April 29th, 2011

Economics & Finance

Venezuela oil tax to net billions before Chavez vote

New Venezuelan taxes on windfall oil revenue will let socialist President Hugo Chavez boost spending on popular social programs by billions of dollars ahead of his re-election bid next year. They set a top rate of 95 percent on some oil income and are Chavez's latest move to increase the state's share of the OPEC member's main export. During 12 years in power he has nationalized most of the South American nation's oil industry. His government predicted on Tuesday the new tax rates will bring in between $9 billion and $16 billion this year if oil prices keep rallying. Chavez has earmarked the money for a social spending fund and is already splashing it around. "This is justice," he said as he unveiled pay rises of up to 66 percent for public sector workers. (Reuters, 04-27-2011; http://www.reuters.com/article/2011/04/26/us-venezuela-oil-idUSTRE73P6Z920110426)

Wage hike expected to boost Venezuela's inflation

President Hugo Chavez's decision to increase the minimum wage 25 percent is expected to elevate Venezuela's already high inflation, economists and opposition lawmakers said Wednesday. Chavez's decree involves a 15 percent boost in pay at the beginning of May, then a 10 percent rise Sept. 1. The wage hike announced Tuesday will benefit more than 6 million people, who will earn $360 a month once the full increase is phased in. Chavez also gave public employees a 45 percent raise. Government officials said they hope to keep inflation in check despite wage hikes. Labor Minister Maria Iglesias suggested greedy businessmen are partly responsible for Latin America's worst inflation, accusing them of unjustifiably inflating prices. (Forbes, 04-27-2011; http://www.forbes.com/feeds/ap/2011/04/27/general-lt-venezuela-inflation_8438194.html)

PDVSA transfers U$D1.37 Bln to Venezuela's National Development Fund

Petroleum Minister and PDVSA President Rafael Ramírez said the state-owned Petróleos de Venezuela (PDVSA) has transferred $1.37 billion to the Venezuela’s National Development Fund (FONDEN) in the first quarter of this year, to be invested in socioeconomic development projects. The announcement was made during the presentation of the Law that creates a special tax on windfall and exorbitant oil prices in international oil markets. (AVN, 04-27-2011; http://www.avn.info.ve/node/54954)

JP Morgan criticizes lack of transparency in government figures

In a report, the U.S. firm JP Morgan described a "puzzling" lack of transparency in government figures in regard to the surplus oil which is obtained by rising oil prices. It notes that it has become difficult to make accurate estimates due to the opacity in the official numbers. The document also points to a drop in international reserves pegged at U$D 3.6 billion to date this year. The firm claims that U$D 2 billion are attributable to transfers to the National Development Fund and the rest may have been used by the Ministry of Planning and Finance for repayment of some of the titles of the Republic, which became due on April 20 2011. (El Nacional, 04-28-2011;

http://www.el-nacional.com/www/site/p_contenido.php)

Tariffs could be reduced by 6 points once Venezuela enters MERCOSUR

Eduardo Porcarelli, executive director National Council for Investment Promotion (CONAPRI) says that once Venezuela becomes a full member of MERCOSUR, the common external tariff – which currently averages 13%  - should drop by 3 percentage points. "In the specific case of agricultural and agroindustrial products, the existing tariff which is 16.66% on average, would decrease more than six percentage points, because MERCOSUR has a 10% tariff for third countries, "said the expert. Juvenal Arvelaez, chief executive of the Venezuelan Chamber of the Food Industry (CAVIDEA) agrees with Porcarelli that "the entry of Venezuela into Mercosur will mean an average 40% reduction in the protection of agricultural and agribusiness sector in Venezuela in relation to third countries." (El Mundo, 04-27-2011; http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=19&Id_Noticia=54171)

Businessmen warn that entering MERCOSUR now is harmful

Private sector spokesmen say it is the worst time for Venezuela to enter into MERCOSUR. "At this time, accession to MERCOSUR would be really harmful for the country's industry," said Ismael Pérez Vigil, the executive president of the Venezuelan Confederation of Industries (CONINDUSTRIA). After withdrawal from the Andean Community of Nations (CAN), government authorities' priority is to enter the Common Market of the South (MERCOSUR)

(El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/businessmen-warn-that-membership-in-mercosur-is-harmful.shtml)

Minister of Labor: Wages for 21% of workers still do not cover the cost of the basic food basket

María Cristina Iglesias, the Minister of Labor and Social Security, said that 21% of the working population earns the minimum wage, compared with about 65% 11 years ago. There are about 2.7 million workers earning the minimum wage, according to data reported by the Minister of Labor. From May 1, they will be paid VEB 1,407.4 (U$D 327.30), after a 15% increase in a first tranche and an additional 10% raise from September 1. (El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/minister-of-labor-21-percent-of-workers-still-fail-to-cover-the-cost-of-food-basket.shtml)

