January 31th, 2012

Economics & Finance

Chavez again threatens to nationalize banks over agriculture loans to farmers

President Hugo Chavez threatened to take over the country’s banks if they don’t hand over 40 billion bolivars (U$D 9.31 billion) for agriculture loans this year. Chavez, speaking on state television yesterday, cited Banesco Banco Universal, BBVA Banco Provincial and Mercantil Banco Universal for giving loans to industrial producers and not to small farmers. The government plans to create a fund called Ezequiel Zamora to assign the loans directly, while borrowers pay the banks, Chavez said. The president will use special legislative powers granted to him by the congress to create the fund, he said. (Bloomberg, 01-30-2012; http://www.bloomberg.com/news/2012-01-30/chavez-threatens-to-seize-banks-to-guarantee-agricultural-loans.html)

Chavez: Venezuela won’t accept rulings by World Bank’s international arbitration body

Venezuela’s government will ignore future decisions by a World Bank-affiliated arbitration body involving any business disputes in the South American country, President Hugo Chavez said Friday. Venezuela formally began its withdrawal from the Washington-based International Center for Settlement of Investment Disputes this week. (The Washington Post, 01-28-2012; http://www.washingtonpost.com/business/industries/chavez-venezuela-wont-accept-rulings-by-world-banks-international-arbitration-body/2012/01/27/gIQAp9LSWQ_story.html)

Venezuela receives shipment of gold, says it has withdrawn U$D 9 billion from foreign banks

Venezuela repatriated a final shipment of gold from foreign banks Monday, saying the country has withdrawn a total of U$D 9 billion in its gold reserves and moved it to the country’s Central Bank. The shipment of 14 metric tons (15 tons) brought the total amount of gold shipped to Venezuela since November to 160 metric tons (176 tons), Central Bank President Nelson Merentes said. Merentes did not say from where the shipment had arrived, nor in which foreign banks Venezuela still has gold. While some economists have questioned the move, Chavez has said having the gold in Venezuela will help protect the oil-exporting country from economic troubles in the U.S. and Europe. (Washington Post, 01-30-2012; http://www.washingtonpost.com/business/venezuela-receives-shipment-of-gold-says-it-has-withdrawn-9-billion-from-foreign-banks/2012/01/30/gIQAIRIWdQ_story.html)

Commodities

Over 550,000 agriculture units received financing in 2011 in Venezuela

A total of 554,293 agricultural units received State credits in 2011. That is an increase of 200% compared to 2010, highlighted this Sunday president Hugo Chavez, during his weekly TV and radio show "Alo, Presidente."

President Chavez recalled that governmental program Mission AgroVenezuela, launched on January 25 2011, was the first "grand mission" created to boost the socio-productive development of the country. Almost 700,000 agricultural production units registered, almost all of them have been inspected already.

In reference to financing, the head of State said that "of the whole units that have been included in the financing system, we have granted credits to 81%: 554,293." (AVN, 29-01-2012; http://www.avn.info.ve/contenido/over-550000-agriculture-units-received-financing-2011-venezuela)

PDVSA debt up 40%, even at higher oil prices

Venezuelan oil prices rose in 2011, but it did not translate into much higher oil revenues given the performance of oil exports. Balance of payments figures provided by the Central Bank of Venezuela (BCV) show that with oil prices at U$D 101.04, oil revenues amounted to U$D 89.9 billion, with export volume at 2.51 million barrels per day, according to state-run oil holding Petróleos de Venezuela (PDVSA) as of June 30, 2011. (El Universal, 01-28-2012; http://www.eluniversal.com/economia/120128/even-with-higher-oil-prices-pdvsas-debt-is-up-40)

Venezuela’s export barrel averaged U$D 107.58/bbl., this week, down from U$D 108.04/bbl. posted last week, according to the Ministry of Oil and Mining. The average for the year is U$D 108.23/bbl as compared to an average U$D 101.04/bbl. last year. (Veneconomy, 01-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29190&idc=4)

SIDOR says it will produce 3.7 tons of liquid steel during 2012. Carlos D’Oliveira, President of the state owned company made the announcement in a press release. More in Spanish: (Agencia Venezolana de Noticias, 01-31-2012; http://www.avn.info.ve/contenido/durante-2012-sidor-producirá-37-millones-toneladas-acero-líquido)

Gold production plummets at VENRUS and RUSORO

Both companies have survived due to sales to the Central Bank (BCV). VENRUS did not process a single gram of gold in January 2012, as the La Camorra gold processing plant has been paralyzed since November. If it sells an expected 250 ounces this week it will use up inventories. RUSORO produced 1000 ounces approximately in January 2012, but the reduction is dramatic considering it averaged 6,000 ounces per month production during 2011. More in Spanish: (El Universal, 01-31-2012; http://www.eluniversal.com/economia/120131/en-picada-produccion-aurifera-de-venrus-y-rusoro)

