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.

Tuesday, January 3, 2012

January 03erd, 2012

Economics & Finance

Venezuela to pay Exxon Mobil only U$D 255 million
Venezuela said Monday it has successfully defended itself in an international arbitration case brought by Exxon Mobil Corp. and will need to pay only U$D 255 million of the more than U$D 900 million awarded to the company. State oil company Petroleos de Venezuela SA, or PDVSA, said in a statement that debts and court action reduce what it owes under decision by the International Chamber of Commerce, which awarded Exxon Mobil more than U$D 907 million in compensation. It noted that Exxon Mobil had previously used international courts to freeze about U$D 300 million in Venezuela's U.S. accounts and that the company also has a debt of U$D 191 million relating to financing of an oil project in the country, as well as U$D 160 million that the arbitration tribunal said was due to PDVSA. PDVSA called it a "successful defense" and said Exxon Mobil had initially demanded about $12 billion in compensation while pursuing two international arbitration claims, adding it would make the payment within 60 days. (Reuters, 01-02-2012;; El Universal;; Bloomberg,;

GDP growth not sustainable
Efraín Velásquez, Chairman of the National Economic Board believes the 4% growth Venezuela experienced during 2011, according to preliminary BCV figures, is not sustainable over time as it depends on public spending and not investment. “There continue to be serious difficulties in investment. Gross fixed capital formation increased by only 1% in 2011, which shows growth driven by consumption, not investment.” More in Spanish:  (El Universal, 01-03-2012;

Venezuela in debt despite higher oil prices as Central Bank receives smaller portion of FOREX
In his end-of-year message, Central Bank President nelson Merentes admitted that the Central Bank received U$D 36.73 billion from state-run oil holding Petróleos de Venezuela (Pdvsa), that is, 41% of total foreign exchange received from oil exports, a 43% increase compared to 2010, according to official data. As a consequence the Venezuelan government borrowed at high interest rates and international reserves remained virtually unchanged. (El Universal, 01-02-2012;

Inflation hits the highest level since 2008
In his New Year message, Central Bank (BCV) President Nelson Merentes reported that, based on preliminary figures, inflation at the end of 2011 was 27.6%. The communiqué says a "more dynamic domestic aggregate demand" pushed prices up, in a "context of continuing restraints preventing the expansion of the supply of goods and services." Consequently, inflation in 2011 hit its highest level in the last three years. In early 2011, the government's inflation target was 25%. (El Universal, 12-31-2011;

Minimum wage does not cover the food basket, labor organizations seek general salary increase
By November 2012, the local minimum wage (VEB 1,548 or USD 360) only covered 90.5% of the cost of the basic food basket, as estimated by the National Statistics Institute (INE), according Central Bank President Nelson Merentes, in his end-of-the year message. Labor organizations are calling for a general salary increase for this year. (El Universal, 01-02-2012; and more in Spanish:

New controls, higher taxes and 497 expropriations
In 2011 the state tightened its stranglehold on the private sector
Over the past twelve months, some of the obstacles hindering the performance of companies in the country have resurfaced. Expropriations, currency restrictions, limited supplies and the electricity crisis are some of the most noted issues. (El Universal, 12-31-2011;

Venezuela among the worst in productivity according to industrial indicators
Economist Santiago Guevara points out that “according to international industrial productivity indicators, such as 'Doing Business', Venezuela is in the worst positions with regard to negotiations, and over the years it will come in last.” Carabobo Chamber of Industry President Gerardo Barreto, underlined that “industrial production remains the same over the past 20 years". More in Spanish: (Notitarde, 01-03-2012;


BCV plans to set up a gold refinery in Venezuela
BCV president, Nelson Merentes announced that the Bank's Board approved the Draft Regional Headquarters BCV Guiana, which involves certification projects national gold reserves in mines, feasibility studies for the installation of a national refinery, establishes sales mechanisms for the gold processing industry and the creation of the certification center of jewelry and gold. More in Spanish: (El Universal, 01-02-2012;

Chavez plans to Invest U$D 5 Billion in Orinoco Oil Belt
Venezuela will invest U$D 5 billion in the Orinoco heavy crude belt in 2012 to increase production, President Hugo Chavez said today on state television, without providing additional information. The country expects to increase production to 3.5 million barrels a day in 2012 and 4 million barrels a day in 2014, from about 3 million barrels a day now, Chavez said. Venezuela wants to produce 6 million barrels of oil a day in 2019 and 10 million barrels daily by 2030, he said. (Bloomberg, 12-31-2011;

Venezuelan oil basket closes at U$D 106.70
The Ministry of Petroleum and Mining reported that the Venezuelan oil basket ended the week at U$D 106.70 per barrel, up from U$D 103.89 per barrel the previous week. Through December 30, the Venezuelan oil basket price averaged U$D 101.04 this year. (El Universal, 12-30-2011;

Colombia agrees to extend natural gas exports to Venezuela
Colombia’s state-run oil company ECOPETROL, in partnership with Chevron Petroleum Company, has agreed to extend a contract with PDVSA Gas SA to export natural gas from Colombia to Venezuela. The extension agreement for two and a half years becomes effective from January 2012. It provides for exports of gas from La Guajira (Colombia) to Maracaibo (Venezuela) and other areas of western Venezuela, according to EFE. (El Universal, 12-30-2011;

International Trade

Government takes 35% of all imports
Preliminary figures released by the Central Bank of Venezuela show the State again increased its share of foreign purchases in 2011. "Imports estimated at U$D 45.615 billion also exceeded the amount recorded in 2010. It is noteworthy that the public sector continued to increase its share in total imports rising from 34.2% in 2010 to 35.1% in 2011," said Central Bank president, Nelson Merentes. He added that Venezuela's total purchases abroad this year increased 18%, with the private sector remaining with the highest proportion of transactions. More in Spanish. (El Mundo, 01-02-2012;


Venezuela sees 'record murder rate' in 2011
The Venezuela Violence Observatory says at least 19,336 people have been killed this year, an average of 53 a day.
The figures suggest Venezuela's murder rate is the highest in South America and four times that of Mexico.
Criminal violence is set to be a major issue in next year's elections, when President Hugo Chavez is seeking another term in office. (BBC News, 12-28-2011;

Analyst says Venezuelan foreign policy became less radical in 2011
Felix Arellano, head of the Central University’s School of International Studies, says Venezuelan foreign policy has evolved away from the time when it called for recognition of Colombia’s guerrillas and labelled Latin American presidents who do not support its ideology as “lackeys”. Arellano says the turning point came with the discovery of information on FARC leader Raul Reyes’ computers and the downfall of José Manuel Zelaya in Honduras. More in Spanish: (El Universal;

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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