Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Friday, October 29, 2010

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.

Tuesday, October 26, 2010

October 25th, 2010

Economics, Trade & Business

36.7 percent of items missing from Venezuelan shelves
The fact that end users do not find goods at the place and the time that they look for them not only entails a higher expenditure -since shortages have increased prices- but a waste of time because many customers have to go to other points of sale to get such products. The survey called Goods Missing from Shelves (PFA) 2010, conducted by consultanting firm GS1 Venezuela and released by the Venezuelan Chamber of Food Processing Industries shows that 35.76 percent of goods are not available at the usual shelves on sales floors. This means that 67,662 goods out of the 189,237 products analyzed in the study were missing from the shelves. The index shows a 3.4-percent slowdown in 2010 versus 39.1 percent in 2009. (El Universal, 10-25-2010; http://english.eluniversal.com/2010/10/25/en_eco_art_food-items-missing-f_25A4650771.shtml)

Venezuelan gov't: Non-oil GDP to decline 2.6 percent this year
The Venezuelan government has estimated that the economy will shrink 2.5 percent compared to an initial estimate of 0.5 percent growth, based on one of the documents used to prepare the 2011 Budget Law. According to the 2011-2013 multi-year framework, the Venezuelan government estimates that the non-oil gross domestic product will decline 2.6 per cent at the end of the year, while oil activity will fall 1.4 percent. (El Universal, 10-25-2010; http://english.eluniversal.com/2010/10/25/en_eco_art_venezuelan-govt:-no_25A4652131.shtml)

Socialism to be consolidated with additional funds for production districts
During the introduction of the 2011 Budget Bill, the Minister of Planning and Finances -Jorge Giordani- said that the means of production will eventually be of a social nature. To that end, a new economic system is to be developed. Consequently, special "production districts" should be encouraged and will receive more funds. Ending in 2007, the Plan for Economic and Social Development intended to bolster the socialist model was re-enforced. While the budgets for FY2008, 2009 and 2010 were constructed according to that program, the draft budget for FY2011 delves into the recently defined system of social property (El Universal, 10-25-2010; http://english.eluniversal.com/2010/10/25/en_eco_esp_socialism-to-be-cons_25A4650899.shtml)

PDVSA bond issue attracts orders in excess of $ 6 billion
In the international public offering for its bond due in 2017, Petróleos de Venezuela (PDVSA) received 105,357 orders for a total of 6.985 million dollars, far exceeding the amount specified in the call for up to 3,000 million dollars. The amount allocated for the issuance stood at U.S. $ 3,000 million, maturing on November 2, 2017. (AVN, 10-25-2010; http://www.avn.info.ve/node/24894)

In Portugal, agreements would be valued at near €1 billion
Among the agreements signed by José Sócrates and Hugo Chávez are the construction of two asphalt tankers at the Viana do Castelo shipyards; the purchase of a ferry, which could be extended to “four or five,” according to Chávez; the creation of a mixed natural gas transportation and liquefaction company and the contracting of 12,500 pre-fabricated housing units for Venezuela. (Veneconomy, 10-25-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23614&idc=1)



Politics

Venezuelan President Hugo Chávez to report on reached agreements
Referring to agreements reached during his recent international tour, Venezuelan president Hugo Chavez asserted that Venezuela has taken a "place of dignity in the current world, in the newborn world, the multipolar world. The world has changed; it is no longer the world we had ten years ago. In that multipolar world…, the Venezuelan fatherland, the Venezuelan people, the Venezuelan revolution has started to play a fundamental role which has been recognized throughout the planet." (El Universal, 10-25-2010; http://english.eluniversal.com/2010/10/25/en_pol_esp_venezuelan-president_25A4651331.shtml)

