October 28th, 2011

Economics & Finance

IMF projects Venezuela’s debt to reach 42.1% of GDP in 2012

According to an economic forecast report by the International Monetary Fund predicts Venezuela’s total public indebtedness will reach 42.1% of its GDP in 2012; that is 17.5 points above 2008.  The fiscal deficit is projected at 2% of PIB, 0.5 above 2011. Income is estimated to drop by U$D 1.4 billion due to lower worldwide demand for staples. Venezuela will continue to be the nation with the highest inflation in the region, estimated at 32.5% by the close of 2011. Central Bank President Nelson Merentes has said 2011 inflation will exceed projections. More in Spanish: (El Nacional, 10-26-2011; http://www.el-nacional.com/ and El Universal, 10-26-2011; http://www.eluniversal.com/economia/111026/central-bank-inflation-in-2011-to-exceed-projections)

Venezuela debt repayment through 2038 comes to U$D 122 billion, says professor Boris Ackerman

Boris Ackerman, a professor at the Simón Bolívar and Andrés Bello Catholic Universities says capital and interest payments on sovereign and PDVSA outstanding bonds will add up to U$D 122 billion through to 2038. He considers the debt burden manageable for the next 3 or 4 years, but says “the breaking point starts around  2014." More in Spanish: (El Universal, 10-28-2011; http://www.eluniversal.com/economia/111028/122-millardos-en-deuda-pagara-venezuela-hasta-2038)

High debt is a mistake, says economist José Guerra

Economist José Guerra criticized Venezuela's high level of indebtedness while oil prices have doubled in global markets. He noted that since 2009 Venezuela's debt has been growing to the extent that in the second quarter it reached some U$D 118 billion. "Apparently, high oil revenues were not enough. We ate all revenues up and we continue to borrow," said the expert. (El Universal, 10-27-2011; http://www.eluniversal.com/economia/111027/economist-jose-guerra-venezuelas-high-debt-is-a-mistake)

PDVSA's fiscal contribution to increase by 50% in 2012

The government will keep the pressure on state-run oil company Petróleos de Venezuela (PDVSA) next year to ensure funds required for current expenditure and parallel funds. Some of these demands are mirrored in the estimates of PDVSA's fiscal contribution next year. The draft 2012 Budget Law states that PDVSA's initial contribution will amount to U$D 15.77 billion, a 50% increase compared with the amount allocated in 2011 (U$D 10.51 billion). With these revenues, PDVSA will cover 23% of Venezuela's total spending in 2012, which is initially estimated at U$D 69.26 billion. (El Universal, 10-25-2011; http://www.eluniversal.com/economia/111025/pdvsas-fiscal-contribution-to-increase-by-50-in-2012)

Foreign exchange adjustment predicted after elections

José Manuel Puente, an economist and professor at Caracas-based business school Institute of Higher Management Studies (IESA), says that the exchange rate and tax policies implemented by the government will lead to a Venezuelan bolivar exchange adjustment after presidential elections to be held on October 7, 2012. He adds that the government underestimates the price of the oil barrel in the 2012 budget in order to offset the overestimation of Venezuela's oil production. (El Universal, 10-26-2011; http://www.eluniversal.com/economia/111026/economist-predicts-foreign-exchange-adjustment-after-election)

CADIVI has allocated over U$D 5.02 billion for food imports to date this year

The Venezuelan Foreign Currency Administration Commission (CADIVI) has allocated over U$D 5.02 billion for food imports to date this year, an increase of 11.7% over the same period of 2010 when U$D 4.18 billion were approved.

Moreover, currency operations approved in 2011 for food are 22.7% of the total approved for all imports. Nestle, Cargill and Polar are among the companies that have been allocated most currency this year, according to official sources. (AVN; 10-26-2011; http://www.avn.info.ve/contenido/cadivi-has-granted-over-502-billion-import-food)

Venezuelan companies investing less abroad

According to a report by the UN Economic Commission for Latin America and the Caribbean (ECLAC), Venezuela show a decrease of U$D 1.09 billion in outward capital flows during the first semester of 2011, as compared to U$D 2 billion invested abroad over the same period last year. It also reported U$D 1.18 billion in direct foreign investment into Venezuela. More in Spanish: (El Nacional, 10-26-2011; http://www.el-nacional.com/)

