November 15th, 2010

Economics, Trade & Business

Escotet says bank law won’t spark seizures

Venezuela’s Juan Carlos Escotet, president of the Banking Association, said that a bill being discussed by lawmakers to tighten control of the industry won’t usher in a general nationalization. “We’re studying the bill closely because it allows greater control of banks, but it’s not a first step in a state takeover of the industry,” Escotet said today during a news conference in Caracas. “The bill includes a separation between private and public banks so deposits aren’t at risk.” (Bloomberg, 11-12-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aBsumVrnZkSk)

Venezuelan Congress devises a socialist financial system

The socialist production model promoted by the Venezuelan government requires a financial system which can be adapted to that plan, and the National Assembly has paved the way to reach that goal and consolidate the "new financial architecture." In the 2007 proposal to amend the Constitution, President Hugo Chávez suggested the creation of a new system and, in spite of its defeat at the ballots, that same model is now being bolstered. (El Universal, 11-15-2010; http://english.eluniversal.com/2010/11/15/en_eco_esp_venezuelan-congress_15A4731535.shtml)

Chavez creates ‘socialist’ bourse with ‘high yields’

Venezuelan President Hugo Chavez said he is creating a “socialist” state-run Public Bond Market that will offer local investors high yields to stimulate saving and allow nationalized companies to seek financing. The Public Bond Market, which will begin operations in December, will allow state-run companies to sell debt to finance operations and individuals to seek investment opportunities, Chavez said. (Bloomberg, 11-15-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aClviN3326L0)

PDVSA completes bond swap for $618 million, 18.3% of investors

Petróleos de Venezuela SA said that 18.3 percent of investors agreed to exchange zero-coupon bonds maturing in 2011 for 8 percent notes due in 2013 for a total of $618.7 million, according to a statement posted on the company’s website. PDVSA offered to exchange the $3 billion of bonds maturing in 2011 at 112.5 percent of face value on Oct. 15. There will now be $2.45 billion of 2011 bonds outstanding, PDVSA said in the statement. (Bloomberg, 11-12-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a47Iq61FHaKU)

"Flagship" items are at half mast

The Government has tried to promote the development of domestic production through economic policies that allow food self-sufficiency, especially agricultural products. In the attempt to achieve endogenous development, on two occasions the Executive set priorities to enhance the development of a number of items. Hence arose the so-called flagship products: rice, corn, coffee, cocoa, palm oil and dual purpose cattle (milk and meat) which were classified as strategic products years later. However, these efforts have not capitalized in all areas and much less materialized, as the country continues to rely heavily on imported raw materials, including those in which it was previously self-sufficient. (El Universal, 11-14-2010; http://eluniversal.com/2010/11/14/eco_art_rubros-denominados_2105748.shtml)

Government requires farmers to give up its

The National Land Institute (INTI) does not recognize private ownership of livestock and agricultural producers and only grants certificates of occupancy and stay on farms. Fedenaga president, Manuel Cipriano Heredia, said that instead of certifying they are legitimate landowners to access bank credits, mortgages or make any financial transaction to finance  production, INTI is forcing ranchers and farmers to renounce their status as owners. "Producers who have owned their farms for over 40 years and have all legal documents are only supplied with proof of residence or occupation of land. Titles are not recognized either," said Heredia, who added the population must be alert to the Government's intention of taking over more than 250 farms in the region south of Lake Maracaibo, which includes parts of Táchira, Merida and Zulia. (El Nacional, 11-15-2010; http://www.el-nacional.com/www/site/p_contenido.php)

Politics

Why Venezuela's government is taking over apartments

"Expropriese!" came the cry from Hugo Chavez, a command which has come to fill private investors in Venezuela with dread: "Expropriate it!”. Hilton, Banco Santander, Williams, Cargill, Owens Illinois - the list of companies whose Venezuelan subsidiaries have been on the receiving end of President Chavez's orders in recent months reads like a Who's Who of major foreign investors. Banking, agriculture, tourism, energy, construction and steel production have all been affected by the government's decision to intervene in private ownership over the past year. Banco Santander received $1bn (£620m) compensation. Others are still waiting. (BBC News, 11-15-2010; http://www.bbc.co.uk/news/world-latin-america-11756492)

