May 24th, 2011

Economics & Finance

United States to sanction Pdvsa on Iran trade

The United States will sanction Venezuela's state-run oil holding Petróleos de Venezuela (Pdvsa) on Tuesday for dealing with Iran in violation of a Washington ban, sources familiar with the situation told Reuters.

Deputy Secretary of State James Steinberg was expected to announce the sanctions, which could include stiff penalties such as being banned from the US financial system or being denied US contracts, the sources said. (El Universal, 05-24-2011; http://english.eluniversal.com/2011/05/24/united-states-to-sanction-pdvsa-on-iran-trade.shtml)

 
Venezuelan financial authorities expect inflation under 20% in 2012

The president of the Venezuelan Central Bank Nelson Merentes estimates an inflation rate below 20% for the next year, if demand for massive consumption products, such as food, is satisfied. “We can besure that this is the first time that the country has a technical team analyzing weekly the behavior of goods and services. We know that we have to produce more, most of all in the food sector to satisfy domestic demand and prevent market distortions,” he explained. (AVN, 05-23-2011; http://www.avn.info.ve/secciones/english/venezuelan-financial-authorities-expect-inflation-under-20-in-2012)

Central Bank chief says the private sector grew more strongly than the public sector

Central Bank President Nelson Merentes has said that the private sector grew significantly within the economy “with more strength than even the public sector”, in the First Quarter of this year. He said that all productive areas related to industry grew by 7.6%. More information in Spanish. (Agencia Venezolana de Noticias; 05-24-2011; http://www.avn.info.ve/secciones/economia/nelson-merentes-sector-privado-economia-crecio-manera-importante)

Eight industrial sectors in Venezuela produce less than in 1997

After two years of a steady decline in industrial production, Venezuela's industrial output rebounded during the first quarter of this year and grew by 7.5% over the same period in 2010. However, a thorough analysis shows that this economic sector needs much more to move from stagnation to real growth. Data from the Central Bank of Venezuela (BCV) shows that the industrial sector grew compared to a quarter in which electric power shortage led to production stoppages in many plants. A comparison of the first quarter of 2011 with periods prior to 2010 found insignificant progress. For instance, industrial production in the first quarter of 2011 remained 2.5% beneath industrial output in the same quarter of 2009 and was 3.1% less than in the first quarter of 2008. (El Universal, 05-23-2011; http://english.eluniversal.com/2011/05/23/eight-industrial-sectors-in-venezuela-produce-less-than-in-1997.shtml)

Sagging oil GDP mirrors drop in drilling

As the Venezuelan economy grows at 4.5% in goods and services, the outlook is not as encouraging for the oil sector. According to data supplied by the Central Bank of Venezuela (BCV), in the first quarter of 2011, oil operations recovered 1.8% compared with the same period last year. But it is the poorest result since the first quarter of 2003, in the middle of a nationwide oil strike. Drilling volume has gradually dwindled up to 2.76 million barrels per day (BPD), based on the latest audit of the industry. Oil drilling had already diminished in 2010, on average, as low as 2.78 bpd. Nevertheless, PDVSA’s official report put the output volume at 3.1 million bpd. (El Universal, 05-21-2011; http://english.eluniversal.com/2011/05/21/sagging-oil-gdp-mirrors-drilling-drop.shtml)

Brokerage firms may “eventually” return to the bond market

In a first stage they will only be allowed to trade instruments in bolivars to later trade financial instruments in dollars, a government source told daily El Mundo. (Veneconomy, 05-23-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26077&idc=2)

National Academy of Economics views communal system as confiscatory

Following a review of the communal economic system, the Venezuelan National Academy of Economic Sciences concludes that the new model institutionalizes seizure and expropriation of private property. “In this system, the State is responsible for allocating ownership, never grants ownership to anybody. It is almost similar to what they are doing with housing, the State grants the right of use," explained Pedro Palma, the president of the Academy. (El Universal, 05-21-2011; http://english.eluniversal.com/2011/05/21/communal-system-is-viewed-as-confiscating.shtml)

Investment in public works slows despite Government spending increase of 10,4% 

Construction dropped 7.7% in the first quarter of 2011. This was not only due to by a decline in private sector's activity, but also because of a decrease in public sector's construction for lack of resources. In the first quarter of the year, government's spending surged by 10.4%, according to data from the Central Bank of Venezuela (BCV). However, those funds were mainly allocated to current spending instead of infrastructure investments. The number of completed housing units dropped 35% compared to 2010 and the road infrastructure construction fell 16%. (El Universal, 05-23-2011;  http://english.eluniversal.com/2011/05/23/despite-high-spending-investment-on-public-works-has-slowed.shtml;  Veneconomy, 05-23-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26076&idc=2)

