Emerging Markets' Presence Grows at Davos Economic Forum -- Bloomberg

Jan. 29 (Bloomberg) -- Emerging markets are gaining attention at the
World Economic Forum in Davos, Switzerland, as developed nations flounder and seek a solution to the global financial crisis.

The financial meltdown has undermined western-style capitalism as an economic model, leading some to question whether emerging markets are willing to listen follow western advice for their economic development as they did in the 1990s. (Source: Bloomberg)

For more Bloombergcoverage from Davos see http://www.bloomberg.com

Who wins during a recession in China? --- Op/Ed from ptl-group China newsletter

Just as the world’s financial system faces the most severe crisis since WW-II China’s economy is reaching a level of maturity and strength that will give it a unique and central role in the future financial order. Although it has shown that China is not decoupled from the rest of the world, the crisis represents more of an opportunity than a threat for China. There is good reason to believe China has significant comparative advantages over other economies that are trying to navigate clear of serious damage during the crisis and emerge in a position of strength.
Click here to access the full article from ptl-group

China National Offshore Oil Corp. to invest $6.76 billion

The China National Offshore Oil Corp., announced yesterday that it plans to invest $6.76 billion US dollars in developing oil fields and in exploring / securing rights to new sources of crude oil and natural gas.

Investment figures are up about 18.9% according to the article published by Asia Pulse Pte Ltd yesterday, and accessible through this link to Rigzone.

"Seeking long-term increase in Chinese demand, the state-owned entity will continue with investment aimed at boosting its production capacity at a time when OPEC has reduced its own output.

The pie is being divided as follows. Oil field development will be getting $4.38 billion of the total investment and exploration for new oil and gas fields will receive about $1.1 billion.

So how to you decipher the meaning behind all this sudden spending? For starters, exploring for commodities when prices are as low as they are is quite risky. The reward can be potentially huge if legitimate and cost-effective discoveries are made, but new resources still take years to develop until they are extractable.

China is therefore being smart about things. Allocating the majority of the investment towards developing fields that will start to produce oil so that when demand does pick up it won't be left scrambling for crude. Furthermore, if demand does not pick up and the global economy continues to slow, China will not have wasted too much of the investment in finding new resources that there is no demand for.

South-South Cooperation: Africa's largest bank to move its headquarters to Sao Paulo, Brazil

Standard Bank Group Ltd., the Johannesburg-based bank has hired Eduardo Centola from Goldman Sachs Inc. to head it's headquarters in Brazil, which will represent the bank in the greater region of the America's.

In this bloomberg article president of Banco Standard de Investimentos, the Brazilian unit of the bank stated: “The epicenter for the Americas needs to be a country like Brazil, which is the most promising emerging country in the region. Our plan in Brazil is for the long term.”

Standard Bank Group will form a private equity fund of about $250 million to invest in Brazil. Very interesting to see Africa and South America "brushing shoulders."

Since the start of this site, I don't think I've once stumbled on a story of Africa making a investment in South America. I've had many posts about leaders from the two regions meeting with one another, but never about a African bank entering a South American market as a new investor.

It will be interesting to see what form South American-African Economic Cooperation will take in the future. With the global economy as it is today it is inevitable, two continents which lie at opposite ends of the ocean from one another (like the US with Europe and Asia) shouldn't have a open exchange.

At the moment however, the two areas have a similar niche in the global economy as commodity producers. However, as the investment above shows, there is room for each region to help each other in its respective development.

Creating a fund for investing in Brazilian companies is a perfect example. This particular bank from South Africa will be earning returns (hopfully) from investing in Brazilian companies that need cash and have aspirations to grow into bigger and more profitable entities.

Very nice. Very nice indeed.

South-South Cooperation: Andean Community (Comunidad Andina - CAN) to be modernized

Mincetur, Peru's Ministry of Commerce and Tourism announced that the country's of the Andean Community (Comunidad Andina - CAN) have plans to work together to redefine the community in order to promote a more modern and efficient environment for investment and trade.

The news comes on the heels of the upcoming meeting CAN is having with the European Union in regards to a FTA the two economic unions have in the works.

Bolivia which is also a member of CAN had previously been against the FTA agreement with the EU, but stated that it is open to negotiations and willing to compromise if certain changes are made.

If you would like to read more on this story and can read Spanish,
check out ---> this article published on Andina.com

A world without poverty -- ACCION & LendtoEndPoverty.org

Microfinance is a topic i've touched upon before on this site (See June 17, 2008 post). In this turbulent time, Microfinance borrowers believe it or not but are still paying back their loans despite the credit crisis.




