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

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...

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.

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)

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.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Hungry for IPO's in 2009? Do Chinese and Brazilian firms have the capacity or guts to test the market?

It seems just yesterday that Chinese IPO's where the talk of the town. Even if you were not buying them yourself, it still seemed as if everyone else was. When you consider what an IPO is, it's no wonder why the investment communities appetite for them has disappeared.

When companies go public they offer a certain portion of their company to shareholders. In exchange shareholders invest their money in hopes of seeing a given company grow and prosper. If a company grows and prospers, shareholders are rewarded by seeing the value of their investments rise. If the company preforms poorly investors see their investments loose value.

If you have cash lying around would you trust your money in a company looking to expand or finance some project in the context of the economic climate today?


Chinese companies are feeling the pinch, turning to banks instead the stock market to raise the capital they need. The Financial Times reports “Mainland companies last year raised a record $100bn in IPOs on exchanges in Shanghai, Shenzhen and Hong Kong – far more than established bourses in New York or London.”

(Click here to access the full article from the Financial Times)

In response, the Chinese Government is attempting to encourage banks to lend to companies looking for expansion capital. The recent interest rate cuts make lending cheaper, which will help entice banks to lend, but if history repeats itself Chinese banks may find themselves with a great deal of outstanding loans that can not be repaid.

This happened in the late 90's and it could happen again. Especially if the Chinese economy is not able to weather the global recession as well as many hope. Additionally, many IPO's from 2006 and 2007 benefits not from legitimate investments from people who had faith in their business, but rather from speculative investors who wanted a piece of the profits.

Chinese media, Xinhua, reports Pricewaterhouse Cooper (PwC) expects IPO's will rise in value by 45% in the second half of 2009 as a result of the government stimulus package. PwC forecasts Companies will raise about 150 billion yuan (22 billion U.S. dollars) through IPOs in China in 2009.”

State media in China should be analyzed with a bit of skepticism for obvious reasons (it is filtered if you didn't know). This fact alone contradicts with the figures presented by the Financial Times that in 2009 over $100bn was raised. It would be nice to be told what base measure they are using when they figure the 45% increase. If anyone feels like checking out the PwC report you might be able to find out.

(Click here to access the full article from Xinhua)

Brazilian IPO's also seem to be having a tough time, as reported by Bloomberg LP today.

“The point isn’t that VisaNet isn’t interested in listing, but that there have been problems, in this market, in pricing the offer in a way that shareholders will be satisfied,” said Victor Mizusaki at Sao Paulo-based Itau Corretora, the brokerage unit of Brazil’s biggest non-state bank. “There is a deadline to turn in all the paperwork and to price the offer, and the time limit was running out.”

Brazil’s boom in IPOs dried up last year with only four companies going public compared with 64 in 2007 as the global financial crisis sent the benchmark Bovespa index down 41 percent and reduced investors’ appetite for riskier emerging-market assets. Companies raised more than 70 billion reais through initial and additional stock sales in 2007, according to data from exchange owner BM&FBovespa SA.

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

All in all, I'd say IPO's are going to far and wide in the developing world for 2009. All these countries have seen the incredible attraction they garner when times are good and investors are flowing with confidence and money. They also see that when times are bad, people will pick and choose their investments very carefully. Meaning far less appetite for risky investments, in particular with companies that have yet to face the pressure of being traded and valued within the context of this chaotic and unpredictable market.

News Line:

China Development Bank keen to support projects in Peru – reports Andina.com

Lima, Nov. 30 (ANDINA).- The China Development Bank (CDB) is interested in supporting infrastructure and agricultural projects in Peru as part of a cooperation agreement recently signed with Peruvian state-bank Banco de la Nación (BN).

"China Development Bank is very interested in infrastructure and agricultural projects that involve development of rural communities in Peru," BN general manager Julio del Castillo told Andina news agency...

Click here to access the full story from Andina.com


BRIC Shoppers Will “Rescue World” Says Goldman Sachs Economist – reports Bloomberg's William Mellor and Le-Min Lim

Dec. 1 (Bloomberg) -- The best hope to keep the global economy growing may be people like Wei Yufang. A peasant who farms a small plot beside the mud-brown Huaihe River in central China, Wei has a modest dream: to buy an air conditioner to give her family relief from the dusty heat that each summer envelops Xiaogang (Little Hill) village in Anhui province.

