July 29th, 2011

Economics & Finance

Debt service payments to triple in 2013 and 2014

National public debt will become really heavy in the a couple of years, according to Econometrica director Ángel García Banchs, who says the debt payment schedule for 2013 and 2014 shows approximately U$D 15 billion dollars will need to be paid for debt service. The new U$D 4.2 billion bond issue is the largest ever made ​​by the Republic.  More information in Spanish. (Tal Cual; 07-28-2011; http://www.talcualdigital.com/index.html)

High demand for U$ dollars leads to added debt cost

A consequence of the unrealistic official exchange rate is that demand for foreign currency is far above amounts allocated by the Foreign Exchange Board (CADIVI). This imbalance forces the Venezuelan Ministry of Finance to issue heavy debt in order to increase the dollar supply. Demand is expected to triple the amount of the new bond, according to unofficial estimations by the financial system and the Ministry of Planning and Finance. Fights broke out at three financial agencies when computer lines broke down and they were unable to complete transactions.

The Ministry of Finance is selling bonds denominated in foreign currency that companies can buy with bolivars and subsequently resell abroad in order to get US dollars. Paradoxically, 40% of the total issue which amounts to U$D 4.2 billion, has been reserved for companies dealing in health care, food and capital goods. (El Universal, 07-28-2011; http://english.eluniversal.com/2011/07/28/high-demand-of-us-dollars-in-venezuela-results-in-heavy-debt.shtml; El Nacional, 07-28-2011; http://www.el-nacional.com/www/site/p_contenido.php)

CADIVI dismissed by Colombian exporters

Colombian producers and entrepreneurs will not take new risks when trade reopens with Venezuelan clients. Letters of credit will be the new system to be adopted to avoid delays and payment defaults due to CADIVI. Recently, Colombian Agriculture Minister Juan Camilo Restrepo, said shipments of agricultural products to Venezuela will begin a couple of months, but with “payment to be made through letters of credit with the support of commercial banks.”

More information in Spanish. (Tal Cual; 07-27-2011; http://www.talcualdigital.com/index.html)

Santos hopes to negotiate a trade treaty with Venezuela

Colombian President Santos speaks about negotiating a new trade treaty with Venezuela in order to reconquer market space in the neighboring country. He adds that creating new jobs is a priority for his government in order to further development and diminish poverty. More in Spanish: (El Universal; 07-29-2011; http://www.eluniversal.com/2011/07/29/santos-espera-negociar-tratado-de-comercio-con-venezuela.shtml)

Commodities

PDVSA oil exports to China rose 63% in 2010

Petróleos de Venezuela SA, the state oil company, increased its oil exports to China by 63% to 155,000 barrels a day in 2010, up from 95,000 barrels a day in 2009, according to a financial report handed out to reporters in Caracas today. (Bloomberg, 07-26-2011; http://www.bloomberg.com/news/2011-07-26/pdvsa-oil-exports-to-china-rose-63-percent-in-2010-correct-.html)

PDVSA CEO predicts the Orinoco oil belt points to the future

Venezuelan Minister of Energy and Petroleum and CEO of state-run PDVSA Rafael Ramírez say the Orinoco oil belt has become a region that points to the future ever since the government decided to recover oil sovereignty.

During a tour of the oil-rich area for the extraction of the first sample of oil production, Ramírez stressed the government’s commitment to preserve oil independence and sovereignty, noting that in the past the Orinoco oil belt had been handed out to multinationals such as EXXON. Ramirez said the Orinoco Oil Belt would add up 146,000 oil barrels to Venezuela’s oil production this year. (El Universal, 07-28-2011;  http://english.eluniversal.com/2011/07/28/pdvsa-ceo-orinoco-oil-belt-points-to-the-future.shtml; AVN, 07-28-2011; http://www.avn.info.ve/node/69792)

PDVSA debts to suppliers leapt to U$D10.9 bln during 2010

The debt owed to suppliers by Venezuela’s state oil company PDVSA jumped 55% to U$D 10.9 billion by the end of 2010, up from the previous year, according to financial statements just published. More debt to suppliers could make it harder for it to boost stagnant production, because partners may demand funds up front or raise prices in anticipation of delays getting paid. One form of payment devised by the oil company last year was to “terminate debt” by trading over its own repurchased bonds to creditors. PDVSA 2010 financial statements show there has been swapping and repurchasing of bonds issued in 2007, 2009 and 2010, and maturing in 2011, 2013, 2014, 2015, 2016 and 2017. PDVSA registered earnings of U$D 55 million from such trading “due to the difference between the book value of the debt and the purchasing value of those bonds.”In December 2010, PDVSA conducted operations of this kind for a total of U$D 323 million, on notes expiring in 2013, 2014, 2015, 2016 and 2017. (Reuters, 07-26-2011; http://www.reuters.com/article/2011/07/26/venezuela-pdvsa-idUSN1E76P0LG20110726; El Universal, 07-28-2011; http://english.eluniversal.com/2011/07/28/pdvsa-has-paid-providers-usd-182-million-in-bonds.shtml)

