On May 30, United States President Donald Trump announced plans to impose new tariffs on all products imported from Mexico to the United States. Such an act would significantly impact binational trade and especially those sectors that have integrated supply chains, such as the automotive, agriculture, clothing, alcohol, electronic devices, and oil and gas industries.
On Friday, May 17, 2019, the United States opted to reduce trade tensions with its immediate neighbors – Mexico and Canada – by eliminating Section 232 tariffs on steel and aluminum on imports from those countries, helping to pave the road for congressional approval of the U.S.-Mexico-Canada (USMCA) Agreement. While global trade tensions remain, for the time being President Trump has also postponed the imposition of tariffs on automobiles from Europe and Japan. At the same time as this truce with the North American neighbors, President Trump is seeking to toughen measures on China, which has been accused of unfair trade practices and flooding global markets with subsidized steel and aluminum products.
On April 15, the Brazilian National Petroleum Agency (ANP) scheduled the 6th bidding round for the pre-salt under the partnership agreement to be held on November 7. The hearing to discuss pre-notice and drafts of the production sharing agreements will be held on May 6. Companies interested in participating in the bidding must communicate their intention in the bidding round until September 19.
Earlier this month, the Argentine government published a public tender for the construction and operation of a 487 kilometer, high-voltage electricity network, five substations, and ancillary 132 kV infrastructure, ultimately involving five provinces. This project aims to relieve current transmission congestion and increase the capacity of the country’s existing transmission network through a 15 year term public-private partnership (PPP) contract. According to the current tender calendar, proposals are due May 2019 and the award of the contract is expected in July 2019, with construction scheduled to last 36 months.
This public tender for large-scale energy infrastructure was published by the Argentine government despite months of negative economic news and events. Most notably, the country has suffered a gross depreciation of its currency, a 60% interest rate (the highest in the world), brutally high-inflation (48%) and a downgrading of its credit rating, this couple with the fact that it is in the thick of a two-year recession with the economy shrinking 2.5% in 2018 (its worst performance since 2014 the year the previous government defaulted on its debt).
On October 31, Fitch Ratings lowered its long-term outlook for Mexico from stable to negative, while keeping the country’s sovereign credit rating at investment grade. This, largely in reaction to Mexico President-Elect Andres Manuel Lopez Obrador’s (also known as AMLO) statement on October 29 that once in office he plans to cancel the continued development of the US$13.3 Billion partially-constructed New International Airport of Mexico City (NAIM). The NAIM, sited on the outskirts of Mexico City in Texcoco, is considered the largest airport under construction in the world. Such move comes as a result of AMLO’s presidential campaign promise to combat alleged corruption and overspending on such project, and to hold a referendum for the public to determine whether to shut down its continued construction. Bolstered by the results of such referendum held on October 29, AMLO has announced that instead of continuing with the NAIM, he will support a plan to revitalize and expand an existing military airport to supplement the capacity of the Benito Juarez International Airport that currently receives 44 million passengers per year, but was originally only designed to handle 32 million annual passengers.
During a recent visit to Washington, DC, Argentina’s Minister of Production and Labor, Miguel Braun, stated that Argentina’s government continues to strengthen its economy by focusing on increasing foreign direct investment to the country.
Minister Braun also stated that, while preparing for presidential elections in October 2019, President Mauricio Macri will continue to implement economic and fiscal reforms and work on simplifying institutional bureaucracy in order to improve the business environment in Argentina. For example, Macri’s administration is reforming ministries, such as the Ministry of Agriculture and Foreign Affairs, in order to streamline processes and create a more competitive market that further facilitates exports. A new digital trade system is expected to expedite exports in various sectors and make foreign investment easier.
Minister Braun further reinforced that President Macri is committed to strengthening economic growth, tightening fiscal policies and developing national infrastructure. In an effort to restore investor confidence and boost Argentina’s economy, President Macri agreed on a lending package from the International Monetary Fund for $57 billion. Argentina has already received $15 billion and will have access to another $35 billion by the end of 2019.
