Free Markets, Free People

Brazil

Brazilian orange juice banned in US

oranges

Right now there’s a shortage of orange juice in the US because of a number of diseases, especially one called “greening” that has been destroying the crop.

However, there’s an alternative – import Brazilian orange juice

But we can’t:

The U.S. Food and Drug Administration, after several weeks of deliberation, has blocked imports of frozen, concentrated orange juice from Brazil, probably for the next 18 months or so, even though the agency says the juice is perfectly safe.

So if it is admittedly safe and we need the juice to help meet demand (and keep the price down) why can’t we import this juice?  Why can’t we do what is necessary with something the FDA says is safe?

Regulation.

The FDA’s explanation is that its hands are legally tied. Its tests show that practically all concentrated juice from Brazil currently contains traces of the fungicide carbendazim, first detected in December by Coca-Cola, maker of Minute Maid juices. The amounts are small — so small that the U.S. Environmental Protection Agency says no consumers should be concerned.

The problem is, carbendazim has not been used on oranges in the U.S. in recent years, and the legal permission to use it on that crop has lapsed. As a result, there’s not a legal "tolerance" for residues of this pesticide in orange products.

So, according to the FDA, any speck of this fungicide, if found in orange juice, is an illegal adulterant and won’t be allowed, even though residues of the same fungicide are allowed in many other foods, including apple and grape juice.

There is no “legal permission” to use the fungicide on the crop because such “permission” has lapsed and thus there is no “legal tolerance” for any residue no matter how benign.  Consequently, because of that lapse the regulatory regime says “no go” on the import of something perfectly safe and in demand.

The result of the unwarranted ban (this orange juice is welcome in Europe, by the way):

In 2010, about 11 percent of all the orange juice consumed in America came from Brazil, according to the U.S. Department of Agriculture. That share may seem modest, but economist Thomas Prusa of Rutgers tells The Salt that cutting it out could boost wholesale prices of concentrated orange juice by 20 to 45 percent.

So gas prices aren’t the only thing going up soon.  And in the case of orange juice, the price increase can be tied directly to government regulation.

As orange juice goes up by 20 to 45%, who is it that will be hurt the most?  That’s right – the poorest among us who now either have to find a substitute or perhaps forgo the juice altogether.

~McQ

Twitter: @McQandO

$2 billion US dollars to Brazil, but the oil will go to China

Remember this?

The U.S. is going to lend billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil’s planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-I’m Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas.

And  this?

“We want to work with you. We want to help with technology and support to develop these oil reserves safely, and, when you’re ready to start selling, we want to be one of your best customers.”

Mr. Obama was saying that while he was drastically slowing down leasing and permitting in the US and whining about “subsides” to US oil corporations.  We apparently can subsidize government controlled oil companies in foreign countries, but not here (and I’m not arguing for subsidies here – just pointing out the usual Obama contradiction – kind of like he’s against bailouts, except for Chrysler, GM, Solyndra, etc.)

Well, that little jump-start of ObamaDollars has indeed helped “develop these oil reserves”.  And the beneficiary?

Off the coast of Rio de Janeiro — below a mile of water and two miles of shifting rock, sand and salt — is an ultradeep sea of oil that could turn Brazil into the world’s fourth-largest oil producer, behind Russia, Saudi Arabia and the United States.

The country’s state-controlled oil company, Petrobras, expects to pump 4.9 million barrels a day from the country’s oil fields by 2020, with 40 percent of that coming from the seabed. One and a half million barrels will be bound for export markets.

The United States wants it, but China is getting it.

Less than a month after President Obama visited Brazil in March to make a pitch for oil, Brazilian President Dilma Rousseff was off to Beijing to sign oil contracts with two huge state-owned Chinese companies.

Well done, Mr. Obama.

[HT: Red Country]

~McQ

Twitter: @McQandO

Seriously?! Obama offers Brazil our technology (and money) for their oil?

This should go a long way toward breaking our dependence on foreign oil, shouldn’t it?

