Ideology vs profit; Colombia and Venezuela’s trade dispute gets nasty

Economist Article —

Venezuela and Colombia — Politics versus trade

Sep 10th 2009 | SAN ANTONIO DEL TÁCHIRA
From The Economist print edition
Hugo Chávez stamps out regional economic integration

BUSINESS is slack at José Nelson Uribe’s tiny grocery store in San Antonio del Táchira, just a stone’s throw from Venezuela’s border with Colombia. “I’m not selling even a quarter of what I sold before,” says Mr Uribe. His woes are a result of the political conflict between his namesake, Colombia’s president, Álvaro Uribe, and Venezuela’s Hugo Chávez. “Before” means before July 28th, when Mr Chávez declared a “freeze” on diplomatic ties and said he would seek alternatives to Colombian goods.

This was officially a response to an agreement formalising American use of seven Colombian bases for anti-drug operations, but it also coincided with questions as to how anti-tank rocket-launchers sold by Sweden to the Venezuelan army ended up in a camp belonging to the FARC guerrillas in Colombia. It is not the first time that Mr Chávez has threatened trade sanctions, but this time he seems serious.

The impact on the border region was swift. For each country, the other is the second-biggest trading partner (after the United States in both cases). Bilateral trade totalled $7.2 billion last year, of which $6 billion consisted of Colombian exports, mainly of food, live animals, clothing and cars. Four-fifths of that trade passed along the twisting mountain road that links San Antonio with the state capital, San Cristóbal. “That represents 50,000 direct jobs and 250,000 indirect [ones],” says José Rozo, a local business leader. Many of these are in transport firms and customs agencies. “Before, the local lorry drivers were doing around 500 trips a day,” Mr Rozo says. “Now it’s down to about 80.” Industry in Táchira has been hit too, since many companies depended on imports from Colombia.

The border is not closed. But few of the 30,000 Colombians who used to cross each day to shop do so now, because Venezuela’s National Guard confiscates their goods when they recross the border, says Mr Uribe, the shopkeeper. Venezuela’s government has stopped issuing import permits, nor is it providing dollars at the official exchange rate for imports from Colombia (a dollar costs almost three times more on the parallel market)…

Click here to read the complete article from the Economist

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A few words of wisdom from Confucius

Happy b-lated Labor Day to all my fellow US-Americans out there in cyberspace. I hope you spent it with friends and family and made it to work this morning without a hangover.

CSA (China South America) is going to begin the US work week with some rather enlightening words of wisdom from one of the wise men of the ancient world — Confucius.

Confucius on Self-Cultivation —
“The man of virtue only practices what hes practiced.”

Confucius on Humanity and Morality —
“A man who has faith in humanity always puts a lot of hard work before he is duly rewarded. Such a man may be regarded as a bearer of the virtue of humanity.”

Confucius on Education —
“When you know a thing, say that you know it; when you do not know a thing, admit that you do not know it. That is wisdom.”

Confucius on State Governing —
“Incorrect wording of status will lead to an irrational stream of speech; irrational stream of speech will lead to failure in handling affairs; failure in handling affairs will lead to impossibility to promote the rites and music; impossibility to promote the rites and music will lead to improperness in enacting penalty; improperness in enacting the penalty will lead to panic among the people.”

Confucius on Family —
“A son should keep in mind the age of his parents, for he should feel joyful for their healthiness and at the same time fearful for their aging.”

Confucius on Philosophy —
“If one fails in making friends with those who are well established in the doctrine of the mean, one should associate with those are are ambitious and those who adhere to moral principles. Those who are ambitious tend to be enterprising and those are adhere to moral principles seldom do evil deeds.”

~ Confucius 551 BC – 479 BC

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China becomes L America’s privileged partner: ECLAC official

Xinhua news reports,

China has become a “privileged partner of Latin America,” and the region needs to define a joint strategy to develop its ties with China, an official of the Economic Commission for Latin America and the Caribbean (ECLAC) said Wednesday.

The “post- (economic) crisis will find a bigger and more important China than the one it has been in the world economy,” said Osvaldo Rosales, ECLAC’s director for international trade and integration.

Citing the World Trade Organization’s report on Tuesday that China had displaced Germany in the first half of 2009 as a leading exporter, Rosales observed that “this has been reflected in its (China’s) growing relative presence in the world’s trade, mainly in Latin America.”

“The numbers of destinations and exporters show that China has become a privileged partner of Latin America,” Rosales told Xinhua in an interview.

This was because the Chinese government had “already defined the strategy for Latin America in its white book,” Rosales explained, adding that the region needed to do the same.

Regarding bilateral trade relations, Rosales worried about Latin America’s export structure, which focused on a few products and natural resources. He called for a diversification of the export basket.

“Latin America is in some ways linked with China, the world economy’s engine of the 21st century, but it is doing that with an export structure from the 20th century,” Rosales observed.

Click here to read the full story from Xinhua

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Chile cuts interest rate to record low; Peso falls

Chile’s central bank lowered interest rates to record lows today. This
is the country’s latest effort to stimulate a slowing economy which is
heavily dependent on global prices and demand for its commodity
exports.