Brazil has taken another important step towards the battle against corruption. In August 2018, Brazil enacted Decree-Law No. 9,468/18, which provides broader power to the Public Transparency and Anti-Corruption Council, public entity subject to the Secretary of Transparency, Supervision and Control of Brazil.
Under the law, the Council’s purpose is to discuss ideas and suggestions to improve policies and strategies aimed at combating corruption and impunity within the Federal Public Administration. The Council must also provide transparency and access to public information, promote ethics within private and public sectors, and encourage social control over public spending.
On Thursday, September 6, 2018, the United States House of Representatives passed H.R. 4606 – Ensuring Small Scale LNG Certainty and Access Act (the “Bill”) by a vote of 260-146 largely along party lines with 37 Democrats joining 223 Republicans. The Bill amends Section 3(c) of the Natural Gas Act (15 U.S.C. 717b(c)) (the “NGA”) to provide that the importation or exportation of natural gas shall be deemed in the public interest and an application for such importation and exportation shall be granted by the Department of Energy (the “DOE”) without modification or delay, if:
(1) the volume of natural gas to be imported or exported does not exceed 0.14 billion cubic feet per day (Bcf/D); and
(2) the approval of such application by the DOE would not require an environmental assessment (an “EA”) or environmental impact statement (an “EIS”) under the National Environmental Policy Act of 1969 (the “NEPA”) (i.e., a categorical exclusion applies).
Currently, only those applications for the importation or exportation of natural gas (including liquefied natural gas) from or to countries with which the United States has a free trade agreement are deemed by the NGA to be in the public interest and thus subject to approval without delay or modification.
On August 14, 2018, after eight years of debates and drafting in the National Congress, Brazilian President Michel Temer sanctioned Law No. 13.709/2018, which regulates the General Data Protection in Public and Private Sectors.
The General Data Protection Law is the first legislation in the country that provides for the data protection of individuals and private and public legal entities. The law was largely inspired by the European Union’s General Data Protection Regulation (“GDPR”). Among other important provisions, Law No. 13.709/2018:
Earlier this year Squire Patton Boggs hosted the International Institute of Communications’ (IIC) Telecommunications and Media Forum (TMF), which took place in Miami. The IIC is an international non-profit organization that brings together regulators, policy-makers and industry representatives to promote open dialogue and shape the public policy agenda in the telecommunications, media and technology sector. The TMF was a two-day conference that focused on Latin America and examined the policy frameworks that can best promote infrastructure deployment, investment, and innovation for the digital economy in that region. In attendance were representatives from regulatory agencies from across Latin America; the Federal Communications Commission; the International Development Bank; other regional organizations; carriers; broadband providers; and telecom equipment manufacturers who are invested in Latin America.
One of the panels at the TMF focused on digital infrastructure and the policy choices that can lead to sustained investment and innovation at the network, service and applications level. SPB partner Eduardo R. Guzmán, a member of the firm’s global Communications Group, participated as a panelist in that discussion. He focused his remarks on the state of wireless network infrastructure in Latin America and the need for reforms to lower the costs of deploying the infrastructure that Latin American providers will need to expand coverage and set the table for 5G networks. Below is a Q&A with Eduardo that summarizes the key points he made at the TMF on this critical issue for the evolution and expansion of telecommunications service in Latin America.
Why is discussing barriers to wireless infrastructure deployment critical in Latin America?
Because wireless networks will be they key drivers of broadband deployment in Latin America. Mobile devices connected to wireless networks already are by far the preferred mode of access to the Internet in the region, and smartphone adoption is only expected to increase that trend. At the same time, Latin America still faces significant challenges when it comes to extending connectivity in rural and remote areas, and 4G adoption and coverage are still lagging behind when viewed in terms of total usage, coverage or in comparison to smartphone adoption rates (which are steadily increasing in Latin America). And stagnant average revenue per user and real limitations at the customer base level to pay for premium services has historically affected investment in the region and is likely to delay the rollout and adoption of 5G. In this climate, reducing the costs of infrastructure deployment is critical and needs to be discussed more broadly.