China South America

CHINA SOUTH AMERICA HAS MOVED

noreply@blogger.com (Bennett A. Reiss) — Wed, 21 Oct 2009 18:09:00 +0000

After over one year of ups and downs with Google's blogger, my loyalty to the tech giant is slowly fading as its service remains blocked in The People's Republic of China.

Adding insult to injury is this new limit on the number of tags / labels you can use when posting.

Please visit http://chinasouthamerica.com/home to access all the content you see here on ChinaSouthAmerica and for future updates.

Thank you,

Benito

China and rare earth metals

noreply@blogger.com (Bennett A. Reiss) — Sun, 11 Oct 2009 20:54:00 +0000

The Economist has just published a new article about China’s abundant and ever more precious rare earth metals. This adds to a flurry or articles, which have recently made it into major English language publications here in the US and Canada—including the Wall Street Journal, Market Watch and Business Week-Canada.

The value of global rare-earth trade last year was just $1.25 billion, and it is projected to grow to about $3 billion by 2015—not much by most accords. However, the metals in question are absolutely essential for many high tech industries because of their phosphorescent and magnetic properties.

Rare earth metals include terbium, dysprosium, yttrium, thulium, lutetium, neodymium, europium, cerium, and lanthanum. These metals, as described by The Columbia Encyclopedia usually occur together in minerals as their oxides ( rare earths ) and are somewhat difficult to separate because of their chemical similarity.

The state-controlled Inner Mongolia Baotou Steel Rare-Earth Hi-Tech Company dominates production of “rare earth metals” in China. Alistair Stephens of Arafura Resources in Australia, explains, “the Chinese realized the strategic importance of rare earths decades before the West.”

Producing the latest flat screen TV’s, smart phones, wine turbines, solar panels and even electric batteries which power America’s new Chevy Volt (battery powered car), are all simply not possible without these rare earth metals.

I am not one to doubt the incredible potential of the free market system, but in this particular situation, Deng Xiaoping was wise not to trust in the free market to dictate his “rare earth metals” policy in the 80’s.

As commodity prices fell in the mid 80’s, rare earth producers in the United States and Canada were priced out of the market. Deng Xiaoping, the man associated with introducing markets in China, instead encouraged the development of mines in the mid-1980s as prices fell dramatically.

Rare earth metals may not generate as much revenue as oil does for Saudi Arabia or Russia, but it is clear if China chokes off supply and begins consuming more of their rare earth metals domestically, the developed world will need to find new sources.

Additional articles on rare earth metals:

Will China Tighten 'Rare Earth' Grip? - The Wall Street Journal

Rare earths are vital; and China owns them all - Market Watch

Rare-earth metals: The new China syndrome - The Canadian Business Week

China South America is moving ---

noreply@blogger.com (Bennett A. Reiss) — Sat, 10 Oct 2009 16:09:00 +0000

Peruvian Micro-Entrepreneurs head to China

noreply@blogger.com (Bennett A. Reiss) — Sat, 10 Oct 2009 15:59:00 +0000

It’s been awhile since CSA last ventured into the world of MicroFinance. Well today some news caught my attention.

About sixteen Peruvian Micro-Entrepreneurs (if that’s the correct term to call them) from various sectors will travel to Guangzhou, China to participate in the 106th Guangzhou Import and Export fair. With a total of 209 countries in attendance, and thousands of exhibitors, this is a big deal for these small Peruvian businesses.

I question if these business are truly worthy of being called the products of micro-finance. I hope that they are, but my gut is telling me it’s quite possible corruption and classic South American favoritism probably led the Peruvian government to carefully handpick a few to send to China.

Ministra de la Producción, Mercedes Aráoz, inauguró Feria de Beneficios
y Oportunidades de Foncopés en IPAE. Foto: ANDINA/Norman Córdova.

On the other hand, if they are truly small micro-enterprises which earned this trip to China through participating in a micro-finance program of some sort, this would be a case and point example of the potential of micro-finance institutions to empower the poor with the tools they need to succeed.

