Sunday, August 31, 2008

Hugo Chávez is directly responsible for selling cocaine to your children

These last few days have seen another round of bickering between the USA and Venezuela, and the bone being picked at is drugs. Again.
  • US Drugs Czar John Walters (note to self; must check if that's the same guy who directed Hairspray) last week said Venezuela wasn't doing enough to stop drug trafficking, and part of the problem is that Venezuela denies entry visas to his DEA troops. Again.
  • Venezuela replies, saying that the arrogance of DEA agents that both demand a visa and specify which day they want to arrive in Venezuela shows no sovereign respect and wouldn't go down well anywhere. Again.
  • And the DEA say that Venezuela has been a major problem since they were kicked out three years ago. Again.
  • And Venezuela says the DEA agents were kicked out because they were corrupt and part of the trafficking problem, not the solution. Again.
  • So the two sides bicker like little as bad as the other...and thing kind of boils up and we get stupid "Chávez Kills Our Firstborns" headlines. Again.
It all gets a little strange when you look at the drug trade logically. It's kind of difficult to understand when you think about the basics.

1) They know where it's grown, and coca bushes tend to stay in the same neighbourhoods as where you plant them.

2) They know where it's consumed, and the people tend to stay in the same neighbourhoods as where you put them.

3) But the blame is constantly levelled at the governments of the places where the cocaine passes through, which probably involves planes, trains and automobiles (and high powered boats, and submarines, and cargo containers and bicycles for all I know) that move quickly and are harder to pin down than...let's say....a bush. Or a zapped out cokehead.

Also, a lot of fingers are wagged at the (small) amount of drugs seized inside Venezuela. The latest batch of numbers used for the fingerwagging are "256 tonnes" (amount of cocaine the US thinks got shipped through Venezuela in 2007) and "34.15 tonnes" (the amount of drugs seized by Venezuelan anti-drugs dudes so far this year). Now I don't know whether those numbers are true, false or whatevs, but it's clear that the idea behind presenting the two numbers is to get you to say "Hah! Venezuela SUCKS at drugbustin".

But if we take Peru as our comparative to Venezuela we at least get a bit of context. In 2007 the UN estimated Peru's cocaine production at 290 tonnes. So far this year, the Peru authorities have seized 27 tonnes of merchandise. And remember this is a country where it's actually produced, not just a transport route. In fact it's second only to Colombia as world producer, but Chávez still gets the blame. I wonder why?* And talking of Colombia, the bulk of the world's cocaine is still produced there even though the US gov't has thrown over U$6.7Bn at Plan Colombia. What gives?

Well, one thing that gives is the Venezuela/Colombia border is controlled by ruthless Colombian right wing paramilitaries that are not prosecuted in the way that the just-as-bad FARC are, but even then we're scratching the surface of an extremely complex logistical process. Therefore, why get deep into an issue when we can dumb it all down and just blame Chávez?

So really, the only conclusion we can draw from these numbers is that those nasty cocaine guys are slippery little eels and tough to catch. Which is true everywhere, but especially true when you have the Peruvian government, judiciary and police forces in your pocket.

*Well, I don't really. Bit of irony on display.

A new blog

Yeah, it's another Sunday afternoon navel-gaze. It won't become a habit, pretty promise.

As mentioned before, I've really appreciated the unexpected extra bonus of meetin', greetin' and exchanging mails with new people that have got in touch with me thanks to the blog. But after a while, one question that has often come up in conversation is "So what sort of music are you into, Otto?" and I kind of hum and hah and don't really know what to say, because the short answer of "a real range of sounds" doesn't really explain much.

So yesterday I decided to do something about it and started a simple little blog that you can go visit if you like. Here's the link to "Otto's Songs", and it's also also part of the links list on the right hand side of this screen. I've uploaded 10 tracks already, and they're kinda starting to show the eclectic range that gets heard Chez Otto. There will be plenty more to come, and the general plan is to add a track every two or three days.

The main idea is to create a little personal collection that's easily accessible, and if you don't visit it's no worries either way...I'll be there replaying the tracks though, that's for sure. I just thought that a few of you might be interested, so there you go. Have a nice Sunday.

Triangle Centers: Nagel Point Proof

Visual illustration
The lines connecting each vertex of a triangle ABC with the point of tangency between the opposite side and the opposite excircle are concurrent at a point called the Nagel point.

Nagel Point

See complete interactive proof with animation and key concepts at:

Level: High School, SAT Prep, College geometry

Death in Peru: The Pandora's Box is opening

Ever wondered what a Peruvian drug baron looks like?

In this post on Friday, I told you about the very strange goings on in the La Libertad region of Peru, with district mayors accused of murdering a gov't employee because he wouldn't join in with the drug money scam operating in the locality.

Well, it looks like this story might blow the lid off one of the long-standing truths so far held unaccounted in Peru. The Sanchez-Paredes family have long been "suspected" of being narcos, and I put the word suspected in inverted commas because only someone with no idea of all things Peru and mining thinks they're innocent. The scam has been going on for years, and the Peruvian fiscals have always been on their tail without actually doing anything concrete. The reason is that the kickbacks go very high up in the Peruvian justice and gov't system, and nobody wants the S-P family to go under and start talking. I mean NOBODY.

