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 24, 2012

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;

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 11th 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;

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;

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;

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;

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;


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;

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;

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;

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;

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;

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;

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; and Veneconomy, 01-23-2012;


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;

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;

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;; The Washington Post, 01-21-2012;

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;

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;

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