May 31th, 2011

Economics & Finance

International reserves rose to U$D 27.626 million

Venezuela's international reserves increased by U$D 751 million last week, to U$D 27.626 million, according to the Central Bank (BCV). U$D 3 million from that total are still held in the Macroeconomic Stabilization Fund (FEM), created to offset high risks in the economy. More information in Spanish: (El Mundo, 05-30-2011; http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Reservas-internacionales-de-Venezuela-suben-a-$27-.aspx)

Opposition Congressman estimates U$D 60 billion lost to corruption under Chavez

Congressman Ismael García, a former Chavez ally, says corruption scandals during the rule of President Hugo Chavez translate into losses of over U$D 60 billion to Venezuela. He clays damages to the National Treasury and to citizens over the past few years is unprecedented, and mentioned a few cases: The Antonini Wilson briefcases to Argentina in 2007, bond issues in 2008, the finantial microcrisis in 2009; 130,000 tons of damaged food imported by PDVAL in 2010; and the U$D 540 million fraud on the PDVSA pension fund uncovered this year. More information in Spanish: (El Nacional, 05-31-2011; http://www.el-nacional.com/www/site/p_contenido.php?q=nodo/211081/Naci%C3%B3n/Ismael-Garc%C3%ADa:-La-corrupci%C3%B3n-se-ha-tragado-60-millardos-de-d%C3%B3lares)

Venezuela ranks 129 out of 140 countries surveyed on the ability to protect private property

Venezuela ranks 129 of 140 countries surveyed on the ability to protect private property, through an index that evaluates the legal and political environment, physical property rights and intellectual property rights. Within a global context, incendiary official speeches, the systematic expropriation, confiscation and occupation of companies, farms and urban areas through armed gangs known as militias, are setting up a scenario where the international community could declare Venezuela as a outlaw nation outside international law. This leads to economic and financial sanctions. The government faces over 16 lawsuits in the U.S., Europe and Asia, for breach of contract in oil exploration and production, nationalization of private foreign capital and confiscation of assets of individuals or persons. Infringement of property rights tends to isolate Venezuela and increase the level of borrowing costs to 12% in loans and debt on a global average of 3 to 4%, even with an added value of domestic crude to U$D 96s. More information in Spanish: (Enfoque 365, 05-29-2011; http://www.enfoques365.net/N23275-mundo-burstil--derecho-a-la-propiedad.html)

Under 5% of farms expropriated have received Government compensation

Manuel Cipriano Heredia, president of the National Cattle Federation (FEDENAGA), says the Government has only paid compensation for under 5% of all farms expropriated recently. He reports these farms now remain idle, which translates into the importation of over 51% of beef products consumed by Venezuelans. "Today we see with great concern that our farmers activity is impaired and cover only 49% of domestic production, figures that have been certified by the National Statistics Institute (INE), who indicates that meat consumption has declined in the country, while this is denied outright by the Ministers of Agriculture and Land, Food and Bolivarian associations, "he said. He added that the statement made by the Executive, that 70% of the meat consumed in the country is domestically produced, is false. More information in Spanish: (Ultima Hora, 05-30-2011; http://ultimahoradigital.com/ultimahora/detalles_noticias.php?id=12526)

Economic policies curb industrial growth

Manufacturing climbed by 7.6% in the first quarter of 2011, according to the Central Bank of Venezuela (BCV). However, industrial leaders are certain that unscheduled power cuts, insecurity, fitful supply and legal uncertainty continue making an impact on growth. Abelardo Riera, an alternate director of the Industrial Chamber of the city of Barquisimeto, agrees with analysts that have said that the BCV data are due to a technical recovery. "We do not believe any improvement in the manufacturing sector," he said. (El Universal, 05-30-2011; http://english.eluniversal.com/2011/05/30/economic-policies-curb-the-industrial-sector.shtml)

Commodities

Oil basket rises to USD 100.70

Venezuela's crude oil and products averaged U$D 100.70 per barrel during the week of May 23- 27, with a slight increase of U$D 1.58, after three weeks of decline. Crude oil prices remain volatile but ended the week with an upward trend mainly due to the drop of the US dollar against the Euro and concerns about oil supply from North African countries and the Middle East. The Venezuelan oil basket now averages U$D 96.39 per barrel for 2011. (El Universal, 05-27-2011; http://english.eluniversal.com/2011/05/27/venezuelan-oil-basket-rises-to-usd-10070.shtml)

