February 25th, 2011

Economics & Finance

Venezuela: Economy shrank 1.4% last year, despite a slight uptick during the last quarter

Venezuela's economy contracted 1.4% in 2010, its second consecutive yearly drop, but the country showed signs of recovery during the final quarter, according to the Central Bank. The drop in gross domestic product, coupled with 27% inflation, made Venezuela end 2010 with Latin America's worst economic indicators. Venezuela has been in recession for two years, and its economic problems have lingered even as other nations in the region have resumed growing. The Venezuelan economy shrank 3.3% in 2009. (AP, 02-22-2011; http://finance.yahoo.com/news/Venezuela-Economy-shrank-14-apf-3058827811.html?x=0&.v=1)

Private sector GDP declines for eight quarters in a row

According to recently released Central Bank figures show that slight economic growth in Q4 2011 is underpinned only by the results of state-run companies and by public spending, as the government increases indebtedness at a rapid pace despite rising oil prices. The country is still far from regaining the ground it lost to recession. In fact, Venezuela's production in the fourth quarter of 2010 declined 5.2% compared with the same period of time in 2008. (El Universal, 02-23-2011; http://english.eluniversal.com/2011/02/23/private-sectors-gdp-declines-for-eight-quarters-in-a-row.shtml)

Overall imports up 33%, and imports by the government rise by 72% in Q4 2010

The Central Bank of Venezuela (BCV) reported that in the fourth quarter of 2010, imports went up 33.1% compared with the same period of time in 2009, to total USD 11 billion. Exports accounted for an income of USD 17 billion, including USD 16.74 billion for oil sales. At the same time, Venezuelan government's imports amounted to USD 3.81 billion in the fourth quarter of 2010, a 72% increase over the same period in 2009. "Imports of food, electrical appliances, machinery and common metals were particularly important," said the BCV report. Public sector's imports, in annual terms, have increased by 42 percent in 2010. (El Universal, 02-23-2011;http://english.eluniversal.com/2011/02/22/imports-up-33-percent-in-fourth-quarter-of-2010.shtml) and http://english.eluniversal.com/2011/02/23/govnt-imports-climb-72-percent-in-q4-2010.shtml)

Venezuela is negotiating a $4 billion financing with China for a joint investment fund, said Venezuelan Planning and Finance Minister Jorge Giordani yesterday. The amount represents the third installment of a financing signed in 2009 in exchange for oil sales in advance. (Veneconomy, 02-25-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25059&idc=2)

Trade Minister claims imports are necessary to bring down inflation

Among the outstanding statements made Economic Sector ministers at their hearings in at the National Assembly, one that stands out is Trade Minister Edmée Betancourt’s testimony that it “is necessary to import” some first-need food staples in order to fight inflation. She added that the measure also allows the government to fight speculation. (Veneconomy, 02-23-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25009&idc=2)

Businessmen decry weakened productive sector in Venezuela

The Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS) openly differ with the government on the nation's economic performance. While the Executive Office said that a GDP increase (0.6%) in the fourth quarter of 2010 is an economic recovery and growth, FEDECÁMARAS says the economy continues to shrink. "No one can deny that the private sector continues to decline. It tumbled even in the fourth quarter of 2010," said Noel Álvarez, the president of FEDECÁMARAS. (El Universal, 02-23-2011; http://english.eluniversal.com/2011/02/23/businessmen-decry-fragile-production-apparatus-in-venezuela.shtml)

Venezuelan industrialists forecast drop in sales of six food items

The Venezuelan Chamber of Food Processing Industries (CAVIDEA) predicted a 1.52-10.30% drop in sales of six items of the basic food basket during the first half of 2011. (El Universal, 02-23-2011; http://english.eluniversal.com/2011/02/23/venezuelan-industrialists-forecast-drop-in-sales-of-six-food-items.shtml)

Government claims the growth in agricultural production meets people's needs

According to Agriculture and Land Minister Juan Carlos Loyo, agricultural policies implemented by the Venezuelan Government over the past 12 years have generated a 44% growth in the overall production, which shows an increase of food to satisfy the needs of Venezuelans and guarantee agrifood security and sovereignty. The Minister made the claim during his testimony to the National Assembly upon submitting his annual report. (AVN, 02-23-2011; http://www.avn.info.ve/node/44854)

Heinz announced activities in its San Joaquín plant continue paralyzed by the union, despite a call made by the Labor and Social Security Ministry authorities for a resumption of activities last Wednesday. The plant stopped 24 days ago. (Veneconomy, 02-24-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25033&idc=3)