Canary Islands seek solution for seizure of companies in Venezuela

The local parliament of the Canary Islands requested the Spanish government to seek negotiations to work out the "unresolved" serious problems due to the seizures of Spanish companies in Venezuela, undertaken by Venezuelan authorities. The resolution shows all political groups are aware of the difficulties faced by Spanish companies seized by the Venezuelan government and the implications for those involved. (El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/canary-islands-seek-solution-for-seizure-of-companies-in-venezuela.shtml)

Commodities

Venezuela sets oil windfall tax for oil price at U$D 40-70

The Venezuelan government set an additional 20% tax on oil windfall revenues by state-run oil company Petróleos de Venezuela (PDVSA) and its joint ventures whenever oil prices fluctuate between U$D 40 and U$D 70 per barrel, as per decree No. 8,163, published in the Extraordinary Gazette No. 6,022 with the Law that creates a special tax on windfall and exorbitant oil prices in international oil markets. "When the monthly average of the Venezuelan basket of liquid hydrocarbons in international markets is above the price set in the Budget Law for that fiscal year, but not higher than U$D 70 per barrel, a 20 percent tax will be levied on the difference between both prices," according to the Official Gazette. (El Universal, 04-27-2011;

http://english.eluniversal.com/2011/04/27/venezuela-sets-oil-windfall-tax-for-oil-price-at-usd-40-70.shtml)

Economic emergency was declared in ALCASA

Company president, Elio Zayago, publicly declared a state of "financial and operational emergency”, thus admitting that the situation is untenable in CVG ALCASA. "It is no secret that when this administration, under workers' control took over management of the plant, it received more than 50% of diseased cells, with high temperatures and exceeded nominal life. These conditions, which are joined by strikes that prevented the proper treatment and low cash flow generated (sic) a weakness in terms of acquisition time, coke, tar and fluoride, "he explained Thursday at a news conference. More information in Spanish. (El Universal, 04-29-2011; http://www.eluniversal.com/2011/04/29/fue-declarada-la-emergencia-economica-en-alcasa.shtml)

Venezuela Oil Hits $110.33

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) during the week ending April 29 rose to U$D110.33 from the previous week's U$D108.29, raising the average for the year to U$D95.04, above the previous high set by 2008's U$D86.49 average. (Latin American Herald Tribune, 04-29-2011; http://www.laht.com/article.asp?ArticleId=392690&CategoryId=10717)

Venezuela's PDVSA Discussing Tech Projects With China Firms

Venezuelan state oil company Petróleos de Venezuela said Thursday that it is discussing possible technological development projects for refining and upgrading of crude oil with an advisory group from the China Development Bank. (The Wall Street Journal, 04-28-2011; http://online.wsj.com/article/BT-CO-20110428-721423.html)

PDVSA said to be building seven thermoelectric plants to add 1,954 MW by 2012

Electric Energy Minister Alí Rodríguez Araque says Venezuela’s state-run oil company Petróleos de Venezuela (PDVSA) is building seven thermoelectric plants that will add 1,954 MW to the National Electric System in 2012. He has recently said that “In total, 800 megawatts will be added by PDVSA by the end of 2011”. By the end of 2011, the Government claims it will to add 2,568MW in total. In addition, to the 800 MW from PDVSA, the National Electric Corporation (CORPOELEC) expects to add 1,593 MW and the Basic Industries and Mining Ministry other 175 MW for the National Electric System. (AVN, 04-27-2011; http://www.avn.info.ve/node/54975)

Venezuelan steelmaker recovers after power crisis in 2010

Venezuelan state-run steelmaker Siderúrgica del Orinoco (SIDOR) reported an output of 767,000 tons of liquid steel in the first quarter this year, said Pedro Acuña, the main director of Class B shareholders on SIDOR's board of directors.

Production in the same period of 2010 totaled 308,000 tons, amid power rationing implemented in Guayana's basic industries, which undermined SIDOR's regular operating performance. The output of Venezuela's main steelmaker rose 149% in 2011 compared to 2010. (El Universal, 04-29-2011;

http://english.eluniversal.com/2011/04/29/venezuelan-steelmaker-recovers-after-power-crisis-in-2010.shtml)

Politics

Some 25 foreign ministers prepare a summit to set up a "parallel OAS"

Latin American and Caribbean foreign ministers are meeting in Venezuela to prepare a presidential summit to be held in Caracas in July in order to establish a new regional body that excludes the United States and Canada. Ministers and diplomatic representatives from over 25 countries are discussing regional integration and development issues, and will prepare the agenda of the presidential summit to be held in Venezuela on July 5. The Presidents and Heads of State of the region will outline the Charter of the Community of Latin American and Caribbean States (CELAC), which aims to be an Organization of American States that excludes the United States and Canada. (El Universal, 04-26-2011;

http://english.eluniversal.com/2011/04/26/some-25-foreign-ministers-prepare-a-summit-to-set-up-a-parallel-oas.shtml)

