Posts Tagged ‘NT’

November 05 2010 5:23 PM GMT
Race for resources tests trade openness

By Alan Beattie in Washington and Bernard Simon in Toronto

An Australian minerals company failing to take over a Canadian fertiliser producer hardly sounds like the turning-point at which globalisation went into sharp retreat

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Venezuela: Overcoming an Election Setback
October 24, 2010 | 1357 GMT

Venezuelan President Hugo Chavez has until mid-December to push through a series of laws designed to strengthen the executive’s power after his ruling Partido Socialista Unido party lost its parliamentary supermajority in September. These laws also seek to endow the thousands of communal councils loyal to the president with greater funding at the expense of state governments, undercutting his opposition. Passage of these laws will give Chavez better control of foreign assets in Venezuela and put him in a better position to stifle opposition supporters.

Venezuelan President Hugo Chavez may have suffered a slight setback Sept. 26 when his ruling Partido Socialista Unido de Venezuela (PSUV) lost its two-thirds supermajority in the Venezuelan parliament, but he has options to try to maintain his political authority. Chavez and his allies have until Dec. 15 to push through a series of legislation before members of the opposition claim their seats in January 2011, when the next National Assembly session begins. Even then, the PSUV will still have 98 seats (compared to its previous 137 seats) in the 165-seat National Assembly with which to influence the legislative agenda. The various pieces of legislation currently making their way through parliament share the common purpose of augmenting the power of executive authority and the thousands of communal councils loyal to the president. If they make it through the National Assembly by year’s end, Chavez will be able more effectively to control foreign assets in the country and to sideline problematic legislators, mayors and governors who have sided with the opposition. A summary of the most critical legislation currently under review follows below.

Enabling Law for Special Presidential Powers

Summary: The details of this legislation have not been released, but it would likely contain provisions for the president to enact legislation by executive decree. Given the sensitivity of the legislation and the controversy that it would produce, the government appears to be keeping this proposal under wraps for now.

Status: This law was proposed by PSUV legislators Mario Isea and Iris Varela on Sept. 28, but has not been presented to the national assembly.

Oil Service Company Regulation Law
This law would enable the government to bypass parliament when it wishes to nationalize the assets of oil and natural gas firms. According to the draft text, “… oil and gas operation assets can be subjected to measures of protection, insurance, requisition and expropriation when the continuity of work is affected …” The law would also allow the government to set tariffs for companies, prohibit the relocation of assets outside the country without state permission and prevent recourse to international arbitration in disputes. This is a reminder to firms like Halliburton, Schlumberger and Baker Hughes that watched nervously as the Venezuelan government nationalized 11 oil drilling rigs belonging to U.S. firm Helmerich & Payne in late June, which had halted production in protest of state-run Petroleos de Venezuela (PDVSA)’s failure to pay the company for its services. The legislative proposal also comes at a time when Venezuela is earnestly seeking foreign investors to develop its extra-heavy oil reserves in the Orinoco fields. Foreign firms are growing skittish over the regime’s intentions toward their assets, however. Even so, Venezuela’s deepening relationship with China to develop Orinoco in exchange for much-needed investment in state-owned sectors may be giving Caracas the extra boost of confidence to see this type of legislation through.

Status: A draft of the law has been completed and is supposed to be presented to parliament by the end of the year.

Communal Economic System Law
This law is part of a package of “Popular Power” legislation designed to empower thousands of local communes comprised of mostly PSUV sympathizers. By devolving power to the local level and increasing their funding at the expense of state governors and municipal officials, Chavez aims to undercut his opposition and widen the number of Venezuelans dependent on him for their livelihood. This law on the economic system of the communes details how the executive authority will be able to directly transfer funds to the communes for local projects. It also attempts to stem rampant money laundering rackets that have debilitated state firms <>  by promoting non-monetary trading through an exchange, which allows for the bartering of goods. However, such a system is unlikely to resolve Venezuela’s corruption <>  ailments.

Status: This law is currently being debated in the National Assembly. PSUV legislator Dario Vivas has said that Popular Power laws, including the Communal Economic System Law, will be given priority during this legislative period.

National Arms Control Law
The disarmament law aims to give the government the sole authority to issue weapons licenses and to import and sell firearms. It would establish specific punishments for the use of firearms deemed illegal and involve a national survey to confiscate any such illegal arms. The law is being presented as a way to bring down the high level of violent crime in Venezuela, but has been criticized by the opposition for aiming to keep most Venezuelan arms in the hands of state security <>  organizations, such as the growing National Bolivarian Militia <> .

Status: This law is still under debate in the National Assembly.

Banking Activity Regulation Law
As part of the Organic National Financial System Law, this law is intended to give the state more authority in directing bank financing toward economic projects prioritized by the state, to include state-owned firms and communal council activities. State authority within the banking system has also greatly facilitated corruption among state-owned firms in the food, electricity, metals and energy sectors.

