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 10, 2011

June 10th, 2011

Economics & Finance

"Chavez has tripled Venezuela´s foreign debt”
The director of the School of Economics at the Venezuela´s Central University (UCV), Jose Guerra, warned that "President Chavez tripled the country's external debt, despite the fabulous oil prices ". The analyst recalled, "when Chavez assumed the presidency in 1999, the total debt of the Republic was approximately U$D 30 billion, including debt of Petróleos de Venezuela (PDVSA)." The current debt, including the new request to the National Assembly, is up to around U$D 120 billions, he said. Guerra also points out that the ratio of debt to GDP has doubled since 2008, and is up of 31.3%. More information in Spanish. (Enfoques 365, 06-08-2011; and El Nacional; 06-08-2011;

How much longer can Venezuela pay its bills?
According to UBS, the combination of ballooning public sector debt stocks and declining oil export volumes can only lead to an explosive fiscal cocktail. To quantify, if the public sector continues to issue US$D 8 billion debt on a net basis per year at say a 9% coupon, the resulting increase in dollar interest cost is equivalent to 20,000 barrels of exports per day, or nearly 1% of the total. And if oil export volumes continue to head south and oil prices remain stable, the dollar interest payment/oil export volumes ratio would increase at a faster rate over time. This erodes Venezuela’s public sector large net long dollar flow position and therefore the effectiveness of devaluations as a fiscal adjustment mechanism, the country’s recurrent exit strategy to address imbalances. In the absence of policy adjustments or ever higher oil prices, we think Venezuela’s fiscal story ends in an accident. (UBS Investment Research, 06-07-2011;

Government to import U$D 3.9 billion worth of food during 2011
The Government will allocate U$D 3.9 billion for importing food staples during 2011, as per a funding request by Food Minister Carlos Osorio to  President Hugo Chávez. They plan to import 1 million tons of yellow maize, 442,500 tons of raw sugar, 168,000 tons of white maize, 90,000 tones of tuna, 74,000 tons of black beans, 26,000 tons of green coffee and 23,000 tons of beef. More information in Spanish. (El Nacional; 06-09-2011; and  El Universal,

Govn't recognizes impact of devaluation on debt service
Venezuela's Executive Office will allocate USD 1.39 billion from the Special Indebtedness Law to service public debt, due to the impact of devaluation on the payment of obligations. Under the new law, currently being approved by the pro-Government majority in the National Assembly, "a total of USD 1.39 billion will be appropriated for the payment of fees and interest rates due to the end of the dual exchange rate. This allocation allows (Venezuela) to honor commitments with creditors and ensures access to domestic and global capital markets." (El Universal, 06-08-2011;

CAVECOL: Trade between Colombia and Venezuela increased 49% January to May 2011
According to information provided by the Venezuelan Economic Integration Chamber Colombiana (CAVECOL), trade between Venezuela and Colombia increased 49% between January and May of 2011 – as compared to the same period of 2010. The exchange was U$D 804 million, Venezuelan imports from Colombia stood at U$D 520rs and exports at 284 million. More information in Spanish. (Noticias 24, 06-08-2011;

Venezuela funds electricity subsidies in Nicaragua
Nicaragua's government authorized U$D 107 million taken from Venezuelan aid to subsidize the price of electricity. The Ministry of Energy and Mines reported that funding for energy rate is done "with proceeds from ALBA funds and do not bear interest." More information in Spanish. (El Nacional; 06-09-2011;


OPEC oil talks collapse, no output deal
OPEC talks broke down in acrimony Wednesday without an agreement to raise output after Saudi Arabia failed to convince the oil cartel to lift production. Analysts said that while there were opposing views on whether markets required more crude, the backdrop to the disagreement revolved around political tensions in the Middle East and North Africa and differences over how to respond to consumer demands. Saudi's Naimi said OPEC's four Gulf Arab countries proposed the 12-member group increase output by 1.5 million barrels a day to 30.3 million barrels a day, including Iraq which is not bound by an OPEC quota. But this time those in OPEC politically opposed to the United States -- in particular Iran and Venezuela -- found enough support to block Riyadh. "Venezuela and Iran likely feel they have less to gain politically by increasing quotas as a symbolic gesture." (Reuters, 06-08-2011;; The Wall Street Journal, 06-08-2011;

Ramírez says OPEC advocates crude oil prices
Venezuelan Minister of Energy and Petroleum Rafael Ramírez said that OPEC member countries "unconditionally advocated" oil prices during the regular meeting of the Organization of the Petroleum Exporting Countries (OPEC). Ramírez said that the lack of an agreement in the OPEC meeting held in Vienna and the fact that the member countries were given more time to assess the situation "is not a catastrophe," EFE reported. (El Universal, 06-08-2011;

Logistics & Transport

Venezuela 250% Port fee increase may accelerate world’s fastest Inflation
Venezuela boosted tariffs and levies at its seaports, a move that may accelerate the world’s fastest inflation. The government set a single rate for services in all ports in order to improve and promote port activity, and prices at Puerto Cabello, the country’s largest, will rise by an average of 250%, according to the port’s chamber of commerce. The government, by raising port fees to better reflect costs, is making it a priority to have sufficient goods on shelves rather than fighting inflation ahead of elections next year, said Boris Segura, Latin America analyst at Nomura Securities International. While the government may absorb the higher fees for its own imports, price adjustments will be passed on to consumers for goods imported by the private sector, he said. (Bloomberg, 06-07-2011;


Venezuela violence is rising at an alarming rate
The Inter-American Commission on Human Rights (IACHR) in its annual report for 2010 says "Social violence in Venezuela is increasing at an alarming rate". It says the country is one of the five cases that deserved "special attention" because of vulnerability in human rights. It reports homicide is the leading cause of death among young Venezuelans aged between 15 and 19. The report shows that violation of human rights in Venezuela covers a wide spectrum ranging from inaction in safeguarding lives, to the lack of guarantees for the full exercise of political rights. The document states this is affecting the lives of Venezuelans of all social strata and sectors." More information in Spanish. (Enfoques 365, 06-08-2011;

US says sanctions on PDVSA are aimed at punishing Iran
Outgoing US Assistant Secretary of State for Western Hemisphere Affairs (WHA) Arturo Valenzuela said on Tuesday that sanctions imposed on state-run oil company Petróleos de Venezuela (PDVSA) are not intended to punish Venezuela but Iran, in compliance with United Nations resolutions.  "With these measures, the US is seeking to punish a country: Iran", Efe reported. (El Universal, 06-08-2011;

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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