Venezuela-Colombia relations benefit the entire region

Colombian Foreign Affairs Minister Maria Angela Holguin has said that bilateral relations with Venezuela will not be “derailed” by any differences because, Colombia is working hard to keep and improve the ties with its sister nation. “The relation, as you well know, has a lot of issues to deal with day after day. Many things happen in the border, which is big, issues are many, and there are many critics. It is not an easy relationship, but the Colombian Government is committed to it, the President Santos and I have placed this relationship as a priority for Colombia. We believe it not only benefits the people of Colombia and Venezuela, but the entire region and we will keep working for such purpose”. (AVN, 04-27-2011; http://www.avn.info.ve/node/54943)

Cardoso urges Rousseff not to be contradictory on Venezuela

Brazil's former President Fernando Henrique Cardoso asked current Brazilian President Dilma Rousseff and Foreign Minister Antonio Patriota to be "sensitive enough" to deal with criticism from the Venezuelan government, without damaging the relationships and the dialogue between the two countries. "It appears that, as regards human rights, she (Rousseff) has been more consistent in her protest, but Brazil has common interests with Venezuela and we cannot all of a sudden have an attitude that could be regarded as contradictory on Venezuela". (El Universal, 04-27-2011; http://english.eluniversal.com/2011/04/27/cardoso-urges-rousseff-not-to-be-contradictory-with-venezuela.shtml)

Chavez announces a Libyan delegation sent by Qaddafi is in Venezuela

President Hugo Chavez has announced that a Libyan delegation sent by Muammar Qaddafi has arrived in here seeking international support for a truce in the Libyan conflict. The delegation will hold talks with Chavez’s government to see if members of the Bolivarian Alternative for the Americas, a trade bloc spearheaded by Chavez, and other Latin America countries can help efforts to restore peace to Libya, said Foreign Minister Nicolas Maduro. (Bloomberg, 04-26-2011; http://www.bloomberg.com/news/2011-04-26/libyan-delegation-sent-by-qaddafi-in-venezuela-chavez-says-1-.html)

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.

April 26th, 2011

Economics & Finance

President Chávez initials law on special oil tax

Venezuela's President Hugo Chávez announced he is issuing a decree under the special powers vested in him by the National Assembly (AN), to levy a special windfall tax for above the average oil prices in the world market. "It is a law which creates, with current oil prices, a new mechanism for the people to get much more from the oil income," Chávez said during a telephone conversation with state-run TV channel Venezolana de Televisión (VTV). The excess profits will go to the National Development Fund (FONDEN), the president added. (El Universal, 04-22-2011; http://english.eluniversal.com/2011/04/22/president-chavez-initials-law-on-special-oil-tax.shtml)

New oil production spared tough Venezuela tax

Joint ventures between private firms and Venezuela's state oil company PDVSA will not pay a windfall tax on new output until they have recovered their investments, the oil minister said on Monday.

The government of President Hugo Chavez is putting pressure on companies including Chevron, Repsol, BP and Shell  to boost production at joint venture projects in the South American OPEC member.

Last week the socialist leader unveiled a new higher rate for the country's windfall oil tax, saying the extra revenue from high global crude prices would go into a development fund. (Forexpros, 04-25-2011;  http://www.forexpros.com/news/commodities---futures-news/exclusive-new-oil-production-spared-tough-venezuela-tax-210945)

CAN hopes that Venezuela's withdrawal does not hit trade

The Andean Community of Nations (CAN) is positive that the expiration of tariff preferences received from and granted by Venezuela on April 2 will not make an impact on trade nor damage the will to integrate. Community Secretary Adalid Contreras reported that Andean countries and Venezuela have made provision to prevent this from happening through bilateral agreements on economic cooperation and complementation. An extension of the trade relationship in force at CAN had been envisaged in the event that any agreements could not be executed in advance to the expiry date of said advantages on April 21. The senior officer said Venezuela submitted its irrevocable resignation from the Andean Community on April 22, 2006. Since then, pursuant to article 135 of the Cartagena Agreement, any and all rights and duties arising from its status of member country ceased, with trade advantages surviving for five years. (El Universal, 04-22-2011; http://english.eluniversal.com/2011/04/22/can-hopes-that-venezuelas-withdrawal-does-not-hit-trade.shtml)

