Americas Inc
Economy
Energy Deal With Brazil Gives Boost to Paraguay
By ALEXEI BARRIONUEVO | The New York Times
Brazil has agreed to triple its payments to Paraguay for energy from a massive hydro-electric dam on their border, ending a long-running dispute.
For decades Paraguayans have protested the raw deal they got when their dictatorship-era government decided to build the world's largest hydroelectric power plant with Brazil along their shared border. While Brazil used the Itaipú dam to help develop its cities and industries, Paraguay was forced to sell its excess capacity to Brazil at preferential rates. Fernando Lugo, a former Roman Catholic bishop who was elected president of Paraguay last year, vowed to change that, making a renegotiation of Itaipú one of his chief campaign pledges.
Brazil's president, Luiz Inácio Lula da Silva, agreed to triple Paraguay's income from Itaipú, and to allow Paraguay to sell its power to Brazil at market rates. The agreement is a huge deal for Paraguay, one of South America's poorest countries. And it is a much-needed boost for Mr. Lugo, who has struggled with declining support in Congress and accusations that he fathered several children when he was a priest. For Brazil, the approximately $240 million a year it agreed to give up is a small price to pay for Mr. da Silva's broader goals of calming tensions with its neighbors, asserting Brazil's leadership in the region and promoting regional integration. "Brazil is not interested in growing and developing if its partners don't grow and don't develop," Mr. da Silva said in a speech here.
Brazil had long rejected the possibility of renegotiating the original arrangements for selling electricity from Itaipú. But with Honduras in chaos and President Hugo Chávez of Venezuela continuing to spread his political influence, Mr. da Silva was seeking to manage Brazil’s desire to expand its economy while reining in the nationalist demands of its neighbors, political and risk analysts said. "The whole hemisphere is in play," said Riordan Roett, chairman of the Latin American studies program at Johns Hopkins University. "The Brazilians are going to do anything they can to shore up the moderate or democratic left in Latin America. They are quite clearly hoping that Lugo will move in the direction of staying with the Brazilians." >>> Go to Full Story >>>
Latin America poised for quick exit from crisis: IDB
VINA DEL MAR, Chile (AFP)
Latin America and the Caribbean are well placed to emerge from the storm buffeting much of the global economy, multilateral lenders said here Friday while meeting with regional ministers.
The finance ministers gathered at Vina del Mar in Chile agreed to seek "a more active role from multilateral lending institutions" for the crisis but also for after the crisis, said Chilean Minister Andres Velasco. Velasco cited a World Bank report that estimated a financing shortfall of 350 to 635 billion dollars per year for emerging countries, of which Latin America accounted for 115 to 180 billion.
The Inter-American Development Bank (IDB) meanwhile said it would increase its capital base by 6 billion dollars to help Latin America and the Caribbean tackle the global financial crisis. The funds came from Canada's offer to increase to 4 billion dollars its contribution to the regional lender, the bank said in a statement. Two more billion dollars would come from a change in an internal norm at the bank that had limited the amount of the loans depending on contributing countries.
Another priority identified by the ministers meeting in Chile was better integrating the continent, its infrastructure and its transportation, Velasco said. >>>>Go to Full Story >>>
Mexico's city of the technical stoppage
By Adam Thomson in Mexico City / Financial Times
Ms Horst is one of the swelling ranks of unemployed in Mexico as the country faces potentially the worst economic contraction since the 1995 Tequila crisis, and possibly even worse than that. The economy shrank 8.2 per cent during the first quarter, and many private sector analysts believe the contraction in the second quarter could be in double figures. Last week Goldman Sachs estimated that Mexico's economy would shrink 8 per cent this year.
"The economy is currently facing the worst recession in its modern history,& wrote Luis Carlos Niño, Latin American economist at Capital Economics, a UK-based consultancy, recently. His research note was entitled: "Mexico's GDP: awful, just awful". Predictably enough, the country's woes are almost entirely the result of troubles in the US — though the effects of the recent A/H1N1 virus and measures to contain it are widely expected to contribute about 0.5 percentage points towards the overall contraction.
In spite of efforts to diversify trade, Mexico sells 80 per cent of its exports to the US, and these account for about a quarter of the total annual production of goods and services. In April the value of Mexico's exports fell 35.6 per cent from the figure in the same month last year. >>> Go to Full Story >>>
Auto Manufacturers Race for Bolivia’s Lithium Reserves
From Universia Knowledge@ Wharton
Recently, Bolivia has become the nerve center of Latin America, attracting the interest of several multinational companies. The reason: The world's largest reserves of lithium are in this country, in the Salar (Salt Flats) de Uyuni.
Located in the Potosi region in the southeast of the country, 3,500 meters above sea level, the Salar de Uyuni holds five million tons of lithium, a mineral that is required for manufacturing batteries for hybrid and electric cars. The region represents an attractive investment option for global automotive manufacturers who are trying to break their dependence on petroleum and produce more fuel-efficient products.
Aware of the positive effects that the industrialization of lithium would have on the automotive sector and the local economy, Morales has declared his intention to engage in a partnership with some multinational firm. However, given the unusual amount of interest awakened by the mineral at Uyuni, Morales – who has already nationalized the local petroleum and natural gas industries — declared that "the goal of the Bolivian government is to exploit lithium on a grand scale" and that the government "will never lose ownership of its natural resources," according to the daily newspaper El Diario de Bolivia.
Given that fact, John Tilton, a professor in the Catholic University of Chile's mining division, warns that "the actions of the government and its policy for foreign investments in Bolivia will be the determining factors, and they could drive multinationals to invest in Chile or in other countries in Latin America if Bolivia does not offer the appropriate climate for investment."
"There are deposits of lithium in Chile and Argentina, and a promising deposit in Tibet," notes Oji Baba, an executive in Mitsubishi's Base Metals Unit. "But it is clear that the biggest prize is in Bolivia. If we want to lead the next wave of lithium-based automobiles, we have to be in the Salar de Uyuni." >>>>Go to Full Story >>>
Global Economic Forecast for 2009: Will Demand for Good News Outpace Supply?
After a year of financial shock and sharp economic loss, 2009 is likely to be extremely difficult for the global economy, with investors, business leaders and policymakers struggling to find signs of recovery, according to Wharton faculty and academic partners around the world. In the wake of crumbling stock markets, mounting bad debt and rising unemployment, policymakers are scrambling to devise strategies to restore stability and lay the groundwork for new growth. Latin America, which is typically a casualty in global financial crises, has managed to keep itself afloat this time. According to Juan Carlos Martínez Lázaro, professor at the IE Business School, Latin America finished 2008 with a growth rate of more than 4%. The first part of the year was very strong as a result of record-high prices for raw materials, making up for the sharp declines during the second half of the year. However, 2009 is going to be hard for Latin America, which will not be able to totally escape the global economic problems, says Martínez Lázaro. He predicts that the region will suffer the impact of the global downturn in several areas: manufacturing exports, remittances from workers living abroad, investments and financing. Some countries will suffer more than others.