International Trade

Imports from Colombia said to double

Even as the governments of Venezuela and Colombia have not concluded negotiations on a partial trade agreement, ECOANALITIC is projecting imports from Colombia could double this year. A report by the firm says Colombia’s export volume to the local market should total U$D 4.5 billion in 2012, this would double imports in 2011, according to the Venezuela-Colombia Economic Integration Chamber. More in Spanish: (El Universal, 01-31-2012; http://www.eluniversal.com/economia/120131/estiman-que-se-duplicaran-compras-a-colombia)

Byelorussia admits irregularities in Venezuela

Caracas and Minsk traded over U$D 2 billion in 2011, but irregularities have been reports. Byelorussian President, Aleksandr Lukashenko, admitted that "complaints and law violations were brought to light in Venezuela". (El Universal, 01-28-2012; http://www.eluniversal.com/nacional-y-politica/120128/byelorussia-admits-irregularities-in-venezuela)

Politics

Elias Jaua appointed to Agriculture and Lands Ministry

President Hugo Chavez has appointed Vice President Elias Jaua to take command of the Agriculture and Lands Ministry. He said that outgoing minister, Juan Carlos Loyo, will leave his functions to follow a medical treatment.

Also, he said that strategies will be reinforced so as to give more strength to agricultural production. (AVN, 29-01-2012; http://www.avn.info.ve/contenido/elias-jaua-appointed-agriculture-and-lands-ministry)

Mexican Ambassador and wife kidnapped, held 4 hours, assailants not captured

Mexico’s  Ambassador to Venezuela, Carlos Pujalte, and his wife were kidnapped Sunday night and freed Monday morning after a large amount of dollars were paid to captors, according to unofficial sources. The Mexican Embassy reports both the Ambassador and his wife are in good health, has asked the Venezuelan Government for an extensive investigation, and has offered to assist local authorities. The criminals remain at large. More in Spanish: (Tal Cual, 01-31-2012; http://www.talcualdigital.com/index.html)

Venezuela’s new chance

In 13 years of ruling Venezuela, Hugo Chavez has often benefited from his opposition. His first election victory reflected disgust with a complacent and corrupt political order; in his early years, the remnants of that elite played into his hands by boycotting elections while trying to oust him through non-democratic means. In the last presidential election, in 2006, Mr. Chavez faced a respectable but uncharismatic opponent with a history in the old order. He won handily, then forced challenger Manuel Rosales into exile.

Six years later Mr. Chavez’s Venezuela is a wretched mess of inflation, food shortages, rampant drug trafficking and one of the world’s highest murder rates. Yet in the opposition, a promising new political generation has emerged whose leaders look a lot like their counterparts in Brazil, Chile or Mexico. They are populist but pragmatic; internationally schooled yet focused on the problems of the poor; and committed to peaceful change. With another presidential election less than nine months away, they are offering Venezuela a path toward rejoining the democratic world. (The Washington Post, 01-30-2012; http://www.washingtonpost.com/opinions/venezuelas-new-chance/2012/01/25/gIQA2kOxaQ_story.html)

Spanish Government told to stand up for expropriated nationals

Ana Oramas, a congresswoman in the Spanish Parliament has requested an appearance by that nation’s Foreign Ministry in order to provide information on “the lack of physical and legal guarantees suffered by Spanish citizens in Venezuela. The parliamentary delegation from the Canary Islands asked the Government to disclose what it is doing on behalf of Spanish citizens whose property has been expropriated in Venezuela. More in Spanish: (Tal Cual, 01-31-2012; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/economia/120131/solicitan-aclarar-expropiaciones-realizadas-a-los-espanoles;  El Nacional; http://www.el-nacional.com/)





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.

January 27th, 2012

Economics & Finance

World Bank confirms Venezuela will be out of ICSID in six months, current liabilities remain

The World Bank confirmed it has received Venezuela’s request to withdraw from the International Center for Settlement of Investment Disputes (ICSID) and added withdrawal will take effect six months after receipt of such notification, which is July 25, 2012. The Foreign Ministry said in a press release the 1966 treaty that established the ICSID undermines Venezuela's sovereignty. Withdrawing from ICSID does not mean Venezuela can avoid over 20 suits that have been brought against the Chavez regime, including suits brought by international oil companies. (Veneconomy, 01-25-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29147&idc=2; El Universal, http://www.eluniversal.com/economia/120125/venezuela-officially-withdraws-from-icsid; More in Spanish: El Mundo, 01-27-2012, http://www.elmundo.com.ve/Noticias/Economia/Politicas-Publicas/Banco-Mundial--Venezuela-quedara-fuera-del-Ciadi-e.aspx; Tal Cual; http://www.talcualdigital.com/index.html)

