Lula Unveils $886 Billion Brazil Investment Plan for Successor

Brazilian President Luiz Inacio Lula da Silva announced an $886 billion infrastructure investment plan that would be carried out by his chosen successor, Cabinet Chief Dilma Rousseff, should she win the October presidential election.

The plan, the second stage of Lula’s Growth Acceleration Program, will help Latin America’s biggest economy expand an average 5.5 percent a year through 2014, Finance Minister Guido Mantega said. The proposal calls for public and private investments of 959 billion reais ($534 billion) between 2011 and 2014 and 632 billion reais after 2014, Mantega said.

Lula announced the plan, known as PAC 2 for its Portuguese initials, at a ceremony also attended by his cabinet chief. Rousseff is in second place in national presidential polls, trailing Sao Paulo state Governor Jose Serra.

“This is a purely political move,” said Bolivar Lamounier, a partner at Sao Paulo-based Augurium Consultoria, a political analysis company. “I believe the government conducted researches to assess the political gains this announcement could bring or it wouldn’t have announced it with such pomp.”

Rousseff said in her speech today that the program wasn’t driven by political interests. The infrastructure plan seeks to boost economic and social development, she said.

Serra widened his lead over Rousseff in the latest poll by Datafolha, Folha de S. Paulo reported March 27.

The Datafolha poll put Serra’s support at 36 percent, nine percentage points ahead of Rousseff, the newspaper said. A month ago, Serra had a four-point lead.

Tax Cuts

The second round of the Growth Acceleration Program forecasts 220 billion reais in public investments, which may include tax cuts similar to those implemented last year on purchases of cars and appliances, Mantega said. Brazil’s solid fiscal policy will help sustain the spending, and it won’t threaten the government’s goal of posting a budget surplus in 2013, the minister said.

“PAC 2 will probably continue on the same track, with new tax incentives to stimulate production in the country and boost domestic demand,” Mantega said.

The plan hasn’t been approved by Congress and the country’s new president won’t be obligated to carry it out.

Under the measure, urban development programs are slated to receive 278 billion reais, including funds to build 2 million homes for low-income people.

The government plans to invest 105 billion reais in transportation infrastructure such as new roads and ports, according to the document. Investments in railroads are slated at 46 billion reais, and include studies for three new high- speed trains connecting the cities of Sao Paulo, Curitiba and Belo Horizonte.

“The PAC is a chance for the next government not to start from scratch,” Candido Vaccarezza, leader of the government’s ruling coalition in the Lower House, said today in an e-mailed statement.

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Maple Energy Seeks U.S. Partners to Develop Gas Find

Maple Energy Plc, a crude and natural-gas producer with operations in Peru, plans to meet with U.S. producers to line up a partner to develop its Peruvian shale gas discovery, General Manager Guillermo Ferreyros said.

Lima-based Maple’s Santa Rosa prospect in the central jungle has “tremendous potential” after the company found gas instead of oil at a well in September, Ferreyros said.

“We’re going to get together with most major U.S. players,” Ferreyros said today in an interview in Lima, without specifying the companies. “We expect to have more results by mid-year to be able to see the size of the area.”

Maple is among companies expected to invest $10 billion in Peru’s energy industry over the next seven years, according to the country’s Energy Ministry. The company is also developing a $245 million ethanol project.

The company plans to start planting sugar cane this year on 13,000 hectares (32,110 acres) of land on Peru’s north coast to start producing 35 million gallons a year of ethanol in the first half of 2011, Ferreyros said.

Maple aims to export part of its ethanol production to the United States and European Union as the Peruvian market can only consume an estimated 20 million gallons annually, he said.

Companies including Pure Biofuels Corp., Heaven Petroleum Operators and Peru’s Romero Group are investing a total $100 million in Peruvian biofuel projects using crops such as canola and palm oil, according to the Energy Ministry.

“Peru’s definitely going to become a net ethanol exporter,” Ferreyros said.

Denatured ethanol for April delivery fell 1.7 cents, or 1.1 percent, to $1.547 a gallon at 12:45 p.m. on the Chicago Board of Trade. Futures have fallen 20 percent this year.

Maple rose for a second day in London trading, gaining 1.5 pence, or 2.3 percent, to 68 pence. The stock has climbed 8 percent this year.

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Total Seeks Stakes in Brazil Oil Blocks, Pluen Says

Total SA, Europe’s third-biggest oil company, is seeking “various opportunities” to buy stakes in oil projects in Brazil, country manager Patrick Pluen said.

The company currently owns a minority stake in one offshore block in Brazil’s Campos Basin, Pluen said in an interview on the sidelines of a conference in Rio de Janeiro today.

Japan’s Inpex Corp. and BP Plc have bought stakes in Brazilian oil blocks this year as discoveries in the country’s pre-salt offshore region lure investments. Petroleo Brasileiro SA, Brazil’s state-controlled producer, raised its five-year investment plan to $200 to $220 billion as it taps deepwater deposits, including Tupi, the biggest find in the Americas since Mexico’s Cantarell in 1976.

