Notes From The Margin

July 29, 2008

Venezuela Presses Its Claim – The Propaganda War Starts

We have tracked two stories on Venezuela’s claim of Barbados’ waters in the Venezuelan media today. The tone of one is actually quite strident.

The first article:

NGO reports Barbados is bidding oil blocks in Venezuelan waters

The government of Barbados has launched an oil and gas bid for 26 offshore blocks, two of which are allegedly located in part in Venezuelan waters, claimed on Monday Aníbal Martínez, head of non-governmental organization Frente Nacional Pro Defensa del Petróleo Venezolano (National Front for the Defense of Venezuelan Oil).

Martínez said that the government of Barbados put 26 oil and gas blocks for tender stretching more than 70,000 square kilometers. He added that there are two blocks in the bid, called Botton Bay and Crane Bay, 70 percent of whose area would be in Venezuelan waters.

“This amounts to an area of 5,200 square kilometers. It is a hostile act on the part of Barbados, and we have to be on alert. Even if it was one square centimeter, we cannot let this to happen,” said the Venezuelan oil expert.

The second article is a follow up

Claims of sale of oil licenses by Barbados

Venezuelan Minister of Energy and Petroleum Rafael Ramírez reported that the Ministry of Foreign Affairs is in possession of the evidence attesting to the sale by Barbados of licenses for oil drilling in Venezuelan maritime areas.

“We took the official letter to the appropriate channels; the Foreign Ministry is working on it. This has been the case in the past, where countries, well, awarded licenses for areas that are beyond their jurisdiction and by talking, directly speaking, things are eventually placed where they should be,” said the official.

What will also be interesting to watch is the reaction of Caracas to Barbados claims to the outer continental shelf. What is legally Barbados’ southernmost waters Venezuela considers to be its exit to the Atlantic (hence the Trinidad/Venezuela treaty) However Venezuela never made a treaty with Barbados, and Barbados has no reason to negotiate one as it is a small slice of their territory. The Venezuela/Trinidad treaty has no impact on Barbados or Guyana, so it will be interesting to see where this goes.

It is unlikely that this will go away.  Further Barbados has little reason to take on Venezuela’s claims other than Venezuela has the means to agressively enforce its claims on the area by force of arms.

Hopefully this will not go that far.

Marginal

How Trinidad Recognised Venezuela’s Claim to Most Of Guyana’s Land

Venezuela and Its Claim of Most of Guyana’s Land

Marginal Picks Up His Pen – Venezuela’s Claim of Barbados’ Waters

June 16, 2008

Marginal Picks Up His Pen – Venezuelas Claim of Barbados’ Waters


After much thought we’ve decided to come out of retirement to blog on the subject of Venezuela’s claim of Barbados’ waters. This is not a full re-opening of NFTM but we felt that given our history of blogging on Venezuela and it’s territorial claims that we might be able to provide some clarity on this issue. This article is freely reproducible (once the source is attributed). In fact we would ask that given the potential seriousness of the claim that members of the blogosphere and other media propogate this story.


Marginal

Like Barbados Free Press we saw the story today in the Venezuelan publication PetroleumWorld entitled “Barbados’ Troubled Waters”

The new government of Barbados opened the bidding process for rights to offshore blocks for oil & gas exploration on Monday and will close it on September 30. The winner announcement will be made on Nov 20th. More than 20 companies were present this week in the bid kick off, including among others, Exxon, Gazprom, Lukoil Shell, BHP Billiton of Australia, Hess Oil Company, Anadarko Petroleum Corporation, Marathon Oil and Murphy Oil, all of the United States, StatoilHydro, Petro-Canada, and Petrobras from Brazil. However, there is an issue that the IOC’s perhaps have not taken in account, that is that two of the block are in venezuelan waters, the Bottom Bay blocks Ad I and Ad II. We expect that the venezuelan government will issue a diplomatic note to the government of Barbados asking for clarification and the Venezuelan oil company PDVSA will issue a warning to the OIC’s on the issue.

