August 30th, 2011

Economics & Finance

Venezuela’s Central Bank director predicts economy to continue growing in 2nd half of 2011

Armando León, a director of Venezuela’s Central Bank predicts the South American country’s economy will continue growing in the second half of this year. He says growth will be comparable to the pace from January through June, when the economy grew 4.8% in the first quarter and 2.5% in the second quarter. Expansion during the first half of the year was spurred by increased government spending and high oil prices. (The Washington Post, 08-29-2011; http://www.washingtonpost.com/business/economy/venezuelas-central-bank-director-predicts-economy-to-continue-growing-in-2nd-half-of-2011/2011/08/29/gIQAO9tJoJ_story.html)

Debt soars, as parallel funds grow

According to the Central Bank’s (BCV) balance of payments, the government pays high interest rates for its debt at the same time it places billions of US dollars in funds that allow it to spend without budget constraints. The BCV has reported that the US dollar deposits held in parallel funds, such as the Fund related to the China agreement; the National Development Fund (FONDEN); the Fund for Social Emergencies (Fondo Súbito Social); the National Treasury; state-run oil company Petróleos de Venezuela (PDVSA)" and the Central Bank of Venezuela (BCV), added up to U$D 35.17 billion by the end of June 2011 after the government pumped U$D 15.26 billion into them over the past six months. (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/venezuelas-debt-climbs-parallel-funds-also.shtml)

Gov't has seized 988 companies

The Venezuelan government has seized 988 companies since 2002, according to data from the Venezuelan Confederation of Industries (CONINDUSTRIA). An in-depth analysis of seizures shows that, far from diminishing, government's seizures have increased. So far this year, 401 companies were taken over by Venezuelan authorities, which is 41% over the 284 companies expropriated in 2010. According to CONINDUSTRIA, this scenario "creates legal uncertainty; drives investments away; and reduces the possibility of increasing production," and offers diminishing opportunities for solving such problems as supply and the high cost of living. (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/venezuelan-govt-has-seized-988-companies.shtml)

Guayana holds U$D250 billion in gold, according to Mundo report

Venezuela’s southern Guayana region, which includes the states of Bolivar, Amazonas and part of Delta Amacuro, has 140 million ounces of gold reserves, newspaper El Mundo reported today. The reserves, valued at about U$D 250 billion, include deposits in the El Callao, Brisas del Cuyuni and Las Cristinas mining districts, the Caracas-based daily reported, citing a document from the Ministry of Mining and Basic Industries. (Bloomberg, 08-29-2011; http://www.bloomberg.com/news/2011-08-29/venezuela-s-guayana-holds-250-billion-of-gold-mundo-report.html)

Gov't airs plans on exploration of new gold mines

The Minister of Basic Industries and Mining José Khan says the government will embark on an exploration program to find new gold mines, an operation in the hands of joint ventures under the State control. "The purpose is to undertake a huge plan on certification and exploration of the mines that have been known for many years and discover new deposits," he said, as quoted in a press release from his ministry. (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/venezuelan-govt-airs-plans-on-exploration-of-new-gold-mines.shtml)

Public spending rose 8.1% but consumption rose only 3.1%

Public spending has increased 8.1% from January to July 30 2011 in real terms (indexed for inflation), according to the National Treasury. However, consumption which is one of the main generators of growth increased 3.2%. More in Spanish: (El Nacional, 08-30-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Commodities

Refineries operate 25% below their capacity and the volume of crude oil processed in said refineries has dropped 8.2% in 12 years as a result of delays in investments at the Paraguaná Complex and at El Palito, and Bajo Grande plant in Zulia state and Puerto La Cruz and San Roque plants in Anzoátegui. (Veneconomy, 08-29-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27354&idc=4)

Refineries show U$D 10.2 billion in lost yield

Petróleos de Venezuela (PDVSA) refining figures are showing red. Costs and expenses exceed income. Numbers by the end of last year indicate losses of U$D 10.2 billion that were only be offset by higher revenues received from oil sales. Refined products revenue reached U$D 24.8 billion, but that amount covered only 71% of operating costs and expenses, which were at U$D 35 billion. More in Spanish: (El Nacional, 08-30-2011; http://www.el-nacional.com/www/site/p_contenido.php)

BCV has funded PDVSA by Bs 42.5 billion

Jose Guerra, who has served as manager of economic research at the Central Bank, says that by the end of July this year official indicators show "PDVSA – the state owned oil company - has been funded with Bs 42.5 billion, a figure that is nearly U$D 10 billion at the official exchange rate." More in Spanish: (El Universal, 08-30-2011; http://www.eluniversal.com/2011/08/30/en-ao-y-medio-el-bcv-financio-a-pdvsa-con-bs-425-millardos.shtml)