With economies from the U.S. to Japan in recession, Wei and the other 2.8 billion people in Brazil, Russia, India and China may provide the consumer demand needed to counter the slump.

Jim O’Neill, the Goldman Sachs Group Inc. economist who in 2001 coined the acronym BRIC from the initials of the four big emerging economies, says the faster growth investors have come to expect from these countries will survive this crisis. O’Neill, who is based in London, says the citizens of the BRIC nations are poised to spend more. “The BRIC consumer is going to rescue the world,” he says...

Click here to access the full story from Bloomberg LP


China, India Drop Inflation Controls as Economic Growth Slows – reports Bloomberg's Nipa Piboontanasawat and Thomas Abraham

Dec. 1 (Bloomberg) -- China and India lifted controls targeting prices of products from vegetable oil to natural rubber after inflation eased in the world’s fastest-growing major economies.

China today stopped requiring companies to seek approval for some food-price increases, the government said. India dropped a ban on futures trading in natural rubber, soybean oil, potatoes and chickpeas, the consumer affairs ministry said.

...

“For China, the main focus of the government is to boost economic growth and prevent deflation,” said Wang Qing, chief China economist at Morgan Stanley in Hong Kong.

In India, Prime Minister Manmohan Singh dropped a seven- month ban on futures trading in natural rubber, soybean oil, potatoes and chickpeas...

Click here to access the full story from Bloomberg LP


China's Manufacturing Contracts by Record on Exports – reports Bloomberg's Nipa Piboontanasawat

Dec. 1 (Bloomberg) -- China’s manufacturing shrank by the most on record and export orders plunged, adding to evidence that recessions in the U.S., Europe and Japan are dragging down the world’s fastest-growing major economy.

The Purchasing Managers’ Index fell to a seasonally adjusted 38.8 in November from 44.6 in October, the China Federation of Logistics and Purchasing said today in an e- mailed statement. A second PMI, released by CLSA Asia-Pacific Markets, also showed a record contraction...

Click here to access the full story from Bloomberg LP


Following visit Russian leader calls for bigger LATAM role

Russian president Dmitri Medvedev said he was very satisfied with his Latinamerican tour which took him to Peru, Brazil, Venezuela and Cuba because it enabled to re-establish strong links with the region.

...

“Latinamerica is a region developing fast, which has a concentration of significant intellectual and natural resources, and most important the peoples of the region want to cooperate with Russia”, added Medvedev

...

“We are prepared to increase political, economic and military cooperation with Latinamerican countries and their leaders, particularly in a world with so many security problems and challenges.” ...

Click here to access the full story from Mercopress

News Line: BRIC Countries, US-Peru ties to grow stronger says presidential hopeful Barack Obama (special thanks to Bloomberg LP for this post)

1)  India and China step up protection from global crisis -- courtesy of Bloomberg LP

Nov. 3 (Bloomberg) -- India and China are accelerating efforts to prop up growth as a global slump threatens the world's fastest-expanding major economies.

The Reserve Bank of India on Nov. 1 lowered its benchmark interest rate for the second time in two weeks, and for the first time in 11 years reduced the amount of money lenders are required to keep in government bonds. China's central bank removed temporary controls over loans to maintain ``relatively fast'' growth, Xinhua News Agency reported Nov. 1, three days after cutting its key rate for the third time in two months.

...

Emerging Asian economies that account for one-fifth of world growth are being dragged down as their main markets in the U.S. and Europe contract, increasing the likelihood of a global recession. Policy makers in India and China are also boosting spending to prevent their economies from going under.

...

China's Premier Wen Jiabao says sustaining economic growth is the government's ``first priority.'' China has already raised export incentives, cut costs for home buyers and pledged infrastructure spending.

India and China need to move fast to implement their stimulus plans, with growth already slowing in Asia's second- and third-largest economies amid weaker foreign demand.

Click here to read the full article from Bloomberg LP

2)  China's stocks drop to a two-year low -- courtesy of Bloomberg LP

China's stocks fell to the lowest in almost two years, led by industrial companies, after a report showed China's manufacturing contracted amid the worst financial crisis since the Great Depression.

