September 09th, 2011

Economics & Finance

High liquidity fuels inflation, hits the poor hardest

The Government is increasing public spending to overcome recession, but increasing circulating money by 11,6% from June to August has fed inflation, which rose to 2.2% in August for a total 18.6% year to date. According to Central Bank figures, inflation over the past 12 months was 27.5% for the poor and 26.2% for the more affluent inflation while those with stronger buying power. More in Spanish at: (El Universal; http://www.eluniversal.com/2011/09/09/alza-de-la-liquidez-amenaza-con-impulsar-la-inflacion.shtml and El Nacional; http://www.el-nacional.com/www/site/p_contenido.php)

Government says Smurfit Kappa won’t be compensated for forestry seizure

Venezuela won’t compensate Smurfit Kappa Group Plc (SKG) for the seizure of 12,000 hectares of forestry plantations the Irish cardboard maker controlled in the South American country, Agriculture Minister Juan Carlos Loyo said. The government has taken steps to remove Smurfit from three different farms and won’t negotiate over the issue, Loyo said in comments carried by state television last night. Smurfit Kappa isn’t making any comment. (Bloomberg, 09-08-2011; http://www.bloomberg.com/news/2011-09-08/venezuela-says-smurfit-won-t-be-compensated-for-forestry-seizure.html)

Venezuela awaits sentencing in 15 international arbitration cases

Fears of losing several international arbitrations became evident as the Minister of Planning and Finance, Jorge Giordani, and the president of Banco Central de Venezuela, Nelson Merentes presented plans to repatriate gold reserves and mobilize a portion of liquid international reserves held in the U.S. and UK to Brazil, China and Russia. Over the past 12 years the Chavez administration has accumulated 23 lawsuits by foreign companies, due to defaults, unilateral breach of contract or lack of agreement on compensation by the Venezuelan state. More in Spanish at: (El Nacional, 09-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

Analyst considers gold repatriation could damage Venezuelan risk perception

MOODY’s analyst Patrik Esteruelas believes the move by Chávez to "repatriate gold reserves can potentially be negative to credit, as reserve management grows less transparent". More in Spanish at: (El Mundo, 09-09-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/repatriacion-de-oro-podria-afectar-riesgo-venezuel.aspx)

Venezuelan public institutions dropped to the lowest ranking of 142 countries assessed by the World Economic Forum this year. It kept its rank as 122^nd in global competitiveness. (Veneconomy, 09-07-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=27499&idc=2)

Orinoco River channel management to be privatized, according to the three new agreements signed by the Venezuelan government with Chinese firms. The agreement provides for management of the navigation channel of the Orinoco and full control of purchases of parts, spares, equipment and parts for FMO. More in Spanish: (Tal Cual, 09-08-2011; http://www.talcualdigital.com/index.html)

Economist says reserves shield Venezuela

Economist Victor Alvarez says that Venezuela has proven oil reserves estimated at 296.501 million barrels, giving it a huge external purchasing power to supply domestic aggregate demand. More in Spanish: (El Nacional, 09-07-2011; http://www.el-nacional.com/www/site/p_contenido.php)

International reserves at U$D30.83 billion

Central Bank President Nelson Merentes announced that international reserves currently stand at U$D 30.83 billion. (AVN, 09-08-2011; http://www.avn.info.ve/node/76246)

Commodities

Gold miner sees 1.2 ton output in 2011

According to Government media the state gold miner MINERVEN expects to produce 1.2 tons of the precious metal this year, rising to 4.5 tons in 2012 as it takes a central role in the nationalization of the sector. It is down from 1.7 tons in 2010, but reverses that going forward as it takes over projects during the nationalization drive. Venezuela boasts some of Latin America's biggest gold deposits, buried below the jungles south of the Orinoco River. (Reuters, 09-08-2011; http://www.reuters.com/article/2011/09/08/venezuela-gold-idUSN1E7870HH20110908)

PDVSA Spends 190 Million Euros on 42 Boats

Petroleos de Venezuela SA (PDVSA), spent 190 million Euros (U$D 268 million) to purchase 42 boats manufactured in Singapore and Malaysia. The vessels will operate in the oil exploration areas of Lake Maracaibo. (Bloomberg, 09-07-2011; http://www.bloomberg.com/news/2011-09-07/venezuela-s-pdvsa-spends-190-million-euros-on-42-boats.html)

Electricity consumption cap to be raised in some regions

Then Minister for Electricity, Ali Rodriguez, says the government will raise the cap on residential electricity consumption in some states, but did not specify in which states the move will apply. (El Universal, 09-07-2011; http://www.eluniversal.com/2011/09/07/venezuela-to-raise-electricity-consumption-cap-in-some-regions.shtml)

Politics

Venezuela poll: Chavez's popularity holds steady

A new poll in Venezuela shows that President Hugo Chavez's approval ratings remain in the 50% range but that a majority disapproves of the government's performance on key issues such as crime, corruption and the economy. The survey by the Caracas-based polling firm DATANALISIS says Chavez's popularity stood at about 49% in late July, similar to his 50 percent rating the previous month. The poll of 1,300 Venezuelans had a margin of error of 2.7 percentage points. (Taiwan News, 09-08-2011; http://www.taiwannews.com.tw/etn/news_content.php?id=1700719)

US sanctions Venezuelans for alleged FARC links

The US has accused four close allies of Venezuelan President Hugo Chavez of helping Colombia's FARC rebels. The four - an army general who commands the Venezuelan army's 4th Armoured Division, an intelligence officer and two politicians - have been put a US Treasury list of people subject to sanctions. "Today's action exposes four Venezuelan government officials as key facilitators of arms, security, training and other assistance in support of the Farc's operations in Venezuela," said OFAC director Adam Szubin. The Venezuelan government has condemned the US measure as an act of aggression. (BBC News, 09-08-2011; http://www.bbc.co.uk/news/world-latin-america-14848240)

Santos says Venezuela trade will not go back to past levels

Colombian President Juan Manuel Santos says he has told many exporters: “Forget that trade Venezuela will go back to past levels, despite the fact it is a natural market for us”. Although he acknowledged improved diplomatic relations, he underlined very different economic views in both nations. More in Spanish: (El Universal; http://www.eluniversal.com/2011/09/09/para-santos-el-comercio-con-venezuela-no-sera-como-en-el-pasado.shtml)

Cuban firm creating operating system for registries, national identity card

Cuba´s ALBET Engineering and System firm, which is producing Venezuela’s new electronic identity card, has also contracted with the Ministry of the Interior and Justice to create an operating system for notaries and registration offices that will go into effect in October. The firm generated software for the national identity card, which it supplies through a Dutch affiliate in Mexico. More in Spanish at: (El Nacional; 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.