“By some estimates, the oil you recently discovered off the shores of Brazil could amount to twice the reserves we have in the United States.  We want to work with you.  We want to help with technology and support to develop these oil reserves safely, and when you’re ready to start selling, we want to be one of your best customers.  At a time when we’ve been reminded how easily instability in other parts of the world can affect the price of oil, the United States could not be happier with the potential for a new, stable source of energy.”

That’s what the President of the United States said on March 19th in Brazil.   He’s all for Brazil developing its oil reserves, but here at home?   Not so much.

And in case you missed this late last year, it’s also telling:

The U.S. is going to lend billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil’s planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount.

So we’ll “invest” in Brazil’s oil industry, but essentially shut ours down?

Brilliant strategy, Mr. Obama.  Outstanding energy policy, Mr. President – all but shut domestic oil down, outsource oil jobs to Brazil (plus subsidizing it) and make us more dependent on foreign oil.

As API’s President Jack Gerard said:

“It is beyond comprehension the administration would encourage trade for Brazilian oil while obstructing U.S. oil and natural gas development, eliminating related jobs here at home, and decreasing oil and natural gas revenues to the U.S. Treasury when the government is trillions of dollars in debt. The message from the White House to America’s oil and natural gas workers: we’re going to outsource your job.”

“The administration is missing the obvious: what makes sense for Brazil also makes sense for the United States. Like every other nation, we should be developing our own oil and natural gas resources. It’s good for energy security, good for the economy, good for jobs, and it will help bring down our deficit.”

“The administration says it supports more oil and natural gas development here in the United States, then at every turn discourages it. And today, the White House is making a deal with Brazil for the oil it is not allowing companies to produce here. There’s nothing wrong with buying Brazilian oil, but there’s a big problem when we’re forced to because we’re held back from producing our own.”

This is simply unbelievable.  Investors Business Daily wraps it up for you:

Obama wants to develop Brazilian offshore oil to help the Brazilian economy create jobs for Brazilian workers while Americans are left unemployed in the face of skyrocketing energy prices by an administration that despises fossil fuels as a threat to the environment and wants to increase our dependency on foreign oil.

That nails it.

Whose president is he again?

~McQ

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Iran: If these are tough sanctions, what were the "low-impact" options?

Well I’m pretty sure Iran is just horrified at the new sanctions – the toughest ever as our president claimed.

“With time, we got a resolution that we felt was very meaningful and credible and significant,” said Susan E. Rice, the United States ambassador to the United Nations. “But had we wanted a low-ball, low-impact resolution, we could have had that in a very short period of time.”

Good thing they went for the brass ring and didn’t take a low-ball, low-impact resolution, by gosh. I mean, check this beauty out:

The main thrust of the sanctions is against military purchases, trade and financial transactions carried out by the Islamic Revolutionary Guards Corps, which controls the nuclear program and has taken a more central role in running the country and the economy.

Right – so now they’ll set up front companies and do their business through willing countries like Turkey, Brazil and Venezuela. Moving on:

The sanctions tighten measures previously taken against 40 individuals, putting them under a travel ban and asset freeze, but adds just one name to the list — Javad Rahiqi, 56, the head of the Isfahan Nuclear Technology Center.

Whoa – they added one person to the sanctions of travel bans and asset freezing for a total of 41? My goodness, the humanity. That has a terrific chance of stopping any nuclear program dead in its tracks.

More:

The sanctions require countries to inspect ships or planes headed to or from Iran if they suspect banned cargo is aboard, but there is no authorization to board ships by force at sea. Iran has also proved itself adept at obscuring its ownership of cargo vessels.

So, wait, other countries can try to inspect Iranian ships they suspect of carrying banned cargo, but they cannot use force to board that ship. In other words, all the Iranian captain has to say is “no” and refuse to allow them on board, and the “inspection” is over? Thank goodness they didn’t go for low-ball, low-impact sanctions. They’d have probably allowed the Iranians to board the inspecting ship.

Another aspect of the sanctions bars all countries from allowing Iran to invest in their nuclear enrichment plants, uranium mines and other nuclear-related technology, and sets up a new committee to monitor enforcement.

Well there you go – the one positive aspect of this whole thing: the UN has managed to form yet another committee which will offer employment to a plethora of 3rd world diplomats who might otherwise have to do something useful to earn their keep without it.