If you can read Spanish please click here to access the article which served the basis for this post.

Al-Qaeda declares holy war on China over repression of Uighurs

noreply@blogger.com (Bennett A. Reiss) — Thu, 08 Oct 2009 22:22:00 +0000

According to this Bloomberg article, Abu Yahya al-Libi, the alleged successor to Osama Bin Laden has declared a holy war against the Chinese state for its repression of its Uighur.

Abu Yahya al-Libi has been quoted saying:

"The state of atheism is heading to its fall.”

"China will suffer the same fate as the “Russian bear.”

How China is going to deal with this new threat remains to be seen. Also, how Abu Yahya al-Libi plans to wage this holy war is far from clear. Foreign policy buffs describe some obvious concerns such as the growth of the Xinjiang-based East Turkistan Islamic Movement, which is based in the Taliban-rules areas of Pakistan.

This declaration of sorts comes on the heels of The July riots in the capital of Xinjiang which were the deadliest in China in decades. Bloomberg writes, "Al-Libi’s speech, entitled 'East Turkistan, the Forgotten Wound,' echoed complaints of the Uighurs that decades of government-sponsored migration to the province is making them a minority in their homeland."

Personally, this blogger feels a threat such as a Pakistan based, anti-Chinese (Han) movement is not a major problem in the short-term, but it will no less force China to become more involved over the future of Afghanistan and Pakistan.

All eyes will be watching next week when members of Shanghai Cooperation Organization meet in Shanghai to discuss regional issues. This group includes China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan. Xinjiang, or East Turkistan, as many in the Muslim world refer to it lies at the heart of this grouping of Central Asian countries.

Click here to access Bloomberg's article on this topic

Everyone wants a piece of Uruguay

noreply@blogger.com (Bennett A. Reiss) — Thu, 08 Oct 2009 02:05:00 +0000

Hot off the presses… “Investors from Brazil, Argentina, Basque Province of Spain AND China flock to Uruguay.” So hot in fact, the article seems to be running on “Future Standard Time,” because despite the fact it is still October 7th in the US (where I’m writing from) and in Uruguay, its quite curious how the article was published at 12:39am UTC on October 8th…

You can click the highlighted article title above to access the article directly and read all the juicy details about how Uruguay seems to be the place to be.

Interestingly enough it is not because the country is swimming in resource wealth, a cheap labor sector or any of the cliché niches of a “developing country.” Rather because of its excellent record of political stability, the existence of a judicial system which is fair and honors the law and in my opinion… also because of its unique position next door to Brazil—Uruguay’s major economic partner at the moment.

Major investments highlighted in the article include:

Argentina: No particular companies mentioned, but the article describes how Argentina’s investment community has become “disenchanted with the unorthodox policies and uncertainties of their country they have crossed to Uruguay looking for investment opportunities.”

Brazil: In Sept 2009 Brazilian food processing giant, Marfrig acquired a 51% in the Uruguayan Tannery Zenda. Zenda produces upholstery for some of the most prestigious German car brands

Spain (Basque Province): Cultural heritage links many Uruguayans to “la madre patria” aka, the mother country of Spain, and specifically to the Basque region. Finance minister Alvaro García met with Basque entrepreneurs who expressed “a firm interest to invest in different sectors.”

China: In Sept 2009, a delegation of Uruguayan entrepreneurs attended China’s International Investment and Trade Fair and returned with news Chinese investors were interested in investing in Uruguay’s infrastructure sector; including its ports, energy sector and water treatment facilities.

October fire sale! Russian credit & Rubles accepted

noreply@blogger.com (Bennett A. Reiss) — Tue, 06 Oct 2009 22:27:00 +0000

Rigzone reported today that a Russian oil consortium would not have the pay the $1 billion usd Venezuela had previously requested as a down payment in order to partake in tapping Venezuela's Orinoco oil fields.

