Latin America (Colombia) to be affected by the Credit Crisis
Interesting article for those interested on the impact of the crisis in Latin America including Colombia. While a fairly brief article, it details some effects that the current situation could have on Colombia.
There may be harder times ahead for the peso and ie housing markets in inflated areas. Wouldn’t like to be in Venezuela’s shoes from the jist of the article!!
‘’ Commodity prices, which through direct ownership (Mexico, Venezuela, Ecuador, Colombia, Chile) or taxation (Argentina, Bolivia) provide huge shares of government revenues, have dropped sharply. Growth forecasts for the last quarter of 2008, and mainly for next year, have been cut dramatically. So much for the idea of Latin immunity from contagion.’’ ….
foreign loans are crucial for infrastructure projects and foreign investment remains important for many economies (Mexico, Brazil, Colombia, Peru).
………..
If the Dow plunges, their value follows in New York, the fall spreads to São Paulo, and so on, and local investors flee the local exchanges and buy what the rich in Latin America have always bought: dollars. The currency plummets, central banks raise interest rates to retain money at home, and a domestic debt bubble bursts: mortgages, automobile loans and credit-card balances become unsustainable. All of this is beginning to happen, and will probably get worse before it improves.
……..others will weather the storm, though suffering greater harm (Colombia, Peru).
interesting article; there's no reason to believe latin america will avoid some pretty brutal effects as this worldwide recession grows. as the author suggests, their banking systems will likely be ok but it's the rapid deflation that will hurtthe most. most experts are just now beginning to believe that the recession will be long and deep but not approach the 1930's in scope or damage. nonetheless, painful for many people who will suffer a reduced standard of living but they'll adjust and survive.
posted it more as an opposite point of view to those here that believe that Colombia is its own bubble that will not be affected at all by what is occuring.
Investment Strategy - buying when others are crying!! Offloading when others are gloating!!!
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gringoloid (Trustee board) says on Nov 11, 2008, 14:36:
thank you for the link, bickerss..........and don't we have a lot of those here at pbh?
"most experts are just now beginning to believe that the recession will be long and deep but not approach the 1930's in scope or damage."
Most experts are completely worthless. These are the same people who predicted last January that US markets would go up 20% this year and whose projections TODAY still call for 25% gains in the S&P 500 between now and the end of the year.
Taking advice on how to deal with this crisis from people that failed to foresee it in the first place is dangerous.
"Taking advice on how to deal with this crisis from people that failed to foresee it in the first place is dangerous."
no argument there....anybody who listens to others about the direction of the stock market definitely subscribes to the greater fool theory...but this is one time where they happen to be the greater foo themselves. lol
Thanks for the article but I find it very sloppy and uninformed.
Some of my previous posts have illustrated or alluded to the fact that both the IMS and World Bank, etc. have already distiguisehd the Colombian and Chilean economies as being able to weather the sotrm better than te rest of Latin America. In fact, this has been a mian reson why the EU is now looking for a bilateral FTA with Colombia -as it was announced today.
Those of you truly informed about the reasons for the growth of the Colombian economy in recent years know the following fact(s), which I call the “Colombian Singularity (made-up of three components):”
1. Colombia’s GDP is principally catalyzed by internal consumption, far more than any other large Latin American economy. While exports of course play an important role (like for everyone), Colombia can still chug-along in a worst case scenario because of a well-developed infrastructure of commerce and banking system (that even influences its neighbors, more than the converse). Remember, Colombia’s growth has been by ar more driven by internal investment than by foreign investment, in sharp contrast to the case of Chile –and to some degree Peru (with its FTA/TLC).
2. Colombia has a much larger and more diverse natural resources pool “per capita” than any other Latin American nation, by far, and year-round growing seasons and an uninterrupted flow of oil (and refineries) even if an OPEC oil embargo were to ever take place.
3. Last but not least; Colombia’s monetary policies (as demanding as they may be for die-hard capitalists) is the envy of Latin America. …Remember; Colombia has the only major economy in the region whose currency has NEVER has any major devaluation or crash. All of this is beautifully packaged by the fact that Colombia’s democracy, despite its failings, is still the most mature and seasoned democracy in Latin America –a fact that even the most ardent Colombia-haters amongst you cannot argue with historians about.
