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.

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

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...

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

South South Cooperation in focus: Venezuela and Bolivia: energy joint venture

Petroandina, a joint enterprise formed by the Bolivian and Venezuelan state energy companies, plans to invest $883 million to finance oil and natural gas exploration and production in Bolivia, a top official said.

Energy Minister Carlos Villegas announced the figure Tuesday during a press conference to discuss Petroandina's operating contracts, which the Bolivian Congress is set to vote on shortly.

According to Villegas, Petroandina will invest $242.2 million in the western Andean province of La Paz and another $646.1 million in central and southern Bolivia...................

Click here to access the full article from Rigzone

Venezuela and Colombia make up and begin discussing Orinoco Oil Projects

Venezuela and Colombia are set to discuss possible joint development projects in the oil rich Orinoco belt when the presidents of both countries meet Friday, the Colombian ambassador to Venezuela,
Fernando Marin, said.

"The Venezuelan government has told us that it's important for them to have Colombian presence in the Orinoco belt. It's something that we're eager to talk about," Marin told Dow Jones Newswires.

........................

Allowing for Colombia's presence in the Orinoco belt would be a surprising gesture by Venezuela, given the recent diplomatic disputes between both countries, which escalated to threats of war in March. Chavez has threatened on several occasions to shut imports from Colombia.

Orinoco Heavy Oil Belt, Venezuela

........................

Click here access the full article. Provided by Rigzone and Copyright (c) 2008 Dow Jones & company, Inc.

Venezuela's PDVSA and China's CNPC to cooperate in the production of 8 new oil rigs -- annually

I am intrigued, as usual, by the fact I am only able to find a few sources in English which have covered the recent development in Sino-Venezuelan cooperation. I suppose this is one of the main reasons I started this site-- to share developments in the works between China and South America, which go largely unnoticed in the West.

As described in a recent article published by BNAmericas, Venezuela's state oil company PDVSA (Petroleos de Venezuela S.A) and China's state oil company CNPC (China National Petroleum), have entered into a joint venture in which the two government owned oil conglomerates will work together in order to produce 8 new oil rigs by years end in Venezuela.

This adds to the two oil rigs delivered by CNPC in November 2007, and three more to come in 2009, bringing the total number of "made in China" oil rigs operating in Venezuela to 13. This will also allow Venezuela's PDVSA, for the first time in the country's history to construct their own oil rigs domestically... without North American or European assistance.

Don't get too excited... This it is not major sign of political or economic unity between the two nations. At least, not on the level Venezuelan state media is reporting it to be. Want proof?

Chinese media has virtually ignored this development, as they usually do with most things concerning Venezuela. China does not want to attract the attention of the US or Europe by dealing too closely with Chavez.

The most recent article published by China's state media, Xinhua, I can find on this subject (in either Chinese or English), is dated May 13, 2008.

Granted my reading ability in Chinese is far from perfect, however searching the words "petrol," and "Venezuela" can usually lead me in the right direction and allow me to find a story pertaining to the topic I am searching for. From what I am able to comprehend in this Chinese article from May, I personally do not feel it is directly related to the deal discussed on June 23, 2008 on BNAmerica's website.

Chavez would like to consider China a strategic ally, both on a political and economic level. As the world's second largest consumer of energy, the match seems to fit... Too bad for Chavez its quite costly to ship Venezuela's heavy, dirty crude oil all the way to China.

Second, Chavez has unrealistically already raised China's economic position and importance for his country right next to the spot the US still occupies. This is hardly feasible to imagine considering Venezuela and China's geographic locations.

Third, Venezuela's trade with China is inconsequential compared with Venezuela's trade with the US.

Fourth, when you compare China's trade with other Latin American nations, Venezuela's trade is insignificant when compared with China's current trade with other nations such as Brazil, Chile or Argentina.