Presidential tour prioritizes agreements on housing, energy and trade  
The 12-day tour completed by the President of Venezuela Hugo Chavez through Asia, Europe and Africa had as a priority the signing of agreements on housing, energy security and trade, so as to guarantee Venezuelans' welfare.
At his arrival to the International Airport Simon Bolivar on Sunday night, Chavez stated that the work meetings held with his counterparts of Russia, Belarus, Iran, Ukraine, Libya, Syria and Portugal were productive and he emphasized that the 69 accords were inked “with the head and the beating heart, thinking in Venezuela.” (AVN, 10-25-2010; http://www.avn.info.ve/node/24892)

Venezuelan VP: Companies will be nationalized as required
Last Friday, Venezuelan Vice-President Elías Jaua defended the nationalization of private companies. In his opinion, the action is lawful. The government nationalization policy "is aimed at dismounting the structure of monopolies established in Venezuela to exploit, exclude and reign over the people," Jaua said. (El Universal, 10-22-2010; http://english.eluniversal.com/2010/10/22/en_eco_esp_venezuelan-vp:-compa_22A4641815.shtml)

The Government is preparing to take 450,000 hectares in 2011
Further measures expropriating farms are expected in 2011. The National Land Institute, an entity attached to the Ministry of Agriculture, seeks to apply next year to pass measures by the state under which 450,000 hectares of rural land may be expropriated. Reports on the draft for the 2011 budget law indicate that the office will continue the policy of fighting against large estates to strengthen "XXI century socialism". According to the Ministry of Agriculture, in the last decade they have "rescued" more than 3 million hectares which were in the hands of private producers. In most cases, the Government alleged that the lands were idle and that the occupants did not have titles to prove ownership. (El Nacional, 10-25-2010; http://www.el-nacional.com/www/site/p_contenido.php)



Petroleum & Energy

Venezuela Invests $800 Million in Iranian Gas Project
Venezuela has agreed to invest about $800 million in the development of phase 12 of South Pars, the largest gas field in the world, the Iranian energy projects coordinator, Hamad Akbari, said on Sunday. The investment will be made by Venezuelan state-owned oil giant PDVSA, providing 10 percent of the total financing for this phase of the project, Akbari told the Shana energy news agency. “The final agreement will be wrapped up in a maximum term of three months,” the energy official said. (Latin American Herald Tribune, 10-24-2010; http://www.laht.com/article.asp?ArticleId=373724&CategoryId=10717)

PDVSA lost $ 600 million in discounted crude sales to Belarus
Petróleos de Venezuela is already sending oil to Belarus at a discount, long before the agenda was set for the recent meeting between Presidents Hugo Chavez and Alexander Lukashenko in Minsk. In April this year, PDVSA began to comply with that request. Lukashenko's government asked for a discount of 30% in the price of oil, which was the percentage rebate that - until December 31, 2009- was given to Belarus by Russia. This would imply PDVSA selling crude at an equivalent to $ 48.50 per barrel; compared to an average price of $ 7 According to industry estimates, Venezuela this year will receive only $ 1.4 billion for the oil bill to Belarus, where the amount should be close to $ 2 billion. (El Nacional, 10-25-2010; http://www.el-nacional.com/www/site/p_contenido.php)



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.

Thursday, October 21, 2010

October 21th, 2010

Economics, Trade & Business

A total of 195 businesses have been seized in 2010
The Venezuelan Confederation of Industries (Conindustria) rejected recent expropriations by the Venezuelan government.  Upon the seizure of the motor lubricants company Venoco and Fertinitro, a producer of nitrogen fertilizer, the number of confiscated companies rose to 195 in 2010. In addition Conindustria stated that "strongly rejects new threats of expropriation.” (El Universal, 10-20-2010; http://english.eluniversal.com/2010/10/20/en_eco_art_a-total-of-195-busin_20A4631291.shtml)