Petrobras and Total will continue appraising the deepwater Xerelete discovery in the offshore Campos Basin to decide when to begin commercial production, Pluen said. The companies will explore deeper in the reservoir below the so-called pre-salt layer before setting a production schedule, he said. Petrobras operates the block.

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Chile May Raise Mining Taxes to Fund Reconstruction

Chile may increase taxes on mining companies to help pay for reconstruction after last month’s earthquake, Deputy Finance Minister Rodrigo Alvarez said.

The government of Sebastian Pinera is considering changes to mining taxes among other measures such as raising debt externally after last month’s 8.8-magnitude earthquake damaged infrastructure and buildings, Alvarez told Radio ADN today.

“We need a lot of resources and for many years,” he said.

Chile’s Mining Council, which represents BHP Billiton Ltd., Rio Tinto Plc, Anglo American Plc and other mining companies, said today that the tax increase may discourage planned investments of $22.1 billion over the next five years.

Higher taxes will not be the “centerpiece” of reconstruction funding and any increase would be “moderate,” Finance Minister Felipe Larrain said at conference in Santiago today. The government will also tap its $11.3 billion copper savings fund, Larrain said. Reconstruction costs are estimated at $30 billion, the minister said.

Copper prices have almost doubled in the last 12 months after China, the world’s largest consumer of the metal, boosted demand. Prices rose fourfold between 2003 and 2007 as Chilean production fell and China’s economy expanded.

Economist Paul Fontaine presented a study to Chile’s government that included proposals such as an increase in mining royalties to 8 percent, from between 4 and 5 percent currently, he said in an interview today.

Tax Revenue

“The government would earn about $500 million a year,” if the law is passed, said Fontaine, who has been working on a proposal to increase royalties for Pinera since his presidential campaign. “If mining companies agree to pay higher royalties, their contracts would be extended until 2040, which increases business stability.”

Companies that don’t agree to pay higher taxes would have to renegotiate levies in a few years and “may end up paying as much as three times more than they pay now,” Fontaine said.

The council said mining companies paid $24.8 billion in taxes over the past five years, more than any other industry.

Chile is the world’s largest copper producer. BHP and Rio Tinto operate Escondida, the world’s largest copper mine, in Chile’s Atacama Desert.

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Running to rebuild a shaken country

HE HAS always been hyperkinetic. But taking office as Chile’s president just 12 days after a devastating earthquake has thrown Sebastián Piñera into a frenzy of activity. No sooner had he been sworn in on March 11th as the country’s first elected right-of-centre leader in half a century than he was off on a helicopter tour of the damage from a big aftershock, cancelling lunch with seven visiting Latin American presidents. Having set up an emergency committee under his interior minister to handle the disaster, Mr Piñera is doing much of the work himself, holding cabinet meetings late into the night and making whistle-stop visits to the worst-affected areas in south-central Chile.

He has a big task ahead of him. The ground is still shaking. Parts of the coast have been raised by two metres. The death toll (at around 500) is lower than at first feared. An official in the outgoing government reckons that 150,000 families were made homeless (down from an initial guess of 500,000). Even so, the new team guesses that the earthquake has caused damage to infrastructure, businesses and homes of some $30 billion (a sum equal to around a fifth of GDP), though it will be weeks before an accurate tally is made.

The damage is concentrated in the regions of Maule, Bío-Bío and O’Higgins, all to the south of Santiago. A string of coastal towns and villages were flattened by a tsunami triggered by the quake. They are thick with the stench of rotting fish, thrown ashore by the waves.

Schools and hospitals were destroyed or damaged. In all, some 250,000 people still lack access to primary health care according to the Pan American Health Organisation. The quake coincided with the start of the school year. Pupils from damaged schools are doubling up in others, or will use temporary classrooms. Mr Piñera has given orders that all classes must resume by April 26th.

Water and electricity were quickly restored in most places. All the main roads were made passable within a few days, although some still have temporary bridges. But some minor roads in coastal areas are still blocked or can be used only by light vehicles. Santiago airport is working again, though passengers must use tents because the main terminal building was badly damaged. So was the big fishing port at Talcahuano, in the south, as well as quays in many smaller fishing towns.

As the southern-hemisphere summer turns to autumn, the priority is shelter. A Catholic charity has begun to build emergency housing for 20,000 families. It is basic: small, uninsulated wooden huts without kitchens or bathrooms. How robust they will prove in the winter storms that typically whip south-central Chile is unclear. And another 40,000 more are needed. One local mayor has refused the huts out of fear that they will become permanent shanty towns—something Chile’s governments had all but eliminated over the past 25 years of rising prosperity.

