December 27th, 2010

Economics, & Finance

Banks have 180 days to divest their holdings in financial groups

A correction to a "material error" in the Organic Law for the Financial System was published in the Official Gazette dated December 21. The law forces banks to carry out a financial corporate divestiture, that is, to reduce the structure that currently allows them to gather a bank, an insurance company and a brokerage firm under one corporation. Although this prohibition had already been included in the Law on Banking Sector Institutions, passed last Tuesday, bankers were confident that the Organic Law, as a fundamental law, is more important than a regular law, and as a result, financial groups would remain unaffected. (El Universal, 12-27-2010; http://english.eluniversal.com/2010/12/27/en_eco_art_banks-have-180-days_23A4890573.shtml)

Commodities

PDVSA production down amidst increasing debt

The Venezuelan oil industry is past its prime. State-run oil conglomerate Petróleos de Venezuela faces a bleak outlook, amidst a number of shortcomings in core operations, increasing debt and significant financial commitments. In numbers, oil production and oil shipments abroad continue to decline -a trend that began about two years ago. But other secondary sources such as the Organization of Petroleum Exporting Countries (OPEC) reported that Venezuela's production of crude oil is 2.25 million barrels a day. According to OPEC statistics, this volume involves a year-on-year decline of 2.9 percent compared to 2.31 million barrels per day produced by PDVSA in November 2009. In November 2008, before the OPEC adjusted quotas, the Organization reported that Venezuela produced 2.3 million barrels a day. (El Universal, 12-27-2010; http://english.eluniversal.com/2010/12/27/en_eco_esp_pdvsa-production-dow_27A4901451.shtml)

Venezuelan crude oil sales to the US down by 12 percent

The steady decline in crude oil shipments from Venezuela to the US worsened over the week that ended on December 17, according to data provided by the Energy Information Administration, the statistical arm of the Department of Energy in Washington. Weekly statistics show that during the week of 13-17 December, the average US daily crude oil imports from Venezuela hit 758,000 barrels per day. This means a decline of 103,000 barrels per day, or 12 percent, compared to 6-10 December, when shipments to the United States averaged 861,000 bpd. Including the average exports to the US over the past 30 days, 799,000 bpd represent the lowest average weekly oil sales since July this year, when oil sales to the US were about 733,000 barrels per day. (El Universal, 12-27-2010; http://english.eluniversal.com/2010/12/27/en_eco_esp_venezuelan-crude-oil_27A4902893.shtml)

Logistics & Transport

Venezuela – Illegal narcotics onboard ships

The International Group supports efforts by all countries to prevent ships being used to smuggle illegal narcotics. However, the International Group has become increasingly concerned with what appears to be the indiscriminate and disproportionate application of criminal law in Venezuela in cases where ships have been targeted by drug smugglers for the carriage of illegal narcotics…We accordingly wish to draw members’ attention to certain risks associated with trading their ships to Venezuela. (The Standard, 12-22-2010; http://www.standard-club.com/docs/Bermudacirc22-12-10.pdf)

Politics

A democratic test for Venezuela

A new Venezuelan congress is due to take office in January in which opposition representation will rise from virtually zero to nearly 40 percent. A presidential election is scheduled in two years, and with the country suffering from one of the worst economic crises and highest murder rates in the world, the chances that Hugo Chavez would win a free and fair vote are not looking good. (The Washington Post, 12-20-2010; http://www.washingtonpost.com/wp-dyn/content/article/2010/12/19/AR2010121903018.html)

Venezuela Parliament pushes through host of new laws

Venezuela's outgoing parliament has pushed through a raft of new laws, including giving President Hugo Chavez decree powers for 18 months, outraging opponents who accuse him of ushering in Cuban-style Communism. Here is some of the most important legislation that has been passed ahead of a new National Assembly being sworn in on January 5 in South America's top oil producer, plus other measures that Chavez could take using his fast-track decree powers. (Reuters, 12-23-2010; http://www.reuters.com/article/idUSN1627424020101223)

Three more laws to close this year in Venezuela

The Enabling Law (Ley Habilitante), granting extraordinary legislative powers to the President for 18 months, the Reform of the Organic Law on Science, Technology and Innovation and the Decree extending the Bar against Dismissals until December 2011. Venezuela parliament pushes through host of new laws. (Laws attached)

