Subscribe via email, get all daily posts sent to you next day (and without all the annoying ads)

4/26/08

More Ecuador: To prove I wasn't dreaming this morning, and to show the BS spin Reuters put on this story today

Here's a link to an Ecuador news report on the part of today's radio show Correa dedicated to the mining issues. It gives a much better representation that the spin Reuters is putting on the story. Reuters took a small issue and turned it into the headline, presumably because it was the only thing that could possibly be turned into something negative.

Because it reflects Correa's words far more faithfully, here's my translation of the confirmado dot net story linked above. As usual, I'm happy with both my level of Spanish and this translation, but remember I'm not a sworn translator and you should consider getting a second opinion before making any decisions based on the contained information.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx


"The position of the gov't is "yes" to responsible mining", President Rafael Correa said this Saturday during his radio program transmitted from Zaruma, in the province of El Oro.

The President asked groups that completely reject (mining) activity to suppress their "inflexible positions". On this subject, he asked "In what country in the world is mining prohibited?"

He ratified his joint responsibility along with the Constitutional Assembly for the elaboration of the mining mandate (decree). He stated that they were strong measures that have been established, but that they were necessary. He reminded those present that the Assembly has granted a 180 day term to produce a new mining law with "concessions granted in a technical and rational way."

He explained that by the term "responsible mining" he means negotiating contracts that benefit all concerned, that is to say "royalties are paid to the owner of the resource (the State), protecting the environment and allowing the participation of the communities that live in the zones where the activities are realized."

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

That last part is a direct Correa quote, and makes it look very different. As I wrote earlier, the whole Correa radio section on mining this morning sounded very positive for the industry in Ecuador. So shove that up your editorial control, Reuters. As mentioned before, it's your responsibility to report the facts as stands, and not cherrypick the facts you want and then spin them whichever way you want. You can smell the BS from here.

Correa tells Ecuador: We welcome foreign investment

Nearly every Saturday, President Correa addresses Ecuador in a regular radio slot. In today's version, the subjects covered (as always) were wide and varied, but one was the mining sector. So let's make it 100% clear as to what he said when talking about mining:

"Damos la bienvenida a la inversión extranjera" were his EXACT words today. This translates as:

"We welcome foreign investment".

How do you like your political messages? Wrapped up in subtle nuances, or absolutely direct and to the point like this one? I like straight talk, personally. So far this week, we've had Correa telling miners they're welcome here, and the mining mandate was a necessary evil to straighten out the crazy legal situation of the sector. Now I disagree with that view on the need for the stop work mandate, but hey....I'm not the Prez.

Today Correa told his own people exactly the same thing. This is not some double-talk for miners only.

Got ARU?

UPDATE 3:36PM: As I heard the news on the radio, there weren't any links to provide. Now there is, and here's the Reuters version of the story. But I really wonder if I was listening to the same radio show, cos Reuters has decided to headline its piece with "Ecuador wants community stakes in mining projects", trying to imply some sort of expropriation. What total bullshit! There are a thousand ways that locals can take a piece of a local project; for one thing they can buy the company's stock!! For another, the company can float new shares for those who want them. then there's the whole issue of taxation, and the royalty payments, and the worker's participation profits.

The big news ...the major mining message in Correa's address was clearly
"We welcome foreign investment". That was 100% obvious to anyone listening, but Reuters filters this news, decides on what it thinks is worthy news for the English-speaking world and shuffles the real headline to the bottom of its report, as if it weren't important.

Message to reporters:
REPORT THE FACTS, NOT WHAT YOU THINK.


sneakydeaky quiztime (VII)

Throw Momma From a Train.......it's............

click to enlarge (worth it)

SNEAKYDEAKY QUIZTIME VII

Yes indeed, that moment in your weekend when you kick back, relax and ponder over some of the more salient issues in Latin America. This week we're going for the "sublime-to-ridiculous" technique, as it's all about the big guys and what Otto thinks of them.

Here are your destructions: Listed are ten (YES TEN!) famous dudes and dudettes from the world of LatAm politics. Then there are ten nicknames that your humble Otto uses to describe them. Your job is simple WHICH PERSON FOR WHICH MONIKER?

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Here are the people
(in alphabetical order)


Alan Garcia (Prez Peru)

Alvaro Uribe (Prez Col)

Cristina Fernandez de Kirchner (Prez Arg)

Edualdo Duhalde (Ex Prez Arg)

Evo Morales (Prez Bolivia)

Fernando Lugo (prez in waiting, Paraguay)

Hugo Chavez (Prez Ven)

Lula da Silva (Prez Braz)

Nestor Kirchner (Ex Prez Arg)

Rafael Correa (Prez Ecu)

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
And here are the nicknames
(also in alphabetical order)

Fernet Branca

Hot Lips

Leviathan

Maradona

Marty Feldman

More Cake

Morticia

Rasputin

Studmuffin

Teddybear

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And what's this week's fabbo prize, you ask? It's as peachy-keen as ever, cos first prize is a month's supply of Peruvian Pisco. By the way, second prize is a year's worth of Chilean Pisco....so I'm sure you'll be keen to get the topspot this week.

Who is who, peeps? Write down which nick for which name, at send 'em in to:

otto.rock1 (AT) gmail (DOT) com.

You've got until Wednesday morning to get those answers in., so until then then, best of luck and.........

Toodle Pip!

4/25/08

Why Martin Lousteau is now out of a job

I'm glad Lousteau is gone, but maybe not for the reason you might suspect. In this post back in March, I pulled him up on what he was doing. He 'd drunk from the poison chalice and was doing exactly what his morally bankrupt masters (namely Nestor Kirchner and entourage) were asking of him. He'd fronted up the new export tax hike on agro produce (soybean, corn, etc) and was busily defending the policy move using all the unjustified bullyboy attack methods of this government.

In that post, i accused him of selling his soul. Well, it looks like he couldn't go the whole hog, because Lousteau decided to go out with a bang, not a whimper. Instead of being used as the scapegoat for the upset caused by the new agro policy, Lousteau finally turned on his masters and forced their hand. He now has the privilege of being thrown out the front door, and being able to shake his fist at them and mutter "Well, at least I tried to warn you assholes."

This afternoon I was sent Lousteau's 12 point plan to combat inflation, that had up 'til now only been circulated inside government circles. I'll paste the whole thing at the bottom of this post (it's in a Word document and in Spanish), but a few of my own comments first.

The 12 point plan has some ideas I personally like (eg1, raising electricity and gas tariffs in such a way to place the burden on the top 40% of earners and leaving the poorest sectors basically untouched, eg2, adjusting bank retentions to promote higher interest rates for time deposits), and it has some ideas I don't like at all (eg continuing with the weak Peso policy), but in the end these are just my personal likes and dislikes and there's not much point in debating on lil' old Otto. What the whole paper does show is a smart guy who knows how to think laterally and look for solutions, even within an apparently tight policy framework....hey...the lad's got brains.

But there were two specific points in his paper that basically meant that Lousteau was giving the finger to his bosses and telling them to go f*** themselves.

Here's the first one translated:

"...Refocussing of the tasks of the Secretary of Interior Commerce. Supermarket profit margins have grown strongly in the last few years. Presently, they are between two and three times greater than in other countries, including those of this region. The Secretary of Commerce should concentrate itself almost exclusively in this matter that is a cause of inflation and directly impacts the consumer capacity of the population...."

