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, June 28, 2011

June 28th, 2011

Economics & Finance

Venezuelan bonds recover on expectation of policy changes
Bonds of the Republic and of Petróleos de Venezuela rose on speculation that there could be another bond issue in the absence of President Hugo Chávez and possible policy changes, even a government with different economic strategies. The price of the oil securities rose 1% to 2%, while the Republic rose between 2.5% and 3%. It is considered unusually positive for paper to increase value by more than 1% in one day. Unofficially it was learned that the Global 2027 could increase to 17 points. More information in Spanish. (El Nacional; 06-28-2011;

CITI says the government can avoid deficit
If Venezuelan oil prices remain above U$D 82.9 and production continues at current levels (2.3 million barrels a day), the Government can avoid a deficit this year, says the latest report Citi Group. For the situation to continue in 2012, the barrel can’t be below U$D 85.3. It adds, the proviso that Executive decisions can impact this outcome as an excessive increase in bond emissions bonds in order to finance current spending-would impact accounts. The firm believes that it is an "external variable to consider," as of production does not increase in 2013 there could be a deficit. More information in Spanish. (El Nacional; 06-28-2011;

Debt issues may not be imminent
The ECOANALÍTICA economic consultant firm believes that new bond issues will be offered in 2011, but are not imminent as the Ministry of Planning and Finance does not want to pay a high coupon and prefers to wait for market conditions improve. More information in Spanish. (Tal Cual; 06-28-2011;

Power failures and fitful input jeopardize Venezuelan industry
Government statistics showed a surge in the Venezuelan economy for the first quarter of the year. According to data supplied by the Central Bank of Venezuela (BCV), manufacturing recorded one of the most significant growth rates (7.6%). However, members of the Venezuelan Confederation of Industries (CONINDUSTRIA) are cautious and maintain that manufacturing still shows no real signs of recovery, except for specific sectors. Carlos Larrazábal, president of CONINDUSTRIA, says some industries increased their production during the first quarter in order to deplete inventories purchased with the old exchange rate. (El Universal, 06-27-2011;

Venezuela faces unstable food supply
The supply of food in Venezuela is still hit by instability and volatility. According to figures provided by pollster DATANÁLISIS, the shortage rate amounted to 16% two weeks ago; a reduction of numbers shown  in April, when the index stood at 21%. However, the situation cannot ne regarded as a steady decrease. The real issue is that the government is not dealing with the underlying problem with price adjustments and a stimulus to domestic production, but rather trying to offset shortfalls with imports to create the perception that the market is supplied, according to Luis Vicente León, director of polling firm. (El Universal, 06-27-2011;

Government says it has invested over U$D9.2 million in electricity
The Government of Venezuela has invested over U$D 9.2 million to stabilize the National Electric System, according to Electric Energy minister Ali Rodriguez Araque. He explained that a series of projects in the sector have been developed since 2010, first aimed at solving the electrical crisis caused by the “El Niño” climate phenomenon; as well as unification of 14 electric companies into the National Electric Corporation (CORPOELEC); and the creation of the Electric Energy Ministry. (AVN, 06-27-2011;


PDVSA's partners are unaware of the extent of windfall tax
According to oil companies the new oil windfall tax or "special tax on windfall and exorbitant oil prices" is unexpected and untimely. Companies face an uncertain scenario about the scope and potential impact of the new tax, which sets 80 to 95% rates, when the barrel of oil exceeds U$D 70. The tax severely hits the cash flow of subsidiaries and minority partners of state-run oil holding Petróleos de Venezuela, and this prevents joint ventures from implementing the "remedial" plans that the Ministry of Energy and Petroleum set at the end of 2010 plans to raise oil output. (El Universal, 06-27-2011;

