Studies to Eliminate Dollar in Brazil-China Trade Going Slow

China and Brazil have created a work group to study the possibility of implementation of a bilateral trade program in their respective currencies, in replacement of the North American dollar, said a source in the Central Bank of Brazil.

"The negotiations are still in an initial phase, with a work group having been created with representatives of Brazil and China, who also met during the G-20 summit, in London," explained a source.

The next step should be the visit of a Central Bank of Brazil delegation to China, "despite there being no forecast as to when it may come true," said the source.

The work group should analyze the "results to be reached through an agreement that China recently established with Argentina" - the first country in South America to benefit from trade exchanges in the same currency with the Asian giant and with whom Brazil has also been developing the same program since September 2008.

The Central Banks of China and Brazil are also going to develop a "study of the potential bilateral trade volume to analyze the possibility of an agreement."

Click here to read the full article

Written by Newsroom
Wednesday, 16 September 2009
[Source] - brazzilmag.com

Argentina could potentially attract $10 billion to its stock market if restrictions are lifted, reports Bloomberg

Argentina’s stock exchange called on the government to lift capital controls that caused it to become the only major Latin America market classified as “frontier,” adding the move may help lure $10 billion in foreign investment.

A requirement for international investors to deposit 30 percent of what they put in Argentina with the central bank for a year “have stopped making sense,” Adelmo Gabbi, the Buenos Aires stock exchange’s chairman, said yesterday in a speech.

Capital controls prompted MSCI Inc. to remove Argentina from its benchmark emerging-market index in June, assigning it the so-called frontier status along with the world’s least developed markets. The controls have helped Argentina avoid volatility, said President Cristina Fernandez de Kirchner.

Argentina's stock exchange, Buenos Aires
Image courtesy of Business Week

“We have to seek a rule so that the inflow of funds won’t be speculative,” she said, without elaborating.

...

“The deposit requirement was imposed in 2005 and was one of the forces that allowed us to confront the brutal volatility of the markets during the crisis,” Fernandez responded yesterday in a speech at the Buenos Aires stock exchange.

Fernandez’s husband and predecessor Nestor Kirchner imposed deposit requirement in order to discourage speculators from investing in local markets after the country restructured about $104 billion in bonds...

Click here to access the full article from Bloomberg

Chinese Oil Firms Bid for Repsol's Argentine unit

Chinese oil conglomerates China National Petroleum and Cnooc have offered to pay an estimated $17 billion usd for all of Repsol YPF's state in its Argentine unit called YPF.

You can read the Wall Street Journal's paraphrased article (the original costs money) at thestreet.com, by visiting this article.

Will this deal actually be completed? China South America reported on this possible deal back on July 7, 2009. You will notice, the offer at this point was only $14.5 billion for a 75% stake. China has since upped the offer and is now looking to buy the entire thing.

Why China? Are you angry over Australia rejecting your Rio bid? Are you feeling flustered that countries from the industrialized world, but also in Africa and Latin America are starting to think twice about selling the rights to their raw materials?

I don't blame them, after all, Australia is quite similar to South American commodity producing countries. Two note worthy and simple similarities include

1. A large portion of GDP is generated from commodity exports
2. The relative strength or weakness of domestic currencies such as the Ausie Dollar, Argentine Peso, Peruvian Sol and Brazilian Real, are all inherently linked to the global market price of the commodities the countries export. [ie: if the spot price for copper drops 50%, observe what happens to Peru and Chile's Peso's.
   

According to the WSJ article, the main obstacles to this deal include

• Spain is hesitant to see some of its best assets in Argentina be sold to China

• Argentina's government has no financial stake in YPF, but nonetheless under Argentine law has the right to veto decisions such as transfer of ownership. In my personal opinion, this translates into who is willing to pay more “under the table” to the Argentine government.

• China National Petroleum and Cnooc are state owned organizations. Despite their growing influence and presence in oil markets around the world, many governments still remain weary of doing business with companies officially tied to a foreign government.

Argentina-Uruguay friendly goes bad...

South-South Cooperation at its umm... worst

China to buy Repsol Assets in Argentina - Update

[China - Argentina - Spain]

China's CNPC said offering $14.5 billion for Repsol investment - Market Watch

SAN FRANCISCO (MarketWatch) -- China National Petroleum Corp. has offered up to $14.5 billion for a majority stake in the Argentine unit of Spanish oil company Repsol YPF SA, according to media reports published on Tuesday.