Venezuela and Peru agreed to maintain the legal framework of the Andean Community of Nations (CAN, in Spanish) to regulate their economic relations until next July while they negotiate an alternate agreement, announced Peruvian Foreign Affairs Minister José Antonio García Belaúnde as he was leaving the Venezuelan Foreign Affairs Ministry in Caracas on the second day of technical meetings between delegations of both countries. (Veneconomy, 04-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25681&idc=3)

Ministry will present strategic mining plans as alternative to oil production by July

Next July, the Basic Industries and Mining Ministry will present to the Government strategic short term (2011-2013), medium term (2013-2018) and long term (2018-2030) plans as an alternative to the oil production in Venezuela, according to minister Jose Khan.  The goal is to underpin productive mining processes, “taking advantage of international prices and consolidate the country as a mining power as an alternative to the oil production,” he pointed out. He said the proposal is linked to a visit by a commission of 12 Chinese strategic planning experts, led by the Li Xinchuang, President and Chief Engineer of China Metallurgical Planning and Research Institute, and the Director of the Institute Bai Linlin. (AVN, 04-25-2011; http://www.avn.info.ve/node/54529)

President Chavez increased minimum wage by 25%

The President of Venezuela Hugo Chavez announced on Monday an increase in the minimum wage to 1,548 bolivares ($360). During a council of ministers held in the Miraflores Presidential Palace, in Caracas, he explained that the increase will be done in two parts: on May 1, there will be a 15% of rise and another 10% from September 1, based on the new salary. “That makes 26.5 percent [of real increase], but let`s round off to 25 percent,” the Head of State added. (AVN, 04-26-2011; http://www.avn.info.ve/node/54718)

El Nacional reports Venezuela has 5 years overdue accounts at the IMF

Venezuela has had no accountability with the International Monetary Fund for over than five years, which violates membership standards and carries penalties such as not being able to have its share of funding if there is a crisis in its balance of payments (unable to meet payments for imports) or a debt moratorium. The report adds that Article 4 of the IMF's policy stipulates that all member countries have an obligation to submit their public accounts once a year or every 2 years. Venezuela did so in 2006. The situation increases country risk, transparency and clarity in their accounts. In practice this failure creates mistrust in international markets. (El Nacional, 04-26-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Over 60% traders expect fewer sales

The trade sector is not expecting any better for the second quarter of 2011. Based on the "consultation on present conditions" of the National Council of Trade and Services (CONSECOMERCIO), 62.4% of interviewees feel that their sales will drop in May-June; only 14.8% think that they will rise. 75% of interviewees have no plans at all to make any new investment ahead of the second quarter. Association data, based on polls of some 200 state chambers, noted that in the first quarter of 2011, sales receded 29.7% versus the same period last year. None of the 20 sub-sectors measured by the poll reported on any improved invoicing. (El Universal, 04-21-2011; http://english.eluniversal.com/2011/04/21/over-60-percent-dealers-fear-fewer-sales.shtml)

Seasonal factors slow inflation

Finance Minister Jorge Giordani and President of the Central Bank of Venezuela (BCV) Nelson Merentes claim inflation is losing strength. In fact 1.4% in March is the lowest inflation rate thus far this year. However, there is every sign that the seasonal factors which provide a breath of fresh air will vanish over the short term. BCV numbers show that prices have slowed down due to the harvest season and discounted agricultural products, a very influential aspect in the inflation index. (El Universal, 04-20-2011; http://english.eluniversal.com/2011/04/20/seasonal-factors-arrest-inflation.shtml)

Cadivi resumes registration processes for corporations that want to request foreign currency. According to Notice 106 published in the December 3, 2010, Official Gazette they must enter the institution’s web page directly (www.cadivi.gob.ve) and follow instructions. (Veneconomy, 04-18-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25682&idc=2)

Logistics & Transport

China weighs potential cooperation with BOLIPUERTOS

A delegation from the People's Republic of China on visit in Venezuela toured on Wednesday the facilities of Bolivariana de Puertos (BOLIPUERTOS) to assess potential cooperation with Venezuelan port authorities. The delegation met with of Puerto Cabello, La Guaira, Guamache and Guanta. (El Universal, 04-21-2011; http://english.eluniversal.com/2011/04/21/china-weighs-potential-cooperation-with-bolipuertos.shtml)

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.