Instead, the Russian consortium will only have to pay $600 million usd. Sounds like a nice 40% bargain to this blogger. It's a nice deal if you ask me, which coincidentally comes on the heels of Venezuela's securing a large credit line from Russia to buy military equipment.

Orinoco Belt Regions - [Rigzone, 10-6-09]

According to this Dow Jones Newswire published by Rigzone,

The Chavez-led government has talked about plans for nearly $70 billion in oil investments over the coming years as this oil-rich nation seeks to ramp up dwindling production numbers and boost its sagging economy.

But so far, nearly all those plans are based only on memorandums of understanding, with no solid investment commitments from foreign oil companies.

Sounds like Venezuela is becoming increasingly hungry not only for foreign investment, but also to cement its relations with a geopolitical power like the Russian Federation.

Click here to read the newswire article from Rigzone, which I must admit does a far better job at detailing the situation than the concise, and slightly cynical analysis published here at China South America (CSA).

Strike continues at Shougang in Peru (update)

noreply@blogger.com (Bennett A. Reiss) — Tue, 06 Oct 2009 22:20:00 +0000

Reuters released their latest update on the ongoing strike occurring at Chinese owned iron ore mine, Shougang.

LIMA (Reuters) - Shougang Peru operations stopped by strike

Shougang Hierro Peru, the country's only iron ore producer, said on Monday a week-old strike at its mine had halted production and slowed mineral shipments.

The company's comments were its first since some 1,200 workers walked off the job more than a week ago in a bid to pressure Shougang (SHP.LM: Quote) to raise wages.

"Workers are on strike, therefore (the mine) is not producing," Raul Vera, Shougang's chief executive, told Reuters.

Click here to access the complete update on the situation, courtesy of Reuters

Chile, Copper and BHP Billiton

noreply@blogger.com (Bennett A. Reiss) — Tue, 06 Oct 2009 22:08:00 +0000

Newswire / CSA Commentary --

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Chile copper output rises 7.8%

Copper output in Chile, the world's biggest producer, rose 7.8% in August from a year earlier after state-owned Codelco and BHP Billiton boosted production, the government said.

Output increased to 459,823t from 426,689t a year earlier, the country's national statistics agency said in a statement distributed in Santiago today.

Click here to access the complete article

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Likewise, as this next article exhibits, BHP’s full year profit forecast may be substantially larger than previously thought…

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BHPB profit forecast raised 22% on copper, RBS says

BHPB's profit after tax may be US$10.68 billion in the year ending June 30, analysts led by Warren Edney said in a report dated yesterday. Profit may be US$14.9 billion in the year ending June 30, 2011, up 11% on an earlier forecast, he said.

Click here to access the complete article

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However, we’ll see how this all plays out when BHP’s workers meet next week to vote a potential strike

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BHPB Chile copper workers to vote on strike next week

BHP Billiton workers at the Spence copper mine in Chile will vote whether to go on strike next week after rejecting the company's latest pay offer, a union official said...

Workers may start a strike on October 3 for an indefinite period if they fail to get more of a pay increase, Mr Ramirez said yesterday...

Click here to access the complete article

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All while yet another big player in the copper sector ups their 2010 forecast of avg copper prices

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Chile's Sonami sees 2010 avg copper price $2.50/lb

Chile's second biggest mining association, Sonami, expects the average price of copper to rise by up to 19 percent next year, which might encourage the continuation of more copper projects in the South American nation, its president told Reuters on Monday.

The average copper price may rise to $2.50 per lb in 2010 from an average of $2.10 to $2.30 this year, Sonami's Alfredo Ovalle said in an interview at a forum in Santiago.

Click here to access the complete article

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RBS forecasts copper prices may hit a new record by 2013

noreply@blogger.com (Bennett A. Reiss) — Sun, 04 Oct 2009 15:45:00 +0000

Copper is likely to reach a new high by 2013 as the market moves into a deficit and further tightens in the coming years, RBS Global Banking & Markets said on Thursday.