...

The CSI 300 The CSI 300 has slumped 69 percent this year, making it Asia's worst-performing benchmark index. Stocks have fallen amid concern demand for Chinese products will decline as the global credit crisis drags the world's largest economies into recession.

...

Net income at the 487 companies listed on the Shenzhen Stock Exchange's main board rose 3.4 percent in the first three quarters, a fraction of the 89 percent increase a year earlier, according to data in a statement released by the bourse today.

Economy Slows

China's economy grew at the slowest pace in five years in the three months through September as export orders shrank and industrial production waned. The expansion cooled for a fifth straight quarter, to a 9 percent gain from a year earlier.

Click here to read the full article courtesy of Bloomberg LP

3)  Subbarao Abandons India 'Inflation Vigil,' Cuts Rates -- courtesy of Bloomberg LP

 
Nov. 3 (Bloomberg) -- Indian Central bank governor Duvvuri Subbarao has abandoned the "inflation vigil'' he outlined just 10 days ago in his inaugural monetary policy statement.

For the first time since 1997, the Reserve Bank of India on Nov. 1 deployed all three of its main tools to shore up growth after inter-bank lending rates climbed to 21 percent. Economists at Yes Bank Ltd. and Standard Chartered Bank predict more interest-rate cuts following the weekend reduction.

``India's central bank has no other option but to focus on economic expansion," said Shubhada M. Rao, chief economist at Yes Bank Ltd. in Mumbai. ``Global cues have turned against growth and it was surprising to see the hawkish tones on inflation'' last month.

Subbarao, less than two months into the job, has grappled with monetary policy at a time when inflation is double the central bank's target and a global downturn threatens to hit the economy. The central bank's renewed focus on growth aligns with Prime Minister Manmohan Singh's push to buoy the economy ahead of elections due by May.

The decision to cut rates on Nov. 1 was a U-turn from the stance Subbarao spelled out in his first statement. At that time, he said price pressures could come from lower farm production, volatile oil prices and a weaker rupee.

...

Click here to read the rest of the article courtesy of Bloomberg LP

4) BRIC see no relief even as rally lures stock bulls -- courtesy of Bloomberg LP

Nov. 3 (Bloomberg) -- Forget last week's record 20 percent gain in emerging-market stocks. Hard times are ahead for equities in Brazil, Russia, India and China, some of the world's biggest money managers say.

Even with developing-nation shares trading at their cheapest levels in a decade, financial crises in Hungary and Pakistan that required international rescue packages and concern that economies from Turkey to Argentina are also teetering prompted investors to pull out of emerging-market funds at a record pace.

RBC Capital Markets cut its estimates on Oct. 23 for 2009 economic growth in Brazil to 2.5 percent from 4 percent and Russia to 4 percent from 6 percent. That may undermine analysts' forecasts for a 14.5 percent increase in earnings at a time when the global credit crunch seized up lending from Sao Paulo to Seoul and a slump in 24 of 25 developing-nation currencies last month inflated the costs of repaying dollar-denominated debt.

...

Click here to read the full article courtesy of Bloomberg LP

5)  Brazil central bank to signal interest rate outlook: week ahead -- courtesy of Bloomberg LP

Nov. 3 (Bloomberg) -- Brazil's central bank may provide signals on the outlook for interest rates after halting six months of increases to weigh an economic slowdown against inflationary pressure from a weakening currency.

Economists will be closely reading the minutes from the bank's Oct. 28-29 meeting, to be published Nov. 6, to gauge whether its unanimous decision to pause rate increases herald a change in policy.

...

Click here to read the full article courtesy of Bloomberg LP

6) After Colorado rally Obama says U.S. - Peru ties to grow stronger -- courtesy of Living  in Peru

RPP Noticias, a local news agency in Peru had the chance to speak with Barack Obama after his final campaign stop in Colorado on Saturday November 1.

After a festive meeting with thousands of jubilant supporters dancing in the streets, Obama affirmed to RPP reporters that the relationship between the United States and Peru would grow closer and stronger.

RPP correspondents explained Obama made these statements as he was leaving his rally, which was compared by Peru reporters to the presentation of a famous show-business star.

...

