February 8th, 2011

Economics & Finance

Economist claims Venezuela’s Central Bank official figures show red

The transfer of international reserves to the National Development Fund (FONDEN) in the past five years has used up assets from the Central Bank of Venezuela. According to economist José Guerra, the institution´s balance, published two days ago, shows a capitalization of 64.3 billion Bolivars. According to the official report, total assets of Bs.207.5 billion add up to. However, this total amount includes reserves transferred to the FONDEN, which total 73.6 billion Bolivars since 2005. These transfers are no longer in the hands of BCV but are part of the fund used to finance the Executive, so they cannot be included as assets, according to Dr. Guerra. More information in Spanish. (Reportero 24; 02-08-2011; http://www.reportero24.com/2011/02/finanzas-bcv-se-descapitaliza-y-presenta-numeros-en-rojo/)

Macroeconomic Stabilization Fund turns over USD 832 million to Venezuela's Executive

About two weeks ago, Venezuela's President Hugo Chávez asked Rafael Ramírez, the president of state-run oil company Petróleos de Venezuela (Pdvsa), to transfer USD 500 million from the Macroeconomic Stabilization Fund (FEM), from the USD 832 million that Pdvsa held in the Central Bank of Venezuela (BCV). Chávez said that the money would be spent to build houses and refurbish shelters for people made homeless by heavy rains. The latest numbers released by the BCV indicate that the state-run oil company withdrew USD 829 million from the Macroeconomic Stabilization Fund (FEM). (El Universal, 02-04-2011; http://english.eluniversal.com/2011/02/04/en_eco_art_fem-transfers-usd-83_04A5113291.shtml)

Government considers transferring exchange functions to the Bicentennial Public Securities Exchange Market (BPVB, after its initials in Spanish) in the short term, according to sources within the Venezuelan Planning and Finance Ministry. (Veneconomy, 02-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24771&idc=2)

Average household income fell by 8% during 2010

Economic difficulties and rising prices in goods and services were the common denominators in a year in which household income plummeted for the first time since 2003. According to the numbers produced by the National Statistics Institute (INE), by the first half of last year, household monthly income averaged USD 743.62, versus USD 621.24 the previous year. In nominal terms, it was a 19.7-percent growth. However, inflation added, in 2009-2010 there was a real drop at 8.3 percent. (El Universal, 02-04-2011; http://english.eluniversal.com/2011/02/04/en_ing_esp_average-household-in_04A5099091.shtml)

Declining trade reported in Venezuela

Trade has not recovered in Venezuela, said Fernando Morgado, the president of the Venezuelan Council of Trade and Services (Consecomercio). "We have seen that the downward trend in trade continues," Morgado said during a meeting of the board of director of the Venezuelan Federation of Trade and Industry Chambers (Fedecámaras). With regard to the supply of food products in the domestic market, the businessman said that policies implemented by the government continue to hit manufacture, distribution, and marketing of different goods. (El Universal, 02-07-2011; http://english.eluniversal.com/2011/02/07/en_eco_art_warnings-against-dec_07A5127491.shtml)

Paraguayan congress puts price to Venezuela’s Mercosur incorporation

The Paraguayan political system is willing to consider the incorporation of Venezuela to Mercosur as a full member if there is a “significant gesture or compensation” from the government of President Hugo Chavez, according to congressional sources in Asunción. (MercoPress, 02-05-2011;  http://en.mercopress.com/2011/02/05/paraguayan-congress-puts-price-to-venezuela-s-mercosur-incorporation)

Paraguay supports Colombia’s bid to join Mercosur

Colombia’s request to formally join Mercosur will be addressed during the group’s next summit to be held in Paraguay June 24th, revealed Paraguayan Foreign Affairs minister Hector Lacognata. (Latin Daily Financial News, 02-01-2011; http://www.latindailyfinancialnews.com/index.php/en/politics/world/7710-paraguay-supports-colombias-bid-to-join-mercosur.html)

Commodities

Venezuela´s export barrel average up to $87.60/bbl. this week, up $3.65 from last week, said the Venezuelan Energy and Oil Ministry on Friday. The average for the year-to-date is $85.71/bbl., up $13.02/bbl. compared to 2010. (Veneconomy, 02-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=24782&idc=4)

Venezuela's oil exports to the US rise to 1.38 million bpd

Venezuela's crude oil exports to the United States bounced back in the last week of January, up 34 percent compared to average exports in January 17-21. Venezuelan oil exports to the US in the week between January 24 and 28 averaged 1.38 million barrels per day (bpd), according to figures provided by the Energy Information Administration (EIA), the statistical arm of the US Department of Energy. The previous week, Venezuela's total crude oil exports amounted to 1.03 million bpd. Preliminary figures showed that in January Venezuelan oil exports to the United States averaged 998,000 bpd. (El Universal, 02-04-2011; http://english.eluniversal.com/2011/02/04/en_eco_esp_venezuelas-oil-expo_04A5112891.shtml)

Venezuelan oil minister: $200 oil possible

Crude oil prices could more than double if the unrest in Egypt forces the closure of the Suez Canal, Venezuelan Oil Minister Rafael Ramirez said, according to a Bloomberg News report. A disruption of shipments along the waterway would prompt a meeting by the Organization of Petroleum Exporting Countries “because oil could reach $200 a barrel,” Ramirez told reporters today in Caracas. A $200-a-barrel oil price would easily eclipse the all-time high of $147 a barrel reached in July 2008 and would be roughly double today's prices. A large, sustained rise in oil prices could send retail gasoline prices well above $4 a gallon in the U.S. (Blogs Star Telegram – Barnett Shale, 02-04-2011; http://blogs.star-telegram.com/barnett_shale/2011/02/venezuelan-oil-minister-200-oil-possible-.html)