The country is far better placed to rebuild itself than it was after the previous big earthquake in 1985, let alone the one in 1960 which was of similar massive force to that of February 27th. Stricter building standards limited the damage. Insurance will cover around a quarter of the total bill, and is mostly reinsured abroad. Mr Piñera can draw on savings of over $11 billion, piled up in an offshore sovereign fund by his fiscally prudent centre-left predecessor, Michelle Bachelet. The government has almost no debt and an investment-grade credit rating. Ordinary Chileans are better able to help each other too: a telethon held earlier this month for the housing charity raised $59m, twice its target.

Chile’s big copper mines, which produce around half its total exports, lie north of the quake zone and were unaffected. But many labour-intensive export industries—forestry, fishing, wine and fruit—were hurt. A strong economic recovery, after last year’s recession, has been dented, though investment in reconstruction will boost growth by the end of the year.

All this will be a big test for Mr Piñera, a successful businessman whose political skills are relatively unproven. Ms Bachelet’s natural empathy with ordinary Chileans meant that she left office with an approval rating of over 80%, even though her government’s immediate response to the earthquake was not faultless.

Chileans will look to Mr Piñera for results. His cabinet is stuffed with technocrats, most of them educated at private schools and Santiago’s Catholic University. Many have close ties to Chile’s main private business groups. Respect for their technical skills and efficiency could easily turn to resentment in a country that has just become poorer and even more socially unequal. The new president had better keep running. (The Economist)

Argentine president to arrive in Peru with over 100 business people

Argentine President Cristina Fernandez de Kirchner will arrive in Lima with more than 100 business people as part of her upcoming state visit to Peru, said Argentine ambassador in Lima, Dario Alessandro.

Ambassador Alessandro stressed the importance of President Fernandez's visit to Peru saying it will help further strengthen the bilateral relationship and increase trade and investment.

The diplomat told Andina that the Argentine business people have already arranged about 500 meetings with their Peruvian counterparts.

According to Dario Alessandro, the number of business meetings is expected to increase since the delegation of Argentina includes business people from different commercial and industrial sectors as well as investors who want to explore business opportunities in Peru.

In addition, Alessandro said that during Cristina Fernandez's state visit, the first one by an Argentine head of state to Peru in 16 years, a Binational Business Committee will be set up to identify and propose the adoption of mechanisms that facilitate two-way trade and investment. (Andina)

Peruvian cement company shares rose 400% in Chile’s Stock Market

Peruvian cement company Melon share price rose almost 400 percent in Santiago’s Stock Market, following the earthquake on February 27, Sebastian Blondet, Celfin Capital analyst, reported Wednesday.

Reconstruction efforts in the southern country have benefited the valuation of this cement company which belongs to the Brescia Group.

“The prospects that the government is going to invest an important amount of money to rebuild the second most important city of Chile benefited the cement sector of that country”, he told Andina.

Melon shares have registered a 392 percent profit since the earthquake, which up until yesterday represented a 1.35 billion dollar increase in its stock market capitalization.

Blondet said that, unlike Peru, Chile Stock Market has no restrictions over share price increases. (Andina)

Peru GDP Grows Less Than Forecast on Fishing Decline

Peru’s economy expanded less than economists forecast in January as a decline in fishing catches overshadowed gains in construction and factory output.

Gross domestic product rose 3.6 percent from the same month a year earlier, the government’s statistics agency said today. Economists predicted growth of 5.8 percent, according to the median estimate of 12 analysts surveyed by Bloomberg. Construction, manufacturing and retailing all rose while fishing fell the most since 2006.

The start of fishing season in Peru, the world’s largest producer of fishmeal, has been delayed this year as warmer water temperatures associated with the El Nino weather pattern have driven anchovy further out to sea. Still, rising internal demand fueled construction, manufacturing and retail output, giving the economy a sixth month of year-on-year growth.

“Domestic commerce has shown signs of recovery,” David Rees, emerging market economist at London-based Capital Economics, said in an e-mail. “Manufacturing is benefiting from a pick-up in global trade.”

Construction output rose 10 percent in January, thanks to investment in mining, malls, and the building of a new container pier at the country’s biggest port Callao, the statistics office said.

Manufacturing output grew for a second month, expanding 0.2 percent, while retail increased 5.6 percent. Fishing was the only industry to post a decline, falling 27.1 percent from the same month a year earlier.

Growth Drivers

Peru’s construction industry has been the key driver of economic growth, thanks to a government stimulus package worth 2 percent of GDP, Rees said. Surging construction activity enabled South America’s sixth-largest economy to post a 0.9 percent rise in gross domestic product last year.

Peru’s economy will probably expand 5 percent in the first quarter, setting the stage for an increase in the central bank’s benchmark lending rate from June onward, Scotiabank Peru said in a report today.

Inflation may enter the central bank’s 1 percent to 3 percent target range this month and surpass the 1.25 percent interest rate within two to three months, Scotiabank said.

The central bank may wait for rates to first rise in Brazil to avoid an inflow of short-term capital that could disrupt the foreign exchange market, Scotiabank said.