The South China Morning Post, citing unnamed sources, reported that CNPC has offered between $13.2 billion and $14.5 billion for a 75% stake in the unit.

Dow Jones Newswires reported that Repsol said last week that it had received proposals from a number of companies for a stake in the unit.

China has been acquiring energy assets as its growing economy demands more resources to support its needs.

Sinopec has also secured a deal with Brazilian firm Petrobras (PEFGF) to supply it with 150,000 barrels of crude a day this year, and 200,000 barrels per day for nine years starting in 2010, according to the state-run China Daily.

Argentina and Spanish oil giant Repsol still thinking...

[China - Argentina - Spain]


Pretty good Wall Street Journal articles hit the presses in NYC today relating to the topic of Repsol selling their assets in Argentina to China

CNOOC Says Interested In Cooperation, Not Takeovers - EFE

Argentina Still Weighs on Repsol

Repsol is playing down speculation about unloading some of its 85% stake in Argentinian oil business YPF. But shareholders must hope a deal materializes, and soon. Apart from its exposure to Argentina's political and economic risks, YPF ties up capital that Repsol could use to develop large recent Brazilian oil discoveries.

Unfortunately, what makes it wise for Repsol to sell YPF may deter potential buyers. YPF's reserves are declining. Buenos Aires has to approve any share sale, while Repsol has committed to keep at least a 50.1% stake until 2012.

YPF also has to satisfy domestic oil demand -- where prices are capped -- before it can export, paying a punitive export tax. Chinese suitors, in particular, will likely bridle at such restrictions.

Click here, or the links above to view the complete articles from the WSJ

Weekend Newswire: Latin America

OAS can’t agree on Cuba, while Havana ridicules the organization
The task force created by the Organization of American States, OAS, in an attempt to bridge different members’ proposals to consider the readmission of Cuba seems to have stalled with the main actors clearly underlining their stance.


Colombia Cuts Benchmark Lending Rate to Record Low 5% to Stimulate Growth
Colombia’s central bank cut its benchmark interest rate to a record today and signaled it’s ready to lower it further in an effort to ward off an extended recession as inflation eases


Braskem Taps Peru, Venezuela in $3.6 Billion Expansion Outside of Brazil
Braskem SA, Latin America’s largest petrochemicals producer, plans to invest $2.5 billion in a polyethylene plant in Peru, said Cleantho de Paiva Leite, Braskem’s director of international projects.

Sao Paulo-based Braskem, which holds a 50 percent share of Brazil’s resins market, also is working on engineering studies for a $1.1 billion petrochemical plant in Venezuela with state- owned Pequiven SA, de Paiva said in an interview in Lima.


Venezuela Expropriations: Chávez Talks Himself into Trouble with Argentina's Fernández de Kirchner
The spark for the conversation sought by Fernández de Kirchner was a remark Chávez is reported to have made in private to Brazilian President Inacio Lula da Silva. That remark, it’s said, was to the effect that Venezuela was on course to take over foreign companies except for Brazilian ones.

President Hugo Chávez’ strategy of nationalizing companies including foreign ones, and a remark he did or did not make in seriousness to Brazilian President Ignacio Lula da Silva, appear to have posed problems for him and his Argentine friend and colleague, Cristina Fernández de Kirchner.

Chávez has depicted Fernández de Kirchner as an ally and soulmate in his bid to build a regional alliance to counter what he sees as the undue influence and power of the United States in Latin America. But his peremptory takeover of steelmaker Sidor and his tendency to talk off the top of his head may well have put her in between the proverbial rock and a hard place at home.


Argentina May Be Sanctioned By Manhattan Judge in Bondholder Litigation
Argentina may be sanctioned for failing to comply with a U.S. court order to turn over to bondholders documents regarding its pension funds, a federal judge in Manhattan said.

U.S. District Judge Thomas Griesa ruled in October that Argentine pension funds nationalized by that country’s government and held in the U.S. may be used to satisfy bondholder judgments against the republic. Argentina has appealed. Griesa later ordered the South American nation to turn over documents related to its pension funds to bondholders.


Argentina's Construction Activity Declined 5.5% in April From Year Earlier
Argentine construction activity fell the most in five months in April, as Argentines delayed investment plans amid the global financial crisis and political concern ahead of next month’s mid-term elections.


Mexico GDP to Sink Most Since 1932 in Fall `Hard to Fathom,' Goldman Says
Mexico’s economy will contract this year by the most since 1932 as a slump in the U.S. curbs demand for exports and slows dollar flows from tourism and remittances, Goldman Sachs Group Inc. said.

