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.

Wednesday, March 2, 2011

March 1st, 2011

Economics & Finance

Venezuela central bank sees faster growth in 2011
Venezuela's economy should grow more than the 2 percent calculated in the budget this year, the central bank president said on Sunday, in a rosier view of growth prospects than is taken by many private economists. Fourth quarter data published last week showed 0.6 percent growth, signaling a sputtering recovery in the OPEC member after a long recession. "We have entered a phase of growth and we have left the phase of recession," central bank chief Nelson Merentes said in an interview on television station Televen. (Reuters, 02-27-2011;

Siege on industry endangers economic recovery
Venezuelan Executive Office began 2011 focusing on economic recovery in order to break a recession ongoing since 2009. But their expectations seem to clash with reality, at least within the manufacturing sector, which faces multiple obstacles to its development. Starting in 2003, a list of around 200 situations, decisions and policies threaten industrial development in Venezuela. As of the first quarter last year, a qualitative industrial survey conducted by the National Statistics Institute (INE) listed the most serious eight problems for manufacturers: difficulties accessing foreign currency; input scarcities; shrinkage in the domestic market; high costs and import difficulties; world economic recession; unfair competition and electricity rationing. (El Universal, 02-25-2011;

Could Venezuela really go bankrupt?
Ever since Greece plunged into a sovereign debt crisis in 2009, investors have focused on which European country might be next. According to Capital Economics, a research firm in London, however, the next trouble spot could be Venezuela. "There is a growing risk that the government will default on its obligations in 2012," its analysts wrote on Feb. 17. Some in the markets have taken fright, too: the country’ credit default swaps imply a 50 per cent chance of default by 2015. That may be overblown. Even so, Hugo Chavez, Venezuela’s leftist president, seems to be pulling off a dubious achievement by causing the bond markets to fear for the solvency of the world’s eighth-largest oil producer. (The Economist, The Chronicle Herald, 02-27-2011;

Government economic policy called contradictory
Parliamentary questioning of cabinet members in charge of the economy revealed contradictions in government policy, according to Noel Álvarez, the president of the Federation of Trade and Industry Chambers (FEDECÁMARAS). "The fact of the matter is that they are contradictory speeches," he said apropos the remarks by Ricardo Menéndez, the Minister of Science, Technology and Basic Industries (MCTII) and of Edmée Betancourt, the Minister of Trade. On the one hand, Menéndez said during his presentation at the National Assembly (AN) that the "new productive model" was intended to leave rent-seeking behind and diversify production. On the other hand, Betancourt backed the import policy as a formula to curb inflation. (El Universal, 02-25-2011;

Trying to survive inflation? Ask Venezuelans!
Having suffered double-digit inflation since Ronald Reagan was in the White House; Venezuelans know a money-stretching trick or two the rest of the world could heed as soaring commodities push up prices. A relatively wealthy country with some of the world's largest crude reserves, Venezuela's reliance on exports of one commodity have produced a string of booms and crashes accompanied by double-digit inflation since 1985. (Reuters, 02-25-2011;

MERCOSUR central bankers see heightened economic risks
Central bank chiefs from South American countries in the MERCOSUR customs union said on Friday there are heightened risks to the global economy in light of higher food prices and turmoil in Middle East, but indicated a broad regional slowdown was unlikely. The joint statement was made after a periodic meeting of central bankers from Brazil, Argentina, Uruguay, Paraguay, Bolivia, Venezuela, Peru and Chile. "The tasks of central banks is looking more complex," said the statement, which warned about the challenge of dealing with the growing risk of external price shocks at a time of red-hot domestic demand. (Reuters, 02-25-2011;

Chavez's nationalizations worry Asian investors
Asian financial investors expressed interest in Latin America at a seminar in Hong Kong where American entrepreneurs sought to improve the image of their markets, affected by political suspicions. More information in Spanish. (El Mundo, 02-28-2011;

Rise in consumer spending triggered prices
The private final consumption expenditure showed slight signs of recovery between October and December 2010. In that period, the indicator rose 0.4% after six quarters of declines, according to official figures from the Central Bank of Venezuela (BCV). Jesus Casique economist believes that private consumption can be increased at the end of this year if the executive increases spending, but warns that "this strategy will bring higher inflation, because the domestic supply of goods and services do not meet domestic demand". More information in Spanish. (El Mundo, 03-01-2011;