Chevron sees Orinoco output in 2012, needs funds
Chevron could begin pumping 50,000 barrels per day from Venezuela's huge Orinoco extra heavy crude belt next year but needs investment in the project, an executive said in remarks published on Sunday.
Ali Moshiri, Chevron's president of exploration in Africa and Latin America, added that a move to hike taxes on some windfall oil income in Venezuela could affect the company's future investment decisions in the country, which is South America's biggest oil exporter. The U.S. major has a 34% stake in Orinoco's Carabobo Project 3, which has estimated reserves of 66 billion barrels. Venezuelan state oil company PDVSA holds 60%, while Venezuelan and Japanese companies split the rest. (Reuters, 06-26-2011;

Venezuela is offering Russian TNK-BP 40% of its stake in PetroMonagas
According to Russian daily Kommersant negotiation depends on how the ongoing litigation with ExxonMobil goes and on the share price. (Veneconomy, 06-24-2011;

Guasare mines produce no coal
No mineral has been extracted for four days at the Paso Diablo mine in Mara Township, operated by the state company Carbones del Guasare. Workers maintain an indefinite sit-down strike, to the failure of the company of their contractual benefits. The stoppage halts production of 11 metric tons of coal per day, reported yesterday employees, who request anonymity. "The strike is total. There are no activities. We're not doing anything at the mine or the port. We are waiting for a decision by the company." (Petroleumworld, 06-23-2011;


With Hugo Chávez hospitalized, Venezuela frets about the future
There is genuine cause for speculation about Chávez's health, if only because the world is getting little more than Twitter messages right now from a leader who is famous for interrupting Venezuelan TV broadcasts so he can talk for hours. But medical experts say it can take a few weeks to recover from abdominal abscesses, and that may well be what Venezuelan Foreign Minister Nicolás Maduro was referring to over the weekend when he said Chávez is "battling for his health." His hospital hiatus in Cuba has raised questions about the condition of his socialist Bolivarian revolution. With problems like high inflation, chronic power outages and a bloody prison riot outside Caracas vexing the oil-rich South American nation, many Venezuelans are fretting about who's in charge of their government. Officials in Caracas sound tongue-tied. Chavistas seem genuinely spooked about their 2012 prospects if Chávez can't run. (Time, 06-27-2011;,8599,2079996,00.html#ixzz1QVdeaWrM)

A Chávez brother threatens armed struggle
Adán Chávez, the president's older brother and governor of the southwestern state of Barinas said during a meeting of the United Socialist Party of Venezuela (PSUV), that while their United Socialist Party prefers to retain power at the ballot box, "we must be aware of the dangers that beset us and that the enemy does not rest. As authentic revolutionaries, we cannot exclude other forms of fighting, including armed struggle." (El Universal, 06-27-2011;

National Assembly Speaker says Chavez doesn’t have cancer, will return home
Fernando Soto Rojas, the pro-Chavez leader of the National Assembly, says “I would be the first to tell the country” if Chavez had cancer. The lawmaker said that Chavez continues to recover from an operation to remove a pelvic abscess and should return to Venezuela in time to celebrate the 200th anniversary of the nation’s independence from Spain on July 5. (Bloomberg, 06-27-2011;

Venezuela’s opposition: Chavez’s health following surgery should not be shrouded in secrecy
Opposition leaders accused Hugo Chavez on Sunday of failing to fully inform Venezuelans about his health, saying the president’s condition following surgery in Cuba should not be shrouded in secrecy. Despite assurances from top government officials and close relatives that Chavez is recuperating following surgery more than two weeks ago, the president’s silence and seclusion since the operation have spurred growing speculation about how ill Chavez may be. Opponents say Chavez and his aides should be more straightforward. (The Washington Post, 06-26-2011;

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.

