February 28th, 2012

Economics & Finance

New price controls order cuts of up to 25%

The government will cut prices on a slate of basic goods up to an average of 25% as part of a long-awaited first wave of broadly expanded price controls that officials say will combat the country's soaring inflation, Vice President Elias Jaua announced Monday. "We have not messed with profit margins," Jaua said during a televised rally. "We have only taken out the costs that should not be included in a cost structure." Among the adjustments, the price of bleach and dishwashing liquid will fall 6%, toilet paper and tooth paste, 11%, and shampoo and detergent, 25%. The new prices will go into effect April 1, allowing a chance for appeals, though Chavez has threatened to seize the assets of any company that resists the changes. Companies that faced audits in connection with the first installment of revised prices include local units of multinationals like Colgate-Palmolive Co., PepsiCo Inc., H.J. Heinz Co., Johnson & Johnson Unilever PLC and Nestle, as well as local food distributor and packager Alimentos Polar. (Fox Business, 02-27-2012; http://www.foxbusiness.com/news/2012/02/27/venezuelas-new-price-controls-order-cuts-up-to-25/#ixzz1niHkOVEY)

Venezuelan bonds continue their momentum

Since 2006, the government has been issuing government bonds, with three objectives: control the parallel dollar exchange rate, drain excess cash flows and secure financial resources to invest. Although experts say these goals have not been achieved (the parallel dollar drops momentarily, but quickly starts rising again, liquidity is drained only temporarily), they provide an important opportunity for many Venezuelans to secure dollars below parallel market prices. More in Spanish: (Tal Cual, 02-27-2012; http://www.talcualdigital.com/index.html)

Internal debt increased 13% in six weeks to Bs.148 billion despite the fact that oil prices, the country’s main source of revenue, have rallied 24% in the first six weeks of this year, compared to the same period in 2011. (Veneconomy, 02-24-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29548&idc=2)

Private consumption gets a breath of fresh air, but still at bottom

Central Bank statistics show that last year government spending moved up 5.9% to create a boom as part of the election agenda. Nonetheless, private consumption is still 1% below the 2008 level. Barclays Capital explored the effect of public spending and transfers such as scholarships and subsidies in household consumption. According to the investment bank, while there was a positive reaction, "it is worth noting that it is relatively modest compared with that recorded between 2006 and 2008." At that time, a similar expansion of spending attained a "two-digit growth in private consumption." (El Universal, 02-27-2012; http://www.eluniversal.com/economia/120227/private-consumption-takes-a-breath-of-fresh-air-but-still-at-bottom)

Commodities

China raises financing to Venezuela

The government has signed as many as 14 additional bilateral cooperation agreements with the People's Republic of China. The legal instruments will allow for additional funding around U$D 10 billion. As a result, Chinese total lending amounts to U$D 38 billion. "(U$D) 10 billion to reinforce and expand oil drilling at the Orinoco Oil Belt, for agricultural development, for home building, for economic and industrial development, and infrastructure development," said Vice-President Elías Jaua during the signing ceremony held at the headquarters of state-run oil holding Petróleos de Venezuela. (El Universal, 02-28-2012; http://www.eluniversal.com/economia/120228/china-raises-financing-facility-for-venezuela)

Capacity to raise production at the Orinoco Oil Belt in doubt

State-run oil holding Petróleos de Venezuela has voiced its intention to raise by 445,000 barrels per day (bpd) the output at the Orinoco Oil Belt in 2012, that is: from 1.18 million bpd to 1.63 million bpd. PDVSA needs to invest heavily to meet this schedule. The oil company has particularly neglected production due to the large amount of social and industrial commitments set by the Chavez government, which leads many to question the far-reaching nature of the goals in view of difficulties faced by Pdvsa. (El Universal, 02-25-2012; http://www.eluniversal.com/economia/120225/doubts-about-the-capacity-to-lift-production-at-the-orinoco-oil-belt)

Agricultural balance still in the red

World food prices will continue to play a key role in supplying goods to the Venezuelan market in 2012. While the value of some commodities, including sugar, cereal and oil, dropped at the end of 2011, international organizations fear that prices this year will continue above the average. This situation will undoubtedly benefit traditional Latin American exporters, such as Colombia, Brazil, Argentina and Paraguay. However, for Venezuela as an importer of both final products and raw materials, the outlook will not that bright. (El Universal, 02-27-2012; http://www.eluniversal.com/economia/120227/agricultural-balance-still-in-the-red)

Venezuela heads in the opposite direction of Carbs

The new map of the global economy encompasses China and India as a bloc of high-growth emerging nations; superpowers hit by the crisis and showing little progress, such as the United States and the Euro area, and the CARBS (Canada, Australia, Russia, Brazil and South Africa) a the group of countries, which have made effective use of the boom of commodities. CARGS is the acronym coined by Citigroup, to describe the five countries that make-up the world's key commodity markets. As a whole, these countries own commodity-related assets worth U$D 60 trillion. The sun does not set in territories that cover 29% of the planet and control 25-50% of the output of important metals and minerals. (El Universal, 02-25-2012; http://www.eluniversal.com/economia/120225/venezuela-heads-in-the-opposite-direction-of-carbs)

Cristinas gold mine to be developed with China

Venezuela will develop its huge Las Cristinas gold project in partnership with Chinese state investment company CITIC, President Hugo Chavez announced on Friday. The government last year cancelled Canadian company CRYSTALLEX International's permit to develop the long-troubled mine project south of the Orinoco river. Russian-Canadian miner RUSORO had hoped to partner with Venezuela in what could be Latin America's largest gold deposit. Las Cristinas has estimated reserves of 17 million ounces. (Reuters, 02-24-2012; http://www.reuters.com/article/2012/02/24/venezuela-gold-idUSL2E8DOBTT20120224)

