Peruvian Micro-Entrepreneurs head to China

It’s been awhile since CSA last ventured into the world of MicroFinance. Well today some news caught my attention.

About sixteen Peruvian Micro-Entrepreneurs (if that’s the correct term to call them) from various sectors will travel to Guangzhou, China to participate in the 106th Guangzhou Import and Export fair. With a total of 209 countries in attendance, and thousands of exhibitors, this is a big deal for these small Peruvian businesses.

I question if these business are truly worthy of being called the products of micro-finance. I hope that they are, but my gut is telling me it’s quite possible corruption and classic South American favoritism probably led the Peruvian government to carefully handpick a few to send to China.

Ministra de la Producción, Mercedes Aráoz, inauguró Feria de Beneficios
y Oportunidades de Foncopés en IPAE. Foto: ANDINA/Norman Córdova.

On the other hand, if they are truly small micro-enterprises which earned this trip to China through participating in a micro-finance program of some sort, this would be a case and point example of the potential of micro-finance institutions to empower the poor with the tools they need to succeed.

If you can read Spanish please click here to access the article which served the basis for this post.

Strike continues at Shougang in Peru (update)

Reuters released their latest update on the ongoing strike occurring at Chinese owned iron ore mine, Shougang.

LIMA (Reuters) - Shougang Peru operations stopped by strike

Shougang Hierro Peru, the country's only iron ore producer, said on Monday a week-old strike at its mine had halted production and slowed mineral shipments.

The company's comments were its first since some 1,200 workers walked off the job more than a week ago in a bid to pressure Shougang (SHP.LM: Quote) to raise wages.

"Workers are on strike, therefore (the mine) is not producing," Raul Vera, Shougang's chief executive, told Reuters.

Click here to access the complete update on the situation, courtesy of Reuters

Reuters Update: Strike at Shougang Peru mine enters fifth day

A strike of some 1,200 workers at Shougang Hierro Peru (SHP.LM), a unit of China's Shougang Group, entered its fifth day on Friday with no end in sight, union leaders said.

"We don't see a solution, there's no dialogue with the company," said Julian Sulca, a union official.

Click here to access the full article from Reuters

Protests erupt in Peru at Chinese owned miner Shougang

Reuters reported a few days back that workers at the Chinese owned Shougang Hierro Peru (SHP.LM), which happens to the only iron producer in the country of Peru, were planning a strike.

Well today the workers took action. A leader of the workers union told Reuters reporters "that all 1,200 workers at the mine had joined the labor action."

More updates to come in the days to come. Click here to access the Reuters wire on this story directly.

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

Newswire: South America

[Brazil] -- Brazil strengthens state control over offshore oil reserves -- Xinhua
Brazil announced on Monday new oil exploration rules to increase state control over its recently discovered offshore oil reserves.

Under the plan, the state-owned oil and gas giant Petrobras will be the sole operator of the new oil reserves. It will also have a minimum 30-percent stake in all future projects in the pre-salt layer fields.

Brazil Tries to Maximize Offshore Oil Bonanza-- Latin America Herald Tribine
Brazilian President Lula revealed the government's plans to make Brazil one of the top 10 oil producers in the world and develop what he believes are the world's 9th largest oil reserves, but his announcement of increased state control and further equity sales shook markets, causing Petrobras to lose $7 billion in value in one day.

Petrobras Loses $7 Billion Value as Lula Seeks Stake -- Bloomberg
Brazilian President Luiz Inacio Lula da Silva’s plans for the development of the country’s offshore oil fields stripped Petroleo Brasileiro SA investors of $7 billion in a day.

The proposal, announced yesterday, may allow the state to boost its stake in the company and ensure most income from oil exploration “stays in the hands of our people,” Lula said at a press conference in Brasilia. Petrobras, as the Rio de Janeiro- based company is known, led the Bovespa stock index to the biggest drop in the Americas yesterday after the announcement.


[Venezuela] -- Chavez Says Venezuela Will Continue Oil Exports to U.S. -- Latin America Herald Tribine
Venezuelan President Hugo Chavez said that his country will continue exporting oil to the United States because it is in the Andean nation’s interest.

