Arevenca end game? González jailed in Venezuela (Updates on everything #1)

Yes, this blog is mostly shut down, as I am now working full-time. I’m just updating some old stories. Please note that this is just my personal research and thoughts, no connection to my employer.

Maybe you remember Arevenca. It’s mostly a guy named Francisco González, with a few colleagues and family members. Using the name of a defunct sandlot on the coast of Venezuela, Arenera de Venezuela CA, he pulled a series of big, long cons over the last decade. They include:

I first covered Arevenca here and I wrote about it in Vice and CJR.

As you can read in the Vice story, González and a string of accomplices — some of them apparently themselves victims of the deception — hit a home run with the Díaz family in Puerto Rico, extracting US$7.8 million for a nonexistent shipment of asphalt. The Díaz family has been going after him for years in Aruba, Puerto Rico and Spain. A month ago, after González failed to show up to court in Spain too many times, the court issued this arrest warrant:

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Soon, Venezuelan authorities arrested him for possible extradition to Spain.

After a few relatively quiet years, González had just recently popped up again. First, the Arevenca Bank website was redesigned.

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And then there was this letter to Venezuelan Trade Minister Jesús Farías, offering Arevenca’s British Virgin Islands corporation as a source of US$10 billion in financing for food imports to Venezuela.

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In addition to all of this, González is also facing legal processes in the USA. And Aruban authorities auctioned off his helicopter.

Whether González ever goes to trial, however, is an open question. Article 69 of the Venezuelan constitution says “Extradition of Venezuelans is prohibited,” and the Venezuelan justice system isn’t exactly a model of efficiency. But in any event, this guy seems to be nearing the end of his run.

Where’s the blog? (updated)

I got a job and am not really writing here anymore. I continue to write about Latin American energy companies, but I decided that it’s ok to write behind a paywall in return for a paycheck. I’m still reading your thoughts and comments. So please feel free to send your tips and hate mail. I read them all. Thanks for a few great years, thanks for the kind donations, thanks for all the leads and tips. Hasta la próxima!

UPDATE 6 December 2015: I realize that was a pretty unromantic way to say bye. This blog has been a really wonderful experience. I have met many of you either by e-mail, phone or (occasionally) in person, and you’ve been a great bunch of people. I will miss the tips, the encouragement, and the random ventings of frustration that you sent me over the years.

It was sometimes frustrating to see big law firms, government agencies and multinational corporations coming by for free information. But the real humans out there, searching for the truth behind weird energy industry intrigues, made it quite worthwhile. I’ll let you know if I find a way to get back to writing publicly that doesn’t get in the way of my job.

Meanwhile, if you do happen to be at one of those big law firms, multinational corporations or government agencies, please check out REDD Intelligence. It’s a great outlet for coverage of distressed companies and sovereigns in Latin America.

Also, I continue to post from time to time on Twitter. See you!

Colombia, Venezuela get opportunity to overcome oil addiction. You’ll believe what happens next.

Venezuela and Colombia, where I’ve been hanging out for the last couple weeks, are terminal oil junkies. Both countries have built economies so oil dependent that with the current low price of crude, people are freaking out.

Of course crisis=opportunity and all that, so what better way to stimulate the local economy and set the countries up for the next cycle than invest in renewable energy? Good time to build some wind farms and microhydro projects, you might think. Good time to lay some solar panels onto reservoirs, you might think. Well, that’s not what’s happening.

In Venezuela, the government is bragging that it’s reactivating mature oil wells. And as the government faces the country’s worst financial crisis since at least the 1990s, it continues to give away gasoline to anyone who can take it. Free. Seriously. Younger people with dollar signs in their eyes are now investing their cash into oil, too. The folks behind Derwick Associates, led by Alejandro Betancourt, have spent about $250 million on shares of Bogota-based oil company Pacific E & P (formerly known as Pacific Rubiales), while their pal Francisco D’Agostino is part of a group that is putting more than $30 million into Harvest Natural Resources, a Texas oil company. Everybody’s betting on oil.

