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Presidents Luiz Inacio Lula da Silva of Brazil and Andres Manuel Lopez Obrador of Mexico. The two have worsened the business climate in Latin America this year. (Photo: Lopez Obrador X account)
Latinvex looks at the five best events in Latin America business this year.
Monday, December 18, 2023

Latin America Business: Worst in 2023

The worst news in Latin America business in 2023.


The worst events in Latin American business this year, according to Latinvex editors.


As Luiz Inacio Lula da Silva nears his first year as president of Brazil, local and foreign investors have reason to be on edge. For those who supported Lula against the often irrational Jair Bolsonaro in the last election (including several prominent economists), they are likely to have been strongly disappointed.

Lula’s third government is not like his first two at all. Instead of the pragmatist leader, Lula now appears constantly picking a fight with investors, the US and the Western world. When he isn’t traveling abroad, he is busy trying to boost fiscal spending and weaken the fight against inflation.

In March he announced a surprise 9.2% oil export tax to help shore up public finances and counter a weak economy. Although the measure was temporary (four months) it was harshly criticized by Shell, TotalEnergies, Repsol, Equinor and Galp Energia.

“This measure… brings uncertainty to new investment decisions, negatively impacting the country’s competitiveness in the upstream sector,” Shell said in a statement in March.

Lula has also managed to weaken state oil company Petrobras, which during the leadership of CEO Pedro Parente (2016-18) had recovered the credibility it lost during the administrations of Lula and his protégé Dilma Rousseff due to massive corruption and overspending. Now Petrobras is again overspending on projects that don’t help the bottom line, has stopped the necessary divestment strategy aimed at cutting debt and weakened its corporate governance.

Lula has also threatened to renationalize electricity company Eletrobras, although experts believe there is a small chance of that happening due to legal hurdles.

One of the low points of Lula’s government has been his nasty attacks against Roberto Campos Neto, the head of the central bank because he refused to cut rates amidst high inflation.

All in all, Lula has been overwhelmingly bad news for investors this year.


Mexico’s radical president Andres Manuel Lopez Obrador – whose term will end on October 1, 2024 – has outdone himself this year.

AMLO, as he is popularly called among supporters and opponents, shocked local and foreign investors when he seized a 120-kilometer stretch of a rail line belonging to Grupo Mexico in May. One large business group said it could damage investor confidence in the country, while another said Lopez Obrador’s recent actions have held up tens of billions of dollars of investments, Bloomberg reported at the time. 

The previous month, AMLO announced that he was buying 13 power plants from Spanish energy giant Iberdrola in a deal worth $6 billion, which Mexico’s president hailed as a “new nationalization” of the electricity market that will amp up state control, Reuters reported. The sale was seen as forced since AMLO had been relentless in attacking Iberdrola since he assumed power in 2018, often alleging the Spanish company was corrupt.

“There are no more gray lines,” John Padilla, managing director of IPD Latin America, told Bloomberg in April. “The attack on Iberdrola since the beginning of this administration has been front and center.”

Perhaps even worse, has been a new set of laws that AMLO got his Congress to pass this year. In May, Congress approved a new mining law that cuts the concession period and requires new concessions to be awarded under public bidding processes, instead of “free land, first applicant” basis as before. The concession time has been reduced from 50 years (with a one-time renewal for another 50 years) to 30 years (with a one-time renewal for 25 years).

“This would increase risk to mining investments and would render some projects economically unviable as the shortened time horizons may not be sufficient to justify the significant up-front investments that mining projects require,” Covington & Burling warned in an overview.

Even winning the bid won’t secure a concession as miners will need to secure any and all necessary environmental, social and / or labor authorizations and permits.

The reform could cost the country some $9 billion in lost investment in coming years and up to 420,000 direct jobs, the head Mexico’s mining chamber warned, Reuters reports.


As was expected, the presidency of radical Gustavo Petro has been a complete mess and hurt Colombia’s economy.

The country’s GDP is expected to grow by 1.4 percent this year compared with 7.3 percent last year. Colombia will have gone from one of Latin America’s top three growth winners in 2022 to one of the bottom six laggards.

Apart from the political noise, both Petro’s economic policies and rising insecurity are leading many local and foreign investors to hold off on investment plans.