The Secretariat of Commerce is run by Lousteau's nemesis......

Lousteau "talking" with Moreno recently...can you feel the love?

.....Guillermo Moreno. Moreno's post is ostensibly inferior to that of Lousteau's but it is common knowledge that Moreno is Nestor's main man and rules the whole gov't roost. Lousteau's suggestion that his direct inferior should stop poking his nose in other affairs and just go and sort out the supermarkets is the equivalent of using a flamethrower in an oil refinery.

The all-powerful Moreno would have gone totally ballistic on reading this, and Lousteau must have known he was signing his own pinkslip when he wrote it. But that's not all, cos here's the other zinging point (in translation), which is about the INDEC gov't statistics office, the body accused of fixing the inflation numbers:

"...Advance with INDEC. At present it is is again quite clear what was discussed in November in respect to the lack of credibility of the INDEC in general and the CPI calculations in particular. This adds to the inflationary dynamic, as there is no objective benchmark and the population makes its own subjective adjustments (replacement pricing, salary demands etc) and with respect to prices the subjective is greater than the reality. This is why there are surveys that indicate people estimating inflation at over 30%. The only way the resolve this is to stop (the INDEC) interventions, put together for INDEC a suitable team and call on a group of experts who use these statistics (academics, economists, financial analysts representatives of consumer associations) who will endorse the work done...."

Again, he might have had the same effect by sticking his finger up Nestor's nose after scratching his own ass first. The whole Neshtor gameplan is to proceed with the outright lie of the INDEC statistics, so Lousteau basically proposed that the gov't admitted to its people that it was a bunch of liars. There is no way Nestor could have stood for this kind of document doing the rounds inside his gov't. Again, Lousteau knew this.

So all in all, Lousteau's last major move was to get himself thrown out of the Kirchner government. GOOD FOR YOU, MARTIN. I'm happy to take back much (not all) I said about you. You sure played along with them for a while, but it's good to see that you've come out of this intact. Time is on your side now, and better things await when this government's economic model drags the whole country down the toilet. They'll come running back to you.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

MEDIDAS ANTI-INFLACIONARIAS

· Ajuste de tarifas de energía eléctrica, gas y un sendero futuro para transporte: este es un elemento estricta justicia distributiva, ya que el interior paga más que la Capital Federal y los estratos más ricos pagan muy poco en energía eléctrica y gas. La re-tarifación tiene que recaer más en los estratos más pudientes: es posible aumentar las tarifas sin tocar a la población pobre y ajustando sólo por inflación a la clase media-baja. El esquema es similar al propuesto hace dos meses y hace recaer lo sustancial en el 10% más rico, y luego en el 30% siguiente. El efecto anti-inflacionario de esta medida es doble, ya que la medida es dejar de hacer transferencias a los consumidores. Por eso, aumenta el superávit y el ahorro nacional y hace que las clases más altas moderen su consumo (que tiene más componentes importados y de servicios suntuarios). Dependiendo de cuánto se aumenten las tarifas, el ahorro fiscal podría rondar los $4500 millones.

· Mantenimiento por unos meses del actual nivel del tipo de cambio, apuntando a no exceder el $3.25-3.30 a fin de año: La competitividad del tipo de cambio es un pilar fundamental del modelo económico. Sin embargo, depreciar más el Peso en estos momentos contribuiría a la inflación por múltiples vías y podría generar desconfianza y hacer que la gente se vuelque hacia el dólar. Si primero no se dan señales de contención de la inflación, todo aumento del dólar generará mayor inflación y erosionará la depreciación (un poco como el efecto de un perro mordiéndose su propia cola). Además, por ahora el Dólar se debilitó contra el resto del mundo, por lo cual también se debilitó el Peso. Hay que guardar el margen para depreciar el Peso para cuando el Dólar revierta su tendencia actual y la inflación haya entrado en un curso descendente.

· Suba diferencial de los encajes: Se trata de una medida para favorecer la extensión del plazo de los depósitos. Lo que se hace es subir en promedio los encajes, pero bajando los de los plazos fijos mientras se suben los de las cuentas a la vista. Esto hará subir la tasa de plazos fijos, generando mayor propensión al ahorro y mejor capacidad de prestar a plazos más largos.

· Coordinación entre el Ministerio de Economía y el BCRA del nivel de esterilización: El BCRA no puede comportarse como si fuera un banco comercial y mirar sólo su balance en lugar de la consistencia de la política monetaria con el objetivo del tipo de cambio real y solvencia del sistema financiero. Si la suba de encajes es sólo para transferir el costo de esterilización del BCRA a los bancos para cumplir con la fantasía de un Programa Monetario, la medida no sirve. Sin embargo, esa ha sido la tendencia del BCRA en los últimos tiempos. Por es, se propone una coordinación de la política de esterilización de manera tal de que las medidas tengan el impacto macroeconómico buscado.

· Eliminación de la exención impositiva a los certificados de participación de los fideicomisos: En este ámbito se está produciendo un claro abuso de la normativa vigente que conduce a elusión. Quienes generan créditos, luego los securitizan y buscan financiamiento. Sin embargo, suelen quedarse con los certificados de participación que están exentos. De esta manera eluden el impuesto a las ganancias generadas por vender artículos en cuotas. Esto está haciendo que las casas de electrodomésticos se transformen cada vez más en negocios financieros que cobran tasas usurarias y tienen sus ganancias exentas. El Decreto para corregir este problema está a la firma, pero es conveniente sacarlo en conjunto con otras medidas.

· Sujeción del gasto en obra pública e infraestructura a lo presupuestado: Los recursos demandados por el Ministerio de Planificación están excediendo largamente lo presupuestado. El impacto inflacionario que el mayor gasto genera tiene un retraso de varios meses en su manifestación explícita. Esto significa que si se limita esta expansión hoy, se hará una contribución significativa a moderar la inflación. Con ésta última ya controlada, puede volverse a un ritmo superior el año que viene. Ello contiene también una lógica política.

· No reabrir las negociaciones salariales ya cerradas este año y cerrar las que restan con una pauta similar: Esto tiene que ocurrir en el marco de una clara señal del Gobierno Nacional en materia de política anti-inflacionaria. Hay que sumar a ello a los sectores productivos, para lo cual puede servir el marco del Acuerdo que se está actualmente trabajando.

· Refocalización de las tareas de la Secretaría de Comercio Interior: Los márgenes de los supermercados crecieron muy fuertemente en los últimos años. En la actualidad, son entre dos y tres veces superiores a los de otros países, incluidos los de la región. La Secretaría de Comercio debería concentrarse casi con exclusividad en este tema que alienta la inflación e impacta directamente en la capacidad de consumo de la gente.

· Acuerdo de márgenes para los productos de la mesa familiar: el modo más efectivo de mantener el poder de compra de alimentos por parte de la gente, que es donde la inflación se siente más, es cerrar un acuerdo de fuerte reducción de márgenes de los mismos con los supermercados. Hay que actuar con Defensa de la Competencia para controlar que no esté habiendo abusos y también cerrar con los productores, que en muchos casos etiquetan directamente los productos para los supermercados. Adicionalmente, el propio Estado podría para una canasta específica y con los comercios y productores que se adhieran comprar una cierta cantidad adicional a la que compra el centro de venta contra el compromiso de precio del total vendido de esos productos. De estas dos maneras se garantiza a las familias el acceso de todos los productos que constituyen la mesa diaria familiar.