Venezuela central bank lowers reserve deposit requirement
Venezuela's central bank said on Wednesday it had lowered bank reserve requirements to increase liquidity after a bond issue last week aimed at local banks. The central bank dropped the minimum reserve requirement for bolivar deposits to 20 percent from 23 percent, the bank said on its website. Analysts say the measure is aimed at bolstering the banking system's liquidity at a time when the government is seeking local buyers for a $3 billion bond issued by state oil company PDVSA on Monday. (Reuters, 10-20-2010; http://www.reuters.com/article/idUSN2022302720101020)

Venezuelan inflation, as measured by the basic goods basket, is up 26% year on year
The basic goods basket -the cost of providing foods, goods and services for an average Venezuelan household- amounted to VEB 4,730.05 (USD 1,100, at the official exchange rate of VEB 4.30 per US dollar) in September, a 26.3 percent increase from September 2009, said the Workers' Center for Documentation and Social Analysis (Cenda). Between January and September 2010, the basic household basket soared 19 percent. (El Universal, 10-20-2010; http://english.eluniversal.com/2010/10/20/en_eco_art_venezuelas-basic-ba_20A4630417.shtml)

Second stage of expropriation of Empresa Polar’s lots in the Barquisimeto Industrial Zone began today with a formal inspection by a commission from the Prosecutor’s Office in the plant today. The inspection is expected to conclude on Friday. President Chávez announced the lots would be expropriated last February. (Veneconomy, 10-21-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23571&idc=3)

Some thrive, others sink on land "rescued" by Chavez
With red harvesters shearing rice and tall corn across the vast farm it should be a happy day in this young community, but Idelmaro Ceteno looks decidedly grumpy as the machines circle his land. Ceteno, 61, is one of nearly a thousand farmers given land five years ago by the government of President Hugo Chavez on the El Charcote farm, a vast cattle ranch that until then belonged to one of Britain's wealthiest families, the Vesteys. (Reuters, 10-20-2010; http://www.reuters.com/article/idUSN2019699920101020)

Four banks in Venezuela have been authorized to carry out good imports or exports for public or private companies through the Regional Compensation Payment Single System (SUCRE, after its initials in Spanish). These are: Banco de Venezuela, Banco del Tesoro, The Venezuelan office of the Cuban Banco de Comercio Exterior and Banco de Comercio Exterior (Bancoex). (Veneconomy, 10-21-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23568&idc=2)

Trade between Alba nations rises to $ 8,000 million
Trade between the nations of the Bolivarian Alternative for the Peoples of Our Americas (ALBA) increased from $ 700 million, which was the average between 1996 and 2003, to a present sum of $ 8 billion. This was announced on Wednesday by the president of the Regional Monetary Sucre, Eudomar Tovar.  This economic union was aimed at reducing the effects of the global economic crisis -and those of dependence on the dollar as the currency for international transactions- on its member nations. (AVN, 10-20-2010; http://www.avn.info.ve/node/24014)

Iron ore imports on the up
The World Steel Association’s August reports shows how some of the large steel producers are recovering, while others are struggling to get back to production levels recorded a couple of years ago. Indian steel production has recovered from the low production in the early part of 2009, and posted over a 6% increase year-on-year from August last year, from 5.3m tonnes to 5.7m tonnes, which is one of the highest output recorded. This is in stark contrast to the USA that has seen steel production decline for several years. (Dry Bulk Review, 10-21-2010; http://drybulkreview.msgfocus.com/q/18CbvS0aNjkhxcX/wv)



Politics

Chavez: Pluripolar world is the alternative to imperialist hegemony
Venezuela’s President Hugo Chavez emphasized that his visit to the Syrian Arab Republic is a manifestation of desired strategic alliances in the Middle East which aim to catalyze the construction of a new pluripolar world as an alternative to the “imperialist hegemony”. “Syria is like the core of a new world, the pluripolar world. We are obliged to recognize that world, which is an alternative to the imperialist hegemony,” he said at his arrival to (AVN, 10-21-2010; http://www.avn.info.ve/node/24169)