The Sanchez-Paredes own two mines in the La Libertad region, namely Comarsa and San Simon, and these mines have been an integral part of the drug running operation. It's a long story, and if you're proficient in Spanish just Google the names already provided and find out as much as you want about the whole thing (much ink has been spilled), but basically the operation is suspected as running as follows:

1) The mine provides legitimate cover to import the necessary chemicals for cocaine production.

The cocaine makes its way to the USA via Mexico

3) The unlaundered dollars return to Brazil, where they're exchanged for gold bullion mined by artisan 'garimpeiro' miners.

The gold is smuggled into Peru via the highly perforated border with Brazil, where it is thrown onto the heap leaches at San Simon and Comarsa.

The mine then "produces" the gold bought in Brazil and the drug money is laundered, spun-dry and clean as a whistle. (It's widely understood by the Peru mining scene that the ore grades and throughput tonnage at the two mines are not enough to produce the quantity of gold that they do).

But it seems like there's a big development about to take place in the Huamachuco murder case that might just change everything. Tonight Peruvian investigativeTV show "El Cuarto Poder" (The Fourth Power) is going to show a video of a town hall meeting featuring the mayor of Sangorán, Santos Ruíz Guerra (the man accused of the original murder) telling the meeting that there will be no more mining concessions authorised in the San Simón sector, the decision being by popular demand.

The finger is being pointed even more directly at the Sanchez-Paredes family now, and threatens to spread the scandal into a nationwide affair. And as a bit of a gossip exclusive, your ear-to-the-ground Otto can reveal that all this comes at a time when the Sanchez family is looking to float the San Simon mine in a public offering in the USA (names can be provided, but not on blog). To be frank, I think the last thing they need right now is exposure to SarbOx rules.

Elearn Geometry Problem 169

Parallelogram, Triangles, Pentagon, Areas

See complete Problem 169 at:

Parallelogram, Interior and Exterior Points, Diagonals, Pentagon, Triangles, Areas. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

Saturday, August 30, 2008

Aurelian Resources: how some people reacted to the news

This is simply unmissable, so I've made this the first embedded video to grace the site. I have no idea who SOCKOFAN is, but he has my undying gratitude.

As the blurb left by SOCKOFAN says on the youtube page:

"This was Hitler's reaction when he was told of the Kinross Gold offer to buy out Aurelian Resources. My German is rusty, but I translated it as best I could."

Absolutely wonderful stuff, though I should mention there's a little bit (not much) of adult language about half way through, so no viewing if offended easily or in the company of seven year old nieces, please. Caveat over with. Click and enjoy.

Elearn Geometry Problem 168

See complete Problem 168 at:

Parallelogram, Diagonals, Pentagon, Triangles, Areas. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

Elearn Geometry Problem 167

See complete Problem 167 at:

Parallelogram, Diagonal, Triangles, Areas. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

Anatomy of a Canadian Stock Promotion (part 5)

In part four of the series, some of the ostensible advantages of Dorato Resources' Cordillera del Condor project were outlined. Today's part five takes a look some of the drawbacks of the project with a view to giving an idea of the difficulties the company may encounter in the short, medium and long term. This post concentrates on issues around the actual projects being moved forward by Dorato (DRI.v) and not the company structure.

So on with the show, and I've identified four basic problems that will need to be overcome by DRI.v if the project is ever to get off the ground. There may, of course, be other specific problems to add to this list and do not include any of the global issues that affect all mining companies at present. Click on any photo, map etc to enlarge if necessary.

1) Terrain and infrastructure
To say it's difficult working terrain is an understatement. Here are a few maps of the area that give you an idea of the lack of basic infrastructure. There are no roads at all on the Peruvian side of the border.

The nearest main road lies between at least 60km and up to 120km from the concession areas.

And as this map shows, rivers and their tributaries severely restrict possible travel routes.

Rivers such as the Cenepa are not navigable with heavy transport craft...

.... and are totally innavegable even in canoe for around 1/3rd of their length.

The Cenepa River, 1995

Therefore any plans to move equipment in and large production tonnage out by water would seem far-fetched. It goes without saying that power supply to the region is virtually non-existent, which would be a serious and expensive issue to overcome if mine construction were ever considered. This satellite photo of the central ground area taken during the Cenepa war of 1995, although not very clear, shows the homogenous nature of the tropical jungle

Note: To help with location, note Falso Paquisha marked on this satellite and compare to the first map in the post above.

2) Logistics and Exploration Costs
By looking at the budget for this year's exploration program at Dorato Resources, we can get an idea of just how expensive this project is likely to become. The phase one and phase two plans that combines exploration work, mapping geological discovery programs and a 14 to 24 hole drilling program have been budgeted at U$4.46m.

