Chile, Copper and BHP Billiton

Newswire / CSA Commentary --

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Chile copper output rises 7.8%

Copper output in Chile, the world's biggest producer, rose 7.8% in August from a year earlier after state-owned Codelco and BHP Billiton boosted production, the government said.

Output increased to 459,823t from 426,689t a year earlier, the country's national statistics agency said in a statement distributed in Santiago today.

Click here to access the complete article

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Likewise, as this next article exhibits, BHP’s full year profit forecast may be substantially larger than previously thought…

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BHPB profit forecast raised 22% on copper, RBS says

BHPB's profit after tax may be US$10.68 billion in the year ending June 30, analysts led by Warren Edney said in a report dated yesterday. Profit may be US$14.9 billion in the year ending June 30, 2011, up 11% on an earlier forecast, he said.

Click here to access the complete article

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However, we’ll see how this all plays out when BHP’s workers meet next week to vote a potential strike

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BHPB Chile copper workers to vote on strike next week

BHP Billiton workers at the Spence copper mine in Chile will vote whether to go on strike next week after rejecting the company's latest pay offer, a union official said...

Workers may start a strike on October 3 for an indefinite period if they fail to get more of a pay increase, Mr Ramirez said yesterday...

Click here to access the complete article

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All while yet another big player in the copper sector ups their 2010 forecast of avg copper prices

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Chile's Sonami sees 2010 avg copper price $2.50/lb

Chile's second biggest mining association, Sonami, expects the average price of copper to rise by up to 19 percent next year, which might encourage the continuation of more copper projects in the South American nation, its president told Reuters on Monday.

The average copper price may rise to $2.50 per lb in 2010 from an average of $2.10 to $2.30 this year, Sonami's Alfredo Ovalle said in an interview at a forum in Santiago.

Click here to access the complete article

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China, Costa Rica make progress in free trade talks - AFP

SAN JOSE — China and Costa Rica concluded the fourth round of negotiations in Beijing aimed at reaching a free trade agreement, according to the foreign trade ministry.

Costa Rica -- which gave up six decades of ties with Taiwan in favor of China two years ago -- is the third Latin American country to negotiate a free trade deal with China, after Chile and Peru.

In the round of talks that ended Thursday agreements were reached for more than 90 percent of each country's exports, the trade ministry said.

Costa Rican exports include coffee, bananas, fruit juices, cigars, pork, beef and chicken, said Costa Rican chief negotiator Fernando Ocampo...

Click here to access the full article from AFP

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

Newswire: Latin America - Region

[Venezuela] -- Oil-Services Law to Affect Some Foreign Companies
New nationalization legislation now in the hands of Venezuelan lawmakers will impact the operations of some oil-services companies but will leave out rig firms and large well-service firms.

Oil Minister Rafael Ramirez noted Wednesday that firms such as Williams Co. (WMB), a U.S. firm that operates a high-pressure gas compression facility in Venezuela, could be affected by the new law, but noted that oil rig firms and large service firms such as Schlumberger Ltd. (SLB) and Halliburton Co. (HAL) are not included.


[Bolivia] -- U.N. Team Documents Forced Labor Among Indians in Bolivia
LA PAZ – A mission dispatched by the U.N. Permanent Forum on Indigenous Issues reported Tuesday that it had verified the existence of Indian communities in eastern Bolivia that are being subjected to forced labor.


[Peru] -- Central Bank May Cut Interest Rate to 4% as Domestic Demand Stalls
Peru’s central bank will probably cut its benchmark lending rate for a fourth straight month today as slowing inflation allows policy makers to lower borrowing costs and bolster flagging domestic demand.


[Peru] -- Repsol to Invest $500 Million a Year in Peru, Complete Projects
Repsol YPF chairman and CEO Antonio Brufau said Tuesday that the Spanish energy giant would invest $500 million per year in Peru, completing $6 billion in oil and natural gas projects.

The Spanish oil company has a large stake in the development of the Camisea natural gas field in southeastern Peru and plans to begin exporting fuel to Mexico next year.


[Chile] -- Codelco Increases Reserves by 20 Percent
Chile’s state-owned National Copper Corporation, or Codelco, the world’s largest producer of the red metal, increased its proven and probable reserves by 20 percent in 2008, company sources told Efe on Wednesday.