The two blocks in question are the two southernmost blocks that are up for bid (Highlighted in red in the illustration). Venezuela’s claim rests on two pillars

1. It’s claim to approximately half of Guyana’s land area.

Venezuela claims everything west of the Essequibo river, the historical reasons for this can be found in our post. Venezuela and Its Claim of Most of Guyana’s Land

2. Venezuela’s Maritime Treaty with Trinidad.

In 1990 Venezuela and Trinidad agreed a treaty delineating their maritime boundary. This treaty can be found on line HERE.  This treaty allowed the development of Trinidad and Tobago’s offshore oil resources. However this treaty had two unforeseen impacts. First it tacitly recognised Venezuela’s claims on half of Guyana, and secondly it pushed Trinidad’s territorial claims north which is what led to the Maritime border dispute between Barbados and Trinidad. The impact of this can be seen in our post How Much Gas Does Trinidad Have? Indeed the main sticking point in the negotiations was the Trinidadian position that Barbados should recognise the 1990 treaty. The UNLOS council held that two countries could not bind a third without it’s consent and hence the 1990 treaty had no impact on Barbados.

The maritime boundaries are currently as seen in the diagram below. The purple line indicates Trinidad’s initial boundary claim and the brown line indicates the claim they put forward to the UNLOS Council. The green line represents the final decision of the UNLOS Council.

The result of the UNLOS is that the 1990 boundary between Venezuela and Trinidad extends into what is (and always was) legally Barbados’ waters.

Venezuela is now seeking to exercise a claim in an area that it has no right to claim. The waters under discussion can ONLY be Venezuelas if you accept that

1. Half of Guyana is actually Venezuela.

2. That two countries (Venezuela and Trinidad) can commit a third and fourth countries (Barbados and Guyana)  to some form of agreement or treaty without consulting them and without their agreement.

In short, the Venezuelan claim is baseless.

Marginal

Other interesting information on this topic.

International Law Environment by Professor Robert Volterra

Venezuela and Bird Island

Details on Aves Island – How Venezuela Controls the Caribbean Sea

Bird Island Again! – Grenada in Maritime Boundary Dispute With Venezuela.

April 8, 2008

Somehow We’re Not Convinced!

Filed under: Banking,Barbados,Capitalism,Caribbean,Economy,Globalisation,Media,mergers — notesfromthemargin @ 6:39 pm

Has anyone else noticed how all the major bankers are lining up to tell us how the take over of RBTT by RBC won’t affect competition in the Barbados banking market place? First John Beale and now Oliver Jordan who are both saying the same thing….

PRESIDENT and CEO of RBTT Bank Barbados Limited, John Beale, does not foresee any significant impact on the local banking sector from the recently approved amalgamation between RBTT and the Royal Bank of Canada (RBC).

Speaking to Business Monday, Beale stated I dont think it will have a great impact, I dont think it will affect the competition.

You’ll pardon us but somehow we can’t see that the removal of one of the major banks from a marketplace that verges on an oligopoly won’t affect the competition.

Maybe we’re just cynical but despite the goodly efforts of Mr. Beale and Mr. Jordan we remain rather skeptical.

Marginal

April 7, 2008

Is The Barbados Stock Exchange Becoming Irrelevant? Is it already?

We on the margin were reflecting on the recent conclusion of the Neal & Massey BS&T takeover. Neal & Massey were successful of course in buying the entire company. Some 97% of shareholders willingly took the offer and the remainder were bought out by N&M following the 90% rule. (If you own 90% of a public company you can take possession of the other 10% of shares just by paying for them). So lock stock and barrel, BS&T as an independent entity is history. What was once considered the symbol of white corporate power in Barbados has been sold (but that is another post).

