January 17th, 2011

Economics, & Finance

Another Venezuela currency devaluation

Venezuela is likely to devalue its currency again soon after President Hugo Chavez scrapped a plan to increase the country's sales tax as analysts said the impact of New Year devaluation had been limited. Wall Street experts had welcomed the socialist president's plan to hike the recession-hit economy's sales tax and maybe put in place a new bank tax and other moves to generate income. (Reuters, 01-17-2011; http://uk.reuters.com/article/idUKTRE70D5NK20110114)

PDVSA is authorized to trade bonds in the state-run stock exchange

The state-run oil company Petróleos de Venezuela (PDVSA) was authorized to negotiate up to USD 6 billion of its bond portfolio. With this transaction, the new state-run securities exchange will be ready to start operations. The state-run Bicentennial Stock and Bond Exchange (Bolsa Publica de Valores Bicentenaria) is expected to start operations in the next few days. Bonds will be traded in the market. According to analysts, it will be a source of foreign currency under a foreign exchange control implemented in Venezuela in 2003. (El Universal, 01-14-2011; http://english.eluniversal.com/2011/01/14/en_eco_art_pdvsa-is-authorized_14A4984175.shtml)

Venezuela's industrialists ask for a single exchange rate

The Venezuelan Confederation of Industries (CONINDUSTRIA) urged the government to establish a "coordinated and stable" economic policy that sets, among other things, a "unique and competitive" exchange rate. "The domestic manufacturing sector reiterates that if Venezuela had stable and coordinated macroeconomic policies, as provided by the Constitution of the Bolivarian Republic of Venezuela, and a single and competitive exchange rate, there would be a healthier economy, a stronger and more productive industry, and less dependence on imports. Therefore, Venezuela would not have the highest inflation rate in the hemisphere and an accelerated process of destruction of the national production apparatus". (El Universal, 01-12-2011; http://english.eluniversal.com/2011/01/12/en_eco_art_venezuelas-industri_12A4970493.shtml)

Growing deindustrialization and dependence on oil

Official numbers reveal that in 12 years the government of President Hugo Chávez, far from eroding the rent-seeking condition of the Venezuelan economy, has reinforced a system that since the late eighties means stagnation and inability of sustainable wealth creation. The socialist project, focused on replacing the private sector, has enhanced a scheme of deindustrialization where the country technically exports oil only. In the meantime, imports soar and the State allocates oil revenues by selling cheap dollars, thickening the payroll of public servants and granting subsidies. Numbers provided by the Central Bank of Venezuela (BCV) put non-oil exports ending 2010 at USD 3.43 billion, 18.8 percent below USD 4.22 billion in 1999. (El Universal, 01-14-2011; http://english.eluniversal.com/2011/01/14/en_ing_esp_growing-deindustrial_14A4983331.shtml)

Domestic output tumbles; foreign purchases soar

From a premise of agricultural and food security and sovereignty, the government has implemented policies and regulations that have by no means favored domestic production. On the contrary, the move has laid a siege to the agribusiness sector, resulting in less production and growing dependence on imports. As a result of such government policies, domestic production is undergoing deep recession. According to the Venezuelan National Confederation of Farmers' Association (FEDEAGRO), 70 percent of the food consumed in the country is imported. For this reason, the association has urged the government to boost agriculture with fair trade policies and fair prices. (El Universal, http://english.eluniversal.com/2011/01/14/en_ing_esp_domestic-output-tumb_14A4983251.shtml)

Venezuela and Ecuador trade with new virtual currency

Ecuador sent Venezuela an initial shipment of crude palm oil under a new trade currency regime known as the Unified System for Regional Compensation, or Sucre, the Ecuadorian government said. Ecuador’s state-run National Development Bank, or BNF, said Tuesday the shipment carrying 5,000 metric tons of crude palm oil – part of a bi-monthly export agreement between firms in both countries – left for Venezuela on Dec. 31. (Latin American Herald, 01-13-2011; http://www.laht.com/article.asp?ArticleId=383865&CategoryId=10717)

Venezuelan government intervention of Banco Industrial, and its subsidiary FIVCA has been lifted, announced the Banking Institutions Superintendent Edgar Hernández Behrens. He explained the audit board of the bank which was intervened in 2009, presented a business plan for its recovery between 2011 and 2013. He said the members of the new board of directors will be appointed in the next two weeks. (Veneconomy, 01-12-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24460&idc=2)

Commodities

Venezuela crude, products exports rise 10% in December

Venezuela’s net exports of crude and refined oil products rose 10 percent in December from the previous month to 2.24 million barrels a day, according to Inspectorate Venezuela SCS, a contractor to Venezuela’s Energy and Petroleum Ministry. Net shipments increased from a 2010 low of 2.03 million barrels a day in November, according to shipping records e- mailed to Bloomberg. Exports climbed 1.4 percent from a year earlier. Production of crude declined 4.1 percent to 2.69 million barrels a day in November from 2.8 million barrels a day in October, Inspectorate also said today. (Bloomberg, 01-13-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aZejJuBvf7rM)

