Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Tuesday, February 1, 2011

January 31th, 2011

Economics, & Finance

Expert charges Venezuela’s Central Bank conceals information on government funding
For the last 12 months, the Central Bank of Venezuela (BCV) has not supplied information on the sources of the monetary base, a key indicator to assess economic performance. Among others, the sources of the monetary base show if the BCV has financed the government or state-owned companies, such as the oil holding Petróleos de Venezuela (Pdvsa). "The monetary base collects the creation of money; shows if there has been funding to the public sector. This is the first time that the BCV hides such statistics. It did not happen even under the government of General Marcos Pérez Jiménez," said José Guerra, former BCV manager of economic research. (El Universal, 01-28-2011;

Markets view Venezuela as a high-risk country despite high oil prices
Since oil prices are climbing, thus ensuring enough funds for Venezuela to meet its obligations, investors should view Venezuela as a low-risk country. However, the lack of confidence in the South American nation lingers. Venezuela's country risk -an indicator of the spread between the yield an investor demands in order not to buy US Treasury bonds and purchase instead Venezuelan sovereign bonds- started the week at 11 percent. This figure exceeds by far Chile's 1.16 percent; Peru's 1.48 percent; Colombia's 1.49 percent; Mexico's 1.64 percent; Brazil's 1.75 percent; Argentina's 4.95 percent and Ecuador's 8.41 percent. Low country-risk is important for developing countries to borrow money in international markets at a lower cost and attract foreign investments, a prerequisite for improving job creation and technology breakthroughs. (El Universal, 31-01-2011;

National Assembly Finance Committee Chairman says Government analyzing tax changes under Enabling Law. More information in Spanish. (Entorno Inteligente, 01-31-2011;


OPEC Would Act If Egypt Crisis Disrupts Supplies
The Organization of Petroleum Exporting Countries said Monday it would increase output if the Egyptian crisis lead to supply disruptions but sees this situation as unlikely, the OPEC secretary-general said. (Nasdaq, 01-31-2011;

There are 233 working drilling rigs permanently in Venezuela at the moment, according to PDVSA president and Energy and Oil Minister Rafael Ramírez. He said the goal is to get to 240 drilling rigs. (Veneconomy, 01-28-2011;

The rapid decline of PDVSA is reported
What is the production of Petróleos de Venezuela (PDVSA), the state-owned oil company of Venezuela? The company claims a production of 3.2 million barrels per day, although OPEC and the International Energy Agency place it at 2.3 million barrels per day, almost one million barrels per day less. This is a huge discrepancy that has already persisted for a long time. The level of commercial oil exports is also in doubt since Venezuela is consuming over 600,000 barrels per day internally and is sending highly subsidized oil to Cuba, Nicaragua, Bolivia, Ecuador, Argentina, Central America and the Caribbean countries. (Latin Business Chronicles, 01-28-2011;

Venezuela may review licenses granted to foreign oil companies
Venezuela would review the rights granted to foreign oil firms to operate in the South American country in joint ventures with state-run oil company Petróleos de Venezuela (Pdvsa) if they fail to increase output, warned Venezuela's Minister of Energy and Petroleum Rafael Ramírez. In December, amid a decline in oil production in Venezuela -where more than 90 percent of revenues come from oil exports- the Ministry of Energy and Petroleum asked oil joint ventures to increase oil output, Reuters reported. In December, Venezuela requested oil firms to present a schedule to raise output within a period of 30 working days. "If they fail to comply with their schedules, I would have enough grounds to review the rights that were granted," Ramírez said. (El Universal, 01-28-2011;

Petrovietnam and PDVSA are developing a joint venture that would produce 200,000 barrels per day (bpd) of heavy crude at Bloc Junín 2 in the Orinoco Belt by 2015. On Friday, Vietnamese media informed the Standard Chartered Bank had arranged to raise financing up to $430 million for Petrovietnam Exploration Production Corp (PVEP) to help it extend its operations in Venezuela. (Veneconomy, 01-28-2011;

New seizures aim at consolidating State controls over agribusiness
Consolidation of networks of agricultural producers seems to be the government strategy to secure the supply of raw materials for the operation of industries under its umbrella. The latest event is being faced by farmers in South Lake Maracaibo, western Zulia state. Some of them have been recommended to send their milk output to Lácteos Los Andes, a company that was expropriated in 2008. Some farmers answered to the call made by government authorities; some others were exempted due to their commitments to private companies. (El Universal, 01-28-2011;

Camiven president projects a bleak future for Venezuela's mining sector
El Mundo Economía y Negocios newspaper has published an interview with Mining Chamber of Venezuela (Camiven) president, Jose Alejandro Rojas, who seems down in the mouth about the mining situation in Venezuela. Painting a doomsday picture, Rojas sustained that the mining sector is being destroyed … "no new mines this year, no projects on the agenda that we are aware of." Any mining project, he stated, usually takes between one to ten years to get through depending of course of its size and the amount of investment involved. In Venezuela's case, it will be a matter of first recovering existing installed capacities that are destroyed before embarking on a project. In the last two years (private) mining companies have contracted 60%. Rojas disclosed that if money isn't invested in maintenance of machinery, then production drops within two to three years. (VHeadline, 01-27-2011;


Venezuelan and Uruguayan presidents signed 16 bilateral agreements in the areas of agriculture (4), science and technology (5), trade (3), power generation (1) society (2) and nutrition (1). (Veneconomy, 01-28-2011;

Chavez says no plans to takeover Spanish bank unit
Venezuela's President Hugo Chavez said on Saturday he had no plans to nationalize the local unit of Spanish bank BBVA because a senior company official had apologized for his comments during a testy exchange. The socialist leader said the executive, Pedro Rodriguez, had behaved "haughtily" when Chavez phoned him live on television this week and warned him the bank could be taken over if it did not provide more home loans. (Reuters, 01-29-2011;

Edmee Betancourt takes over as new Trade Minister
Mr. Betancourt was Viceminister of Labor in 2000-2003, Viceminister for Industry at the former Ministry of Trade and Inddustry (2003-2005) and Minister of Trade and Light Industry when it was established in 2005 and until recently President of Venezuela´s Economic and Social Development Bank (BANDES). She is generally considered a moderate technocrat and replaces Ricardo Canaan, who is very hostile toward the private sector. More information in Spanish at:

Venezuela Arms Factory Explosions Leave One Dead, Three Injured
A fire at an arms factory in Venezuela triggered a series of explosions that killed one person and injured three others, Aragua state governor Rafael Isea said in comments carried on state television. Authorities in the city of Maracay began evacuating a 5- square-kilometer (3-square-mile) area around the Compañía Anónima Venezolana de Industrias Militares, or CAVIM, a state- run weapons factory, and restricted traffic on a nearby freeway after the fire began at about 4:45 a.m. local time, the Interior Ministry said in a statement. (Bloomberg, 01-30-2011;

Primero Justicia lawmaker Julio Borges claims Chávez has given away $69.9 billion to over 40 countries worldwide over the last five years. Only in 2010 the give-aways amounted to $13.4 million and the most recent, a submarine fiber optic cable to improve the Internet in Cuba cost $70 million. (Veneconomy, 01-31-2011;

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.

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