The ONLY major concern that I have (RE: economy), is that Colombia/ns may over-invest in US-Dollars in the weeks to come, thinking it will protect them.
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Tinto (Moderator) (Trustee board) says on Nov 11, 2008, 15:46:
The author of that article sure gets around - he's always showing up on some political affairs show or penning op-eds. He's a former Mexican politician and his bias shows: How can a 30% devaluation in the Mexican peso, a plunging/halted stock market, reduced remittances, a rapid depletion of the country's main oil field, and having the number one (and nearly only) export customer sucking wind not be really bad news for Mexico? Yet he claims they'll be one of the Latin American countries least affected.
All of this is beautifully packaged by the fact that Colombia’s democracy, despite its failings, is still the most mature and seasoned democracy in Latin America –a fact that even the most ardent Colombia-haters amongst you cannot argue with historians about.
The narco economy will always be there, and THAT will prove to be Colombia's saving grace. No matter how poor people get they are not gonna stop buying the white powder. The price may go down a tad, that's all.
Tinto, also consider that the worse the economy of the US, the less money the 20 million Mexicans in the US have to send home. Oh yeah, Mexico will be affected.
"Here in Colombia, it's about adding life to your years, not years to your life." Brian Andrews
"The economy is like a wild animal. You can take action to affect it's behavior but you can never control it and you can certainly never predict it."
how true. most science historians and philosophers of science will agree that economics is nothing more than pseudoscience. economists like to think that their discipline has some kind of scientific legitimacy and something that actually exists in the natural world or reality. but it's all too obvious it's nothing more than an artifact of the mind. it is a little better than astrology. lol
Tobyboy
Kind of disagree a little. Colombian stock market is sucking wind, peso is dropping and growth is looking like it might slow to 1% next year. That with inflation thought to be at 5%.
The bank's next decision would be to cut interest rates which will cut outside investment.
Your natural resources pool “per capita” is kind of misleading as Colombian oil output is a joke and with prices dropping on oil- coal etc this will greatly hurt the exports.
As I have said before I still think the US is the still the best of all the sucky places to be right now.
The elusive variable affecting the Colombian economy seems to be drug money. While it is a dirty term and does tend to corrupt any analysis would not be complete unless it includes probable impact. Trouble with measurement is that it is largely an underground economy with no logical instruments for gaging its effect.
TobyBoy says on Nov 11, 2008, 15:32: flag
Colombia has a much larger and more diverse natural resources pool “per capita” than any other Latin American nation, by far
--
You are claiming Colombia has a more valuable natural resources pool per capita than Chile or Brazil?
More diverse, maybe. Larger, no. Or tell me, by what factor is it larger and where do you get your figures?
What the hell is a natural resources pool? Never heard that exact term. And why the hell should anyone care? Does it make you feel patriotic? Not me. Most Colombians will never see that wealth. I go to my second-cousin's house in Boyacá—no toilet, no hot water, the children are dirty and barefoot, and a f**king little family of turtles lives in their front room.
Why it matters is that Colombia is self-sufficient in oil, and probably will continue to be. Now if that family in Boyacá were a typical American suburban family wasting every last resource almost as fast as they could, THEN Colombia would have a natural resource problem!
America used to be the #1 SUPPLIER of oil, now there is barely any left and comnined with skyrocketing use, they have to import more and more every year.
Also, between Colombia and Brazil they have 30% or so of the world's fresh water supply.
The style of living the Americans have can NOT last much longer. It is already starting to come apart at the seams. You talk as if people are going to be able to sustain that lifestyle in America forever!
You bring up a very good point about the US. But fricken Colombia is not an acceptable alternative! There is no reason why poor people's lives can't be improved in Colombia without living like fat North American consumer junkies. It's not as if they're mutually exclusive.
