel Boric in 2021 and won the first round – proposed building a wall between Chile and Bolivia to reduce illegal immigration. According to estimates from Chile’s statistics bureau INE, 107,223 people were living in Chile without documentation in 2023. This made up 6.6% of the foreign-born population. Chile receives immigrants principally from Venezuela, Colombia, Haiti, and El Salvador. Ninety percent of Chileans called for a stricter immigration policy in an April 2024 survey from polling firm Cadem. President Gabriel Boric’s administration recently invested USD1 million in building new observation posts, installing optical and thermal cameras, and implementing a constitutional reform allowing armed forces to carry out checks at the border alongside police. Chile will hold presidential elections next year, and Kast has already confirmed he will run. He is currently second in the polls behind center-right candidate Evelyn Matthei, according to the latest Cadem poll.
COLOMBIA
Colombia breaks diplomatic relations with Israel
On 2 May 2024, the Colombian Foreign Ministry confirmed the rupture of diplomatic relations with Israel. President Gustavo Petro first announced the move in a 1 May 2024 speech commemorating Labor Day. In a statement, the ministry said Colombia did not want to be “complicit” by maintaining relations with a government facing accusations of war crimes. According to an analysis from Santiago Rodriguez Álvarez for digital outlet La Silla Vacía, Israel is Colombia’s second-largest supplier of security material after the US. The Middle Eastern country also purchases about USD500 million in Colombian exports annually, according to figures from 2023. The Israeli government has condemned the move, while the US administration has called on both countries to reconcile.
Missing ammunition comments strain government relationship with military
On 30 April 2024, comments from President Gustavo Petro about missing projectiles and ammunition further raised tensions between the government and military forces. Petro said during a press conference that more than a million projectiles and pieces of ammunition were missing from two military bases, saying that members of the armed forces allegedly sold these munitions to organized crime groups. However, military sources told news outlets including El Tiempo that Petro allegedly misread the report. In the El Tiempo article, military sources argued that the quantities of missing equipment are significantly smaller than what Petro has stated. This is the latest clash between the government and the military since Petro became president in 2022. Since Petro announced his government would break diplomatic relations with Israel, the armed forces have expressed unease because Israel supplies nearly 75% of its materiel. Defense Minister Iván Velásquez faced Congressional scrutiny during a 30 April 2024 hearing, in which opposition legislators accused him of weakening the armed forces.
Interest rate cut reveals distance between central bank and government
On 30 April 2024, Colombia’s central bank announced that it was lowering interest rates to 11.75% from 12.25%. The move comes after a steady decline in inflation since 2023. The government, however, thinks the central bank is being overly cautious. Speaking at an event in London, Finance Minister Ricardo Bonilla called on Colombia’s central bank to consider lowering interest rates to 11.25%. He argued that inflation was slowing down fast enough to merit the cut. The central bank acknowledged this but also highlighted the “uncertainty” that government announcements cause in financial markets, arguing that Colombia’s risk rating could rise sharply due to the government’s agenda of increasing government expenditure. Financial analyst Daniel Velandia said in a Bloomberg Línea article that the bank’s mention of national politics was highly unusual, and responded to President Petro’s tentative plans of calling for a new constitutional assembly.
ECUADOR
Government distances itself from contractor with potential organized crime links
On 2 May 2024, President Noboa issued a statement saying the government will not tolerate any commercial relationship with private companies thought to have links with organized crime in their supply chains. The move comes after the government announced that Lafattoria, the catering company for Ecuador’s prisons, was found to allegedly have possible organized crime links through its vendors without any making evidence public. Lafattoria, which has made USD171 million through its government contracts since 2015, denied any wrongdoing. The company won a public contract to supply food to Ecuador’s prisons in 2014. Investigative outlet Mil Hojas said it learned from Ecuadorian intelligence sources that catering company Lafattoria allegedly has organized crime links.
China trade agreement comes into effect
On 1 May 2024, a free trade agreement between Ecuador and China came into effect. The deal, signed in May 2023, will eliminate tariffs on 99.6% of Ecuadorian products exported to China. Thousands of Chinese products will also be exempt from import duties in Ecuador, although some goods, such as cars, will only see tariffs fall gradually over the next 15 years. According to a report by the UN’s Economic Commission for Latin America and the Caribbean (CEPAL in Spanish), Chinese imports are set to grow by 15% during the first year of the treaty. Those imports totaled nearly USD5.6 billion in 2023, Primicias reported. In 2023, Ecuador exported USD5.3 billion to the Asian country. The treaty was negotiated and signed during former president Guillermo Lasso’s administration.
Noboa declares new state of emergency in five coastal provinces
On 30 April 2024, President Daniel Noboa decreed a state of emergency in five coastal provinces — El Oro, Guayas, Los Ríos, Manabí and Santa Elena — to tackle “organized armed groups.” The state of emergency will last for 60 days, during which the army will be deployed alongside national police and certain rights will be suspended. Noboa declared an “internal armed conflict” in January 2024, whereby organized crime groups were reclassified as terrorist organizations. In April 2024, Ecuadorians voted to allow the army to take on policing duties in a referendum. Former president Guillermo Lasso (2021-2023) enacted about 20 states of emergency during his term, to limited effect.
