Venezuela’s Economy Is Entering ‘Stagflation,’ Esteruelas Says

Venezuela is entering a period of “stagflation” signaled by a central bank report that the economy in 2009 probably shrank for first time in six years, said Patrick Esteruelas, a Latin America analyst at Eurasia Group.

As other countries in the region including Brazil and Chile recover from a recession, Venezuela is lagging behind and “firmly in stagflation territory” with rising prices and a shrinking gross domestic product, Esteruelas said. A central bank report released last night said the oil-dependent economy probably contracted 2.9 percent this year.

“Venezuela is continuing to post negative quarterly growth rates at a time when most, if not all, its Latin American peers are already beginning to show quarterly positive growth as they leave the worst of the economic contraction behind,” Esteruelas said today in a telephone interview from New York.

A contraction in the fourth quarter would mark the third straight period of annual decline this year after the economy shrank 4.5 percent in the third quarter. Oil revenue, which accounted for 95 percent of exports excluding services in 2009, fell this year by 35 percent to $57.6 billion, the Central Bank of Venezuela said in its year-end report on the economy.

Annual inflation in Caracas slowed to 28.6 percent through November, according to the central bank. The rate is the highest of 78 economies tracked by Bloomberg.

Oil Exports

The central bank’s report shows that increased government borrowing, designed to spur growth, failed to overcome the drop in oil exports by price and volume, said Miguel Octavio, head of research at BBO Financial Services Inc. in Caracas.

“The government was used to having exaggerated resources and those resources are increasingly limited,” Octavio said in a telephone interview. “They had a lot of money accumulating in various funds at a time when the oil price was very high, but they’ve been spending it.”

A recovery in oil prices allowed Venezuela to avoid deeper economic distress. The government, which had originally budgeted oil to average $60 a barrel this year, cut back its expectations to $40 a barrel in March and slashed its spending plan.

The average price for Venezuelan oil exports this year through Dec. 24 was $56.88 a barrel, down 34 percent from the $86.49 average in 2008, and the country held back output to comply with a quota from the Organization of Petroleum Exporting Countries.

International Reserves

Venezuela had $33.6 billion of international reserves on Dec. 28, according to data on the central bank’s Web site. The government and the state oil company sold a combined $11.3 billion of bonds this year.

The economy was also hurt in the year’s final quarter by the government decision to close eight banks over possible misuse of depositor funds, locking up customers’ savings during the holiday shopping season, Octavio said. He estimated holiday sales fell 15 percent to 20 percent in the month of December.

“When you have a crisis like this, banks with money think twice before lending, especially if there’s a chance customers will come to withdraw money,” Octavio said. “Many depositors couldn’t move their money. That affected liquidity and the movement of money in the banking system.”

Consumption probably fell 1.8 percent in 2009, down from a 7 percent gain the previous year, the central bank said. Industrial production fell 7.2 percent compared with an increase of 1.4 percent in 2008.

Venezuela’s current-account surplus fell to $12.4 billion this year from 37.4 billion in 2008, and the combined current, capital and financial account reached a deficit of $11 billion, the central bank report said.

In 2008, the combined current, capital and financial account surplus was $9.3 billion, after posting a $5.7 billion deficit in 2007.

Finance Minister Ali Rodriguez told reporters Dec. 21 that “preliminary results” showed the country’s economy shrank 2 percent in 2009 and inflation would end the year at about 27 percent.

Bloomberg - Jose Orozco and Steven Bodzin
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Colombia Growth in 2010 May Be Cut by Venezuela Trade

Colombian Finance Minister Oscar Ivan Zuluaga said Venezuela’s move to freeze trade between the countries will reduce economic growth next year.

Exports to Venezuela may fall by about half to $2 billion next year, Zuluaga said today in an interview in Bogota. Exporters are diversifying by sending more goods to Mexico, Peru, Central America and the Caribbean, Zuluaga said.

“The government’s basic premise is that Venezuela’s economic problems will continue and the exports will remain below what they reached in recent years,” Zuluaga said. “This is the most realistic outlook.”

Venezuelan President Hugo Chavez in July pledged to end imports from his neighbor in retaliation for a deal to allow U.S. armed forces access to seven Colombian military bases. Exports to Venezuela, which account for about 15 percent of Colombia’s sales abroad, fell 70 percent in October from a year earlier.

Zuluaga said the impact on Colombia’s growth next year will depend on the depth of Venezuela’s economic slowdown. Venezuelan Finance Minister Ali Rodriguez said Dec. 21 that the economy may have contracted 2 percent this year.