Here in Colombia, I heard Finance Minister Mauricio Cárdenas address an oil conference. He told the crowd that his country is committed to maintaining oil output at 1 million barrels a day or more, despite the fall in oil prices. “That’s why it’s important for the hydrocarbons sector to have all the stimuli, all the incentives, so that in this low-price scenario, it can invest, it can explore, and most of all, increase production. This is fundamental for the national economy, and indispensable for the public finance of the country.” (Link to story about his speech here, but the quote is from my own recording.)

The same day that he spoke, August 26, this report came out:

The consequences of global sea level rise could be even scarier than the worst-case scenarios predicted by the dominant climate models, which don’t fully account for the fast breakup of ice sheets and glaciers, NASA scientists said today (Aug. 26) at a press briefing.

What’s more, sea level rise is already occurring. The open question, NASA scientists say, is just how quickly the seas will rise in the future.

So you have these two tropical, coastal countries, facing the loss of their coral reefs and atolls, not to mention their glaciers and the unique alpine moors called páramos. Two countries that depend on a robust, constant hydrologic cycle for their energy supply and their basic survival. And their reaction to a crisis in the oil industry is to keep investing in oil.

Humanity! Never change.

Gold-oil ratio goes wild

Gold miners can now buy 30.33 barrels of West Texas Intermediate crude oil for every ounce of gold they sell. That is the most in at least 15 years.

Oil-gold ratio

If history is any guide, I’d expect that extreme reading to revert to the mean, which would require cheaper gold or pricier oil. But for now, gold miners are doing great. Which is probably why their stock index looks like this:

GDX index weeklies

Latin American currency: Colombia goes bananas

A good way to monitor Latin American currencies is against the Canadian dollar, rather than the US dollar. The USD, as world reserve currency, is mostly a measure of risk tolerance around the world. People fearing instability (still and despite it all) buy greenbacks. But the CAD, as the currency of a stable, developed, but resource-dependent country, is a nice comparison point for the Latin American currencies, as it cuts out a lot of the USD’s noise.

Against the CAD, the Colombian peso long tracked other currencies in the region, particularly the Peruvian nuevo sol and the Chilean peso. Latin American currencies 2010-2014

This first chart shows currencies against the CAD from 1 Jan 2010 to 1 Oct 2014. The Colombian peso (COP) is the red dotted line, green is Peru, navy blue is the Mexican peso, and fucsia is Chile. Up top, you see the Brazilian real and the Argentine peso doing their wacky and devaluatory deeds in red (solid line) and purple.

Here’s what the same currencies have looked like over the past calendar year:

Latin American currencies 1-year chart to 27 July 2015

This time, Argentina is down there with Peru and Chile, actually appreciating against the Canadian dollar. Mexico is drifting weaker, and Colombia is suddenly tracking Brazil in a big, painful devaluation. The are both big oil producers whose state-controlled companies were once stock market darlings. They are both economies that were overhyped circa 2011, and are now probably in an excessive backlash.

The upshot:

Latin American currencies 5-year chart to 27 July 2015Here’s the 5-year chart. Colombia has detached from its usual peers and is devaluing mightily.

The upshot for me, as a consumer of Colombian Harina P.A.N. precooked corn flour in Canada, is that a kilogram of this white powder has dropped from CAD 4 to CAD 3.3 over the past year.

Given what we already saw in 2014, I suspect Colombia will get a competitive advantage in the production of other white powders. Next year’s coca production reports will likely show Colombian output surging.

 

The lighter (heavier?) side of devaluation

Screen Shot 2015-07-08 at 12.45.25 PMTurns out it can be a good thing to have your biggest banknote worth only USD 0.20. That way nobody can carry a significant amount of money. Just too damn heavy.

Thieves in Caracas today hit a bank at the very moment when its vault was open, allowing them to get the unusually large haul of BSF 2.4 million, newspaper El Nacional reports. However they abandoned a sack with almost 1.8 million bolivars in it outside the bank, and got away with only 647,000. That’s about USD 1,440 at the market rate.