Venezuela deliberately reduces US oil sales

Sanctions imposed by the US Department of State on state-run oil holding Petróleos de Venezuela (Pdvsa) for trade with Iran are not fully clear, nor is the response of the Venezuelan government, which exports an average of 1.2 million bpd of oil to the United States, according to data from Venezuelan Minister of Energy and Petroleum Rafael Ramírez. Despite symbolic gestures and high-flown statements, Venezuela-US oil ties have loosened due to "sovereign diversification of markets," with a clearly geopolitical outlook and oil diplomacy on the part of Venezuela; and US attempts at ensuring supplier' trustworthiness and reliability. The decline in volume of crude oil and byproducts shipments is the first indicator: In 2005, Venezuela shipped to the United States 1.52 million bpd on average. In 2010, it fell down to 987,000 bpd, or 35% less, according to Washington's numbers. During that five-year period of time, Venezuela, formerly among the three largest oil suppliers in the world, came down to the fifth place. (El Universal, 05-28-2011; http://english.eluniversal.com/2011/05/28/ramirez-venezuelan-oil-supply-to-the-us-is-compromised.shtml)

Cuban refinery financed by Venezuela is forging ahead

A Venezuelan project to build a refinery in the Cuban port of Matanzas is ongoing, Cuba Standard reported, citing Rafael Tenreyro, head of exploration at CubaPetroleo. The construction of the 150,000 barrel-a-day refinery will cost more than U$D 4 billion, according to Cuba Standard. (Bloomberg, 05-29-2011; http://www.bloomberg.com/news/2011-05-29/venezuela-built-cuba-refinery-going-ahead-cuba-standard-says.html)

Ferrominera to receive U$D 900 million from China

State-owned iron ore producer Ferrominera Orinoco (FMO), will receive about U$D 900 million in credit from China to modernize facilities and increase production, which suffered a sharp fall in 2009,according to  its chairman. The head of FMO, Radwan Sabbagh, said that funding will be earmarked for the implementation of a line of pellets with a capacity of 3 million tons, and various projects to improve production capacity and delivery of iron ore. Sabbagh said that U$D426 million will go towards construction of a second line of pellets and another U$D 460 million for recovery operations and increased sales capacity. More information in Spanish: (Ultimas Noticias; 05-31-2011; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Ferrominera-recibira-$900-millones-de-China.aspx)

Politics

US oil sanctions against Venezuela may end up helping Chavez

U.S. sanctions against Venezuela's state oil company may benefit rather than hurt President Hugo Chavez's government by providing fuel for anti-U.S. rhetoric as the leftist leader rallies supporters ahead of next year's presidential elections. "Chavez is using [the sanctions] as a weapon to consolidate his base, to put the opposition in an uncomfortable situation and to rally support for his election campaign," said Anibal Romero, a Caracas-based retired professor of political science. The Chavez government has portrayed the U.S. penalties as an encroachment on Venezuela's sovereignty. The head of PDVSA, Rafael Ramirez, told a cheering crowd that in delivering the sanctions, U.S. authorities "hit us with everything they had." "I think the response from [Chavez] is fairly typical, very anti-American and very tough. I think there's more bark than bite," said Terry Hallmark, director of political risk and policy assessment at the Houston office of IHS, an energy industry research firm. "I'm pretty sure Chavez is trying to make the most of it politically." Venezuela's political opposition also denounced the U.S. sanctions. (The Wall Street Journal, 05-30-2011; http://online.wsj.com/article/BT-CO-20110530-704865.html)

Former OPEC Sec. Gen. says US sanctions violate international law

Alvaro Silva Calderon, Secretary General of the Organization of Petroleum Exporting Countries (OPEC) during 2001-2003 claims sanctions unilaterally imposed by the United States on the national oil company Petróleos de Venezuela (PDVSA) are an aggression against sovereignty and violate the international law. (AVN, 05-30-2011; http://www.avn.info.ve/node/60129)

Santos holds Colombian interests first and foremost

According to Colombian President Juan Manuel Santos, in renewed Colombia-Venezuela relations, Colombian interests have taken precedence over confrontation with his Venezuelan counterpart Hugo Chávez. During an interview, President Santos answered critics who consider that the change of discourse was too hasty. The Colombian president is certain that neither he nor Chávez have changed their mind over power and governance. They just opted to be pragmatic, based on common respect. (El Universal, 05-28-2011; http://english.eluniversal.com/2011/05/28/for-santos-colombian-interests-first-and-foremost.shtml)

Venezuela's opposition seeks assurances against ballot blackmail

A meeting between leaders of Venezuela's political parties and members of the National Electoral Council (CNE) to talk about the implementation of the Comprehensive Authentication System (SAI), on changing voting system, turned into a debate on the public "perception" of the use of the fingerprint reading machines in all polling stations. The opposition political parties consider changes approved by the CNE can cause fear and people do not vote freely if they are afraid.

According to opposition deputy Tomás Guanipa (Primero Justicia), directors of the National Electoral Council (CNE) were asked to make sure that biometric authentication devices are not used by the Executive to "blackmail and intimidate" voters, especially public employees and beneficiaries of social projects (missions.) (El Universal, 05-27-2011; http://english.eluniversal.com/2011/05/27/venezuelas-opposition-asks-for-assurances-against-blackmail.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.