Transport to and from the area is a major problem and adds significant cost. At U$1.685m budget, just paying for the helicopter support adds 42% of the total cost of phases I and II (which includes for example salaries for project manager, geologists and support personnel, explorations, steam samplings, IP resistivity surveys, the drilling program, laboratory expenses, construction and running costs of a 20 person camp, and the thousand other things not mentioned here that make up a field project).

It therefore goes without saying that if the area is considered sufficiently prospective and the project moves forward towards the construction of a mine, costs for the mine will have to include a very expensive road. As already mentioned, power supply to the area will also be a major cost problem.

Even when on site, the terrain is not easy. This photo of the Tambo target (number 1 in maps featured in part 4 of the series)....
.....shows artisan mining works in the side of the steep hill. This kind of terrain makes simple drilling preparation and execution tricky, let alone actual mining.

3) Environmental Issues
There is no doubt that, if this project has initial success in the discovery of sufficient gold grades and orebody tonnage/area, that the project will come under intense environmental scrutiny. Not only is the area home to many rare species of flora and fauna, but the area also drains through the lower-lying jungle areas to the East and into the Amazon river. There are many consequences to this, but as just one thought amongst many the construction of any local tailings facility would be both expensive compared to peers and technically very challenging.

4) Land Mines
Yes, land mines. In 1995, the region was the scene for the so-called "Cenepa War" between Peru and Ecuador. The fighting was short-lived but hot, and many land mines were laid by both sides.

In April 2007, the gov't of Peru estimated there were over 30,000 land mines laid in 35 areas designated 'dangerous zones'. Two of the three main regions for these dangerous zones lie inside the DRI.v concession areas. As well as posing a direct threat to those exploring the area for prospective sites, the land mines will cause headaches galore if the moment comes to construct better communications roads between the site and the outside world.

The land mines issue also partially explains why using the Ecuador road system and infrastructure to service any potential mine is not feasible. The two countries may be at peace with each other now, but it is unlikely (to say the least) that Ecuador would start lending a helping hand to Peru in a micro-region so politically sensitive.

These are just four problems that Dorato Resources will have to overcome if it is ever to make a viable case for large-scale mining in the area. I've chosen these four because potential investors in DRI.v need to see the advantages and disadvantages of any project as soon as possible, and it is unlikely that the company itself would voluntarily bring these issues to the public eye.

It is, of course, perfectly possible that the company has good answers and clear solutions to all the problems mentioned. But the potential investor now has a better idea about what to ask the company before considering an investment.

So that wraps it up for an overview of problems and issues for the Cordillera del Condor project itself. In part 6 I'll start looking at the structure of the company, and we'll begin to see how the track records, backgrounds and people involved are important to the future of the stock promotion.

Related posts
Anatomy of a Canadian Stock Promotion (part 1)
Anatomy of a Canadian Stock Promotion (part 2)
Anatomy of a Canadian Stock Promotion (part 3)
Anatomy of a Canadian Stock Promotion (part 4)

Disclosure: I would like to remind you that at no point will I make any sort of recommendation to buy or sell any DRI.v securities. I would also like to make it clear that to the best of my knowledge the promotion techniques used and to be used by Dorato are totally legal. Finally, I would like to make it clear that I am not passing any moral judgement on Dorato Resources, and will try to avoid any insinuation of judgement in future posts in this series. The aim is to educate readers about some of the ways promotion campaigns are used and the company structures behind them.

Third time lucky?

From the "weekend kickback silly news" files:

Youth survives being hit by a train for the second time in Peru

A young Peruvian survived being hit by a train for the second time after falling asleep on the rail tracks while drunk, informs the Peruvian press.

EFE: Eddie Vincent Reyes, a 28 year old homeless drug addict, was hit by a train that was transporting minerals in the outskirts of Lima when he fell asleep on the railway line after a drinking session with friends.

The victim was dragged various metres by the locomotive, but only suffered contusions in the head and thorax and a fractured leg.

This is the second time that Reyes has survived this type of accident, as two years ago he lost a part of one leg after falling asleep on the rails and being run over by a train.

Good weekend reading from respected bruddasites*

Corporate profits down? Banks teetering on the edge? Not in China. South-South Cooperation gives you the lowdown, and shows how reports of Chinese economy problems have been greatly exaggerated.

I didn't cover this story here because I knew Lillie at Memory in Latin America would pick it up. Argentina hands out a welcome piece of long, long overdue justice to Dirty War participants.

I have to say I like Tyler Bridges' blog 'Inside South America' more and more, which is a first for a mainstream journalist corporate-style blog. Concise and snappy snapshots of the region. Here's the link to the main page, as the five most recent posts are all worth reading. A variety of subjects and countries.

Trend and Value Report goes USA political in his....errrr...own style. Good for a smile.

Mexico, abortion, Supreme Court rulings. The Mex Files gives you the lowdown on this week's polemic decision in one of the world's biggest Catholic states. A great summary of the situation, and you even get to play 'spot the typo' in the title ;-).

