Mexico’s Pemex Buckling Under Crushing Pension Debt, Brazilian President Bolsonaro Promises to Restore ‘North-South’ Alliance with United States, Artificial Intelligence Helped Prevent $2B in Financial Fraud, and More from Latin America
Other featured stories include: Mexico Goes a Day Without Women on March 9th, Conflicts Over Indigenous Land Grow More Violent in Central America, Latin American Venture Firm Mountain Nazca Buys Scooter Company Grow, Lawyers Create Women’s-Only Offices in Brazil, Mexico’s Low Coronavirus Count Spurs Doubts About Testing Rate, and The Impact of Coronavirus in Latin America.
Mexico’s Pemex Buckling Under Crushing Pension Debt
With a massive debt load and facing the risk of a ratings downgrade, Mexican state oil company Petroleos Mexicanos (Pemex) was hit with a record spike in its pension liabilities last year as more workers retired on generous benefits.
Pemex is fighting to avoid having its bonds cut to speculative grade, or “junk”, which would put pressure on Mexico’s sovereign rating and deal a heavy hit to President Andres Manuel Lopez Obrador, who has vowed to revive it.
As reported by The New York Times,
“Unfunded pension liabilities at Pemex rose 34.8% last year to almost 1.5 trillion pesos ($77.3 billion), the company’s accounts show. It also has $105.2 billion in financial debt.”
Pemex negotiated most of its pensions with Mexico’s oil workers’ union years ago. At the time, oil prices were higher and life expectancy was lower.
“No company in the world, whether private or public, can sustain these. What has brought Pemex to bankruptcy is, amid other things, its terrible pension system,” said Jorge Sanchez, director at financial think tank FUNDEF. “
Backed by an implicit government guarantee, Pemex is one of Mexico’s largest employers, as well as the world’s most indebted oil company. The company had 159,400 active workers and 130,444 pensioners in 2018. Some retirees received up to 300% of their former salary in pension payments, a recent audit shows.
AMLO has thrown Pemex multiple lifelines, including cash injections, tax breaks and debt refinancing. Investors have become increasingly wary that the President can rescue Pemex, whose crude output fell again last year. All ratings agencies have Pemex on a negative outlook, signaling further downgrades.
"Pemex is a company that has no control over its balance sheet, let alone its destiny,” said Kim Catechis, head of investment strategy at asset manager Martin Currie.
Meanwhile, interest rate cuts by central banks worldwide are putting downward pressure on the returns made by pension funds, Catechis added.
Mexico’s economy slipped into a mild recession last year, and if pension liabilities climb further, the government will be less able to provide support, said Gonzalo Monroy, an independent energy expert.
Brazilian President Bolsonaro Promises to Restore ‘North-South’ Alliance with United States
This Monday in Miami, Brazilian President Jair Bolsonaro promised to restore the “north-south” strategic alliance with the United States and slash regulations to promote investments
In front of an audience of investors and entrepreneurs for the seminar “Brazil-U.S. Business Relations in Florida” organized by export agency Apex, Bolsonaro spoke about his ambitious plan to boost the economic relationship with the United States.
“The key word is trust. In the last decades of leftist governments, there has been distrust of the United States. That changed. Now we have a government that respects the family, the will of the people, its military forces, and that believes in God,” Bolsonaro said.
The Brazilian President also promised to eliminate regulations to reduce bureaucracy.
“Brazil cannot remain as one of the most difficult countries for investors,” he said.
As reported by Miami Herald, Bolsonaro repeatedly criticized his country’s “left wing” and mentioned Venezuela as an example of what “should not be” during his speech.
Bolsonaro is counting on his relationship with Trump to ensure agreements that help revive the Brazilian economy and create more jobs. His government has implemented austerity policies and a controversial pension reform with the hope of boosting growth. In 2019, Brazil attracted $75 billion in investments, Foreign Minister Ernesto Araújo told the audience at the Miami event.
“Although Trump left open a discussion about imposing new tariffs on Brazilian products, the administration signaled its interest in strengthening an alliance with the second-largest economy in the Americas. In a joint statement, both presidents said they instructed their officials to speed up negotiations for a bilateral trade agreement” (Miami Herald).
Artificial Intelligence Helped Prevent $2B in Financial Fraud
A risk control tool that uses Artificial Intelligence helped various financial institutions prevent fraud for an amount estimated up to $2 billion last year alone in all of Latin America and the Caribbean.
Through the company’s Visa Advanced Authorization (VAA) platform, Visa was able to prevent possible fraud with the use of more than 100 applications and capabilities that allow consumers, retailers and financial institutions throughout Latin America and the Caribbean to protect each stage of the payment experience.
Eloy Ávila, Americas CTO for the firm Darktrace, emphasized the important opportunities that Artificial Intelligence will bring in terms of both cybersecurity for companies, in addition to the protection of bank details.