Venezuela's Hugo Chavez uses new powers for flood fund

Venezuelan President Hugo Chavez has made his first use of new decree powers to create a fund for reconstruction after recent flooding. Mr. Chavez said the first part of the initial $2.3bn (£1.5bn) fund would be used to build houses in the western state of Zulia. He said the new powers were needed to respond to the disaster that left more than 130,000 people homeless. But critics say they will allow him to repress dissent. (BBC News, 12-27-2010; http://www.bbc.co.uk/news/world-latin-america-12082993)

Venezuela, Peru strengthen bilateral relationship

The governments of Venezuela and Peru agreed to find mechanisms to strengthen their bilateral relationship and increase commerce, informed on Tuesday Peruvian Foreign Minister Jose Garcia Belaunde after a meeting with his Venezuelan counterpart, Nicolas Maduro. “We are working hard to guarantee that commerce between the two countries, which has been affected by the international economic crisis, improves,” Belaunde stated. The Peruvian Foreign Minister expressed they may use the Unified System for Regional Compensation (SUCRE) -virtual currency implemented by the Bolivarian Alliance for the Peoples of our America, ALBA- as trade currency. (AVN, 12-22-2010; http://www.avn.info.ve/node/35051)

This is our last 2010 bulletin, and we will resume activity
on January 10, 2011. 

We wish you a new year filled with health, wisdom and prosperity.

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group

December 21th, 2010

Economics & Finance

Venezuelan bonds drop on report government may owe $8 billion

Venezuelan dollar bonds fell the most in three weeks after the New York Post said the country may have to pay as much as $8 billion to holders of securities issued by a state-run bank. The yield on Venezuela’s benchmark 9.25 percent bonds maturing in 2027 rose 19 basis points, or 0.19 percentage point, to 13.12 percent at 1:06 p.m. in New York, according to JPMorgan Chase & Co. Yields surged as much as 50 basis points earlier today. The bond’s price fell 1 cent on the dollar to 74 cents. (Bloomberg, 12-20-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aktML6dYwko8)

Barclays expects Venezuela to devalue the Bolivar against the US$ in 2011

Although President Hugo Chavez announced a devaluation of Venezuela's official exchange rate last January to strengthen the national economy, curb unnecessary imports and stimulate exports, the situation 11 months later shows that non-oil exports are still down and dependence on imports has increased to the extent that investment banks and economic researchers see a new devaluation of the bolívar in early 2011 as the only solution. (VHeadline, 12-16-2010; http://www.vheadline.com/readnews.asp?id=99533)

Fall in tax collection requires the executive to reform laws

The difficulties in the collection of Income Tax and Value Added Tax reflect the behavior of the country's economic activity between 2009 and 2010. The latest data on tax revenues provided by Seniat indicates a total of 23.634 million bolivars in revenue between January and October 2010, an increase of 6.15% in nominal terms. However, the revenue from the profits of companies in the country recorded a fall in real terms of 17.2% before the ravages of inflation. Likewise, the economic downturn has prevented an increase of the profits of the various economic sectors and therefore a fall of tax income for the Treasury. (El Mundo, 12-20-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=40947)

Towards state socialismOwners of property, large or small, sleep uneasily in Venezuela these days. After the opposition narrowly won a majority of the vote in a legislative election in September, Hugo Chávez, the country’s leftist president, has been on a nationalization spree, seizing everything from steel companies and bottle makers to housing schemes. By the government’s own reckoning, it has confiscated some 3m hectares (7.4m acres) of farmland, and plans to seize another 450,000 hectares next year. Although the 1999 constitution guarantees property rights, successive changes to the land law have given the government the right to seize any farm it takes a fancy to, in most cases with little or no compensation. Industrial and commercial firms have fared no better. According to the employers’ organization, Fedecamaras, since Mr. Chávez became president in 1999 almost 400 companies have been nationalized, the vast majority in the past two years. The Venezuelan-American Chamber of Commerce says that compensation was paid to the owners of only nine out of the 44 of its member-firms that have been taken over this year. The constitution states that no expropriation can take place without a final verdict from the courts and fair compensation. In practice, a stroke of the president’s pen is all that is required. (The Economist, http://www.economist.com/node/17527250/print)

