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, April 26, 2011

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;

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;

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;

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;

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;

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;

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;

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;

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;

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 ( and follow instructions. (Veneconomy, 04-18-2011;

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;

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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