“Like Brazil, Peru’s central bank could increase reserve requirements first and leave a rate rise until inflation has quickened and the economy is growing more soundly.”

Global Demand

Cement sales, an indicator of construction output, rose 15 percent in February from a year earlier, the central bank said in a March 12 presentation. Electricity output rose to the highest output in at least 21 months, the central bank said.

The country’s textile industry has increased output as demand from the U.S. and Europe improves, Martin Reano, general manager of the National Society of Industries’ textiles committee, said March 9.

Peru’s exports jumped 46 percent year-on-year in January to $2.37 billion, led by sales of copper, zinc and gasoline, the statistics agency said March 10.

Peru’s sol was unchanged at 2.8385 per U.S. dollar at 4:14 p.m. New York time. The sol has gained 1.7 percent this year, the ninth-best performance against the dollar among 26 emerging- market currencies tracked by Bloomberg.

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BHP, Anglo, Xstrata Ship Coal 10,000 Miles to China

BHP Billiton Plc, Anglo American Plc and Xstrata Plc are shipping coal 10,000 miles to China from their Cerrejon mine in Colombia for the first time this year because of surging demand and rising prices in Asia.

Cerrejon, the world’s largest open-pit mine of coal for export, started shipping fuel through the Panama Canal and on other routes to China after prices became “much better” than those in Europe, Leon Teicher, the venture’s chief executive officer, said in an interview. Cerrejon may also make its first sales to India this year, he said.

China’s accelerating economic growth is stoking demand for coal to fuel power plants and steel mills. Prices 45 percent above Europe make it worthwhile to transport the fuel to ports that are twice as far as European harbors such as Rotterdam. China’s coal imports tripled last year to 126.6 million metric tons, according to the China General Administration of Customs.

“There is a transition,” Teicher said in a March 10 interview in Bogota. “Prices in the Pacific are much higher than they have ever been relative to Europe.”

Thermal coal used by power utilities rose 22 percent in the 12 months through March 5 to $107.70 per ton in Qinhuangdao, a port in northeastern China, from $88 a year ago, according to data from McCloskey Group Ltd. The price was 45 percent higher than the $74.40 for coal delivered to northwestern Europe.

Chinese Growth

China will be a net importer of coal this year even as its own output climbs, Teicher said. The nation’s gross domestic product expanded 10.7 percent last quarter, the fastest since 2007. Last week, central bank Governor Zhou Xiaochuan said policies to stimulate the economy must end “sooner or later.”

“I don’t believe that China is a bubble,” Teicher said. “China has arrived.”

An “important” share of Cerrejon’s exports may be sent to Asia this year, he said, without providing an estimate. Coal prices will be stable or rise on demand in Asia, Teicher said.

China is the world’s largest user and producer of coal. The country will probably stop being a net importer of the fuel in 2011 as new production comes online, Huainan Mining Industry Group Co. President Kong Xiangxi told reporters today in Beijing.

Output at Cerrejon, on the northeastern edge of Colombia, will rise to between 31 million and 32 million tons of coal in 2010, after falling last year as demand waned in Europe, he said. BHP, Anglo American and Xstrata each own a third of the mine.

Mine’s Capacity

Annual output capacity may be expanded to 40 million tons at a cost of $800 million to $1 billion once “the market will take that expansion,” Teicher said. “Right now is not yet the time.”

Capacity may reach 60 million tons, Teicher said, without providing a timeframe.

Last year, Cerrejon sold most of its coal to Europe, the U.S. and Latin America. Demand in Europe remains “depressed” because of weak economic growth and as the region draws on stockpiles of coal purchased prior to the downturn, he said.

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Argentina May Limit Fuel Exports to Ensure Supply

Argentina may limit fuel exports and force refineries to step up production to ensure domestic supplies after Petroleo Brasileiro SA and Royal Dutch Shell Plc cut output.

Petrobras and Shell pared refinery output in Argentina to push up gasoline prices, Planning Minister Julio de Vido said today in a statement.

“There’s been a decision by these companies to refine less oil to cause this shortage situation,” de Vido said in the statement. The government may “regulate fuel exports so that local markets may be properly supplied” and “intervene so that these refineries utilize their maximum capacity.”

Rio de Janeiro-based Petrobras, as Brazil’s state- controlled oil company is known, owns three refineries in Argentina, with a combined capacity to refine 101,500 barrels a day, according to data compiled by Bloomberg. The Hague, Netherlands-based Shell owns one unit with a capacity to process 113,000 barrels daily.

Buenos Aires-based press officials at Shell and Petrobras didn’t return calls from Bloomberg News seeking comment.

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Chile Faces Risk That Quake May Hit Copper-Rich North

Chile, struck last month by an 8.8- magnitude earthquake that killed hundreds and damaged the country’s main road, may be hit by another “large” temblor in the copper-rich North, a national earthquake specialist said.

