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Posts Tagged ‘argentina’

Invest Like George Soros With This Commodity Stock

October 17th, 2012

Jared Cummans: George Soros is one of the biggest names in commodities, as he is largely known for his success running the Quantum Fund with Jim Rogers. In recent years, Soros has been something of a gold bug, making huge allocations to the SPDR Gold Trust (NYSEARCA:GLD). Read more…

Agriculture, Commodities, ETF

Why The Global Economy Is In Trouble

October 15th, 2012

The global debt crisis has reached a dangerous new phase.  Unfortunately, most Americans are not taking notice of it yet because most of the action is taking place overseas, and because U.S. financial markets are riding high.  But just because the global economic crisis is unfolding Read more…

Economy, Europe, Government

Bernanke Describes US Economic Growth as “Frustratingly Slow”

June 8th, 2011

Well… Big Ben Bernanke said the economy was “frustratingly slow”… So… For once, he agrees with me, for I said it long before he ever admitted it! So, we’ve got that to talk about this morning, and a few other things.

Well… As I walked out of the door yesterday, Big Ben Bernanke was speaking to the good people in Atlanta… I say they are good people, because they sat and listened, and didn’t pull a John Wilkes Booth on Big Ben! But, just like politicians who like to pat their own backs when something goes right, even though it had nothing to do with them, Big Ben is touting the “necessity” of his stimulus or quantitative easing (QE)… He told the audience yesterday that his stimulus was “warranted” because the economy is “frustratingly slow”… Hmmm… Yes the second part of that statement is correct; it is “slow”… But, unless you are trying to emulate the Japanese, shouldn’t you have just let the economy bottom out, and by now we would be moving in the right direction, instead of these starts and stops caused by your stimulus, Mr. Bernanke?

Hey… Did you hear that White House Chief Economist, Goolsby, is leaving his job? I find this very suspicious, considering that the other day, I told you how he had downplayed last week’s jobs data, and called it a “freak report” and merely a “bump in the road”… And now he’s gone… Oh well, he was as useless as a pay toilet in a diarrhea ward to me, or the US as a whole, given that he was so removed from reality…

So… The currencies rallied throughout the day and, as I left for the day, the euro (EUR) was nearing 1.47 (1.4690), and I was all prepared to talk about how the guys that have been calling for an end of the euro for over a year now, had to be squirming with the single unit gaining about 1-cent a day lately… But, the media decided to bring up the Eurozone debt problems again… And soon the euro was scrambling in the overnight markets.

With the euro scrambling, the other currencies were dragged down, along with gold and silver, which again, makes me scratch my balding head, for if there is uncertainty (Eurozone) then gold and silver should be soaring… But, let me bring something to your attention… Yesterday, gold was moving higher, and then within a couple of minutes gold fell $13! Now, how does that happen, you might ask, as I did… Ahhh grasshopper, this is the stuff that the GATA people have been talking about for years… I suggest you go check them out here

So… We had some strange occurrence move gold down $13 in a matter of minutes… I’m sure the boys and girls over at the CFTC (Commodities, Futures, Trading Commission) will tell you that it was just a co-inky-dink! But I’m not buying that swampland they are trying to sell… And it just ticks me off to no end that nothing is done about this stuff!

OK… So, we’re weaker in the currencies and metals this morning than we were yesterday morning… You know, I had a reader send me a note yesterday that pretty much said that I should write about opportunities in currencies before it’s too late, and they are already rallying… Hmmm… Sorry… Thought I already did that… Now, I do admit that sometimes I’m so far ahead of the market with a call, that people begin to question the call before it comes to fruition… And I do admit that sometimes you have to read between the lines, because the Legal Beagles would give me a swift boot if I actually “recommended” something, besides diversifying your portfolio!

The boys and girls over at Citicorp must be reading the Pfennig these days… Let’s listen in… “Over the last two years when you did have US economic weakness, you also had a policy response.” Ahhh… They’re talking about the prospects of more stimulus…

And the US President was doing his best to help out Greece yesterday… He said that the US stands ready to assist Greece through the IMF, to avoid a disaster… That’s nice, and makes sense on the side of the coin that calls for the US/IMF to keep another financial meltdown from happening in the world… But doesn’t make sense on the side of the coin that says the US is in no position to prop up other countries, when all it would do is add to their debt…

So… Like I said above, the media decided to drag the Eurozone debt problems out of the closet again, and hang on the clothesline so all the neighbors can see… And whenever that happens, the Swiss franc (CHF) goes on a tear, along with Japanese yen (JPY), (now that the coordinated effort to stem the yen’s weakness is a fading memory to traders). Yen is actually trading with a 79 figure this morning…

It used to be that the dollar would be the king pin safe haven currency… But, think about that for a minute… My colleague and friend over at the Sovereign Society, Jeff Opdyke, shows a slide during one of his presentations that lists all the things that have happened in the past year that would normally have seen a rush to the dollar… But NOOOOOOOOO! It didn’t happen…

So… I ask the question: Has the dollar already begun to lose its reserve currency status?

Well… All you have to do is ask that question in: Asia, Belarus, Argentina, Russia, and Brazil… For these countries have signed currency swap agreements with China, which removes dollars from the trade between China and each respective country on their currency swap roster… Oh, and China is currently working on an agreement with Japan and Korea, and there are rumors that the Arab nations are interested in a swap agreement with China…

So, if you asked these countries, they would say “yes” to that question. And it will continue like this from here on out, until the dollar is no longer the reserve currency… You might think that’s no big deal… But ask the people of the UK if it was a big deal after World War II, when they lost that reserve status for their currency… It’s a BIG DEAL, folks…

And it will come about mainly because of our deficit spending, and resulting national debt. Things like this story from yesterday’s USA Today (thanks Scott!)… “The federal government’s financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows. The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security.”

OK… I can’t blame all of the euro’s backing off of its assault on 1.47 on the media… German Industrial Production fell 0.6% in April… March’s number was revised upward, though, so the combining of the two months isn’t as bleak as a 0.6% fall would normally look…

And then on the Greek news… German Finance Minister, Schaeuble, sent a letter explaining his position, which just so happens to be in alignment with the story I told you about on Monday from the news agency Die Welt… Here’s what I said on Monday in the Pfennig

The German newspaper, Die Welt, reported that the plan the Germans have come up with for Greek debt maturing 2012-14, is to have them volunteer to exchange this debt for new 7-year bonds… With all sorts of bells and whistles attached to the bonds to make them attractive…

You all may recall that I made this same suggestion a couple of months ago… To simply exchange present maturing bonds for longer term bonds… The only thing the holder would be out was the interest, but there could be some makeup applied to smooth out the wrinkles here… So, it’s nice to see that these guys took my suggestion!