Friday, June 24, 2011

June 23th, 2011

Economics & Finance

PDVSA planning U$D1.5 billion bond offering to repay Venezuelan Central Bank
Petróleos de Venezuela SA will sell U$D1.5 billion of bonds to the central bank to repay a loan and will likely sell additional securities in the second half of the year, a government official said. PDVSA, as the state oil company is known, within a month plans to issue more of its bonds due in 2022 that were first sold in February, the official, who asked not to be identified because he isn’t authorized to speak publicly on the matter, told reporters. (Bloomberg, 06-23-2011;

Overnight banking rates sink toward zero as Gov’t pushes to spur lending
Venezuela’s overnight bank lending rate fell to the lowest since 2008 as President Hugo Chavez’s push to boost bank lending swelled the amount of cash in the financial system. The rate at which banks lend to each other declined to an average of 0.09% today from 0.1% yesterday, said an official at the central bank, who asked not to be identified because he isn’t authorized to speak publicly. That’s the lowest level since June 20, 2008. The rate has fallen for 8 consecutive days from 10.5% on June 9. (Bloomberg, 06-21-2011;

Gold is now 60% of reserves
The balance sheet published by the Central Bank at the end of May shows that 60% of reserves is invested in gold.
A report published in May this year ECOANALÍTICA addresses the issue of investments in gold and notes that "it seems extremely high ratio of international reserves that the central bank remains in this metal. Today we can say that not only are vulnerable to oil prices, but also the fluctuations in the price of gold."It adds that the revaluation of this metal in recent months has allowed cushion the fall in international reserves and exchange profits and inflate the operation of the BCV to deliver to the Treasury. More information in Spanish. (El Universal; 06-23-2011;

BCV to increase supply of foreign exchange through SITME
Venezuela's Central Bank to raise the supply of foreign exchange through SITME system, securities transactions in foreign currency, in order to cover some of the unmet demand for some imports. A source close to the Ministry of Planning and Finance said the central bank has a sufficient bond portfolio from Petróleos de Venezuela and the Republic. More information in Spanish. (El Nacional; 06-23-2011;

Ministry imposes fines of up to 320% on industry and commerce for electric consumption
The Ministries of Electricity and Information and Communication published the incentives and penalties on residential and corporate rates. For industrial, commercial or official users it provides fine ranging from 9% to 320%, with intermediate rates of 20%, 46%, 80% and 200%. More information in Spanish. (El Nacional;

Venezuela's business criticizes steps taken in power crisis
Noel Álvarez, the president of the Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS) is afraid that the government is not taking the "appropriate measures" to resolve the power crisis. He said that rather than "consumer demand," the main problem is "power demand." Álvarez said the collection of fines levied against companies that fail to reduce their power demand is an "indirect" increase of power rates. (El Universal, 06-22-2011;

16 State companies considered not sustainable
A study carried out by IESA researchers show that the way these companies –most of them expropriated- operate is not sustainable since they follow political criteria and not profit generation. The lack of funds has forced them to depend on government subsidies which have reduced incentives for employees and productivity. (Veneconomy, 06-22-2011;

Venezuela moves to expropriate MATESI
TENARIS S.A. announced that the Venezuelan National Assembly passed a law declaring all MATESI assets of public and social interest and ordered the expropriation of assets required for a state-owned project for the production, sale and distribution of briquettes, and will start negotiations for the acquisition of said assets. (Finance Yahoo, 06-22-2011;

Sucre operations said to reach U$D 375 million
Authorities claim that transactions have increased in the region despite obstacles encountered in the Unitary System Regional Payments (Sucre), which caused a first meeting of Authorized Operating Banks at the Central Bank of Venezuela (BCV). "The Sucre is a virtual currency for central banks such as the Ecuadorian exporter is paid in dollars, legal currency in this country and the exporter Venezuelan bolívar was canceled. The Venezuelan importer buying its currency and the importing Ecuador well. Each uses its national currency," said the president of Banco Central del Ecuador, Diego Borja. More information in Spanish. (El Mundo, 06-22-2011;$375-millones-.aspx)


Venezuela claims oil output reaches 2.8 million bpd
Venezuela's oil production rose slightly to 2.82 million barrels per day (bpd) in April from 2.8 million bpd in March, according to the Ministry of Energy and Petroleum, which said that exports of crude oil and products amounted to 2.56 million bpd in May, compared to 2.22 million bpd in April. Rafael Ramírez, Minister of Energy and Petroleum and president of state-run oil company Petróleos de Venezuela (PDVSA), said recently that Venezuela would increase oil output by 50,000 bpd in 2011. (El Universal, 06-21-2011;