An earthquake as strong as magnitude 8.5 may strike along a 670-kilometer (416-mile) stretch of northern Chile that runs from Mejillones to Arica, said Jaime Campos, director of the International Center to Investigate Earthquakes Montessus de Ballore. The forecast, which doesn’t include a specific timeframe, is based on the Santiago-based group’s studies of seismic measurements and previous quakes in the area.

“The most likely thing is for there to be a big earthquake there,” Campos said yesterday in a telephone interview from Santiago. “There is enough energy to produce an 8.5, very similar to what happened in central Chile.”

The Feb. 27 quake off the coast of southern Chile destroyed homes and triggered a tsunami that washed some homes out to sea. Copper mines owned by state-run Codelco, Anglo American Plc and Antofagasta Plc temporarily halted output because of power cuts, fueling a 4.1 percent gain in copper futures last week in New York. Chile is the world’s biggest supplier of copper.

Campos said prior studies at the University of Chile, where the group is based, showed the area of southern Chile was vulnerable to a large temblor. Most of the nation’s copper production is in northern Chile, where mines weren’t damaged.

Drills

The quake has prompted the Dona Ines de Collahuasi copper mine in northern Chile to plan earthquake drills to train employees, Bernardita Fernandez, a spokeswoman for Collahuasi, said yesterday in an e-mail. The mine also is updating emergency systems, she said.

A magnitude 7.7 quake that rocked northern Chile in 2007 knocked out power to mines including Collahuasi, controlled by Xstrata Plc and Anglo American. The North division at Codelco, the largest copper producer, and BHP Billiton Ltd.’s Escondida copper mine, the world’s biggest, also were temporarily halted.

Copper futures for May delivery were little changed to close at $3.410 a pound on the New York Mercantile Exchange’s Comex division.

Chile is prone to quakes because its coastline, which stretches about half the length of the South American continent, lies near the boundaries of two tectonic plates that make up the earth’s crust.

The movement of one plate sliding under the other caused the world’s largest-ever measured quake in 1960, which had a magnitude of 9.5. That event led to a tsunami that swamped the southern Chilean city of Valdivia and reached Hawaii and Japan, according to the U.S. Geological Survey.

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Brazil Economists Raise CPI Forecast for Seventh Week

Brazilian economists raised their 2010 inflation forecast for a seventh straight week, increasing pressure for the central bank to raise the benchmark interest rate as early as next week.

Economists covering Latin America’s biggest economy expect the benchmark IPCA price index to rise to 4.99 percent in 2010, up from last week’s forecast of 4.91 percent, according to the median estimate in a March 5 central bank survey of about 100 economists published today. The annual rate has exceeded the bank’s 4.5 percent target in each of the past two months.

Rising inflation expectations are forcing policy makers to unwind the stimulus put in place amid the credit crunch to ensure that rising consumer demand won’t stoke inflation, said Zeina Latif, chief economist at ING Bank in Sao Paulo. The central bank has kept the benchmark interest rate at a record low of 8.75 percent since July.

“The central bank knows it will need to raise rates, so it’s best to start raising sooner than later,” said Latif, who expects the so-called Selic rate to be lifted at the bank’s March 17 meeting. “Additional economic stimulus increases the risk for a deterioration in the inflation outlook.”

The yield on the interest rate future contract due January 2011, the most traded on Sao Paulo’s BM&F exchange, rose as much as three basis points, or 0.03 percentage point, to 10.44 percent. At 8:46 a.m. New York time, the real weakened 0.2 percent to 1.7810 per dollar from 1.7782 on March 3.

Economists expect inflation will slow to 4.5 percent next year, down from last week’s estimate of 4.53 percent, the central bank’s survey shows.

“The forecast for 2011 inflation will remain anchored around the target should the central bank increase interest rates and continue to tighten reserve requirements,” said Caio Megale, an economist and partner at Mau Sekular Investimentos in Sao Paulo.

Policy makers on Feb. 25 increased by 71 billion reais ($40 billion) the amount lenders must keep on deposit at the central bank as part of a plan to dial back measure taken during the credit crunch.

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Brazil May Overheat on Investments, Coutinho Says

Brazil’s economy may overheat as too much foreign investment flows into the country, said Luciano Coutinho, president of state development bank BNDES.

“We are worried about excessive inflow or excessive growth this year,” Coutinho said during an interview at Bloomberg’s London office yesterday. He added that the government is seeking economic growth of 5 percent to 5.5 percent in 2010.

Foreign investors are piling money into Latin America’s largest economy as the country builds houses, roads and stadiums for the 2014 World Cup soccer tournament and 2016 Olympic Games in Rio de Janeiro. Gross domestic product has tripled since President Luiz Inacio Lula da Silva came to power in 2003.

The benchmark inflation rate rose for the fourth straight month in January to 4.59 percent, above the government’s target of 4.5 percent, as economic growth quickened. Analysts raised their forecasts for 2010 inflation to 4.91 percent in a weekly central bank survey published March 1, adding to speculation that the central bank may raise interest rates for the first time since 2008 as soon as this month.