Trade association thinks that Law on Fair Prices is risky for the government

Carlos Fernández, president of the Venezuelan Council of Trade and Services (CONSECOMERCIO), thinks that "it is a political risk for the government" to enforce the Law on Costs and Fair Prices. The businessman says, "when prices increase, the blame is placed on storekeepers; but when the government raises prices, the blame is also placed on retailers; if the government does not adjust prices, this will lead to product shortages. And it is politically costlier than raising prices." (El Universal, 01-25-2012; http://www.eluniversal.com/economia/120125/trade-association-thinks-that-law-on-fair-prices-is-risky-for-govt; http://www.eluniversal.com/economia/120125/businesses-to-expand-production-amidst-higher-govt-spending)

Former central bank manager: there will be no devaluation in 2012

José Guerra, former manager for economic research at the Central Bank of Venezuela (BCV), says the Government can count on high oil prices, indebtedness and funding from the National Development Fund (FONDEN), the Venezuelan Bank for Economic and Social Development (BANDES) and the Treasury Bank. (El Universal, 01-25-2012; http://www.eluniversal.com/economia/120125/former-central-bank-manager-there-will-be-no-devaluation-in-2012)

Commodities

PDVSA says it invested U$D 15.1 billion in 2011

Rafael Ramírez, Minister of Petroleum and Mining, visited the Orinoco Oil Belt and said that oil production in that area is expected to increase from 1.18 million bpd to 1.63 million. He said that about 100,000 workers will be needed in the Orinoco Belt to meet the goals of the Oil Sowing Plan. Ramírez also said that state-run oil company Petróleos de Venezuela (PDVSA) invested U$D 15.1 billion in 2011, 31% more than in 2010, when PDVSA invested U$D 11.5 billion. According to the 2010 annual management report released by PDVSA, the Venezuelan oil industry had planned to invest U$D 18.36 billion (including partners' contribution) in the Oil Sowing Plan in 2011. (El Universal, 01-25-2012; http://www.eluniversal.com/economia/120125/pdvsa-says-it-invested-usd-151-billion-in-2011)

New Orinoco oil wells drilled to boost production

Petróleos de Venezuela SA, the state oil company, and a group of Russian companies started drilling the first oil well on the Junín 6 block today in the Orinoco crude belt, Oil Minister Rafael Ramirez said. PDVSA operates the block in a venture with Consorcio Nacional Ruso SRL and will reach production of 20,000 barrels of oil a day by December after starting early production in June, Ramirez told reporters. “The plan that we presented to increase current production of about 3 million barrels a day to 3.5 million barrels a day is based on 470,000 barrels a day of new output from the Orinoco belt and 88,000 barrels a day that will come from the West of the country,” said Ramirez. (Bloomberg, 01-24-2012; http://www.bloomberg.com/news/2012-01-24/pdvsa-russian-partners-begin-drilling-at-junin-6-ramirez-says.html)

Agriculture Minister says China will help develop 600,000 hectares of farmland, under an agreement signed that calls for road recovery, irrigation systems, and building infrastructure for agriculture and agribusiness. More in Spanish: (El Universal, 01-27-2012; http://www.eluniversal.com/economia/120127/china-apoyara-desarrollo-de-600-mil-hectareas-agricolas)

International Trade

China-Venezuela trade reached U$D18 billion

Chinese and Venezuelan trade exchange reached U$D18 billion in 2011, according to the Chinese Ambassador in Caracas Zhao Rongxian. He announced they expect to exceed the U$D 20 billion in 2012 and reminded reporters by the end of 1999, the first year of the Chávez administration, trade amounted to U$D 358 million. (Veneconomy, 01-25-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29140&idc=2)

Russian official says Venezuela has no plans to buy more weapons

Sergei Chemezov, director of Russian state-run industrial holding company ROSTEKHNOLOGII, said that the company does not expect that the Venezuelan government will sign new contracts to buy Russian weapons. (El Universal, 01-25-2012; http://www.eluniversal.com/nacional-y-politica/120125/russian-official-venezuela-has-no-plans-to-buy-more-weapons)

Politics

Obama says Chavez blames US for his own failures

US President Barack Obama expressed his wish for an improvement of relations with Venezuela, but said “There is an unfortunate tendency by the Venezuelan Government to use the United States as an excuse for the failure of some of their domestic policies; and also to cause problems for some of their neighbors”. Obama said bilateral problems were “manageable”. More in Spanish: (El Universal, 01-27-2012; http://www.eluniversal.com/nacional-y-politica/120127/obama-cree-que-chavez-excusa-su-fracaso-con-eeuu)

Lopez bows out of Venezuela presidential race, supports opposition front-runner Capriles

Opposition politician Leopoldo Lopez bowed out of Venezuela’s presidential race on Tuesday, saying he will support his leading rival as the opposition seeks to field a single candidate to challenge President Hugo Chavez. The announcement gives a significant boost to Henrique Capriles, the youthful 39-year-old state governor who has a commanding lead in the polls ahead of the Feb. 12 opposition primary. It also shakes up the field of five remaining contenders in the primary, which will choose a unity candidate to face Chavez in the Oct. 7 election. (The Washington post, 01-25-2012; http://www.washingtonpost.com/world/americas/lopez-bows-out-of-venezuela-presidential-race-supports-opposition-front-runner-capriles/2012/01/24/gIQAujsiNQ_story.html)