Union agrees to restart operations at Heinz Foods
After 27-day standoff, representatives of Heinz Foods and the union agreed this weekend to restart operations at the company, located in San Joaquín, Carabobo. The union leader Edison Garcia reported that the plant is currently undergoing maintenance, in order to achieve the start of production on Wednesday 2 March. More information in Spanish. (El Universal, 03-01-2011;


Venezuela assigns new exploration area to Gazprom
Venezuela has assigned new gas exploration rights to Russia's Gazprom for $20 million, according to Monday's official government gazette. The continent's biggest crude oil producer is sitting on some of the world's largest offshore gas reserves, experts say, but is yet to begin producing any commercial gas. Gazprom has found nothing in two Gulf of Venezuela blocks where it won exploration rights in 2005, so was being granted a "re-assignment of areas," an Energy Ministry source said. Gazprom could now start new explorations in redrawn boundaries for the Urumaco I area, and also in Urumaco III for the first time, the gazette resolutions said. Both of those concessions are for 3-4 years. (Reuters, 02-28-2011;

Expert says that Venezuelan energy crisis is not over
Guillermo Ovalles, the former president of Venezuelan electricity distribution company ELECENTRO and current president of the Commission on Electric Power of the Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS), said that Venezuela's electricity crisis, which started in 2010, is far from over. "The situation has not been overcome. Chaos persists," Ovalles stressed. He recalled that the government promised last year that it would add 5,000 megawatts of energy capacity in 2010, but it only added 1,200 MW, of which 600 MW are related to distributed generation plants. (El Universal,

Venezuela Net Exports of Crude Rose 13% in January
Venezuela’s oil ministry said the nation’s net exports of crude and refined oil products rose about 13 percent in January to 2.54 million barrels a day. Production of crude oil climbed to 2.8 million barrels a day in December, according to an e-mailed statement today, which cited information from Inspectorate Venezuela SCS, a contractor to Venezuela’s Energy and Petroleum Ministry. (Bloomberg, 03-01-2011;

Venezuela Oil Price Soars to $91.11
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 25 soared to $91.11 from the previous week's $85.02. (Latin American Herald Tribune, 02-25-2011;

Venezuelan oil production fell 7.7% in 2010
Venezuelan crude production averaged 2.78 million barrels per day (bpd) last year, said Tuesday the Department of Energy according to figures audited by an independent firm. Exports from OPEC member country recovered, for his part, averaging 2.59 million bpd in January, up from 2.28 million bpd the previous month. The production achieved in 2010 was 7.7% lower than the 3.01 million bpd a year earlier, according to audited financial statements of PDVSA. On the other hand, exports from the OPEC member was recovered in January, averaging 2.59 million bpd, down from 2.28 million bpd the previous month. The increase followed a rise in conventional crude oil shipments, improved crude Orinoco Belt and products. Heavy rains that lashed the country in the last quarter of the year affected the work of release of oil in the Venezuelan ports to stop the entry and departure of ships for several weeks. More information in Spanish. (El Mundo, 03-01-2011;

BCV records production increase in food
The production of processed foods rose 7.1% in the last quarter of 2010, according to a report of the Central Bank of Venezuela, who attributed the recovery to a sustained increase in demand for Christmas products. The report indicates that the surge in orders was met by the timely delivery of currency to purchase raw materials and direct imports by the Government. More information in Spanish. (Entorno Inteligente, 03-01-2011;


US is investigating Venezuelan business with Iran
The State Department notified the Venezuela´s charge d'Affaires in Washington about the US law that calls for sanctions against foreign companies that negotiate with Iran. The chief U.S. diplomat for Latin America, Arturo Valenzuela, had told members of the House of Representatives that Federal authorities are closely following alleged violations by Caracas. U.S. sources claimed that one of the reasons is the sale of gasoline to Iran, for which U.S. is investigating the government of Venezuela and PDVSA for allegedly violating US legislation on Comprehensive Sanctions, Accountability and Divestment against Iran, which increases restrictions on trade with the Islamic Republic, designed to impact foreign companies trading with the Asian nation. More information in Spanish. (Noticiero Digital, 03-01-2011;

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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