Outbreak of Violence Not Slowing Business Activity in Mexico

On Saturday I crossed over into Mexico. Before heading over, I called a journalist who covers the crime beat for one of the local papers. He said his paper has forbidden writers to cross into Mexico. People have told me stories about journalists being kidnapped and tortured. One was beaten to death. Several are still missing.

An article in Sunday's New York Times says:

"Traffickers have gone after the media with a vengeance in these strategic border towns where drugs are smuggled across by the ton. They have shot up newsrooms, kidnapped and killed staff members and called up the media regularly with threats that were not the least bit veiled. Back off, the thugs said. Do not dare print our names. We will kill you the next time you publish a photograph like that.

'They mean what they say,' said one of the many terrified journalists who used to cover the police beat in Reynosa. 'I’m censoring myself. There’s no other way to put it. But so is everybody else.' "

Looking out over the river into Mexico, its hard to get a sense of what's going on. The park is empty. It doesn't look like there is much activity. I put 50 cents into the turnstile and walk through the U.S. side onto the bridge that connects Roma with Miguel Aleman. On the Mexican side, nobody stops me or checks my passport. I walk right through.

One block in, I see that business in Miguel Aleman is bustling. It's 10:30 a.m. on a Saturday, and all the shops are open. Even the travel agency is open. Stores selling cowboy boots, baby clothes, jewelery, and other items have their doors open, shopkeepers stand on the sidewalk. Street vendors are selling honey on blankets. The taco stands are already serving customers. The streets are filled with cars. I see mostly relatively new American cars, a white Jaguar, and a white Lincoln Navigator. Walking through the streets, I don't see any bullet holes or broken windows. People have told me that there have been shootings reported in town, but I don't see any major damage. I change $20 in for pesos and walk into a restaurant.

There's an old man and a young guy in his late twenties. I'm not sure if they work there. "Ya esta abierta la cocina?" I ask. Yes, the kitchen is open. "For here or to take-away?" the old man responds, in Spanish. "For here," I say, "an order of tacos." I tell them I'm going to buy a newspaper and come back to eat. I buy the local newspaper and also the paper from nearby Reynosa. "MASSACRE," the headline says. "16 DEAD at party." There's a photo of soldiers standing around small body-sized mounds that are covered in blue tarps. Below it there's a photo of a woman crying. The caption says, "The wife of one of the dead blames (Mexican president) Felipe Calderon." The local paper, The Times, is printed on one sheet of paper, double sided. In grainy type the front page says--- Laredo, Texas--- "Detienen a dos hombres por traficar mariguana."

The old man snaps orders at two slightly disheveled men, one in his twenties, one in his late forties. The old man walks to the refrigerator and pulls out a head of lettuce and a tomato. The younger man gets a wooden cutting board from the kitchen. The old man starts cutting up the vegetables. The young man disappears into the kitchen and comes back few minutes later with a piece of fried chicken. The old man minces it on the cutting board. I read my newspapers.

"Are you from Roma?" He asks me. No, but I'm visiting a friend there, I say. "Hey, I heard Miguel Aleman, used to be called San Pedro, but they changed the name, for Mexico's old president. Did you live here when it was called San Pedro?" He says they changed the name in 1950, he was 20 at the time. He says he's lived here is whole life. "Do you have family in Roma?" I ask. Yes. Two daughters. His grand-daughters go to middle school in Roma. Ask them if they've seen the tall guy with the curly hair, I say, they've probably seen me there.

A man in a blue shirt and straw hat walk in. They speak in muffled tones, i hear the word "Zeta" mentioned several times. The guy in the straw hat looks over at me, "he speaks Spanish," the old guy says. "How do you say vacation from school in English?" he asks me. Spring break, I say. "Do you think a lot of people have come here for spring break?" I ask. They tell me maybe people will come. They say it's safe here for "gente normal" normal, non-drug dealing people. The violence is at night they say. After 8:00 everybody has to be inside. Most of the violence is in the hills, outside of the town, they say. I ask if there have been incidents right here in the neighborhood, outside of the restaurant. Yes, but not recently. They recently through a grenade into a car near my house, the man in the blue shirt says. It blew up, and then the gas tank blew up, one of his neighbor's house caught on fire.

