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 16, 2011

December 15th, 2011

Economics & Finance

Venezuela's economic model leads to weak economic growth
Local quality of life has been hit by the economic policies implemented by the Chávez Administration. According to Efraín Velásquez, President of Venezuela's National Council on the Economy, changes to the institutional structure are creating uncertainty and are hurting changes for development. Velásquez warned against high inflation and said that even though Venezuela's economic activity began to show an upward trend this year; these results have a limited effect. "In principle, the level attained in the third quarter of 2011 (3.5%) has the same size as in 2009," he said. (El Universal, 12-14-2011;

Public spending threatens to spur inflation
The government will expand public spending in 2012, an election year, to boost consumption. However, increased liquidity and unchanged supply will lead to higher prices. Given booming oil prices, new corporate taxes and debt issues, central government spending grew over 50% over the past three months, after inflation, as compared to the same period in 2010. (El Universal, 12-14-2011;

More dollars to be sold in 2012 to drain excess liquidity
Official sources say one way to rein in growing money supply is to increase foreign currency allocations starting in 2012. They claim greater fluidity in allocating foreign currency demand will be key to reaching macro-economic goals and avoid runaway inflation next year. More in Spanish: (El Mundo, 12-15-2011;

Venezuela among the most expensive countries in which to do business
Venezuela is among the most expensive countries for investment, according to Carlos Henrique Blohm, president of the Venezuelan-American Chamber of Commerce and Industry (VenAmCham). "The cost of doing business is higher than that in any competitive country and it will not decrease through laws and repression," said Blohm. “A comparison of prices prevailing in Venezuela with prices in Mexico, Colombia and Brazil shows that those nations have "a third of our risk and a fifth of our inflation." (El Universal, 12-14-2011;

Government takes up to 60% of net income on any product made in Venezuela
A study by the National Industry Federation (CONINDUSTRIA) shows that around 40% to 60% of net income from any product goes to the Government in taxes. The report says that for each product local companies must pay the Government a added value tax (12%), income tax (34%), municipal taxes and labor contributions (9 to 11%); employment benefits contribution (2%), official training programs (2%), and housing and living contributions (2%). More in Spanish: (El Universal, 12-15-2011;

Local companies have received only 2.2% of indemnity payments for expropriations
According to ECOANALÍTICA Director Asdrúbal Oliveros the Government has paid out U$D 11.5 billion dollars in expropriation compensations from 2007 to 2011 to date. Multinational companies that have received payments include VERIZON, Spain’s Santander banking group, and the LAFARGE, HOLCIM and CEMEX cement companies. He added that the Government still owes close to U$D 22 billion on account of expropriations. It owes CONOCO and EXXON alone some U$D 12.6 billion. More in Spanish:  (El Nacional, 12-15-2011;

Venezuela’s price regulator extends company registration period
The government extended the period transnational and local companies have to register the price of 18 beauty and cleaning products to December 30, according to a resolution published today in the Official Gazette. President Chavez’s administration froze prices last month on products including toothpaste, soap and diapers, and ordered companies including Colgate-Palmolive Co. (CL), Johnson & Johnson (JNJ), Procter & Gamble (PG), and Unilever to report their production costs to the government as he seeks to extend price regulations in Venezuela. Initially, companies were given three days to register. (Bloomberg, 12-14-2011;

Food shortages worry Venezuelans
During a recent visit to Guaicaipuro, a traditional market in Caracas, the Venezuelan capital, a fresh meat refrigerator sat empty at a grocery. Many consumers looking for beef, poultry or fish had to go home empty-handed.
The produce section looked well stocked with plenty of fruits and vegetables. But consumers shopping at Guaicaipuro complained that prices, even for basic products, had skyrocketed. (CNN, 12-13-2011;

Venezuela will take another U$D 4 billion loan from China to finance an ambitious housing construction plan to be started in advance of the 2012 presidential elections, according to President Chávez. It was not clear whether he was referring to a new loan or to the third installment of the Chinese-Venezuelan Fund. (Veneconomy, 12-14-2011;; and El Universal;


