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 29, 2011

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.

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