· Actualización del estudio de la Comisión Nacional de Defensa de la Competencia del nivel de concentración y abuso de mercado existente en los quince principales sectores de insumos industriales: La comercialización de estos insumos (entre los que se cuentan el acero, el aluminio, el cemento, el vidrio, la química básica, el petróleo, los envases de hojalata, los cables, etc.), donde el poder de mercado es grande, es fundamental para la construcción de los precios de un amplísimo sector de la economía. En 1997 se realizó un estudio muy amplio, que es necesario actualizar para analizar posibles cursos de acción.

· A vanzar con el INDEC: A esta altura vuelve a quedar claro lo que se discutía en noviembre con respecto a la falta de credibilidad del INDEC en general y del IPC en particular. Esto está agravando la dinámica inflacionaria, ya que al no haber pauta objetiva, la gente ajusta subjetivamente (su precio de reposición, su demanda salarial, etc) y en lo que respecta a precios siempre lo subjetivo supera la realidad. Así es como hay encuestas que indican que la gente estima la inflación en más del 30%. La única manera de resolver esto es terminar con la intervención, poner a cargo del INDEC un equipo idóneo y convocar un grupo de expertos que sean usuarios de las estadísticas (académicos, economistas, analistas del sistema financiero, representantes de las asociaciones de consumidores) que den su aval al trabajo que se haga.

· Club de París: Esto no tiene que ver estrictamente con la inflación, pero constituiría una señal importante para regenerar la confianza. Ya se tiene una propuesta informal para el Club que aguarda la aprobación de la Presidenta, con un plazo de 8 años y tres de gracia. EEUU está dispuesto a apoyar oficialmente la postura argentina de que el arreglo no involucre al FMI y hasta viajaría gente del Tesoro a nuestro país como señal. El FMI también mostró su disposición a mantenerse al margen. Están aguardando que nosotros enviemos la propuesta.

Some investment advice: how to use this blog to make good money

Just remember that my calls are damn good but my timing sometimes sucks

Signed: Otto Rock

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Aurelian and Other Mining Companies Meet With President Correa and Top Officials; Correa Says Responsible Mining Will Go Ahead in Ecuador
Friday April 25, 8:30 am ET

TORONTO, ONTARIO--(Marketwire - April 25, 2008) - Aurelian Resources Inc. (TSX:ARU - News), today announced that the company and seven other mining companies (Cornerstone Capital Resources, Corriente Resources, Dynasty Metals & Mining, Ecometals Limited, IAMGOLD, International Minerals and Salazar Resources) collectively met with President Correa and other top officials yesterday afternoon in Quito to discuss the future of mining in Ecuador and the impact of the previously announced Mining Mandate.

The companies welcomed President Correa's repeated statements that responsible mining will go ahead in Ecuador. He said that the purpose of the Mining Mandate was to allow the government time to draft and implement a new mining law so that responsible mining can proceed. The President invited the mining companies to meet with the ministry to help formulate the new mining law starting this coming Monday, April 28.

4/24/08

Carlos Fernández replaces Lousteau as Argentine Finance Minister

The new Argentina Finance Minister,
Carlos Fernández.....better haircut


The Fernández dude is a bit of a surprise, with my best guess of Redrado not getting the job (maybe not wanting it...i dunno).

Fernández was the head dude (known as interventor) of the AFIP tax office. He was only top dog there for a little over a month, so this all seems a bit slapdash and improvised to this little Otto.

Previously, Fernández was also in the Economy ministry in the Nestor gov't with brief to look after provincial matters. He's a big supporter of Alberto Fernández (no relation), Cristina's cabinet chief, which is interesting because Alberto was rumoured to be on the way out. This is a clear support signal for Alberto. Carlos Fernandez also has a fair working relationship with Guillermo Moreno, the main Nestor man in government, and this was probably the reason why he got the job.

Cristina is for show....Nestor is still king. Keep that clear.

So a Carlos Finance minister basically means another Neshtor lapdog in for show. The ridiculous weak peso policy will continue and inflation will import Argentina to hell in the next 12 months. Sad to see such a wonderful country ruled by such idiots.

Martin Lousteau Resigns, surprises nobody who reads inca kola news.

In a non-shocking move, the ex-worst finance minister in Latin America has decided to voluntarily resign from his post after being told to resign immediately by Nestor Kirchner.

Expect the next dude in to have a better haircut but have the same first name.

Alvaro "mysterious past" Uribe versus Rafael "Studmuffin" Correa. Ready to rumble, girls?


No more pussyfooting around, no more forced smiles and handshakes at regional meetings, no more pretending to get on with the neighbours for the sake of the region. It's handbags at dawn ladies....two LatAm presidents are gettin' bitchy on us, and just for a change neither is called "Chávez".

Rafa spots a piece of spinach between Álvaro's front teeth

Let's start with the Rafa "Studmuffin" Correa, and a little interview he gave to Spanish magazine 'Publico' earlier this week. Why this gem hasn't been picked up by the English-speaking press is quite beyond me, cos it's the hottest interview with a Prez I've read in ages and forevers. It was even translated into English by this blogsite (and it's a very good and faithful translation, by the way) for the lazy reporters, but it seems to have been swept under the carpet. A pity, cos the world would enjoy some of the choice phrases Studmuffin uses about Uribe:

"...Uribe’s government is completely discredited...." (not bad, but that's just for warm-ups)

"...It’s true that in the European Union as much as the United States, the backing of (Uribe's) lies by some powerful media has harmed us..."

"...We know with whom we are dealing; with a militaristic country, with a president who has an imperfect past, with enormous support from foreign intelligence agencies and with an impressive propaganda machine...."

So far so good, but then Rafa really gets into his stride with;

"....He’s like the little emperor who follows his boss’s dictates...."

"....Peace is not convenient for Uribe because fighting guerrillas gives the Colombian electorate a secure feeling......Uribe doesn’t want peace, nor does he want hostages released, because Betancourt is a potential presidential candidate......"

"...Uribe has always shown a lack of respect toward Ecuador...."

Then comes the detailed attack:

"....Uribe has tried to involve us, not only my government, but also the Armed Forces, as supporters of the FARC. Later he alleged that my presidential campaign had been financed by the guerrillas. It’s disgraceful. Where does this gentleman get off, after having violating every international law, accusing us of support for guerrilla groups whose actions we’ve said a thousand times we reject; it’s insulting. That’s why I told him to look at my hands. Just to highlight the contradiction with Uribe’s position, which has been so scandalously related to drug trafficking. His warmongering policy is not going to end the conflict, instead it will exacerbate it and he’s going to leave thousands dead as a result. My hands are clean and bloodless. That’s something Uribe cannot say...."

And as a finale, back to the direct personal insults

"...Just when relations improve with him, something strange happens and you get stabbed in the back. Something in his head’s not working right...."

"....His behavior is terribly psychotic....."

