March 7th, 2011

Economics & Finance

Annualized inflation in Venezuela is 28.7%, compared to 24.7% a year earlier. Inflation in February was 1.7%, one percent point below that of January 2011 which means a 4.5% inflation rate for the year so far, according to a report from the Venezuelan Central Bank (BCV) made public on Thursday. (Veneconomy, 03-04-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25143&idc=2)

Venezuela Roils Multinationals

Venezuela's currency devaluation wreaked havoc on the balance sheets of multinational companies last year and remains a challenge for companies operating in the country this year. It's the latest in a series of issues—ranging from price fixing to the nationalization of certain industries—that multinationals are contending with in the Latin American country as they chase growth markets outside the U.S. and Europe and set their sights on Latin America's burgeoning middle class. Doing business overseas can bring with it challenges such as unstable currencies and political turmoil, but Venezuela has proven to have an inordinate number of pitfalls. (The Wall Street Journal, 03-07-2011; http://online.wsj.com/article/SB10001424052748704076804576180772710245068.html)

Operating reserves down; debt up

Pedro Palma, the president of the Venezuelan National Academy of Economic Sciences, considers that Venezuela's finances are a blend of two toxic effects: a foreign debt rising at an amazing pace and a substantial drop of operating reserves of the Central Bank of Venezuela (BCV). Operating reserves are the liquid portion of international reserves, that is, US dollars placed in bank accounts or instruments to make them immediately available to cover imports and for payment of the foreign debt. Palma noted that according to the Central Bank, total reserves stand at USD 26.6 billion. If the portion placed in gold as special drawing rights (SDR) and deposited in the International Monetary Fund (IMF) continues being the same as the one ending 2010, then operating reserves at that time accounted for USD 6 billion only. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/operating-reserves-down-debt-up.shtml)

Moody's rules out review of Venezuela s credit rating

Moody's will decide whether to raise credit ratings before mid-year for Brazil and Colombia, which have a positive rating outlook, Patrick Esteruelas a sovereign risk analyst on Latin America said on Thursday. He added that Venezuela's rating can’t be reviewed yet. Esteruelas said in an event organized by the Andean-American associations in New York that Venezuela is among the worst performing countries Latin America in the last few years. "As an economy as a whole, it would deserve a much higher rating that the one we gave it, but the impact of Venezuelan government's policies prevent us from raising the rating," he said, as quoted by Efe. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/moodys-rules-out-review-of-venezuela-s-credit-rating.shtml)

Commodities

Venezuelan oil basket climbs to USD 97.51

The average price of the Venezuelan oil barrel is steadily increasing and ended the week at USD 97.51 per barrel, a USD 6.40 gain compared to last week. The average price of Venezuelan oil stands at USD 87.29 so far this year. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/venezuelan-oil-basket-climbs-to-usd-9751.shtml)

Pdvsa results contrast with other oil companies

In times of high oil prices, oil companies show their best financial health, at least in most cases. Last year's results of state-owned oil holdings, such as Colombian ECOPETROL or Brazilian PETROBRAS showed higher profits, mainly due to the hike of oil prices, such as the European Brent, which gained 28% from 2009 to 2010.
However, the profit and loss statement of PETROBRAS and ECOPETROL is different from that of Petróleos de Venezuela. Based on data supplied by the Venezuelan Executive Office, PDVSA profits diminished 28% in 2010, no matter the 28% surge in oil prices. It seems that the tax pressure to give funds to the Executive Office has dwindled PDVSA's financial resources. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/pdvsa-results-in-contrast-with-other-oil-companies.shtml)

Government guarantees supply of construction materials, according to the Minister for Revolutionary Transformation of Greater Caracas, Francisco Sesto, during a meeting with about 50 construction companies. Sesto reiterated the commitment of the Venezuelan State and timely payments for completed phases, to companies that develop housing projects within the National Housing Plan. (Veneconomy, 03-04-2011; http://www.veneconomy.com/site/index.asp?idt=25134&idc=3&ids=44&Var_Send=1&mmD=03&ddD=04&mmH=03&aaD=2011&ddH=07&aaH=2011&Send=Buscar)

