October 14th, 2010

Economics, Trade & Business

Cost of banking crisis amounts to USD 962 million

More than a year after a group of small and medium-sized financial institutions went bankrupt, the Venezuelan Bank Deposit Guarantee and Protection Fund (Fogade) provided partial data about the banking crisis. Fogade must pay each depositor a deposit insurance amounting up to USD 6,977. As of October 10, the Venezuelan financial institution has paid about USD 962 million at the official exchange rate of VEB 2.60 per US dollar) to customers of seized banks Federal, Canarias, Banpro, Baninvest, Sol, Real and Inverunión. Not all depositors have claimed insurance payment. If they had done so so, Fogade would have had to pay USD 1.26 billion. (El Universal, 10-14-2010; http://english.eluniversal.com/2010/10/14/en_eco_esp_cost-of-banking-cris_14A4605533.shtml)

Goldman Sachs highlights upside potential of Venezuelan and Argentine debt

Argentine bonds with a coupon linked to growth look attractive ahead of the 2011 election, even after their recent rise, while Venezuelan debt would also have an upside potential, said Sam Finkelstein, a managing director in the emerging markets debt team at Goldman Sachs Asset Management, in London. "One should be aware of the risks of investing in Venezuela, but the risk of default is not imminent. I do not think that it is easy to invest in these instruments, but the outlook could change," he said. (El Universal, 10-14-2010; http://english.eluniversal.com/2010/10/14/en_eco_esp_goldman-sachs-highli_14A4607611.shtml)

Morgan Stanley warns about foreign exchange crunch in Venezuela

Venezuela keeps borrowing as a mechanism to ease the effects of the foreign exchange crunch on the domestic economy, and to find new funds that to help the country improve the profile of its liquid assets. State-run oil company Petróleos de Venezuela announced on Tuesday the issuance of USD 3 billion in bonds in a press release. The issue will have a semi-annual coupon and mature in 2015, 2016 and 2017, with equal repayment. Bonds may be purchased in the primary market, at the official exchange rate of VEB 4.30 per US dollar. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_eco_art_morgan-stanley-warns_13A4600937.shtml)

BCV special coin will circulate its 70 anniversary

The Central Bank of Venezuela (BCV) will put into circulation on Friday October 15 a special issue of the currency of 0.50 cents, designed and minted by the Central Bank to celebrate its 70th anniversary. Will be issued five million pieces of that coin, which differs from the current 0.50 cents per show on the reverse the official logo of the 70 anniversary of the BCV, even if on the face are equal. (AVN, 10-13-2010; http://www.avn.info.ve/node/22880)

Andean Development Corp lends Venezuela $700 mln

The Andean Development Corporation approved a loan of $700 million for a Venezuelan hydroelectric dam and public transport project, the development bank said on Wednesday. (Reuters, 10-13-2010; http://www.reuters.com/article/idUSN1327896520101013)

Venezuelan business sector rejects state-centered policies

"Economic despotism" implemented by Hugo Chávez's government has put Venezuela country in a "state of shock" and will only lead to the "destruction of the country," said Noel Álvarez, the president of the Venezuelan Federation of Trade and Industry Chambers, to sum up the perception of local entrepreneurs vis-à-vis the decisions made by the Executive Office. "The only results of a foolish and unfeasible economic project are economic downturn and (a litany of) excuses. (This model), which aims at establishing only one employer who, through the tyranny of monopoly, wants to make decisions in each sector of our public and private lives," said the business leader in the closing session of the 66th annual meeting of Venezuela's private business chamber, held in Puerto Ordaz, a major city of southern Bolívar state. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_eco_art_venezuelan-business_13A4601133.shtml)

The costs of the revolution

Venezuela is paying a high price for the imposition of the Castro-communist project. In the interests of the revolution, the regime has been legislating grotesquely outside the bounds of the Constitution and, resorting to farcical illegality, wiping out private property by dint of “expropriations,” which, in fact, is no more than pillage by those who abuse their power in the belief that it is eternal. These mass “expropriations” of private companies are costing the country dear, not only because this practice has meant the destruction of the domestic productive apparatus, but also because of investments that have not been made. In the first quarter of 2010, direct investment was -US$1.8 billion. (Veneconomy, 10-14-2010; http://www.veneconomy.com/site/)

