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 22, 2011

March 22th, 2011

Economics & Finance

Prices for imported foodstuffs will rise by 18,3% once Venezuela leaves the Andean Community
The Food Producers Chamber says Venezuela will lose its tariff privileges as of 22 April, when the nation’s withdrawal from the Andean Pact becomes fully effective. Chamber President Pablo Baraybar says Venezuela will cease to enjoy preferential tariffs, not only from the Andean Region, but also from third parties such as the United States, Canada, and Argentine, which account for a large part of its imported finished products. See more in Spanish. (El Nacional, Entorno Inteligente, 03-22-2011;

The Government will have to pay cash for imports
If the Government decides to centralize purchases required by national private agribusiness it will be forced to pay cash for most imports of food items and raw materials. Rising international prices for major agricultural commodities, along with restricted global inventories for most cereals, fats, dairy and sugar leads to fierce competition among countries with deficits and insufficient domestic production. All this is compounded by lack of confidence n the Venezuelan market among international brokers, after problems with payments caused by official exchange controls and the recent devaluation.  More information in Spanish. (El Nacional, Entorno Inteligente, 03-21-2011;

Government opened 11 plants in cooperation with Iran
The president, Hugo Chavez, said Sunday that 11 plants will soon be opened in cooperation with Iran. He also announced plans to open 15 facilities with countries such as: Argentina, Belarus (2) and China (1). The president explained that milk plants are to be located in Guárico, Bolivar, Táchira, and corn plants will be located in Guárico, Bolivar and Portuguesa. It also will open a factory located in Tinaquillo for processing petroleum pipelines; a vegetable processing factory in Táchira state; and industrial refrigeration, cattle processing and a fruit processing installations in Lara state. (Ultimas Noticias, 03-20-2011;

Only 53% of oil export income went to the Central Bank during 2010
Income and expenditure flows for foreign exchange at the Central Bank of Venezuela (BCV) and Venezuela’s balance of payments show that during 2010 state-run oil company Petróleos de Venezuela (PDVSA) transferred to the BCV USD $33.41 billion, which is only 53% of total Venezuelan oil revenue. Such treatment of revenue is possible under a legal reform approved in 2005, which exempts PDVSA from the obligation of transferring almost all the petrodollars to the Central Bank. However, this practice has important implications for inflation and the amount of foreign exchange available for private sector imports. As PDVSA transfers petrodollars to the Central Bank, the bank builds up international reserves to cover private sector foreign currency purchases, once approved by the Foreign Exchange Administration Commission (CADIVI). (El Universal, 03-21-2011;

Expert charges Venezuela is gradually abolishing private property
"We are not facing the threat of private property, we have it’s gradual abolition," said sociologist Felipe Benites, who is director of the Observatory Center Property Dissemination of Economic Development Association (CDA). The department recorded 2,000 actions against property rights between 2005 and February 2011. Benites say that statistically, if contrasted with the amount of assets, the data has no greater significance. "It's a quite small percentage, but the issue is not statistical; the issue are the impacts and implications and the notice given to other owners, political apathy, the injection of fear and you say this can happen to you". (El Mundo, 03-21-2011;


Oil related construction slows down
Public construction wound up in the red for 2010 due to lack of investment and materials, and the downturn was even sharper in the oil sector. Based on statistics supplied by the Central Bank of Venezuela (BCV), in 2008 (during high oil prices), construction related to the oil sector recorded an average growth of 9% during each quarter. This performance improved the following term. Despite shrinking oil revenues during 2009 as a result of diving prices, the state-run oil holding Petróleos de Venezuela (PDVSA) injected funds into the sector and growth rates ranged from 13 to 22%. (El Universal, 03-18-2011;

Venezuela says OPEC won’t hold meeting over Libya
Venezuelan Oil Minister Rafael Ramirez dismissed the possibility holding a special meeting of the Organization of Petroleum Exporting Countries to evaluate the situation in Libya, which is a member of the group. “We can’t pretend to have stability in the oil market when the big industrial powers introduce this kind of destabilization,” Ramirez said. (Bloomberg, 03-20-2011;

Venezuelan oil basket down USD 3.69 to USD 97.57
The price of the Venezuelan oil basket sank USD$ 3.69 and ended the week at USD$ 97.57 per barrel, according to the Ministry of Energy and Petroleum. "Average oil prices fell this week due to the uncertainty as to the impact on the economy and on crude oil demand following the earthquake and tsunami in Japan," the ministry stated. (El Universal, 03-18-2011;

According to Chávez, food distribution networks will rise to 300,000 tons per month by the end of 2011
State food distribution network will go from the current 170,000 tons per month to 300,000 tons, by the end of 2011, and will cover 50% of the national demand. According to the President, the Venezuelan Government allocated a sum of $697.67 million as a part of its policy to expand the system for producing, processing and distributing food. “Employment, development, technology, and the satisfaction of basic human needs are the main goals of the Bolivarian Revolution. Food is the first of them,” he underscored. (AVN, 03-20-2011;

Catalytic cracking unit of Isla refinery shuts down
335,000-bpd Isla refinery, operated by state-run oil company Petróleos de Venezuela (Pdvsa) in Curacao, halted its catalytic cracking unit due to a failure in the supply of steam, the president of the union of workers of the plant told Reuters. Isla, the second largest refinery in the Caribbean, halted earlier this month four processing units and had begun the start-up protocol, but the continuing failures in industrial services complicated the restart of operations of the plant.
"The CUOC plant (Curacao Utilities Operating Company) has problems again. During the restart of operations we had to stop the cracking unit. We expect to resume operations this week," said Angelo Meir, the president of the union of workers of the refinery.
(El Universal, 03-21-2011;

Logistics & Transport

Chávez says railroad construction in the Cua-La Encrucijada segment will start anew
Construction work on the railroad section Cua (Miranda) – La Encrucijada (Aragua) will be start back up soon, thanks to the new investment sources available to the national government. President Hugo Chavez said that construction had been deferred for lack of funding to meet payments to international companies involved. (AVN; 03-20-2011;


Venezuela, Cuba reviewed bilateral agreements at 11th Inter-ministerial Conference
Cuban and Venezuelan representatives held their 11th Inter-ministerial Conference in order to strengthen the bilateral agreements on international cooperation. The Venezuelan Oil Minister announced that debates will be held by areas, through the creation of working groups. Cuban vice-president Ricardo Cabrisas said he was pleased with this conference that follows intense work by both countries. (AVN, 03-21-2011;

Chavez condemns Libya airstrikes, warns Obama: “Don’t even think about it” in Venezuela
Venezuelan President Hugo Chavez condemned what he called “indiscriminate bombing” by the U.S. and its allies in Libya, saying Sunday that the assault is unjustified and will only unleash more bloodshed. Chavez claimed the U.S. is after Libyan oil, and warned President Barack Obama not to try any similar intervention in his country. “With Venezuela, don’t even think about it, Mr. Obama,” he said. (Washington Post, 03-20-2011;

National Production Law proposed
Primero Justicia’s national coordinator Julio Borges proposed the creation of a National Production Law, which would further the creation of new jobs, food production and an increase in Venezuelan brand names. Borges said Venezuela currently imports 70% of the food staples it consumes. (Veneconomy, 03-21-2011;

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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