February 10th, 2011

Economics & Finance

S&P holds Venezuela ratings at BB-/B

S&P on Wednesday affirmed its BB-/B foreign and local currency sovereign credit ratings with a "stable" outlook on Venezuela. The affirmation also covered the BB- transfer and convertibility assessment. The service said the country's solid external and fiscal positions are major rating strengths while its unstable political environment, immature legislation, price and foreign exchange controls and other unpredictable economic measures are rating weaknesses. In addition, frequent seizure of private companies by the state hampers private investments and productivity, the service noted. (ADP News, 02-10-2011; http://adpnews.info/?nid=4156d030ed0b847b)

Venezuela’s inflation accelerates after forex adjustment

Inflation in Venezuela is on an upward trend, as appears from the numbers released on Tuesday by the Central Bank of Venezuela (BCV), which show a 2.7 percent increase in the consumer price index. This rise was due to several reasons, but the exchange rate adjustment was the main factor. In a scenario where the government promised that the unification of the two-tier exchange rate at VEB 4.30 per US dollar in December 2010 would not damage the price of food items and health services, reality shows otherwise, according to Venezuelan economist Pedro Palma. (El Universal, 02-09-2011; http://english.eluniversal.com/2011/02/09/en_eco_esp_venezuelan-inflation_09A5137457.shtml)

Inflation rose 2.7% in January, nearly one percent point higher than the rate last December (1.8%) and a whole point higher than the rate in January 2010. The inflation rate in the last 12 months is 28.5%, the highest in the region.

(Veneconomy, 02-08-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24832&idc=2)

Agricultural prices rose by 68 percent in 12 months

Data released by the Central Bank of Venezuela (BCV), shows the rising cost of food is unstoppable. This variable has the strongest impacts on the quality of life in the poorest Venezuelan households. The cost of agricultural products in January rose 9.1 percent and over the past twelve months, the cumulative increase in prices reached 68 percent. The BCV showed that the price of vegetables was up 11.1 percent, and it played the main role in the hike of food prices, in general. Food prices were up 4 percent in January and 37.3 percent in the last 12 months. This is the highest jump in the Latin American region. (El Universal, 02-09-2011; http://english.eluniversal.com/2011/02/09/en_eco_art_prices-of-agricultur_09A5136453.shtml)

Commodities

Venezuela's PDVSA offers $3 billion 2022 bond

Venezuela's state oil firm PDVSA offered on Wednesday a new $3 billion 2022 bond which it said was intended to raise funds for its investments in the South American OPEC member nation. In a statement on its web site (www.pdvsa.com), the company said the dollar-denominated paper would have a coupon of 12.75 percent and price at 100 percent. The bond - offered first to companies in Venezuela's "productive sector" - can be purchased at the lowest official exchange rate of 4.3 bolivars to the dollar and then traded abroad in dollars, PDVSA added. (Reuters, 02-09-2011; http://www.reuters.com/article/2011/02/10/venezuela-bond-idUSN0922934020110210)

Barclays Capital: Pdvsa cash flow plunging, short USD 20 billion in cash

The cash flow of state-run oil company Petróleos de Venezuela's will plunge due to the preferential financial conditions granted by Venezuela and the exchange of crude oil and products for goods and services. According to a report issued by Barclays Capital, Pdvsa "will not receive in cash USD 9.4 billion in 2011 and USD 10.7 billion in 2012" due to the export agreement with Cuba and a 50 percent discount in the total invoice value of Venezuelan oil exports to the Caribbean countries (under the PETROCARIBE cooperation agreement). Figures include preferential terms such as long-term funding, and the mandatory payments on loans granted by the bilateral Chinese Fund. As a result, Pdvsa will not receive USD 20.1 billion in cash between 2011 and 2012. (El Universal, 02-09-2011; http://english.eluniversal.com/2011/02/09/en_eco_esp_barclays-capital:-pd_09A5136573.shtml)

