Archive for the ‘business’ Category

Venezuela: New deal with China

Tuesday, November 25th, 2014

High hopes, we’ve got high hopes . . .

The Chinese pull the chestnuts (temporarily) off the fire:
China Loosens Debt Terms for Venezuela
With Default Threatening the Economy as Oil Prices Tumble, Caracas Gets a Lifeline From Its Biggest Creditor

Not only for Venezuela, but also for Argentina (emphasis added),

Last week the president [Maduro] used a $4 billion Chinese credit, traditionally earmarked by the Chinese government for infrastructure projects and held in off-budget funds, to increase reserves to $23.2 billion. China also recently lent $1.3 billion to help Argentina buoy falling reserves, giving President Cristina Kirchner , a close ally of Mr. Maduro, a cushion to help alleviate that country’s cash crunch.

Beijing’s largess may appear irrational given economic policies in Venezuela and Argentina that do not appear sustainable, said Barbara Kotschwar, a scholar who tracks Chinese investment in Latin America at the Peterson Institute for International Economics in Washington.

“On the other hand,” Ms. Kotschwar said, “they are so invested in Venezuela’s oil industry that they may have calculated that a political crisis would have a negative impact on their return on investment or on Venezuela’s repayment of loans.”

That’s putting it mildly; according to Maduro himself,

Venezuela’s oil revenues, which account for 96% of the country’s dollar income, are down by 35% in the past month

China has risked millions of dollars in Latin America to secure their supply lines, and as analyst Russ Dallen, managing partner at brokerage Caracas Capital Markets, put it, “for the short term, they’re secure.” However, considering that

China last month scrapped the requirement that Venezuela ship at least 330,000 barrels of oil a day as payment for its existing loans

the meaning of “secure” may be more fluid than we believe – and not only for the short term.



Panama: Legal truble for Carlos Slim

Tuesday, November 25th, 2014

Carlos Slim, best known in the USA for his Obamaphones, and who was bidding for Univision earlier this year, is looking to diversify.

A Panamanian judge, however, is cramping his style:
Panamanian Judge Orders Embargo on Carlos Slim Assets
A Panamanian judge has ordered an embargo on the local assets of Mexican billionaire Carlos Slim’s infrastructure company in a legal dispute over a concession to build and operate a hydroelectric plant.

The decision to embargo 10 properties, including the Bajo de Mina hydro plant, follows a complaint by Panamanian businessman Julio César Lisac, who charges that the Panamanian government unjustly canceled his right to the concession in 2006 and later gave it to Mr. Slim’s company, Panamanian newspaper La Estrella de Panama reported on Sunday

Slim’s Ideal also operates toll roads, water projects and public transport terminals in Mexico.

A commenter at the WSJ mentions that “had the exact same thing happen to him after he bought Comp-USA almost fourteen years ago now.” Here’s a link to that story.

Chile: Blowing up the ATMs

Friday, November 21st, 2014

375 of them:

Crooks Blow Up ATMs in Crimes Leaving Chileans Stuck in Line

The method is simple. Use a hose to inject propane into the machine while being careful to seal all cracks and vents with duct tape, then light the fuel with a spark. The top of the machine explodes, leaving the cash tray almost intact.

And then there’s also robbing the armored trucks delivering the money.

Argentina: Jorge Lanata will petition US Court re: Cristina’s US businesses

Tuesday, November 11th, 2014

The headline is less tactful,
Argentinean Journalist to file petition in U.S. Courts to obtain information about Cristina Kirchner’s money laundering operations

Last night, Argentinean renowned investigative journalist Jorge Lanata announced he is planning to submit an application for an order for discovery pursuant to 28 U.S.C. § 1782 in a Nevada District Court, aiming to obtain information related to President Cristina Kirchner’s companies in the United States.

Section 1782 of Title 28 of the United States Code is a federal statute that allows a party to a legal proceeding outside the United States to ask an American court to obtain evidence for use in the non-US proceeding. The full name of Section 1782 is “Assistance to foreign and international tribunals and to litigants before such tribunals”.

