Fausta's Blog

Cristina looks at a specimen

Argentina’s Deadbeat Special: Buy a 4% Bond or Go to Jail

President Cristina Fernandez de Kirchner wants tax evaders hiding about $160 billion in dollars to help finance Argentina’s oil-producing ambitions. Her offer: Buy a 4 percent bond or face the prospect of jail time.

The tax authority announced the plan May 7, highlighting its information-sharing agreements with 40 nations and warning Argentines who don’t use the three-month amnesty window that they risk fines or arrest. Evaders have two options for their cash and the only one paying interest will be a dollar bond due in 2016 to finance YPF SA (YPF), the state oil company. The 4 percent rate is a third the average 13.85 yield on Argentine debt and less than the 4.6 percent in emerging markets.

I’m sure investors will rush to purchase bonds with below-market yields from a government who’s fined economists who dared publish data on Argentina’s real inflation rate of 25%, while

The government’s statistics agency reported Wednesday that annual inflation last month amounted to 10.5%.

That’s been roughly the rate around which the government has been paying on its inflation-linked bonds.

If investors in those securities have accepted the reduced payments based on the official data, workers unions in recent years have not, successfully garnering annual wage increases of 25% or more.

But, hey, the government’s increasing the monitoring of income and spending.

What could possibly go wrong?

Linked by Dustbury. Thank you!

The drilling platforms are leaving:
Cuba’s Oil Bust

Last week, Florida’s Sun Sentinel reported that “after spending nearly $700 million during a decade, energy companies from around the world have all but abandoned their search for oil in deep waters off the north coast of Cuba near Florida.” Separately, CubaStandard.com reported on Friday that “the shallow-water drilling platform used by Russian oil company OAO Zarubezhneft will leave Cuban waters June 1, to be redeployed to Asia.”
…
The Brazilian state-owned Petrobras PETR4.BR -0.05% had given up on deep-sea drilling in Cuban waters in 2011. Repsol REP.MC -0.60% gave up in May 2012. The deep water platform it was using was then passed to Malaysia’s state-owned Petronas, which also came up empty. Venezuela’s PdVSA had no luck either. In November Cuba announced that the rig that had been in use would be heading to Asia. Last week came the end of shallow-water drilling.

And,

The loss to the regime is not just about the foreign exchange that oil implied. The threat of spills, as well as lost opportunity for American companies, were ways for Cuba to engage the U.S. and perhaps even get the embargo lifted without having to make any human-rights concessions. Some Democrats, whose party is more often found in opposition to oil exploration, tried to help.

This also means that the Cuban Communist regime will try harder to keep those daily 100,000 barrels of Venezuelan oil coming, regardless; as you may recall, ending that gift is one of Capriles campaign promises.

ANTIGUA
Stanford Victims Will Benefit From $300M Settlement

ARGENTINA
Imprisoned priest Francisco Jalics breaks silence over Pope Francis, clearing him for involvement in ‘Dirty War’
Jalics had been silent for years in a German monastery. He once thought then-Cardinal Bergoglio played a role in his arrest

Social Justice And Pope Francis: Choosing Freedom Over Serfdom

After Frosty Past, Pope Meets Argentine Leader

Making nice? Argentina’s Kirchner and Pope Francis meet in Rome (+video)
Beneath the cordial meeting today between new Pope Francis and President Kirchner lies a rocky and strained relationship that stretches back to 2004.

[Additional video below the fold]

BRAZIL
Indians, police clash at Rio complex near Maracana to be razed for 2014 World Cup

Brazil’s opposition
The Minas medicine
Aécio Neves ran his state well. But he may struggle to convince voters that his formula is right for the presidency

CHILE
Wave of prawn deaths baffles Chile city of Coronel
Thousands of dead prawns have washed up on a beach in Chile, sparking an investigation.
Hundreds of dead crabs were also washed ashore in Coronel city, about 530km (330 miles) from the capital, Santiago.

COLOMBIA
Ten years later, Colombia nabs rebel linked to Uribe inauguration attack. What’s with the “rebel” thing? The guy’s a terrorist.