Transport & Logistics

La Guaira port traffic fell 6.9%
Traffic at the La Guaira port continues in full retreat. Very few vessels are trying to reach the state of Vargas. According to numbers obtained from the state-owned Central Coast Ports (PLC), vessel traffic for September 2010 was 6.9% lower than that for the same period in 2009. The port’s container throughput, as measured in TEU’s was 229,790 for the month of September.  A significant decrease from a September 2009 throughput of 291,077 TEUs. (Tal Cual, 10-21-2010; http://www.talcualdigital.com/index.html)



Petroleum & Energy

Venezuela and Syria to sign agreement to build a refinery
Following negotiations between Syria and Venezuela, it is expected that the two nations will endorse an agreement to build a refinery in Syria with the capacity to refine 140,000 barrel per day.  Iran and Malaysia are expected to co-invest. The information was released by the Energy and Oil Minister Rafael Ramirez while detailing the agenda that for the visit of President Chavez to Damascus, Syria. (AVN, 10-21-2010; http://www.avn.info.ve/node/24180)

Pdvsa's revenue up 47 percent while net profit down 14 percent
In the context of the company's bond issue, state-run oil company Petróleos de Venezuela presented its financial statements at the end of the first half of 2010. The report showed increased revenue on higher global crude oil prices, but also mirrored higher payments which ultimately undermined net profits. According to data issued by the state-run oil company, revenue from sales of crude oil and oil byproducts amounted to USD 46.7 billion, which means a 47.2 percent increase versus the same period a year earlier, when revenue stood at USD 37.8 billion. This increase was partly due to the fact that oil prices recovered to USD 70 in the first half of 2010, from USD 46 in the first six months of 2009. (El Universal, 10-20-2010; http://english.eluniversal.com/2010/10/20/en_eco_esp_pdvsas-revenue-up-4_20A4630333.shtml)

Venezuela says Exxon drops demand to $7 billion
Exxon Mobil Corp has reduced to $7 billion from $12 billion a compensation claim against Venezuelan state oil company PDVSA, which nationalized assets belonging to the U.S. major three years ago, according to a PDVSA document seen by Reuters on Wednesday. In 2007, Venezuela's socialist President Hugo Chavez pushed foreign oil companies into minority partnerships with PDVSA at multibillion dollar projects in the Orinoco Belt crude region, home to some of the world's largest oil reserves. Exxon and ConocoPhillips rejected the new terms and began international legal proceedings for compensation. (Reuters, 10-20-2010; http://www.reuters.com/article/idUSN2024579720101020)

Venezuela draft oil law would make takeovers easier
Venezuelan President Hugo Chavez's government is studying a draft law that would make it easier to nationalize the assets of oil field service companies working in South America's biggest crude exporter. Big service companies including Schlumberger Ltd, Halliburton Co and Baker Hughes have avoided public spats with the Caracas authorities, while resisting calls to create joint ventures with state oil company PDVSA. They have declined to comment in the past on nationalizations that put most of the OPEC member's oil sector under Chavez's control. If the proposed legislation is passed, it could make their position in the country less secure. (Reuters, 10-19-2010; http://www.reuters.com/article/idUSTRE69I44W20101019)




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.

Tuesday, October 19, 2010

October 18th, 2010

Economics, Trade & Business

2017 PDVSA bond sale starts today
The offer period for PDVSA bonds with 2017 maturity begins today, according to the prospectus for the issue that intends to place a total of $ 3,000 million in the local market and will culminate next Friday 22. The coupon of the paper is 8.5%, with three annual amortizations in 2015, 2016 and 2017. The bond is being offered at par value, payable in Bolivars. (El Mundo, 10-18-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=9815)

