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.