Counting the cost of crime

A recent report shows that Venezuela’s acute insecurity problem – it has one of the highest homicide rates in the world – also makes it the Latin American country where crime affects businesses the most. Basing its findings on World Bank figures, a new survey by Latin Business Chronicle looked at factors like the losses sustained by companies as a result of robberies and vandalism, as well as the cost of security. (Latin Business Chronicle, 01-25-2012; http://www.latinbusinesschronicle.com/app/article.aspx?id=5413)

Venezuela expects OPEC to discuss Iran situation

The members of the Organization of Petroleum Exporting Countries, or OPEC, must urgently discuss the “aggression against Iran” by the United States and Europe, according to Energy Minister Rafael Ramirez. OPEC, whose rotating presidency is held by Iraq, has not called a meeting of member countries to discuss the situation, but the oil cartel must do so because “any direct aggression or attack on Iran will cause a sharp rise in oil prices,” Ramirez said. (Latin American Herald Tribune, 01-25-2012; http://www.laht.com/article.asp?ArticleId=465489&CategoryId=10717)

Brazil, Venezuela defense ministers meet in Caracas

Brazilian Defense Minister Celso Amorim arrived in Caracas to hold a meeting with President Hugo Chavez and with his Venezuelan counterpart, Henry Rangel Silva, to tackle with issues related to security and defense in the two nations. (AVN, 01-25-2012; http://www.avn.info.ve/contenido/brazil-venezuela-defense-ministers-meet-caracas; El Universal, 01-25-2012; http://www.eluniversal.com/nacional-y-politica/120125/brazil-venezuela-sign-agreements-on-security)

CNE says it is ready for all of the three elections this year

Tibisay Lucena, president of the National Electoral Council (CNE) has said that the CNE is "ready" to carry out all of the three elections scheduled for 2012. Some of the work completed in 2011 included preparing handbooks for polling station members, review of nominations, streamlining of voting machines and year long enrollment. (El Universal, 01-25-2012; http://www.eluniversal.com/nacional-y-politica/120125/cne-gets-ready-for-all-of-the-three-polls-this-year)

Attorney General Carlos Escarra dies of heart attack

Justice Minister Tareck Al Aissami announced that that the Attorney General has died of a heart attack on Wednesday. Lawmakers allied with President Hugo Chavez chose Escarra as attorney general in August 2011. (The Washington post, 01-25-2012; http://www.washingtonpost.com/world/americas/venezuelas-attorney-general-carlos-escarra-dies-of-heart-attack/2012/01/25/gIQAzxVvQQ_story.html; Bloomberg, http://www.bloomberg.com/news/2012-01-25/chavez-s-lawyer-of-the-revolution-dies-from-heart-attack-1-.html)

US offers help to reopen Venezuela's consulate in Miami

Mike Hammer, Acting Assistant Secretary for Public Affairs, said Tuesday through Twitter that his government is willing to work with Venezuela to keep the Venezuelan consulate in Miami open. "The decision to close the consulate is that of the government of Venezuela. We are unaware of threats to the Consulate. We take seriously the obligation to protect diplomats. We are willing to work with Venezuela if they keep the consulate open," Hammer replied to a journalist's question. (El Universal, 01-25-2012; http://www.eluniversal.com/nacional-y-politica/120125/us-offers-help-to-reopen-venezuelas-consulate-in-miami)

January 24th, 2012

Economics & Finance

Venezuela among lowest in poverty rates in Latin America

According to the UN Economic Commission for Latin America (ECLA), Venezuela ranks third among nations with the lowest poverty rates in Latin America. In a report called “Social Outlook on Latin America 2011” it says that in 2010 the number of Venezuelans ranked as poor was 27.8%. It also says that from 2002 to 2010 poverty went from 48.6% to 27.8%; and extreme poverty fell from 22.2% to 10.7%. More in Spanish: (Ultimas Noticias, 01-23-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-es-uno-los-menos-pobres-de-latinoamerica.aspx)

Venezuela ranks high on initiatives

The Global Enterprise Monitor (GEM) has again ranked Venezuelans among those with the highest vocation for initiative. The study shows 15.4% of the population is undertaking new initiatives, which places Venezuela in 11^th place among 54 nations analyzed. Although the index has deteriorated in the past few years, the report says “Venezuela continues to be one of the nations with the highest TEA rates worldwide”. More in Spanish: (El Universal, 01-23-2012; http://www.eluniversal.com/economia/120123/venezuela-entre-los-paises-con-mayor-emprendimiento)

Where has the money gone?

