www.gulf-daily-news.com Vol XXV   NO. 361      Sunday      16 March 2003

NICOSIA: Crude production from the Opec soared by 8.6 per cent or 2.217 million barrels a day in February to 27.88m bpd, the Middle East Economic Survey (Mees) reported.

With Venezuela resuming output and a significant surge from Gulf states, output by the Opec 10 without Iraq climbed 10.1pc to 25.45m bpd last month from 23.113m bpd in January, the industry newsletter says.

Opec 10 output was 950,000 bpd above the ceiling of 24.5m bpd effective since February 1, Mees notes.

Iraqi production fell 120,000 bpd as exports to Turkey by truck were suspended, Indonesia dropped 60,000 bpd and Nigeria held steady at 2.15m bpd.

The biggest increases were seen in Venezuela which boosted output last month by 880,000 bpd and Saudi Arabia up 800,000 bpd.

Algerian production hit a new all-time high of 1.15m bpd which was expected to rise to 1.25m bpd this month, the Cyprus-based specialists said.

"Saudi Arabia, Kuwait and the UAE were expected to continue ramping up production through March with production set to rise to around 9.4m bpd, 2.4m bpd and 2.3m bpd respectively by the end of this month," Mees says.

World oil prices slipped for the second consecutive day on Friday as traders speculated that a quick, successful US-led war in Iraq would lead to a steep fall in prices.

New York's reference light sweet crude contract for April delivery skidded 63 cents to $35.38 a barrel, after having plunged by $1.82 a day earlier.

The price of benchmark Brent North Sea crude for April delivery fell by $1.05 dollars to $31.38 a barrel. The contract had already lost $1.48 on Thursday.

From the March 7, 2003 print edition Jim Freer  

For more than a year, watchful eyes in the South Florida banking community have wondered whether the problems of Terremark Worldwide (Amex: TWW) could spill over on its primary lender, Ocean Bank.

Executives of Ocean Bank, the largest commercial bank based in South Florida, did not return phone calls this week.

But on Monday, the Federal Deposit Insurance Corp. released data that indicates an answer of "not as of Dec. 31."

That data is in Ocean Bank's year-end Call Report to the FDIC, the most-detailed information available on the privately held bank whose owners are based in Venezuela.

The report shows that Ocean Bank continues to have an alarmingly high number of nonperforming or problem loans, but that income from other loans has enabled the bank to continue to post solid profits.

Ocean Bank's major business is commercial real estate lending to clients including developers of offices and condominiums in South Florida.

The bank's commercial loan clients include Miami-based Terremark, owner/operator of the NAP of the Americas, the world's fifth tier-1 network access point.

The NAP is a high-speed electronic interchange where data is transferred from one major carrier to another. It occupies the second floor of the Technology Center of the Americas building under a 20-year lease. Its business has suffered in the telecom industry's meltdown.

Ocean Bank's 2002 net income was $45.5 million, for a 1.1 percent return on year-end assets of $4.1 billion. That gave the bank an ROA above the 1 percent that is the banking industry's standard for strong profits.

Ocean opened in December 1982 and has reported a profit for each of the 20 years it has been in business.

Seeds of a future income dip

But the FDIC's new report on Ocean Bank included some numbers that often indicate the prospect of a future drop in income for a bank.

The bank closed 2002 with $98.4 million in loans that are nonperforming – those that are 90 days more delinquent and those that no longer accrue interest.

Ocean Bank also had $1.1 million in real estate owned (REO) property. That's basically properties taken in foreclosure.

The $99.5 million total gave Ocean Bank a 2.4 percent ratio on nonperforming loans and REO to total assets.

The national average for banks and savings & loans was 0.9 percent on Dec. 31, according to the FDIC.

Ocean Bank's ratio was slightly higher than 1 percent for several quarters until the quarter ended June 30 – when it rose above 2 percent.

Of Ocean Bank's nonperforming loans at the end of last year, $97.7 million were in nonaccrual status. That category traditionally has the highest prospects for charge-offs or writedowns.

And a look at Ocean Bank's data, which includes a level of reserves that is strong by most standards, leads to questions about whether and when the bank might have to take a hit on problem loans and about how such a step could impact its balance sheet.