Microfinance is an effective, long-term solution to ending poverty that empowers poor families with the financial resources they need to improve their lives.

But there is an urgent need to expand these services. Right now, microfinance is only reaching 10-20% of the estimated 500 million people who would benefit from these life-changing opportunities.

As you'll see in the two-minute video, microfinance has the power to improve the lives not just of individuals, but of families and entire communities around the world.

~ ACCION Video Link courtesy of Youtube

Special Report: Is the Grim Commodities Outlook Prices in? -- Bloomberg

Coverage from Sao Paulo, Brazil: Emerging Markets Dropped in Second Half, Morgan Stanley's Index Plunging 55% for the Year

Does Brazil have a cash flow problem?

Brazil seems to be having some money troubles by the looks of the press. It's not good news for Latin America when its largest economy slows, especially when until just recently it seemed Brazil (the depreciation of the Real aside) was well relatively well poised to weather the storm.

Like its fellow BRIC country's, Brazil is far from immune to the global crisis. The country is still heavily dependent on commodity exports, which was the main engine of growth for both the Brazilian economy and stock market the past few years.

Despite reports that consumer spending is still holding up and that Brazil's big state conglomerates like Petrobras are increasing spending (see MercoPress article here), it simply won't be enough to keep the economy afloat forever—and it definitely will not be enough to maintain growth levels of 4-5%.

Poor Ronaldo seen here losing at the French World

Now... for the grim news. While just days earlier Petrobras reported it will be increasing spending, yesterday things did not go its way when it went shopping in international markets to raise money. The company was forced to put off plans to sell bonds because the cost of borrowing to finance the bonds in dollar denominated debt was simply too high (see Bloomberg article here)

Moving on. Brazil's government also had some bad news to bring to the table, announcing plans to freeze roughly 6% of its planned spending budget for 2009 because slow economic growth is eroding tax collection ( see bloomberg article here)

To round up the negative news is one last story concerning loan defaults in Brazil. Credit card spending may be surging, people may be packing the stores but they aren't paying their bills. Loan defaults surged last month to their highest since September 2002 (see Bloomberg article here).

Not good news people...

China starts spring cleaning on the internet

Chinese authorities have shut down about 1500 pornographic websites and are making no secret about it, reporting about it in their own state press.

A total of 41 individuals where also apprehended during the crackdown after being linked to the vulgar content.

Singapore's Straits Time reported:

"The government has warned that Internet giants such as Google, MSN and Baidu, the most popular Chinese search engine, could also be shut down if they continue to link to vulgar content.

Google, Baidu and others have since issued apologies and said they have taken steps against online porn."

Click here to read more on this story from the Straits Times

South-South Cooperation: Venezuela's PDVSA begins drilling in Bolivia's Vibora Field

Petroleos de Venezuela SA (PDVSA), announced today one of its oil rigs began operations in Bolivia. Drilling is reported to have begun in the Vibora field, roughly 170 km north of the city of Santa Cruz.


Not a bad headline for Morales and his supporters who voted "yes" for a new constitution just days ago which allows for Morales to run beyond his term limits and which is partly designed to empower indiginous rights.

Bolivians back Morales Charter - Reuters

Jan 26 - Bolivian President Evo Morales appears before a crowd of supporters to claim victory in a controversial election that grants him the right to run for re-election

Bolivian voters approved a new constitution to give the poor indigenous majority more power, let socialist President Evo Morales run for re-election and hand him even tighter control over the economy.

Aymara, Quechua, Guarani and other indigenous groups who suffered centuries of discrimination in South America's poorest country largely backed the new constitution and exit polls showed it was approved with around 60 percent support.

Penny Tweedie reports.

Commodities in focus – Gold prices rise above $900/oz

The spot price of Gold rose above $900/oz on Monday for the first time since October 10, 2008.

Gold ETF's also benefited. New York's SPDR Gold Trust GLD, the world's largest gold EFT allows investors to invest in physical gold like they do normal stocks. This is accomplished through issuing securities backed by physical gold stocks. SPDR said its security backed gold holdings rose 1.6% percent to an all-time high of 823.57 tonnes during Friday trading.

The ETF isn't doing all that bad either. Year-to-date it is up 4.92%. Take a look at the ETF's performance over the year year. The chart truly does justice to the age old concept of investing in gold as a safe heaven. With interest rates so low, investing in Gold, even at yields of 4.92% will become even more enticing as banking woes persist in developed world.




The Royal Bank of Scotland's head of commodity strategy, Nick Moore told Reuters factors including falling interest rates, the re-inflation of Western economies and the prospect of lower supply both from mines and via central bank sales were supporting gold.

“In times of economic crisis, falling equity markets and mounting aversion to risk, physical gold is preferred as the safest form of investment,” Commerzbank analyst Eugene Weignberg said.

Below I have included two links. The first link directs you to a informative analysis and perspective on the gold market by Lawrence Williams who, along with his “expert panel” are forecasting gold prices to reach a high of $1074/ oz.

The second is a article about how gold miner Red Back has managed to successfully raise capital on the Toronto Stock Exchange, further indication of the support for gold.

Forecasting the gold price – expert panel predicts $1074 high, Mineweb readers $1305 – Mineweb

Gold miners still able to raise capital from the markets – Mineweb

Direct flights open between Peru and Cuba! -- Andina reports

Lima, Jan. 26 (ANDINA).- TACA Airlines will begin flying directly between Lima (Peru) and Havana (Cuba) in the first quarter of 2009.

Beginning on March 23rd, TACA will fly three times a week on the Lima-Havana route to meet the growing demand from travelers.

Click here to access the full article from Andina

Global financial crisis lifts Australia's four largest and relatively healthy banks into the top 20

Australia's big banks have joined the ranks of the world's largest banks. Australian banks have seen their share prices plummet around 50%, but no less remain in relatively healthy positions when compared with their counterparts in the United States and United Kingdom.

Total stock market capitalization of Westpac, Commonwealth Bank, National Australia Bank and AZN (Australia and New Zealand Banking Group) is now greater than Citigroup, Morgan Stanley, Barclays and Deutshe Bank.

Phil Chronican, head of institutional banking at Westpac said “the maintenance of the bank's market capitalization and value compared with its international peers had increased its reputation and knowledge among major institutional investors.

The banks seem in good position for foreign expansion and acquisitions. ANZ has already been widely successful in Asian markets. Westpac now ranks at the 9th largest bank in the world, and is seeing its foreign exchange deals increase substantially.

"The Australian banking sector is now roughly a quarter the size in market capitalization of the US listed banking sector and much larger than the UK, which raises the question why not expand and become seriously global," Mr Davison said. "However, we believe the most likely scenario is domestic banks will simply be in suspense from the ever changing effects from the nationalization of banks in these foreign markets and survival as a private entity will be deemed being successful."

Click here to read a more comprehensive report of this story at the Australian

Happy New Year China!

Chinese people around the world began their 15 day long lunar-calendar celebration this weekend, ushering the start of the "Year of the Ox."

Citizens go shopping in Fuzhou, capital of south China's Fujian Province, Jan. 25, 2009.
Spring Festival, or the Chinese Lunar New Year, is the most important traditional Chinese
festival of family reunion. It falls on Jan. 26 this year.(Xinhua/Wei Peiquan)

Chinese folk lore describes the Ox as a sign of prosperity through fortitude and hard work. Appropriate considering the current financial crisis don't you think?

Just in case you where wondering... If you happen to be born in the Year of the Ox (1913, 1925, 1937, 1949, 1961, 1973, 1985, 1997, 2009), you are believed to have a natural tendency to exhibit patience, speak little and inspire confidence in others. Not a bad set of characteristics huh?

Anyway... Happy New Year to the billion + Chinese around the world and all others celebrating this joyous holiday!

Migrant workers, who could not return home for the Spring Festival,
gather together to have new year's dinner in Guilin, a city of south China's
Guangxi Zhuang Autonomous Region, Jan. 25, 2009. (Xinhua/Chen Ruihua)

Looking to the East -- Peru and South Korea to discuss a FTA in March

Peru and South Korea have agreed to hold the first round of negotiations for a Free Trade Agreement this March, according to Peru's Minister of Foreign Affairs and Trade.

Korean President, Lee Myung-Bak (left)

Peruvian President, Alan Garcia (right)
Photo: ANDINA /Jack Ramon

Preliminary work for the FTA was compiled in Lima January 20-21, days after the Asian Pacific Economic Cooperation (APEC) had concluded.

“At the preliminary talks, the two sides agreed upon the scale, formation, process and schedule of the Korea-Peru FTA, and together laid the groundwork for effective negotiations in the future," the ministry said.

The two sides will now examine each others drafts of the Agreement before meeting in March, at which point they will debate and hopefully find a middle ground on how to go about opening each market up to one another.

This is great evidence of something that has been written about on this site since its creation, that is—the Pacific countries of Asia and South America are finding cooperating in both economic and political contexts is beneficial for all parties and increasingly necessary in this global and interconnected world.