Commodities

Venezuela does not anticipate an OPEC meeting on Arab unrest

Venezuela does not expect an emergency OPEC meeting in the short term because ample supplies in consuming nations can absorb any disruption from turmoil in the Middle East, a local paper said on Wednesday. Venezuela, which has not diversified from a decades-old reliance on crude as the backbone of its economy, routinely calls for higher prices and says $100 per barrel is fair. Oil Minister Rafael Ramirez said he was consulting his counterpart at top OPEC exporter Saudi Arabia, Ali al-Naimi, and neither of them expected any disruption to global supplies due to the large reserves held by major consuming nations. (Reuters, 02-23-2011; http://www.reuters.com/article/2011/02/23/venezuela-mideast-oil-idUSN2320853820110223)

Venezuela evaluating options for working the Las Cristinas gold mine

Government sources say Venezuela is evaluating the possibility that foreign companies involved in the massive Las Cristinas gold deposit, just weeks after it canceled the contract with the Canadian miner Crystallex. Crystallex (KRY) reported in early February that Venezuela decided to unilaterally terminate its contract to develop Las Cristinas. Immediately afterward, the Russian-Canadian company Rusoro (RML) said it was interested in exploiting the huge gold deposit. (VHeadline, 02-22-2011; http://www.vheadline.com/readnews.asp?id=101272)

Union members hold Chavez responsible for ALCASA aluminum's uncertain future

President Chavez has been held of being responsible for the state of affairs at Alcasa aluminum. Uncertainty seems to be the overriding sentiment at the plant after the government brokered an agreement with the trade unions at the nearby Venalum aluminum plant last week. Members of the Unidad Alcasiana labor group complained that neither Alcasa trade unions nor Basic Industries & Mining Minister, Jose Khan Salamat are coming up with solutions to end the current conflict. (VHeadline, 02-22-2011; http://www.vheadline.com/readnews.asp?id=101265)

Billions of dollars required to expand oil production in Venezuela

Venezuela’s state-owned oil industry must begin an ambitious investment program in oil exploration and production in order to expand its capacity to extract oil throughout the next decade. According to Asdrúbal Baptista, an economist and professor at the Institute of Higher Education in Business Administration (IESA), Venezuelan’s premier management school, the ratio of oil extraction volume to capital allocated for oil exploration and production projects suggest that Venezuela should invest USD 215 billion from 2011 to 2020 to expand production capacity to 4 million barrels a day. This means that Venezuela should be investing approximately USD 20 billion a year. (El Universal, 02-24-2011; http://english.eluniversal.com/2011/02/24/billions-of-dollars-needed-to-expand-oil-production-in-venezuela.shtml)

Construction declines amid lowered investment and input scarcities

Venezuela's construction activity has declined for five quarters in a row, yet during the past three months of 2010 the fall was sharper (-8.6%), according to data published by the Central Bank of Venezuela (BCV). This decrease was due to a slower execution of Venezuelan public spending in the infrastructure sector, lower private investments and failures in the provision of inputs such as cement, rebar’s and aggregates. (El Universal, 02-24-2011;  http://english.eluniversal.com/2011/02/24/construction-declines-amidst-poor-investments-and-scarce-inputs.shtml)

ENI’s appraisal well in Venezuela is successful

Success in the Perla 4 appraisal well in the Cardón IV block in the Gulf of Venezuela brings the Perla gas in place estimate to over 16 tcf. The well is in 60 m (~200 ft) of water and showed 17 MMcf/d of gas and 560 b/d of condensate during a production test. Cardón IV is operated by a joint company owned 50% by ENI and 50% by REPSOL. The venture has concluded the front-end engineering and design for early production of 300 MMcf/d of gas I 2013. (Offshore, 02-24-2011; http://www.offshore-mag.com/index/article-display/1095911294/articles/offshore/field-development/latin-america0/2011/February/eni-appraisal_well.html)

Politics

Venezuela protesters end 3-week hunger strike

Protesting students ended a three-week hunger strike Tuesday, saying they stopped because the Organization of American States is discussing their allegations of human rights abuses by Venezuela's government. Student activist Lorent Saleh said that Venezuelan authorities also agreed to review the cases of people considered political prisoners by the protesters."The government responded to our demands," Saleh said at a news conference. (Americas msnbc, 02-22-2011; http://www.msnbc.msn.com/id/41721815/ns/world_news-americas/)

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.

February 22th, 2011

Economics & Finance

Chavez and Kadhafi had announced a joint billion U$ dollar development fund

“There is the money to begin this project: producing milk, rice and ecologic tourism”, said the Venezuelan President last October 25^th, upon announcing a billion dollar development fund together with Libya’s Muammar Khadafi. This fund was part of 69 agreements signed by Chávez during his recent visit to the Libyan president – most of which were simply memorandums of understanding, the first step toward negotiations. Their purpose was to finance joint industrial and agricultural ventures in Venezuela, aimed at increasing exports from the North African nation. More information in Spanish. (El Nacional; 02-22-2011; http://www.entornointeligente.com/articulo/1092760/Chavez-esperaba-crear-fondo-de-$-1-millardo-con-Gadafi)