"....we have 11,000 men deployed which costs the state coffers around $100 million annually. Last year 13 soldiers died in a war that is not ours and on top of that we have to swallow the insolence of Álvaro Uribe Vélez...."

And there are plenty more zingers in the full interview (and here's the same link to the English translation again, now I've got your attention).

In another TV interview this week, another thing that Correa said was that Ecuador would recognize the FARC as a belligerent group* as long as the FARC stopped doing the badboy stuff like kidnapping, holding civilian hostages, dealing drugs and shit like that.

This gave Alvaro "Mysterious Past" Uribe, his chance to get back (it seemed to him at least). So the dude got himself a slot on the radio and came back at Rafa with his own shots, including

"...In a democracy, you can't give belligerent group to a violent group....a terrorist group..."

"...don't even dream (they'll get such a status)..."

"...(this is) an outrage against democracy..."

"...I'm not here as President of the Republic for cocktail parties and international rules of courtesy..."

"...they can forget about removing us from our path to finish with these terrorists..."

".... (Colombia must) close ranks to defend democracy, and avoid these attacks against democracy..."

And other such pearls. Here's an English report on it, but catch Spanish ones like this one for a better idea. So Colombia has now prepared an official diplomatic complaint against Correa's thoughts on the FARC that it will deliver to the necessary flunkies in the near future, but meanwhile Ecuador has come out with a "the Colombian dudes are twisting it all" kinda statement today, which points out that Studmuffin would only give FARC warring status if a whole range of criteria were met, like Geneva convention, stop bombing people etc etc (see above)

All very diplomatic from Ecuador, which is a big jump from the serious slagging Correa gave his opposite number a few days ago. My ears are still ringing from that interview, so what Mysterious Past must be thinking is beyond me, especially if Rafa is right about the psychosis.

Expect this one to run a while longer, yeah?


*The precise Spanish is "fuerza beligerante", which is kinda tough to translate but basically recognizes the FARC as a warring entity and not a band of terrorists

Some Ecuador scuttlebutt that's worth passing on

In Latam there are rumours and there are rumours, and if I had a dollar for every rumour (etc etc)..............But this one is quite interesting and it passes the major tests for scuttlebutt

1) The source is not a BS merchant (and no, i'm not telling you)

2) It's logical

3) It's relevant

......so i'm gonna take a flyer and share it.

It concerns the concessions that are getting taken back by the gov't (again, theoretically....for argument's sake here we're going to follow the gov't line and ignore the legal minefield they've set themselves) and goes like this:

Word from the Ministry of Mines and Petroleum is that once the 3000+ fallow concessions are gathered back in, the government will put them up for tender. But the obvious question here is "Who in their right mind will buy a concession from a gov't they can't trust to honour a deal?" I mean, would a newbie want to come in on a concession after the stunt Ecuador has just pulled on the serious foreign mining companies? This offer is shaping up to be the "lobster thermidor in bar mitzvah" variety.

Well, this has finally occurred to the bright sparks in the Ecuador gov't, especially the Ministry of Mines and Petroleum (who are spitting mad at Acosta's Assembly, by the way). And the answer they've recently....like really recently...come up with is to re-sell the concessions to the same mining companies that lost them. Of course, they'll be going up as public tender, but "preference"* will be given to the ex-holders. This serves three purposes:

1) It backs up the support the Presidential executive wants to show the mining sector (please don't confuse the Presidency right now with the attitude of the Constitutional Assembly)
2) If the gov't lays on the guarantees to the miners, it guarantees buyers for the concessions held by the large miners.
3) The Ecuador gov't gets a revenue result that it can show to its people, thus justifying its manoeuvres.

The bottom line is that Ecuador will get money for its "serious" concessions, and all those silly concessions that included town squares and churches never see the light of day again. The miners get back what was rightfully theirs, and also they are going to have to get love from the gov't before opening the purse strings, so we can also expect some concrete pro-mining statements from out of Ecuador on the back of all this.

Assuming, of course, my juice is good. I think it is.

*please note the italics and the speech marks.

Spooky Development: IMF Friendly & Approachable to LatAm

Hooda thunkit, homie?

Anoop wears his hair in a different way

Remember that know-it-all arrogant attitude that the IMF paraded around in the late 90s and early 00s? The bit where they declared on which LatAm country was good and which was bad? The way they gave advice, then said "Not our fault" when it all went wrong? Well maybe the act of being unceremoniously chucked out of the region might have finally made an impression on the guys in suits. Today, Anoop Singh........

Anoop Dogg meets his adoring fans

Anoop caught on camera as he mulls
over
dark matter economics theory

......wrote a post in RGE Monitor's Latin American blog. Now you may know Anoop for his music, but he's also the Western Hemisphere Department of the IMF which basically means he be head honcho for this neck of the woods. This discerning Otto thoroughly recommends his essay and urges you to read it (linked right here dude). Two good reasons for this:

1) It's not too technical in nature and approachable for the non-economist (ie no funny words, no squiggly symbols, minimal blinding by science)

2) For the first time since I dunno when, I'm actually reading an IMF dude and thinking, "Yeah, he's right.......good attitude.......yup, that's true.......you've got a point there, dude...." etc etc etc.

Highlights include:
  • LatAm is doing better than most people expected
  • This is not just due to good luck in commods prices, but smarter gov't policies
  • Although Snoop thankfully didn't mention the horrid word, there's a certain amount of decoupling going on
  • Some places are doing better than others, nobody's doing really badly, but the better gov'ts are now investing in infrastructure
  • Structurally, LatAm is better equipped than ever to see out a rough moment in world economics
  • Better social spending programs are needed (Man, my mouth dropped open on that one. Hearing an IMF biggie say "take that money and spend it on the poor" was so cool)
  • He even hinted (though didn't actually come out and say) that central bank intervention isn't such a bad idea at this time*
He outlined the risks that the region faces, too (commods prices might drop...duh) and recommends something called "counter cyclical policy" (speciality of Chile...don't worry 'bout it too much....it's just a fancy econ-way of saying "save for a rainy day") but his conclusion just about catches the general mildly optimistic feel of the note:

"....our assessment is that with policy makers focused on safeguarding the gains of recent years, Latin America can remain much more resilient to the current global slowdown than in the past...."

And that's as close as you'll ever get to hearing the IMF say "you're doing fine without us". But perhaps the coolest thing of all is the whole idea that the main IMF man for the region is making the effort to write on a popular blog. This guy is actually coming out of the stuffy meetings and getting it on with us mere mortals, so for both the message and the manner, the Singh dude deserves serious kudos.

So no more joking and puerile mis-spelling of names. This guy in the photo here is Anoop Singh of the IMF, and he did good today. And if that's confused you cos you expect Otto to automatically slag off any member of the establishment and only cheer for the marginals, then tough titty to you and feel confused. Credit where credit is due. Now go read his note.

Ok...Ok...Anoop Singh of the IMF

*The precise phrase; "...Recent inflationary pressures constitute an important test of the autonomy of central banks in curbing the second round effects of food prices on inflation, and reining in very rapid recent credit growth. Their efforts need to be supported with flexibility in other aspects of the macroeconomic policy mix, especially exchange rate and fiscal policies..."

4/23/08

It's even beginning to get through to the locals


Left caption: "Hello? Mingo*? Fernando speaking. I need you to do me a favour."
Right caption: "Hello? Roberto**? Cristina speaking. I need you to do me a favour."