Colombia’s government last week reaffirmed its growth target of 2.5 percent for next year.

Venezuela was the Andean nation’s second-biggest export market until China surpassed it last month, data from Colombia’s customs agency shows. Colombian exports to Venezuela dropped 22 percent to $3.71 billion in the year through October from a year ago, according to government figures.

Economic Contraction

The withering of trade with Venezuela could put a drag on Colombia’s economy after gross domestic product shrank for a fourth straight quarter in the July to September period, the longest slump in a decade, as the global credit crunch cut exports and domestic demand fell.

Latin America’s fifth-largest economy will probably register slightly more than zero growth this year before expanding in the lower half of the bank’s 2 percent to 3 percent forecast in 2010, central bank chief Jose Dario Uribe said today in an interview.

GDP fell 0.2 percent in the third quarter from a year earlier, surprising economists who expected 0.2 percent growth, according to the median of 19 forecasts in a Bloomberg survey. Colombia’s economy grew 0.2 percent from the previous quarter, the statistics agency said last week.

The country’s currency will stabilize at 2,000 pesos to 2,050 pesos per U.S. dollar next year, Zuluaga said.

Bloomberg - Helen Murphy and Andrea Jaramillo
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Bunge to Buy Brazilian Sugar Mills for $416 Million

Bunge Ltd., the world’s second- largest sugar trader, agreed to acquire Usina Moema Participacoes SA for about $416 million in stock to gain Brazilian sugar and ethanol plants with a prospect to buy more.

Moema Participacoes’ investors would receive 7.3 million Bunge shares, which includes a $36 million payment for working capital, White Plains, New York-based Bunge said today in a statement. Bunge, which would also assume about $480 million in debt, said the purchase will close in about 45 days.

The acquisition would more than double Bunge’s sugarcane milling capability in Brazil by adding a 60 percent share of the 15.4 million metric tons of capacity at six mills. The company said it will decide within 90 days whether to take full ownership of the Moema Group mills for a total price of $770 million in stock.

“This transaction fulfills Bunge’s strategic goal of building a large-scale fully integrated business in sugar and bioenergy,” Chief Executive Officer Alberto Weisser said in the statement. “It adds significant scale to our current milling operations and enables us to vary production among multiple sugar and ethanol products.”

The Moema mills can produce 990,000 tons of sugar and 190 million gallons of ethanol a year when the facilities are geared to maximize sweetener production, said Susan Burns, a Bunge spokeswoman. When ethanol production is optimized, the mills can put out 220 million gallons of the biofuel and 815,000 tons of sugar.

Shares Rise

Bunge rose $1.03, or 1.7 percent, to $63 at 1 p.m. in trading on the New York Stock Exchange, which closed early because of the Christmas holiday. The shares have gained 22 percent this year.

Bunge earlier this week said sugar prices may rise by as much as 20 percent in the next six months because of a global deficit of the sweetener.

Moody’s Investor Service today lowered its outlook on the company’s debt rating to negative, partly on concerns over the company’s financial leverage, risks of expanding into sugar and ethanol, and increased operations in Brazil.

“With the capital already invested by Moema Par in the sugar operations, Bunge’s combined sugar and bioenergy operations should generate high margins and free cash flow,” Moody’s said in a statement. “Moody’s remains concerned that the balance between Bunge’s strategic growth and leverage reduction may not be compatible with its current Baa2 rating.”

Existing Mills

Bunge’s three sugar mills in Brazil have combined annual capacity of 3 million metric tons, and that will double to 6 million tons in 2010 without acquisitions, Burns said. The mills can produce both sugar and ethanol.

Acquiring a full interest in Moema’s six mills would cost about $1.48 billion, including $710 million in assumed debt, Bunge said. The mills are clustered near the border of Sao Paulo and Minas Gerais states, the country’s largest ethanol markets, Bunge said. Full ownership would more than triple the company’s estimated 2010 production capacity in Brazil.

The acquisitions would add to earnings in the first 12 months, the company said.

Bloomberg - Jack Kaskey
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Peru mining investment exceeded US$ 2.2 billion in 2009

Peru mining investment exceeded US$ 2.2 billion this year, a 30 percent increase over 2008, despite the international crisis, reported Energy and Mines Ministry (MEM).

"The 2010 prospects are even better since this field is expected to attract further investment," said Deputy Minister of Mines, Fernando Gala.

