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, December 9, 2011

December 09th, 2011

Economics & Finance

Inflation rises above 27%
The Central Bank says the country's annual inflation has risen to 27.6%. Monthly inflation was 2.2% in November, up from 1.8% in October. Annual inflation rose slightly from the 26.9% rate recorded in October. The country has had Latin America's highest inflation for the past six years. Increasing government economic controls, heavy reliance on imports and an expanding money supply have contributed to the problem; and the government is attempting to fight inflation through a new law that expands price controls to a wider range of goods and gives the government more enforcement authority. (CBS News, 12-06-2011;

Chavez: Venezuela willing to talk with EXXON MOBIL
President Chavez says his government would be open to negotiating with EXXON MOBIL Corp. in a dispute over the nationalization of an oil project in the country. Venezuelan officials have previously said EXXON MOBIL's compensation demands are excessive. The Irving, Texas-based oil company turned to international arbitration after refusing to accept the terms of the nationalization in 2007. Chavez says he would be willing to "sit down with them and seek a friendly settlement, but that's up to them and not to us." Exxon Mobil declined to comment. (Google - AP, 12-07-2011;

PDVSA triples contributions to state
State oil company PDVSA more than tripled contributions to President Hugo Chavez's social programs and development fund in the first half of 2011 compared to the same period last year, company results show. PDVSA's first-half figures show a massive, ten-fold hike in contribution to Chavez's off-budget special development fund FONDEN to U$D 7.3 billion, compared with U$D 691 million during the same period of 2010. Transfers to existing "missions" -- the social projects in slums and other poor areas that have assured Chavez's popularity among the poor in a 13-year rule -- nearly doubled to U$D 8.5 billion from U$D 4.5 billion. A new "Great Housing Mission", under which Chavez hopes to solve Venezuela's two million housing unit deficit in coming years, took another U$D 2.4 billion, the results showed. The total increase in contributions to the state over the period -- from U$D 5.2 billion to U$D 18.2 billion -- was in keeping with an accelerating spending spree by the government ahead of a 2012 presidential vote. (Reuters, 12-07-2011;

PDVSA Social is announced for investments from retirees
President Chavez announced the organization of another subsidiary of state-run oil holding Petróleos de Venezuela, C.A. (PDVSA), in which retirees may invest their funds in order to strengthen the social security system. "We have been working on this idea for quite a while and time has come to launch it in order to provide financial and economic sustainability to universal social security for everyone," he said; adding that this new subsidiary will have assets, goods and probably some oil fields within the Orinoco Oil Belt. (El Universal, 12-07-2011;

PETROBOND issue reaches U$D 9.32 billion
Félix Franco, president of the Venezuelan Public Stock Exchange, says PETROBONDS to be issued for payment of labor liabilities will come to U$D 9.32 billion. The issue was announced by President Chavez on Tuesday evening.
Franco, based on the performance of VEBONDS, has estimated the coupon for PETROBONDS around 17%. (El Universal, 12-07-2011;


Work stoppage ended at SIDOR
Operations at steel maker Siderúrgica del Orinoco (SIDOR) are again running. After contractual operators and SIDOR president Carlos D'Oliveira agreed to set up round tables to negotiate their incorporation as into staff. "Yesterday (Tuesday) night, the stoppage was lifted and the furnace got started. In the meantime, in the early hours of this Wednesday, the production of rebars began. Therefore, 60 trucks loaded with 1,750 tons of rebars are to be dispatched on a daily basis," says Néstor Astudillo, corporate marketing manager. (El Universal, 12-07-2011;

Failure at Cardón refinery hits production
One day after PDVSA officials reported a shutdown in a unit at Amuay refinery, in Northwestern Venezuela, inside sources reported another failure in Cardón refinery. The two crude oil refineries are within the Paraguaná Refinery Complex (CRP). Iván Freites, Secretary General of the Falcón State industry union says there was a shutdown at the delayed coking unit of Cardón refinery. (El Universal, 12-07-2011;