Chavez orders takeover of two construction suppliers

President Hugo Chavez on Sunday ordered the expropriation of two Venezuelan companies that produce construction materials. Appearing on his weekly television and radio program, Chavez signed decrees for the "forced acquisition" of Sanitarios Maracay and Aluminio de Venezuela, or Alven. Chavez said both companies had been paralyzed and the government will now use them to boost production of materials from aluminum sheeting to bathroom supplies. Chavez has seized a growing list of private companies while pledging to turn Venezuela into a socialist state. (AP, 12-19-2010; http://finance.yahoo.com/news/Chavez-orders-takeover-of-2-apf-1589638101.html?x=0&.v=1)

Commodities

Venezuela oil exports fell 9.8% in November from month earlier

Venezuela’s net exports of crude and refined oil products in November fell 9.8 percent from the previous month to 2.03 million barrels a day, according to Inspectorate Venezuela SCS, a contractor to Venezuela’s Energy and Petroleum Ministry. Net shipments declined from 2.25 million barrels a day in October, according to shipping records sent to Bloomberg by e- mail. In November 2009, exports were 2.31 million barrels. Venezuela’s production of crude rose 2.2 percent to 2.8 million barrels a day in October from 2.74 million barrels a day in September, Inspectorate said. (Bloomberg, 12-20-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a5NoDAdwfpPA)

Falling domestic aluminum output

The arrival of a vessel with raw materials such as fluoride and cryolite has extended the operations of the Venezuelan aluminum company CVG Alcasa at least until February, but disinvestment remains a latent threat to its operation. The state-run industry is operating above (200 cells) the minimum nominal molten steel capacity of 150 cells, but union representatives have warned that sinking production in 2010 is significant. Venezuela's aluminum output hit 114,000 tons in 2009. However, it could reach 90,000 tons this year, a 21 percent drop compared to 2009. (El Universal, 12-20-2010; http://english.eluniversal.com/2010/12/20/en_eco_esp_falling-domestic-alu_20A4878053.shtml)

Matesi restarts operations

Matesi, producer of briquettes in Ciudad Guayana, resumed operations last Friday after almost a year and a half. The company was part of the assets held in the country by the Argentine-Italian group Techint until May last year when President Hugo Chavez announced its nationalization. In the framework of the Socialist Guyana 2009-2019 Plan, the National Development Fund (Fonden) is to invest approximately $ 14 million in services, maintenance of equipment and supplies. The recovery plan at the plant includes two phases: the first, recovery and auxiliary systems of reactor number one. The second will consist of the rehabilitation of reactor number two. (El Mundo, 12-20-2010; www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=18&Id_Noticia=40969)

Logistics & Transport

No opening date of scales in the port

Bulk sector activities have developed normally despite the lack of a date to commission the new weighing scales at the port of Puerto Cabello. This was announced by Julio Abreu, President of the Bulk Federation (Fetragransic) who emphasized that the failure of the Internet service last Friday affected work in the maritime terminal. Abreu said that so far he has not received any notice of Bolipuertos on the operation of the scales to complement the activities of loading and unloading in the primary zone. (Notitarde, 12-19-2010; www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1209947&idcat=9849&tipo=2)

Politics

U.S. warns of ‘consequences’ to Venezuela’s rejection of Palmer

U.S. State Department spokesman Philip J. Crowley today said “there will be consequences” to Venezuela’s decision to formally protest President Barack Obama’s nomination of diplomat Larry Palmer as the U.S. ambassador in Caracas. Without elaborating on steps the administration may take, Crowley told reporters today that an official letter of protest sent by Venezuela would have an impact on relations with the Latin American country. “We have cautioned them,” Crowley said in a briefing in Washington. “They have made their decision. In light of what has happened, we will evaluate” our next move. (Bloomberg Businessweek, 12-20-2010; www.businessweek.com/news/2010-12-20/u-s-warns-of-consequences-to-venezuela-s-rejection-of-palmer.html)

