Saturday, January 24, 2009

Bolivia nationalizes one of the last remaining foreign owned natural gas fields

Bolivia's President Evo Morales, on Friday nationalized one of the last remaining gas fields of which a foreign entity was the still the major share holder. Standing alongside his supporters, military and thousands of indigenous leaders Morales explained his "regret that some energy companies do not respect Bolivian laws."

President Evo Morales

The Carrasco gas field is located in the central province of Cochabamba, which by most accounts is Bolivia's wealthiest. Prior to nationalization, the Chaco gas company controlled the production from this field.

British Petroleum (BP) owns 60% of Pan American Energy which in turn owned until yesterday, 51% of Chaco. The remaining 49% was already in Bolivian control... by the country's state-owned petrol company, Yacimientos Petrolíferos Fiscales Bolivianos YPFB which owned the remaining 49%.

Chaco, which operates about a dozen gas fields in Bolivia recently announced plans that it would invest $64 million to increase gas production in the country. Despite the good will, Hydrocarbons Minister Saul Avalos, explained the government was not able to reach an agreement with Pan American Energy on how to arrange for majority control to pass to YPFB.

There are interesting developments from the Andean nation. A mere two days before the referendum on the new constitution President Morales has proposed.

Brazilian province of Minas Gerais floods -- Reuters video

Jan. 23 - Rescue teams rush in to save trapped flood victims as heavy rains and severe flooding continue to plague Brazil's southeastern state of Minas Gerais.

27 people have died in the state since the rainy season began in September and over 100 districts have declared a state of emergency. Pavithra George reports.SOUNDBITE: Alexandre Fernandes Rosario

For those of your who are not too familiar with Minas Gerais, it is Brazil's 2nd or 3rd most important region after Sao Paulo and Rio de Janeiro. Called Minas Gerais because of its mineral wealth. The province is supposed to be one of Brazil's driest, hardly ever getting rain. So you might be able to guess why it's a big deal when it floods like this.

Friday, January 23, 2009

South-South Cooperation in focus: Venezuela & Argentina

Argentine President Cristina Fernandez signed 21 agreements on Thursday with the country of Venezuela. The agreements are meant to lay the foundation for future cooperation between the two South American nations in such fields as energy, industry and transportation.

Argentinian President Cristina Fernandez (L) and Venezuelan President Hugo Chavez
attend the signing ceremony in Caracas, the Capital of Venezuela, Jan. 22, 2009.

The two presidents agreed to set up a joint venture between Petroleos de Venezuela (PDVSA) and Argentina's state-operated Enarsa energy company to develop oil fields in Venezuela.

"Our strategic cooperation is increasing," Chavez said when referring to the commercial and diplomatic ties between Venezuela and Argentina.

Click here to read further details from this article, courtesy of Xinhua

South-South Cooperation in focus: Peruvian PM to meet with Correa in Ecuador

The PM of Peru, Yehude Simon travels to Ecuador today to hold a meeting with Ecuador's president, Rafael Correa (the one who recently caused all those headlines with the bonds) to discuss bilateral trade topics.

According to the information reported over at Andina, Simon is heading to Ecuador discuss and resolve any problems related to the Resolution No 466 adopted by the Foreign Trade and Investments Council (COMEXI) of Ecuador.

"Resolution No 466 authorizes the application of a protection measure for balance of payments, general and not discriminatory, to imports of all countries including those that have trade agreements in force with Ecuador which recognize tariff preferences, as it is the case of Peru.

Click here to access Andina's article on this topic

Many face gloomy Chinese New Year -- AlJazeeraEnglish

Hundreds of thousands of Chinese have begun their journey home for the Chinese New Year festivities, but for many, the global economic downturn has left very little to celebrate.

Al Jazeera's Melissa Chan reports on those who have taken the one-way ticket home.

Thursday, January 22, 2009

Good readings

Opinion: India, China, and Obama's Oil Policy
by William Nobrega
Business Week Online 1/22/2009

If China's Growth Goes South What Happens to Oil?
by G. Allen Brooks
Parks Paton Hoepel & Brown 1/22/2009

The China factor and what it means for the price of copper
by Simon Hunt
Weybridge, UK (SHSS) 1/14/2009

Reuters Video -- China's GDP Slows

China's economic growth slows to 6.8%

According to official data, released from the Chinese statistics bureau in Beijing, gross domestic product grew by 6.8% in the 4th quarter of 2008, a sharp decline from the 9% average gain realized in the first three quarters of 2008.

Goldman Sachs, Thompson Reuters Data Stream PBOC

- China: Total Loans 2008
- China: Industrial Production 2006-08
- China: Real GDP 2000-2009

This is big news for the global economy, especially for commodity markets. Adding to the damages was further news from the region.

Japan saw its exports decline 35% in December, the biggest drop since 1980.

South Korea released official figures, stating its economy has contracted by 5.6% in the 4th quarter of 2008.

Singapore has said it will tap into its reserves from the first time ever, with the president giving his “in-principle approval” to fund a $4.9 billion relief package.

News is not all that good, to say the least. Check out the press from a few major news sources.