Commodities

New investments totaling U$F 16 billion announced at PETROCARIBE summit

Managua – The meeting here of ministers from the 18 countries taking part in the Venezuelan-sponsored PETROCARIBE initiative ended with agreement on more than U$D 16 billion in new investment and a commitment to studying the possible incorporation of food security into its programs. Venezuelan Energy Minister Rafael Ramirez confirmed plans to build one new refinery in Cuba and another in Nicaragua, as well as expand Cuba's Camilo Cienfuegos crude-processing plant. Nicaraguan President Daniel Ortega, said PETROCARIBE accounts for 45% of the energy needs of 14 of the initiative's 18 member countries. Read more: (Fox News, 10-26-2011; http://latino.foxnews.com/latino/money/2011/10/26/new-investments-totaling-16-bn-announced-at-petrocaribe-summit/#ixzz1c1KKFBES)

Taxes make Orinoco Belt plans less attractive, says lawyer

Heavy and extra-heavy oil projects at the Orinoco Oil Belt, where the government foresees a U$D 142 billion investment through to 2015, could become less attractive if the tax and legal framework for the state-run oil company Petróleos de Venezuela (PDVSA) and its transnational partners continue to be applied, according to Juan Carlos Garantón, of the Torres, Plaz y Araujo, a law firm. (El Universal, 10-26-2011; http://www.eluniversal.com/economia/111026/taxes-make-orinoco-belt-plans-less-attractive-says-lawyer)

Production declines at oil wells in Western Venezuela

Oil extraction in that region has diminished 23% between 2008 and 2010, according to figures published in PDVSA’s 2010 operational report. Production in the Maracaibo-Falcón basin went from 1,084.000 barrels per day (bpd) in 2008 to 832,000 bpd last year. (Veneconomy, 10-26-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28193&idc=4)

Fire hits PETROPIAR oil upgrader

A small explosion and fire hit the PETROPIAR heavy oil upgrader on Tuesday in the second incident at the 180,000 barrel per day (bpd) facility this month, but no one was hurt, officials said. PETROPIAR is a joint venture between state oil company PDVSA and U.S. oil company CHEVRON. Venezuela's four upgraders convert tar-like crude from the OPEC nation's Orinoco belt into lighter, more valuable oil. (Reuters, 10-25-2011; http://www.reuters.com/article/2011/10/25/venezuela-upgrader-idUSN1E79O0VE20111025; Veneconomy, 10-25-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28185&idc=4)

Guyana building hydroelectric plant in the Essequibo

The Guyanese government is building a hydroelectric plant in the central-western area of the Essequibo territory where the Amaila and Kuribrong rivers meet (on the left bank of the Essequibo River, in the disputed zone) in order "to provide a reliable supply of electricity." The project, which will be implemented by a holding comprising Guyanese and US companies and one Chinese corporation, dates back to 2002, and was published by the Environmental Protection Agency-Guyana in July 2011. (El Universal, 10-27-2011; http://www.eluniversal.com/nacional-y-politica/111027/guyana-sets-up-hydroelectric-plant-in-the-essequibo)

Logistics & Transport

ALSTOM wins 325 million EUR Metro contract in Venezuela

Transport and power engineering company Alstom said on Thursday it has won 325 million euros (U$D 449 million) contract to build a new metro line Los Teques, Venezuela. (Reuters, 10-27-2011; http://www.reuters.com/article/2011/10/27/alstom-idUSL5E7LR44820111027)

Politics

Chavez calls doctor ‘big liar’ over cancer death prognosis

President Chavez says the doctor who claimed the president had less than two years to live never treated him and must have been paid to make those claims. Chavez said he may have briefly met Dr. Salvador Navarrete some years ago when he contemplated setting up a medical team to treat him in case of emergencies. (Bloomberg, 10-26-2011; http://www.bloomberg.com/news/2011-10-26/chavez-says-he-s-not-hiding-details-of-cancer-feels-cured-.html)

Dominican president unexpectedly cancels trip to Caracas

Dominican President Leonel Fernández cancelled at the last minute a planned trip to Caracas to meet with his Venezuelan counterpart Hugo Chávez. A Dominican government official said that the suspension of the visit is not related to an alleged deterioration of Venezuelan president's health, Reuters reported. (El Universal, 10-27-2011; http://www.eluniversal.com/nacional-y-politica/111027/dominican-president-unexpectedly-cancels-trip-to-caracas)

Military given 50% across the board salary increase

President Chavez has announced an increase of 50% in the wages for the military. "We will increase 50% in the salary of the military sector. And you (soldiers) deserve that," he said during an encounter with high-ranking officials at the Military Academy, in Caracas. (AVN, 10-27-2011; http://www.avn.info.ve/node/84361)

Venezuela among the 10 most violent nations in the world

Six out of the 14 countries with the highest recorded rates of violent death in the world are in Latin America, including Venezuela, reported a document issued by The Geneva Declaration on Armed Violence and Development titled "Global Burden of Armed Violence". The ten most violent are El Salvador, Iraq, Jamaica, Honduras, Colombia, Venezuela, Guatemala, South Africa, Sri Lanka and Lesotho. (El Universal, 10-27-2011; http://www.eluniversal.com/nacional-y-politica/111027/venezuela-among-the-14-most-violent-countries-in-the-world)