Venezuela Terminates Crystallex - Canada Miner Mulls Legal Action

Canadian gold miner Crystallex International Corp said that a state-owned Venezuelan company unilaterally decided to end their contract on Las Cristinas project, their largest asset. The Venezuelan company, Corporación Venezolana de Guayana, claimed that Crystallex had not done enough to advance the project, according to a Crystallex statement on Sunday. Crystallex disputed that assertion, saying it had met all of its obligations under the contract and had worked to ensure the project was "shovel ready" while awaiting a permit from Venezuela's Ministry for the Environment and Natural Resources. (Reuters, 02-06-2011; http://www.reuters.com/article/2011/02/06/crystallex-idUSN0617093420110206)

Rusoro eyes Venezuela mine after Crystallex exit

Russian-Canadian miner Rusoro is eyeing Venezuela's Las Cristinas gold project after President Hugo Chavez's government canceled Crystallex International's permit, sending its shares down 35 percent. The mine, south of the Orinoco river and near a town bearing the name of the mythical golden city of El Dorado, may hold Latin America's biggest gold deposits, studies have shown. But a decades-old saga over its development underlines the risks of doing business in Venezuela, where the lure of vast natural resources has been dulled by rule changes, economic difficulties and Chavez's "21st century socialism" project. (Reuters, 02-07-2011; http://www.reuters.com/article/2011/02/07/venezuela-gold-idUSN0722524820110207)

Gold´s share in Venezuela’s total reserve rises to 12%, while foreign currency share drops by 37%

Venezuela’s central bank increased its share of gold reserves 12 percent during the second half of 2010 while its reserves in foreign banks fell 37 percent in the period, according to the bank’s year-end financial report. The bank’s gold reserves increased to 42.4 billion bolivars ($9.86 billion) at the end of 2010 from 37.3 billion bolivars at the end of June, the bank report said. The central bank’s reserves held in foreign banks fell to 7.32 billion bolivars by year-end from 10 billion bolivars in June. (Bloomberg, 02-05-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=auvgUpD6iV_U)

PDVSA announces it will launch six agro-industrial complexes during 2012

Two sugar plants and four agro-industrial complexes to process ethanol and other sugar cane products will be inaugurated by PDVSA Agricola next year, informed Egly Ramirez, president of the Venezuelan state-run oil company subsidiary. “We are working intensively to inaugurate them in 2012. The budget has been approved, the works show great progress and we are currently in the construction stage,” he stated. The six complexes, built simultaneously in different zones of the country, will allow the Venezuelan Government to strengthen the domestic production of sugar, increase the production of balanced food for animals and make incursion into the processing of ethanol and sugar cane derivatives. The two sugar plants would have the capacity to process 7,000 tons of cane per day each. (AVN, 02-06-2011; http://www.avn.info.ve/node/41867)

Politics

Chavez seeking third six-year term

Venezuelan President Hugo Chavez, beset by an economic slowdown for the second consecutive year, announced he would fight on and seek re-election next year for a third six-year term. Chavez suffered setbacks in last year's National Assembly elections that depleted his comfortable majority but, as widely anticipated, he reacted by saying he wouldn't hesitate to issue a presidential decree if and when he faced opposition on a particular issue. (UPI, 02-03-2011; http://www.upi.com/Top_News/Special/2011/02/03/Chavez-to-fight-on-for-a-third-six-year-term/UPI-73841296765848/#ixzz1DHYuvgCy)

Strict timetable is set for National Assembly to grill three ministers on annual report

Three government ministers will appear before Parliament next week to face questions. National Assembly president, Fernando Soto Rojas has made it clear that questions to the ministers should be to the point. Each deputy will be given five minutes to put a question and get an answer. (VHeadline, 02-04-2011; http://www.vheadline.com/readnews.asp?id=100811)

Land redistribution is a clear priority in Venezuela after 12 years of Revolution

One of the most significant achievements in these 12 years of Bolivarian Government is the clear intention regarding lands redistribution and the planning for the agricultural development, said the Agriculture and Lands Minister Juan Carlos Loyo. “The Bolivarian Revolution brought with it the awakening, a spirit of freedom, the knowledge of what the values are and represent on the vision people had up to midst 90s, when nobody dared to express an own opinion, debate and only allowed minorities to make decisions for the majorities,” he said. (AVN, 02-06-2011; http://www.avn.info.ve/node/41907)

An American seems to have the President’s ear in Venezuela

Slip into Librerías del Sur, a chain of state bookstores. Read a state newspaper. Turn on state television. Listen to state radio. Eva Golinger, a New Yorker who speaks Spanish with a thick American accent, seems to be expounding everywhere these days on the threats to this country’s so-called “Bolivarian revolution.” Welcomed into President Hugo Chávez’s fold to such an extent that she accompanied him on a recent trip to Iran, Libya and Syria, Ms. Golinger, a lawyer who first came to Venezuela in the 1990s to research her family’s history, has created a unique niche for herself here: an American with the president’s ear. (The New York Times; 02-04-2011; http://www.nytimes.com/2011/02/05/world/americas/05venezuela.html?_r=1&scp=2&sq=venezuela&st=cse)

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.