World Spotlight: Latin American Countries Are Getting Investors Attention In Global Commodities Markets
Read about updates on Brazil, Argentina, Guyana & Panama
Brazil’s Fertilizer Diplomacy
The ongoing effects from the Black Sea Grain Initiative in international politics have raised the issues on global food security throughout the developing world. The issues of concern here have been thoroughly analyzed and covered due to the devestating impacts to food security brought on by Russia’s invasion of Ukraine.
Ukraine is an important agricultural producer and exporter of grain and wheat to countries throughout Africa and the Middle East regions. Russia, on the other hand, is a very important fertilzer producer and exporter for which it has been using as political leverage over the Black Sea Grain Deal.
This has given birth to a new concept in international affairs called “fertilizer diplomacy”.
On May 3, 2022, Brazil announced that the government was taking a trip to North Africa for the purpose of engaging Jordan, Egypt and Morocco for “Fertilizer Diplomacy.”
This diplomatic engagement underscores the issues that Brazil is facing in securing fertilizer imports in the aftermath of Russia’s invasion of Ukraine.
Moreover, because Russia is one of the world’s largest fertilizer exporters, Brazil has doubled down on its efforts to implement a new fertilizer strategy, which was unveiled by President Bolsarno in early 2022.
Brazil’s National Fertilizer Plan even proposes to mine potash from underground reserves in the Amazon Rainforest which has caused an uproar from the environmetal protection advocates and indigenous communities there.
Steven E. Lobell explains that countries in the international system must seek to attain security by means of moderate and and reserved policies in order to avoid resorting to means of domination and hegemony to attain security.
Factors such as geography and rivalries (sometimes historical ones) tend to play a bigger role in this school of thought.
That’s why I believe it is the perfect way to understand Brazil’s fertilizer diplomacy. The act of touring through the Middle East and North Africa (MENA) is based around the whole geographical region; on the other hand, by ensuring fertilizer supply from many countries in MENA, this ensures Brazil that it will be dealing with similiar cultures and geographical constraints when working with producers and suppliers.
These are going to be key elements for judging the effectiveness of fertilizer production and supply. Therefore, using the IR theory of Defensive Realism allows for a framework when at looking at global commodities: in this case, Brazil, and the country’s fertilizer strategy.
FShow, a Shanghai-based source for the global fertilizer industry, with their publication Fertilizer View, for which the organization has studied the impact of Brazil’s record-breaking planting season from 2021–22. The projections have estimated that Brazil’s production of soybeans, corn, cotton, rice and beans — amounting to approximately 289.6 million tons — would account for 95% of its overall grain production from 2021–22.
This means that despite the global fertilizer supply shock due to higher commodity prices and fertilizer shortages, Brazil will continue to rely on imports of fertilizer from sources around the world. It is therefore a classic example of defensive realism, and why Brazil must maintain friendly relations (i.e. moderate and reserved policies) with Russia, even as the United States and European Union, including others, intend to ostracize Vladimir Putin’s regime for Russia’s invasion of Ukraine.
Argentina’s Upcoming 2024 Elections
Bloomberg reported this week that some of world’s largest agriculture companies — Cargill Inc., Louis Dreyfus Co., and China’s state-owned Cofco Corp — feel uneasy about the upcoming elections and political changes in Argentina this year.
Representatives from the global agribusiness leaders expressed their concerns about the agriculture industry in Argentina during a soybean conference in Rosario, a significant trading hub located in Argentina.
Speaking on behalf of all represenatives, Pablo Scarafoni, head of commercial operations for Cargill in South America, told an audience in Rosario that the outcome of Argentina’s election will be a decisive matter for the country’s agriculture industry; and thus a crucial factor in the global agribusiness leaders’ economic forecasts. Here’s what he said:
“It’s very sad for me to see how Argentina has lost influence and relevance in global markets. While Brazil is growing with gigantic strides helped by the political and economic framework, while the US also grows with policies like biofuel mandates, Argentina’s soy production is stagnant.”
Argentine elections are to be held on October 22. Reuters also reported this week that the South American country is poised to develop its oil sector to attract more foreign investment by loosening the government’s grip on the country’s exchange rate for the Argentine peso.