Do something that Simon Romero won't do. Get ahead of the curve and actually read Bolivia's proposed constitution that goes to referendum vote on December 7th. Abiding in Bolivia serves it up on a silver platter.

*and always respect, lillie

Friday, August 29, 2008

Death in Peru

Panorama of the District of Sanagorán

Tonight we bring you a story from "The Other Peru". Extrajudicial killings and cover-ups, corrupt government officials, death by poisonings, police corruption, mob rule and drug trafficking. All the ingredients that would make for international headlines in any Latin American country not deemed "investor friendly" by the North.

This is the Peru that long-suffering Peruvians want stamped out, and this story of complicity between government officials, police and large amounts of drug money is one that is quietly repeated up and down the country. This particular sordid tale has only unraveled because one man went too far and was denounced by locals demanding justice in the face of official indifference, and they had to literally riot before anyone from the National gov't took notice.

The cast of characters

1) Santos Ruíz Guerra, aged 35.....
.... the Mayor of Sanagorán, a district of La Libertad region, Peru. Suspected of murder, illegal financial activities and narcotrafficking.

Location of Sanagorán

2) Santos Sabino Cerna, aged 19, hired assassin.
Now dead, presumed murdered by poisoning. The local police force are strongly suspected of his death.

3) Marcelino Yupanqui Pacheco, aged 45, typist or topograph (depending on conflicting reports in local and national media), native of the nearby town of Huamachuco. Murdered by being shot to death and decapitated, his body dumped in a ravine.

4) César Silva Urbizagastegui, Police Commander. Suspected of leading a corrupt local police force.

5) One angry mob


The events

5th June 2008: Marcelino Yupanqui Pacheco, a local of the region, is reported dead in a ravine. The police state he died in a motorcycle accident and fell into a deep ravine.

16th June: Yupanqui's body is recovered from the ravine where it fell. The body had been decapitated (head still not found) and its arms cut off. A bullet wound was found in the torso .The autopsy fiscal later stated "I do not have the slightest doubt that this was a murder."

6th June to 5th August: Time passes. The police seem to do nothing and get nowhere with the investigation. The local population get agitated.

6th August: Locals capture and hand in to the local police Santos Sabino Cerna, aged 19.

Santos Sabino Cerna is handed in by locals

Santos then calmly confesses to helping murder Yupanqui by taking him to the scene of the crime on motorcycle. He also states that Santos Ruíz Guerra, the Mayor of Sanagorán, was the person who killed Yupanqui by shooting him twice in the head and once in the back. Two other people (as yet uncaptured) were at the crime scene, and between them the Mayor gave them between S/30,000 (about U$11,000) and S/35,000. Santos's share was S/15,000.

The motive of the crime was apparently to silence Yupanqui about the Mayor's financial dealings, almost certainly cocaine-related. Yupanqui had often complained to his wife (now widow) that he was hated by the Mayor and entourage because he refused to join in with his criminal activity.

An order for the arrest of Mayor Ruíz Guerra is issued. The mayor takes refuge with some 300 loyal locals in Sanagorán. The police do not execute the arrest order.

26th August: A mob congregates in Huamachuco town plaza and demands the arrest of the mayor as well as the arrest of the second in command at the municipality building, who they accuse of also being guilty of the murder. They also demand the resignation of the local police force commander, César Silva Urbizagastegui, alleging he is part of the corrupt gang. A 24 hour deadline is announced.

27th August: The mayor arrives from next door Sanagorán and hands himself in to the police at Huamachuco. The mayor is accompanied by a large crowd of Sanagorán supporters who protest his innocence. Local Huamachuco dwellers arrive, and fighting breaks out between the two groups. The Huamachuco locals then sack the police station and try to capture Mayor Ruíz Guerra in order to linch him.

Mayor Ruíz Guerra escapes along with the seven police officers on duty. The police station is destroyed and three police vehicles set on fire as well as the contents of the police station. Nineteen prisoners escape from jail, including Sabino Cerna. National police arrive the next morning to restore calm.

29th August (yesterday): Santos Sabino Cerna, the confessed assassin hired by Mayor Ruíz Guerra is allowed home after being recaptured. He complains of having been beaten and threatened by police, who want him to retract his confession. He shows his father two needle marks on his arm and says the police injected him with something. Minutes later he begins to feel unwell. Four hours later he is dead, showing all symptoms of having been poisoned. The autopsy is currently underway.

The case against the Mayor relied solely on the confession of the now dead Sabino Cerna. The mayor is currently being held in the coastal city of Trujillo while investigations continue.

UPDATE SATURDAY 30th: Cover up, what cover up? The official autopsy has said that Santos Sabino Cerna did not die of poisoning, but of pulmonary edema. I'm no doctor, but here's the wikipedia page to give a general idea, and it does say that the causes are "either due to direct damage to the tissue or a result of inadequate functioning of the heart or circulatory system." So what's a 19 year old doing with a suddenly inadequate heart? I mean, would you be suspicious of this diagnosis?