For the last two years, Jorge Lanata has been conducting an investigation known as the “Kirchner Money Route”, through which he demonstrated that Kirchner cronies were laundering millions of dollars coming from corrupt activities through a vast networks of shell companies and shady financial institutions in Argentina, Uruguay, Panamá, Switzerland, Seychelles Islands and the U.S., among others.

This investigation was then used by NML Capital Ltd., a hedge fund who holds a judgment against Argentina for more than $1.7 Billions (see NML Capital Ltd. vs. Republic of Argentina), as the main source of evidence to produce information about 123 companies in the State of Nevada that may point to the location of Cristina Kirchner’s assets in the United States and abroad. NML Capital Ltd. was able to depose a key witness to the “K-Money Route”. However, that deposition is being sealed by the request of the parties.

In Spanish, Lanata’s Sunday show.

More on NML bond holdouts:
A New Twist in the Argentine Debt Saga

But Dart’s legal complaint draws attention to something that had been overlooked as the talks progressed: The so-called Gang of Five—the five holdouts at the center of Singer’s legal case: Singer’s NML Capital, Aurelius Capital, Blue Angel Capital, Oliphant, and a small group of retail investors—hold only about a quarter of all the New York bonds held by holdouts. In addition to Dart, there are approximately $2.4 billion worth of bonds out there that are governed by New York law and in the hands of other holdout investors. The minute Argentina settles with Singer’s group and the bondholder payments are allowed to flow through, all the other holdouts will likely rush forward to Judge Thomas Griesa’s court, demanding the same legal rulings and the same terms, which could block the payments again. The default could be cured temporarily, but then Argentina would be right back where it started.

NML Capital Ltd. can’t force an Argentine lawyer to remain in the U.S. for questioning, a Washington judge ruled

NML sought an emergency court order last week barring attorney Cesar Guido Forcieri, a former World Bank director, from returning. There’s no reason NML can’t question Forcieri when he gets to Argentina, U.S. District Judge Royce Lamberth said in a one-page order issued Nov. 6 and made public today.
. . .
Forcieri is a close associate of Argentine Vice President Amado Boudou, NML said in court papers. Boudou was indicted in June by an Argentine federal court on corruption charges related to his alleged involvement in acquiring a bankrupt printing company, Ciccone Calcografica SA, that later won contracts to print the nation’s currency.

Boudou was initially indicted with five others. In September, an Argentine judge indicted Forcieri for his alleged role in helping to steer business to Ciccone. If Argentine courts find Boudou guilty, the country may confiscate any profit, funds or property employed in the takeover scheme, according to NML’s lawyers.

Until last month, Forcieri served in Washington as a World Bank director for Argentina, Bolivia, Chile, Paraguay, Peru and Uruguay. He worked with Argentina’s Ministry of Economy and Public Finances as a G-20 finance deputy from 2010 until March, according to a profile on LinkedIn.

NML served Forcieri with a subpoena on Sept. 10 seeking documents regarding his involvement in the alleged Ciccone scheme. The Argentine lawyer failed to appear for a deposition on Oct. 20, NML said.

This ain’t over yet, not by a long shot, no matter what the SCOTUS ruled.

Venezuela to appeal ICSID Exxon decision

Tuesday, October 28th, 2014

Living up to its reputation as possibly the world’s worst-managed economy, the Venezuela government is appealing the US$1.6billion settlement against Exxon by the World Bank’s International Centre for Settlement of Investment Disputes, or ICSID.

Just to put things in perspective,

Exxon had originally wanted $20 billion out of the deal; arbitrators awarded it just $1.6 billion, $600 million of which had already been paid.

The country must honor ICSID rulings to avoid default of sovereign bonds; by having the ICSID provisionally stay the enforcement of the award, Venezuela buys time.