The almost childlike belief by this administration that it can accomplish anything through the UN, especially stopping Iran from achieving a nuclear device, is incredible on its face. But to think the list of “sanctions” above equals “tough” is mind-boggling.

There is no appetite among the 3rd world to punish Iran in favor of the US’s policy desires. And especially now that they see a weak horse in charge here. The Obama administration can call this anything they want, but calling them “tough sanctions” is embarrassing. Thank goodness they didn’t opt for the low-impact, low-ball option. I’m sure that included a strongly worded letter.

~McQ

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Brazil says “no” to Iranian sanctions

So far this South American swing has been a real tour de force for Hillary Clinton – first she manages to anger one of our more stalwart allies by giving false Argentine claims legitimacy and now Ms. Clinton has managed to get Brazil to publicly refuse our attempt to increase sanctions on Iran.

Brazil.

We can’t even get Brazil to go along with us:

Brazilian President Luiz Inacio Lula da Silva pre-empted Clinton even before she could make the case for new United Nations Security Council penalties. Silva is an outspoken opponent of sanctions, and his country currently sits on the Security Council, which will be asked to approve its toughest-ever penalties on Iran later this year.

“It is not prudent to push Iran against a wall,” Silva told reporters hours before meeting with Clinton. “The prudent thing is to establish negotiations.”

Clinton told a news conference she respects Brazil’s position but thinks if there is any possibility of negotiating with Iran, it would happen only after a new round of sanctions.

So that’s at least one no vote on the UN’s Security Council. China and Russia are no fans of the idea. That could mean up to 3 no votes. Yup, this sanctions thing is really taking off.

The U.S. officials said that despite clear differences at the moment, the Brazilians assured Clinton their current position was not “etched in stone.”

The officials spoke on condition of anonymity to discuss the private diplomatic exchange.

That’s diplo speech for “yeah, had a great time and I promise I’ll call you tomorrow”.

~McQ

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Stimulus? Try Offshore Drilling

During the last days of the Bush administration, there was a small flurry of hope among proponents of drilling for oil and gas which is off our coast. The president lifted the ban on offshore oil drilling and Congress, understanding the politics of the moment, let their ban expire. As the Washington Examiner explains, that leaves only one obstacle to the US finally going after what is thought to be about 3 billion barrels of oil and 11 trillion cubic feet of natural gas:

So the only thing keeping U.S. firms from drilling off our own continental shelf is President Barack Obama and his secretary of the interior, Ken Salazar, who is slow-walking the approval process that must be cleared before the work can begin.

However, President Obama has managed to break 2 billion of your dollars loose to loan to Brazil to help bankroll their offshore drilling in the Atlantic. One assumes that will give Brazil a savings which will allow them pursue drilling in the Gulf of Mexico as well, since they are one of a number of nations pursuing oil and gas there:

Brazil, China, India, Norway, Spain and Russia have all signed agreements with Cuba and the Bahamas to initiate exploration and production in the Gulf of Mexico within the next two years. So the prospect of seeing Russian oil rigs 45 miles off the Florida Keys — where American oil companies are now forbidden to drill — is a very real possibility.

That “very real possibility” would see us buying oil from the Gulf from foreign oil producers when it was just as readily available to us and our own companies.

And who would you rather produced it – US companies who have proven over the years that they have the ability to recover both oil and gas safely and in an environmentally sensitive way or foreign companies 45 miles off your coast who could give a good rip one way or the other how environmentally safe their methods were?

Then there’s the recession, jobs and the government’s hunt for revenue. This seems like a natural “shovel ready” industry that wouldn’t cost the taxpayer a nickle to crank up but would benefit the economy and the tax base:

According to the American Petroleum Institute, the development of America’s coastal oil and gas resources would generate more than $1.3 trillion in new government revenue and 160,000 high-paying jobs over the next two decades.

