camberiu
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Brazil's Vale Halts $6 Bln Argentine Potash Project
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scotttswan
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6 billion of investment gone..... ouch!
Yes it could be.
I dont know the ins and outs but I am not even sure this one if necessarily CFK and her governments fault. Iron Ore miners have been suffering with the depressed prices and if this project is touch and go Vale are obviously playing it safe. Either way, putting a few thousand out of work (atleast for the time being) is never good news. Hopefully for Argentina and the provinces sake it can be sold / restarted soon.
I dont know the ins and outs but I am not even sure this one if necessarily CFK and her governments fault. Iron Ore miners have been suffering with the depressed prices and if this project is touch and go Vale are obviously playing it safe. Either way, putting a few thousand out of work (atleast for the time being) is never good news. Hopefully for Argentina and the provinces sake it can be sold / restarted soon.
scotttswan
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http://www.buenosairesherald.com/article/126283/de-vido-warns-declaring-vale-in-%E2%80%98breach-of-contract%E2%80%99
De Vido warns declaring Vale in ‘breach of contract’
De Vido warns declaring Vale in ‘breach of contract’
camberiu
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From Google Translate (original:http://www1.folha.uol.com.br/mercado/1245335-fim-de-projeto-da-vale-acirra-tensao-entre-brasil-e-argentina.shtml )
The Brazilian government doesn't throw down the towel completely on the topic because fears are growing that the Argentine economy would collapse, which would bring immediate losses to Brazil.
In addition to being required to bail out its neighbor, Brazil could experience even greater losses on their foreign sales.
Even after registering a significant drop of 21% on purchases of Brazilian products last year, Argentina still occupies the third position in the ranking of the top destinations of the country's goods abroad, behind the United States and China.
The Brazilian government doesn't throw down the towel completely on the topic because fears are growing that the Argentine economy would collapse, which would bring immediate losses to Brazil.
In addition to being required to bail out its neighbor, Brazil could experience even greater losses on their foreign sales.
Even after registering a significant drop of 21% on purchases of Brazilian products last year, Argentina still occupies the third position in the ranking of the top destinations of the country's goods abroad, behind the United States and China.
Let´s hope Lil´Lula will save the day. This link should take you to an article on Yahoo.com today: "Argentines hope Lula will pull off miracle on Vale potash mine: http://www.ft.com/cm...l#axzz2V5dssPbU or here´s the article (originally from Financial Times) :
June 2, 2013 2:39 pm
Argentines hope Lula will pull off miracle on Vale potash mine
By Samantha Pearson in São Paulo
It was an unnerving sight for Vale’s investors. Dressed in a traditional Andean poncho, Brazil’s former president Luiz Inácio Lula da Silva was pictured in Argentina in May discussing the future of the miner’s suspended potash project.
“We are trying to make the venture viable and he seemed open to the idea,” Francisco Pérez, the governor of Argentina’s Mendoza province where the mine is based, said after their meeting.
The visit came less than a month after President Dilma Rousseff also flew to Argentina to discuss the matter, raising concerns that Vale, the world’s second-biggest miner by volumes, is facing growing political pressure to maintain the cash-draining project.
Vale’s Rio Colorado venture was set to be one of the biggest foreign capital investments in Argentina, turning Brazil’s neighbour into a top supplier of potash – the potassium compounds that Brazilian farms so desperately need as fertiliser.
However, after spending $2.5bn completing more than 40 per cent of the project, which includes a port terminal as well as 790km of railway, Vale officially suspended it in March.
Rampant inflation and exchange rate controls in Argentina have made the venture commercially unviable, Vale says, almost doubling its cost to $11bn from initial estimates.
The announcement came as a huge blow to Argentina, threatening to renew trade tensions between the two Latin American countries. As well as employing some 6,000 workers, the mining project would have provided Argentina with enough exportable potash to help protect the country’s all-important trade surplus. Production was set to start in 2014 and estimated at 4.3m tonnes of potassium per year – all of which was destined for Brazil.
Vale’s decision to ditch its only major asset in Argentina also caused discomfort in the Brazilian government, not least because it jeopardised its goal to make Brazil self-sufficient in fertiliser by 2020.