Local stock market up 52.93%

Venezuela stocks rose 0.33% last week on a return to low volumes, with barely 75,000 shares trading all week. Of the five stocks that changed price, four were up and one was down, with Electricidad de Caracas increasing the most to Bs. 0.2 for a 5.3% increase, Envases Venezolanos rose 5% at Bs. 21, CANTV rose 3.9% to Bs. 6.75 and Banco Provincial continued its ascent, rising 2.9% to Bs. 36. The lone stock to go down was Corimon, down 20% at Bs. 228. (Latin American Herald Tribune, 08-29-2011; http://www.laht.com/article.asp?ArticleId=420613&CategoryId=10717)

Transfer of shares suspended at the Caracas stock exchange

The National Securities Commission has ruled that intervened, liquidated or suspended brokerage firms may not sell or transfer its shares in the Caracas Stock Exchange. More in Spanish: (El Universal, 08-30-2011; http://www.eluniversal.com/2011/08/30/suspenden-transferencia-de-acciones-de-la-bolsa-de-caracas.shtml)

Politics

Chavez undergoes third chemo session in Venezuela

President Hugo Chavez is undergoing a third round of chemotherapy for cancer at home in Venezuela beginning Sunday, he said, instead of traveling to Cuba where he had two previous rounds of treatment. The socialist leader underwent surgery in Havana in June to remove a baseball-sized tumor, then returned to the communist-led island twice for chemotherapy as the guest of his friend and mentor, former Cuban leader Fidel Castro. (Reuters, 08-27-2011; http://www.reuters.com/article/2011/08/27/us-venezuela-chavez-idUSTRE77Q2XH20110827)

Venezuela puts signs in buses to fight world's highest murder rate

The government of President Hugo Chavez said Thursday it is adding a new weapon in its fight against the world's highest murder rate: signs in buses. According to the Interior and Justice Ministry, the signs will say “Firearms-free zone”. Venezuela’s murder rate has skyrocketed since Hugo Chavez took office in 1999, growing from 4,450 murders in 1998 to a projected 19,000-plus murder this year. The Chavez government has announced 33 different “security” plans, roughly three a year, since he took over, and the post of Interior & Justice minister has been held by 12 ministers in 12 years. (Latina American Herald Tribune, 08-25-2011; http://www.laht.com/article.asp?ArticleId=419627&CategoryId=10717)

"No de facto government can be established in Venezuela", says Heinz Dieterich

In a recent article posted on the Kaosenlared website, Heinz Dieterich described how his ties with Hugo Chávez began to deteriorate since 2005. He says the president does not want to hear Dieterich's assertion that "there is no socialism here, not in the historical sense of the term." From then on, the German Marxist sociologist, a professor at Universidad Nacional Autónoma de México (UNAM) and creator of the "Socialism of the 21st Century" thesis, fell from grace. Execrated, he progressively lost his status as ideologist of Chavezism, and in 2007 the final breakdown took place. (El Universal, 08-27-2011; http://www.eluniversal.com/2011/08/27/no-de-facto-government-can-be-established-in-venezuela.shtml)

Capriles will be officially launched in October

The governor of Miranda, Henrique Capriles Radonski, announced that the official launching of his campaign as presidential candidate will take place next October, and after the event he will begin touring the country. More in Spanish: (Tal Cual, 08-29-2911; http://www.talcualdigital.com/index.html)

Colombia considers security is still a challenge for Venezuela

Colombian Foreign Minister Maria Angela Holguin has noted rebuilding relations with Venezuela and Ecuador, but says "there is still a challenge in terms of security." However, she emphasized that agreements have been signed for the fight against crime and drugs. More in Spanish: (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/30/para-colombia-la-seguridad-es-un-desafio-con-venezuela.shtml)

Andean Community keeps open doors for Venezuela

CAN Secretary General Adalid Contreras says no official steps have been taken for a potential return of Venezuela, but considers it "the right timing" due to positive development prospects in the Andean trade bloc, composed of Bolivia, Colombia, Ecuador and Peru. More in Spanish: (El Universal, 08-29-2011; http://www.eluniversal.com/2011/08/29/can-keeps-the-doors-open-to-venezuela.shtml)

Ambassador of Venezuela left Tripoli

Venezuela's ambassador to Libya, Afif Tajeldine has left Tripoli, according to his son, Basem Tajeldine, who says

"For reasons of security is no longer there, but in an area of the Maghreb, North Africa". More in Spanish: (El Nacional, 08-30-2011; 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.