Instead of going full bore and trying to get this program off the ground – or in this case, in the water, we’re still piddling around trying to pass legislation:

Senators Lisa Murkowski, R-Ak., and Mary Landrieu, D-La., are bipartisan co-sponsors of a bill that provides coastal states such as Florida their fair share of revenues produced by off-shore drilling and production. The same thing should be done for states on the East and West coasts. California Gov. Arnold Schwarzenegger and the state’s lawmakers hope to tap deposits off Santa Barbara to generate billions in royalties, and Virginia’s front-running gubernatorial candidate Bob McDonnell has made drilling 50 miles off that state’s coast a key component of his energy plan.

Meanwhile foreign nations are moving to exploit resources we should have been exploiting for decades.

We have a huge looming energy gap. We’re behind the curve as it stands right now. While all the politics is focused on health care reform, this need isn’t going away and only becomes worse. Instead of “slow-walking” this, Barack Obama and Ken Salazar should be fast-tracking it and getting us out in those offshore areas to grab the most productive regions first. If we don’t, we’ll be moaning about how the percentage of oil and gas we import has gone up again.

And, as usual, that will be our own negligent fault.

~McQ

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Crisis For The Dollar? Is This The Calm Before The Storm?

A week or so ago, I mentioned the fact that Russia was lobbying for a new international currency to replace the dollar and opined that it most likely wouldn’t have any legs.  By itself, Russia just didn’t have enough clout to bring about such a change.   But apparently Russia was only the beginning.  Later that same week, the UN came out in favor of a new currency option:

A U.N. panel will next week recommend that the world ditch the dollar as its reserve currency in favor of a shared basket of currencies, a member of the panel said on Wednesday, adding to pressure on the dollar.

Currency specialist Avinash Persaud, a member of the panel of experts, told a Reuters Funds Summit in Luxembourg that the proposal was to create something like the old Ecu, or European currency unit, that was a hard-traded, weighted basket.

Persaud, chairman of consultants Intelligence Capital and a former currency chief at JPMorgan, said the recommendation would be one of a number delivered to the United Nations on March 25 by the U.N. Commission of Experts on International Financial Reform.

“It is a good moment to move to a shared reserve currency,” he said.

But does the UN have enough leverage to push something like this through? Probably not without some fairly powerful backers of the idea.  And speaking strictly of the UN, any such proposal would have to pass through the Security Council, and it’s unlikely the US would sanction such a change.

Today, though, China came out in favor of doing exactly what Russia and the UN recommend:

China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

In an essay posted on the People’s Bank of China’s website, Zhou Xiaochuan, the central bank’s governor, said the goal would be to create a reserve currency “that is disconnected from individual nations and is able to remain stable in the long run, thus removing the inherent deficiencies caused by using credit-based national currencies”.

As was noted last week, China has some concerns about the US economy:

“This is a clear sign that China, as the largest holder of US dollar financial assets, is concerned about the potential inflationary risk of the US Federal Reserve printing money,” said Qu Hongbin, chief China economist for HSBC.

And that’s a valid concern. With the Fed pumping out trillions of freshly printed dollars, inflation is almost assured.

In case you haven’t noticed, Russia and China are two of the four countries known as BRIC (Brazil, Russia, India, China). These emerging economies feel they deserve more clout than they now enjoy. And they’re meeting in advance of the upcoming G20 meeting in April of this year:

Finance ministers and central bankers from Brazil, Russia, India and China will convene ahead of the Group of 20 finance chiefs’ meeting in London on Friday, a Russian delegation source told Reuters on Thursday.

The source said the four will discuss the reform of international financial organizations such as the International Monetary Fund and the Financial Stability Forum, anti-crisis policies and preparations for the G20 summit in April.

Take a look again at China’s proposal for basing the international reserve currency in the IMF and the topic of their upcoming meeting in advance of the G20. Suddenly Russia’s proposal has some legs.

What clout does BRIC bring to the proposal? Well they are the holders of vast portions of the currency reserves around the world:

China runs the world’s biggest reserves, Russia comes 3rd, India 4th and Brazil 7th, as of last autumn.

Keep an eye out for Brazil and India weighing in on this. Should they come out in favor of such a change, as has China, it could portend some fireworks at the G20.

In the meantime, read this by Mikkel Fishman. It will explain some of the deeper and less evident problems we face.  Then take a moment to look around and reflect.  In my estimation, this truly is the calm before the storm.

~McQ