So… It looks as though this is the route that will be taken… All it does is kick the can further down the road, but the way today’s markets and consumers see the world… “Let’s party today, and not worry about tomorrow”… Almost sounds like a song, eh? This plan would allow some breathing room for the euro… But, in reality, the debt is still there… And unless Greece, Portugal, and Ireland all take the necessary steps to cut spending, we’ll be right back here in a few years…

Then there was this… Do you know what a “High Frequency Trader” (HFT) is? Well, it is was it says it is… But, when it becomes large institutions, it becomes a problem… Here’s the famous, and well respected, Ted Butler on HFT’s trading in Silver… (I had to remove references to specific companies that Ted feels are responsible, but most of you know who he’s talking about)

Ted Butler on High Frequency Traders in Silver…

Who are these HFT traders? You guessed it – mostly the big silver shorts, led by dominant CME Group members. Only these big traders can afford the million-dollar computer hardware and software to run the HFT algorithms. How has it come to the point where giant traders with documented concentrated silver short positions have been further allowed to dominate daily trading volume that causes sharp dives in the price of silver? It is so crazy and outrageous that it should make your blood boil. Believe it or not, I’m trying to contain my outrage. These HFT traders, led by the silver crooks, are like a band of outlaws in the old West who have come to control and terrorize a town and its citizens.

To recap… Eurozone debt fears came back to the markets overnight, and have pushed the euro down from yesterday’s high of near 1.47. That has taken most of the other currencies lower too, with the removal of the risk appetite. Gold and silver saw huge gaps down on the day within minutes of trading, and Big Ben Bernanke described the economy as “frustratingly slow”…

Chuck Butler
for The Daily Reckoning

Bernanke Describes US Economic Growth as “Frustratingly Slow” originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Bernanke Describes US Economic Growth as “Frustratingly Slow”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

George Soros Just Spent $455 Million on These Two Stocks

June 3rd, 2011

George Soros Just Spent $455 Million on These Two Stocks

Billionaire investor George Soros and his team of advisors take a “top-down” approach. This means they seek out big, “macro” investing themes, and then work their way down to the best ways to play that theme. Every quarter, they adjust their stakes in a range of companies, either by loading up or pulling back, while also looking to enter a few new positions.

In the most recent quarter, Soros, through his financial services company Soros Fund Management, added two brand new positions to his portfolio. Each could be viewed as a proxy for major themes playing out in the global economy.

Here's why they're worth looking into…

Adecoagro (Nasdaq: AGRO)
This ticker symbol says it all. Adecoagro owns and operates nearly 40 massive farms in Brazil, Argentina and Uruguay, a region known for fertile and productive land. Indeed, agriculture has always been the leading export in Argentina, but it also now holds the top spot in Brazil's export economy. This isn't just a play on soybeans or wheat either. It's also a play on cotton, rice, sugar cane-based ethanol, dairy cows, coffee, sugar and other commodities. This all means Adecoagro's annual results aren't subject to the vagaries of volatile prices for any particular commodity, though it surely helps that just about all the items noted above have seen a surge in price in recent quarters.

For George Soros, his $330 million investment (of roughly 27 million shares) in Adecoagro is the perfect play for the ongoing global demographic changes that are taking place. As the global population continues to rise, the amount of unused arable land continues to shrink. In addition the growing middle classe in many emerging markets are consuming ever more calories on a per-capita basis.

Beyond the demographic appeal of South American agriculture, Soros has likely spotted three other reasons to own this stock. First, operating income appears set to rise nicely in the near-term, from $74 million in 2010 to more than $150 million this year, and to $200 million by 2013, according to one of Brazil's largest banks, Banco Itau. Second, high-quality agricultural land is becoming a scarce commodity as new cities pop up in formerly rural areas of South America and Asia. Soros likely anticipates solid appreciation potential in the land Adecoagro holds. Third, Adecoagro plans to aggressively ramp up its ethanol business. Unlike the U.S. production of corn-based ethanol, which needs the help of government subsidies, Brazil's sugar cane-based approach is considered to be more cost-effective and more environmentally sound. In a world of high oil prices, sugar cane-based ethanol is likely to see rising demand.

Adecoagro pulled off a $12 initial public offering (IPO) in late January, rose higher, but now trades right at the offering price. The main reason for the underwhelming post-IPO action is in the complex nature of the company's business. In effect, investors need to figure out a value for each distinct business group. For example, the ethanol business alone is likely worth about $1 billion, according to Banco Itau. The bank's analysts think shares deserve to trade up to $16 (implying a 30% gain) over the course of this year, and perhaps well higher down the road as the company's growth plans come into focus and its real estate holdings appreciate in value.

Look for Soros to hold this stock as a key long-term position for his eponymous investment fund. For the rest of us, Adecoagro provides a way to get into farming without getting down in the dirt, as I discussed in this article earlier this year. The bottom line is that farmland has been a solid investment for a long time and will likely remain so for many years to come.

Visteon (NYSE: VC)

One of the most stunning consequences of the recent global recession was the absolute implosion of demand for new cars and trucks. Many key auto makers and their key suppliers had been used to operating with lots of debt, so when the downturn hit and sales began to slide, they either had to cut costs drastically, seek government bailouts or file for bankruptcy, as was the case with General Motors (NYSE: GM) and Chrysler in 2009. Visteon, which is an auto-part maker and a Ford Motor (NYSE: F) spin-off, couldn't avoid the maelstrom and sought bankruptcy protection as well.

But that's beginning to look like ancient history now: Visteon went public once again last October (with a much cleaner balance sheet) and saw its shares rise from about $50 to $75 before a recent pullback down to $61. George Soros' firm established a new 2.1-million share position (worth about $125 million), presumably after the stock suffered a 20% drop in just two days in early March, after announcing a year-over-year decline in first-quarter sales and profits.

Commodities, Real Estate, Uncategorized

5 Things You Need to Know about the European Debt Crisis

May 25th, 2011

5 Things You Need to Know about the European Debt Crisis

Here in the United States, the scary days of 2008 when Bear Stearns and Lehman Bros. collapsed, major auto firms needed to be bailed out and Uncle Sam injected $85 billion into a teetering AIG (NYSE: AIG) are starting to seem a like a distant memory. The bailed-out auto makers are looking stronger, the rest of Wall Street failed to buckle under as Lehman and Bear did, and much-reviled AIG is valued at more than $50 billion once again.

But from Berlin to Paris to Rome to Athens, the painful economic crises have never left the stage. Three years on, policy makers are struggling to come up with yet another plan to save the weakest economies in Europe without saddling the larger, healthier economies with open-ended liabilities. It's been a Sisyphean task, trying to get that boulder up the hill — and Sisyphus is getting tired. If Europe can't reverse course and develop a better game plan, then a whole series of events will play out, with mixed implications for equity investors.