[Mexico] -- Calderon Deploys Reserves as Swine Flu Depletes Mexico Financial Resources
As the sun sets on Ciudad Juarez, the Mexican border city’s citizens flee to the safety of their homes. The vendors who crowd Avenida Juarez to sell tacos and ice cream during the day pack up their carts and disappear. Hawkers who hand out leaflets for a local mall are gone too -- and the mall itself is a ghost town.

What's shakin in Latin America?

Obama leaves for Mexico and prepares for regional summit test - MercoPress

United States President Barack Obama heads to Mexico Thursday and then continues on to Trinidad and Tobago for the fifth Summit of the Americas. Security concerns along the US-Mexico border are expected to top Mr. Obama’s discussions with Mexican President Felipe Calderon, while the summit provides an opportunity to reinvigorate the US hemispheric ties and forge a regional response to the global economic downturn, according to a Voice of America report.

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Peru's economy likely to have grown 3.1% in 1Q 2009 - Andina

Lima, Apr. 14 (ANDINA).- Peru's economy might have grown 3.1 percent in the first quarter, according to the Lider index estimates, which shows economic trends in the short term, stated today the Ministry of Economy and Finances (MEF).

Peruvian economy keeps growing despite global crisis. Photo: ANDINA/Archive

This estimate is lower than the 3.8 percent reported by the Ministry in last month's report.

Under the new estimates, the economy would have grown by 2.2 in February, lower than the three percent predicted previously, however the Ministry keeps its March estimate of 3.9 percent.

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Bilateral commission to study power sales to Chile - BNAmericas

Argentine and Paraguayan government officials have agreed to establish a bilateral commission to study the technical feasibility of selling power to Chile.

The commission will have 180 days to carry out the study, Paraguay's presidential website reported.

Paraguay would receive roughly US$140mn/y from the energy sales, according to Carlos Cardozo, the landlocked country's director of the EBY joint venture, which administers the Yacyretá hydroelectric dam on the Argentine-Paraguayan border.

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Supermercados chinos - Danwei, Nancy Lu (Chinese run supermarkets in Argentina)

At first glance, this book may seem uninteresting. After all, nobody reads manuals.

But upon closer inspection, you realize that this is a Chinese-Spanish language manual for running a supermarket. Open it and you find the distinctive Rioplatense Spanish of Argentina, with useful phrases such as “Gracias a vos: 谢谢你” (thank you) or “Yo tampoco tengo monedas: 我也没有硬币” (I don’t have coins either).

One finer detail of the book is that it is written in simplified Chinese, addressed to a mainland audience. Yet the name in traditional Chinese at the bottom of the cover indicates something about the author — he is Taiwanese.

The evolution of the Chinese-run supermarkets provides an interesting snapshot of the changing Chinese presence in Buenos Aires. While most Chinese-run supermarkets were originally opened by immigrants from Taiwan, there is a shift towards these businesses being sold to and run by mainland Chinese. This book is further evidence of that trend.

Chile To Invest $30 Billion in Copper, Gold Projects - MercoPress

Investment in Chilean copper and gold projects is expected to total over $30 billion.


Chile is the world’s No. 1 producer and exporter of copper and each 1-cent increase in the annual median price of copper represents an additional $40 million for the treasury of the Andean nation. The median price per pound so far this year is $1.59, compared with $3.15 a pound in 2008.

Click here to access this article in its entirety from MercroPress

South-South Cooperation: Chile supports India as permanent member of UN Security Council - MercoPress

India and Chile reaffirmed their support for a comprehensive reform of the United Nations including expansion of the Security Council to make the world body more representative, legitimate and effective.

PM Manmohan Singh and visiting Chilean President Michelle Bachelet stressed and acknowledged the need for continued efforts by member states to ensure "meaningful and result-oriented intergovernmental negotiations".

Chilean President Michelle Bachelet with PM Manmohan Singh

The joint statement issued after the meeting said that Chile reiterated its support for India's permanent membership on an expanded UN Security Council. It also confirmed their reciprocal support for each other's candidature for non-permanent membership of the UN Security Council for 2011-12 (India) and 2014-15 (Chile).

Click here to access the complete article from MercoPress

Vice Prez, Joe Biden says "US moving towards new day in Latin America

La Nacion, a Buenos Aires based newspaper published a interesting op-ed piece today, which the Latin American Herald (access their article here).

Biden stressed the importance of the Progressive Governance conference which he is currently attending in Chile.

