December 20th, 2011

Economics & Finance

International reserves drop 4.4% in 2011

Although oil prices have risen 40% to an average U$D 100.87, there is no growth in currency availability at the Central Bank for exchange needs and foreign debt payments. International reserves have dropped by 4.4% during 2011, and on December 15 were pegged at U$D 28.198 billion. More in Spanish: (El Universal, 12-20-2011; http://www.eluniversal.com/economia/111220/reservas-internacionales-acumulan-caida-de-44)

55% of debt held abroad

Official figures from the Ministry of Finance and Planning show that July-September 2011 total central government public debt was up to U$D 78.598 billion dollars, which is an increase of 8,68%, over June this year. More in Spanish: (El Mundo, 12-20-2011; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/55--de-la-deuda-se-encuentra-en-manos-de-acreedore.aspx)

Private sector wage purchasing power remains stagnant

The private sector has begun to recover after two years of recession, but worker purchasing power, after subtracting the effect of inflation, on average recorded only a small improvement of 1.4%, during 3Q 2011 as compared to 3Q 2010, according to Central Bank figures. Jose Guerra, director of the School of Economics, Central University of Venezuela, believes that "the private sector comes from a long recession; this means that companies sell less and in a context of high inflation is very difficult to improve the wages in real terms." (El Universal, 12-19-2011; http://www.eluniversal.com/economia/111219/se-estanca-capacidad-de-compra-del-salario-en-el-sector-privado)

Bank Superintendency approves Caroni, Guayana merger

The Banking Superintendency approved the merger of Banco Caroni C.A. and Banco Guayana, according to a resolution published in today’s Official Gazette. Banco Caroni’s assets now represent 1.7% of the total in Venezuela’s banking system, making it the country’s 10th largest bank, according to data on the Superintendency’s website. (Bloomberg, 12-16-2011; http://www.bloomberg.com/news/2011-12-16/venezuela-s-bank-superintendency-approves-caroni-guayana-merger.html)

Commodities

Coal processing plant expropriated 

The Government has ordered the expropriation of the Grafitos Del Orinoco carbón products industrial processing plant in the Industrial Area of Matanza, at Puerto Ordaz in Bolivar state. The plant processes such products as anthracite and liquid graphite. More in Spanish: (El Nacional, 12-20-2011; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/111220/gobierno-decreta-expropiacion-de-grafitos-del-orinoco)

Venezuela mortgages its oil to China for U$D 30 billion

China increased its claim on Venezuela's oil production this week with an additional U$D 4 billion in loans, bringing to U$D 30 billion the total owed by the nation, which is secured by future Venezuelan oil production. To repay the debt, Venezuela now sends about 410,000 barrels of crude a day to China, or half the average 806,000 barrels per day that Venezuela sent to U.S. refineries in September, the last month for which Department of Energy figures are available. The country's average production is 2.3 million to 2.4 million barrels per day. Planning and Finance Minister Jorge Giordani said this week that China does not get a discount on the oil it receives. If true, that means Venezuela is receiving the loans without paying any financing costs or interest rates. Apart from the loans, China has signed deals totaling U$D 40 billion to invest in energy projects through 2016, including an oil production and refining project called Junin in the oil-rich Orinoco Belt in eastern Venezuela. (Los Angeles Times, 12-16-2011; http://latimesblogs.latimes.com/world_now/2011/12/china-venezuela-loan-oil.html)

Venezuelan oil slips to U$D 104.39

Venezuela's weekly oil basket slipped to U$D 104.39 as oil prices fell in international markets as hopes dimmed for a rapid resolution of the debt crisis rocking Europe and world markets. According to figures released by the Venezuela Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending December 16 fell to U$D 104.39 from the previous week's U$D 107.47. (Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=452806&CategoryId=10717)

Rusoro may turn to arbitration to resolve Venezuela gold mining dispute

Rusoro Mining Ltd. (RML) said it may file a claim against Venezuela in an international arbitration court if negotiations to resolve the nationalization of its assets aren’t resolved within six months. Rusoro, a Vancouver-based gold mining company, said a 90- day period to form a joint venture with the government following the nationalization of the gold industry in September has expired. The company hasn’t been told about the status of the venture or any possible compensation. (Bloomberg, 12-17-2011; http://www.bloomberg.com/news/2011-12-17/rusoro-may-turn-to-arbitration-to-resolve-venezuela-gold-mining-dispute.html)

Ferrominera Orinoco closes year producing 17 million tons of iron ore, still beneath break even

According to union sources, Ferrominera Orinoco will close this year producing 17 million tons of iron ore. This is an increase of almost 2 million tons above last year but still below break even, which requires producing over 20 million tons. More in Spanish: (El Mundo, 12-20-2011; http://www.elmundo.com.ve/noticias/economia/industrias/ferrominera-orinoco-cierra-produccion-en-17-millon.aspx)

International Trade

Chávez visits Uruguay to push for Venezuela´s entry toe MERCOSUR

President Chavez says he feels well enough to attend the MERCOSUR summit meeting in Uruguay, where the Foreign Ministers of Argentina, Brasil, Paraguay and Uruguay seek ways to circumvent a veto by Paraguay’s Congress on Venezuela’s admission into MERCOSUR due to compliance issues with the group´s democracy requirements. Before departing for Montevideo, Chavez said increased trade within South America is key to meeting the challenges of the global financial crisis. More in Spanish: (Últimas Noticias, 12-20-2011; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/chavez-viaja-para-puyar-ingreso-en-el-mercosur.aspx); El Nacional; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/nacional-y-politica/111220/mercosur-busca-formulas-para-acoger-a-venezuela) and Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/chávez-propone-aumentar-mercado-suramericano-para-enfrentar-crisis-económica-mundial)

