The growth of stock markets in Latin America

The Latin Business Chronicle published a story today which technically, was supposed to focus on the growth of Colombia’s stock exchange and explain why it was the regions best performer last year.

In addition to Colombia, the article also shares data complied by Economatica on the growth of the other major stock exchanges in the region, which is what CSA will be sharing with you today.  To read the full article from the Latin Business Chronicle click here.

Colombia – Best performer in Latam last year, IGBC (Colombia’s benchmark) stock index has grown in value by 927.9% during the past 10 years, and average decline in value of transactions in 2008 was 2.3%—lower than all other countries in the region

Brazil – Latin America’s largest stock market, Ibovespa (Brazil’s benchmark) stock index has grown 301.3% during the past 10 years, and the average decline of transitions in 2008 compared with 2009 was 13.6%.

Mexico – IPC (major benchmark index in Mexico) has grown 250.5% during the past 10 years, and the average decline in transactions last year was 13.9%

Venezuela – The Caracas stock index has grown by 916.5% during the past 10 years, and the average decline in transactions was 29.5% last year—the second worst in Latin America.

Argentina – The Merval inces has grown by 321.3% during the past ten years, and had the worst average decline in transactions last year, suffering a decline of 54.4%.

Peru – The Lima stock index (IGBVL) has been one of the regions best performing in the past few years.  Seeing growth of 671.1% during the past 10 years, and a decline in average transactions last year of 21%.

Chile – Last but not least, Chile’s IPSA index has grown by 218.8% over the past 10 years, and the average decline in transactions last year was a mere 3.6%-second best next to Colombia.

South American Stock Markets; weekly roundup

South America: An Analysis of Arms Races and Regional Geopolitics

A insightful analysis on the ongoing arms build up occurring in South America was released on Tuesday, October 20 by Council on Hemispheric Affairs (COHA). You can access the full analysis, written by research fellow Alex Sanchez if you sign up to be a (free) member of MercoPress.

Img: MercoPress

MercoPress is an independent news agency based in Montevideo, Uruguay focused on delivering news related to South America, Mercosur-member countries and covering an area of influence which includes the South Atlantic and insular territories.

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In mid-September, Secretary of State Hillary Clinton critiqued Venezuela’s leader Hugo Chavez for his ongoing purchases of mostly Russian military equipment, arguing that this could trigger an arms race in South America. The statement has added fuel to the ongoing discussions about what form South America’s rearmament is taking and what this could come to mean for the security of the region.

The aim of this paper is to discuss the major arms purchases now going on in South America and the likelihood of inter-state war breaking out as the result. Ongoing reports about major purchases by Venezuela, Brazil and Chile tend to blur the actual geo-security situation in the region, as several countries, with Argentina as the most prominent example, have carried out only limited military acquisitions. The common perception is that an arms race raises the possibility of inter-state war; however, the reality in South America (and Central America as well) is that inter-state warfare has seldom occurred since World War II. Additionally, regarding the arms race in South America, it is misleading to assume that all South American countries are carrying out their arm purchases with the same gusto as Brazil, Chile and Venezuela.

It is generally assumed that South America is either already engaged in an arms race or is about to enter one. This is somewhat inconsistent because the start of an arms race is not easily defined. It could also be argued that what is occurring is not so much a general arms race as it is a product of certain militaries capitalizing on weak civilian governments (an updated version of former Uruguayan President Bordaberry in 1973) to increase their defense budgets. Furthermore, in spite of domestic security issues in several South American countries, most notably the insurgent movements in Colombia and Peru as well as occasional inter-state tensions, the reality is that inter-state wars in the region have been notably scarce in the past few decades, which raises the question: is interstate warfare necessarily the future of South America? The final section of this article will discuss whether an arms race could lead to general warfare.

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Click here to access the full analysis from MercoPress

South America; Energy Newswire

[Venezuela & Ecuador]– Venezuela, Ecuador Exploring for Gas in Gulf of Guayaquil

Venezuela and Ecuador’s state energy firms said Wednesday that exploration is under way at a test well in Ecuador’s Gulf of Guayaquil, with expectations of finding up to 1.3 trillion cubic feet of natural gas.