April 18th, 2011

Economics & Finance

Regulators halt U.S. lending by Venezuelan state bank

The Federal Reserve Board imposed a lending halt and civil penalties of $1.8 million against Venezuelan state-owned Banco Industrial de Venezuela after repeated examinations of its U.S. operations found deficiencies. The cease-and-desist order, jointly issued with state bank supervisors in New York and Florida, restricts Banco Industrial from making new loans or taking on new customers without the regulators' approval. Banco Industrial de Venezuela agreed in a statement that it would file audited financial results for 2010 and 2011. More information at: http://www.reuters.com/article/2011/04/16/us-usa-fed-venezuela-idUSTRE73F0EN20110416

The order “is designed to address deficiencies revealed in repeated examinations of the agencies by the Federal Reserve”, according to a statement today. “The order also addresses issues relating to BIV’s financial condition and the lack of audited financial statements.” (Bloomberg, 04-15-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aEgG.NuYHR7E)

Unions deplore state of nationalized companies

Trade union representatives of CVG Refractarios Orinoco, FRIOSA, NORPRO and SIDETUR have joined efforts in a common interest: requests for better labor conditions which have stagnated long after Government takeover of these industries. Far from gaining benefits after the State took over these plants, workers complain nowadays about worsened labor conditions. (El Universal, 04-15-2011; http://english.eluniversal.com/2011/04/15/staff-deplores-status-of-nationalized-businesses.shtml)

Power deficit hits Venezuelan industry

Official goals for power generation in 2010 went fulfilled, despite the urgency imposed by the national emergency. Only 1,250 MW out of 5,200 megawatts (MW) targeted were actually added to Venezuela's power grid system. The Ministry of Electricity in an analysis of its performance, found technical, budgetary, financial and political barriers to upgrading the power generation system during 2010. (El Universal, 04-15-2011; http://english.eluniversal.com/2011/04/15/power-deficit-hits-venezuelan-industrial-sector.shtml)

Venezuela raises official food price caps 48% amid inflationary surge

Venezuela raised government-set price caps on some food products by as much as 48% even as President Hugo Chavez’s government struggles to contain one of the highest inflation rates in the world. The government raised the price on cans of powdered milk 48% to 23.7 bolivars (USD$5.50) and on corn oil by 36%, according to a resolution published today in the Official Gazette. The costs of sunflower oil and mixed vegetable oil were also raised. (Bloomberg, 04-15-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=aweQ3FTwPaHg)

Central Bank reports 9.9% sales hike in January

Two weeks ago, Nelson Merentes, the president of the Central Bank of Venezuela (BCV) announced the end of recession. "All sectors of the economy are reacting pretty well: manufacturing, trade, which was stagnated, or building." First measurements on trade show that consumption has taken a breath of fresh air after two years of economic shrinkage. Sales leapt to 9.9% compared with January 2010. Gross sales skyrocketed to 26.44%; retail sales also took a step forward, although more modestly, at 5.21%. (El Universal, 04-18-2011; http://english.eluniversal.com/2011/04/18/central-bank-reports-99-percent-hike-in-january-sales.shtml)

Industrial property rights weakened by exit from Andean Community

According to expert Leonel Salazar, an expert on intellectual property and law professor at Venezuela’s Central University, exit from CAN has brought about “pretty unfortunate situation” for intellectual property rights as Andean legislation has for years benefitted different economic sectors. See more in Spanish: (El Universal; http://www.eluniversal.com/2011/04/18/salida-de-la-can-freno-avances-en-temas-de-propiedad-industrial.shtml)

Recession and inflation hit business profits, tax results

Total income tax revenues fell by 2.5% in real terms during the first quarter of 2011 vs. the same period in 2010, closing at Bs F 9.784 million. Analysts say high inflation within Venezuela’s economy weakens local currency and lowers the value of bolivars collected by tax authorities. SENIAT figures tout a nominal increase of 24.4% (Bs. F. 1.920 million) for first quarter income tax revenue this year. (More in Spanish at: El Mundo, http://www.elmundo.com.ve/Default.aspx?id_portal=1&id_page=26&Id_Noticia=16666)

Venezuelan government moves forward on plans for binational bank with Russia

The 2010 annual report of the Venezuelan Ministry of Planning and Finance shows that last year two bi-national funds were established and steps were taken to organize a Russian-Venezuelan bank. Based on the report, in order to organize the bi-national financial institution, shares in EVRO FINANE MOSNARBANK were bought. However, there is not a breakdown of the invested amount. It only states that "this entity will be set to bolster the process of strategic alliance and funding of projects in the national interest in several areas." President Hugo Chávez reported on the organization of the financial institution last October. Shortly afterwards, Russian authorities notified that the National Development Fund (FONDEN) would be responsible for buying 49% of the shares of the new bank. The initial capital stock was set at USD$ 4 billion. (El Universal, 04-18-2011; http://english.eluniversal.com/2011/04/18/venezuelan-government-moves-forward-in-bank-with-russia.shtml)

China to support new projects in Venezuelan glass company

Technicians of China’s Development Bank visited the recently incorporated company Venezolana del Vidrio (VENVIDRIO), which manufactures container glass products (OWENS ILLINOIS before a government takeover), in order to get acquainted with the way the company works and exchange experience on developing new projects. The Asian delegation reviewed the current situation of the company, extension projects, the supply of raw material and other important items. (AVN, 04-17-2011; http://www.avn.info.ve/node/53664)