Petro got off to a better-than-expected start in August 2022 when he formed a coalition government that also included centrist and center-right parties, leading to hope that the longtime leftist would tone down his most radical plans, including suspending new contracts for oil drilling and reforming the health and labor sectors.

Yet, this year got off to a bad start when Petro fired his moderate education minister Alejandro Gaviria after strong disagreements over his planned health reform, which aims to reduce the private sector share in favor of state control. Gaviria had served as health minister from 2012 to 2018 and had considerable knowledge about the sector.

Two months later, Petro decides to completely change his cabinet, marking the end of the broad coalition. To the surprise of even his own supporters, Petro fired his respected finance minister Jose Antonio Ocampo (again in large part because of opposing the president’s radical health reform) as well as health minister Carolina Corcho, who had fronted the controversial reform. At the same time, Petro decided to keep the unpopular Irene Velez as energy and mining minister.

The end of the coalition implied that Petro’s radical health, labor and pension reforms suddenly lacked a congressional majority to pass. It appeared Petro preferred talking about reform rather than passing reforms based on compromises.

“Petro is making sure that instead of being the first of many leftwing presidents in Colombia, he will be the only one,” Sergio Guzmán, director of Colombia Risk Analysis told the Financial Times.

Then in June, Petro was weakened further by revelations of possible illegal financing of his 2022 campaign. The news led to the peso strengthening against the dollar.

“What is bad for Petro is good for investment, for the dollar and for the country,” Juan Pablo Vieira, CEO of JP Tactical Trading, told local business newspaper La Republica. 

In July, Velez was forced to resign amidst charges that she abused her job to avoid rules on children traveling abroad without the proper paperwork. “Velez was reviled by the market for her heavy leftist ideological views and complete lack of management experience,” Walter Molano, Chief Economist, BCP Securities said in a client note.

Petro’s tax reform included raising taxes and eliminating exemptions (such as a popular yearly shopping day without value added taxes) just as the economy was showing signs of slowing down. Raising the VAT on airlines and hotels contributed to major problems for those sectors, contradicting Petro’s pledge that tourism would help offset a future decline in oil revenues because of his no-drilling policy.

The VAT on airlines and hotels went from 5% to 19% at the start of the year. Lowcost airline Viva suspended all its flights in February, while its rival Ultra did so the following month. Hotel occupancy has declined and hospitality sector leaders are asking the government to cut the VAT to 5% again.

Meanwhile, security has worsened considerably under Petro, a former member of the Marxist guerilla group M-19, which seized the Supreme Court palace in a bloody operation in November 1985. Drug production and trafficking, extorsions, kidnappings and homicides are all growing dramatically, becoming another burden for the private sector.

Petro has pledged to sign an agreement for “total peace” with the top three terrorist and criminal groups, but they have responded by boosting their illegal endevours – possibly as a bargaining chip or to take advantage of a likely amnesty when a peace deal would be signed. Meanwhile, Colombia’s police and armed forces appear to be semi-paralized under Petro. 


Mexican president Andres Manuel Lopez Obrador shocked the world when he in 2018 – even before assuming office – announced that he would scrap a $16 billion international airport that was already a third finished.

However, AMLO’s work at worsening air traffic in Mexico was not over. This year, he ordered Mexico City’s top airport (known as AICM) to cut flights in a move condemned by the International Air Transport Association. “This decision by the government does not take into account the interests of consumers, nor does it respect the necessary consultative process with operators and users, especially at the country’s main airport,” Peter Cerda, IATA regional vice president, said in a statement.

The cuts follow previous flight caps at the airport last year, as AMLO tries to divert traffic to his pet project, the Felipe Angeles International Airport (AIFA). The $5.2 billion airport constructed by AMLO has failed to attract passengers and to help with the congestion at AICM, El Financiero reports. AIFA only handled 1.3 million passengers in its first year compared with 42 million at AICM last year.

To boost the new airport, AMLO banned all cargo traffic at AICM, ruling that it needed to be moved to AIFA – a measure completed in September amidst criticism from cargo carriers.

In October, AMLO’s government announced that it would cut airport usage fees while almost double what it charges operators for its concessions to run the airports.  The news led to shares of airport operators Asur, GAP and OMA plunging.

And last week, El Financiero reported that AICM plans to hike prices for airlines by 77%. IATA says the measure will hurt passengers and airlines and weaken Mexico’s competitiveness, El Economista reports.