Politics

Chávez expects to be reelected with 60% of votes

During a broadcast phone call to Vice-President Elías Jaua, President Chavez said: “I am already drafting the guidelines of the government plan I will present late this year or early 2012. We will review the political scenario for the 2012 election campaign. I will run for reelection and, God willing and with my determination to live, I will be reelected by a large majority of the people. I invite you to join me,” said Chavez. In the light of numerous reports raising doubts about his health, he described his foes as “insane” and added “let me work; leave my cancer alone. I am defeating my disease. Let us unite the country”. “Let us get 10 million votes. Let us win at least 60% of votes let us begin the 2013-2019 presidential term,” he said. (El Universal, 07-28-2011; http://english.eluniversal.com/2011/07/28/chavez-expects-to-be-reelected-with-60-percent-of-votes.shtml)

Chávez urges agribusiness to work with the government

Venezuelan President Hugo Chávez Frías on Wednesday invited the domestic production sector “to build and join a socialist, creative, constructive, and balanced economic model.” (El Universal, 07-27-2011; http://english.eluniversal.com/2011/07/27/chavez-urges-agribusiness-sector-to-work-together-with-the-government.shtml)

President Chavez proposes CELAC Summit on December 9

President, Hugo Chavez announced he has personally written to the heads of State and Governments to propose that the founding meeting for the Community of Latin American and Caribbean States (CELAC) to be held on December 9, in Venezuela. He explained that the date was chosen by him based on his own estimations on medical results and a projection of his recovery. (AVN, 07-28-2011; http://www.avn.info.ve/node/69746)

The three statements above were made during the same lengthy broadcast phone call to Vice President Jaua.

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.

July 26th, 2011

Economics & Finance

Venezuela to issue U$D 4.2 billion of 20-year dollar bonds in local market

In the country’s first offering since August. it will sell the 11.95% bonds at face value and announce the results of the offering on Aug. 1, according Central Bank. It hired Deutsche Bank and EVROFINANCE MOSNARBANK SA to handle the sale. “This is an extremely high amount that represents about 13% of the country’s external bond debt,” says Boris Segura, a Latin America strategist at Nomura Securities International Inc. “The market will have a tough time digesting this new supply.” The debt ceiling was raised this year by 85% in order to finance government projects to build homes and boost agricultural output. Venezuela sells dollar-denominated bonds to locals in bolivars to help meet demand for foreign currency and will allocate at least 40% of the offering to companies registered with the foreign exchange board. Individual investors and companies not registered with the board can also put in orders of a minimum U$D 3,000 calculated at the official exchange rate of 4.3 bolivars per dollar. (Bloomberg, 07-26-2011; http://www.bloomberg.com/news/2011-07-26/venezuela-to-issue-4-2-billion-of-20-year-dollar-bonds-in-local-market.html)

Cost-Price Law erases the role of the market

In the face of persistent inflationary pressures, the Venezuelan Government has chosen – by decree - to replace the market as the only entity engaged in pricing. The broad scope of the new law is set in article 3 which applies to all "Venezuelan or foreign individuals and corporations". Jorge Botti, president of the Venezuelan Federation of Chambers of Commerce and Industry (Fedecámaras) has countered that "if we do not understand how the economy works, what we will do henceforth will further hinder operations in an already battered Venezuelan economy and also hit consumers". (El Universal, 07-25-2011; http://english.eluniversal.com/2011/07/25/costs-law-erases-the-role-of-the-market.shtml)

An analysis by EFE says the new law will be difficult to enforce

The newly approved Cost-Price Law will be difficult to apply as the economy may stall as it attempts to control all goods and services. EFE said analysts foresee potential corruption and a elements that could trigger a black market for some product. The new Law went into effect Tuesday, but Executive Vice President Elías Jaua says it is not intended to attack the private sector, adding that those who do not speculate "should not fear." More information in Spanish. (Ultimas Noticias, 07-25-2011; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Economia/Analisis-EFE--Una-ley-de-dudosa-aplicacion.aspx)

Minister says the new Cost-Price Law to start with food and health

Commerce Minister Edmee Betancourt is reported as saying the new Costs Law will start operating within the next three months by setting maximum prices on food, medicine, construction materials, textiles, shoes and school materials. The law may set pricing ranges for products and may not be applied to all sectors of the economy, Betancourt said. (Bloomberg, 07-25-2011; http://www.bloomberg.com/news/2011-07-25/venezuela-price-law-to-begin-with-food-health-el-mundo-says.html)

According to ECLAC Venezuela has the lowest social inequality gap in Latin America

Venezuela is the country with the lowest percentage (0.38%) of social inequality in the continent, according to a report issued by the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). The president of the National Statistics Institute (INE in Spanish), Elias Eljuri, claims the report shows extreme poverty has dropped in from 21% in 1999, to the current 6.9%. (Veneconomy, 07-26-2011; http://www.avn.info.ve/node/69306)