Chavez said in a statement published in the Lima daily El Comercio that “many people don’t know” that Venezuelan state oil giant PDVSA, through its Citgo subsidiary, has seven large refineries and more than 10,000 service stations on U.S. soil.

“Venezuela can’t take a decision against ourselves. We send the oil to our refineries and to our distribution systems in the United States,” he said.

Caracas Stock Market Up 3% for the Week -- Up 41% for the Year -- Latin America Herald Tribine
The Caracas Stock Index rose 3.16% for the week to close at 49,507 mostly on the back on the continued rise of Sivensa shares on continued optimism over the buyback of its shares to be considered at its shareholders meeting next week. Sivensa shares rose sharply, closing at Bs. 16.5 for a 37.5% rise.


[Peru] -- Two Wounded in Rebel Attack, Peruvian TV Reports -- Latin American Herald Tribine
At least two soldiers were wounded in an attack apparently mounted by Shining Path guerrillas Monday against a counterinsurgency base in central Peru’s Junin province, Canal N television reported.

The guerrillas opened fire around 3:30 a.m. on the Jose Olaya base in the strife-torn Valley of the Apurimac and Ene rivers, known as the VRAE region, Canal N said.


[Bolivia] -- Morales Named “World Hero of Mother Earth” by UN General Assembly-- Latin America Herald Tribine
The president of the United Nations General Assembly, Rev. Miguel D’Escoto Brockmann, on Saturday declared Bolivian President Evo Morales as “World Hero of Mother Earth” in a ceremony at the presidential palace in this capital.

With a medal and a parchment scroll, the General Assembly of the United Nations Organization named Morales “the maximum exponent and paradigm of love for Mother Earth” in the resolution for his decoration that was read during the ceremony.

Bolivia Cries Foul Over Peru Plans for Drilling in Titicaca -- Latin America Herald Tribine
Bolivian President Evo Morales’ government will present a formal complaint to Peru over its plans to drill for oil in Lake Titicaca without consulting La Paz, state-run news agency ABI reported.

Hydrocarbons Minister Oscar Coca sent Bolivia’s Foreign Ministry a note requesting that a formal complaint be made since the body of water straddles the border between the two nations, ABI said.

“Since Lake Titicaca is a bi-national area, it’s obvious that there can’t be unilateral actions” and therefore the matter requires a diplomatic solution, Coca said.


[Cuba] -- Cuba endeavors to raise farm output amid economic downturn -- Xinhua
Pressured by a global economic crisis and a stern U.S. economic blockade that has lasted nearly half a century, Cuba is actively seeking ways to boost its agricultural production.

The measures include turning over land close to cities to residents to plow, replacing fuel-burning tractors with oxen, redistributing fallow land and raising the prices of state-regulated farm products.

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,”

Newswire: South-South Cooperation

[Peru – Brazil] - Eletrobrás sets sights on Peruvian generator – BNAmericas

Brazilian federal power holding company Eletrobrás (NYSE: EBR) is planning to buy a Peruvian generator to participate in an upcoming hydro auction in Peru, company CEO José Antonio Muniz Lopes told journalists. The executive declined to say which generator Eletrobrás was looking to acquire but said the purchase was essential for the Brazilian holding group to operate in Peru.


[Peru – Brazil] – Brazil, Peru Work Out Details of Hydro Plants – Latin American Herald

Energy ministers from Brazil and Peru announced details of plans for several hydroelectric plants to be built in the Andean nation, saying after a meeting that 80 percent of the energy generated by the stations would go to Brazil and the rest to Peru.

Both partners will have the right to sell their respective energy quotas to other South American countries, Brazilian Mines and Energy Minister Edison Lobao said Friday after a meeting in Rio de Janeiro with his Peruvian counterpart, Pedro Sanchez.

The first five power stations – to be built in Peru’s eastern lowlands at a cost of between $12-15 billion – will generate a combined total of 6,000 megawatts annually once they come on stream in 2015.