Status: This law has been discussed in the National Assembly Finances Commission and has been listed as a priority for approval, but has not yet been presented to the National Assembly.

Emergency Urban Land Regularization Law
This law is intended to allow the government to reclaim land in urban spaces for residence construction and to nationalize private housing projects that have been halted. Under deteriorating economic conditions, a number of housing projects have stalled and have thus threatened to undermine Chavez’s popularity among Venezuela’s poor. It is probably not a coincidence that Chavez is also in the process of making deals with Iran, Russia and Belarus for large-scale housing projects. Such projects not only allow the president to boost his image among his constituency, they can be used for money laundering.

Status: This law is being debated in the National Assembly.

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Reviving Codelco

“During last year’s election campaign, Sebastián Piñera, who became Chile’s president in March, often criticised Codelco, the country’s state-owned copper company, for its inefficiency, griping over its stagnant output and climbing costs.

Yet it was engineers from Codelco who stood beside him this month as the 33 miners trapped since August 5th in the privately […]

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Under the plan and new laws, the sales are divided into two categories: companies and assets. The state companies are 12-14 national champions that are up for privatization, including oil giant Rosneft and transportation monopoly Russian Railways. The state’s assets that are up for privatization are a mixture of small companies and assets that the state does not deem strategic.

The private stakes up for sale in the “companies” category range from 10 percent to 49 percent, with most of the stakes on the smaller side. This is because the state considers these firms important enough to limit foreign control over them, but attractive enough to bring in some major international bidders. The government hopes the privatization of the main firms will bring in an estimated $29 billion by 2012.

Items in the “state assets” category either remained under state control since the Soviet days, fell under state control during the period of economic consolidation or were picked up by the state during the financial crisis. This category includes some 5,000 small companies and assets that are expected to be privatized before 2014. These firms and assets can be fully privatized, if the state wishes. The government hopes these privatizations will bring in an estimated $20 billion.

The Cash

In total, the Russian government hopes to bring in $50 billion — roughly the entire gross domestic product of neighboring Belarus — over three to five years purely by selling shares in companies and assets. And there is no shortage of sectors in need of that funding.

Theoretically, the cash is to be invested back into the firms being privatized. Most of the national champions are in desperate need of modernization, with much of their infrastructure suffering from decades of neglect and decay. Many of the state firms also have large-scale expansion plans for the future. But modernization and future expansion for most of the national champions is an incredibly expensive undertaking; $50 billion is nowhere near sufficient to meet these goals.

For foreign investors to be considered for involvement in the privatization program, they must first convince the Kremlin of their plans to modernize and expand the companies in which they invest, but there is an understanding that modernization is to be a joint private-public effort. Should the state renege on this understanding, it will find it difficult to find investors for future privatization rounds — remember, this is being done over five years so that Russia can ease itself into the changes, which means the state must continually express its own financial commitment to the effort to maintain investor interest.

This will be difficult, since the state actually plans to use most of the $50 billion of anticipated income to help plug the budget deficit, which Kudrin hopes to decrease greatly by 2014. Russia’s forecast budget deficit for 2010 alone is $101 billion, which means $50 billion would not solve the budget problem this year, let alone through 2014. This would leave the government to its own devices to find the cash necessary to fund the modernization and expansion plans.

The Deals

The government has been secretive and cautious in proceeding with its privatization plan. This is in part because several of the state firms selected for privatization are resisting. Longtime Rosneft chief Sergei Bogdanchikov and a handful of his loyalists were sacked after they spoke out against the plan to privatize part of the firm. Nikolai Tokarev, chief of Russian pipeline monopoly Transneft, has also publicly objected to the privatization plan. Sberbank chief Sergei Ignatiev has also voiced concerns about the initiative; he would rather have shares of his firm up for public auction, where they could fetch more money, instead of a private Kremlin deal with a foreign player. However, the Kremlin wants to ensure it can control and monitor every foreign group gaining access inside Russia, which would be more difficult through a public auction.

The other reason for the Kremlin’s caution is that it is still weighing estimations presented by Kudrin’s economic team on whether the still-skittish financial markets would be willing to invest tens of billions in an economy that has a reputation for being less than safe. Even with the nervousness in foreign markets, quite a few foreign players are lining up to strike private deals with the Kremlin on stakes in these strategic firms.

In both the modernization and privatization programs, the Kremlin has used economic and financial deals in order to strike strategic bargains with foreign groups and governments. For example, according to STRATFOR sources, Italian energy firm Eni is interested in buying a stake in Rosneft as a way to give Eni more freedom to work in Russia and possibly secure other oil deals previously off-limits to the foreign firm. Similarly, sources say that U.S. firm Boeing and France’s Thales are interested in a stake or a seat on the board of Russian Technologies, Russia’s military industrial umbrella organization, which could be used to strike private deals for Russia’s strategic titanium supplies.

