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Travel to any country in Latin America and you will see the visible hand of China at work: a computer manufacturing plant in Mexico, a copper mine in Peru, a football stadium in Costa Rica. In the year 2007, the thought of China in Latin America would have appeared, at best, improbable. But in a three-year stretch, China signed free trade agreements with Chile, Peru and Costa Rica, inked billions of dollars worth of deals in oil and mining projects throughout the region, and supplanted the US as Brazil’s biggest trading partner. Once almost unseen in Latin America, China’s bilateral trade has risen from $12bn in 2000 to well over $150bn today.

Given the importance of its new Asian friend, Latin Americans are rolling out the red carpets to Chinese business delegations and jumping on planes not only to Beijing but also to Shanghai, Shenzhen, and Tianjin.

Rationale Behind Chinese Investments in Latin America [...]

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(Oct 26-30, 2009)

*metals commodity prices obtained via Kitco Metals
*energy commodity prices obtained via Yahoo Finance
*agriculture commodity prices obtained via Yahoo Finance
*wheat futures via Bloomberg

libcom.org

“The position of the workers is to go on strike on Monday starting at 9 a.m. (1400 GMT) and leave the mines,” Luis Castillo, the federation’s director, told Reuters.

Reuters reports some unions have agreed to stay on the job, but considering that Peru is the largest producer of silver in the world, #2 of zinc, #3 of copper, #4 of lead, and #6 in gold—such a walk out does have the potential ripple over into global spot prices for the above mentioned metals.

When miners held a similar strike in mid-2008 and the strike helped push copper prices toward a record high—although this was at the peak of bull markets, the market effect is no less noted. The underlying point; markets are watching and investors pay attention to these kinds of things.

Company’s which will be affected include, Volcan (VOL_pb.LM), Newmont (NEM), Freeport-McMoRan’s (FXN), Xstrata’s (XTA.L), Buenaventura (BVN), Southern Copper (PCU) and BHP Billiton (BHP).

Click here to access a more details story on this topic from Reuters.

As always, CSA will keep you up to date with relevant developments as they unfold.

~ Benito

June 29 (Bloomberg) — Commodities, heading for the first quarterly advance in a year, may struggle to repeat their gains in the next three months as supply expands and speculators sell.

Nickel may average 29 percent less in the third quarter than now, crude oil 16 percent, copper 14 percent and gasoline 10 percent, analyst estimates compiled by Bloomberg show. Hedge funds and speculators cut their bets on higher prices by 23 percent in the two weeks ended June 23, the first back-to-back drop since March, based on an index using U.S. Commodity Futures Trading Commission data. The World Bank said June 22 the global recession will be deeper than it expected three months ago.

“Commodities have gotten a little ahead of themselves,” said Walter “Bucky” Hellwig, who helps oversee $30 billion at Morgan Asset Management in Birmingham, Alabama. “As long as there’s uncertainty about growth, that’s going to be headwind commodities won’t be able to overcome.”

Commodities rose 14 percent this quarter, led by nickel, oil and sugar, after three consecutive declines, according to the Reuters/Jefferies CRB Index of 19 raw materials. This year’s 57 percent advance in oil costs, combined with widening budget deficits, may cause another global slump, said Nouriel Roubini, the New York University economics professor who predicted the financial crisis.

Click here to access the full article from Bloomberg

Before you do however, I implore you to proceed with caution if you decide to park your hard earned currency in Peru. As always, it would be a good idea to do your own due diligence and listen to what your textbook, academic gut feeling has told you about Latin America since you started reading about continent in economic and finance classes you took in college.