DATANÁLISIS: Chavez evaluation positive by 53%

Luis Vicente León, director of the DATANALISIS polling firm has explained that the positive evaluation of President Chavez in their 28 September poll stands at 53,1%, and not 62,7% as reported in the official Venezuelan News Agency. More in Spanish:  (Ultimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/datanalisis--evaluacion-positiva-de-chavez-en-53-.aspx)

Chavez says he won’t recognize new government in Libya

President Hugo Chavez says he won’t recognize Libya’s new government and predicted more war in the country. He condemned the killing of Libyan strongman Moammar Gadhafi, whom he had considered a friend. He defended Gadhafi throughout the conflict and strongly criticized NATO’s military involvement in the country. (The Washington Post, 10-26-2011; http://www.washingtonpost.com/world/middle-east/venezuelas-chavez-says-he-wont-recognize-new-government-in-libya/2011/10/26/gIQA7mzjJM_story.html)

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.

October 25th, 2011

Economics & Finance

Morgan Stanley sees Venezuela as LatAm's weakest link

In its latest report, Morgan Stanley claims that Latin America is more prepared than ever to deal with the worsening global crisis, but it labels Venezuela as the region's most vulnerable country. Though Venezuela benefits from solid current-account surplus, the report shows that if the price of raw materials remains stagnant since the first quarter, the balance of payments may change dramatically. If import and export upward trends remain changeless, Venezuela would end up having a current-account deficit of nearly 6.4% in its GDP. (El Universal, 10-22-2011; http://www.eluniversal.com/economia/111022/morgan-stanley-sees-venezuela-as-latams-weakest-link)

Venezuela sells U$D 3 billion of 15-year bonds in local market

Venezuela sold U$D3 billion of bonds due in 2026, swelling total issuance this year to a record U$D 7.2 billion as President Hugo Chavez looks to finance government social programs ahead of his re-election bid. The bonds were priced at 95 cents on the dollar to yield 11.75%, according to a statement published on the Public Credit Office’s website. Venezuelans who bought them in bolivars at the official rate of 4.3 per dollar can sell the notes abroad at a discount to obtain foreign currency, a practice that skirts currency controls imposed in 2003. (Latin American Herald Tribune, 10-23-2011; http://www.laht.com/article.asp?ArticleId=435651&CategoryId=10717)

Food sales dropped 3.71% in September, supermarket sales down

Food sales dropped for the seventh consecutive month according to a poll taken by the Food Industry Association (CAVIDEA) with shows that tonnage went down 3.71% in September for 12 basic items: rice, pasta, oats, pasteurized milk, powdered milk, sardines, cured meats, tuna, oil, margarine, mayonnaise and tomato paste. The President of the National Supermarket Association, Luis Rodríguez, points out that sales volumes have gone down in the past months as consumers have less money available for large scale purchases. More in Spanish:  (El Universal, 10-25-2011; http://www.eluniversal.com/economia/111025/las-ventas-de-alimentos-cayeron-371-durante-septiembre and El Nacional, 10-25-2011; http://www.el-nacional.com/)

Nicaragua hosts 7th PETROCARIBE Ministerial Council

Representatives of PETROCARIBE from Latin America and the Caribbean arrived in Managua, Nicaragua, to participate in the Seventh Ministerial Council October 24-25. The goal of the summit is to analyze the social and economic impact of said energy initiative. The Venezuelan Energy and Oil Ministry says Nicaragua has confirmed the attendance of Antigua and Barbuda, Belize, Cuba, Dominica, Grenada, Guatemala, Guyana, Haiti, Jamaica, Dominican Republic, San Kitts and Nevis, Saint Vincent and the Grenadines, Suriname and Venezuela. (AVN; 10-24-2011; http://www.avn.info.ve/contenido/nicaragua-hosts-7th-petrocaribe-ministerial-council)

Commodities

Venezuelan oil basket spikes to U$D 104.79 per barrel

The average price of the Venezuelan oil basket gained U$D 2.74 during the week and ended at U$D 104.79 per barrel from October 17 to October 21. The Venezuelan basket of crude oil and products averages U$D 99.58 per barrel.