Russia is also being cautious with the timeline for privatizing shares in its strategic state monopolies. For any national champion that will see more than a 10 percent stake privatized, the stake will be sold in multiple tranches in order to see if the first sale is successful and not destabilizing. This will give the Kremlin time to reconsider a second tranche if necessary. VTB, one of Russia’s largest banks and the first big company the state is considering privatizing, will have its 24.5 percent stake sold in two tranches — first 10 percent and then the remaining 14.5 percent. Thus far, the Kremlin has been in private negotiations with U.S. investment firm Texas Pacific Group, whose chiefs traveled to Moscow in recent months to meet with First Deputy Prime Minister Igor Shuvalov to secure the deal. The first tranche is expected to sell for $3 billion, since VTB is worth $30 billion. According to STRATFOR sources, U.S. firm Merrill Lynch is conducting preliminary negotiations for the sale of the second tranche.

But in order for the multiple tranche plan to succeed, the Kremlin will have to prove after each tranche that there will be returns and results, which goes back to the government’s need to find reinvestment funding. The Kremlin will also need to prove that it is willing to help with the cash shortfalls associated with the firms’ modernization and expansion plans. Without any results, bidders will turn away from the remaining tranches for sale.

Another problem in striking deals with foreign groups is the difficulty the foreign firms could face in getting their shareholders to agree to such large deals with the Kremlin, which has proven in the past to be an unreliable business partner. Many firms looking to get back into Russia were burned by business deals there just a few years ago, when the state pushed them out or nationalized their assets.

In the end, the overall concern is that Kudrin’s strategy for modernization and privatization has created an incredibly ambitious, intricate and fragile plan. There are many variables — bureaucracy, investor skittishness, markets’ ability to handle the investments, possible backlash and Kremlin politics — that must align in a certain way in order for Kudrin’s vision to materialize. If just one fails to fall into place, Russia’s plan for an economically vibrant future could be at risk.

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Cuban entrepreneurs who hire employees will have to pay a 25 percent payroll tax on their salaries, and all Cubans who are self-employed must put 25 percent of their income into a social security system from which they will eventually draw a pension, according to new economic regulations published by the Cuban government, AP reported Oct. 25. The law also establishes many deductions for raw materials, transportation and other business expenses. The new regulations will allow any permanent resident of Cuba over the age of 17 to start their own business and citizens can also apply for licenses for more than one business.

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October 25, 2010

Rare earth metals draw attention

From Tuesday’s Globe and Mail

The elements required in many technologies face a supply crunch as China – the world’s main producer – cuts back exports

Among the hottest commodities these days are the rare earth elements – obscure metals used widely in key technologies such as smart phones, televisions, hybrid cars, lasers and military equipment.

These elements aren’t actually rare, or earths, for that matter. They are metals that are found readily on Earth’s crust, but not in concentrations that make them easy to mine.

Geopolitical trade issues have shone a light on them in recent months. More than 90 per cent of rare earths are produced in China, and there are worries the country will cut back exports to ensure it has enough domestic supply, leaving technology producers in Japan and the West in the lurch. Those concerns were heightened last month when it was reported that Chinese rare earth exports to Japan might be trimmed after a diplomatic incident in which the captain of a Chinese trawler was detained by the Japanese in disputed waters.

Worries about the security of supply has boosted the prices of rare earth metals, and lit a fire under producing companies or those exploring for new mines. But the possibility of an investment “bubble” is itself a concern, as some institutional investors are retreating from the sector.

It takes years to get a new mine up and running, so even if the flurry of activity results in new production in the West, there could still be short-term shortages.

What they are

Of the 17 most commonly used rare earth metals, 14 appear on one of the lower rows on the periodic table – the part you probably paid no attention to in high-school chemistry class.

Many have unpronounceable names, such as dysprosium, praseodymium, ytterbium, and neodymium.

In combination with other elements, they form compounds that are highly useful as pigments for glass and ceramics, or as components in electronic products that require high heat resistance.

Where they are used

Hybrid cars: In batteries, catalytic converters, electric motors and LCD screens.

Miniature electronics: In the batteries that make devices such as iPods and Blackberrys work, and in the tiny magnets needed for mini-motors and speakers.

Wind power: Used in the magnets that are key components of wind turbine generators.

Television screens: They provide a bright red phosphor that helps make television pictures sharp.

Canadian players

Quest Rare Minerals Ltd., Montreal: Exploration projects in Quebec, Ontario and New Brunswick;

Avalon Rare Metals Inc., Toronto: The Nechalacho project in the Northwest Territories is set to begin production in 2014.

Great Western Minerals Group Ltd., Saskatoon: Properties in Canada, the U.S. and South Africa

Neo Material Technologies Inc., Toronto: Production in China, Thailand, North America.

