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.

Friday, June 3, 2011

June 03rd, 2011

Economics & Finance

Special Indebtedness Law said to include two new bond issues, one by PDVSA
Treasury sources say the National Assembly will next week discuss a Special Indebtedness Law that authorizes two dollar denominated bond issues. They say authorities will not establish dates in order to surprise markets. British investment firm Barclays Capital projects most of the new bonds will be sold in the domestic market. The company adds that PDVSA will issue most of the US dollar-denominated securities. The investment bank believes the government will issue about U$D 12 billion in US dollar-denominated bonds this year. Barclays predicts that U$D 9 billion will be issued by the state oil company and the remaining U$D 3 billion offered by the central government in the fourth quarter of the year. (El Universal, 06-02-2011; Additional information in Spanish: (El Nacional;

PDVSA may be liable for U$D 4-5 billion compensation to EXXON, could turn over Chalmette refinery
According to Credit Suisse and Goldman Sachs, EXXON-MOBIL will win its 4 year old lawsuit against PDVSA over project takeovers in Venezuela, and the state owned company will be required to pay compensation estimated at U$D 4-5 billion. PDVSA has reserved U$D 1-1.5 billion, which would cover only 30-40% of liability if arbitration confirms the EXXON claim. As a contingency PDVSA is contemplating contingency option of turning over its stock in the Louisiana Chalmette refinery, which is owned jointly with EXXON. Another option might be to use future oil sales. CONOCO PHILLIPS is undertaking similar action against Venezuela for a much larger amount. More information in Spanish at: (Noticiero Digital, 06-03-2011;

Reports indicate Lula came to collect for ODEBRECHT
Reports claim former Brazilian President Luiz Inacio Lula Da Silva came to Venezuela mainly to protect the interests of Brazilian companies.  Construction industry sources report the Venezuelan government owes Brazilian construction company NORBERTO ODEBRECHT between U$D 1 billion and 1.5 billion, and the company is currently developing projects in Venezuela for a total of about U$D 5.4 billion. Among others, it is building the Tocoma hydroelectric plant in Bolivar state, which is scheduled for completion by 2012. Work could grind to a halt if debts with the company are not honored. Venezuela is ODEBRECHT’s largest client outside Brazil, for a total of 21% of its total business by year end 2010. It is reported company President Emilio Odebrecht will join talks between Lula and President Chavez. More information in Spanish at: (America Económica, 06-02-2011; and Entorno Inteligente, 06-02-2011;

State controlled basic industries require U$D 1 billion to meet housing goals set by President Chavez
Reuters reports key Venezuelan industries require U$D 1 billion in order to provide material for 2 million new housing units announced by President Chavez. The amount adds petitions to the Government from companies such as MINERVEN, ALCASA, VENALUM and BAUXILUM, in order to cover needs ranging from payroll to purchasing raw material.  More information in Spanish: (El Universal, 06-03-2011;$1-millardo-requieren-empresas-basicas-para-operar.shtml)

Government seizes glass manufacturer
President Hugo Chávez ordered the forced acquisition of the all property pertaining to Vidrios Venezolanos Extras (VIVEX), a glass manufacturer located in the state of Anzoátegui. The government says action is in order to "consolidate public sector industrial capacity for manufacturing laminated safety glass and tempered glass used by the automotive industry."  The Ministry of Science, Technology and Intermediate Industries will be responsible for the company. (El Universal, 06-01-2011;

Expropriations scare off private investment
According to Luis Vicente Leon, director of the DATANALISIS polling firm 'the threat of expropriation, price controls and the persecution of business scares away private sector investment." He also asserted that half of the population believes the government cannot meet the goal of 2 million houses in six years. 50% distrust or do not believe that they can achieve the goal, 36% think it possible and the remainder did not answer, he added. (Enfoques 365; 06-01-2011;

An estimated 300,000 jobs lost in industry; 22.500 more jobs believed killed by farm expropriations
The Executive President of the National Industrial Association reports that some 300,000 jobs have been lost since 1998 by closing down about 40% of the nation’s industry. The President of the National Cattle Association, Manuel Cipriano Heredia, estimates that expropriation of 900 productive farms has destroyed some 22,500 jobs. “Many of those rural workers are now enlarging the slum belts in cities”. More information in Spanish: (El Nacional;

A first-quarter drop in construction this year was driven by diminished resources as private investment fell 30%, according to Venezuelan Construction Chamber President Juan Francisco Jiménez. He added the goal of building 153,000 units this year is difficult considering there are persistent supply problems with materials, especially steel products. (Veneconomy, 06-01-2011;

Venezuela's inflation rose 2.5% in May
The Central Bank of Venezuela (BCV) reported that the Consumer Price Index (CPI) advanced by 2.5% in May and accrued inflation for the first five months of 2011 adds up to 10.3% versus 14.2% percent for the same period of 2010.Prices have grown 22.8% from May 2010 and May 2011. (El Universal, 06-02-2011;