[Peru – South Korea] - Peru, S Korea examine tomorrow progress of APEC bilateral agreements – Andina

Peru and South Korea examine on Wednesday the progress of the bilateral agreements achieved by Presidents Alan Garcia and Lee Myung-bak during the summit of leaders of the Asia Pacific Economic Cooperation (APEC) held in Lima in November 2008, the Korean Embassy reported. "The agreement achieved last year includes mutual cooperation in oil, mineral and natural gas sectors", the Ambassy reported.


[Peru – Japan] - Peru, JICA to invest US$ 23.3 million in 6 new docks in Peru – Andina

Peru’s Government and the Japan International Cooperation Agency (JICA) will invest 70 million soles (around 23.7 million dollars) in the construction of 6 new docks located along the Peruvian coast, reported today Production Minister Mercedez Araoz.


[Venezuela – Russia] - Russia Promotes “Energy Alliance” with Venezuela – Latin American Herald

Prime Minister Vladimir Putin said Tuesday he was ready to promote an “energy alliance” of global oil giants Russia and Venezuela, and confirmed his willingness to study Caracas’ requests for additional arms purchases.

Putin told Venezuelan Energy Minister Rafael Ramirez that Russia will employ “the most modern equipment and technologies” to carry out plans for cooperation with Venezuela in the oil and gas sector.


[Venezuela – Brazil] - Brazil To Export Coffee Immediately to Venezuela – Latin American Herald

The accord was struck by representatives of the ministry and the state-run firm Cafe Venezuela last Friday and represents $4.1 million in revenue for small producers and family cooperatives in southeastern Brazil.

Peru lowers interest rates to 2.5%

Peru's macro economic picture is not as hot as one might think from
watching Bloomberg anchors on live TV talk up how the country's stock
index is one of this year top performing, year to date. Ironically
the following excerpt is also from Bloomberg
(http://www.bloomberg.com/apps/news?pid=20601086&sid=a0pA8xgoGZi8)

Peru's central bank will probably cut its benchmark lending rate for a
sixth month today after consumer prices fell for a second month and
the economy shrank for the first time in almost eight years.

The seven-member board, led by bank President Julio Velarde, will
lower its reference rate by a half-point to 2.5 percent from 3
percent, according to 11 of 20 economists surveyed by Bloomberg. Nine
analysts expect a one-point cut.

The global financial crisis has blunted demand for Peru's exports and
sapped domestic spending, reining in economic growth and consumer
prices. The economic slump, deflation and local currency gains will
push the bank to extend its longest rate cutting cycle on record, said
Neil Shearing, an emerging markets economist at Capital Economics Ltd.

"There's been very aggressive action across the region to combat this
slump," Shearing said in a telephone interview from London. "Cuts will
continue, but will probably slow to see the effects of earlier
rate-cutting."

--
Sent from my mobile device

Benito
International Trade Consultant
Mir Global Marketing LLC
http://www.mirglobalmarketing.com
http://www.chinasouthamerica.com

Asian smelters to benefit from Doe Run Peru shutdown

Doe Run Peru shut down its lead and zinc smelter on June 2 after the company ran out of money and credit, therefore rendering it unable to buy the raw materials being produced at near by mines.

According to this Bloomberg article, guess who's stands poised to benefit from this? You guessed it Asia's smelters, who despite the global slow down remain hungry for
more.

Alex Emery in Lima down in Lima writes:

Glencore International AG, the world's biggest commodities trader, and Trafigura Beheer BV are benefiting as suppliers of Doe Run Peru's shut lead and zinc smelter seek international traders to sell their concentrates.

"We're looking for more clients abroad, particularly Asian smelters," to buy the extra production, Glencore's Peruvian manager Fernando Cafe said in a July 3 interview.

Cia. De Minas Buenaventura SA, Pan American Silver Corp. and about 30 other miners in the central Peruvian Andes have had to seek alternative buyers after the Renco Group Inc. unit smelter ran out of cash and halted all operations on June 2...

To read the complete article please visit the complete Bloomberg article.