Economic study shows Venezuela is reaching a point of no economic return

That Latin America faces the possibility of staging a great story of economic success in the coming years is already widely shared analysis. But among large countries Venezuela is in serious danger of losing the train. In the Caribbean Giant, "the deterioration of the productive and external debt dependence and reduce growth potential and increase the likelihood of new crises," according to a new economic study on the Latin American region by the advice Madrid Solchaga Recio & Associates It specializes in the latest report confirmed the view that 12 years of Chavez are about to put Venezuela on a point of no economic return. (El País, 02-19-2011;

http://www.elpais.com/articulo/internacional/Venezuela/descuelga/exito/latinoamericano/elpepuint/20110219elpepuint_2/Tes)

Chavez Currency Market Takeover could spur further devaluation

The U.S. dollar is becoming scarce in Venezuela nine months after President Hugo Chavez took over the currency market to slow capital flight and fight inflation. Companies including Kellogg Co. and Pernod Ricard, S.A. have reduced imports since the Central Bank imposed currency trading system that limits purchases to $50,000 a day. Rationing may lead Chavez to further devalue the bolivar, according to Alberto Ramos, a senior Latin America economist at Goldman Sachs Group Inc. in New York. Chavez devalued the currency twice in the past 13 months, pushing inflation to a five-month high of 28.5 percent in January. (Bloomberg, 02-21-2011;  http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aKAbqPKpwacI)

FEDECAMARAS considers a general wage increase untenable and would generate exponential growth of inflation, said the head of Fedecámaras Noel Álvarez in a communiqué. He said it is necessary to increase workers’ minimum wage but urged the government to do so by meeting with the workers and the private employers. The Tripartite Commission (State, private employers and workers) has not been summoned in over a decade. (Veneconomy, 02-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24955&idc=3)

Pricing 2022 PDVSA bonds may get monetary and financial authorities in trouble, according to América Economía. Public banking institutions that bought this new foreign currency convertible bond will have to thoroughly assess what strategy to use when they sell such securities withiin the Foreign Currency Securities Transactions Integrated System (SITME) so as not to have financial losses. (Veneconomy, 02-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24954&idc=3)

Total Imports from Brazil declined 12.6% during January

Brazilian exports to Venezuela fell 12.6% in January respect to the same month of 2010, which dragged down the trade between the two nations by 1.8% during the first month of the year. The report of the Secretariat of Foreign Trade (SECEX), Ministry of Development, Industry and Foreign Trade of Brazil, said last January that goods sent to Venezuela for a total of over 208.3 million dollars FOB , were $ 30 million less when compared to the total of a year ago, when this indicator stood at 238.4 million dollars. Brazil is the main market where Venezuela acquires agricultural inputs and livestock, especially beef (live and frozen) and sugar, chicken and coffee, among other items. (El Mundo, 02-21-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=17&Id_Noticia=47595)

Venezuela-based Alimentos Polar has found an alternative to its home market: Colombia, where it registers $100 million in annual sales, Portafolio reports. More information in Spanish. (Portafolio, 02-17-2011; http://www.portafolio.com.co/noticias/empresas/polar-entra-al-mercado-canino-en-colombia

Commodities

It’s official: Venezuela oil company profits down

Venezuela's energy minister concedes profits from the South American country's state-run oil company fell last year. Rafael Ramirez says profits at Petróleos de Venezuela SA fell 28.8 percent in 2010 compared to 2009, despite an increase in international oil prices. Ramirez told the National Assembly on Thursday that profits reached $3.1 billion last year compared to $4.3 billion in 2009. (AP, 02-18-2011; http://finance.yahoo.com/news/Official-Venezuela-oil-apf-2088167079.html?x=0&.v=1)

Venezuela Oil Price Falls to $85.02

Venezuela's weekly oil basket fell slightly from the previous week, with the price of oil in international markets slipping on the easing of tensions in Egypt. According to figures released by the Venezuela Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) during the week ending February 18 fell to $85.02 from the previous week's $85.64. According to the Ministry, the average price so far in 2011 for Venezuela's mix of heavy and medium crude is $85.67, higher than 2010's $72.43, and much higher than 2009’s average price of $57.01 -- but still below the high set by 2008's average of $86.49. (Latin American Herald Tribune, 02-18-2011; http://www.laht.com/article.asp?ArticleId=387368&CategoryId=10717)

Venezuela's Amuay refinery to halt FCC unit for repairs in late 2011

Venezuela's Amuay oil refinery will shut its fuel catalytic cracking (FCC) unit for maintenance works in late 2011, the head of Venezuela's Paraguaná refining complex, Jesus Luongo, said yesterday. Amuay, which has a processing capacity of 645,000 barrels per day (bpd), is part of the Paraguaná complex and its 104,000-bpd FCC unit is key for the fuel production. Venezuela is also planning maintenance works in its Cardón refinery, namely in the lubricants unit and in a hydro treatment unit, both scheduled for 2011, Luongo said. (ADP News, 02-22-2011; http://adpnews.info/?nid=cd26b3a5f0a7badc)

