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.

Tuesday, November 1, 2011

November 01st, 2011

Economics & Finance

Venezuela scrambles to bring U$D 11 billion worth of gold home
17,000 gold bars are being shipped back on the order of President Hugo Chavez. Repatriating about 190 tons of bullion worth more than U$D 11 billion from banks in the West will be risky, slow and expensive, experts say. “It doesn’t make sense. Gold is a fungible asset. It would be cheaper to sell the gold and at the same time buy gold in closer locations with delivery to Venezuela included,” said Russ Dallen. (Latin American Herald Tribune, 10-31-2011;

Real 2012 government expenditures close to VEF 500 billion
It is once again estimated that extraordinary expenses will be an important part of government expenditure during the 2012 election year, far beyond the VEF 297.8 billion in the official budget. José Guerra, former research manager at the Central Bank estimates actual expenditures in 2012 could be around VEF 500 billon. More in Spanish: (Tal Cual, 11-01-2011;

Gold sales projected to provide VEF 220,5 million to Treasury
The Ministry for Basic Industry and Mining (MIBAM) plans to provide the Treasury with VEF 220.5 million next year from sales of gold, silver, platinum and other metals, according to their projected 2012 budget. This would be 6.7% above the amount budgeted for 2011. More in Spanish: (El Universal. 11-01-2011;

Official agency says Caracas remains the most attractive city for investment in Venezuela
For the third consecutive edition (2005, 2007 and 2009), the capital of Venezuela tops the ranking of the most attractive Venezuelan cities for investment, "even though it recorded a lower score" than that obtained in the previous survey, according to Eduardo Porcarelli and Litsay Guerrero, CONAPRI's Executive Director and Manager of Economic Affairs and Investor Services. They explain that the survey is intended "to provide input" to potential investors, policy makers and those implementing local and central governments' public policies. (El Universal, 10-29-2011;


Venezuela oil climbs to U$D 106.14
Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending October 28 rose to U$D 106.14 a barrel from the previous week's U$D 104.79, bringing the average for the year to just under $100 a barrel. (Latin American Herald Tribune, 10-28-2011;

High taxes in Venezuela to hurt oil joint ventures
Higher taxes in Venezuela have spooked investors and are likely to mean lower crude production from mature oil fields operated by more than 20 joint venture projects, sources at the companies said. The government is putting new pressure on the joint ventures between state oil company PDVSA and private companies, threatening to cancel their permits if they do not meet increased output targets. It first began issuing the warnings last December to companies including CHEVRON , REPSOL , BP , SHELL and PETROBRAS .
But a decision in April to hike windfall taxes on what Chavez called "exorbitant" income from high oil prices could spell the end of loans pre-approved by foreign banks to fund the projects, senior executives at the companies told Reuters."Some companies already had loans secured and even pre-approved, but the tax change destroyed their plans," said one director at a private company, who asked not to be named. (Reuters, 10-31-2011;

Exports from the Paraguaná Refining Complex down from 55% to 33% of total production in 5 years
The Paraguaná Refining Complex (CRP, after its initials in Spanish), the largest in the world with a capacity to process 955,000 barrels a day, has gone in five years from exporting 55% of its production, to only 33% of oil byproducts (those with the highest value within the Venezuelan oil basket), according to data provided by PDVSA director and CRP general manager Jesús Luongo. (Veneconomy, 10-31-2011;

Press reports frozen domestic fuel rates devastate the internal market
The policy of freezing fuel prices at any cost is leaving increasing scars on Venezuelan domestic market. Distortions dragged out for over a decade of rate lag and indexation at state-run oil holding Petróleos de Venezuela (PDVSA), have the company having to face growing subsidization. Supplies of gasoline, diesel and gas in canisters (liquefied petroleum gas, LPG) are having frequent trouble with distribution, sale and trade, in the face of rising demand and sale prices regarded within the hydrocarbons sector as "unreasonable" based on the economic reality. (El Universal, 10-29-2011;