Commodities

Venezuelan oil basket rises USD$ 2 to USD $ 107.30

The price of the Venezuelan oil basket ended the week at USD$ 107.30 after a USD$ 2 increase compared to the previous week, according to figures released by the Venezuelan Ministry of Energy and Petroleum.
"Concerns over oil supplies in some oil-producing countries, coupled with a weak dollar versus the euro, boosted oil prices throughout the week," the Ministry reported. (El Universal, 04-15-2011;

http://english.eluniversal.com/2011/04/15/venezuelan-oil-basket-rises-usd-2-to-usd-10730.shtml)

Logistics & Transport

Venezuela, China lay plans for aquatic spaces

Representatives of the China Development Bank and the Venezuelan Institute of Aquatic Spaces (INEA) met in Caracas seeking planned development of aquatic spaces in the South American country. INEA head Luis Rodriguez said they aim to strengthen the development of these spaces by working with experts from the People´s Republic of China. According to a press release from the institute, they are working on the Apure-Orinoco region. (AVN, 04-17-2011; http://www.avn.info.ve/node/53677)

Politics

Brazil Safer, Venezuela Worse

Brazil and Panama have become safer for foreign multinationals and executives, while Venezuela has worsened further, according to the fifth annual Latin Security Index developed by FTI Consulting Ibero America for Latin Business Chronicle. Overall, however, Latin America remains unchanged from a year ago. The Latin Security Index takes into account how each country in the region is doing related to public insecurity, with a special focus on the business community. Apart from polling its business contacts in the region related to issues affecting their security, FTI analyses government statistics at the federal, state or province and municipal levels in areas such as homicides, serious crime, cargo theft, home invasions, kidnapping, political and labor unrest, riots and violent demonstrations and drug trafficking, as well as the efficacy of government programs put into place to combat these problems. (Latin Business Chronicle, http://www.latinbusinesschronicle.com/app/article.aspx?id=4824)

Analysis: Oil rally helps Chavez's re-election chances

Hundred dollar oil, a brighter economic outlook and growing popularity after a tough couple of years are just a few reasons Venezuela's President Hugo Chavez has to be cheerful as he plans a re-election bid. Add to that list bickering among opposition parties and the bombing of Libya by Western nations, and the socialist stalwart has plenty to help counter popularity-sapping problems such as high inflation and shoddy public services. Any number of factors could yet upset Chavez's plan to do away with capitalism in South America's biggest oil exporter, but for now the former soldier looks like the favorite ahead of a December 2012 election that would give him a new six-year term. (Reuters, 04-18-2011; http://www.reuters.com/article/2011/04/18/us-venezuela-chavez-idUSTRE73H42H20110418)

Venezuela has purchased Russian weaponry for almost $11 billion, over the last five years, becoming the main importer of Russian weaponry in Latin America, according to the Russian State corporation for weapon exports ROSOBORONEXPORT. (Veneconomy, 04-15-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25669&idc=1)

Venezuela, Cuba, Colombia and Honduras are once again “black listed”

According to the Inter American Commission on Human Rights a number of nations in America must strengthen respect towards human rights, according to the annual report Haiti was removed from the list because of “its special situation” after the 2010 earthquake. For Venezuela, the CIDH again reports the deteriorating situation of the judicial system which has lost Independence and impartiality. (Veneconomy, 04-15-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=25668&idc=1)

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.

April 15th, 2011

Economics & Finance

Inflation: Venezuela World’s Worst

Venezuela posted the world’s highest inflation last year, followed by Argentina, according to a Latin Business Chronicle analysis of data from the International Monetary Fund (IMF) for 186 countries worldwide. Venezuela’s rate of 28.2 percent was higher than African countries like the Democratic Republic of Congo, Sierra Leone, Guinea and Angola. (Latin Business Chronicle, 04-14-2011; http://www.latinbusinesschronicle.com/app/article.aspx?id=4853)

Official Inflation in Venezuela at 27.4%

March CPI came in at 1.4%, as measured by the INPC, lower than the previous month and adding to a 6% increase in prices so far in 2011. Twelve-month inflation reached 27.4%. "The slowing of inflation, despite the fact that there was significant devaluation, is due to the fact that the Government has yet to increase the prices of many controlled items, something it will be forced to do in the upcoming months to avoid shortages," say Miguel Octavio, Head of Research at investment bank BBO in Caracas. "Thus, while the index has slowed down, it will likely remain high in the upcoming months." (Latin American Herald Tribune, 04-13-2011;

http://www.laht.com/article.asp?ArticleId=391651&CategoryId=10717)