August 26th, 2011

Economics & Finance

Central Bank reports economy grew 2.5% in Q2

Venezuela's economy grew 2.5% during the second quarter of this year compared with the year-ago period, the Central Bank said on Thursday. It said the OPEC member nation's current account surplus widened to U$D 8.3 billion in the second quarter from U$D 2.26 billion in the same quarter of 2010, while its capital account deficit was U$D 6.35 billion compared with a U$D 1.53 billion deficit in the same period last year. The bank also said the economy grew 3.6% in the first six months of the year. (Reuters, 08-25-2011; http://af.reuters.com/article/commoditiesNews/idAFN1E77O1RH20110825)

Chávez again threatens to nationalize banks

President Hugo Chávez again threatened to nationalize banks if they do not finance “productive projects”. He publicly instructed Vice-President Elías Jaua to "contact private bankers and schedule some meetings. They must comply with the law, otherwise (...) I have no problem to nationalize those banks (...) Private banks have enough resources to fund projects."  According to Chávez, financial institutions have failed to grant mandatory loans to agricultural projects. "The banking sector holds deposits amounting to VEB 200 billion (U$D 46.5 billion). The banking sector's deposits are virtually the same as the annual domestic budget," Chávez said. (El Universal, 08-23-2011; http://www.eluniversal.com/2011/08/23/chavez-threatens-again-to-nationalize-the-banking-sector.shtml)

Agriculture Minister says: "We will not let supply and demand control agriculture prices"

The Minister of Agriculture and Lands, Juan Carlos Loyo announced there will be no further increases in corn prices, but producers of coffee, milk and other items such as sugar cane can expect an adjustment and review of the costs of production this year. He noted that by using state controls the government will not allow the free supply and demand control the agricultural sector and the production and distribution of vegetables. He added that there is no plan now for massive imports, but that they will fight cartels and middlemen who monopolize trading these items. More in Spanish: (El Nacional; 08-24-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Venezuelan operating reserves have declined by U$D 26 billion, further devaluation predicted.

Economists Jesús Rojas, a former chief financial officer at the Central Bank of Venezuela (BCV); Angel García Banchs, and José Guerra, ex manager of economic research at the BCV; and the CEO of private bank Banco Venezolano de Crédito, Oscar García Mendoza, all have said that operating reserves, that is, the liquid funds that a country has available to pay for imports and debt are now at U$D 6.2 billion, and have dropped U$D 26 billion since 2008. These analysts say the sharp decline in international reserves has not been fully noticed because the price of gold has skyrocketed, and gold ingots are valued at a higher price. The group of economists agree that the nation has entered a cycle of high inflation that will inevitable bring another devaluation (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/venezuelan-operating-reserves-have-declined-usd-26-billion.shtml; more in Spanish: El Universal, 08-26-2011; http://www.eluniversal.com/2011/08/26/advierten-que-el-pais-se-aproxima-a-otra-devaluacion.shtml)

Venezuela to add 7 tons of gold to reserves

Central Bank President Nelson Merentes says Venezuela will certify an additional 7 tons of gold, to add to the country's reserves. He said the technical process is underway and that these 7 000 kilos will add U$D 44 million to reserves. He added 9 tons were certified in 2009. More in Spanish: (Agencia Venezolana de Noticias, 08-24-2011; http://www.avn.info.ve/node/73808)

Central Bank monetary policy paves way for added indebtedness

The Central Bank of Venezuela (BCV) has implemented a strategy that paves the way for the Ministry of Finance to sell large amounts of bonds and treasury notes. The Central Bank prevents the bonds it uses to drain money from economy from competing with the bonds and notes that are issued by the Ministry of Finance to increase government revenue. In order to open more space to the bonds issued by the Ministry of Finance, a BCV regulation prevents financial institutions from having an amount of BCV bonds higher than the total reported in November 2009. (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/central-bank-monetary-policy-facilitates-the-issuance-of-debt.shtml)

TENARIS Seeks Tribunal's help in obtaining compensation from Venezuela

Argentine steel company TENARIS (TS) said Wednesday it will ask a tribunal at the International Center for Settlement of Investment Disputes for help obtaining fair compensation for Venezuela's 2009 expropriation of its subsidiary, MATESI Materiales Siderurgicos SA. In 2009, Venezuela's government took operational control of MATESI, a hot-briquetted iron unit that was majority-owned by TENARIS, and pledged to compensate TENARIS appropriately. Despite this action, plant manager Daniel Rodríguez believes negotiations can still end positively and says “there hasn’t been an agreement because the company has sought indemnity about the real cost of the plant, so they are reviewing numbers”. (Fox Business, 08-25-2011; http://www.foxbusiness.com/markets/2011/08/24/tenaris-seeks-tribunals-help-in-obtaining-compensation-from-venzuela/ and more in Spanish: El Universal, 08-26-2011; http://www.eluniversal.com/2011/08/26/diferencias-sobre-costo-de-matesi-retrasan-negociacion.shtml)

Commodities

US DOE: Venezuelan first semester 2011 oil revenues were U$D 34 billion

Venezuelan revenues related to sales of oil and oil products came up to U$D 34 billion between January and July 2011, according to estimates of the US Department of Energy (DOE), based on export data from the member countries of the Organization of the Petroleum Exporting Countries (OPEC). The report states that during 2010 Venezuelan revenues from oil exports were U$D 41 billion. This amount indicates that oil income in 2011 will exceed total revenues obtained in 2010. (El Universal, 08-24-2011; http://www.eluniversal.com/2011/08/24/us-doe-venezuelan-oil-revenues-amount-to-usd-34-billion.shtml)