Click here to read the full article courtesy of Living in Peru and RPP Noticias

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

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

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

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

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

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



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

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

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

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

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

Click here to access the full article from Bloomberg LP



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

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

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

...

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

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

Click here to access the full article from Merco Press



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

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

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

Click here to access the full article from Rigzone
http://www.rigzone.com/news/article.asp?a_id=68576

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

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

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

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

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

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

News Line: South-South Cooperation -- Asia-Latin America Business Boom

1) Latin Business Chronicle: Asia-Latin Trade Boom - by Joachim Bamrud

With the U.S. economy continuing to show weak results, Latin America is increasingly betting on Asia. Latin American exporters have found eager markets in countries like China, Japan and India, while Asian companies, in turn, are boosting their exports to Latin America.

"The growth of Asia will drive the business with Latin America," says R. Viswanathan, India's ambassador to Argentina, Uruguay and Paraguay and widely considered India's leading expert on Latin America. “Both governments and business have started looking at the potential for complementary cooperation between the two regions....

"Trade will grow despite short-term commodity price fluctuations because demand in Asia remains high for Latin America’s resources," says Michael Diaz, managing partner at U.S.-based law firm Diaz Reus, which serves many clients involved in Asian-Latin American business....

*** You must be a full member of the Latin Business Chronicle to access the full article. Click here for the free expert

2) Gazprom, Total to invest $45 billion in new exploration in Bolivia reports Business News Americas Russian oil company Gazprom and French oil major Total (NYSE: TOT) have signed an MOU with Bolivia's state hydrocarbons company YPFB to invest US$4.5bn in a new natural gas project in Bolivia, a YPFB spokesperson told BNamericas, confirming local press reports.

The three companies will develop the project in the southeast of Bolivia, where Total is already producing natural gas from six wells, the spokesperson said.

Production from the project could reach 26Mm3/d.

Click here to access the full article from Business News Americas

3) Garcia and Lulu discuss increasing bi-lateral trade and investment between Peru and Brazil reports Andina News

Sao Paulo, Sep. 18 (ANDINA).- President Alan García held Thursday evening a meeting with his Brazilian counterpart, Luiz Inácio Lula da Silva, to discuss about bilateral relations and the possibility to attract more investments to Peru....

President Alan Garcia and his Brazilian counterpart
Luiz Inacio da Silva in San Paulo. Photo Sepres

García said Thursday morning that during the meeting he will propose to his Brazilian counterpart “a reinforced bilateral agreement”, a kind of Free Trade Agreement (FTA), which will include speeding up a tariff exemption process....

Click here to access the full story in english from Andina News

South American Energy in focus

Venezuela's PdVSA Reports Successful Oil Drilling Ecuador

A slew of energy developments in a handful of countries in South America has made headlines in the past day or so. For starters Venezuela and Ecuador made headlines this morning once again... this time for successful drilling and exploration in the Amazonian region. The newly established supply of crude will eventually be sent to the new refinery being build on the pacific coast.

Click here to access the full story from Rigzone.



Petrobras' Production Soars 3.3% More in June

Petrobras’ average oil and natural gas production abroad was 218,117 barrels of oil equivalent per day (boed) in June, 8.1%.

Added to the volume lifted from the domestic fields, Petrobras’ total production in June set a monthly record, topping out at 2,421,155 barrels of oil equivalent, 3.3% more than a year ago and 2.3% higher than May 2008.

Click here to access the full story from Rigzone.



Arduous Process of getting the Camisea facilities in Peru up and running
- Wood Snag 3-Year Maintenance Contract for Camisea Facilities

The Camisea Project comprises the exploitation The San Martin and Cashiriari fields natural gas fields, the construction and operation of two pipelines, one for natural gas (NG) and one for natural gas liquids (NGL) and the distribution network for natural gas in Lima and Callao. The pipelines wiII make NG and NGL available for domestic consumption and for export.

Natural gas wiII be transported to the main consumption center in Lima, where it will be used for residential and industrial purposes and to generate electricity, that will then be distributed nationwide through Peru’s existing transmission infrastructure (click here to read more about the Camisea Project)

Wood Group Production Facilities has been awarded a three-year, performance-based contract by Pluspetrol Peru Corporation to provide integrated maintenance services for the Camisea facilities in Peru. The Camisea project includes the largest natural gas field in the region.