RUSORO requests flexibility on profit repatriations
RUSORO, the Russian firm aiming to exploit Las Cristinas mine, has asked the Government to be more flexible on obstacles to profits repatriation. At present only 30% of foreign exchange earned from exports can be repatriated. More information in Spanish. (El Nacional; 06-22-2011;

Government imports up to 25,000 tons of beef per month
Imports come from countries such as Argentina, Uruguay, Brazil and Colombia, or from as far away as New Zealand, Mexico or the United States. South America continues to top the list as 80% is imported directly from Caracas through CASA and BARIVEN, and the remaining 20% goes through private importers. According to the CENDA economic analysis unit, Venezuelans paid 32% more to buy meat and meat products last year, a category that covers 16% of household expenditure on food. More information in Spanish. (El Carabobeño; 06-22-2011; and El Mundo,

Logistics & Transport

Port services may increase at least by 53%
The new pricing structure for port services is an increase of at least 53% of the costs of port operations, according to calculations by the Chamber of Commerce of Puerto Cabello (JPAC). "Not only is this rate adjustment confusing in its wording, it also increase overall port costs at least 53% the rate of 4.30, not counting the increases that will occur in the freight and any surcharges further, "said the JPAC press release. On the contrary, Elsa Gutierrez Graffe, BOLIPUERTOS President, claims the new rates are an average decrease of 54.02%. More information in Spanish. (El Mundo, 06-22-2011;


Details scarce on Chavez's condition after surgery
Most reports sum up Hugo Chavez's medical condition in a few words. Official accounts repeatedly say Venezuelan leader is "recuperating satisfactorily". Chavez has not updated his Twitter page or appeared on live television. His absence from Venezuela has sparked debate and speculation. In a Wednesday interview Barinas State Governor Adán Chávez, said: “We don't know exactly when he will return. We have to wait for the doctors' evaluation. But In a few days, 10 days, 12 days, the president will be here". (CNN, 06-23-2011;

Chavez's silence gets Venezuela talking
Venezuela is abuzz these days over the condition of Hugo Chavez -- whose prolonged, uncharacteristic silence and convalescence in Cuba has generated all manner of rumor. No interviews, no broadcast tirades, and no Twitter postings for two weeks have fuelled speculation across online social networks and in bars and cafes. Officials have tried to be reassuring, saying 56-year-old Chavez was recovering well and was continuing to give orders from Cuba."It's all very dark, opaque and mysterious," says Ignacio Avalos, a sociology professor at the Central University of Venezuela. But in the legislature, a fierce debate is raging over whether Chavez has the right to rule from abroad. The minority opposition is demanding more transparency. (AFP, 06-22-2011;

Five out of 10 Venezuelans support a change of government
Five out of 10 Venezuelans reject the government's argument suggesting that obstacles have been set to prevent Hugo Chávez from fulfilling his obligations. According to the second quarter's public opinion survey conducted by pollster Alfredo Keller & Asociados, only three out of 10 citizens deem it true that "the opposition does not let Chávez work." The Venezuelan pollster examined people's support for the Head of State and found that four out of 10 people retain hope and enthusiasm for Chávez, whereas five out of 10 have become disillusioned with the President or have become a permanent critic of his work. (El Universal, 06-22-2011;

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.

