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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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  • Further Protests In Peru At Newmont's Yanacocha Mine

    Late last week there were further protests in Peru at Newmont's (NYSE:NEM) showcase Latin American gold mine Yanacocha. This mine is the largest gold producer in Latin America and a significant gold producer for Newmont, which operates it with its junior partner Peru's Compania de Minas Buenaventura (NYSE:BVN). There has been no publicity to date in the mainstream western press concerning the protests but they are part of a series of ongoing local protests against the mine because of environmental concerns in the local community.

    These protests haven't reduced production at the mine. As Bloomberg reported on May 9th 2012, Peru's gold output has climbed for a fourth successive month on gains at Newmont Mining's Yanacocha mine, with production increasing by 27%.

    Late last year Newmont suspended its planned commencement of the Conga gold mine in Peru as a result of continuing protests against the mine over concerns of increased environmental concerns by residents in the northern Andean department of Cajamarca in recent months due to threats to their water supply. Newmont has proposed building reservoirs to replace the four natural lagoons that thousands depend on, so that it can drill for gold.

    As a result the Peruvian government re-evaluated the mine and demanded a new EIS. As a result changes were recommended but opposition has continued and this has shaken up President Ollanta Humala's government, with Cabinet chief Salomón Lerner and the environment minister among others resigning from the government.

    This seems to indicate further instability in President Humalla's government, which is certainly leading me to consider that the level of political risk for investors in Peru has risen. Especially when considered in conjunction with recent incidents showing a re-emergence of Peru's once thought spent insurgency group, the Shining Path. Overall it indicates that the degree of investment risk is rising in Peru and investors would be welled advised to understand the implications this has for their investments.

    Disclosure: I am long BVN.

    May 14 2:09 AM | Link | Comment!
  • Colombian Security Situation Continues To Improve; Bodes Well For Investors

    We are seeing continuing improvements in Colombia's security situation as the FARC continues to soften its agenda due to ongoing Colombian military successes against them. In November 2011 we saw the death of the FARC leader Alfonso Cano after a long military pursuit in the peaks of the Andes in the Departments of Cauca and Huila.

    Since then the FARC have made significant overtures for seeking peace including, new leader Timochenko committing to ending kidnapping for ransom as this month old article from the International Crisis Group states:

    "Yesterday, the Revolutionary Armed Forces of Colombia (FARC) delivered on its promise to free 10 military and police hostages it had held in the jungle for more than 12 years. FARC has also pledged to abandon its decades-long practice of kidnapping for ransom. (Hundreds of civilians have been held in captivity and scores have lost their lives. According to some organizations, several hundred more are still held captive for ransom.)"

    Interestingly the only hostages released to date are those that the FARC categorizes as prisoners of war, i.e. military and police hostages, not civilians that were kidnapped for ransom, which the FARC categorizes as political hostages.

    It does bode well for oil companies operating in Colombia's oil zone in the south east in the Amazon basin and near the border with Ecuador which have been long-time conflict hot-spots. But as my Colombian friends tell me only time will tell whether this is a genuine initiative by the FARC or a repeat of their old tricks where they used the peace negotiations held with the Pastrana government to buy time to rearm and recruit.

    Should this stop investors from considering in Latin America's new investment hot-spot? I don't think so as the opportunities outweigh the risks.

    Disclosure: I am long EC.

    May 12 11:38 PM | Link | Comment!
  • Security Situation In Peru Heats Up! Does This Create Greater Country Risk For Investors?

    Despite long held claims by the Peruvian security forces that the Shining Path as an organized insurgency are essentially a spent force we have seen a recent spike in Shining Path attacks on security forces and mining operations across the country. It seems the resurgent Shining Path are being financially fuelled by the cocaine trade, which has grown exponentially in neighboring Colombia and Boliva.

    With much of their activity being criminally focused with kidnapping for ransom by the group on the rise, which is in stark contrast to a recent statement from South America's longest running insurgent group, the Colombian FARC, in which they state they have abandoned kidnapping for ransom. Is this resurgent group politically based and are they intent on destabalizing the government or are they more concerned with self enrichment through kidnappings and cocaine manufacturing? As the Wall Street Journal highlights in a recent article:

    While the Shining Path was a heavily ideological group with links to universities in Lima, analysts debate whether the current groups are mainly revolutionaries or profiteers-much like Colombia's cocaine-funded guerrillas, the Revolutionary Armed Forces of Colombia, or FARC.

    Of even more concern is the disorganized and haphazard approach to managing the problem, which is symptomatic of poor decision making within the government. The fallout from a recent Shining Path ambush has seen the resignation of the Peruvian Interior and Defense ministers.

    This recent article from RRT News certainly indicates that the insurgency is not a spent force and is actively targeting oil operations and workers in the country and that the government response has been shambolic at best.

    The development comes as both Interior Minister Daniel Lozada and Defense Minister Alberto Otarola were under threat of being censured by the country's Congress over the death of the policemen and the search operations that followed.

    The incident in question happened after Shining Path rebels ambushed a convoy of security forces and police officers as they were pursuing a group of rebel fighters who had abducted 36 gas workers last month near natural gas fields in the Apurimac-Ene valley in the southern region of Cusco.

    There was a public outrage in Peru after the father of one of the policeman killed in the ambush managed to find his son's body in the jungle by himself days after authorities abandoned their search for the missing.

    Further, one wounded policeman had managed to survive in the jungle all alone for 17 days before making his way to safety days after the security forces abandoned their search for their missing colleagues. The incidents triggered calls for resignation of the concerned ministers.

    This certainly leads to a reconsideration of the degree of country risk because of the escalating security situation and signs of political instability within the current government. Should this prevent investors from considering investing in Peru? Certainly not at this time, but it is important to be aware of the situation on the ground and the risks incident such as these that create additional risk for investors.

    Disclosure: I am long BVN.

    May 11 11:59 PM | Link | 2 Comments
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