Over USD 22 billion should have been received by the Venezuelan Bank for Economic and Social Development (BANDES) from the Chinese Fund; and it is still unclear where that money has gone after being directly handled by the National Executive. Vice-President Elías Jaua and Minister of Energy and Petroleum Rafael Ramírez are due to pay a visit to the National Assembly in order to explain how this credit scheme works and render accounts on how they have invested it. (El Universal, 01-21-2012; http://www.eluniversal.com/economia/120121/where-has-the-money-gone)

Venezuela rebuffed by U.S. High Court on BANDAGRO bond suit

The U.S. Supreme Court refused to block an Ohio investor group from suing Venezuela over potentially U$D 900 million in bank notes that the South American country says are forgeries. The justices today turned away an appeal from Hugo Chavez’s Venezuelan government, which sought to invoke a U.S. law that immunizes foreign sovereigns from some lawsuits in American courts. The Supreme Court acted after the Obama administration urged rejection of the appeal. (Bloomberg, 01-23-2012; http://www.bloomberg.com/news/2012-01-23/venezuela-rebuffed-by-u-s-high-court-on-bandagro-bond-suit.html)

The first Venezuelan branch of the Spirito Santo Bank, BES Universal Bank, opened its doors in Caracas. The Portuguese bank, headed by Antonio Ramírez is one of the international financial institutions from which PDVSA has borrowed money in the last five years. (Veneconomy, 01-20-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29093&idc=2)

Since 1985, Venezuela has failed to take inflation to one digit

Inflation in Venezuela has two stages: a stable period in 1950-1978 that contributed to create wealth; another stage where the way was lost, to such an extent that since 1985, the governments of Presidents Jaime Lusinchi, Carlos Andrés Pérez, Rafael Caldera, and Hugo Chávez have failed to prevent prices from increasing less than 10% in one year. (El Universal, 01-21-2012; http://www.eluniversal.com/economia/120121/since-1985-venezuela-has-failed-to-take-inflation-to-one-digit)

Commodities

Declining oil production mirrors low investment

Venezuela has the world's largest oil reserves in the Orinoco Oil Belt and the price of oil has increased by 17% since 2008. However, these two facts have not led to a steady increase in oil output. Both delayed implementation of the 2010-2015 Oil Sowing Plan and the global economic crisis have hit PDVSA's oil production. José Guerra, former economic research manager at the Central Bank of Venezuela (BCV) says: "PDVSA's investment level is very low. Investments in oil exploration and production do not even reach 1% of revenues, whereas oil giants spend between 2% and 3% of their revenues" in that area. (El Universal, 01-23-2012; http://www.eluniversal.com/economia/120123/venezuelas-declining-oil-production-mirrors-low-investment

PDVSA fails to provide guarantees for a refinery with PETROBRAS

In a new setback for the delayed project, Venezuela's state-run oil company Petróleos de Venezuela (PDVSA) has not provided acceptable guarantees to obtain financing that would ensure its share along with Brazilian federal oil company Petroleo Brasileiro (PETROBRAS) in a USD 14 billion refinery in the Brazilian state of Pernambuco, accorgint eo Brazilian media. PDVSA would need a U$D 10 billion loan from state-owned Brazilian National Development Bank (BNDES) to fund its 40% stake in the Abreu e Lima refinery in the northeastern state of Recife, according to Brazilian newspaper Valor Económico said. (El Universal, 01-20-2012; http://www.eluniversal.com/economia/120120/pdvsa-fails-to-provide-guarantees-for-a-refinery-with-petrobras)

PDVSA’s Luongo says Amuay Refinery operating normal after fire

Petroleos de Venezuela SA’s Amuay refinery is operating normally after a small fire at a distillation unit yesterday, Jesus Luongo, general manager of the complex, said in a statement on the company’s website.

The fire was extinguished within 10 minutes and is a “routine incident” in refining activities, Luongo said, according to the statement. (Bloomberg, 01-22-2012; http://www.bloomberg.com/news/2012-01-22/pdvsa-s-luongo-says-amuay-refinery-operating-normal-after-fire.html)

Aluminum: Minister admits VENALUM and ALCASA in terrible shape

For many years VENALUM and ALCASA sold raw materials to local manufacturers at a small discount. Now multinationals get all of the advantages and domestic industry has all of the problems. During a recent visit to VENALUM, Ricardo Martínez, Minister for Industries responsible for Guayana and its industries, declared that “I did not know this was as bad, with so many problems; I thought it was exaggerated opposition propaganda”. He made the statement to a group of workers during a plant tour with company president Rada Gamluch. Workers had pointed out almost 400 inactive reduction cells, the lack of raw material needed to produce high quality aluminum, and the staggering debts to labor. More in Spanish: (Tal Cual, 01-24-2012; http://www.talcualdigital.com/index.html)

Venezuela gas deal to boost local power generation

As gas prices plunge to their lowest for a decade, Venezuela will pay over the odds to tap one of Latin America's biggest fields wanting to boost power generation and even help revive stagnant oil production. Venezuela is among the top 10 nations in terms of gas reserves, but has yet to begin any commercial production. Instead, it imports supplies from neighboring Colombia. (Reuters, 01-20-2012; http://www.reuters.com/article/2012/01/20/us-venezuela-gas-idUSTRE80J1SI20120120)

