Final decision has been made to operate this New and Analysis blog from its original URL. Please check for updates there.
Posts
The Mexican border… with Canada?
11 months ago
Wednesday, January 28, 2009
A world without poverty -- ACCION & LendtoEndPoverty.org
Microfinance is a topic i've touched upon before on this site (See June 17, 2008 post). In this turbulent time, Microfinance borrowers believe it or not but are still paying back their loans despite the credit crisis.
Microfinance is an effective, long-term solution to ending poverty that empowers poor families with the financial resources they need to improve their lives.
But there is an urgent need to expand these services. Right now, microfinance is only reaching 10-20% of the estimated 500 million people who would benefit from these life-changing opportunities.
As you'll see in the two-minute video, microfinance has the power to improve the lives not just of individuals, but of families and entire communities around the world.
~ ACCION Video Link courtesy of Youtube
Microfinance is an effective, long-term solution to ending poverty that empowers poor families with the financial resources they need to improve their lives.
But there is an urgent need to expand these services. Right now, microfinance is only reaching 10-20% of the estimated 500 million people who would benefit from these life-changing opportunities.
As you'll see in the two-minute video, microfinance has the power to improve the lives not just of individuals, but of families and entire communities around the world.
~ ACCION Video Link courtesy of Youtube
Special Report: Is the Grim Commodities Outlook Prices in? -- Bloomberg
Coverage from Sao Paulo, Brazil: Emerging Markets Dropped in Second Half, Morgan Stanley's Index Plunging 55% for the Year
China starts spring cleaning on the internet
Chinese authorities have shut down about 1500 pornographic websites and are making no secret about it, reporting about it in their own state press.
A total of 41 individuals where also apprehended during the crackdown after being linked to the vulgar content.
Singapore's Straits Time reported:
"The government has warned that Internet giants such as Google, MSN and Baidu, the most popular Chinese search engine, could also be shut down if they continue to link to vulgar content.
Google, Baidu and others have since issued apologies and said they have taken steps against online porn."
Click here to read more on this story from the Straits Times
A total of 41 individuals where also apprehended during the crackdown after being linked to the vulgar content.
Singapore's Straits Time reported:
"The government has warned that Internet giants such as Google, MSN and Baidu, the most popular Chinese search engine, could also be shut down if they continue to link to vulgar content.
Google, Baidu and others have since issued apologies and said they have taken steps against online porn."
Click here to read more on this story from the Straits Times
Does Brazil have a cash flow problem?
Brazil seems to be having some money troubles by the looks of the press. It's not good news for Latin America when its largest economy slows, especially when until just recently it seemed Brazil (the depreciation of the Real aside) was well relatively well poised to weather the storm.
Like its fellow BRIC country's, Brazil is far from immune to the global crisis. The country is still heavily dependent on commodity exports, which was the main engine of growth for both the Brazilian economy and stock market the past few years.
Despite reports that consumer spending is still holding up and that Brazil's big state conglomerates like Petrobras are increasing spending (see MercoPress article here), it simply won't be enough to keep the economy afloat forever—and it definitely will not be enough to maintain growth levels of 4-5%.
Poor Ronaldo seen here losing at the French World
Now... for the grim news. While just days earlier Petrobras reported it will be increasing spending, yesterday things did not go its way when it went shopping in international markets to raise money. The company was forced to put off plans to sell bonds because the cost of borrowing to finance the bonds in dollar denominated debt was simply too high (see Bloomberg article here)
Moving on. Brazil's government also had some bad news to bring to the table, announcing plans to freeze roughly 6% of its planned spending budget for 2009 because slow economic growth is eroding tax collection ( see bloomberg article here)
To round up the negative news is one last story concerning loan defaults in Brazil. Credit card spending may be surging, people may be packing the stores but they aren't paying their bills. Loan defaults surged last month to their highest since September 2002 (see Bloomberg article here).
Not good news people...
Like its fellow BRIC country's, Brazil is far from immune to the global crisis. The country is still heavily dependent on commodity exports, which was the main engine of growth for both the Brazilian economy and stock market the past few years.
Despite reports that consumer spending is still holding up and that Brazil's big state conglomerates like Petrobras are increasing spending (see MercoPress article here), it simply won't be enough to keep the economy afloat forever—and it definitely will not be enough to maintain growth levels of 4-5%.
Poor Ronaldo seen here losing at the French World Now... for the grim news. While just days earlier Petrobras reported it will be increasing spending, yesterday things did not go its way when it went shopping in international markets to raise money. The company was forced to put off plans to sell bonds because the cost of borrowing to finance the bonds in dollar denominated debt was simply too high (see Bloomberg article here)
Moving on. Brazil's government also had some bad news to bring to the table, announcing plans to freeze roughly 6% of its planned spending budget for 2009 because slow economic growth is eroding tax collection ( see bloomberg article here)
To round up the negative news is one last story concerning loan defaults in Brazil. Credit card spending may be surging, people may be packing the stores but they aren't paying their bills. Loan defaults surged last month to their highest since September 2002 (see Bloomberg article here).
Not good news people...
Tuesday, January 27, 2009
South-South Cooperation: Venezuela's PDVSA begins drilling in Bolivia's Vibora Field
Petroleos de Venezuela SA (PDVSA), announced today one of its oil rigs began operations in Bolivia. Drilling is reported to have begun in the Vibora field, roughly 170 km north of the city of Santa Cruz.
Not a bad headline for Morales and his supporters who voted "yes" for a new constitution just days ago which allows for Morales to run beyond his term limits and which is partly designed to empower indiginous rights.
Not a bad headline for Morales and his supporters who voted "yes" for a new constitution just days ago which allows for Morales to run beyond his term limits and which is partly designed to empower indiginous rights.
Monday, January 26, 2009
Bolivians back Morales Charter - Reuters
Jan 26 - Bolivian President Evo Morales appears before a crowd of supporters to claim victory in a controversial election that grants him the right to run for re-election
Bolivian voters approved a new constitution to give the poor indigenous majority more power, let socialist President Evo Morales run for re-election and hand him even tighter control over the economy.
Aymara, Quechua, Guarani and other indigenous groups who suffered centuries of discrimination in South America's poorest country largely backed the new constitution and exit polls showed it was approved with around 60 percent support.
Penny Tweedie reports.
Commodities in focus – Gold prices rise above $900/oz
The spot price of Gold rose above $900/oz on Monday for the first time since October 10, 2008.
Gold ETF's also benefited. New York's SPDR Gold Trust GLD, the world's largest gold EFT allows investors to invest in physical gold like they do normal stocks. This is accomplished through issuing securities backed by physical gold stocks. SPDR said its security backed gold holdings rose 1.6% percent to an all-time high of 823.57 tonnes during Friday trading.
The ETF isn't doing all that bad either. Year-to-date it is up 4.92%. Take a look at the ETF's performance over the year year. The chart truly does justice to the age old concept of investing in gold as a safe heaven. With interest rates so low, investing in Gold, even at yields of 4.92% will become even more enticing as banking woes persist in developed world.
The Royal Bank of Scotland's head of commodity strategy, Nick Moore told Reuters factors including falling interest rates, the re-inflation of Western economies and the prospect of lower supply both from mines and via central bank sales were supporting gold.
“In times of economic crisis, falling equity markets and mounting aversion to risk, physical gold is preferred as the safest form of investment,” Commerzbank analyst Eugene Weignberg said.
Below I have included two links. The first link directs you to a informative analysis and perspective on the gold market by Lawrence Williams who, along with his “expert panel” are forecasting gold prices to reach a high of $1074/ oz.
The second is a article about how gold miner Red Back has managed to successfully raise capital on the Toronto Stock Exchange, further indication of the support for gold.
Forecasting the gold price – expert panel predicts $1074 high, Mineweb readers $1305 – Mineweb
Gold miners still able to raise capital from the markets – Mineweb
Gold ETF's also benefited. New York's SPDR Gold Trust GLD, the world's largest gold EFT allows investors to invest in physical gold like they do normal stocks. This is accomplished through issuing securities backed by physical gold stocks. SPDR said its security backed gold holdings rose 1.6% percent to an all-time high of 823.57 tonnes during Friday trading.
The ETF isn't doing all that bad either. Year-to-date it is up 4.92%. Take a look at the ETF's performance over the year year. The chart truly does justice to the age old concept of investing in gold as a safe heaven. With interest rates so low, investing in Gold, even at yields of 4.92% will become even more enticing as banking woes persist in developed world.
The Royal Bank of Scotland's head of commodity strategy, Nick Moore told Reuters factors including falling interest rates, the re-inflation of Western economies and the prospect of lower supply both from mines and via central bank sales were supporting gold.
“In times of economic crisis, falling equity markets and mounting aversion to risk, physical gold is preferred as the safest form of investment,” Commerzbank analyst Eugene Weignberg said.