I am quite sure about Colombia's abundance of natural resources. While Chile may have more copper, Colombia has the biggest reserves of Coal in Latin America, more oil, gas and gold reserves (just to name a few) than either Chile or Brazil (though recent figures for oil reserves vary a lot between Brazil & Colombia –but Colombia still has more per capita either way).
Colombia is truly better poised to survive much better the worst global tempest. Certainly it will be felt hard, but compared to the rest of Latin America –but especially the world, it will be as good as it can be.
While I do not have the time to continuously have to provide proof as you and others ask, please note that this information is always available to those of you who are really interested (on line, etc.).
The rest is even easier to verify on your own.
___________________________
MGM Mineral Resources Acquires Exceptional Property in Colombia's High Yielding Gold Zone
Posted on: Wednesday, 3 May 2006, 09:00 CDT
Metro Gold Mines Mineral Resources Inc. (OTC: MGMX), a growing gold mining company engaged in the acquisition and development of production properties in South and Central America, announced that it has completed the acquisition of La Esperanza gold mine. La Esperanza is located in Segovia, the richest, most gold-bearing municipality in Colombia.
There are proven multi-million ounce deposits of rich gold under Colombian soil. Colombia is the highest-yielding nation in South America, having produced more than 125 million ounces of gold. But it is also the most under-explored and under-developed. With the notable exception of neighboring Frontino Gold Mines LTD -- which has produced over 5 million ounces of gold in the Segovia area -- the majority of local miners have not had the resources or technology to sustain maximum production.
MGM Mineral Resources is working to modernize operations and maximize profitability of La Esperanza mine, which is located within the province of Antioquia where between 60 and 80 percent of the nation's gold is produced. Through partnerships with local and federal government authorities and the surrounding communities, the company is ramping up the mine to achieve full production capacity. MGM Mineral Resources believes it can significantly accelerate the extraction process, increase overall productivity and lower production costs.
"MGM Mineral Resources has been working to acquire La Esperanza since its inception and it is extremely gratifying to see this exceptional property become part of our portfolio," said Ken Lamb, President of MGM Mineral Resources. "The Company is very excited about La Esperanza's prospects and would like to thank Mr. Jairo Giraldo, our CEO, for orchestrating this acquisition. Mr. Giraldo is a highly respected figure in the Colombian mining community with more than 40 years of proven experience in the industry. Due in large part to his hard work, close relationships with government and industry officials and excellent reputation we are able to embrace this opportunity."
"We are working on releasing the results of our geology reports, which will outline just how extensive a project this mine will become," said Chairman and CEO Jairo Giraldo. "La Esperanza is located within our country's richest gold zone. We are highly pleased with what we have seen so far. We believe this acquisition has the potential to significantly improve our bottom line and increase shareholder value."
About MGM Mineral Resources (OTC: MGMX)
Metro Gold Mines Mineral Resources Inc. is a growing, expertly managed gold mining company focused on acquiring and producing an impressive portfolio of exploration and production properties in South and Central America. MGM Mineral Resources is working to establish itself as a world-class gold company, capitalizing on smart acquisitions, leading edge technology, modernized operations, deep industry expertise and a strong gold market to cost-effectively produce high quality gold. The company has identified a significant opportunity to exploit proven but under-developed mineral resources in Colombia and is in the later stages of negotiations with several high grade gold and silver properties. MGM Mineral Resources is initially targeting the richest gold zone in Colombia, where between 60 and 80 percent of the nation's gold is produced.