Tuesday, June 21, 2011

June 21th, 2011

Economics & Finance
Investors avoid PDVSA bonds for fear of arbitration
According to Credit Suisse the key reason investors are cautious and leery of PDVSA bonds is that a ruling is due shortly which may favor the EXXON MOBIL suit begun four years ago against PDVSA. "Venezuela and PDVSA assets remain subject to negative risk mainly due to expectations about a pending arbitration decision on the EXXON case”. PDVSA has set aside a U$D 1.5 billion reserve for this case, but the final amount may rise to U$D 4-5 billon. “Financial markets will probably take the news negatively, whatever the final indemnization is”, according to the investment bank. More information in Spanish. (El Nacional; 06-21-2011;

Country risk increases
An increase of 45 billion bolivars in public debt has raised concerns internationally on Venezuela’s ability to meet obligations, despite the fact that oil is the guarantee to foreign indebtedness. As a consequence, country risk in early June was 1.130 points to Treasury bonds and closed last week at 1.192 points. More information in Spanish. (Tal Cual; 06-21-2011;

Venezuela, China replenish development fund with U$D4 billion loan
Venezuela and China signed an accord to replenish a bilateral development fund with a $4 billion loan from the China Development Bank, according to an e-mailed statement from state oil company Petróleos de Venezuela SA.
The $32 billion fund, which was established in 2008, finances Venezuelan industrial, housing and transportation projects, the statement said. Venezuela, in turn, provides China with oil for its investment. (Bloomberg, 06-18-2011;; AVN, 06-19-2011;

State-run banks' loans to gov't up 73%
The Ministry of Finance announced on June 13 that the network of state-run financial institutions, including Banco de Venezuela, Banco Bicentenario, Banco Industrial and Banco del Tesoro, will buy U$D 2.32 billion in sovereign bonds.
The Chávez administration is deepening its strategy of using state-run banks as a funding source. In fact, including this latest bond purchase of U$D 2.32 billion, total funds received by the Executive Office through the sale of bonds and Treasury bills increases by 73% in the first six months of the year. The portfolio of the state-run banks will now rise to bonds and Treasury bills amounting to U$D 9.88 billion and the core of their activity is lending to government rather than granting loans to consumers. (El Universal, 06-18-2011;

Electricity crisis is considered an obstacle by 70% of industrialists
According to a poll by the National Industry Federation (CONINDUSTRIA), 70% of the nation’s industrialists believe electricity rationing will become a hindrance to production in 2011. The problem has emerged as a key factor. In the last quarter 2010 58% of respondents cited electricity rationing as a key problem, and the number rose to 70% in the first quarter 2011. (El Universal; 06-21-2011;

Instability keeps Colombian exporters away
Trade between Venezuela and Colombia has become unstable. Despite improved relations between governments, Colombian products are disappearing from Venezuelan markets, and vice versa. According to a study quoted by Bogotá’s El Tiempo daily, out of U$D 30.746 billion Venezuelan imports in 2010, only 5% went to Colombian products. This is down from 13% in 2008 and 11% in 2009. More information in Spanish. (El Universal; 06-21-2011;

The IMF slightly trimmed its growth outlook for Latin America and the Caribbean to 4.6% in 2011 from 4.7% in April and warned the increase of domestic demand can result in economic overheating, especially in South America. Venezuela posts the next to lowest growth at 3.3%, after the Caribbean area which is projected with a 2.7% growth. (VENECONOMY, 06-18-2011;


Venezuela’s export barrel average U$D104.29/bbl., up U$D 0.31 due to the positive effects in the market of favorable indicators in the reports on the American and Chinese economies, according to the Venezuelan Energy and Oil Ministry in its weekly report. The average for the month is U$D103.96/bbl. and the average for the year-to-date is U$D97/bbl. (Veneconomy, 06-18-2011;

PDVSA says it will raise output by 300,000 BPD this year
Minister of Energy and Petroleum Rafael Ramirez, aims to increase production later this year by some 300,000 barrels per day (BPD) in order to meet OPEC increase outputs if required. He says the plan is to grow production capacity in at least 10%, which means he estimates current production around 3.2 million BDP. More information in Spanish. (Ultimas Noticias; 06-20-2011;

