Colombia’s ICJ threat to Venezuela (Reuters)

Jul 23 – Colombian Attorney General says that Colombia could potentially use evidence of Venezuelan support for rebels at the International Court of Justice. (Reuters)

Must read article about Sino-Latin American relations

A must read article for anyone interested in Sino-Latin American relations was published today on SeekingAlpha’s website.  It is written by Erik Bethel, one of the four founders and CEO of Sino-Latin Capital.  I highly recommend it to anyone even mildly interested in the growth of Sino-Latin American relations.

Click here to access the full article direct from SeekingAlpha.

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 [...]

Please visit SeekingAlpha to read the full article

China to create $5 billion fund to invest in Latin America

In line with China’s outbound investment strategies in Africa and Asia, China is now planning to create a $5 billion usd investment fund for Latin American investments.

The funds target investments will include, infrastructure (probably to help the Chinese get commodities out), agriculture, mining and energy.

Read more in Spanish from Argentinean DERF Agencia de Noticias.

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.

Sino-Venezuelan Cooperation; mining and energy in focus

CSA a bit late on bringing this news to you, but it’s no less the exact kind of newsbites this website scavenges the news world for.

Mining Deal

China Development Bank Corp has agreed to provide a $1 billion usd credit line to Corp Venezolana de Guayana, a.k.a, Venezuela’s state owned mining giant and aluminium producer, in exchange for a guarantee of access to any newly discovered mining resources in the future.

China’s rolling the dice on this one.  Most of the mining world knows Venezuela is sitting atop abundant mineral wealth, nonetheless, the country has always lagged its South American neighbors like Chile, Peru and Argentina when it comes to exploiting its mineral wealth.

Dishing out $1 billion usd, in a moment when China is searching for world to secure new sources of commodities and Venezuela is desperate for dollars/ cash this is a logical investment which could pay dividends if Venezuela can provide the institutional framework to develop a robust mining industry using Chinese capital.

Energy Deals

Dec 22 (Tuesday) – Caracas and Beijing sign a framework agreement to set up and manage a new JV (joing venture) to develop the Junin 8 Block in the Orinoco Belt.  The set goal is to produce 200,000 barrels per day of extra-heavy crude, according to an official report.

Dec 23 (Wednesday) – China National Offshore Oil Corp signed agreements with PDVSA to assist with deep water and ultra-deep water drilling and to evaluate reserves in the Orinoco Belt block known as Boyaca 3.

What is China getting in exchange for this “olive branch,” it is offering Venezuela?

According to this Chinamining article,

The agreements included a one-year contract – signed by Venezuela’s PDVSA and Petro China – that calls for Venezuela to ship 500,000 barrels per day of crude and related products to China.  As for the mining agreement, China will receive supplies of iron ore for their generosity.

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.

October fire sale! Russian credit & Rubles accepted

Rigzone reported today that a Russian oil consortium would not have the pay the $1 billion usd Venezuela had previously requested as a down payment in order to partake in tapping Venezuela’s Orinoco oil fields.

Instead, the Russian consortium will only have to pay $600 million usd. Sounds like a nice 40% bargain to this blogger. It’s a nice deal if you ask me, which coincidentally comes on the heels of Venezuela’s securing a large credit line from Russia to buy military equipment.

Orinoco Belt Regions – [Rigzone, 10-6-09]

According to this Dow Jones Newswire published by Rigzone,

The Chavez-led government has talked about plans for nearly $70 billion in oil investments over the coming years as this oil-rich nation seeks to ramp up dwindling production numbers and boost its sagging economy.

But so far, nearly all those plans are based only on memorandums of understanding, with no solid investment commitments from foreign oil companies.

Sounds like Venezuela is becoming increasingly hungry not only for foreign investment, but also to cement its relations with a geopolitical power like the Russian Federation.

Click here to read the newswire article from Rigzone, which I must admit does a far better job at detailing the situation than the concise, and slightly cynical analysis published here at China South America (CSA).

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