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, March 15, 2011

March 15th, 2011

Economics & Finance

President Chávez defines two types of property: a good one and a bad one
In order to explain his economic views, President Chávez said yesterday that there are two types of property, one that is small, family owned, which is good since it seeks one’s living and “not to enslave” others. And then, there’s the property defended by FEDECÁMARAS and the “right wing” which is “evil” since it seek profits. (Veneconomy, 03-14-2011;

Polar's CEO Lorenzo Mendoza: "Private sector's role is vital"
During celebrations for the 70th anniversary of the Venezuelan giant food and beer conglomerate Empresas Polar, its CEO, Lorenzo Mendoza said that "the only way out involves the presence of honest private companies committed to the community." The business leader added that the participation of the private sector is "essential" to solve Venezuela's problems. Empresas Polar employs over 31,000 people, accounts for 3.83% of non-oil tax revenue in Venezuela; contributes with 3.03% of non-oil Gross Domestic Product (GDP) and produces 18 percent of the Venezuelan food basket. (El Universal, 03-14-2011;

CONINDUSTRIA says import substitution policies have been abandoned over the past12 years
With the nation’s productive capacity impaired, imports have become the lifeline for the Government in order to supply the local market. Far from diminishing purchases abroad, the National Executive looks set to invest oil revenues in the acquisition of foreign products. An order enacted last week exempts authorities and public administration agencies from import formalities for the next twelve months, while noting that it seeks to ensure "timely delivery of goods and merchandise" in areas such as food security, health and housing, the measure applies to "all areas that help raise the welfare of the population." The private sector interprets this decision as a possible Government strategy to delay updating of price controls and avoid possible shortages in essential items. "It is a confirmation that the Government's industrial policy is an import policy," said Ismael Perez Vigil, chief executive of the Venezuelan Confederation of Industries (CONINDUSTRIA). (El Universal, 03-14-2011;

Agriculture expert indicates more imports equal more inflation
Increasing oil prices mean greater availability of fiscal resources to finance imports, increase spending and thus boost the economy. However, the increase in oil prices has negative consequences, particularly inflation as the increase in fuel prices is also a factor in the price of other commodities. As the value of crude oil grows, so does the inflation of food and other commodities in the international market. In Venezuela, where 70% of food is imported, imported inflation will add to that already existing in the country. Thus, benefits obtained by the increase in oil prices are offset by the increase in other commodities. "You have to allocate more dollars to buy the same amount of food. The import capacity will be linked to the difference between the rising price of oil and food," said the expert in food and agriculture policies, Carlos Machado Allison. More information in Spanish. (Tal Cual, 03-14-2011;

Cepal: Inflation in Venezuela could grow to 32.6% in 2011
The economy of Latin America and the Caribbean will grow 4.5% in 2011, a level 4.2% higher than that projected by the end of last year the Economic Commission for Latin America (CEPAL), told Efe executive secretary of the agency, the Mexican Alicia Bárcena. The trend is that in any case in 2011 inflation will be more than one digit with two exceptions, Argentina and Venezuela, the last being "more problematic" and that "closed in 27.2% (2010) and in 2011 it is seen that may have grown to 32.6%." More information in Spanish. (Notitarde, 03-15-2011;

Basic foods prices rose 3.2% in January
The cost of the food basket was VEB 2,616.63 (USD 608.51) in February, a 3.2% surge over January, according to data issued by the Workers' Center for Documentation and Social Analysis. Sinking consumption, bank bankruptcies, and falling production have erased jobs in Venezuela. (El Universal, 03-11-2011;

Holguín: "There is no free trade with Venezuela”
The Foreign Minister of Colombia, Maria Angela Holguin, acknowledged that diplomatic relations with Venezuela have improved over the first seven months of government by Juan Manuel Santos, but regretted that trade does not have the same dynamic of years ago, when it reached the US $D 7 billion annually. “In practice there is no free trade. We must be realistic. Creativity characterizes what Colombians have to use under the new scheme. Now the Venezuelan government buys from Colombian industry and calls for new patterns for projected production chains, which many entrepreneurs may be interested in accessing, "the official said in an interview published yesterday in the newspaper El Espectador. More information in Spanish. (Guía, 03-15-2011;

Venezuela and China review joint venture project
Venezuela and China are reviewing the possibility of setting a joint venture to produce machineries and equipment for construction, as well as a joint venture of services. Venezuelan President Hugo Chavez said the information during a meeting he held with representatives of the Chinese company XCMG (Xuzhou Construction Machinery Group), at the Miraflores Presidential Palace, Caracas. Chavez said the joint ventures would be placed in Venezuela and aim at fostering the national housing plan. (AVN, 03-14-2011;

Government needs another loan from China
Already used U.S. $ 4,000 million loan that gave China the national government, through an agreement on future oil also known as Chinese Fund. That agreement still remains another 16,000 billion dollars available for use by the Venezuelan government. But this is not enough. The president, Hugo Chavez, said it takes more resources and China is still the more affordable alternative. "We are negotiating a new loan to China," said the president yesterday in the Aló Presidente N° 371. More information in Spanish. (El Mundo, 03-14-2011;