According to the Ministry of Energy and Petroleum, "the average price of crude oil ended the week with an upward trend, mainly driven by favorable macroeconomic data in the United States, the weakness of the US dollar against other currencies, and expectations about plans to contain debt crisis in some European countries." (El Universal, 10-21-2011; http://www.eluniversal.com/economia/111021/venezuelan-oil-basket-spikes-to-usd-10479-per-barrel)

Venezuelan heavy metals mining starves for cash

Ciudad Guayana, the only planned city in Venezuela, is a far cry from its designers’ vision fifty years after it was launched. The area holds important deposits of gold, iron and bauxite, yet the local industries, which employ 1.6 million Venezuelans, has languished in recent years. “This government destroyed industry here,” Pablo Perez, the opposition governor for one of Venezuela’s richest states, Zulia, said on a recent visit to the area. (The Gulf Today, 10-23-2011; http://www.gulftoday.ae/portal/28f7072d-9694-4858-8e09-7bf53401fb3d.aspx)

Commissions for gold transference to joint companies set up

The Ministry for Basic Industries and Mining (MIBAM) has set up a transition and negotiation commission to transfer gold reserves to joint companies with the Venezuelan government as the major shareholder. The commissions are divided into sub commissions such as mining and plant, finances and fiscal, legal, labor, small mining, environment, industrial safety, occupational, communications and social development. (Veneconomy, 10-22-2011; http://www.veneconomy.com/site/index.asp?ids=44&idt=28135&idc=2)

Catalytic cracking unit at Venezuela refinery restarts operations

The 89,000-bpd catalytic cracking unit of Cardón refinery, the second largest in Venezuela, has begun its start-up protocol after a failure that disrupted operations in the unit last week, a PDVSA source told Reuters. (El Universal, 10-24-2011; http://www.eluniversal.com/economia/111024/catalytic-cracking-unit-at-venezuela-refinery-restarts-operations)

Government to import 300 thousand tons of rice

With rice production down 13% from initial projections, additional imports will be required for a total of 300,000 tons, according to the President of the Rice Producers Association (FEVEARROZ), Fuaz Kassen. More in Spanish at: (Ultima Hora Digital, 10-24-2011; http://ultimahoradigital.com/ultimahora/detalles_noticias.php?id=18613)

International Trade

High level bilateral meetings held in Bogotá, trade rules extended for 90 days

During a trip to Bogotá, Foreign Minister Nicolás Maduro and Interior Minister Tarek El Aissami met with Colombian President Juan Manuel Santos in order to discuss plans for a meeting between Santos and President Chavez. Maduro met separately with Colombia’s Foreign Minister María Ángela Holguín to review gasoline and gas sales, as well as major projects such as a joint oil pipeline company that could be established by PDVSA and Colombia´s ECOPETROL that would go through both nations. As a result of the meeting former Andean trade rules have been again extended 90 days in order to establish a new system within ALADI. El Aissami and his Colombian counterpart Juan Carlos Pinzón agreed to exchange border officials to improve efforts against drug trafficking. More in Spanish at: (AVN, 10-25-2011;  http://www.avn.info.ve/node/83832; http://www.avn.info.ve/node/83842; and El Universal10-25-2011; http://www.eluniversal.com/nacional-y-politica/111025/caracas-y-bogota-intercambiaran-oficiales-enlace-para-la-frontera)

Cuba absorbd over 70% of BANDES aid funds

Cuba has found the state-run Venezuelan Bank for Economic and Social Development (BANDES) to be a true lifesaver in providing funds in order to avoid a shipwreck. Up to September 2011, 70% of the BANDES International Cooperation Fund (FCI) has aimed at "supporting" the Cuban government and paying for projects between Havana and Caracas. Data was obtained by El Universal within the "Financial Summary of the Executive Management for International Cooperation and Finance" released by Bandes, and updated as of September 2011. The report shows, among other things, the interest of the government of President Hugo Chávez in strengthening international cooperation, particularly with Cuba, but also with Bolivia and Nicaragua. (El Universal, 10-24-2011; http://www.eluniversal.com/economia/111024/cuba-consumes-more-than-70-of-bandes-aid-funds)

Politics

Government doctors clain Chavez in optimal health

President Hugo Chavez is in optimal health after undergoing cancer treatment, doctors on his medical team said Saturday. The Venezuelan doctors spoke out to dispute a surgeon's remarks about Chavez's condition. Dr. Salvador Navarrete has been quoted as saying in a recent interview that he believed the president's prognosis "is not good" and that the life expectancy in such cases can be as little as two years. Dr. Fidel Ramirez, one of Chavez's doctors, read a statement at a televised news conference Saturday saying Chavez had never been a patient of Navarrete. The doctors questioned the surgeon's ethics, saying he is wrong and doesn't have access to Chavez's medical information. Ramirez said Chavez's health is "absolutely satisfactory, with an excellent prognosis." Ramirez, who is a brother of Chavez's close confidant and oil minister, Rafael Ramirez, declined to answer questions about the type of cancer or where the tumor was located. (AP, 10-24-2011; http://www.google.com/hostednews/ap/article/ALeqM5geGLgy2I8MhhRMaudTCN7EOYFvxg?docId=ebd3ba194cb147d49d15de38c6218aa6)

