Tuesday, 17 February 2009

Colombia's Uribe Seeks Brazilian Oil, Milk, Beef Investments. Colombia Seems a Better Client than Ecuador, Venezuela or Bolivia for These Sectors

Uribe officials say his six-year policy of building
investor trust will pay off during the crisis. We will see ...

Colombian President Alvaro Uribe started a two-day visit to Brazil yesterday, courting the São Paulo's industrial elite and urging them to invest in a country where rules for private entrepreneurs hardly change. This is very true, relative to the actions of its neighbours (Venezuela, Ecuador ...) Uribe sat down next to Petrobras President José Sergio Gabrielli at a lunch; he said having Petrobras as partner in the upgrading of the Cartagena refinery would be ''magnificent´´ (see our Earlybird posting today on the exit of Glencore as partner in this venture.) Uribe also urged beef and dairy makers to invest in Colombia -- where installed capacity to process the products in insufficient. Uribe's move is clever, though late. By stopping short of asking the Brazilians for their support on Colombia's fight against narco-terrorism, he seeks to focus on more concrete stuff, with a concrete proposal now that the government is opening the spending faucets as aggressively as ever. The Brazilians may be interested to invest in Colombia, weren't for the crisis has left some of their companies in bad shape. Currently the Votorantim group, Gerdau, Petrobras are some of the large investors working and making good money in Colombia.

Uribe meets Lula today in Brasilia. Truth is, Colombia and Brazil aren't countries whose exports tend to complement. Comparative advantages are hard to find out, but Colombia offers two oceans, a very consistent infrastructure investment programme that is well funded, a growing consumer market (the third most-populated in Latin America) and is a key seller to the U.S. Let's hope the Workers' Party undertakes these talks in a non-ideological mode, that it listens to its business community and defends its interests first before shutting the door on a potential good partner that is more likely to respect private sector interests than the natural allies (Argentina, Bolivia, Ecuador, Venezuela, among others.) Let's put it clear-cut: Lula, just keep Marco Aurelio García, your top international aide, away from these negotiations with Uribe.

Earlybird, Feb. 17, 2009

These are the headlines:

ECUADOR -- Ecuador Ceases Interest Payments on 2030 Bond (click here for link to Comercio story): The Rafael Correa administration decided not to make a $135 million coupon payment on the bonds, alleging these are part of an ''illegal´´ issuance. The worst part of this is that one cabinet minister, Diego Borja, threatened to sue bondholders, God only knows why. The real reason, please read the story's last two graphs, is liquidity. The illegality is refusing to pay because you have no money, not because your clients have alleged counterfeit products of yours ...

ECUADOR -- Viteri Quits Finance Ministry; No Changes in Policy Expected (click here for link to Telegrafo story): Maria Elsa Viteri, the finance minister of the Correa government, tendered her resignation after assuming full responsibility for an accusation made by her office that a group of professors earned salaries close to $9,000 a month -- the teachers pointed at by Viteri aren't precisely the staunchest Correa supporters. The reason seems quite innocent, and it wouldn't be surprising that Viteri and her team are departing as a result of the very challenging policy moment. Viteri probably chickened out and wanted out before the scenario of shrinking fiscal revenues and economic downturn deteriorates even further. The need for a tough policy correction is growing, and it seems that the government's stance on things will remain unaltered. Policy options, thanks to Correa's recent radicalisation, are turning scarce. The stance towards bondholders and the default will stay the same (it seems to be something already decided between Correa, his Rasputin and Interior Minister Ricardo Patiño, and the Economic Affairs Councilor Borja.)

COLOMBIA -- Glencore to Exit Cartagena Refinery Expansion Plan, Problem for Colombia (click here for link to Portafolio story): Glencore might exit the refinery for something close to $200 million, according to Portafolio. President Alvaro Uribe threatened to cancel all Glencore contracts in the country unless the Swiss company made good on promises to pay its part for a $3 billion upgrading of the Cartagena refinery -- the most ambitious infrastructure project in Colombia's oil sector. Glencore alleged that access to new funds has been restricted in the light of the current financial crisis. Now Colombia will have to look for another partner. This event deals a setback for Uribe, who is seeking the execution of $20 billion in infrastructure projects to weather the financial crisis.

COLOMBIA -- Macquarie Bank, Ashmore, Inverlink Said to Be Chosen to Manage $500 Million Infrastructure Fund (click here for link to Portafolio story): The $500 million fund created by the CAF, the IADB and the Colombian government to help finance infrastructure will have these three managers. The formal announcement about the fund's structure and focus should come in a few days, ahead of the IADB meetings in Medellín, Colombia, scheduled for the end of March, government sources told this blog.

BRAZIL -- Government Offers Credit to Argentina, Seeks to Fend Off Attempt to Block Brazilian Exports (click here for link to Estado story): A story that never ends. The external policy of the Workers' Party administration is privileging political criteria over commercial sense. Using the same mechanism that failed in Ecuador (the excuse of providing Brazilian companies with loans for investments in a foreign nation) the Luiz Inácio Lula da Silva administration is seeking to trump Cristina Fernández's growing protectionism. The scheme includes the use of Treasury (Brazilian taxpayer money) to finance shipping of Argentine goods into Brazil. Or somewhere else. The problem is not the planned measures in the end, but the lack of transparency of the policy elements involved. Lula does whatever he wants with the money of taxpayers -- and no one says a word.

MARKETS -- U.S. Offers $4 Billion in Additional Aid to General Motors (click here for link to Reuters story): The news are unlikely to spark a recovery in global stock prices. Analysts continue to see the Barack Obama bailout/economic salvage plan incomplete, lacking of the sufficient tools to avert a deeper downturn.