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, May 3, 2011

May 3rd, 2011

Economics & Finance

Morgan Stanley says Venezuelan disposable reserves may run out by the Third Quarter 2011, but estimates the country may grow 3%
In the latest report on Venezuela, dated May 2, Morgan Stanley increased the estimate of growth for the country's economy in 2011 from 0.3% to 3%.
Also, the investment bank improves its growth forecast for next year from 1.6% to 3.6%. The improved outlook is due solely to the jump in oil prices in the order of 40% over the past four months, but the analysis makes clear that the barrel no longer has the same effect on the economy. The study points out that the liquid portion of international reserves, that is, dollars immediately on hand for imports, debt repayment and demand for foreign currency, decreased by U$D 3 billion this year, to U$D 6,100 billion. It adds that if this trend continues Venezuela will find itself without liquid reserves by the Third Quarter. More information in Spanish. (El Universal;

Supply of U$D through Sitme shrinks by 26%
The System for Foreign Currency Denominated Securities Transactions (SITME), created by the Central Bank of Venezuela for companies that do not receive US dollars through the Foreign Exchange Administration Commission (CADIVI) to access US dollars at an exchange rate of up to VEB 5.30 per US dollar, has registered a significant drop in the supply of foreign exchange. Data released by the Central Bank of Venezuela, which manages SITME, show that between September and December 2010, the daily supply of US dollars averaged U$D 42 million. However, it plummeted 26% to U$D 31 million durin the first four months of 2011. Analysts believe the way SITME was set up forces financial authorities to keep a low supply of dollars. (El Universal, 05-02-2011;

Chavez to Cut Bank Reserve Requirements by 3% to Fund Housing
Venezuelan President Hugo Chavez said he has asked the central bank to lower reserve requirements by 3 percent to free up money so that private banks can provide credit to build houses. Chavez, speaking on state television at the start of a social program that aims to eradicate Venezuela’s housing deficit of more than 2 million homes, said banks will be obliged to finance a portion of the 30 billion bolivars ($7 billion) needed to build the government’s 2011 target of 153,000 homes. Central bank President Nelson Merentes said lowering reserve requirements by 3 percent would free up 10 billion bolivars ($2.33 billion). (Bloomberg, 30-04-2011;

Bill on Costs, Prices and Protection of Salaries to be discussed this week in Council of Ministers
Next Tuesday, the President of Venezuela Hugo Chavez will bring to the Council of Ministers the Bill on Costs, Prices and Protection to Salary to be discussed and passed in the framework of the Enabling Law. Chavez underscored that the new legal instrument is aimed at giving tools to the State and the people to “defeat speculation, hoarding and the voracity of the markets and the bourgeoisie.” The announcement was made on Sunday during a mass gathering in Caracas, where thousands of workers met to commemorate the May Day. The President explained that it is expected to transform the Institute for the Defense of People’s Access to Goods and Services (INDEPABIS in Spanish) “into a sort of superintendence of costs, prices and protection of salaries.” (AVN, 05-02-2011;

EPA following Éxito’s path?
During the same speech, President Chávez also threatened to expropriate the EPA chain of hardware stores if it “insists” on speculating with prices, and “that has to be in the law,” he said. (Veneconomy, 05-02-2011;

Terms for Venezuela-Colombia trade are made official
The Venezuelan government has implemented an agreement entered into by Venezuelan President Hugo Chávez and his Colombian counterpart Juan Manuel Santos on April 9 in Cartagena. These rules will govern bilateral trade provisionally.
Technical teams of Venezuela and Colombia held talks to achieve an Agreement on Economic and Trade Complementarity upon Venezuela's departure from the Andean Community (CAN) on April 22. Absent a permanent understanding, the Heads of State chose to extend for 90 days the regulations within the sub-regional bloc. (El Universal, 04-29-2011;

A reliable power supply requires an additional grid
A study by the public electric enterprise EDELCA on problems within the National Grid (SEN) has found that in order to support the economic growth envisaged for this and subsequent years, in addition to housing, development programs, and increasing population, demand for electricity is rise to heighten by a yearly average of 6.5%. Professionals and experts from the company, now merged into the National Electrical Corporation (CORPOELEC), find that "the electricity supply should be of a thermal nature, in order to diversify sources and ensure a safe grid." During 2011 there is the need to "rely on 2,700 installed megawatts (Mw) of new thermal generation, composed of combined-cycle and gas plants." (El Universal, 04-29-2011;


Venezuela ministry source says China could invest U$D40 billion in energy sector
China could further increase its investments in Venezuela's energy sector in oil production, refineries, natural gas projects, terminals and in the exportation and industrialization of coke and sulfur, a source with Venezuela's Energy and Oil Ministry said Monday. "It is anticipated that the joint investments between PDVSA and Chinese companies might reach $40 billion in the next 10 years," said the official, who spoke on condition of anonymity. This comes after a Chinese delegation visited Venezuela during the last two weeks of April to discuss possibly participating in state oil company PDVSA's projects underway to improve refineries in Puerto La Cruz and El Palito. Delegates included representatives from the China Development Bank, China International Engineering Consulting, and China Petroleum and Petrochemical Engineering. (Platts, 05-03-2011;

Venezuela’s ALCASA to Get U$D403 Million Investment From Government, China
A joint development fund between China and Venezuela will invest $403 million in CVG Alumino del Caroni SA after the state-run aluminum producer declared an operational and financial emergency, Venezuela Basic Industries and Mining Minister Jose Khan said. Beijing-based Aluminum Corporation of China Limited will provide operational advice to the metal maker known as ALCASA, Khan said in comments carried on state television. “This is going to give ALCASA an increase in production and an increase in its income,” Khan said. (Bloomberg, 30-04-2011;

El Salvador- ALBA fuel storage plant, a joint venture with Venezuela, will be inaugurated next month. The plant, located in Acajutla, 85 kilometers from the capital city El Salvador, has capacity for 300,000 barrels of gas, diesel and natural gas. (Veneconomy, 04-29-2011;


President Chavez's performance rating rose 12% in 2011
According to data gathered by a polling company called GIS XXI in March, released by the Government news agency, the performance rating for President Hugo Chavez has risen 12% over the past 12 months. From a sample of 2,500 people surveyed for the comparative study between the first trimester of 2010 and 2011, the study shows that 52% of the people consider the general performance of the head of State as very good. The index was at 40% in the first trimester of 2010. (AVN, 05-01-2011;

Venezuela's Chavez predicts full employment if re-elected
Addressing tens of thousands of red-clad workers at a May Day march on Sunday, Venezuelan President Hugo Chavez set a goal to create more than 3 million jobs in eight years and end unemployment in the OPEC nation. Chavez arrived at the rally waving a Venezuelan flag from an open-topped truck. "I am absolutely sure we will incorporate 3.5 million jobs in the next eight years," Chavez told the workers, who were brought in on buses to Caracas from across the country. (Yahoo News, Reuters, 05-01-2011;

Jaua says people's awareness crucial for the continuation of the Revolution
Venezuelan Executive Vice President Elias Jaua said this Monday that “the guarantee for the continuation of the Revolution in the future is politicization.” In a local television program, Jaua said that raising people’s level of consciousness and their capacity of organization is crucial for the revolutionary process to keep in the future. The Venezuelan Revolution is relaunching itself and if works keeps the same pace, “we will have a great people’s victory in 2012 (in the presidential elections), a guarantee for the Revolution to continue.” (AVN, 05-02-2011;

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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