Venezuelan weekly oil exports to the US decline

Venezuela's oil exports to the US have declined by nearly 160,000 barrels a day over the past six weeks, according to weekly reports issued by the US Department of Energy. In mid August, Venezuela's oil shipments to the US averaged 793,000 bpd, a decline of 120,000 barrels a day compared to June (916,000 barrels per day). If compared to data from August 2010, the decline is 210,000 barrels a day, averaging 29%. Although Venezuelan oil exports to the US averaged 916,000 bpd during the first five months this year and 912,000 barrels per day in 2010, there has been a decline over the last 10 years, according to the US government audited figures. (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/fall-in-venezuelan-weekly-oil-exports-to-the-us.shtml)

CVP and MINERVEN to create joint ventures to develop gold

Venezuelan state mining company MINERVEN and Venezuelan Oil Corporation (CVP), a subsidiary of state-run oil company PDVSA, will create two joint ventures to produced the nation's gold. Venezuelan Minister of Energy and Petroleum Rafael Ramírez said that the companies will be created after nationalization of gold resources. The Venezuelan oil company Petro Anzoátegui will support gold extraction; and MINERVEN will support the oil sector. (El Universal, 08-25-2011; http://www.eluniversal.com/2011/08/25/cvp-and-minerven-to-create-joint-ventures-to-develop-gold.shtml)

S&P cuts Electricidad de Caracas to B- after Venezuela downgrade

Standard & Poor's Ratings Services (S&P) lowered its ratings on Venezuela's electrical utility C.A. La Electricidad De Caracas (EDC) to 'B-' from 'B'. The outlook is stable, according to S&P. The ratings cut on EDC followed the August 19th cut of the Bolivarian Republic of Venezuela credit rating to 'B+' from 'BB-'. (Latin American Herald Tribune, 08-24-2011; http://www.laht.com/article.asp?ArticleId=419194&CategoryId=10717)

Politics

Venezuela’s Chavez says he may undergo more chemotherapy, calls treatment ‘preventive’

Venezuelan President Hugo Chavez said Wednesday that he may undergo another round of chemotherapy next week.

Chavez said he feels he is overcoming his illness. When he mentioned cancer, he described it in the past tense saying: “I had it.” (The Washington Post, 08-24-2011; http://www.washingtonpost.com/world/americas/venezuelas-chavez-says-he-may-undergo-more-chemotherapy-calls-treatment-preventive/2011/08/24/gIQA9BMwbJ_story.html)

Chavez says Libya’s tragedy just beginning with the fall of Gadhafi’s government

Venezuelan President Hugo Chavez said Wednesday that Libya’s crisis is just beginning with the fall of Moammar Gadhafi’s government. Chavez has been a staunch defender of Gadhafi throughout the conflict, and he condemned NATO airstrikes and killings of civilians. “The drama of Libya isn’t ending with the fall of Gadhafi’s government. It’s beginning,” Chavez said. “The tragedy in Libya is just beginning.” (The Washington Post, 08-24-2011; http://www.washingtonpost.com/world/middle-east/venezuelas-chavez-libyas-tragedy-just-beginning-with-the-fall-of-gadhafis-government/2011/08/24/gIQAljEjbJ_story.html)

Russia, Venezuela strengthen ties through new agreements

Venezuelan Foreign Minister Nicolás Maduro and his Russian counterpart, Sergei Lavrov, have signed three agreements to promote scientific, cultural and diplomatic relations. One of the agreements provides for the creation of a Russian scientific and cultural center in Caracas, in order to bring the people of both countries closer together. (El Universal, 08-24-2011; http://www.eluniversal.com/2011/08/24/russia-venezuela-strengthen-ties-through-new-agreements.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.

August 23th, 2011

Economics & Finance

Venezuela’s debt rating cut by S&P on “arbitrary laws”, Chavez's health

Venezuela had its credit ratings cut for the first time since 2006 by Standard & Poor’s, which cited concern over the country’s “changing and arbitrary laws” as well as the health of President Hugo Chavez. The downgrade comes after Chavez ordered the central bank to repatriate as much as $11 billion of gold reserves as he battles with an undisclosed type of cancer. Venezuela’s international reserves held abroad were “a strength of the rating, and with this movement that situation is going to change, which adds extra uncertainty.” Venezuela joins Bolivia, Paraguay and Suriname as Latin American nations with the B+ rating. Moody’s assigns Venezuela a B2 grade, while Fitch also gives Venezuela a B+. (Bloomberg, 08-19-2011; http://www.bloomberg.com/news/2011-08-19/venezuela-s-debt-rating-is-downgaded-to-b-from-bb-by-standard-poor-s.html)

V-bonds fell less than expected

The behavior of the Venezuelan bonds in international markets yesterday was relatively stable, averaging a drop of 0.5%. It was expected that lowering the credit rating by Standard & Poor's would greatly affect the price of debt on the first day of operations, but Venezuelan papers remained a relatively good choice. A source said this was due to the fact that Standard & Poor's was the last to lower the rating of the country. Fitch and Moody's had punished the risk rating in Venezuela a few weeks ago, ranking it even lower than Standard. More in Spanish: (El Nacional, 08-23-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Local stock market up 51.43%

