U.S. investors to learn about dead miners

U.S. mining companies that file reports with the Securities and Exchange Commission may have to say how many workers they killed each quarter under a new rule up for discussion at the SEC. These rules look useful for those of us who as reporters, investors or everyday people like to keep an eye on corporate behavior. The new rule would also require miners to report various types of U.S. regulatory action.

The one problem I see in these rules is that they don’t explicitly apply to operations outside the USA. I already wrote the SEC to ask them to be clear that the rule about reporting deaths, at least, should apply to fatalities both inside and outside the USA, and to give the date and location of each incident.

Otto has the full SEC statement here accompanied by a bit more snark than the nice SEC folks saw fit to include. The SEC comment form is here.

Yes, Chile is still “emerging”

Since emerging markets, and Chile in particular, are currently all the rage among people whose idea of adventure travel is to check out a different bathroom at the multiplex, I give you a little wrapup of recent stories from South America’s only truly serious country™.

Petrobras through Vennietrans

Original story here. (Nice work Mr. Millard.)

Petroleos de Venezuela SA, Venezuela’s state-run oil company, said production next year will rise by less than half a previous forecast as President Hugo Chavez’s expropriations spree cuts into the OPEC nation’s lifeline.

Output will increase by 3.5 percent to 4 percent, Eulogio del Pino, head of exploration and production, told reporters today in Maracaibo. PDVSA previously said in a presentation that output would rise on average as much as 9.4 percent a year and reach 3.9 million barrels a day in 2014. Daily oil and natural gas output averaged 2.56 million barrels in the first 10 months of 2010, according to its website. Independent analysts including the Organization of Petroleum Exporting Countries says Venezuela produces less than the official figures.

“The rainy day has arrived for Venezuela,” New York-based A.N. Analyst said. “Chavez has been devouring the golden goose and eventually he has to pay the piper. This will likely hasten his downfall.” Analyst declined to disclose his bank’s position in Venezuela bonds.

PDVSA is working on a new five-year business plan and hasn’t set a specific production target for next year, del Pino said. PDVSA will fall short of its production target for 2010 because the target was politically driven to start with, Analyst said.

PDVSA is seeking to boost output in the Orinoco Belt, which the U.S. Geologic Survey estimates to contain a half-trillion barrels of recoverable oil, to help compensate for aging fields and disinvestment. President Hugo Chavez has slowed Orinoco Belt development with frequent rule changes and by partnering with state oil companies from allied countries.

I’m long Petrobras, through a mutual fund. Which is why I guess I’m glad that no matter what happens to them, it’s not going to change the master narrative of Petrobras as the savior of all retail portfolios.

Oxygen is the dominant atmospheric gas

It is often reported that nitrogen is the most prevalent gas in our atmosphere. For example, Wikipedia says it makes up more than 70% of Earth’s gaseous layer. These claims are often repeated uncritically.

Studies show that the human body absorbs very little nitrogen in the course of respiration. Almost all of the air molecules absorbed into the body are oxygen.

It is clear from these data that statements about nitrogen “dominating” the atmosphere are not only exaggerated, but simply false.

Drip drip drip

The days pass, the Wikileaks leak, and little by little we hear interesting tidbits that for whatever reason the nice U.S. embassy people had never seen fit to leak earlier. I’m impressed with their discretion — there are a lot of reports that make people look like fools, and many of those apparent fools are not best friends with the USA.

With summer upon us here in the Southern Hemisphere, and paid work and delightful family outings thankfully occupying much of my time, I haven’t been as diligent as I’d like to be with these leaks. As far as South American oil affairs, the best stuff so far was detailed by El Pais, one of the newspapers lucky enough to get early access to the whole Manning file. Caracas Chronicles’ Francisco Toro, locked away in his frigid Arctic bunker, wrote up a nice summary of what they said.

This time, the U.S. embassy in Caracas supposedly found one of the ways in which PDVSA overstates its production figures — export to offshore storage, reimport, and export again. I had guessed years ago that this would be the easiest way to pump up the figures, which is exactly why I always refer to net exports (subtracting out imports), rather than total exports. However, the PDVSA annual reports don’t use export numbers at all; they claim to be reporting figures directly from the field. What I want to know is, if the numbers are being inflated, at what stage does it happen? My current theory is that it’s similar to the USSR’s grain statistics. Low-level people are scared of reprimands if they say they missed quotas, so they do whatever is necessary to avoid that, from faking paperwork to physically moving products to be double-counted. But who knows.

The embassy’s intel-gathering method mentioned by El Pais is amusing. Because the lines are so long for anyone (from Maria Lopez visiting her nephew to the oil minister) who needs a U.S. visa, the embassy had lookouts keep an eye on the line so they could help high-level people jump the queue, and then hit them up for info. However, El Pais doesn’t link to any documents describing this method. That may have just been an oversight; it will be interesting to see what other methods come out.

In response to Marcus Anonymous’s comment this morning asking whether I see any scandals in these memos — not really. The Wikileaks-produced article titled “U.S. secret blueprint to undermine Chavez” is hilariously mistitled. It’s actually a secret blueprint to recover U.S.-oriented trade and debt policies in the Southern Cone, an area where Chavez’s influence has never been particularly strong. (If anything, the influence flows the other way, with Salvador Allende and Juan Peron influencing Chavez.) The memo discussed is scandalous only in being hilariously misinformed. While most of the embassy memos show an informed, smart, even witty foreign service struggling to teach Washington about the world, this memo includes the following line:

We must challenge the mistaken notion that the U.S. is absent and aloof from the region. President Bush’s visit to five countries in the region in March, and his follow-on meeting with President Lula at Camp David, made a hugely positive impression

The embassy’s take on President Bush’s visit to five countries in the region in March 2007 was rather different from that of The Google. Like me, the Google remembers the visit as an utter fracas, with Bush being hounded by riots, while Chavez made a well attended speech nearby. In fact, Google image searches turn up more pictures of Chavez than of Bush, even on a search for “Bush visit Argentina 2007.” I was in Buenos Aires a few months ago, where I saw anti-Bush grafitti that remains from three years ago.