Ecuador Pays 35 Cents for Defaulted Bonds in Buyback

Ecuador paid 35 cents on the dollar to holders of as much as $3.2 billion of defaulted bonds and gave creditors a second chance to sell back their securities.

The payout is 5 cents more than the minimum price set by the government and the 30-cent payout offered by Argentina in its 2005 debt restructuring. Ecuador didn’t say how many investors participated in the buyback.

The government, seeking to pressure bondholders into participating, said it won’t improve the offer to those creditors who hold out of the buyback auctions. President Rafael Correa halted payments in December on $510 million of 2012 bonds and in March on $2.7 billion of 2030 bonds, saying the securities were “illegitimate” and “illegal.” A drop in oil exports has sparked a tumble in Ecuador’s reserves.

The repurchase prices “reflect the resources of the republic and are responsive to the majority of the offers received,” Finance Minister Maria Elsa Viteri said in a statement. “The republic will not offer equal or more favourable terms to those being offered to holders of bonds presently.”

Ecuador’s stance is similar to that of Argentina after its 2005 debt settlement. Creditors holding $20 billion of the bonds Argentina defaulted on in 2001 rejected the government’s offer of about 30 cents on the dollar. Then-President Nestor Kirchner pushed legislation through congress that blocks the government from making a second offer to creditors.

Click here to access the full article from Bloomberg

Argentina's debt; finding a middle ground

[Argentina Analysis] -- Perspective from a recent college graduate with a econ degree

Argentina's beloved Maradona

When I entered American University in 2004, one of the most popular topics of conversation among the students studying International Relations or Economics, was the Argentine economic crisis of 1999-2002.

As a young Peruvian-American, studying economics, I frequently found myself debating the event with people from all over the world, including Latinos. It seemed that students, teachers and the authors of our textbooks had all gotten together and decided to use Argentina as a prime example of how

a) The Washington Consensus had failed

b) The IMF and other regional lenders had doomed Argentina by lending money with unfair "strings attached"

Let me make one thing clear... American University is a VERY liberal school.

I quickly came to feel a consensus had been reached within the classrooms of American University (AU). Argentina emerged as the symbolic victim of IMF abuses and the misguided Washington Consensus of the 90's.

Pegging the peso to the U.S Dollar, initially a wise decision to help stem inflation, was doomed to fail from the start because there would be no way Argentina's industrial and labor sectors would be able to adjust to a appreciating dollar.

Economists and foreign policy buffs at AU did not argue the value of having a lending system, the global economy after all needs one. However, it became very easy "for the average Joe" to accept Argentina's default during this era of backlash against the Washington Consensus and also of course in the midst of a liberal University environment.

I will be posting this article on the American University Alumni LinkedIn and Facebook group, hoping to get some feedback from students currently attending. Which I will then share on ChinaSouthAmerica.com

If you have not yet heard or read, there are a few "liberal democrats" in the House of Representatives trying to get Argentina to pay up. I have included a few paragraphs from this MercoPress article which outlines their efforts.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

The bill, H.R. 2493, called the Judgment Evading Foreign States Accountability Act of 2009, would bar from US capital markets any nation that has been in default of US court judgments totaling more than 100 million US dollars for more than two years. The legislation would also require the US government to consider the default status of these countries before granting them aid.

"Argentina is ignoring billions of dollars in US court judgments, which has hurt not just US citizens, but also Argentine citizens," said ATFA Executive Director Robert Raben. "US taxpayers are still waiting to be repaid money they lent to Argentina in good faith."

The effort is being led by Representative Eric Massa, a Democrat from New York State who was raised in Argentina while his father served as US Naval Attaché in Buenos Aires. Also introducing the legislation were Representatives Paul Tonko (D-NY), Robert Wexler (D-FL), Timothy Bishop (D-NY), Carolyn Maloney (D-NY), Dan Maffei (D-NY), Mike McMahon (D-NY), Ed Towns (D-NY), and Brian Higgins (D-NY).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Generally speaking, Latin America was happy with the election of Barack Obama. Many experts believe, and I happen to agree, a new era in U.S-Latin American relations has been initiated. After eight long years of being ignored by President Bush who would argue?