Venezuela's food inflation trebles Latin American average

The high food prices hitting Venezuelan households exceed by far those in the rest of Latin American countries, according to the Food and Agriculture Organization of the United Nations (FAO). Between February 2011 and February 2010, food prices climbed 37.3 percent in Venezuela, while the Latin American average food inflation is 8.8 percent, based on a statement prepared by the FAO to disseminate its quarterly newsletter. The Latin American countries with the highest annual inflation rates at the end of February were Venezuela, followed by Paraguay (17.1 percent), Bolivia (17 percent) and Argentina (10.6 percent), while inflation in Colombia, Mexico and Peru was below 5 percent. (El Universal, 04-15-2011; http://english.eluniversal.com/2011/04/15/venezuelas-food-inflation-trebles-latin-american-average.shtml)

Venezuela's international reserves fall to lowest level since August 2007

Venezuelan companies are required an authorization from the Foreign Exchange Administration Commission (CADIVI) to obtain US dollars at the official exchange rate. Then, the Central Bank of Venezuela (BCV) disburses the foreign currency. However, according to official data, there is a lower availability of foreign currency despite skyrocketing oil prices. To supply US dollars authorized by CADIVI and pay foreign debt obligations, the Central Bank of Venezuela has used the international reserves account, which of April 8 amounted to USD$ 25.92 billion, a 12% drop so far this year and the lowest level since August 14, 2007. A study prepared by economist José Guerra, a former economic research manager at the Central Bank of Venezuela, shows the portion of international reserves backed by gold increased from 39.56% in 2009 to 70% by the end of March 2011. (El Universal, 04-13-2011;

http://english.eluniversal.com/2011/04/13/venezuelas-international-reserves-fall-to-lowest-level-since-august-2007.shtml)

Central Bank Director expects Venezuela’s economy to enter into a long growth cycle

Armando Leon, director of the Venezuelan Central Bank (BCV), considers that the recovery of the Venezuelan economy could be within the framework of the new long growth cycle, involving all the productive sectors. “What trends show is that almost all the sectors of the economy should grow this year,” he said and highlighted that this recovery began during the fourth trimester of 2010. “The Venezuelan economy was affected by foreign and domestic factors. As they were overcome, the economy has been recovering. The connection between the private and public sector has improved,” he explained. (AVN, 04-13-2011; http://www.avn.info.ve/node/53064)

Industrial sector reports increase in power failures in Venezuela

Daily power failures in Venezuela are impacting industrial activity nationwide. "We are increasingly witnessing problems to maintain production processes without energy," said César Guillén Lamus, the president of the Chamber of Commerce and Industry of the western state of Mérida. He added that in the past 15 days, "unscheduled power cuts" have increased and have hit trade and production (El Universal, 04-13-2011;

http://english.eluniversal.com/2011/04/13/industrial-sector-reports-increase-in-power-failures-in-venezuela.shtml)

Commodities

PDVSA to have a role in Vietnam's Dung Quat refinery expansion

Venezuelan state oil company Petróleos de Venezuela (PDVSA) and Vietnam's state oil group PETROVIETNAM yesterday agreed on PDVSA's participation in the expansion of Vietnam's Dung Quat refinery. After the expansion, the refinery will process 100,000 barrels per day (bpd) of upgraded crude oil from Venezuela's Orinoco oil belt, to be supplied by PDVSA Petromacareo. PDVSA Petromacareo was created by PDVSA and Petrovietnam with the objective to produce and upgrade extra heavy crude oil from Venezuela's Junín 2 block for 25 years. PDVSA expects to extract the first 50,000 bpd of crude from Junín 2 in the third quarter of 2012. (ADP, 04-14-2011; http://adpnews.info/?nid=b1f92cf612ab4f92)

Venezuela steelmaker sees Q1 2011 output rise

Venezuelan state-owned steelmaker SIDOR's output rose 16% during the first quarter compared with the last three months of 2010, according to a company document seen on Wednesday by Reuters. The biggest steelmaker in the Andean region and the Caribbean, Sidor has seen production decline since its nationalization in 2008, and the trend accelerated last year due to severe power shortages amid a drought. "The company started to increase production capacity with the end of electricity rationing," Sidor's industrial production director Rubens Llanes said in the document, referring to improved first quarter 2011 results. (Reuters, 04-13-2011;

http://www.reuters.com/article/2011/04/13/venezuela-sidor-idUSN134187320110413)