Forward-Looking Statements
Statements contained in this news release, which are not historical facts, are forward-looking statements within the meaning and pursuant to the Safe Harbor provisions of the Securities Litigation Reform Act of 1995 that involve risks, uncertainties and other factors that could cause actual results, performance, prospects and opportunities to differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results or events to differ materially from current expectations include, among other things: volatility and sensitivity to market prices for gold; replacement of reserves; procurement of required capital equipment and operating parts and supplies; equipment failure; unexpected geological or hydrological conditions; political risks arising from operating in certain developing countries; imprecision in reserve estimates; success of future exploration and development initiatives; competition; operating performance of the facilities; environmental and safety risks including increased regulatory burdens; seismic activity, weather and other natural phenomena; failure to obtain necessary permits and approvals from government authorities; changes in government regulations and policies including tax and trade laws and policies; ability to maintain and further improve positive labor relations; and other development and operating risks. Although MGM Mineral Resources believes that the assumptions inherent in the forward-looking statements are reasonable, undue reliance should not be placed on these statements, which only apply as of the date of this report. The company disclaims any intention or obligation to update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
Contact: For further information on MGM Mineral Resources please call: 905 704 8026
SOURCE: MGM Mineral Resources
Source: MARKET WIRE
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Tinto (Moderator) (Trustee board) says on Nov 12, 2008, 08:33:
Natural resources are a gift, to be sure, but they don't mean much absent infrastructure and a decent regulatory and royalty climate. Colombia is nowhere near Africa in this respect, but it has a lot of room to improve.
Your article says nothing about gold reserves, it talks about historical production. Most of the low hanging fruit has been picked clean a matter of centuries ago. That gold is now sitting as gold bars in bank vaults in Europe and North America, and Colombia has a hole in the ground where the gold used to be.
We could talk about this further if you want, but it's already becoming clear to me that your analytical skills are pretty poor.
I wish you had at lease READ the article before slinging your ubnfounded critique at me. I will attempt to paste again at least the relevant paragraph from the article, please take teh time to read it, as it is from 2008:
"There are proven multi-million ounce deposits of rich gold under Colombian soil. Colombia is the highest-yielding nation in South America, having produced more than 125 million ounces of gold. But it is also the most under-explored and under-developed. With the notable exception of neighboring Frontino Gold Mines LTD -- which has produced over 5 million ounces of gold in the Segovia area -- the majority of local miners have not had the resources or technology to sustain maximum production."
Now wiht reagrds, to your so called figures; it is emabrrasing to see that your "analytical skills" be so milsleading. Did you happen to notice the DATES of your supposed sources?
Have you any idea why Ecopetrol BP and otehres aregoing gangbusters THIS year exploring for oil in Colombia?
I'm outta here, whata waste of time these exchages can be. I have better things to do while the world's economy starts to burn.
So what are Colombia's gold reserves? 125mmozs is the historical prodution. And? Do you understand the difference between reserves and historical production?
You can claim something as many times as you like. But usually that is supported by empirical and independently verifiable facts, of which you provided nothing of value.
Yeah I noticed the dates. I also observed Brazil's oil exploration is on the ascendency, much more so than Colombia. If you are claiming my numbers are out of date (2006 or 2007 figures), provide better ones please. I can't wait to see what you don't come up with.
At the moment I have shown Brazil's reserves are ten times the size of Colombia's and will at least double. You have replied with a lot of hot air.
Pedro, do not twist my words just so can insult me.
Once again, READ what I said (penultimately):
"...Colombia has the biggest reserves of Coal in Latin America, more oil, gas and gold reserves (just to name a few) than either Chile or Brazil (though recent figures for oil reserves vary a lot between Brazil & Colombia –but Colombia still has more per capita either way)."
Irrespctive of reserves, Colombia has had more oil production PER capita than Brazil. I never addressed future output.
Now, with regards to Gold, if you think there is no more gold to be mined in Colombia, then you'd better start telling companies to stop mining for it Colombia !
Tinto (Moderator) (Trustee board) says on Nov 12, 2008, 09:54:
There shouldn't even be a debate about the size of proven and probable crude oil reserves in Brazil and Colombia, it's no contest. And until a hell of a lot more exploration takes place in Colombia it will remain that way.
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Tinto (Moderator) (Trustee board) says on Nov 12, 2008, 09:58:
As for per capita crude oil reserves:
BRASIL
12,000,000,000 barrels proven*
180,000,000 people
67 barrels per capita
*if it's commercially feasible to drill through the off shore salt crust, this number is going way up, the oil is there.
COLOMBIA
1,450,000,000 barrels proven
43,000,000 people
34 barrels per capita
You guys can can argue about gold; my knowledge begins and ends with oil and mangos.