Politics

Chávez to strengthen ties with Russia, Iran and Libya

Venezuela's President Hugo Chávez is starting in Moscow on Thursday an international tour that will take him to Iran, Belarus, Ukraine, Syria, Libya, Algeria and Portugal, in order to strengthen his political and economic relations with these countries. "It is an extremely important trip that will allow us to deepen our relations in a multi-polar world," said the Venezuelan president. Chávez, who is an advocate of a new world order and has worked to counteract the traditional influence of the United States over Latin America, has established for years a web of relations with countries such as Iran, Russia, Syria or Libya, based on political affinity. Later, he has signed important cooperation agreements. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_pol_esp_chavez-to-strengthen_13A4601257.shtml)

Chavez defends nuclear energy right, denies ETA link

Venezuela's President Hugo Chavez hailed its alliance with Russia and said his country had a right to develop nuclear energy as he started a visit to Moscow on Thursday. Chavez is planning to buy tanks in Russia, after committing to $5 billion in earlier arms deals, and discuss construction of a nuclear plant which will use Russian technology. "We are going to develop nuclear power and nothing will stop us," he told Russian and Venezuelan students at the Library of Foreign Literature in Moscow. He denied that two members of the ETA militant group were trained in Venezuela and called Spain's charges "part of the aggression by the (U.S.) empire." (Reuters, 10-14-2010; http://www.reuters.com/article/idUSLDE69D1YO20101014)

Venezuelan Attorney General vows to probe alleged ETA member

Venezuelan Attorney General Luisa Ortega Díaz said that her office will take all necessary steps in the context of the investigation carried out into José Arturo Cubillas Fontán, for his alleged connection with Basque terrorist group ETA and the rebel Revolutionary Armed Forces of Colombia (FARC). Ortega Díaz stated in a press release that all people possibly related to the investigation, even those living outside Venezuela, will be summoned. (El Universal, 10-14-2010; http://english.eluniversal.com/2010/10/14/en_pol_esp_venezuelan-attorney_14A4607091.shtml)

"Armed forces refuse indoctrination"

In the opinion of the director of the Projective Policy Study Center (CEPPRO), José Machillanda, it can inferred from the recent remarks of the former chief of the Operational Strategic Command, General Jesús Gregorio González González, " that there is inside the military component, a group of professional military chiefs that openly rebuts the intended indoctrination, fracture and breakup of the armed forces." In the words of González González, "we cannot link our military to the president or the leftwing trend under the current government." For Machillanda, the general's message mirrors "a behavior nearing military professionalism and contains a political-military request for the president to observe the Constitution." (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_pol_esp_armed-forces-refuse_13A4602091.shtml)

New Minister of the President’s Secretariat is recently re-elected legislator Francisco Ameliach (PSUV-Carabobo), according to a presidential decree published in Monday, October 11 Gaceta Oficial, circulating today. (Veneconomy, 10-14-2010; http://www.veneconomy.com/site/?ids=44&idt=23456&idc=1)

 

Petroleum & Energy

PDVSA to Sell Refinery Stake to Russia, Chavez Says

Petróleos de Venezuela, S.A., the state-owned oil company, agreed to sell a German refinery stake to a Russian company, President Hugo Chavez said, without naming the potential buyer or the refinery. “This is a good deal for us and Russia is very interested in the stake for geopolitical purposes,” Chavez said today on state television after arriving in Russia for an official visit. “This liberates us from an asset that we don’t need and will allow us to invest in other areas.” (Bloomberg, 10-14-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aD9LIxh7yiU0)

Venezuela's oil production up 111,000 bpd

According to the monthly report of the Organization of Petroleum Exporting Countries, Venezuela's oil production increased by 4.8 percent in September, hitting 2.4 million bpd, a little less than 10 percent of OPEC's oil production. Venezuela's oil production averaged 2,288,000 bpd in August, while it increased by 111,000 bpd in September to 2,400,000 bpd. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_eco_art_venezuelas-oil-prod_13A4602571.shtml)

China-Venezuela agreement terms for the development of the Junín 4 Bloc at the Orinoco Oil Belt include a $900 million bonus fee CNPC would pay Venezuela; a 25-year exploitation term that could be extended for a further 15 years if both parties meet the agreed Mixed Company’s (Venezuela, 60% and China, 40%) Investment Plan (October 11 Gaceta Oficial). (Veneconomy, 10-14-2010; http://www.veneconomy.com/site/?ids=44&idt=23458&idc=4)

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.