Silvia Santacruz

Chevron Plaintiff Lawyer’s Least Favorite Writer

by Silvia Santacruz on September 18, 2009

in Energy, International, Natural Resources

In Forbes yesterday, New York lawyer Steven Donziger, consultant attorney for Ecuadorian plaintiffs in the suit against Chevron, criticizes my article, “Toxic Revenge,” in the same publication:

[W]riter Silvia Santacruz rolled out the latest of Chevron’s counter-attacks: that Ecuadorian President Rafael Correa has publicly supported the plaintiffs and made a fair trial impossible; that plaintiff attorneys have made a career out of pursuing Chevron; and that this is really just a case of radical environmentalism at work. What Chevron doesn’t say is that it has been afforded more due process rights than probably any defendant in the history of environmental litigation.

While he implies, without evidence, that I’m some sort of mouthpiece for Chevron, I found it strange why I’m the only writer critical of his case cited in his piece. (In fact, my employer, CEI, has been critical of a recent Chevron ad campaign.)

Why is this? I have no idea, but my guess would be that the fact I’m Ecuadorian should make me an especial target of criticism, because I know my country and the issues affecting its indigenous tribes. I highlighted this recently on blogger Fausta Wertz’s Podcast, and questioned the environmentalist NGO movement’s motives:

This kind of NGOs tells the developing world what to do. They say they represent them. But at the Competitive Enterprise Institute, where I work, we argue with that. Who gave them the right to represent my Ecuadorian people? How come these internationally-funded NGOs dare to say to represent them?

Another writer critical of Donziger’s case is The Miami Herald’s Glenn Garvin, who questions the entire basis of the case:

The conduct of the Chevron case has been an outrage from the beginning, with faked cancer cases, backdated documents, findings of pollution at nonexistent wells and grotesquely inflated costs estimates. (One court-appointed “expert” recommended billing Chevron $2.2 million for cleaning up each well pit, even though Petroecuador cleans up its own pits for $ 85,000 a piece.

And, far from a plucky underdog:

Donziger, the lead attorney representing the Ecuadoreans, is Barack Obama’s law-school pal who raised more than $ 40,000 for the campaign and likes to brag about his political clout.

More articles critical of Dozinger’s case and the environmental groups behind it can be found at www.theAmazonPost.com

David, Goliath and Chevron

by Silvia Santacruz on May 5, 2009

in Energy, Environment, International, Natural Resources

How is little Ecuador going to collect from big Chevron?

In 2007, investigative reporter Greg Palast posed the question to Ecuador’s president Rafael Correa regarding the $27 billion environmental remediation lawsuit against the American oil giant.  The president’s answer: “The international community should impose upon Chevron-Texaco the moral duty to pay this money,” he said while showing his support to a group of indigenous Amazonian Ecuadorians suing Chevron in a national court.  Go to Correa’s Interview

The Chevron-Texaco case made headlines in the American media in recent weeks and became a hotter issue last Sunday when CBS ran a story segment on its 60 Minutes news program.  Watch 60 Minutes segment on the Chevron case

No matter how or from where you learn about this story, it plays like a David and Goliath tale.  Who David and Goliath depends on public perception, however.  On the one hand, it is easy to believe that Chevron is Goliath because it is the second-largest oil company in the United States after Exxon-Mobil.  But “little Ecuador” recently re-elected an aggressive and powerful leftist populist president who enjoys a 70 percent approval rating—and a supermajority in the unicameral congress.

As I noted today in a letter to the Washington Post titled Ecuador’s Attack on Foreign Companies:

Chevron is correct to argue that it won’t be treated fairly as long as Mr. Correa runs Ecuador. In fact, fewer and fewer firms will. Mr. Correa has halted foreign mining operations, raised telecommunication firms’ fees, attacked the media and defaulted on the country’s external debt. His recent reelection should allow him to put aside his “permanent campaign” style and play fair with foreign companies. Whether he actually will do so remains to be seen.

Nonetheless, Chevron’s Global Issues and Policy manager, Silvia Garrigo, seems to be aiding public perception that Goliath is, in fact, the oil giant.

“I have makeup on my face and there’s naturally occurring oil in my face.  That doesn’t mean I’m going to get sick from it,” she said on 60 Minutes, mocking the suit that argues for damages caused by three decades of environmental pollution.