Joe Biden with a few South American heads of state

Biden also had the guts to acknowledge much like Hillary Clinton did in Mexico the other day that the United States must “do more” to reduce the demand for illegal drugs and stop the arms trade."

He congratulated “Mexico’s brave stand” against drug cartels and the “efforts” of Colombia to combat drugs, but warned that these “will have the secondary effect of pushing traffickers towards Central America.”

“The world economic crisis has affected almost everyone. Citizens of all countries are looking for answers, looking for hope, and for that they turn to their leaders. It is our duty, as partners, to listen to their plea and together forge the solution to a shared problem, explained Biden.”

Green investment in Chile -- Irish firm to invest $1 billion in wind farms

Ireland's Mainstream Renewable Power has just announced plans to invest more than $1 billion in Chile over the next five years in the construction of wind farms, according to company CEO, Eddie O'Conner.


Mainstream Renewable Power will partner up with Andes Energy, Chilean energy company in order to lay the foundation for a system which will generate more than 400 MW of electricity.

O'Conner presented a report to the Chilean Energy Minister Marcelo Tokman this past Tuesday outlining how if certain strategies are implemented correctly it would be possible for Chile to achieve energy independence.

“Our research shows that Chile has the natural resources to develop 44,000 megawatts of wind energy and another 37,000 of solar energy. Renewable energy resources alone can turn Chile into an exporter of clean energies.” O’Connor said.

Bolivia... still trying to regain lost land from the War of the Pacific (1879-1883)

Don't be ashamed if you're asking yourself, "what the heck is the War of the Pacific?" Well don't feel too bad, the majority of people who even claim to be history war buffs are largely ignorant to the fact that there have even been regional wars in South America.

The War of the Pacific (1879-1883) is one of the major wars waged between South American nations. The war escalated over territory disputes along the old boarder region of Peru, Bolivia and Chile.

Naval Battle of Iquique: the Esmeralda versus the Huáscar

If you are interested, check out the surprisingly comprehensive Wikipedia page on the war.

Basically I'll break down the history of the war as follows. Just keep in mind I am a Peruvian-American, so I may be a little bias and my quick synopsis may be full of typical South American cliche's...

Once upon a time, in a land to the South, there was this barren and skinny country known as Chile. Despite having virtually no natural resources, Chile was working its heart out to make something of itself in the tumultuous reality of the late 19th century.

Bolivia on the other hand, was and still is, a country with a abundant supply of natural resources. Sadly, much like how the Spanish squandered all the wealth they stole from Peru and Bolivia, the left over remnants of the conquistadors were running the country as if they were still living the life of a aristocrat in Spain back in the 17th century.

When it came time to work out a plan for doing business with Chilean ventures edging up Bolivia's old coastal province of Antofagasta, Bolivia decided to create a very unfair business environment which essentially leached from the profits of Chile's new enterprises.

Economically speaking, Peru at the time was stuck somewhere in between Chile and Bolivia . Like Bolivia, Peru has a great deal of natural resource wealth. The difference between the two was that thanks to commerce and a friendlier terrain, Peru had a bit more than Bolivia going on in terms of entrepreneurial spirit.

However, at the time Peruvians thought their shit smelled better than the rest of Latin America because the country had been Spain's hub when it owned much of South America. Peru being a pompous country (with nothing to back it up), decided to support Bolivia when the arguing with Chile turned violent.

Chile was the best prepared for war of the three. Chile's military had recently inherited some nice Prussian (German) soldiers from Europe who knew what they where doing, compared with the now out dated left-overs of Peru and Bolivia's Army and Navy from colonial times. Furthermore, when considering the way things escalated, Chile had the most incentive to expand its boarders.

When war broke out, Chile spanked Peru and Bolivia, over-powering their armies with ease.

Chile even had the guts to March its army through Peru's capital, Lima. This event is remembered much like Hitler's escapade in Paris with the Nazi Army. EMBARRASSING to think about as a Peruvian to this day, but no less well deserved historically speaking.

Chilean Army marching on Lima in January, 1881

Once the war was over, Chile had claimed two provinces of Peru and one of Bolivia's. Flash forward a few years and these regions are now Chile's prize possessions. Lucky for the Chileans, the provinces they won (or took away depending on your perspective) are loaded with valuable base metals like copper, zinc and gold.

