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, October 14, 2011

October 14th, 2011

Economics & Finance

Venezuela selling U$D3 billion of bonds to meet demand for foreign currency, may trade at BF 5.70
Venezuela will offer U$D 3 billion of bonds in the local market, swelling dollar debt sales this year to U$D 7.2 billion, as the country seeks to finance spending and meet investor demand for foreign currency. The government will sell the 11.75% bonds due in 2026 to local investors, who will pay with bolivars at the official foreign-exchange rate of 4.3 bolivars per dollar, according to a statement posted on the Public Credit Office’s website. CREDIT SUISSE Group AG (CSGN) and EVROFINANCE MOSNARBANK SA will manage the sale, the statement said. “This has taken the market by surprise,” said Jeff Williams, an emerging-market debt strategist at Citigroup Inc. in New York. “People weren’t expecting a new Venezuela issue this year, so in that sense it’s negative for the market.” The Finance Ministry will announce the results of the sale on Oct. 17. Analysts say local demand will be very high as the year is ending and there are many bolivars circulating, plus banks offer financing in order to promote their acquisition and their web pages have collapsed with orders. (Bloomberg, 10-11-2011; and more in Spanish: El Mundo, 10-14-2011;,70.aspx)

FITCH rates Venezuela's 2026 bond "B+"
Credit rating agency FITCH Ratings said on Wednesday that it had assigned a rating of 'B+' to the Venezuela U$D 3 billion Global bond maturing in 2026, with a 11.75% coupon, Reuters reported. The rating is in line with Venezuela's sovereign bond rating, which is underpinned by its positive record of servicing debt even under political and economic stress in recent years, FITCH said. (El Universal, 10-12-2011;

Venezuela to pay U$D 5.28 billion in interest
Although average oil prices have hit a record high at U$D 100 this year, the government here is getting into debt at a frantic pace. According to Angel García Banchs, director of economic research firm ECONOMÉTRICA, Venezuela will have to pay U$D 5.28 billion in interests on bonds issued this week. (El Universal, 10-12-2011;


Venezuelan upgrader stopped by equipment failure-source
Venezuelan heavy crude upgrader PETROPIAR suffered equipment failure that shut down operations this week, a project source told Reuters on Tuesday, adding the project was expected to be back up and running on Thursday.
PETROPIAR converts up to 180,000 barrels per day of extra heavy crude from the Orinoco belt into exportable oil.
"There was a problem in a water pump and the upgrader is being reactivated," said the source, who requested anonymity as they are not allowed to comment on operations. (Reuters, 10-11-2011;

Public foodstuff distribution data
According to official figures, 60% of food purchased through the MERCAL network comes from international purchases carried out by the Corporation CASA, while the other 40% is produced locally. The distribution plan of the main state network marketing is still at 130,000 tons of food a month, despite resources approved to expand its distribution to 140,000 tons. The Government, through MERCAL, PDVAL and the Bicentennial market network, provides some 300,000 tons of food for public consumption. It also has an infrastructure of 19,000 retail outlets across the country. The government's goal is to meet 50% of national consumption. More in Spanish. (El Universal, 10-13-2011;

MERCAL price increase denied: Productive Economy Vice President Minister Ricardo Menéndez denied government plans to increase prices of products distributed by the MERCAL Network and assured they will remain under Government subsidy. However, last Monday Venezuelan News Agency reported that at least 14 food staples could experience increases, citing Food Minister Carlos Osorio. (Veneconomy, 10-12-2011;

International Trade

Trade with Colombia to be conducted in local currencies
Trade between Colombia and Venezuela is no longer dependent on the dollar as the only means of payment. The Venezuelan customs authority (SENIAT) has issued a resolution allowing bilateral trade to be priced in local currencies. Henceforth products exported to Colombia may be payable in pesos and imported into bolivars. More in Spanish. (El Universal, 10-13-2011;

Economic agreement to relaunch Venezuela, Peru relations
The governments of Peru and Venezuela will relaunch their political and economic relations by signing an agreement on productive and commercial complementation next Friday in Lima, according to Peruvian Foreign Minister Rafael Roncagliolo, who will meet with his Venezuelan counterpart Nicolas Maduro. Roncagliolo said that the accord was previously debated in round tables of technical commissions from the two countries, which took place on October 04-05 in the Peruvian capital city. "These talks attained advances, but there are some aspects pending to be defined," said the Peruvian diplomat. (AVN, 10-12-2011;