Government admits to high idle capacity in industry

The Venezuelan government will try to capitalize on the domestic industry installed capacity in 2012, says Minister of Industry Ricardo Menéndez. "In a country which is seeking production of rebars, production of inputs, obviously there should not be idle capacity in the production apparatus," Menéndez said in a press conference. The senior official conceded that idle capacity in some businesses, including state-owned companies, is very high. "In the case of (steel maker) SIDOR, we are have 66% of used capacity versus installed capacity, but some other companies are at 39% of their utilized capacity." (El Universal, 01-21-2012; http://www.eluniversal.com/economia/120121/venezuelan-government-admits-high-idle-capacity)

Logistics & Transport

Venezuela to buy EMBRAER, Airbus jets to expand state airline CONVIASA

President Hugo Chavez announced his government plans to buy new Embraer jets from Brazil as well as used Airbus jets to expand his country’s state airline Conviasa. Chavez said Venezuela will negotiate credit with the Brazilian Development Bank to buy up to 20 Embraer jets from Brazil. Chavez thanked Brazilian President Dilma Rousseff “for the credit they’re going to give us.” He said the estimated cost of 20 jets would be $814 million. He also approved a million dollar investment to purchase four five -year-old Airbus 340-500 from the United Arab Emirates. (Washington Post, 01-22-212; http://www.washingtonpost.com/business/chavez-says-venezuela-to-buy-embraer-airbus-jets-to-expand-state-airline-conviasa/2012/01/22/gIQALz3AJQ_story.html and Veneconomy, 01-23-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29103&idc=3)

Politics

Spanish journal reports Chavez has less than a year to live unless treated intensively

Spanish newspaper ABC reports it has had access to reports by his medical team that show President Chavez has 9-12 months to live if he insists in refusing treatment that would force him to temporarily leave office. The information says “his health seems to be deteriorating more quickly; there has clearly been metastasis in the bones and spine”. A most recent report – dated January 12 – says “during the last month he has received an increase in dosage of pain killers and stimulants, which explains the extensive public activity he has been carrying out.” A December 30th report, says ABC, reveals “a new cancerous lesion approximately 2x1.5 mm in the upper segment of his colon”. More in Spanish: (ABC de Sevilla, 01-23-2012; http://www.abcdesevilla.es/20120123/internacional/abcp-chavez-queda-vida-menos-20120123.html)

Chavez opponents pledge no shock therapy if they gain power

Opponents of Venezuelan President Hugo Chavez won’t apply “shock” adjustments to reverse policies such as currency and price controls if they unseat the self-declared socialist in October’s election, according to two advisers for the opposition alliance.  Six candidates competing in an opposition primary next month will sign a 164-page policy platform Jan. 23 committing them to a plan of action should they defeat Chavez. The document, which has not yet been made public, calls for a slow phasing out of currency controls to prevent capital flight and a depreciation of the bolivar, said Ronald Balza, the Democratic Unity Table’s coordinator of economic and oil policy. (Bisiness Week, 01-19-2012; http://www.businessweek.com/news/2012-01-19/chavez-opponents-pledge-no-shock-therapy-if-they-gain-power.html)

Chavez blames U.S. in Venezuelan Consulate closing, Venezuelans in Miami protest closing

President Hugo Chavez on Sunday rejected the criticism in Miami over the closing of the Venezuelan Consulate in that city after the expulsion of Consul Livia Acosta, and he said that in this case the Venezuelan government had been “run over by the empire.” “Now that we are closing the consulate administratively over threats against the personnel, they’re accusing me now that it’s a plan to sabotage the primary elections (of the opposition), that it’s an outrage against the Venezuelans who live in Miami,” Chavez told Televen. At a park in downtown Miami, alongside a statue of their country’s liberator, Venezuelans gathered Saturday to protest the closing of their consulate, an action they say will cause major problems for the thousands of Venezuelans living in Florida, Georgia and the Carolinas. (Latin American Herald Tribune, 01-23-2012; http://www.laht.com/article.asp?ArticleId=464694&CategoryId=10718; The Washington Post, 01-21-2012; http://www.washingtonpost.com/national/venezuelans-in-us-protest-closure-of-miami-consulate-following-diplomats-expulsion/2012/01/21/gIQAXLFrGQ_story.html)

HRW has its eyes on Cuba and Venezuela

Human Rights Watch (HRW) signaled Cuba as the only Latin American nation that represses all dissent, denounced weakened human rights in Venezuela and warned that repressing organized crime is increasing violence in Mexico. In its worldwide report on 2011 human rights, HRW also pointed out that powers given to Ecuadorian President Rafael Correa can damage freedom of expression and the independence of the judiciary. More in Spanish: (Tal Cual, 01-24-2012; http://www.talcualdigital.com/index.html)