Russia’s Evrofinance to Operate in Venezuela

Venezuela authorized Moscow-based Evrofinance Mosnarbank SA, in which it has a 49% stake, to operate in Caracas as a commercial bank. Russia and Venezuela signed an agreement in 2008 to create a bilateral bank to fund joint oil and infrastructure projects. Venezuela paid U$D400 million to buy its participation in Evrofinance in February, according to Moscow-based news agency RIA Novosti. Evrofinance will open one office in Caracas. (Bloomberg, 07-25-2011; http://www.bloomberg.com/news/2011-07-25/russia-s-evrofinance-to-operate-in-venezuela-gazette-says.html)

Reserves down USD$ 421 million in one week

International Reserves lost U$D 421 million in the third week of July, according to the Central Bank of Venezuela (BCV). They closed Friday at U4D$ 29.429 million. More information in Spanish. (El Mundo, 07-26-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-perdieron-$421-millones-e.aspx)

Local stock market up 33.47% over Chavez illness

Venezuela's stocks continued moving up last week as investors continued buying the few shares available as a play on the possibility of political change in the country. The Caracas Stock Index was up 1.4% for the week, closing at 87,207. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=410305&CategoryId=10717)

Commodities

Venezuelan’s export barrel average’s price closed Friday at U$D107.01/bbl, up U$D1.26 from last week, according to the Ministry of Oil and Energy. The average for the year-to-date is U$D 98.97/bbl. (Veneconomy, 07-23-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26852&idc=4)

PDVSA claims it will to produce 6 million daily barrels of oil over the next decade

The state oil company Petróleos de Venezuela, S.A. (PDVSA) expects to produce 6 million barrels of crude daily over the next decade, according to Eulogio del Pino, it’s Vice President of Exploration and Production. He claims the country reached an average production of 9.9 billion barrels between 2000 and 2008 by producing over 12 billion barrels in the last decade, and adding approximately 2.2 billion barrels produced in 2009 and 2010 at a level of 3.1 million barrels per day. More information in Spanish. (AVN, 07-26-2011; http://www.avn.info.ve/node/69275)

SIDOR produced 1.4 million tons of liquid steel in first half of 2011

The Venezuelan state-run iron and steel company Siderurgica del Orinoco (SIDOR) is reporting an output of 1,454,799 tons of liquid steel during the first half of this year. The figure is 80% of the total output in 2010 (1.8 million tons). According to figures issued by SIDOR, output in June stood at 227,721 tons of liquid steel, which is 5 million tons less than the output in May. (AVN, 7-25-2011; http://www.avn.info.ve/node/69152)

Politics

Chávez returns to Venezuela 'better'

Venezuelan President Hugo Chavez made a surprise return home on Saturday after completing the first stage of chemotherapy in Cuba. Mr. Chavez's arrival at Maiquetía airport outside Caracas was broadcast live on state television. The Venezuelan leader, who left for Havana a week ago, was greeted by government officials, including Vice President Elias Jaua. "During the course of this week I have not lost focus on Venezuela for an instant," said Mr. Chavez, who has faced questions from critics on the legality of his continuing to govern from abroad while receiving cancer treatment. (The Wall Street Journal, 07-25-2011; http://online.wsj.com/article/SB10001424053111903999904576465263631928584.html?KEYWORDS=Venezuela)

Chavez says he won’t give up re-election bid in Venezuela despite cancer

Venezuelan President Hugo Chavez said he is certain he will pursue his re-election bid next year even though he has cancer. Chavez said in an interview published Monday that he hasn’t “for an instant thought about withdrawing from the presidency.” He said if there were physical reasons to step down he would do so but that he is pursuing his candidacy “with more strength than before.” “I’m resolved to reach 2031,” Chavez said. The leftist president has been in office since 1999 and is seeking another six-year term. (Washington Post, 07-25-2011; http://www.washingtonpost.com/world/americas/chavez-says-he-wont-give-up-re-election-bid-in-venezuela-despite-cancer/2011/07/25/gIQArFvWYI_story.html)

U.S. believes Venezuela offers a "permissive environment" for drug trafficking and terrorism

The U.S. government says it is concerned over the "permissive environment for drug traffickers and terrorist organizations" in Venezuela. In a document released Monday during the launching of a new strategy against transnational criminal organizations it says: "Corruption and a lack of judicial independence impede effective prosecution," says the report, which states it is "unclear to what extent" the government of Hugo Chávez "provides support to foreign terrorist organizations." (El Nacional, 07-26-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela and Ecuador agreed to further bilateral trade though preferential tariff fees and the use of the Sucre (Unitary Regional Compensation System, after its initials in Spanish) as virtual currency, according to a resolution published in the Gaceta Oficial. The preferential tariff fees will be “applied to all products native to and coming from either country,” according to the resolution. (Veneconomy, 07-25-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26871&idc=3)

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.