Cisneros to team with Chinese banks in Latin America oil, gold
Venezuelan billionaire Gustavo Cisneros is setting up joint ventures with Chinese banks to carry out investment in Latin American commodities industries. The chairman of Cisneros Group of Companies, who is relinquishing operations of the firm to his youngest daughter Adriana, said he aims to push through projects delayed by state inefficiencies through partnerships in energy, agriculture and metals. Deals may take place in countries including Brazil, Colombia, Mexico and Panama, Cisneros said. “You’ll probably see in the next year or two a lot of Cisneros China or China Cisneros in Latin America and it’s going to be whatever comes, whether it’s oil, gold or big cattle operations,” Cisneros, 66, said yesterday in an interview at Bloomberg’s headquarters in New York. (Bloomberg, 06-17-2011;


After surgery, Chavez faces troubles in Venezuela
While President Hugo Chavez has been recovering from pelvic surgery in Cuba, his troubles at home in Venezuela have been accumulating. On top of 23% inflation and growing government debt, worsening blackouts have emerged as a serious dilemma, forcing Chavez's government to announce rationing measures including rolling power outages in some parts of the country. Chavez is increasingly focused on shoring up support ahead of his 2012 re-election bid, and some analysts say his domestic woes seem to be limiting his international reach in Latin America. Its unclear how soon Chavez could return from Cuba, where he underwent surgery June 10 to have a pelvic abscess removed. (Associated Press, 06-19-2011;

A former Chavez VP claims sustained popularity evidences success of social policies
Former Chavez Vice President Jose Vicente Rangel claims that after 12 years rule, “the popularity of President Hugo Chavez does not drop from 60%,” he says that conservative administrations such as Chile’s Sebastian Piñera, who after one year in office has 56% rejection. Piñera “has just one year in government and the latest poll showed that rejection of his administration went from 49% to 56%, while his support dropped from 41% to 36%,” said Rangel. (AVN, 06-19-2011;

Social level E is still 44.1% of Venezuela’s population
The social map in Venezuela remains unchanged since 1999, despite government claims that the number of poor has dropped sharply. According to research firm DATANÁLISIS, the proportion of social levels is quite similar to what it was twelve years ago and the only difference is that now the poor receive more state subsidies than before. Luis Vicente León, the managing partner of the consulting firm, said that levels AB  are 2.31% of the population; 17.6% are in the C level; 35.9% are in D level and the E status -which includes the poorest- comprises 44.15% of the population. (El Universal, 06-18-2011;

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.

Friday, June 17, 2011

June 17th, 2011

Economics & Finance

Government issues U$2D.3 billion in bonds
Venezuela's government says it is issuing the equivalent of U$D 2.3 billion in bonds to help cover debt payments and public spending this year. The Planning and Finance Ministry announced the offering of 10 billion bolivars in government bonds. It said in a statement on Tuesday that the bonds will be offered to state-run banks. The ministry said the funds obtained by the government will go toward "national public debt service" as well as public spending. In recent months, President Hugo Chavez's government has turned to state-run banks to help finance growing public spending. Government debt held by state banks increased 32% in the first four months of this year and stood at about U$D7.5 billion in April. (Forbes, 06-14-2011;

Venezuela will honor debts to Colombian suppliers
Venezuelan importers will honor debts of just over U$D 718 million to Colombian suppliers after being authorized by the Central Bank of that country, today according to Minister of Foreign Trade of Colombia, Sergio Diaz-Granados, who added: "hopefully in the near term, we can say that the entire debt is paid". Diaz-Granados explained that a little over U$D 718 million is for disbursements made ​​through the ALADI Convention towards ordinary import and airlines and insurance. He added that CADIVI has analyzed obligations for U$D 1.398 billion, has authorized U$D 877 million and rejected U$D 109 million. It is currently investigating additional requests for around U$D 409 million. More information in Spanish. (Ultimas Noticias; 06-15-2011;