At the funeral procession, the 1,000 people attending gave authorities 10 days to bring some justice to this case, and included the reiterated demand for the resignation of the local police chief as one of their demands. So far there haven't been any more violent episodes, but you can bet money on there being further trouble if the Peruvian authorities continue sweeping this scandal under the carpet. It's not just Denmark that stinks sometimes.

Elearn Geometry Problem 166

See complete Problem 166 at:

Parallelogram, Diagonal, Triangles, Areas. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

More Venezuelan currency stuff

An e-mail friend just sent me this report in the IHT and added his question "What exactly does this mean?" Well here's the full report pasted, and underneath is my reply to him (as it's a quiet day, let's do this "discovered mailbox" thing again). The moral of this story is that finance-world people sometimes talk funny, but the logic is translatable.


CARACAS, Venezuela: Venezuela plans to take steps to curb a 6.5 percent decline in banking-related activity during the first half of this year.

Finance Minister Ali Rodriguez says some local banks are holding financial securities without the cash required to back them up while others are not meeting lending requirements.

Rodriguez denied on Thursday the banking system is nearing crisis, but said measures "to clean up the financial sector" will soon be announced by President Hugo Chavez's administration.

The Central Banks says banking-related activity has declined by 6.5 percent during the first six months of 2008 compared with the same period last year.

Rodriguez also says some banks are holding risky financial securities.



It means the banks are storing dollars and by design putting pressure on the Bolivar.

If you have a dollar and you can exchange it on the parallel market at 3.8, but you're pretty sure you can get 4.2 for it next week...what do you do? Sell your dollar or buy another one? Yep, you buy another one, cos you want to double your profit from now to next week. And if you know your friends in other banks are thinking the same way, that "pretty sure" becomes "nailed on certainty".

So the bank can't meet its reserve requirement (i.e. the physical cash in the tills and the safes and whatnot) because all the VEFs are being tied up...they've been used to buy dollars.

Therefore what Rodriguez is saying to the banks here is, "Look, I know what your game is....either back off voluntarily now and stop whacking on the VEF, or I'm gonna get busy on your tushes."

Palin's finest moment

click here to see the best Palin possible.

Trading Post (Friday b4 Labor Day edition)

Yep, it sure feels like the Friday before Labor Day today (and if you have to ask what that means you shouldn't do any trading today).

Net Servicos (NETC) at $11.60. Wowsers, I'm actually up a buck a share on the tiny position I took a few days ago, and this thing has paid back a bit of the previous losing trades. I like the fundamentals on NETC, and that won't change just because the Bovespa goes in and out of fashion up North.

KRY up 22% or so at $1.39 (I'm not polluting this site any further by mentioning the company by name). It's just slightly tempting to short here, but the standing advice is the same as always. AVOID THIS STOCK. Do not go long, do not go short. You cannot seriously think you can beat the crooks that run this paper.

Aurelian ( at $6.00. Counter bid? Sorry, I just hear crickets. Over at the best place for info on ARU, the talk is of how John Embry called the Kinross move "brilliant" on BNN last night (I took a few minutes last night and read all the posts yesterday guys...thanks for the intelligent viewpoints). The fact is that Embry is 100% correct, and it should make you think of win-win dealing psychology.
  • When one side says a deal is "fair", or "good", then that's a win-win.
  • When one side says a deal is "brilliant", be clear that the other side has been taken to the cleaners.
That's you, Mr. Anderson. You know that old saying about sitting at a poker table, Patrick? If you can't work out who the patsy is, it's you. And you wonder why there's a revolt on..... jeesh...welcome to Bay St.

Breakwater ( at 0.34, fading after yesterday's rally. Keep it front'n'centre on your radar, though.

Vena Resources ( at 0.41, and actually rallying a bit (at long last). Another example of good fundies over bad recent market action.

Base metals fade again

Copper back to $3.40/lb, zinc under $0.80 and the volatile lead down to 0.88 (and dropping, it seems). So be it. The reason given to the market is the usual bearish yada yada about China demand. The yada from Reuters includes...
 "People were hopeful there might be a pick-up in Chinese
demand after the Olympics, although we are not really getting
the feeling that is starting to come through as yet," said Dan
Smith, analyst at Standard Chartered.
....about king copper. To labour the point, this is why I like looking at the bigger picture, cos the fleabrained concepts that run the day-to-day market just stick in my craw.

I did notice Breakwater ( rally very strongly yesterday...

.....but wasn't on for the ride personally...not this time. Can't win 'em all, but any further strength in the stock today in the face of this latest "China demand worry" will be telling. Missing a 20% + move doesn't hurt when you can still grab the thing under $0.40 and watch it go back towards its 52 week high ($3.41....yes, it really has dropped that hard).

Think zinc, people. Think zinc.

Thursday, August 28, 2008

Photos of the day: Some guy in the USA made a speech last night

I'm going to justify these photos on a LatAm blog by pointing out that Obama has overwhelming support in all local polls (for what that's worth). But really, these are here simply because they're mightily impressive images.

What goes through the mind of any human being at a moment like this?