Click here to access the full story from Rigzone



Shell to invest $300m in search for oil and natural gas in Peru

Royal Dutch Shell is ready to invest as much as $300 million in exploring for oil and natural gas in Peruvian waters as part of a agreement with BPZ Energy, executives from the two companies said Thursday.

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In March, U.S.- and Peruvian-owned BPZ found an estimated 60 million barrels' worth of crude oil and 40 million cubic feet of natural gas in the same region off Peru's northern Pacific coast.

The accord announced Thursday calls for Shell to spend up to $300 million on exploration and - if reserves are found - exploitation of natural gas, while BPZ will put the same amount into searching for crude oil along with an additional $150 million to build an electric plant in the area.

Under the deal, BPZ will get 51.75 percent of any oil or gas produced and Shell will claim the rest.

Click here to access the full story from Rigzone



Geopark Grabs up Additional Petroleum Block in Chile

GeoPark Holdings Limited announced that the Ministry of Mining in Chile has awarded the Otway Block in southern Chile to a consortium consisting of GEOPARK (42%), Methanex Corporation of Canada (16%) and Wintershall Energia SA, a division of BASF Ag of Germany (42%).

The Otway Block is a large new attractive exploration area (5,992 square kilometers) located in the Magallanes region near GEOPARK's Fell Block operation in Chile. GEOPARK is the first and only private-sector oil and gas producer in Chile and the addition of the new Otway Block will further enhance GEOPARK's position as the premier private-sector oil and gas operator in Chile.

Click here to access a previous post in regard to GEOPARK's natural gas discoveries in the Magallanes Region -- published on South-South Cooperation on June 17th, 2008.

Click here to access the full article from Rigzone



Colombia to create oil price stabilization fund

Colombia's government is creating an oil price stabilization fund (FEPC) that will be used to cushion domestic oil prices from unexpected rises on international markets, government news agency SNE reported.

Congress has approved the fund, which is included in the national development plan and must go to the president for final authorization. The finance ministry would administer the fund, which would receive financing from the existing oil stabilization fund (FAEP) owned by state oil company Ecopetrol.

Click here to access the full story from Rigzone

Update: Lula's in South East Asia pt. 2 -- Indonesia and Brazil to cooperate in biofuels

Brazilian Present Luiz Inacio Lula da Silva began his tour of South East Asia in Vietnam. He met with his counterpart Nguyen Minh Triet and the two discussed promoting stronger trade ties between their respective counries (click here to view original Vietnam piece from July 10).

Lula has moved onto his second destination, Indonesia, where he also made a good impression with with his Indonesian counter-part, President Susilo Bambang Yudhoyono.

Brazilian and Indonesian leaders agreed on Saturday the two nations could mutually benefit if they developed a framework in which to cooperate on biofuels. Brazil and Indonesia are home to much of the world's remaining tropical rain forest, which at the moment is shrinking due to expropriation, illegal timber operations and government/ private sector expansion--- many times into biofuels.

The two nations signed an agreement for Indonesia to send experts to Brazil to study its biofuel developments, said Indonesian President Susilo Bambang Yudhoyono.

"Brazil has been successful developing bioethanol and of course Indonesia can learn from the research and development," Yudhoyono stated at a news conference.

Both countries are big biofuel producers-- Brazil produces large amount of pure ethanol for both domestic use and export. Brazil does so through tapping into its huge sugar cane sector, mixing a sugar cane based fuel with gasoline to make a clean ethanol it fuels its automobiles with.

Indonesia, a former member of the OPEC cartel, is also the world biggest palm oil producer. Indonesia once mainted a surplus of oil, allowing it to export its surplus abroad in exchange for hard currency which it used to subsidize much of its state spending, and maintain price controls on goods ranging from food to gasoline.

Indonesia is now a net importer of crude oil. The country has naturally began exploring alternative energy options, one of which is to encourperate biofuel made from palm oil. The government hopes this will at least partially help to compensate for both increasing energy demand in Indonesia as population rises and society modernizes and also for its own decreasing domestic production.

Indonesia's government has set a goal of making as many petroleum based products as possible into a new blend petroleum biodiesal blend. The blend will use 2.5% biodiesal produced form domestic palm oil.