In Argentina, Obama's election was welcomed by Cristina Fernandez. However, as this MercoPress article explains, Argentina's President is finding herself increasingly isolated. The most frequent visitor to Argentina has become Hugo Chavez. Fernandez has not been invited to the White House like her Brazilian and Chilean counterparts. Obama also neglected to make a pit-stop in Argentina, as he did in Mexico, on the way to the Summit of the Americas. For the third largest country in Latin America after Brazil and Mexico, this should be insulting, and... indicative of the way the international community and the United States currently view Argentina.

"Che! We got no money!"

Additionally, within the region, Argentina has ongoing political disputes with: neighboring Chile over energy exports, with Uruguay over a bridge that links the two countries, various trade disputes with Brazil within the Mercosur community, and has banned the crossing of Bolivian and Paraguayan soybeans through Argentine territory--which much infuriate two land lock countries trying to export their produce.

Joaquin Morales Solá, a leading political analyst, writing a column in La Nacion recalls, "that there have been no major foreign visitors to Argentina for over two years, precisely since then President Nestor Kirchner left the Queen of Holland waiting at an official ceremony; he never turned up and never apologized. The only and sporadic “business” visits have been from Chavez, Lula da Silva and Bolivia’s Evo Morales."

Furthermore Obama is not Bush, he’s one of the most popular world leaders and Chavez short of oil revenue can’t attack the US president. Nevertheless says Morales Solá, the only leader visiting Argentina is heading for the perfect dictatorship: a ban on the import of books and only official Chavez, Bolivar and Marx texts at school. The leader of the Venezuelan opposition and elected mayor of the country’s second largest city was forced to take refuge in Peru; the nationalization of industries, confiscation of companies and land advances since “private property” can’t be an impediment for the revolution. Chavez is determined to end with the independent media and has virtually broken relations with Israel and the local Venezuelan Jewish community.

So with all this drama... let me now ask. "Should Argentina be forced to pay back its debt to foreign creditors?

When I was a first year university student I would have answered NO. Five years later, my answer has changed, albeit slightly.

Yes, the polcies put in place by the IMF in Argentina in the late 90's were extremly unfair. I am not debating this. However, I do not think it is wise for Argentina to continue refusing to pay their debt. Ecuador recently followed in Argentina's footsteps, defaulting on their own foreign debt as bonds came due. Both countries have offered their debt holders reduced payback (ie: $.50 to the $1.00), but as of now no deal has yet to be reached with Argentina and their creditors.

According to this MercoPress article, a team of Argentine economists concluded in 2006 that Argentina's default status causes the nation to lose more than 6 billion US dollars in foreign direct investment every year, reports MercoPress in this article.

Furthermore, by the estimates of the President of the American Task Force Argentina (ATFA), Robert Raben "President Kirchner has said several times she's prepared to negotiate with bondholders, but we've seen no action whatsoever," Raben said. "Argentina has 45 billion in reserves and can afford to pay its 3.5 billion in debts to US bondholders many times over. It's time to resolve this issue for the benefit of both nations."

Of course this doesn't mean they can afford to use their $45 billion to pay off international investors... they need it for many other things like making sure the Argentine Peso doesn't slip off the fact of the earth. Nonetheless it does not help when you consider the creditors are aware of this, and that Argentina's leadership has been incredibly unwilling to compromise.

I know one thing, Latin America will continue to need to borrow money. The Bank of the South and other regional lending institutions can not replace the United States or the IMF any time soon.

Argentina can cry about how unfair the loans they must repay are, but reaching some type of deal would at least allow Argentina to gain access to international capital markets once again. For a country with so much potential, the current government really knows how to hold a grudge.

Newswire: South-South Cooperation

[China - Venezuela] -- CNPC, Venezuela Plan to Build Two Oil Refineries in China
China National Petroleum Corp. and Venezuela plan to build two oil refineries in China, Jiang Jiemin, the president of the Chinese company, told reporters in Beijing today.


[China - Trinadad & Tobago] -- Alutrint: Chinese labor needed due to lack of local expertise
China's EXIM bank placed as a condition on its consent to provide a US$400mn loan to the Trinidad & Tobago government to build the Alutrint aluminum smelter - in the La Brea region of Trinidad island - that the project hire Chinese contractor CMEC to provide labor and technology for the plant, Alutrint manager of communications and community relations Josieann Richards told BNamericas.


[China - Russia] -- Chinese Envoy to Russia: Oil Pipeline Serves Strategic Goals of Both Sides
The construction of the China-Russia oil pipeline conforms with the strategic goals of China and Russia to diversify the former's energy imports and latter's energy exports, Chinese Ambassador to Russia Liu Guchang has said.


