July 08th, 2011

Economics & Finance

Gov’t claims inflation is down by 3.3% during the first semester of 2011

The National Consumer Price Index (INCP), prepared by Venezuela’s Central Bank (BCV) and the National Statistics Institute (INE), shows an accumulated variation of 13% for the first semester this year, which is 3,3% less than the same period 2010. It’s register for June 2011 shows a 2.5% variation which is the same as the previous month and higher than June 2010 (1,8%). According to the official report, the Consumer Price Index has improved to 23.6% in June 2011, down from 31.3% in June 2010. More information in Spanish. (Agencia Venezolana de Noticias; 07-08-2011; http://www.avn.info.ve/node/66033)

Venezuela's US-dollar bonds dip

After rising steadily for a week, Venezuela's dollar-denominated global bonds halted their upward trend and are showing a moderate decline. Venezuela's benchmark 2027 US-dollar bond, which is the most traded Venezuelan bond, dropped 1.5 points and ended Tuesday at 71.1% of its value. Debt traders said that the decline is because the Central Bank of Venezuela (BCV) stopped repurchasing debt and investors who speculated about a change of leadership in the short term, due to Chávez's illness, have realized that the Venezuelan president may remain in office. (El Universal, 07-06-2011; http://english.eluniversal.com/2011/07/06/venezuelas-us-dollar-bonds-dip.shtml)

International reserves rose by U$D 1,178 million in one day

Venezuela’s international reserves closed at U$D 29.567 million, according to the Central Bank, which is a gain of U$D 1,178 million compared to end June 30. More information in Spanish. (El Mundo, 07-07-2011; http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Reservas-Internacionales-subieron-$1-178-millones.aspx)

Expert estimates private sector will receive BF 26 billion less this year

Daniel Mogollón, a consultant on sustainability, innovation and energy estimates the productive sector will receive BF 26 billion this year due to changes in the Law on Science, Technology and Innovation (LOCTI). He explained that during 2009 funds applied to these areas were 2.6% of GDP and their projected total for 2010 was BF 26 billion. Changes in the law have diverted such funds directly to the Government. More information in Spanish. (El Universal; 07-08-2011; http://www.eluniversal.com/2011/07/08/sector-productivo-dejara-de-percibir-bs-26-millardos.shtml)

Colombian exports to Venezuela drop again

Venezuela seems to be recovering slowly from a two year recession, but bilateral trade with Colombia does not reflect improvement. Colombian exports to Venezuela grew back by 14% for the first time in two years, according to the Colombian National Statistics Office (DANE); but according to preliminary data from the Colombian Tax Authority (DIAN), they fell again by 6.4% in May. More information in Spanish. (Ultimas Noticias; 07-08-2011; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Economia/Caen-exportaciones-de-Colombia-a-Venezuela.aspx)

Venezuela is the only oil producer with increased indebtedness

After eight years of high oil prices, oil exporters - except for Venezuela – are consistently saving part of the revenues and reducing debt, according to data and projections from the International Monetary Fund (IMF). (El Universal, 07-06-2011; http://english.eluniversal.com/2011/07/06/venezuela-is-the-only-oil-producer-that-increases-debt.shtml)

Food consumption by low-income Venezuelans declines

According to recent data released by the National Statistics Institute (INE), low-income Venezuelans face greater difficulties to improve their food intake. By the end of the second half of 2010, the apparent daily consumption of food by the least favored sectors of the population showed a larger reduction, while the wealthiest social groups' food intake increased. (El Universal, 07-07-2011; http://english.eluniversal.com/2011/07/07/low-income-venezuelans-food-consumption-declines.shtml)

Commodities

IEA raises Venezuela's oil output estimates

Doubts about state-run oil company Petróleos de Venezuela (PDVSA) output and exports figures led secondary sources in the oil market to provide data quite different from those reported by PDVSA. However, two weeks ago, the International Energy Agency (IEA, which comprises 28 oil-importing countries) announced a review of their data for the past decade, which shows a downward trend in Venezuela's domestic production for 2002-2004, but also led to an upward trend in 2005-2011. According to the IEA, Venezuela's average domestic output decreased by 100,000 barrels per day (bpd) n 2002, 2003 and 2004 (during and after the oil strike); from 2.47 million to 2.37 million bpd. However, in 2005-2011, average oil output went 300,000 bpd higher, from 2.39 million bpd to 2.7 million bpd. (El Universal, 07-07-2011; http://english.eluniversal.com/2011/07/07/iea-raises-venezuelas-oil-output-estimates.shtml)

Food prices (controlled or not) rose 16% between December 2010 and June, almost six percent points above general inflation (10.3%), according to the Venezuelan Central Bank (BCV), and were also above the 9.5% posted by the Food sector for that period. (Veneconomy, 07-06-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=26612&idc=2)

Politics

Chávez confirms Cabinet and extends command terms for military leadership

President Hugo Chávez has extended terms of service for all military commanders and confirmed his Cabinet as to signal cohesion within his government in order to dismiss opposition rumors about changes in the higher military ranks. He also confirmed the Executive Vice President Elías Jaua, and named María Pilar Hernández as Youth Minister. More information in Spanish. (Agencia Venezolana de Noticias;  07-08-2011; http://www.avn.info.ve/node/66126)

Venezuelan army is crucial player in the midst of uncertainty

The armed forces will probably have an important role in the political future of the country if Chavez is forced from office by cancer. Senior military commanders appeared next to Chávez, as he greeted the participants of the bicentennial parade from the presidential palace. However, some analysts and former military officers say there are old divisions between those who strongly support Chavez's socialist politics and who do not. Some believe that simmering tensions could explode within the ranks and that the military could end up playing a crucial role in any transition to new leadership, should the president's health problems become worse. More information in Spanish. (El Mundo, 07-06-2011; http://www.elmundo.com.ve/Noticias/Economia/Politica/ANALISIS---AP--Ejercito-venezolano-sera-actor-cruc.aspx)

According to Reuters, Chávez’s cancer jeopardizes elections

In an analysis of President Chávez’s illness and Venezuelan elections, the Reuters news agency says his situation has uncovered the government’s enormous dependence on its leader, which it claims could derail dozens of political and economic projects crucial to the 2012 election campaign. More information in Spanish. (Ultimas Noticias; 07-08-2011; http://www.ultimasnoticias.com.ve/Noticias/Actualidad/Politica/Reuters--Elecciones-en-jaque-por-cancer-de-Chavez.aspx)

Nicaraguan businessmen seek a free trade agreement with Venezuela

According to DPA, Nicaraguan businessmen, concerned over the health of Venezuelan President Hugo Chávez, are insisting the Ortega government should negotiate a free trade agreement (FTA) with Venezuela.

Entrepreneurs believe that the FTA would provide stability to bilateral trade relations, beyond current governments. (El Universal, 07-06-2011; http://english.eluniversal.com/2011/07/06/nicaraguan-businesspersons-seek-free-trade-agreement-with-venezuela.shtml)

Venezuela, Chile evaluate new date to hold CELAC Summit

The Venezuelan Foreign Affairs minister Nicolas Maduro met with his Chilean counterpart Alfredo Moreno to set a new date for the summit to formally constitute the Community of Latin American and Caribbean States (CELAC). (AVN, 07-07-2011; http://www.avn.info.ve/node/66049)

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.