The above cartoon comes from the blogsite of Dr. Lecter, a dude who puts these things together on all things Argentina. It's worth going to his site just to see his wonderful version of 'The Last Supper'.

Otto sez: That Lousteau is on the way out is no shocker. That Lavagna comes back wouldn't surprise many, either. But keep one thing clear: whoever gets to sit in the comfy office, the real Argentine Finance Minister will still be this guy:



*Domingo Cavallo, bi-polar ex-econ minister who was brought back in 2001 to avoid a crisis. He failed.

** Roberto Lavagna, soporific ex-econ minister who solved the shitstorm caused by Mingo.

Definition of Capitalism: An inefficient and outdated way of getting rich

The politics sucked, the artwork was magical

It's a very cool time to be a middle-class Venezuelan dude. A little list as to why:

1) You can walk into the local Mercal store* and pay 30% less just like them proles do
2) There's the world's greatest selection of 18 year old single malt scotch whiskies on offer for your discerning palate.
3) You can spend your dollar salary on a brand new 4x4 and then pay about a squillionth of a dollar for the fuel to keep it running.
4) You get The Simpsons on cable TV at any time you want (and your favourite Fox News, too....I mean...that Cisneros channel just isn't the same these days, and you never really watched RCTV anyway, did you?).
5) Your standard of living is higher and inflation lower than it was under the previous administration**.
6) But the big bonus is you get to bitterly complain about your President at cocktail parties*** and everyone agrees with you!

But your caring "Fatherland, Socialism or Death" government still thinks you're being hard done by, so this week it has arranged to GIVE YOU FREE MONEY! In the latest cool deal, it is emitting U$3Bn in dollar bonds that you can buy with your funny little VEFs (strong Bolivar currency) and then do what you want with them. Here's a link in English.

And here's how the deal breaks down:

1) You sign up for the minimum buy of U$4,000 dollars' worth of bonds (or more if you're "friends" with the bank manager).

2) The offer price is at 115%, meaning you pay U$115 for every U$100 worth of paper.

3) You pay for the bonds with VEFs at the official exchange rate of 2.15 = U$1

4) So for U$4,000 of bonds, you pay 2.15 X 4,000 X 1.15 = VEF9,890

Then when you get your bonds, you can sell them next day at the parallel exchange rate, currently standing at 3.40 = U$1

U$4,000 X 3.4 = VEF13,600

Or in other words, you make VEF3,710. That's a 37.5% profit on U$4k.....handy, no? So we can expect this latest bonds issue to be oversubscribed about a thousandfold, the banks will make their normal killing, and once it's over the VEF parallel rate will spring back a bit...maybe to 3.6 or so. Here's a chart that shows what the parallel rate has done so far this year....

click to enlarge

....now that's an impressive recovery, and all thanks to a caring government handing over the oil revenues to the middle class and their bankers, rather than storing them into the state reserves.

But however this bonds thing finally goes down, the result will be that people with money make more money. And remember, if poor little rich guy on the street can make a good profit on U$4,000 of starting collateral, just think what the guys who organize the bonds emissions make.

What? Did you really think 21st Century Socialism was the same as that boring, grey, poverty stricken, drudgy, 20th century Soviet version? Who told you that?


*Well, what I really mean is "get your housemaid to walk into the ............"
**Undisputed facts that are rarely mentioned by the opposition. I wonder why.
***My mojito is better than your mojito

sneakydeaky quiztime (VI): the answers

click to enlarge (worth it)

Wowsers, the response was gooooooooood this week. For the first time we got into contestant double figures, which really wholly and truly rocks my world, dudes. If this carries on I'm gonna have to hire a secretary (aka ask the wife to help out).

Okey dokey, here come the all important answers (Spanish translation: "answeros"), and to make it interesting, I'm going to use a few of the answers sent in by you guys, cos you guys rock.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 1) In what year did Francisco Pizarro found Lima?

The answer is 1535. Inca Atahualpa apparently wet himself laughing when he heard where Pizarro had chosen for his capital, saying between guffaws that they'd all die of pneumonia if they live there. So Pizarro killed him.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
2) Name the only three LatAm countries to have won the World Cup of football.

The answer: Uruguay, Brazil and Argentina

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
3) How many times in total have those three teams won the World Cup of football?

In total, 9 times. 5 Brazil, 2 Argentina*, 2 Uruguay. One contestant expressed amazement that Uruguay beat Brazil in the 1950 final in Brazil. Don't worry, Brazilians still can't believe it either, and whenever a Uruguayan meets a Brazilian for the first time you can still expect the word "Maracanazo" to come up in the first 3 minutes of conversation.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
4) In what year and where did Simon Bolivar die?

I'll leave this one to Carlos G: "........Simón José Antonio de la Santísima Trinidad Bolívar Palacios y Blanco dies in 1830 in Santa Marta Colombia. Why did Latin (or is it Catholic?) people stop giving themselves such glorious names?? I feel short-changed in that I only have two......"

Damn right about the name thing, Carlos.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
5) Which country was the original "banana republic", and how did the name originate?

Most of you got this one right, but let's quote my brother on his answer, cos it's succinct and spot on (and my brother rules):

"......Honduras, due to the influence of the united fruit company who deposed a president and installed their own......"

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
6) Who first said, "I will return, and I will be millions"?

And to everyone who answered "Eva Peron"...WRONG! The answer is Tupac Amaru II, the Peruvian insurgent who nearly toppled Spanish rule in 1581 and was hung, drawn and quartered for trying. They were his last words. Evita is a copycat.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
7) Who is Latin America's longest ever serving President?

Answer: Fidel Castro. 49 years is tough to beat.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
8) In what year did the first ship pass through the entirety of the Panama canal?

The answer is 1914.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
9) What type of sentence is "A man, a plan, a canal; Panama"?

Joe and Frank were the only dudes to nail this one. The answer is a palindrome. And when you carry around a name like "Otto", you learn a deep understanding of things that read the same backwards.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
10) Which Latin American city is generally recognized as having created the world's first interconnecting bus route system?

The answer: Buenos Aires, Argentina. They sure love their "bondis" down there, too. Gotta say it really is an excellent system. You can go from point A to point B anywhere you like in a city of 14 million people with maximum one change of bus.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And so ends this week's quiz. All that's left to reveal is the name of this week's winner, who gets the tour of a gold mine in Venezuela as prize. The lucky chappy is CARLOS G, who scored a whoopy doopy 7/10. There was in fact a tie for first at 7/10, but Carlos gave better answers so I'm calling him the winner.....And it's my blog....so tough.

Soooooooooooooooooooooooooooo.....hope you'll join me again on Saturday for the next edition of da quiz. Until then:

Toodle Pip!


*will be three by the end of the year 2010

4/22/08

For true Peru juice, Schuldt is the main man

And you think I write weird?