Many analysts following the elections in Argentina believe that a controversial political figure, Javier Milei of the Liberty Advances coalition, will win the elections in October.
Milei is known as a stauch supporter of former American President Donald Trump but also for his radical views on the country’s sex education and gun policies.
To know more about global agriculture market trends, read this full story about agriculture news in Areas & Producers: Agriculture News — World’s Largest Ag Producers Are Concerned About Global Market Trends.
Guyana’s Crude Oil Exports
The International Monetary Fund (IMF) and BMI (of Fitch Solutions) are jumping for joy over the economic growth of South America’s tiny country on the Caribbean Sea — Guyana.
According to their economic projections, Guyana’s GDP growth will surpass 100% in the next five years.
Andrew Trahan, BMI head of Latin America country risk, noted that Guyana is already on track to recieve the benefits from this economic growth in 2023. Here’s what he told CNBC reporters about these projections:
“Guyana’s robust growth has been, and will continue to be, driven by a rapid expansion of oil production following a series of discoveries in recent years. We see this strong growth continuing over the coming years as oil production keeps going up, with real GDP rising roughly 115% between 2022 and 2028.”
However, BMI’s analysis about Guyana’s stupendous economic growth also takes into account the country’s political stability during a volatile oil price risk scenario. Much of this optimism is clouded in a mystery of oil prices going forward, which, in the meantime, keeps the government in Guyana in a stable position. Lower oil prices could quickly change this outlook.
This uncertainty hasn’t deterred ExxonMobil from its pursuits there. According to a latest report by OilNOW ExxonMobil Guyana is already making plans to send eight more drillships to the country’s offshore areas by mid-2025 to boost crude oil production in the future.
Read more about ExxonMobil’s crude oil production scenarios in Guyana in this story about oil news in Areas & Producers: Oil News — Guyana’s Crude Oil Exports Make It The World’s Fastest Growing Economy.
Panama’s Mina de Cobre Copper Mine
Mining.com revealed that Panama’s construction workers’ union has obstructed the progress of First Quantum’s Cobre Panama copper mine on 25 September 2023.
According to the update, Union leader Saul Mendez is fighting for the country’s rights to stop First Quantum from taking control of national land, air and maritime assets. The decision will be made by Panamanian President Laurentino Cortizo whether to allow First Quantum’s contract for building the Cobre Panama copper mine to proceed in the country.
The Mina de Cobre copper mine is operated by Canadian miner First Quantum Minerals; it is considered to be the largest copper mine in Central America.
An update on the pending status of regulatory approval from the Panamanian government was released by Mining.com on 25 May 2023.
The regulatory status for operating the mine has been in trouble, ever since the Panamanian government sought to increase its stake in the mine negotiating for a minimum annual income of $357 million. After failing to reach a new agreement with the government initially, the copper mine was forced to stop operations from Feburary 2023.
Moreover, legal issues surrounding the labor rights and environmental protection statuses of the mine have come into play. First Quantum Minerals continues to push back against all of those allegations.
Indigenous groups are coming out in opposition as global mining projects are being planned by miners and governments to spur economic activity and commit to Net-Zero Emissions 2050 during what has been called a new era for Environment, Social, Governance (ESG) and global mining projects.
These trends are part of the much larger geopolitical trends that have been kickstarted by the global COVID-19 pandemic. The global pandemic has caused several countries to unravel, with socio-political instability that was building up for decades, and causing the global economy to be shaken up with uncertainties, putting the world’s largest companies in some of the most vulnerable areas.
All of these trends should give us a broader understanding of what’s happening in geopolitics and the global economy after the COVID-19 pandemic. Whether or not we can overcome our pre-conceived ideas about energy and commodities is going to be a key problem facing the world’s population after the global pandemic.
Read more about global mining projects in the publication Areas & Producers.
This is part of The Weekend Brief newsletter by Areas & Producers.
The Weekend Brief is a weekend guide to international issues and global markets.
By signing up, readers would receive all of the weekly content and updates from Areas & Producers on the subjects of investing, tech, mining, energy, EVs, AI and world. Sign up for the newsletter and instantly receive the content, to the e-mail inbox provided, every Saturday and Sunday!