Sitme operations rise as demand grows
Trading volume in the Securities Transactions in Foreign Currency (Sitme) system has increased since last September, daily volumes averaging between $30 million and $ 40 million. Nevertheless, this has yet to satisfy demand, which has also risen in recent weeks. Sources connected to the Central Bank of Venezuela (BCV) reported that requests for foreign currency have amounted to $120 million a day, partly driven by proximity to the holiday season. Importing companies that supply the country have had to go over to this system to supply the market. (El Mundo, 10-18-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=33728)

Venezuela commissioned 16,000 tons of milk powder from Belarus
Venezuela ordered 16,000 tons of milk powder from Belarus next year, almost twice as much as has been purchased so far this year, said the agency in that country (Belta). Vasili Prudnikov, head of foreign economic activity under the Ministry of Agriculture, said that "during the months of January to August this year to 9,000 tons were sent to Venezuela." (El Mundo, 10-18-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=17&Id_Noticia=33686)

Venezuela and Belarus endorse mining and industry agreements
Venezuela and Belarus endorsed on Sunday six new cooperation agreements, mainly in mining and industry, during the visit of President Chavez to said European country. Among the accords there is a letter of commitment for the purchase of a production line of electrically welded mesh, as informed the Foreign Affairs Vice Minister for Asia, Oceania and Middle East Temir Porras. Likewise, the Basic Industries and Mining Minister Jose Khan explained that said production line would use wire rods produced by Venezuela’s state-run iron and steel industry. (AVN, 10-18-2010; http://www.avn.info.ve/node/23547)

Venezuela agreed to sell 20,000 MT of coffee to Belarus
The Venezuelan government agreed to the sale of 10,000 tons of ground coffee, from Café Venezuela, to Russia, by the end of 2010, and another 20,000 tons of coffee to Belarus, as a result of agreements reached during his tour, President Hugo Chávez. The Minister of Agriculture and Land, Juan Carlos Loyo, stated that with the placement of Venezuelan products on the Byelorussian market, "This visit has not only strengthened ties, but accelerated the geopolitical and strategic consolidation of trade". (El Mundo, 10-18-2010; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=9798)

Which steel if production is not enough?
Venezuela is studying the possibility of exporting steel to Belarus, announced Chávez on Sunday. He also announced the nationalization of Las Cristinas and Las Brisas mines. On the other hand, Venezuelan Basic Industries and Mining Minister José Khan informed they signed an agreement with Belaz to buy 128 mine dump trucks for mining production in the country. (Veneconomy, 10-18-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23504&idc=3)

FAO highlights that 14 million Venezuelans have access to food at fair prices
The United Nations Food and Agriculture Organization (FAO) representative to Venezuela Alfredo Missair highlighted on Monday the achievements reached by Venezuela in this matter, such as the fact that 14 million Venezuelan citizens have access to food at fair prices. Missair also underscored that Venezuela is on its way to achieve the Millennium Development Goals in reference to the reduction be half the percentage of undernourished population. In the nineties, the indicator was at 7.7%; currently is at 3.7%, a very low record compared to Latin America´s average, which is 6%. (AVN, 10-18-2010; http://www.avn.info.ve/node/23591)

"The economic model established in Venezuela does not work. With no legal certainty, there is no investment and without investment, there is no growth,” said Brookings Institution’s Initiative for Latin America director Mauricio Cárdenas. He added companies operate under a permanent confiscation threat and the state of despair and uncertainty is general. (Veneconomy, 10-15-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23492&idc=3)



Politics

Ukraine and Venezuela to open embassies
Presidents Victor Yanukovich and Hugo Chávez agreed to open embassies in both countries today. Later in the day, Chávez will visit State plane manufacturer Antonov facilities where he could announce the purchase of two An-74s. (Veneconomy, 10-18-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23506&idc=1)