"Copper remains our most favoured base metal," RBS said in a research note, in which it forecast an average cash copper price of $9,000 a tonne by 2013, a rise of more than 46% from the current cash MCU0 price on the London Metal Exchange. Benchmark three-month copper price MCU3 hit a record high of $8,940 a tonne in July 2008 and traded at $6,115 a tonne on Thursday.

"Copper's demand prospects are not among the best but we believe copper producers will have the most difficulty in keeping up with growing demand. We forecast an underlying market deficit by 2011 and that by 2013 it will be fast approaching pre-recession tightness," the bank said.

Copper, used extensively in construction, has doubled in price since the beginning of the year on the back of restocking from China, the world's top consumer of the metal and on expectations of a recovery in the global growth.

...

Click here to access the full article from Mineweb

Congratulations Rio de Janeiro; let the party begin

noreply@blogger.com (Bennett A. Reiss) — Sat, 03 Oct 2009 21:59:00 +0000

China parade marks anniversary

noreply@blogger.com (Bennett A. Reiss) — Sat, 03 Oct 2009 21:54:00 +0000

A nice show of retro-decadence if you ask this blogger. Pretty impressive nonetheless and indicative of China's emergence as a global power. Although, as many articles here in the West have pointed out, this type of parade was not meant to scare Western observers. Rather it was meant to dazzle and impress the 1.4 billion Chinese, and that it did...

Oct 1 - China puts up a spectacularly choreographed show of military might to mark the 60th anniversary of the birth of the People's Republic of China.

Puja Bharwani of Reuters reports.

Reuters Update: Strike at Shougang Peru mine enters fifth day

noreply@blogger.com (Bennett A. Reiss) — Sat, 03 Oct 2009 21:05:00 +0000

A strike of some 1,200 workers at Shougang Hierro Peru (SHP.LM), a unit of China's Shougang Group, entered its fifth day on Friday with no end in sight, union leaders said.

"We don't see a solution, there's no dialogue with the company," said Julian Sulca, a union official.

Click here to access the full article from Reuters

Protests erupt in Peru at Chinese owned miner Shougang

noreply@blogger.com (Bennett A. Reiss) — Mon, 28 Sep 2009 15:43:00 +0000

Reuters reported a few days back that workers at the Chinese owned Shougang Hierro Peru (SHP.LM), which happens to the only iron producer in the country of Peru, were planning a strike.

Well today the workers took action. A leader of the workers union told Reuters reporters "that all 1,200 workers at the mine had joined the labor action."

More updates to come in the days to come. Click here to access the Reuters wire on this story directly.

Back in action after 10 day hyades

noreply@blogger.com (Bennett A. Reiss) — Mon, 28 Sep 2009 15:37:00 +0000

Apologies to readers who check this site on a frequent basis for the lack of recent updates. I've been traveling and preparing for some big changes. Updates to resume this afternoon. For now, feast your eyes on China's preparation for its 60 year celebrations of the founding of the People's Republic of China.

Sep 28 (Reuters) - Chinese authorities expect 200 million people to be on the move over this year's October National holiday and China's 60th anniversary.

Japan; a look at the growth strategy of the world's 2nd largest economy

noreply@blogger.com (Bennett A. Reiss) — Thu, 17 Sep 2009 23:18:00 +0000

Sep 17 (Reuters) - Japan's new government is crawling out of the worst post-War recession ever, but its ability to spend is growing more limited.

Sino-Brazilian Cooperation

noreply@blogger.com (Bennett A. Reiss) — Thu, 17 Sep 2009 15:42:00 +0000

Loro Horta presents a good analysis of the growth and future direction of Sino-Brazilian Cooperation.

The dragon and anaconda: China, Brazil and power balance in Americas

By Loro Horta
Published on September 16, 2009

The Sino-Brazilian strategic partnership signed nearly two decades ago has, in recent years, begun to produce some impressive results. In 2007 trade between the two giants reached US$29 billion and grew to an impressive $43 billion by the end of 2008. This expanding economic relationship is being complemented with a corresponding growth in their political and diplomatic partnership.

