September 06th, 2011

Economics & Finance

Country risk peaked in August

During August  country risk for Venezuela reached its highest point this year, due to market volatility caused by degradation of US debt from AAA to AA + by Standard and Poor's (S & P). By August 23 the risk Venezuelan risk reached 1,241 points, up from just over 1,000 earlier in the month. A director of ECONOMÉTRICA, Henkel Garcia, says this behavior is due to prospects for slow global growth, or worse, that the world slip into recession. If this happens the demand for commodities such as oil, would fall and in turn bring down prices. More in Spanish: (Tal Cual, 09-05-2011; http://www.talcualdigital.com/index.html)

Industry barely using 51.77% of installed capacity

The industrial sector continues stagnant and is using as little as 52.77% of the installed capacity, according to a survey of the second quarter 2011 prepared by the Venezuelan Confederation of Industries (CONINDUSTRIA).

Despite growth of domestic economy for three consecutive quarters, corporate used capacity remains virtually the same as in the second quarter of 2010, during a recession. At that time, Conindustria data pointed to 52.08% for the installed capacity. "No significant changes are noteworthy with regard to the same term last year," the survey disclosed. (El Universal, 09-03-2011; http://www.eluniversal.com/2011/09/03/industrial-used-capacity-barely-reaches-5177.shtml)

Opposition says 90% of the expropriated land produces nothing “which reflects such an utter failure” says the Opposition Democratic Unity Table (MUD). It explained “much of the land ‘recovered’ by the government has been used to house squatters who had previously taken them arbitrarily.” (Veneconomy, 09-05-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27454&idc=3)

Colombians seek to do business with the Venezuelan Government

According to Magdalena Pardo, Executive President of the Colombian-Venezuelan Chamber in Bogotá, affiliated businessmen have expressed interest in direct negotiations with the various ministries of the Venezuelan government. "The government is one of the leading producers and distributors of the Venezuelan economy, and it imports a third of what the country buys. We want to be providers of what the State buys because there are fewer restrictions on this trade," says Pardo. More in Spanish: (El Mundo, 09-05-2011; http://www.elmundo.com.ve/noticias/economia/empresas/colombianos-quieren-hacer-negocios-con-el-gobierno.aspx)

Chavez complains of stolen gold

President Chávez has said that of 23 million tons of gold that left the country last year, only 6 million were reported for taxes. "What is that?" he queried. "Mafia, smuggling, we have to get rid of them." However, in the El Callao region, they point out that all of the malfeasance goes under the government's nose. Workers at the La Isidora mine warn of theft, loss or evaporation of more than 30,000 tons of auriferous material, the raw material of gold. "They were swallowed by the earth," says Edward López. "They steal the half from us and the State," he added. (El Universal, 09-03-2011; http://www.eluniversal.com/2011/09/03/who-stole-my-gold.shtml)

Commodities

Agreements signed with China to boost iron production

Venezuela has signed three cooperation agreements with Chinese companies for a total of U$D 470 million, in order to boost production and transportation of iron at the Ferrominera del Orinoco Socialist Company in Bolivar State.

One agreement was with WISCO International Resources Development s for the purchase of machinery worth U$D 200 million in order to promote the technological adaptation Ferrominera del Orinoco. A second agreement, for U$D 161 million, was with the railway company responsible for the expansion of the Port of Palua; as well as improving the maintenance of rails, chutes and elevators. A third agreement calls for an U$D 161 million investment by the China Communications Construction Company Company (CCC) to dredge the Orinoco River navigation channel in order to improve navigation and improve transportation of iron produced. More in Spanish: (AVN, 09-06-2011; http://www.avn.info.ve/node/75867)

Wikileaks releases Venezuela-China special oil discounts

US diplomatic information, filtered by Wikileaks, reveals further details on the alleged financial and operating activities of Venezuelan state-run oil company PDVSA. A 2007 statement by a senior PDVSA anonymous source and quoted by the US Embassy in Caracas revealed that the Venezuelan oil company stopped shipping oil to China at some point that year due to significant losses arising from special discounts. (El Universal, 09-05-2011; http://www.eluniversal.com/2011/09/05/wikileaks-releases-venezuela-china-special-oil-discounts.shtml)

Ministry says Venezuelan oil breaks U$D 100 barrier

Venezuelan oil basket spiked to U$D 101.89 per barrel and broke the U$D 100 barrier after gaining U$D 4.60 during the week from August 29 to September 2, according to the Ministry of Energy and Petroleum. The Venezuelan oil showed an upward trend during the past week. The average price of the Venezuelan crude oil and byproducts so far this year stands at $SD 99.29 per barrel, well above U$D 40 per barrel estimated by the Venezuelan government in the 2011 official budget. (El Universal, 09-02-2011; http://www.eluniversal.com/2011/09/02/venezuelan-oil-breaks-usd-100-barrier.shtml)

Government has a 5,400,000 ton food storage capacity to guarantee supplies to the population, said Food Minister Carlos Osorio on Friday during his inspection of a pre-cooked corn processing plant in La Veguita in Barinas. (Veneconomy, 09-02-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27442&idc=3)

Politics

Venezuela's Chavez finishes third chemo session

President Hugo Chavez ended a third round of chemotherapy on Friday, saying he "couldn't feel better". Chavez had checked into the Military Hospital instead of traveling to Cuba. The decision to stay at home could be a sign he is growing more optimistic about the pace of his recovery before a presidential election next year. Chavez has not said what kind of cancer he has, meaning assessments of his condition, and the possibility of remission, remain mostly speculation. (Reuters, 09-03-2011; http://www.reuters.com/article/2011/09/03/us-venezuela-chavez-idUSTRE78200920110903)

Chávez admits disregarding the energy issue

President Hugo Chávez has acknowledged that his government was not careful enough to deal with problems in the national electric grid, saying: "We have done all that is possible to solve the problem with the national electric system. The scale of the problem was overwhelming. We have to admit it. It was out of control for reasons we have already explained". (El Universal, 09-06-2011; http://www.eluniversal.com/2011/09/05/chavez-we-disregarded-the-energy-issue.shtml)

Meanwhile, Venezuela donates U$D 22 million for Gambia's power grid

Venezuela has donated U$D 22 million to Gambia in order to finance revamping of its power grid and improve its energy supply service, according to Lang Sabally, the project leader; who adds that the funds should pay for "revamping, overhauling, and extending the power grid in the capital Banjul and its surroundings". The donation will also allow Gambian authorities to install streetlights in some sectors of the capital. (El Universal, 09-06-2011; http://www.eluniversal.com/2011/09/05/venezuela-donates-usd-22-million-for-gambias-power-grid.shtml)

Wikileaks: Venezuelan meddling raised concerns in Curacao

In 2007 Netherlands Antilles Prime Minister Emily de Jongh Elhage, told US chief of Mission Robert Sorenson they were "very concerned about Chavez's actions in Curacao and the region”; because of "suspicions of political financing from Venezuela to oppose a constitutional reform agreement with the Kingdom of the Netherlands”, as negotiations were under way for future investments in the PDVSA owned refinery on the island. More in Spanish: (El Nacional, 09-06-2011; 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.