Venezuela's stock market dropped slightly this week, with the index dropping 0.62% to 98,094 from last week's 99,558 close. Volume picked up, but mostly with a large cross trade in MANTEX shares, which accounted for over 900,000 shares traded. (Latin American Herald Tribune, 08-22-2011; http://www.laht.com/article.asp?ArticleId=418669&CategoryId=10717)

Central Bank requests gold holdings held by BOE, Merentes says gold is over 60% of total reserves

Venezuela’s central bank has requested its 99 tons of gold holdings from the Bank of England, according to a bank statement sent by e-mail, citing the institution’s president Nelson Merentes. “We’ve contacted the Bank of England and the corresponding protocols have been initiated to complete this operation as soon as possible,” Merentes said, according to the statement. “Once that’s done, the shipments will begin by sea.” He also said Venezuela’s gold is a little over 60% of total international reserves, some U$D 18 billion. (Bloomberg, 08-21-2011; http://www.bloomberg.com/news/2011-08-21/venezuela-requests-gold-holdings-held-by-boe-merentes-says.html); and more in Spanish: (Agencia Venezolana de Noticias; http://www.avn.info.ve/node/73498)

Swap of US dollars for yuans or rubles ruled out

Venezuelan reserves will be moved, but kept in US dollars according to Central Bank President Nelson Merentes. Venezuela will move its operating international reserves from Swiss, British, French, and American banks to financial institutions in Russia, China, or Brazil, but that does not mean that US dollars would be swapped for Chinese yuan, Russian ruble, or Brazilian real. He justified the decision to move reserve funds by saying that "we are protecting our funds, in a first phase. If there is a region affected by an economic disturbance, the most prudent and advisable decision is to change the location of these reserves (...) We are protecting ourselves from the risk of contagion. We seek better safeguard (for the funds)." (El Universal, 08-22-2011; http://www.eluniversal.com/2011/08/22/venezuela-rules-out-swap-of-us-dollars-for-yuans-or-rubles.shtml

Merentes: "It is not true that China asked to extend credit guarantees"

The president of the Central Bank of Venezuela, Nelson Merentes, says it is false that China has asked for guarantees to back credits. He says they will diversify their portfolio and only a small amount will be placed in China in order to anticipate markets. “China is virtually the second world power in production. Our studies say the yuan will become convertible very soon and those who get ahead will come out favorably”.  More in Spanish at (El Nacional, 08-22-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Chavez’s gold grab prompts dash for physical, Citigroup expects increase to $ 2,000 gold per ounce

The gold price reached a new nominal high of $1,913.50 in Asian trading today, while silver, platinum and palladium all also recording gains. Gold has been propelled sharply higher in recent trading sessions by the news that Venezuelan strongman Hugo Chavez plans to repatriate Venezuela’s gold holdings from banks mainly in the UK and the USA. Given that the “physical market” in gold is approximately 100-times the size of the amount of actual metal by which it is purportedly backed, this is raising concerns of a dramatic short-squeeze. According to a study by the analysis unit of Citigroup, the price of gold in the nearest term will continue to rise, expected a price of U$D 2,000 per ounce underpinned by market uncertainty and unsteadiness of monetary policy. More in Spanish: (El Universal, 08-23-2011; http://www.eluniversal.com/2011/08/23/citigroup-preve-que-el-oro-aumentara-hasta-$2000-por-onza.shtml and Gold Money, http://www.goldmoney.com/gold-research/chavezs-gold-grab-prompts-dash-for-physical.html?page=3088&utm_source=twitterfeed&utm_medium=twitter&utm_campaign=Feed%3A+GoldMoneyGoldResearch+%28GoldMoney+-+Gold+Research%29)

Tax revenue share declines in 2010

The 2010 economic report issued by the Central Bank of Venezuela (BCV) showed that the tax revenues share of Venezuela's total fiscal revenues declined last year. According to the central bank, "as a result of increased oil prices and foreign exchange adjustment there was a change in favor of oil revenues and at the expense of funds of domestic origin." In 2010, the share of oil revenues climbed from 35.1% to 40.6%, while the weight of tax revenues fell from 64.9% to 59.4%. (El Universal, 08-22-2011; http://www.eluniversal.com/2011/08/22/tax-revenue-share-declines-in-2010.shtml)

401 companies reported taken over by the Government since January 2011

In 2011 to date 401 companies have been taken over by the Government, according to Carlos Larrazábal, president of the National Industrial Council, who adds the situation generates legal uncertainties, scares away investments and hurts chances of raising production. He made the statement after the expropriation of Forjas Santa Clara, TETRACERO and Cartonajes GRANICS. Larrazabal says over 80% of takeovers have taken place since 2009 and are growing. More in Spanish at: (Noticias 24, 08-22-2011; http://economia.noticias24.com/noticia/76024/conindustria-asegura-que-401-empresas-han-sido-intervenidas-durante-2011/)