Chinese President Hu Jintao (R) shakes hands with his Brazilian counterpart Luiz Inacio Lula da Silva

after signing the joint communique at the Great Hall of the People in Beijing, capital of China,

May 19, 2009. (Xinhua/Rao Aimin)

Both countries have cooperated in very sensitive areas such as space technology, aviation and military-related technologies. Since the early 1990s the two countries have launched three jointly-developed satellites and are co-producing a medium-range commercial jetliner. American defence and intelligence officials have expressed concern over such ties, claiming that Brazil was passing to China sensitive satellite and remote sensing technology in exchange for Chinese ballistic missile know-how.

Brazil is indeed a very important source of technology for a China that has been restricted by arms sanctions by the West following Tiananmen. Brazilian weapons have reached as far as Southeast Asia, when Malaysia acquired 18 Astros multiple rocket launchers (MRLS), causing concern in Singapore in the early years of the current decade.

Brazil is not just a major military technology provider, but also a supplier of civilian products. This was clearly demonstrated in August 2007 when it signed a $1.3 billion contract to sell commercial jetliners to Lufthansa and Japan Airlines.

An example of the closeness of Sino-Brazilian military ties came in May this year when Brazilian defence minister Nelson Jobim announced that Chinese fighter pilots would be trained on the Brazilian aircraft carrier Sao Paulo. Jobim's announcement came shortly after a senior Chinese military official publicly stated Beijing's intention to acquire an aircraft carrier in the near future. Bearing in mind that very few countries in the world possess an aircraft carrier and that they are all close US allies, the Brazilian gesture no doubt attests to the importance of Brazil as a source of military technology and know-how.

The energy sector is fast emerging as one of the most important areas of cooperation between the two nations. Brazilian national oil company Petrobras and China have signed several agreements for the construction of various sections of a massive $6 billion pipeline to transport Brazil's growing energy exports to China. In May this year the Chinese government signed a loan of $10 billion to Petrobras to assist it in developing the newly discovered Tupi oil fields.

In exchange, Brazil is to supply Chinese state-owned Sinopec with 200,000 barrels of oil a day for the next 10 years - nearly 7 per cent of China's oil needs. Petrobras is also reported to be transferring deep-water drilling technology to Chinese state-owned companies - an area where China has been rather unsuccessful. Most of its oil activities in China and throughout the world are on shore or in relatively shallow waters.

Click here to read the full analysis

Studies to Eliminate Dollar in Brazil-China Trade Going Slow

noreply@blogger.com (Bennett A. Reiss) — Thu, 17 Sep 2009 15:39:00 +0000

China and Brazil have created a work group to study the possibility of implementation of a bilateral trade program in their respective currencies, in replacement of the North American dollar, said a source in the Central Bank of Brazil.

"The negotiations are still in an initial phase, with a work group having been created with representatives of Brazil and China, who also met during the G-20 summit, in London," explained a source.

The next step should be the visit of a Central Bank of Brazil delegation to China, "despite there being no forecast as to when it may come true," said the source.

The work group should analyze the "results to be reached through an agreement that China recently established with Argentina" - the first country in South America to benefit from trade exchanges in the same currency with the Asian giant and with whom Brazil has also been developing the same program since September 2008.

The Central Banks of China and Brazil are also going to develop a "study of the potential bilateral trade volume to analyze the possibility of an agreement."

Click here to read the full article

Written by Newsroom
Wednesday, 16 September 2009
[Source] - brazzilmag.com

Jim Rogers Investment strategy in time of crisis CNBC

noreply@blogger.com (Bennett A. Reiss) — Tue, 15 Sep 2009 14:57:00 +0000

Words of wisdom, as usual, from my man Jim Rogers.

"Protectionism is getting worse and worse. I'm terribly worried about because protectionism lead to the Great Depression... I'm worried about a lot of things. A 50% rise in 6-9 months is something to worry about. You usually have corrections after that.