The guy in the blue shirt leaves. "That's my cousin." the old man says. I end up chatting with him for about two hours about the town, Mexico, and his family. He owns the restaurant and the hotel. I ask if I can take his picture. Yes. He gives me his business card and says I have a home there whenever I come back.

I walk out and snap a few pictures of the businesses and cars. There's one car with a broken circle punched in the window. Bullet hole?

I walk back towards the bridge. There are Mexican soldiers in green uniforms standing guard. I put a quarter in the turnstile and walk though. There are about 12 cars waiting to get through. There's a bus of tourists waiting. Walking over the bridge can see the signs for Jack in the Box, Payless Shoes and the Dollar Store. There are only three people ahead of me in the pedestrian lane.

"What were you doing in Mexico?" the border patrol agent asks. I've spent about a week in Roma and I wanted to see the sights I say. He doesn't search the white plastic Wal-Mart bag I've used to carry my camera. Welcome to the United States, the sign says.

Pressure in the Pipeline: Colombia’s State Oil Company EcoPetrol under Attack

A year ago Ecopetrol, Colombia’s state oil company was still repairing several of its office buildings that were partially destroyed in an attack by guerilla fighters. In the same attack, rebel fighters from the FARC, Colombia’s largest left-wing guerilla group also set fire to five of Ecopetrol’s vehicles. Now Ecopetrol is launching a US$7 billion investment campaign, and planning to expand further into some of Colombia’s more remote regions, areas that are largely controlled by groups like the FARC. Analysts say that in the run-up to Colombia’s 2010 presidential election, oil companies operating in the country, and in particular Ecopetrol are likely to be targeted by militant groups looking to discredit the government and attract attention to themselves. In spite of the obvious security risks, oil companies in the country are moving forward with ambitious investment programs. Thanks in part to these investments, Colombia’s economy is expected to fully recover from the 2009 recession, and report economic growth of 2.5% in 2010, according to estimates from the country’s Ministry of Finance.

Although Colombia has many strengths, it is also a country in which businesses face special risks. In a recent statement to reporters in Bogota, Colombia’s capital, Armando Zamora, director of the country’s National Hydrocarbons Agency said that despite the government’s efforts to boost security and encourage oil infrastructure investment, companies with facilities in isolated areas remain “easy” targets for rebels.

Due to military operations undertaken under the right-of-center administration of Alvaro Uribe, Colombia's president, oil pipeline assaults in the country fell from a peak in 2001, when a single pipeline was attacked 171 times, to about 11 in 2008. Official figures for attacks in 2009 have yet to be published.

Oil companies in Colombia operate in an environment that can put them in a squeeze between sabotage, terrorist attacks, and kidnappings by left-wing guerilla groups on one side, and theft, extortion, and attack from right-wing paramilitary and criminal groups on the other side. Ecopetrol, Colombia’s state-run oil company, is affected by a particularly high level of political and security risk.

Unlike multinationals like British Petroleum or newcomers like China’s Sinopec, Ecopetrol is a national symbol with links to Colombia’s government. Not only does the government own 80% of Ecopetrol’s shares, but five out of eight members of the company’s board of directors have worked in senior level positions within the Uribe administration.

According to a biography posted on Ecopetrol’s website, board member Mauricio Cardenas is Colombia's former Minister of Transportation. Directors Hernan Martinez, Carolina Renteria, and Oscar Zuluaga Escobar are all high-ranking government officials. The company's Chairman, Fabio Echeverri served as the campaign director and senior adviser to Mr. Uribe, Colombia's president.

Ecopetrol has operations in rural regions of Colombia that are often affected by ongoing conflicts between armed groups, criminal activity, kidnappings, terrorism and vandalism. During the last decade there have been several hundred attacks on oil pipelines in the region in which the company operates. In 2000 Ecopetrol rescheduled an oil shipment and was prevented from repairing damage to sections of its pipeline caused by previous attacks by rebel groups due to heavy fighting then occurring in the region between right-wing paramilitary groups, the national army and left-wing guerrilla fighters.

In 2001, one of the company's regional pipeline security supervisors was murdered, allegedly by a regional criminal group. Ecopetrol has publicly accused paramilitary groups of illegally reselling millions of dollars of gasoline that had been stolen from company facilities. On Friday, September 19, 2008 three Ecopetrol employees were kidnapped by the ELN, a left-wing criminal guerrilla group that operates in rural regions of Colombia. The company has been in the news more recently because of similar incidents.

