Everyone wants a piece of Uruguay

Hot off the presses… “Investors from Brazil, Argentina, Basque Province of Spain AND China flock to Uruguay.” So hot in fact, the article seems to be running on “Future Standard Time,” because despite the fact it is still October 7th in the US (where I’m writing from) and in Uruguay, its quite curious how the article was published at 12:39am UTC on October 8th…


You can click the highlighted article title above to access the article directly and read all the juicy details about how Uruguay seems to be the place to be.

Interestingly enough it is not because the country is swimming in resource wealth, a cheap labor sector or any of the cliché niches of a “developing country.” Rather because of its excellent record of political stability, the existence of a judicial system which is fair and honors the law and in my opinion… also because of its unique position next door to Brazil—Uruguay’s major economic partner at the moment.

Major investments highlighted in the article include:

Argentina: No particular companies mentioned, but the article describes how Argentina’s investment community has become “disenchanted with the unorthodox policies and uncertainties of their country they have crossed to Uruguay looking for investment opportunities.”

Brazil: In Sept 2009 Brazilian food processing giant, Marfrig acquired a 51% in the Uruguayan Tannery Zenda. Zenda produces upholstery for some of the most prestigious German car brands

Spain (Basque Province): Cultural heritage links many Uruguayans to “la madre patria” aka, the mother country of Spain, and specifically to the Basque region. Finance minister Alvaro García met with Basque entrepreneurs who expressed “a firm interest to invest in different sectors.”

China: In Sept 2009, a delegation of Uruguayan entrepreneurs attended China’s International Investment and Trade Fair and returned with news Chinese investors were interested in investing in Uruguay’s infrastructure sector; including its ports, energy sector and water treatment facilities.

Newswire: South-South / Emerging Market Cooperation

[China - ASEAN] - China to Boost Cooperation With Asean on Investments - Bloomberg

China wants to boost cooperation with members of the Association of Southeast Asian Nations to develop trade and increase investment, said Chinese Commerce Minister Chen Deming.


[ASEAN] - Five Asean Nations May Form Rice-Trade Body, Thai Official Says - Bloomberg

Five Southeast Asian nations may set up a rice-trade association next year to cooperate in stabilizing rice prices, a Thai official said.

Thailand, Vietnam, Cambodia, Laos and Myanmar will also cooperate on other issues related to food security and production, said Chiya Yimvilai, a spokesman at a meeting of Asean economic ministers in Bangkok. The countries would also work together on developing rice products, he said.


[Venezuela - Russia] - PDVSA, Russian Group to Start $30 Billion Oil Venture - Bloomberg

Petroleos de Venezuela SA and a group of Russian oil companies plan to spend $30 billion on a joint venture in Venezuela’s Orinoco region.

The 40-year venture will seek to produce crude in the Junin 6 area and may expand to other Orinoco blocks, Russian Deputy Prime Minister Igor Sechin told reporters in St. Petersburg today after meeting with Venezuelan Vice President Ramon Carrizalez. Russian investors will include OAO Gazprom, OAO Rosneft, OAO Lukoil, TNK-BP and OAO Surgutneftegaz. The venture will be signed “in the coming months,” Sechin said.


[Mexico - Uruguay] - Mexico/Uruguay sign strategic association accord and advance trade - MecroPress

Mexico president Felipe Calderón and Uruguay’s Tabare Vazquez signed on Friday in Montevideo a Strategic Association accord to strengthen political dialogue and bilateral trade relations in the framework of the 2004 free trade agreement.


[Mexico - Colombia - Venezuela - Ecuador] - Mexico offers to mediate between Colombia and Venezuela and Ecuador - MecroPress
Mexican president Felipe Calderón on an official visit to Colombia offered his country’s mediation in the conflict between Bogotá and neighbouring Ecuador and Venezuela.


[Peru - Brazil] - Brazilian President to visit Peru to strengthen strategic alliance - Andina
The next arrival to Lima of Brazilian President Luiz Inacio Lula da Silva will contribute to create a new strategic alliance to face Asian markets when signing several trade agreements, the President of Peru-Brazil Integration Chamber Miguel Vega Alvear.

“The arrival of Brazilian President will strengthen the progress achieved up to now in this Peru-Brazil strategic alliance and it will create a new stage in which both countries can face Asia-Pacific markets,”

Argentina-Uruguay friendly goes bad...