1.

Uncategorized

Bill Gates Just Spent $51 Million on this Stock

May 24th, 2011

Bill Gates Just Spent $51 Million on this Stock

Bill Gates founded Microsoft (Nasdaq: MSFT) in 1975 and for a time was the wealthiest person on the planet, thanks to the company's ubiquitous Windows operating system. In June 2008, Gates gave up his day-to-day role at Microsoft to spend more time working with his wife at the Bill & Melinda Gates Foundation. Mexican businessman Carlos Slim has since taken the title as the world's richest person, while Gates has shifted focus to his philanthropic efforts.

A significant portion of Gates' $56 billion wealth has shifted to his foundation as well as his private investment vehicle, Cascade Investment LLC. The foundation received significant further support when Gates' long-time friend and fellow billionaire Warren Buffett committed to donating a significant portion of his $47 billion net worth to the Bill & Melinda Gates Foundation.

When you are investing such vast sums of money for philanthropic work, you need to play it safe in terms of investment risk and preserving the long-term value of the asset base. After all, the Gates Foundation has to fund grants to support causes such as global health and related charitable gifting for many years to come. As such, investors following these types of investments can sleep well knowing that they're intended to be relatively safe.

Recently, Cascade and the Bill & Melinda Gates Foundation have been accumulating a nearly $1 billion stake in Mexican bottler Coca-Cola FEMSA S.A.B de C.V. (NYSE: KOF). Better known as Coca-Cola Femsa, it is the largest bottler of Coca-Cola (NYSE: KO) products in Latin America. Mexico is the company's largest market in the region, at close to 40% of sales, followed by Venezuela at more than 20%. The company also serves Brazil, Argentina and most of Central America.

Coke is the dominant carbonated beverage in Latin America, with an estimated market share of 60%. Given the popularity of Coke, Coca-Cola Femsa has grown rapidly in recent years. In the past decade, sales and net income have expanded by more than 20% annually. Growth has slowed somewhat in the past three to five years but has still been impressive, as annual sales and earnings increases have both been in the mid-teens. This year will likely be no exception: analysts currently project sales growth of 17.7% and total sales of nearly $10 billion. They also expect earnings of $4.96 per share, more than 10% ahead of last year's $4.50 per share.

Uncategorized

Bill Gates Just Spent $51 Million on this Stock

May 24th, 2011

Bill Gates Just Spent $51 Million on this Stock

Bill Gates founded Microsoft (Nasdaq: MSFT) in 1975 and for a time was the wealthiest person on the planet, thanks to the company's ubiquitous Windows operating system. In June 2008, Gates gave up his day-to-day role at Microsoft to spend more time working with his wife at the Bill & Melinda Gates Foundation. Mexican businessman Carlos Slim has since taken the title as the world's richest person, while Gates has shifted focus to his philanthropic efforts.

A significant portion of Gates' $56 billion wealth has shifted to his foundation as well as his private investment vehicle, Cascade Investment LLC. The foundation received significant further support when Gates' long-time friend and fellow billionaire Warren Buffett committed to donating a significant portion of his $47 billion net worth to the Bill & Melinda Gates Foundation.

When you are investing such vast sums of money for philanthropic work, you need to play it safe in terms of investment risk and preserving the long-term value of the asset base. After all, the Gates Foundation has to fund grants to support causes such as global health and related charitable gifting for many years to come. As such, investors following these types of investments can sleep well knowing that they're intended to be relatively safe.

Recently, Cascade and the Bill & Melinda Gates Foundation have been accumulating a nearly $1 billion stake in Mexican bottler Coca-Cola FEMSA S.A.B de C.V. (NYSE: KOF). Better known as Coca-Cola Femsa, it is the largest bottler of Coca-Cola (NYSE: KO) products in Latin America. Mexico is the company's largest market in the region, at close to 40% of sales, followed by Venezuela at more than 20%. The company also serves Brazil, Argentina and most of Central America.

Coke is the dominant carbonated beverage in Latin America, with an estimated market share of 60%. Given the popularity of Coke, Coca-Cola Femsa has grown rapidly in recent years. In the past decade, sales and net income have expanded by more than 20% annually. Growth has slowed somewhat in the past three to five years but has still been impressive, as annual sales and earnings increases have both been in the mid-teens. This year will likely be no exception: analysts currently project sales growth of 17.7% and total sales of nearly $10 billion. They also expect earnings of $4.96 per share, more than 10% ahead of last year's $4.50 per share.

Uncategorized

Forget Emerging Markets: THIS is Where You Should Invest

May 13th, 2011

Forget Emerging Markets: THIS is Where You Should Invest

Many investors wish they had invested earlier or more substantially in one or more of the BRIC countries: Brazil, Russia, India and China. In the mid-1990s the writing was on the wall that China and other emerging markets were headed for bigger and better things. But that message was overlooked by many retail investors and investment advisers.

The asset-allocation models that most brokerage firms recommend today have changed little over the years. A standard “Growth” model portfolio is 70% stocks and 30% bonds and cash, just like decades ago. The portfolio is further divided with 60% going to domestic stocks and 10% to foreign stocks. The majority of the foreign allocation is usually in developed economies in Europe, Australia and Asia. A small portion might be invested in emerging markets.

It is true that years ago countries such as China were unstable politically and economically. For some, they were too risky to invest in very heavily, or at all. But as conditions improved and as these countries began to demonstrate significant growth and exert an influence over the world economy, it should have been common practice to increase the allocation to emerging markets. But this has not been the case. Asset-allocation models are essentially the same. It is a shame to realize that many investors who followed the generic recommendations of their brokers and brokerage firms missed out on a more than a decade of profitable investing in emerging markets.

Here's some statistics to consider:

The MSCI USA Index, which measures large and mid-cap equity performance, grew 0.86% per year for the 10 years ending May 10, 2010. That's where 60% of a “Growth” investor's portfolio was invested. Not much growth there…

The MSCI EAFE Index, an index of developed foreign markets, averaged 2.48% in the same period. Better, but not quite keeping up with inflation (which averaged about 3% during that time).

Now let's consider the emerging markets:

You may feel like calling your adviser and asking why you weren't invested in emerging markets. But all is not lost. There's the potential for plenty of growth still to come in the BRIC countries, it likely just won't be as robust as the past 10 years.

More important, there is a new crop of countries that are “emerging” into investable economies. These are called the “frontier markets. The frontier markets include countries from Latin America, Africa, Eastern Europe and the Middle East. Examples of specific countries are South Africa, Turkey, Nigeria and Argentina (some have already moved South Africa to the “emerging market” category, renaming the “BRIC” countries the “BRICS”).

