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.