PDVSA may still post debts this year
Off-the-record information so far indicates the operation would be a direct and private sale to the Venezuelan Central Bank (BCV). The most recent allocation of the 2031 Bond left a whole number of interested parties outside the sale and those who could buy only received half a bond ($1,500). (Veneconomy, 10-31-2011;

Government admits lack of investment in electricity projects
Although the government has repeatedly stated that the power crisis in Venezuela is being solved as it is taking actions in all the required areas, energy authorities' management reports show otherwise. "Updating the power sector has been difficult due to the lack of transmission lines, inefficient plants, and equipments and the lack of funds to invest," according to an official memorandum submitted along with the 2031 Sovereign Bond issue in August. (El Universal, 10-31-2011;

50% of projected thermal plants are operating
About 50 % of the portfolio of thermal power projects planned by the National Electricity Corporation (CORPOELEC) for 2011 has been completed. According to an official report, CORPOELEC planned the construction of 14 plants in 2011, including the construction of new plants and thermal power units, which would add 1,635 megawatts (MW) to the electricity grid. So far, at least half of the projects aimed at meeting thermal power demand nationwide are pending. (El Universal, 10-31-2011;

U$D 979,043,801 investment planned for electricity in 2012
The draft Venezuela's budget for FY2012 includes an allocation of U$D 982,307,280 to the Ministry of Electrical Power to continue building thermal and hydroelectric power plants, revamp equipment, and strengthen the National Electrical Corporation (CORPOELEC) as an institution. The funds, according to the Special Borrowing Law, would be spent as follows: U$D 434,135,994 for the TERMOZULIA III plant; U$D 231,963,449 for the TOCOMA powerhouse; U$D 189,351,733 to overhaul units 1-6 at the Guri Dam mill room 1; U$D 60,514,231to build substations embedded in the urban area of Maracaibo, and U$D 66,458,426 to strengthen and develop CORPOELEC. (El Universal, 10-29-2011;


Chavez orders more land taken from British firm disputing compensation for earlier seizure
Chavez has ordered the expropriation of 716,590 acres belonging to a British-owned company amid a disagreement over compensation for earlier takeovers of ranchland from the firm. He announced the latest seizure after saying that Venezuela refuses to pay compensation in foreign currency to Agropecuaria Flora, a local subsidiary of the British company VESTEY GROUP. He said the government had received a demand from the company that it be paid in dollars for the previous seizure of tens of thousands of acres. But the government insists in paying in bolivars, Venezuela’s currency. (The Washington Post, 10-30-2011;

Takeover of 34,595 more acres in central Venezuela ordered
Chavez has also authorized the creation of Social Production Enterprise (EPS) Valles de Los Tacariguos, and in doing so ordered the seizure of 34,595 acres located in the states of Aragua and Carabobo (central Venezuela.) He says the government will create at least 10 EPS in the state of Aragua in an area of 21,167 acres, while the government will seize other 10 private properties in the state of Carabobo, with an area of 12,825 acres. "There are some EPS already working, near the highway. We have to seize lands from there to here, throughout all these valleys to fight large estates," Chávez said. (El Universal, 10-31-2011;

4% of Latin Americans view Venezuela as a model, 77% of Venezuelans support democracy
The LATINOBARÓMETRO 2011 poll asked a group of Latin Americans: "Which nation would you like that (your country) look more like? Think as a whole: your lifestyle, values, customs, economic and political situation, etc.," Venezuela got 4% of the votes of respondents in 18 countries. The United States (26%), Spain (19%), Brazil (11%), China (8%), and France (6%) were the most preferred countries. The study was conducted between July 15 and August 16, 2011. The continental support for democracy fell to 58%, three points down compared to 2010. Venezuela reported the highest support to democracy (77%). (El Universal, 10-31-2011;

Venezuela to launch second satellite in 2012
Venezuela is working with China to develop a second satellite to be launched between September and October next year, says Science, Technology and Intermediate Industries Minister, Ricardo Menendez. He explained that this remote sensing satellite will allow the country to have an updated cartographic system and contribute to reinforce Government plans on urban and agricultural planning , as well as and in the managements of risks and natural disasters. (AVN, 10-30-2011;

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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