MEXICO
Supreme Court approves hydrocarbons law
On 29 April 2024, the Supreme Court of Justice (SCJN) ruled that reforms to the hydrocarbons law President Andrés Manuel López Obrador presented in May 2021 are valid, making it harder for companies to get permits as the state exercises stricter control over the industry. President López Obrador sought to make it harder for companies to get a permit in the oil industry and remove concessions if the companies holding them are found to violate requirements. Foreign investors and governments heavily criticized the reform, alleging that it violates international trade agreements and affects private investment opportunities in the energy sector. It also raises concerns about possible market centralization and the environmental impacts of prioritizing fossil fuels over renewable energy sources. Because of this, the law was stopped by a series of injunctions. Three years later, the Supreme Court ruled that the changes were constitutional. The law also says that permits in various energy-related activities can be temporarily suspended for reasons of national security, energy security, or the economy.
BMW starts building USD861 million car battery center
On 3 May 2024, BMW announced it had started construction work on a new USD861.1 million car battery production center at its plant in central San Luis Potosí state. The center is part of the strategy the German company announced last year, which seeks to position BMW as a pioneer in the electric car manufacturing industry as the first to produce all-electric vehicles and also high-voltage batteries. The battery production center will cover an area of more than 80,000 square meters (about 861,100 square feet). The San Luis Potosí plant started production in 2019 with an investment of more than USD1 billion; it seeks to produce more than 175,000 cars annually and employ more than 2,500 people.
Candidates present fiscal projects in second presidential debate
On 28 April 2024, Mexico’s three presidential candidates presented their proposals on four key subjects: economic growth, infrastructure, inequality, and climate change. MORENA-PVEM-PT candidate Claudia Sheinbaum — currently leading the polls — proposed maintaining the fuel subsidy, building 1 million homes, and creating 100 new industrial parks nationwide. Opposition candidate (PAN-PRI-PRD) Xóchitl Gálvez’s proposal focused on combating extortion to improve the business environment. She also proposed tax exemptions for those earning the equivalent of less than USD880 a month. Movimiento Ciudadano (MC) candidate Jorge Máynez, a distant third candidate based on recent polls, proposed increasing annual investment spending by USD6 billion. The candidates were speaking at the second of three debates organized by the National Electoral Institute (INE). They plan to present their security plans in the third and final debate on 19 May.
PERU
Organized crime members allegedly attacked mayor of Lima suburb
On 1 May 2024, Comas Mayor Ulises Villegas was wounded in an attack. Villegas was beaten with a gun and required medical attention. Villegas said he believed his attackers belonged to organized crime groups opposing his crackdown on extortion and prostitution networks, among other illicit activities in Comas. Villegas reported death threats in January 2024 after he ordered the closure of the Chacra Cerro market, an alleged center of illegal commerce. Comas is a Lima suburb with about 600,000 inhabitants. Violence is growing in this district outside the capital, with three firearm-related murders taking place in a week. These events are allegedly connected with organized crime. According to a recent survey by Peru’s National Police (PNP), about 90% of residents in Comas say they feel unsafe.
Finance Ministry estimates economy will grow 3.1% in 2024
On 1 May 2024, the Finance Ministry updated Peru’s 2024 growth estimate to 3.1% of GDP. In 2023, the country’s GDP shrank by 0.6%. The ministry’s forecast is more optimistic than other sources. Private think tank Instituto Peruano de Economía forecasts 1.9% GDP growth, while the World Bank’s figure stands at 2.7%. The ministry expects a rise in export revenue to partially boost growth, driven by rising copper and gold prices. In the first two months of 2024, revenues from copper and gold exports grew by 17% and 66% respectively. It also expects the country’s agriculture sector to recover after last year’s El Niño weather phenomenon. The finance ministry also highlighted several international risks to its economy. These include possible trade conflicts between the US and China (Peru’s two main trade partners), the Houthis’ further disruptions to shipping logistics within the Arabian Peninsula and the ongoing war between Russia and Ukraine.
Petroperú to submit oil wells to private tender process
On 30 April 2024, Petroperú’s general manager announced that the state-owned company would submit three Talara oil wells to the private tender process after the government granted them to the company in October 2023. The move represents a U-turn of the government’s energy policy, which during 2023 had focused on empowering the state-owned company. The three oil fields in the Talara region known as I, VI, and Z-69 have a combined monthly production of around 230,000 barrels. The oil fields will be offered in their entirety to private tenders around August 2024, meaning that Petroperú will not be a partner in their exploitation. The move comes after several oil fields offered in partnership with Petroperú attracted scant attention from private companies. In 2023, Petroperú reported a deficit of about USD340 million.
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