Below I have included two links. The first link directs you to a informative analysis and perspective on the gold market by Lawrence Williams who, along with his “expert panel” are forecasting gold prices to reach a high of $1074/ oz.
The second is a article about how gold miner Red Back has managed to successfully raise capital on the Toronto Stock Exchange, further indication of the support for gold.
Forecasting the gold price – expert panel predicts $1074 high, Mineweb readers $1305 – Mineweb
Gold miners still able to raise capital from the markets – Mineweb
Direct flights open between Peru and Cuba! -- Andina reports
Lima, Jan. 26 (ANDINA).- TACA Airlines will begin flying directly between Lima (Peru) and Havana (Cuba) in the first quarter of 2009.
Beginning on March 23rd, TACA will fly three times a week on the Lima-Havana route to meet the growing demand from travelers.
Click here to access the full article from Andina
Beginning on March 23rd, TACA will fly three times a week on the Lima-Havana route to meet the growing demand from travelers.
Click here to access the full article from Andina
Global financial crisis lifts Australia's four largest and relatively healthy banks into the top 20
Australia's big banks have joined the ranks of the world's largest banks. Australian banks have seen their share prices plummet around 50%, but no less remain in relatively healthy positions when compared with their counterparts in the United States and United Kingdom.
Total stock market capitalization of Westpac, Commonwealth Bank, National Australia Bank and AZN (Australia and New Zealand Banking Group) is now greater than Citigroup, Morgan Stanley, Barclays and Deutshe Bank.
Phil Chronican, head of institutional banking at Westpac said “the maintenance of the bank's market capitalization and value compared with its international peers had increased its reputation and knowledge among major institutional investors.
The banks seem in good position for foreign expansion and acquisitions. ANZ has already been widely successful in Asian markets. Westpac now ranks at the 9th largest bank in the world, and is seeing its foreign exchange deals increase substantially.
"The Australian banking sector is now roughly a quarter the size in market capitalization of the US listed banking sector and much larger than the UK, which raises the question why not expand and become seriously global," Mr Davison said. "However, we believe the most likely scenario is domestic banks will simply be in suspense from the ever changing effects from the nationalization of banks in these foreign markets and survival as a private entity will be deemed being successful."
Click here to read a more comprehensive report of this story at the Australian
Total stock market capitalization of Westpac, Commonwealth Bank, National Australia Bank and AZN (Australia and New Zealand Banking Group) is now greater than Citigroup, Morgan Stanley, Barclays and Deutshe Bank.Phil Chronican, head of institutional banking at Westpac said “the maintenance of the bank's market capitalization and value compared with its international peers had increased its reputation and knowledge among major institutional investors.
The banks seem in good position for foreign expansion and acquisitions. ANZ has already been widely successful in Asian markets. Westpac now ranks at the 9th largest bank in the world, and is seeing its foreign exchange deals increase substantially.
"The Australian banking sector is now roughly a quarter the size in market capitalization of the US listed banking sector and much larger than the UK, which raises the question why not expand and become seriously global," Mr Davison said. "However, we believe the most likely scenario is domestic banks will simply be in suspense from the ever changing effects from the nationalization of banks in these foreign markets and survival as a private entity will be deemed being successful."
Click here to read a more comprehensive report of this story at the Australian
Happy New Year China!
Chinese people around the world began their 15 day long lunar-calendar celebration this weekend, ushering the start of the "Year of the Ox."
Citizens go shopping in Fuzhou, capital of south China's Fujian Province, Jan. 25, 2009.
Spring Festival, or the Chinese Lunar New Year, is the most important traditional Chinese
festival of family reunion. It falls on Jan. 26 this year.(Xinhua/Wei Peiquan)
Chinese folk lore describes the Ox as a sign of prosperity through fortitude and hard work. Appropriate considering the current financial crisis don't you think?
Just in case you where wondering... If you happen to be born in the Year of the Ox (1913, 1925, 1937, 1949, 1961, 1973, 1985, 1997, 2009), you are believed to have a natural tendency to exhibit patience, speak little and inspire confidence in others. Not a bad set of characteristics huh?
Anyway... Happy New Year to the billion + Chinese around the world and all others celebrating this joyous holiday!
Migrant workers, who could not return home for the Spring Festival,
gather together to have new year's dinner in Guilin, a city of south China's
Guangxi Zhuang Autonomous Region, Jan. 25, 2009. (Xinhua/Chen Ruihua)
Citizens go shopping in Fuzhou, capital of south China's Fujian Province, Jan. 25, 2009.Spring Festival, or the Chinese Lunar New Year, is the most important traditional Chinese
festival of family reunion. It falls on Jan. 26 this year.(Xinhua/Wei Peiquan)
Just in case you where wondering... If you happen to be born in the Year of the Ox (1913, 1925, 1937, 1949, 1961, 1973, 1985, 1997, 2009), you are believed to have a natural tendency to exhibit patience, speak little and inspire confidence in others. Not a bad set of characteristics huh?
Anyway... Happy New Year to the billion + Chinese around the world and all others celebrating this joyous holiday!
Migrant workers, who could not return home for the Spring Festival,gather together to have new year's dinner in Guilin, a city of south China's
Guangxi Zhuang Autonomous Region, Jan. 25, 2009. (Xinhua/Chen Ruihua)
Sunday, January 25, 2009
Looking to the East -- Peru and South Korea to discuss a FTA in March
Peru and South Korea have agreed to hold the first round of negotiations for a Free Trade Agreement this March, according to Peru's Minister of Foreign Affairs and Trade.
Korean President, Lee Myung-Bak (left)
Preliminary work for the FTA was compiled in Lima January 20-21, days after the Asian Pacific Economic Cooperation (APEC) had concluded.
“At the preliminary talks, the two sides agreed upon the scale, formation, process and schedule of the Korea-Peru FTA, and together laid the groundwork for effective negotiations in the future," the ministry said.
The two sides will now examine each others drafts of the Agreement before meeting in March, at which point they will debate and hopefully find a middle ground on how to go about opening each market up to one another.
This is great evidence of something that has been written about on this site since its creation, that is—the Pacific countries of Asia and South America are finding cooperating in both economic and political contexts is beneficial for all parties and increasingly necessary in this global and interconnected world.
Korean President, Lee Myung-Bak (left)Preliminary work for the FTA was compiled in Lima January 20-21, days after the Asian Pacific Economic Cooperation (APEC) had concluded.
“At the preliminary talks, the two sides agreed upon the scale, formation, process and schedule of the Korea-Peru FTA, and together laid the groundwork for effective negotiations in the future," the ministry said.
The two sides will now examine each others drafts of the Agreement before meeting in March, at which point they will debate and hopefully find a middle ground on how to go about opening each market up to one another.
This is great evidence of something that has been written about on this site since its creation, that is—the Pacific countries of Asia and South America are finding cooperating in both economic and political contexts is beneficial for all parties and increasingly necessary in this global and interconnected world.
Saturday, January 24, 2009
Bolivia nationalizes one of the last remaining foreign owned natural gas fields
Bolivia's President Evo Morales, on Friday nationalized one of the last remaining gas fields of which a foreign entity was the still the major share holder. Standing alongside his supporters, military and thousands of indigenous leaders Morales explained his "regret that some energy companies do not respect Bolivian laws."
President Evo Morales
The Carrasco gas field is located in the central province of Cochabamba, which by most accounts is Bolivia's wealthiest. Prior to nationalization, the Chaco gas company controlled the production from this field.
British Petroleum (BP) owns 60% of Pan American Energy which in turn owned until yesterday, 51% of Chaco. The remaining 49% was already in Bolivian control... by the country's state-owned petrol company, Yacimientos Petrolíferos Fiscales Bolivianos YPFB which owned the remaining 49%.
Chaco, which operates about a dozen gas fields in Bolivia recently announced plans that it would invest $64 million to increase gas production in the country. Despite the good will, Hydrocarbons Minister Saul Avalos, explained the government was not able to reach an agreement with Pan American Energy on how to arrange for majority control to pass to YPFB.
There are interesting developments from the Andean nation. A mere two days before the referendum on the new constitution President Morales has proposed.
President Evo MoralesBritish Petroleum (BP) owns 60% of Pan American Energy which in turn owned until yesterday, 51% of Chaco. The remaining 49% was already in Bolivian control... by the country's state-owned petrol company, Yacimientos Petrolíferos Fiscales Bolivianos YPFB which owned the remaining 49%.
Chaco, which operates about a dozen gas fields in Bolivia recently announced plans that it would invest $64 million to increase gas production in the country. Despite the good will, Hydrocarbons Minister Saul Avalos, explained the government was not able to reach an agreement with Pan American Energy on how to arrange for majority control to pass to YPFB.
There are interesting developments from the Andean nation. A mere two days before the referendum on the new constitution President Morales has proposed.