Chávez to meet Argentine counterpart in November

In a telephone call by President Chavez to Cristina Kirchner, to congratulate her upon reelection, both heads of state agreed to “meet next November to continue consolidating the strategic alliance between both nations”. More in Spanish: (AVN, 10-25-2011; http://www.avn.info.ve/node/83706)

Former Chavez VP says the President would lead polls by a comfortable margin over 19%

President Hugo Chavez would lead the upcoming polls by a comfortable margin over 19%, according to a survey by the Institute for Data Analysis (IVAD), which interviewed 1200 people nationwide between September 24th and October 2nd of this year.  The IVAD survey also reported that 71.8% of those polled looks favorably upon the Chavez Administration, according to journalist Jose Vicente Rangel during his Sunday television talk show. (AVN, 10-23-2011; http://www.avn.info.ve/contenido/chavez-would-lead-polls-comfortable-margin-over-19)

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.

October 21th, 2011

Economics & Finance

Venezuela to raise spending 46% in 2012 budget ahead of vote

The government will boost spending by 46% in 2012 as President Hugo Chavez seeks resources to fund housing, agriculture and job creation plans that are pillars of his re-election bid next October. Expenditures will jump to 297.8 billion bolivars (U$D 69.34 billion) while estimates see the economy expanding 5% and the Western Hemisphere’s highest inflation rate falling to between 20% to 22%, Finance Minister Jorge Giordani said during a presentation of the budget proposal to the National Assembly. Consumer prices rose 26.7% from a year earlier in September. The Bolívar won’t be devalued next year, Giordani said and added that the government will set a ceiling for new debt of 81.7 billion bolivars in 2012, of which 25.8 billion bolivars will be used to service outstanding borrowing. The budget was calculated using an average oil export price of $50 a barrel. Venezuela expects a deficit of 3.6% of GDP in 2012, a wider deficit than the 3.4% posted in 2010. (Business Week, 10-20-2011; http://www.businessweek.com/news/2011-10-20/venezuela-to-raise-spending-46-in-2012-budget-ahead-of-vote.html)

Takes on U$D 3 billion more debt

The Venezuelan government said on Monday it had successfully sold U$D3 billion of bonds maturing in 2026, making the South American OPEC member's debt issuance this year by far the largest in Latin America. The Finance Ministry said 40% of the bonds went to Venezuelan businesses in priority sectors at tranches of between U$D 3,000 and U$D 1.47 million, while the rest went to a mix of private investors and state-run financial institutions. Venezuela surprised markets last week with the new bond issue, intended both to supply dollars to businesses and to provide funds for social projects. (Latin American Herald Tribune, 10-19-2011; http://www.laht.com/article.asp?ArticleId=434362&CategoryId=10717)

Borrowing raises credit concerns-Fitch

Fitch Ratings on Monday said Venezuela's credit profile faces increased risk of deterioration if increased borrowing is met with a "significant" macroeconomic shock. Venezuela, rated B-plus by Fitch, sold an additional U$3D billion worth of debt maturing in 2026 at a discounted price of 95 cents on the dollar with a coupon of 11.75%. The OPEC member's borrowing, between the government and the state-run oil company PDVSA, totals U$D 15.2 billion so far in 2011. (Reuters, 10-17-2011; http://af.reuters.com/article/commoditiesNews/idAFWNA107020111017)

World Bank says it is difficult to conduct business in Venezuela

The Doing Business 2012 report by the World Bank and the International Finance Corporation (IFC) signals Venezuela as the most complicated country in which to do business in Latin America and most of the world. The country dropped two steps down to 177 out of 183 nations analyzed for investment and business creation climate. The report says: “Over the past 6 years, 163 economies adopted more open regulations for business, only a few went in the opposite direction. The Bolivarian Republic of Venezuela and Zimbabwe are those that enacted more difficult regulations for business” according to an AP report. More in Spanish: (El Nacional, 10-21-2011; http://www.el-nacional.com/)

Business questions allocation of foreign exchange

Carlos Fernández, president of the Venezuelan Council of Trade and Services (CONSECOMERCIO) says the Government must correct the criteria to allocate US dollars through the issuance of bonds. "It is not possible that (all the foreign currency) is allocated to priority sectors," said the business leader with regard to the recent issue of US dollar-denominated 2026 bonds. (El Universal, 10-19-2011; http://www.eluniversal.com/economia/111019/entrepreneurs-question-allocation-of-foreign-exchange)