Rare earth metals draw attention – The Globe and Mail

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Demolition in El Frío Ranch

It was seized by the government of President Hugo Chávez in March 2009 upon the grounds of environmental protection

The Páez House, the emblem and centerpiece of El Frío Ranch, before the seizure Dossier
The house that once belonged to General José Antonio Páez, a hero of the Venezuelan independence; the core of El Frío Ranch and preserved for almost 150 years, is nowadays dilapidated after its premises were seized by the government of President Hugo Chávez. The image of two times dramatically shows the mood of a revolution.

Located in western Apure state, El Frío was not only one of the major cattle raising centers in the country, with 20,000 heads of cattle, but also among the most specialized natural biodiversity reservoirs in the Western Hemisphere, as well as a research center into ecological cattle raising and a renowned conservation center both inside and outside Venezuela.

The Páez House was the main house in the ranch. It accommodated the corporate administrative and professional staff. It had two big dining rooms, two kitchens and two living rooms. The gardens of the house, nowadays unroofed and in ruins, are being used as parking lot for incoming and outgoing official vehicles. The former hustle and bustle of a productive business was replaced with military officers who guard the ranch with AK-103 slung across their backs and staff in red T-shirts attending the courses of political ideology given by Cubans.

Decree on expropriation
In March 2008, the National Lands Institute declared the exceptional recovery of the plot of land called El Frío Ranch. According to Desirée Rodríguez, the corporate legal counsel, the action started in the absence of the due administrative procedure concerning land recovery. The ranch of 64,000 hectares belonged for more than a century to the Maldonados; it was incorporated as Invega in 1948 and its ownership chain comes from colonial times.

In January 2005, the local chapter of the National Lands Institute in Apure state commenced an administrative proceeding for wastelands against El Frío. In early 2009, after a request made by folk music singer Cristóbal Jiménez in the Sunday TV and radio show Aló Presidente (Hello, President!), the government resumed the confiscatory process. On March 31, seizure was carried out.

The results
The government presently has the whole property of El Frío Ranch without having paid one single bolivar. It is known that part of the 20,000 animals that used to graze in the wetlands have been killed for provision of beef, but nobody knows about the recipient of the sale proceeds.

Rodríguez claimed that the reservation areas include Guariquito ravine, where fishing is banned, but practiced now. A river port was built there and vessels come to get fish.

In addition to cattle, the reservation is the refuge of 7,000 deers, thousand capybaras, the giant nutria, the anteater, the puma, the freshwater dolphin, anacondas and small alligators. One of the most noteworthy projects was preservation and reproduction of the endangered Orinoco caiman. The project started in 1996 and managed by the local biological station succeeded in the reproduction of 2,500 caimans that were released in Guairuito ravine. In 2008, the ranch had the third largest population of reptiles in the country, particularly in Macanillal ravine. In its wetlands cattle breeding remained low to favor the best environmental conditions.

Journalist Ramón Hernández tells in his book “Story of dispossession,” next to be released that each year, near 300 undergraduate and graduate students from all universities and colleges across the nation would visit the site to complete their studies in ecology, animal protection and environment. Also, Carolina Foundation and the Spanish government implemented a master course in Management of Biodiversity in the Tropic. Latin American students used to explore at El Frío Ranch environmentally friendly cattle breeding, reintroduction of endangered species and recovery of native horses.

Today, there is glaring abandonment of farms and biological stations. Attorney Rodríguez complained that high-ranking government officers and persons of the ruling party surreptitiously engage in illegal hunting there.

The agricultural failure
Not knowing about the issue, after the seizure of El Frío Ranch, President Chávez heralded at the seized premises that Apure state would become a rice-growing superpower. Taking issue with experts, who said that the soil is V and VI class with few nutrients and able for large-scale cattle breeding, Chinese and Vietnamese were brought there to sow rice. The crop was a total failure. The delusive estimates of Elías Jaua, then Minister of Agriculture and Lands, never accomplished. Today, Venezuela needs to import 450,000 tons of rice, accounting for 40 percent of the domestic consumption. To the contrary, until 2004, Venezuela had been self-sufficient in that item and exported 120,000 tons.

While no numbers on production and profitability are known of the ranch, now managed by the socialist company Marisela, the payroll rose by 234 versus 140 workers during the previous administration. Most of the payroll was dismissed shortly after the seizure. Workers are still waiting for collection of their severance payment. Interestingly, Hernández said: “In order to bolster self-government and people’s self-defense among workers and communities for food sovereignty and integral defense of the nation, the company (Marisela) trains 1,000 militiamen with the help of the armed forces.”

Translated by Conchita Delgado

Francisco Olivares

Demolition in El Frío Ranch – Daily News – EL UNIVERSAL

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