Politics

Venezuela's allies tell OAS chief not to meddle

Allies of Venezuela in Latin America came to the defense of President Hugo Chavez's government on Saturday, telling the head of the Organization of American States not to meddle in Venezuela's domestic affairs. Nations belonging to a left-leaning bloc led by Venezuela and Cuba accused OAS chief Jose Miguel Insulza of being a pawn of the U.S. government, which has urged Chavez's administration to allow an international investigation into alleged human rights abuses. Dozens of Venezuelan students participating in a hunger strike are demanding that Insulza look into their allegations that the government improperly uses judges and prosecutors to persecute Chavez's political adversaries. (AP, 02-19-2011; http://news.yahoo.com/s/ap/20110220/ap_on_re_la_am_ca/lt_venezuela_hunger_strike_1)

Venezuela: US should mind own business on protests

Venezuela's top diplomat hit back at the United States on Friday over its suggestion that President Hugo Chavez's government should allow an international investigation into alleged human rights abuses. Foreign Minister Nicolas Maduro said the matter is a domestic affair and Washington has no business meddling. "We absolutely reject that the U.S. get involved in this issue," he said. "Our country does not accept tutelage from anybody." Maduro was responding to a statement Thursday from the U.S. State Department, which urged the South American nation to permit an investigation "as a means to promote dialogue and understanding." (AP, 02-18-2011;

http://news.yahoo.com/s/ap/20110219/ap_on_re_la_am_ca/lt_venezuela_hunger_strike_3)

Criminalizing dissent?

Biagio Pilieri, a former journalist and mayor, was until recently little known in Venezuela. But last September he was elected to the National Assembly. He has been unable to take his seat because, despite parliamentary immunity, he is under house arrest, awaiting trial for the third time on corruption charges of which he has already been cleared.

Mr. Pilieri is just one of more than two dozen Venezuelans that opponents of President Hugo Chávez say are political prisoners. They include two other elected representatives. Thousands of opposition supporters have been subjected to political persecution, ranging from loss of government jobs to pursuit through the courts. Some have fled abroad. (The Economist, 02-17-2011; http://www.economist.com/node/18184396?story_id=18184396)

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.

February 18th, 2011

Economics & Finance

Former BCV leading economist says Government uses reserves to finance current expense

According to economist José Guerra, the Central Bank has suffered a loss of 64.3 billion Bolivars, according to its latest balance, where – he points out – liabilities are accounted for as assets. “Venezuela does not guarantee monetary stability because the Central Bank is an appendix the Government uses to finance its expenditures by creating valueless currency in order to finance fiscal deficits.” Guerra says that from 2005 to date U$ 38.8 billion dollars have been transferred by PDVSA to the National, upon which the Central Bank has printed bolivars using these dollars as a reserve. These reserves are later depleted without reimbursement to the Bank, thus weakening its position. More information in Spanish. (Entorno Inteligente, 02-14-2011; http://www.entornointeligente.com/articulo/1090904/Gobierno-dispone-de-los-recursos-del-BCV-para-financiar-gastos)

Sales fell 28.4% in the fourth quarter of 2010, according to CONSECOMERCIO president, Fernando Morgado. A survey carried out by the National Trade Council shows commercial increased by 38% during the last three months of last year. The same period reveals a job loss of 20.4%. (Veneconomy, 02-16-2011;  http://www.veneconomy.com/site/index.asp?ids=44&idt=24937&idc=3)

Likely shortage of products in the absence of price increases

The manufacturing sector has requested the Venezuelan government to allow price increases for regulated products, in order to prevent shortage of goods in the domestic market, said Carlos Larrazábal, the President of the Venezuelan Confederation of Industry (CONINDUSTRIA). "We are very concerned about the fact that the Venezuelan government has not taken any decisions so far about the impact of the devaluation" of the bolivar, said the business leader at a press conference. (El Universal, 02-17-2011; http://english.eluniversal.com/2011/02/17/en_eco_esp_likely-shortage-of-p_17A5177651.shtml)

2022 PDVSA Bonds soaked up by health and food sectors

Within this group, all orders between $3,000 and $20 million were assigned in full while the remaining orders which were over this amount were assigned at $20 million. In the case of individuals, the top assignment was of $10,000. (Veneconomy, 02-15-2011; http://www.veneconomy.com/site/index.asp?idt=24908&idc=2&ids=44&Var_Send=1&mmD=02&ddD=15&mmH=02&aaD=2011&ddH=16&aaH=2011&Send=Buscar)

The basic goods basket rose 1,5% to Bs.F.5,051.36 in January, according to the most recent report from The Union’ Documentation and Analysis Center (CENDA). The CENDA pointed out hygiene and toiletries were the items that experienced the greatest increase (2.2%) compared to December 2010. (Veneconomy, 02-16-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24925&idc=2)