Peru’s Lima General Index has sky rocketed a whoppin’ 95% this year due to the following reasons in particular (in my opinion)

a) The country’s investment grade debt rating

b) Rising metals prices; copper, gold, silver, etc (note I did not include Zinc here)

c) Optimism in Peru’s metropolitan middle and upper-middle class residents of Lima who partially feed the international excitement by telling stories of economic boom. Ask a university student of la Universidad de Lima, UPC, Universidad Pacifico or a employee at Banco Santander and they will probably (some of them at least) tell you of rising apartment buildings, new beach houses and cafes so full of customers you must wait to get a table. Yes, it is still difficult to find a job that pays well, but if you know anything about Peru this has been the case since the beginning of time…

d) Shrinking investment opportunities in the region because of western fears and dislike of Chavez in Venezuela, Correa in Ecuador, Morales in Bolivia and more recently Cristina Fernández de Kirchner in Argentina.

e) LIES… LIES… oh and yes, more LIES. Farid Matuk the previous head of INEI (Peru’s statistics office) and Otto from IncaKolaNews have been telling readers for months that you simply can not trust economic data from Peru. Alan Garcia has replaced the people working at the statistics office with those loyal to his political party and they have inherently changed the way statistics are collected and the way GDP and other economic indicators are calculated.

Here are some links to Farid Matuk and Otto’s recent observations of Peru’s economic picture. I will stick to English, but I highly recommend if you can read Spanish that you check out some of Matuk’s non-English posts.

Doubts grow about accuracy of Peru GDP numbers — Reuters Terry Wade

Peru’s Economic Model and Poverty Reduction: Is it Working — Farid Matuk

Farid Matuk Explains Peru’s False GDP Figures — INK

Now that you know one side, here’s the other. GAINS AND LOTS OF THEM.

Peru Lima General Index – 2 yr performance as of 6/4/09

It seems to me the majority of the international financial community have bought into Garcia’s lies and have come to believe Peru is a solid place to park your money.

This is despite, as Otto says, demand for base metals just simply does not add up. The Chinese are stockpiling their metals and eventually prices will have to go back down to reality. Check this article.

Despite this reality, investors and what they perceive can go a long way in financial markets. If investors jump on board, this new Peruvian ETF might begin to soar… albeit temporarily until reality sets in.