“The introduction of new digital platforms, such as CoDi, Banco de México’s digital payment platform, will make computer and security protection of public and private institutions more difficult” (Forbes México).
Tools like VAA help monitor and evaluate purchases made on platforms such as VisaNet, Visa’s global payment network, to detect possible fraud. The platform uses AI to analyze over 500 attributes and generate a risk score for each transaction in approximately one millisecond, which then helps financial institutions decide whether to approve or deny a purchase.
According to a research study conducted by Forrester Consulting, fintech companies, banks and businesses in Latin America expect an increase in the use of digital payments due to the widespread adoption of connected devices.
Forbes México reports that to support the end-to-end payment needs of consumers and drive greater digital engagement, companies are shifting their focus to mobile banking, mobile wallets, and person-to-person payments. The top reasons cited for the adoption of new payment technologies include greater convenience and the speed of transactions.
Mexico Goes a Day Without Women on March 9th
This Monday, across much of Mexico, women took the day off in a widely anticipated protest. The “national strike,” as organizers called it, was intended to raise consciousness about violence against women and (more broadly) to protest against a culture that many say overlooks women’s contributions to society.
Women were urged to skip both paid employment and domestic chores at home. Throughout the day, photos of half-empty offices, shops and restaurants circulated social media platforms.
“I decided not to go to work, not to leave my house, not to go shopping, as a protest against violence that women suffer. This is a powerful message to society: If we continue doing nothing, tomorrow something could happen to your wife, to your daughter or mother,” Brenda Hernández, 33, a supermarket manager in Mexico City told The Los Angeles Times.
Many business leaders and government officials supported the strike, promising that women skipping work would still be paid for the day.
The protest — dubbed 9M, or March 9th — came a day after tens of thousands of women marched in cities throughout Mexico to denounce femicide. Officials say in Mexico, 10 women are killed everyday, and aggressors routinely go unpunished.
Photo Courtesy of Reuters
As reported by The Los Angeles Times,
“Recent slayings in Mexico City of a 7-year-old girl and a 25-year-old female office worker galvanized a growing movement seeking to curtail the violence. Organizers said they hoped the strike would translate into concrete action, such as more robust police investigations and enhanced penalties for men who assault or kill female victims.”
Organizers of the women’s strike stated they took their cue in part from previous “days without women” in various countries, including a protest in 2016 in Poland, and the enormous marches in the United States prompted by what critics called sexist behavior by President Trump.
Conflicts Over Indigenous Land Grow More Violent in Central America
For decades, members of the Brörán tribe in southern Costa Rica have hoped to take back what they considered ancestral land from the farmers who claimed it.
One weekend last month, the tribe took action, entering several farms, hanging up signs and vowing to stay put. It was not long before a group of agitated farmers came out armed with machetes, sticks and firearms, as Indigenous leaders implored the police to come help.
A brawl broke out soon after, resulting in the death of Jerhy Rivera, 45, an Indigenous activist in the community.
According to The New York Times, Mr. Rivera’s death came just weeks after another Indigenous man in a nearby town was shot in a land dispute, and a year after a land rights leader in that town was gunned down in his home.
Photo Courtesy of The New York Times
As reported by the Business & Human Rights Resource Center, over the past five years, conflicts over land and natural resources in the region have led to about 200 confrontations and the deaths of 60 Indigenous people.
Four Indigenous people were killed in an attack in Nicaragua in January, and at least a dozen more died in Colombia in just the first two weeks of this year, according to the United Nations.
The deaths in Latin America are the result of increasingly violent clashes between people who have lived on the land for thousands of years and newer settlers. Indigenous tribes are pushing back against ranchers, loggers, miners and other business interests in hopes of reclaiming their community land.
Latin American Venture Firm Mountain Nazca Buys Scooter Company Grow
On Wednesday, venture capital fund Mountain Nazca acquired a controlling stake in Latin American scooter firm Grow Mobility.
As reported by Reuters, under the terms of the deal, in which no cash was exchanged, Grow investors will retain about 20% of the company.
Among Latin America’s most prominent startups, Grow was formed from the merger of Mexican scooter startup Grin and its Brazilian counterpart Yellow last year.
As part of the change in its shareholding structure, Grow said the company’s mobility vice president Roberto Álvarez Cadavieco will become Grow’s global chief executive.
“My focus now is the following: to offer the best experience to our users and have a profitable business model that allows the company to grow in a sustainable way,” Cadavieco said.
Lawyers Create Women’s-Only Offices in Brazil
Patrícia Bertolin, author of “Women in Advocacy - Male Career Standards or Glass Ceiling”, interviewed 32 lawyers from 14 of Brazil’s largest law firms. Bertolin found that in 2014, less than 30% of women were partners at these firms, despite representing half of the employees.