Commodities

Venezuela has world’s largest oil reserves: OPEC

The Organization of Petroleum Exporting Countries, a notoriously conservative organization, has stated that Venezuela has world’s largest oil reserves, even exceeding those of OPEC’s top producer, Saudi Arabia. Oil production in Venezuela is under the control of the state-owned Petróleos de Venezuela, S.A. company, or PDVSA. Petroleum Intelligence Weekly lists PDVSA as the world's fourth largest oil company, due to its proven reserves, production, refining and sales, MercoPress news agency reported. (Commodities Now, 08-19-2011; http://www.commodities-now.com/news/power-and-energy/7467-venezuela-has-worlds-largest-oil-reserves-opec.html)

Iran, Venezuela start building Petchem complex, Press TV says

Iran and Venezuela started construction on a petrochemical complex in the southern Iranian province of Bushehr, Press TV reported, citing National Iranian Petrochemical Organization Managing Director Abdolhossein Bayat. The countries are building a methanol unit in the southern port town of Assaluyeh, Bayat said yesterday, according to a report published on the website of the state-run news channel. Agreements for a similar project in the South American country have yet to be completed, he said, without giving details of the costs. (Bloomberg, 08-21-2011; http://www.bloomberg.com/news/2011-08-21/iran-venezuela-start-building-petchem-complex-press-tv-says.html)

Companies acquired by PDVSA report losses

Diverse responsibilities assigned to state-run oil company Petróleos de Venezuela (PDVSA) have boosted its operating costs. Most industrial and agricultural companies purchased since 2008 are no longer profitable and report losses during the 2010 fiscal year. According to PDVSA's operating report, the companies purchased by the oil giant reported U$D 14 million in losses as of December 31, 2010 (VEB 60 million, at the exchange rate of VEB 4.28 per US dollar.) At the end of 2009, PDVSA's accounting ledgers showed the companies reporting earnings amounting to U$D 12 million (VEB 26 million at the exchange rate of VEB 2.15 per US dollar). (El Universal, 08-22-2011; http://www.eluniversal.com/2011/08/22/companies-acquired-by-pdvsa-report-losses.shtml)

Logistics & Transport

Venezuela signed new agreements with Chinese company on port modernization

Venezuelan Transport and Communications Minister, Francisco Garces, and representatives of the China National Machinery Industry Corporation (SINOMACH) have signed an agreement to purchase equipment for Venezuelan harbors. The investment adds up to U$D 25.57 million for, among other items, 11 chargers, 78 forklifts, 52 trucks and tow trucks and 10 electricity generator plants. The equipment should be in the country in the next six months and will be distributed among the six harbors run by state-run harbor company Bolivariana de Puertos (BOLIPUERTOS). (AVN, 08-19-2011; http://www.avn.info.ve/node/73294)

Politics

“I do not feel sick, but I am convalescing from the disease I had,” says Chavez

The president of Venezuela, Hugo Chavez, said this Sunday that he does not feel sick anymore, but “convalescent” from the disease he had. He made said statements during a religious ceremony held for his recovery in the Miraflores Presidential Palace, in Caracas. Chavez added that he is in a recovery process and that the next week will be very important. Depending on the results, he could undergo a third round of chemotherapy. (AVN, 08-22-2011; http://www.avn.info.ve/node/73571)

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.

August 19th, 2011

Economics & Finance

S&P cuts Venezuela's long-term ratings to 'B+'

Standard & Poor's lowered its long-term foreign and local currency ratings on Venezuela to 'B+' from 'BB-'. This reflects our recently revised sovereign rating methodology's heavier weight on political risk, which is a credit weakness for Venezuela. The stable outlook balances the negative impact of the government's interventionist policies on investment and growth prospects against the country's still modest fiscal and external positions. (TD Waterhouse Market, 08-19-2011; https://research.tdwaterhouse.ca/research/public/Markets/NewsArticle/1314-N1E77I12A-1)

Venezuela repatriating gold reserves, nationalizing it’s gold mining industry

Venezuelan President Hugo Chavez ordered his government to repatriate U$D 11 billion in gold held in banks abroad to safeguard the country from the economic crisis and said he’ll nationalize the local gold industry. Venezuela has about 211 tons of its 365 tons of gold reserves held abroad at institutions including the Bank of England, JPMorgan Chase & Co. (JPM), Barclays Plc (BARC), Standard Chartered Plc (STAN) and the Bank of Nova Scotia (BNS), according to a government document. “We’ve held 99 tons of gold at the Bank of England since 1980. I agree with bringing that home,” Some cash reserves, which total U$D 6.3 billion, will be shifted into currencies from emerging markets including China, Russia, Brazil and India, central bank President Nelson Merentes said today at a news conference. (Bloomberg, 08-17-2011; http://www.bloomberg.com/news/2011-08-17/chavez-preparing-government-takeover-of-venezuela-s-gold-mining-industry.html)

