January 8 2015 image description
by: jmhumire 0 Comments

Dropping Oil Prices Reveal Failed Economic Policies in Latin America

As the global price of oil drops, the effects of this phenomenon are unveiling the failure of Latin America’s populist governments to generate sustainable prosperity while depending on oil-for-loans schemes, mainly with China.

In the last few months, the price of Brent crude oil has declined from a high of over $140 per barrel to under $60 a barrel as of the latest date. The reasons for the decline are manifold, but two stand out for many analysts. First, a technological revolution in energy extraction, known as “fracking” has substantially increased the supply of petroleum and natural gas in the U.S., making it less dependent on foreign sources of oil. Second, Saudi Arabia and other Gulf state producers have increased output in an attempt to drive out marginal producers, whose cost of production are highest. For instance, the on-shore unit cost of production in Saudi Arabia averages $18 while U.S. costs’ average $34 a barrel…. (more…)

October 6 2014 image description
by: jmhumire 0 Comments

Does China Own Ecuador?

Is the Ecuadoran government of Rafael Correa a wholly owned subsidiary of China? The more analysts look at the finances of the Andean nation of 15.6 million, the more it seems that the Correa government is selling the country’s resources to one main buyer in order to pay for its populist agenda.

After taking up residence in the Palacio de Carondelet in 2007, the country’s executive mansion, the socialist Correa declared the country’s sizeable foreign debt to be “illegitimate” and “odious,” contracted with “monsters” in the world of finance. By December 2008, Ecuador defaulted on $3.2 billion in global bonds.

World capital markets reacted harshly treating Ecuador as a pariah. The country faced potentially serious hardships as its solvency was directly challenged, but as economic circumstances would have it the resource rich-nation, like many other commodity exporters, was able to ride the wave of rising world prices for petroleum…. (more…)