In the name of democracy

Santa Cruz's Municipal Gov't has been caught red handed trying to import army helmets and shields into Bolivia.

As detailed in this or in this report, customs officials stopped a truck laden with contraband from making its journey from La Paz (El Alto) to Santa Cruz. The paperwork the truck driver was holding said that the load was 674 motorcycle safety helmets and 364 polycarbon plates. In fact, when the load was inspected they found 674 full metal jacket type army helmets and 364 high impact resistant police shields.

In the words of the head of Bolivian customs, ".... this (is) contraband that threatens the security of the State; these materials are for war, they are war helmets, these materials cannot even be used under the argument of anti-riot equipment."

Also, the final delivery is clearly stated as "Municipal Government of Santa Cruz."

Was this part of Goldberg's plan, I wonder? There ain't nothin' tin foil about these hats, duderino.

Venezuela's currency slide: Mo' Moris

Well, I marked your card on this last week, so if you didn't do anything about it you've only got yourself to blame. The Venezuelan Bolivar Fuerte (VEF) has sunk around 20% in the space of just two weeks (click on any chart to enlarge).........

VEF parallel currency evolution, May 2006 to date

Here's the currency year to date. We can see the
exchange rate came down sharply, but has
recently started moving back up

The one month chart, with the recent rise clear to see

......with the slide coming right after the interview Moris Beracha gave Venezuelan newspaper 'El Nacional' on August 18th. Your dutiful Otto even translated the interview into English for you (link right here) last week, so readers here are on the cutting edge of intel, that's for sure.

The interview was one of the most interesting I've read for a while, and is almost certainly the catalyst for the 20% slide in the VEF since then. Really...I'm not joking. That's cos Beracha is the number one top dog king of the hill main man in Venniefinances these days, and his word is law. There's plenty to take away from the Nacional report, but maybe the main consequence was from this Beracha line

"...I don't think there will be another debt emission this year, unless it's in Bolivares (VEF)...."

because as soon as the VZ money minions read that single line they knew there was only hope and wishes holding the VEF down at the 3.2 to 3.4 range. The currency immediately (like that same day) moved to 3.5, and here we are with the VEF at 4.05 ask this afternoon. Yes, Moris really is that connected and that powerful.

Beracha was the catalyst for sure, but as this next chart shows, there are fundamental reasons behind this currency weakness, too.
Venezuelan Central Bank (BCV) stats show that M2 money supply (without getting boring on you, M2 is basically the money in circulation in any given economy) has ratcheted up sharply in the last few weeks, as the BCV has not been neutralizing the extra VEF by buying them back for dollars (as was the Beracha/Isea plan of previous months). Basically, the Gov't has been at the printing presses, and that means the currency comes under pressure.

The current U$75.18Bn (converted into dollars at the official 2.15/1 rate for convenience purposes only) in VEFs circulating in the Venezuelan economy marks a 5.7% increase in M2 in just 10 weeks. Now that may not seem like a lot to you, but currency-watchers know that's a seriously big move for M2 numbers in a relatively short space of time.

But the big question is, "Where is the VEF going in the next few days/weeks?" My best guess answer to that is "I think we'll see VEF4.5/U$1, then it will come back down a bit", and here's why:

With Venezuela's International Currency Reserves currently standing at U$37.49Bn, this means that we can do a very basic calculation and say there's an equilibrium point between the VEFs in circulation and the dollars kept in reserve that points to VEF4.31 as an optimum parallel exchange rate at present (you do this by dividing M2 by reserves, and then taking the resulting inflator ratio and multiplying the VEF's official exchange rate of 2.15 to the goes like this: 75.18 / 37.49 = 2.005 X 2.15 = 4.31).

This calculation doesn't take into account any psychological influences of a population that's watching the VEF slide, of course. Therefore we may well see the VEF go lower before rebounding, and that's why I'm calling 4.5 to 1 right now. But as always, DYODD on this, dude.

Related Post
Moris Beracha and the Venezuelan Parallel Exchange Rate

BREAKING NEWS: LatAm economists make stupid predictions again

The 2007-2008 version of the CEPAL "Estudio económico de América Latina y el Caribe" was published this week. This report is one of the most complete annual economics studies of the region and over the years has become required reading (for wonky guys like me, that is).

You can get your own copy, free gratis and for nothing, by clicking on this link right here (I'm good to you, am I not?). I'm quite sure this 200 page PDF in dense, financial Spanish is bound to brighten anyone's weekend.

It really is an excellent source of reference, but the word "stupid" crept into the title line because these CEPAL dudes insist on trying to predict (read 'guess') how the regional economies will pan out in the next couple of years. I'm going to use the example of Venezuela, and shock horror you'll be surprised to find out that CEPAL consistently underestimates its economic growth rates. You need to check previous publications for the figures and I've only got them on file in the PC, but I've managed to find some website links that prove the point. Here are the CEPAL prediction numbers in the chart below from 2004, from 2005, from 2006 and 2007.

