October 29th, 2010

Economics, Trade & Business

Economist Pedro Palma foresees more debt, inflation and recession in 2011. He also said the 2011 national budget is insincere since it estimates monthly oil production at over 3 million barrels when in reality, Venezuela is producing much less. (Veneconomy, 10-27-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23672&idc=2)

Owens Illinois Announces Beginning of the transfer  of its Ownership to the State

The company issued a statement saying that -despite reports that it had not yet reached an agreement with the Government- the nationalization of the firm would begin today.  Officials are due to take the offices at Los Guayos (Carabobo) and Valera (Trujillo). (Ultimas Noticias, 10-28-2010; http://www.ultimasnoticias.com.ve/capriles/cadena-global/detalle.aspx?idart=3422396&idcat=56431&tipo=2)

Venamcham urges the government to stop government takeovers

Carlos Henrique Blohm, the president of the Venezuelan-American Chamber of Commerce and Industry (Venamcham) said that in order to improve the investment climate in the country the government should desist from the seizure of assets. Blohm said that 46 out of the 1,080 members of the trade chamber have had assets seized.  Further, he stated that of these, only 10 companies have received compensation from the Venezuelan government following the expropriations. The sum of the values of all expropriated assets amounts to USD 20 billion. (El Universal, 10-28-2010; http://english.eluniversal.com/2010/10/28/en_eco_art_venamcham-urges-the_28A4665371.shtml)

Owens-Illinois Seizure by Chavez May Undermine Empresas Polar

Venezuela’s plan to expropriate the local unit of glassmaker Owens-Illinois Inc. may undermine Empresas Polar SA, the South American country’s largest company and a frequent target of President Hugo Chavez’s criticism. The takeover will weaken closely held Polar, Venezuela’s biggest beer and food producer, by putting its supply chain under government control, said Rafael Alfonzo, president of Caracas-based researcher Cedice. Combined with the expropriation earlier this month of Agroislena C.A. Sucesora de Enrique Fraga Alfonso, Venezuela’s biggest farm-supply business, the move gives Chavez significant sway over Polar, Alfonzo said. (Bloomberg, 10-26-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=afKRLfrme52A)

Legal issues prevent operations at Las Cristinas gold mine from resuming

Operations at the Las Cristinas gold mine, paralyzed eight years ago by government decree, are still the subject of political and legal debate.  Estimates for the value of foregone production are as high as BF 10,000 billion; most of which would have been attributed to Crystallex’ facilities, the product of a $15 million in investment by the aforementioned Canadian firm.  Government party leaders claim that there still exist a series of legal hurdles which impede the conclusion of negotiations between all interested parties. (El Mundo, 10-29-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=18&Id_Noticia=35137)

Politics

Venezuela to nationalize U.S.-owned bottle manufacturer

Charging U.S. bottle manufacturer Owens- Illinois with worker exploitation and environmental damage, Venezuelan President Hugo Chavez has announced plans to confiscate the local unit of the company, the 200th nationalization of a private firm this year. The seizure comes as Venezuela suffers through a sinking economy and the continent's highest inflation rate. Some experts blame the conditions in part on the inefficiency caused by Chavez's takeovers of private industry, an element of his so-called 21st century socialism program. (Los Angeles Times, 10-27-2010; http://articles.latimes.com/2010/oct/27/world/la-fg-venezuela-nationalize-20101028)

Venezuela vows 'just compensation' for expropriated US firm

Venezuela will negotiate a "just compensation" for US glass maker Owens Illinois it expropriated earlier this week, Vice President Elias Jaua said Wednesday. "We've convened company officials here in Venezuela to begin talks on the company's transition from private to social property... (and) on setting up an evaluation committee for the payment of... a just compensation, as required under the law and the constitution," Jaua told a press briefing. Venezuelan President Hugo Chavez late Monday announced the expropriation of the local affiliate of the US-based firm, accusing it of causing environmental damage and exploiting its workers. (Yahoo News, 10-27-2010; http://news.yahoo.com/s/afp/20101027/bs_afp/venezuelauspoliticsbusinesscompany_20101027200454)

Santos, Chávez to meet in Caracas on Tuesday

The presidents of Colombia -Juan Manuel Santos- and Venezuela -Hugo Chávez- have plans to meet next Tuesday, November 2, in Caracas. This would be their second meeting since diplomatic relations between the two countries were resumed. "The meeting between Presidents Juan Manuel Santos and Hugo Chávez, on November 2 at the Miraflores Palace in Caracas, has been confirmed," reported a brief statement of Casa de Nariño, the seat of the Colombian Executive Office. (El Universal, 10-28-2010; http://english.eluniversal.com/2010/10/28/en_pol_esp_santos,-chavez-to-me_28A4665091.shtml)

70% of Venezuelans reject expropriations

Oscar Schemel, president of Hinterlaces, reported that over 70% of Venezuelans reject the policies of expropriation, confiscation and nationalization that President Chavez is advocating. "In the case of Polaris, the rejection of the expropriation is 76 %, a large majority of Venezuelans disagree with nationalizations and expropriations.  Polls carried out following parliamentary elections show that nearly 80 percent of Venezuelans believe that the results of these elections are a manifestation of a rejection of the direction the country is heading in right now," he said. (Notitarde, 10-28-2010; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1163477&idcat=9845&tipo=2)

Petroleum & Energy

Venezuela moves more oil exports away from U.S.

Venezuela has moved ahead with a strategy of diversification of oil exports by promising more fuel to Belarus and Syria and less to the United States, where President Hugo Chavez has hinted he would like to sell assets. Oil Minister Rafael Ramirez said on Wednesday that South America's top oil producer will boost crude oil exports to Belarus by 150 percent next year to 200,000 barrels per day. State oil company PDVSA will also export 20,000 bpd of diesel to Syria, under an agreement signed by Chavez on a recent tour. (Reuters, 10-27-2010; http://www.reuters.com/article/idUSTRE69R0DX20101028)

Citgo was impacted by sale of assets and financial aid to Pdvsa

The Venezuelan government reiterated its interest in selling the assets of Citgo Petroleum, the US subsidiary of the state-run oil company Petróleos de Venezuela. "Citgo has eight refineries in the United States; I don't know how many thousands of distribution tanks, terminals and pipelines. It distributes fuel, produced from Venezuelan crude oil via 8,000 gas stations, yet it yields no profit for us," President Hugo Chávez said on Monday. The Venezuelan president set a minimum price for the oil company because "Citgo should cost much more than USD 10 billion. If we sell it and put that money in banks, the benefits would be higher even if we only take interests into account." (El Universal, 10-27-2010; http://english.eluniversal.com/2010/10/27/en_eco_esp_citgo-was-impacted-b_27A4659411.shtml)

150% rise Venezuela oil shipments to Belarus

Following agreements signed between the Governments of Minsk and Caracas, Belarus will receive 200,000 barrels per day (bpd) in 2011, the minister of Energy and Petroleum and PDVSA President Rafael Ramirez told Reuters. Belarus currently receives about 80,000 barrels of PDVSA, which means that shipments will increase by 150% starting next year. Venezuela has embarked on a strategy of diversification with regards to the destinations of its crude oil exports. The main beneficiaries of this strategy have been China and Eurasian countries.  The government states that this policy is being pursued in order to reduce dependence on oil sales to the United States, which is currently the biggest customer for Venezuelan crude. (El Universal, 10-28-2010; http://www.eluniversal.com/2010/10/28/eco_art_venezuela-elevara-15_2083783.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.