Transport & Logistics

Port will operate during holiday season

Members of the local maritime community insured Puerto Cabello will operate normally during the holidays. Santos Rivas, president of the Chamber of Commerce, recalled in casual conversation with the newsroom that the port activities are minimized but not paralyze as a whole over the holidays. Reduction of vessels calling at that time on Puerto Cabello, as is traditional in December, will be a good ally for operators working on Christmas Day and New Year. (El Carabobeño, 11-14-2010; www.el-carabobeno.com/impreso/articulo/t151110-sl06/el-puerto-operar-durante-fiestas-decembrinas)

Puerto Cabello flow reduced to three weekly arrivals

Workers in Puerto Cabello port assert that the flow of vessels arriving at this terminal has been reduced by over 70%. This week, only three ships berthed at the docks. The same source indicates that many of the ships arriving at Puerto Cabello are coming with fewer loads than usual. Representatives from business have warned repeatedly that this is due primarily to lower grant of dollars, forcing them to go to the swap market which makes transactions less competitive. (El Carabobeño, 11-12-2010; www.el-carabobeno.com/litoral/articulo/3672/se-redujo-a-tres-los-arribos-semanales-de-buques-al-puerto)

Operations at the port of La Guaira fall by 9%

Activity in the port of La Guaira continues to decline. According to data presented by the Central Coast Ports Company (PLC), until last October, the Vargas state port had tended to some 583 vessels while in the same period last year (January to October), La Guaira received 641 motorboats (container, general cargo, passenger ships and bulk carriers, etc.). The numbers represent a decline of 9% for 2009. However, for the tenth month, the port handled 67 ships (eight ships more than in September and three more than the same month in 2009). In terms of TEUs (measurement unit used to calculate 20 feet container capacity), 35,763 were mobilized. The year to date indicates that 265,553 TEUs have been mobilized. Likewise, the numbers indicate that in the similar period of 2009, 320,845 had been mobilized. (Tal Cual, 11-15-2010; http://www.talcualdigital.com/ediciones/2010/11/15/default.asp)

Petroleum & Energy

eni confirms another Perla discovery in offshore Venezuela

eni announced the successful results of the Perla 3 well, located in the Cardón IV Block, in the shallow water of the Gulf of Venezuela. This well confirms Perla as a world-class supergiant gas discovery, one of the most significant in recent years and the largest ever in Venezuela, upgrading current estimates of gas in place to over 14 Tcf (2.5 billion barrels of oil equivalent). Perla 3, drilled in 70 m of water depth, encountered 675 ft (210 m) of net pay carbonate sequence with the same hydraulic regime as the discovery well and with excellent reservoir characteristics, confirmed by the 730 ft (225m) of bottom hole cores that have been recovered. During the production test, the well flowed 68 million scf per day of gas and 1,350 barrels of condensate per day, highlighting the high productivity of this reservoir. (Latin Petroleum, 11-15-2010; http://www.latinpetroleum.com/new/newsdetail.php?cid=34&art_id=9045&content=F&aid=9045)

PDVSA gives contract for Mariscal Sucre platform to France's Technip

Venezuelan state oil company PDVSA said Friday it awarded French oil technology company Technip a contract to build Venezuela's first offshore natural gas production platform. The platform will be used for the Mariscal Sucre exploration and production project. PDVSA, in a statement, reiterated that production from Mariscal Sucre will begin in 2012. The offshore gas will be sent to the mainland through a 115-km underwater pipeline and then processed in CIGMA, a petrochemical complex being built in Sucre state, in eastern Venezuela. (VHeadline, 11-12-2010; http://www.vheadline.com/readnews.asp?id=98673)

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.