So what happens next? Of course the company will be de-listed from the BSE, it’s now a wholly owned subsidiary so it won’t be traded. As a result the numbers of companies on the exchange take a hit. This will be the latest in a series of reductions in the number of public companies in Barbados. Island Properties Ltd. was taken off the exchange by Colin Brewer & Tony Hoyos, Life of Barbados was taken down by the Mutual (now Sagicor), BWIA was grounded by the Trinidad Government. If we want to think back that far Plantations Ltd. went in a long agonizing slide into oblivion. Now we have BS&T joining the ranks of companies that were once public.

Along with this slow dwindling, there is a scarcity of new companies going on to the exchange. Of course unless you count Sunbeach (we won’t go any further on that one). To make matters worse there’s an overwhelming tendancy for people to buy shares and then hold onto them for long term appreciation. So we have far more buyers than sellers. The mutual funds have added a new dimension but the returns (if you take out the BS&T takeover) have been pretty much moribund.

Merging the regional exchanges will buy time, however the fact of the matter is the investment arena in Barbados is pretty stagnant. If you listen to the rumour mill, the stories floating around about “back room deals” may or may not have substance, but they don’t engender confidence in smaller investors.

The management of the exchange must see the trends, and also must realise that from a long term view, if they do not take action they will be consigned to the same file folder that currently holds BS&T.

Marginal

April 4, 2008

Beachfront Development In Barbados, A Look Into The Future…

Now that the dust has had a chance to settle, we on the margin have been reflecting on the sale of Cheffette Holetown. At $40 Million for the site Cheffette would have taken the offer. How many years of profit is that from the Restaurant? Further that’s enough money that they could build a second restaurant nearby and still have money left over. As a business deal this is fairly straight forward, Cheffette got an offer that was simply too good to turn down and that is that.

From an economic point of view, the Holetown site in condos will contribute more to the economy than it would as Cheffete. Certainly it would be part of the foreign exchange earning sector rather than being a user of foreign exchange. Economically this is good for Barbados as well.

However one of the very few remaining windows to the sea will close when condos go up on the site. Locals will have to go in either at the Holetown Police Station (the old Pizza House restaurant) or go all the way up past Sandy Lane to access the beach. Heading south after that we believe the next opportunity for beach accesss is Paynes Bay.

Now we on the Margin can’t argue with Condos, but we do have a specific issue with beach development. The development of a condo project allows the developer to make his money back quickly, with relatively little risk. A hotel means that the developer takes the business risk and all of the headaches that come with running a hotel. So if you are a developer, a condo is lower risk for a higher return and an extremely quick payback period. This is why hotels are closing for condos, we on the margin doubt that anything the new administration does will change this. (Despite what Mr. Loveridge says)

The other factor at work here is that there’s only so much beach front land in Barbados. The simple law of supply and demand means that prices for land on the coast will skyrocket in the face of huge demand fed from outside of the island. Hence we can hear about $40 million being paid for a relatively small piece of land. Remember all of those little chattel houses in the Garden in St. James? Little gold mines each one of them.

Now because the land costs are skyrocketing developers need to do two things 1. increase the value of each condo unit and 2. increase the number of units on the lot. This means that development along the beach is going to be high value, and is going to maximise the land use (so much for beach access for locals) and further is going to go up and up and up. This results in what we are seeing at Paynes Bay in St. James where the people on the land side of highway one stop seeing the sun around 3.00pm in the afternoon each day.

If you watch the BTA advertisement above it talks about

“…an island that hasn’t been homogenised and supersized and commercialised away from even being Caribbean anymore”

While these words are being said images of high rises next to the beach are being shown.

Ironic isn’t it?

We think that there is a need for a policy intervention by Government that puts the brakes on this form of development. Now this will have to be done with a light touch otherwise we run the risk of killing the goose that laid the golden egg. One possibility is restricting future high rise structures to the land side of the road. We are not saying no to development of the coast, we are simply saying if we continue as we are going now we will end up being one of those islands that no one wants to go to. The economics of it are inexorable.

Now is the time for an enlightened policy response.