South-South Cooperation at its umm... worst

Weekend Newswire: South-South Cooperation

[Brazil - Argentina] -- Brazil, Argentina Working on $1.5 Billion Credit Line
Brazil and Argentina are nearing agreement on a “precautionary” measure to create a $1.5 billion credit line to help boost liquidity amid the global financial slowdown, ministers from the two countries said.

As many as seven countries, including Argentina and Uruguay, may establish reciprocal credit lines to help boost liquidity in South America, Brazilian Finance Minister Guido Mantega told reporters in Buenos Aires. Argentine Economy Minister Carlos Fernandez said the credit line with Brazil would be for the equivalent of $1.5 billion in local currencies.


[Peru - South Korea] -- Peru, S Korea to hold 2nd round of FTA talks
The Second Round of Negotiations for a Free Trade Agreement (FTA) between Peru and the Republic of Korea will be held in the Peruvian capital Lima on May 11-14, the Ministry of Foreign Trade and Tourism (Mincetur) reported Sunday.

On Monday, the negotiating teams will discuss issues such as dispute settlement, trade remedies, temporary entry, investment, sanitary and phytosanitary measures, cooperation, rules of origin and public purchases.

On Tuesday, they will discuss trade in goods, intellectual property, telecommunications and financial services.

On Wednesday, the meeting will focus on institutional and labor matters, financial services and competition policy.

On Thursday, issues to be discussed include customs and trade facilitation, services and investments, as well as environment.


[China - Zambia] -- Zambia picks China group to run Luanshya copper mine
Zambia on Friday selected Chinese company NFC Africa as the new investor to run the closed Luanshya Copper Mines (LCM), which is due to restart production at the end of May.

"It is now with great pleasure that I announce the sale of the 85% shares to China Nonferrous Metals Mining, commonly known as NFCA," Zambia's President Rupiah Banda told former Luanshya Copper Mines workers at a public meeting.

Bank of the South - South American leaders reach a definitive agreement

A definitive agreement for the launching of the Bank of the South was reached in Buenoes Aires on Friday afternoon. Everything seems set to go with one minor change to note, The Bank of the South will begin operations with $7 billion in working capital, not the $10 billion reported previously.

South-South Cooperation is a term historically associated with the exchange of resources, technology and knowledge between developing countries. This latest initiative by the countries of Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela is especially exciting for the region as it:

a) Involves seven South American countries
b) Includes countries with very different political and economic ideologies
c) Includes the regional powerhouse of Brazil
d) Is not dominated by one power, but rather uses a fair system to calculate member country donations
e) Sends a message to member countries that what is good for the region is good me

What is mysterious, and surely politically motivated, is the fact the most staunch US allies in the region; Colombia, Peru and Chile, have not been included...

Here's the scoop from what went down over in Buenos Aires on Friday, courtesy of MercoPress.


“We’ve closed all pending issues and therefore this is the last ministerial meeting on the subject, said Argentine Finance minister Carlos Fernández who nevertheless added that the final stitch is “the technical review of statutes” of the new bank and the “parliamentary approval by the seven founding countries”.

[Arg Finance Minister, Carlos Fenandez]


The Bank of the South, started at the end of 2007 (and the brainchild of Venezuela’s Hugo Chavez), will have an initial capital of 7 billion US dollars (originally it was planned 10 billion), of which Argentina, Brazil and Venezuela will supply 2 billion US dollars each; Ecuador and Uruguay 400 million US dollars each and Bolivia 200 million.

“The terms of the agreement are acceptable, so the statutes should be easily approved without much discussion”, said Brazil’s Finance minister Guido Mantega. “This is the missing step for financial integration”, he added.

“Given the current international context the bank should be operational as soon as possible” added Argentina’s Fernandez. “It’s not easy to create a financial institution of this kind in the midst of an international crisis”.

According to the statutes each country member will have “one vote” in the board but for approval of loans 70 million US dollars plus, support from votes representing two thirds of capital subscription will be needed, explained Fernandez.

At the same meeting Argentina and Brazil also agreed to a 1.5 billion US dollars swap to reinforce their international reserves. The operation is similar to that recently agreed between Argentina and China and the one signed by the Federal Reserve and fifteen other countries, including Brazil.

The swap is “preventive” and enables each country access to a credit in Brazilian Reales or Argentine Pesos equivalent to 1.5 billion US dollars and valid for three years.