Here is the link to Peruvian Economics Professor Jürgen Schuldt's most excellent blog, Memorias de Gregorio Samsa*, and if you'd heeded his smart words last week you may well have made a killing in the markets yesterday. In the post ¡Controles radicales de capitales golondrinos en el Peru! you would have learned that the Peruvian Nuevo Sol (PEN) was about to take a serious dive. And there's no excuse for not speaking Spanish cos the Schuldt dude also published the note in English right here. As this excerpt illustrates, Schuldt took you by the hand and gently pointed to where the PEN was headed in the near future:

"...As from May, when the new BCRP measured is applied, somewhere between U$900m and U$1200 would have already left the big Lima casino. There will not be many dollars coming in as replacements, either, because the outward flow of currency has already caused the Sol to devalue somewhat (to the relief of ADEX, the association of exporters). The phenomenon will added to, because the monthly capital flow of currency to pay for imports will be greater than the revenues from exports..."

So guess what happened on Monday? Yup, the PEN was dumped on from a great height as reported here by Bloomberg:

April 21 (Bloomberg) -- Peru's sol had its biggest decline in 13 years as the central bank's move to triple the reserve requirement on foreigners' deposits in local banks prompted investors to pull their money out of the country.

More insight was provided by Reuters today, who quoted central bank grande fromage Velarde (talking about the heavy reserve requirements he put on foreign money) as saying,

"We will not hesitate to raise (the requirements) to 150, 200, 240, 500 700, 1,000 percent -- this is the message,"

...which is a very cool quote, Reuterguys.

So remember, for cutting-edge Peru econ-analysis Schuldt's blog is the place to be. Or if you don't make it that far, you could have just read Otto's take on things:

".....A quick explanation: Y'see, before a foreigner could send U$100 over and put it all in PEN or Peru bonds or time deposit accounts or whatever she or he fancied. They'd make interest on the deposit, then also make money on when he changed his cash back to dollars cos the Sol was rising fast (check that currency chart again). But then in Feb 2008 central the bank slapped a 40% reserve requirement on non-Peruvians, meaning that if you wanted to invest U$100 in soles, you'd have to send U$140 over and the U$40 would just sit there in dollars doing nothing. And now, that requirement is U$120 sitting there doing nothing if you want to invest U$100 in the Peru system. Bye bye hot money, hello sexyworld of capital controls....."

...written on the 12th April. Yeah, you heard it here first...again. Cancel that Stratfor sub, yeah?

*also available in the links section of this blog over there on the right

4/21/08

Dirty Rotten Scoundrels

On the 21st April 2008 (today), Haywood Securities bought 115,300 shares of Aurelian (ARU) at an average price of C$3.49. Haywood sold 30,300 shares of ARU at an average price of C$3.51

A difference of +85,000 shares balance in the house's favour.

Why was Haywood buying shares all day at an average C$3.5 when that same morning, just before the bell, in a trumpeted event that got Canada-wide coverage they called ARU at a target price of C$1.40 per share?

Go on.....have a wild guess.....

When Garcia agrees with Chavez, you know something's up

Image courtesy Ripley's
Believe-It-Or-Not 2008 Annual

Maybe.....just maybe...... Garcia has an eye Chávez's popularity ratings. I dunno, but with Alan currently scoring 26% approval and Chávez on 66.5% (and that's after nearly 10 years at the top), maybe Alan feels just a teensy weensy bit jealous of the big-lipped one.

The subject is food and fuel, and earlier this week Venezuela's Energy Minister Ramirez said it was "criminal" that food was being turned into biofuel while prices for soft commodities were skyrocketing. He said "Look at the effect it has...All countries, and particularly in Latin America, have problems with food stuffs. It is such a bad idea to use foodstuffs for fuel, it is criminal."

All very thrusting for sure. So then Alan piped up, and in this report (typed into the world's information system by the delicate hands of the enchanting Ms. Dana Ford) says, "...It's creating very serious problems for countries that have to import these (food) products. We believe there are alternative energies that do not put the world's food in danger..."

So what's going on with Alan all of a sudden? It's strange how only a few weeks ago the dude was telling us about the Peruvian economic miracle, and how beer was the finest leading indicator possible. I mean, isn't this the country with 11% GDP growth? Suddenly its government is worried sick about not being able to raise money to buy food for its own people?? How bizarre....

Maybe......just maybe.....somebody's been lying to you.

In a shocking development, an Argentine states the obvious about Martin Lousteau

Lousteau grimaces when he spots his mother
in the crowd making funny hand signals


One of the head honcho of the Confederaciones Rurales Argentinas (CRA...in English "Confederation of Argentine Farmers" is close enough) today said that Argentine Finance Minister Martin Lousteau had only been present at one of the many of the supposedly key meetings that the country boys have had so far with the government boys over the ongoing dispute about the hikes export tax on soybeans, wheat, corn etc. He also said that (in translation), "He's not there, because all this goes over his head, because he does not have the authority to control certain situations and it's better that he isn't there."

Lousteau impersonates George Formby

If talking about a Minister of Finance in such terms comes as any surprise to you, then you obviously don't know much about the way Argentina is ruled (repeat ruled) these days. Lousteau is Pleshident Klishtina's lapdog, brought in from her time as senator for Buenos Aires province, who was supposed to show the world that she is not just the continuation of her husband's mandate, but she's her own woman.

Two ageing rock stars

Total crap. Any and all serious decisions are still being made by Neshtor, and get handed down to the mortals via his favourite attack dog Guillermo Moreno. Moreno is the Secretary of Interior Commerce, which is an ostensibly inferior post to that of finance minister. But this is of no matter whatsoever; Moreno gets the serious job of thrashing out a deal with the agro reps, while Lousteau gets carted off to meet'n'greet with Argentine-born Princess Maxima Zorra-Guita (oops....make that "Zorreguieta"....I'm always getting that wrong...dunno why) to talk about some vague idea of getting banks to give better credit lines to small businesses via the United Nations, which sounds great but let's face facts here.....ain't gonna happen, is it?

So the big talk now is that while Klishtina is away on a trip to see Studmuffin, getting shouted at by strange people in hotel lobbies and picking up a bauble last won by Eva Peron (symbolic, innit?), the real ruler, Neshtor, has sounded out Central Bank head man Martin Redrado for the job of finance minister. Y'see, Nestor is reportedly fed up to the back teeth of seeing mophead hanging around. And let there be no doubt about where the real power lies, damas y caballeros.

So as predicted here weeks ago, Lousteau's days are numbered. Good. He's an idiot and shouldn't have been given the job in the first place. Get a haircut, boy. As for Redrado, there are worse out there....not wonderful, and he has this strange tendency to play "God Save the Queen" and "Land of Hope and Glory" on his office stereo when visited by Brits, but at least he has a bit of gravitas about him.

So much for saying "hope this is the last post on Ecuador mining"

Total madness in the markets this morning over this Ecuador story, and almost impossible to be a small voice of reason with all the shouting that's going on. I'd honestly forgotten how shark-like the Canadian brokerage houses could be when they smell blood. Amazing to watch, and I pity the retail investor who reacts to their devious ways. Haywood in particular should be ashamed of themselves. In a note today they dropped their target on ARU to C$1.40, down from the $6 they called Friday (which itself was dropped from $12) This is:

1) playing ambulance chasing with the market prices (which coincidentally are set by the big Canadian houses and their pre-market bids...go boyz go)

2) spreading fear among the little players with statements that DIRECTLY contradict the Ecuador government (see comments below). Haywood says that Ecuador could nationalize and expropriate, while every single statement from every single person in authority in Ecuador says that is not true.