Showing his true colours                                                                                                                                                   When the opposition to Hugo Chávez’s radical leftist government won a majority of votes in a legislative election this September, its leaders hoped the result would slow Venezuela’s slide towards dictatorship. But the message Mr Chávez seems to have received is that he will have to become even more authoritarian to hold power. In recent days, the president’s allies in the outgoing congress have rushed to approve a package of laws that virtually eliminate the country’s last vestiges of checks and balances and protection for civil liberties.(The Economist, 12-21-2010, http://www.economist.com/blogs/americasview/2010/12/hugo_ch%C3%A1vezs_venezuela)

Venezuela, Ukraine set legal basis on energy, commercial cooperation

The meeting held between Venezuela´s Foreign Minister Nicolas Maduro and his Ukrainian counterpart, Kostantyn Gryschenko, will set the legal basis for cooperation in commercial and energy matters between the governments of Caracas and Kiev. The information was given by Minister Maduro during an event to install the high-level meeting, which takes place in the Venezuelan Foreign Ministry, with the attendance of ministerial delegations from the two countries. (AVN, 12-20-2010; http://www.avn.info.ve/node/34825)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

December 16th, 2010

Economics, Trade & Business

Venezuela Plans Financial Transactions Tax

Venezuela’s Finance Ministry is preparing a law to introduce a tax on financial transactions that would be enacted through decree powers requested by President Hugo Chavez. The tax, which would apply to all bank transactions, aims to head off a drop in government revenue expected next year. (Bloomberg, 12-16-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a6HG6spQKlzg)

Venezuela to increase VAT due to lower contributions from income tax and PDVSA revenues

The financial needs of the Venezuelan government have increased despite high oil prices. Therefore, it has decided to increase the Value-Added Tax rate to offset lower oil incomes and a decline in income tax collection due to the economic downturn. Last Monday, President Hugo Chávez Frías announced that the government would revise the VAT due to the state of emergency in the Venezuelan territory. He said that through the collection of taxes his administration would set up a fund to assist the population hit by rainfalls. However, before the emergency declared in several Venezuelan states due to heavy rains, the government had suggested that it required more funds for the next fiscal year. (El Universal, 12-15-2010; http://english.eluniversal.com/2010/12/15/en_eco_esp_venezuela-to-increas_15A4858611.shtml)

Venezuela Central Bank Said to Boost Sitme Bond Sales

Venezuela’s central bank plans to step up sales of dollar-denominated bonds it holds to become the main provider of foreign currency to importers next year, a government official said. Banco Central de Venezuela will sell as much as $40 million a day of government and state oil company bonds to supply the Sitme currency market for at least the first three months of the year, said the official, who asked not to be identified because he isn’t authorized to speak publicly. The government in June ordered commercial banks to sell their dollar-denominated bonds to supply Sitme. (Bloomberg, 12-14-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aHQZ7kAO5SwE)

Study to certify Coltan reserves (industrial name for columbite–tantalite) requires a $32 million investment, according to a proposal under consideration by the government. The information was part of a presentation at the Venezuelan Central University’s (UCV) School of Engineering Research Symposium at the beginning of December, with the title Mining Potential at the El Parguaza Zone, located to the west of Bolívar state. (Veneconomy, 12-16-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=24349&idc=3)

Venezuelan Urea diverted from Corn to Coca farming

It is a long way from the cornfields of Guárico, in central Venezuela, to the cocaine labs of Colombia. But Venezuelan farmers and the drug cartels are linked in a curious way -- to the detriment of the farmer. Urea, a nitrogen-rich fertilizer vital to crops from corn to tomatoes, is also used to fertilize the coca plants that provide the raw material for cocaine. A thriving black market that diverts the fertilizer from legal crops to coca has reduced agricultural production, contributing to Venezuela's increasing dependence on imported food. (Miami Herald, 12-13-2010; http://www.miamiherald.com/2010/12/13/1972175/coca-pushing-out-corn-in-a-black.html)