Admitting you may have been wrong about something once all the facts are on the table is usually seen as a sign of good character and generosity of spirit.
On the other hand, trying to wriggle out of something while insulting the other person who showed you the error just makes you look like a nob.
The US has used up most of its oil, and now imports more than half of it's needs. There's little to argue about there. Most of its coal too. I dunno what else off the top of my head.
Let me get into specifics:
When you go out for a hot dog in the USA they hand you enough paper napkins to write fucking War And Peace on. In Colombia you get just as many as you need.
In most jurisdictions in the USA you are REQUIRED as a landlord to have a hot water tank, heating the hot water so that it's on demand. This is not only an incredible waste of energy, there are also health hazards associated with it.
As a landlord you are also required to heat rooms to a minimum of 68 degrees in the winter. This means that if you have an apartment that has the hottest room at 85 degrees and the coldest room at 67 degrees you are in violation. Once again, this is a CRAZY waste of energy, and it's mandated by LAW. No one's going to die if a room as at 65 60 or even 55 degrees!
Not to mention there was a documentary done on one lady making minimum wage in Kansas, she was using paper plates and utensils because it was CHEAPER than paying for the water to wash them.
And let's not even get started on the fact that the vast majority of America has piss-poor public transit, REQUIRING people to have cars.
None of this is an indictment of the average American nor am I lifting up the average Colombian. I'm simply pointing out the differences in SYSTEMS.
It's more like 40% BTW, not 64%. And anyways like I said maybe what the world needs is a little more poverty and sustainability right now.
And I don't think the lifestyle in America will get as rough as it is in Colombia. I think it will be WORSE. MUCH MUCH MUCH worse. They really screwed up the way things for the past 50 years have been built so spread out from one another. That was a colossal mistake, once again, doesn't necessarily 100% reflect on the American people, but the people WILL be the ones to pay for it.
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Tinto (Moderator) (Trustee board) says on Nov 12, 2008, 13:23:
Yeah, people in restaurants waste a lot of napkins, but we're not anywhere close to running out of coal (or trees). With over 25% of the total recoverable reserves, the US is the Saudi Arabia of coal.
One bright spot of the higher energy prices is more support for public transport, closer to the city living and on-demand water heaters.
Once again, I thank you for your good help (in a response before). While your chart is a good comparison of “reserves & per capita”, standing vis-a-vis oil reserves (–which was not my initial point), I nevertheless do stand corrected because Brazil’s “production output” has also dramatically increased in recent years (and though I was aware of it, I did write about it in haste). Not to worm my way out of this ridiculous contretemp, but the truth is that I wrote my initial comment rather fast, and the focus of my comparison was Colombia vs. Chile, against which in this and various other posts I have had to point out my favored Colombian position. Nevertheless, we must all keep in mind that Colombia's actual oil reserves are still an unknown and quantity, and heavy exploration is only now beginning to take place again.
With regards to output; the essence of my thesis was simply that all round; Colombia is uniquely positioned to weather the worst of any financial crisis ahead, better than most other nations, in Latin America or elsewhere. –That is what the original post is inviting discussions about, and not who has the biggest oil-rig.
However, it is sad to see that the rest of my other very valid points about the plethora of Colombia’s natural resources are ignored, just so that someone can have fun attacking me in what should have been a more mature dialogue, about what is a very serious and cloudy future for all of us in the months to come …and I really hope I am wrong on this issue.
Coal, I dunno, the USA uses a LOT of it still. As a matter of fact, we all know they are importing coal from the Santa Marta area with Drummond.
The problem is, many US cities are built so low-density that it's going to be real difficult or even impossible to make them efficient again.
Colombia for having just really started to develop itself has an enormous advantage. There are almost no suburbs in Colombian cities. Even in Bogota, 7 million people live within city limits and only another half a million live outside. I hope this NEVER changes. Hopefully Colombia as it grows and develops will avoid the mistakes made in North America.