Forex board: Over USD 9.7 billion authorized for imports
Venezuela's forex board, the Foreign Exchange Administration Commission (Cadivi), granted USD 9.7 billion to meet import requests in areas such as health, food, industry supplies and machinery.
Cadivi's president, Manuel Barroso, said that in the first five months of the year, Cadivi allocated between 84 percent and 85 percent of the USD 14 billion that have been managed by the Central Bank of Venezuela.
"We have had positive results in the first five months of the year," Barroso told state-run TV network Venezolana de Televisión (VTV). (El Universal, 06-17-2011;

Venezuela to ration electricity in several regions due to recurring blackouts
Venezuela will soon begin rationing electricity in several regions because of recurring power outages, the country’s energy minister said Wednesday. Ali Rodriguez said he has ordered authorities to start scheduling rolling blackouts in affected regions and informing residents when they will be implemented. He did not provide details or say how many of Venezuela’s 24 states would be affected. They say power consumption must be reduced by 10 percent and have warned that hefty surcharges will be imposed on consumers who don’t reduce usage. Venezuela has experienced three major blackouts in the past three months. (The Washington Post, 06-16-2011;

PDVSA, Central Bank to create oil satellite account
Petróleos de Venezuela, S.A., the state oil company, and the country’s central bank will create a satellite account in order to measure the impact of oil on the economy, according to Oil Minister Rafael Ramirez. The account will measure crude beyond what the central bank calls oil gross domestic product by better gauging the “behavior of volume”. Ramirez also said Venezuela has no plans to increase production unless the Organization of Petroleum Exporting Countries approves a change to output quotas. (Bloomberg, 06-15-2011;

Venezuela: Trade with China is a "strategic alliance"
Trade with China is the "main strategic alliance" for the Venezuelan government, said Minister of Trade Edmée Betancourt.
"The relationship is of foremost importance for both governments," she said within the framework of the Third China-Venezuela Trade and Industry Expo.
The top Venezuelan official said that when President Hugo Chávez took office in 1999, bilateral trade was below USD 200 million and it has now increased to about USD 10 billion. "These figures attest to our new bilateral relationships." (El Universal, 06-17-2011;

VAT exemption for imports of goods for domestic production
A Value Added Tax (VAT) exemption for goods imported in order to boost domestic production came into force, and will be applied for valves imported to be used only for a project implemented by a Socialist enterprise known as the Venezuelan Endogenous Valves Industry (INVEVAL). Imports of movable tangible property used exclusively for the petrochemical, carbochemical industry and the like are also VAT exempted. (El Universal, 06-15-2011;


PDVSA to repay $1.5 Billion Japanese loan with oil
The Japan Bank for International Cooperation is preparing a $1.5 billion loan for Petróleos de Venezuela, S.A. that would be paid back with oil, newspaper El Nacional reported, citing a Japanese diplomat. PDVSA, as Venezuela’s state oil company is called, would be able to repay the loan with as much as 3 million barrels of oil a year that would be sent to Japanese companies over a five-year period, the Caracas-based daily newspaper reported, citing Takashi Kondo, a diplomat at the Japanese embassy in Caracas. (Bloomberg, 06-15-2011;

Crystallex to seek compensation from Venezuela
Canadian gold miner Crystallex International Corp said it will seek to restore permit to develop the Las Cristinas gold mine in Venezuela and compensation for the interim losses suffered. Alternatively, Crystallex said it may seek full compensation of more than U$F3.8 billion for the contract cancellation. A state-owned Venezuelan company had unilaterally decided to end their 2002 contract on Las Cristinas project in February. (Reuters, 06-14-2011;

Minister Ramírez denies fractures within OPEC
Venezuelan Minister of Energy and Petroleum and Pdvsa CEO Rafael Ramírez denied that OPEC "is injured or with irreparable fractures," adding that the organization "is clear in its strategic objectives," even though during their last meeting the OPEC failed to reach consensus on the production quotas of its member countries. Ramírez said he will keep watching over the market, which he described as unstable due to the situation in Libya. Therefore, he argued, OPEC member countries should "work in close cooperation." This includes monitoring the spare capacity of OPEC, and the efforts of each member country to maintain a balance in production. (El Universal, 06-15-2011;

