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, January 20, 2012

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;

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;

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;

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;


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;; El Universal, 01-18-2012;; Reuters,; Bloomberg,

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;

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;ó-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;

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;ón-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;


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;

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;

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;

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;

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;

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