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.

Tuesday, July 19, 2011

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;

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,

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;

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;

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;

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;

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;


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;

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;

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;



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; and (Bloomberg, 07-16-2011;

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;

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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