With the food crisis in full swing (read previous post on food crisis), many critisize the biofuel sector for being responsible for rising prices, since those crops otherwise would go to markets instead of factories to be made into fuel... Maybe, but that's over simplyfying the situation and leaving out the United States which has probably hurt poor people's diet much more substantially due to its use of corn to produce its ethanol.

It also probably angers a country like Brazil. Brazil is home to the most fertile land of any country on the planet, yet its agriculture industry is inhibited because of agricultural subsidies from the developed world-- a point Lula continuously tries to make well known.

Another factor Indonesia has been keep to point out itself is the fact richer nations should also be responsible for their own forests (Canada and the US in particular), which also account for large stores of carbon and act like sponges to soak up greenhouse gases just as tropical forests do.

"No one wants to preserve our forests more than we ourselves but the most polluting countries they must start to discuss more seriously how to cut greenhouse gas emissions," said Lula on Saturday to Indonesian Press.

Click here to access a article on this topic from the Economictimes.indiatimes.com

Although originally questioned for being a bit too far to left for the likings of the United States, Lula and his administration have prooven to be quite good at managing the macro economy. Add to that the incredible strides Lula has made in the international areana.

He has successfully promoted Brazil as the leader of the fight between developing contries and developed counries over farm subsidies.

His presidency has successfully brought inflation under control and made the Brazilian Real one of the best preforming currencies against the US $ in the world as of recent.

He has forged strategic ties with a wealth of countries which Brazil previously had little or no exchange with-- Vietnam and Indonesia being two recent examples.

Brazil has joined the ranks of China, India and Russia in what is now referred to as the BRIC contries-- the largest and potentially most influential developing countries in the world.

The list goes on... note however, there also exist many scandels, political mishaps and growing problems; such as the growing income disparity and extremly high crime rates in its major cities. No less Brazil has not done so bad.

Brazil to Sell Oil Fields at Auction

Brazil will auction oil fields, except for the newly discovered pre-salt areas, authorities said Thursday.

Brazilian Basins

Brazil's National Agency of Petroleum, Natural Gas and Biofuels, a regulatory department for the industry sectors concerning the natural resources, will restart the eighth round of auctions of oil fields, which had been suspended by a court dispute, Minister of Mines and Energy Edison Lobao said.

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Click here to access the full article provided by Rigzone. Copyright (c) Xinhua News, 2008

South-South Cooperation in Focus -- Brazilian president seeks stronger trade ties during his first trip to Vietnam

Brazilian Present Luiz Inacio Lula da Silva is in Hanoi, Vietnam meeting with Vietnam's leader, Nguyen Minh Triet to discuss increasing trade ties between the two nations. Vietnam's state media released a statement saying quite comically "it hoped to benefit from Brazil's foodtball skills."

Hanoi, Vietnam - Lula and Triet

"Vietnam wishes to strengthen cooperation with Brazil in all areas, particularly the economy, trade and investment, oil and gas, seafood processing, education, health and fighting poverty," Triet said.

Trade between Brazil and Vietnam rose to US$323 million last year from US$43 million five years earlier, said Silva, who is traveling with a delegation of business leaders.

Lula will be moving on in the coming days to East Timor and Indonesia to discuss increasing trade and bilateral connections with them as well. These developments indicate Brazil is expanding its horizons beyond China and India, the regions big players and now seeking to shore up support and new markets in South-East Asia.

Lets go Globalization....!

Leaders of the BRIC Countries show signs of solidarity at the G-8 meeting in Hokkaido, Japan

China's foreign media is reporting Hu Jintao's participation in the G-8 summit this week as a milestone, calling it a "major diplomatic move which produces important achievements in many aspects for China."

Click here to access the full story from Xinhua-- China's State Media

Through the G8 outreach session in recent years, communications between the world's developed and developing countries have been conducted on key issues to coordinate stance and seek solutions to key issues, a move deemed conducive to the South-North cooperation and the settlement of global problems reports Xinhua.

It is interesting how China's state media describes Hu Jintao's presence at the G-8. Western press has been very critical as to why China, India and other emerging markets are not included in the some of the more important meetings which only the actual G-8 member countries can attend.

It is clear developing countries have gained some influence in the international arena. The global food crises, energy crises, climate change and other important issues can no longer be left to debate soely amongst the world's industrialized and wealthiest nations.