Francisco Toro speculates,

One of two things is going on here. Either the super-fancy and well-worth-top-dollar New York Law Firm representing Venezuela at ICSID, Curtis Mallet-Prevost, has persuaded Ramírez they can get an even better settlement on appeal or the government is now so strapped for cash they’re willing to try any delaying tactic to avoid having to pay up right away.

I don’t know which one it is.

I don’t either, and considering how Nicolas Maduro opened his campaign by saying he talked to Chavez, who is now a bird , maybe he (and his cohorts) went by Chavez’s 2012 promise that Venezuela will not recognize World Bank ruling in the Exxon case.

All you can be sure of is that law firm Curtis Mallet-Prevost will make money out of this, and, as I said last month, that Venezuela has no intention to pay Exxon.



Brazil: Ibovespa volatility

Tuesday, October 28th, 2014

First Brazil’s stocks tanked,
Ibovespa Tumbles Toward Bear Market as Rousseff’s Win Sinks Real

Brazil’s benchmark equity index led global declines as President Dilma Rousseff’s re-election damped speculation for a change in policies that wiped out $553 billion of stock market value and left the economy in recession.

The Ibovespa (IBOV) dropped 2.8 percent to 50,503.66 at the close of trading, the most among the 20 biggest indexes globally. After tumbling as much as 6.2 percent earlier, approaching the threshold for a bear market, the gauge pared losses as education companies and pulp exporters rallied. The real posted the world’s biggest loss as it sank 1.9 percent to a nine-year low.

After years of weak growth, high inflation and intervention, Dilma’s re-election tanked the currency, too,

The real’s plunge to 2.5224 per dollar put it at the weakest level on a closing basis since April 2005. One-month implied volatility on options for the real, reflecting projected shifts in the currency, was the world’s highest. The currency sank 12 percent in the past three months.

Then why did things rise up again?

“To some extent, markets were already pricing in her victory last week, and that may explain why the reaction to the election results wasn’t as negative as I expected,” Alvaro Marangoni, a partner at Quadrante Investimentos Ltda., said by phone from Sao Paulo. “We’re all waiting to see if policies are adjusted so the economy can recover.”

That’s an optimist, indeed.

The states that opposed Dilma out in the grasslands, soybean farms, cattle ranches and productive and innovative industrial centers down south, went for her free-market opponent. The states with 25% of the population dependent on welfare went for Dilma,

The takers have become politically stronger than the makers

As Monica Showalter of IBD said,

Now Brazil can look forward to not just low growth, but also high protectionist trade walls, more taxes, more corruption, more intrusive government and an increasingly arrogant state.

I was optimistic on Brazil years ago, but no more.

Argentina: Creeping to the edge

Thursday, October 23rd, 2014

Chris Noon interviews Prof. Steve Hanke on Argentina creeping closer to the edge. You must read the interview in full,

Argentina’s bleak fiscal situation could deteriorate further over the next year, with a prominent economist telling Interfax on Monday the Latin American country’s foreign reserves could shrink to “near $10 billion” by October 2015. It would leave Buenos Aires struggling to meet payments for dollar-denominated LNG imports, which are essential to the country’s energy matrix.

“To get there [$10 billion], we would see monthly declines in reserves that were roughly similar to those of Q1 2014. It could come about through macroeconomic factors, such as the combination of a strong US dollar, weak commodity prices, and decreasing oil prices. The Saudis are squeezing their competition – especially Canadian tar sands producers – as they push for more market share. This may push down Brent crude further to $60-70 per barrel,” said Hanke.
“It’s difficult to say what will be the ‘straw to break the camel’s back’, but if you keep piling up economic problems, you create a ‘tipping-point’ situation. There’s just too much weight on everything and it gives way,” said the economist.

Trying to put a band-aid on a gashing wound, the government is trying to bring dollars into the country by forcing farmers to export soybeans held in storage even when the price of soybeans has plummeted by around 30% since April, and

Buenos Aires has resorted to making deals with friendly foreign lenders to replenish its coffers. A multibillion-dollar currency swap between Argentina and China will be launched in November, the Latin American country’s central bank chief was quoted as saying in a local paper on Sunday.