Many of the countries considered to be frontier markets are experiencing significant growth economically and politically and are building thriving economies. Many are also still too risky to invest in individually, however. As with China years ago, it can be difficult to find reliable information on companies

ETF, Mutual Fund, OPTIONS, Uncategorized

Sizzling Demand for Meat Drives China-Brazil Deals

May 1st, 2011

Rudy Martin

When Dilma Rousseff, Brazil’s new president, visited China recently, the business delegation travelling with her hammered out several deals. One of the success stories of the trip was the Brazilian meat production industry.

Here’s a quick roundup of the Latin American industries and three stocks that might also benefit from this.

China’s burgeoning population and rising wealth have increased demand for food which can only be met through imports at this stage of the country’s development.

Take a closer look at beef imports into China. China’s beef imports are expected to jump 38 percent to 55,000 metric tons (MT) in 2011 from 40,000 MT in 2010.

Where’s the beef?

It will come from Latin American nations, like Brazil and Uruguay which should benefit most from the higher beef imports needed by China. Until 2008, Argentina was among the world’s top beef exporters. However, now 80 percent of Argentina’s production stays domestically, due to Argentine government sanctions on beef exports. As a result, smaller regional peers such as Paraguay and Uruguay have been able to surge past that nation in beef exports.

China also needs pork. It accounts for 50 percent of global pork consumption. This year it will import 1 million MT of pork, an increase of 20 percent over 2010 levels.

Within the next four years, Brazil’s annual pork supply to China is expected to touch 200,000 MT (slightly under 40 percent of its total exports in 2010). With these new orders, China will be competing with Russia and Hong Kong which accounted for over 61 percent of Brazil’s pork exports in 2010.

And demand for pork and beef is growing in other areas too.

The European Union’s proposed free trade agreement with the Latin American trade block (MERCOSUR), will allow imports of various types of meat such as beef and pork, creating high-end opportunities for producers into Europe over the next few years.

But it may not take years for the effects to be felt. All this demand is likely to be putting upward pressure on global beef and pork prices and production soon.
Among the ADRs that might benefit are the following:

BRF Brasil Foods SA (NYSE:BRFS) emerges as a clear winner in this recent deal, given that the company accounts for 40 percent of Brazil’s pork exports. The company’s stock has been a trail blazer on the bourses, notching up a string of new 52-week highs in recent weeks.

Cresud Inc. (NASDAQ:CRESY) in the medium term. In addition to its Argentine operations it also owns 36 percent of Brasil Agro which uses the same agricultural land development model to create value in Brazil.

Chile’s Sociedad Quimica y Minera (NYSE: SQM), a major producer of plant-nutrients whose Latin American operation includes facilities in Brazil, Mexico, Peru and Ecuador, as well as Chile. Its products are also distributed throughout North America, Europe, the Middle East, Africa, Asia and Australia. Given that land prices are rising, productivity is becoming a more crucial element, so expect fertilizer prices to rise as well.

To put it in a nutshell, I believe that demand from China will dictate the fortunes of the beef and pork industry in Latin America in the near future. It also will create some profit-making opportunities for Latin stock investors.

Rudy Martin, editor of Emerging Market Winners, is widely recognized as an authority on stock and ETF investing. With more than 25 years of investing experience, Rudy started his investment career by co-managing a $2 billion private equity portfolio for Transamerica. He also served as an analyst for DeanWitter and Fidelity Investments, and research director of a quantitative research firm that is now part of TheStreet.com. Recently he has been providing his investment ideas directly to a select list of global hedge funds as Managing Director of Latin Capital Management, an institutional money management firm with more than $180 million in assets under management. For more information on Emerging Market Winners, click here.

Read more here:
Sizzling Demand for Meat Drives China-Brazil Deals

Commodities, ETF, Mutual Fund, Uncategorized

Sizzling Demand for Meat Drives China-Brazil Deals

May 1st, 2011

Rudy Martin

When Dilma Rousseff, Brazil’s new president, visited China recently, the business delegation travelling with her hammered out several deals. One of the success stories of the trip was the Brazilian meat production industry.

Here’s a quick roundup of the Latin American industries and three stocks that might also benefit from this.

China’s burgeoning population and rising wealth have increased demand for food which can only be met through imports at this stage of the country’s development.

Take a closer look at beef imports into China. China’s beef imports are expected to jump 38 percent to 55,000 metric tons (MT) in 2011 from 40,000 MT in 2010.

Where’s the beef?

It will come from Latin American nations, like Brazil and Uruguay which should benefit most from the higher beef imports needed by China. Until 2008, Argentina was among the world’s top beef exporters. However, now 80 percent of Argentina’s production stays domestically, due to Argentine government sanctions on beef exports. As a result, smaller regional peers such as Paraguay and Uruguay have been able to surge past that nation in beef exports.

China also needs pork. It accounts for 50 percent of global pork consumption. This year it will import 1 million MT of pork, an increase of 20 percent over 2010 levels.

Within the next four years, Brazil’s annual pork supply to China is expected to touch 200,000 MT (slightly under 40 percent of its total exports in 2010). With these new orders, China will be competing with Russia and Hong Kong which accounted for over 61 percent of Brazil’s pork exports in 2010.

And demand for pork and beef is growing in other areas too.

The European Union’s proposed free trade agreement with the Latin American trade block (MERCOSUR), will allow imports of various types of meat such as beef and pork, creating high-end opportunities for producers into Europe over the next few years.

But it may not take years for the effects to be felt. All this demand is likely to be putting upward pressure on global beef and pork prices and production soon.
Among the ADRs that might benefit are the following:

BRF Brasil Foods SA (NYSE:BRFS) emerges as a clear winner in this recent deal, given that the company accounts for 40 percent of Brazil’s pork exports. The company’s stock has been a trail blazer on the bourses, notching up a string of new 52-week highs in recent weeks.

Cresud Inc. (NASDAQ:CRESY) in the medium term. In addition to its Argentine operations it also owns 36 percent of Brasil Agro which uses the same agricultural land development model to create value in Brazil.

Chile’s Sociedad Quimica y Minera (NYSE: SQM), a major producer of plant-nutrients whose Latin American operation includes facilities in Brazil, Mexico, Peru and Ecuador, as well as Chile. Its products are also distributed throughout North America, Europe, the Middle East, Africa, Asia and Australia. Given that land prices are rising, productivity is becoming a more crucial element, so expect fertilizer prices to rise as well.

To put it in a nutshell, I believe that demand from China will dictate the fortunes of the beef and pork industry in Latin America in the near future. It also will create some profit-making opportunities for Latin stock investors.