Foreign direct investment will jump 47 percent this year to $38 billion, according to the median forecast of about 100 economists in a central bank survey published this week. International investors added 20.5 billion reais ($11.4 billion) to their stock holdings last year, the most since records began in 1994, as the benchmark Bovespa Index gained 83 percent.

‘Somewhat Volatile’ Currency

Policy makers are next scheduled to decide on the overnight interest rate March 17. Banco Central do Brasil will raise the so-called Selic rate to 11.25 percent by year-end from 8.75 percent currently, according to the median forecast of about 100 economists surveyed by the central bank.

The Brazilian real will be “somewhat volatile” against the dollar in the coming months as the U.S. economy starts to recover, Coutinho said. The return to growth in the U.S. will lead to a stronger dollar and a weaker real, he said.

The real may also decline against the euro, he said.

The Brazilian currency rose 0.2 percent to 1.7875 per dollar at 11:19 a.m. New York time. The real has fallen 2.4 percent this year against the U.S. dollar, after rising 33 percent last year.

“I do not see a trend for consistent appreciation of the real,” Coutinho said in the Bloomberg television interview in the U.K. capital, where BNDES opened an office last year. “I would advise investors not to bet on an excessive appreciation of the real.”

No Capital Controls

The central bank will intervene in the case of “excessive” inflows or further appreciation of the currency, the bank’s president said. The government doesn’t intend to adopt capital controls and would use “conventional” market instruments to contain appreciation, he said.

Brazil’s economy may have grown a “small” amount last year as it recovered from its first recession since 2003, Planning Minister Paulo Bernardo told reporters in Brasilia yesterday, when asked about his expectations for the gross domestic product figures that will be released March 11.

The economy will grow 5.5 percent in 2010, according to the median estimate of analysts in Feb. 26 central bank survey published March 1. The central bank estimates economic growth of 5.8 percent this year and foreign direct investment of $45 billion.

BNDES, which was founded in 1952 and provides financing in Brazil and overseas, lent a record $72 billion last year, Coutinho said yesterday.

The bank wants to lend “somewhat less” this year as it seeks to “share the burden” with private banks, Coutinho said.

BNDES Ltd., the London-based unit, will “soon” be able to support companies with lending operations as it takes on banking services such as asset management, he said. The bank will eventually be able to raise funds in the U.K. and operate in capital markets, he said.

BNDES set up the unit last year to buy equity stakes in joint ventures and subsidiaries that Brazilian companies are setting up overseas.

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Chile Endures Shortages, Looting Amid ‘Late’ Relief

Four days after Chile was hit by its strongest earthquake in 50 years, victims are criticizing the government for failing to respond quickly enough to a disaster that left them drinking fetid water and scrounging for food.

“No one from the government has even showed up to tell us what to do, much less give us any help,” said Julio Valle, a fisherman whose 12-meter trawler was destroyed when a wall of water generated by the Feb. 27 temblor crashed into the port of Talcahuano. “The government has abandoned us to our fate.”

Chilean President Michelle Bachelet has dispatched thousands of troops to areas of the country hardest hit by the 8.8-magnitude quake and government officials have said that their sole focus is helping victims. Still, most of the 1 million people who live in Talcahuano and the nearby city of Concepcion don’t have access to drinking water, power or fuel.

“We’re on our own,” Valle said, standing amid mud, dead fish, broken boats and a wasteland of buildings reduced to rubble. He, his wife and his two children are living under a plastic tarp on a hillside, searching for food amid the debris.

Frustration is growing among Chileans from Concepcion, the country’s second-largest city, to the capital Santiago, where neighbors are banding together to guard against looters looking to take advantage of the disorder to steal.

Bachelet isn’t acting fast enough to bring order to the chaos, said Concepcion Mayor Jacqueline Van Rysselberghe. There aren’t enough troops to restore calm and efforts to distribute food, water and temporary shelter have fallen short, she said.

‘Insufficient’ Aid

“Help is starting to arrive in the area, but unfortunately it’s late,” she told ADN Radio Chile. “The amount of aid that’s arrived is insufficient.”

The Navy shares the blame for deaths resulting from a tsunami in Talcahuano after residents, who had fled to higher ground, returned when an alert was lifted only to be hit by a massive wave, said Admiral Edmundo Gonzalez.

“We were not very clear in the information that we delivered,” he said in a televised interview on TVN. “We weren’t precise enough in telling the president to maintain the alert or lift it. We share the blame.”

Juan Soto, a 45-year-old sardine fisherman, says that error may have gotten people killed. “They drove around with loudspeakers telling people it was safe so a lot of folks went back to low ground,” said Soto, 45. Most people in his fishing village of Coliuma lost their homes and some were swept out to sea when a tsunami smashed the shoreline, he said. “The government shares the blame for people’s deaths,” he said.

‘Time for Action’

Chile’s president said the government is doing the best it can under the circumstances.