Last, and perhaps Hugo's biggest mistake, is thinking China would be willing to extend it self to a country which is not only in the "back yard" of the US, but also a country which currently is not on good terms with US. Chinese culture, tradition and history have shown the Chinese have a tendency to avoid potential problems that could threaten "peace" or "stability," and a more significant relationship with with Venezuela would therefore be risky.

China has no interest in antagonizing the US, which remains China's major trading partner in the global economy. For now, China's outbound investments will be focused in projects such as the one discussed above. PDVSA will retain a 85% stake in the project, leaving 15% to CNPC. Total investment is projected to be roughly $430 million usd.

Quite small, when you consider for China's new sovereign wealth fund has about $300 billion usd sitting in reserve, waiting to be invested.

**Useful hint for readers **

It is easy to translate English words into Chinese characters without a pinyin input system using this great Chinese-English online dictionary / translator (dict.cn). After you find the characters for the key words you're looking for use "ctrl + f" or "apple key + f (for mac os)," to search for them in a article. Petrol = 汽油 (qi you) , Venezuela = 委内瑞拉 (wei nei rui la).

Ecuador's Government and International Oil Firms reach settlements... hope looms in the distance for reviving output for S.A's #5 oil producer

Thanks to a link from Southamericadaily.com I discovered this morning The Economic Times of India, a relatively new news agency that so far looks pretty credible and I personally like the focus of what they choose to report / analyze.

Ecuador... thankfully has worked out the problems that have emerged between the government and foreign oil companies, which Ecuador as President Correa knows, can not afford to have abandon their Ecuadorian operations. The problems arose when the government, largely spurred by President Correa decided to levy a new oil tax on foreign companies which the government argued was fair in light recent record breaking prices of crude oil (Bloomberg LP article from June 16th, 2008 on oil prices).

Despite representing a "left wing government," Correa is no Chavez. Chavez, lush with money from his own countries oil exports, has been able to offer campaign (financial) assistance to many potential candidates running for high office in Latin America. Even if it is illegal to directly contribute campaign financing, he finds other ways to facilitate their elections, even if it means going in person to campaign as he did in Costa Rica (one country off the top of my head I recall him doing so in). The candidates tend to have characteristics such as being anti-US, socialist, anti-privatization, nationalistic, pro-nationalization of key industries, popular among the poor, and or a flashy ability for political rhetoric among the many.

The US media, however overplays the true relations which develop for many reasons, usually beginning with the fact the leader in question tends to have been elected in place of the candidate the US would have ideally desired to win the elections, and second because it's a way to "check" the capacity of Chavez's influence and power to further increase. This Washington Post Article does a decent job at showing readers the views held by the political elite of Washington.

Correa may share some of those traits, and was openly supported by Chavez during his campaign for president, but he for one lacks the passion and fever Chavez displays quite openly and most importantly his "golden tongue" for speeches. Second Correa is smart enough to realize Ecuador does not share the same luxury of being capable of completely implementing Chavez style reforms to the extent Chavez and to a certain degree Evo Morales have done in Venezuela and Bolivia respectably. Ecuador can not afford to miss out on the record high prices of many commodities they produce, and has already noticed total exports are decreasing, meaning the governments state revenues are also in decline.

Comparing Ecuador with Bolivia, which in reality lacks the economic resources to successfully build a new system with new and respected institutions, as Morales is trying to accomplish, is also difficult and unlikely to even be possible in Ecuador. Ecuadorian society is not as divided as it is in Bolivia between people of pure Andean decent and mixed and or people of foreign decent (predominantly European). An interesting fact Bolivians tell me, is that Bolivia is the only Spanish speaking country in Latin America where it is said you are a minority if you can ONLY speak Spanish. Most of society speaks either both Spanish and a native tongue, usually Quechua or Amyara, or, only speak a native language--that is they never learned Spanish, probably aren't Catholic, and definitely do not share the same cultural and social characteristics of the more mixed or European Bolivians. Ecuadorian society therefore in my opinion will not support a total overhaul of its countries institutions as Morales is attempting, and succeeding to a certain degree in doing so in Bolivia.