Brazilian province of Minas Gerais floods -- Reuters video
Jan. 23 - Rescue teams rush in to save trapped flood victims as heavy rains and severe flooding continue to plague Brazil's southeastern state of Minas Gerais.
27 people have died in the state since the rainy season began in September and over 100 districts have declared a state of emergency. Pavithra George reports.SOUNDBITE: Alexandre Fernandes Rosario
For those of your who are not too familiar with Minas Gerais, it is Brazil's 2nd or 3rd most important region after Sao Paulo and Rio de Janeiro. Called Minas Gerais because of its mineral wealth. The province is supposed to be one of Brazil's driest, hardly ever getting rain. So you might be able to guess why it's a big deal when it floods like this.
Friday, January 23, 2009
South-South Cooperation in focus: Venezuela & Argentina
Argentine President Cristina Fernandez signed 21 agreements on Thursday with the country of Venezuela. The agreements are meant to lay the foundation for future cooperation between the two South American nations in such fields as energy, industry and transportation.
Argentinian President Cristina Fernandez (L) and Venezuelan President Hugo Chavez
attend the signing ceremony in Caracas, the Capital of Venezuela, Jan. 22, 2009.
The two presidents agreed to set up a joint venture between Petroleos de Venezuela (PDVSA) and Argentina's state-operated Enarsa energy company to develop oil fields in Venezuela.
"Our strategic cooperation is increasing," Chavez said when referring to the commercial and diplomatic ties between Venezuela and Argentina.
Click here to read further details from this article, courtesy of Xinhua
Argentinian President Cristina Fernandez (L) and Venezuelan President Hugo Chavezattend the signing ceremony in Caracas, the Capital of Venezuela, Jan. 22, 2009.
The two presidents agreed to set up a joint venture between Petroleos de Venezuela (PDVSA) and Argentina's state-operated Enarsa energy company to develop oil fields in Venezuela.
"Our strategic cooperation is increasing," Chavez said when referring to the commercial and diplomatic ties between Venezuela and Argentina.
Click here to read further details from this article, courtesy of Xinhua
South-South Cooperation in focus: Peruvian PM to meet with Correa in Ecuador
The PM of Peru, Yehude Simon travels to Ecuador today to hold a meeting with Ecuador's president, Rafael Correa (the one who recently caused all those headlines with the bonds) to discuss bilateral trade topics.According to the information reported over at Andina, Simon is heading to Ecuador discuss and resolve any problems related to the Resolution No 466 adopted by the Foreign Trade and Investments Council (COMEXI) of Ecuador.
"Resolution No 466 authorizes the application of a protection measure for balance of payments, general and not discriminatory, to imports of all countries including those that have trade agreements in force with Ecuador which recognize tariff preferences, as it is the case of Peru."
Click here to access Andina's article on this topic
Many face gloomy Chinese New Year -- AlJazeeraEnglish
Hundreds of thousands of Chinese have begun their journey home for the Chinese New Year festivities, but for many, the global economic downturn has left very little to celebrate.
Al Jazeera's Melissa Chan reports on those who have taken the one-way ticket home.
Thursday, January 22, 2009
Good readings
Opinion: India, China, and Obama's Oil Policy
by William Nobrega
Business Week Online 1/22/2009
If China's Growth Goes South What Happens to Oil?
by G. Allen Brooks
Parks Paton Hoepel & Brown 1/22/2009
The China factor and what it means for the price of copper
by Simon Hunt
Weybridge, UK (SHSS) 1/14/2009
by William Nobrega
Business Week Online 1/22/2009
If China's Growth Goes South What Happens to Oil?
by G. Allen Brooks
Parks Paton Hoepel & Brown 1/22/2009
The China factor and what it means for the price of copper
by Simon Hunt
Weybridge, UK (SHSS) 1/14/2009
China's economic growth slows to 6.8%
According to official data, released from the Chinese statistics bureau in Beijing, gross domestic product grew by 6.8% in the 4th quarter of 2008, a sharp decline from the 9% average gain realized in the first three quarters of 2008.
Goldman Sachs, Thompson Reuters Data Stream PBOC
- China: Total Loans 2008
- China: Industrial Production 2006-08
- China: Real GDP 2000-2009
This is big news for the global economy, especially for commodity markets. Adding to the damages was further news from the region.
Japan saw its exports decline 35% in December, the biggest drop since 1980.
South Korea released official figures, stating its economy has contracted by 5.6% in the 4th quarter of 2008.
Singapore has said it will tap into its reserves from the first time ever, with the president giving his “in-principle approval” to fund a $4.9 billion relief package.
News is not all that good, to say the least. Check out the press from a few major news sources.
China's economy slows sharply, worse yet to come – Reuters
China's economic growth slows – BBC
China's GDP grows by seven-year low of 9% in 2008 - Xinhua
China's GDP growth slowed to 6.8% in fourth quarter (update 2) – Bloomberg
S'pore to tap reserves – The Straight Times
South Korea braces for first recession in 11 years – The Business Times Malaysia
Japan's exports plunge as recession deepens – AP via Yahoo News
Miners to be hit as China's slowdown worsens – The Australian
Goldman Sachs, Thompson Reuters Data Stream PBOC- China: Total Loans 2008
- China: Industrial Production 2006-08
- China: Real GDP 2000-2009
This is big news for the global economy, especially for commodity markets. Adding to the damages was further news from the region.
Japan saw its exports decline 35% in December, the biggest drop since 1980.
South Korea released official figures, stating its economy has contracted by 5.6% in the 4th quarter of 2008.
Singapore has said it will tap into its reserves from the first time ever, with the president giving his “in-principle approval” to fund a $4.9 billion relief package.
News is not all that good, to say the least. Check out the press from a few major news sources.
China's economy slows sharply, worse yet to come – Reuters
China's economic growth slows – BBC
China's GDP grows by seven-year low of 9% in 2008 - Xinhua
China's GDP growth slowed to 6.8% in fourth quarter (update 2) – Bloomberg
S'pore to tap reserves – The Straight Times
South Korea braces for first recession in 11 years – The Business Times Malaysia
Japan's exports plunge as recession deepens – AP via Yahoo News
Miners to be hit as China's slowdown worsens – The Australian
Sunday, January 18, 2009
Video -- Investing in Emerging Markets -- Bloomberg
Analysis and Discussion with Gordian Kemen of Barclays
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)
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)
Thursday, January 15, 2009
Gloomy day in the news -- 3 part update
When I woke up this morning and did my morning news reading there weren't too many stories that particularly stood out... If you wanted to describe the news this morning in one word, it would have to be gloomy.
I've assembled separate posts according to region and subject of the the “Gloom and Doom,” as Marc Faber says.
I've assembled separate posts according to region and subject of the the “Gloom and Doom,” as Marc Faber says.
News reel: Economic Meltdown p3 – Commodities
Click on article titles to access the full copy from parents websites
Gold Little Changed in Asia as Dollar Steady Before ECB Meeting – Bloomberg LP - Jan 15, 2009
Jan. 15 (Bloomberg) -- Gold traded little changed in Asia as the dollar steadied before a European Central Bank meeting where interest rates are widely expected to be cut by at least half a percentage point. Platinum declined.
Resources downturn trips up contractors – The Australian – Jan 16, 2009
MINING companies slashing costs and cutting production as they struggle to cope with the global financial crisis is driving down revenue in Australia's engineering, contracting and services sectors.
Although analysts believe that the diminished income and the prospect of further contract cancellations are already being incorporated into share prices, they said the full impact had not yet been incorporated.
Metal meltdown rocks global miner Rio Tinto – The Australian – Jan 16, 2009
RIO Tinto continues to be battered by the global slowdown, with fourth-quarter iron ore sales falling 31 per cent.
Slumping metal prices are set to wipe more than $US500 million ($758 million) from the miner's bottom line and more aluminium production cuts have been flagged.
Under new management, miner ready to tackle debt – The Australian – Jan 16, 2009
RIO Tinto's board has shown it is serious about its turnaround by dumping chairman Paul Skinner 11 months ahead of plan. And yesterday's 18 per cent fall in iron ore production underlined the magnitude of the cutbacks ahead.
Rio's fourth-quarter production report is, of course, just a warm-up to the real event on February 12, when its half-year profits are released.
Oil Falls Below $34 After OPEC Reduces 2009 Demand Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Crude oil fell below $34 a barrel after OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use.
Natural Gas Falls After U.S. Supplies Drop Less Than Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Natural gas fell to the lowest in more than two years in New York as government reports today on gas stockpiles, producer prices and manufacturing pointed to slower demand as the U.S. recession deepens.
Stockpiles declined 94 billion cubic feet last week, less than the 102 billion analysts expected, an Energy Department report showed. Prices paid to producers in the U.S. dropped for the fifth straight month and manufacturing in the New York and Philadelphia areas shrank. Slowing demand from factories and power plants has helped send gas down 15 percent this month.