Venezuelan JV with private Chinese food company aims to boost food reserves

The Venezuelan government has entered into another agreement with a Chinese company. Last week, President Chavez announced the creation of a joint venture with the Heilongjiang Beidahuang Group that runs 16 agriculture branch companies in China and the Haolianghe Fertilizer Company. It is also parent company to Beidahuang Grains co. Chavez said Venezuela wants to increase its food reserves and lower food prices… another key aim is to boost production. Venezuela could follow China's example, he stated, and not only provide for its own people but also export food to other nations. (VHeadline, 03-07-2011; http://www.vheadline.com/readnews.asp?id=101559)

Politics

Venezuelan Consulate staff in Miami fired over irregularities

Twenty-nine diplomatic and administrative staff members at the Venezuelan Consulate in Miami have been removed from service. Consul General Antonio José Hernández Borgo may have resigned in support of the fired employees after complaints of alleged irregularities, a former Venezuelan official reported on Sunday. "There were massive layoffs and they gave us 30 days to leave our incumbencies. We are requesting Foreign Minister Nicolás Maduro and Venezuelan President Hugo Chávez to inform us why they decided to remove the staff," said Román Orta, one of the fired employees and spokesmen of the group, Efe reported. (El Universal, 03-07-2011; http://english.eluniversal.com/2011/03/07/venezuelan-consulate-staff-in-miami-fired-over-irregularities.shtml)

Paraguay’s government wants Venezuela in Mercosur

The Paraguayan government, which holds the six-month presidency of the Common Market of the South (MERCOSUR), vowed to insist on the approval of Venezuela's full membership in the regional bloc, which is up to the Paraguayan Congress. Miguel López Perito, Paraguay's Cabinet Chief told reporters that "the strategy is to help Venezuela become a full member of MERCOSUR is to work with the production sectors of the country and convince them of the importance (of this action) for our country," Efe reported. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/paraguayan-government-wants-venezuela-in-mercosur.shtml)

Insulza forecasts a strained 2012 for Venezuela

Organization of American States (OAS) Secretary-General José Miguel Insulza said Friday in New York that 2012 will be filled with tension in Venezuela due to the scheduled presidential election, which could endanger democracy.
"Venezuela is going through a very serious crisis and the situation will likely worsen next year due to the political tension around the ballots," said Insulza during a speech at the 8th annual conference of the Latin American and Hispanic Business Association at Columbia University in New York. (El Universal, 03-04-2011; http://english.eluniversal.com/2011/03/04/insulza-forecasts-a-strained-2012-in-venezuela.shtml)

Venezuela proposes commission for to seek a peaceful solution in Libya

Venezuelan has proposed the creation of an peace international commission for Libya in order to help that nation to overcome the current armed conflict by peaceful means, according to Foreign Minister Nicolas Maduro. During an extraordinary of foreign ministers of the Bolivarian Alliance for the Peoples of Our America (ALBA), Maduro called to preserve the dignity and unity of the Libyan people in the face of imminent threats of a military invasion on behalf of foreign powers. (AVN, 03-04-2011; http://www.avn.info.ve/node/46612)

US discusses Iran sanctions with Venezuela

US officials have "discussed" concerns that Venezuela may be breaching international sanctions on Iran, State Department spokesman Philip Crowley said Thursday. "We have had discussions with Venezuela regarding the Iran Sanctions Act," Crowley told reporters in referring to the US laws that places economic sanctions on firms doing business with Iran. Washington is closely examining whether Venezuela's cooperation with the Islamic republic on energy issues violates international sanctions on the Tehran regime over its nuclear program, which Western powers fear is a cover to build nuclear weapons. (AFP, 03-04-2011;  http://news.yahoo.com/s/afp/20110304/pl_afp/uspoliticsdiplomacyvenezuelairan_20110304140949)

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.