Venezuela raises oil reserves, Chavez says

President Hugo Chavez said Venezuela has dramatically increased its oil reserves and is now the world leader. Some experts, however, said the new figures are inflated and that Venezuela's oil industry is suffering serious problems. Chavez said Tuesday night that officials certified vast deposits of heavy crude in the Orinoco River basin in December, and that “we have reached 253 billion” barrel of oil. Gustavo Coronel, an energy consultant and former executive of state oil company Petroleos de Venezuela SA, said such a quick increase is technically impossible. (Washington Post, 01-12-2011; http://www.washingtonpost.com/wp-dyn/content/article/2011/01/12/AR2011011201885.html)

PDVSA subsidizes a third of sales and finances 40% of exports

Petroleos de Venezuela will have problems in its revenue stream during 2011, even with high oil prices, as forecast by the experts at Bank of America Merrill Lynch. In a report warning that the government sold a third of exports below market price and 40% of foreign sales are on credit. "We estimate that 1 million barrels will be sold at market price and nearly 500,000 barrels placed under the special conditions governing energy cooperation agreements," they say. (El Nacional, 01-13-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuelan steelmaker announces investment plan to expand production

Venezuela-based steel manufacturer Siderurgica del Orinoco "Alfredo Maneiro" Sidor announced Monday a new investment plan and infrastructure improvements that will aid in accomplishing its production targets for 2011, which aim to reach four million metric tons of liquid steel. Sidor produced 1,804,000 mt of liquid steel in 2010. (VHeadline, 01-11-2011; http://www.vheadline.com/readnews.asp?id=100033)

Cemex and Venezuela would make their “friendly agreement” on the amount the Venezuelan government is to pay for the expropriation of three cement plants among other assets in the next days. Swiss UBS office in Mexico said $650 million for a 75.7% stake in the company would be a “reasonable” amount; the same amount the government promised to pay Swiss company Holcim. (Veneconomy, 01-11-2011; www.veneconomy.com/site/index.asp?idt=24437&idc=3&NPag=2&Start=15&aaD=2011&ids=44&Var_Send=1&mmD=01&ddD=11&mmH=01&ddH=13&aaH=2011&Send=Find)

Politics

Venezuela's Chavez could shorten decree powers

Venezuela's President said on Saturday he was not a dictator and could reduce his much-criticized 18-month decree powers to a shorter period if laws were implemented to attend an emergency caused by floods. "I am capable of asking this National Assembly to overturn the Enabling Law," he told parliament of the measure giving him fast-track decree powers. "In five months we might be able to carry out all the laws to manage the emergency." (Reuters, 01-15-2011; http://www.reuters.com/article/idUSN1522458320110115)

Government invites private sector to work together to increase domestic production

Based on the projection that Venezuela will have an economic growth of 2% this year, President Hugo Chavez made a call to the private sector to work jointly with the Government. “To the private sector that works and likes to work, if you need support from the Government, here you have my hands to work together to rise the domestic production, the small, middle and big companies,” he said on Saturday during the presentation of the 2010 Annual Report and Accounts. (AVN; 01-15-2011; http://www.avn.info.ve/node/38455)

Venezuela among the countries where democracy has reversed

Democracy significantly retreated in 25 countries in 2010, and the democratic world did not resist the process, Freedom House, an independent group which monitors the status of liberties, reported on Thursday. Latin America was represented in this list by Venezuela, Mexico and Haiti. (El Universal, 01-13-2011; http://english.eluniversal.com/2011/01/13/en_pol_esp_venezuela-among-the_13A4977051.shtml)

Vargas Llosa: What is happening in Venezuela is catastrophic

"What is happening in Venezuela is catastrophic," the 2010 Nobel Laureate, Peruvian author Mario Vargas Llosa, said on Thursday in Uruguay, in reference to the government of Venezuelan President Hugo Chávez. These few remarks leaked, so far, from a private speech delivered in a hotel of the Uruguayan city of Punta del Este, where the writer is engaged in a number of activities. (El Universal, 01-13-2011; http://english.eluniversal.com/2011/01/13/en_pol_esp_vargas-llosa:-what-i_13A4978411.shtml)

Opposition plans to ask for Venezuela's entry into Mercosur

The opposition bloc of the Venezuelan Parliament Group to the Latin American Parliament (Parlatino), composed of five deputies, prepared a "draft agreement" that will be introduced in next-week’s session. The purpose is seeking the unanimous approval of a request made to Paraguay to let Venezuela enter Mercosur. (VHeadline, 01-11-2011; http://www.vheadline.com/readnews.asp?id=100081)

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.