“It’s not the time for analysis, it’s the time for action,” Bachelet said in a speech. “This is an earthquake of unprecedented proportions and we expect understanding.”

World Vision International workers cannot enter some of the hardest hit areas because of damaged roads, and supplies are being delivered by boats and helicopters, slowing their arrival, said David Dickler, a spokesman for the Los Angeles-based relief organization.

“It’s not the government’s fault, it’s just nature’s force,’ he said.

The government put more army troops and marines on the streets of Concepcion and Talcahuano after thieves pillaged and torched businesses over the past three days. Officials instituted a nighttime curfew in a bid to prevent looting.

Satellite Phones

Efforts to provide relief are hampered by a lack of electricity, spotty communication and severed highways. Secretary of State Hillary Clinton delivered 25 satellite phones to Bachelet yesterday and said the U.S. would provide water purification plants, a field hospital and mobile bridges.

Pledges of assistance have also come from the United Nations, Brazilian President Luiz Inacio Lula da Silva and Peruvian President Alan Garcia.

Clinton yesterday praised the government’s response to the earthquake that released hundreds of times more energy than the temblor that left more than 200,000 dead in Haiti in January.

“Your leadership and the extraordinary efforts of your government and the people of Chile are responding with resilience and strength,” Clinton said in Santiago.

The perception among some Chileans was different.

Wrecked Boat

“We have gotten nothing, nothing from the government to help,” said Capt. Fernando Cartes, commander of the main fire brigade in Talcahuano.

Near Valle’s wrecked boat, dozens of people took gasoline from the tanks of a destroyed service station yesterday while another group looted sacks of flour from a warehouse within sight of troops stationed at the gates of Chile’s biggest naval base. A military patrol sped by without stopping, images broadcast on CNN Chile showed.

In Santiago, which wasn’t hit as hard as towns and cities closer to the quake’s epicenter in south-central Chile, reports of bands of thieves roaming the capital’s wealthiest areas stirred fear among residents.

In some areas, people spent the night outside their houses armed with clubs and other weapons to ward off intruders.

“It’s collective psychosis,” said Gonzalo Barrientos, 22, a university student who stood guard outside his home. “There is just fear.”

Bachelet will leave office March 11, when President-elect Sebastian Pinera takes over. Pinera said late yesterday that he’s considering expanding the area of the country covered by a “state of catastrophe” declaration made by Bachelet.

‘Finding Solutions’

“I don’t want to grade the government’s response to the crisis,” he told reporters. “I’m committed to finding solutions, especially in public security that clearly has been a weak spot, and water and electricity supply. The time for evaluations hasn’t arrived yet.”

The total economic cost from the quake may be as much as $30 billion, or about 15 percent of the country’s gross domestic product, according to estimates by disaster-scenario modeler Eqecat Inc. Insured losses may amount to $3 billion to $8 billion, Eqecat said. Damages at the high end of that range would make the quake the second-costliest for insurers in history, following the 1994 Northridge, California, temblor.

Stock Market

Chile’s IPSA stock index has declined 2.4 percent since the quake, including a 0.7 percent fall today at 8:20 a.m. New York time. Vina Concha y Toro SA, Chile’s largest winemaker, fell the most in eight months yesterday after the company had to suspend production.

Other companies benefitted. Lafarge Chile SA, a cement maker, jumped the most on record on bets that demand would increase.

Chile’s peso rose 1.1 percent yesterday, the biggest gain among emerging-market currencies, and rose 0.5 percent to 516.25 per dollar in trading today. Traders are betting the government will repatriate overseas savings to fund reconstruction, increasing demand for local currency.

Codelco, the world’s largest copper miner, said it was on track to reach full output yesterday after the quake had knocked out power to two mines supplying more than a third of its production.

Most of Chile’s copper deposits and port facilities are in the northern half of the country and had no reports of damage.

Concerns about supply pushed copper for May delivery up 1.75 cents to $3.4290 a pound on the New York Mercantile Exchange’s Comex unit. It was the metal’s third day of gains.

The Feb. 27 earthquake was the world’s fifth strongest since 1900, carrying a force 500 times stronger than the magnitude 7.0 earthquake that last month devastated Haiti, in terms of the energy released, according to the USGS.

Bloomberg - Michael Smith, James Attwood and Sebastian Boyd

To contact the reporters on this story: Michael Smith in Concepcion at mssmith@bloomberg.net; James Attwood in Santiago at jattwood3@bloomberg.net; Sebastian Boyd in Santiago at sboyd9@bloomberg.net

Venezuela Recession Deepens as Region Resumes Growth

Venezuela’s economy fell deeper into recession in the fourth quarter, falling behind other Latin American economies that are seeing growth accelerate as they emerge from the global financial crisis.

