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. 

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:

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:

Here’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.

 

Odebrecht — Just a Brazilian issue?

Marcelo Odebrecht, head of Brazil’s biggest engineering and construction company, is in jail in Brazil on allegations of kickbacks in the procurement of oil industry materials to Petrobras. Without prejudging his guilt or innocence, I think it’s fair to say he isn’t doing himself any favours with e-mails like this:

Brazilian police said on Wednesday they intercepted a note from the jailed chief executive of Odebrecht SA to his lawyers asking to “destroy email,” after he became the highest-profile executive arrested in Brazil’s largest ever corruption investigation.

The handwritten note, reproduced by Federal Police and posted in court documents online, says “destroy email drilling rigs.”

Marcelo Odebrecht, head of Brazil’s largest engineering and construction conglomerate, was arrested Friday in a sweeping investigation into a kickback scheme at the state-run oil company Petrobras. [ID:nL1N0Z50JB]

Dora Cavalcanti, a lawyer for Odebrecht, called the publication of the note “an act of extreme bad faith by the police,” and said there was nothing criminal about its contents or Odebrecht’s intent.

“That phrase ‘destroy email’ meant ‘explain’ or ‘refute’ the allegations about the email,” Cavalcanti told Reuters, adding that it was one of seven points in Odebrecht’s notes for his plea for habeas corpus, or release from unlawful imprisonment.

Yes, clearly, he was only saying that the e-mail needed to be destroyed metaphorically. I’m all for metaphoric destruction. When you growl “I will destroy you” of course you don’t mean that you will put someone in a meat grinder. Rather, you mean you will harm the person’s reputation. Something Mr. Odebrecht is learning all about, now that I think of it.

Joking aside, the question is, does Odebrecht have operations in other oil-producing countries? With an ostensibly weak compliance regime in Brazil, might there be something to investigate in other countries? Happily, the answer is no. Because Odebrecht operates only in strictly controlled, low-corruption jurisdictions:

Odebrecht Oil & Gas offers integrated solutions for the upstream oil and gas industry in Brazil, and selectively, in Angola, Venezuela, Argentina and Mexico, both during the investment as well as the operations phase.

Oh good, nothing to worry about.

Update a few minutes later: I see the NY Times does Angola today:

Corruption Is Killing Children in Angola

This is a video report that I’ll never be able to do again. It’s about Angola, an oil-rich and fabulously corrupt country that also happens to be thedeadliest place in the world to be a child.

Angola, naturally, doesn’t welcome journalists. It took me about five years to get a journalist visa to get into Angola, and after my reporting I doubt I’ll get another visa as long as the current regime remains in power. So at The Times, we poured a lot of time and effort into the story of what corruption does to a country.

For me, the most compelling moments are those of rural Angola, the villages where people live without any access to doctors or dentists. We simply drove down a highway for hours, and then twice took small dirt roads quite randomly to see where they would lead, and then stopped in villages and chatted with people. It’s pretty heartbreaking to see kids suffering untreated from disease and unable to attend school, or to meet a mom who has lost 10 children — and it’s not just sad, but infuriating when you see it in a country that is rich with oil and diamonds. Then you remember that the Angolan president’s daughter is a billionaire, that Western governments are buddying up to the president — and, well, you feel you owe it to the villagers you met to tell their story in their own words. So we shot some videos to run with my columns. May this add pressure on the government to spend its oil wealth not just on Porsches and Champagne for the leaders, but also on health and education for ordinary Angolans.

Go watch Kristof’s video if you can stand it. And don’t worry about Odebrecht because I’m sure they had nothing to do with any of this.

An edifying video

You could go to Harvard and take classes from Francisco Monaldi. You could hire Eurasia Group’s Daniel Kerner for big bucks. And you could wait months for a meeting with Chevron’s Ali Moshiri. Or you can go to YouTube and watch them speak with remarkable candor about the big picture of oil and gas in Argentina and Venezuela. For free, while you brush your teeth.

As usual, humans are failing. This master class by three of the top names in the industry has, count ’em, 206 views.

Here are a few notes. I took more, but they’re for me. You need to go watch this one for yourself.

The problem with collaborators (Galt’s Gulch Chile, Argentine dictators, and Derwick Associates, oh my)

Ken Johnson, head of Galt’s Gulch Chile, looks at proposed subdivision map at Curacaví city hall.