COSTA RICA
Starbucks buys coffee farm in Costa Rica (h/t DP)

CUBA
African Politicians Laundering Money Through Cuba

Daughter of Oswaldo Paya demands international inquiry into his death

DOMINICAN REPUBLIC
Dominican Republic detains 35 soldiers and police, 4 French citizens in drug investigation

République dominicaine : démantèlement d’un réseau de trafic de drogue vers la France

ECUADOR
Ecuadorian diplomacy fails in his attempt to change the IACHR reforms

GUATEMALA
Guatemala ex-ruler Rios Montt on trial for genocide
The trial of the former military ruler of Guatemala, Efrain Rios Montt, for genocide and crimes against humanity has begun in Guatemala City.

HONDURAS
Seldom Tried Honduran Dishes Made from Unusual Root Crops (h/t DP)

LATIN AMERICA
Heads of state at the Papal inauguration, Bayly style (in Spanish),

MEXICO
Mexico’s attorney general says no motive yet in US car shooting that wounded 2 CIA agents

PANAMA
Panama Canal Minister: Deepen Port of Savannah

PERU
Petroperú to Take Over Former Talisman Concession in Peru
Petróleos del Perú SA plans to take over operations at Block 64 in northern Peru, an important step for the state-owned oil company to return to upstream operations.

PUERTO RICO
Puerto Rico: US army drills ‘did not cause illnesses’

VENEZUELA
Venezuela Acts to Ease Dollar Shortage

Chavez trek

The week’s posts:
Pope Francis not dancing to Cristina’s tune

Yoani Sanchez meets Marco Rubio

Latino demographics: Integration is the key factor

Mexico: Will PEMEX reforms come to pass?

Correcting my error on my article on Pope Francis

Podcast

(more…)

AP has an article, Mexico’s president gathers power, pushes reform, on Enrique Peña Nieto’s recent moves,

The moves have built momentum behind what could be his most dramatic and difficult reform – modernizing and drawing foreign and private capital to the behemoth state oil company, a long sacrosanct but increasingly inefficient pillar of the Mexican economy. On Sunday, at a celebration of the 75th anniversary of the nationalization of the Mexican oil business, Pena Nieto said again that he will transform Petroleos Mexicanos. The longtime head of the Pemex union, who had been expected by many to fight any changes but has been the subject of questions about unexplained family wealth, pledged his support.

Pena Nieto says his plan will make Mexico more democratic and competitive in the world economy, and his drive for reform is fueling international confidence about Mexico. Rating company Standard and Poor’s raised the country’s long-term sovereign credit rating from “stable” to “positive” last week, citing optimism about the government’s ability to carry out structural changes. The Mexican peso is stronger against the dollar than it’s been in a year and a half.

Many, including myself, are skeptical, as Pemex has been fossilized (all puns intended) into its current form for decades. Just two days ago, Enrique Peña Nieto himself asserted,

“Pemex will not be sold nor privatized; Pemex must be transformed,” Mr. Pena Nieto said to the applause of unionized oil workers present at the ceremony at a Pemex refinery in central Mexico.

While Pemex’s crude-oil production has fallen to about 2.55 million barrels a day in 2012 from around 3.4 million barrels in 2004, the country has proven reserves of oil and gas totaling 13.87 billion barrels of crude-oil equivalent.

Adam Thomson asks, Pemex turnaround: can it be done? The problems are huge:

• Four divisions, with only one turning a profit, operating as separate companies; 1
• 70,000 employees, huge pension liabilities and crippling union contracts;
• $2billion in losses in the refining division.

Enrique Peña Nieto’s party, the PRI, has symbolized entrenched power, political and economic, at the top. Whether the transformation of Pemex will involve a substantial involvement of foreign capital and technology that would make it more competitive remains to be seen.

For now, however, privatization has been ruled out.

[Post re-edited to comply with FT's restrictions.]

Mexico Moves on Energy in Economic Reset
In Interview, Pemex Chief Says Overhaul to Broadly Cut Costs

For decades, Mexico’s energy policy has largely boiled down to exporting oil for cash to fund state spending. Now the new government is negotiating with rival political parties to curb that practice and instead use state monopoly Petróleos Mexicanos to a different end: cheaper energy, said Pemex CEO Emilio Lozoya.

In an interview with The Wall Street Journal, the 38-year-old chief said the administration of President Enrique Peña Nieto was striving to overhaul tax and energy laws this year that Mr. Lozoya said would result in cheaper energy for consumers and companies that could drive a more competitive economy.

There’s also shale, too:

Mexico may hold the world’s fourth-biggest reserves of shale gas, according to the U.S. government. But Pemex has drilled only a few wells and not produced any gas. “Mexico ought to be producing more of its own gas, and eventually exporting it,” Mr. Lozoya, a lawyer and economist who got his master’s degree in public policy at Harvard said. “Clearly the geology that you have in some parts of the U.S. extends into Mexican territory. So it’s a matter of just investing and getting it done.”

Here in the USA, the government is holding up the Keystone pipeline, bans itself from off-shore drilling, and Obama pours money on “green” failures like Solyndra and other duds. Case in point:

President Barack Obama used his fifth State of the Union address to extol the virtue and job-creating power of federal investment in solar, wind and advanced battery development. Maybe he should have consulted his Department of Energy first.

In a scathing report issued Wednesday, the department’s Office of Inspector General said LG Chem Michigan Inc. misused most of $150 million in federal grants to build its battery cell manufacturing plant in Holland. The company used taxpayer dollars to pay employees to volunteer at local nonprofits, play games and watch movies.

Obama does not see how high-technology, industrialized economies run, grow, and thrive on cheap energy.

But hey, we’re talking about someone who said in the SOTU

“As long as countries like China keep going all in on clean energy, so must we.”

As IBD points out (h/t Instapundit)

All in? Sixteen of the world’s top 20 most polluted cities are in China. The New York Times reported just a couple weeks ago that Beijing’s air quality ranked a “crazy bad” 755 on a scale of 0 to 500.
The country has been building a new coal plant almost every week and plans 363 more, and China now emits almost twice as much CO2 as the U.S.

Mexico has a long way to go to a de-nationalization of the oil industry sector, which would solve many of its problems. The US, however, is set on taking the wrong path.

Mary O’Grady poses the question, If Chávez believes the nation’s oil billions belong to the people, why not give it to them directly?

Mr. Monaldi, along with Venezuelan economists Pedro Rodríguez and José Morales, have a better idea. In a paper published in September by the Center for Global Development, they propose offering Venezuelans a plan to replace many of the government’s social programs and subsidies funded by oil revenue with direct, “universal, transparent and regular payments” to citizens.

The authors argue that this “direct distribution mechanism” (DDM) would be a more equitable way to distribute the wealth from the country’s vast oil reserves, and it would make Venezuelans better off. Marketing the idea to the electorate may be one of the few cards the political opposition has left to play.

Ah, but Hugo’ been giving “regular payments” to the Chavistas, the Cubans, and his other cronies in Latin America.

Meanwhile, in the USA, we’ll be debating Fair vs Fracking for the next 4 years.

At OilPrice.com, James Stafford interviews James Kwak, associate professor at the University of Connecticut School of Law and blogs at The Baseline Scenario, which he co-founded with Simon Johnson

Oilprice.com: What are your thoughts on America’s oil and gas boom?

James Kwak: There are some obvious benefits. Lower dependence on politically unstable parts of the world is clearly good. Shifting electricity production from coal to natural gas is also good. One can also come up with a plausible scenario in which plentiful natural gas buys us the time necessary to shift toward greater usage of renewable energy sources.

On the downside, I worry about the political implications of the boom. Increased domestic production will encourage politicians to declare victory on the energy front without doing anything about the big, long-term problem: climate change. Before, fears of rising energy prices and dependence on the Middle East were encouraging political investment in renewables and conservation. Now the message from ExxonMobil and its allies will be that we don’t need to do anything because we are a (net) energy exporter and energy is cheap. That will further reduce the chances that we do anything meaningful about climate change.

Oilprice.com: What do you see happening to the US and global economies in 2013?

James Kwak: I’m modestly positive about the U.S., but that’s not because of any particular insight. It’s because I read Calculated Risk, and because the housing market is turning around.

Go read the whole thing.

The power struggles in Venezuela are on, and Raul Castro and his cronies are stepping in:

Today’s Nuevo Herald reports that Cuba’s Communist regime is behind Venezuela’s transition. Under their plan, National Assembly president Diosdado Cabello would be interim president until a new election is called, with Nicolas Maduro, the current VP, as presidential candidate. Cabello will continue as National Assembly president, but with additional powers and influence. (You can read the whole thing here (in Spanish). La Patilla has more.)

At the same time, the Finance and Economics minister, Jorge Giordani, has been asked to stay, and to negotiate a grace period with China on debt payment. The objective is to issue more bonds, increase liquidity and bankroll more misiones for a year. Venezuela has been borrowing at credit card rates for quite a while.

Of course, Cuba would continue to get those Venezuelan oil shipments. One can’t help but wonder how far would 105,000 barrels of oil a day at full market value would go towards meeting Venezuela’s debt with China.

As readers of this blog well know, Venezuela is propping the Cuban Communist regime,

Raul Castro and his cronies aim to create in Venezuela “a politburo of sorts, a council that operates in consensus and will guarantee Chavismo’s stability as it unites likely heirs and rivals.”

By doing this, Raul is also perpetuating his iron grip on Cuba. Last June the Wall Street Journal pointed out,

Few analysts think a departure of Mr. Chávez would lead to political revolt in Havana that would threaten the Castros’ regime. But it might force Cuba to accelerate free-market reforms. The crisis of the 1990s forced Cuba to adopt limited free-market reforms to survive, including the first licenses for private restaurants. When times got better under Mr. Chávez, Fidel Castro rolled back the reforms.

“If Chávez were to kick the bucket, then the impetus toward reform would probably return because there wouldn’t be any other alternative,” said Arch Ritter, an economist specializing in Cuba at Carleton University in Ottawa.

Additionally, according to at least one analyst, Control of the Venezuelan government implies control of the largest natural gas reserves in Latin America and the largest deposit of oil in the world.

Venezuela’s neighbor, Brazil, is watching the action, and Dilma Rousseff has appealed for Venezuelans to follow their constitution. As you may recall, Venezuela joined Mercosur at a summit headed by Rousseff but has yet to adopt its tariffs and rules.

For now, my friend M. put it well, “the Castros have taken control [of Venezuela] without firing a shot!”

What about Chavez’s health, you ask? I don’t expect anything other than rumors and leaks until January 10. Venezuelan blogger Daniel expects Epiphany on January 5 (tomorrow).

RELATED,
Chavez Will Leave Behind An Economic Crisis of Historic Proportions

Post re-edited to correct code.

UPDATE,
Richard Fernandez looks at Venezuela.

Cross-posted at Liberty Unyielding.

The price of gas in Princeton yesterday was $4.15.

Other oil news,
DAMON’S ‘PROMISED LAND’ USES MONEY FROM OPEC MEMBER TO TRASH AMERICAN OIL COMPANIES

Big Oil Funding U.S. Politics

Walter Russell Mead writes about how Socialism Kills, Venezuela Edition

On Saturday, 39 were killed and more were injured in an explosion at Venezuela’s Paraguaná Refinery, one of the largest in the world. This is only the latest in a string of accidents that the state owned oil company, Pétroleos de Venezuela (PDVSA), has racked up in past years. The New York Times reports that—once again—faulty state supervision of the facilities is to blame:

José Bodas, an oil union leader, said that the company had failed to invest in maintenance. “This has as a consequence the increase in accidents and tragic deaths like what we are seeing today,” he said in a telephone call to Globovision, a television channel associated with the political opposition to President Chávez.

It is clear that the Chávez regime has been squeezing every last penny out of the oil sector, but despite the “Bolivarian” socialist rhetoric promising equal distribution of this wealth, the money hasn’t just been used for social programs, but also to fund Venezuela’s expensive foreign policy, as well as its efforts to cover up the results of poor policy, rampant cronyism, and the general mismanagement of the public sector. When things go wrong, Venezuelan citizens are the ones who pay the price for the state’s poor choices.

Time is asking, Venezuela’s Refinery Explosion: Will It Affect Hugo Chávez’s Re-election Chances?