Reuters — "Era of Cheap Oil Over" — IMF’ chief Dominique Strauss-Kahn warns of looming threats from rising prices for LATAM

Using the great and free online personal finance management site “Mint,” I have been able to monitor all my personal expenditures from my various bank accounts and credit cards.

Since the month of September, I’ve seen my expenditure on food increase roughly 20% and my gas expenditure has increased about 70%. Since August 2006, when I purchased the car, the cost of filling my tank has more than doubled.

If price rises are really hitting home in the United States, the cliche “world consumer,” this pinch is definitely affecting the emerging world. IMF, chief Dominique Strauss-Kahn urged Latin American leaders on Monday “the rising threat of inflation in Latin America, urging policymakers to take steps to contain the shock to prices from energy and food.”

He continues, explaining “The task for policymakers is to ensure that the initial impact of the supply shock on prices is contained and that macroeconomic policies successfully prevent higher inflation from becoming entrenched in expectations and wage demands”

“In the short term the challenge for Latin America is inflation. The region built credibility in the last decade and that credibility is now being tested”.

Strauss-Kahn’s comments as the world as a whole attempts to fight inflation and ride the wave of problems resulting from the global credit crunch and sub-prime mortgage crisis in the US.

To view the full article from Mercopress in which I accessed Strauss’s comments from click here

Reuters – Era of Cheap Oil Over

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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).

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Rising food prices hit home — Bolivia’s poor, whom sit at "the heart of South America" — go hungry as food prices continue to rise

Apologies if entries this weekend where a bit “lacking.” I was traveling and simply had little access to computers.

Following up to this mornings post, in which I discussed in brief the tremendous untapped agricultural capacity of South America, emphasizing Brazil and Argentina, I present the other side of the story via this video from Reuters.

Bolivia, South America’s poorest country used to feed over half a million people using UN donations. Those same donations, in the wake of rising fuel costs, can feed a mere 200,000 today, leaving many with empty stomachs as the video above describes.

The question remains… Yes, no one doubts the “richness” of Latin America, but how do you translate natural resources or un-tapped agriculture potential into sustainable development? Second, how do these countries keep their resources from being exploited by multi-nationals or corrupt and greedy locals?

Most Latino’s learn in school and as they grow up their countries are richly endowed with resources, giving their countries the potential to emerge from poverty and develop their countries. Sadly, this has not been the case for any Latin American country, perhaps Chile being a unique example once again.

Chile did succeed to a certain degree in this, putting much of their copper wealth towards sustainable economic development goals. The Chilenean economy emerged significantly more competitive and efficient compared to its neighbors in South America.

Let us not forget the high-cost and much suffering on the parts of some people who lived through the Pinochet dictatorship and the reforms of the “Chicago boys.”

Bolivia, itself, in the past 15-20 years has developed its own agricultural capacities in the low lands of the country. I learn new things about Bolivia everyday, society is quite fragmented between the mestizo population (and European descended), and the indigenous community. Despite social and racial problems, a countries people, endowed wit vast resources as Bolivia should not be going hungry.

Bolivia is a unique country in South America, the good man Erneste “Che” Guevara called it the “heart of the America’s,” and that it is. I hope to see the country with my own two eyes one day before I pass further judgment, but no less, regional methods or a more cohesive internal movement should be put in place to at least alleviate malnutrition and hunger in Latin America.

The continent is poor, but always prided itself as being a poor continent which at least “did not go hungry.” This age old myth (yes… myth), is now also on the verge of disappearing as food prices around the world continue to rise.

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Argentina’s agricultural sector in focus — ”There’s a lot of capacity in Argentina, including a lot of capacity that hasn’t been met,” Pisacco said

”There’s a lot of capacity in Argentina, including a lot of capacity that hasn’t been met,” Pisacco said. “We believe we’ll be able to help feed the rest of the world.”

A farmer in Argentina told a reporter for the Miami Herald, this weekend. Click here to read the full article.

No less, the current picture of the global economy remains quite gloomy, and leaders around the world will be desperate to keep their people from going hungry, including the countries of South America.

South America, in particular Argentina and Brazil, currently have found themselves as possible answers to world food shortages and sky rocketing prices.

Ironic as large portions of the population in these countries and South America as a whole live in poverty and struggle on a daily basis.

Central and South America as they have been centuries, are stuck within greater global economy with a image they have found hard to shed. Articulated very nicely in Michael Reid’s book “the Forgotten Continent,” mentioned in earlier posts, as follows:

“Latin America has often been condemned to failure. Neither poor enough to evoke Africa’s moral crusade, nor as explosively booming as India and China, it has largely been overlooked by the West.”

Click here to purchase the book

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Eurocup 2008 – Spain emerges victorious after years of historical "under-achievement"

Spain advances to the semi-finals in Eurocup 2008, after years of “La Madre Patria” (the mother country), entering international championships with world quality and internationally top ranked teams… yet always falling short of expectations.