Mercosur discord eased by Paraguay deal on Venezuela

Latin America's Mercosur trade pact is going through a rare period of constructive cordiality after member countries reached agreements to solve two intractable problems -- discord over Venezuela's membership and an Argentine-Paraguay row over river transport that threatened to scuttle the group's next summit. Paraguayan ratification for Venezuelan membership, delayed over many years, became a near certainty after a congressional deal that had been delayed due to domestic politics. (UPI, 12-15-2010; http://www.upi.com/Science_News/Resource-Wars/2010/12/15/Mercosur-discord-eased-by-Paraguay-deal-on-Venezuela/UPI-22041292418025/)

Politics

Chavez seeks power to rule by decree for 1 year

Venezuelan President Hugo Chavez asked congress Tuesday to grant him special powers to enact laws by decree for one year, just before a new legislature takes office with a larger contingent of opposition lawmakers. The measure, which quickly received initial approval from the overwhelming majority of pro-Chavez lawmakers, would give the president the authority to bypass the National Assembly for the fourth time since he was first elected almost 12 years ago. (Miami Herald, 12-14-2010; http://www.miamiherald.com/2010/12/14/1973120/chavez-seeks-decree-powers-for.html)

How will Chavez decree rule impact Venezuela?

Venezuelan President Hugo Chavez is taking decree powers for a year in a move he says is needed to deal with disastrous floods but opponents denounce as a calculated blow to democracy. What are the possible consequences for South America's biggest oil producer and its flamboyant socialist leader two years ahead of the next presidential election? (Reuters, 12-16-2010; http://www.reuters.com/article/idUSN1515206120101216)

Amendment to telecommunications law endorsed in first session

The National Assembly (AN) passed on Wednesday in a first session the amendment to the Telecommunications Organic Law with dissenting political Podemos party voting against. According to Deputy Ismael García, for Podemos party, the reform "violates and puts in the hands of the president and of Conatel (National Telecommunications Commission) in a discretionary manner the regulation of the radio spectrum." García warned that the biggest problem in the reform is that "it is targeted at those media which are not in line with the State and government policy." (El Universal, 12-15-2010; http://english.eluniversal.com/2010/12/15/en_pol_esp_amendment-to-telecom_15A4859331.shtml)

Petroleum & Energy

Venezuelan crude oil production dropped in November 2010, compared to the same period last year. According to figures published by the OPEC, last month, Venezuela produced an average 2.2 million barrels of crude per day, down 3% from November 2009. (Veneconomy, 12-14-2010; http://www.veneconomy.com/site/index.asp?idt=24303&idc=4&NPag=2&Start=15&aaD=2010&ids=44&Var_Send=1&mmD=12&ddD=14&mmH=12&ddH=16&aaH=2010&Send=Buscar)

Brazil: Pdvsa is likely to walk out of refinery project

After nearly five years of disagreements, Brazilian oil company Petrobras admitted that state-run oil company Petróleos de Venezuela is likely to desist from participating in a project to build the Abreu e Lima refinery in the Brazilian state of Pernambuco. Petrobras has already started works but has not received funds from Venezuela, which is expected to invest USD 4.47 billion in the project. (El Universal, 12-14-2010; http://english.eluniversal.com/2010/12/14/en_eco_art_brazil:-pdvsa-is-lik_14A4854251.shtml)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

December 13th, 2010

Economics, Trade & Business

ECLAC Venezuelan economy projected to close 2010 with a 1.6% contraction

The Venezuelan economy will close this year with a contraction of 1.6% according to projections by the Economic Commission for Latin America and the Caribbean (ECLAC), which disclosed its regional its balance in Santiago de Chile. The organization notes that the country will recover next year with a growth of 2%. As for the region, projected growth is 4.2% in 2011, a 6% lower performance at the close of this year. (El Mundo, 12-13-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=11373)

PDVSA said to plan $2 billion bond sale before year-end

Petróleos de Venezuela SA plans to sell $2 billion in bonds to the central bank to repay a loan, said a government official with direct knowledge of the transaction. The bond sale will take place before the end of December, said the official, who asked to stay anonymous because the plan isn’t public. With the bond sale, the state-run oil company will have practically repaid the full amount of the loan, the person said. (Bloomberg, 12-13-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aitFIwX7uY4g)