To change this situation, lawyers have opened offices exclusively for women, some with the corporate name "Society of Lawyers”.
One woman, Claudia Bernasconi, left one of Brazil’s most prominent criminal law offices for a bank headed by women because she wanted to spend more time with her kids. In the current office, there are six partners, only one of whom is a man. In all, 25 people work there, 19 of them women.
"In the woman’s office, if you look at people and say ‘they called me from school and my son is sick,’ your boss says ‘go, go see what your son has.’ In the other office, I called my husband and said: ‘they called from school. Caio has a fever and needs to go home’. It is a cultural issue. It is much easier for another woman to understand that you will be late because your child is sick,” she said (Folha De S. Paulo).
Mexico’s Low Coronavirus Count Spurs Doubts About Testing Rate
Mexico’s low count of confirmed coronavirus cases is raising concern about how adequate the testing in the country is, and whether or not the government is doing enough to prepare for an epidemic.
As of Tuesday, there were only eight confirmed cases, while Mexico is monitoring 37 possible cases. By comparison, Brazil (where the first case was confirmed two days before Mexico’s) confirmed 37 cases and suspected another 876.
By Wednesday evening, Mexico’s Health Ministry said the number of confirmed cases had reached 12. Earlier that day, the outbreak was declared a pandemic by the World Health Organization, as worldwide cases surpassed 120,000 and deaths exceeded 4,300.
Graphic Courtesy of Bloomberg
According to Bloomberg, as of Tuesday night, the Mexican Health Ministry said it had performed 278 tests.
“I’m worried about the lack of diagnostic testing. If Mexico has undetected cases circulating, the spread of the disease is going to be brutal,” said Francisco Moreno, infectious disease specialist and head of Internal Medicine at ABC Hospital in Mexico City.
Mexico has largely decided against implementing containment efforts. Currently, Mexican airports aren’t widely screening travelers from countries with high numbers of cases and no big government events have been canceled.
As reported by Bloomberg, in Mexico, those working from home are doing so mainly according to region-wide policies from multinational corporate employers.
“We have the best experts on the matter. We still have the same number of cases and luckily there’s been no loss of life. We’re not hiding information from the population,” President Andres Manuel Lopez Obrador said Wednesday at his morning press conference.
At a Mexican Health Ministry press conference on Wednesday evening, Jean-Marc Gabastou, an advisor in emergency health for the Pan-American Health Organization/World Health Organization, said that the country was among the first to implement diagnostic capacity in each of its 32 states, with a total of 40 laboratories.
“We need to copy what some other countries are doing in early detection of the disease,” Moreno said. Mexico “appears to be waiting for the problem to start before taking measures. And my fear is that when it grows, we’re going to be far from being able to contain it,” said Francisco Moreno, infectious disease specialist and head of Internal Medicine at ABC Hospital in Mexico City.
Alejandro Macias, the former national commissioner for influenza in Mexico during the H1N1 outbreak, stated that currently, Mexico is only testing people who have a direct connection to someone who’s traveled to a country deemed high-risk, or who have been in contact with a confirmed case.
The Impact of Coronavirus in Latin America
Experts from ECLAC, the U.S. Department of Health and Human Services, World Bank, and the World Health Organization discussed the pandemic and how countries can best mitigate its effects.
The coronavirus landed in Latin America on February 26, when Brazil confirmed a case in São Paulo.
Aside from the health risks, there will likely be an economic impact as well, given that China ranks as a either the first or second-largest trade partner for several Latin American countries. On March 2, the OECD decreased global GDP growth expectations for the year by half a point to 2.4 percent. Prior to the epidemic, the IMF predicted 1.6 percent GDP growth for the region for 2020. In a perfect storm for economies, dropping oil prices have resulted in plunging Latin American markets and currencies.
Americas Society and Councils of the Americas released the following report, which provides a break down of how Latin American nations are being affected.
- As of March 12, Argentina had 21 confirmed cases.
- On March 11, President Alberto Fernández announced that as of Wednesday all travelers from China, Japan, Iran, South Korea, the United States, and the entire European continent must self-quarantine for 14 days upon arrival. The Ministry of Labor, Employment and Social Security announced on March 6 a special salary license to workers who traveled from abroad to work from home should they prefer.
- China is Argentina’s second-biggest export destination and the outbreak is already hitting trade. For example, 75 percent of Argentina’s beef exports go to the Asian country, and the value of these exports to China dropped 33.4 percent from December to January.
- As of March 12, Bolivia had 2 confirmed cases.
- Interim President Jeanine Añez declared a national state of emergency after meeting with Bolivia’s mayors and governors on March 11. To coordinate action against the spread of COVID-19, officials agreed to develop measures focused in three areas: communication, intergovernmental coordination, and attention. The government has also set up rapid response teams throughout the country as well as controls in place at airports and ports of entry.