13% of Nicaraguan exports go to Venezuela
Nicaragua expects to close 2011 with record exports of over U$D 2,000 billion, sending its main products in the U.S. and Venezuela. The first country is 30% of sales and 12% in Venezuela, mainly beef, cattle and beans, DPA said. More in Spanish. (El Universal, 10-13-2011;


President Chavez in Cuba for medical exams
President Chavez confirmed he will travel to Cuba for a series of medical exams to check on his recovery. He said; ”I am going to Cuba this weekend for some medical exams. I have no more chemotherapy. My hair has started to grow out and now I am going to have thorough exams to see how I am. I feel well and better every day, I am not exaggerating”. More in Spanish. (AVN, 10-14-2011;

US asks Venezuela to "reconsider" human rights suggestions
The United States on Wednesday urged Venezuela to reconsider its decision to reject several of the recommendations made during the Universal Periodic Review of the UN Human Rights Council that Venezuela underwent last week.
"Many countries raised serious and legitimate concerns about the state of human rights in Venezuela at its Universal Periodic Review (UPR) process," the US State Department said in a statement quoted by AFP. (El Universal, 10-12-2011;

Chavez proposes a law to defend airspace
President Chavez has proposed a Law for the Control and Defense of Airspace which will authorize gunning down aircraft involved in drug trafficking. More in Spanish. (El Universal, 10-14-2011;

Chavez gives U$D 1.5 billion to Cuba and ALBA
Venezuela spent more than U$D 1.5 billion in three years to finance dozens of projects in Cuba and other allied countries, including airport expansions in Cuba and replacing light bulbs in Bolivia, although the oil producer has amassed massive debt in the last few years to cover its own commitments, according to a Venezuelan government document. 88% of disbursements from January 2007 to May 2010 covered Cuban financial projects said the document from the Economic Social Development Bank of Venezuela (BANDES), which was obtained by El Nuevo Herald. (The Miami Herald, 10-13-2011;

Chavez's increasingly long shadow in Latin America
Recent reports, no less than their accompanying photos, suggest that Hugo Chavez may be dying. But if he hangs on, he is on his way to being reelected president again in Venezuela's December 2012 national elections. He is now using his cancer patient status to his political advantage, and his popularity is rising as a result. But if his illness increases his popularity, it lessens his authority. He is getting his medical treatment in Cuba in order to control the flow of information that might leak back into Caracas. So an optimist might say that the prospects for change in Venezuela are excellent: Either Chavez is finished, by cancer or the ballot box; or in his efforts to appeal to the middle class and small businessmen he is compelled to moderate his socialist policies. However, it now seems that Chavez is hardly the extent of Venezuela's political problem. No matter what happens to the founder of chavismo, evidence shows that the country's political class is marked by institutionalized criminality and ties to international terrorism. (CBS News, 10-11-2011;

REUTERS: Re-energized Chavez floods Venezuela's airwaves
Of many surreal moments in the life and times of Hugo Chavez, the flamboyant Venezuelan leader's encounter with a puppet of himself this week was one of the wackiest. Despite his convalescence from cancer surgery and four rounds of chemotherapy, the 57-year-old Chavez has since the start of October been hitting the air-waves like the old days, with phone-ins to state TV any time from dawn to midnight. "It's not time to die, it's time to live! To those who want me dead, I tell them that soon my return will be complete," Chavez said in what has become a daily mantra. He clearly feels upbeat, re-energized -- and desperate to show it. Yet cancer experts say it takes several years before anyone can be confident they have beaten the disease. "If you were my patient, and you said you had just finished chemotherapy two weeks ago and you were cured, I would say that is absolutely ridiculous," said a U.S. specialist, who asked not to be named. "It is much too early to say." (Reuters, 10-13-2011;

Minister claims GUMILLA poll shows 52% prefer socialism over capitalism
And 71,4% say a socialist system guarantees the common good, according to a poll allegedly taken by the Jesuit Center for Research and Social Action (Centro GUMILLA) and distributed by Communications and Information Minister Andrés Izarra. More in Spanish: (Ultimas Noticias;

Venezuela, Palestine to create commission to review bilateral accords
President Chavez and Palestinian National Authority President Mahmoud Abbas, have agreed to create a joint commission to extend and strengthen the accords signed by the two nations. "We have agreed to create a commission to review what we are doing and to review the new horizons of cooperation in all matters possible," said Chavez after a meeting he held in Caracas with Abbas. (AVN, 10-12-2011;

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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