Linda Townsend, senior regulator for South Florida for the state government agency that is the primary regulator of Ocean Bank, said she and her staff are monitoring the bank, but not to any greater extent than they watch other banks with large amounts of nonperforming loans.

"Ocean Bank has shown a history of being very prudent in adding to its reserves and, when necessary in charging off loans," said Townsend, bureau chief for South Florida in the Florida Department of Financial Services' Bureau of Financial Institutions.

Townsend said Ocean Bank is among South Florida banks whose problem loans have grown due to the economic slump that is impacting real estate markets and due to problems in Latin America that are impacting many businesses in South Florida.

"There are indications that they [Ocean Bank] are managing it well," she said.

Townsend said her agency is not permitted to identify any nonperforming loans at Ocean Bank or other banks.

Ocean Bank's Call Report shows that during 2002 it added $47 million to its reserves for potential loan losses.

Reserve ratio draws attention

The bank had $84.9 million in reserves at year-end for a ratio of 90 percent to its nonperforming loans.

That ratio is high, considering that many banks whose problem loans have been growing have reserve ratios in the 50 percent to 60 percent range.

Townsend said she cannot comment on reserve ratios of particular banks.

"Speaking generally, you would be concerned about a bank even with a high percentage of reserves if a lot of the nonperformers are in auto loans," she said.

In Ocean Bank's case, she said, the portfolio is heavily laden with real estate, which regulators generally regard as strong collateral.

Research, including a review of Ocean Bank's Web site, shows no instances in which the bank has publicly identified borrowers for any of its loans in non-performing status.

But bankers and other business people are monitoring Ocean Bank's loans to Terremark, which operates at the Technology Center with the NAP.

In a filing with the SEC on Feb. 14, Terremark said it is negotiating a restructuring of its

$44 million in debt owed to Ocean Bank.

Terremark said it owes $1 million in unpaid interest on that credit.

In the filing, Terremark said it had obtained a letter from Ocean Bank waiving any current default under its credit agreement resulting from past due interest or from $22.6 million in liens that creditors have on the TECOTA building.

The waiver from Ocean Bank is through March 31.

That deadline is raising questions about whether and when the bank might take charges on its Terremark loan or on other problem loans.

Townsend said her agency has no indications that any such actions are pending.

Ocean Bank's Call Report for Dec. 31 shows $50.1 million in commercial and industrial loans that are in nonaccrual status and

$29.3 million in construction and land development loans in that status.

Precursor to a writedown?

If a bank charges off or writes down a large total of nonaccrual loans, it subtracts the amount from its loan reserves.

In quarters when a bank takes such action, it usually adds money to those reserves – often under orders from regulators.

Money a bank adds to reserves is reported as an expense, which reduces a quarter's income and in some cases can lead to a quarterly loss.

Ken Thomas, a Miami banking consultant, said he does not know which of Ocean Bank's loans are in nonaccrual status.

But he said that when large real estate loans are written down, a bank usually gains recovery on a large amount within several quarters, often through sales of property.

Thus, he said, Ocean Bank's current level of reserves might enable it to cover a large share of any writedowns.

Thomas said he feels that Ocean Bank has "strong management, and a good track record including managing of their portfolio."

At the end of last year, Ocean Bank had $327 million in Tier I capital, a figure similar to equity. Its ratio of that capital to assets was 7.92 percent – almost twice what regulators require for adequate capitalization.

But Ocean Bank's nonperforming loans are a main reason the bank is rated only in the high "adequate" range by Bauer Financial of Coral Gables.

For the quarter ended Sept. 30, Ocean Bank has a three-star rating from Bauer Financial, which rates banks on a one to five scale, with five being the highest, based on factors that include profitability, capital and loan delinquencies.

E-mail contributing writer Jim Freer at jimfreer@aol.com.

www.brazzil.com March 2003

What would a UK Social Services department make of all this? I guess all the children would be immediately rounded up and shunted off into care, and there would be calls for a Royal Commission to be set up…but we are in Brazil. According to Unicef, there are from seven to eight million kids in worse shape, living or working on the streets.

Mark Ereira

www.guardian.co.uk Sunday March 16, 2003 1:20 AM

CARACAS, Venezuela (AP) - Venezuela's crude oil production has surpassed 3 million barrels a day - approaching levels that made it the world's fifth-largest exporter before a crippling national strike, the state oil monopoly's president said Saturday.

