Chilean Companies Temper Growth Plans As New Constitution Takes Shape

Bloomberg Línea — The process of writing a new constitution in Chile has increased political and economic uncertainties, discouraging corporates’ growth plans, according to a report by Fitch Ratings. The proposed reforms have heightened longer-term risks as they could increase obstacles for developing projects in the country, including obtaining project approvals, weakening property rights, and reducing the availability of local financing due to changes to the pension system. The agency says it does not expect its ratings to be immediately affected, however.

“If the new charter is approved, its implementation will require supporting legislation, which will take time, extending the period of uncertainty. Chilean corporates have tempered their growth strategies to reflect these uncertainties,” the ratings agency says in a note published Tuesday.

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On the region’s stock markets, Argentina’s Merval (MERVAL) posted the strongest gains amid opportunity buying, after the index posted its biggest intraday drop since November 2021 on Monday. The Peruvian stock market had the worst performance on Tuesday, closing with a drop of 1.15%, while Brazil’s Ibovespa (IBOV) also closed lower.

Following is a roundup of Tuesday’s news from Bloomberg Línea and Bloomberg reporters across Latin America.

Argentina:

• U.S. ambassador to Argentina Marc Stanley called for friendship and cooperation between both countries on Tuesday, highlighting opportunities in trade and tourism, and the potential for U.S. companies to increase their investment flows into the South American country.
• Likewise, Economy Minister Martín Guzmán called on businesses to “boost investments” in the country and, although he acknowledged that in Argentina it is necessary to “anchor expectations”, he assured that “steps forward” are being taken in terms of economic growth and business opportunities.

Brazil:

• In another week that began with strong volatility and a wave of risk aversion pushing down stocks and the U.S. dollar rising against Latin American currencies, billionaire and businessman Jorge Paulo Lemann said that he has been through many crises, but that there is always opportunity, even in recessionary scenarios. Lemann was participating on a panel with investor and former SoftBank CEO Marcelo Claure, during an event organized by Volpe Capital.

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Chile:

• The ongoing process to write a new constitution in Chile has increased political and economic uncertainties, discouraging corporates’ growth plans, according to a report by Fitch Ratings. The reforms have heightened longer-term risks as they could increase obstacles for developing projects in the country, including obtaining project approvals, weakening property rights, and reduce the availability of local financing due to changes to the pension system. The agency says it does not expect its ratings to be immediately affected, however. “If the new charter is approved, its implementation will require supporting legislation, which will take time, extending the period of uncertainty. Chilean corporates have tempered their growth strategies to reflect these uncertainties,” the agency says. Fitch expects such capex cutbacks to become more apparent in the longer term, due to time-lags in project planning and execution, and which will affect economic growth and employment, putting pressure on many corporates. The draft of the new constitution will be put to a national and obligatory vote in September.

Colombia:

• Minister of Mines and Energy Diego Mesa said Tuesday that, at the close of 2021, Colombia increased the expected duration of its oil and gas reserves, with oil reserves for 7.6 years, up from the 6.3 years projected by the government in 2020.

Costa Rica:

• The country’s banking system is stable and maintains adequate liquidity and solvency in accordance with regulatory thresholds, but credit delinquency and the probability of default increased, particularly in foreign currency debtors, according to a report by the central bank.

Ecuador:

• President Guillermo Lasso is seeking technical assistance from Israel to combat drug trafficking and organized crime in Ecuador, the president said during a meeting with senior executives of Israel Aerospace Industries (IAI) in Tel Aviv on Tuesday.

El Salvador:

• President Nayib Bukele’s Bitcoin (BTC) gambit is becoming onerous for cash-strapped El Salvador, but that isn’t stopping him from adding to his stockpile. Bukele has bought 2,301 Bitcoins for the government since making them legal tender back in September, based on his announcements on Twitter. That includes a purchase of 500 coins on Monday as their price plunged below $31,000, extending a wild six-month sell-off. Those tokens are worth $74 million today. That’s 28% less than the $103 million Bukele paid for them, according to calculations by Bloomberg.

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Honduras:

• Former Honduran President Juan Orlando Hernández Alvarado pleaded not guilty Tuesday to drug and weapons charges during his second hearing at the Southern District Court of New York, following his extradition last month from the Central American country.

Mexico:

• President Andrés Manuel López Obrador said Tuesday he will not attend the Summit of the Americas in Los Angeles next month if the governments of Cuba, Nicaragua and Venezuela are not invited by the President Biden administration, calling for a united Americas in which dialog must continue despite political or ideological differences.
• Private oil companies operating in Mexico reported production of 97,106 barrels per day in March, a new record since such companies were granted permission to extract oil in the country by the 2013 energy reform. The increase of 9.5%, or 8,451 barrels is due in part to Italian oil company Ente Nazionale Idrocarburi (ENI) ramping up production at the Miztón field, where it has suffered pressure problems due to the delay in the arrival of a vessel that was able to fix the problem.
• State-owned Petróleos Mexicanos (Pemex) reduced natural gas flaring by 45% during the first quarter of 2022. The oil giant headed by Octavio Romero Oropeza sent 390 million cubic feet per day of natural gas into the atmosphere, compared to 712 million in the same period of 2021, according to a company report.

Peru:

• Southern Peru Copper Corporation, a Grupo México company, is close to starting initial drilling at Michiquillay, a copper mega project that the company acquired in June 2018, located in the Cajamarca region.

Uruguay:

• Uruguayan startup Bankingly has announced the closing of a Series A investment round for $11 million, with which it will seek to deepen its expansion in Latin America, as well as achieve greater penetration in Asia and Africa.

Venezuela:

• Mexico’s President Andrés Manuel López Obrador claimed during his daily press conference Tuesday that an agreement has already been reached between Venezuela and the United States, allowing for a U.S. company to extract one million barrels of oil per day from the South American country. Voice of America’s White House correspondent Jorge Agobian took to Twitter to refute López Obrador’s claims, citing the White House National Security Council.