[South Korea - Peru] -- Peru hopes to complete 70% of FTA talks with Korea this week
Peru hopes to complete 70 percent of free trade negotiations with South Korea this week because of the similarities found between the two negotiating teams, allowing them to progress quickly, Peruvian chief negotiator Nathan Nadramija said Monday.

During the first round of FTA Negotiations in Seoul on March 16, both countries successfully concluded four chapters relating to electronic commerce, border services, as well as two other chapters related to institutional issues.


[India - Argentina - Bolivia] -- Jindal Begins Producing Gas in Bolivia for Export to Argentina
India’s Jindal Steel & Power has started producing natural gas in Bolivia that will be exported to Argentina, a company executive told Efe on Monday.

Luis Carlos Kinn, manager of Jindal subsidiary Gas to Liquids Internacional S.A., confirmed the successful completion of the first production test at the well drilled in the El Palmar field, some 50 kilometers (31 miles) from Santa Cruz, the capital of the likenamed eastern province.


[Chile - Bolivia] -- Chile Open to Tunnel Proposal Giving Bolivia Access to Sea
The Chilean government is willing to study the proposal by a group of architects that would provide landlocked Bolivia with access to the sea through a tunnel to an artificial island in the Pacific Ocean.


[Venezuela - Angola] -- Venezuelan Government Bank BANDES To Open Branch in Angola
Jesus Alberto Garcia, Venezuelan ambassador to Angola, stated in an interview with Radio Nacional de Angola that Banco de Desarrollo Económico y Social de Venezuela (BANDES), the state development bank of Venezuela, will open a branch in Angola. He added, “This is one of the main things President Chavez wants to do with Africa.” Branches of BANDES outside of Latin America and the Caribbean include Syria and the Republic of Mali.


[Latin America - Spain] -- Spain Wants Closer Ties with Latin America
Spain’s King Juan Carlos and Prime Minister Jose Luis Rodriguez Zapatero said Monday that the upcoming bicentennials of Latin American independence should be used to promote Spanish and European Union ties to the region.

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.

Newswire -- Testing out mobile posting (Go blackberry)

"Argentina’s 2008/09 crop exports forecasted to drop 56%"

Argentina’s cereals and oil seeds exports are forecasted to drop to 13.8 billion US dollars in this 2008/09 crop which means 56% less compared to the 31.9 billion of the 2007/08 crop according to a paper from the Argentine Agrarian Federation, FAA.

Mercopress


"China and India post manufacturing gains"

Surveys of industry executives registered positive results for the first time in months in April, offering evidence the global economy may be through the worst of its sharpest slump in six decades.

FT - Asia Pacific


"China becomes main destination of Brazilian exports ahead of US"

China has become the main purchaser of Brazilian exports during the first quarter of this year displacing United States which held the position undisputed for decades, according to reports in the Sao Paulo press based on the latest statistics.

MercoPress


"China denies anti-Mexican discrimination"

Foreign ministry insists confinement of scores of Mexican nationals over fears of the H1N1 flu are correct procedure, not bigotry.

FT - Americas


"Japan in $100bn aid offer to neighbours"

Japan offered $100bn yesterday in financial help to Asian states hit by the financial crisis in a move aimed at shoring up its regional economic leadership, despite...

FT - Asia Pacific

Bloomberg News Wire -- International Relations, G20, Asia, Latin America, Commodoties, Emerging Markets, Equities and the crazy lady in Argentina

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G-20 Shapes New World Order With Lesser Role for U.S., Markets

April 3 (Bloomberg) -- Global leaders took their biggest steps yet toward a new world order that’s less U.S.-centric with a more heavily regulated financial industry and a greater role for international institutions and emerging markets.

At the end of a summit in London, policy makers from the Group of 20 yesterday delivered a regulatory blueprint that French President Nicholas Sarkozy said turned the page on the Anglo-Saxon model of free markets by placing stricter limits on hedge funds and other financiers. The leaders also pledged to triple the resources of the International Monetary Fund and to hand China and other developing economies a greater say in the management of the world economy.

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Emerging-Market Bond Sales Surge to Two-Year High (Update1)

April 3 (Bloomberg) -- Emerging-market governments and companies borrowed more in international bond markets this week than at any time in the past two years as interest costs plunged on optimism the worst of the global recession may be over.

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China GDP Growth May Quicken to 10% by Year End, Nomura Says

April 3 (Bloomberg) -- China’s economy may grow as much as 10 percent by the final quarter of this year as the government’s 4 trillion yuan stimulus package ($585 billion) takes effect, Nomura Holdings Inc. said.