The two firms, Petroecuador and Petroleos de Venezuela, or PdVSA, announced their plans a year ago to drill for gas in the gulf’s 300,000-hectare block 4.

[Colombia] – Petrolifera Executes Onshore Colombian License Contract with ANH

Petrolifera has executed the Magdalena exploration contract with the Agencia Nacional de Hidrocarburos (“ANH”) for the conversion of the Sierra Nevada II TEA into the Magdalena License, covering lands adjacent to the company’s Sierra Nevada License in the Lower Magdalena Valley, onshore Colombia. The Magdalena License comprises approximately 595,000 acres that is considered to be mainly prospective for natural gas and natural gas liquids. The minimum work commitment associated with the Magdalena License for the initial 15 month phase is primarily 150km2 of 3D seismic. As required by ANH, Petrolifera has established and funded a US $4.1MM trust, which in effect funds the assigned value of the initial work commitment of the License.

[Brazil] — Chevron: New Oil Law Reduces Opportunities in Brazil

Changes to Brazil’s oil laws don’t allow much space for international oil companies to take part in recent offshore oil finds, the vice president for global upstream and gas at U.S. oil major Chevron Corp. said Wednesday.

In September, Brazil’s government proposed changes to the country’s regulatory framework, giving the government a greater stake in the discoveries and state-run energy giant Petrobras the lead role in development.

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

As promised… China steps up overseas investments in commodities

Aug 14, 2009 — State-owned Yanzhou Coal Mining Co. buys Australia’s Felix Resources Ltd. for about A$3.5 billion ($2.9 billion), reports Bloomberg

Aug 13, 2009 — Sinochem Corp., China’s biggest chemicals trader, makes an offer to buy to buy Emerald Energy Plc for 532 million pounds ($881 million). Giving Sinochem Corp., access to oil fields in Syria and Colombia, reports Bloomberg

“The Chinese don’t have enough nickel, don’t have enough oil, and they don’t have enough copper. There’s a crisis coming. They are going around the world buying up what they can. They’re preparing for a rainy day.” Jim Rogers, chairman of Rogers Holdings and the author of books including “Investment Biker” and “Adventure Capitalist”, said in a telephone interview yesterday.

Weekend Newswire: Latin America

OAS can’t agree on Cuba, while Havana ridicules the organization
The task force created by the Organization of American States, OAS, in an attempt to bridge different members’ proposals to consider the readmission of Cuba seems to have stalled with the main actors clearly underlining their stance.

Colombia Cuts Benchmark Lending Rate to Record Low 5% to Stimulate Growth
Colombia’s central bank cut its benchmark interest rate to a record today and signaled it’s ready to lower it further in an effort to ward off an extended recession as inflation eases

Braskem Taps Peru, Venezuela in $3.6 Billion Expansion Outside of Brazil
Braskem SA, Latin America’s largest petrochemicals producer, plans to invest $2.5 billion in a polyethylene plant in Peru, said Cleantho de Paiva Leite, Braskem’s director of international projects.

Sao Paulo-based Braskem, which holds a 50 percent share of Brazil’s resins market, also is working on engineering studies for a $1.1 billion petrochemical plant in Venezuela with state- owned Pequiven SA, de Paiva said in an interview in Lima.

Venezuela Expropriations: Chávez Talks Himself into Trouble with Argentina’s Fernández de Kirchner
The spark for the conversation sought by Fernández de Kirchner was a remark Chávez is reported to have made in private to Brazilian President Inacio Lula da Silva. That remark, it’s said, was to the effect that Venezuela was on course to take over foreign companies except for Brazilian ones.

President Hugo Chávez’ strategy of nationalizing companies including foreign ones, and a remark he did or did not make in seriousness to Brazilian President Ignacio Lula da Silva, appear to have posed problems for him and his Argentine friend and colleague, Cristina Fernández de Kirchner.