More than 90 per cent of the country’s vast potash consumption comes from imports, leaving the country’s farms largely at the mercy of two producers: Russia’s Uralkali and Canada’s Potash Corporation of Saskatchewan.
Such pressure from both sides of the border will present one of the biggest tests yet of Vale’s independence, analysts say.
“If the government intervenes this time it would be a very bad sign not only for the company but for the country,” says Catarina Pedrosa at Brazil’s Itaú BBA bank.
The only way to sell it would be for Argentina to subsidise the project but the country is not in a good enough economic position to support a project that size
- Catarina Pedrosa, Itaú BBA
Although Vale was privatised in 1997, Brazil’s government has looked to exert more control over the miner as part of an increasingly interventionist approach to the economy, pushing out Roger Agnelli, former headstrong chief executive, in 2011.
“The risk of government interference has definitely increased since then,” says Ms Pedrosa. Concerns over an upcoming revision of Brazil’s mining code as well as the willingness of current chief executive Murilo Ferreira to back down over government tax demands have helped knock 25 per cent off Vale’s shares this year, she says.
However, forcing Vale to bail out Argentina is probably one step too far, analysts say.
For Pedro Galdi, an analyst at SLW Corretora in São Paulo, Mr Lula da Silva’s recent negotiation efforts in Mendoza go no further than diplomatic posturing. “The project is more important for Argentina than it is for Brazil,” he says.
Mr Ferreira has remained firm on the issue, reiterating his intention to halt the project as part of global cost-cutting efforts only hours after President Rousseff last month claimed there was still room for negotiation with Argentina.
Vale has also begun firing workers at the site after reaching a compensation deal with the main union – part of the $611m in contractual obligations that Vale says it must still pay before leaving the site.
Although Vale has tactfully referred to a “suspension” of Rio Colorado, analysts believe it will simply abandon the site, prompting Argentina to revoke its concession before it expires in four years. The company has said it would welcome buyers for the mine, which it acquired from Rio Tinto in 2009, but analysts doubt there will be any firm offers.
“The only way to sell it would be for Argentina to subsidise the project but the country is not in a good enough economic position to support a project that size,” says Ms Pedrosa.
Argentina’s currency imbalances are unlikely to improve either in the near term, says Siobhan Morden, head of Latin America strategy at Jefferies in New York. Once the country’s midterm elections are over in October, President Cristina Fernández de Kirchner is still expected to intervene heavily in the foreign exchange market, she says.
Nevertheless, some Argentines are still pinning their hopes on a political miracle from Mr Lula da Silva, whose mediation efforts as president once even extended to an ill-fated uranium swap between Turkey and Iran.
“We all know about Lula’s capacity for negotiation,” says Alberto Alzueta, president of the Argentine-Brazilian Chamber of Commerce. “So let’s hope he can pull it off this time.”
[background=rgb(255, 255, 255)]High quality global journalism requires investment. Please share this article with others using the link below, do not cut & paste the article. See our Ts&Cs and Copyright Policy for more detail. Email [email protected] to buy additional rights. http://www.ft.com/cms/s/0/e30b56d4-c39d-11e2-aa5b-00144feab7de.html#ixzz2V5m8HqWZ
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[/background]
June 2, 2013 2:39 pm
Argentines hope Lula will pull off miracle on Vale potash mine
By Samantha Pearson in São Paulo
It was an unnerving sight for Vale’s investors. Dressed in a traditional Andean poncho, Brazil’s former president Luiz Inácio Lula da Silva was pictured in Argentina in May discussing the future of the miner’s suspended potash project.
“We are trying to make the venture viable and he seemed open to the idea,” Francisco Pérez, the governor of Argentina’s Mendoza province where the mine is based, said after their meeting.
The visit came less than a month after President Dilma Rousseff also flew to Argentina to discuss the matter, raising concerns that Vale, the world’s second-biggest miner by volumes, is facing growing political pressure to maintain the cash-draining project.
Vale’s Rio Colorado venture was set to be one of the biggest foreign capital investments in Argentina, turning Brazil’s neighbour into a top supplier of potash – the potassium compounds that Brazilian farms so desperately need as fertiliser.