“An investment boom led by the government’s stimulus package and a very low growth rate in the fourth quarter of 2008 may push growth to rebound to around 10 percent” by the fourth quarter of 2009, Sun Mingchun, an economist at Nomura in Hong Kong, said yesterday. The economy grew 6.8 percent in the fourth quarter of 2008.

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Chavez Says Trip to Japan, China for Financing for Oil Projects

April 2 (Bloomberg) -- Venezuelan President Hugo Chavez said he’ll seek investment agreements this week during a trip to Japan and China to secure financing for oil projects in the South American country.

Chavez is making stops in Asia and the Middle East to deepen economic ties after a plunge in oil prices forced him to cut government spending last month. He met yesterday with Iranian President Mahmoud Ahmadinejad to inaugurate a joint development bank

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Kirchner Restates Argentina’s Claim to Falklands, AFP Reports

April 3 (Bloomberg) -- Argentine President Cristina Fernandez de Kirchner reiterated her country’s claim to the Falkland Islands and called on the U.K. to renew talks on their sovereignty, Agence France-Presse rep

... is this woman smoking crack? Didn't Argentina learn that you do not mess with the British, they ruled the friggin world for nearly two centuries.

WHAT ON EARTH DO YOU WANT WITH SOME ISLAND IN THE MIDDLE OF THE ATLANTIC OCEAN, WHERE THE PEOPLE FEEL BRITISH...

China and Argentina Agree on Currency Swap --Update from IDB annual meeting in Colombia

March 30 (Bloomberg) -- The central banks of China and Argentina reached an agreement for a three-year, 70 billion yuan ($10 billion) currency swap, Chinese Central Bank Governor Zhou Xiaochuan told reporters in Medellin, Colombia, today.

It’s the first such accord between the world’s third- biggest economy and a Latin American nation. The move follows swap accords between China and Indonesia, South Korea, Hong Kong, Malaysia and Belarus.

The agreement broadens Argentina’s access to foreign- currency reserves and may ease concerns about the country’s ability to control the peso amid uncertainty over a conflict with farmers over export taxes and legislative elections scheduled for June 28. Argentina wasn’t part of a swap facility program created by the U.S. Federal Reserve for emerging markets, including Brazil and Mexico, last year.

Click here to access this full article from Bloomberg

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.

Argentina's Provinces to Share in Soy-Tax Revenues -- Latin American Herald

Argentina is creating a Solidarity Fund according to the Latin American Herald, in this article.

BUENOS AIRES – The Argentine government said on Thursday that the country’s provinces and municipalities will receive 30 percent of the revenue from a controversial tax on soy exports.

President Cristina Fernandez announced the plan in a meeting with governors and mayors at her official residence on the outskirts of Buenos Aires.


She told them she signed a decree enabling their jurisdictions to “co-participate” in the proceeds of the levy on soy exports that has sparked a year-long battle between her government and Argentina’s powerful agribusiness interests.

Fernandez said provincial administrations would share 30 percent of a “solidarity fund” financed from the 35 percent tax on exports of soy.

India -- Tata Motors a cool emerging company

New Delhi/Mumbai: The social networking era has become a great aid for the Tata Motors' Nano sale buzz to flourish in the online world. The Nano campaign, prior to its release, has been intensified through its extension to networking sites like Facebook and Orkutmaking the 'world's cheapest car' known to a larger mass.

The company targeted the online audience through its own portal, www.tatanano.com, but the networking sites triggered a gushy response with people from all over the world asking for a similar car in their land too, reports Mint. Darlene in Facebook said, "Please bring this car to Toronto, Canada!!!" while Luis recommends the manufacturer to make the car in Columbia. "You guys should make the Nano in Colombia since it would be a good place to produce them; we are in the middle of the American continent so it can be easily transported anywhere from Canada to Argentina at a lower cost," Luis said.

Click here to read more about this cool story.

Also... if you happen to be interested in Tata Motors (TTM), a company which happens to making a car which will cost between $2500-$3000 here's a bit from Yahoo Finance and how the ADR listed in the states has been performing.




TATA MOTORS LIMITED manufactures commercial and passenger vehicles primarily in India. It offers passenger cars; multi-utility vehicles; and light, medium, and heavy commercial vehicles, including mini-truck, light two-tonne truck, heavy dumpers, ... click here for more from Yahoo Finance

Might be a decent buying time for a company with a very attractive Div & Yield of 0.35 (8.90%).