- As of March 12, Brazil had 73 confirmed cases.
- Brazil confirmed Latin America’s first case on February 26: a 61-year-old man who had recently returned to São Paulo from a business trip to northern Italy.
- After Brazil’s secretary of communications tested positive for the virus following a presidential trip to Miami, President Jair Bolsonaro and other members of the delegation are being monitored for the disease.
- China is Brazil’s top trading partner. The Brazilian stock market tumbled 7 percent on news of the first case, amounting to the biggest depreciation since May 2017. The Real also fell to its lowest level against the dollar since the creation of the currency in the 1994. Goldman Sachs has since trimmed its 2020 growth forecast for Brazil from at least 2% to 1.5%.
- As of March 12, Cuba had 3 confirmed cases.
- Official Cuban broadcast media confirmed the island’s first three cases on March 11. Three Italian tourists traveled to Havana on March 9 and have been quarantined at the Pedro Kourí Tropical Medicine Institute in the capital.
- As of March 12, Chile had 23 confirmed cases.
- On March 3, Chile confirmed its first case, which involved a 33-year-old male doctor who had travelled to Asia.
- On March 10, Chile’s government imposed a 14-day quarantine for travelers coming from Italy and Spain, per the Health Ministry’s regulations.
- The country’s health ministry implemented a sworn declaration of health form to be completed by all passengers arriving from abroad to Chile, as well as a sanitary control measure in which passengers will be screened for the virus upon arrival to Chile from high-risk locations.
- As of March 12, Colombia had 9 confirmed cases.
- President Iván Duque announced the implementation of a required 14-day quarantine for all travelers entering Colombia from China, France, Italy, and Spain.
- Duque was tested for the virus after possible exposure during a trip to Washington DC, where he joined an event also attended by people who had been exposed to a carrier of the virus. The president tested negative.
- Colombia’s peso reached a new low next to the dollar, and with China as Colombia’s third largest trading partner, Grupo Bancolombia said the outbreak could drag down Colombia’s GDP growth by up to 0.35 percent.
- As of March 12, Costa Rica had 22 confirmed cases.
- On March 6, Costa Rica became the first Central American country to confirm a case, involving a 49-year-old tourist visiting from the United States.
- Costa Rica’s Central Bank raised concerns that the economy could be affected by a slowdown in tourism and trade.
- As of March 12, Dominican Republic had 5 confirmed cases.
- The DR’s first confirmed case was reported on March 1. The 62-year-old Italian tourist was quarantined in a military hospital in San Isidro, near Santo Domingo.
- As of March 12, Ecuador had 17 confirmed cases.
- President Lenín Moreno declared a national health emergency on March 11, requiring that all who travel to Ecuador from countries that have confirmed cases be placed under home quarantine and restricting events with large crowds across the country. The government also prohibited mass gatherings in Guayaquil and Babahoyo, the two places visited by the first confirmed carrier. The government prohibited mass gatherings in Guayaquil and Babahoyo, the two places visited by the first confirmed carrier. Ecuador’s National Institute of Public Health Research is in charge of monitoring the outbreak.
- COVID-19’s arrival hit the country’s oil sector. On March 2, Ecuador registered an estimated $11.80 drop in the price of crude oil barrels, bringing the price down to $39.54 per barrel.
- As of March 11, Honduras had 2 confirmed cases.
- In a statement released by the Health Ministry, the government applied all the WHO International Sanitary Regulations recommendations once the cases were confirmed, and those who came in contact with the virus carriers were reached for examination.
- The government also confirms the shift to the second phase of national Containment and Response Plan to mitigate the effects of the outbreak on public health and the economy.
- As of March 12, Mexico had 12 confirmed cases.
- Mexican President Andrés Manuel López Obrador, who has urged calm in the face of the outbreak, announced there would be a daily update about the virus each evening. Those updates cover how many confirmed and suspected cases exist in Mexico, prevention measures, and global information. The president says he will not cancel his daily morning press conferences in the National Palace, usually referred to as las mañaneras. He also plans to continue his weekend travels that take him to all corners of Mexico.
- As of March 12, Paraguay had 5 confirmed cases.
- The government held a press conference following the first confirmed case and shared a number to call for people who traveled to countries where COVID-19 is present and who have symptoms. It also announced it will suspend for at least 15 days public events or large gatherings such as concerts, as well as classes in schools.
- As of March 12, Peru had 15 confirmed cases.
- On March 11, the government ordered that travelers coming from China, France, Italy, and Spain be quarantined at home for 14 days. The administration also announced that school classes are suspended until March 30.
- China is Peru’s top trading partner, with 30 percent of its exports destined for the Asian country. Goldman Sachs says Peru, along with Chile, counts as Latin America’s most exposed economy due to coronavirus.