Chavez heads to Iran on diplomatic tour
Venezuelan President Hugo Chavez is set to arrive in Iran Monday night to discuss the expansion of relations between the two countries, according to Iran's semiofficial Fars News Agency. His visit comes on the heels of stops in the Russian Federation and Belarus, where the Venezuelan leader signed economic cooperation deals, which included an agreement with Moscow to build Venezuela's first nuclear power plant. With its burgeoning nuclear program, Iran has shown interest in uranium deposits in Venezuela. (CNN, 10-18-2010; http://edition.cnn.com/2010/WORLD/meast/10/18/iran.chavez.visit/index.html?section=cnn_latest)

There! He said it!
Caracas’ elected lawmaker to the National Assembly -Aristóbulo Istúriz (PSUV)- said all governorships and mayors’ offices should disappear in order to catalyze the movement towards a Socialist system in Venezuela. He claimed “with these mayoralties, with these governorships, we’re not going to carry out the revolution.” Istúriz added that they also have to move “towards the socialization of the means of production.” (Veneconomy, 10-18-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23508&idc=1)



Petroleum & Energy

Ukrainian companies to develop oil and gas fields in Venezuela
The presidents of Ukraine, Viktor Yanukovych, and Venezuela, Hugo Chávez, reached an agreement on Monday under which Ukrainian companies will develop oil and gas in Venezuela. "I agreed with Chávez that Ukraine will start to develop oil and gas in Venezuelan territory," Yanukovich said in a joint news conference with Chávez, according to Ukrainian agencies. (El Universal, 10-18-2010; http://english.eluniversal.com/2010/10/18/en_pol_esp_ukrainian-companies_18A4622491.shtml)

Rosneft will pay PDVSA $1.6 billion for its 50% stake in four Ruhr Oel refineries in Germany, according to the agreement signed in Moscow on Friday. PDVSA co-owns the refineries with BP. The plants have a combined capacity of 1.04 million barrels per day. (Veneconomy, 10-15-2010; http://www.veneconomy.com/site/index.asp?ids=44&idt=23495&idc=3)

Russia to Build Venezuela’s First Nuclear Power Plant
Russia agreed to build Venezuela’s first nuclear power plant after talks in Moscow between the countries’ presidents, Dmitry Medvedev and Hugo Chavez. The two nations will cooperate to develop nuclear power in Venezuela, including a research reactor, according to the agreement signed today by Sergei Kiriyenko, head of Rosatom Corp., Russia’s state-run nuclear holding company. (Bloomberg, 10-15-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aaFfwM94Uaew)

Venezuela inks oil deal with Belarus--Chavez
Venezuelan President Hugo Chavez agreed on Saturday to supply the former Soviet republic of Belarus with 30 million tons of oil over three years from 2011 in a deal worth as much as $19.4 billion. Belarus has slashed imports of Russian Urals blend oil and increased purchases from Venezuela since Moscow imposed export duties, a step that raised the price of Russian exports to Belarus by about 36 percent. (Reuters, 10-16-2010; http://www.reuters.com/article/idUSLDE69F0CK20101016)



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.

Thursday, October 14, 2010

October 14th, 2010

Economics, Trade & Business

Cost of banking crisis amounts to USD 962 million
More than a year after a group of small and medium-sized financial institutions went bankrupt, the Venezuelan Bank Deposit Guarantee and Protection Fund (Fogade) provided partial data about the banking crisis. Fogade must pay each depositor a deposit insurance amounting up to USD 6,977. As of October 10, the Venezuelan financial institution has paid about USD 962 million at the official exchange rate of VEB 2.60 per US dollar) to customers of seized banks Federal, Canarias, Banpro, Baninvest, Sol, Real and Inverunión. Not all depositors have claimed insurance payment. If they had done so so, Fogade would have had to pay USD 1.26 billion. (El Universal, 10-14-2010; http://english.eluniversal.com/2010/10/14/en_eco_esp_cost-of-banking-cris_14A4605533.shtml)