3) picking target figures out of a hat. Why $1.40? Why not $2? Or $0.50? Or $5.23 and a half? They justify it with a 1.0X price to net asset value calculation...why not 2.0X? ...Or if they really think Ecuador is nationalizing and expropriating, it should be 0.0X, no?

Pathetic. It's another day to remind yourself the disadvantages of being a small fish in a big pond. Personally I'm not selling a single share, even though I'm so underwater I'll need scuba gear soon.

Minister of Mines and Petroleum, Galo Chiriboga, is holding a press conference right now. In the press conference he is apparently presenting the new draft mining law to the world. Meanwhile, so far today we've had these comments from him (and he seems to like the word "absolutely"):

"What the decree is looking for is to adequately regulate the present situation of absolute dis-control, the absolute lack of criteria in the granting of concessions (up to now)...."

"...there have not been any confiscations...we are not nationalizing (the industry). We have taken absolutely nothing from these companies. What we are going to do is organize ourselves in a way that the wealth favours all Ecuadorians...."

(The country's mining industry is) ".....a fundamental industry, but it has to be adequately regulated and with mechanisms of competition and not favouritism....."

Chiriboga also mentioned this morning quite clearly that the current producing mines are the ones that will be allowed to continue during the 180 day period, and not the exploration mines like ARU. I'll repeat here that the mining decree still has a clear loophole in it (article 8, para 2), and it matters not what the intention was on this part. However, the gov't has the miners so nervy now that they'll probably play it meek and comply with the spirit of the decree rather than try any hardball tactics.

Finally, I've mentioned before how I admire the Coffin brothers for what they do. I don't want to reprint everything they wrote in their newsletter dated today and entitled "Left Field Rising..." because they run a subscription service and fair is fair. However here's a small part of what they said about Aurelian (there are plenty more words of wisdom from them about Ecuador in the newsletter)

"..Holding or buying ARU at this point is a bet
on the Ecuadorian government being
sensible going forward, and neither more nor
less than that for the time being. Events
have knocked the price back to our initial
coverage, but well below later buys. FDN is
a target for bulk underground mining that
would have a relatively small development
footprint. We still think FDN is likely to be
mined, and to be mined by ARU. We
wouldn’t try to guess where the stock will
bottom, but would expect that to happen in
the coming week. Trading down costs would
make sense, but with a realization that gains
are not likely until more is on the table from
the Ecuadorian government..."

4/20/08

The Rise of Lu

Paraguay's LU seen voting today.
Is that a secret LU hand signal he's using there?


Should we be afraid of Lu? Is there a Lu conspiracy to take control of THE WHOLE WORLD*? First there was Lulu.....

.......pint-sized Scottish pop singer with a really annoying voice. It seemed so innocent at the time.....now I'm not so sure........

Then there was Lu de France, brand name of the scrummiest biscuits, cookies and cakes possible:
(please note the photo is of its "Petit Ecolier" brand, and if you've never tried one of those you are seriously missing out...run to the shops, dude).

Then came Lucent technologies, which brazenly uses the stock exchange ticker LU and obviously has plans to take over the technological world....like...probably....errrrr......dude.

Then there was Lula da Silva, who took Brazil by storm and gave George Bush a lesson in G-spots.

And now it looks like the latest weapon in the Lu people control machine is about to hit us, as Paraguay's ex-bishop Lugo (LU....GO!!!) looks like the winner of today's Presidential election according to the exit polls at least. This is perhaps the most blatant example of LU-POWER™ up to now, because.......

This Lu is taking power away from the Colorado Party for the first time in 61 years...an impressive LUfact

This Lu looks far too similar to Brazil's Lu to be mere coincidence. YOU BE THE JUDGE!**

Which is Lugo, which is Lula? LULULULULULULULULU
So be on the alert, fellow tinfoilhatters. If someone approaches you with anything connected with the letters LU in....let's say...the next 10 years, you can be 100% sure it's an illuminati plot to take over the world....NO DOUBTS. I mean, just think that another word for 'code' is 'cypher'. LUcypher.....so obvious.................

*please say this part out loud in a deep, Vincent-Pricey voice
**thank you ifi

Ecuador, the mining law, the assembly decree, the situation as stands and how it affects Aurelian (ARU)

After getting several mails from people that read this blog and are worried about what has been going on (some of whom know me, others that don't), here's what I hope will be my final post on the Ecuador mining situation and Aurelian (ARU.to). This post is quite long, and is basically split into three parts.

First, a translation of the articles in the new decree, or mandate, that was passed on Friday. I haven't translated the legal bumph that came before or after the articles.

Second, how these articles concern ARU (I've chosen ARU cos that's the company i recommend, and things might be different for Corriente, Dynasty etc).

Third and last are my own interpretations and conclusions. So here we go, starting with a translation of the 12 articles in the approved decree (mandate):

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Article 1
The extinction is declared with no economic compensation for those mining concessions in exploration phase that have no made any investment in the development of the projects to 31 December 2007 or have not presented the respective environmental impact study or have not completed the processes of prior consultation, including those that are pending an administrative resolution.

Article 2
The lapse of mining concession is declared that have not paid the conservation patents in the time established by the Mining Law, which is to say by 31st March of every year paid in advance as from 2004.

Article 3
The extinction is declared with no economic compensation mining concessions granted inside protected natural areas, protected forests, buffer zones defined by the competent authorities, and those places that affect sources and provision of water.

Article 4
The extinction is declared with no economic compensation for those mining concessions that in number greater than three have been granted to a single person or their spouse, or to judicial persons and their related companies, be it via the direct participation of the judicial person, or its shareholders and their family members up to the fourth grade of blood and second of affinity.

Article 5
The extinction is declared with no economic compensation for all mining concessions granted to functionaries and ex functionaries of the Ministry of Natural Resources, Ministry of Energy and Mines, Ministry of Mines and Petroleum or their immediate family up to the fourth grade of blood and second of affinity, due to the use of privileged information for their personal interest.

Equally made available is the lapse of concessions currently held by third parties that were the product of transfers originally granted to functionaries and ex functionaries of the Ministry of Natural Resources, Ministry of Energy and Mines, Ministry of Mines and Petroleum or their immediate family up to the fourth grade of blood and second of affinity.

Article 6
The moratorium is declared of the granting of new concessions from the date of approval of this decree (mandate) and until the new legal and constitutional framework becomes law. As a consequence, the National Government, via its Ministry of Mines Petroleum, is required to temporarily halt all pending solicitations for new mining areas. The Ministry of Finance is required to transfer the necessary monies so that the values paid for solicitation fees are returns to the soliciting parties.

Article 7
Non-metallic and construction materials mining concessions that are not covered by the cases described in articles 1, 2, 3, 4 and 5 of the present decree (mandate) may continue their activities, but are obliged to renegotiate their ownership titles according to the new legal framework that regulates their activity.

The state, as owner of mineral resources, has the preferential right of free advantage of construction materials that conform to environmental regulations and others that are of effect according to the Ministry of Mines and Petroleum.

Article 8
Activities are suspended in all metals mining concessions that are not covered by the cases described in articles 1, 2, 3, 4 and 5 of the present decree (mandate), until the approval of the new mining framework that regulates this activity and redefines operational conditions.