Chávez to decree Venezuela sales tax rise

President Hugo Chavez said on Monday he would use special decree powers to hike Venezuela's sales tax rate and raise cash to help the South American nation recover from disastrous floods. "We need extraordinary funds and one of the laws we are going to approve is going to be a rise in sales tax," Chavez said. The Venezuelan leader said the government had still not decided by how many points it wanted to raise the tax from the current level of 12 percent. But any increase would have only a "minimal effect" on inflation, Chavez said. Each percentage point rise in the sales tax would raise 5 billion bolivars, Chavez said, without specifying over what time period that would be. (Reuters, 12-13-2010; http://www.reuters.com/article/idUSN1323747220101214)

Venezuelan government exonerates debts of flood-hit farmers

The government will exonerate agricultural debts acquired by farmers and producers with private or public institutions in the region of Sur del Lago, western Venezuela, informed last Sunday Agriculture and Lands Minister, Juan Carlos Loyo. Loyo commented the State is taking measures in the agricultural area with the aim to benefit all farmers who were affected by the heavy rains which hit the country. “Any agricultural producer who has a debt and had a partial or total loss will be exonerated by the Government and we will make it by means of an instrument which is being requested in Parliament,” he informed. (AVN, 12-13-2010; http://www.avn.info.ve/node/33673)

Argentina and Venezuela to build textile joint venture

The first textile joint venture in Portuguesa state will be built in the framework of the agreements between Venezuela and Argentina, to promote national production of fabric and rescue the production of cotton. The factory is expected to cost about 7.69 billion dollars. The Mayor of Araure, Jose Rafael Vasquez, where the factory will be built, announced that the works have already begun and the factory should be fully operational by March. It will be the largest textile company in Venezuela and with it, Portuguesa will generate 80% of the national cotton production,” he commented. (AVN, 12-13-2010; http://www.avn.info.ve/node/33744)

Politics

Chavez seeks decree powers over opposition protests

Venezuelan President Hugo Chavez is set to ask the National Assembly to grant him powers to enact legislation without its approval; a move the opposition says is intended to weaken the new congress being sworn in next month. Decree powers are needed to quickly allocate resources to build homes and repair infrastructure after heavy rains killed 35 people and left 124,000 homeless, Chavez said Dec. 10. The government will request permission as early as today and begin to pass legislation on Dec. 17, he said. (Bloomberg, 12-13-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a5aSH4Qme6ac)

Venezuela ranks 76th in quality of democracy

Norway is the most complete and developed democracy in the world, followed by Sweden and Finland, according to an interdisciplinary study prepared by the Vienna-based institute. In the 100-country list, New Zealand, which ranks sixth, is the only non-European country. The ranking considers indicators related to politics, economy, gender equality, access to education, health and environmental protection. The first Latin American country is Uruguay (21), while Chile and Costa Rica rank 28 and 29, respectively. Argentina ranks 38, ahead of Brazil (43), El Salvador (45), Ecuador (49), México (51), Colombia (55), Paraguay (59), Nicaragua (63), Bolivia (64), Honduras (70), Guatemala (74) and Venezuela (76). (El Universal, 12-13-2010; http://english.eluniversal.com/2010/12/13/en_pol_esp_venezuela-ranks-76th_13A4848855.shtml)

Venezuelan bill seeks to regulate the right to strike in the oil industry

Labor conflicts and union demands are perceived by the Executive Office's authorities as possible threats to the oil industry's operations. Therefore, a possible legal instrument to regulate oil workers' right to strike is being considered by Venezuelan authorities. According to an article of the draft Organic Law for Protection of the National Hydrocarbons Sector, "the right to strike may be exercised within the companies included in the national oil and gas sector, in the terms and conditions authorized by the Ministry with competence over labor issues. It will also provide the minimum services to be carried out to ensure the continuity and regularity of operations." (El Universal, 12-13-2010; http://english.eluniversal.com/2010/12/13/en_pol_esp_venezuelan-bill-seek_13A4848493.shtml)