350,000 hectares projected for additional government takeovers next year

The 2012 budget for the Agriculture and Land Ministry will grow 16.7%, to 2.93 billion VEB, and includes government plans to take over 350.000 hectares of agricultural land next year, 22.2% less than were projected in the 2011 budget. More in Spanish: (El Nacional, 10-21-2011; http://www.el-nacional.com/)

Giordani says FONDEN has received U$D 81.1 billion since creation

Venezuela’s Finance Minister Jorge Giordani said the government’s off-budget fund known as FONDEN has received U$D 81.1 billion dollars since it was created. About U$D 47.3 billion have already been spent while a further U$D 31.9 have been assigned to projects, Giordani said today in Caracas during the presentation of the country’s 2012 budget. (Bloomberg, 10-20-2011; http://www.bloomberg.com/news/2011-10-20/giordani-says-fonden-received-81-1-billion-since-creation.html)

Government approves U$D 179.16 million to strengthen food distribution

The Council of Ministers has approved U$D 179.16 million to continue strengthening food distribution, according to Food Minister, Carlos Osorio, who said that all the products within the basic-needs food basket (milk, chicken, sugar, etc) will have a priority so the Government can distribute them at low prices among Venezuelan families. (AVN, 10-19-2011; http://www.avn.info.ve/contenido/government-approves-17916-million-strengthen-food-distribution)

Commodities

PDVSA says studies show recovery factor above 20% in Orinoco Oil Belt

Eulogio Del Pino, vice-president of Exploration and Production of the Venezuelan state-run oil company PDVSA, says technical studies will be presented that show it possible to obtain a recovery factor above 20% in the Orinoco Oil Belt.

In a press release he announced the presentation of studies used to obtain the quantification and certification of oil reserves in the Orinoco Oil Belt, which placed Venezuela as the world's largest oil reserves holder.(AVN, 10-20-2011; http://www.avn.info.ve/contenido/studies-show-recovery-factor-above-20-orinoco-oil-belt)

Major refining compound hit by failure

A disruption has occurred within the gasoline production unit (which processes 8,300 tons of gasoline) at the Paraguaná-Cardón Refining Complex, in the northwestern Venezuelan state of Falcón. The glitch occurred in the catalytic cracking unit (FCC). Oil experts were working in the plant to start up the complex on Thursday. CRP oil workers said that the damaged equipment had been recently purchased for plant expansion. (El Universal, 10-20-2011; http://www.eluniversal.com/economia/111020/venezuelas-major-refining-compound-hit-by-failure)

International Trade

Peru announces new negotiations with Venezuela

The Peruvian Trade Ministry announced the Third Round of Negotiations for a Productive and Commercial Complementarities Agreement with Venezuela will be held November 9-11 in order to finish up pending issues. Foreign Affairs Ministers, Rafael Roncagliolo (Peru) and Nicolas Maduro (Venezuela), had already agreed to extend tax regulations between AnPact member countries. (AVN, 10-19-2011; http://www.avn.info.ve/contenido/peru-announces-new-round-negotiations-venezuela)

Politics

Chavez declares he is free of cancer

Hugo Chavez has declared he is cancer-free four months after surgery to remove a malignant tumor."I am free of illness," Chavez, 57, said in an address to Venezuelans after touching down from Cuba in a western state to make a pilgrimage to a Catholic shrine. "The new Chavez is back ... We will live!" Despite the charismatic socialist president's ebullience, doctors say it is impossible for him to be considered out of danger until at least two years after treatment has finished. "No matter what kind of cancer he was treated for, it's just too early to tell," said a U.S.-based cancer expert, who asked not to be named. U.S.-based Nomura Securities analyst said Chavez was seeking to quell the speculation his condition had awoken. "Nobody is going to know for sure if he is cured. But he has to say this because he needs to bring peace to the Chavistas. His being there is to try to calm them down and tell them that Chavismo continues and he'll take it from here." (Reuters, 10-20-2011; http://www.reuters.com/article/2011/10/20/us-venezuela-chavez-idUSTRE79J5CA20111020

Government fines TV station for prison coverage

Regulators fined a TV channel more than U$D 2 million on Tuesday for its coverage of a deadly prison riot that became a political headache for President Hugo Chavez. The hefty fine against GLOBOVISION sharply raises the stakes in an intermittent conflict between the government and the country's only remaining channel that takes a staunch anti-Chavez stance. GLOBOVISION was fined for its coverage of a prison riot that erupted in a prison in June after troops raided an adjacent prison looking for weapons. The raid set off gunfights that left three dead, and the standoff finally ended with negotiations after 27 days. Authorities said four inmates who escaped also were slain by soldiers. (Business Week, http://www.businessweek.com/ap/financialnews/D9QEUSH80.htm)