Agriculture and Food Ministries have issued no import licenses so far this year

The National Council of Industries CONINDUSTRIA noted that ministries of Food (Minal) and Agriculture and Lands (MAT) have not granted import licenses so far this year, which heightens uncertainty about the lack of decisions on price adjustments after the devaluation implicit December past. "There are firms that are not receiving licenses, which together with strong delays in the delivery of certificates of non-production to suggest that the supply situation is getting complicated," said Carlos Larrazabal, president of CONINDUSTRIA. More information in Spanish. (El Mundo, 02-17-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=17&Id_Noticia=47278

State-run bank provides USD 2 billion to Pdvsa

The financial needs of state-run oil company Petróleos de Venezuela (PDVSA) have been on the rise in the last three years, thus pushing the oil holding to resort to public entities, including state-run bank Banco del Tesoro. In a report published upon the offering of USD 3 billion in PDVSA bonds expiring in 2022, the Venezuelan oil giant said that it issued two investment certificates in December 2010 to Banco del Tesoro for a total of USD 2 billion, thus paving the way for the state-run bank to pump funds into the Venezuelan oil company. (El Universal, 02-17-2011;

http://english.eluniversal.com/2011/02/17/en_eco_art_state-run-bank-provi_17A5178653.shtml)

Heinz ready to resume discussion of collective bargaining agreement

According to a statement released by the US food company, a total of 167 companies and some 2,000 workers are hurt by the strike at a plant run by Heinz in San Joaquín, state of Carabobo, north central Venezuela. The companies that have been affected include sugar mills, glass containers manufacturers, cardboard industries, manufacturers of metal lids for bottles, fruit pulp processors, producers of tomatoes and tomato paste and manufacturers of spare parts for industrial equipment maintenance. (El Universal, 02-17-2011; http://english.eluniversal.com/2011/02/17/en_eco_esp_heinz-ready-to-resum_17A5179857.shtml)

Commodities

Venezuela's oil reserves rose to 296.5 billion barrels

Venezuela's proven oil reserves total 296.5 billion barrels, according to figures updated and officially announced by the Ministry of Energy and Petroleum (Menpet) in a statement. The new proven oil reserves come from traditional and offshore areas which total 242.41 billion barrels, while crude oil from the Orinoco Oil Belt amounts to 86.16 billion barrels. The Menpet said that in February "Minister of Energy and Petroleum Rafael Ramírez announced that Venezuela was in a position to certify the data, and now it can confirm it has become the nation with the largest proven crude oil reserves in the world." (El Universal, 02-15-2011; http://english.eluniversal.com/2011/02/15/en_eco_esp_venezuelas-oil-rese_15A5167373.shtml)

Suggested gasoline rationing may hide a drop in Venezuelan oil production, former PDVSA president Humberto Calderón Berti told Globovisión on Wednesday. He said the possibility of enforcing a rationing of gas consumption would be absurd since it would not solve the high consumption and would rather generate “corruption.” (Veneconomy, 02-16-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24933&idc=4)

Venezuelan Government to boost campaign on proper use of gasoline, denies rationing

“There is not rationing of gasoline in Venezuela. The Energy and Petroleum Ministry seeks to begin a campaign to teach the proper use of gasoline”, explained on Wednesday the chairman of the National Federation of Hydrocarbons Businesses (FENEGAS), Giuseppe Gherardi. Gherardi said to the official Venezuelan News Agency (AVN) that the campaign to be boosted by the Ministry seeks to prevent the waste of gasoline, which is sometimes used for purposes different to supply vehicles, such as cleaning floors. “As gasoline is so cheap, we are wasting it”, affirmed the representative of the association, which joins more than 1,200 gasoline pump stations out of 1,820 existing in the country. (AVN, 02-16-2011; http://www.avn.info.ve/node/43617)

Venezuela choses firms for 15 tcf gas project-sources

Venezuela has picked at least four companies from China, Malaysia, Russia and Algeria for a long-delayed offshore natural gas project in the South American OPEC member, sources at the companies said on Tuesday. The continent's biggest crude oil producer is sitting on some of the world's largest offshore gas reserves, experts say, but it has yet to begin producing any commercial gas. Venezuelan state oil company PDVSA has spent more than a decade searching for partners to develop its Mariscal Sucre project, which is estimated to hold 14.7 trillion cubic feet. (Reuters, 02-15-2011; http://www.reuters.com/article/2011/02/15/venezuela-gas-idUSN1518067920110215)

Simon Bolivar gold mine 70% paralyzed

Trade unions representing workers at the Simon Bolivar gold mine in south-eastern Venezuela held a special meeting to protest against Central Bank´s (BCV) red tape creating obstacles in carrying out a 50-50 export agreement with private mining companies. SUTRAMIOCS union general secretary, Manuel Montiel declared that the mine is currently at a 70% standstill because of a lack of tools and supplies. He charged the Central Bank has not released the necessary cash for the company to purchase tools and manage a necessary cash flow. (VHeadline, 02-15-2011;

http://www.vheadline.com/readnews.asp?id=101080)