Here's a map that shows the territories Chile claimed from Peru and Bolivia. Yes Peruvians remain bitter about this mis-hap in their history against their southern rival Chile. Bolivia as you can see lost it's one exit to the Pacific, creating a land-locked country.

A little unfair yes... Especially for a country with some of the most treacherous terrain in South America and one which remains one of the poorest in the region to this day. As history shows, this is sadly how the cookie crumbles and I seriously think the US will hand Texas back to the Mexican's before Chile cedes any land it won from Bolivia over 100 years ago back.

The new map after the war

Now that you have some context, check out this article which describes how President Evo Morales of Bolivia is once again trying to get the land it lost to Chile back.

South-South Cooperation -- Chile and Pakistan

Eni has signed a Protocol for Cooperation with the Government of Pakistan aimed at developing new, important projects in the upstream, midstream and downstream sectors in the country.

The agreement further strengthens relationships between Eni and Pakistan, as it makes available exclusively to Pakistan state oil companies the capabilities, the know how and the innovative technologies developed by Eni in the oil sector, especially in terms of efficiency in exploiting hydrocarbon fields. The agreement also enables Eni to become a strategic partner in developing the oil & gas sector in Pakistan and to enter fields which are so far managed by state-run oil companies.

Click here to access this article from Rigzone

ENERSIS (ENI) 2 year

Australia Chile free trade agreement becomes effective

The Australia-Chile Free Trade Agreement came into force on Saturday 6 March, the first trade agreement between Oceania and a Latin American country. Besides trade the agreement covers services, investments, government purchases and intellectual property plus a special chapter on academic and scientific cooperation.

(MecroPress Article)

Chilean & Argentine Law makers Stake Antarctic Claim

Ten Chilean and Argentine lawmakers gathered Thursday in the Antarctic to stake territorial rights after the U.K. laid claim to a wide swath of ocean bottom off the frozen continent, officials said.

The aim of the meeting "is to strengthen our nation's legal position in the Antarctic Territory...and to support all the legal instruments of the Antarctic Treaty System, or ATS, including the (1998) Antarctic-Environmental Protocol," Chile's Chamber of Deputies said in a statement.

Click here to read more on this development from Rigzone

Enap, Chile's state oil company declares $958 mil net loss in 2008

Chile's state oil company, Enap, the second largest company in the country after copper giant Codelco (according to this FT article) declared a $958 million net loss in 2008 yesterday.

Enap produces 230,000 barrels of oil per day and 13m cubic meters of fuel a year. The company also has interests in Argentina, Ecuador, Egypt and Iran and . It supplies about 85 per cent of Chile’s fuel needs and exports to Central and South America.

Sadly, Enap is what will go down in history as a classic victim from the volatile markets of the world economy during the global economic crisis of 2008-2009.

Record high commodity prices reached in 2007-2008 forced Enap to purchase a great deal of the crude it refined for use in the domestic economy for around $140 a barrel. When oil prices dropped to $34 a barrel in December, the company was forced sell its refined crude products for the lower market price. In all, this macro swing in the global economy cost the company around $650 million.

Two other factors also contributed to the loss. Drought in northern Chile forced Enap to shut down some hydroelectric plants. Second internal problems in Argentina lead the government to implement subsidies on petrol products, igniting demand in Argentina. When push came to shove and Argentina realized there wasn't enough gas to go around, the country diverted some of its supplies meant for Chile to the domestic economy. Thus forcing Chile in both instances to import energy from new and more expensive sources.

All in all a bad year for Enap in the global economy.

According to this FT article, Enap has pinned its hopes on hydrocarbons exploration in the Magallanes region in the far south of Chile, but the state auditor has raised questions about the viability of the project, and Enap has yet to announce whether it will go ahead.

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)

FT Commentary -- How are frozen credit markets and the global slowdown being felt down in South America?

Stephen Fidler put together a great piece on January 8th where he presents various perspectives and analysis from South America on how the global crisis is affecting the region.

Across the continent, the crisis has brought about a large-scale destruction of wealth. Claudio Loser, a former western hemisphere chief at the International Monetary Fund, calculates that 40 per cent of Latin America’s financial wealth was wiped out in the first 11 months of 2008 through falls in stock and other asset markets and currency depreciation. That $2,200bn (£1,440bn, €1,610bn) loss alone could cut domestic spending by 5 per cent next year, he estimates.

