Welcome to our weekly roundup of news from South America.
Mosoj ESG provides information, data and analyses relating to South America integrating Environmental, Social and Governance topics to promote sustainable development.
Last Christmas - I gave you my heart
Last December, trouble was already brewing in the region after a difficult year, with many countries entering 2020 with their economy on the backfoot, while most hopes were pinned on Brazil set to grow by 2.5%. Then arrived a pandemic that no-country was ready to face, given the chronic underinvestment in the healthcare system, and all hell broke loose with mass graves and bodies reportedly left on streets in many cities across South America.
By mid-March, governments had implemented some of the strictest lockdowns in the world, the bluntest of all tools, across every country. Subsequently, economies across South America plunged, taking their biggest hit in decades, if not ever.
However, outlook generally improved in the second half of 2020, and Brazil did emerge comparatively well. By then, of course, household economic considerations trumped people’s health concerns as they just needed to earn money to feed themselves.
At the same time, the virus spread appeared to have slowed down and although data is unreliable, there was a clear downward trend in cases and fatality. In some cases, it is said that herd immunity had been reached in some parts. For example, research showed that an estimate of 76% of Manaus had been infected by the virus.
That being said, there does seem to be a resurgence of the virus, which does not bode well for economic activity in the region, who remains powerless vis-à-vis the virus.
Nevertheless, it is important to note, that for the most part, though lingering, coronavirus is no longer the primary concern in South America, as Google Mobility Data show. By and large, people are now back at work if they still have a job!
So what next? Well, beyond the usual political noise in the region, we believe there will be an environmental, social and governance crisis (see EESG crisis) in 2021, in tandem with a big topic for 2021 and beyond, namely China and the US relationship.
First, this is because of the region’s increasing trade with China, which has supplanted the US as South America’s biggest customer. Indeed, at end-2019, the US had imported more goods than China in only 4 countries, Colombia, Ecuador, Bolivia and Paraguay.
Second, because we might be on the verge of another commodity boom, driven in parts by China’s demand for the region’s commodities (minerals, energy and agri-products), which is likely to drive economic considerations for countries that are just emerging from an economic catastrophe. This will have its incidence on environmental and governance considerations – witness Brazil and Bolivia’s lax attitude to deforestation.
Finally, there will be increased geopolitical risk as China, the US but also possibly other powers like the EU face-off in the region to access key resources such as lithium amongst others. Indeed, the region holds over 60% of global resources, and by our estimation supply will soon fall short of demand given the adoption of EVs.
In this context, one has to be pretty bullish about the prospect of a Mercosur deal despite the negotiation noises. The so-called cows-for-car swap is not so much as a battery raw-material-for-market access deal, which cynics would point to German/EU automobile industry vs EU Farmer story.
This said China has made tremendous progress to infiltrate strategic parts of South America through direct investments in the power sector, across several countries such as Brazil, Chile, Peru and so on. At the same time, it is easily alienating many, eg. the predatory fishing practices on the coast of several South American countries.
Moreover, one cannot rule out a sudden change of tack of the US in the region. Indeed, much of the economic recovery and crisis containment is thanks to the Fed monetary policy and flooding of money in the markets, encouraging investors to seek yield wherever they can. For example, it is quite an extraordinary feat that Peru was able to issue $4bn worth of debt last month, including century bonds with a coupon rate of just 3.23%, after an economic drop of 30% in Q2-2020!
Thus, there are reasons for optimism, despite the immediate challenges in 2021, as long-term economic prospects remain positive. Besides, governments and companies would do well to remember that trillions of dollars are linked to ESG considerations, as this is an opportunity for the region and likely to play a major role in the future.
Finally, this year Mosoj ESG has grown from 1-country to 6-country daily coverage in South America, with regular research publications ranging from the macro to industry and companies, as well as social media interaction covering a wide range of topics. We thus would like to thank all of those involved for their outstanding contribution and always welcome new members to our community.
Feliz Navidad! Feliz Natal!
Bolsonaro signs MP with $4 bn credit for vaccination against Covid-19
Pandemic fight has cost $120 bn so far, says Guedes
Congress approves Budget for 2021 and government will have a deficit of $49 bn
Agricultural production should exceed $200 bn in 2021
Brazil loses $83 bn per year with tax fraud
Vale approves 30-year extension of railroad concessions for commitments of $5 bn
Concessions in nine states expected to raise $1.4 bn
Vivo, Tim and Claro buy assets from Oi mobile network for $3.3 bn
Soybean crop increases in value by over $4.8 billion
Waso Holding Fund increased its holdings of PBI bonds from $150 mn to $750 mn
Budget 2021: fiscal spending to reach $12.04 billion
The GDP accumulated fall of 11.8% in the first nine months of the year
Extension of AA2000 concession implies 1.4 bn investment in the next seven years
Car prices increase by an average of 40% in 2020
Debt-to-GDP ratio could approach 100%, the highest level in 15 years
Government exchanges peso securities for $750 mn of dollar bonds
YPF will invest $320 million to recover conventional oil production
Trade between Chile and China reached $30.6 billion
Colombian ISA to invest $4.85 bn in Chile until 2023
Funds have paid out over $1 billion for second pension withdrawals
Fiscal cost of public sector readjustment reaches $600mn
Between August and October, underemployment reached 22%
Number of employees in Chile’s mining sector drop 15% in September
Chilean approves Pfizer-BioNTech vaccine. First 20,000 doses will arrive this month
Salmon & trout exports could drop by 15.4% due to lack of air cargo space in 2021
ECLAC expects 5% growth for the Colombian economy during 2021
Colombian agricultural exports grew by 8% in October
The IDB launches consultancy tender for hydrogen development in Colombia
Primax opens $58.5 mn bond sale in Colombia
Colombia to resume $850 mn highway PPP next year
Amendments to credit paument terms in Colombia reached $9.6 bn
Natural gas projects to attract investments of $ 2.9 billion
Foreign Direct Investment in Colombia fell 58.5% in the third quarter
Ecopetrol expects to invest between $3.5 and $4 billion in 2021
Spanish Elecnor to invest $100 mn in two wind projects in Colombia
Budget 2021 authorizes $3 bn debt
Representatives approve $32.71 billion Budget 2021 and allocate 10% to health
The BCB ratifies the immobility of the exchange rate
The BCB will transfer $50.21 million for productive sector support trusts
Government creates a $130 million Fund for import substitution
ECLAC readjusts economic projection in Bolivia with an 8% drop in GDP
Beverage smuggling causes loss of $118 mn per year
Taxes will collect 240 times more for the chicha, after an agreement to buy 60 thousand T of corn
Ichilo-Mamoré Waterway: Its reactivation could cost more than $70 mn
Mutún Steel Company sells iron at a price 85% lower than the global value