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Caiman Valores is a Colombian based independent investment analytics and risk management consultancy. The consultancy specializes in South American listed companies as well as conducting regional economic and risk assessments. The consultancy is currently located in Colombia. The principal of... More
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  • Petrobras Already Admits It Needs Fuel Prices To Rise To Fund Its Investment Program

    With the Petrobras share price in a tailspin and investors becoming even more concerned about the direction of the Brazilian economy it was hoped the company's new investment plan would be good news for investors. However, there was a gaping financial hole in this plan, how was it to be funded in light of falling oil prices and the unwillingness of the Brazilian government to increase gasoline prices. Now the CEO of Petrobras Maria das Gracas Foster has admitted gasoline prices will need to rise if the company's investment plan is to proceed.

    Clearly at current prices Petrobras in unable to fund the program, which is the world's largest corporate investment program. Whether the Brazilian government will increase domestic gasoline prices is a considerable unknown.

    To date the Brazilian government has made it clear that with restarting the domestic economy and controlling inflation being priorities combined with the intimate connection between transport prices and gasoline prices that a gasoline price rise is out of the question. This becomes even clearer when it is considered that oil prices are falling and that the Brazilian economy has slowed to recessionary levels.

    However, if Petrobras is unable to execute the program it will be unable to access the pre-salt reserves. This is something the government wants more than ever as a means of funding its social programs and catapulting Brazil to the status of being an international oil power.

    Whatever the end result, it is evident that the interest of Petrobras share holders is far from the minds of the government's and company'skey decision makers.

    Disclosure: I am long PBR.

    Jun 19 12:09 AM | Link | 2 Comments
  • Argentina: Is It Anti-Spanish Or Being Driven By Economic Necessity?

    First we saw the expropriation of YPF SA (YPF) from its Spanish owner Repsol (OTCQX:REPYY) by the Argentine Government. Now the government has fined Spanish telecommunications giant Telefonica $43 million for a service outage in Argentina on April 2nd 2012.

    The outage occurred in Telefonica's wireless unit Movistar, which has operations offering wireless voice and data services across South America. During this outage 18 million clients of Movistar were without phone and data services for several hours on April 2 due to technical problems.

    After the outage, the company had moved to compensate customers but the Argentine government decreed that the compensation wasn't sufficient. The fine translates into $2.25 for each customer affected and $1.4 million for the government.

    Interestingly, as this article in MercoPress points out, the Argentine Planning Minister has also asked telecommunications companies to increase their investment in fixed infrastructure in Argentina. He was also quoted as stating:

    Cell-phone service quality has declined in recent months, . . We need to have full service, not service that gets worse when you walk a few meters one way or another.

    All of which I believe indicates that the government is using the regulatory stick to pressure telecommunications companies to increase investment in infrastructure in Argentina. Especially as any investment will improve government popularity, as it seen to create jobs in a country with high unemployment. It also alleviates the government's inability to raise the necessary funds to invest in critical and much needed internal communications infrastructure, because they can't tap international credit markets for those funds.

    Even more cynically, I would think that the fine is nothing more than a much needed capital injection, as the government faces renewed balance of payments pressure and attempts to raise funds for investment in newly nationalized YPF. Telefonica has around 40% share of the Argentine wireless communications market so it is unlikely the company will depart the country as a result of the fine.

    Interestingly Argentina's biggest communications company Telecom Argentina (TEO), which is majority owned by Nortel Invesora (NTL) a company that is majority controlled by Telecom Italia (TI) paid a dividend to investors earlier this year. This was in defiance of government demands for companies to retain capital and re-invest it in Argentina in preference to the payment of dividends, particularly to foreign investors. Could the telecommunications industry be the next target for expropriation, in particular Telecom Argentina?

    May 16 8:30 AM | Link | Comment!
  • Bogota Bombing: Is Colombian Security Risk Escalating?

    Just when we are seeing positive signs regarding the security situation in Colombia with the FARC renouncing the use of kidnapping of civilians for ransom, 2 people have been killed and 39 injured in a bombing in Bogota. The bombing, an attempted assassination, targeted the former Interior and Justice Minister in the government of President Santos' predecessor, Alvaro Uribe. Prior to this bombing a car bomb was also detected and disarmed in Bogota. The car has been attributed to the FARC but there is uncertainty over who is behind the attempted assassination.

    This indicates just how fluid the security situation in Colombia is and how quickly it can change as discussed in my articles; Beat the BRICs: Invest in Colombia, Latin America's Hidden Investment Gem and Gran Tierra Energy: Is it Time to Invest in this Latin American Oil Small Cap?

    However, it is to early to say whether it is the sign of a prolonged terrorist campaign against the government or an escalation in the security risk. There are a wide number of armed groups operating in Colombia and to date the government has taken strong measures against all of them. This includes the killing by police of the leader of the Urabenos (a neo-paramilitary group) in northern Colombia and ongoing military successes against the FARC. There has also been a crackdown in Medellin against the Oficina de Envigado an organized crime group, which is the last element of Pablo Escobar's former empire.

    I certainly don't believe that the bombing represents an escalation in risk in Colombia for investors, if anything it is representative of the current security situation and the threat that Colombians deal with on a daily basis. But it does confirm that investors in Colombian companies or companies operating in Colombia should remain aware of the security environment and the effects its changes can have on their investments.

    Disclosure: I am long EC.

    May 16 12:16 AM | Link | 2 Comments
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