January 10th, 2011

Economics, & Finance

Venezuela to devalue second time in 2011

Venezuelan President Hugo Chavez will devalue the bolivar for a second time in three months as the government seeks to boost spending and pull the economy out of recession, according to a Bloomberg survey. South America’s largest oil-producing nation will devalue its currency by weakening the exchange rate used in the central bank-administered bond trading market, or Sitme, by 18.5 percent to 6.50 bolivars per U.S. dollar from 5.30 at present, according the median estimate of eight analysts surveyed by Bloomberg. Five of the analysts said the adjustment, which helps boost government revenue from oil exports, will occur by March 31. (Bloomberg, 01-07-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aXAJKD6yRVws)

Second contraction year for Venezuela; 2% expansion forecasted in 2011

Venezuela's economy contracted 1.9% 2010, marking a second year of recession according to a release from the Central Bank. The economy shrank 3.3% in 2009, but President Hugo Chavez' government said the country is now pulling out of recession and on course for 2% growth in 2011. "We foresee a positive tendency for 2011," the Central Bank said in its annual report on preliminary economic data for this year. The report said oil GDP shrank 2.2% in 2010 while the non-oil economy fell 1.8%. Estimated annual inflation in December was 1.6%, bringing the annual consumer price rise for 2010 to 26.9%, up from 25.1% in 2009, said the bank. (Merco Press, 01-06-2010; http://en.mercopress.com/2011/01/06/second-contraction-year-for-venezuela-2-expansion-forecasted-in-2011)

Investment plummets 15 percent in the last three years

After decades of misfortune, oil exporting countries have learnt that if they are to expand production capacity, they need both to save a part of their revenues and to diversify exports, which requires investments in machinery, equipment, and tools. According to data issued by the Central Bank of Venezuela (BCV), after a period of recovery, following a lockout in 2002, investment has tumbled in the last three years, for an accumulated 15-percent decrease between 2007 and 2010. In 2009, investment fell 4.8 percent and the only positive sign was an increase in public sector investment in the second half of the year thanks to the purchase of plants and equipment to deal with electricity shortage. (El Universal, 01-10-2011; http://english.eluniversal.com/2011/01/10/en_eco_esp_investment-plummets_10A4956971.shtml)

Commodities

Venezuela's oil production below 2003 level

Figures released by the Central Bank of Venezuela (BCV) on the behavior of the economy in 2010 raise new doubts about the operational capacity of state-run oil company Petróleos de Venezuela (PDVSA), as oil production has declined to the lowest level in the last seven years. The Year's End Message released by the BCV late in December 2010 reported that the Venezuelan economy fell 1.9 percent. Last year, oil gross domestic product (GDP) declined 2.2 percent compared to 2009, when it recorded a sharp drop of 7.2 percent versus 2008. In real terms, and based on the Venezuelan bolívar's value in 1997, the BCV estimates that in 2010 the amount of barrels of oil and gas, as well as oil byproducts and refined oil products, was valued at VEB 6.33 billion (USD 1.47 billion) versus VEB 6.74 billion (USD 1.57 billion) in 2009. (El Universal, 01-10-2011; http://english.eluniversal.com/2011/01/10/en_eco_esp_venezuelas-oil-prod_10A4956493.shtml)

Venezuela ready to buy Azerbaijani oil to meet contractual obligations to Belarus

Venezuela is ready to buy crude from Azerbaijan to meet its contractual obligations to deliver 30 million tons of oil to Belarus between 2011 and 2013, Americo Diaz Nuñez, the Venezuelan ambassador in Minsk said. He promised that Azerbaijani oil shipped to Belarus would have the same quality as Venezuela's light sweet Santa Barbara crude. "There may be a situation where Venezuela is not capable of producing 10 million tons of oil, which is in demand across the world, or where transport problems arise," Mr. Nuñez warned. (Naviny, Belarus News, 01-06-2010; http://naviny.by/rubrics/english/2011/01/06/ic_news_259_358832/)