Trade rules with Colombia remain undefined

An inside source that withheld its identity says that despite an agreement signed by the Presidents of both nations at the close of November, specific customs rules remain undefined. Meetings last week “were not very fluid” and no agreement was reached on several instances. Colombia wants no tariff on products involved in bilateral trade from 2006 to 2010, while Venezuela expects preferential tariffs to be applied to 90% of products exchanged during the same period. More in  Spanish:  (El Universal, 12-20-2011; http://www.eluniversal.com/economia/111220/sin-definir-las-normas-comerciales-con-colombia)

Subsidized food ends up in Colombia as contraband

Products subsidized by the Venezuelan Government and sold at controlled prices through MERCAL and PDVAL goes to Colombia border towns "in large trucks at late hours and it is not known which authorities allow this”. Venezuelan made powdered milk, corn oil, and precooked flour are sold in their original packaging and at prices up to six times greater than in Venezuela. Currency exchange rates favor Colombia, making the deal even more lucrative. More in Spanish:  (El Nacional, 12-20-2011; http://www.el-nacional.com/)

Venezuela receives another 60 tons of textiles from Bolivia

A second shipment of 60 tons of textiles from Bolivia, arrived in Venezuela last week. Huáscar Ajata, Bolivia's Vice Minister of Trade and Exports, reported that the shipment includes more than 100,000 units of clothing and 30% of it was prepaid by Venezuela. The rest of the shipment (70%) remains to be paid, Bolivian media reported. (El Universal, 12-19-2011; http://www.eluniversal.com/economia/111219/venezuela-receives-another-60-tons-of-textiles-from-bolivia)

Trade with Ecuador grew 20%

Trade between Venezuela and Ecuador grew by U$D 300 million this year, compared to 2010, says Ecuador's ambassador to Caracas, Ramon Torres. The increase is due to the development of new forms of trade in place after Venezuela withdrew from the Andean Community (CAN), says Minister of Commerce, Edmee Betancourt. Bilateral trade in 2010 was U$D 1.5 billion. (Últimas Noticias, 12-19-2011; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/intercambio-economico-con-ecuador-crecio-20-.aspx)

Venezuela and Cuba sign 47 cooperative agreements for 2012

Oil and Mining Minister Rafael Ramirez reports that both nations signed 47 agreements for cooperation during 2012, fo a total of U$D 1.6 billion. Agreements were reached for joint programs on education, agriculture, transport, trade, culture, environment sport, health and electricity. More in Spanish: (AVN, 12-20-2011; http://www.avn.info.ve/contenido/venezuela-y-cuba-suscribieron-47-acuerdos-cooperación-para-año-2012)

Politics

Obama: "Venezuela ties to Iran and Cuba have not served its interests", Chavez calls him a “total fraud”

The US Head of State answered in written form to a questionnaire forwarded by El Universal daily in Caracas. President Obama highlighted that his government is worried to see undermined public powers in Venezuela and the ties of the Venezuelan government to Iran. He also advocated more cooperation between the United States and Venezuela. "In Venezuela, we have been deeply concerned to see action taken to erode the separation of powers." "I look forward to the day when our governments can work more closely". Obama’s replies drew immediate sharp rebukes from both Chavez – who called the US President a “total fraud” - and his supporters, demanding he “mind his own business” and leave Venezuela alone. (El Universal, 12-29-2011; http://www.eluniversal.com/nacional-y-politica/111219/venezuelan-govts-ties-to-iran-and-cuba-have-not-served-its-interests; Reuters, 12-19-2011; http://www.reuters.com/article/2011/12/19/us-venezuela-usa-obama-idUSTRE7BI14H20111219; The Washington Post, http://www.washingtonpost.com/world/americas/obama-criticizes-venezuelas-rights-record-ties-to-iran-and-cuba-in-remarks-to-newspaper/2011/12/19/gIQAyF5Y4O_story.html; More in Spanish: AVN; http://www.avn.info.ve/contenido/chávez-“obama-es-fraude-total; El Universal, http://www.eluniversal.com/nacional-y-politica/111220/chavez-insta-al-presidente-estadounidense-a-dejarnos-tranquilos)

Chavez rolls back seizures as shortages hurt re-election bid

President Chavez is enlisting Mexico’s Gruma SAB, French retailer Casino and other international companies to boost supplies of milk, corn flour and cement as shortages threaten to dent his bid for re-election in 2012. He is rolling back policies that have allowed him to expand control over the economy. He is forging alliances with corporations he previously accused of price-gouging.  He now says: “In the past, socialist models that nationalized everything were forced to later ease their policies.” “We’re moving towards a flexible model, our historic creation.” Colombia-based Forsa SA, which produces aluminum molding for construction, has agreed to a joint venture to produce materials for housing projects. Healso invited Cemex SAB to re-invest in the country after paying the Monterrey-based company $600 million this month to resolve a three-year dispute over compensation for assets seized in 2008. (Bloomberg, 12-16-2011; http://www.bloomberg.com/news/2011-12-16/chavez-rolls-back-seizures-as-shortages-hurt-bid-for-third-term.html)

Venezuela honors Simon Bolivar with new coffin

President Chavez has unveiled a new coffin containing the remains of 19th Century South American independence hero Simon Bolivar. The mahogany coffin, encrusted with diamonds, pearls and golden stars, was revealed at a ceremony to mark the anniversary of Bolivar's death in 1830. The president claims him as the inspiration for his "Bolivarian" revolution, though some historians say Bolivar would not agree with Mr. Chavez's socialist policies. (BBC, 12-18-2011; http://www.bbc.co.uk/news/world-latin-america-16236105)

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.