Venezuela's PDVSA claims Jan-Sept 2010 profit up 35 pct

Net profit at Venezuela's state oil company PDVSA rose 35 percent to $3.455 billion in the first three quarters of 2010, compared with the same period of the previous year, the company said on Thursday. PDVSA's total financial debt was $22.1 billion at the end of September last year, 0.8 percent higher than at the end of 2009, the company said. The results were a sharp improvement on the first half of 2010, when PDVSA said net profit fell 14 percent after it hiked payments to the state more than 1,200 percent. (Reuters, 02-10-2011; http://www.reuters.com/article/2011/02/10/venezuela-pdvsa-idUSN1018763820110210)

Survey finds global oil production and prices up

An analysis found January oil production from OPEC members reached levels not seen for more than two years as the crisis in Egypt affects prices. Results from a survey by the Platts news agency indicated that oil production from Organization of the Petroleum Exporting counties averaged slightly more than 29 million barrels per day in January, up 300,000 bpd from December and the highest level in more than two years. The survey found that production declines from Iran and Nigeria were balanced by increased production in Angola, Kuwait, Saudi Arabia, the United Arab Emirates and Venezuela. (UPI, 02-10-2011; http://www.upi.com/Science_News/Resource-Wars/2011/02/10/Oil-production-and-prices-up-survey-finds/UPI-46811297345884/)

Alcasa and Venalum aluminium smelters are operating at minimum levels

Negotiations in Caracas by union leaders at CVG Venalum, a Venezuelan basic industry, were unsuccessful. Demonstrations at the aluminum smelter on Monday and workers blocked the access gates of the plant. As a result, operations remain at a minimum level. (El Universal, 02-08-2011; http://english.eluniversal.com/2011/02/08/en_eco_art_aluminum-smelters-al_08A5131571.shtml)

Mayor in Barinas says Venezuela will launch an ethanol plant there by end-2011

Venezuela's government plans to inaugurate in late 2011 a plant in the western Barinas state that will be able to produce 700,000 litres (184,900 gallons) of ethanol per day. Joel Meneses, mayor of the Pedro Manuel Rojas municipality said the plant is being built in the Pedro Manuel Rojas municipality, with Cuban technology as part of a bilateral agreement. The project could benefit communities in the states of Barinas, Portuguesa and Cojedes. The plant is part of a complex, which will include also a 10,600-ton sugar cane mill, storage facilities and a 50 MW power plant. (ADP News, 02-10-2011; http://adpnews.info/?nid=e0607c4806d6aebf)

Politics

VP Jaua says the Government met five serious crises during 2010: energy, banking, rains, mortgage frauds and relations with Colombia

In his speech to the National Assembly on Tuesday, Venezuelan Executive Vice President Elias Jaua highlighted the way the Bolivarian Government overcame successfully five serious crises and he affirmed that only together people and state-run agencies were able to face such situations without negative results, even though attempt of the Right to “take advantage of adversities to generate a climate of hope and send messages of popular defeat.” The Bolivarian Government managed to overcome successfully crises in matters of energy, banking, bilateral relations with Colombia, as well as emergencies in matters of rains and mortgage frauds. He said they were able to overcome these situations and turn them into development opportunities for the population, thanks to reliable and efficient policies implemented by the Executive. (AVN, 02-09-2011; http://www.avn.info.ve/node/42394)

Rousseff seeks to continue Brazil’s close ties With Chavez

Brazil’s President Dilma Rousseff and her Venezuelan counterpart Hugo Chavez will continue the tradition of holding quarterly meetings to discuss trade and social issues, Brazil’s Foreign Minister Antonio Patriota said in Caracas.

“My presence here is to reaffirm Brazil’s pledge to strengthen our bilateral relationship,” Patriota said in comments carried on state television while he met with Venezuela’s Foreign Minister Nicolas Maduro. (Bloomberg, 02-07-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aiDV8eKz3BUo)

Fiber-Optic undersea cable from Venezuela Reaches Cuba

Cuban Computer Science and Communications Minister Medardo Diaz said the undersea cable that arrived on Cuba’s eastern coast on Tuesday after a 19-day voyage from Venezuela, “opens a breach in the (economic) blockade” that the United States has imposed on the island and bolsters “national sovereignty” in telecommunications. (Latin American Herald Tribune, 02-09-2011; http://www.laht.com/article.asp?ArticleId=386513&CategoryId=10718)

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.