Venezuela prepares new ALBA Summit

President Hugo Chavez announced his Administration is working on the next summit of the Bolivarian Alliance for the Peoples of Our America (ALBA).  Chavez said that "we have played a role in all this process of Latin America. We have to recognize that in a fair dimension, in the awakening of the peoples of Latin America." (AVN, 01-23-2012; http://www.avn.info.ve/contenido/venezuela-prepares-new-alba-summit)

January 20th, 2012

Economics & Finance

Venezuela needs as many as 15 years to leave Arbitration Court

Venezuela will need as many as 15 years to renegotiate bilateral investment treaties before it can leave the World Bank arbitration court, said Prosecutor General Carlos Escarra. Venezuela has treaties with 24 countries that need to be amended or canceled before authorities can pull out of the Washington-based International Centre for Settlement of Investment Disputes, or ICSID, says Escarra. “There’s a problem that we’re studying, investment treaties that we have with 24 countries have clauses that require us to use the ICSID, and it could take 10 to 15 years to renounce each treaty.” Venezuela’s withdrawal from the ICSID is unlikely to affect arbitration cases already under way, said Michael Nolan, of Milbank, Tweed, Hadley & McCloy. (Businessweek, 01-17-2012; http://www.businessweek.com/news/2012-01-17/venezuela-needs-as-many-as-15-years-to-leave-arbitration-court.html)

Executive getting ready to review investment agreements

The Venezuelan government is getting ready to change the rules of investment promotion and protection through renegotiation of 23 bilateral treaties signed by Venezuela, particularly during the 1990's, following President Hugo Chávez's decision to withdraw from the World Bank's International Centre for Settlement of Investment Disputes (ICSID). (El Universal, 01-18-2012; http://www.eluniversal.com/economia/120118/executive-office-is-poised-to-review-investment-agreements)

Exit from ICSID damages investment climate

Carlos Larrazabal, Chairman of the National Industrial Council (CONINDUSTRIA) says leaving ICSID will further deteriorate an already weakened investment climate, "Any investor who comes requires clear rules, mechanisms where you are certain that your investment will be protected." He considers the step to be contrary to the national economy with requires. "Stable and sustained investment". More in Spanish: (Tal Cual, 01-18-2012; http://www.talcualdigital.com/index.html)

New private housing project index declines dramatically

Juan Francisco Jiménez, president of the Venezuelan Construction Chamber, says that if current trend continues, the construction index of new houses by the private sector would soon hit zero or almost zero. The Venezuelan developer added that the legal harassment faced by the construction sector, along with the lack of construction materials such as cement and rebar’s, are seriously reducing the participation of private developers. (El Universal, 01-18-2012; http://www.eluniversal.com/economia/120118/index-of-new-private-housing-projects-declines-dramatically)

Commodities

Virgin Islands refinery shutdown to hit Venezuela hard

The announced shutdown of an oil refinery in the Virgin Islands will hit hard the state-run Petróleos de Venezuela, S.A. (PDVSA), a company that loses a major customer for its hard-to-place heavy crude and a major supplier of components for the gasoline consumed in the country, analysts said. The experts added that the closing of the refinery — one of the world’s 10 largest — could also impact the cash flow of the state-owned company, as the complex, where PDVSA has a 50% share, is one of the clients that best pays for Venezuelan crude. The refinery, operated by the joint venture HOVENSA has the capacity to process 495,000 barrels a day, 248,000 of which are supplied by PDVSA. HOVENSA, which belongs to PDVSA and the U.S. company Hess Corp., announced this week it will close the refinery in a month after accumulating losses totaling U$D 1.3 billion in the last three years. Venezuelan crude is difficult to place in a global network of refineries designed primarily to process light crude. (Miami Herald, 01-19-2012; http://www.miamiherald.com/2012/01/19/2598119/virgin-islands-refinery-shutdown.html; El Universal, 01-18-2012; http://www.eluniversal.com/economia/120118/pdvsas-joint-venture-shuts-down-virgin-islands-oil-refinery; Reuters, http://www.reuters.com/article/2012/01/18/hess-idUSASA03GU220120118; Bloomberg, http://www.bloomberg.com/news/2012-01-18/new-york-gasoline-strengthens-with-hovensa-oil-refinery-to-shut.html)

Venezuela's oil GDP has fallen 7% despite high prices

In the opinion of Economist José Guerra, ex manager of economic research at the Central Bank of Venezuela (BCV), oil GDP has kept "a downward trend despite exceptionally favorable" oil prices since 2006. Guerra noted that the oil Gross Domestic Product "has fallen 22% between 1998 and 2011 due to current oil policy, which is based on the extraction by the Executive Office of the largest amount of tax revenues from state-run oil company Petróleos de Venezuela (PDVSA) at the expense of investment and oil production; it is also due to Pdvsa's extreme diversification, since the oil company has now multiple goals other than oil, and to joint ventures with state-run oil companies." (El Universal, 01-18-2012; http://www.eluniversal.com/economia/120118/venezuelas-oil-gdp-has-fallen-7-despite-high-prices)