Garrigo aims and scores quite low comparing her makeup with the oil disaster in a rural area in Ecuador’s Amazon region, where poverty reaches 90 percent and no running water save for rivers is available.  Was she really talking about her makeup?

Chevron’s representative was of little help to her company, losing her composure and asserting that “…corruption and fraud is perpetrated against an American company in Ecuador in this corrupted and politicized judicial system.”

Garrigo is fortunate that 60 Minutes airs in America, a country where the first amendment protects freedom of speech.  The same charge made in Ecuador would have meant trouble for her.  President Correa often attacks his country’s media establishment and imprisons journalists when he believes they have committed libel.  The most recent victim – who is in hiding – is columnist Romulo Lopez Sabando.  Lopez, a free market analyst and commentator, faces a warrant for speculating about Correa de-dollarizing Ecuador’s economy.  Read FreeMarketeros’ Correa Calls for Arrest of Journalist and CATO’s Freedom of Speech Under Attack in Ecuador

Ms. Garrigo’s performance in 60 Minutes may be steering public opinion in the direction of Ecuador being little David, deserving a $27 billion windfall from Goliath Chevron, and actually aiding environmentalist NGOs to satire the oil giant.  Read Chevron Lawyer Stumbles in 60 Minutes Interview over Ecuador Oil Contamination

Americas Summit: Two Views

by Silvia Santacruz on April 21, 2009 · 1 comment

in International, Politics as Usual, Trade

Abajo! (“Down!”) was the response given by the friendly, bronzed-skinned middle-aged Cuban man who chatted with my husband and me over Cuban coffee on Calle Ocho, downtown Miami, when asked about Fidel Castro.  This discussion and our interaction with many other proud Cuban Americans occurred during a recent visit to Miami, just prior to the Fifth Summit of the Americas.

His sentiment against the 50-year-old communist dictatorship is the tenor among many Cubans living in Florida who disapprove of the Castro brothers’ administration.  It is but one example of how the American media choose to focus on President Obama’s conciliatory approach to the region [especially Cuba].  Meanwhile, Latin American newspapers are praising Obama and hoping for a hemispheric alliance.

“If the United States wants, it has the chance to write a new chapter in history, not of interference, but of cooperation, building things with the countries of Latin America and the Caribbean,” asserted Brazilian President Lula da Silva, as reported in the Bogota, Colombia-based El Tiempo newspaper.

On the other hand, WSJ Mary Anastasia O’Grady authored a column yesterday titled Summit of Americas: A Missed Opportunity.

“Mr. Obama had to know that the meeting [the Summit] is used by the region’s politicians to rally the base back home by showing that they can put Uncle Sam in his place.  Realizing this, the American president might have arrived at the Port of Spain prepared to return their volley.  They have, after all, tolerated and even encouraged for decades one of the most repressive regimes of the 20th century.  In recent years, that repression has spread from Cuba to Venezuela, and today millions of Latin Americans live under tyranny.  As the leader of the free world, Mr. Obama had the duty to speak out for these voiceless souls. In this he failed.”

Thus, there are two views of the fifth Americas Summit.  The one reported in the region describes a successful Summit with an open door to do business, while the American view, when not praising the president’s efforts to be liked, questions Obama for not defending his nation’s main principle: freedom.

One positive outcome from this Summit is that the region got Obama’s attention early on and his administration is currently reviewing the Colombia trade agreement, a huge leap from his prior campaign statements to his organized labor supporters.  Finalizing this agreement would bolster a strong U.S. ally in a region where anti-Americanism is on the rise.  Read WSJ’s New Movement on Colombia Trade Pact

Tech is Key in Ideas Battle

by Silvia Santacruz on April 16, 2009

in International, Nanny State, Tech & Telecom

Earlier today, Competitive Enterprise Institute President Fred Smith delivered an informative but lively, entertaining speech about the role of NGOs.  The speech was delivered at the Washington-based Atlas Economic Research Foundation, an umbrella organization that sponsors the creation of free-market NGOs worldwide.