Copper Prices Drop for Second Day in N.Y. as Stockpiles Rise – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Copper futures fell for a second straight day as climbing inventories signaled global output of the metal is exceeding demand.
Stockpiles monitored by the London Metal Exchange climbed 1.4 percent to 387,325 metric tons today and have jumped 14 percent this month after surging 72 percent last year. Before today, copper prices plunged 65 percent from a record in May as slumping global growth slashed demand for the metal used in pipes and wires.
Soybeans Prices Jump on Adverse Weather in Argentina, Brazil – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Soybeans prices jumped on signs that demand for U.S. supplies will increase as adverse weather damages crops in Argentina, the world’s biggest exporter of vegetable oil and animal feed made from the oilseed.
Australia Expects ‘Significant’ Drop in Coal, Iron Ore Prices – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Export prices for coal and iron ore from Australia, the world’s biggest shipper of the raw materials, may drop significantly this year as slowing industrial growth curbs demand, the nation’s central bank said.
Gold Little Changed in Asia as Dollar Steady Before ECB Meeting – Bloomberg LP - Jan 15, 2009
Jan. 15 (Bloomberg) -- Gold traded little changed in Asia as the dollar steadied before a European Central Bank meeting where interest rates are widely expected to be cut by at least half a percentage point. Platinum declined.
Resources downturn trips up contractors – The Australian – Jan 16, 2009
MINING companies slashing costs and cutting production as they struggle to cope with the global financial crisis is driving down revenue in Australia's engineering, contracting and services sectors.
Although analysts believe that the diminished income and the prospect of further contract cancellations are already being incorporated into share prices, they said the full impact had not yet been incorporated.
Metal meltdown rocks global miner Rio Tinto – The Australian – Jan 16, 2009
RIO Tinto continues to be battered by the global slowdown, with fourth-quarter iron ore sales falling 31 per cent.
Slumping metal prices are set to wipe more than $US500 million ($758 million) from the miner's bottom line and more aluminium production cuts have been flagged.
Under new management, miner ready to tackle debt – The Australian – Jan 16, 2009
RIO Tinto's board has shown it is serious about its turnaround by dumping chairman Paul Skinner 11 months ahead of plan. And yesterday's 18 per cent fall in iron ore production underlined the magnitude of the cutbacks ahead.
Rio's fourth-quarter production report is, of course, just a warm-up to the real event on February 12, when its half-year profits are released.
Oil Falls Below $34 After OPEC Reduces 2009 Demand Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Crude oil fell below $34 a barrel after OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use.
Natural Gas Falls After U.S. Supplies Drop Less Than Forecast – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Natural gas fell to the lowest in more than two years in New York as government reports today on gas stockpiles, producer prices and manufacturing pointed to slower demand as the U.S. recession deepens.
Stockpiles declined 94 billion cubic feet last week, less than the 102 billion analysts expected, an Energy Department report showed. Prices paid to producers in the U.S. dropped for the fifth straight month and manufacturing in the New York and Philadelphia areas shrank. Slowing demand from factories and power plants has helped send gas down 15 percent this month.
Copper Prices Drop for Second Day in N.Y. as Stockpiles Rise – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Copper futures fell for a second straight day as climbing inventories signaled global output of the metal is exceeding demand.
Stockpiles monitored by the London Metal Exchange climbed 1.4 percent to 387,325 metric tons today and have jumped 14 percent this month after surging 72 percent last year. Before today, copper prices plunged 65 percent from a record in May as slumping global growth slashed demand for the metal used in pipes and wires.
Soybeans Prices Jump on Adverse Weather in Argentina, Brazil – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Soybeans prices jumped on signs that demand for U.S. supplies will increase as adverse weather damages crops in Argentina, the world’s biggest exporter of vegetable oil and animal feed made from the oilseed.
Australia Expects ‘Significant’ Drop in Coal, Iron Ore Prices – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- Export prices for coal and iron ore from Australia, the world’s biggest shipper of the raw materials, may drop significantly this year as slowing industrial growth curbs demand, the nation’s central bank said.
News reel: Economic Meltdown p2 – China / Asia
Click on article titles to access the full copy from parent websites
Asian stocks tumble – The Straits Times – Jan 15, 2009
HONG KONG - ASIAN stock markets tumbled on Thursday, with Japan's benchmark sliding almost 5 per cent, on gloomy US holiday sales and renewed concerns about the banking industry.
Every market across Asian suffered steep declines, with broad-based selling hitting industries from energy to financials to exporters. A sharp drop in Japanese machinery pointed to a deepening recession in the world's No. 2 economy, while oil prices continued to fall on worries that the global economic slump will further weaken demand for crude.
China may bailout more – The Straits Times – Jan 15, 2009
BEIJING - CHINA is planning more help for its steel, textile, shipbuilding and other key industries, analysts said on Thursday, a day after the government unveiled a stimulus package for its ailing auto sector.
Chinese slowdown, serious risk for the global economy MercoPress – Jan 15, 2009
A severe economic slowdown in China is one of the biggest risks faced by the world this year, the World Economic Forum (WEF) has warned. The WEF report said a hard landing for China's economy could create domestic social tensions and put stress on the global financial system.
Foreign Direct Investment in China Falls 5.7 Percent (Update3) – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) – Foreign Direct Investment in China declined for a third month, adding to the toll that recessions in the U.S. and Europe are taking on the world’s third-biggest economy.
Investment fell 5.7 percent to $5.98 billion in December from a year earlier, the commerce ministry said at a briefing in Beijing today. November’s decline was 36.5 percent.
China Home Prices to Continue Falling Until 2011, DTZ Says – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Home prices and sales in China, which fell last year for the first time in a decade, will continue dropping until they reach a “reasonable” level and will rebound in 2011, property agency DTZ said.
Hong Kong Stocks Fall to Two-Month Low; Yue Yuen, HSBC Decline – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) – Hong Kong's benchmark stock index fell to the lowest in almost two months on concern slowing demand is deepening the global economic slump.
China-U.S. Ties to Get Stronger, Departing American Envoy Says – Bloomberg - Jan 15, 2009 Jan. 15 (Bloomberg) -- The economies of the U.S. and China, together generating 30 percent of the world’s gross domestic product, will become increasingly interdependent in the next 30 years, said America’s longest-serving envoy to China.
China unveils support package to auto, steel industries – Xinhua – Jan 14, 2009
· China's State Council unveiled a support package for the auto and steel sectors Wednesday.
· The gov't will lower purchase tax on cars under 1.6 liters from 10% to 5% from Jan. 20 to Dec. 31.
· The plan also urges improvements in the credit system for car purchase loans.
SKorea to miss growth forecast - The Straits Times – Jan 15, 2009
SEOUL - SOUTH Korea's economic growth this year could fall below the central bank's forecast of 2 per cent as the global recession deepens, the country's second vice finance minister said in a prepared speech on Thursday.
India’s Sensex Falls to One-Month Low; Infosys Leads Declines – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- India’s benchmark stock index fell to the lowest in more than a month. Tata Consultancy Services Ltd. and Infosys Technologies Ltd. led declines after a Canadian customer for their software services collapsed.
Satyam May Take 3 Months to Restate Accounts, Delaying Bailout – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) – Satyam Computer Services Ltd.'s new auditors may take three months to clear up an alleged $1 billion fraud at India's fourth-largest software exporter, delaying access to government funds.
Satyam fell 32 percent today after the government said it has no plans for a bailout until the board seeks aid. Satyam won't know how much it needs until auditors confirm assets and assess how much clients owe, director Deepak Parekh said. ``The government doesn't bail out every sick company,'' he said.
India’s Inflation Rate Falls, Paving Way for Stimulus (Update2) – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- India’s inflation slowed to an 11- month low, paving the way for further stimulus measures to bolster an economy expanding at the weakest pace in six years.
Asian stocks tumble – The Straits Times – Jan 15, 2009
HONG KONG - ASIAN stock markets tumbled on Thursday, with Japan's benchmark sliding almost 5 per cent, on gloomy US holiday sales and renewed concerns about the banking industry.
Every market across Asian suffered steep declines, with broad-based selling hitting industries from energy to financials to exporters. A sharp drop in Japanese machinery pointed to a deepening recession in the world's No. 2 economy, while oil prices continued to fall on worries that the global economic slump will further weaken demand for crude.
China may bailout more – The Straits Times – Jan 15, 2009
BEIJING - CHINA is planning more help for its steel, textile, shipbuilding and other key industries, analysts said on Thursday, a day after the government unveiled a stimulus package for its ailing auto sector.
Chinese slowdown, serious risk for the global economy MercoPress – Jan 15, 2009
A severe economic slowdown in China is one of the biggest risks faced by the world this year, the World Economic Forum (WEF) has warned. The WEF report said a hard landing for China's economy could create domestic social tensions and put stress on the global financial system.