Oil joint ventures operating in Venezuela seek U$D 14 billion
A dozen joint ventures operating in mature oil fields in Venezuela are studying new ways to relieve their tight cash flow and obtain fresh capital from parent companies or private banks for investment over the next five years. According to a source involved in planning told Reuters that companies seek to raise U$D 14 billion in outside funding to reverse the trend of declining or stalling oil production in Venezuelan oil fields. Spanish oil company REPSOL-YPF, Royal Dutch Shell and Brazilian federal oil company Petroleo Brasileiro (PETROBRAS), minority partners of state-run oil holding Petróleos de Venezuela (PDVSA) in several joint ventures, are among the oil firms seeking to reverse the trend of declining or stalling oil production in Venezuelan ancient oil fields, which require substantial investments. (El Universal, 12-14-2011;

Russia-Venezuela oil venture said set to miss 2012 output target
Russia’s five largest oil companies will fail to meet next year’s crude production target for the Junin 6 project with Petroleos de Venezuela SA, said two company officials with knowledge of the matter. The OAO Gazprom Neft-led group may produce no more than 10,000 barrels a day next year, about 20% of the planned level, said the people, who work at different companies and who declined to be identified because the matter is sensitive. State-run OAO Rosneft, OAO Lukoil, TNK-BP and OAO Surgutneftegas are partners. (Bloomberg, 12-15-2011;

Ramirez says OPEC agrees on oil output ceiling
The Organization of the Petroleum Exporting Countries (OPEC) has agreed on a new output limit for the first time in three years, thus ending a six-month argument over output quotas with a move that favors Saudi Arabia. The OPEC ministers agreed on a new supply target of 30 million barrels a day, according to Venezuelan Petroleum and Mining Minister Rafael Ramírez. The figure is roughly in line with current production. (El Universal, 12-14-2011;

Venezuela becomes the largest consumer of Guyanese rice
Venezuela purchased close to 160,000 metric tons of rice from Guyana during 2011, which makes it the largest cereal buyer, according to the Guyana Chronicle. The information was disclosed as Guyanese Agriculture Minister Leslie Ramsammy inspected an outgoing shipment of 5000 as part of a U$D 48 million agreement signed in October. The Guyana Chronicle says the deal means Caracas will purchase 30.000 metric tons  of white  rice at U$D 800 a unit; and another 50000 tons of paddy at U$D 480 per unit. There have been claims of surcharging in the deal. More in Spanish: (El Nacional, 12-15-2011;


Chavez launches new social programs, boosts spending ahead of re-election campaign
President Hugo Chavez is launching new social programs including hikes in pensions and a $100-a-month cash payment for needy children as he prepares for his re-election bid next year. Chavez has announced that the government would increase pension payments to more than 200,000 retirees through a newly created “mission” program. A day earlier, he launched a program to benefit the South American country’s poorest children, whose parents will receive $100 per child every month to help them makes ends meet. Such programs have helped Chavez cement support among the poor who are his electoral base. The newest programs will cost an estimated U$D 3.7 billion, Chavez said. (Washington Post, 12-13-2011;

CITGO resumes US energy aid effort
Venezuelan-owned oil group CITGO announced plans Tuesday to resume its winter energy assistance program to needy US consumers, a move which has drawn kudos from some but has also been denounced as propaganda. CITGO, a wholly owned subsidiary of the state-owned Petroleos de Venezuela, said its program offering heating oil will help more than 400,000 people this year in 25 US states, including 250 homeless shelters. CITGO president and chief executive Alejandro Granado was joined at the announcement by former congressman Joseph Kennedy II, now head of the nonprofit group Citizens Energy. (AFP, 13-12-2011;

US sees no change in bilateral relations
James Derham, Deputy Chief of Mission of the Embassy of the United States in Venezuela says the relationship between the governments of the two countries is "a complicated, most of the time, difficult relationship"; and added that "dramatic changes" will hardly appear in the bilateral relationship over the short term. (El Universal, 12-14-2011;

Carter Center will monitor opposition primary in February
Teresa Albanes, head of the Election Commission for the Democratic Unity opposition coalition announced that the Carter Center will attend as an international observer in opposition presidential primary election scheduled for February 12, 2012. She added that OAS Secretary General José Miguel Insulza is awaiting an invitation from the National Elections Board in order to send a representative from his organization. Over 40 international political leaders are expected to attend. More in Spanish: (El Nacional, 12-15-2011;

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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