PDVSA bonds decline as Central Bank announces plan to sell securities

Petroleos de Venezuela SA bonds maturing in 2022 had their biggest fall in two weeks after a central bank director said more of the securities will be offered to investors in a state-run currency trading system. Yields on the PDVSA bond that matures in 2022 rose 14 basis points, or 0.14 percentage points, to 16.42% after central bank director Armando Leon said they would be sold on the SITME market for the first time. The yield on PDVSA bonds maturing in 2017, currently offered in Sitme, fell 5 basis points to 15.26% percent after Barclays Capital recommended buying following Leon’s comments. (Bloomberg, 05-20-2011; http://www.bloomberg.com/news/2011-05-20/venezuela-may-weaken-currency-rate-to-discourage-import-surge.html)

Commodities

Venezuelan oil Falls to $99.12

Venezuela's weekly oil basket fell just under a dollar as oil prices continued to soften in international markets. According to figures released by the Venezuelan Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petróleos de Venezuela, S.A. (PDVSA) during the week ending May 20 fell to U$D99.12 from the previous week's U$D100.00. (Latin American Herald Tribune, 05-20-2011; http://www.laht.com/article.asp?ArticleId=394462&CategoryId=10717)

Minister says Venezuela plans to ration energy for another year

Venezuela will ration energy again this year, planning steps similar to those taken in 2010 amid an energy crisis, Electricity Minister Ali Rodriguez said. “We’re going to reapply the measures we applied in Caracas last year nationwide, which punishes the wasting of electricity and encourages energy savings,” Rodriguez said in an interview on state television today. Any rationing measures require President Hugo Chavez’s approval, Rodriguez said.  Venezuela has struggled to boost energy-generating capacity to keep pace with an estimated 6% increase in demand this year. The consumption jump, if it persists, would require an additional 2,000 megawatts of new capacity a year, which is “unsustainable,” Rodriguez said. Rodriguez said that the Government is ready to install 7,747 MW adding the units that have been purchased from China. (Bloomberg, 05-23-2011; http://www.bloomberg.com/news/2011-05-23/venezuela-plans-to-ration-power-for-second-year-minister-says.html; AVN, 05-23-2011; http://www.avn.info.ve/secciones/english/venezuelan-electric-system-to-be-stable-by-the-end-of-2011)

PDVSA’s Cardon refinery rocked by explosion

Petróleos de Venezuela, S.A.’s Cardon refinery in western Venezuela had an explosion today at its catalytic cracking unit, news agency NOTIFALCON reported on its website, without saying where it got the information. The explosion damaged the unit, without specifying the amount of damage or how production was affected. Plant workers were evacuated, and the situation has been controlled, Notifalcon, based in Punto Fijo, Venezuela, reported. (Bloomberg, 05-23-2011; http://www.bloomberg.com/news/2011-05-23/pdvsa-s-cardon-refinery-rocked-by-explosion-notifalcon-says.html)

Politics

President Chavez nominated his vice-president for governor

President Hugo Chavez has nominated his vice-president Elias Jaua as a candidate for Governor of Miranda State, in the next regional elections. (AVN, 05-22-2011; http://www.avn.info.ve/secciones/english/president-chavez-proposes-his-vice-president-for-governor)

Paraguayan Senator claims Venezuela offers up to U$D 200,000 for votes on MERCOSUR entry

Paraguayan Senator Juan Carlos Galaverna, of the Colorado Party, says the Venezuelan Government offers “incentives” of up to U$D 200,000 to Paraguayan senators for a positive vote on Venezuela’s entry into MERCOSUR. “The amounts fluctuate between 100,000 and 200,000 per head”, he said and added “the briefcases” come “from Buenos Aires” and are paid out by “a retired military officer along with a foreigner and other compatriots”, he told Agence France Presse. The Paraguayan Senate is the last hurdle to Venezuela’s entry into the regional group. More information in Spanish. (El Universal; 05-24-2011; http://www.eluniversal.com/2011/05/24/denuncian-que-gobierno-ofrece-hasta-$200-mil-para-ingresar-al-mercosur.shtml)