Reform of the Telecommunications Act

The Democratic Unity Bureau warned that the planned amendments to the Telecommunications Law is evidence, once again, of the government's intention to establish greater controls to prevent the free flow of information and opinions in Venezuela. "If the Venezuelan democratic society does not reject it (...), the country would end up with one version of events that will be presented by the government controlled media (...) A citizen would have no option to choose and could only have access to the services provided by the government," warned the executive secretary of the UNT, Ramon Guillermo Aveledo, who condemned the Government's attempt to "seize the airwaves and even online." (Ultimas Noticias, 12-13-2010; www.ultimasnoticias.com.ve/Noticias/MUD-condena-reforma-a-Ley-de-Telecomunicaciones.aspx)

Petroleum & Energy

Venezuela Oil Minister: OPEC unlikely to change output in 2011

OPEC is unlikely to change its production ceiling in 2011 even though the price of oil could rise, Venezuela Oil Minister Rafael Ramirez said Saturday. Speaking to reporters after the Organization of Petroleum Exporting Countries' meeting, Ramirez said that oil's likely rise to the $100 per barrel does not reflect its true cost to consumers, as it is due to the relative weakness of the U.S. dollar. "The price we are seeing is not real," he said. "The price is affected by the dollar devaluation and the cost of services." (Fox Business, 12-11-2010; http://www.foxbusiness.com/markets/2010/12/11/venezuela-oil-min-opec-unlikely-change-output/)

US documents: Chavez's oil industry deteriorating

U.S. officials detailed declining conditions in Venezuela's oil industry in memos released by WikiLeaks, saying the country's growing economic problems are taking a toll on President Hugo Chavez's popularity. In one confidential document dated Oct. 15, 2009, the U.S. Embassy said "equipment conditions have deteriorated drastically" since the government expropriated some 80 oil service companies earlier that year. It said safety and maintenance at the now state-owned oil facilities were in a "terrible state." (AP, 12-10-2010; http://news.yahoo.com/s/ap/20101211/ap_on_bi_ge/lt_wikileaks_venezuela_1)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.

December 9th, 2010

Economics, Trade & Business

Guasare coal declares force majeure -buyers

Venezuelan coal miner Guasare Coal International has declared force majeure on December shipments from the port of Maracaibo, European coal buyers said on Tuesday. Guasare, a joint venture between Venezuela's state-owned Carbozulia, U.S.-headquartered Peabody and Anglo American Plc, operates the Paso Diablo mine in Venezuela's western Zulia state. Paso Diablo produces around 6 million tonnes a year of high energy content coal, which is sold to industrial users and power plants in Europe, Brazil, Canada, the U.S. and Caribbean. (Reuters, 12-07-2010; http://www.reuters.com/article/idUSLDE6B61ND20101207)

Venezuelan Industrial sector closed the year down 3%

The industrial sector closed the year in a tailspin. Conindustria President, Carlos Larrazabal, reported yesterday that 2010 "concludes as we had anticipated, with a stagnant economy, estimating a further drop in manufacturing GDP of 3%." We have had six consecutive quarters of decline… so we've lost five years of growth." (Ultimas Noticias, 12-09-2010; http://www.ultimasnoticias.com.ve/Noticias/Industriales-cierran-el-ano-con-una-caida-de-3-.aspx)

Venezuela's consumption shrinks for second year in a row

Venezuela's consumption rate was characterized by a slowdown in 2010. After showing high levels of growth in previous years, it downsized for second year in a row. Luis Vicente León, the director of polling firm Datanálisis reported that domestic consumption has fallen 3.3 percent this year, similar to the drop in 2009, when the economic downturn amounted to 3.2 percent. This slowdown, which amounts to 7-8 percent in the past two years, has created pessimism in Venezuelan consumers who "consider they have lost their quality of life." (El Universal, 12-08-2010; http://english.eluniversal.com/2010/12/08/en_eco_art_venezuelas-consumpt_08A4830973.shtml)

Nationwide Consumer Price Index (NCPI) posted an accumulated increase of 923% in the 11 years and 10 months of Chávez’ administration, said private firm Capital Market Finance director Jesús Casique. The increase of prices of goods and services happened despite the controls enforced by the President at the beginning of 2003 and the appearance of the bolívar fuerte in 2008. (Veneconomy, 12-09-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=24245&idc=2)