I’ve been thinking about collaborators: people who go along with situations where they aren’t comfortable. Resisting or opposing would be hard, or cause legal inconveniences, or burn bridges, or ruin the chance of making big bucks. Some are just afraid. Collaborating with misbehavior, from a petty lie up to a major human rights violation, is normal and human. I probably go along to get along 99% of the time. But anyone who counts on reluctant collaborators is taking chances.

One example is Galt’s Gulch Chile (GGC). This is a proposed real estate development in the suburbs of Santiago, Chile, marketed toward libertarians and others who think the US, Canada and Western Europe are likely to collapse. Among its problems are that its managing partner, Ken Johnson, alienated a lot of workers, investors and buyers. By last November, when I visited the place for a Spring Celebration, some of the big names that were promoting the project were already feuding with Johnson over money and employment conditions. I sensed there were some odd personal dynamics but I figured they were the usual things one would get between a bunch of lone wolves trying to work together. Turns out it was worse. A few people have privately complained about Johnson; then a couple weeks ago, an early buyer went public alleging financial malfeasance. That broke the dam.

Suddenly, the interpipes were flooded with people who had been suspicious, those who claim to have warned buyers against the project, and even promoter-in-chief Jeff Berwick, saying that he was hoodwinked. He now claims he was already disillusioned with the project last August but chose to keep going along to get along so as not to cause other people any problems. Lawyer Erin Gallagly (who has never returned my calls seeking comment), in a now-deleted comment on Facebook, said she “witnessed a plethora of horror” in three months at GGC: failure to pay vendors, withholding pay from employees, threatening employees, financial mismanagement, and demanding that salespeople not share information. 

Oil notes from around South America

You have no idea how many half-written blog posts I have in my stack. Not going to publish before their time. But here are a few interesting things to keep you busy:

Flooding in the Neuquén province of Argentina is causing problems for the local oil industry, including a truck stuck in a washout and a spill of crude oil and produced water.

El Cartel Negro is a remarkable investigation of how organized crime dominates Pemex, Mexico’s state oil company. The book is now available at Amazon and other on-line vendors. I’m reading it, I’ll try and review it at some point.

Colombian oil drilling is being blamed (passive mood quite intentional, I don’t know who’s behind this campaign) for a drought in Casanare. I have no idea if there’s anything to these accusations, but I have written before about how oil drilling in the Colombian llanos is really water drilling with a bit of oil mixed in.

Cuba is using Dassault Falcons with Venezuelan registrations as presidential jets. I can’t find much info about who owns these

Speaking of PDVSA, the company is continuing to provide millions of dollars a year for a Formula 1 racing team. (Thanks SM for the heads-up on that.) Cash crunch, what cash crunch?

US Senator Marco Rubio has been making a stink about Venezuela as a human rights violator, and threatening to revoke visitor visas for some government figures. He also says the US shouldn’t impose sanctions on Venezuelan oil.

Rebecca Solnit gives the very big picture on how the oil industry is a giant case of institutional violence.

If you want little tidbits like this all the time, you should subscribe to my Twitter feed. I may be off in the Great White North but I continue to track South American oil and energy.

Venezuela fuel imports update: the derroche continues

Venezuela is buying ever more finished motor fuel from the USA. In January, it bought a record 113,000 barrels a day of the stuff. Meanwhile, it halted purchases of MTBE and special naphthas, which I previously referred to as the “good” imports. It’s grim.

Source: US EIA

Comments on Chevron-Ecuador in Argentina

An informed observer sends this in:

I love the subsidiaries argument. As in, this thing belongs to me, but when you want to take it away from me, it doesn’t belong to me, it belongs to something that belongs to me, therefore you can’t take it from me. I’m a bit disappointed this has been taken at face value.

… Pretty quick turnaround for a decision of that magnitude. And pretty lame that the judge said “If you want to appeal this decision, take it back to Ecuador, because that’s where we go the order from.” Seems flimsy. A pretty big fight for Argentina, which already has some nasty fights on the horizon anyway.

But I kinda want to think this will eventually make Chevron uncomfortable. Best case scenario would be at some point they’d stumble across a legal regulation that says they have to provision some part of this, which means they have to put it on their books, which gets investors talking about it, which means it gets interesting. I’m guessing we’ll never get to that.

