Peru: Sweet times: Privatisation heralds a sugar boom (emphasis added)
IN THE 1960s, Peru’s sugar industry was among the most efficient in the world. It was all downhill thereafter. A military government expropriated the sugar estates on the country’s north coast, turning them into government-owned co-operatives. Having peaked at 1m tonnes in 1975, output fell to 400,000 tonnes by the early 1990s. But since then the sugar industry has passed into private hands again. Over the past decade production has returned to its historic peak—and is now set to boom.
The change has been gradual. The government has sold its stake in the industry in tranches. But now investors are piling in. As in other parts of South and Central America they are attracted by higher prices for sugar because of its use for ethanol. Industry sources predict that land under sugar will expand by 10,000 hectares (25,000 acres) a year, more than doubling output over the next decade. That would turn Peru into an exporter—though not on the scale of Brazil or Colombia.
Last year, local investors secured a controlling stake in Casa Grande, the largest sugar plantation. Bioterra, a Spanish company, plans a $90m ethanol plant nearby. Maple, a Texas company, has bought 10,600 hectares of land in the northern department of Piura. Its plans call for an investment of $120m and ethanol production of 120m litres a year. Brazilian and Ecuadorean investors are also active.
CARACAS, Venezuela (AP) — Meat cuts vanished from Venezuelan supermarkets this week, leaving only unsavory bits like chicken feet, while costly artificial sweeteners have increasingly replaced sugar, and many staples sell far above government-fixed prices.
President Hugo Chavez’s administration blames the food supply problems on unscrupulous speculators, but industry officials say government price controls that strangle profits are responsible. Authorities on Wednesday raided a warehouse in Caracas and seized seven tons of sugar hoarded by vendors unwilling to market the inventory at the official price.
Andres Oppenheimer is pessimistic for Latin America: More ‘elected dictators’ are likely coming soon
Meanwhile in Venezuela, the land of the narcissist-Leninist elected dictator, to use Oppenheimer’s words, Ahmadinejad and Chavez Ride a Downward Spiral
This frenzy of rash acts have produced significant losses to the country in terms of lack of confidence of private investors and to thousands of small private shareholders of the companies above mentioned. Inflation is now running at the rate of 25 percent for the year and unemployment remains the highest in Latin America.
National debt has doubled in the past six years and the oil company Petroleos de Venezuela is currently trying to obtain a loan of some $3.5 billion, to recover some of the money that Chavez is taking away from them to give to their buddies in Cuba, Bolivia, Nicaragua, and Ecuador.
Mary Anastasia O’Grady of the WSJ describes the damages to the infrastructure:
Things got so bad halfway through 2006 that, according to a report in the July 21 issue of the economic newsletter VenEconomia, there was a spate of protests — some violent — against the headquarters of Cadafe and its subsidiaries for the increasing frequency of power failures. VenEconomia commented on “the incomprehensible paradox” of Cadafe’s performance in a country with abundant energy sources.
The explanation is simple: There has been serious underinvestment in power generation and transmission at Cadafe during Mr. Chávez’s tenure. “From 2001 to 2005 Cadafe completed barely 24% of its investment objectives at a time when it registered millions of dollars in operational losses,” VenEconomia noted. Meanwhile, energy demand increased 9% per year nationwide since 2003, and in some areas of the country demand jumped by as much as 20% per year over the same period. Though Cadafe had been budgeted more than $2 billion in government funds, VenEconomia said, the company warned that the new thermal generation projects would take between two and three years to complete.
Miguel Octavio has a round-up of other Venezuelan items.
The crucial factor on Chavez’s influence is oil: The Economist has an article on the waning oil boom,
Venezuela Glimpsing the bottom of the barrel. Lower oil prices threaten Hugo Chávez’s expensive revolution. But he is not about to run out of cash soon
The oil price has crept back up over the past fortnight after a sharp fall. It may well rise further. Even if it does not, few expect the benchmark price to fall to its levels of 2003, let alone 1999. But if prices stay at their levels of the past month, some economists believe that Venezuela’s economy will struggle. “There’s a sustainability problem,” says Luis Zambrano, an economist at the Catholic University in Caracas. “More and more spending is needed to produce a [percentage] point of economic growth.” What will lubricate the revolution when the oil bonanza ends?
Interestingly, sugar might be one of the elements bringing down the oil bonanza. Investor’s Business Daily has an article on the subject:
Axis Of Ethanol
Energy: Could lowly switch grass mow down the petropower tyranny of Venezuela’s Hugo Chavez? A U.S.-Brazil ethanol pact signed this week may supply the fuel to do just that.
But a new deal announced with Brazil to pool ethanol technology and produce greater quantities of ethanol in both countries could help.
We haven’t been big supporters of switchgrass energy, because oil is more efficient. But we’re all for expanding ties to Brazil and helping develop the economy of the far-friendlier state.
The ultimate aim of the ethanol deal is to create a commodity market. This could give every country in the region alternatives for energy buying. In turn, it will undercut Chavez’s monopoly and abusive influence.
The move to increase ethanol production with Brazil takes a page from Ronald Reagan. He once undercut the Soviet empire by persuading Saudi Arabia to ramp up oil production to drive down prices. The move worked, and made then-barely developed Soviet energy too costly to produce, ending the streams of hard currency that propped up the USSR.
The U.S.-Brazil pact may be signed within a year. Though ethanol is a small player in the world energy scene, and both the U.S. and Brazil get most of their energy from oil, the two countries together produce 70% of the world’s ethanol and could create a market.
This alliance pools technical know-how and encourages the production and marketing of better products in both countries. Brazil isn’t going to become ethanol’s answer to Saudi Arabia. But along with other energy diversification measures, more ethanol will give consumers more choices. That’s all bad news for Hugo Chavez, who favors state monopolies, high prices and tight supply.
Energy independence won’t be accomplished by this development alone, but every little bit helps. And the deal could have particularly good side effects.
For one, it’s pulling Brazil outside its shell and enticing it to become a world leader. President Luiz Inacio Lula da Silva is determined to double ethanol exports by 2010 to expand Brazil’s economy and global presence. He’s already signed pacts to supply Sweden and Japan.
Read the entire article.
I can only hope that Lula “sees the light” and leads his country into a free-market, property-rights, rule of law economy. Brazil has the size, the natural resources, and most importantly, the people power to lead Latin America to a bright future. With the right leadership, Brazil can become a world power.
Were Brazil to do so, all the countries in Latin America would follow.
Brazil is the pivotal country, even if Venezuela has the oil.
As a final note, I’d like to give special thanks to AM Mora y Leon for her kind words.
Update: Don’t miss Augusto’s comment re: Brazil.