Peru ETF (EPU) launched Monday, June 22

Peru's first exchange traded fund, MSCI All Peru Capped Index Fund (EPU), started trading yesterday, Monday June 22, 2009.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Seeking Alpha Reports:

The iShares MSCI All Peru Capped Index Fund (EPU) will allow US investors to easily access one of Latin America's hottest markets by tracking a pure free float market cap weighted index. Its 25 names are heavily concentrated in the materials sector (65%), with a particular focus on gold, silver, and copper. Its largest holding at 19% Cia De Minas Buenaventur (BVN) who produced nearly half a million ounces of gold last year (compared to Goldcorp's 2.4), and its second largest at 15% is Southern Copper (PCU), the biggest player in the world's fourth largest copper producing nation.

The fund also holds an 11% weighting in Credicorp (BAP) - Peru's largest financial firm with operations in commercial banking, insurance, and investment banking - whose shares have held up well during the crisis, and several smaller miners with operations in lead, zinc, and iron.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Now then... it is time for a few "million dollar questions.

a) Does this ETF facilitate investment in Peruvian equities for international investors?
Yes, as one of the world's best performing benchmarks of the year, loaded with companies seeing gains of well over 60-70% from the beginning of 2009, it will indeed offer investors a way to tap into these companies not listed via ADR's or OTC.

b) Does this ETF accurately track a Peruvian benchmark , like the Lima General Index?
Time will tell. ETF's always claim that they do, but I won't fully believe it until I see hard data supporting such. This ETF does not track Peru's Lima General Index, but rather MSCI All Peru Capped Index. Click here to access a PDF that explains the methodology behind MSCI All Peru Capped Index.


c) Is now the right time to invest?

Here are some factors to consider when doing your own due diligence:

• Markets around the world are down and it seems the downward trends in recent markets might continue throughout the summer months.

• Copper, gold and silver have already had pretty amazing run ups in recent months and are Peru's crown jewels of commodity exports (yes there are others like zinc, but lets emphasize these major Peruvian money makers for the time being).

• Volatility due to the political risk associated with the upcoming Peruvian elections in 2011 which pit two extreme candidates of the left and right against one another. Ollanta Humala, the left-wing buddy of Chavez and Keiko Fujimori, right wing, daughter of former president & dictator Alberto Fujimori.

• Recent political unrest in the Amazon region which only calmed down after heated disputes between the government and indigenous protesters lead the deaths of many Peruvian police officers and the massacre of protesters, forced to rely on wooden spears to defend themselves against high powered weapons. *** Note, this is the opinion of this sites humble and open minded Peruvian-American blogger, who can trace his ancestry on his maternal grandfathers side back to the amazon provinces of San Martin and Amazonas, Peru.

• Perceived instability (political and financial) as a result of plummiting approval ratings of President Alan Garcia, who was instrumental is creating the climate for the recent protests in the Amazon--contrary to the popular belief of those who believe his propaganda. Garcia's administration loves to blame Hugo Chavez and Evo Morales for everything wrong with Peru and as crazy as it might be, it is a great deal like Ahmadinejad in Iran who blames the West whenever something goes wrong.

I have used this statement from Iran's state television station about the protests occurring right now to articulate my point.

"At least 10 people were killed in the latest unrest to shake Tehran (Bagua), state television said on Sunday as Iranian leaders (President Garcia's administration) took aim at Western "meddling" (Hugo Chavez and Evo Morales "meddling") in the post-election tumult (Peruvian Amazon Region) that has triggered the worst crisis since the Islamic revolution (the worst political unrest in his Presidential Term).

Invest wisely my friends! More to come on this topic at the end of the week.

Analysis by Benito

Peruvian Ambassador enlightens the U.S. with his overview on recent conflict in Bagua

Peru's Ambassador to the United States presented his overview of the recent clashes / massacre / protests (depending on what you call it) in the Peruvian Amazon to The Council of the America's today in Washington D.C.

The Council of the America's summarizes this wonderful treat from Peruvian Ambassador, Luis Valdivieso as follows:

Security forces clashed with indigenous groups protesting the development of ancestral lands for oil and natural gas extraction in recent week. The ambassador provided an overview of the current situation, discussed Peru’s legal framework for sustainable development, and highlighted actions taken by the government toward a long-term solution, including the decision to postpone the implementation of land-use laws. He noted that a permanent solution must include dialogue with indigenous groups, the participation of civil society, and respect for democratic principles.