Venezuela's Electricidad de Caracas reports USD$215 million losses

Electricidad de Caracas reported its fiscal 2010 results, which closed in December. Revenues were up 7% at Bs. 3 billion (USD$ 697 million), but costs increased sharply by 86% to Bs. 3.9 billion (USD$ 906 million). The biggest jump in expenses was payroll, increasing 134% to Bs, 1.6 billion (USD$ 372 million). Total losses for the year were Bs. 926.8 billion or USD$215 million at the official rate of exchange of Bs. 4.3 per US dollar. (Latin American Herald Tribune, 04-13-2011; http://www.laht.com/article.asp?ArticleId=391647&CategoryId=10717)

Politics

Venezuelan opposition to hold its Presidential primary Feb. 12

Venezuela’s opposition parties will hold primary elections for a presidential candidate to run against President Hugo Chavez on Feb. 12 next year, according to a statement sent by e-mail from the Democratic Unity Table alliance. (Bloomberg, 04-13-2011; http://noir.bloomberg.com/apps/news?pid=newsarchive&sid=abXhnJoWZzr8)

Ruling party deputy: pact with Colombia is better than CAN Agreement

Although the Economic and Trade Complementarity Agreement between Venezuela and Colombia was deferred for three months, the deadline set by the Cartagena Agreement for Venezuela to continue being a full member of the Andean Community ends on April 21. However, Roy Daza (ruling party PSUV), a Venezuelan deputy to the Latin American Parliament (Parlatino), said that some agreements with the sub-regional bloc are likely to remain in force. He specifically mentioned the Hipólito Unanue Convention on Cooperation on Health, which is an institution of the Andean Integration System that aims to coordinate and support efforts of member countries to improve people's health. Under this legal mechanism, countries can purchase vaccines at affordable prices. He also referred to the Andrés Bello Convention, which promotes educational and cultural projects. (El Universal, 04-12-2011; http://english.eluniversal.com/2011/04/12/ruling-party-deputy-pact-with-colombia-is-better-than-can-agreement.shtml)

Venezuela strengthens bilateral cooperation with Andean countries

The fact that Venezuela is leaving the Andean Community (CAN) has not prevented it from strengthening bilateral cooperation, beyond commercial agreements, with the member states of this bloc, such as Colombia, Ecuador, Bolivia and Peru. A few weeks before Venezuela´s participation in the CAN comes to an end, the Venezuelan government has reached agreements with Colombia, Ecuador and Bolivia, and is holding talks with Peru, to reach agreements under new legal parameters. (AVN, 04-13-2011; http://www.avn.info.ve/node/52984)

Venezuelan President, Argentine Minister meet in Caracas

President Hugo Chavez met with Argentine Minister of Federal Planning, Public Investment and Services, Julio De Vido, to strengthen bilateral relations. De Vido also met with Rafael Ramírez, Venezuela’s minister of Energy and Oil and chairman of the state-run company PDVSA. The two ministers discussed oil projects undertaken jointly by Energía Argentina (ENARSA) and Petróleos de Venezuela (PDVSA). They also discussed a project involving four mature oil fields in which the two companies undertook development plans. (AVN, 04-13-2011; http://www.avn.info.ve/node/53008)

Venezuela's militia

The Economist: A Caribbean Tripoli?

It is a long way from Tripoli to Caracas. But although Hugo Chávez, unlike his friend and close ally Muammar Qaddafi, is an elected president, there are some striking similarities between the Libyan and Venezuelan regimes. Mr Chávez’s grassroots “communes” resemble Colonel Qaddafi’s “people’s committees”, for example. And a new decree, published last month, speeds up the creation of a sectarian militia like that which opened fire against unarmed protesters in Libya.

A year ago Mr Chávez assembled more than 30,000 uniformed, gun-toting militiamen and women for a parade in the centre of Caracas. Unsheathing a sword that belonged to Simón Bolívar, Venezuela’s independence hero, he led them in an oath to work tirelessly to “consolidate…the socialist revolution”. Officials claim that the militias total 125,000, and that the goal is to reach 2m. Sceptics put the number trained so far at under 25,000. (The Economist, 04-07-2011; http://www.economist.com/node/18529829?story_id=18529829)

Venezuela's Chávez bankrolled Nicaragua with $1.6 billion since 2007

Venezuela upped aid to Nicaragua last year by 15 percent to $511 million, more than making up for diminishing aid flow from other countries, according to a report released Wednesday from Nicaragua's Central Bank.

Since President Daniel Ortega returned to power in 2007, Venezuelan President Hugo Chávez has provided his comrade with $1.6 billion in total aid, according to a Monitor tally of Central Bank figures. That growing pool of petro-dollars has supported Mr. Ortega's political programs and perhaps even saved his nation's fledgling economy from collapse, according to opposition analysts and the president himself. (The Christian Science Monitor; 04-07-2011; http://www.csmonitor.com/World/Americas/2011/0407/Venezuela-s-Chavez-bankrolled-Nicaragua-with-1.6-billion-since-2007)

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.