November 5th, 2010

Economics, Trade & Business

Venezuela Finance Minister: 2011 budget is prudent

Jorge Giordani, the Venezuelan Minister of Planning and Finance, said that the government's budgetary policy is prudent. For the purposes of  the 2011 government budget, the government estimated the price of the Venezuelan crude oil (which trades at a significant discount to Brent or WTI) to hover around USD 40 per barrel. Giordani's remarks were made at the Venezuelan legislature, where he commented on the draft 2011 Budget Law. He said that the budget cannot be prepared based on price variability; hence, revenues must be generated by the economy. (El Universal, 11-03-2010; http://english.eluniversal.com/2010/11/03/en_eco_esp_venezuela-finance-mi_03A4689451.shtml)

Cutting inflation rate index to one digit in three years is viable, said Venezuelan Central Bank (BCV) president Nelson Merentes. He also said he believes the Venezuelan economy will grow 2% by 2011. (Veneconomy, 11-04-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23771&idc=2)

Venezuela, Colombia Sign Accords, Vow to Revive Lost Trade

Venezuelan President Hugo Chávez and Colombian President Juan Manuel Santos signed agreements in Caracas on energy projects and vowed to revive bilateral trade hurt in part by a border dispute. Santos said the two leaders will meet every three months to improve ties and discuss joint projects. Petróleos de Venezuela, S.A. will restart gasoline shipments to Colombian border areas and work with Colombia’s Ecopetrol, S.A. to pump oil from mature wells, according to the accords. The companies may also create a venture to produce heavy crude oil from the Orinoco Belt. The two leaders agreed to study a plan to extend a gas pipeline into Central America and another to build an oil pipeline from Venezuela to Colombia’s Pacific coast. (Bloomberg, 11-03-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a3br6p.8V_nE)

No more Pdvsa bonds this year

State-run oil holding Pdvsa will not issue more bonds this year. Issuances of Pdvsa bonds are aimed at offsetting feeble cash flows, paying for nationalized companies and for funding CAPEX. In the meantime, the government has been applying  lot of pressure on the company to keep the social spending for its socialist project high. Ending October, Pdvsa issued USD 3 billion in amortizable bonds at 2017. Demand was more than twofold the supply. (El Universal, 11-03-2010; http://english.eluniversal.com/2010/11/03/en_eco_esp_no-more-pdvsa-bonds_03A4689893.shtml)

Industrialists say the economy will have negative growth of -1.8% in

Industrial sector entrepreneurs say that in 2011 the economy will shrink by 1.8%, according to results from a survey Conindustria at the "Outlook 2011" to over 300 participants. "It reveals the pessimism with which they are watching the situation in the country," press release. Inflation will be 31.5% in 2010 and 32.5% for 2011. (El Mundo, 11-04-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=17&Id_Noticia=35874)

Venezuela is one of the countries with the worst business climate, according to the eight edition of the World Bank’s report along with the International Finance Corporation (IFC): “Doing business 2011: Making a Difference for Entrepreneurs“. The report classifies 183 global economies. Venezuela ranked 172th, down two positions from 2010. Colombia, Mexico and Peru are ranked among the best in the region. (Veneconomy, 11-04-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23779&idc=3)

Fitch places Sidetur's ratings on Rating Watch Negative

Global rating agency Fitch Ratings has placed the ratings of the Venezuelan steel maker Siderúrgica del Turbio (Sidetur) on Rating Watch Negative, following the announcement made by the Venezuelan government last week to nationalize the steel producer. The decision reflects "the uncertainty regarding the exact time by which the nationalization will be completed and its impact on the company's operations during this process," Fitch said in a statement. (El Universal, 11-03-2010; http://english.eluniversal.com/2010/11/03/en_eco_esp_fitch-places-sidetur_03A4689577.shtml)