Foreign Direct Investment in China Falls 5.7 Percent (Update3) – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) – Foreign Direct Investment in China declined for a third month, adding to the toll that recessions in the U.S. and Europe are taking on the world’s third-biggest economy.
Investment fell 5.7 percent to $5.98 billion in December from a year earlier, the commerce ministry said at a briefing in Beijing today. November’s decline was 36.5 percent.
China Home Prices to Continue Falling Until 2011, DTZ Says – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Home prices and sales in China, which fell last year for the first time in a decade, will continue dropping until they reach a “reasonable” level and will rebound in 2011, property agency DTZ said.
Hong Kong Stocks Fall to Two-Month Low; Yue Yuen, HSBC Decline – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) – Hong Kong's benchmark stock index fell to the lowest in almost two months on concern slowing demand is deepening the global economic slump.
China-U.S. Ties to Get Stronger, Departing American Envoy Says – Bloomberg - Jan 15, 2009 Jan. 15 (Bloomberg) -- The economies of the U.S. and China, together generating 30 percent of the world’s gross domestic product, will become increasingly interdependent in the next 30 years, said America’s longest-serving envoy to China.
China unveils support package to auto, steel industries – Xinhua – Jan 14, 2009
· China's State Council unveiled a support package for the auto and steel sectors Wednesday.
· The gov't will lower purchase tax on cars under 1.6 liters from 10% to 5% from Jan. 20 to Dec. 31.
· The plan also urges improvements in the credit system for car purchase loans.
SKorea to miss growth forecast - The Straits Times – Jan 15, 2009
SEOUL - SOUTH Korea's economic growth this year could fall below the central bank's forecast of 2 per cent as the global recession deepens, the country's second vice finance minister said in a prepared speech on Thursday.
India’s Sensex Falls to One-Month Low; Infosys Leads Declines – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- India’s benchmark stock index fell to the lowest in more than a month. Tata Consultancy Services Ltd. and Infosys Technologies Ltd. led declines after a Canadian customer for their software services collapsed.
Satyam May Take 3 Months to Restate Accounts, Delaying Bailout – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) – Satyam Computer Services Ltd.'s new auditors may take three months to clear up an alleged $1 billion fraud at India's fourth-largest software exporter, delaying access to government funds.
Satyam fell 32 percent today after the government said it has no plans for a bailout until the board seeks aid. Satyam won't know how much it needs until auditors confirm assets and assess how much clients owe, director Deepak Parekh said. ``The government doesn't bail out every sick company,'' he said.
India’s Inflation Rate Falls, Paving Way for Stimulus (Update2) – Bloomberg – Jan 15, 2009
Jan. 15 (Bloomberg) -- India’s inflation slowed to an 11- month low, paving the way for further stimulus measures to bolster an economy expanding at the weakest pace in six years.
News reel: Economic Meltdown p1 – South America
Click on article titles to access the full copy from parent websites
Peru in Talks to Borrow From U.S. Fed, China, Valdivieso Says – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Peru is in talks with the U.S. Federal Reserve and China’s central bank to swap its currency for dollars as the government seeks to boost liquidity amid the global credit crunch, Finance Minister Luis Valdivieso said.
The country may tap another $9 billion in loans from multilateral lenders to help finance about $35 billion in mining, energy and other development projects, Valdivieso said in an interview with Bloomberg television last night at the Finance Ministry in Lima.
Brazil Company Debt Payment Aid Points to Larger Need in Region - Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Brazil’s plan to provide more than $20 billion to help companies roll over maturing international debt may point to even bigger financing constraints in the rest of Latin America, according to Standard & Poor’s.
Brazil’s central bank President Henrique Meirelles unveiled plans yesterday to tap reserves for helping 4,000 or more companies meet international debt payments this year. Brazilian companies have $61.6 billion of foreign debt coming due this year, including $44.9 billion of obligations that mature in less than a year, Schineller said, citing central bank data.
Brazil’s Exports May Plunge 20 Percent in 2009, Barral Says – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) – Brazil’s exports may plunge 20 percent this year on slumping demand and falling prices as world economic growth slows, Foreign Trade Secretary Welber Barral said.
Argentina’s Buzzi Says Government’s Plan Isn’t Enough (Update1) – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Argentine farm leader Eduardo Buzzi, president of the country’s Agrarian Federation, said measures announced by the government yesterday aren’t enough to help farmers facing drought and falling commodity prices.
Ecuador Bank Drafting Bill for Second Currency, Hoy Reports – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Ecuador’s central bank is preparing legislation that would allow it to issue a currency to be used alongside the dollar, Quito-based newspaper Hoy reported, citing a draft of the bill it had obtained
Bolivia breaks relations with Israel over Gaza invasion – MercoPress- Jan 15, 2009
President Evo Morales announced Wednesday that Bolivia severed diplomatic ties with Israel as an act of solidarity with Palestinians suffering from the current offensive in the Gaza strip.
Peru in Talks to Borrow From U.S. Fed, China, Valdivieso Says – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Peru is in talks with the U.S. Federal Reserve and China’s central bank to swap its currency for dollars as the government seeks to boost liquidity amid the global credit crunch, Finance Minister Luis Valdivieso said.
The country may tap another $9 billion in loans from multilateral lenders to help finance about $35 billion in mining, energy and other development projects, Valdivieso said in an interview with Bloomberg television last night at the Finance Ministry in Lima.
Brazil Company Debt Payment Aid Points to Larger Need in Region - Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Brazil’s plan to provide more than $20 billion to help companies roll over maturing international debt may point to even bigger financing constraints in the rest of Latin America, according to Standard & Poor’s.
Brazil’s central bank President Henrique Meirelles unveiled plans yesterday to tap reserves for helping 4,000 or more companies meet international debt payments this year. Brazilian companies have $61.6 billion of foreign debt coming due this year, including $44.9 billion of obligations that mature in less than a year, Schineller said, citing central bank data.
Brazil’s Exports May Plunge 20 Percent in 2009, Barral Says – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) – Brazil’s exports may plunge 20 percent this year on slumping demand and falling prices as world economic growth slows, Foreign Trade Secretary Welber Barral said.
Argentina’s Buzzi Says Government’s Plan Isn’t Enough (Update1) – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Argentine farm leader Eduardo Buzzi, president of the country’s Agrarian Federation, said measures announced by the government yesterday aren’t enough to help farmers facing drought and falling commodity prices.
Ecuador Bank Drafting Bill for Second Currency, Hoy Reports – Bloomberg - Jan 15, 2009
Jan. 15 (Bloomberg) -- Ecuador’s central bank is preparing legislation that would allow it to issue a currency to be used alongside the dollar, Quito-based newspaper Hoy reported, citing a draft of the bill it had obtained
Bolivia breaks relations with Israel over Gaza invasion – MercoPress- Jan 15, 2009
President Evo Morales announced Wednesday that Bolivia severed diplomatic ties with Israel as an act of solidarity with Palestinians suffering from the current offensive in the Gaza strip.
Tuesday, January 13, 2009
Hints for configuring your long term portfolio -- from the Motley Fool
Excerpt -- This is where you buy growth -- Motley Fool
by Nate Weisshaar
Two thousand years ago, Rome ruled the known world. Two hundred years ago, China and India contributed nearly half of the world's wealth. In 1913, Argentina was the 10th richest country in the world. Change is, as they say, the only constant.
...
Making change work for you
Smart investors are positioning themselves to profit from the changes of the next several decades. Warren Buffett and Jim Rogers have both called this China's century. Mohamed El-Erian, former investment manager for Harvard's endowment and current co-CEO of PIMCO, suggests that investors hold two-thirds of their investments in assets outside the United States.
You'd be hard-pressed to find that much foreign exposure in most Americans' portfolios. Just a few years ago, most investment advisors felt that foreign stocks should make up around 20% of your portfolio at most. My, how things have changed.
-- Click here to access the full article from the Motley Fool
Monday, January 12, 2009
Commodities in focus: Sector outlook
Gold -- To hold gold or not to hold gold...? That is the question.
Gold is a funny metal in the commodity family. Despite its functional use in areas such as filling cavities, gold is also a very fickle metal in the sense that a variety of other macro-conditions ultimately play a big role in determining the price of gold.
The price of gold has held up reasonably well, remaining in the $800/t oz. Range despite a short dip into the $700's/t oz in October and November. Reasons to favor gold right now come predominantly in the form of using it as a hedge against future depreciation of the US dollar vs. the Euro and other major currencies. With all the money the US Government is printing and spending, plus historically low interest rates, most analysts estimate that the currency will weaken in the coming quarters.