July 22th, 2011

Economics & Finance

Venezuela’s possible debt crisis

Greece may have to move over. While global investors and financial regulators have been transfixed in recent months on a possible European debt crisis, Venezuela, a major oil exporter, ranks just behind the cradle of Western civilization in terms of the risk of defaulting on its debt and roiling global financial markets. Will its petrodollars be enough to keep it from default? While analysts say yes for now -- and probably for as long as oil prices stay high -- the long-term odds are not as good. London consultancy CMA Datavision July 7 gave Venezuela a greater than 51.4% chance of defaulting on its sovereign debt within five years. That puts it right behind Greece, which tops CMA’s list with an 80.6% chance. (Platts, 07-19-2011; http://www.platts.com/NewsFeature/2011/venezuela/index)

Venezuela bonds slide on speculation sale will top U$D 4 billion

Venezuelan bonds fell on speculation the government will sell more than U$D 4 billion of bonds to finance government programs, swelling the supply of debt in international markets. The yield on Venezuela’s benchmark 9.25% dollar bonds due in 2027 rose 15 basis points to 13.05% in New York, according to data compiled by Bloomberg. The price on the bonds fell 0.82 cent on the dollar to 74.63 cents. Speculation is mounting that the offering will total about U$D 4.2 billion. A Finance Ministry press official declined to comment on the sale. (Bloomberg, 07-20-2011; http://www.bloomberg.com/news/2011-07-20/venezuelan-dollar-bonds-slide-as-investors-anticipate-4-billion-offering.html)

International reserves at $ 29.923 million

International reserves closed yesterday at U$D 29.923 million, having increased by U$D 473 million, according to the Central Bank of Venezuela (BCV). More information in Spanish. (El Mundo, 07-22-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-llegaron-a-$29-923-millon.aspx)

Government to ban unauthorized price increases

The just published law on Costs and Prices authorizes Government control over any and all production, importation and marketing of all products and services it deems priority to ensure the population’s well being. The text on “Integrated National Costs and Prices” establishes controls on companies with profits deemed excessive in proportion to cost structures of goods produced and sold or services rendered. Companies are now required to inform and request permission from the government when they change production costs or prices. The act requires labeling that indicates amounts are calculated according to the new system. More information in Spanish. (El Nacional; 07-20-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Experience shows market distortion has forced relaxation of price controls on 48 items

While the Executive insists on price controls as a strategy to stem the rise in prices, Central Bank figures reveal it has not been effective in combating inflation. After eight years of price regulations, the government has had to admit distortions generated by controls over the economy, and to authorize increases in regulated areas at least once a year and release product prices. It has had to exclude 48 controlled items from the original list of 106 retail food products published in February 2003. More information in Spanish. (El Universal; 07-21-2011; http://www.eluniversal.com/2011/07/21/distorsiones-del-control-han-obligado-a-liberar-48-rubros.shtml)

World Bank to hear Koch arbitration against Venezuela

The World Bank will hear an arbitration case requested by U.S. company Koch Industries after Venezuela's President Hugo Chavez nationalized a fertilizer plant it owned with the OPEC nation's state oil firm. The World Bank's investment dispute body ICSID says on its website it will form a tribunal to hear the complaint by two subsidiaries of Koch, one of the world's largest privately owned companies. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/venezuela-koch-idUSN1E76I27U20110720)

Commodities

OPEC certifies growth of Venezuelan oil reserves by 339% in last 5 years

The project Magna Reserva, launched in June 2005 to quantify and certify oil reserves at the Orinoco Oil Belt, was the key for Venezuela to become the country with the world’s largest oil reserves, adding up 296.5 billion barrels by the end of 2010. Said figure shows an increase of 339% of certified reserves in the last five years. According to the annual report issued by the Organization of Petroleum Exporting Countries (OPEC) in 2006, Venezuela owned a total of 87.32 billion barrels of certified reserves. Venezuela ranks over big oil exporting countries, such as Saudi Arabia (264.52 bn b); Iran (151.17 bn b); and Iraq (143.1 bn b). (AVN, 07-20-2011; http://www.avn.info.ve/node/68240)

Venezuela boosts proven natgas reserves by 11.3 tcf

Venezuela boosted its proven reserves of natural gas by 11.3 trillion cubic feet (tcf), taking reserves to 195.1 tcf as of the end of 2010, according to the government's gazette circulating on Wednesday. The gazette did not specify from where the new reserves came. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/venezuela-gas-idUSN1E76J0DK20110720)

PETROBAR’s debt with PDVSA is the result of the subsidy on gasoil prices, as well as a series of illegal operations and administrative sloppiness by the Paraguayan state oil company and prohibited by the Public Contract’s Office. Other multi-million dollar amounts that are part of the debt were due to the purchase of fuels from PDVSA without signed contracts. (Veneconomy, 07-21-2011;  http://www.veneconomy.com/site/index.asp?ids=44&idt=26819&idc=4)

Politics

DATANALISIS warns opposition results depend on official failure

José Antonio Gil Yepes, president of DATANÁLISIS, says that despite poll figures that show the opposition with a good chance of winning the 2012 presidential election, results depends largely on one factor controlled by the Government: "The main source of votes for the opposition is not from offering, or leadership, but what the other side (the government) does or does not". He explained that according to their statistics voting intentions between Hugo Chavez and combined opposition candidates are in a stalemate. More information in Spanish. (El Universal; 07-21-2011; http://www.eluniversal.com/2011/07/21/advierten-que-la-oposicion-depende-del-fracaso-oficial.shtml)