Businessmen fear another downturn in construction
Juan Francisco Jiménez, president of the Venezuelan Construction Chamber, says construction activity will plunge in the fourth quarter of the year due to a shortage of supplies and legal uncertainty. He specified that the supply of cement is irregular. "If building grows, the production of cement must rise, but it has not reached the levels attained in 2008 and 2009."  (El Universal, 12-07-2011;

PDVSA profits up to U$D4.1 billion in the semester 2011
The profits of the State oil company were up around an inter-annual 60% to U$D 4.1 billion in the first half of this year due to higher oil prices, according to local daily El Universal. Revenues for oil exports and food sales went up around 37% to U$D 64.1 billion from January to June, in proportion with the 37.3% increase in the Venezuelan oil basket. (Veneconomy, 12-07-2011;

International Trade

Chavez says China could soon surpass US as Venezuela’s top trade partner
President Chavez says that China could surpass U.S. as Venezuela’s No. 1 trade partner due to a strategic alliance between the two countries. He says trade between Venezuela and China has reached U$D 20 billion this year, up from U$D 600 million just over a decade ago. It is growing at a rate of U$D 2 billion a year. Trade between the United States and Venezuela has reached U$D 33.5 billion so far this year, according to the U.S. Census Bureau.  Last month, Chinese officials signed $6 billion in new loans to Venezuela aiming to boost the South American country’s oil industry. China has swiftly become Venezuela’s biggest foreign lender in recent years. The Asian giant had previously agreed to more than $32 billion in loans. Venezuela, in turn, is increasing oil shipments to China. (Washington Post, 12-06-2011;

Venezuela signs agreements with Russia for housing, agriculture
The governments of Venezuela and Russia set up 10 working groups to continue developing agreements in housing, energy, mines, agriculture, sports, culture, foreign policy, industries, science and information technology.
The groups will monitor agreements signed between Venezuela and Russia. Executive Vice-President Elias Jaua says it was agreed to build 30 thousand new housing units in Venezuela with Russia's cooperation. (AVN, 12-08-2011;; El Universal;

Vladimir Putin says Venezuela-Russia trade has increased 10 fold
After a meeting in Moscow with Venezuela´s Executive Vice President Elías Jaua, Russian Prime Minister Vladimir Putin remarked: “I would like to mention one fact: From January to September this year bilateral trade has increased 10 times”. More in Spanish: (AVN, 12-09-2011;

Venezuela receives third ocean patrol vessel from Spain
Spain has delivered to the Venezuelan Army the third of four ocean patrol vessels contracted with the naval builder NAVANTIA. The Yekuana (PC-23) will join surveillance of Venezuelan coasts. The commander general of the Army, Admiral Diego Alfredo Molero Bellavia, presided over the ceremony at NAVANTIA's shipyard, in Cádiz Bay. A Venezuelan crew will bring the Yekuana to Venezuela. (AVN, 12-08-2011;


Chavez tells international media he would concede an eventual opposition win
At a press conference marking the 13th anniversary of his first election, President Chavez told foreign correspondents “We will recognize election results, and always have, whether in favor or against”; he predicted his own victory by a 4 million vote margin and said that the opposition should be asked whether they would recognize his own victory. He also said he is “on the lookout” about the accession of Mariano Rajoy as head of the Spanish Government and added he will not tolerate any intervention into Venezuelan affairs on the part of Spain. More in Spanish: (El Universal, 12-07-2011;

An email saying Hugo Chavez was dead grew Venezuelan bond prices
If Venezuelan and PDVSA bonds are worth some $60 billion, then yesterday a computer virus made them gain about $1.2 billion, just like that, as the virus was embedded in an email with a headline mourning the death of none other than Hugo Chavez. The whole thing was bizarre. An email purportedly showing a page from Panama’s La Prensa was circulating, saying “All of Venezuela in Mourning” because of Chavez’ death. But the whole thing turned out to be a virus, as if you clicked in the video of Chavez, it would download a virus which supposedly takes over your PC. Some people did not even click, they believed the news and it spread all the way to debt markets, where it had a not-insignificant effect. The underlying truth is that debt markets would have an incredible rally if there was the possibility of political change in Venezuela. (The Christian Science Monitor, 12-08-2011;

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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