The rise of the Yuan

noreply@blogger.com (Bennett A. Reiss) — Tue, 15 Sep 2009 14:21:00 +0000

Yuan Inflows to Rise as Dollar Loses Luster, WisdomTree Says -- Bloomberg

Sept. 15 (Bloomberg) -- Investors are putting more money into the yuan
on bets China will allow appreciation in the exchange rate to make it
more accepted as an international currency, according to WisdomTree
Investments Inc.

A weak dollar, linked to concern about record amounts of debt in the
U.S., will drive more funds into China and emerging markets given
prospects growth rates will exceed those in developed countries, Bruce
Lavine, president of investment firm WisdomTree, said in an interview.

Lavine said in each of the last three months there was an inflow of
$25 million into his $142 million Chinese Yuan Exchange-Traded Fund,
which was started in May 2008 and invests mostly in yuan
non-deliverable forwards. ETFs are listed on an exchange where they
are bought and sold daily like stocks.

"Five years from now you will see a thoroughly different landscape in
terms of internationalization of the yuan," said New York-based
Lavine, whose funds oversee $5.1 billion in assets. "When the dam
finally breaks, it happens faster than you think."

To access the full article please visit --
http://www.bloomberg.com/apps/news?pid=20601110&sid=a7FkyJviwSqE

--
Sent from my mobile device

China, Costa Rica make progress in free trade talks - AFP

noreply@blogger.com (Bennett A. Reiss) — Mon, 14 Sep 2009 17:45:00 +0000

SAN JOSE — China and Costa Rica concluded the fourth round of negotiations in Beijing aimed at reaching a free trade agreement, according to the foreign trade ministry.

Costa Rica -- which gave up six decades of ties with Taiwan in favor of China two years ago -- is the third Latin American country to negotiate a free trade deal with China, after Chile and Peru.

In the round of talks that ended Thursday agreements were reached for more than 90 percent of each country's exports, the trade ministry said.

Costa Rican exports include coffee, bananas, fruit juices, cigars, pork, beef and chicken, said Costa Rican chief negotiator Fernando Ocampo...

Click here to access the full article from AFP

Use it or lose it!

noreply@blogger.com (Bennett A. Reiss) — Mon, 14 Sep 2009 17:40:00 +0000

BEIJING, Sept 14 (Reuters) - China's finance ministry on Monday ordered local governments to use money allotted to them under a 4 trillion yuan ($585 billion) stimulus package quickly and efficiently, or else risk losing out on future spending.

The central government could "delay or cut" further allocations of money to those provincial governments that do not use their existing stimulus funds appropriately or do not raise enough of their own funds to complete the projects, the ministry said in a statement on its website (www.mof.gov.cn).

The move aimed to "ensure that projects backed by the central government get started in time and that budgeting for them is accelerated, in order to achieve our strategic goal of expanding domestic demand and promoting economic growth," it said.

Click here to access the full article from Reuters

China Unicom and Spain's Telefonica team up

noreply@blogger.com (Bennett A. Reiss) — Mon, 14 Sep 2009 03:51:00 +0000

"China Unicom (NYSE: CHU) gains after the mainland's No.2 wireless player reaches a deal with Spain's Telefonica (NYSE: TEF)."

[Source] - Reuters

Newswire: China and Mongolia

noreply@blogger.com (Bennett A. Reiss) — Sun, 13 Sep 2009 22:24:00 +0000

1) Wen Signals Unprecedented Spending Will Drive Chinese Rebound - Bloomberg

China's Premier Wen Jiabao signaled he will maintain unprecedented
government spending to drive a recovery from the slowest expansion in
almost a decade.

"China's economic rebound is unstable, unbalanced and not yet solid,"
Wen said yesterday in a speech at the World Economic Forum in Dalian,
a city in northeastern China. "We cannot and will not change the
direction of our policies when the conditions aren't appropriate."