Venezuela to take care of relations with Colombia, prevent conflicts

President Chavez has emphasized that the Government has recovered relations with Colombia and "we shall keep caring them. We do not want more conflicts, because that is a sister Republic." At his arrival from Cuba into La Fria, in Tachira state on the Colombian border he said that Venezuela and Colombia are destined to be brother countries.  (AVN, 10-20-2011; http://www.avn.info.ve/contenido/venezuela-care-relations-colombia-prevent-conflicts)

US urges Venezuela to abide by IACHR ruling on ex mayor, Venezuela rejects US statements

A US State Department spokesman says Venezuela should meet its international commitments and abide by the ruling of the Inter-American Court of Human Rights (IACHR Court) which restores the political rights of opposition leader Leopoldo López. "We join the Court, as well as Human Rights Watch and other observers to ask Venezuela to fulfill its international commitments," said spokesman Mark Toner. Venezuela then issued a formal communiqué rejecting the statements made by the US State Department spokesman questioning the local judiciary system. (El Universal, 10-19-2011; http://www.eluniversal.com/nacional-y-politica/111019/us-urges-venezuela-to-abide-by-ruling-on-ex-mayor; AVN, 10-20-2011; http://www.avn.info.ve/contenido/venezuela-rejects-us-statements-questioning-venezuelan-judiciary-system)

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.

October 18th, 2011

Economics & Finance

Venezuela sells U$D 3 billion of 15-year bonds within local market

Venezuela sold U$D 3 billion of bonds due in 2026, swelling total issuance this year to a record U$D 7.2 billion as President Hugo Chavez looks to finance government social programs ahead of his re-election bid. The bonds were priced to yield 11.75%, according to a statement published on the Public Credit Office’s website. Venezuelans who bought them in bolivars at the official rate of 4.3 per dollar, at a price of 95 cents on the dollar, can sell the bonds abroad at a discount to obtain foreign currency as a way to skirt controls imposed in 2003. (Bloomberg, 10-17-2011; http://www.bloomberg.com/news/2011-10-17/venezuela-sells-3-billion-of-11-75-bonds-due-in-2026.html; El Universal, 10-17-2011; http://www.eluniversal.com/economia/111017/individuals-access-to-venezuelas-foreign-currency-bond-limited)

U$D 47.452 billion in dollar denominated bonds are now outstanding

Since 2005 Venezuela has primarily used bond issues for financing government expenditure. Over 12 years of the Chavez administration there have been 17 bond issues for a total of U$D 47.452 billion, which is above current international reserves of U$D 30.594 billion. More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/mercados/inversion/gobierno-ha-emitido-$47-452-millones-de-bonos-en-d.aspx)

200% increase projected in government food acquisition expenditure

As international dollar denominated food prices continue on the rise, President Chavez announced official plans to guarantee food supplies to the general population. The government has increased by 200% its projected budget for buying foodstuff in order to avoid scarcities. The plan to supply basic foods calls for an increase of 4900 tons of edibles for state distribution. More in Spanish: (El Mundo, 10-17-2011; http://www.elmundo.com.ve/noticias/economia/agro/gobierno-se-blinda-para-asumir-una-factura-aliment.aspx and http://www.elmundo.com.ve/noticias/economia/politica/gobierno-anuncia--soberania-alimentaria-para-2014”.aspx)

Giordani believes crisis in US reflects the depletion of its socio-productive model

Planning and Finances minister, Jorge Giordani, considers what he calls a current financial and political crisis in the United States to be " a consequence of the concentration of power" and of a productive model that generates inequalities. He claims the development and "sophistication" of finances, stocks and payment methods transformed into a bubble that has finally exploded. According to the architect of Venezuela’s current economic model:"True economy distances itself from the real economy and, at the end, a balloon is created that cannot resist the internal pressure anymore." (AVN, 10-17-2011; http://www.avn.info.ve/contenido/crisis-us-reflects-depletion-its-socio-productive-model)

Commodities

Venezuela oil jumps U$D 6 to U$D 102.05

Venezuela’s oil for export basket rose for the first time in 4 weeks, jumping U$D 5.75 a barrel, to U$D 102.05 for the week of October 10-14, Venezuela's Energy and Oil ministry said. The Venezuelan barrel of crude oil and products had fallen to U$D 96.30 the previous week. (Latin American Herald Tribune, 10-16-2011; http://www.laht.com/article.asp?ArticleId=433605&CategoryId=10717)

