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 9, 2011

August 09th, 2011

Economics & Finance

Venezuelan bonds fell amid the crisis in global markets, despite some predictions
Venezuelan bonds fell an average of four points as investors dispose of any titles linked to raw materials and oil, and take refuge in Treasury of the United States. Reality contradicts views advanced by some analysts who predicted a revalued role for emerging markets. Venezuelan debt depreciated over one point, which is the limit for considering again or loss relevant. The Sovereign Bond 2031, issued recently, fell 5.25 points to close at 78.25%. Fitch Ratings Director Pedro El Khaouli had said this could be an "opportunity" for the secondary market for Venezuelan bonds denominated in dollars. More information in Spanish. (El Nacional, 08-09-2011;, and El Mundo, 08-09-2011;

Chavez: Venezuela not immune from U.S. economic woes
President Hugo Chavez said Saturday that Venezuela is not immune to the economic woes afflicting the U.S. and Europe despite efforts to distance itself from world powers and establish a socialist system. Chavez warned that economic problems around the globe would probably hurt Venezuela as international oil prices fall, but added that the South American nation has partially protected itself by diversifying its economy and forging trade ties with countries like China and Russia. (Fox News, 08-06-2011; and The Washington Post, 08-06-2011;

Government has issued an additional U$D 16-billion debt
Despite skyrocketing oil prices where this year so far the Venezuelan oil barrel has smashed a record averaging U$D 99.27, the Chavez administration is getting into debt at a frantic pace. Between September 2010 and July 2011, the Venezuelan Ministry of Finance and state-run oil holding Petróleos de Venezuela (PDVSA) have borrowed about U$D 16.5 billion, an amount equivalent to U$D 50 million daily over the past 11 months, through the sale of bonds denominated in foreign currency and borrowing from Japanese firms.  This estimation includes issue and reissue of bonds maturing in 2013, 2015, 2016, 2017, 2022 and 2031, launched to the market the last week of July, as well as a credit for U$D 500 million sought by PDVSA from Japan. (El Universal, 08-06-2011;

SITME operation steadily raises Venezuela’s foreign debt
The Venezuelan government created the Transaction System for Foreign-Currency Denominated Securities (SITME) in order to bolster distribution of U$ dollars. Under this system, companies buy bonds in foreign currency at the Central Bank and can sell them abroad to obtain dollars at an average exchange rate of VEB 5.30. Yet the results have not been as expected: Since the system needs sufficient bonds to sell on a daily basis both the government and state-run oil holding Petróleos de Venezuela (PDVSA) to steadily raise their indebtedness and compromise public finances. (El Universal, 08-06-2011;

CADIVI has authorized U$D 11.835 billion for imports this year
The Currency Administration Commission (CADIVI) has authorized U$D 11.835 billion for normal imports and through payment agreements within the Latin American Integration Association (ALADI), in the first semester this year.
Of the total, U$D 9.494 billion went to ordinary imports, which is 65.1% of total foreign exchange approved by CADIVI. U$D 2.341 billion were granted under the ALADI agreement, for 16.1% of approved foreign exchange transactions. More information in Spanish. (AVN, 08-09-2011;

Dialogue breaks down as Government and business discuss Price-Cost Law
Despite a “cordial” call by the Government for private sector companies to sit down and discuss the cost structures made by Executive Vice President Elias Jaua, new allegations by the Food Minister Carlos Osorio have attempted to discredit data provided by the Venezuelan Dairy Industry Association (CAVILAC) and the Venezuelan Food Industry Association (CAVIDEA) calling them "unrealistic" and seeking only to profit. The Minister said: "All associations: CAVILAC, FEDECÁMARAS and CAVIDEA represent savage capitalism". More information in Spanish. (Tal Cual, 08-09-2011;
Venezuelan acquires Colombian cable news channel
Venezuelan journalist Alberto Federico Ravell, formerly a shareholder of GLOBOVISIÓN shareholder, has acquired 100% of Colombia's cable channel news CABLENOTICIAS. Juan Gonzalo Angel, owner of Cablenoticias said in an interview that he sold Ravell the channel for U$D 17 million: U$D 10 million in cash and the remainder paid in installments. More information in Spanish. (Noticias Terra, 08-05-2011;,476a9a4368b91310VgnVCM10000098f154d0RCRD.html)


