Week 35, 2024 - Latin America

Newsletter

The EU-Mercosur trade agreement aims to create one of the world's largest free trade zones, covering a market of 780 million people. Although negotiations have faced numerous delays, primarily due to environmental concerns and regulatory challenges, recent progress suggests that the deal may soon be ratified.

Published on

September 2, 2024

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“It’s always important to read a room, but sometimes disrupting the room can help achieve something” - Pedro Pascal (Chilean-American actor)

MARKETS

August 29, End Of Day

Argentina
- S&P MERVAL Index = 1,660,143.94 (YTD = 78.57%)
Brazil
- BOVESPA Index = 136,041.35 (YTD = 1.38%)
Chile
- S&P IPSA Chile = 3,494.65 (YTD = 0.78%)
Colombia
- MSCI COLCAP = 1,335.32 (YTD = 11.72%)
Mexico
- IPC Mexico BMV = 53,138.96 (YTD = -7.40%)
Peru
- S&P/BVL Peru = 28,441.73 (YTD = 9.56%)

BUSINESS

The EU-Mercosur Trade Agreement

The EU-Mercosur trade agreement, which has been under negotiation for over 20 years, is on the brink of finalization. The agreement, involving the European Union and Mercosur countries (Brazil, Argentina, Uruguay, Bolivia and Paraguay), aims to create one of the world's largest free trade zones, covering a market of 780 million people. Although negotiations have faced numerous delays, primarily due to environmental concerns and regulatory challenges, recent progress suggests that the deal may soon be ratified.

1. A New Era of Trade Relations

Once finalized, the agreement will reduce tariffs on goods and services between the EU and Mercosur countries, significantly enhancing trade flows and economic integration. For Latin America, this means greater access to European markets, particularly for agricultural products like beef, poultry, and sugar, where the region holds a competitive advantage.

2. Economic Opportunities for Latin America

The elimination of 93% of tariffs on EU imports provides a substantial boost to Latin American exports. Beyond agriculture, industries such as automotive, textiles, and machinery are expected to benefit from improved access to European supply chains, potentially driving industrial growth and job creation across the region.

3. Environmental and Regulatory Challenges

Despite the economic benefits, the agreement faces opposition due to concerns over environmental impacts, particularly deforestation in the Amazon. The deal’s alignment with global sustainability goals, including the Paris Agreement, remains a critical issue that could influence its ratification and implementation.

Fundraising picks of the week

Te Ayudo: Te Ayudo is offering a digital platform that connects users with trusted service providers. Te Ayudo simplifies the process of finding and booking various services via a mobile app. Dive deeper into the case here.

OGA Soluciones: OGA Soluciones is transforming home maintenance in LatAm with a comprehensive platform offering on-demand and subscription-based services, from plumbing and electrical work to gardening and cleaning. Dive deeper into the case here.

Dora: Dora has reached nearly 1000 tenants in just 12 months and achieved a 30% month-over-month revenue growth. The company has expanded to 17 new city markets in Colombia in 2023. Dive deeper into the case here.

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Dive deeper into other fundraising firms in LatAm here.

CURRENT AFFAIRS

Mexico: Volvo has chosen Monterrey, Mexico, as the site for its new $700 million North American heavy-duty truck plant. The factory, expected to begin operations in 2026, will supply Volvo Trucks and Mack Trucks in the U.S., Canada, Mexico, and Latin America. The location offers logistical advantages for supporting sales across these regions.

Suriname: Suriname is exploring an innovative plan to finance forest protection by leveraging its recent offshore oil discoveries. The country aims to issue sovereign carbon credits (ITMOs) linked to its rainforest conservation efforts, potentially creating a global carbon trading market. The plan could require local and international companies, especially in the oil and gas sectors, to purchase ITMOs to offset their emissions. However, challenges remain in generating demand and ensuring the effectiveness of this carbon credit scheme.

Argentina: The Central Bank of Argentina (BCRA) plans to introduce 540 million ARS$20,000 bills in early 2025 to address market needs and replace smaller-denomination bills. This comes in addition to 230 million ARS$20,000 bills ordered from China, arriving between October and December. The move aims to alleviate pressure on bank vaults caused by the abundance of low-denomination notes in circulation, as the BCRA continues to phase out the lowest denominations.