Chávez has depicted Fernández de Kirchner as an ally and soulmate in his bid to build a regional alliance to counter what he sees as the undue influence and power of the United States in Latin America. But his peremptory takeover of steelmaker Sidor and his tendency to talk off the top of his head may well have put her in between the proverbial rock and a hard place at home.

Argentina May Be Sanctioned By Manhattan Judge in Bondholder Litigation
Argentina may be sanctioned for failing to comply with a U.S. court order to turn over to bondholders documents regarding its pension funds, a federal judge in Manhattan said.

U.S. District Judge Thomas Griesa ruled in October that Argentine pension funds nationalized by that country’s government and held in the U.S. may be used to satisfy bondholder judgments against the republic. Argentina has appealed. Griesa later ordered the South American nation to turn over documents related to its pension funds to bondholders.

Argentina’s Construction Activity Declined 5.5% in April From Year Earlier
Argentine construction activity fell the most in five months in April, as Argentines delayed investment plans amid the global financial crisis and political concern ahead of next month’s mid-term elections.

Mexico GDP to Sink Most Since 1932 in Fall `Hard to Fathom,’ Goldman Says
Mexico’s economy will contract this year by the most since 1932 as a slump in the U.S. curbs demand for exports and slows dollar flows from tourism and remittances, Goldman Sachs Group Inc. said.

Corporacion Andina de Fomento Sells $1 Billion of 10-Year Notes

Corporacion Andina de Fomento sold $1 billion of 10-year notes, according to a person familiar with the transaction.

CAF sold the bonds to yield 4.5 percentage points above U.S. Treasuries, said the person, who declined to be identified.

[Source] — Bloomberg

Newswire: Latin America

Latinamerica foreign trade forecasted to contract 9 to 11% in 2009
The main impact for Latinamerica of the global financial crisis and economic slowdown has been the contraction of trade, so far in the range of 9 to 11%, revealed Alicia Bárcena, Executive Secretary of the UN Economic Commission for Latinamerica and the Caribbean, Cepal.

“The strongest impact we are seeing in the region is the fall in trade volumes. I believe that the “shock” of the contraction of global demand for our goods and services is our most relevant issue”, said Bárcena in an interview with the Cuban daily Granma.

She recalled that when the last big crisis Latinamerica’s foreign debt was equivalent to 24% of GDP, while in 2008 it had dropped to 8%.

Latinamerican Liberals hold congress in “Bolivarian” Venezuela
Liberal political parties and thinkers from Latinamerica are holding their annual congress this week in the Venezuelan capital Caracas. The event is in the framework of the 25th anniversary of the local branch Cedice-Libertad and will promote debates on liberal policies to address poverty and the current global slowdown.

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The congress is bound to spark some reaction among President Chavez followers since his Bolivarian revolution and XXIst Socialism stand at the opposite end of the political spectrum from the Liberals and the concept of individual freedom.

The two events will be taking place during a particularly sensitive week since President Chavez has ordered the nationalization of oil industry subcontractors, banks, steel industry, food processors and farm land considered idle.

Foreign direct investment to Latam reached 139 billion USD in 2008
Direct foreign investments in Latinamerica and the Caribbean are showing a significant resistance to the global crisis and in 2008 reached a record 139 billion US dollars, up 9.4% from the previous year according the United Nations Conference on Trade and Development.

Latinamerica’s bicentennial independence festivities begin in Bolivia
Bolivia’s commemoration on Monday May 25th of the 200th anniversary of the first uprising in Latinamerica against the Spanish colonial empire will also mark the beginning of similar independence celebrations along the continent which will peak in 2010.

Third re-election running “inappropriate” admits Colombia’s Uribe
Colombia’s President Alvaro Uribe says it would be “inappropriate” for him to seek a third consecutive term. His statement comes two days after the Senate approved a referendum that would ask voters to permit him to run again. Uribe did not, however, clearly rule out a re-election bid.