denotes premium content | Jan 6 2009 Trade & Forfaiting Review magazine archive
Volume 8 Issue 7
While the US has its ‘democratic’ eyes set firmly on the Middle East, it runs the risk of letting things slip closer to home. Deteriorating trade relations with Venezuela are a case in point. With one of the world’s largest known oil deposits, Venezuela is a country the US should be keen to keep sweet. But by taking its eye off the ball, it has opened the door to China, which has seized the opportunity to secure another market to meet its growing energy needs.
The US currently buys around 60% of Venezuela’s crude-oil output. But with Venezuelan president, Hugo Chavez, on a mission to lessen dependence on its main export market, this could change. Of course, all of this plays nicely into the hands of China, which has been aggressively seeking new energy markets to reduce its reliance on the Middle East. Consequently, Latin America, along with Russia and Africa, are primary targets.
Early this year, Chavez signed 19 co-operation agreements with China, including a trade deal that gives the Asian nation operating control of 15 oil fields in eastern Venezuela. Chavez has also indicated plans to expand a Panamanian pipeline pumping crude oil to the Pacific, which would allow easier onward transportation to China. Venezuela’s determination to divert trade routes away from the US towards Asia could also spread to other Latin-American countries. In addition to its focus on energy supplies, China has also shown a growing appetite for soft-commodities – good news for Latin-American grain and soybean exporters.
Indeed, Chinese demand for raw materials helped push oil prices to record highs this year, boosting the economies of the region’s commodity-rich exporting countries. But slower Chinese (and US) growth could bring prices down and reduce liquidity. Market watchers are already predicting a decline in steel prices, for instance, which would negatively impact Brazilian exporters in that sector. But, for now, Brazil’s surprising elevation over the past couple of years to a state of excess liquidity has meant trade-financiers face an aggressive market, thinning margins and lengthening tenors.
Michele Martensen, editor
Features
Overcoming the odds
Since its inception in November 2003, the Trade Bank of Iraq’s financial performance has exceeded all expectations despite operating in one of the most challenging environments on the trade map. Kathleen Williams speaks to Hussein Al-Uzri, president and chairman of the Baghdad-based bank, about the progress that has been made and the challenges that lie ahead...
Escalating trade flows
Latin America, and particularly Brazil, has gone through something of a renaissance of late. High commodity prices and strong demand from China has led to an excess of liquidity in the region, which has led to lower margins and lengthening tenors. But, as Erika Morphy reports, political uncertainties and a commodity-price correction could easily alter dynamics...
Viva Venezuela
With one of the world’s largest known oil deposits, a president intent on cutting ties and oil supplies with the US, and notoriously cumbersome trade restrictions, Venezuela makes for an interesting if somewhat challenging operating environment. Kathleen Williams talks to ABN Amro’s Antoine Arts about current events and how they affect trade financiers...
Cautiously moving in
Three-and-a-half years after Argentina’s catastrophic economic and currency collapse, banks are beginning to re-establish trade finance lending activities with the country. Erika Morphy reports on the cautious but growing appetite for Argentine risk...
A case of ownership
Why aren’t warehouse receipts more widely traded in India? Andrew Taylor, a partner in the Singapore office of Lovells, and Sawant Singh, partner at Trilegal in Mumbai, review warehouse financing and its place in the India market...
Regulars
Market View: Kimberly Wiehl
Looking at recent year-end results for global trade, overall volumes grew by nearly 10% in 2004...
Letter from Hong Kong
When I was into my teens I used to stay up late on Sundays and watch ‘Film on two’ on BBC2. They used to have all these strange international movies, which I found immensely entertaining. Of course staying up and pinching my dad’s ‘No 6’ cigarettes was also an attraction. I wonder how my parents didn’t pick up on the wafts of cigarette smoke drifting up to their room, or maybe they did...
60-second interview: Adrian Katz
This March, Finacity, a trade finance start-up backed by ABN Amro, Bank of America, Euler Hermes ACI and Amroc Investments, structured what its principals say was a transaction unique to the Mexican market: the first trade-receivables securitisation for local investors. A twist on a standard export-receivables securitisation, this deal’s senior security was peso-denominated as were the majority of the underlying receivables...
Gauging risk
In his regular quarterly column, Peter Sargent explores the benefits of on-the-ground transaction management for emerging-market trade finance...
Emerging-market debt pricing
Omni Whittington Commentary, April 2005
Country-risk appetite
The analysis from Standard Bank London Limited
