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 8, 2011

November 08th, 2011

Economics & Finance

Executive Office rules out debt default
Beatriz Bolívar, the head of the Public Credit National Office, said at the National Assembly that Venezuela is far from debt default. She added that Venezuela pays a high premium for bonds because of the global economic crisis, which makes funding more expensive. She noted that interest rates are pushed up by the private media's smear campaign against the government. (El Universal, 11-07-2011;

BOA: Venezuela's fiscal deficit to increase to 8% in 2012
Bank of America assessed Venezuela's government management in a report entitled “Fiscal accounts in Venezuela: A black box”, and estimated that fiscal deficit in FY2011 will average 4% of GDP, but it will rise to 8% in FY2012, thus reflecting government's funding needs. BOA's paper added that the gap will be larger next year due to presidential elections and the government's decision to keep the official exchange rate unchanged. Venezuela's foreign exchange rate would be increased in 2013, according to the US financial institution. (El Universal, 11-07-2011;

Venezuela's revenue from devaluation at USD 5.35 billion
The Venezuelan government has resorted to different funding sources such as revenue from devaluation, dividends of state-run agencies and investments made by the Treasury in order to implement its policy of expanding public spending this year. These three sources will yield the National Treasury U$D 6.05 billion this year, according to estimates of the Ministry of Finance. (El Universal, 11-07-2011;

FEDECAMARAS foresees parity adjustment in 2012
In a recent study, FEDECAMARAS, the main business federation, is projecting a higher parity rate in 2010, continued exchange controls, and higher foreign debt. It places 2011 year end inflation at 27.3%, slightly higher than 2010, and estimates it could be slightly lower in 2012. More in Spanish: (El Nacional, 11-08-2011;

Nearly U$D 30 billion is reported missing from the Venezuelan national development fund controlled by President Hugo Chavez, who appears to have diverted some of the missing money to his political allies in other countries, while much of the rest remains unaccounted for. The money came from a U$D 69.4 billion fund for development aid, known as FONDEN, which operates outside the Venezuelan National Assembly’s budget process and largely beyond public scrutiny, answerable only to a board of directors and to Chavez himself. A comparison of a comprehensive list of FONDEN projects and, separately, a breakdown of contributions to the fund and allocations over the years uncovered a gaping U$D 29 billion shortfall between the money allocated for projects, and the actual projects on record. It now appears that much of the missing funds instead went to Chavez’s political allies in the region in Bolivia, Cuba and Nicaragua, who belong to a group known as the Alianza Bolivariana, para los Pueblos de Nuestra America, or ALBA.  (100 Reporters, 10-31-2011;

Central Bank analyzes anti-inflation policies
The bank’s First Vice President, Eudomar Tovar, says the institution is working with the government to seek price regulations and seeking options to bring down inflation. He said “inflation is curbed by producing more, and we are seeking alternatives”. More in Spanish: (El Universal, 11-08-2011;

Venezuela-owned Russian bank beats CITIGROUP in Venezuela bond sales
A Russian bank whose biggest shareholder is the Venezuelan government is overtaking CITIGROUP Inc. (C), Credit Suisse Group AG (CSGN) and Deutsche Bank AG (DBK) in bond underwriting in the South American country.
Evrofinance Mosnarbank SA managed U$D 3.6 billion in bond deals from the Venezuelan government this year, while Credit Suisse, Deutsche Bank and Citigroup followed with U$D3 billion, U$D 2.1 billion and U$D 1.5 billion respectively including securities sold by state-owned oil company Petroleos de Venezuela SA, according to data compiled by Bloomberg. Evrofinance didn’t do any deals in Venezuela last year, when CITIGROUP ranked first with U$D 3 billion. (Bloomberg, 11-07-2011;

PDVSA announced it was reopening bond offer for U$D 1,783 million via a private and direct placement addressed to the Venezuelan Central Bank (BCV). The bonds maturing in November 2013 and with an 8% coupon will be ruled by the law of New York State in the United States and will have the same terms and conditions of those issued in November 2010. (Veneconomy, 11-07-2011;


Lack of investment hits mature oil fields
Crude oil production at mature oil fields has stagnated and even plunged in some cases as oil companies are facing problems to get funds, sources told Reuters. Once again, Hugo Chavez's administration threatened to revoke the permits for joint ventures between state-run oil company Petróleos de Venezuela (PDVSA) and private companies operating mature oil fields if they fail to meet the new output targets that were set when they were established in 2006. (El Universal, 11-07-2011;

SIDOR production halted by worker protests demanding 33 months retroactive pay. More in Spanish: (El Universal, 11-08-2011;; Correo del Caroní, 11-08-2011;

POLAR´s Lorenzo Mendoza says “Venezuela has a significant exporting potential in rice, cocoa and chocolate among other products, but its current economic model does not allow for business with other countries,” Empresas Polar CEO Lorenzo Mendoza spoke at the 8th Business Meeting held at the Caracas Chamber. He indicated there can be no alliances when paying with currencies that are not acknowledged abroad. (Veneconomy, 11-07-2011;


President Chavez celebrates Daniel Ortega’s victory, congratulates Guatemala´s Molina
President Hugo Chavez celebrated what he called Ortega’s “overwhelming” victory and congratulated the Nicaraguan people for the peaceful climate that marked the presidential elections of last Sunday, which shows Daniel Ortega heading for reelection. He also congratulated the elect president of Guatemala, Otto Perez Molina, who won the presidential elections in this country last Sunday. (AVN, 11-07-2011; and

Venezuela, Brazil foreign ministers meet in Caracas
Brazil's Foreign Affairs Minister Antonio Patriota has arrived in Caracas to meet with his Venezuelan counterpart, Nicolas Maduro, in order to review bilateral issues. The agenda includes setting a date for a visit of President Dilma Rousseff to Caracas. This is the third visit by Foreign Minister Patriota to Caracas, and the meeting will be used to review bilateral, regional and international issues. (AVN, 11-07-2011;

Venezuela among world leaders — in red tape, says Andrés Oppenheimer
Following last week’s announcement that Venezuelan President Hugo Chávez has created two new Cabinet ministries — the Ministry of Ground Transportation and the Ministry of Air and Water Transportation — it may be time to propose a new economic theory: that countries’ economic development is inversely proportional to their number of ministers .The two new Cabinet ministries that — like many others in Venezuela — will be headed by military officers. The two new positions bring to 31 the number of Venezuelan Cabinet ministries.
Since taking office in 1999, Chavez has created dozens of new Cabinet ministries, and has changed Cabinet ministers 176 times since he took office in 1999. With so many Cabinet ministries and their respective bureaucracies, it’s not surprising the World Bank “Doing Business in 2012” report released last week placed Venezuela among the world champions of red tape.m In Venezuela, it takes 17 legal procedures to register a business. The huge government bureaucracies in Venezuela are doing little more than creating more corruption opportunities for government inspectors and their supervisors, and more burdens for average citizens. (Miami Herald, 11-05-2011;

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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