During a interview Correa said, "Most of the companies have said yes" to the offer, meaning somehow a agreement was reached. No mention of concessions where stated, but since foreign companies could not be reached for immediate comment, some where probably made. Loosing the presence of foreign oil companies in the long run is not in Ecuador's best interest, as it has generally brought problems in other countries which have lost foreign investors, Venezuela being the obvious answer. Although, Venezuela might be able to create its own refining capacities, explore for its own oil, repair its degrading industry in the long run-- it will not come easily and many now argue (even those who support Chavez) if complete nationalization was a good idea after all... Ecuador will not be able to so and needs the presence of such oil companies which include; Spain's Repsol, Brazil's Petrobras, China's Andes Petroleum and France's Perenco.

The tax was viewed by foreign companies as a tactic for the government to fatten the state coffers. Unlucky for Ecuador, that such a move in some situations would be justifiable, and even with Western companies tendency to argue and fight them, as of recent there have been many situations in countries in Latin America, Africa and elsewhere, when foreign owned companies do concede to some if not all demands. The problem is this move comes after a great deal of anti-US, left-wing rhetoric, and general fear that has been factored into the markets originating from Correa's campaign for President; where he expressed interests of nationalizing Ecuador's oil industry.

Therefore, a great deal of uncertainty has been factored into the market but the foreign companies, and since expectations largely guide many aspects of how investors view and access investments, it was natural they would scale back their plans and operations in Ecuador. Correa, overall, from my perspective has done a poor job of making Ecuador look like a good place for foreign investors... allying himself too closely with Chavez and attempting reforms a bit too far to the left in economic and political theory.

Among the many factors that did not help Ecuador's image was the recent potential outbreak of war with Colombia. When Colombian troops entered Ecuadorian territory in search of FARC rebels who where hiding within Ecuador, along the countries Colombian border, Ecuador immediately as sovereign nations usually do in similar situations by asking for an immediate explanation and deeming the entry illegal.

It was at this point from my perspective, when Chavez and Correa from my analysis of the situation saw a opportunity to promote some anti-US fever and ignite nationalism in their own countries. The two countries instantly declared themselves allies, and threatened war against the "US puppet of Latin America," Colombia--sending troops to their respective borders with Colombia. (See Reuters Article here, written by Saul Hudson and Alonso Soto).

As I searched for articles to provide links for all readers to credible sources I realize Western media has almost forgotten this even happened, and some even predicted that if Chavez's threats came to be reality, the U.S. would attempt to convince countries it has friendlier relations with to help Colombia. Their first calls would probably go in my opinion (in ranking order) go to Panama, Peru, Chile and then to what the US knows would have been a very reluctant Brazil.

As nice as it is for South American countries to be spoken about on major US media, it is aggravating they do so mostly during times like these (war), or perhaps natural disaster (ex: 2007 summer earthquake in Peru), and or even when the daughters of president Bush get robbed while US secret service is supposedly accompanying them and protecting them as they shopped in Buenos Aires, Argentina (good work secret service!).

I personally disagree with many things Correa has done in Ecuador, and I think he has managed his international policy horrendously, but despite all this he is not a horrible president, especially when you look back on Ecuador's track record. From all my analysis, readings and opinions expressed by others to me about Ecuador, it seems the country is stuck as a Chavez ally and will be associated as one until until a change of government occurs, yet it realizing it would have been in the country's general best interests to have chosen a more neutral path in foreign policy such as Brazil or Chile's left leaning government have. Regionalism is something South America needs and should have, but as it stands now, Chavez is too strong a character, unpredictable and temperamental to lead the region which despite his calls for decoupling from the domination of Latin America by both the US and the old colonial powers which now compose the European Union, the region simply put... needs them (the US and EU).

