June 07th, 2011

Economics & Finance

Interest payments and refinancing absorb U$D $2.330 billion of new debt

President Hugo Chavez’s request for almost doubling public indebtedness budgeted for this year would increase Government debt by 113% over 2010. The requested U$D 10 billion would add on to the current projected debt for this year of up to BF. 52.201 billion. U$D 2.330 billion of the new indebtedness will go to interest payments and refinancing outstanding commitments, not included in the 2011 budget. More information in Spanish at: (El Mundo, 06-07-2011; http://www.elmundo.com.ve/Noticias/Economia/Politica/Nuevo-endeudamiento--Venezuela-destinara--$2-330-m.aspx)

CITI warns deteriorating finances may hit Venezuela’s credit rating

CITI’s latest report on Venezuela analyzes the consequences of accelerated public indebtedness after it was announced that limits will be increased by 86,5% this year. The report says most of the additional debt is in the national currency and within the internal market, and therefore subject to reduction through future devaluation, but adds that its impact on fiscal indicators “could lead credit rating agencies to lower” sovereign bonds. CITI says according to their projections total Venezuelan indebtedness could rise this year to 39.9% of GDP. More information in Spanish at: (El Universal; 06-07-2011; http://www.eluniversal.com/2011/06/07/citi-alerta-que-el-deterioro-fiscal-afectara-rating-del-pais.shtml)

Cadivi owes multinationals U$D $ 4.5 billion

A source close to Venezuela’s Central Bank told El Nacional daily that the Currency Board owes multinational companies around U$D 4.5 billion for capital repatriation, dividend payments, patent royalties, and technology payments. The Bank and Planning Ministry are preparing a payment schedule to reduce these debts, but that honoring all commitments would take up 15.2% of the nation’s foreign currency reserves. More information in Spanish at: (El Nacional; 06-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Chavez Administration disbursed U$D 106 billion over five year period through parallel funds

A parallel budget, comprising 9 special funds and administered separately from the official budget by the Venezuelan government, has disbursed an estimated U$D 106 billion between 2005 and 2010. The National Development Fund (FONDEN), the Chinese Heavy Fund, Miranda Fund, Alan Fund, Independence Fund, Sowing Fund, Simón Bolívar Fund, Mao Fund and Renot Fund, were used for special projects and to finance budget shortfalls in public entities and payroll commitments, among others. Analysts claim that this structure manages revenue without controls as they do not have the rigidity of ordinary allocations, which involves spending by items. (El Universal, 06-06-2011; http://english.eluniversal.com/2011/06/06/parallel-funds-disburse-usd-106-billion-in-five-years.shtml)

PDVSA faces sanctions and asset seizures

Petróleos de Venezuela (PDVSA), which supplies 95% of the country's revenue, is facing difficulties including, in the short term, such threats as additional US sanctions, impending verdicts in ongoing lawsuits and arbitration at the World Bank with EXXONMOBIL and CONOCOPHILIPS, and investor fears.  The Venezuelan government claims it is still evaluating the true impact of decisions which could prevent PDVSA from fulfilling commitments to the US government; obtaining funds to import and export from the United States, as well as export licenses in the United States. (El Universal, 06-04-2011; http://english.eluniversal.com/2011/06/04/pdvsa-faces-sanctions-and-requests-of-assets.shtml)

Opposition spokesman says staple prices have risen up to 50% in four months

Julio Borges, of Primero Justicia, says prices for basic food staples have risen up to 50% in four months. "Based on figures from the National Statistics Institute, prices for regulated basic food have risen unprecedently from December to April". More information in Spanish at: (El Nacional; 06-06-2011; http://www.el-nacional.com/www/site/p_contenido.php & El Universal, http://www.eluniversal.com/2011/06/06/borges-denuncia-que-precio-de-alimentos-aumento-50.shtml)

Venezuelan economy may grow more than 4% in 2011

Central Bank director Armando León says Venezuela’s economy may expand more than 4 percent in 2011 as the construction industry begins to grow, public spending is maintained and more importers have access to foreign currency. (Bloomberg, 06-06-2011; http://www.bloomberg.com/news/2011-06-06/venezuela-economy-may-grow-more-than-4-in-2011-mundo-reports.html)

Commodities

Government will import more aluminum to supply ALCASA deficits

After meeting with Basic Industries Minister José Khan, ALCASA President Elías Sayago has said the Ministry approved imports of 60,000 metric tons of primary aluminum to provide added value and continue meeting internal demand, and thus improve CVG ALCASA’s cash flow in order to meet added payment for raw materials and honor labor obligations. He said Khan told them President Chavez has approved their request for U$D 70 million for purchasing raw material; and called for the Executive Committee of the SINTRALCASA labor union to rejoin weekly meetings with company representatives. More information in Spanish at: (Correo del Caroní, 06-04-2011, with press information from CVG ALCASA, http://www.correodelcaroni.com/index.php?option=com_wrapper&view=wrapper&Itemid=174&id_articulo=180178&catid=75)