Kitco - 6 month gold spot
On the other side of the equation, demand is falling from major consumers like India. Second, if stock markets do witness a sharp rebound, investors may have reason to turn away from gold and return to stocks which are at historical valuations. Chandrashekhar of the Hindu Business Line, a Indian news site says “In the short-term it could come under pressure amid a deflationary environment or during bouts of dollar strength.”
Base Metals – Copper futures jump 5% limit in Shanghai trading, but outlook still remains dim
Li Rong, chief analyst at Great Wall Futures in Shanghai told Bloomberg (in this article), “Chinese consumers took advantage of lower overseas prices to stock up ahead of the Chinese New Year.”
Chandrashekhar had the following to say about base metals.
In case of copper, market fundamentals, especially the demand side continues to deteriorate. This metal may have the furthest downside potential from current levels. According to experts, copper prices are still above production costs and miners still make money. Therefore, there would likely be cost-related cutbacks in production. On the other hand, aluminum, zinc and nickel prices have all fallen very close to weighted average production costs. There is growing risk that copper could dip near to this level at $2,100/t (click here to access the full article from the Hindu Business Line).
Crude Oil / Energy -- Bounce back?
At the moment the financial crisis and the recent political tensions in the Middle-East and Eurasia (Russia) have created a sense that oil prices may have come too low. Additionally OPEC has just announced large production cuts will be hitting the markets in the coming months to bolster oil prices.
When the global crisis appears to have been brought under control and demand returns to markets, the price of a barrel of crude may well spike back above $50 a barrel. Further dollar deterioration and escalation of political tensions may also contribute to higher prices.
Gold is a funny metal in the commodity family. Despite its functional use in areas such as filling cavities, gold is also a very fickle metal in the sense that a variety of other macro-conditions ultimately play a big role in determining the price of gold.
The price of gold has held up reasonably well, remaining in the $800/t oz. Range despite a short dip into the $700's/t oz in October and November. Reasons to favor gold right now come predominantly in the form of using it as a hedge against future depreciation of the US dollar vs. the Euro and other major currencies. With all the money the US Government is printing and spending, plus historically low interest rates, most analysts estimate that the currency will weaken in the coming quarters.
Kitco - 6 month gold spotOn the other side of the equation, demand is falling from major consumers like India. Second, if stock markets do witness a sharp rebound, investors may have reason to turn away from gold and return to stocks which are at historical valuations. Chandrashekhar of the Hindu Business Line, a Indian news site says “In the short-term it could come under pressure amid a deflationary environment or during bouts of dollar strength.”
Base Metals – Copper futures jump 5% limit in Shanghai trading, but outlook still remains dim
Li Rong, chief analyst at Great Wall Futures in Shanghai told Bloomberg (in this article), “Chinese consumers took advantage of lower overseas prices to stock up ahead of the Chinese New Year.”
Chandrashekhar had the following to say about base metals.
In case of copper, market fundamentals, especially the demand side continues to deteriorate. This metal may have the furthest downside potential from current levels. According to experts, copper prices are still above production costs and miners still make money. Therefore, there would likely be cost-related cutbacks in production. On the other hand, aluminum, zinc and nickel prices have all fallen very close to weighted average production costs. There is growing risk that copper could dip near to this level at $2,100/t (click here to access the full article from the Hindu Business Line).
Crude Oil / Energy -- Bounce back?
At the moment the financial crisis and the recent political tensions in the Middle-East and Eurasia (Russia) have created a sense that oil prices may have come too low. Additionally OPEC has just announced large production cuts will be hitting the markets in the coming months to bolster oil prices.
When the global crisis appears to have been brought under control and demand returns to markets, the price of a barrel of crude may well spike back above $50 a barrel. Further dollar deterioration and escalation of political tensions may also contribute to higher prices.
Sunday, January 11, 2009
Commodities in focus – mixed messages from China
Until this past October / November when markets came crashing down all over the world as the US credit crisis exploded into a full blown global economic crisis it seemed as if nothing could stem China's insatiable demand for commodities.
However, once economic crisis spread to wealthy nations a chain reaction started.
First, consumers who had been eating up cheap Chinese exports for years decreased their spending as credit dried up. Less demand for goods produced by China's manufacturing sector would mean less Chinese demand for commodities.
Second, a slowing global economy produced a situation where aggregate commodity demand shrank around the world. It mattered little if a country is rich or poor, a slowing global economy would mean less demand for energy and metals.
Third, as economic problems continued to spread it became less and less likely the economic dragon of China would be able to ride the storm out. If a global recession occurred, China would find it very difficult to rely solely on their domestic economy and international currency reserves to keep things growing as fast as they had been from 2001-2008.
Finally (and this is a over-simplification), combine all facts and you get a situation where the future of the global economy is unpredictable. Meaning, no one really knows when Chinese demand will pick up again, no one really knows when the global economy will recover and therefore investing in metals and energy seemed foolish if recession would hamper demand in the near future.
That being said, a few interesting stories passed through the presses this weekend. The first two indicate demand is returning to the commodity markets in China, the second two tell a different story.
Baoshan Steel, Angang Steel, Wuhan Iron & Steel and Maanshan Iron & Steel. Four major Chinese steelmaker stock ratings where raised by Credit Suisse, which said improving demand will help raise steel prices (click here for Bloomberg LP article).
China National Petroleum Corp., the country's biggest oil and gas producer, said it plans to increase oil and gas production by 5% annually to meet domestic demand (click here for Bloomberg LP article).
China's State Electricity Regulatory Commission said demand and output in China will continue to shrink this year because of slower economic growth. China is the world's second largest consumer of energy.
If people are using less electricity it means one of three things. First, it could be a bad sign for the economy. It could indicate the Chinese are becoming more efficient / environmentally friendly. Or third, it may mean the Chinese are trying to save a few Yuan from the higher price they have to pay for the energy.
The correct answer in this situation I feel is the first. A slowing economy simply means less demand for energy. I don't doubt the Chinese are indeed adapting their growth strategies to be more environmentally friendly, but I don't think it is the reason their demand for energy is shrinking (80% of China's energy comes from coal). Last, I don't think it's because of higher prices, commodities after all have once again become very cheap (click here for the Bloomberg LP article).
Moving onto aluminum. China's Shanxi Guanlu said on Friday it was shutting 40,000t of aluminum capacity owing to low prices and weak demand (click here for the full article from the Mining Journal).
I think the main idea to take away with you from all of this is that the market has no idea how to make up its mind and neither do the participants in the market. If and when the global economy does see a recovery, be sure you have some of your money invested in energy and metals, because demand will return and with a vengeance.
For a bit of perspective check out what Jimmy Rogers and Marc Faber, the guru's of commodity investing have to say.
Jim Rogers - Recession and Commodities in 2008
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P1
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P2
However, once economic crisis spread to wealthy nations a chain reaction started.
First, consumers who had been eating up cheap Chinese exports for years decreased their spending as credit dried up. Less demand for goods produced by China's manufacturing sector would mean less Chinese demand for commodities.
Second, a slowing global economy produced a situation where aggregate commodity demand shrank around the world. It mattered little if a country is rich or poor, a slowing global economy would mean less demand for energy and metals.
Third, as economic problems continued to spread it became less and less likely the economic dragon of China would be able to ride the storm out. If a global recession occurred, China would find it very difficult to rely solely on their domestic economy and international currency reserves to keep things growing as fast as they had been from 2001-2008.
Finally (and this is a over-simplification), combine all facts and you get a situation where the future of the global economy is unpredictable. Meaning, no one really knows when Chinese demand will pick up again, no one really knows when the global economy will recover and therefore investing in metals and energy seemed foolish if recession would hamper demand in the near future.
That being said, a few interesting stories passed through the presses this weekend. The first two indicate demand is returning to the commodity markets in China, the second two tell a different story.
Baoshan Steel, Angang Steel, Wuhan Iron & Steel and Maanshan Iron & Steel. Four major Chinese steelmaker stock ratings where raised by Credit Suisse, which said improving demand will help raise steel prices (click here for Bloomberg LP article).
China National Petroleum Corp., the country's biggest oil and gas producer, said it plans to increase oil and gas production by 5% annually to meet domestic demand (click here for Bloomberg LP article).
China's State Electricity Regulatory Commission said demand and output in China will continue to shrink this year because of slower economic growth. China is the world's second largest consumer of energy.
If people are using less electricity it means one of three things. First, it could be a bad sign for the economy. It could indicate the Chinese are becoming more efficient / environmentally friendly. Or third, it may mean the Chinese are trying to save a few Yuan from the higher price they have to pay for the energy.
The correct answer in this situation I feel is the first. A slowing economy simply means less demand for energy. I don't doubt the Chinese are indeed adapting their growth strategies to be more environmentally friendly, but I don't think it is the reason their demand for energy is shrinking (80% of China's energy comes from coal). Last, I don't think it's because of higher prices, commodities after all have once again become very cheap (click here for the Bloomberg LP article).
