December 22th, 2011

Economics & Finance

BCV chief discards devaluation; experts say it is inevitable

Central Bank (BCV) President, Nelson Merentes denied any devaluation of the official exchange rate, currently pegged at VB 4.30 to the U$D. "That is out, it makes no sense," he said, adding that " income is guaranteed and well balanced with expenses." He also denied the possibility of increasing the currency allocation for individual Internet purchases, and said economic growth will be around 5% by the end of 2011. (El Nacional, 12-22-2011; http://www.el-nacional.com/; El Universal, http://www.eluniversal.com/economia/111222/inflacion-bajara-entre-1-y-3-puntos-por-ley-de-costos; and more in Spanish: Tal Cual, http://www.talcualdigital.com/index.html; El Mundo, http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Devaluacion-de-23--generara-ingresos-extras-de-3-.aspx)

Tariffs may apply on sensitive products from Colombia

Luis Alberto Russian, President of the Venezuela-Colombia Economic Integration Chamber reports that although the presidents of both countries have signed a Partial Agreement, Andean Community will continue to govern trade between the two countries until January 22 until details are worked out between negotiators from both nations. It is being suggested that Venezuela apply tariffs on “sensitive” products coming from Colombia. (El Universal, 12-22-2011; http://www.eluniversal.com/economia/111222/aplicaran-aranceles-a-productos-sensibles-con-colombia)

BCV says Cost-Price Law should be applied to 50 products

The Central Bank of Venezuela (BCV) has recommended that the Government apply the Law on Costs and Fair Prices to 50 products, including beef, dairy, perishable items, cleaning supplies and personal hygiene items. The statement was made by Bank President Nelson Merentes, who said that "we have suggested focusing on the most driving forces of inflation” … as an approach and then extend it "to other products”. (El Mundo, 12-22-2011; http://www.elmundo.com.ve/Noticias/Economia/Banca/BCV-recomienda-aplicar-Ley-de-Costos-a-50-producto.aspx)

ECLAC: predicts Venezuelan economy is to grow 3% in 2012

The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) lowered its estimate of economic growth for the region to 3.7% in 2012, after having projected an economic growth of about 4%, due to an adverse external environment. Due to the adjustment, ECLAC estimates that Venezuela will record a 3% GDP, while in previous reports it projected a 3.5% growth. (El Universal, 12-21-2011; http://www.eluniversal.com/economia/111221/eclac-venezuelan-economy-is-to-grow-3-in-2012)

2011 real official expenditure up 67%

The government initially projected a U$D 47.44 billion budget for 2011, but due to commitments made during the fiscal year, the Venezuelan National Assembly has allocated 67% in additional funds than originally appropriated. Additional loans approved by the Venezuelan Congress came to U$D 32.02 billion. As a result, Venezuela's budgeted expenditures are now at U$D 79.5 billion. (El Universal, 12-21-2011; http://www.eluniversal.com/economia/111221/venezuelas-2011-budget-up-67)

Commodities

Production for seven agricultural items plummeted in 2011

The National Federation of Agricultural Producers (FEDEAGRO( says Venezuelan agriculture did not recover in 2011. Weather, price controls, legal and personal insecurity, land seizures, input shortage s and the steady increase in production costs hit agriculture this year. The Federation reported that domestic agriculture continued "a downward trend noted in previous years" and recorded a significant fall in seven basic food staples. The year-end balance supplied by the farmers association states that the production of corn took a 23.68% plunge. (El Universal, 12-22-2011; http://www.eluniversal.com/economia/111222/seven-agricultural-goods-tumble-in-2011)

Chavez claims Venezuela will boost oil output to 3.5 Million BPD

President Chavez now claims Venezuela will boost its production of crude to 3.5 million barrels per day in 2012.

“We are at 3 million, fluctuating there – a little more, a little less – there we are at 3 million. Now, in 2012, as a result of all the efforts we have made, we should make a leap to 3.5 million,” he said during a Cabinet meeting broadcast on state television. He also predicted Venezuela’s oil output will reach 4 million bpd in 2014, adding that no more than five countries in the world have “the capacity to increase production at a pace like this.” (Latin American Herald Tribune, 12-20-2011; http://www.laht.com/article.asp?ArticleId=454149&CategoryId=10717)

International Trade

MERCOSUR sets up committee to study Venezuela's deferred entry

The presidents of MERCOSUR (the Common Market of the South) set up a high level committee to seek a way to carry out Venezuela's entry into the bloc - which has been halted for five years by the Paraguayan Senate. President Chavez travelled personally to the latest MERCOSUR Summit in Uruguay in order to seek an expeditious way to overcome legal barriers based on the group’s democracy requirements, but came away empty handed as the matter was handed over to a special panel to be appointed by MERCOSUR heads of State. (El Universal, 12-21-2011; http://www.eluniversal.com/economia/111221/mercosur-sets-up-committee-to-study-venezuelas-entry; and more in Spanish: El Nacional; http://www.el-nacional.com/)

Politics

Noam Chomsky pleads with Hugo Chavez to free judge

Hugo Chavez's long-time supporter Noam Chomsky has issued a renewed appeal to the President to free a judge who was controversially jailed two years ago. Maria Lourdes Afiuni, 48, is currently under house arrest in Caracas.  Chomsky, a linguistics professor from the Massachusetts Institute of Technology, urged Chavez to "correct an injustice". Afiuni is a cancer patient who underwent an abdominal hysterectomy while in jail. Afiuni's troubles began on 10 December 2009 when she granted bail to Eligio Cedeño, a businessman and banker who had been jailed on charges that he had evaded currency controls and, on release, fled to the United States. Her ruling triggered a furious public reaction from Chávez, who took to the airwaves claiming the judge deserved 30 years in prison and suggesting that in another era she would have been hauled before a firing squad. (The Guardian, 12-21-2011; http://www.guardian.co.uk/world/2011/dec/21/chomsky-chavez-free-judge-letter)

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.