December 16th, 2010

Economics, Trade & Business

Venezuela Plans Financial Transactions Tax

Venezuela’s Finance Ministry is preparing a law to introduce a tax on financial transactions that would be enacted through decree powers requested by President Hugo Chavez. The tax, which would apply to all bank transactions, aims to head off a drop in government revenue expected next year. (Bloomberg, 12-16-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=a6HG6spQKlzg)

Venezuela to increase VAT due to lower contributions from income tax and PDVSA revenues

The financial needs of the Venezuelan government have increased despite high oil prices. Therefore, it has decided to increase the Value-Added Tax rate to offset lower oil incomes and a decline in income tax collection due to the economic downturn. Last Monday, President Hugo Chávez Frías announced that the government would revise the VAT due to the state of emergency in the Venezuelan territory. He said that through the collection of taxes his administration would set up a fund to assist the population hit by rainfalls. However, before the emergency declared in several Venezuelan states due to heavy rains, the government had suggested that it required more funds for the next fiscal year. (El Universal, 12-15-2010; http://english.eluniversal.com/2010/12/15/en_eco_esp_venezuela-to-increas_15A4858611.shtml)

Venezuela Central Bank Said to Boost Sitme Bond Sales

Venezuela’s central bank plans to step up sales of dollar-denominated bonds it holds to become the main provider of foreign currency to importers next year, a government official said. Banco Central de Venezuela will sell as much as $40 million a day of government and state oil company bonds to supply the Sitme currency market for at least the first three months of the year, said the official, who asked not to be identified because he isn’t authorized to speak publicly. The government in June ordered commercial banks to sell their dollar-denominated bonds to supply Sitme. (Bloomberg, 12-14-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aHQZ7kAO5SwE)

Study to certify Coltan reserves (industrial name for columbite–tantalite) requires a $32 million investment, according to a proposal under consideration by the government. The information was part of a presentation at the Venezuelan Central University’s (UCV) School of Engineering Research Symposium at the beginning of December, with the title Mining Potential at the El Parguaza Zone, located to the west of Bolívar state. (Veneconomy, 12-16-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=24349&idc=3)

Venezuelan Urea diverted from Corn to Coca farming

It is a long way from the cornfields of Guárico, in central Venezuela, to the cocaine labs of Colombia. But Venezuelan farmers and the drug cartels are linked in a curious way -- to the detriment of the farmer. Urea, a nitrogen-rich fertilizer vital to crops from corn to tomatoes, is also used to fertilize the coca plants that provide the raw material for cocaine. A thriving black market that diverts the fertilizer from legal crops to coca has reduced agricultural production, contributing to Venezuela's increasing dependence on imported food. (Miami Herald, 12-13-2010; http://www.miamiherald.com/2010/12/13/1972175/coca-pushing-out-corn-in-a-black.html)

Mercosur discord eased by Paraguay deal on Venezuela

Latin America's Mercosur trade pact is going through a rare period of constructive cordiality after member countries reached agreements to solve two intractable problems -- discord over Venezuela's membership and an Argentine-Paraguay row over river transport that threatened to scuttle the group's next summit. Paraguayan ratification for Venezuelan membership, delayed over many years, became a near certainty after a congressional deal that had been delayed due to domestic politics. (UPI, 12-15-2010; http://www.upi.com/Science_News/Resource-Wars/2010/12/15/Mercosur-discord-eased-by-Paraguay-deal-on-Venezuela/UPI-22041292418025/)

Politics

Chavez seeks power to rule by decree for 1 year

Venezuelan President Hugo Chavez asked congress Tuesday to grant him special powers to enact laws by decree for one year, just before a new legislature takes office with a larger contingent of opposition lawmakers. The measure, which quickly received initial approval from the overwhelming majority of pro-Chavez lawmakers, would give the president the authority to bypass the National Assembly for the fourth time since he was first elected almost 12 years ago. (Miami Herald, 12-14-2010; http://www.miamiherald.com/2010/12/14/1973120/chavez-seeks-decree-powers-for.html)

How will Chavez decree rule impact Venezuela?

Venezuelan President Hugo Chavez is taking decree powers for a year in a move he says is needed to deal with disastrous floods but opponents denounce as a calculated blow to democracy. What are the possible consequences for South America's biggest oil producer and its flamboyant socialist leader two years ahead of the next presidential election? (Reuters, 12-16-2010; http://www.reuters.com/article/idUSN1515206120101216)

Amendment to telecommunications law endorsed in first session

The National Assembly (AN) passed on Wednesday in a first session the amendment to the Telecommunications Organic Law with dissenting political Podemos party voting against. According to Deputy Ismael García, for Podemos party, the reform "violates and puts in the hands of the president and of Conatel (National Telecommunications Commission) in a discretionary manner the regulation of the radio spectrum." García warned that the biggest problem in the reform is that "it is targeted at those media which are not in line with the State and government policy." (El Universal, 12-15-2010; http://english.eluniversal.com/2010/12/15/en_pol_esp_amendment-to-telecom_15A4859331.shtml)

Petroleum & Energy

Venezuelan crude oil production dropped in November 2010, compared to the same period last year. According to figures published by the OPEC, last month, Venezuela produced an average 2.2 million barrels of crude per day, down 3% from November 2009. (Veneconomy, 12-14-2010; http://www.veneconomy.com/site/index.asp?idt=24303&idc=4&NPag=2&Start=15&aaD=2010&ids=44&Var_Send=1&mmD=12&ddD=14&mmH=12&ddH=16&aaH=2010&Send=Buscar)

Brazil: Pdvsa is likely to walk out of refinery project

After nearly five years of disagreements, Brazilian oil company Petrobras admitted that state-run oil company Petróleos de Venezuela is likely to desist from participating in a project to build the Abreu e Lima refinery in the Brazilian state of Pernambuco. Petrobras has already started works but has not received funds from Venezuela, which is expected to invest USD 4.47 billion in the project. (El Universal, 12-14-2010; http://english.eluniversal.com/2010/12/14/en_eco_art_brazil:-pdvsa-is-lik_14A4854251.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.