Brazilian minister Mantega said that when Brazil signed the agreement with the FED he advanced that the scheme would be expanded to the region, with Argentina and Uruguay as first interested parties.

“It’s a precaution mechanism to reinforce international reserves. Let’s hope this becomes available as soon as possible and operational for the two central banks”, said Fernandez.

The Bank of the South -- A step towards regional integration in South America

[South America Analysis] -- The significance of creating a new regional bank in South America.

** Note the opinions reflected in this article are my own and do not reflect any resource used in writing this analysis.



As high level Economy and Finance ministers from seven South American countries meet in Argentina with the goal of moving forward the creation of the Bank of the South (El Banco Sur), it is imperative to examine the bigger picture. I have synthesized two major points I would like to highlight.

1) South American countries are experimenting with new institutions. If found to be viable and efficient, these institutions can potentially form the building blocks of larger and more complex ones. The end result will be the promotion of legitimate regional integration in South America.

2) The Bank of the South, along with other efforts such as the Andean Development Corporation will provide South American countries first-hand experience in promoting economic development through South-South Cooperation. Development via this avenue takes advantage of the strengths and weaknesses of other developing countries to promote development from within. South-South Cooperation has great potential to create a new channel in which to promote sustainable economic growth and empower developing countries with the tools and means in which to help each other develop, thus cutting their reliance on external aid from wealthy donor countries or multi-lateral organizations such as the IMF (eventually).

The Bank of the South, which has been financed by the South American countries of Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela, will begin operations with an initial capital pool of $10 billion. This figure was agreed upon during the last meeting held in March in Caracas, Venezuela (MercoPress).

When you casually see hundreds of billions of dollars being thrown around in today’s headlines, it is easy to dismiss this $10 billion effort as menial, at best…

The real point however is not to rock the boat, the boat in this context being the International Monetary Fund (IMF) and other multilateral lending institutions. Hugo Chavez may be full of rhetoric that says otherwise, but as much as he would like the Bank of the South to counter the influence of the IMF, he knows at the moment it cannot.

Consider two major lending institutions—the IMF and the Inter-American Development Bank (IDB). Ideas are being floated around to increase IMF capital to $500 billion (see this BBC article). Granted not all this will go to Latin America, but no less this is a substantially larger capital pool than the Bank of the South will have. The IDB, which is a Latin America specific regional lender, has $101 billion of its own of capital.

However, if we look at one other regional lender—the Andean Development Corporation, which includes some of the remaining South American countries which are not participating in the Bank of the South (Peru, Chile and Colombia), has a capital pool of $5 billion. The Bank of the South, with seven founding members and $10 billion in capital to lend is a definite step forward for the region

Consider for a moment, the fact South American countries have not always been as successful as they are now at managing inflation, debt, budgets, political stability, etc. Today in 2009, South American countries have international reserves. Click here to access a great article with some straight forward data that illustrates this phenomenon from Victoria Saddi’s site, Brazil and Economics. In a few years the United States may have to add to their Chinese and Middle Eastern credit lines by opening up new ones with countries in Latin America.

Definitely not a good thing for U.S self-esteem, but that is another story all together. Discussion welcome for those who would like to share their opinions on the subject.

The Bank of the South will not tip the international balance of power in either the worlds of regional and or international lending institutions. It will however help create the foundation for future organizations and institutions which one day will rival the influence of first world institutions like the IMF.


~ Analysis by Bennett Reiss

Moving forward, Creating a Bank of the South

South-South Cooperation: The Bank of the South


Back in March I did a small piece on the creation of the Bank of the South, a.k.a, El Banco Sur (click here to see post). Currently working on my own analysis to this development and my general view on this South American effort to create a regional bank.

For now, here are a few excerpts from today's MercoPress article.

Economy and Finance ministers from seven South American countries are scheduled to meet Friday in Buenos Aires to advance in the creation of the Bank of the South, a financial institution to fund infrastructure and development projects in the region.

“At the meeting participants will advance in the founding multilateral agreements for the establishment of the Bank of the South“, said the Argentine Central Bank in a short release.

Participating ministers are from Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela.

Banco del Sur

In 2007 the countries of Venezuela, Argentina, Brazil, Bolivia, Ecuador, Uruguay and Paraguay formed Banco del Sur (Bank of the South). The bank if finally opening its doors, and, not surprisingly has made few headlines up in North America.