Welcome to China-south America Trade and Finance Blogs -- Dedicated to exploring the growth of these two regions and the implications of cooperation

As it stands, a “new economic order” is emerging as a global re-balancing of international economic power and influence occur. This “new economic order,” to be described in this working paper can be largely attributed to the increasing importance and presence of emerging markets in the world economy and inter-emerging market cooperation. Accounting for only the populations of the four largest developing nations; Brazil, Russia, India and China (BRIC countries), roughly 2.7 billion economic agents have become active competitors in the global economy. This research study focuses on the growth and cooperation of the emerging markets of China and the South American commodity exporting countries of Peru, Chile, Colombia, Brazil, Argentina and Venezuela, and, how to understand their cooperation the ramifications in the field of international investing..

Chinese expansion in the fields of trade and investment in South America, the general growth in Sino-South American relations and in particular, the countries of focus in this paper, has greatly altered the expectations of many economist and investors around the world. Economists and international investors have responded through creating new international models for their respective fields. For instance, many within the investment community have developed alternative investment strategies and portfolio diversification strategies with a international focus. Strategies, typically consider international factors such as market volatility, political risks, growth forecasts, and or advancements in technology—all of which are important indicators which help investors identify a strategic mix of investments in which to construct an international portfolio.

A unique aspect behind China's emergence as a global economic power, is that China remains (by western standards) a developing country, home to over 350-400 million people living below the international poverty. Never the less, China has managed to achieve global recognition while still being classified as an emerging market. With hundreds of millions in China yet to benefit, the country's economic growth and development is far from complete. Furthermore, China's recent materialization as the world’s second largest economy (in PPP terms) provides a clear message; no developed or developing country can afford to ignore or marginalize the affects of China's rapid economic growth (Colombia Futures Group; 2005). Referred to by many as; “the work shop of the world,” China has is now a major center of economic activity with ample capacity to further expand its influence and position.

Emerging markets such as China and India, both of which have over a billion people, evolve and become new engines of global growth—much like North America and Western Europe. Additionally, in light of globalization and ever increasing levels of international commerce and production matrices, emerging market cooperation has developed into its own respective engine of growth for developing countries—facilitating the rise of commercial exchange between regions which may have previously had little or no connections with one another, as China and South America have (Estevadeordal; 2006).

In response to the ever-increasing interconnectivity of economic activity in the world economy, emerging markets have managed to develop both their domestic capacities and establish significant levels commercial exchange with other emerging markets. When the global credit crises of late 2007-2008 emerged, it led to world-wide market corrections in developed countries real estate, banking, and financial sectors. The developing world, including the countries in this research, in part, where able to use their domestic and regional economies to compensate for the adverse effects of economic slowdown or recession in the US.

Despite problems which need to be addressed in the global economy, emerging markets discussed here show signs they will achieve favorable growth in 2008 and for the next few years to come. The countries of focus in this research all managed to achieve very positive growth rates in 2007. GDP growth rate data from 2006 and 2007, has been adquired from Bloomberg L.P reports. China achieved avg GDP growth of 10.7% over 2007. While, in South America GDP growth were calculated as: Peru 9%, Chile 5.2%, Colombia 7.8%, Brazil 4.8%, Argentina 8.7% and Venezuela 8.4%.

In 1970, two-way trade between China and all of Latin America, which includes Central America and the Caribbean region, was reported to be a meager $150 million. Additionally the majority of this exchange occurred between China and Cuba, largely because of ideological. In 1980, the figure had begun to change drastically, increasing 1000% o ver ten years to $1.5 billion (Li; 38-39). From 1984-2004, Chinese commodity imports from Latin America surged by a factor of 20. By 2005 two-way trade between the regions had increased another 900%, growing to over $50 billion. Trade data from 2004, provided by the International Monetary Funds direction of trade statistics estimates the total value of Chinese commodity imports at $200b USD (Santiso; 2007).

This blog will be a resource for all those interested in participating in exploring this new dynamic relationship.

Up to date news and relevant developments from reputable news agencies will be posted when they pertain to this growing cooperation and the emerging markets of South America and China.