Rains to boost inflation in agricultural products

Rains and floods have battered farmers, who so far have reported losses in crops of plantains, vegetables, cocoa and taro in 11 Venezuelan states. This will further undermine agriculture production, which is already insufficient, and acts as a catalyst for inflation. Data provided by the Central Bank of Venezuela (BCV) shows that, between January and November 2010, prices of agriculture products increased by 51.3 percent. Inflation has hit low-income families the hardest, since they spend more than half of their income on food. While the Venezuelan government could boost imports in order to increase the supply of products, such a move has proven unsuccessful in recent years. (El Universal, 12-09-2010; http://english.eluniversal.com/2010/12/09/en_eco_esp_rains-to-boost-infla_09A4834291.shtml)

Venezuelan Government to cancel debt of producers affected by rains

The Venezuelan Government will cancel the debts of the agricultural producers in the Sur del Lago region, in the Zulia state (Venezuela’s northwest), who lost their crops, homes and possessions due to the precipitations that fell in the country in the past weeks. The announcement was made by the President of Venezuela Hugo Chavez during an inspection by the affected zone. “I have decided to begin with a process to restructure the debts and credits to producers. Those who lost all their crops will not pay anything; therefore, we will evaluate farm by farm. I promise to cancel the debts of all the producers,” he explained. (AVN, 12-09-2010; http://www.avn.info.ve/node/33044)

Rains threaten to undermine economic rebound in 2011

Asdrúbal Oliveros, the director of Ecoanalítica, believes that the consequences will be felt in 2011 rather than in the fourth quarter this year. "The greater impact will come in the first quarter next year. Since agriculture has little weight in GDP, growth in trade, transport and storage would be most seriously hit." Official statistics show that agriculture accounts for less than 3 percent of GDP, while trade, transport and storage, overall, amount to 13.1 percent of GDP. (El Universal, 12-08-2010; http://english.eluniversal.com/2010/12/08/en_eco_esp_rains-threaten-to-un_08A4830055.shtml)

Venamcham presents the top 100 in Venezuela

Carlos Henrique Blohm, the president of the Venezuelan American Chamber of Commerce and Industry (Venamcham), announced the list of the Top 100 Companies in Venezuela. He said that the ten first companies are: Pdvsa, Cantv, Movistar, Mercantil, Banesco, Farmatodo, Provincial, Seguros Caracas, Digitel, Banco de Venezuela and Coca-Cola. In a survey of 287 companies that participated in the poll, 53 percent considered that there will be no changes in national expectations. (El Universal, 12-09-2010; http://english.eluniversal.com/2010/12/09/en_eco_art_venamcham-presents-t_09A4835057.shtml)

Politics

Venezuela govn’t takes stake in anti-Chavez TV

Venezuela's government has taken control of a fifth of the shares in Globovision, a sign of mounting pressure on the opposition television network opposed to President Hugo Chavez. Chavez has in the past threatened to close Globovision, which has a strong editorial line against his socialist policies and is seen by its supporters as a bastion of opposition to the many pro-government television stations. (Reuters, 12-07-2010; http://www.reuters.com/article/idUSN079924120101207)

Transport & Logistics

Sea Departure Restrictions Lifted

Motivated by improving sea conditions in the states of Sucre, Nueva Esparta and Falcon, the National Institute of Aquatic Spaces (INEA) lifted the restrictions on departures for smaller vessels (less than 150 gross tonnage units). The general manager of Harbor Master, Christopher Figueroa, reported that evidence such entities have clear skies, good visibility, calm seas and moderate winds. (Ultimas Noticias, 12-08-2010; http://www.ultimasnoticias.com.ve/Noticias/Inea-levanta-restriccion-de-zarpes.aspx)

Petroleum & Energy

Venezuela orders oil companies to lift output

Venezuela's oil minister has given oil companies including Chevron, Repsol, BP and Petrobras 30 days to raise production at more than 20 joint ventures, as the OPEC nation struggles with falling output of its main export, according to a letter seen by Reuters on Wednesday. In the letter, Oil Minister Rafael Ramirez gave the companies 30 days to present a new production plan and requested they seek their own financing. Several firms want another month, a company source said. The joint ventures have a combined output capacity of at least 400,000 barrels-per-day. (Reuters, 12-08-2010; http://www.reuters.com/article/idUSTRE6B756O20101208)

The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.