Role reversal: Latin America taunts US on debt woes

After three decades spent battling their own debt crises and getting constantly lectured about them by Uncle Sam, many Latin Americans are watching the countdown to a possible default in Washington with a mix of “schadenfraude” and fear of what a collapse might mean for them. For everybody from presidents on down to street vendors, seeing US politicians argue over where to make painful budget cuts has also been a reminder that those days are over in Latin America. For now, at least, as most of the region enjoys an era of economic prosperity and comparatively tiny deficits. (Reuters, 07-20-2011; http://www.reuters.com/article/2011/07/20/us-latinamerica-usa-idUSTRE76J5XS20110720)

Peru and Venezuela Andean Community tariff preferences extended for 90 days

Peru and Venezuela agreed to extend Andean Community tariff preferences between the two countries for 90 days, according to Peruvian Minister of Foreign Trade, Eduardo Ferreyros, who said: "Both countries expressed their agreement to maintain the tariff preferences in force from July 22, 2011, and within 90 additional days, with the objective of concluding negotiations for a Trade and Productive Complementarities between Peru and Venezuela". More information in Spanish. (El Mundo, 07-22-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/peru-y-venezuela-prorrogan-preferencias-arancelari.aspx)

Provisional tariff agreement with Colombia could be extended

The deadline set by the governments of Hugo Chavez and Juan Manuel Santos to maintain trade agreements between the two countries after Venezuela’s formal withdrawal from the Andean Community (CAN) ended as of July 21st.

At the time the extension was enacted President Santos had said: “As there is yet no new agreement, it was decided to extend the rules that now govern for three months, extendable, as the teams are still in negotiation". According to the Executive President of the Venezuela-Colombia Chamber of Commerce (CAVECOL) Luis Alberto Russián, some experts another extension of the 18 April agreement “is automatic”, while others believe a new decision should be published in order to eliminate any doubt. More information in Spanish. (El Universal; 07-22-2011; http://www.eluniversal.com/2011/07/22/proponen-que-venezuela-regrese-y-refunde-a-la-can.shtml and http://www.eluniversal.com/2011/07/21/vence-prorroga-de-acuerdo-comercial-con-colombia.shtml)

US Congress eliminates aid to Venezuela and allies

The US House Committee on Foreign Affairs has passed an amendment to remove in FY2012 US assistance to Argentina, Bolivia, Ecuador, Nicaragua and Venezuela. The move, championed by Republican Connie Mack -Chairman of the Subcommittee on the Western Hemisphere- cuts out U$D 96 million requested by President Barack Obama in February. The decision does not include government funds to NGOs, AP reported. (El Universal, 07-22-2011; http://english.eluniversal.com/2011/07/21/us-congress-deletes-aid-of-venezuela-and-allies.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.

July 19th, 2011

Economics & Finance

Venezuela to sell at least U$D 3 Billion of dollar-denominated debt this year

Venezuela will sell at least U$DF 3 billion of dollar-denominated bonds in the local market this year to take advantage of declining borrowing costs, a government official said. The government may begin selling the bonds as soon as next month, said the official, who is involved in the transaction and asked not to be identified because he isn’t authorized to speak publicly on the matter. He declined to comment on the maturity and interest rates the bonds would offer. Venezuela last sold dollar debt in August, when it issued U$D 3 billion of 12.75% notes due in 2022. (Bloomberg, 07-18-2011; http://www.bloomberg.com/news/2011-07-18/venezuela-to-sell-at-least-3-billion-of-dollar-denominated-debt-this-year.html)

Italian oil giant ENI to invest U$D7 billion in Venezuela

Italian oil major ENI plans to invest $7 billion in projects in Venezuela with the aim of boosting its output there to 240,000 barrels per day by 2018, company CEO Paolo Scaroni said. ENI’s boss spoke at a press conference in Caracas with Venezuelan Energy Minister Rafael Ramirez, who is also head of state-owned Petróleos de Venezuela, S.A. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=407227&CategoryId=10717)

Government source claims the economy grew 4% in 2nd qtr 2011

Venezuela's gross domestic product grew about 4 percent in the second quarter compared to the same period a year ago, a senior government source said on Monday. Venezuelan President Hugo Chavez is seeking to spur the economy in the run-up to the 2012 presidential elections, which are likely to be his most challenging yet as he battles to recover from cancer. "The expansion has been solid," said the source, who asked not to be identified. The growth estimate was based on preliminary figures, the source told Reuters. (Reuters, 07-18-2011; http://www.reuters.com/article/2011/07/18/venezuela-economy-idUSN1E76H1NO20110718)