Yarmouth industries urged to link-up with Venezuela

A representative from UK Trade and Investment visited the seaside town to discuss developing links with the the South American country. "They can win business and that will help save jobs in the region," said Haden Spicer, a representative from the British Embassy in Caracas. Venezuela has one of the world's largest oil reserves. "There's a big push in the UK to try and export our way out of the current economic downturn," said Mr. Spicer. (BBC News, 02-17-2011;

http://www.bbc.co.uk/news/uk-england-norfolk-12494206)

Crystallex seeks USD 3.8 billion compensation from Venezuela

Under terms of the treaty between Canada and Venezuela for the Promotion and Protection of Investments, Canadian mining company Crystallex International Corp. has filed a request for arbitration against the Venezuelan government. The Toronto-based company decided to file the request before the World Bank's International Centre for Settlement of Investment Disputes ("Icsid"), seeking a full compensation in excess of USD 3.8 billion. (El Universal, 02-17-2011; http://english.eluniversal.com/2011/02/17/en_eco_esp_crystallex-seeks-usd_17A5177931.shtml)

Logistics & Transport

Chinese will take part in building a new container terminal

Representatives of the Asian company Chec visited the port of Puerto Cabello, to join the team responsible for building the new container terminal, agreed action, under an agreement between Venezuela and the Republic of China. The new company technicians from China Harbour Engineering Company Limited, together with staff from Bolivariana de Puertos, will undertake geological and geotechnical studies, including topography and hydrography, prior to starting construction. (El Carabobeño, 02-18-2011; http://www.el-carabobeno.com/impreso/articulo/t180211-sl05/chinos-incorporados-a-construccin-de-nuevo-terminal-de-contenedores)

Politics

Colombia, Venezuela foreign ministers review bilateral accords

Venezuelan Foreign Minister Nicolas Maduro and Colombia’s Maria Angela Holguin met in Caracas this week to focus basically on politics, frontier security and commerce. In a statement before his encounter with his Colombian counterpart, and Colombian National Defense Minister Rodrigo Rivera and Minister of Commerce, Industry and Tourism, Sergio Diaz Granados, Maduro said they do not expect to sign any agreements because the meeting aims at reviewing those already signed. “We will specially tackle with the debt, illicit acts in commercial matters, the accord to substitute the Andean Community of Nations (CAN) and joint ventures in matters of production.” (AVN, 02-16-2011;

 http://www.avn.info.ve/node/43657)

US examining whether Venezuela violates Iran sanctions

A top US official said Tuesday that Washington is closely examining whether Venezuela's cooperation with Iran on energy issues violates international sanctions on the Tehran regime. Arturo Valenzuela, the top State Department diplomat for Latin America, told a congressional panel that "we are looking at that issue" and that the US administration is "trying to determine if in fact there is a violation." (AFP, 02-15-2011;

 http://news.yahoo.com/s/afp/20110216/pl_afp/usvenezuelairansanctionenergy_20110216000657)

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.

February 15th, 2011

Economics & Finance

Venezuela's operational reserves cover only 2.89 months of imports

The country operational reserves were pegged at the end of last year at 9.168 million dollars, according to the balance sheet of the entity's financial statements, published yesterday in the Official Gazette N º 39,614, dated February 11, 2011. This level of reserves sufficient to cover 2.89 months of imports, according to the level maintained in 2010. More information in Spanish. (Entorno Inteligente, 02-15-2011; http://www.entornointeligente.com/articulo/1090924/Se-cubren-2-89-meses-de-importaciones-)

Venezuelan exports to the US increased by 16.6% during 2010, according to figures published the US Census Bureau. Venezuela exported goods for $32.7 million. According to Venamcham, 96.80% of these exports ($31.7 million) are oil and related products while the remaining 3.21% is other products (($1.04 million). (Veneconomy, 02-11-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24879&idc=3)

January Inflation accelerates to 2.7%

Venezuela’s inflation index, the INPC accelerated in January, registering a value of 2.7%, higher than December’s 1.8% and the highest since April of 2010. With this value inflation for the last twelve months has been 28.5%, above last year’s value. While the Government has yet to approve increases for controlled items after the devaluation from Bs. 2.6 per US$ to Bs. 4.3 per US$, non controlled items led rises with Health, up 4.5% in January, Food and non-alcoholic beverages, up 4% and Diverse Goods and Services up 3.3 % leading the way. Most of the increases in Food and non-alcoholic beverages were in unprocessed items and garden products. The Government wants to play hardball in the approval of price increases in the food and health sectors in the next few months, but given the large devaluation in the foreign currency assigned to these products, it will have to approve increases before May as the alternative of widespread shortages has proven to be more damaging than inflation in the last few years. (bbo Weekly Report, 02-14-2011; http://www.bbo.com)