Described both in this upate and in my post yesterday, developing countries are increasingly forming their own strong connections with one another. The leaders of the BRIC countries; Brazil, Russia, India and China can be seen below expressing their solidarity at the end of the G-8 summit. These four emerging market giants want to make it clear that on certain issues they stand united and that when united their voice should not and can not be ignored.

After all, accounting for only the populations of the BRIC countries, these four nations represent roughly 2.7 billion people...

Chinese President Hu Jintao (2nd R), Russian President Dmitry Medvedev (2nd L), Indian Prime Minister Manmohan Singh (1st L) and Brazilian President Luiz Inacio Lula da Silva (1st R) pose for a photo as they meet at Toyako in Hokkaido, north Japan, on July 9, 2008. (Xinhua Photo)

South America News in Focus -- Brazil, Ecuador and Chile

Articles collected from Bloomberg LP

Brazil --

Lula May Increase Brazil's Oil Take as Tupi Spurs Rules Review
By Jeb Blount

July 9 (Bloomberg) -- Brazilian President Luiz Inacio Lula da Silva (photo on the right) may boost the government's stake in oil fields after the largest discovery in the Americas since 1976 prompted a review of rules for how petroleum deposits are developed.

Lula is examining how Brazil and producers will share revenue from offshore deposits that may hold more than $6 trillion of oil at current prices. Lula said the Tupi discovery and nearby prospects will at least triple Brazil's crude reserves, and he wants the wealth to be shared nationwide.

``This oil is ours, it belongs to the people, not Petrobras or Shell,'' Lula said in a June 26 interview in Brasilia, referring to state-controlled Petroleo Brasileiro SA and Royal Dutch Shell Plc of The Hague. ``The wealth is not for the few, it's for the many.'' ....................

Click here to read the full story at Bloomberg LP


Brazil May Take Other Measures to Curb Inflation (Update1)
By Adriana Brasileiro and Carla Simoes

July 9 (Bloomberg) -- Brazil will take ``all necessary measures'' to curb inflation that's accelerating faster than the government forecast, Planning and Budget Minister Paulo Bernardo said.

``Saying that nobody in the government is worried about inflation is an exaggeration,'' Bernardo said in a Bloomberg Television interview in Brasilia today. ``But we don't see any reason for panic. The government has

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Inflation as measured by the IPCA-15 index accelerated to 0.9 percent increase in the month through June 15, the fastest in four years, from a 0.56 percent rise in the previous month. The increase exceeded all estimates in a Bloomberg survey that forecast a 0.78 percent rise.......................

Click here to read the full story at Bloomberg LP


Ecuador --

Ecuador's Dollar Bonds Rebound as Salgado Eases Default Concern
By Lester Pimentel

July 9 (Bloomberg) -- Ecuador's bonds rose, rebounding from their biggest rout in almost a year, after new Finance Minister Wilma Salgado said the government will keep paying its debt.

The extra yield investors demand to own Ecuador's debt rather than U.S. Treasuries narrowed 12 basis points, or 0.12 percentage point, to 6.53 percentage points at 10:04 a.m. in New York, according to JPMorgan Chase & Co.'s EMBI Plus index. The so-called spread surged 54 basis points yesterday, the most since Aug. 16. ........................

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The yield on Ecuador's 10 percent bonds maturing in 2030 fell 13 basis points to 10.71 percent, according to JPMorgan. The bond's price gained 1 cent to 94 cents on the dollar.

Click here to read the full story at Bloomberg LP

Chile --

Chile Economists Lift 2008 Inflation Forecast to 7.5% (Update1) By Sebastian Boyd

July 9 (Bloomberg) -- Chilean economists raised their inflation forecast for this year by 2 percentage points, a central bank survey of economists showed.

Consumer prices will rise 7.5 percent this year, according to the median estimate of 36 economists in a survey carried out between July 2 and July 8. Economists had expected 5.5 percent inflation in last month's survey.

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Chile's central bank aims for inflation expectations inside its target range of between 2 percent and 4 percent over a two- year horizon. The median estimate of 31 economists in this month's survey was for inflation of 3.8 percent in June 2009. ..........................

Click here to read the full story on Bloomberg LP