Smith acknowledged that the libertarian movement, although weaker than its opponents, is gaining ground through the Internet, online video sharing and other peer-to-peer technologies.  The latest example of the successful usage of such technologies is yesterday’s landmark Tea Party protests, a spontaneous action on Tax Day led by regular American citizens.  CEI housed a supply of one million tea bags originally meant to be dumped at the White House, but a lack of adequate permission to legally make the delivery prevented the initiative.  Read 1,000,000 Tea Bags Find a Home

CEI’s president also recommended that the private sector end the mea culpa and allow libertarian think tanks to be a friendly critic of their policies.  “They spend $1 trillion trying to communicate with Joe and John citizens.  But businesses spend nothing defending businesses.  It is depressing how naïve the business community is with all their wisdom,” he asserted.

Other speakers at the April installment of Atlas’ International Thursday were Aleksandar Novakovic reporting on the rise of Liberty Camps in Slovenia, Feng Xingyuan of the Cathay Institute for Public Affairs and Marcos Victoria of the Argentinean Consultcom S.A.

Ironic Snowfall for Resource-Rich Greenies

by Silvia Santacruz on March 2, 2009 · 1 comment

in Energy, Environment, Global Warming, Natural Resources

Environmentalists characterize themselves as petite Davids battling gargantuan corporate Goliaths in order to grab media attention.  But hundreds of green activists demonstrated today to raise awareness of global warming and against coal production in front of the Capital Power Plant in southeast Washington D.C.  The group had plenty of resources ranging from a raised stage with microphones, to trucks loaded with food and coffee, to green plastic helmets, all the way down to fluorescent caps and fancy colored anti-industry signs.

We, the counter protesters, were comprised about 25 to 30 Davids.  Participants hailed from the Competitive Enterprise Institute (CEI)—the event organizers—as well as the producers of the film Not Evil Just Wrong, the National Mining Association (NMA), American for Prosperity (AFP), the National Center for Public Policy Research, Conservative Caucus and others.  All of us proudly held our no-frills signs celebrating coal, highlighting its importance to electricity generation and the nation’s economy.

Despite the disparity between the number of anti-coal demonstrators and the “Celebrate Coal” participants, the weather proved to be a major ally: the nation’s capital was anything but warm today, making the global warming argument sound absurd.  In fact, Americans needed a lot of affordable coal-generated electricity today to heat their homes.

One of my favorites images of today’s dual protest (see picture above) was a Greenpeace activist seen cleaning snow from the top of his solar-powered truck with a metal sign that read, “Stop Global Warming Now”.  One of my colleagues couldn’t resist and asked, “How is that global warming sign working with cleaning out the snow?”

The greenie was too ashamed to continue, and left.

Nobody Messes with The Dow

by Silvia Santacruz on February 25, 2009

in Economy, Energy, Stimulus to Nowhere

Last night a charismatic President Obama delivered a forceful speech to a joint session of Congress, promising that his plan “will rebuild, will recover, and make the United States stronger than before.” However, there was little buy-in from investors, who remain skeptical about his plan’s effectiveness in stimulating the economy. The Dow Jones Industrial average fell 80.05, or 1.9 percent, the Standard & Poor’s 500 index lost 8.05 point, or 1.07 percent, and the Nasdaq Composite Index also declined, 16.40 points or 1.14 percent according to a Reuters report.

Investors, it seems, are voting with their feet and disapprove of the manner in which the economy is being handled. Concerned investors are also seeking safe haven assets including precious metals like gold. Not only do they want to pour their money into gold futures on the commodity exchanges, but some are willing to incur the expenses and trouble of physically taking the precious metal into their possession, reveals the WSJ article Worried Investors Want Gold on Hand

Tony Klancic, an account executive at Lind-Waldock, a Chicago commodities brokerage, says he has been taking calls since September from individual investors wanting to buy physical gold. These are real people in rural America with money under the mattress, and wealthy individuals coming to the futures market strictly intending to take delivery, Mr. Klancic said.

This brings to mind President Obama’s sound bite “Nobody messes with Joe,” uttered last night when describing Vice President Joe Biden’s forthcoming oversight of stimulus package spending. However, it might have been more apropos to say “Nobody messes with the Dow,” since the spiraling index is a direct reflection of investors’ trust – or distrust – of the whole stimulus scheme.