Expert: Guyana intends to develop oil fields at disputed waters

Oil expert Aníbal Martínez says the delimitation of marine and submarine waters along the western Venezuelan coast in state of Delta Amacuro is vital to ensure control over known energy resources and of those likely to be found in the area. He says Guyana's formal request to the United Nations Commission on the Limits of the Continental Shelf (CLCS) to extend its continental shelf and maritime domain from 200 to 350 nautical miles is a threat to Venezuelan gas projects such as DELTANA Platform located at Delta del Orinoco (El Universal, 10-17-2011; http://www.eluniversal.com/nacional-y-politica/111017/expert-guyana-intends-to-develop-oil-fields-at-disputed-waters)

Brazilian daily reports China Development Bank backs PDVSA loan for refinery

A Chinese government-backed bank will provide loan guarantees needed by Venezuela's government-run oil company, Petroleos de Venezuela SA, to participate in construction of an oil refinery in Brazil, according to a person familiar with the transaction. Over the weekend, the O Estado de Sao Paulo newspaper reported the China Development Bank will provide 75% of the bank guarantees needed by PDVSA to participate in the U$D15 billion Abreu e Lima refinery to be built in Brazil's Pernambuco state in partnership with Brazil's government-run oil company, Petroleo Brasileiro, S.A. (Fox Business; 10-17-2011; http://www.foxbusiness.com/industries/2011/10/17/china-development-bank-backs-pdvsa-loan-for-refinery-source/)

International Trade

Provisional trade rules expire this Friday

Next Friday the provisional trade rules established between Venezuela and Colombia will expire. Negotiations have been conducted for six months and Foreign Ministers Nicolás Maduro y María Ángela Holguín and scheduled to meet next Monday in Bogotá. The Bilateral Chamber of Commerce in Caracas believes it possible that a new extension will be agreed to, and suggests it should be “for 180 days or a year, in order to allow both sides time enough” to arrive at a full agreement. More in Spanish: (El Universal, 10-17-2011; http://www.eluniversal.com/economia/111017/en-manos-de-chavez-y-santos-extension-de-norma-andina)

Logistics & Transport

Almost half of national aircraft units are damaged

As local airlines prepare to submit import requirements for replacement parts needed for out-of-service aircraft, the head of the National Aeronautics Institute (INAC), Francisco Paz Fleitas, has confirmed that 43 to 45 out of 90 units of national aircraft are out of service for lack of replacement parts. More in Spanish: (Ultimas Noticias, 10-17-2011; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/la-mitad-de-los-aviones-nacionales-estan-danados.aspx)

Politics

Chavez heads to Cuba for cancer check-up

President Hugo Chavez said he is travelling to Cuba for a health check-up, four months after he had surgery for cancer there. He said tests would determine if any cancerous cells remained in his body and has previously described his treatment as successful. But secrecy about his illness has fuelled speculation that it may be worse than officially stated. In comments broadcast on Venezuelan state television, he said he was going to Cuba to undergo "rigorous examinations" to check for cancerous cells, and would "inform the people" on his return to Venezuela. He has also said his illness will not stop him from standing for re-election next year. (BBC News, 10-15-2011; http://www.bbc.co.uk/news/world-latin-america-15323343)

Former Chavez surgeon projects President’s life expectancy up to two years

According to surgeon Salvador Navarrete, who was part of the President’s medical team, Hugo Chavez has “an aggressive pelvis tumor and his life expectancy could be up to two years”. In an interview, the former medical advisor said he is surgeon for the Chavez family, which has supplied him the information. More in Spanish: (El Nacional, 10-17-2011; http://www.el-nacional.com/; Fox News, http://www.foxnews.com/world/2011/10/17/report-venezuelas-chavez-only-has-two-years-to-live/)

Supreme Court bars Hugo Chavez rival from taking office

The Court dismissed as "unfeasible" a decision issued last month by the Inter-American Court of Human Rights, based in Costa Rica that demanded Venezuelan electoral officials allow presidential hopeful Leopoldo Lopez to run for office. The former Caracas district mayor was on a list of politicians blacklisted due to corruption investigations but insists he is innocent and was never sentenced in a court. The Supreme Court president, Luisa Estella Morales, told reporters that Lopez "can freely sign up and participate in elections" including next year's presidential vote, but whether or not he could actually take office if elected "isn't within the judicial branch's analysis at this time". Chavez has strongly criticized the Costa Rica-based Human Rights court, saying it was part of an international system that "protects the corrupt and obeys the mandate of the [US] imperial power". The coalition of Venezuela's main opposition parties, known as the Democratic Unity Table, condemned the supreme court ruling, saying in a statement that it violated the constitution as well as international treaties and promising to take the matter to the Organization of American States. (The Guardian, 10-18-2011; http://www.guardian.co.uk/world/2011/oct/18/venezuela-bars-hugo-chavez-rival?newsfeed=true)

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.