However, after spending $2.5bn completing more than 40 per cent of the project, which includes a port terminal as well as 790km of railway, Vale officially suspended it in March.
Rampant inflation and exchange rate controls in Argentina have made the venture commercially unviable, Vale says, almost doubling its cost to $11bn from initial estimates.
The announcement came as a huge blow to Argentina, threatening to renew trade tensions between the two Latin American countries. As well as employing some 6,000 workers, the mining project would have provided Argentina with enough exportable potash to help protect the country’s all-important trade surplus. Production was set to start in 2014 and estimated at 4.3m tonnes of potassium per year – all of which was destined for Brazil.
Vale’s decision to ditch its only major asset in Argentina also caused discomfort in the Brazilian government, not least because it jeopardised its goal to make Brazil self-sufficient in fertiliser by 2020.
More than 90 per cent of the country’s vast potash consumption comes from imports, leaving the country’s farms largely at the mercy of two producers: Russia’s Uralkali and Canada’s Potash Corporation of Saskatchewan.
Such pressure from both sides of the border will present one of the biggest tests yet of Vale’s independence, analysts say.
“If the government intervenes this time it would be a very bad sign not only for the company but for the country,” says Catarina Pedrosa at Brazil’s Itaú BBA bank.
The only way to sell it would be for Argentina to subsidise the project but the country is not in a good enough economic position to support a project that size
- Catarina Pedrosa, Itaú BBA
Although Vale was privatised in 1997, Brazil’s government has looked to exert more control over the miner as part of an increasingly interventionist approach to the economy, pushing out Roger Agnelli, former headstrong chief executive, in 2011.
“The risk of government interference has definitely increased since then,” says Ms Pedrosa. Concerns over an upcoming revision of Brazil’s mining code as well as the willingness of current chief executive Murilo Ferreira to back down over government tax demands have helped knock 25 per cent off Vale’s shares this year, she says.
However, forcing Vale to bail out Argentina is probably one step too far, analysts say.
For Pedro Galdi, an analyst at SLW Corretora in São Paulo, Mr Lula da Silva’s recent negotiation efforts in Mendoza go no further than diplomatic posturing. “The project is more important for Argentina than it is for Brazil,” he says.
Mr Ferreira has remained firm on the issue, reiterating his intention to halt the project as part of global cost-cutting efforts only hours after President Rousseff last month claimed there was still room for negotiation with Argentina.
Vale has also begun firing workers at the site after reaching a compensation deal with the main union – part of the $611m in contractual obligations that Vale says it must still pay before leaving the site.
Although Vale has tactfully referred to a “suspension” of Rio Colorado, analysts believe it will simply abandon the site, prompting Argentina to revoke its concession before it expires in four years. The company has said it would welcome buyers for the mine, which it acquired from Rio Tinto in 2009, but analysts doubt there will be any firm offers.
“The only way to sell it would be for Argentina to subsidise the project but the country is not in a good enough economic position to support a project that size,” says Ms Pedrosa.
Argentina’s currency imbalances are unlikely to improve either in the near term, says Siobhan Morden, head of Latin America strategy at Jefferies in New York. Once the country’s midterm elections are over in October, President Cristina Fernández de Kirchner is still expected to intervene heavily in the foreign exchange market, she says.
Nevertheless, some Argentines are still pinning their hopes on a political miracle from Mr Lula da Silva, whose mediation efforts as president once even extended to an ill-fated uranium swap between Turkey and Iran.
“We all know about Lula’s capacity for negotiation,” says Alberto Alzueta, president of the Argentine-Brazilian Chamber of Commerce. “So let’s hope he can pull it off this time.”
This really just comes to down to country risk. Rio saw it coming. If Vale cant make this work given there knowledge of the region, the diplomatic efforts of Brazil, I cant see any other global miners that can. Its a shame for Mendoza province and the Argentina people, its a lot of jobs lost.
Its all well and good to be protectionist, but Argentina doesnt have any money internally and no access to capital and so who is going to fund investment of companies such as YPF if they cant find Investment partners?
Its all well and good to be protectionist, but Argentina doesnt have any money internally and no access to capital and so who is going to fund investment of companies such as YPF if they cant find Investment partners?
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