Not good news for a country like Chile. Copper demand (its primary
commodity export) looks set to slow in the upcoming months as demand
from China wanes, which until recently had been stockpiling resources.
This seems to be over and now one of Chile’s primary buyers is
sitting on mountains of unused copper. Once again, not good for
Chile, Peru or any other countries that sell their metals to China.

Bloomberg reports:

The currency slipped 1.1 percent to 552.65 per U.S. dollar at 9:15
a.m. New York time, from 546.85 yesterday.

The central bank said in May and June that traders were overestimating
the future path of interest rates. Now it will offer banks six-month
loans that match the new overnight rate of 0.5 percent and cut sales
of its own debt to push yields lower.

“It is necessary to increase monetary stimulus,” the bank said in
yesterday’s statement. “The policy rate will be held at this minimum
level for a prolonged period of time.”

To access the entire article from Bloomberg please visit:
http://www.bloomberg.com/apps/news?pid=20601086&sid=alxLFHEdnThQ

—
Sent from my mobile device

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

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Peru lowers interest rates to 2.5%

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

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

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

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

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

—
Sent from my mobile device

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

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China to launch iron ore trading platform – AP

China will launch its first iron ore trading platform next week in a move that may lead to setting up its own pricing index and possibly exerting more influence over import costs, an official and reports said Friday.

The Rizhao International Iron Ore Trade Center will begin providing electronic commercial services for iron ore suppliers and steelmakers on Monday, said Liu Qiang, sales manager of Shandong Huaxin Trading Co., which is heading the project.

The center, a joint venture by Shandong Huaxin and four other local companies involved in bulk commodity dealings, will handle electronic transactions, information exchange, quality inspection, storage, transport, insurance and trade settlement, Liu said.

The center will act as a clearinghouse for information on iron ore trading, Liu said.

“As it gains influence in the long-term, it may have some influence on price negotiations,” he said.

Rizhao, a port in eastern China’s Shandong province, is one of the country’s biggest handlers of iron ore imports.

The trading platform would likely mainly serve China’s numerous smaller steelmakers. They buy independently from the biggest mills and do not pay the same benchmark prices the big steelmakers agree to each year in sometimes tortuous negotiations with overseas miners like Brazil’s Companhia Vale do Rio Doce SA and global miner Rio Tinto Group.

Meanwhile, the annual negotiations with overseas iron ore suppliers dragged on, according to the government-affiliated China Iron & Steel Association, which vehemently denied reports that Chinese steelmakers had settled for 30 percent to 35 percent price cuts.

“China’s steel industry and those of Japan and Korea are facing severe shocks from the global financial crisis,” CISA said in a statement posted on its Web site. It said the annual negotiations were continuing on a basis of “mutual interest and long-term stability.”

Unlike in previous years, when Shanghai-based Baosteel Group led the talks, this year CISA is handling the negotiations. Analysts say it is seeking at least a 40 percent cut in this year’s benchmark prices.

China imported 444 million tons of iron ore in 2008 – half of the volume of all imports worldwide, according to government figures. Imports in January through April surged to 188 million tons, as traders took advantage of lower prices to build up stockpiles.

Iron ore pricing has long been a point of contention between China, the world’s biggest steel producer and consumer, and foreign raw materials suppliers.

Such friction intensified in recent years as surging demand due to the booming economy and speculative buying drove prices for iron ore and other commodities higher.

But a slowing in industrial production due to the global economic crisis has raised expectations that Chinese and other steelmakers may win big concessions in this round of talks after yielding to demands for double-digit increases in ore prices in previous years.

[Source] — Associated Press researcher Ji Chen contributed to this report.

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Brazil’s president arrives in Beijing

[South-South Cooperation] — China, Brazil — Al Jazeera

Lula arrives in China – [Reuters]

Brazil’s president has arrived in China for three days of talks expected to focus on broadening ties between two of the world’s largest developing economies and moves to decrease their dependency on the US dollar.

The visit by Luiz Inacio Lula Da Silva is his second in 12 months, highlighting the importance of China which recently overtook the US as Brazil’s most important trading partner.

On Tuesday Lula will hold talks with his Chinese counterpart, Hu Jintao, as well as host a bilateral business forum and visit an aircraft factory.

Speaking ahead of the visit he said he was looking to the trip to promote “a new economic order”, while an official from the country’s foreign ministry said a theme of the talks would be a “reorganisation of the international scene”.

…

Al Jazeera’s Tony Cheng reporting from Beijing says the main point of discussion during Lula’s visit will be on Brazilian energy resources which Beijing, with reserve funds to spare, was keen to exploit.

…

Brazil’s two-way trade with China, one of the few economies still growing strongly despite the global crisis, reached $3.2bn in April, surpassing the $2.8bn trade total with the US.

So far this year, government data showed that Brazilian exports to China grew 65 per cent over the same period in 2008, rising from $3.4bn to $5.6bn.

Click here to access the complete article from Al Jazeera

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