Latin America round-up: Venezuela presidential election, dissention in Mercosur and Chilean wine recovery

The latest Daily Update coverage of Latin American trade looks at how upcoming Venezuelan presidential elections could impact international trade, a dispute within the Mercosur trade bloc and Brazil’s cotton exports.

Venezuela’s election

An election in Venezuela could alter the fate of both Latin American trade and geopolitics, as a deeply unpopular and authoritarian leader faces elections on 28 July.

Nicolás Maduro, Venezuela’s president and leader of the ruling United Socialist Party of Venezuela, faces Edmundo González on 28 July in the country’s presidential elections.

This is seen as Venezuela’s first free and fair presidential election since 2013, when Maduro first won a tight race for election. Since then, the ruling socialists have increasingly cracked down on media and opposition figures as the economy suffers from the weight of Western sanctions.

The US and EU had lifted some restrictions in exchange for a deal on a free and fair elections, agreed to between the government and opposition parties.

However, the US reimposed sanctions after the united opposition’s first two presidential nominees were disqualified by Venezuelan courts. Other barriers to voting and media participation also remain.

González, a 74-year old former diplomat who has never run for public office before, is leading in most polls, and has promised a “government for all”. In response, Maduro called him a “puppet president”, referring to his strong ties to banned opposition leader María Corina Machado.

A victory for González could signal a new era for the former energy powerhouse, which has been a regular subject of international sanctions for over a decade, whereas another term for Maduro would see a continuation of his pro-Russian and pro-Chinese diplomacy.

Mercosur tension

Tensions are building inside one of Latin America’s most important regional organisations.

Despite earlier reports that Argentinian president Javier Milei and German chancellor Olaf Scholz wanted a quick end to negotiations between the EU and Mercosur over a long-awaited trade deal, Milei did not show at the Latin American bloc’s recent presidential summit in favour of a meeting with fellow South American conservatives.

Brazilian president Luis Inacio Lula da Silva, a frequent critic of Milei, slammed the move as “complete foolishness”.

Lula himself called for a more “active Mercosur”, highlighting the recent ratification of an agreement with Palestine. Mercosur and Palestine originally signed a deal in December 2011, but Brazil only deposited the instrument of ratification with Mercosur’s central office on 12 July 2024.

However, both Argentina and Uruguay raised the idea of the members unliterally negotiating trade agreements outside of Mercosur’s framework, something that breaches the association’s current rules. Lula is said to be opposed to this.

Mercosur is a common market consisting of Argentina, Brazil, Paraguay, Uruguay and Venezuela, with Bolivia currently in the process of joining. Venezuela’s membership has been suspended since 2017.

Brazilian cotton

Brazil has established itself as the world’s leading supplier of cotton just as prices fall to their lowest levels in almost four years, despite ongoing concerns about the environmental impact of the good.

The FT reports cotton futures have fallen to their lowest levels since October 2020, with part of the fall attributed to increased production by Brazil.

Additionally, despite prices spiking in 2022, global demand for cotton has fallen as consumers look for a cheaper clothing alternative.

Despite the falling demand and price, Brazil’s exports of the commodity have increased, with the Latin American nation shipping 12.4m bales compared to the US’ 11.8m.

This came despite recent reports that Brazil’s cotton industry may be fuelling deforestation and destroying traditional communities in the country.

NGO Earthsight’s recent ‘Fashion Crimes’ investigation found that the world’s largest fashion brands were using cotton linked to “land-grabbing, illegal deforestation, violence, human rights violations and corruption in Brazil”.

This occurred despite the fact that Better Cotton, an industry accreditation scheme, had certified that the products were environmentally friendly and protected workers’ rights.

Better Cotton said they would expand their due diligence requirements in response to the report.

Freight growth

Latin America has been seen “surprising” growth in new freight capacity, according to new research.

According to the Loadstar, data from Alphaliner showed that freight capacity into the region has increased by more than global growth.

This came despite large amounts of capacity being tied up in Asia-Europe routes to mitigate against the ongoing Red Sea crisis.

Between June 2023 and June 2024, 2.85m worth of twenty-foot equivalent unit (TEU) capacity had been created, representing a 10.6% year-on-year growth.

Latin American capacity has jumped 17.4% by comparison.

Major shippers like CMA and Maersk have focused on South America, as Latin nations increasingly position themselves as middle-men between the West and China, looking to take advantage of near-shoring and friend-shoring trends.

Wine exports

The UK has become the leading importer of Chilean wine once more, with imports rising by 40% in the first three months of 2024.

According to the Observatorio Espanol del Mercado del Vino (OEMV), Chile boosted their volume of wine exports by 9.6% in the first quarter of 2024, with value also up by 3.3%.

2023 was one of the worst on record for the Chilean wine industry, as both China and the US cut back on their wine purchases. Overall, the sector saw a 20% reduction in international exports.

Eduardo Jordan, winemaker for Miguel Torres Chile, told the Drinks Business that 2024 was “a really spectacular harvest”.

Chile has been looking to move away from its traditional export base of copper and other hard commodities, as pro-environmental president Gabriel Boric looks to focus on agri-goods and other imports.