Alba Economic Council promotes common area for regional trade
After meeting in Quito, Ecuador, the Economic Council of the Bolivarian Alternative for the Peoples of Our Americas (ALBA) announced that the fundamental challenge for the countries of the region is to promote a common trade area based on the development local economies. The announcement was made by Ecuadorian Undersecretary of negotiations, Jorge Acosta. He also said that the goal of strengthening the trading system, one of the main actions will accelerate the Unified Regional Payments through the common currency, the Sucre. (AVN, 03-13-2011;


Venezuelan oil basket hits USD 101.26
The average price of the Venezuelan oil barrel and byproducts exceeded USD 100 this week and ended the week at USD 101.23 per barrel. The armed conflict in Libya continues to push oil prices, according to a report issued by the Venezuelan Ministry of Energy and Petroleum. The average price of the Venezuelan oil stands at USD 88.64 in 2011, well above USD 40 per barrel estimated by the Venezuelan government in the national 2011 budget. Therefore, there is a USD 48.64 surplus per barrel. (El Universal, 03-11-2011;

According to Electricity Minister Alí Rodriguez Araque, the Bolivarian Government has multiplied electricity generating capabilities 10 times since 1999.
The Minister claimed the Bolivarian government investment has multiplied nationwide electricity generation and distribution by 10 since 1999. Rodriguez Araque said that during 1989-1998, 373 thermal megawatts (MW) were incorporated into the national grid, whereas from 1999 to 2010 they added 3,229 megawatts for a total of 5,419 MW. "The tenfold multiplication of installed of thermal generation capacity in comparison with the previous 10 years," he stressed. More information in Spanish. (AVN, 03-14-2011;

Losses at state-run power utility Cadafe totaled USD 1.02 billion in 2010
CADAFE, the state owned power utility and subsidiary of the National Electric Corporation (CORPOELEC), which serves 80% of Venezuelan’s territory, reported 2010 fiscal year losses amounting to USD 1.02 billion, according to company preliminary financial statements. The amount is an increase of 55.5% over 2009, when CADAFE's losses were USD 558 million. (El Universal, 03-14-2011;

Joint oil venture set up with Cuba and Angola
PDVSA signed a contract for the creation and administration of a joint company with Sonangol Pesquisa & Producao (Angola) and Cubana de Petróleos (CUPET). The head of the Venezuelan Oil Corporation (CVP, in Spanish) Eulogio del Pino said these companies will jointly work with the Migas and Melones oil fields located in Anzoátegui state. (Veneconomy, 03-11-2011;

Coal mining concession cancelled
The Official Gazette No. 39,630 today published a resolution which terminates the coal concession called "Pastora N° 2" held by Carbones Nueva Naricual, C.A. The company had an area of 500 hectares in the Simón Bolivar municipality in Anzoátegui state. The resolution states that the measure was taken because of breaches of its obligations under the Mining Act. Among the alleged faults is non-compliance with an obligation with the Registration of environmental liabilities and funding second jobs to mitigate existing environmental liabilities. More information in Spanish. (El Mundo, 03-10-2011;

Logistics & Transport

President Chávez announces a railroad system for Western Venezuela during his Sunday show broadcast from the South of the Lake region. He said the president of a Chinese railroad company that will support the construction of this transport media is in the country for that purpose. (Veneconomy, 03-14-2011;

Venezuela and China boost construction of new container terminal in Carabobo
Experts from the China Harbour Engineering Company Limited and Ministry of Popular Power for Transportation and Communications (MTC) and the Bolivarian State Ports (Bolipuertos) visited the area of the bay near Punta Salinas in Puerto Cabello, Carabobo state, where will build a new container terminal. Asian Technical and advance national efforts to define the engineering report, procurement and construction above to work. "Preparations for the construction of this modern container terminal capable of receiving post panamax vessels of up to 70 000 dwt, are given with firm and sure steps," said the president of Bolipuertos, Elsa Gutierrez Graffe. More information in Spanish. (AVN, 03-15-2011;


Chavez charges opposition with seeking a Libya-like uprising in Venezuela
President Hugo Chavez accused his political opponents on Sunday of trying to divide the military as part of a broader plan aimed at spurring a Libya-like uprising in Venezuela following next year's presidential election. Chavez said such a conflict would give Washington a justification to lead a military invasion of Venezuela. "They want to divide the armed forces," said Chavez, referring to Venezuela's opposition. "The Yankee empire, the CIA and the State Department is behind them." (Miami Herald, 03-13-2011;

3,114 public protests reported in Venezuela during 2010
The number of street protests reported in Venezuela throughout 2010 was 3,114, a 5.6% decline from 2009, according to a report prepared by NGO Espacio Público (Public Space), and a human rights watchdog group called Venezuelan Program of Education-Action in Human Rights (PROVEA). The two organizations also found that the number of demonstrations that were crushed by Venezuelan authorities decreased, as they barely exceeded one percent of total protests in the past year. (El Universal, 03-14-2011;

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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