Although kidnappings of oil engineers and attacks on oil companies in Colombia also have decreased this decade under Uribe, some former Ecopetrol employees remain in captivity by criminal groups. Kidnappings in Colombia have tumbled to 213 people last year from 2,882 in 2002, when Uribe took office, according to Ministry of National Defense figures. Contacted this week, Mariana Torres Montoya, an Associate at the World Economic Forum, who grew up in Bogota, said that she thinks people in Colombia recognize that in recent years there has been a broad “transformation” in Colombia’s security situation. “With the constant presence of the military…people and freight are now traveling in the country's roads where before they either did not travel at all or they did not travel at night,” she explained.

Despite the risks, foreign companies’ oil investments in Colombia are expected to reach a record US$4 billion a year in 2010 and 2011, up from around US$3 billion in 2009, according to official government figures. According to a company press release filed in January, Ecopetrol, plans boost output and increase spending this year by 11 percent to US$7 billion. Expanding oil firms will no doubt seep into territories controlled by rebel groups and criminal organizations, creating a potentially combustible mix.

It can be lucrative for companies like Ecopetrol to expand further into rural Colombia. However, this type of expansion comes with obvious risks. Colombia’s government is at war with the drug cartels. Because of its ties to the government, Ecopetrol is likely to remain caught in the crossfire.

Carlos Slim's America Movil Wins Approval to Acquire Telmex Internacional

On February 11, 2010, Mexico’s competition regulator, the CFC, approved a plan proposed by Carlos Slim’s America Movil, S.A.B. de C.V. (BMV: AMXA to merge with Telmex Internactional S.A.B. de C.V. (BMV: TELINTL) and Carso Global Telecom S.A. de C.V. (BMV: TELECOMA1), two of Slim’s other telecom companies. The proposed merger would have broad implications for Mexico’s telecom sector.

Analysts say a merger would allow America Movil, Mexico’s dominant telecom company to provide Latin American consumers with package deals on internet, cable T.V., and wireless and fixed line telephone service.

Chile’s New Finance Minister Aims to Sustain Country’s Growth Trajectory

When Felipe Larrain takes over as Chile’s finance minister in March, he will be charged with creating one million jobs and speeding up the country’s recovery from the 2009 global financial crisis. Unlike most countries, Chile reported positive growth in 2009 and Larrain aims to keep the country’s economy on pace in 2010.

Larrain has said that he will reverse a longer term slowdown in Chile’s annual growth rate, which he blames on declining productivity, and help the country’s new president-elect, Sebastian Pinera, fulfill his campaign promise to increase employment. Larrain said that reviving economic growth is the administration’s main challenge. He has publicly said that creating 1 million jobs is feasible with growth of 6 percent a year. Larrain recently told reporters that “this country needs to regain its capacity to grow” and that his goal is to “double the growth rate.”

Recent estimates from J.P. Morgan, the investment bank, have forecast 5% growth for Chile in 2010.

However, even as he claims to want to kickstart the country’s economy into action, Larrain is not expected to make any radical changes to Chile’s highly respected economic policy framework. For example, he is expected to maintain the government’s long-standing “structural balance rule,” which requires saving excess revenue during boom years for use when the economy slows, Alejandro Puente, an economist at Banco Bilbao Vizcaya Argentaria SA in Santiago, recently told reporters.

Larrain will step into office a year after his processor, the Columbia University educated Andres Velasco, and Michelle Bachelet, then Chile’s president tapped US$4 billion of copper savings last year for tax cuts and extra spending to blunt the global economic crisis.

In a recent interview with Latin American Lens, Marpin Binghim, an economist and independent management consultant who specializes in Latin America, explained that “Chile is the most outstanding country in Latin America in terms of macro-economic policy management in the last twenty years.” Binghim added that “even though there is a global crisis, Chile has been able to tap into its rainy-day fund and smooth output, avoiding a major downturn.”

“Larrain’s appointment is a sign of continuity,” Ricardo Hausmann, director of the Center for International Development at Harvard University, told a reporter from Bloomberg in a telephone interview. In all likelihood, Chile’s nascent recovery will gather strength in 2010, and under the direction of Larrain, should fully recover by the year’s end.