That will probably help remedy Argentina’s deeply-ingrained structural problems as well as Venezuela’s oil deals with China have in solving that country’s problems, which is to say, not at all.

Argentina: Hoping it’s hit rock bottom

Thursday, October 2nd, 2014

Incurable optimists are betting that Argentina has hit rock bottom:

Argentina’s economy is projected to contract by 2.1% this year and its inflation rate is among the world’s highest. In July, Argentina defaulted for a second time in 13 years. A U.S. judge on Monday found Argentina in contempt of court for its handling of the debt.

Investors see a potential turning point in presidential elections scheduled for October 2015, from which Mrs. Kirchner is constitutionally barred.

Contenders for her post have vowed to work toward exiting default and to adopt policies aimed at righting the economy.

Money managers hope to get in front of a stampede into Argentina should a new government succeed in restoring the country’s credibility in global financial markets.

Well, yeah, if I won the Power Ball I may make it to the Forbes 400.

Snark aside, Argentina has been defaulting on its debt since 1826. The country’s stock market is small, another devaluation is looming, the peso has dropped to a record low against the dollar, the country’s foreign exchange laws and business environment are negative, public spending is out of control, Steve Hanke estimates a 68% annual inflation rate, and, while yields may be high, the central bank’s reserves are dwindling and the government does not have a strategy to solve its domestic economic problems.

Oh yes, it can get worse. When the airlines don’t sell tickets more than 90 days in advance for fear they won’t get paid, you know things are not about to get rosy.

The Merval’s up. Take that as a sell signal.



Argentina: Cristina’s vultures

Friday, September 19th, 2014

Argentinian president Cristina Fernandez has taken time between Botox injections to indulge in more name-calling.

No longer satisfied to refer to Argentina’s creditors as vulture funds, she now has vulture airlines:

Cristina tilda de ‘buitres con turbinas’ a American Airlines Cristina dubs American Airlines ‘vultures with turbines’

Why?

American Airlines will not sell tickets in Argentina more than 90 days in advance. Cristina says this is an “attack against the country to cause uncertainty” about the currency.

Considering how Argentina joins the Venezuela School of Economics by passing laws

that cap consumer prices of goods, set profit margins for private businesses and levy fines on companies found to be making “artificial or unjustified” profits

AA is worrying about getting paid. Over in Venezuela, the government is withholding US$3.6 billion in airline ticket revenue.

UPDATE
Linked to by Babalu. Thank you!


Venezuela: The next default

Monday, September 15th, 2014

Mary O’Grady writes on more to come from the ALBA deadbeat zone:
Venezuela Heads to a Default Reckoning
Amid bills for imports and debt servicing, and shrinking dollar liquidity, something has to give.

Venezuelan bond prices swooned last week on renewed speculation that the government of President Nicolás Maduro might soon default on as much as $80 billion of foreign debt. The yield on the government bond due in 2022 hit a six-month high of 15.8% on Sept. 9. David Rees of London-based Capital Economics, who last year warned of the risks of falling oil prices to Venezuelan solvency, told Bloomberg News by telephone that “the bond market is finally beginning to wake up.”

That may be true. It’s clear that the foreign exchange that Venezuela earns from oil exports cannot pay its import bills along with debt service. There are dire shortages of industrial and consumer goods as well as services. Something has to give and odds are that allowing the required adjustment to the economy won’t be the government’s first choice.

Nearly 1 million [corrected] barrels per day (almost one third of the daily 2.3 million barrels of crude OPEC says Venezuela produces) don’t generate revenue: 300,000 bpd go to Cuba, some 100,000 bpd are smuggled into the Colombia by insiders, and 650,000 bpd are sent to China to pay debt. This is even more disastrous when considering how the Venezuelan economy has become more dependent on oil after foreign capital leaves the country and productivity plummets.