Goldman Sachs highlights upside potential of Venezuelan and Argentine debt
Argentine bonds with a coupon linked to growth look attractive ahead of the 2011 election, even after their recent rise, while Venezuelan debt would also have an upside potential, said Sam Finkelstein, a managing director in the emerging markets debt team at Goldman Sachs Asset Management, in London. "One should be aware of the risks of investing in Venezuela, but the risk of default is not imminent. I do not think that it is easy to invest in these instruments, but the outlook could change," he said. (El Universal, 10-14-2010; http://english.eluniversal.com/2010/10/14/en_eco_esp_goldman-sachs-highli_14A4607611.shtml)

Morgan Stanley warns about foreign exchange crunch in Venezuela
Venezuela keeps borrowing as a mechanism to ease the effects of the foreign exchange crunch on the domestic economy, and to find new funds that to help the country improve the profile of its liquid assets. State-run oil company Petróleos de Venezuela announced on Tuesday the issuance of USD 3 billion in bonds in a press release. The issue will have a semi-annual coupon and mature in 2015, 2016 and 2017, with equal repayment. Bonds may be purchased in the primary market, at the official exchange rate of VEB 4.30 per US dollar. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_eco_art_morgan-stanley-warns_13A4600937.shtml)

BCV special coin will circulate its 70 anniversary
The Central Bank of Venezuela (BCV) will put into circulation on Friday October 15 a special issue of the currency of 0.50 cents, designed and minted by the Central Bank to celebrate its 70th anniversary. Will be issued five million pieces of that coin, which differs from the current 0.50 cents per show on the reverse the official logo of the 70 anniversary of the BCV, even if on the face are equal. (AVN, 10-13-2010; http://www.avn.info.ve/node/22880)

Andean Development Corp lends Venezuela $700 mln
The Andean Development Corporation approved a loan of $700 million for a Venezuelan hydroelectric dam and public transport project, the development bank said on Wednesday. (Reuters, 10-13-2010; http://www.reuters.com/article/idUSN1327896520101013)

Venezuelan business sector rejects state-centered policies
"Economic despotism" implemented by Hugo Chávez's government has put Venezuela country in a "state of shock" and will only lead to the "destruction of the country," said Noel Álvarez, the president of the Venezuelan Federation of Trade and Industry Chambers, to sum up the perception of local entrepreneurs vis-à-vis the decisions made by the Executive Office. "The only results of a foolish and unfeasible economic project are economic downturn and (a litany of) excuses. (This model), which aims at establishing only one employer who, through the tyranny of monopoly, wants to make decisions in each sector of our public and private lives," said the business leader in the closing session of the 66th annual meeting of Venezuela's private business chamber, held in Puerto Ordaz, a major city of southern Bolívar state. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_eco_art_venezuelan-business_13A4601133.shtml)

The costs of the revolution
Venezuela is paying a high price for the imposition of the Castro-communist project. In the interests of the revolution, the regime has been legislating grotesquely outside the bounds of the Constitution and, resorting to farcical illegality, wiping out private property by dint of “expropriations,” which, in fact, is no more than pillage by those who abuse their power in the belief that it is eternal. These mass “expropriations” of private companies are costing the country dear, not only because this practice has meant the destruction of the domestic productive apparatus, but also because of investments that have not been made. In the first quarter of 2010, direct investment was -US$1.8 billion. (Veneconomy, 10-14-2010; http://www.veneconomy.com/site/)



Politics

Chávez to strengthen ties with Russia, Iran and Libya
Venezuela's President Hugo Chávez is starting in Moscow on Thursday an international tour that will take him to Iran, Belarus, Ukraine, Syria, Libya, Algeria and Portugal, in order to strengthen his political and economic relations with these countries. "It is an extremely important trip that will allow us to deepen our relations in a multi-polar world," said the Venezuelan president. Chávez, who is an advocate of a new world order and has worked to counteract the traditional influence of the United States over Latin America, has established for years a web of relations with countries such as Iran, Russia, Syria or Libya, based on political affinity. Later, he has signed important cooperation agreements. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_pol_esp_chavez-to-strengthen_13A4601257.shtml)