Rising food prices bring host of political risks

The highest risks of farmland expropriation remain in Latin America, insurers say -particularly Venezuela, Bolivia and Ecuador- but this is more down to local political factors than rising prices. The greatest impact of the recent rally could be on land deals in Africa, some suggest. (Reuters, 01-07-2011; www.reuters.com/article/idUSTRE70521L20110107?pageNumber=2)

Logistics & Transport

Bolipuertos announces infrastructure works in 2011

Bolipuertos authorities announced infrastructure and general works in all the country's ports during the first quarter of the year through a general contract, among which asphalt and transport improvements. Bolipuertos president, C/N Elsa Gutiérrez Graffe, said the modernization of the main ports of Puerto Cabello and La Guaira had been approved through the National Plan for Port Development, which aims to develop ports to international standards. (Radio Nacional de Venezuela, 01-06-2011; http://www.rnv.gov.ve/noticias/?act=ST&f=2&t=146081)

Politics

Chávez orders to "intensify" takeover of urban lands

"The rich took the Valley (of Caracas)". This statement made by Venezuela's President Hugo Chávez leads people and militia to seize abandoned urban plots of land. In his 368th radio and TV show Aló, Presidente (Hello, President), Chávez ordered his supporters to "intensify" the takeover of urban lands that could be used to build houses. "A commission should be established soon and the militia must occupy abandoned plots of land," said the Venezuelan president. He insisted that "the poor were forced and deceived into living in the most fragile hills, with steeper slopes, prone to more landslides, with no planning and engineering aid." (El Universal, 01-10-2011; http://english.eluniversal.com/2011/01/10/en_pol_esp_chavez-orders-to-in_10A4957371.shtml)

People in makeshift shelters to receive workshops

The Venezuelan Ministry of Science, Technology and Intermediate Industries, together with the Ministry of Communes and Social Protection, will begin a training process by means of social productive workshops for people who remain in different makeshift shelters enabled by the government. The information was given on Monday by deputy minister of scientific and technological development, Jorge Arreaza, who also explained they will arrange a plan of action with the different training commissions created in makeshift shelters. The idea is that people who live in these makeshift shelters can carry out the process of workshops themselves. (AVN, 01-10-2011; http://www.avn.info.ve/node/37547)

Venezuelan government lifts nationalization measure on 16 estates in Zulia

The Government of Venezuela lifted the nationalization measure on 16 estates that were located at the South of the Lake Maracaibo zone, Zulia state (Venezuela’s northwest), after verifying their operations, informed this Monday the Agriculture and Lands Minister Juan Carlos Loyo. Loyo explained that it was corroborated that the owners of said estates lived in those lands, they do not own more lands and they are willing in joining the reconstruction and support policies for the farmers of the zone. Moreover, the Lands Minister underscored that the governmental measure continues in the rest of the estates, which represent close to 21,000 hectares, because of terrible  labor relations, violations to the Labor Law and human rights. (AVN, 01-10-2011; http://www.avn.info.ve/node/37576)

A coup against the constitution

IN AN election for the National Assembly last September, Venezuelan voters sent a clear message to Hugo Chávez, their autocratic elected president. Slightly more of them voted for opposition candidates than for the ruling party and its allies. Thanks to the government’s manipulation of the electoral rules, the opposition’s votes only translated into 67 seats, whereas the chavistas ended up with 98. But even that was not secure enough for Mr. Chávez. He has used the final three months of the outgoing assembly, in which he has an overwhelming majority, to render irrelevant the incoming legislature, due to be sworn in on January 5th. The centerpiece of this effort is an enabling law which grants the government the power to rule by decree for the next 18 months. (The Economist, 12-28-2010; http://www.economist.com/node/17796581?story_id=17796581)

Venezuela: A divided country?

As Venezuela's new parliament meets for the first time, the BBC's James Robbins asks if the oil-rich country is now as polarised as its parliament, where the opposition has gained seats but only limited influence. (BBC News, http://www.bbc.co.uk/news/world-latin-america-12123071)

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.