CADIVI allocated over U$D 6,300 billion for food in 2011

During 2011, the Currency Board (CADIVI) assigned over U$D 6.3 billion for food imports, that is 25% of total allocations last year, which was U$D 31.4 billion. The information was released by CADIVI president, Manuel Barroso, who said the food sector grew by about 11% compared to 2010. More in Spanish: (AVN, 01-19-2012; http://www.avn.info.ve/contenido/cadivi-asignó-más-6300-millones-al-sector-alimento-2011)

Central Bank, agro-industry meet to increase production

Representatives of the private food industry and Central Bank of Venezuela (BCV) officials have started a series of roundtables where they will examine the situation of this economic sector in order to fine tune policies by the Executive Office to reactivate agro-industry, boost production and reduce inflation in food commodities. Discussions will focus on seven priority items now in a critical situation due to the delay in price increases: pre-cooked corn flour, pasta, white rice, edible oils, coffee, sugar and milk, according to industry sources. (El Universal, 01-18-2012; http://www.eluniversal.com/economia/120118/central-bank-agro-industry-meet-to-stir-up-production)

State food distribution networks increased 111% during 2011

The distribution of food through the MERCAL state networks, and Bicentennial PDVAL increased 111% during 2011, with the previous year, according to Production Vice Minister Ricardo Menendez. More in Spanish: (AVN, 01-18-2012; http://www.avn.info.ve/contenido/distribución-alimentos-redes-del-estado-aumentó-111-2011)

Logistics & Transport

New equipment arriving at maritime terminals

Representatives of the Bolivarian Port Authority (BOLIPUERTOS) say that new machinery will arrive at Puerto Cabello within the next few days for use in operations there. This includes 5 Reach Stacker cranes. La Guaira Port has already received new equipment from Sweden, 4 Reach Stacker cranes; and Guanta Port is expecting another four cranes. More in Spanish: (Notitarde, 01-20-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1537084&idcat=9849&tipo=2)

Politics

US insists on concerns over Rangel Silva

US Assistant Secretary of State for Security, María Otero, admitted to concerns over the designation of General Henry Rangel Silva – charged by Washington with collaborating with Colombian guerrillas and drug traffic - as the new Venezuelan Defense Minister. “The designation does concern us because... he is listed by the US among suspected accomplices of guerrillas and drug cartels”, she said in a statement to Colombian radio. (El Universal, 01-20-2012; http://www.eluniversal.com/nacional-y-politica/120120/eeuu-insiste-en-preocupacion-por-rangel-silva)

Colombia in talks with Venezuela over appointment of Defense Minister

Colombian Foreign Minister María Ángela Holguín confirmed she has talked with her Venezuelan counterpart Nicolás Maduro over several issues including the appointment of the new Venezuelan Defense Minister. However, she said her government will not make public comments on that issue. (El Universal, 01-19-2012; http://www.eluniversal.com/english/)

Chavez says foes renewing smear campaign against Venezuela’s new military chief

President Hugo Chavez defended his new military chief on Tuesday, saying renewed allegations that he aided drug traffickers and Colombian rebels were part of a smear campaign against the general. Speaking before thousands of soldiers standing in formation at a Caracas military base, Chavez urged the military to defend his defense minister, Gen. Henry Rangel Silva. “They hate the armed forces,” Chavez said during Rangel’s swearing-in ceremony, referring to his political opponents. (The Washington Post, 01-17-2012;

http://www.washingtonpost.com/world/americas/hugo-chavez-foes-renewing-smear-campaign-against-venezuelas-new-military-chief/2012/01/17/gIQATA9j6P_story.html)

Latin America's cost of crime for companies is worst in Venezuela, according to a Latin Business Chronicle ranking based on data from The World Bank. The country with the lowest crime cost for business? Uruguay. The analysis looks at three factors measuring the cost of crime: Losses due to theft and vandalism against the firm as a percent of annual sales; security costs as a percent of annual sales, and products shipped to supply domestic markets that were lost due to theft as a percent of product value. (Latin Business Chronicle, 01-18-2012; http://www.latinbusinesschronicle.com/app/article.aspx?id=5400)

International consultants include Venezuela among 2012 geopolitical risks

The evolution of the political situation in Venezuela has a prominent place in the forward analysis of geopolitical risks in 2012. They are many doubts and fears about a turbulent scenario. The presidential election of October 7 are considered a crucial event whose outcome could have a major impact on American and international scene. In its special edition "The World in 2012", The Economist devotes much of his analysis of Latin America to the Venezuelan elections. "Chavez has the backing of nearly half of voters, but support is fading slowly. He mobilized the resources of the State but, if the elections are fair, the opposition can win. The big question is: if Chavez is defeated, will you go quietly? "asks the magazine. More in Spanish: (El Nacional, 01-19-2012; http://www.el-nacional.com/)