Since October, some companies have expressed their intention to present their Environmental Impact Studies earlier, which means they also want to initiate investment earlier because the outlook is favorable, especially now when the crisis has passed and there is access to credit.

The bank loan interest rate for investment in Peru will be lower because the country has been rewarded with investment grade status by Moody's Investor Service, and this will attract more investment, he said.

Regarding the Tia Maria project in charge of Southern, the Peruvian Deputy Minister announced the possibility of holding public hearing in February next year.

In the case of Doe Run, he said, we are willing to reach an agreement with suppliers to resume their operations.

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CAN economies to experience substantial recovery next year

The Secretary General of the Andean Community (CAN) Freddy Ehlers said there are clear signs to indicate that CAN members Bolivia, Colombia, Ecuador and Peru will experience a real recovery in 2010.

Ehlers said that experts from different finance ministries and central banks announced that “there are signs of recovery in Andean economies,” predicting that they will regain pre-crisis levels.

"Regarding trade among CAN member countries, it is estimated that it will grow by over 15 percent next year," Elhers added.

In addition, the CAN Secretary General noted that this four-country group has managed to overcome many difficulties during 2009, mainly due to its institutional strength.

Elhers explained that CAN has mechanisms and tools to tackle diverse problems, while ensuring legal certainty for States and other economic and social actors in the integration process.

According to Elhers, the CAN General Secretariat’s activities continue as normal and have even intensified in areas such as social development, political cooperation and the environment.

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Walmart Names Solorzano Chief of Latin American Unit

Wal-Mart Stores Inc. named Eduardo Solorzano as chief executive officer of its Latin American operations, to take over from Vicente Trius, who left last month after less than five months in the job.

Solorzano, 52, joined Walmart in 1985 and ran its Mexican unit for five years, the Bentonville, Arkansas-based company said today in a statement. He will also become chairman of Wal- Mart de Mexico SAB, replacing Ernesto Vega, who will remain as a board member.

Solorzano, who takes charge in Latin America Jan. 18, will fill one of two international vacancies that opened at Walmart in the past month. Kevin Gardner, a company spokesman, said the world’s largest retailer hasn’t yet named a replacement for Stephan Fanderl, who quit as the head of the retailer’s Moscow office in November. Those executives reported to Doug McMillon, who took over as international CEO in February.

“In Latin America, they’re promoting someone from within in what I’d describe as an orderly transition,” Margaret Gilliam, president of New York-based advisory firm Gilliam & Co., said today by telephone.

International sales accounted for a quarter of Walmart’s total revenue of $401.2 billion in the year that ended Jan. 31.

Solorzano wasn’t available for an interview today, Gardner said. Walmart isn’t saying why Fanderl and Trius left the company, the spokesman said.

Fanderl quit because Walmart failed to expand into Russia during the 18 months he worked for the company, the newspaper Kommersant reported Nov. 17, citing people close to Fanderl.

‘Getting Antsy’

“It seems logical to me that if I were in that position, I’d be getting antsy if I hoped to be a store operator,” Gilliam said.

Solorzano will be based in Miami and oversee operations in Mexico, Central America, Argentina, Brazil, Chile and Puerto Rico. Scot Rank, Walmart de Mexico SAB’s chief operating officer, will replace Solorzano as chief executive of Mexico’s largest retailer, the company said.

Under Solorzano, Walmart de Mexico has almost doubled the number of its stores and restaurants to 1,329 from 694, the company said in the statement.

Walmart rose 9 cents to $52.85 at 4 p.m. in New York Stock Exchange composite trading. The shares have dropped 5.7 percent this year. Mexico City-based Walmart de Mexico fell 11 centavos to 56.14 pesos in trading on the Mexican stock exchange. The shares have jumped 52 percent this year.

Bloomberg - Thomas Black and Chris Burritt
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Cardero receiving final $88mln for Pampa De Pongo iron ore deposit in Peru

Cardero Resource Corp. has announced that Jinzhao Mining Peru, S.A., the Peruvian subsidiary of Zibo Hongda Mining Co., Ltd., a subsidiary of Nanjinzhao Group Co. Ltd. ("Nanjinzhao"), has advised that it is proceeding with the completion of the purchase of the Pampa de Pongo Iron Deposit in Peru.