Marginal

March 28, 2008

David, We will have to disagree on the 100 days point!

We are great fans of Barbados Underground, we find their articles though provoking and well reasoned. We don’t always agree with them, but that’s what makes the blogosphere interesting. David served up an interesting article this week:Barbados Needs National Energy Policy, NOW we agree with the headline and the main point of the article, that in a global economic environment we need a realistic energy policy with a strong emphasis on renewable resources, however we will have to agree to disagree with his subsidiary point.

The Democratic Labour Party (DLP) pledged to Barbadians that within the first 100 days of assuming the reigns of government, it would roll-out several major initiatives. Our commonsense, which has been honed over the years through observation, tells us that the pledge was part of a gimmick which political parties are expected to engage at election time. It should be obvious that a political party in opposition is not equipped to deliver on promises made, simply because it is not in the obvious position of government to efficiently plan and allocate resources. The BU household continue to be amazed at the frenzy which is demonstrated by our educated public concerning trivial matters, whenever we have elections. Following the script to the letter, the opposition Barbados Labour Party (BLP) has reminded the government of its 100 day promise, we listened to Senator Liz Thompson doing so with her usual eloquence in the Senate yesterday.
We commented on the post, to the effect that the “100 Days” was a political gimmick that worked and that it was now fair game for the opposition to use to attack the government. We don’t think it’s the only reason why the DLP won (or even the main reason), but it was a central plank in their platform.
However our real reason goes deeper than that……
The “100 days” was a political gimmick that was packaged for consumption by the electorate. However read more deeply it was the DLP’s statement of “THIS IS WHERE OUR PRIORITIES ARE” and even if you did not believe they were capable of delivering it in the 100 days, (as we think most people with common sense felt) the idea of a time frame communicated that there was a real plan behind the statement.
An opposition party is not in the position of a ruling government in terms of access to information and allocation of resources, however they have a luxury that the Government does not:
Time.
An opposition has time to consult with stakeholders, time to sound out opinions, time to float ideas in informed circles, to create and construct a plan. They also have the unmitigated luxury of doing this in an environment where there is absolutely no pressure to implement. These two things, a sitting government does not have (As Dr. Estwick has found out with Greenland). In this case the DLP had 14 years to craft its agenda for governance.
We think that the Thompson administration should be accountable for its 100 day agenda. If it can’t be done in 100 days, when can we expect it? A year? two years? If the first orders of business are delayed what about the elements of your manifesto that were not in the first 100 days? We should not let it fall quietly by the wayside.
We agree that a discerning eye should be cast over the ABC Highway expansion project and it’s conduct, however we think that the level of scrutiny should be applied to this administration, the principle at stake is simply too important.
Until we hold our politicians accountable for their words and actions we will get the government we deserve.
Marginal

March 22, 2008

We are the middle class….

We were having a chat this afternoon about a Laugh it Off skit from this year’s prodution called “We are the middle class…” which while being very funny takes a very sharp aim at those members of the middle class who have “the big ride” but no money to put gas in it, or who have platinum credit cards (which are maxed out) or who drive soooves (SUV’s).

I was thinking that the middle class in Barbados is perhaps the most hated socio economic group in the islands social milieu. They are constantly pilloried by the “working class” for “forgetting where they came from”, by the “upper classes” for being “social climbers”, by Cave Hill academics as being “petite bourgeois”, by politicians as being somehow “not as bajan” as the “working” class. There is constantly the insinuation that somehow they ought to be ashamed of wanting to live in a nice house, in nice neighborhood and to drive a nice car, or that they did something illegal or immoral to achieve whatever they have.

This goes further, the tax structure in Barbados shields the poor (hell it even gives a reverse tax credit to the poor) and those in the “upper classes” have all sorts of advice from accountants on how to avoid (note I did NOT say evade) paying taxes. The result of this is that income tax in Barbados is paid by the poor sod who works as an employee for a salary (given the exemptions usually a supervisors salary or higher) in short income tax is paid by the middle class.