One positive development is that the US Federal Aviation Administration (FAA) in September reinstated Mexico to Category 1, its highest aviation safety status, after downgrading it in 2001.  Mexico’s two-year-old air safety rating downgrade by U.S. authorities has caused a more-than-billion-dollar hit to national airlines, according to Diana Olivares, head of Mexico’s air transportation chamber and LATAM Airlines’ country manager, Reuters reports.

In a twist of irony, Mexico’s first radical president in modern history is the man who has militarized the country’s infrastructure. Traditionally, Mexico’s left were highly critical of the armed forced for their human rights abuses.

AMLO has handed over the management of 18 airports to the armed forces. In July this year, the Secretariat of the Navy (known as Semar) took formal control of AICM. The navy will also control another six smaller airports, including Campeche, El Financiero  reports.

The new airport AIFA is run by the Defense Secretariat (known as Sedena) and in October, AMLO handed over control of four more airports to Grupo Aeroportuario, Ferroviario, de Servicios Auxiliares y Conexos Olmeca – Maya – Mexica (GAFSACOMM), an entity 99% owned by Sedena. The group already managed another seven airports, including the new international airport of tourism destination Tulum.

Meanwhile, Sedena will also be running the relaunched Mexicana airlines. The airline had to delay its scheduled start in early December due to difficulty in leasing new planes and will initially use military planes, Reuters reports.

Sedena is also managing the planned $28.5 billion Maya Train linking five states, while the navy assumed control of Mexico’s top 14 ports in 2021.


This year Panama has suffered from a twin curse of shutting down a copper mine that accounts for 5% of its GDP and a severe drought hitting the Panama Canal. Combined the two events will significantly hurt Panama’s revenues and economy, with GDP growth likely ending at 1% in 2024 compared with 6% this year. That means Panama will go from having Latin America’s highest growth this year to the lowest one next year, according to a Latinvex analysis of projections from the International Monetary Fund and economists.

J.P. Morgan warned earlier that the odds of Panama losing its investment-grade rating would rise significantly if the mine contract was revoked.

“Panama’s economy and exports will likely take a hit because of the closure of the mine, since copper revenues are the country’s second largest source of exports and account for a tenth of total current account revenues,” points out Jolyn Debuysscher, a Latin America analyst with European credit insurance group Credendo. “On top of that, the closure of the mine comes at a bad time as the country’s biggest export source, the Panama Canal (accounting for a fifth of current account revenues), is already suffering from historic low water levels due to the ongoing El Niño. As a consequence, shipping traffic is currently restricted at less than 60% of its normal capacity.”

There is no improvement in sight in the coming months since the dry season will start at the end of December and the current shipping traffic restrictions will be tightened, she adds. There are plans to build a new reservoir but this will not happen in the short term.

After the false hope of a new agreement this year between Canadian miner First Quantum and Panama’s government, the fate of the $10 billion copper mine was sealed when the Panamanian Supreme Court on November 28, 2023 ruled that the miner’s original contract in 1997 was unconstitutional.

First Quantum suspended the mine, employing 7,000 workers, and started international arbitration.

The implications of the mine closure for Panama’s fiscal outlook are “terrible,” Ricardo Penfold, a managing director at Seaport Global, told Bloomberg. “The country is running a fiscal deficit of 5 per cent of GDP and this will increase it by about 0.6 per cent,” he said. “And then you have the lawsuit.”

The lawsuit could prove a much costlier burden for Panama than the economic hit next year.

“With the company initiating international arbitration against Panama, potential financial implications loom large, including a speculated payment of $50 billion if Panama loses the case,” Walter Molano, chief economist at BCP Securities, told clients in a December 6 note.

Panama is scheduled to hold presidential elections in May next year and a new government could potentially try to restart the mine, both Citibank and Credendo predict.

“Given the copper mine’s economic and fiscal benefits, the most likely scenario is that a new contract will be negotiated,” Credendos’s Debuysscher says. “However, it will be very difficult to do so in the run-up to the general elections of May 2024. Hence, the re-opening of the mine could be stalled for a long time.”

Citibank concurs. “We assume that the new regime would look to restart the mine given its major financial contribution to Panama’s economy,” the bank’s analysts said in a note quoted by Bloomberg. “That said, any contract renegotiation could be protracted.”

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