Due to the fact that Nanjinzhao has not yet finalized its project financing banking arrangements with respect to the Pampa de Pongo project, and is therefore making the final payment from its own corporate resources, it has requested, and Cardero and Cardero Hierro Peru have agreed, that the final payment of USD 88 million will be split into three payments, as follows:

- USD 18 million, to be paid prior to December 17, 2009 - paid

- USD 40 million, to be paid on December 17, 2009 - paid

- USD 30 million, to be paid on December 31, 2009 - to come

"We are very pleased to be concluding the sale of Pampa de Pongo to the Nanjinzhao Group and wish them much success in advancing the project to production," said Hendrik van Alphen, Cardero's president and chief executive officer.

"Our initial acquisition, advancement and ultimate sale of this world-class project is a testament to both the Company's technical and corporate ability to recognize strategic value in an asset and its initiative to crystallize that value. We will work diligently to utilize these significant new funds in the best method for both shareholder value and Company growth."

With the successful completion of the sale of the Pampa de Pongo deposit to Nanjinzhao, Cardero has the requisite financial resources to not only continue to pursue the exploration of its existing projects in Peru, Mexico and Minnesota, but also to evaluate and potentially acquire significantly more advanced projects. Management will be reviewing and assessing, on an ongoing basis, a number of potential projects that may be suitable candidates for acquisition.

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Moody's upgrades Peru's foreign currency ratings

Moody's has upgraded Peru's foreign-currency government bond rating to BBa3 from Ba1 to reflect increased resilience to shocks and reduced credit risks associated with financial dollarization and the current composition of government debt.

“As with other sovereigns that have been recently upgraded, the decision to raise Peru’s foreign currency rating was driven by indications of increased shock-absorption capacity relative to similar or higher-rated sovereigns,” said Moody’s Vice President Mauro Leos, regional credit officer for Latin America.

He added that the rating action implicitly confirms Peru’s status as an “ordinal winner” during the recent period of global and financial turmoil.

“The Peruvian authorities’ ability to steer the economy in the face of adverse external shocks and to avoid a ‘hard landing’ that could have proven disruptive, confirmed the Peruvian government’s ability to implement counter-cyclical policies at a critical juncture,” said Leos.

Additionally, he said, the government’s fiscal and financial flexibility was also evident as a two-year economic stimulus package equivalent to 3.8% of GDP can be easily financed from savings accumulated during the 2006-2008 period of above-trend growth.

“As the decision to adopt a more expansionary fiscal stance during 2009 and 2010 was made in accordance with guidelines defined by the fiscal responsibility law, and after extensive deliberations in Congress, it represents a positive development,” said Leos.

“It confirms the strength of Peru’s fiscal institutions while introducing an element of policy predictability that is typically associated with investment-grade sovereign credits.”

In relation to potential credit vulnerabilities derived from factors previously identified as latent credit risks, including financial dollarization in Peru’s banking system and a high share of foreign currency-denominated government debt, Leos indicated that mitigating factors combined with gradual-but-enduring reductions in both conditions have lowered risks relative to previous years, thus strengthening Peru’s sovereign credit profile.

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Brazil’s Tam Rises Most in Four Months on Multiplus IPO Plan

Tam SA, Brazil’s largest airline, rose the most in four months after announcing plans for an initial share sale in its Multiplus SA frequent-flyer business.

Tam rose 5.6 percent to 38 reais at 11:51 a.m. New York time, the steepest advance in the nation’s benchmark Bovespa stock index. The shares rose as much as 6.6 percent earlier, the biggest gain since Aug. 7. Gol Linhas Aereas Inteligentes SA, its smaller rival, jumped 3.1 percent to 26.50 reais, while the Bovespa rose 0.2 percent.

Tam and Gol are expanding their air-mile programs as the Brazilian economy recovers from the global recession and consumers travel more. Tam, which started its Multiplus Fidelidade program in June, said today it also plans to sell shares in Multiplus outside Brazil.

“These would be investments to try and enhance the ‘Fidelidade’ business, to try and increase revenue,” said Kelly Trentin, head of research at Sao Paulo-based brokerage SLW Corretora. “This would come indirectly to Tam, and would bring benefits for Tam’s shareholders.”

Banco BTG Pactual SA will manage the sale together with the local unit of Credit Suisse Group AG, the Sao Paulo-based company said today. The company yesterday made a request to Brazil’s securities regulator to sell shares in Multiplus.

Air-Mile Partnerships

Multiplus’ business is “totally different” from the airline operations and offers investors lower risk, “strong” cash generation and low capital needs, Libano Miranda Barroso, Tam’s chief financial officer and interim chief executive, said last month.