And no politician dares to be caught giving concessions to the middle class! The poor or “working” class are the politician’s stock in trade in getting the media spotlight. Concessions are given for investment by businesses “to promote growth in employment” but when was the last time you heard a politician crowing about how he was going to help out the guys in the middle?

 The thing is…..

when I think about the middle class people that I know, they are almost all diligent people who work damn hard for a living, they pay their taxes and follow the rules. They do without so that they have something to put away for the future. They are likely to live not just for their future but for their children’s future. They (in many cases) went to UWI in Cave Hill although some were fortunate enough to travel overseas to study (even if only to Jamaica or Trinidad).

Despite being most often accused of “forgetting where they come from” I’ve found that most of them are well aware of where they came from, but more often than not their focus is on “where they are going” and if you follow their lives and careers there is a steady progression towards that goal.

So rather than bashing the middle class, perhaps the next time you hear this type of conversation going on try to relate it to people that you know rather than some amorphous group, ask yourself who are the middle class?

You might be surprised to find out that WE are the middle class..

Marginal

March 19, 2008

A Suggestion on BOLT’s

Minister of Tranport, Works and International Transport John Boyce made a comment in the house yesterday about the Government’s potential use of Build Operate Lease Transfer (BOLT) arrangements in the future.

ANY FUTURE BOLT – Build Operate Lease and Transfer – arrangements that Government signs will be designed to bring economic benefits
to the country.

Minister of Transport, Works and International Transport John Boyce told the House of Assembly yesterday during debate on the 2008-2009 Estimates of Revenue and Expenditure that BOLT arrangements were supposed to generate savings and not additional costs.

The previous administration made use of several of this type of arrangement. However the nature of the implementations often left questions on the transparency of the deals. This was noted in an IMF  report on Barbados.

The report makes a number of reccomendations with regard to this Public-Private Sector arrangement.

We on the margin would be much more reassured by the implementation of a legal framework to govern the use of BOLT’s and similar arrangements than simply Mr. Boyce’s statement of “Trust us”.
Marginal

March 18, 2008

Welcome to the 5 year long election campaign!

When the dust settled on January 16th the two parties ended up being quite far apart on number of seats but actually quite close on total number of votes cast. With only an 8% difference in terms of total votes, it means that the current government is vulnerable to a 4% swing. This means that despite a comfortable majority in Parliament, the Thompson administration must politically plan from now with an eye to elections in 2013. It also means that the Mottley opposition is already keeping an eye on that year.

As a result of this we are likely to see Mr. Thompson trying to attack what has long been perceived as the BLP’s strongest point; it’s management of the economy. The BLP for it’s part will pick at every flaw in the government’s actions.

This leads to the  ludicrousness of things such as Government suddenly becoming skeptical about unemployment statistics despite never having said a word about it before or during the campaign. It certainly was not a part of their platform. They are not releasing those figures because it will reinformce the BLP’s perception of good governance.

For the BLP’s part, this whole “We don’t know why the government won’t work with our consultants” is laughable. They damn well know why and they would do the same if they were in office as well.

What it amounts to is that we are in for a five year long election campaign, with the cut and thrust of January continuing at a lower intensity until 2013

Strap yourselves in, it’s going to be a wild ride!

Marginal

March 16, 2008

A Further Thought on Air One…. and other investments.

A further thought on the AirOne story…. The airone project represented a significant investment project that would have brought considerable jobs to Barbados (or Jamaica for that matter). Because of the upward movement of oil prices, that project won’t be happening now.  If you talk to people in the legal and financial fields there is a feeling of caution in the investment community. There are a number of projects that are still going ahead as their investors are committed, however there are some that have been put on pause as investors wait to see what will happen with the global economy.

If Airone has been put on hold, it does make u wonder what other projects are being put on pause? With Oil at $113 a barrel, it may be sometime before they get considered again.

Marginal

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