To read the full article please visit -
http://www.bloomberg.com/apps/news?pid=20601080&sid=aF3.IaUQ.JEo

2) Standard Bank Borrows $1 Billion From Chinese Banks

Standard Bank Group Ltd., Africa's largest lender, said the $1 billion
loan facility it signed with four Chinese banks will be mainly used
for clients developing projects on the continent.

"The money will be used mainly to support our Africa business, for
clients wanting to do business in Africa and this would include
Chinese clients," said Chief Executive Officer Jacko Maree, after
signing the five-year facility in Macau. It will be used mainly to
fund projects, he added.

To read the full article please visit -
http://www.bloomberg.com/apps/news?pid=20601116&sid=aLPkKY95BnaY

3) Mongolia Fund to Manage $30 Billion Mining Jackpot

The Mongolian government will set up a sovereign wealth fund using
mining royalties and tax revenue, and distribute part of the income to
citizens to alleviate poverty, said Finance Minister Sangajav
Bayartsogt.

The fund, to be run by professional managers from 2013, will disburse
part of its annual income to every Mongolian in cash or non-cash
securities to let them own stakes in the country's mining wealth,
Bayartsogt said. Initial capital will be drawn from Ivanhoe Mines
Ltd.'s $4 billion Oyu Tolgoi copper- gold mine project, estimated to
generate $30 billion in tax revenue over 50 years, he said.

"We're drafting the idea to implement the proposal, and we're
studying examples like the Alaskan Permanent Fund," Bayartsogt said in
a Sept. 9 interview in the capital Ulaanbaatar, declining to specify
the size of the proposed fund.

To read the full article please visit -
http://www.bloomberg.com/apps/news?pid=20601109&sid=aWm8u8kb0R5E

--
Sent from my mobile device

Ideology vs profit; Colombia and Venezuela's trade dispute gets nasty

noreply@blogger.com (Bennett A. Reiss) — Sun, 13 Sep 2009 19:15:00 +0000

Economist Article --

Venezuela and Colombia -- Politics versus trade

Sep 10th 2009 | SAN ANTONIO DEL TÁCHIRA
From The Economist print edition
Hugo Chávez stamps out regional economic integration

BUSINESS is slack at José Nelson Uribe’s tiny grocery store in San Antonio del Táchira, just a stone’s throw from Venezuela’s border with Colombia. “I’m not selling even a quarter of what I sold before,” says Mr Uribe. His woes are a result of the political conflict between his namesake, Colombia’s president, Álvaro Uribe, and Venezuela’s Hugo Chávez. “Before” means before July 28th, when Mr Chávez declared a “freeze” on diplomatic ties and said he would seek alternatives to Colombian goods. This was officially a response to an agreement formalising American use of seven Colombian bases for anti-drug operations, but it also coincided with questions as to how anti-tank rocket-launchers sold by Sweden to the Venezuelan army ended up in a camp belonging to the FARC guerrillas in Colombia. It is not the first time that Mr Chávez has threatened trade sanctions, but this time he seems serious.

The impact on the border region was swift. For each country, the other is the second-biggest trading partner (after the United States in both cases). Bilateral trade totalled $7.2 billion last year, of which $6 billion consisted of Colombian exports, mainly of food, live animals, clothing and cars. Four-fifths of that trade passed along the twisting mountain road that links San Antonio with the state capital, San Cristóbal. “That represents 50,000 direct jobs and 250,000 indirect [ones],” says José Rozo, a local business leader. Many of these are in transport firms and customs agencies. “Before, the local lorry drivers were doing around 500 trips a day,” Mr Rozo says. “Now it’s down to about 80.” Industry in Táchira has been hit too, since many companies depended on imports from Colombia.

The border is not closed. But few of the 30,000 Colombians who used to cross each day to shop do so now, because Venezuela’s National Guard confiscates their goods when they recross the border, says Mr Uribe, the shopkeeper. Venezuela’s government has stopped issuing import permits, nor is it providing dollars at the official exchange rate for imports from Colombia (a dollar costs almost three times more on the parallel market)...

Click here to read the complete article from the Economist