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, August 26, 2011

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;

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;

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;

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;; more in Spanish: El Universal, 08-26-2011;

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;

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;

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; and more in Spanish: El Universal, 08-26-2011;


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;

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;

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;

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;


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;

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;

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;

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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