Rudy Martin, editor of Emerging Market Winners, is widely recognized as an authority on stock and ETF investing. With more than 25 years of investing experience, Rudy started his investment career by co-managing a $2 billion private equity portfolio for Transamerica. He also served as an analyst for DeanWitter and Fidelity Investments, and research director of a quantitative research firm that is now part of TheStreet.com. Recently he has been providing his investment ideas directly to a select list of global hedge funds as Managing Director of Latin Capital Management, an institutional money management firm with more than $180 million in assets under management. For more information on Emerging Market Winners, click here.

Read more here:
Sizzling Demand for Meat Drives China-Brazil Deals

Commodities, ETF, Mutual Fund, Uncategorized

The Best Way to Deal With Squatters

April 20th, 2011

We have just returned from the ranch. We’ll give you a brief resume of our visit. There is not much of financial interest in it…unless you are interested in how to not make money in cattle ranching and wine growing. But life isn’t all about making money. And if these Daily Reckonings had stuck to economics and investments, over the last 11 years, your editor would have gone mad years ago.

“You have to understand,” began our lawyer in Salta. “This is a political problem. It’s not a legal problem. You have all the rights on your side. But you don’t have all the politics on your side.”

Our man was explaining how to deal with the problem of squatters. There are 20 or so families who live on our land. Most of them have been there for generations. They have no title to the land they live on, but by custom, recognized by law, they are allowed to continue raising their goats, cattle and sheep on thousands of acres of mountain wilderness.

There are only two requirements. First, they must pay us a token number of animals in “rent.” These animals are largely unsaleable. So we usually don’t bother to collect them. But without the gesture of payment, the people become squatters. And if they are allowed to squat for 20 years, they become legal owners of the property.

Second, they must respect the mutual agreements regarding water and grazing rights that have governed this area for hundreds of years. Beginning in the month of August, for example, they are only allowed to use water one day out of four. Water is scarce in the winter and spring. It must be allocated fairly.

“Whatever you do, don’t try to throw them off your land – even if they don’t pay. I have a client – a rich guy from Buenos Aires. He was in a similar situation. When some of his people wouldn’t pay – you know, they get stirred up by the idea of “indigenous rights” – he took them to court. Of course, he won. But that was just the beginning. One of the leftist political parties got wind of the story. They decided to make a big deal of it. They printed a newspaper that told the story about how he threw poor women and children off his land and then burned down their houses. It was mostly lies. But it was useful politically for them. They even got Christina Kirschner to make a visit so she could be seen protecting poor people from wicked landowners.

“In the end, they caused so much trouble for him that he couldn’t stand it. He had to pay off everyone – the politicians, the poor people…the lawyers. It ended up costing him a fortune.

“So don’t think about trying to get rid of the people who aren’t paying. Instead, just make sure you hold them to the terms of the their deals with the other families up there. As long as they’re respecting the rules for using water and grazing their animals on the right land, don’t worry about the rent. It isn’t important anyway. Just try to get along with them.”

That seemed like good advice. Besides, the economics of the situation are on our side. Or they’re against us, depending on the way you look at it. Life up in the mountains is so hard…so unforgiving…so unprofitable that the next generation of squatters doesn’t seem to want to stay here anyway.

Of course, the same could be said for the ranch itself. It is not profitable. From what we can tell, it will never be profitable.

Here are the basic numbers. We have 500 cows spread over thousands of hectares. It is high, cold and dry. We’re lucky if 50% of the cows have calves each year…many of which do not survive. And then, when they go to the market, the young animals are thin – only 120 kilograms. This gives us a total income of about $30,000, with which we need to pay a staff of 6 gauchos, along with gasoline, tools, taxes, and all the other expenses of running a working ranch.

Why do we bother? Why don’t we leave…along with the squatters? We’re not sure…

Driving down to the ranch from Salta, we found the land greener than we’d ever seen it. After three years of drought, this year it rained.

“We got 250 millimeters of rain this year,” Jorge reported. “About 4 times as much as last year.”

The hills were green. The mountains were green. Cachi, the big mountain we see up the valley, was white, covered with snow. Even the desert floor itself was green.

“It’s so beautiful…so spectacular,” said Elizabeth as we drove up the valley. But the same water that turned everything green also made it difficult to arrive. We could not cross the river at the usual ford. We had to drive an additional half hour. Then, arriving at the farm, where there was usually a dry riverbed, we found another river. Could we get across? We didn’t know. But there was a track leading into the water and coming out on the other side. We put the truck in 4-wheel drive and plunged in. It took us to the other side without too much trouble.

Everybody at the ranch seemed happy. Jorge had a big smile. Maria seemed relaxed. All the gauchos too – Nathalio, Javier, Pedro, Norberto, Gustavo and Jasimiro – all seemed to be in good spirits.

At first, we attributed this era of good feelings to the backhoe. Then, we realized; it was just the rain.

“Oh, it is a great tool,” said Jorge of the backhoe. “We can do things we never could do before. We’ve been able to clear out many of the rocks from the fields. And we’ve been able to put in a water pipe so the cattle out in the field won’t have to walk all the way down to the river.”

To give you an idea of the scale of these infrastructure improvements, the water line is 5 kilometers long. It takes water from a spring in the mountains and feeds it to the middle of the high pasture.

“Wow… You did all that with the backhoe?” We were impressed.

“No… We just cleared the track with the backhoe. We dug the trench by hand. We wanted to save the backhoe for other things.”

Sunday was a special day in the religious calendar. Palm Sunday. We celebrated it at the little church on the ranch with a priest who drove up from a town down in the valley. We are not exactly True Believers. But we never miss a good show, especially when it offers the hope of everlasting life. To tell you the truth, we’d probably settle for twenty years or so more. But if eternity is on offer, who are we to refuse it?

Arriving at the church at the appointed hour, our “palms” in hand…we found no one there, except Maria, who explained that the padre had been held up by the river.

When he finally arrived so did dozens of local people…women and children mostly. We said hello to everyone and introduced ourselves to the priest. He was a replacement padre, while the usual man was in Rome on a special training mission.

“Where do you come from?” he wanted to know.

We explained that we were a family from the Irish diaspora currently living in the USA.

He seemed to be a likeable fellow…warm and agreeable. He gathered the worshippers at the front door and proceeded to give them a remarkable discourse.

In a nutshell, Jesus entered Jerusalem, his path strewn with palm fronds, in the traditional manner of welcoming a king. He must have known it was a set up. But he went along with the prophecy of Isaiah anyway, entering the town on a burro.

But then came the remarkable part…

“And here you have a family of Irish people as owners of the ranch. You are very lucky, because the Irish are very religious. Very good Catholics.

“So you can follow their example. They set a good example for you. Obey them. When they tell you to work, you should work. And help make this cattle ranch a great success.”

“Where did he come from?” Edward whispered.

We found out later. Franco’s Spain! He had left Spain in 1970 and had been in the valley ever since.

Perhaps we should have set him straight. We are not really Catholics; we’re Episcopalians. And we’re not really Irish either.

But then…who cares? This isn’t really a cattle ranch either…

More to come…

Regards,

Bill Bonner
for The Daily Reckoning

The Best Way to Deal With Squatters originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
The Best Way to Deal With Squatters




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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China Gains Wider Distribution of the Yuan

April 18th, 2011

It looks as though the euro (EUR) is going to have to go through another stretch of beating, from which the single unit will have to tough it out, for sure! Euro weakness this morning, is being driven by a return of Greek debt concerns, and a vote in Finland over the weekend that saw a jump in support for “euro-skeptic” parties… I think this euro reaction has been nothing more than a knee-jerk reaction to what will not amount to a hill of beans in the long run… The Greek debt concern on the other hand, just keeps coming back like that guy Michael in the Halloween movies! Just as scary too!

I’ll tell you something right here, right now that you won’t see reported on the news, or by your regular newsletter writer… But, if you’ve heard me talk about China’s goal of obtaining a wider distribution of the renminbi (CNY), you know that I center the thought on their “currency swap agreements”… Remember, these agreements allow the two parties involved to exchange currencies when settling trade between the two countries, which means, they remove dollars from the equation… So, what China does, is spread renminbi around the world, and remove dollars… Thus eventually making the dollar irrelevant with regards to “terms of trade”…

Well… The latest country to “sign up” with China is New Zealand… That now makes most of Asia, Belarus, Argentina, Brazil, and New Zealand, as countries that have signed these agreements with China… It’s just the beginning, folks… But don’t just let this news slip by, for in less than 10-years, people will look back and wonder how the renminbi became so well distributed, and widespread in operation… But you won’t! Because you read the Pfennig!

And then I read this…

One of the central points at a recent summit of leaders of Brazil, Russia, India, China and South Africa was a need to realign the global order imposed at the end of World War II that put the US dollar at the center of the world’s financial system, according to The Economist. The biggest of the emerging economies, the BRICS, doubt the value of sticking with the dollar as the world’s reserve currency. “Representing around 40% of the world’s population and nearly a quarter of its economic output, the BRICS countries would seem to be well justified in calling for these kinds of changes,” the magazine noted.

OK… The dollar is back to rallying this morning, although the ranges aren’t exactly wide by any stretch of the imagination. And it looks like it across the board this time, with even the Swiss franc (CHF) selling off versus the dollar. Gold and silver, after having very strong moves on Friday, are looking like they will see some profit taking when the US markets open.

You know… There’s one currency that has been ticking stronger versus the dollar in the past week, and it will surprise you, for there’s no real reason for this currency to be rallying, especially now… The Japanese yen (JPY) continues to get some love from the currency traders, and the fact that there’s probably still a bit of repatriation of yen going on, as investors in Japan find the going more rough than they originally thought.

I see that Fed Chairman Big Ben Bernanke is going to be speaking today… I would bet a dollar to a Krispy Kreme that Big Ben is going to attempt to calm the waters that were stirred up last week by the Hawks… Yes, your Fed Heads like Fisher and Hoenig, who spoke very hawkishly about ending QE early last week, will see the Fed Chairman try to speak louder about the need to keep stimulus in place…

Look, I don’t like the Fed, period… And when they are singing from different song sheets, they look ridiculous! And… For them to make comments to the markets, like Fisher and Hoenig did last week, to get the markets thinking way ahead of itself, is just not responsible… And then Big Ben, saying that he believes the inflation pressures we’re seeing are just “transitory” is again irresponsible!

Speaking of irresponsible Fed Chairmen… I see that Big Al Greenspan was giving his two cents worth on the deficit… Let me remind you before you read what Big Al had to say, that his track record even going back to his days before being a Fed Head, is horrendous! During his Senate confirmation, years ago, one senator told him that he had never seen someone make so many bad calls, but they confirmed him any way… UGH! So… Big Al thinks that the “Bush era tax cuts should be allowed to expire, and put the rates back to where they were during the Clinton Administration.”

Thanks Big Al… Not sure we asked for your help…

Last week I told you that a recent communiqué by the European Central Bank (ECB) had indicated to me that the rate hike from earlier this month was the first in a series of rate hikes, even though ECB President Trichet wouldn’t admit to that… Well, now we have ECB Ministers coming out with comments about the rate hike, and they are all singing from the same song sheet, saying, “conditions are too accommodative.”

OK… Back at the beginning of March, I was telling you all about the rebuilding in New Zealand, and giving recognition to Hazlitt’s broken window… But, I was telling you even though economics would tell you otherwise, that historically, we see currencies gather steam at these times… Well… Then on March 18th (while I was in Florida) kiwi (NZD) hit 72 cents… Ever since then it has been on a steady climb upward. In fact, the price chart looks like stair-steps to the attic for kiwi! Go figure! I thought it would be good for kiwi, and voila… It was!

China raised its reserve ratio for banks again this past weekend, in yet another attempt to squash their rising inflation pressures. By raising the reserve ratio for banks, it basically takes money out of the system, which means banks there can’t use it to loan to borrowers, thus reducing the money supply… China has done quite a bit already to put a lid on inflation, but the inflation pressures keep rising… Which just means that more rate hikes, and reserve ratio hikes are on the docket for China…

Then there was this… From Zero Hedge, Bloomberg, and my good friend Dennis…

Tipping points are funny: for years, decades, even centuries, the conditions for an event to occur may be ripe yet nothing happens. Then, in an instant, a shift occurs, whether it’s due [to] a change in conventional wisdom, due to an exogenous event or due to something completely inexplicable. That event, colloquially called a black swan in recent years, changes the prevalent perception of reality in a moment. This past week, we were seeing the effect of a tipping point in process, with gold prices rising to new all time highs day after day, and the price of silver literally moving in a parabolic fashion. What was missing was the cause. We now know what it is: per Bloomberg: “The University of Texas Investment Management Co., the second-largest US academic endowment, took delivery of almost $1 billion in gold bullion and is storing the bars in a New York vault, according to the fund’s board.

To recap… The dollar is back to rallying this morning, after being slammed by the currencies, gold and silver on Friday. China was in the news a lot this past weekend, as they raised their reserve ratio for banks, and vowed to bring more inflation cutting measures to the markets. China also signed a currency swap agreement with New Zealand, thus removing dollars from trade between the two countries. And the surprising Japanese yen is the only currency on the “green side” of the ledger versus the dollar this morning…

Chuck Butler
for The Daily Reckoning

China Gains Wider Distribution of the Yuan originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
China Gains Wider Distribution of the Yuan




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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The War on Money

April 12th, 2011

If you keep your money or savings in US dollars inside of the United States, you are a risk taker of epic proportions. Have you not been paying attention to what is going on?

To begin with, the US Government now employs cash-sniffing dogs at most international airports. If you are carrying more than $10,000 in cash and don’t declare it to the Government when coming in or out of the US, your cash will be seized. Thanks to these cash-sniffing canines, US customs officials seized $3.2 million at Boston’s Logan Airport last year.

Some government apologists might say, “If you aren’t doing anything wrong, why would you mind being x-rayed, sniffed, patted down, detained and questioned?”

Besides the obvious absurdity of that question, the main reason this is of concern is because in every case in history when a government has inflated its currency into worthlessness they always institute capital controls. Just ask anyone from Argentina or Italy. And it won’t take much to change the rules from having to “declare” $10,000 to “not being allowed” to take $10,000 out of the country.

Not to mention that if you do declare you are taking $10,000 out of the country, who knows what kind of database you will end up on. You are obviously highly suspicious if you have more than a few hundred bucks! Only Wall Street bankers and others associated with the government are supposed to have more than a couple dollars! The most ludicrous example of the War on Money came across the newswire today, “Feds Seek $7 million in Privately Made Liberty Dollars.”

The news story is only about 10 paragraphs long yet it has dozens of logical absurdities. Even in the Headline is one.

According to the headline, part of the reason they want to seize these dollars is because they are “privately made”? Yes, we wouldn’t want to compete with the private Federal Reserve banking cartel!

And I know the Constitution is passé in the US, nowadays, but how in the world can this man be in trouble for making silver coins? The constitution states:

No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts.

He is in trouble because he is making currency out of gold or silver yet, the Federal Reserve, another private organization, is not doing anything wrong by making paper currency NOT backed by gold and silver coin?

Apparently, the thing they “got him on” was the following:

Federal prosecutors successfully argued that von NotHaus was, in fact, trying to pass off the silver coins as US currency. Coming in denominations of 5, 10, 20, and 50, the Liberty Dollars also featured a dollar sign, the word “dollar” and the motto “Trust in God,” similar to the “In God We Trust” that appears on US coins.

Ignoring the fact that the dollar sign was originally used for Spanish and Mexican pesos and was stolen by the US to use for its dollars and the fact that the word dollar actually comes from the word thaler which was a silver coin minted in Bohemia, according to the Feds, he was trying to pass off coins, made of silver, worth more than $35/ounce, as quarters, which are now made from 92% copper and 8% nickel, and worth $0.06 in metal value.

Boy, that’s quite the racket! Passing off highly valuable silver to people who were expecting to receive near-worthless copper and nickel tokens! It’s a good thing they stopped him before it was too late!

Anne Tompkins, the US Attorney who was put on this important case, stated:

“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism.”

Anne, if attempting to undermine the currency of the US is a form of terrorism, why has Ben Bernanke not been tracked down and sent off to the Guantanamo concentration camp?

This “news” story finished by quoting an unbiased source: a group named the Southern Poverty Law Center, a group that tracks political extremism which has apparently been tracking Bernard von NotHaus, the proprietor of the silver coin making terror enterprise. According to the story, long before the government began its investigation into von NotHaus, the group was raising concerns about the popularity of Liberty Dollars among fringe groups on the far right.

“He’s playing on a core idea of the radical right, that evil bankers in the Federal Reserve are ripping you off by controlling the money supply,” said Mark Potok, spokesman for the group. “He very much exists in the world of the anti-government patriot movement, whatever he may say. That’s who his customers are.”

The US has started another war. The war on money. Anyone with any amount of cash more that will buy them a couple NFL tickets and beers for the game is suspect. And if you are one of those deluded people who thinks the Federal Reserve is evil and is ripping you off and you buy gold or silver to protect yourself, you are a domestic terrorist.

It’s going to be a fun few years ahead in the US.

Regards,

Jeff Berwick
for The Daily Reckoning

The War on Money originally appeared in the Daily Reckoning. The Daily Reckoning recently featured articles on stagflation, best libertarian books, and QE2

.

Read more here:
The War on Money




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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The Unfortunate State of the Argentine Beef Industry

March 24th, 2011

“I thought this was a gas station,” huffed our Argentine friend with disgust. “I somehow forgot it was an Argentine gas station.”

Five gas trucks were parked out front of the YFP station just outside of Tucuman, where your editor and a group of friends were passing through last week on their way to Salta. Cars, vans and motorbikes of every description were queued up around the corner. The line wasn’t moving.

“No hay nafta,” said the station attendant. “No hay nafta hoy.”

Why would there be no gas at a gas station, we wondered? What kind of business was this? Clearly there was a demand. It stretched half way around the block. And since gas trucks aren’t usually in the habit of stopping at gas stations unless they have some supply to unload, we assumed the five trucks out front had the goods everyone had come for.

“This is just typical,” said our friend. “They won’t sell us any today because they know the price will go up tomorrow or the next day. They’re holding onto their stockpiles until they can get a better price for it.”

“How do they know the price will go up tomorrow, or the next day?” your editor inquired.

Our friend rolled his eyes. “They know people who know people who know people. That’s the way this place works. All these industries are the same. They’re run by crooks and mobsters. Tell me, why did you want to move here again?”

“Well, I like wine and steak…” we began.

“And there you have it again. Same problems. The beef industry here, for example, is heavily taxed and regulated. The government says it wants to keep the price of meat low for domestic consumption, so it taxes exports to discourage farmers selling their produce abroad. We Argentines like our bife de chorizo, as I’m sure you’ve noticed. [We have.] Anyway, these policies are all supposedly put in place to help the poor; the ‘little guy.’ Well, you know how that usually turns out…

“We have some of the best beef in the world here in Argentina. The industry should be growing, leading exports. There are plenty of skilled entrepreneurs who could be driving it. Instead, they are hampered by all these ridiculous rules. Needless to say, producers soon found that, with such heavy taxes on exports, they were unable to make the same profits as before. The government effectively cut their profit incentive. So, the farmers cut production. Land that had previously been used to raise cattle was converted to soya farming. Now Uruguay and even Paraguay are overtaking us.

“What’s more, now that supply is down, now that productive capacity has been reduced, the price of meat is going up locally again. As usual, the little guy, the one who the government supposedly set out to help, ends up paying more.”