Government doubts international commodity prices
As the Venezuelan government struggles with corporate cost structures of companies in order to keep a lid on prices, they are expressing distrust even about international value ​​of agricultural commodities. "In this world there is market speculation to increase the prices of commodities overnight," say Food Minister, Carlos Osorio. The Minister claims international commodity prices are handled by “great mafias”; and adds “one sees CARGILL, one of the largest pasta processers in Venezuela, which is in 162 countries worldwide and is also one of the key wheat producers abroad. How can they justify that prices on a ton of wheat go from 300 to 600 U$D overnight; and then go back down again the next week after we grant them dollars? More information in Spanish. (Entorno Inteligente, 08-08-2011;

Over five years PDVSA's payroll leapt by 89% while output dove 8%
The payroll of state-run oil holding Petróleos de Venezuela is increasing. The corporation not only manages and controls the entire production of hydrocarbons in the country and takes part in many service-related activities, but is also owner and operates companies involved in agriculture and industry, beyond its core business. While most of the payroll is staff of ongoing projects for future drilling at the Orinoco Oil Belt, the exponential leap of Pdvsa's workers is not reflected in increasing production numbers. PDVSA reports show that over five years the payroll grew 89%, whereas drilling sank 8%. (El Universal, 08-08-2011;

Venezuela Oil Falls to U$D103.45
Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) fell to U$D 103.45 during the week ending August 5, down from the previous week's U$D107.84, but still raising the average for the year to U$D 99.43. (Latin American Herald Tribune, 08-05-2011;

Foreign oil partners focus on the Orinoco belt, gas
Development of the Orinoco Oil Belt and natural gas deposits are some of the most ambitious projects for foreign partners of state-run oil holding Petróleos de Venezuela (PDVSA). Despite a difficult business environment, including tax and legal changes every two or three years, they do not want to not miss out on the chance of taking part in development and drilling of huge reserves of Venezuelan hydrocarbons. (El Universal, 08-08-2011;

Energy Minister claims Venezuelan is on track to dramatically increase oil output in coming years
Venezuela’s top energy official said the government is making progress on long-term plans to dramatically boost oil output and is also aiming to diversify an economy that remains heavily reliant on oil wealth. Energy Minister Rafael Ramirez says that the country intends to increase production of heavy crude in the eastern Orinoco River basin by about 15% this year, and by 15% to 25% next year. Venezuela’s goal is to lift its oil output from about 3 million barrels a day now to about 4 million barrels a day in 2015. (The Washington Post, 08-06-2011;

Venezuela exported in July over 12.7 million liters of fuel to Colombia
Venezuela sent Colombia more than 12.7 million liters of fuel to Colombia in July, as part of the bilateral cooperation agreements. That is 5.89% more than in the previous month and will help the neighboring country to cover part of the demand in the 95 gas stations in the Colombian department Norte de Santander. (AVN, 08-08-2011;


Chavez back in Cuba for additional chemotherapy
Venezuelan President Hugo Chavez is now in Cuba again for the next phase of his cancer treatment. His second round of chemotherapy was scheduled to begin last Sunday. Venezuelan lawmakers met Saturday in a special session to authorize his trip, which "could last for several days," according to a statement on the National Assembly's website. (CNN, 08-07-2011;

Chavez officially recognizes inefficiency
In a recent interview President Hugo Chávez ruled out the possibility of an election defeat in 2012, but admitted that the "inefficiency" has been one of the main mistakes of his government. "The lack of efficiency in the routine, day in, adds up to a big mistake that has often jeopardized the government policies, social and economic policies" Chavez said, and added that "inventing a new model inevitably leads to mistakes". (More information in Spanish. (Tal Cual; 08-08-2011;

Andean Community awaits the return of Venezuela
The Andean Community (CAN) still hopes for Venezuela’s return after more than five years since the government of President Hugo Chavez decided to withdraw because of differences with Colombia and Peru negotiated a free trade agreement with the United States. The group’s Secretary General Adalid Contreras says they “do not lose hope that Venezuela would return to the Andean Community, it is part of the CAN," He added that after Chile's return to CAN (with headquarters in Lima) as an associated country after 30 years of absence, "ideally, now we could have the union of the six original members (Colombia, Ecuador, Bolivia, Peru, Venezuela and Chile". (El Universal; 08-08-2011;

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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