Politics

Venezuelan Foreign Affairs Minister Nicolás Maduro began a tour that will take him to Turkey, Ukraine and Syria to go over the agreements signed by President Chávez during his recent trip. (Veneconomy, 11-04-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23777&idc=1)

Venezuela, Turkey Foreign Ministers meet to agree political consultation mechanisms

The Venezuelan Minister of Foreign Affairs, Nicolas Maduro, is holding a meeting on Thursday with his Turkish counterpart, Ahmet Davutoglu, with the aim of reinforcing the mechanisms of political consultation between the two nations. According to a press release from the Venezuelan Foreign Ministry, the Turkish diplomat emphasized the need of strengthening bilateral relations sixty years after Turkey and Venezuela built relationships for the first time. (AVN, 11-04-2010; http://www.avn.info.ve/node/26687)

Chavez allies back Basque separatist in Venezuela

A Basque separatist fighting extradition to Spain testified before Venezuelan prosecutors on Wednesday, a Venezuelan activist said. Spanish authorities want to try Arturo Cubillas, who holds a government job in Venezuela, on accusations he helped the Basque militant group ETA arrange explosives training with Colombian rebels in Venezuela. Cubillas insists he is innocent. Susana Gonzalez, who leads a Venezuelan group that supports Basque independence, said she spoke with Cubillas and he testified for two hours. Prosecutors did not immediately comment on the hearing, and Cubillas did not appear in public. (Miami Herald, 11-03-2010; http://www.miamiherald.com/2010/11/03/1907315/chavez-allies-back-basque-separatist.html)

Petroleum & Energy

Storm stops Venezuela oil upgrader again

Venezuela's troubled 130,000 barrels-per-day (bpd) Petroanzoategui heavy crude upgrader has stopped again after a storm caused a fault in its compressor unit, a source at state oil company PDVSA said on Wednesday. The large facility had been out of action since late September due to boiler problems, but this week PDVSA said it had been restarted and was operating normally. (Reuters, 11-03-2010; http://www.reuters.com/article/idUSN0310819020101103)

Venezuela to supply fuel to Turkey

Venezuela says it has agreed to sell fuel to Turkey and that the two countries have pledged to invest jointly in oil projects. The agreements are part of an energy accord signed by Foreign Minister Nicolas Maduro during a visit to Ankara. The foreign ministry said in a statement Thursday that Turkey will receive fuel and that the countries will cooperate in oil projects, including planned Turkish investment in Venezuela's crude-rich Orinoco River basin. (Boston.com, 11-04-2010; http://www.boston.com/news/world/europe/articles/2010/11/04/venezuela_to_supply_fuel_to_turkey/)

Pdvsa ships 240,000 barrels of jet fuel to China

State-run oil company Petróleos de Venezuela (Pdvsa) said it shipped of 240,000 barrels of aviation turbine fuel (Jet A-1) to different Chinese regions, as part of the energy and financial agreements signed with the Asian country. The first shipment (257,000 barrels) was delivered in early October. So far, Venezuela has exported 497,000 barrels to China. The fuel departed from Venezuela's El Palito refinery. (El Universal, 11-02-2010; http://english.eluniversal.com/2010/11/02/en_eco_art_pdvsa-ships-240,000_02A4684211.shtml)

Venezuela sees oil arbitration rulings 2011-12

Venezuela expects rulings in compensation claims against it by Exxon Mobil Corp and ConocoPhillips to be decided next year or in 2012, the South American OPEC member's energy minister said on Tuesday. The U.S. majors want payment for assets nationalized by Venezuela three years ago when it pushed foreign firms into minority partnerships with the state at multibillion dollar projects in the Orinoco Belt crude region. Both Exxon and ConocoPhillips rejected the terms and began international legal proceedings against Venezuela via the World Bank's arbitration panel. "We expect (a decision) in 2011 or 2012," Rafael Ramirez told reporters when asked about the cases. (Reuters, 11-02-2010; http://www.reuters.com/article/idUSN0225824020101103)

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.