But government officials say work still needs to be done before the industry fully recovers from the failed two-month walkout aimed at forcing President Hugo Chavez to resign or call early elections.

The strike, which ended last month, was strongest in the oil industry, the source of half of government revenues and 80 percent of export earnings.

``The task now that we have reached that level is to maintain and stabilize production,'' said Ali Rodriguez, president of Petroleos de Venezuela S.A.

Oil executives fired for participating in the strike dispute the government figures, saying daily production is at 2.1 million barrels.

Before the strike, the South American country was a main exporter to the United States, producing 3.2 million barrels a day. Oil production dropped to 200,000 barrels a day at the height of the walkout, costing the country $6 billion. Several refineries also were damaged by being shut down for so long.

Energy and Mines Minister Rafael Ramirez said Friday that Venezuela reached an agreement with the Organization of Petroleum Exporting Countries allowing it to produce above its crude oil output quota of 2.8 million barrels a day to make up for the lost revenue. Venezuela is an OPEC member.

www.nytimes.com By LARRY ROHTER

BRASÍLIA, March 13 — Attacking one of Brazil's most shameful but deeply rooted social problems, the country's new left-wing government has announced a sweeping initiative intended to eliminate slave labor.

The plan calls for stepping up police raids on ranches, logging operations and mines that lure poor and often illiterate peasants into servitude, as well as heavier fines and criminal penalties for offenders.

But the government said it would also seek passage of a constitutional amendment that would allow the seizure of businesses and properties found to employ slave labor and to turn those assets over to the former slaves to run.

"Much more than a law, we need determination and the political will of the state to eradicate slave labor in our country," President Luiz Inácio Lula da Silva, a former labor leader, said in announcing the project on Tuesday. "Only in this way can we earn the right to walk in the world with head held high."

The Roman Catholic Church estimates that at any given moment at least 25,000 Brazilian workers are held in debt slavery, most of them in remote areas of the Amazon jungle. Typically, recruiters go to poor rural areas and guarantee peasants good wages and benefits, but renege on those pledges once the laborer has arrived at the jungle workplace and is guarded by gunmen.

"Slavery remains a severe social and economic problem in this country, the result of pitiful people without food or land being duped by false promises and of government policies that have not made the eradication of servitude a priority," said Eduardo Varandas, a federal prosecutor who has brought slavery charges against several ranchers. "The worker ends up stuck with financial obligations he can't ever repay and becomes a slave of his own debt."

Brazil was the last country in the Western Hemisphere to abolish chattel slavery, in 1888, and forced labor continued to be common in rural areas in modern times. But government authorities, labor unions and antislavery groups agree that the problem has intensified in recent years as a result of growing economic pressure to develop the Amazon's vast agricultural frontier.

In 1995, at the beginning of his first term of office, Mr. da Silva's predecessor, Fernando Henrique Cardoso, announced "a national effort to truly comply with the law" that had abolished slavery here. His government created an enforcement squad that was empowered to punish those who recruit Brazilians into slavery, and between 1995 and 2002 it freed more than 5,000 enslaved workers.

But government inspectors complained that their efforts were hampered by weaknesses in Brazil's legal code. While they have the authority to force employers to pay back wages to enslaved workers, criminal charges have to be referred to the court system, where they are often ignored by apathetic prosecutors or shelved by judges sympathetic to business interests.

In some cases, inspectors have raided the same ranch many times, freeing workers, only to return and find that others have been enslaved. The government intends to discourage that behavior by publishing a list of offenders, who will be denied access to any form of government loans, credits, subsidies or tax benefits, and by prohibiting those found guilty from appealing their convictions while out on bail.

"This is not to combat slavery, because that has already been tried," Nilmário Miranda, the government's human rights secretary, told reporters here. "What we are going to do is do away with slave labor by the end of this government's term of office," in 2006.

The program also calls for a sharp increase in the number of inspectors. The Ministry of Labor says that this year it will hire and train more than 650 new inspectors, who will have good salaries and the untrammeled authority to enforce the law.

In the past, "people have known that they can bribe a labor inspector or a police officer, or a mayor or alderman or member of Congress," Mr. da Silva said. "I want it to be known that those days are over."