Colombian and Venezuelan FA Ministers will review debt status

Colombian and Venezuelan Foreign Affairs ministers will meet in Caracas Tuesday, February 15 to review the status of the debt with Colombian exporters, estimated at $800 million. Colombian FA Minister María Ángela Holguín said today Venezuela says it has already paid some $600 million but there are a lot of complaints from the Colombian side about not effectively receiving payment. (Veneconomy, 02-11-2011;

 http://www.veneconomy.com/site/index.asp?ids=44&idt=24877&idc=3)

After eight years of controls, Venezuelan economy in a labyrinth

In February 2003, the government of Venezuela's President Hugo Chávez imposed price controls on more than half of the items in the “basic basket” and, at the same time, imposed foreign exchange controls in order to curb capital flight and stabilize the Venezuelan bolívar. However, the results are not those expected. Inflation increased by 405 percent over the past 12 quarters, undermining purchasing power. At the same time, the Venezuelan bolivar has been hit by severe devaluation. Parity of the US dollar in the official market increased 168 % from VEB 1.6 to VEB 4.30. Price controls discouraged domestic production, just as in the past. Supply plummeted and the government has been forced to allow substantial upward price adjustments in essential goods in order to avoid shortages of goods. (El Universal, 02-14-2011; http://english.eluniversal.com/2011/02/14/en_eco_esp_after-eight-years-of_14A5160217.shtml)

Former Chavez minister says "Some parity able to express productivity must be found"

The government bears many minuses in economics; but one takes precedence over the rest. So-called 21st Century Socialism expands dependence on oil revenues and fails to diversify local production. According to statistics from the Central Bank of Venezuela (BCV), non-oil exports in 2010 fell 18.8 percent versus 1999, whereas manufacturing diminished from 16 percent of GDP when Venezuela's President Hugo Chávez took office, to 15 percent last year. In view of Víctor Álvarez, a former Minister of Basic Industries and Mining, "rent-seeking inertia" has prevailed. While he advocates "a new production model" in his research at the Miranda International Center (CIM), he also says "the economic policy should be revised and straightened." (El Universal, 02-14-2011; http://english.eluniversal.com/2011/02/14/en_eco_esp_some-parity-able-to_14A5162211.shtml)

Commodities

PDVSA reportedly is studying gasoline rationing

"Every time you fill your gas tank, are using the cheapest in the world, and your government is subsidizing more than 90% of what it really costs," said President Hugo Chavez on Sunday, without disclosing that the Ministry of Energy and Oil, has been discussing the issue of rates and the possibility of rationing consumption in vehicles. "We must begin to reduce gasoline consumption," added the president, with figures provided by the Minister of Energy and Petroleum Rafael Ramirez, said that the annual cost for Petróleos de Venezuela to produce gasoline is 1.5 billion dollars annually, an amount that can’t be recovered with sales. More information in Spanish. (Entorno Inteligente, 02-15-2011; http://www.entornointeligente.com/articulo/1090959/Estudian-imponer-restricciones-al-expendio-de-gasolina-)

PDVSA: Venezuela To Receive Four Aframax Oil Ships From Japan

Venezuela will receive four Aframax-sized oil tankers from a Japanese company, state-run oil giant Petróleos de Venezuela, or PDVSA, said in a statement Thursday. The announcement comes on the heels of a three-day summit between officials from both countries, and did not reveal the name of the Japanese manufacturer. Delivery of the first ship is expected in early March, and two more will be delivered later this year. The final vessel will arrive during the first quarter of 2012, the company said. Venezuela has not received a Japanese oil ship in nearly 30 years, according to PDVSA. During the meetings, PDVSA said it signed a memorandum of understanding with Japan's Marubeni Corp. to evaluate joint projects in the petrochemical sector. It also is looking at undertaking a deep conversion project at the Puerto la Cruz refinery and an expansion of the El Palito refinery, in conjunction with Mitsubishi Corp. and Itochu Corp. (Fox Business, 02-10-2011; http://www.foxbusiness.com/markets/2011/02/10/pdvsa-venezuela-receive-aframax-oil-ships-japan/)

Venezuela loses $1.5 bln a year through local gasoline subsidies

Venezuela's state oil company PDVSA loses around $1.5 billion a year through domestic subsidies that make the South American OPEC member's gasoline the cheapest in the world, the energy minister said on Sunday. At a cost of $0.03-0.04 per liter ($0.11-0.15 per gallon), most Venezuelans can fill their tank for under a dollar. And since deadly protests in Caracas in 1989, successive governments have been wary of changing the subsidy policy and hiking prices. "Compared to the cost of production, (the subsidy) is more than $1.5 billion (per year)," Energy Minister Rafael Ramirez, who is also president of PDVSA, told President Hugo Chavez when consulted about the issue on a government TV program. (Reuters, 02-13-2011; http://www.reuters.com/article/2011/02/13/venezuela-gasoline-idUSN1319957420110213)