Tam signed agreements earlier this year with the Ipiranga gas stations, Wal-Mart Stores Inc. and Livraria Cultura to allow clients to collect and spend air miles at stores and gas stations. Sao Paulo-based Gol signed an agreement with two banks to release co-branded credit cards.

Bloomberg - Laura Price
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Brazil, Peru Seek Energy Agreement in 60 Days, Minister Says

Brazil’s government aims to reach an accord with Peru by March to build power plants to secure energy supplies as economic growth picks up, a minister said.

The governments plan to build five hydroelectric plants in Peru that will produce 6,000 megawatts of electricity, Brazilian Energy Minister Edison Lobao said. Peru will keep the energy it needs and supply the rest to cities in Brazil’s Amazon jungle such as Rio Branco via a 1,500-kilometer (932-mile) transmission line, he said.

“Installing the first 2,000 megawatts will cost around $5 billion,” Lobao said in a Dec. 11 interview in Lima. “The long-distance transmission of energy to Brazil is a very costly operation.”

Centrais Eletricas Brasileiras SA, Latin America’s largest utility, will help build the plants in the foothills of the Peruvian Andes as Brazil seeks ways to increase and diversify its power generation capacity. Peru will also supply electricity to other parts of Brazil through 4,000 kilometers of transmission lines, Lobao said.

Latin America’s largest economy needs 100,000 megawatts of additional electricity-generation capacity in the next 20 years as the country’s growth outpaces other emerging economies, Lobao said Sept. 22.

Bloomberg - John Quigley
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Emergent wholesale carrier in Peru selects Digitalk for steady growth

Global Backbone, Peru’s telecommunications newcomer has selected Digitalk Multiservice Platform (MSP) to start their operations in South America.

Leading regional investors conceived the idea in 2008 to collaborate with the launch of innovative new telecommunications services in the region.

The Digitalk Multiservice Platform has been chosen to provide Global Backbone with robustness and the assurance of a steady growth in terms of available services and capacity.

Roberto Obradovich, President of Global Backbone said they chose that company because of the flexibility of its platform and "very much because of the features it has, that are a must for today’s market needs".

“We believe the Digitalk Multiservice Platform is ideally suited to the challenges service providers face in the ongoing changing markets – whether that be in emerging or established environments," said Mark Ashdown, Digitalk’s EVP of Sales and Marketing.

The Digitalk MSP is designed to offer the completeness of a turnkey solution, but with the flexibility to adapt and scale service offerings to suit with which we hope to see Global Backbone enjoy immediate success.”

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Brazil to become Peru's most important partner in a few years

In a few years Brazil will become the most important partner of Peru, on issues relating to investment, industry and technology, said the president of the Binational Chamber of Commerce and Integration, Miguel Vega Alvear.

Vega Alvear highlighted the Dec. 11 visit of Brazilian President Luiz Inácio Lula da Silva to Peru. It was reported that the Brazilian leader will arrive in Lima accompanied by a group of ministers and government senior officials as well as a trade mission composed of representatives from the 150 largest companies of Brazil.

"We are talking about a turning point in the country’s history, because an important relationship between Peru and Brazil is being further strengthened, interconnecting the Pacific Basin with the Atlantic in a strategic alliance," he told Andina.

The businessman stressed that in Peru there is now a consensus in both private and public sectors, “we are on the right path towards integration with Brazil.”

In that context, he mentioned that Brazil is destined to become one of the most important investors in Peru, to the point that it has planned to build 15 hydropower plants in Peru, to produce 9000 megawatts, representing an investment over US$ 12 billion.

"Investment is increasing at a significant rate. Peru-based Brazilian companies have made very large investments while others will come to invest in the country’s new sectors," he said.

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OGX Says It May Have Found New Oil Province in Brazil

OGX Petroleo & Gas Participacoes SA, the oil company controlled by billionaire Eike Batista, said it may have found a new oil province in Brazil, after making a second discovery in a deeper section of a well. Shares rose to a two-month high.

The Rio de Janeiro-based company found hydrocarbons in the Aptian section of its OGX-2A well, located about 77 kilometers (48 miles) off Brazil’s coast in the Campos Basin, according to a regulatory filing posted today. OGX hasn’t provided volume estimates for discoveries in the well’s Aptian and Albian sections.