Moving onto aluminum. China's Shanxi Guanlu said on Friday it was shutting 40,000t of aluminum capacity owing to low prices and weak demand (click here for the full article from the Mining Journal).
I think the main idea to take away with you from all of this is that the market has no idea how to make up its mind and neither do the participants in the market. If and when the global economy does see a recovery, be sure you have some of your money invested in energy and metals, because demand will return and with a vengeance.
For a bit of perspective check out what Jimmy Rogers and Marc Faber, the guru's of commodity investing have to say.
Jim Rogers - Recession and Commodities in 2008
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P1
Marc Faber - Says He'd Favor Industrial Commodities Over Gold 2009 - P2
Saturday, January 10, 2009
Peru in focus -- 2008 growth forecast, natural gas and a new contract for PetroPeru
Andina, a Peruvian news agency had some nice pieces on Peru to offer for those interested.
1. Peru sees solid economic growth amid global crisis -- Andina
It seems the central bank of Peru thinks the country will grow 9.1% in 2008, up from 8.9% in 2007. This will make Peru the fastest-growing economy in Latin America for 2008.
The bank predicts 2009 growth will be around 6.0% and attributes the slide mostly to decreasing revenue from Peru's metal exports.
Peru reported a trade surplus in 2008 of $3.1 billion, down from $8.36 billion in 2007, once again attributed in large due to shrinking revenue from exports and also from surging domestic demand for imports.
I'm not sure what happen Friday evening, but according to this other story on Andina, the Economy Minister revised GDP growth to 10% for 2008. I'll be sure to make a post later on in the weekend or early next week with growth estimates from other sources. Check out both stories and decide for youself =).
2. Peru natural gas output rose 27% in 2008 -- Andina
Good news for the natural gas sector in Peru. Total output during 2008 clocked in at 119.95 billion cubit feet, up 27% from the previous year reported Perupetro on Friday.
Increase in gas production was driven not by speculation from abroad but rather increasing gas consumption in electric power plants in the country. Although the article does mention how in December natural gas production declined by 4.7% compared to November/ December of 2007. Perhaps indicating the global slow down, and subsequent decrease in natural gas demand is hitting home in Peru as well.
Camisea natural gas plant
3. BPZ Resources signs $1.3 billion crude oil sales contract with PetroPeru
BPZ Resources says that the actual number of barrels sold will depend on commodity prices and the actual production of PetroPeru's Covina field in northwest Peru.
The deal covers the sale of roughly 17 million barrels of oil at an average price of $65/ barrel.
1. Peru sees solid economic growth amid global crisis -- Andina
It seems the central bank of Peru thinks the country will grow 9.1% in 2008, up from 8.9% in 2007. This will make Peru the fastest-growing economy in Latin America for 2008.
The bank predicts 2009 growth will be around 6.0% and attributes the slide mostly to decreasing revenue from Peru's metal exports.
Peru reported a trade surplus in 2008 of $3.1 billion, down from $8.36 billion in 2007, once again attributed in large due to shrinking revenue from exports and also from surging domestic demand for imports.
I'm not sure what happen Friday evening, but according to this other story on Andina, the Economy Minister revised GDP growth to 10% for 2008. I'll be sure to make a post later on in the weekend or early next week with growth estimates from other sources. Check out both stories and decide for youself =).
2. Peru natural gas output rose 27% in 2008 -- Andina
Good news for the natural gas sector in Peru. Total output during 2008 clocked in at 119.95 billion cubit feet, up 27% from the previous year reported Perupetro on Friday.
Increase in gas production was driven not by speculation from abroad but rather increasing gas consumption in electric power plants in the country. Although the article does mention how in December natural gas production declined by 4.7% compared to November/ December of 2007. Perhaps indicating the global slow down, and subsequent decrease in natural gas demand is hitting home in Peru as well.
Camisea natural gas plant3. BPZ Resources signs $1.3 billion crude oil sales contract with PetroPeru
BPZ Resources says that the actual number of barrels sold will depend on commodity prices and the actual production of PetroPeru's Covina field in northwest Peru.
The deal covers the sale of roughly 17 million barrels of oil at an average price of $65/ barrel.
Video -- Argentina's Jewish community supports Israel
(REUTERS) Jan 9 - Hundreds of Argentina's Jewish community gather in Buenos Aires to show solidarity with Israel's military action in Gaza.
As Israel continued with its two-week offensive in the Gaza strip, Israel's Ambassador to Argentina Daniel Gazit and Carlos Fraun, President of the Argentine Zionist Organization, addressed the gathering at Buenos Aires' Jewish Centre.
Kimberley Lim reports of Reuters reports
As Israel continued with its two-week offensive in the Gaza strip, Israel's Ambassador to Argentina Daniel Gazit and Carlos Fraun, President of the Argentine Zionist Organization, addressed the gathering at Buenos Aires' Jewish Centre.
Kimberley Lim reports of Reuters reports
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
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
Friday, January 9, 2009
South-South Cooperation -- Ecuador seeks $280 million credit line from Iran
Ecuador is reaching out to its new buddy, Iran for a credit line of $280 million usd to finance pipeline and other oil-sector related projects according to what Mining and Oil Minister Derlis Palacios told the Dow Jones Newswires yesterday (click here for the article, provided via Rigzone).
Senor Palacios seems confident Ecuador will get the money too. Stating in a telephone interview "We are asking for a credit line of $280 million, especially to invest in our pipelines. We are sure that this money will come."
This is all very intriguing. I must admit Correa has done some good for Ecuador and my opinions on him have personally evolved over the years, and in a positive way. However, messing around with Iran on the heels of months of intense fighting with foreign companies and THEN causing hysteria with the country's bonds will definitely reverberate for years to come in the international community.
Yes, it is true Ecuador probably would probably have a hard time securing a loan from any normal western financial institution and that it has all the right in the world to look elsewhere. I just question the path Correa and the political big whigs in Ecuador think is best for the future of Ecuador.
If the political situation changes and new leadership seeks to pursue a different path, one less antagonistic of the international community perhaps, it will be a hard process of re-affirming confidence after all of it.
However, if the world was fair I think Ecuador should be able to go ask Iran for a loan if it wants. They are in the end both developing countries that could probably benefit from cooperating with one another. Sadly we don't live in a fair world, and considering the degree to which Ecuador is connected to the international financial system, I think it should have thought a bit more carefully about its foreign policy in the last year or so.
Senor Palacios seems confident Ecuador will get the money too. Stating in a telephone interview "We are asking for a credit line of $280 million, especially to invest in our pipelines. We are sure that this money will come."
This is all very intriguing. I must admit Correa has done some good for Ecuador and my opinions on him have personally evolved over the years, and in a positive way. However, messing around with Iran on the heels of months of intense fighting with foreign companies and THEN causing hysteria with the country's bonds will definitely reverberate for years to come in the international community.
Yes, it is true Ecuador probably would probably have a hard time securing a loan from any normal western financial institution and that it has all the right in the world to look elsewhere. I just question the path Correa and the political big whigs in Ecuador think is best for the future of Ecuador.
If the political situation changes and new leadership seeks to pursue a different path, one less antagonistic of the international community perhaps, it will be a hard process of re-affirming confidence after all of it.
However, if the world was fair I think Ecuador should be able to go ask Iran for a loan if it wants. They are in the end both developing countries that could probably benefit from cooperating with one another. Sadly we don't live in a fair world, and considering the degree to which Ecuador is connected to the international financial system, I think it should have thought a bit more carefully about its foreign policy in the last year or so.
Commodities in focus -- Copper rises in London trading as China begins to stockpile raw materials
The commodity sector has been hit hard by the global economic crisis, especially in terms of the speed of its decline. For much of 2008 as other equities faltered, shares of commodity and energy stocks seemed immune, many times leading the major US indices into the green despite poor performance in other sectors.
When markets began to tank between September – November this all changed. Year to date (2008), oil is down around 60%, copper 50%, natural gas 20%, etc. As commodities plummeted miners profits shrank, exploration slowed, new mining projects became unfeasible in light of depressed prices and speculators who had been relying on energy and raw materials as a safe investment or inflation hedge withdrew their money.
If the stimulus packages being enacted by governments around the world successfully help to re-invigorate the global financial system and we see a recovery in confidence and economic activity the recession may end sooner than expected. If this happens commodity demand will once again explode, especially considering how so many producers and explorers have scaled back their operations.
China is not oblivious to this. Much like China's logic behind securing resources in Africa to avoid supply disruptions, China is now concerned about supply disruptions that may occur if demand picks up.
Bloomberg and Reuters reported this morning that China's Reserve Bureau, the country's stockpiling agency, is buying aluminum. Analysts seem to think (and I agree in this situation) that if they are buying up aluminum at cheap prices, they will do the same for other metals.