Chavez decision to recall overseas gold reserves could reflect sanctions fear

Hugo Chavez' decision to recall Venezuela's gold reserves and nationalize the industry could reflect his paranoia about being hit with financial sanctions, analysts said. George Gero, a financial adviser with RBC Wealth Management, said Chavez is effectively moving the assets out of countries "that he considers could freeze his gold." "That's basically what that's all about," Gero said, calling the announcement somewhat of a "political statement." Gerald O'Driscoll, a Cato Institute fellow and former economic adviser at the Federal Reserve Bank of Dallas speculated that past disputes with private oil companies and other businesses, and concerns about tensions with the U.S., could be making him "paranoid." "He wants to be judgment-proof, so that means you better not have assets outside your country," O'Driscoll said. "Perhaps he feels there’s reverberations’ coming." (Fox News, 08-18-2011; http://www.foxnews.com/politics/2011/08/18/chavez-recalls-gold-held-in-us-europe-amid-plan-to-nationalize-industry/)

Central bank avoids Fed control, shuns dollars; shows asset drop of 5.3% and decline in reserves

The Central Bank of Venezuela (BCV) and the Ministry of Finance proposed the move international reserves back to Venezuela and to "spread them out" to diversify Venezuelan assets, which implies the South American country will no longer use US dollars for transactions. Authorities claim they sought this move because they fear the US Federal Reserve may freeze part of the dollars Venezuela holds to support its currency, repay foreign debt and pay imports. The top officials did say why the Fed might "freeze" Venezuela's dollar resources. The document did not indicate what currency might replace the US dollar. Central Bank financial statements for the first semester show net assets in foreign currency at U$D 53.5 billion, a drop of 5.3% over the past 6 months, a result of devaluation of the Bolívar. Its international reserves closed yesterday at $ 28.466 million, down $ 132 million from Tuesday. (El Universal, 08-19-2911; http://www.eluniversal.com/2011/08/19/central-bank-proposes-replacing-the-dollar-to-avoid-fed-control.shtml; More in Spanish: El Nacional; 08-17-2011; http://www.el-nacional.com/www/site/p_contenido.php and El Mundo, 08-19-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-siguen-en-bajada-y-se-ubi.aspx)

About 63% of Venezuelan reserves are held in gold

The balance of the Central Bank of Venezuela (BCV) at the end of the first half shows that the operating portion of international reserves has declined, while the gold reserves have increased. Operating reserves, that is, the foreign currency held in bank accounts or in financial instruments for immediate use to pay for imports and repay debt, are now U$D 4.81 billion, a fall of 71% compared to the second half of 2009. (El Universal, 08-17-2011; http://www.eluniversal.com/2011/08/17/about-63-percent-of-venezuelan-reserves-are-held-in-gold.shtml)

Giordani says UNASUR considers the creation of Latin American Reserve Fund

The Union of South American Nations (UNASUR) is discussing the establishment of a Latin American Reserve Fund to ensure sovereign use of U$D 600 billion in reserves within the bloc, according to Venezuelan Minister of Planning and Finance, Jorge Giordani. He says the fund must be created at the next meeting scheduled for August 24 in Buenos Aires, Argentina. More in Spanish: (AVN, 08-19-2011; http://www.avn.info.ve/node/73185)

Business calls for a change in economic direction

Jorge Botti, president of the Venezuelan Federation of Trade and Industry Chambers (FEDECAMARAS), said that the South American country needs a change in its economic direction. "Something is not working in the Venezuelan economy...We can’t continue living with such high cost of living. Venezuelans do not need to live another generation with inflation," Botti said. (El Universal, 08-19-2911; http://www.eluniversal.com/2011/08/18/business-sector-calls-for-a-change-in-economic-direction.shtml)

According to UBS: Caracas, is the most expensive Spanish-speaking city

Sao Paulo, Rio de Janeiro and Caracas top the list of expensive cities to live in, in Latin America, according to UBS. Worldwide, the list is headed by Oslo, Zurich and Geneva. The INFOBAE review, which evaluates the cost of 122 goods and services and ranks 73 cities worldwide, shows that the two most expensive Latin American cities in the world are in Brazil: Sao Paulo in 19^th place and Rio de Janeiro, 26^th. They are followed by Caracas (47 °), Bogota (57 º), Santiago de Chile (59), Mexico City (64 º), Lima (65 °) and Buenos Aires (68 º). More in Spanish: (Ultimas Noticias; 08-17-2011; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/caracas,-la-mas-cara-de-habla-hispana-segun-ubs.aspx)

Commodities

RUSORO says gold nationalization will not affect its operations

Russian-Canadian miner RUSORO Mining Ltd. said Thursday it continued to produce gold from two projects and was developing two other projects in Venezuela. It also said that it has received no indications from the government about a change in company operations since President Chávez nationalized the gold industry in order to boost international reserves. (El Universal, 08-19-2911; http://www.eluniversal.com/2011/08/18/rusoro-nationalization-of-gold-is-not-to-affect-operations.shtml)