UPDATE: This one is really something else — Colombian ex-President Alvaro Uribe was even more aggressive in private than in public. He told the U.S. military high command: “Chavez has a five to seven year plan to advance his Bolivarian agenda in Colombia…Chavez remains committed to bring down both Uribe and his government, as the primary obstacles to his Bolivarian expansionist dreams…The best counter to Chavez, in Uribe’s view, remains action — including use of the military… He was prepared to authorizevColombian forces to cross into Venezuela, arrest FARC leaders, and bring them to justice in Colombia.” I hear that he concluded his speech by saying, “The whole world is a nail.”

A peek behind the curtain

On stage, big oil* and the Venezuelan government tend to get along, with lots of big smiles. Bigwigs from Chevron, Schlumberger and Eni attend the signing ceremonies, wait for President Hugo Chavez to show up, shake hands with Oil Minister Rafael Ramirez, pose for photos, and a good time is had by all.

The Guardian’s Rory Carroll has the U.S. Embassy memos that give a bit more color behind the scenes. For example:

In separate private conversations with the ambassador, Patrick Duddy, industry figures detailed the parlous state of the industry. A senior manager from Chevron estimated the state oil company’s output at 2.1m to 2.3m barrels per day, well below official declarations of 3.3m.

Caracas gets wet

My heart goes out to those who have lost their homes, stuff, and even lives in the downpours plaguing Venezuela and Colombia. In Venezuela, after no rain to speak of into June, the country is now in its wettest year since at least 1890. It seems that my first post on this blog was, unfortunately, way too correct. Since I always have to focus on the aspects of a situation that no one else is looking at (not because I am an inhuman monster, but rather because the main points are well covered elsewhere), I find it interesting to wonder if all this rain will solve Caracas’s water shortage.

Hidrocapital, the water utility, posted its most recent reservoir levels Nov. 20. Camatagua, the big one, is up to 1 billion cubic meters of water, double the 450 million level where it was just a few months ago. Lagartijo and Taguaza are at the highest levels they’ve been at for this date in years. This is good news, but note that it’s still below where it was at this time in three of the last four years. It looks like it could get back to 2008 levels by the time the rains end, at which point the decline will begin anew. The structural deficit remains, but Caracas gets a 1-year reprieve to develop conservation programs and build new reservoirs before things go back to the kind of crisis we saw a year ago. Glad to be proved wrong on my prediction that 2011 would be another crisis, even if these rains are tragic.

Wikileaks: Data on what Cuba sacrifices for Venezuela oil

Cuba permanently loses about 200 doctors a year in return for its Venezuelan oil supply. Nice to have the data, though the publishing of this data will likely make life even harder for people who want to abandon Cuba via Venezuela in the future. Says the US. embassy in Caracas, per Wikileaks:

From 2006 to 2007, 497 Cubans applied for parole through the CMPP at Embassy Caracas. 407 of those applicants were approved, 70 were denied, and 8 cases are still pending. In 2008, there were 201 applicants, 154 approvals, 28 denials, and 8 cases are still pending. In 2009, Embassy Caracas received 237 applications, 161 of which were approved, 36 denied, and 40 still pending. There have not been any approvals or denials yet in 2010. Since Post began to use YY foils instead of transportation letters in March 2009 (due to fraud concerns), 277 of such foils have been issued. It should be noted that the vast majority of our approved CMPP applicants actually do successfully leave Venezuela. Most
successfully leave on their first attempt flying out of Venezuela with a visa foil or travel letter. Those that are initially detained have apparently often been able to bribe their way out on a subsequent attempt. The rest, as noted above, have made the trek to Colombia and been able to get on a flight to Miami.

The main part of the report focuses on how some of these people — parolees or deserters, depending on your perspective — have been harassed at the airport and had to pay bribes, but the report ends with the note above, saying that they do end up getting out. So it turns out Cuba is paying a significant price for its oil trade with Venezuela, in the loss of hundreds of highly trained professionals. Alas for Venezuela, the benefit accrues to the USA.

Why not to read daily market reports

Yahoo 1-day oil price chart

Oil jumped this morning in New York. One of the most prestigious business news organizations explained it like this.

Crude Oil Trades Near Three-Week High as Venezuela Says $100 Price `Fair’ Oil traded near the highest price in three weeks as signs of economic recovery in the U.S. stoked speculation that fuel demand will increase in the world’s biggest crude consumer. Venezuelan Energy Minister Rafael Ramirez said $100 is a barrel a “fair price” for oil and that OPEC is unlikely to change its output quotas at its meeting later this month.

The guys writing this know that Venezuela has nothing to do with the price movement, as you can see by the lead they wrote. But the editors put Venezuela in the headline for the same reason they’d put Lady Gaga up there if they could — it gets you to click. Which, in the end, is the function of people like Hugo Chavez in the news — they draw readers, so the press keeps covering them. As readers learn more about them, they grow more likely to click on the stories. It’s a feedback loop.

But is there any reality to this? How do I know this isn’t really market-moving news? I recall this from November 2007: