The Economy 28/02/11
Latin American economies benefit from surging oil prices as uprisings in the Middle East continue.
As political unrest in the Middle East has spread to Libya, the global oil price has surged by 10%, a fact which is likely to benefit the oil producing nations Ecuador, Colombia, Mexico and Venezuela.
The Ecuadorian newspaper El Universo reported that while ‘the month of Janaury was the thermometer, this month the [Ecuadorian] exports of crude soared by 38% compared to the same period the year before’, thereby bringing unexpectedly high profits to the country.
At the same time, the political events in the Middle East adversely affect the Ecuadorian Yasuní-ITT initiative, a proposal by Ecuador’s government to abstain from tapping the oil reserves in the Yasuní National Park, should the government be able to raise $100m by the end of 2011.
Ecuadorian Heritage Minister María Espinosa stated that a planned fundraising tour in the Middle East, for which the government had held high funding expectations, has been put on hold due to the political turmoil.
In Brazil, the partly state-owned oil company Petrobras announced record profits of $20bn for 2010, representing a 17% increase from the year before. The money will be used to invest in the recently discovered oil fields below the South-Atlantic sea belt, 124 km off the coast of Rio de Janeiro.
According to the Venezuelan Ministry of Energy and Petroleum, the price for oil produced by Petroleos de Venezuela S.A. (PDVSA) rose from $85.02 in the previous week to $91.11 on 25 February. Oil revenues constitute about 90% of Venezuela’s exports and about 34% of the country’s GDP.
President Hugo Chávez recently announced that Venezuela possessed the biggest oil reserves worldwide, with an estimated 253bn barrels solely in the Orinoco belt, that are predicted to last for approximately 200 years. US estimates are even higher.
Given the global importance of Venezuela’s oil exports, Chávez and his Energy and Oil Minister Rafael Ramírez have recently argued that the price of oil should be above $100 per barrel, suggesting this is a ‘fair price‘ that provides security for PDVSA to invest in its production capacities.
In the face of these developments, it might not be surprising that the world’s richest man, the Mexican Carlos Slim who is known to have a nose for profitable business opportunities, bought 70% of the Tabasco Oil Company, which is contracted to extract oil in Eastern Colombia.