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Chavez And The Diminishing Return - Part One
Since coming to power in 1998, Hugo Chavez of Venezuela has not only transformed the political landscape of his own country and influenced the populist movement of South America, but he has also dramatically impacted investment and its outlook. Chavez’s power base has made the prospect of investing (and even preserving) money in Venezuela a complicated affair, and unfortunately it is becoming an increasingly difficult riddle. Chavez during the height of the boom in oil prices found himself in a politically powerful and cash-rich position, able to spend money for pet projects and military rather carelessly. However, because of the global downturn and retrenchment in oil prices, Venezuela finds itself with a sinking economy that is cash strained. The Bolivar is losing value and its bonds ratings are suffering internationally.
Chinese Boycott of Argentina Soybean Oil
In early April China’s Ministry of Commerce banned imports of soybean oil from Argentina as a part of a wider trade dispute. The dispute initially stemmed from Argentina’s move to place a trade barrier on imports from China, which then spiraled into China taking retaliatory measures, including the boycott of Argentina soybean oil. According to a report from an Argentine newspaper (Ambito) dated April 6, Chinese Ambassador to Argentina, Gang Zeng stressed that the dispute was not a commercial or political retaliation, but due to the low-quality of Argentine’s soybean oil. China Daily, in an article dated April 7 also echoed the same reason.
Symbiotic China – Argentina Relation:
Argentina is the largest exporter of soybean oil with a dominant 50% share of global exports. China on the other hand is the largest importer of vegetable oils. In Sept/Oct 2009, China imported 10.5mn tons of oil and fats, or 34% of its total consumption, out of which soybean oil imports were 2.5mn tons. We estimate approximately 70% of China’s soybean oil imports come from Argentina, placing China as an important source of export for the Latin American nation.
Chinese Brazilian Trade Ties Continue to Grow
In April, China and Brazil signed various trade agreements with the objective of boosting two-way trade between the two countries. In particular Presidents Hu and Da Silva signed a 5-year action plan to increase trade and energy cooperation.
Pre-salt: What now?
This event marked an important moment for the Brazilian oil industry, because recent discoveries in the world oil scene have been rare and also because Brazil has always carried the title of eternal latecomer in the race for oil. The Brazilian oil industry was, until then, a classic case of sudden success but with limited potential.
So when their country arrived on the pre-salt scene, Brazilians began to dream of fabulous trajectories of economic development financed by the excessive reserves that surely rested under the water, just waiting to be converted to a new “oil El Dorado.” Brazil would enter the select club of oil exporting countries, and the benefits of being part of this club would be many, including the possibility of obtaining abundant oil rents and participating in OPEC
