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, August 2, 2011

August 02nd, 2011

Economics & Finance

Venezuela confirms allocation of U$D 4.2 Bln, 2031 Bond
Venezuela's Finance Ministry Monday confirmed the allocation of its U$D 4.2 billion, 20-year sovereign bond, which was auctioned last week. In a statement, the ministry said it honored all requests for bonds up to U$D 4.95 million made by companies in the priority sectors like food and health. To other sectors of the economy the bonds were sold in increments of up to U$D 6,000. All requests made by local financial institutions were honored while 57% of the bond orders made by state oil company Petróleos de Venezuela's (PDVSA) pension fund were filled. Analysts at Barclays capital said as much as U$D 2.5 billion was allocated to the financial sector while the private sector in general appears to have gotten a "lower-than-expected proportion of the total issuance" given the low U$D 6,000 cap on requests. The news could be "very negative for the Venezuelan private sector," Barclays said but it may limit the number of bonds that will flood overseas investors since much of the private sector is expected to sell the securities immediately abroad to acquire dollars. he new securities carry a coupon of 11.95% and mature Aug. 5, 2031. (The Wall Street Journal, 08-01-2011;

Central Bank and other government agencies fund PDVSA
Financial statements from the state-run oil holding Petróleos de Venezuela (PDVSA) have revealed a network of transactions during 2008-2010, through which the Central Bank of Venezuela, the National Treasury, Venezuela's Bank for Economic and Social Development (BANDES), the Bank Deposit Protection Fund (FOGADE) and the Treasury Bank have fed the oil company, which seems to have had cash flow problems despite high oil prices. The group of government agencies injected U$D 10 billion into PDVSA through promissory notes and investment certificates, according to notes in the consolidated financial statements. (El Universal, 08-01-2011;

Almost half of corporate private revenues are assigned to taxes, labor duties and compulsory contributions that have slowly eroded private sector finances. According to calculations used by the National Assembly during debates over the Sports Law, 47.18% of corporate gross income goes to meeting these obligations. (Veneconomy, 08-01-2011;

Banks must now turn over 5 % of their gross income to Ministry for Communes and Social Protection
All banking and microfinance institutions will henceforth have to make turn over the 5% of their pretax income every six months to the Ministry for Communes and Social Protection, according to a resolution by the Ministry of Planning and Finance, so that the funds may be used for “organizations with projects, objectives, goals and activities within the National Economic and Social Development Plan”. More information in Spanish. (Enfoques 365, 08-02-2011;

Minister says: "We’re not cheating PETROBRAS; nor are we waiting for the deadline to pay up”.  Venezuelan Energy and Oil Minister Rafael Ramírez has said PDVSA will comply with the U$D 2.5 billion installment and take part in the construction of the Abreu e Lima Refinery in Pernambuco. He did not divulge timing to do so. PETROBRAS Supply director Paulo Roberto Costa said Monday that the deadline for PDVSA to define whether it will remain in the project or not expires on August 15. (Veneconomy, 08-01-2011;

Industrial production fell by 4.7% in April
The Central Bank of Venezuela recorded a decline of 4.76% in industrial production for April this year, as compared to April 2010. Companies encounter production problems amid electricity supply deficits, difficulties in accessing foreign currency and the shortage of basic materials. However, the industry managed overcome two years of recession during the first four quarter this year, with production up 5.2%. The situation is uneven, as the Bank now used 9 as opposed to 16 sectors used in 1997 to evaluate production. Food production is 15.8% above 1997, rubber and plastics up 4.6% and chemicals up 9.33%. More information in Spanish. (El Universal, 08-01-2011;


Venezuela’s export barrel closed at U$D107.84/bbl. this week, up U$D0.83 in a very volatile market due to the Greek rescue and uncertainty over the US debt crisis, according to the Venezuelan Energy and Oil Ministry. The average through July was U$D105.94/bbl. and the year’s average-to-date is U$D 99.27/bbl. (Veneconomy, 08-01-2011;

PDVSA wants to increase production amid high debt
Venezuela means to increase oil production in the short term, but the substantial debt of state-run Petróleos de Venezuela (PDVSA), plus adverse business conditions in the OPEC member country threaten to derail oil sector recovery. PDVSA has declared an "operational emergency" in the Orinoco Belt from July to September this year, in order to pave the way for accelerating extraction by awarding contracts without cumbersome tender procedures. (El Universal, 08-01-2011;

Chavez claims natural gas reserves have been recovered, production improved
President Chavez claims measures have been implemented to recover natural gas, improve production and promote its internal consumption. He says the development natural gas is strategic for the revolution, and adds that the first step was taking back reserves that had been awarded to multinational companies during previous administrations. (AVN, 08-01-2011;

Gold Reserves Inc raises claim against Venezuela
Canadian mining company Gold Reserve Inc said on Monday it has raised the amount it is claiming from Venezuela for seizing its two gold projects to U$D 2.1 billion from U$D1.9 billion. The company filed for arbitration in late 2009 under the World Bank's body for international investment disputes after President Hugo Chavez's government expropriated its Brisas and Choco 5 mining projects. Gold Reserve said the revised amount reflect updated interest calculations to reflect its losses as of June 30 this year. (Reuters, 08-01-2011;


Chavez calls the unified opposition platform a fraud
Venezuelan President Hugo Chavez said the “unified” ballot that the united opposition will present for the 2012 presidential elections, “is a big fraud”. (AVN, 08-01-2011;

Gaddafi emissary meets with Venezuelan Foreign Minister
Foreign Affairs Minister, Nicolas Maduro met this Monday with an emissary of the Government of the leader of the Libyan Revolution, Muammar Al Gaddafi, who arrived in Venezuela on Sunday night. Chavez, currently receiving his cancer treatment, excused himself from receiving himself Gaddafi’s official, but ordered Maduro to receive a letter to him from the Libyan leader. Maduro said the Venezuelan Government was the first to warn of Western plans to intervene in Libya and take over its abundant natural and oil resources, and said it is the same plan the powers are trying to carry out in Syria. (AVN, 08-01-2011;

Chávez eliminates the word "death" from slogans
President Hugo Chávez celebrated his 57th birthday with a rally in front of one of the balconies of Miraflores presidential palace, downtown Caracas, and formally asked followers to delete the word death from their slogans. (El Universal, 07-29-2011;

Imagining a world without Hugo Chavez
Half of Venezuela’s population is under age 25 — meaning half the country can barely remember or imagine a leader other than Hugo Chavez. Chavez is not only the longest-serving head of state now in power in the Western Hemisphere— 12 years and running — but he is also omnipresent in Venezuela. He speaks almost daily on television, often for hours, and his face and phrases are splashed on posters, banners and murals in every large city and along the nation’s highways. It is impossible not to see him, hear him, read him.  Looking ahead, Chavez has made clear that he will be a candidate in the 2012 presidential election and that victory is inevitable. “El Comandante” has referred to 2031 as his time horizon for holding on to power — and he is quick to clarify that his tenure could well go beyond that. (The Washington Post, 07-29-2011;

Irregularities denounced in contract with Cuba for issuing identity cards
National Assembly Deputy Abelardo Diaz, reports that the Cuban ALBET computer firm, contracted by the Chavez Government to process Venezuelan identity cards, has only 10 employees on its payroll and does not have the technological capabilities needed to provide the software and chip, and as a consequence 95% of outsourced services will go to a joint venture (Dutch and Mexican) called GEMALTO for U$S 40.5 million. More information in Spanish. (El Universal, 07-29-2011; and El Nacional, 07-25-2011;

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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