November 18th, 2010

Economics, Trade & Business

Venezuelan Economy Contracts 0.4% in 3rd Quarter

Venezuela’s economy shrank 0.4 percent in the third quarter compared to the same period last year, the central bank reported. The country’s gross domestic product declined 5.2 percent in the first quarter and fell by 1.9 percent in the second quarter, while the cumulative contraction for the year’s first nine months totaled 2.4 percent, the bank said Tuesday. Venezuela’s GDP shrank by 3.3 percent in 2009, while the value of goods and services produced by both the public and private sectors fell in the third quarter of 2010, down 0.1 percent and 0.7 percent, respectively, the institution said. (Latin American Herald, 11-17-2010; http://www.laht.com/article.asp?ArticleId=378086&CategoryId=10717)

Venezuela Could Devalue Currency 15% in 2011, Barclays Says

Venezuela may formally devalue its currency “at least” 15 percent in early 2011, Barclays Capital said in a report, changing its position after meetings with Finance Ministry and central bank officials in Caracas. The government would then sell dollars at official rates of 3 and 5 bolivars per dollar, instead of the current rates of 2.6 and 4.3 bolivars that it established in January, Barclays analyst Alejandro Grisanti wrote. (Bloomberg, 11-18-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aX4TT85d8d04)

Venezuela's oil GDP down 3 percent so far this year

Oil prices have risen in world markets, but declining exports of oil by state-run oil company Petróleos de Venezuela (Pdvsa) has prevented recovery of the sector that generates the most US dollars for the Venezuelan economy. During the first nine months, the oil sector tumbled 3 percent, as shown in the data submitted on Tuesday by the Central Bank of Venezuela (BCV). The oil sector's Gross Domestic Product (GDP), which has an accumulated decline of 11.4 percent since the third quarter of 2008, has been hit by the drop in oil production. (El Universal, 11-18-2010; http://english.eluniversal.com/2010/11/18/en_eco_esp_venezuelas-oil-gdp_18A4746133.shtml)

Venezuela May Exit Recession in Fourth Quarter, Merentes Says

Venezuela’s economy is showing signs of exiting a six-quarter contraction and could post positive growth in the fourth quarter of 2010, central bank President Nelson Merentes said. Venezuela’s economy will grow 2 percent in 2011 and “a little more than that” in 2012, Merentes said in comments carried on state television. Inflation will close the year at levels similar to 2009. (Bloomberg, 11-17-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=arnbDefgYrl4)

Venezuelan government to seize 450,000 hectares in 2011

As part of its policy to seize and occupy agricultural lands, the Venezuelan government plans to seize some 450,000 hectares of lands (1,111,974 acres) in 2011, said Yván Gil, the Vice Minister of Agroproductive Circuits, Ministry of Agriculture and Lands (MAT). The ministry's budget includes VEB 17.9 billion (USD 4.16 billion) to seize lands. (El Universal, 11-18-2010; http://english.eluniversal.com/2010/11/18/en_eco_esp_venezuelan-governmen_18A4746493.shtml)

Venezuela PDVSA to reopen 2017 bond

Venezuelan state oil company PDVSA will reopen its 2017 bond within two weeks to raise $3 billion, a senior government source told Reuters on Wednesday. The source, who asked not to be named, also forecast Venezuela's long recession, will end in the fourth quarter, with the economy growing 1 percent in that three-month period. A swap of 2011 PDVSA bonds for a new 2013 bond with better conditions closed last week after anemic interest from investors. (Reuters, 11-17-2010; http://www.reuters.com/article/idUSN1722483420101117)

Empresas Polar estimates investments for $134.8 million in the food sector next year despite constant government threats to expropriate the company, informed Food director Pablo Baraybar. These planned investments include a yoghurt plant and the purchase of new machinery to expand production of pet foods, among others. (Veneconomy, 11-18-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23960&idc=3)

Chinese mining company looks for gold deposits in Venezuela

China National Gold Group Corporation (CNGGC), China's largest gold producer, said that it is looking for gold deposits in countries such as Brazil, Venezuela, Russia, Mongolia or Congo, the state-run newspaper China Daily said. CNGGC will increase its annual capacity to 50 tons in five years, out of which 40 percent will be produced overseas. (El Universal, 11-18-2010; http://english.eluniversal.com/2010/11/18/en_eco_esp_chinese-mining-compa_18A4747371.shtml)

Politics

Towards state socialism

Owners 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. When workers have protested, he has deployed the national guard against them. The government has justified the confiscations by saying that it was breaking up monopolies or stopping breaches of labor or environmental rules. But the aim appears to be to move decisively against what Mr. Chávez calls “the oligarchy” before the new parliament, which has a sizeable opposition minority, comes into session in January. (The Economist, 11-18-2010; http://www.economist.com/node/17527250?story_id=17527250)

Petroleum & Energy

Pdvsa and ENI set up joint venture to build a refinery

Venezuela on Thursday authorized the creation of a joint venture by and between state-run oil company Petróleos de Venezuela (Pdvsa) and Italian oil and gas multinational company ENI, to build a refinery intended to process heavy crude oil from the Orinoco Oil Belt and to produce oil finished products. Pdvsa and ENI participate in a joint venture for the development of the Junín 5 block of the Orinoco Oil Belt, which is expected to process a total of 240,000 bpd in its phase of development. Pdvsa has a 60 percent stake in the company. (El Universal, 11-18-2010; http://english.eluniversal.com/2010/11/18/en_eco_esp_pdvsa-and-eni-set-up_18A4747531.shtml)

Venezuela in Talks With China on Power Projects After Shortages

Venezuela is in talks with China for 3,000 megawatts of new electricity projects as it seeks to boost production capacity following a crisis earlier this year that forced power rationing to avoid a collapse of the national grid. Chinese companies may work on at least five projects to build hydroelectric reservoirs and thermoelectric plants in Venezuela as the nation seeks to boost capacity by 18,700 megawatts, Electricity Minister Ali Rodríguez said yesterday in an interview in Caracas, without naming the companies involved. (Bloomberg, 11-16-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=asFoo2Zrye4s)

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.