Click here to view/ download a PDF of the PowerPoint show Luis Valdivieso must have used when giving his presentation. I don't believe you will need his assistance in narrating the slide show.

A interesting download and read for readers not too familiar with the geopolitics of Peru. However, if you are looking for the real deal on the situation down in the Peruvian Amazon, I would not get your hopes up.

The PDF is full of fancy graphics from INEI, the National Institute of Statistics of Peru. The problem is that INEI no longer produces legitimate economic data, as Otto from IncaKolaNews and Farid Matuk explain in their respective web sites.

Farid Matuk if you didn't know was the old head of the office until President Garcia replaced him with some of his loyal chronies. You can read more about how the government replaced him and how he is now accusing the goverment of persecution in this article (in Spanish), from the usually very pro-government Lima newspaper, El Comercio.

How much of this map will be red when The Economist does a story on this in 20 years?

Oil and land rights in Peru -- Blood in the jungle

FOR seven weeks tens of thousands of Amazonian Indians blocked roads and rivers across eastern Peru. They seized hydroelectric plants and pumping stations on oil and gas pipelines to try to force the repeal of decrees facilitating oil exploration...

Peru -- Police clash with the indigenous community

AlJazeera English

Dozens of people have been killed in clashes between indigenous people and police in Peru.

The Indians have been protesting against laws which will open up communal jungle lands and water resources to oil drilling, logging and mining.

Al Jazeera's Teresa Bo reports from Bagua Grande in Peru.

Massacre in the Peruvian Amazon

My own personal analysis and more in depth coverage to come tomorrow. Had a very hectic day that kept me away from posting on this, very relevant and important story to get out to the world.

For now, if you have yet to read... please check out some of the following sites.

1. Peruanista -- Gives a summary of all major news sites, from AP, to Reuters to Al Jazeera

2. IncaKolaNews

3. United Nations

The Chair of the Permanent Forum on Indigenous Issues (UNPFII) expresses her shock and deep distress at reports received of atrocities committed starting 5 June against indigenous peoples in the Amazon region, resulting in the loss of lives, disappearances and grave injuries. The Chair sends her deepest condolences to the families of the victims. The Chair calls upon the Peruvian Government to:

* Immediately cease all violence against indigenous communities and organizations,
* Ensure immediate and urgent medical attention to the wounded and assist the families of the victims,
* Abide by its national and international obligations regarding the protection of all human rights, including the rights of indigenous peoples and human rights defenders, especially their right to life and security.


Victoria Tauli-Corpuz

President
United Nations Permanent Forum for Indigenous Issues


4. Reuters

By Marco Aquino - Reuters

TARAPOTO, Peru June 6 (Reuters) - Hundreds of indigenous protesters were holding 38 police hostage early on Saturday in Peru's Amazon jungle after fights between tribes and police killed up to 33 people in the worst violence of President Alan Garcia's government.

Demonstrators also were threatening to set fire to an oil pumping station of state-owned Petroperu unless the government told police to halt efforts to clear weeks of blockades of roads and rivers that have hurt food and fuel supplies.

Tribes, worried they will lose control over natural resources, have protested since April to force Congress to repeal new laws that encourage foreign mining and energy companies to invest billions of dollars in the mostly pristine rainforest.

Violence broke out on Friday as police tried to disperse a roadblock on a stretch of highway called "Devil's Curve" in the Bagua region of Amazonas province, about 870 miles (1,400 km) north of Lima, the capital.

Indigenous leaders said at least 22 protesters were killed. The government reported the deaths of three protesters and 11 police officers, some from spear wounds. At least 100 people were injured and more conflict appeared possible.

Click here to read the full article from Reuters

Peru ETF to start trading this month reports Bloomberg

Are you a international investor with a global perspective? Are you looking to get in on all the action down in Latin America? Well now is the time to consider jumping on board the "Peruvian growth miracle?"

Before you do however, I implore you to proceed with caution if you decide to park your hard earned currency in Peru. As always, it would be a good idea to do your own due diligence and listen to what your textbook, academic gut feeling has told you about Latin America since you started reading about continent in economic and finance classes you took in college.

