Mexican state-run oil giant Petroleos Mexicanos (Pemex) will cut exploration investments this year by 25 percent to $1.5 billion. The company expects to maintain investments in exploration within the range of $1.5 billion and $2.0 billion over the next few years. Pemex has 17.7 billion barrels of proven reserves.
Category: Daily Brief
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Uruguay Delays Bond Sale
Uruguay postponed a planned $300 million bond offering Thursday after emerging market bonds fell. The country started offering12-year securities Wednesday in its first debt sale since it conducted a $5.3 billion bond swap in 2003 that Standard & Poor’s called a default. Uruguay’s sovereign debt is rated B3 by Moody’s Investors Service and B by S&P, six and five levels below investment grade.
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Venezuela Wants to Change Contracts
Venezuela plans to change oil contracts for the second time in seven months, forcing ChevronTexaco and other companies to pay more in taxes from their operations in the country. In October, Venezuelan President Hugo Chavez unilaterally raised the royalties on shareholders in four heavy-oil joint ventures, saying the companies were paying too little.
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Asian Lessons
Twice a year, the international financial community – which is made up of thousands of bankers and bureaucrats – comes together for a few days to network, listen to speeches, do deals and go partying. These annual gatherings are held around the meetings of the Inter-American Development in April and the International Monetary Fund in September. More to the point, discussions and negotiations at these meetings are often overshadowed by some catastrophic Latin American crisis.
But it was clear at this year’s IADB meeting – which has just ended – that Latin America is of less and less interest to the outside world. Holding the meetings in remote Okinawa did not ease this sense of isolation. In a way, the lack of interest is positive: there are no crises on the horizon in Latin America. But instead of patting each other on the back, Latin Americans are agonizing about their irrelevance.
Many bankers are going on to Tokyo, Shanghai, Beijing, Hong Kong, Taipei, Singapore and even Mumbai to hunt down investors or possible M&A clients. Ten or 20 years ago, Asia was mostly a backward region disconnected from global markets. Now, Latin America is falling behind Asia. The good news is that leaders, bankers and business leaders – once stunned into inaction by the rise of China – are reacting. Companies are becoming more international. Governments are sticking to sound economic and social policies. With time, growth rates may raise to 5%-6% a year. That would be a triumph for Latin America but mediocre in comparison with Asia.
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Heineken Eyes Bavaria
Heineken announced that it is among companies interested in buying Colombia’s Grupo Empresarial Bavaria as demand for beer in emerging markets outpaces consumption in the US and Western Europe. Fourteen percent of Heineken’s sales last year came from the Americas.
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Vale Plans Big Investments
Brazilian iron ore giant Companhia Vale do Rio Doce, the world’s largest iron-ore producer, plans to invest $6.2 billion over the next five years to meet rising demand from China. The company is looking to add 140 million metric tons of capacity by 2010, accounting for 37% of global demand. China, the world’s biggest steelmaker, may increase iron-ore imports by 15% this year to 240 million tons.
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Bielsa: G7 Supports Argentina
Argentina’s Foreign Minister Rafael Bielsa said a majority of the Group of Seven industrialized nations backs the country’s debt exchange plan. This comes as the IMF is pushing Argentina to start talks with creditors who rejected the swap offer. Bielsa said the restructuring plan is backed by Germany, the US, France and Canada, while the UK and Japan have given “mixed” signals. Italy opposes the offer. Argentina persuaded 76 percent of its bondholders to exchange their holdings for new securities, while holders of about $20 billion in bonds rejected the offer.
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IMF Lifts Forecasts
The International Monetary Fund raised its growth forecasts this year for Mexico and Brazil, predicting that both countries’ economies will expand 3.7 percent, more than the previous 3.2 percent forecast for Mexico and 3.5 percent outlook for Brazil. The IMF called on Latin American countries to take advantage of the economic expansion in the region to reduce debt and broaden the tax collection base to help keep budget deficits under control.
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Varig Reports Results
Brazil’s troubled airline Varig registered net revenue of $3.4 billion in 2004, up 11 percent year-on-year. The company reduced its net loss 95 percent to $34 million, while gross profit totaled $980 million, up 10 percent. Varig finished 2004 with debts worth $2.2 billion, most of which are owed to the Brazilian government.
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Brasil Telecom CEO Charged
Brasil Telecom Chief Executive Carla Cico was charged with racketeering as part of a Brazilian probe into whether she hired security firm Kroll to spy on the government and executives at Telecom Italia, a business rival. The charges must be confirmed by a court, which could take months. The 44-year-old executive is the first executive to be charged in a police investigation into whether Kroll used illegal methods such as wiretapping to gather information on both the government and Telecom Italia.