Indicators warn of Venezuelan’s deteriorating creditworthiness

Expectations focus on future debt issues by the Government or Petróleos de Venezuela; and brakes that Jorge Giordani, Minister of Planning and Finance, can impose on increased State borrowing, now that President Chavez delegated powers of his office. "Giordani has been very reluctant on new issues," says Boris Segura, an analyst at the Nomura investment bank, in a report which highlights rising prices of Venezuelan debt securities and the slight reduction in country risk levels after Chavez’s health problems were revealed, with perceptions of a possible transition. More information in Spanish. (El Nacional; 07-18-2011;

http://www.el-nacional.com/www/site/p_contenido.php)

Venezuela dips into the dividends of public agencies

In order to maintain an an expansive public spending policy the Venezuelan government has multiplied sources for funding. In addition to parallel funds, the government is resorting to the dividends and revenues of public agencies. Central government expenses recorded 3.8% growth during then first semester of 2011. Analysts say this trend will continue in the second half. President Chávez recently underlined the trend toward increased public spending. By authorizing funding for projects, he emphasized that several sources were being used. (El Universal, 07-18-2011; http://english.eluniversal.com/2011/07/18/venezuelan-government-dips-into-dividends-of-public-agencies.shtml)

Government to oversee product prices, limit profits

Venezuela is creating a new agency to limit profit margins for companies operating in areas such as food and medicine, the vice president said on Monday, in the latest effort to boost state control over the economy. The agency aims to control inflation in the OPEC nation, which has one of the highest rates in the world, by stopping businesses charging "usurious" prices that state officials deem are far above their costs of production. "This law is meant to confront those speculators who have for a long time been pillaging Venezuelans' right to live in dignity," says Vice President Elias Jaua, adding this was not an attack on the private sector. (Reuters, 07-18-2011; http://www.reuters.com/article/2011/07/19/venezuela-prices-idUSN1E76H1YK20110719)

Law on fair price and costs to cause more product shortages

Jorge Botti, the president of the Venezuelan Federation of Trade and Industry Chambers (FEDECÁMARAS), said that the law on fair price and costs, enacted by Venezuelan president Hugo Chávez, is "nonsense" because "it will have a huge impact. The law will cause more shortage (of products) and inflation," said the newly elected president of Venezuela's largest business chamber. Botti added that the law opens the door to massive expropriations by Venezuelan authorities and further weakens the right to private property in the South American country. (El Universal, 07-15-2011; http://english.eluniversal.com/2011/07/15/law-on-fair-price-and-costs-to-cause-more-shortage-of-products.shtml)

Commodities

Venezuela oil reserves surpassed Saudi Arabia in 2010 according to OPEC

Venezuela's crude oil proven reserves surpassed those of Saudi Arabia in 2010, the Organization of Petroleum Exporting Countries said in its annual statistical bulletin recently posted on its website. OPEC says Venezuela's proven crude oil reserves had reached 296.5 billion barrels in 2010, up 40.4% year-on-year and higher than Saudi Arabia's 264.5 billion barrels. (Fox Business, 07-18-2011; http://www.foxbusiness.com/markets/2011/07/18/venezuela-oil-reserves-surpassed-saudi-arabia-in-2010-opec/)

Venezuelan oil basket climbs to U$D 105.75

The Venezuelan oil basket increased by U$D 1.99 compared to the previous period and ended the week from July 11 to July 15 at U$D 105.75 per barrel, according to the Ministry of Energy and Petroleum, which added that with this increase the Venezuelan basket of crude oil and products now averages U$D 98.69 in 2011. (El Universal, 07-15-2011; http://english.eluniversal.com/2011/07/15/venezuelan-oil-basket-climbs-to-usd-10575.shtml)

Logistics & Transport

La Guaira Port operations decrease

According to official reports the La Guaira port mobilized 63 ships during June this year, which indicates that the port received fewer ships in June than in all previous months this year. The same report indicates 61.847 metric tons were imported and only 36 tons were exported through this port. Business representatives say imports have diminished due to delays in currency allocation by the Currency Board (CADIVI) and by the Foreign Currency Transaction System (SITME). They say there are also serious delays in verifying and checking cargo placed on the docks, as well as sanitary controls on exports. Delays weigh negatively on costs, they say, because “official port regulations indicate exports must leave the same day they go through customs: 48 hours maximum, or 2 hours minimum; and the can remain on the docks up to 15 days.” More information in Spanish. (Tal Cual, 07-15-2011;

http://www.talcualdigital.com/index.html)

 

Politics

Venezuela's ailing Chavez delegates some powers

Venezuelan President Hugo Chavez delegated some powers to his vice president and finance minister on Saturday, hours before a planned departure to Cuba, where he will be treated for cancer. At the same time he rejected demands he cede the presidency as he undergoes chemotherapy in Cuba, starting today. Technology will allow him to communicate with his government from the communist island, Chavez said, while demonstrating on state television how he plans to sign laws electronically using a program on a laptop computer. Vice President Elias Jaua was given temporary oversight of ministry budgets, and the power to appoint deputy ministers and expropriate property, while Finance Minister Jorge Giordani was given the authority to grant tax exemptions, Chavez said. (Reuters, 07-16-2011; http://www.reuters.com/article/2011/07/16/venezuela-chavez-idUSN1E76F04K20110716): and (Bloomberg, 07-16-2011; http://www.bloomberg.com/news/2011-07-17/chavez-delegates-powers-to-rule-from-cuba.html)