Gold is King Among Investors

by Silvia Santacruz on February 20, 2009 · 1 comment

in Economy, Energy, International, Odds & Ends, Stimulus to Nowhere

Gold prices are skyrocketing—recently closing at over $1,000 an ounce, the highest in almost a year—while inflation fears continue rising and the dollar weakens.  This is the news that the media is echoing, quoting several analysts.  Many are blaming President Obama’s stimulus package for amplifying investors’ fears that his spending plan will only push the country deeper into recession.

Analysts’ forecasts, nonetheless, are a mixed bag.  Some analysts are calling the gold rush a bubble that can burst, as the dot-com and housing bubbles did, while others believe it can continue upward.

“Currencies are losing value and holders of currencies are losing confidence.  Gold may break through $1,000 and not look back,” says Ron Goodis, retail trading director at Equidex Brokerage Group Inc. in Closter, New Jersey, according to Bloomberg.  Read Gold Tops $1,000, Highest Since March, as Global Equities Slide

On the other hand, Przemyslaw Radomski, editor of Sunshine Profits, warns that Precious Metals and Corresponding Stocks may Fall in a Few Days.

“Since my previous essay on market timing was posted [Feb. 11], gold gained over $100 and silver gained over $2. These levels are substantially higher than when I suggested getting back on the long side of the precious metals market.  This rally has taken gold almost $200 higher within one month, so it is natural for one to expect at least a modest pullback from here,” Radomski said.

But as everything in economics, gold prices in a free market follow the forces of supply and demand.

“In a free market, increasing demand and rising prices provide a significant incentive for producers to increase the supply of an item.  And that’s usually how it works.  But that’s not what is happening in the gold market.  Demand is certainly increasing.  According to the United States Geological Survey, the demand for gold reached 1,133 tons in 2008, an 18% increase from the previous year.  In dollar terms, this represented a 51% increase to an all-time record $31.8 billion, “writes Jon Herring in his article Peak Oil… What About Peak Gold?

Meanwhile, the global supply is limited.  The industry has only discovered one significant deposit in the last 15 years: that of Aurelian Resources—now owned by Kinross Gold Corporation (NYSE:KGC, TSX:K)—with its Fruta del Norte gold-silver discovery in the Cordillera del Condor, in Ecuador, also known as the “gold dinosaur.”  If investors deem gold to be king in this environment, then Ecuador may provide them with their T. Rex.

Skyrocketing gold prices have also ignited the stock values of the four largest gold producers at the time of today’s 4:00 p.m. close.  Newmont Mining Corporation (NYSE:NEM) gained 7.21%, Anglo Gold Ashanti Ltd. (NYSE:AU) was up 6.36%, Barrick Gold Corporation (NYSE:ABX) earned 1.23%, and Gold Fields Ltd. (NYSE:GFI), up 4.46%.

Another factor that can influence gold prices is that most new worldwide discoveries are made by junior exploration companies—those with funded through equity financing, sometimes with less than $50 million—that combined have poured $12.6 billion into global exploration activities in 2008, according to the Metals Economic Group.  42% of this investment was focused on gold discoveries.

Inflation Fears Propel Gold Prices

by Silvia Santacruz on February 19, 2009

in Economy, Energy, Stimulus to Nowhere

As the Dow Jones Industrial Average approached record lows, gold prices shined on a seven-month peak, on Tuesday.  Details of President Obama’s new stimulus package catapulted inflation fears causing investors to hurriedly divest out of their portfolios, dumping company stocks and demanding more gold – considered a safe haven asset – according to Bloomberg.

Gold rose for a second straight day on speculation the recession will deepen, boosting the appeal of the precious metal as a haven asset.

In fact, from some investors’ perspective, the stimulus package won’t help the American recession.  As AP reported in its article Gold Prices Soar as Dow Takes a Dive:

If it stimulates anything, it’s going to stimulate gold, said Peter Schiff, president of Euro Pacific Capital, of the President’s plan.  As the government pumps billions of dollars into the financial system, analysts expect inflationary pressures to resurface.  The more inflation there is, the more attractive gold is, Schiff said.  Ultimately, you’re going to see much bigger upward moves in gold when the dollar starts to collapse.

Besides gold traders, or jewelry owners, gold producers are on the winning team, since their market capitalizations are valued according to the size of their deposits (million of ounces) multiplied by the current metal prices.  Gold mining companies, then, may flourish in 2009 while the Dow Jones continues to dive.