China and Venezuela negotiate national steel development

Corporación Venezolana de Guayana (CVG) officials met with representatives of companies from China to develop projects for the rehabilitation of the national steel industry. José Khan, Minister for Basic Industries and Mining, José Khan, says agreements will allow companies in the basic iron-steel sector access disbursements from the Fund China-Venezuela, both in dollars and RMB, in order to expedite implementation of proposed projects. They have also discussed the creation of a joint venture between China and Venezuela to dredge the navigation channel of the Orinoco river. More in Spanish: (AVN, 08-19-2011; http://www.avn.info.ve/node/73198)

Special report: Pension scandal shakes up Venezuelan oil giant

OPEC said Venezuela is sitting on the biggest reserves of crude oil in the world -- even more than Saudi Arabia.

But the Venezuelan oil industry is also sitting atop a well of trouble as it struggles to take advantage of its bonanza of expanding reserves. A scandal over embezzled pension funds at state oil company PDVSA has renewed concerns about corruption and mismanagement. Retired workers from the oil behemoth have taken to the streets in protest. Their beef: nearly half a billion dollars of pension fund money was lost after it was invested in what turned out to be a Madoff-style Ponzi scheme run by a U.S. financial advisor who was closely linked to President Hugo Chavez's government. (Reuters, 08-17-2011; http://www.reuters.com/article/2011/08/17/us-venezuela-pdvsa-idUSTRE77G2D220110817)

Politics

NGO warns against political violence in Venezuela in 2012

The International Crisis Group (ICG), an independent non-governmental organization based in Brussels says political violence has so far been a latent threat in Venezuela, but with the 2012 presidential elections, "this fragile equilibrium may not hold," warned its report released on Wednesday and quoted by Efe. The report underscored that polarization and militarization within Venezuelan society is to such an extent that "it is likely to undermine the chances" of either a non-violent continuation of the current regime or a peaceful transition to a post-Hugo Chávez era. (El Universal, 08-17-2011; http://www.eluniversal.com/2011/08/17/ngo-warns-against-political-violence-in-venezuela-in-2012.shtml)

Colombian Foreign Minister says relationship with Caracas "not ideal"

Colombian Foreign Minister Maria Angela Holguin, believes the current relationship between her country and Venezuela "is not ideal," but has improved over the last year as compared to the past. She said her works with the Trade Ministry to improve ties, although at present the priority is security. More in Spanish: (El Universal; 08-17-2011; http://www.eluniversal.com/2011/08/17/para-holguin-la-relacion-con-caracas-no-es-la-ideal.shtml)

US says Venezuela does not cooperate with antiterrorist efforts

The United States said again Thursday that Venezuela still fails to "fully" cooperate with counterterrorist efforts and expressed that it "remains concerned" about Hezbollah's fundraising activities in Venezuela and contacts with Iran. The statements were made in the US Country Reports on Terrorism 2010, prepared by the US Department of State. (El Universal, 08-19-2011; http://www.eluniversal.com/2011/08/18/us-venezuela-does-not-cooperate-with-antiterrorist-efforts.shtml)

Russian media says Gaddafi may seek asylum in Venezuela

An Internet publication, The Voice of Russia, says an ill Muammar Gaddafi may relinquish power in Libya and travel to Venezuela, leaving power in the hands of Justice Minister Mohammed Al Oamudi. The report says the issue was discussed in the Tunisian city of Djerba, by representatives of both Gaddafi and Hugo Chavez. It further says the Libyan leader would travel to Venezuela with his family and has conditioned his departure to an immediate cease fire and the end of NATO operations in Libya. More in Spanish: (El Nacional, 08-19-2011; http://www.el-nacional.com/www/site/p_contenido.php)

September meeting scheduled between Iran and Venezuela

During a telephone conversation, Venezuelan President Hugo Chavez and his Iranian counterpart, Mahmoud Ahmadinejad, pledged to strengthen political and economic cooperation, to convene a meeting of delegations from both countries in September in Caracas. The information was released by the Venezuelan Foreign Ministry. More in Spanish: (Tal Cual; 08-17-2011; http://www.talcualdigital.com/index.html)

Special Report: Chavez's socialist medicine dream may become a liability

President Hugo Chavez launched his flagship health program eight years ago, but the socialist leader's biggest social spending experiment fell off the tracks and may become a liability in next year's election. Of 6700 "barrio adentro" neighborhood health centers built in poor neighborhoods since 2003, 2000 had been abandoned by 2009; and hospitals do not have the equipment they need. Frustration is mounting over marathon waits at crumbling hospitals and shortages of basic medicines and supplies. Maternal and child health indicators have deteriorated and health coverage has not improved. http://www.reuters.com/article/2011/08/18/us-venezuela-health-idUSTRE77H0VW20110818

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.