China's economy slows sharply, worse yet to come – Reuters
China's economic growth slows – BBC
China's GDP grows by seven-year low of 9% in 2008 - Xinhua
China's GDP growth slowed to 6.8% in fourth quarter (update 2) – Bloomberg
S'pore to tap reserves – The Straight Times
South Korea braces for first recession in 11 years – The Business Times Malaysia
Japan's exports plunge as recession deepens – AP via Yahoo News
Miners to be hit as China's slowdown worsens – The Australian

Sunday, January 18, 2009

Video -- Investing in Emerging Markets -- Bloomberg

Analysis and Discussion with Gordian Kemen of Barclays

Commodities in focus: Investment, Production Forecasts, New Discoveries and Project Cancellations from South America

The commodity market is having a mid-recession crisis. This is especially troubling for the major commodity producers in South America. Forecasts of when the global economy will recover from the current financial crisis to range from the 2nd half of 2009 into 2010.

Investing your rainy-day fund from the “boom years” and what it means for Chile

For a country like Chile, which has roughly $22 billion of saved reserves from the four-year boom in copper prices (Chile is the world's #1 producer of copper), recession is going to mean tapping into those savings in order to invigorate demand.

Chile has earned a reputation for being a very efficiently managed economy in South America. This, combined with the fact the country has saved for bad times has created a sense that the Chile is in the best position to weather the global recession.

Fund managers and analysts at Scotiabank Sud Americano SA and Santander are of this opinion and emphasize that so far, Chile's Ipsa Index is the best preforming Latin American benchmark, with a gain so far in 2009 of 5.1%.

(click here to read more on this topic from James Attwood's article on Bloomberg)

New Investments & South-South Cooperation: Brazil-Bolivia

In other commodity news, there is a new example of growing South-South Cooperation to report, this time between Brazil and Bolivia. Brazilian oil conglomerate Petrobras has announced plans to invest $1.1 billion in natural gas projects in Bolivia.

Brazil’s state oil company “has made the commitment to invest $1.1 billion in the coming years,” Lula said at a press conference late yesterday in the Brazilian town of Ladario, which borders Bolivia. “We need gas and we will act with the Bolivian government to fulfill that need.”

(click here to access the full article from Bloomberg)

Bolivia is proven to have the second-largest natural gas reserves in South America after Venezuela. Much like Venezuela, foreign investors are quite concerned with the political situation and as a result the flows of FDI in Bolivia have taken a serious hit in recent years.

However, with energy demand holding steady in Brazil and Argentina, Bolivia's current inability to meet supply contracts with the two nations, this is a smart and strategic move on Brazil's part. Furthermore, with ongoing issues concerning the the price Brazil pays for electric power generated by the Itaipu dam (the world's largest hydroelectric plant, located on the Parana River along the Brazil-Paraguay boarder), it is wise of Brazil to secure its energy needs from a additional source in the region.

(click here to access a recent article concerning this issue between Brazil and Paraguay, courtesy of La Presna Latina)

Exploration / New discovery in Brazil

Moving on... discoveries / exploration continue. Spanish company, Repsol has made a oil discovery offshore Brazil. Repsol announced this weekend, it had found “traces” of hydrocarbons at a deep water well being drilled off the Brazilian coast.

Exploration work was headed by a consortium of companies of which Repsol has the largest stake in. Brazil's Petrobras and Australia's Woodside Petroleum Limited are the other two partners.

It's good news to see companies continuing with resource exploration. When the global economy recovers, which it eventually will—commodities will be back in the headlines. The companies which have managed to brave the recession will find themselves rewarded as consumption increases and buyers line up, ready and willing to pay a premium.

(Click here to read more on this discovery from MercoPress)

Production in 2009 – Copper & gold production set to rise in Peru

Peruvian news agency, Andina has reported Peru's mining companies will produce more copper, gold and silver this year in a bid to offset slumping prices, according to Finance Minister Luis Valdivieso.

In the world, Peru ranks as the third-largest producer of copper, zinc and tin. The fifth largest producer of gold, and the number one producer of Silver. None the less, Peru is confident that by raising output it will be able to cope with the global downturn.

However, if the global economy does not recover as quickly, Peru may find increasing output was not the best method to deal with the situation in the long term. If other producers in the world economy do the same, the market will hypothetically be flooded with supply.

With base metal prices down roughly 25-40%, gold and silver down 14% and 43% respectively, this does seem the most logical path for Peru to take at the moment. The ideal situation I assume the big shots making decisions down in Peru can hope is that the global economy does pick up in the 2nd half of 2009, so that prices do not fall to levels in which mining production becomes economically inviable.

(click here to access Andina's article on this topic)

Baosteel and Vale cancel steel project due to lack of credit – BNAmericas

Cia Vale do Rio Doce and Baosteel have canceled their steel project in the Anchieta complex, in the Espirito Santo state of Brazil, the groups announced.

The companies blamed the global economic crisis, which has seen leading steelmakers worldwide cutting their steel production. As result of the global cut in demand, Baosteel proposed the cancellation of the project and the liquidation of Companhia Siderúrgica Vitória (CSV).

(click here to access the full article from BNAmericas)