We see that CEPAL has at least been consistent, as apart from 2004 when they totally miscalculated how quickly Venezuela would rebound from the PdVSA strike and the recall referendum shenanigans, they've missed by about 2% each year, though always to the downside. By simple extrapolation therefore, we can get closer to the suited guys by adding 2% on their FY08 and FY09 guesses. Hey, this prediction game is fun! Let's play more often!

Moral of this story:
Dismal scientists' reports are good places to find out about what happened in LatAm, not what will happen. Feel free to pass this post on to the next person who tells you Venezuela will only grow 4% in FY09. Fact is, the only thing that affects GDP growth in Venezuela to any great extent is the price of crude oil, so you get a better idea of its growth prospects from the CBOT than you do from economists.

UPDATE: I immediately got a mail about this post from a friend who says "Big deal, they got Vennie wrong". Fact is that they suck regionwide, and here's another chart I've just thrown together from the CEPAL yearly publications showing their predictions for pan-regional growth and how the reality has bitten.

You see? They still suck.

Gold Reserve, Rusoro and Don Vito Corleone

This press release from Gold Reserves (GRZ) yesterday tells how Rusoro Mining (RML.v) made an offer for the company (well, they called it an "expression of interest"). RL responded to the GRZ press release with its own PR today (all very calm and relaxed sounding, too).

In it, GRZ said that RML.v offered an all-paper two-shares-of-RML-for-one-GRZ, so with RML currently at $0.80, this puts the takover number at $1.60 (if you use the Kinross/Aurelian school of logic, anyway). Not surprisingly, GRZ rejected the offer immediately, as it is as cheeky as it is lowball. But when I saw the PR, I had one of those "RUH ROH" moments, as it looks like there's an offer you can't refuse in the pipeline. In ballpark terms, it goes like this;
  • RML makes a dirtball lowball offer (done)
  • GRZ rejects the offer (done)
  • RML says, "Well, I suppose we could go to three papers for one, but that's about it."
  • GRZ then gets a visit from Venezuela's mining ministry (MIBAM) who explain that the Rusoro offer is one they can't refuse.
  • GRZ is prised out of Brisas in much the same way Hecla was recently ousted from its Venezuelan operations, which were then coincidentally awarded to Rusoro.
In yesterday's PR, it does seem as though GRZ is willing to negotiate on this. CEO Belanger pointed out that GRZ has plenty of tangible and non-tangible assets, and although RML would be interested in the CAT diggers etc, what the Russians really want is the 10m oz Au and 1Bn lb copper sitting under Brisas (and right next door to Las Cristinas..ahem ahem). So I can easily see an endgame here, where GRZ spins out all assets and the large wodge of cash it has at bank, then hands over Brisas and hightails it out of the Imataca Forest.

But whatever happens, it's pretty clear that RML is the vehicle being used by Venezuela to get its hands on the yummy gold deposits in the area. As soon as KRY goes bankrupt, they're likely to get Las Cristinas, too (and don't expect an offer for Crystallex, ok? Serious companies tend to pay money for other serious companies, not empty shells pretending to be valuable).

Los Andes Copper and Amerigo Resources make a logical move

Los Andes Copper (LA.v) needed money to continue its exploration.

Amerigo Resources ( has money, and it also has a track record of taking minority positions in junior copper miners in the region (check out the large chunk of it owns).

But the big link is Dr. Klaus Zeitler, who happens to be the President of LA.v and also the Chairman of the very successful

The sum total of these three fact is the announcement made today by and the whole deal makes a lot of sense. now owns around 14% of the full dilution in LA.v. As for Klaus Zeitler, have a read of his resumé as posted on the LA.v website; for the record, this is a good example of the kind of background I like to see when I'm looking at a junior:


Dr. Zeitler received his professional education at Karlsruhe University from 1959 to 1966 and obtained a PHD in economic planning. Dr. Zeitler is a member of the Canadian Institute of Mining and Metallurgy and the Prospectors and Developers Association. Dr. Zeitler financed, built and managed base metal and gold mines worldwide (Europe, Africa, North America, South America, Pacific) with a total investment value of $4 billion.

Dr. Zeitler was a managing director of Metallgeschaft AG, a German metals conglomerate and in 1986 founded and was a director and CEO of Metall Mining, later Inmet, a Toronto Stock Exchange listed company with assets of over $1 billion and base metal and gold mines in different parts of the world. After having been a director of Teck and Cominco for many years, Dr. Zeitler joined Teck in 1997 as Senior Vice President and had responsibilities for the exploration and development of mines in Peru, Mexico and the USA. Since his retirement in 2002 from Teck Cominco and in addition to being President and a director of Amerigo, Dr. Zeitler has been actively involved as a director in various junior base and precious metal companies.

Great News! The USA economy accelerated in 2q08

Well that's a weight off my mind, cos all that talk about the US in recession might have started to affect the junior mining sector down here, not to mention exports.

Isn't it refreshing to think that US unemployment can rise so fast and the country just keeps on growing? Maybe they should lay off another couple percent of the workforce and get growth over 5%.