Inflation may be an unintended consequence of the President’s spending-focused plan, but investors’ opportunity to invest in the mining sector may just be a silver – or gold – lining in an otherwise cloudy setting.

Flawed Plan Relies on Consumer Spending

by Silvia Santacruz on February 17, 2009 · 1 comment

in Bailout Watch, Economy, Stimulus to Nowhere

After President Obama signs the controversial stimulus plan, which will add on average $8 per week to most paychecks, his administration will have to cross their fingers hoping Americans will spend it all, as they normally tend to do.

According to the Wall Street Journal article Plan Tries Slow, Steady Stimulus to Revive Spending the idea is to let money trickle out to consumers so it feels like a permanent income boost.  When the government sent lump-sum checks for the 2001 and 2008 stimulus packages, Americans stashed most of the cash in savings or paid off debt.  Neither of those actions fulfills the goals of a stimulus intended to offset weak consumer spending.

Coincidentally, last week, I had a brief conversation with “Sarah”, our office building concierge, and discussed how we spend our coffee shop gift certificates.  While I told her I’m very conservative in buying one cup of coffee at the time, she says she spends the entire card quickly buying all types of elaborated beverages, because she feels “it’s free money.”  Thus, the Obama administration is hoping for more Sarahs and less Silvias in the economy to make their plan work.

It is true.  One of the biggest components of the country’s GDP is consumer spending, but part of the current financial debacle is precisely caused by irresponsible spending from some American families who purchased homes for $500,000 despite joint incomes of $40,000.  So, I’d be cautious in trusting the spending factor to boost the economy.  I liked Obama’s original $1 trillion infrastructure plan, which was going to create jobs at home instead of overseas, where the clothing that Americans buy is made – especially from China.  At the time this infrastructure-heavy plan was discussed, mining analysts told me that a boon for U.S. jobs would certainly be a consequence.

Nonetheless, this spending experiment is being launched in the midst of a crisis, with the highest level of unemployment rate of 7.6% in January, 2.7 points more than a year earlier, the largest annual increase rate since 1975, plus fears that the economy will worsen before it gets better, as President Obama himself previously stated.

The current plan focuses heavily on social spending benefiting the unemployed, which will only revitalize the underground or cash economy.  Unlike the original plan, which stressed more infrastructure investment, this new plan deviates from spending that could have a clear income multiplying effect and instead invests in nonproductive sectors of the economy.  And it counts too much on Americans spending their extra money, since some will save more.

Ecuador’s Mining Law and the 70% WFT

by Silvia Santacruz on January 9, 2009 · 1 comment

in Energy, International, Regulation, Trade

Ecuador, the only Latin American country that lacks large-scale mining operations, is passing a new mining law that will lift a six-month ban on mining operations. However, a feared windfall tax (WFT) on mining profits — one of the biggest concerns among international investors — is not an issue that is open for debate in the Andean nation. As of this writing, it looks as though applying a WFT on mining profits will be a done deal.

Chatting with Maria Paula Romo, former VP of the mini Congress, when visiting Ecuador last March 08.

Chatting with Maria Paula Romo, former VP of the mini
Congress, when visiting Ecuador last March 08.

Hoping to influence the interim Congresillo’s legislators, who will be discussing the law in a second debate next week, I recently published an Op-Ed column on the WFT in the Quito-based El Comercio, the nation’s most politically important newspaper. In the piece, I talk about how the U.S. President-elect is backpedaling from his plan to establish a WFT on oil company profits due to the economic downturn:

The United States president-elect, Barack Obama, dismissed his proposal to impose a 20 percent windfall profits tax (WFT) on oil companies in a move to adjust his campaign promises to the global economic recession. His decision was made despite firms such as Exxon Mobil having recorded historic profits in Q3 2008. Ecuador, however, applies not only a WFT to the oil industry in a much higher percentage -70 percent – but will extend it to mining companies if the law that the National Assembly is currently analyzing is approved without amendments.

Read the complete translated Op-Ed

Go to the original Op-Ed - Spanish only –

For many nations of the world, the days of wine and roses have been replaced by an economic downturn. Oil and banana export-dependent Ecuador is no exception. Siphoning resources away from an industry that creates jobs, develops infrastructure and invests in corporate social responsibility programs is not a good idea during an economic downturn.

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