Tag Archives: macro

Latin America reality check: You too may be the 1%

I’m in the “model” Latin American country, Chile. Yesterday, I had to run some errands in Vitacura, which is part of the prosperous “favoured quarter“* of Santiago. It was a classic edge city day. Much of it could as easily have happened in San Ramon, California, as Santiago, Chile. I dropped off my MacBook Pro at a certified Apple dealer next door to a vendor of fine leathers. Walked on a tree-lined sidewalk past an Audi dealer. In the distance, the Marriott, a towering executive desk ornament, windows shut against the smog.

To keep all this prosperity running, you need a critical mass of people with money, right? Which is why an article in the Sunday print edition of generally elite-oriented newspaper La Tercera was so surprising. Here’s what Yale/UChile economics professor Eduardo Engel writes:

Slightly more than 6 million Chileans received a salary in 2010. How many received a monthly wage of more than 6 million pesos (US$144,000 a year)? Please, wait a second. Don’t keep reading, just answer. It’ll be worth the trouble. You have an answer? Second question: how many earned at least 2 million pesos a month (US$48,000 a year)? And third, how many earned at least 1.2 million a month (US$29,000)? Continue reading

Pricing power, Colombia-Venezuela edition

There are many ways to translate “pricing power” into Spanish. But the easiest way to explain what it means is here (PDF), on page 7.

Ecopetrol’s export price for “gases” — which as far as I can tell is natural gas* — in the fourth quarter went up to US$5.80 per million BTU, from $4 in 4q2010. The average price for the year rose to $5 from $3.90. As long-time readers may recall, Colombian gas exports are basically to Venezuela, via a pipeline built (ostensibly) to export Venezuelan gas to Colombia. Because Venezuela’s natural gas situation remains grim, Colombian producers including Chevron Corp. sell to Colombian national oil company Ecopetrol, which in turn sells to PDVSA, the state oil company in Venezuela, which then sells the gas to power generators and chemical plants.

I’ll leave it to the Venezuela howling squad to worry about the fact that PDVSA’s retail prices for natural gas remain the same year after year. For me, the interesting thing here is that Ecopetrol has Venezuela over such a barrel that it seems able to pretty much raise prices. I mean, where else is Venezuela going to go? Volumes exported also rose 47 percent year-over-year because of “higher demand in Venezuela” and more gas available for export.

At some point, the shoe will be on the other foot, as Venezuela has a nearly bottomless pit of gas if it can ever figure out how to get it out of the ground, and Colombian gas — well, see the last entry for more on that. Gas sales in Colombia are at a 2-year low.

*It’s Friday night so I’m not going to bother Ecopetrol flaks about this, but this whole entry is off-base if the word “gases” includes butane. Sorry for the ambiguity, but this is the journalism you get for free. On Friday night.