Venezuela oil rises to U$D103.01

Venezuela's Energy and Petroleum Ministry is reporting that the average price of Venezuelan crude sold by Petróleos de Venezuela S.A. (PDVSA) during the week ending June 3 rose to U$D103.01 from the previous week's U$D100.70, raising the yearly average to U$D 96.68, above the previous high set by 2008's U$D 86.49 average. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=396235&CategoryId=10717)

Venezuelan Oil Minister says OPEC not likely to raise output

The Organization of Petroleum Exporting Countries is unlikely to raise production quotas at this week’s meeting in Vienna, according to Venezuelan Oil Minister Rafael Ramirez. “We have to wait to discuss the situation in the market, we believe at the moment we’re in balance,” Ramirez said as he arrived today in the Austrian capital. (Bloomberg, 06-06-2011; http://www.bloomberg.com/news/2011-06-06/venezuelan-oil-minister-says-opec-not-likely-to-raise-output-1-.html; Reuters, http://www.reuters.com/article/2011/06/06/us-opec-idUSTRE7553M720110606)

Politics

Venezuela paid ODEBRECHT U$D 630 million

Before travelling to Brazil President Chávez ordered partial payment on the Government’s billion dollar plus debt with Brazilian contractor ODEBRECHT. The disbursement is reported to be of U$D 630 million pending on construction of a third bridge over the Orinoco river and new Metro subway lines in Caracas. Once payment was made, the Government requested speeding up completion so the projects can be inaugurated during 2012, an election year. More information in Spanish at: (El Nacional; 06-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Chavez announces new U$D 3-4 billion dollar deal with Brazil’s ODEBRECHT

President Chavez announced last Sunday that Brazilian contractor ODEBRECHT would finance Venezuela’s Government with around U$D 3-4 billion to build housing. He said the agreement was made during Lula’s recent visit and was to be signed in Brasilia during his recent visit, but provided no further details. Agence France Presse. More information in Spanish at: (Noticiero Venevisión, 06-05-2011;  http://noticiero.venevision.net/index_not.asp?id_noticia=20110605001502&id_seccion=02)

Brazil will finance a shipyard in Venezuela, refinery talks progressing

Brazil’s National Bank for Social and Economic Development (BNDES) will provide financing for a U$D 637 shipyard to be built by Brazilian companies in the state of Sucre, northeast Venezuela. Venezuela is also pondering the purchase of up to 30 aircraft from Brazilian manufacturer EMBRAER, according to an aide to the Brazilian President. Progress was made on plans for Venezuela's state oil company PDVSA and Brazil's PETROBRAS to build the Abreu e Lima refinery in Pernambuco, according to Brazil's foreign policy advisor Marco Aurelio Garcia. (El Universal, 06-06-2011; http://english.eluniversal.com/2011/06/06/venezuela-brazil-sign-agreements-on-oil-and-infrastructure.shtml)

Government spokesmen say Venezuela-Iran ties go beyond the oil issue

Following sanctions by the US Department of State on the state owned oil holding Petróleos de Venezuela (PDVSA), Venezuelan authorities, such as Foreign Minister Nicolás Maduro, Minister of Energy and Petroleum Rafael Ramírez and National Assembly (AN) Deputy Speaker Aristóbulo Istúriz contend that Venezuela will maintain political and trade relations with whomever it wants. And, they underscored, "Venezuela will sell oil to whomever it feels right with," including Iran, also a Member State of the Organization of Petroleum Exporting Countries (OPEC). Caracas and Tehran have established a political and trade relationship in line with their anti-US discourse which encompasses energy, production, housing, food and education, some of which challenge the international community. (El Universal, 06-04-2011; http://english.eluniversal.com/2011/06/04/venezuela-iran-ties-go-beyond-the-oil-issue.shtml)

Foreign Minister Maduro says Venezuela-US relations are frozen

The Foreign Minister claimed relations remain frozen despite attempts by the Chavez regime to restore flowing dialogue and mutual respect with Washington. “Relations with Venezuela are frozen. We cannot say they are tense, although they become tense from time to time”. He added that relations “do not move and there are no prospects that they could move toward more positive communication and respect in the near future”. (Agencia Venezolana de Noticias; 06-06-2011; http://www.avn.info.ve/node/61205)

DATANALISIS says Chavez has not recovered lost popularity

According to the DATANALISIS the uptick in President Chavez’s popularity in 2011 first quarter polls is only transitory. It says that since 2007 he is undergoing a slow but constant decrease in the way public values his performance. The firm says that overall 49% have a positive view of his work, while 46% have a negative opinion on it. Luis Vicente León, director of DATANALISIS, says approval ratings now stand at 49%, down from a high of 55%. More information in Spanish at: (El Universal; 06-06-2011; http://www.eluniversal.com/2011/06/06/chavez-no-logra-recuperar-la-conexion-popular-perdida.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.