Minister claims Venezuela is one of the few countries in a real oil expansion process
Energy and Oil Minister Rafael Ramírez says “Venezuela is one of the few countries into a real process of development of its oil production,” which can be evidenced with the expansion plans of the industry that expects to double its current production (about 3 million barrels per day) through the exploitation of the oil reserves at the Orinoco Oil Belt. “We are going to have in the Belt the same production levels that we currently have; for such reason, we need to double the industrial complex to produce pipelines, valves and rigs,” Ramirez pointed out and underscored that the Government has met with industrial private sectors to boost the sector. (AVN, 06-16-2011;

Nicaragua cattle boom in sales to Venezuela
Last year livestock production became one of the major sources of revenue and jobs in Nicaragua, thanks to a growing demand for meat and dairy products from Venezuela. "Livestock is a source of direct employment for over 800,000 people in the field, which is enough in a country of 5.8 million people," said the president of the Federation of Livestock Producers of Nicaragua, Solon Guerrero. "The activity represents approximately 27% of Nicaragua's total exports and 25% of gross domestic product," he said. The cattle boom is being driven by purchases of Venezuela acquires 44% of Nicaragua's export meat. Trade is conducted government to government. More information in Spanish. (El Nacional; 06-15-2011;


President Chavez recovers at a satisfactory pace
According to Vice President Elías Jaua, President Hugo Chavez is recovering at a good pace after an unplanned surgery he had last Friday in Havana, Cuba, due to a pelvic abscess. (AVN, 06-15-2011;

Indefinite absence authorization ratified
The National Assembly ratified authorization given to President Chávez to remain abroad for “over five days” until he recovers from the surgery he underwent in Cuba. According to the agreement read in Parliament and passed with the votes of the government majority, President Chávez is fully authorized to exercise his duties while he remains in Havana. (Veneconomy, 06-15-2011;

Venezuela on US list of alleged human rights offenders
The United States included Venezuela, China, Iran, Libya, North Korea and nine other countries in a list of nations that Washington wants the United Nations to hold accountable for alleged human rights violations. US ambassador to the UN Human Rights Council Eileen Chamberlain Donahoe on Wednesday said that "too many governments suppress dissent with impunity," reported AP. (El Universal, 06-15-2011;

Chavez will need to overcome health problems and a vigorous opposition to win re-election
Hugo Chávez is unwell. He is running his country from a hospital bed in Havana, following an emergency operation on June 10th to deal with a “pelvic abscess”. Quite what caused the abscess, or exactly how severe it was, has not been revealed. Mr. Chávez’s medical difficulties may well be exceeded by his political ones. The opposition Democratic Unity coalition is due to choose its candidate in February for the election to be held in December 2012. Mired in recession for the past couple of years, and plagued by inflation of close to 30%, the country has recently returned to growth, thanks in part to higher oil prices. Even if growth remains modest, Mr. Chávez has squirreled away billions of dollars in unaudited public funds, and should be able to pay for a pre-election spending binge. But if the polls are to be believed, this election will be no walkover. One survey found that the leading contender for the opposition candidacy—Henrique Capriles, the youthful governor of Miranda state could beat him in a head-to-head contest. (The Economist, 06-16-2011;

Chavez, Lula, or Humala?
Since his June 5 election as Peru’s next president, Ollanta Humala has been the subject of intense debate.  Observers have wondered aloud whether he will be a Chavez or a Lula, or something else altogether.  The debate matters: how Humala chooses to govern will directly impact Peru’s ability to sustain its historically high growth, or whether the country will squander its recent success.  That observers are having this debate at all reflects the reality that most people outside Peru are not sure exactly who Ollanta Humala is, or what he stands for.  His previous run for the presidency in 2006 presented a candidate in the Chavez model, more interested in the distribution than the creation of wealth, more interested in currying favor with Caracas than with Washington or Brasilia. (Latin Business Chronicle, 06-16-2011;

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.