As Production Increases, Peru Becomes World’s Second Largest Copper Exporter

As companies like Compania de Minas Buenaventura S.A. (Lima Stock Exchange:BVN) and Minsur S.A. (Lima Stock Exchange: MINSURI1) boost output, Peru has become the world’s second largest exporter of copper, according to data from the country’s National Mining, Oil, and Energy Society (SNMPE). After producing 1.27 million metric tons of the metal in 2009, Peru displaced the U.S. and now stand second only to its neighbor to the south, Chile, when it comes to copper exports.

Hans Flury, Chairman of the SNMPE, told reporters “Peru, after Chile, is the second [most important] producer of copper in the world, and we hope that we’ll be able to maintain [this position].” Peru is already the world’s largest exporter of copper, second largest producer of zinc, and third largest producer of lead.

Despite the slowdown in the world economy, investments in the mining sector, and revenues from export receipts helped Peru’s economy bounce back in 2009. The country’s central bank has estimated that Peru’s economy will grow by 5.5% in 2010, boosted no doubt, by high levels of precious metals exports.

Data from the SNMPE shows that mining companies invested US$2.2 billion dollars in projects in 2009, an investment which helped boost export receipts for metals to US$16 billion for the year.

In a recent report, Moody’s Investors Service said Peru appears “poised to grow the most and maybe surprise on the upside.” Mario Guerrero, an analyst at Scotiabank Peru S.A. (Lima Stock Exchange: SCOTIAC1) in Lima, Peru’s capital, recently told reporters that “Peru is going to post strong growth this year and … attract… investment from abroad.”

Boosted by precious metals exports, Peru should serve as a reminder to investors that all that glitters may not be gold. After all, some of Peru’s luster comes from copper and silver.

Higher than Expected Soybean Harvests Should Help Boost Brazil's Economy in 2010

Higher than expected Soybean production in Brazil, should provide a further boost to the country’s already strong economy in 2010. According to estimates from the country’s Agriculture Ministry soybean harvests in Brazil, the world’s second largest soybean producer are expected to beat previous expectations. Due to higher that expected rain levels, farmers will likely produce 66.7 million metric tons soybeans in 2010, an increase from a January estimate that output would total 65.2 million tons. In any case, soybean production in Brazil will beat 2009’s output, when soy harvests totaled 57.2 million tons.

After shrinking by 1% in the first three months of 2009, Brazil’s economy, the largest in Latin America, bounced back from the recession, and began reporting quarter on quarter growth by the second quarter of 2009. The country’s economy sped up in the second half of the year, and at a press conference on January 21, 2010 Brazil’s finance minister, Guido Mantega, said that he expects the country’s economy to grow by 5.2% in 2010.

Chile: Boost in Private Investment Helping Drive Economic Recovery

Business spending is on the rise in Chile. Half of the 105 Chilean investment projects that were affected in some manner by the global economic crisis in 2009 have already been re-activated by their owners, according to a report by Chile’s Capital Goods Corporation, an investment company.

In the fourth quarter alone 15 privately financed projects, worth a total of US$3.7 billion, including Cencosud’s (Santiago Stock Exchange:CENCO) Costanera Center and the Phase V expansion of Minera Escondida were re-started. In total, for the year, 52 projects worth a total US$9.4 billion, were set back into motion. However, other projects that are worth a total of US$12.1 billion remain in limbo.

However, overall, the boost in business spending was one of the factors that helped Chile recover quickly from the recession and report an annual growth figure of 1.8%, the best in the OECD, according to figures reported in Chilean daily El Mercurio.

Alvaro Merino, Director of Research at Chile’s National Mining Society, an industry group, said “this [news] is very positive, we have signaled that in the next few years… we’ll have projects worth a total of US$45 billion.” Not just in copper, Chile’s major export, “but also in gold, silver, and non-metal mining,” he added.
Carlos Urenda, General Secretary of Chile’s Construction Chamber of Comerse, said that the country’s improved economic performance and outlook was a major factor venid the jump in investment in the contruction sector. “Better economic conditions… have translated into the initiation of projects in housing as well as infrastructure,” he explained.

In a recent interview, Luis Oganes, head of Latin America research at J.P. Morgan in New York said, “a year after the worst crisis the region has experienced in decades, it’s nice to see [Chile] bounce back in this manner.”