Peru's Lima General Index has sky rocketed a whoppin' 95% this year due to the following reasons in particular (in my opinion)

a) The country's investment grade debt rating

b) Rising metals prices; copper, gold, silver, etc (note I did not include Zinc here)

c) Optimism in Peru's metropolitan middle and upper-middle class residents of Lima who partially feed the international excitement by telling stories of economic boom. Ask a university student of la Universidad de Lima, UPC, Universidad Pacifico or a employee at Banco Santander and they will probably (some of them at least) tell you of rising apartment buildings, new beach houses and cafes so full of customers you must wait to get a table. Yes, it is still difficult to find a job that pays well, but if you know anything about Peru this has been the case since the beginning of time...

d) Shrinking investment opportunities in the region because of western fears and dislike of Chavez in Venezuela, Correa in Ecuador, Morales in Bolivia and more recently Cristina Fernández de Kirchner in Argentina.

e) LIES... LIES... oh and yes, more LIES. Farid Matuk the previous head of INEI (Peru's statistics office) and Otto from IncaKolaNews have been telling readers for months that you simply can not trust economic data from Peru. Alan Garcia has replaced the people working at the statistics office with those loyal to his political party and they have inherently changed the way statistics are collected and the way GDP and other economic indicators are calculated.

Here are some links to Farid Matuk and Otto's recent observations of Peru's economic picture. I will stick to English, but I highly recommend if you can read Spanish that you check out some of Matuk's non-English posts.

Doubts grow about accuracy of Peru GDP numbers -- Reuters Terry Wade

Peru's Economic Model and Poverty Reduction: Is it Working -- Farid Matuk

Farid Matuk Explains Peru's False GDP Figures -- INK

Now that you know one side, here's the other. GAINS AND LOTS OF THEM.

Peru Lima General Index - 2 yr performance as of 6/4/09

It seems to me the majority of the international financial community have bought into Garcia's lies and have come to believe Peru is a solid place to park your money.

This is despite, as Otto says, demand for base metals just simply does not add up. The Chinese are stockpiling their metals and eventually prices will have to go back down to reality. Check this article.

Despite this reality, investors and what they perceive can go a long way in financial markets. If investors jump on board, this new Peruvian ETF might begin to soar... albeit temporarily until reality sets in.

Benito's conclusion: Invest with caution. I've included the Bloomberg article below, but if you like to access it directly, please click here.

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

Peru ETF to Start Trading This Month, Global X Says (Update1)

By Veronica Navarro Espinosa

Peru’s first Exchange Traded Fund will start trading on the New York Stock Exchange by the “middle of June,” said the chief executive officer of Global X Management Company LLC, a New York-based asset manager.

“The stock market has risen a lot, investors are bullish, and that’s helping us,” Bruno del Ama, the New York-based CEO of Global X, said in a phone interview. “We’re giving access to the Peruvian market and in the future people can go short in Peru, which is an option that doesn’t exist today.”

Global X and Barclays Plc have been competing to introduce the first Peruvian ETF, aiming to lure global investors to the world’s best performing stock market this year. The funds issue a number of shares and trade throughout the day like stocks. Most are designed to passively track a benchmark equity index.

Peru’s Lima General Index has jumped 95 percent this year on speculation a rebound in prices of the country’s commodity exports will fuel growth amid the global recession. The index’s advance is the biggest among 92 world benchmarks tracked by Bloomberg, reversing a 60 percent plunge in 2008 that was the steepest in Latin America.

“It will create liquidity and that’s what this market lacks,” Carlos Rojas, who manages $160 million in Peruvian stocks and bonds for Compass Peru, said in a phone interview from Lima. “But it’ll all depend on the size. If it attracts less than $150 million, it’ll be a non-event.”

FTSE Peru 20

The new ETF will track the FTSE Peru 20, which will include the nation’s biggest commodity producers such as Maple Energy Plc., an oil and natural gas producer that has gained fourfold this year, the best performer in the index. Del Ama said other members include Austral Group SA, Peru’s biggest fishmeal producer, and Cia. de Minas Buenaventura SA, the largest precious-metals producer.