Speaking of subsidiaries, here’s a link to Chevron’s annual report to the US securities regulator. I can’t find the part where they say “those 27,000 barrels a day of oil equivalent we’re producing in Argentina, we shouldn’t count those cause they really aren’t ours, they belong to a subsidiary that has nothing to do with us, really guv.” However I do see that the company makes some rather lawyerly terms, and I wonder if this is what they are going to rely on: “Although each subsidiary of Chevron is responsible for its own affairs, Chevron Corporation manages its investments in these subsidiaries and their affiliates.” I certainly don’t know Argentina corporations law, so I have no idea how all this plays out. The only clear winner I see is Buenos Aires law firms and their caterers.

Oh also, you can see how important the market thinks this is: CVX stock has moved with XOM, its closest competitor, for last 2 days. No obvious news-driven divergence, just CVX winning by a bit.

More notes on Chevron-Ecuador in Argentina

A few items for the record.

Statement from James Craig, Chevron’s US-based spokesman on this issue (sent by e-mail):

“Chevron Corp., the Lago Agrio judgment debtor, has no assets in Argentina. All operations in Argentina are conducted by subsidiaries that have nothing to do with the plaintiffs’ fraud in Ecuador. The plaintiffs’ lawyers have no legal right to embargo subsidiary assets in Argentina and should not be allowed to disrupt Argentina’s pursuit of its important energy resources.

“The Ecuador judgment is a product of bribery, fraud, and it is illegitimate. We do not believe that the Ecuador judgment is enforceable in any court that observes the rule of law.”

Amazon Defense Coalition statement:

In a major blow to Chevron’s effort to avoid paying a historic $19 billion environmental judgment in Ecuador, an Argentine judge today signed the first of what is expected to be many orders freezing billions of dollars of assets owned by the U.S. oil company.

The order, signed by Judge Adrian Elcuj Miranda of the Commercial Court of Justice in Buenos Aries, freezes almost all Chevron assets in Argentina pending enforcement of the Ecuador judgment. The embargo applies to 100% of Chevron’s capital in Argentina, 100% of dividends, all of Chevron’s stake in pipeline operator Oleoductos del Valle SA, 40% of Chevron’s oil sales to Argentine refineries, and 40% of the money Chevron has deposited in Argentine banks, said Enrique Bruchou, the lawyer who represents the indigenous and farmer communities in Ecuador who brought the lawsuit.

Argentina vs. Chevron: It’s $19 billion worth of on

Remember how Ecuadorian rain forest villagers won an $18 billion judgment against Chevron Corp. because Texaco polluted the Amazon back in the day? Never mind that the Chevron still says they discharged all their responsibilities long ago and the trial judge was corrupt. Never mind because they got the venue they asked for, they lost the case, and they have spent the last year acting as though no judgment existed. For the most part, that strategy worked fine. No US court was about to seize their assets, at least no time soon. A court case in Canada to enforce the Ecuador judgment promises to be sloow, only with more os. Some have suggested that Chevron try Venezuela, but Venezuela is more dependent on Chevron than vice versa — so that’s not going to happen. But Argentina well, we shall see.

Reuters, take it away:

Argentine judge puts embargo on Chevron assets-lawyer

Nov 7 (Reuters) – An argentine judge has put an embargo on $19 billion in Chevron Corp assets in the South American country over an environmental damages suit in Ecuador, a lawyer for the plaintiffs told reporters on Wednesday.

And that’s the whole article, for now.

For those of you in North America, an “embargo” in South American law is usually pretty much the same as an asset freeze. The company can still use its stuff, but can’t sell it or give it away. I’m sure we’ll all have much more to learn about the term over the next few weeks.

UPDATING WITH CHEVRON STATEMENT:
Bloomberg now has this, from Chevron:

Chevron is unaware of either a filing by the plaintiffs or a court order in Argentina, James Craig, a spokesman for the San Ramon, California-based company said in an e-mailed response to questions.

“The plaintiffs’ lawyers have no legal right to embargo subsidiary assets in Argentina and should not be allowed to disrupt Argentina’s pursuit of its important energy resources,” he said. “The Ecuador judgment is a product of bribery, fraud, and it is illegitimate.”

Bolivia: Journalist lit on fire after reporting on fuel smuggling

Ick.

Bolivian journalist Fernando Vidal set alight on air

A Bolivian radio journalist has been attacked while he was conducting a radio show in the southern city of Yacuiba.

Staff at Radio Popular said four masked men broke into the studio, poured petrol over presenter Fernando Vidal and set him alight.

Mr Vidal, 78, and another staff member are being treated for burns.

Relatives said Mr Vidal had been reporting on smuggling in the border area when the attack happened.

Via @viaSimonRomero