Banco del Sur will launch operations with a initial $10 billion in capital for loans and other programs, reported Venezuela's state news agency ABN.


Contributions break down as follows. Venezuela, Argentina, Brazil will each contribute $2 billion. Bolivia, Ecuador, Uruguay and Paraguay will pool together the other $4 billion.

Venezuela's finance minister Alí Rodríguez told media yesterday, he believes the Presidents of Banco del Sur's member countries know it is necessary to advance regional integration of energy, infrastructure and finance.

Sounds all fine and dandy, but easier said than done. It would be some great ideal if Latin America's commodity producers could come together and form some kind of financial system to trade their goods (one random thought).

It would also be nice if inter-regional trade could be made easier.

Yes... you can drive from Asuncion, Paraguay to La Paz, Bolivia but it will be ONE HECK OF A JOURNEY. Remember to pack extra shocks for your car too.

Good idea to keep watch on this bank and see how things progress in the coming months.

China-Uruguay talk cooperation

Chinese President Hu Jintao and his Uruguayan President Tabare Vazquez met in Beijing yesterday for another typical diplomatic cocktail party in the world of Sino-South American relations.

These meet and greets between China and South American countries are typically very similar, nevertheless, some good information can emerge from them if you pick it out and read in between in the lines.

Chinese President Hu Jintao (L) hosts a welcoming ceremony for
Uruguayan President Tabare Vazquez at the Great Hall of the People
in Beijing, capital of China, March 23, 2009. (Xinhua/Yao Dawei)

Interesting snaps of information worth sharing from this Xinhua News Media article include:

->> China has become the third biggest trading partner of Uruguay
->> The country's plan on exploring ways to cooperate in the agriculture, fishery, product quality inspection, software and engineering technology consultation fields
->> China also proposed the two nations boost cultural and people-to-people exchanges by expanding cooperation in culture, education, sports, media, and tourism sectors—good news for people in the tourism industry.


The typical diplomatic kiss a$$ that goes down on a usual meeting of a top Chinese and South American official.

->> China and the given South American agree (over-and-over again) to promote bilateral relations to a higher level.
->> China South American country XYZ state that important progress in cooperation in various areas has been achieved since diplomatic relations where established back in the day
->> Both country's agree to support peaceful resolutions to international issues and not intervene in one anthers internal affairs... Meaning, lets do business and help each other out but don't you dare stick your nose into my house.
->> China thanks South American country XYZ for supporting the one-China policy and its firm support on issues concerning Taiwan and Tibet.

News Line: Energy in South America and China

Uruguay Opens bids for Offshore Oil, Gas Blocks – reports Uruguay Energy Ministry courtesy of Rigzone

On December 1-3, Uruguay Energy Ministry and ANCAP, the National Oil Company, will launch the offshore licensing round for exploration and exploitation of gas and oil. The blocks on offer, lie in the Punta del Este and Pelotas basins, where water depths range from 50 to 1500 meters, as well as another basin further offshore called Oriental Del Plata. The blocks' areas range from 2,500 to 10,000 square kilometers...

Click here to access the full story from Rigzone

PetroLatina Commences Drilling Colon-1, IDs 4 New Wells Sites in Colombia - reports PetroLatina courtesy of Rigzone

PetroLatina has announced a further operational update to that released on November 7, 2008.

La Paloma

The Company commenced drilling Colon-1, the first exploratory well to be drilled on the La Paloma block, located in Middle Magdalena Valley, Colombia, on Sunday, November 24, 2008. The Colon-1 well has been drilled vertically to a total depth of approximately 600 feet, to date. Drilling continues to be undertaken vertically to an expected total depth of approximately 9,072 feet in order to test the La Paz, Lisama and Umir formations. Drilling is scheduled to take 25 days in total at a cost of approximately $6 million...

Click here to access the full story from Rigzone


Petrobras' Platform P-53 Kicks Off Production at Marlim Leste Field – reports Petrobras courtesy of Rigzone

Petrobras announced that platform P-53 kicked-off its operations yesterday, November 30. This is the first production unit installed in the Marlim Leste field, in the Campos Basin.

The P-53 unit has total production capacity of 180,000 barrels per day of heavy oil, 20 degrees API, and compressing capacity up to 6 million cubic meters/day of natural gas. The platform's oil production will be offloaded to shore by shuttle tankers with the assistance of Autonomous Re-pumping Platform PRA-1 and the FSO Cidade de Macae. Part of the gas that is produced will be consumed by the platform itself as fuel to generate electricity, and the remaining will be exported to shore via the Campos Basin's gas network. The platform will reach peak production in the first half of 2010.

Click here to access the full story from Rigzone


Geopark Tests Positive Oil at Manekenk 1 in Chile – reports GeoPark Holdings Limited courtesy of Rigzone

GeoPark Holdings Limited has announced the successful testing of the new Manekenk 1 well on the Fell Block in Chile at an initial rate of approximately 1,300 barrels of oil per day equivalent (boepd). Geopark operates and owns a 100% working interest in the Fell Block...

Click here to access the full story from Rigzone


Peru's mining/hydrocarbons output rose 4.57% in Oct 2008 – reports Andina.com

Lima, Dec. 01 (ANDINA).- Production in Peru's mining and hydrocarbons sector expanded 4.57% in October from the same month last year, as the mining sub-sector increased 2.72%, the National Statistics Institute (INEI) said Monday...

Click here to access the full article from Andina.com


PetroChina Starts Developing Offshore Block in Bohai Bay – reports Dowjones Newswires courtesy of Rigzone

PetroChina Co. has started developing an offshore block in Bohai Bay with an output target of 3 million metric tons a year or 60,247 barrels a day, parent company China National Petroleum Corp. said Monday.

The Yuedong block, located in shallow water near Liaoning province, has rich reserves of heavy oil, CNPC said on its Web site, without elaborating.

Yuedong is part of the Liaohe field, China's largest heavy oil field, with annual output at 12 million tons a year or 240,986 barrels a day...

Click here to access the full article from Rigzone


China North East Petroleum's October Crude Oil Production up 135% - reports China North East Petroleum courtesy of Rigzone

China North East Petroleum has announced preliminary results for its October 2008 oil production.

Crude oil production for the month ended October 31, 2008 increased 135%, or 40,479 barrels, to 70,545 barrels from 30,066 barrels for the month ended October 31, 2007. On a sequential basis, crude oil production increased 4,627 barrels, or 7%, compared to the month ended September 30, 2008...

Click here to access the full article from Rigzone

Financial crisis... how some South American countries may do better than expected

Six months ago when commodity prices where at record high's it seemed as if South America was entering a golden age of prosperity. Or at least that they where on track. Of course many analysts and “experts” predicted there would be trouble if prices fell back down to reality. None the less, it seemed that surging demand from Asia and the lack of investment in supply capacity throughout the 80's and 90's would be sufficient to keep the prices of various commodities up.

I was personally of the camp which believed prices had come up a bit too fast, but where no less going to stay well above what they where in the late 90's and early 2000's. In the long-run I still believe this will be the case, however the recent global financial has proved me horribly wrong in the short-term.

It does however seem that one thing has been made clear from the recent crisis. At least some of the countries in South America have become better at managing their financial systems and internal economies. Many nations saved, paid off their international debt and invested wisely. Other's didn't and will pay the price (Argentina I mean you).

Here's some recent news worth taking a look at from the past week.

Peru – MTC 2009 budget proposal exceeds $1 billion

Last week Peru's transport and communication minister Veronica Zavala presented congress with a 3.3 billion sol ($1.07) budget proposal. The money according to BNAmerica's will be allocated to various segments of the transport sector. This includes highways, roads, airports, trains and the communication sector.


Peru – Luis Valdivieso, Peru's Minister of Economy and Finances has prepared 49 investment projects aimed to cushion Peru during the financial crisis

Andina.com reports that the Minister of the Economy and finances believes these 49 projects are aimed to keep Peru growing between six and seven percent for the next year.

“We won't allow any reduction in the public spending, consistent with a growth between six and seven percent. To face a possible reduction of fiscal income due to a loss of international markets, if necessary, there is a number of projects ready to fulfill this goal,” stated Luis Valdivieso.


Uruguay confident of weathering financial crisis reports the Financial Times

Interestingly enough, little old Uruguay seems in good position to weather the financial crisis, while it's bigger neighbor, Argentina, does not. The government seems confident that Uruguay can get through this crisis, even if Argentina continues to edge towards economic upheaval, as evident by the countries recent seizure of private pension funds, the governments horrible handling of recent protests and generally scaring away international investors...