Juanson World

WASHINGTON , DC—On January 3, crude oil futures broke $100 a barrel for the first time ever. While prices have cooled since then, falling below $90 a barrel on January 16, worldwide demand for oil shows no signs of abating. Although high oil prices have led to soaring government revenues for the main oil-producing countries in Latin America, continued high prices will affect each country differently. The main factor is the behavior of national oil companies.

Mexico will not stand to take advantage of the boom in oil prices. Increased oil revenues, which represent 35 percent of public spending, helped Mexico grow 3.5 percent in 2007, the highest rate since 1989. Nevertheless, Pemex, the state oil monopoly, is in dire financial and technological straits. Production is declining and may have already peaked, due to a lack of investment and exploration. Some analysts predict that Mexico might become a net oil importer in 10 years. Opening up the oil sector to foreign companies requires a change in the Constitution—a daunting political fight on the immediate horizon for President Felipe Calderon.

Despite claims to the contrary, Venezuela's PDVSA has also seen a fall in output. On January 7, El Universal reported that in 2007 oil production was 680,000 barrels per day (bpd) lower than the goal set by PDVSA's 2012 strategic plan, and 430,000 bpd lower than the 2007 national budget estimate. High oil prices have fueled President Hugo Chavez's domestic and international spending sprees, but increased spending will become unsustainable should prices fall, as no significant new oil reserves have been discovered. The likelihood of such discoveries has declined as Chavez has nationalized projects owned by foreign oil companies. While increased oil revenues led to 8.4 percent growth last year, inflation was 22.5 percent, the highest in the region.

Pemex and PDVSA might serve to learn from Brazil's Petrobras, which recently set a daily production record of just over 2 million barrels. Two reasons explain Petrobras' higher oil output. In 1997, Petrobras opened exploration and production to competition from outside companies. Since 2000, it has sold shares in the New York and Sao Paulo stock markets. Today, about 60 percent of total equity belongs to outside shareholders. The company has developed technological expertise in deepwater drilling. The Tupi deepwater field, discovered in November, is estimated to hold between five and eight billion barrels, representing the world's biggest oil find in the last eight years.

On January 14, Calderon, Chavez, and Brazilian President Luiz Inacio Lula da Silva met in Guatemala City at the inauguration of Guatemalan President Alvaro Colom. "One day, oil is going to run out," said Chavez. "We were talking ... looking for a way to become partners, to form an alliance ... to create new ways of cooperating to increase reserves." Chavez's moment of prescience aside, cooperation will not be enough to weather a potential fiscal crisis—with implications for the regional economy—should prices fall without needed reforms in Mexico and Venezuela.

# posted by Juanson : 6:28 AM  41 comments

1. Aiming for a New Pittsburgh, and Falling Short – New York Times
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6. Latin America Agenda – Financial Times
7. Chavez Deepens Petrocaribe Oil Pledges – AP
8. ‘Stolen’ Guatemalan Children Found – BBC
9. The Free-Trade Divide (Broder) – Washington Post

# posted by Juanson : 10:19 AM  41 comments

Government prosecutors are seeking to close the Congonhas airport in Sao Paulo. New York Times

Cristina Fernandez de Kirchner announced her presidential bid. McLatchy

Fernandez announced that she would continue the economic policies of her husband’s government were she to be elected president. Financial Times

Bolivia signed a deal for the largest foreign investment ever in the country, a $2.1 billion deal with Indian company Jindal Steel and Power. Financial Times

Fidel Castro is visible, but Raul Castro is still firmly in control of Cuba. Financial Times

El Nuevo Herald speculates whether Venevisión owner Gustavo Cisneros and Venzeulan president Hugo Chavez cut a deal back in 2004. El Nuevo Herald

# posted by Juanson : 5:45 PM  41 comments

Sergio Fajardo has revitalized Medellin as mayor through various construction projects and increase in funding for education. New York Times

Corruption cases have been prosecuted in Brazil, whereas in the past they may have been swept under the rug. Washington Post

Forty percent of the economy of Opopeo, Mexico is supported by remittances. Miami Herald

Community councils in Venezuela are part of president Hugo Chavez’s 21^st century socialism. Miami Herald

Andres Oppenheimer argues that a higher ranking Spanish official should have met with Cuba’s dissidents during a Spanish delegation visit in April. Miami Herald

Santo Domingo’s poorest residents are fighting to save the city’s trees. LA Times

Bolivian president Evo Morales aims to increase legal industrial production of coca products while eliminating illegal cocaine production. LA Times

Panama’s vice president Samuel Lewis called for the US to ratify the FTA with Panama. Financial Times

Brazil has requested the extradition of Russian Boris Berezovsky for money laundering; Argentina continues to face energy shortages; RCTV is back in Venezuela on satellite; and further tapes have been revealed in Ecuador’s “secret videos” scandal. FT Latin American Agenda

Jose Maria Aznar argues for the ratification of the US-Colombia FTA. Wall Street Journal

Fidel Castro writes in an essay that the US allows terrorist attacks to happen on its own soil. AP

# posted by Juanson : 11:30 AM  41 comments