I share your hatred for car-dependent suburbia, but I don't think your scenario will come true. America has a tremendous amount of built-up infrastructure and social capital (200 years of industrialization, road building, canal building, railroads, aqueducts etc.). There are hundreds of smaller cities and towns that will be re-colonized in the event of a prolonged oil crisis. We have thousands of miles of railroads that can be put to use.
I'm a bit worried about Colombia in such a situation. The modern, somewhat unified Colombian nation as we know it was created by jet travel and overland trucking. Without them, Colombia will go back to the days of month-long journeys up and down the Magdalena by riverboat. There are no trains, save for el turistren. Lastly, Colombian society is already tearing itself apart. I would not want to see it under cataclysmic economic distress.
...Speaking of which, this just appeared in today's El Tiempo:
"Política de seguridad democrática blinda a Colombia de crisis económica, dice Uribe
El país está "entre los 10 países mejor protegidos" para enfrentar la debacle financiera que ha sacudido al mundo, aseguró el mandatario en un evento de la Policía.
Uribe sustentó su tesis con un reporte de la firma Merrill Lynch sobre los países que mejor condición presentan frente a la crisis financiera mundial.
Para Uribe, la seguridad democrática ha ayudado a recobrar la
confianza inversionista y a obtener el resultado de esa firma de
análisis de riesgo.
En un discurso en el marco de la celebración de los 117 años de la Policía colombiana, afirmó que esa calificación es fruto del trabajo de policías y soldados en la implementación de esa política de lucha contra la violencia y el terrorismo.
"La seguridad democrática (...) le permite a Colombia ser
calificada hoy, como se está dando la noticia internacional, como
uno de los diez países que arriba a esta crisis con la economía
mejor protegida", destacó el gobernante.
Según el informe sobre el análisis de riesgo de 44 economías
mundiales que realizó Merrill Lynch, México, Nigeria, Filipinas,
Colombia, Egipto, Indonesia, Perú, China, Rusia y Omán son las
economías con menor vulnerabilidad en medio de la crisis financiera.
Uribe recordó que en los últimos años las reservas colombianas
pasaron de 10.600 a 24.000 mil millones de dólares, mientras que la cobertura en los bancos para la cartera morosa pasó de un 39 por ciento a un 110 por ciento."
Most of the American railroads are in such piss poor condition by now that they would have to be torn up and rebuilt from scratch. Here's another shocking fact. There is NO WAY for freight trains to pass through NYC from NJ. They all have to stop at NJ and continue in TRUCKS. No wonder Canal street is such a holy mess! The sad part is that America DID have great infrastructure 50 years ago, but most of it is in serious decay.
Colombia definitely sorely lacks a decent rail system, but they are starting on it.
That's a real interesting list Toby "and the last shall be first".....I would add Brazil to that list though.
Plus, Brazil is probably the country in the world that is BEST situated to weather an energy crisis. They have excellent policy in that area, and are now about to reap the benefits. Colombia may not be Brazil in energy policy, but they are not doing too badly either.
You will be happy to learn that President Uribe (this year) has already given the green light to re-furbish old railways and build lots of new ones -a real mega-project of new railways for Colombia.
In fact, it is to be so extensive that when he met with President Lula earlier this year (in Leticia), the two agreea to build the first trans-amazonian raliway -and to give Brazilian goods Colombian-port access for exports.
I grew up in a place in Canada that makes Minnesota look warm, dude. I've done -40 and below to death and back.
There's absolutely no reason why on-demand water heaters shouldn't be used instead of tanks, no matter the climate, the only place they don't work is above 9000 ft of altitude. Yes dude, hot water tanks are BAD. They are a waste of energy and breed bacteria.
I also assure you that at 55 or 60 degrees no internal water pipe is going to freeze on you, unless your place is absolutely shit poorly insulated which is a whole other issue. Not to mention it's actually healthier to have the ambient temperature below 65 degrees, especially in the winter.
Like I said, I hope Colombia NEVER adopts some of America's bad habits. I'd rather the place stay poor as it is. Or now you're going to come out and say that Colombians aren't OBVIOUSLY healthier than Americans??