On top of that, flows of credit from abroad have contracted sharply and the region, much of which depends on exporting raw materials, has been pummeled by a collapse in commodities prices. The deterioration in Latin America’s terms of trade – the price of exports divided by the price of imports – could hit even harder than the credit crisis, says Mr Loser, now with the Inter-American Dialogue, a Washington think-tank. “The fact that the terms of trade have gone so far against the Latin American economies in terms of agriculture, minerals and petroleum is really going to hit the region very hard,” he says.

Click here to access the full article from the Financial Times

Copper prices in 2009 and 2010

Chile's state copper commission Cochilco predicts the price of copper will average $1.60/lb in 2009 and $1.50/lb in 2010.

Cochilco executive VP Eduardo Titelman explained at a Santiago news conference that the demand for copper in 2009 and 2010 is likely to be "modest."

Considering Chile is the world's biggest producer of copper, it is good the country invests a lot of energy into copper forecasts. Check out the chart on this post from IncaKola News comparing Cochilco's copper forecasts with the real market prices between 2005 - 2009.

I'd say they do a pretty decent job, most of the time that is...

For major copper producers like Chile and Peru this might spell bad news. Both depend heavily on copper which in 2007 averaged $3.23/lb. If Cochilco's predictions are correct, the two countries should trim their spending over the next two years.

However this may prove difficult for Chile and Peru to do with upcoming elections and the looming global recession in the background. Chile is fortunate to have stashed away significant reserves from the boom years. Peru is not as lucky and will find it even more difficult to trim its spending than it's southern neighbor which has proved on various occasions it is far more capable of exercising restraint and making sound economic decisions when necessary.

Economics in play -- mixed messages from South American commodity producers

The current economic crisis has hit commodity producers in South America hard. All the talk about decoupling, booming domestic demand and well planned budgets will be tested as commodity exports plummet.

The big names in financial news (Reuters, Bloomberg, FT) reported this morning Brazil, Colombia and Chile have plans to sell bonds in international markets. All three of these economies depend heavily on revenue which is derived from commodity exports The recent tumble in commodity prices is not welcome news for these countries, which until just recently where some of the fastest growing emerging markets in the world.

Bloomberg LP reports Brazil will sell $1 billion of 10 year-notes, Colombia plans to raise what it calls a “benchmark offering” of roughly $500 million, and Chile has yet to release a figure on how much it will raise but its finance minister has confirmed it is very plausible the country will indeed issue its first foreign bonds since 2003 in order to help fun its fiscal stimulus plan.

(click here to access the full article from Bloomberg LP)

More bad news was released this morning when Brazil reported Industrial output dropped the most in 7 years. This is not a good sign. Internal demand from consumers in countries like Brazil and China remains high, but is not sufficient to keep these economies growing at the rates they have enjoyed during the past few years.

According to economists at Bloomberg, Brazil will expand at its slowest pace this year since 2003. Growth forecasts made by the Central Bank of Brazil are being cut in half for 2008 and economists are now predicting interest rate cuts later in January.

(click here to read more on this topic from Bloomberg LP)

One bit of good news comes from Braskem SA, Latin America's largest petrochemical company. It is currently in the midst of a 4-day rally in Sao Paulo trading. The gain comes as Peru announced plans to construct a new petrochemical plant in the southern port of Marcona.

Braskem, has been actively seeking natural gas and raw materials at competitive prices in South America. Peru has lined up $8 billion for its energy industry. Additionally, Braskem already had plans to build a plant in Peru that would be supplied by the Camisea gas fields.

(click here to access the full article from Bloomberg LP)

Recent developments in Peru seem to have bolstered investor confidence in the company which had previously been exploring natural gas investments in Bolivia and Venezuela. In both cases, there were various difficulties that emerged in working with the governments of Morales and Chavez. It seems, Braskem's new choice of opting to work in Peru is being interpreted by the market as the correct one.

I find it pretty interesting, that the mere construction of a Petrochemical plant in Peru, can turn the heads of investors and cause a petrochemical company trading in Brazil to go on a 4-day rally. It just shows how markets can move based on people's perception of regions they know little about.

I just hope investors realize that the rosy picture the international financial community paints of Peru may change if the government continues to fail at bringing prosperity the more remote regions of the country where much of Peru's raw materials are extracted from. For now though it seems the investors are content with Braskem's decision to avoid working with the left wing, anti-American regimes in Bolivia and Venezuela...

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.

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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...