Venezuelan State Oil Giant’s Profits Fall 85% in 3rd Quarter – Still Up 35% for Year on Higher Prices

Venezuelan state oil giant Petróleos de Venezuela S.A. reported a 35% increase In net profits for the January-September 2010 period, compared with the same three quarters of the previous year. For the first nine months of 2010, PDVSA’s net profits totaled just under $3.5 billion, up from $2.6 billion for that same period of 2009, and its total sales from continuing operations climbed 27% to $65.7 billion. The increase in those figures was due to a higher average price of crude in that period of 2010, when the per-barrel price rose to $72.69, compared with $57.02 for those same nine months of 2009. At the same time, the company's profit in the third quarter fell to $358 million from $2.366 billion in the previous year's third quarter, an 85% fall. (Latin American Herald Tribune, 02-11-2011; http://www.laht.com/article.asp?ArticleId=386693&CategoryId=10717)

Venezuelan oil basket falls USD 1.96 to USD 85.64 per barrel

The price of the Venezuelan oil basket fell this week and ended at USD 85.64 per barrel, down USD 1.96 compared to last week. The average price so far this year is USD 85.75. The Ministry of Energy and Petroleum reported that the high availability of crude oil and products have led, among other factors, to a drop in oil prices. (El Universal, 02-11-2011; http://english.eluniversal.com/2011/02/11/en_eco_art_venezuelan-oil-baske_11A5149259.shtml)

Power unit 16 of Guri hydroelectric plant is out of service

Unit 16 of Guri hydroelectric plant, Venezuela’s main source of power generation, has beeen temporarily out of service as of last weekend. There are currently other five units (4, 6, 8, 9, 12) out of service. Some reports through Twitter claim that the unit is at a standstill due to the breakdown of a wound gasket. Following the unit´s shutdown, the National Interconnected System (SIN) will not receive 630 MW. Therefore, there will be the need "to ration 1,100 MW throughout the country." (El Universal, 02-14-2011; http://english.eluniversal.com/2011/02/14/en_eco_art_power-unit-16-of-gur_14A5161611.shtml)

Logistics & Transport

La Guaira port mobilized 75 ships in January

The terminal port of La Guaira mobilized 75 ships in January this year. Data were provided by the Central Coast Ports Company (PLC), a subsidiary of Bolivariana de Puertos (BOLIPUERTOS). The agency said57 boats arrived at the wharf in January 2010, which means an increase of 31.58%. The moored motorboats that are mostly container (65), general cargo (1), RO / RO (2), bulk (1), passenger ships (5) and others (1). As for exports, PLC highlights from the port of La Guaira out 24 metric tons of general cargo. However, 24,685 tons of general cargo and bulk were imports for the month of January. More information in Spanish. (Entorno Inteligente, 02-14-2011;

 http://www.entornointeligente.com/articulo/1090593/La-Guaira-moviliz%C3%B3-s%C3%B3lo-75-buques-en-enero)

Politics

Republican Lawmaker Mack Proposes U.S. Embargo on Venezuela

Republican Congressman Connie Mack of Florida, who has been very critical of Venezuelan President Hugo Chavez, once again called for Washington to put Venezuela on the list of countries that sponsor terrorism and to impose a “full-scale economic embargo” on Caracas. At the Conservative Political Action Conference, or CPAC, the largest yearly gathering of conservative activists which serves as a place for presidential hopefuls to measure their early support, Mack on Saturday devoted almost his entire speech to Chavez, whom he called a “thugocrat” who resorts to using weapons such as oppression, aggression, terrorism and drugs to “destroy” Latin American freedom and democracy. (Latin American Herald Tribune, 02-13-2011; http://www.laht.com/article.asp?ArticleId=386864&CategoryId=10717)

Venezuela's Chavez mocks foes' Egypt comparisons

Venezuela's President Hugo Chavez scoffed on Sunday at comments by critics that his 12-year rule was at risk of a people's uprising like that which toppled Egypt's Hosni Mubarak after three decades in power. "I laugh when some clever analysts from the Venezuelan opposition try to compare my government with that of ex-president Hosni Mubarak in Egypt," Chavez said during his regular weekly "Hello, President!" program. "They're crazy, they're wrong, they have no sense."  (Reuters, 02-13-2011; http://news.yahoo.com/s/nm/20110213/wl_nm/us_egypt_chavez_1)

Venezuela's Chavez predicts 'revolution' will continue - whether he dies or retires

President Hugo Chavez said Sunday that he has no intention of ceasing his efforts to make Venezuela a socialist country, and he expressed confidence that his allies would take the reins of his "Bolivarian Revolution" if he died or decided to step down. "There's no end here, this is going to continue," said Chavez, referring to the political movement he named after 19th-century independence hero Simon Bolivar. (AP, 02-13-2011; http://ca.news.yahoo.com/venezuelas-chavez-says-revolution-continue-even-dies-retires-20110213-133956-676.html)

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.