Chavez defends nuclear energy right, denies ETA link
Venezuela's President Hugo Chavez hailed its alliance with Russia and said his country had a right to develop nuclear energy as he started a visit to Moscow on Thursday. Chavez is planning to buy tanks in Russia, after committing to $5 billion in earlier arms deals, and discuss construction of a nuclear plant which will use Russian technology. "We are going to develop nuclear power and nothing will stop us," he told Russian and Venezuelan students at the Library of Foreign Literature in Moscow. He denied that two members of the ETA militant group were trained in Venezuela and called Spain's charges "part of the aggression by the (U.S.) empire." (Reuters, 10-14-2010; http://www.reuters.com/article/idUSLDE69D1YO20101014)

Venezuelan Attorney General vows to probe alleged ETA member
Venezuelan Attorney General Luisa Ortega Díaz said that her office will take all necessary steps in the context of the investigation carried out into José Arturo Cubillas Fontán, for his alleged connection with Basque terrorist group ETA and the rebel Revolutionary Armed Forces of Colombia (FARC). Ortega Díaz stated in a press release that all people possibly related to the investigation, even those living outside Venezuela, will be summoned. (El Universal, 10-14-2010; http://english.eluniversal.com/2010/10/14/en_pol_esp_venezuelan-attorney_14A4607091.shtml)

"Armed forces refuse indoctrination"
In the opinion of the director of the Projective Policy Study Center (CEPPRO), José Machillanda, it can inferred from the recent remarks of the former chief of the Operational Strategic Command, General Jesús Gregorio González González, " that there is inside the military component, a group of professional military chiefs that openly rebuts the intended indoctrination, fracture and breakup of the armed forces." In the words of González González, "we cannot link our military to the president or the leftwing trend under the current government." For Machillanda, the general's message mirrors "a behavior nearing military professionalism and contains a political-military request for the president to observe the Constitution." (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_pol_esp_armed-forces-refuse_13A4602091.shtml)

New Minister of the President’s Secretariat is recently re-elected legislator Francisco Ameliach (PSUV-Carabobo), according to a presidential decree published in Monday, October 11 Gaceta Oficial, circulating today. (Veneconomy, 10-14-2010; http://www.veneconomy.com/site/?ids=44&idt=23456&idc=1)

 

Petroleum & Energy

PDVSA to Sell Refinery Stake to Russia, Chavez Says
Petróleos de Venezuela, S.A., the state-owned oil company, agreed to sell a German refinery stake to a Russian company, President Hugo Chavez said, without naming the potential buyer or the refinery. “This is a good deal for us and Russia is very interested in the stake for geopolitical purposes,” Chavez said today on state television after arriving in Russia for an official visit. “This liberates us from an asset that we don’t need and will allow us to invest in other areas.” (Bloomberg, 10-14-2010; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aD9LIxh7yiU0)

Venezuela's oil production up 111,000 bpd
According to the monthly report of the Organization of Petroleum Exporting Countries, Venezuela's oil production increased by 4.8 percent in September, hitting 2.4 million bpd, a little less than 10 percent of OPEC's oil production. Venezuela's oil production averaged 2,288,000 bpd in August, while it increased by 111,000 bpd in September to 2,400,000 bpd. (El Universal, 10-13-2010; http://english.eluniversal.com/2010/10/13/en_eco_art_venezuelas-oil-prod_13A4602571.shtml)

China-Venezuela agreement terms for the development of the Junín 4 Bloc at the Orinoco Oil Belt include a $900 million bonus fee CNPC would pay Venezuela; a 25-year exploitation term that could be extended for a further 15 years if both parties meet the agreed Mixed Company’s (Venezuela, 60% and China, 40%) Investment Plan (October 11 Gaceta Oficial). (Veneconomy, 10-14-2010; http://www.veneconomy.com/site/?ids=44&idt=23458&idc=4)



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.