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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...

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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...

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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...

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Latin America in focus: Commodities, food and South-South Cooperation (delayed post from Oct 30)

1) Brazil Petrobras agrees to explore for oil offshore Cuba – Benito's take

Brazil frequently enjoys assuming the role as a leader in the developing world of promoting South-South Cooperation.  This time the nation has agreed to help Cuba explore for oil and gas. Brazil's Petrobras is expected to sign an agreement with Cuba for deep-water oil and gas exploration during President Lula da Silva's two day visit to the island this week.

Cuban media is reporting both sides will “sign a contract for the production of hydrocarbons.” No further details have been reported, but the Cuban Foreign Minister Felipe Perez Roque has stated he “anticipates Cuba will sign in the presence of Lula da Silva a very important agreement for oil exploration in deep water.”

Although the details are shady at best, it no less is a sign of Brazil further developing its reach in promoting economic cooperation among developing nations, with the pretext of mutual economic development.

To read more about this development check out this article published by Merco Press.



2) Petrobras Transpetro unit won't delay 49-tanker plan (update 2) courtesy of Bloomberg LP

Oct. 30 (Bloomberg) -- The transport unit of Petroleo Brasileiro SA will be able to maintain a 49-ship fleet expansion program because it has sufficient financing from a government fund and can ignore the world credit crunch, the unit's president said.

Brazil's Merchant Marine Fund, managed by state-development bank BNDES, has enough cash to pay the $2.5 billion needed for 26 tankers that have already been ordered, said Sergio Machado, president of Rio de Janeiro-based Transpetro, as the unit is known. The fund can also finance another 23 ships that will be ordered by the end of the year, he said.

State-controlled Petrobras, as Transpetro's parent is known, may delay some investments as oil prices fall and credit becomes scarce, Chief Executive Officer Jose Sergio Gabrielli said Oct. 20. The credit crunch may force the cancellation of 20 percent of the deepwater oil rigs under construction, Brian Uhlmer, analyst at Pritchard Capital Partners in Houston, said.

``Everything regarding our shipbuilding program is defined and is part of Brazil's strategic plan,'' Machado said in a phone interview from his office. ``The Transpetro program is fully financed.''

Click here to access the full article from Bloomberg LP



3) Favorable 2009 beef export prospects for Brazil and Argentina, courtesy of Merco Press

Beef exports are forecast to rise nearly 2% during 2009 as gains by Brazil, Argentina and the United States outweigh downturns in Australian and New Zealand shipments according to the US Cattle network.

As the world’s leading trader Brazilian exports are forecast to spring back nearly 5% to over 2.0 million tons. Shipments are projected to decline in 2008 for the first time since 1996. However, by overcoming sanitary barriers, it is now poised to regain sales to Chile, EU-27 and other key markets...

...

In Argentina exports are forecast to expand 20% to 480,000 tons in 2009 after plummeting an expected 25% in 2008.

The rebound stems from the Argentine government setting a higher export quota, cattle and beef supplies not expected to be limited by farmer strikes, and thermo-processed product to be exported outside of the quota.

Click here to access the full article from Merco Press



4) Venezuela books 10.252 billion barrels more in oil reserves, courtesy of Dow Jones Newswires

Venezuela said Wednesday it was adding 10.251 billion barrels of crude to its national reserves as part of an ongoing review of its hydrocarbon reserves.

With this increase, the oil-rich country's total reserves now amount to 152.561 billion, making Venezuela the country with the second largest crude reserves, the Venezuelan oil ministry said in a statement.

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http://www.rigzone.com/news/article.asp?a_id=68576

5) Chile trims 2008 copper output forecast again, courtesy of the Mining-Journal

Chile on Wednesday trimmed its 2008 copper output forecast for the second time since July, this time to 5.45Mt, citing operational issues but not slumping prices for the metal.

Limited financing due to the global credit crisis may delay or cancel some new projects, said Eduardo Titelman, executive vice-president of Chile`s state copper commission Cochilco, one of the world`s leading copper think-tanks.

Copper prices rose above US$2/lb on Wednesday, but they remained less than half the record levels of over US$4/lb hit in July. A global credit crunch and fears the world could enter a recession have hit demand for metals like copper, heavily used in the auto and construction industries.

Click here to access the full article from the Mining-Journal

http://www.mining-journal.com/Breaking_News.aspx?breaking_news_article_id=5174