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, July 15, 2011

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;

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;

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;

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;

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;

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;

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;

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;

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;; El Universal,


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;

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;


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;

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;

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;

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; and Agencia Venezolana de Noticias;

"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;

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;

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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