“Our results to this moment give us more confidence that we’ve found a new oil province in the south part of the Campos Basin,” Chief Executive Officer Paulo Mendonca said today in the statement, without providing more details.

OGX, which plans to drill 79 wells by 2013, currently estimates it holds potential resources of 6.7 billion barrels of crude and equivalents. The characteristics of the OGX-2A well are “typically associated with giant discoveries” and suggest “a bigger oil system” in the area, Emerson Leite, an analyst at Credit Suisse Group AG in Sao Paulo, said.

OGX rose 24 reais, or 1.5 percent, to 1,672 reais in Sao Paulo trading at 1:48 p.m. local time, after earlier gaining 3.5 percent to their highest since Oct. 9. The shares have more than tripled this year.

Tupi Find

“We are growing increasingly confident that OGX is in front of a significant new oil province in the Southern portion of the Campos basin,” Leite wrote in a report Nov. 30. “OGX is the best positioned oil company in this particular area.”

Brazil’s offshore fields have lured increasing investments since state-controlled Petroleo Brasileiro SA discovered Tupi in 2007, the biggest oil find in the Americas in over three decades. The field, which may hold 5 billion to 8 billion barrels of recoverable reserves, is believed to be part of a bigger province in the so-called pre-salt offshore region.

Petrobras plans to spend $174.4 billion through 2013 to tap the region and double output.

OGX estimated Nov. 16 that the upper section of the well, which it started drilling in its BM-C-41 block on Oct. 22, may hold between 400 million and 500 million barrels of recoverable oil. The company said Nov. 30 that if found more oil in the Albian section of the well.

Drilling at OGX-2A will continue “in search of additional targets,” the company said.

OGX said Oct. 14 the BM-C-43 block, also in the Campos basin, may hold between 500 million and 1.5 billion barrels of crude.

Bloomberg - Helder Marinho
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Alcoa, BHP to Start Output at Alumar Refinery Expansion in 2010

Alcoa Inc., the largest U.S. aluminum maker, and BHP Billiton Ltd., the world’s biggest mining company, said the expanded Alumar refinery will begin operating in the first quarter of 2010, a director said.

The expansion, in the final stage of construction, will start test production of alumina in the first quarter of next year, said Nilson Ferraz, an Alumar production director, in an interview today. The companies are adding 2.1 million tons a year capacity to the plant in Maranhao state in northeastern Brazil. It now produces 1.4 million tons a year of alumina.

“Commercial-quality production will start in second-half 2010,” Ferraz said from Sao Luis.

The Alumar expansion, originally scheduled for 2008, was delayed partly because of cost overruns, BHP Billiton said earlier this year.

Rio Tinto Alcan Inc., the world’s third-largest mining company, has a 10 percent stake in the expansion project. Alumina is a raw material used in primary aluminum production.

Bloomberg - Diana Kinch
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Repsol Says Argentine Find Produced 69,000 Barrels

Repsol YPF SA, Spain’s largest oil company, said its Bandurria discovery in Argentina produced 69,000 barrels of oil since March after ramping up output.

YPF, which produces about two-thirds of Madrid-based Repsol’s total oil output, operates Bandurria and also owns a 54.54 percent stake in the field. Wintershall Energy SA owns 27.27 percent and Pan American Energy LLC owns the remainder.

A Buenos Aires-based spokesman for Repsol’s Argentine YPF unit declined to confirm a report in Clarin newspaper today, citing unidentified people, that the field may have the capability to pump 90 million barrels of oil a year. YPF is still assessing the field’s deposits, the spokesman said.

YPF said Nov. 26 it had boosted its oil reserves by 309 million barrels in the last three years and could add as many as another 500 million barrels from so-called contingent reserves. These are resources that will become “reserves when certain investment and market conditions are fulfilled,” Repsol said, without being more specific on the conditions.

Repsol may sell 20 to 25 percent of YPF through a public offering, Chief Operating Officer Miguel Martinez said on Nov. 29. The company is investing in exploration in Brazil’s Santos Basin and regions outside Argentina to stem declining output.

In 2008, Repsol sold a 15 percent stake in YPF to Argentine banker Enrique Eskenazi for $2.2 billion. Eskenazi has an option to buy an additional 10 percent.

On July 2, Repsol said it had been approached by companies interested in buying YPF stakes. None of the offers were “firm,” said Madrid-based Repsol.

Repsol rose 1.91 percent to close at 18.65 euros in Madrid, extending its gain this year to 23 percent.

Bloomberg - Rodrigo Orihuela
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