Benito’s conclusion: Invest with caution. I’ve included the Bloomberg article below, but if you like to access it directly, please click here.

~~~~~~~~~~~~~~~~~~~~~~~~~~~

Peru ETF to Start Trading This Month, Global X Says (Update1)

By Veronica Navarro Espinosa

Peru’s first Exchange Traded Fund will start trading on the New York Stock Exchange by the “middle of June,” said the chief executive officer of Global X Management Company LLC, a New York-based asset manager.

“The stock market has risen a lot, investors are bullish, and that’s helping us,” Bruno del Ama, the New York-based CEO of Global X, said in a phone interview. “We’re giving access to the Peruvian market and in the future people can go short in Peru, which is an option that doesn’t exist today.”

Global X and Barclays Plc have been competing to introduce the first Peruvian ETF, aiming to lure global investors to the world’s best performing stock market this year. The funds issue a number of shares and trade throughout the day like stocks. Most are designed to passively track a benchmark equity index.

Peru’s Lima General Index has jumped 95 percent this year on speculation a rebound in prices of the country’s commodity exports will fuel growth amid the global recession. The index’s advance is the biggest among 92 world benchmarks tracked by Bloomberg, reversing a 60 percent plunge in 2008 that was the steepest in Latin America.

“It will create liquidity and that’s what this market lacks,” Carlos Rojas, who manages $160 million in Peruvian stocks and bonds for Compass Peru, said in a phone interview from Lima. “But it’ll all depend on the size. If it attracts less than $150 million, it’ll be a non-event.”

FTSE Peru 20

The new ETF will track the FTSE Peru 20, which will include the nation’s biggest commodity producers such as Maple Energy Plc., an oil and natural gas producer that has gained fourfold this year, the best performer in the index. Del Ama said other members include Austral Group SA, Peru’s biggest fishmeal producer, and Cia. de Minas Buenaventura SA, the largest precious-metals producer.

Resource companies account for 21 of the 36 stocks in the Lima index because Peru is the world’s third-largest producer of copper, zinc and tin, the biggest miner of silver and the fifth- largest of gold.

IShares, a unit of Barclays, is working on introducing its own Peruvian ETF, said Barclays spokeswoman Christine Hudacko in an e-mail today. There’s “no news on timing,” she said.

The iShares MSCI Brazil Index Fund, managed by Barclays, is among the 10 most-traded ETFs in New York, with daily volume of about $1 billion, Barclays Global Investors’ chief executive for Latin America Daniel Gamba said in December. Trading in ETFs in Mexico now accounts for about 20 percent of average daily volume, Gamba said.

[Source] — Bloomberg

The Ecuadorian government announced plans yesterday of the establishment of a joint mining company with the country of Venezuela and possibly Bolivia. You can read all the vague details in this article from Chinamining.

“We are going to build a great mining company in association with Venezuela and perhaps with Bolivia to exploit some veins of mine ore returned to the State from private hands,”said Ecuadorian Minister of Mines and Petroleum Derlis Palacios.

[Natural Gas] — Nymex Gas Falls as Reports Show Industrial Demand Will Be Slow to Recover
Natural gas futures fell for a third day as reports showed that demand for the fuel from factories and power plants will be slow to recover during the recession.

[Copper] – Copper’s U-Shaped Base Signals Rise, StanChart Says: Technical Analysis
Copper may rise to levels not seen since October in the month ahead, as the metal forms a U-shaped base, Standard Chartered Bank said, citing trading patterns.

[Gold & Silver] — Gold Advances in N.Y. on Speculation Equity Rally May Stall; Silver Gains
Gold prices rose, extending a rally to two weeks, as investment demand increased on rising consumer prices and signs that a rally in U.S. equities may be ending. Silver futures fell.

[Platinum & Palladium] — Platinum Falls as Dim Auto Outlook Cuts Demand in N.Y.; Palladium Gains
Platinum prices fell as the U.S. auto- industry slump eroded demand for the metal used in pollution- control parts. Palladium rose for the first time this week.

[Steel] — China Steel Industry Likely to Post Loss in 2009, Baosteel Chairman Says
China’s steel industry may post a loss this year, Baosteel Group Corp. Chairman Xu Lejiang said at a conference in Shanghai today. Xu said the Chinese steel industry is oversupplied and faces severe structural problems that have been worsened by the financial crisis.

[Soybeans] — Soybeans Head for Third Weekly Gain as Demand Cuts U.S. Supply
Soybeans climbed, heading for a third weekly gain, on speculation that increased global demand may further reduce inventories in the U.S., the world’s biggest grower and exporter of the crop.

[Investments] — Where Commodities Fit In Your Portfolio
Commodities are a great way to diversify your portfolio, but if you are considering allocating some money to the group, don’t expect to catch a draft in the near future, even if there are signs the worst of the global slowdown may be over.

A friend of mine, whose father made his way to the United States selling cabbages on the streets of post-war Korea proposed a question to me the other day. “What is the big deal in particular about Bolivia? After all, you have seen Slumdog Millionaire, there’s really poor people everywhere and I’m sure India has a lot more and a much dire levels of poverty than Bolivia does.”

Perhaps his perspective has some truth to it. It does not however, change the fact there is a democratic country in the Americas which has pockets of slavery. I say pockets because I am sure this is a one of the extreme examples the media has chosen to focus on, hurting the Bolivian farmers out there who are good people, who do treat their workers fairly and are just trying to earn a living.

Here are a few excerpts from the BBC report

“A senior UN official recently described as “unacceptable” the alleged forced labour of indigenous people by landowners in Bolivia. The BBC’s Andres Schipani reports on the contentious issue of “slavery” from the eastern province of Santa Cruz.”

…

“All my life I’ve been here and at the end of it I have nothing and have nowhere else to go,” she says.

Her hamlet of 13 Guarani families – all workers on the plantations near the town of Camiri in Alto Parapeti region in the eastern province of Santa Cruz – built a school but ranchers destroyed it, she says.

“They didn’t want us to learn, they want things to be like they always have been,” Teresa’s granddaughter, Deisy, says.

…

The other side, a.k.a, the owners of the large plantations has this to say for themselves.

“The idea that there is slavery here is absurd … Offering loans and selling food is not a debt trap but a favour because there are few banks and shops in the region,” says Eliane Capobianco of the rancher’s association Fegasacruz, in the eastern city of Santa Cruz, the opposition heartland.

Click here for the complete BBC report

As usual, Jim Rogers is sticking to what he knows best-raw materials. If you’re a new reader, or have not heard of Jim Rogers definitely run a search on the right of his name to bring up past posts and videos including him.

Part 1 /3

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