Four nations re-launch Andean Community of Nations with Venezuela in sight

The presidents of Bolivia, Colombia, Ecuador and Peru will re-launched the Community of Andean Nations (CAN) at a  summit in Lima, after a "deep institutional crisis" in 2007 due to Venezuela's withdrawal. The hope is that this country will return, according to its secretary general, Adalid Contreras. "Expectations on the summit of the Andean Community are political and we again enthusiastically agree with the block of integration". He added that the 2007 crisis was the result of “different views by different member countries" on the political and commercial partnership with the European Union and the United States. More information in Spanish. (Notitarde, 07-15-2011; http://www.notitarde.com/notitarde/plantillas/nota.aspx?idart=1377751&idcat=9845&tipo=2)

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.

July 15th, 2011

Economics & Finance

UN-ECLAC estimates Venezuela’s economy will grow by 4.5%

The economy of Latin America and the Caribbean will move forward by 4.7% this year, a better result than previous estimates, according to a six-month report launched in Santiago by the UN's Economic Commission for Latin America and the Caribbean (UN-ECLAC) on Wednesday. According to the report, Uruguay's GDP would leap by 6.8% in 2011; Colombia's GDP would rise by 5.3%, and Venezuela's GDP would climb by 4.5%. (El Universal, 07-14-2011; http://english.eluniversal.com/2011/07/13/eclac-estimates-that-venezuelan-economy-will-grow-by-45.shtml)

Venezuelan bonds continue on the rise, anticipated conditions calm markets

Conditions for bond issues for BF 45 billion in the local market, published today under the Supplementary Credit Law have quieted international markets. PDVSA and sovereign bond issues continued to rise with expectations of a single sovereign bond issue for U$D 1.7 billion. A US financial analyst says terms do not exclude dollar denominated bonds. More information in Spanish. (El Nacional, 07-15-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Domestic debt increase raises incentives for a devaluation

The administration of President Hugo Chavez has launched debt plan to be implemented primarily by selling bonds in bolivars to the nation's banks, a strategy advantageous to government finances but increases incentives for a devalue and punishes savers. The government has been granted authority to issue bonds for 45 billion bolivars during the remainder of the year, although a portion of this could be placed abroad in dollars using the official exchange rate, the vast majority will be sold in the country by the advantages for the public accounts. More information in Spanish. (El Universal, 07-13-2011; http://www.eluniversal.com/2011/07/13/la-deuda-interna-aumenta-los-incentivos-para-devaluar.shtml)

International reserves down to U$D 30.062 billion

A Central Bank of Venezuela report shows that international reserves fell from U$D 30.159 billion to U$D 30.062 billion. Reserves have been dropping, from U$D 30.547 billion last July 7 to current levels. More information in Spanish. (El Mundo, 07-14-2011; http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Reservas-internacionales-de-Venezuela-bajan-a--(1).aspx)

U$D 1.5 billion going to FONDEN

Chavez says the National Development Fund (Fonden) will receive excess reserves from Venezuela’s Central Bank (BCV), in order to reinvest in economic growth. He explained these are resulting from excess reserves during the first semester of 2011; and added that optimum reserve levels are set at U$D 27 billion. More information in Spanish. (Agencia Venezolana de Noticias, 07-15-2011; http://www.avn.info.ve/node/67299)

PDVSA now receiving financial aid from the Central Bank

Over the past three years, state-run oil company Petróleos de Venezuela (PDVSA) sought financial assistance from government agencies, and the Central Bank of Venezuela (BCV) has been the institution that has provided financial assistance to PDVSA in 2011. (El Universal, 07-13-2011; http://english.eluniversal.com/2011/07/13/pdvsa-received-financial-aid-from-the-central-bank-in-2011.shtml)

Government claims Venezuela's food production increased 44% in 12 years

National food production increased from 17,160,577 tons (1998) to 24,686,018 (2012) over the past twelve years, an increase of 44%, according to figures released by the Information and Communications Ministry. It claims 1,100,000 tons of foods were produced in 2010. (AVN, 07-14-2011; http://www.avn.info.ve/node/67224)

Caracas is the fourth most expensive city in Latin America

Caracas is the fourth most expensive city in Latin America, surpassed only by Sao Paulo, Rio de Janeiro and Brasilia (Brazil), according to Mercer's 2011 Cost of Living Survey. Venezuela’s capital jumped 49 places in the ranking of most expensive cities in the world, and is ranked 51 in the 2011 ranking. The deterioration was caused by inflationary pressure. "In the case of Venezuela, the official exchange rate has remained unchanged at VEB 4.30 per US dollar. This is the reason why overall inflation exceeds 25% and inflation in foodstuffs is over 34.4%. As a result, Caracas has jumped almost 50 places compared to last year," said Gabriel Regalado, human capital consulting manager in Mercer. (El Universal, 07-14-2011; http://english.eluniversal.com/2011/07/14/caracas-is-the-fourth-most-expensive-city-in-latin-america.shtml)

