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.