“Aluminum inventory in warehouses monitored by the Shanghai Futures Exchange declined 18% in the past week, the largest decline since April 2007, figures from the exchange today showed. China’s Ministry of Land and Resources said two days ago the country would build emergency stockpiles of copper and other items to guard against potential supply disruptions.”
(click here to access the full article from Bloomberg, republished by the Mining Journal)
China is smart to do this, with the country's massive foreign reserves and depressed commodity prices it makes sense for them to stockpile the resources they need to ensure their development. China is worried about its slowing economy because of the potential for political unrest in bad economic times.
Considering the fact China continued to purchase commodities when they where selling at their recent historical highs, it must feel like shopping at a giant fire sale for the Chinese who can now scoop up a huge stockpile of raw materials and energy for depressed prices.
When markets began to tank between September – November this all changed. Year to date (2008), oil is down around 60%, copper 50%, natural gas 20%, etc. As commodities plummeted miners profits shrank, exploration slowed, new mining projects became unfeasible in light of depressed prices and speculators who had been relying on energy and raw materials as a safe investment or inflation hedge withdrew their money.
If the stimulus packages being enacted by governments around the world successfully help to re-invigorate the global financial system and we see a recovery in confidence and economic activity the recession may end sooner than expected. If this happens commodity demand will once again explode, especially considering how so many producers and explorers have scaled back their operations.
China is not oblivious to this. Much like China's logic behind securing resources in Africa to avoid supply disruptions, China is now concerned about supply disruptions that may occur if demand picks up.
Bloomberg and Reuters reported this morning that China's Reserve Bureau, the country's stockpiling agency, is buying aluminum. Analysts seem to think (and I agree in this situation) that if they are buying up aluminum at cheap prices, they will do the same for other metals.
“Aluminum inventory in warehouses monitored by the Shanghai Futures Exchange declined 18% in the past week, the largest decline since April 2007, figures from the exchange today showed. China’s Ministry of Land and Resources said two days ago the country would build emergency stockpiles of copper and other items to guard against potential supply disruptions.”
(click here to access the full article from Bloomberg, republished by the Mining Journal)
China is smart to do this, with the country's massive foreign reserves and depressed commodity prices it makes sense for them to stockpile the resources they need to ensure their development. China is worried about its slowing economy because of the potential for political unrest in bad economic times.
Considering the fact China continued to purchase commodities when they where selling at their recent historical highs, it must feel like shopping at a giant fire sale for the Chinese who can now scoop up a huge stockpile of raw materials and energy for depressed prices.
Thursday, January 8, 2009
Indian's version of Enron shakes up Bombay exchange
Satyam Computer Services, one of the largest outsourcing companies in India has just reported it has been inflating profits for years, sending its shares down 80% in Bombay trading. This is hardly good news for India's financial system which is already struggling in the wake of the Mumbai (Bombay) Terrorist Attacks and due to the generally bleak economic picture in the global economy.
The Bombay Stock Exchange's Sensitive Index, or Sensex fell a record 52% in 2008. After news broke yesterday the exchange tumbled 7.3% and also sent the Rupee down. The New York Stock Exchange halted trading of shares in Satyam after news, saying it needed to review the situation.
Reuters reports, "Ramalinga Raju, founder and chairman of India's fourth-largest software services exporter, said in a statement that Satyam's profits had been massively inflated over recent years. He added that no other board member was aware of the financial irregularities at the Satyam, which in Sanskrit means "truth."
(click to access the full story from Reuters or Bloomberg)
The Bombay Stock Exchange's Sensitive Index, or Sensex fell a record 52% in 2008. After news broke yesterday the exchange tumbled 7.3% and also sent the Rupee down. The New York Stock Exchange halted trading of shares in Satyam after news, saying it needed to review the situation.
Reuters reports, "Ramalinga Raju, founder and chairman of India's fourth-largest software services exporter, said in a statement that Satyam's profits had been massively inflated over recent years. He added that no other board member was aware of the financial irregularities at the Satyam, which in Sanskrit means "truth."
(click to access the full story from Reuters or Bloomberg)
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.
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.
Wednesday, January 7, 2009
China goes shopping for commodities
If you have kept up to date as I try to do with China's oversea investments in the commodity and energy sectors you're probably aware of the fact China has been shopping for commodities in emerging markets.
Africa and to a lesser extent South America where the main benefactors of China's spending spree from 2000-2008. The two continents are home to abundant supplies of natural resources China needs to sustain economic growth. The two continents are also home to various countries that are hungry for foreign direct investment in their commodity sectors which until recent had been the main fuel behind their respective economics booms.
China also had a edge up on their western counterparts in many of these countries. Some countries in Africa and South America intimidate traditional western investors due to political instability. Others have such a horrendous human rights record that many western firms are morally inclined not work in them.
With the global slow down in full swing, cash rich Chinese companies and investment groups now find themselves in a different position. Frozen credit markets, plummeting commodity prices, depressed stock market prices and a cloudy horizon in the future have led many mining companies from developed countries to search for long-term investors with the capital to keep their operations running until the global economy improves.
China has shifted its attention away from Africa, instead focusing on possible investment opportunities in Canada, Australia and South America. Keith Spence, president of Global Mining Corp, a China-focused resource investment company was quoted in a great piece published in the Financial Times yesterday.
"The Chinese realize there are massive opportunities in the market. A year ago, they were going to Africa to acquire early-stage development assets. But now they are looking for larger tonnage, longer life, later-stage assets. There is less of an emphasis on emerging markets, because now there is choice."
Last month China's largest zinc producer, Zhongjin purchased 50.1% of Australian zinc miner Perilya for $32 million usd. Chinalco, a Chinese aluminum company has suggested it may increase its stake in Rio Tinto to nearly 15%.
(click here to access the full article on this topic from the Financial Times)
I must say it is interesting to see that although China finds itself in a more lucrative buying position that it has not shunned South America. Evidence to suggest the Chinese may perceive South America as more than simply another commodity rich area in which to extract untapped resources.
Rather it may be that South America has come to represent a region that has well developed assets, worthy of purchasing for the long-term. China is forging much closer ties with fellow APEC members Chile and Peru. China is quickly working with Peru to finalize a Free Trade Agreement and already has one with Chile. China is increasing its investment in agricultural commodities in Brazil and Argentina and hopes to continue easing visa restrictions for many of its citizens on travel to the region.
Below I've included a chart of Chinese investments / cooperation with Latin American countries. I assembled this chart about 6 months ago for my independent study / thesis. If you know of any other instances of Sino-Latin America interaction please by all means let me know and I'll update this chart.
Africa and to a lesser extent South America where the main benefactors of China's spending spree from 2000-2008. The two continents are home to abundant supplies of natural resources China needs to sustain economic growth. The two continents are also home to various countries that are hungry for foreign direct investment in their commodity sectors which until recent had been the main fuel behind their respective economics booms.
China also had a edge up on their western counterparts in many of these countries. Some countries in Africa and South America intimidate traditional western investors due to political instability. Others have such a horrendous human rights record that many western firms are morally inclined not work in them.
With the global slow down in full swing, cash rich Chinese companies and investment groups now find themselves in a different position. Frozen credit markets, plummeting commodity prices, depressed stock market prices and a cloudy horizon in the future have led many mining companies from developed countries to search for long-term investors with the capital to keep their operations running until the global economy improves.
China has shifted its attention away from Africa, instead focusing on possible investment opportunities in Canada, Australia and South America. Keith Spence, president of Global Mining Corp, a China-focused resource investment company was quoted in a great piece published in the Financial Times yesterday.
"The Chinese realize there are massive opportunities in the market. A year ago, they were going to Africa to acquire early-stage development assets. But now they are looking for larger tonnage, longer life, later-stage assets. There is less of an emphasis on emerging markets, because now there is choice."
Last month China's largest zinc producer, Zhongjin purchased 50.1% of Australian zinc miner Perilya for $32 million usd. Chinalco, a Chinese aluminum company has suggested it may increase its stake in Rio Tinto to nearly 15%.
(click here to access the full article on this topic from the Financial Times)
I must say it is interesting to see that although China finds itself in a more lucrative buying position that it has not shunned South America. Evidence to suggest the Chinese may perceive South America as more than simply another commodity rich area in which to extract untapped resources.
Rather it may be that South America has come to represent a region that has well developed assets, worthy of purchasing for the long-term. China is forging much closer ties with fellow APEC members Chile and Peru. China is quickly working with Peru to finalize a Free Trade Agreement and already has one with Chile. China is increasing its investment in agricultural commodities in Brazil and Argentina and hopes to continue easing visa restrictions for many of its citizens on travel to the region.
Below I've included a chart of Chinese investments / cooperation with Latin American countries. I assembled this chart about 6 months ago for my independent study / thesis. If you know of any other instances of Sino-Latin America interaction please by all means let me know and I'll update this chart.
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