Special Law on Costs and Fair Pricing enacted

President Chávez has approved a Special Law on Costs and Fair Pricing, designed to regulate, administer, supervise and control prices in order to end speculation and hoarding which it says lead to inflation. More information in Spanish. (Agencia Venezolana de Noticias, 07-15-2011; http://www.avn.info.ve/node/67353; El Universal, http://www.eluniversal.com/2011/07/15/aspiran-a-controlar-inflacion-con-ley-de-costos-y-precios-justos.shtml)

Commodities

Venezuela in talks to buy Japanese stake in VENALUM

Venezuela’s government said it started talks to acquire a 20% stake in state aluminum producer CVG Venalum from six Japanese companies. The government is seeking to buy the stake from Showa Denko KK (4004), Kobe Steel Ltd. (5406), Marubeni Corp. (8002), Sumitomo Chemical Co., Mitsubishi Materials Corp (5711), and Mitsubishi Aluminum Co., Venezuela’s Ministry of Basic Industries said today in a statement. The ministry expects to have a formal negotiating committee set up in August and aims to have an agreement in place within four months. (Bloomberg, 07-14-2011; http://www.bloomberg.com/news/2011-07-14/venezuela-holding-talks-to-buy-japanese-stake-in-cvg-venalum.html)

Logistics & Transport

Freight operations at Venezuelan ports are twice as costly

Freight operations with Venezuela are the most expensive in the world according to shipping companies that operate at Puerto Cabello, particularly after an announced increase in rates. To illustrate this claim, cargo transfers from China at the Colombian ports such as Cartagena, cost about U$D 2.200 U (10.120 Bolívars), whereas at terminals such as Puerto Cabello, the same operation would cost U$D 4.500 19 350 Bolívars). Both figures are calculated using the official exchange rate BF 4.30 per U$D. More information in Spanish. (El Carabobeño; 07-13-2011; http://www.el-carabobeno.com/impreso/articulo/t130711-sl02/fletes-navieros-hacia-puertos-venezolanos-cuestan-dos-veces-ms)

Politics

Chavez admits “hyper-leadership” was a mistake

In the middle of public reflections on the consequences of having a cancerous tumor removed on June 20, President Hugo Chávez admitted that "hyper-leadership" is one of his "fundamental errors". "He also admitted the need for radiotherapy or chemotherapy in order to "to try to shield the body of new malignant cells." The third stage of the disease has led him to face not only lifestyle but the perception of leadership. More information in Spanish. (El Universal; 07-14-2011; http://www.eluniversal.com/2011/07/14/chavez-acepta-que-su-hiperliderazgo-fue-un-error.shtml)

Moody's: Chavez’s illness raises uncertainties for Venezuela’s future

According to Moody's risk rating, the illness of President Hugo Chavez creates an uncertain future for the country and has mixed implications for debt rating. More information in Spanish. (El Mundo, 07-14-2011; http://www.elmundo.com.ve/Noticias/Economia/Internacional/Moody-s--Enfermedad-de-Chavez-abre-futuro-incierto.aspx)

Venezuelan leader changes his tune

It has appeared repeatedly on Venezuelan state television, government ads, and the even the president's Twitter account. Venezuelan President Hugo Chavez has a new populist slogan.  Chavez, who recently admitted he is battling cancer, is no longer using the slogan that defined his first decade in power: "patria, socialismo o muerte" (fatherland, socialism, or death). He has now changed it for one that is markedly more optimistic. Since he returned from Cuba earlier this month after undergoing cancer treatment that included a surgery, Chavez has been using the slogan "viviremos y venceremos" -- we will live and be victorious. (CNN, 07-14-2011;

http://edition.cnn.com/2011/WORLD/americas/07/14/venezuela.chavez/index.html?iref=allsearch)

Chavez says: "One never undertakes a revolution to become rich"

He made the statement to his followers in a recent public statement. He also called on his cabinet to “advance much more toward our socialism: A socialism within our constitution. Venezuelan style Socialism”. More information in Spanish. (El Universal. 07-15-2011; http://www.eluniversal.com/2011/07/15/una-revolucion-nunca-se-hace-para-volvernos-ricos.shtml and Agencia Venezolana de Noticias; http://www.avn.info.ve/node/67291)

"The US and Venezuela have not started to turn the page"

According to Departing US Deputy Chief of Mission John Caulfield, who adds: "We cannot advance without substantial communication (...) "Drug trafficking concerns us all. There is still minimum cooperation, but it is important”. Caulfield ends his term of service this week and will go to Havana as mission chief; he is being replaced by Kelly Keiderling. More information in Spanish. (El Universal, 07-15-2011; http://www.eluniversal.com/2011/07/15/eeuu-y-venezuela-no-han-empezado-a-voltear-la-pagina.shtml)

Humala meeting with Chávez

Peruvian President-elect Ollanta Humala has arrived in Caracas for a one day visit in order to meet with President Chávez. More information in Spanish. (El Nacional, 07-15-2011; http://www.el-nacional.com/www/site/p_contenido.php)

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.