Hopefully the Spanish economy can make such a come back, as my last post indicates, their position in Latin America has grown in the past years and their FDI is crucial– especially to countries like Cuba and even Peru and Argentina which few can deny are dominated by Spanish banks, telecommunications and construction. Perhaps “dominated”is not the correct term, but rather, lets me describe it as Spain’s growing market presence in Latin America is significant and growing.

Peruvians, despite many expressing their anger over Fujimori’s government signing of what many consider monopolistic rights to Telefonica of Spain, realize Spain is an important partner in the international community.

Telefonica did come to control the majority of the Peru’s telecom sector, and they do charge very high prices for their services in Peru, Spain no less is a important source of FDI, in addition to China, the US, and Europe as a whole.

Latin America continues to grow, and achieve healthy growth rates when compared to other countries and regions in the world economy. Spain knows Latin America is a region they strategically have a advantage over other countries due to the similarities in language, religion and if I might say…

The United States re-placing Spain as the “imperial power” or ”empire.” Today, as of 2008, I believe it is fair to say the failures of the neo-liberal reforms of the 90’s in Latin America. Combined then with the fact the Bush administration in the US has largely ignored Latin America for the past 8 years, has greatly helped Spain’s image in Latin America, along with China, India, Europe and other countries around the world.

Spain, however, is a unique partner in the fact, much like Britain, the countries of Latin America have inherited certain traits and characteristics from the ”mother country.” Second, Spain recently grown quite wealthy in a short period of time, they are in a position more than ever to invest, initiate cooperation and work with Latin America towards helping each other– in economic, political and cultural respects.

Miraflores,Lima. The trendy/modern district. Symbolic of Peru’s recent economic growth.

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Spanish banking giant Banco Santander 2008 profit suprasses 10 bil Euros, helped in large by their operations in Latin America

Santander 2008 Profit to Surpass 10 Billion Euros (Update2)

By Charles Penty

June 21 (Bloomberg) — Banco Santander SA, Spain’s biggest bank, forecast profit will surpass 10 billion euros ($15.6 billion) in 2008, a record, as growth in Brazil and elsewhere in Latin America offsets an economic slowdown in its home market.

“Banco Santander has shown its considerable strength in the face of the abrupt change in financial markets,” Chairman Emilio Botin, 73, told shareholders today at the bank’s annual meeting in Santander, Spain. Santander earned 9.06 billion euros in 2007, or 8.11 billion euros before extraordinary items.

Santander, which makes about 80 percent of its profit from retail banking, has sidestepped much of the collapse in the U.S. subprime mortgage market that so far has caused almost $400 billion in losses. Santander is doubling its presence in Brazil with the acquisition of ABN Amro Holding NV’s bank and Botin said today he expects Latin American profit to increase 20 percent this year in dollar terms.

Santander has “performed well in this environment and that’s admirable,” said Peter Braendle, a fund manager who helps manage about $60 billion at Swisscanto Asset Management AG in Zurich. “But make no mistake — they’re facing many challenges.”

—> To access the full story from Bloomberg LP click here

** Apologies once again for the lacking analysis in the past two days of posting, i’m traveling at the moment and unable to spend much time at the computer. Will make up for in the days to come!

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All eyes on Tibet – Beijing Olympics 2008 cont. coverage / updates

As Reuters reported, Lhasa, the capital of Tibet has been in “lock-down” since the protests began earlier this year. China reports they have been largely instigated by both the Dali Llama and Western Media.

The first video presented by Reuters updates readers on the journey of the Olympic torch, which has finally reached Llasa.

This second video, also provided by Reuters displays the tough stance China is taking in regards to Tibet and the upcoming Olympic games in August–asserting Tibet “will never change.” Rather vague statement, very typical of the Chinese and the central government in Beijing.

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Asian Financial Markets in Focus — Mainland China, Thailand, Singapore finish in the green while the rest of Asia falls on increased petrol prices

Apologies but today I am updating this site using predominantly the news which grabbed my attention this evening, and which I would have ordinarily included in a typical analysis with. Sadly I was stuck in traffic the entire day moving around the North Eastern United States along with 1000’s of other gas guzzling behemoths.

Asian Shares End Mixed — China hikes fuel prices 18%, hoping to trim demand in the world’s second largest consumer of oil. — Reuters

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India — China’s neighborer and fellow BRIC country India suffers wide scale flooding, adding to the list of natural disasters this year

Disaster looms in India as flooding worsens — Reuters

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Beijing 2008 – Olympic Games in Focus: Video updates on developments relating to the 2008 games

Apologies but today I am updating this site using predominantly the news which grabbed my attention this evening, and which I would have ordinarily included in a typical analysis with. Sadly I was stuck in traffic the entire day moving around the North Eastern United States along with 1000’s of other gas guzzling behemoths.

1. Pollution worries continue to plague China’s upcoming games — Reuters

2. Beijing residents protest as urbanization plans of the central government force residents and shop keepers to move in preparation for further large scale construction projects — Reuters

3. Beijing fights back- central government in the process of planting a “green wall” around Beijing — Reuters

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