Gross domestic product contracted an unexpected 5.8 percent in the quarter from a year earlier, the central bank said today in an e-mailed statement, after shrinking 4.6 percent in the third quarter. The contraction surpassed eight of nine analyst forecasts in a Bloomberg survey whose median estimate was for a 4.6 percent drop.

“Venezuela did better than most countries at the beginning of the global recession, but now it’s in greater trouble,” Juan Pablo Fuentes, an economist at Moody’s Economy.com in West Chester, Pennsylvania, said in a phone interview. “This is continued deterioration.”

Venezuela’s economy will underperform Latin America this year, growing just 0.3 percent compared to forecasted growth of 4 percent in the rest of the region, according to Morgan Stanley. Brazil’s central bank forecasts that Latin America’s biggest economy will grow 5.8 percent this year, Mexico’s central bank estimates the economy will rebound 3.2 percent to 4.2 percent after shrinking 6.5 percent last year.

Venezuelan Finance Minister Jorge Giordani expects the economy to grow 0.5 percent this year.

The recession may last until the third quarter of this year after President Hugo Chavez devalued the currency as much as 50 percent in January, a move that may damp private consumption, Fuentes said.

‘Much Worse’

Venezuela’s oil sector contracted 10.2 percent from a year earlier and the non-oil sector shrunk 4 percent in the quarter, the bank said in the report.

“This is much worse than expected,” Boris Segura, an economist at RBS Securities Inc. in Stamford, Connecticut, said. “There’s further downside in the first half of the year due to the recessionary effects of the bolivar’s devaluation.”

Manufacturing fell 6.9 percent and the mining industry, a sector the government has highlighted as strategic to boost non- oil exports, tumbled 4.8 percent. The economy contracted 3.3 percent during 2009.

Venezuela, the biggest oil producer in South America, cut imports 43 percent in the quarter in a bid to save dollar reserves after oil output fell in line with OPEC production quotas.

Government Spending

Chavez will likely begin to ramp up government spending before key congressional elections in September in a bid to curry favor with supporters and to drive economic growth, according to Segura.

“That’s why they devalued last month because they need to spend more,” Segura said in a telephone interview. “In the fourth quarter they couldn’t.”

Chavez devalued the currency on Jan. 8 for the first time since 2005 and created a multi-tiered exchange system in a bid to stimulate non-oil exports and to double the amount of bolivars received for every dollar from oil sales.

Venezuela now sells dollars at the official rates of 2.6 bolivars for goods deemed essential, including some food, medicine and machinery, and 4.3 per dollar for non-essential items. Companies operating in Venezuela turned to the parallel currency market last year when the government curbed dollar sales at the previous official rate of 2.15 per dollar.

The bolivar weakened 2 percent today to 6.85 per dollar in unregulated trading, the lowest since Aug. 14, traders said.

Venezuela’s economy may contract again in 2010 if manufacturing and retail sales are affected by rolling blackouts and a growing nationwide electricity crisis, Asdrubal Oliveros, a director at the consulting firm Ecoanalitica in Caracas said.

The government has ordered companies to reduce energy consumption by 20 percent or face indefinite power cuts. It continues to enforce rolling blackouts outside the capital, Caracas, in a bid to prevent a collapse of the power grid.

“If the electricity situation is resolved in the second quarter, we could see growth in the second half,” Oliveros said in a phone interview. “But if blackouts occur every 36 hours, the outlook is negative and the economy could contract as much as 5 percent this year.”

Bloomberg - Daniel Cancel
To contact the reporter on this story: Daniel Cancel in Caracas at dcancel@bloomberg.net.

Chile Disaster May Cost Insurers $2 Billion, AIR Says

The 8.8-magnitude earthquake that struck Chile last week may cost insurers more than $2 billion, according to catastrophe-modeling firm AIR Worldwide.

The earthquake killed more than 700 people, cut off the nation’s main highway, knocked out power lines and damaged 1.5 million homes, officials said. Economic losses may exceed $15 billion, the Boston-based firm said today in an e-mailed statement.

“The total economic loss will likely be severe from damage not only to buildings, but from the widespread impact on infrastructure, including roads, bridges, airports, and utilities and telecommunications networks,” said Jayanta Guin, senior vice president of research and modeling at AIR, in the statement.

The quake was centered 200 miles (317 kilometers) southwest of Santiago near the main winemaking region and close to Concepcion, a metropolitan region of more than 500,000 people.

The area from Concepcion to Santiago contains residential and commercial property with an insurable value of $275 billion, AIR said. About 60 percent of commercial properties and as little as 10 percent of residential properties are insured against earthquakes, AIR said.

Another modeling firm, Eqecat Inc., on Feb. 27 estimated economic losses of $15 billion to $30 billion. Eqecat had previously estimated the economic losses from the January earthquake in Haiti in the “low-single-digit billions.”

Bloomberg . Joel Schectman and Sapna Maheshwari
To contact the reporters on this story: Joel Schectman in New York at jschectman@bloomberg.net; Sapna Maheshwari in New York at sapnam@bloomberg.net.