Our friend is not exaggerating, not about the Argentine’s love for beef nor their government’s love for stupid rules and misguided regulations. At around 63kgs (almost 140 pounds) of consumption per person per year, Argentina is outranked only by Uruguay at the asado. Indeed, Argentines have been chowing down heartily ever since cattle was first introduced into the country way back in 1536 by the Spanish Conquistadors. Herds multiplied rapidly across the rolling, fertile pampas and the later introduction of the national train network – and, in particular, the invention of refrigerated carriages – helped feed the growing export market. Argentina’s cattle industry soared.

But before governments can turn bad situations worse, they must first work on spoiling the best of situations, i.e., the most productive, promising industries. In 2006, after unsuccessful attempts to contain the rising price of their best export (yes, you read that correctly), the Kirchner administration instituted a total ban on all beef exports for 180 days. This was followed by quotas, fixes and the standard sort of mischief and tomfoolery you’d expect from appointed representatives who think they know the price of a good – any good – better than those actually buying and selling it.

Beef exports subsequently collapsed and, from July 2010 to January 2011, actually fell 63% year-on-year. According to the meat industry chamber, CICCRA, government policies cost Argentina some 4,600 small producers and more than 3,500 jobs while simultaneously “condemning all consumers to pay nearly double for beef than the year before and to reduce per capita consumption to 2001-02 levels.”

Meanwhile, Paraguay, that tiny country to Argentina’s north with less than one-sixth of its southern neighbor’s population, is going gangbusters. After logging an incredible 14% GDP growth last year, Paraguay kicked off 2011 by overtaking, for the first time ever, Argentina’s total beef exports for the month of January. Although that growth rate is expected to slow this year, the outlook for the nation’s key farming sectors – including it’s top two exports: soya and beef – remains strong.

After waiting a few minutes longer, we decided to move on to another gas station down the road, one that was open and actually selling gas.

“There are a lot of problems here, Joel,” our mate continued. “This place is run by crooks. The beef industry is just one example.”

We couldn’t bring ourselves to ask about the wine.

Joel Bowman
for The Daily Reckoning

The Unfortunate State of the Argentine Beef Industry originally appeared in the Daily Reckoning. The Daily Reckoning now provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
The Unfortunate State of the Argentine Beef Industry




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

The Unfortunate State of the Argentine Beef Industry

March 24th, 2011

“I thought this was a gas station,” huffed our Argentine friend with disgust. “I somehow forgot it was an Argentine gas station.”

Five gas trucks were parked out front of the YFP station just outside of Tucuman, where your editor and a group of friends were passing through last week on their way to Salta. Cars, vans and motorbikes of every description were queued up around the corner. The line wasn’t moving.

“No hay nafta,” said the station attendant. “No hay nafta hoy.”

Why would there be no gas at a gas station, we wondered? What kind of business was this? Clearly there was a demand. It stretched half way around the block. And since gas trucks aren’t usually in the habit of stopping at gas stations unless they have some supply to unload, we assumed the five trucks out front had the goods everyone had come for.

“This is just typical,” said our friend. “They won’t sell us any today because they know the price will go up tomorrow or the next day. They’re holding onto their stockpiles until they can get a better price for it.”

“How do they know the price will go up tomorrow, or the next day?” your editor inquired.

Our friend rolled his eyes. “They know people who know people who know people. That’s the way this place works. All these industries are the same. They’re run by crooks and mobsters. Tell me, why did you want to move here again?”

“Well, I like wine and steak…” we began.

“And there you have it again. Same problems. The beef industry here, for example, is heavily taxed and regulated. The government says it wants to keep the price of meat low for domestic consumption, so it taxes exports to discourage farmers selling their produce abroad. We Argentines like our bife de chorizo, as I’m sure you’ve noticed. [We have.] Anyway, these policies are all supposedly put in place to help the poor; the ‘little guy.’ Well, you know how that usually turns out…

“We have some of the best beef in the world here in Argentina. The industry should be growing, leading exports. There are plenty of skilled entrepreneurs who could be driving it. Instead, they are hampered by all these ridiculous rules. Needless to say, producers soon found that, with such heavy taxes on exports, they were unable to make the same profits as before. The government effectively cut their profit incentive. So, the farmers cut production. Land that had previously been used to raise cattle was converted to soya farming. Now Uruguay and even Paraguay are overtaking us.

“What’s more, now that supply is down, now that productive capacity has been reduced, the price of meat is going up locally again. As usual, the little guy, the one who the government supposedly set out to help, ends up paying more.”

Our friend is not exaggerating, not about the Argentine’s love for beef nor their government’s love for stupid rules and misguided regulations. At around 63kgs (almost 140 pounds) of consumption per person per year, Argentina is outranked only by Uruguay at the asado. Indeed, Argentines have been chowing down heartily ever since cattle was first introduced into the country way back in 1536 by the Spanish Conquistadors. Herds multiplied rapidly across the rolling, fertile pampas and the later introduction of the national train network – and, in particular, the invention of refrigerated carriages – helped feed the growing export market. Argentina’s cattle industry soared.

But before governments can turn bad situations worse, they must first work on spoiling the best of situations, i.e., the most productive, promising industries. In 2006, after unsuccessful attempts to contain the rising price of their best export (yes, you read that correctly), the Kirchner administration instituted a total ban on all beef exports for 180 days. This was followed by quotas, fixes and the standard sort of mischief and tomfoolery you’d expect from appointed representatives who think they know the price of a good – any good – better than those actually buying and selling it.

Beef exports subsequently collapsed and, from July 2010 to January 2011, actually fell 63% year-on-year. According to the meat industry chamber, CICCRA, government policies cost Argentina some 4,600 small producers and more than 3,500 jobs while simultaneously “condemning all consumers to pay nearly double for beef than the year before and to reduce per capita consumption to 2001-02 levels.”

Meanwhile, Paraguay, that tiny country to Argentina’s north with less than one-sixth of its southern neighbor’s population, is going gangbusters. After logging an incredible 14% GDP growth last year, Paraguay kicked off 2011 by overtaking, for the first time ever, Argentina’s total beef exports for the month of January. Although that growth rate is expected to slow this year, the outlook for the nation’s key farming sectors – including it’s top two exports: soya and beef – remains strong.

After waiting a few minutes longer, we decided to move on to another gas station down the road, one that was open and actually selling gas.

“There are a lot of problems here, Joel,” our mate continued. “This place is run by crooks. The beef industry is just one example.”

We couldn’t bring ourselves to ask about the wine.

Joel Bowman
for The Daily Reckoning

The Unfortunate State of the Argentine Beef Industry originally appeared in the Daily Reckoning. The Daily Reckoning now provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
The Unfortunate State of the Argentine Beef Industry




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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