Resource companies account for 21 of the 36 stocks in the Lima index because Peru is the world’s third-largest producer of copper, zinc and tin, the biggest miner of silver and the fifth- largest of gold.

IShares, a unit of Barclays, is working on introducing its own Peruvian ETF, said Barclays spokeswoman Christine Hudacko in an e-mail today. There’s “no news on timing,” she said.

The iShares MSCI Brazil Index Fund, managed by Barclays, is among the 10 most-traded ETFs in New York, with daily volume of about $1 billion, Barclays Global Investors’ chief executive for Latin America Daniel Gamba said in December. Trading in ETFs in Mexico now accounts for about 20 percent of average daily volume, Gamba said.

[Source] -- Bloomberg

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.

Corporacion Andina de Fomento Sells $1 Billion of 10-Year Notes

Corporacion Andina de Fomento sold $1 billion of 10-year notes, according to a person familiar with the transaction.

CAF sold the bonds to yield 4.5 percentage points above U.S. Treasuries, said the person, who declined to be identified.

[Source] -- Bloomberg

Twenty-nine countries protest reintroduction of US Dairy Export Subsidies

Twenty-nine countries at the World Trade Organization criticized the United States on Wednesday for reintroducing export subsidies on US dairy products, calling the handouts a dangerous retreat into protectionism and warning of “subsidy wars."

Brazil, speaking on behalf of 23 developing countries, told a WTO meeting that Washington was promoting a "murky protectionism" that weakens the global trading system at a time when global commerce is already shrinking at a record pace.

Australia, on behalf of agricultural exporting countries, said the announcement Saturday by US Agriculture Secretary Tom Vilsack of subsidies for 91.000 tonnes of mainly powdered milk, butter and cheese was unfair to countries trading fairly, and potentially damaging to global economy's recovery.

The subsidy decision under the US Dairy Export Incentive Program follows a similar move by the European Union in January.

[Source] -- MercoPress

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I would like to take a moment to reflect on a old post I wrote a little under a year ago, on June 19, 2008. It is one third about Southern Copper Peru (PCU), one third about sky rocketing commodity prices, and one third about a intense protest I witnessed in Tarapoto, Peru in 2002. I was in Tarapoto during a family trip to the region to visit my maternal grandfathers home town of Rioja. I may be a bit biased but the province of San Martín is a beautiful region of Peru I highly recommend people visiting Peru check out.

I'm going to reflect specifically on the third topic—the protest. If would like you can click here to read my entire post from 6/19/2008.

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In 2002 I was visiting Tarapoto, Peru. The city is located in the Peruvian province of San Martin, Peru. Rice workers had paralyzed the region because US subsidies had made locally produced rice more expensive than imported rice from the US--which ironically was also widely available in this region of Peru which a large amount of rice.

Tarapoto, Peru

By my fourth day in the city protesters had taken over the town square and blocked the roads to my grandpas home town of Rioja. As a tourist who was fortunate to have family in the city I was able to to get back to Lima before the city was forced to shut down. My family and I were woken up at 6am one morning and quickly informed by my grandpa's brothers we needed rush through the back roads of the jungle and get to the airport as soon as possible. Once we arrived at the airport we were rushing into a back office with other tourists holding US, Canadian and European passports, until a flight could take us all to Lima... all the while protesters attempted to rush the airport gates.

It is ironic food prices are now so high, Tarapoto's Rice industry is now growing rice and actually making a profit, although US subsidies still aren't help the overall market. The fact and main point I am attempting to get across is that all it took for protesters to paralyze the region was to create a blockade one highway--leaving the city isolated.

Click here to view a excerpt from the only link to an English language article I was able to find that still had an active link.

If you can read Spanish, I have found two articles. The first article describes how the situation unfolded. The second article explains the accord which was eventually reached by the protesters and the government.

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Benito's conclusion... The United States needs to re-think their protectionist policies, especially when it comes to such goods as cotton, food and other agricultural commodities. Easier said than done, but no less a necessary change that needs to happen sooner than later.

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.