Imports from Brazil and Uruguay on the rise, diminish from Colombia
Exports from Brazil to Venezuela grew significantly over the past 12 years. By 2010, sales totaled U$D 3.8 billion, according to the Ministry of Industry and Foreign Trade of the country. This is a growth of 445% from 1998-year when President Hugo Chavez came to power. Venezuelan imports from Uruguay over the first five months of 2011 totalled U$D 91.81 million, up 34% from last year. At the same time imports from Colombia fell 15.2% during the first quarter of 2011, accumulating U$D 322.49 million by the end of March, according to data released by the Colombian National Bureau of Statistics (DANE). (El Nacional; 06-02-2011;; El Mundo,;,2--en-el-p.aspx)


CITGO receives26% of crude oil shipped by PDVSA to the U.S.
According to PDVSA offices, exports to the United States by the end of the first quarter of 2011 remained at 1 million barrels a day (BPD), a volume that was similar to last year. Of that, CITGO received 26% for processing and the remaining 74% was went to another 12 other oil companies operating in the US. Data from the Information Agency of the US Department of Energy shows that the PDVSA subsidiary received an average of 275,935 barrels per day by the end of March, which amounts to just over a quarter of exports to the US. (El Nacional; 06-01-2011;

Declining oil production in Lake Maracaibo's hinders PDVSA output
According to industry sources the rapid decline of oil production in Lake Maracaibo, formerly the main area of extraction, is hindering government efforts to revive a stalled PDVSA amid the price boom. Extraction of crude oil in 2010 dropped to its lowest level since a prolonged strike hit the local production in 2002-2003, averaging 2.78 million barrels per day (BBD) according to the Ministry of Energy. More information in Spanish. (Noticias 24,

Power rationing sacrifices provinces, benefits Caracas
A power-rationing program is saving the Venezuelan capital city from outages, but hits most of the provinces, as the Planta Centro complex, one of Latin America's largest thermal power plants, is now working at full capacity. The Ministry of Electricity and the National Electrical Corporation (CORPOELEC) report that due to maintenance in Unit 8 of TACOA thermal power plant on the Northern coast of central Venezuela, power-rationing has been implemented in most of the country. Igor Gavidia, head of the National Center for Electric Power Supply of the National Electricity System (SEN), announced that power-rationing began on Tuesday. (El Universal, 06-01-2011;

Production of 10 of 19 basic food staples will decrease according to a poll taken by the Venezuelan Food Chamber (CAVIDEA). Drops in production projected are: Pasteurized milk, by -12.54%; margarine, -10.88%; oil -10.49%, and sardines -9.63%. (Veneconomy, 06-01-2011;


Opposition launches 2012 primary campaign
The Electoral Committee of the Democratic Union Movement was formally installed and assured Venezuelans it will publish all information relating to the opposition voting base. "We are committed to transparency and reliability. We guarantee a clean process, conducted by independent persons, said Committee Chairperson Teresa Albanes said. (El Nacional; 06-01-2011;

Police corruption blamed for kidnapping epidemic
Official data states there were 895 kidnappings in Venezuela last year; but  a government survey suppressed by president Hugo Chavez suggests that the real figure may be closer to 17,000 - 48 daily abductions - with policemen among the principal kidnappers. "I would say that in Caracas eight out of every ten kidnappings have some levels of police involvement," said Joel Rengifo, a former head of the investigative police's anti-kidnapping division. An unpublished survey by the National Institute of Statistics estimated that 16,917 kidnappings over a 12-month period between 2008 and 2009. Caracas is now ranked as one of the most dangerous cities in the world, and crime is now the number one concern for Venezuelans and the main issue in next year's presidential elections. (News Scotsman, 05-31-2011;

US names new DCM in Caracas
The US State Department has named Kelly Keiderling as Deputy Chief of Mission in Venezuela, in the absence of an ambassador. Keiderling is scheduled for a three year tenure starting right after July 4th, and will replace John Caulfield. She has served in Cuba, Zambia, Ethiopia, Dominican Republic, Kirguizistan and Botswana. More information in Spanish: (El Nacional;

Venezuela and United Arab Emirates sign agreement to avoid double taxation and fiscal evasion
Venezuela and the United Arab Emirates have signed a treaty to avoid double taxation and prevent fiscal evasion on income and capital. This Agreement builds on the model of the United Nations and the OECD model The Convention applies to all persons, natural or legal persons who are residents of one or both Contracting States, in terms of Income Tax and Tax on Companies (the second in the case of the UAE) and the identical or similar, to add or replace these existing taxes after the signing of this Agreement and any Taxes on income and capital that never applied in the future contracting parties. More information in Spanish, by Torres, Plaz & Araujo law firm (

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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