Uniquely and exclusively, the metals mining concessions that at this date are in exploitation and are not engaged by the first part of this article will continue their activities, but are obliged to renegotiate their titles under the conditions of the new legal framework.

Article 9
The new legal framework mentioned in this decree (mandate) must be expedited 180 days after the approval of this decree (mandate).

Article 10
Small scale mining concessions, artisan mining, subsistence mining and mining concessions operated by co-operatives, associations and correctly legalize mining condominiums will continue their activities, except those covered by Article 3 of this decree (mandate).

With prejudice to those mentioned in the previous paragraph, no natural or judicial person with titles to mining rights for small scale mining, artisan mining and subsistence mining can hold individual or conjoint titles that exceed 150 hectares of mines in production or have an exploitation volume of more than 150 tonnes per day

Article 11
The National Government via the Ministry of Mines and Petroleum will create the National Mining Company, which will be involved in all stages of activity, working under conditions of environmental preservation and respect of civil rights.

Article 12
The dispositions contained in this constitutional decree (mandate) are obligatory. As such they are not open to complaint, contestation, holding orders, demand, claim, recourse or any other administrative or judicial action. Neither does it give space to any ‘indemnization’.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Ok, so that’s my translation. Now I’m obliged to lay some legal stuff on you (sorry…I’ve been told this is necessary).

Note the word “my” in that sentence, and be very clear that this is my translation and not one done by a sworn translator. I am confident about my level of Spanish, I’m personally happy that this English version accurately reflects the original Spanish document and I am confident in its accuracy, but I would strongly suggest you got a second opinion about the translation before making any decisions based upon it. When it comes to interpreting the “mandato”, you need to seek professional legal advice, because what now follows is my own personal interpretation of matters.

So here’s a little rundown of how I believe these articles affect Aurelian.

Article 1: Doesn’t apply. ARU is up to date and clean as a whistle.

Article 2: Doesn’t apply. No worries here.

Article 3: Doesn’t apply, according to all reports and previous documentation concerning Aurelian’s geographical location.

Article 4: This one affects Aurelian. At time of writing, ARU holds 38 concessions that make up the entire “El Condor” location. The law says that ARU must cut this number to just 3 concessions. The negotiations on this are to be with the Ministry of Mines and Petroleum and apparently have to be concluded in the next 30 days.

My personal take on this article 4:

1) ARU will keep Fruta del Norte (FDN), that one is clear as a bell. If push comes to shove and the stripping of 35 concessions actually takes place (which is debatable at this time) ARU will choose 2 other concessions that show the best promise (there are a couple of concessions that are more promising, according to all sources).

2) The proposed concession stripping is a rather vague idea, legally speaking. If miners such as ARU decide to play hardball on this they will have a very good case for breach of contract with the state, as long as the concessions were originally granted in a transparent and morally correct way (see article 5).

3) This article, (along with articles 1, 2 and 5) is obviously directed at the so-called “concession squatters”, i.e. those people who have been given or paid very little for a whole swathe of concessions and have done little to move then forward. The vast majority of these concession squatters are Ecuadorian nationals who are part of the old boys' club of corruption that has plagued the country for decades. Remember that as of last week there were over 4,000 concessions granted in Ecuador that covered over 12% of the country’s surface area. It’s clear that many of these concessions were corrupt agreements between previous governments/authorities and their friends. Companies like ARU are being damaged here (at least in theory, see point 2), but are being hit somewhat on the ricochet.

Article 5: Doesn’t apply to Aurelian (according to all previous documents and reports)

Article 6: Doesn’t apply

Article 7 : Doesn’t apply to Aurelian. This article is specifically about extraction industries that supply the construction trade (e.g. raw materials for cement, bricks, gypsum plaster etc)

Article 8 : Applies to Aurelian. This article comes in two parts, and needs careful analysis. The first paragraph says that ARU has to down tools and do nothing at its project until the new law is framed. The second paragraph talks about exceptions to this, and says that these exceptions can continue working.

My interpretation on Article 8: I have been informed that the exceptions in paragraph two are specifically five private mines currently producing gold etc. These mines are also mentioned at the end of this article in El Comercio today (if you read Spanish, it is a good background article on the process, too). However, I would like to clearly state that the very carefully chosen wording makes it absolutely clear that Aurelian will be allowed to continue working if it chooses to do so, and it matters not what the intention of the Assembly really was here. ARU is clearly exploiting its property, as understood by the word “explotación” in Spanish. This is a clear legal loophole, and the only question I have is whether this door was left open accidentally or deliberately by the assembly members.

However, it does raise the question of whether ARU will decide to take advantage of this loophole. There are many permutations, but three basic scenarios are:

1) ARU plays hardball, continues work on site, points to article 8 clause as justification. Government accepts this position.

2) ARU plays hardball, continues work on site, points to article 8 clause as justification. Government cries foul, begins to make life difficult for ARU.

3) ARU does not want to antagonize things and stops work for next 180 days.

Article 9 : Worth mentioning here that the 180 day period is a maximum period. If nothing happens when the 180 days are up the individual company (e.g. ARU) has the right to directly deal with the Ministry of Mines and Petroleum and come to an agreement.

Article 10 : Doesn’t apply

Article 11 : Doesn’t directly apply

Article 12 : Doesn’t directly apply ; this is basically a bunch of legalese that says “this decree is law as from now”.

So there you go. Finally, here are a few things to consider:

Friday’s approved mandate was primarily aimed at locals who had taken advantage of previous lax laws to fill up on cheap or even free mining concessions to the detriment of the state. This is the group of people who have lost out, and it comes as no surprise to hear the squeals from the chamber of mining commerce. Some of the decree articles included foreign mining companies as targets, but by no means all of them However, the signal it has sent to world mining is very negative. It may or may not understand how much of a negative signal it has sent this week…a moot point. However bad this mandate seems to the world, I continue to believe that the government of Ecuador has the best interest of the state at heart and does not want to kill the nascent industry, an opinion backed up by statements from President Correa.

I’m long ARU, and took advantage of the prices on offer on Friday. This may colour my views. There is a lot of nerves in the market about all this, and even professionals are making drastic calls. I note that Haywood cut ARU to “sector underperform” before the final vote on Friday, and I’ve heard (though haven’t confirmed) that its analyst cut the price target from $13 to $6. This is crazy, a terrible judgement call from a professional analyst, and one that he will certainly regret in the future. Aurelian is not going to lose FDN. It is priced on FDN, and not the other concessions it may (or may not) lose. The government has gone out of its way after the vote to say that Ecuador still welcomes responsible mining. Even head of Assembly Alberto Acosta said that, “the new mining law will favor serious entrepreneurs, not the speculators.”

The worst case scenario for Aurelian right now is that it downs tools for 180 days then gets on with the job at FDN once that period is over. FDN is not an open pit mining operation which may be subject to a national referendum. From the outset Aurelian has had a socially responsible attitude and is a welcome player in its locality. This is light years away from the attitude of other mining companies such as Ascendant Copper (ACX) that are now getting their just desserts. So things really aren't that bad for Aurelian, no matter what the current market hype and political backlash commentary makes it sound like. ARU is an amazingly cheap buy right now. Hope you got some under $6.