Economy rebounds in 2Q, mostly spurred by exports

Thursday August 28, 8:52 am ET
By Jeannine Aversa, AP Economics Writer

Economy rebounds at better-than-expected pace in the spring, mostly spurred by exports

WASHINGTON (AP) -- The economy shifted to a higher gear in the spring, growing at its fastest pace in nearly a year as foreign buyers snapped up U.S. exports and tax rebates spurred shoppers at home.The Commerce Department reported Thursday that gross domestic product, or GDP, increased at a 3.3 percent annual rate in the April-June quarter. The revised reading was much better than the government's initial estimate of a 1.9 percent pace and exceeded economists' expectations for .......yada yada etc etc

Wednesday, August 27, 2008

Blog from Bolivia: What Happened to "Democracy equals 2/3?"

This from 10 years ago. Think about it

I've just read this post, Blog from Bolivia: What Happened to "Democracy equals 2/3?", at The Democracy Center's "Blog from Bolivia". 100% agreement. There are a lot of points made, but just as a taster, here's one section....

And finally there is this. Aren’t elections supposed to mean something? Three times in a row now, by escalating majorities, Evo and MAS have won national elections – the Presidential vote in 2005, the Assembly vote in 2006, and again this month.

Yes, Evo and MAS should negotiate with their adversaries. Yes, MAS should not seek to build a monolithic state in which it assumes too much power. Yes, national operations should be decentralized so that people don't have to take a bus to La Paz to process a simple public form. But look folks, the vast majority of Bolivians have spoken, and spoken, and spoken, in favor of a turn of direction and it is time to let the government they selected govern.

Now go read it all for yourself.

How to confuse a group of silverbugs

We'll do this as a step-by-step bullet point thing, otherwise they might find it difficult to follow:

1) Show them a 1923 Silver Dollar (I have one right here).

2) Ask them how much silver is contained in the coin.

3) Congratulate the first one that says 24 grams (precisely it's 26.7g and 90% pure silver = 24.03g).

4) Ask them how much the contained silver is worth today (making sure you're not talking about its collector's value; my example has been valued at around U$300, but a truly perfect mint example of the "freedom dollar" can go into the thousands).

5) Congratulate the first one that says "over ten dollars" (in fact, using today's $13.76 London silver fix and doing the necessary calculations, it works out at U$10.63).

6) Ask them how much it seems the silver in that dollar has risen in dollar value in the 85 years since it was minted.

7) Congratulate the first one that says "over 90%" (90.6% if my quick math is correct, but there are a couple of variables), and then go on to say that apparently, and according to the pretty empirical evidence shown by that silver coin, it sure looks like the dollar has lost 90% of its value in the last 85 years.

8) Ask them to look around. Check the room, the street where they're standing, the city and the people. Ask them whether there has been a general improvement in the standard of living in the last 85 years, considering the economy, healthcare, education and any other measurement by which we tend to gauge that thing called "progress".

9) Ask them why they think the financial system will collapse if the hated fiat dollar loses another 90% of its worth in the next 85 years.

10) After a few minutes, I will guarantee that you need to tell one of them, "No, it's not a trick question."

Copper: My kind of technical analysis

Beats me why you guys have to make things so complicated all the time.

Click to enlarge, dude (duh)

Semiperimeter, Excircles, Incircle, Tangents

Visual illustration
Let ABC be a triangle of sides a, b, c and semiperimeter s. Represent (s-a), (s-b), (s-c).

Triangle, Excircles, Incircle

See complete interactive proof with animation and key concepts at:

Level: High School, SAT Prep, College geometry

Snippety stuff (economics with the truths edition)

The normally reliable Reuters brings a report from Cuba that the global finance crunch and Agflation is even affecting the most communist nation in the region.

Darnit, I'm sure President Twobreakfasts assured us that inflation wasn't a problem in Peru and that it was all a media-run hoax.

Inflation is also a headache at that other "investment grade" country, Chile. The Central Bank head says there are more interest rate hikes on the way. With copper having found a bottom, it's good time to bet on the Chilean Peso, methinks.

The Brazil pump is back on! Citigroup today joins yesterday's UBS call to buy Brazil consumer stocks, and DeutscheBank pipe up on a "buy" rating for Petrobras. Birds of a feather.........

Evo in Bolivia wonders why the half moon states are kicking up such a fuss about getting "their fair share" (BS) of the hydrocarbon tax when they never spend it on their populations anyway? The Beni region has spent just 3% of its already collected tax harvest so far this year.

Tuesday, August 26, 2008

Elearn Geometry Problem 165

See complete Problem 165 at:

Parallelogram, Diagonal, Triangles, Areas. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

Elearn Geometry Problem 164

See complete Problem 164 at:

Parallelogram, Trapezoid, Diagonal, Triangles, Areas. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.

Monday, August 25, 2008

Elearn Geometry Problem 163

See complete Problem 163 at:

Trapezoid, Diagonals, Triangles, Areas. Level: High School, SAT Prep, College geometry

Post your solutions or ideas in the comments.