International Trade

U$D34 million allocation to raise tractor production

The production capacity at the Pauny tractor factory Pauny, in Guarico State, should rise after the National Government approved U$D 34.990 million to purchase spare parts. Vice President Jaua says "These resources will allow us to purchase over 300 parts to manufacture the same number of tractors, as well as 120 sowers, 5 sowing drill-machines, 150 rotary seeders, 50 stick compactors from Argentina and 100 spray machines". (AVN, 02-26-2012; http://www.avn.info.ve/node/100839)

Chavez says Venezuela is risk-free for foreign investment, after signing new accords with China and reviewing figures of production and oil revenues, as the country has sufficient resources to offer security and guarantee to foreign investment. (AVN, 02-25-2012; http://www.avn.info.ve/node/100749)

Politics

Chavez in good shape after surgery, VP Says

President Hugo Chavez is in good condition and recovering from surgery in Cuba to remove a lesion in his pelvic area where doctors previously detected cancer, Vice President Elias Jaua said. Jaua, reading from a statement while speaking to the National Assembly on state television, said tests on the “lesion,” which was removed in its entirety, will become available in the coming hours. “President Chavez finds himself in good physical condition, in the company of his family and in constant contact with his Vice President and ministers,” Jaua said as allied lawmakers chanted “Oh no, Chavez won’t go!” (Bloomberg, 02-28-2012; http://www.bloomberg.com/news/2012-02-28/chavez-in-good-health-after-operation-vp-says.html; Reuters, http://www.reuters.com/article/2012/02/28/venezuela-chavez-jaua-idUSL2E8DS70T20120228; El Universal, http://www.eluniversal.com/nacional-y-politica/120228/chavez-in-good-condition-following-operation-authorities-confirm)

Chavez surgery gives rival an opening before vote

Throughout his presidency, Hugo Chavez has relied on his vigor and endurance: playing baseball, speaking for hours at a stretch and making decisions on the fly while bounding around Venezuela exuding energy. Now, just as he may need it most, Chavez finds himself ailing heading into a re-election campaign. The 39-year-old state governor has cast himself as a polite, non-confrontational politician, a sharp contrast to the venom-tongued president, who recently referred to Capriles as "a pig" and has accused rivals of wanting him dead. But Capriles didn't rise to the bait. "I wish the head of state a long life," Capriles said. "I want him to see the changes that are going to come about in our country, for him to see a Venezuela of progress, a united country, a country where Venezuelans have many opportunities." (AJC, 02-26-2012; http://www.ajc.com/news/nation-world/chavez-surgery-gives-rival-1363590.html)

February 24th, 2012

Economics & Finance

Chavez cancer surgery spurs investors to buy Venezuela debt

Venezuela’s bonds rose, sending yields relative to Treasuries to the lowest in 21 months, after President Hugo Chavez said he’ll travel to Cuba for another cancer operation, spurring speculation he may not be able to run in October elections. The extra yield investors demand to own Venezuelan government bonds instead of U.S. Treasuries fell 30 basis points, or 0.30 percentage point, to 988 at 12:38 p.m. in New York, according to JPMorgan Chase & Co.’s EMBI Global index. That compares to an average four basis-point decline in Latin America. (Bloomberg, 02-22-2012; http://www.bloomberg.com/news/2012-02-22/chavez-cancer-surgery-spurs-investors-to-buy-venezuela-debt-caracas-mover.html; El Universal; http://www.eluniversal.com/economia/120222/venezuelan-debt-rebounds-for-uncertainty-about-chavezs-health)

Spanish companies lose interest in Venezuelan market

The Venezuelan market is becoming less and less attractive for Spanish companies. Such is the conclusion from the report "2012: An Overview of Spanish Investment in Latin America," prepared by the IE Business School, based in Madrid. According to their research, countries like Brazil, Colombia, Mexico and Peru still attract Spanish investment. The opposite happens with Venezuela. (El Universal, 02-23-2012;

http://www.eluniversal.com/economia/120223/spanish-companies-lose-interest-in-venezuelan-market)

Private construction dropped 70% over the past two years

The president of the Venezuelan Construction Chamber, Juan Francisco Jiménez, says private construction has dropped 70% over the last two years. The situation was described as serious by the business leader, who said that the construction industry is necessary for the country's development. (El Universal, 02-23-2012; http://www.eluniversal.com/economia/120223/private-construction-drops-70-in-the-past-two-years)

Commodities

Is Venezuela on the cusp of a post-Chavez oil boom?

If Venezuelan President Hugo Chavez is forced to drop his bid for re-election for health reasons, will the primary repercussion for the West be the exit of a voluble thorn in the side? Perhaps, but it will also mean the prospect of yet more newly available oil reserves -- on top of the widely projected U.S. shale oil bonanza. The takeaway: If the shale oil projections are accurate, and Chavez leaves politics under whatever scenario, we have the prospect of a geopolitical shakeup analogous to what has accompanied the rise of shale gas. Venezuela has the largest proven oil reserves on the planet -- 296 billion barrels, according to OPEC figures. The number is slightly misleading: Saudi Arabia's 264 billion barrels are higher quality and cheaper to produce than the extremely heavy crude of Venezuela's Orinoco Basin; yet Venezuela's reserves are so massive that such details almost don't matter. (The Oil and Glory, Foreign Policy, 02-22-2012; http://oilandglory.foreignpolicy.com/posts/2012/02/22/is_venezuela_on_the_cusp_of_a_post_chavez_oil_boom)

Catalytic cracking unit starts up at Venezuelan refinery

The catalytic cracking unit at PDVSA's Cardón refinery, Venezuela's second largest oil plant, began a start-up process, according to oil workers. The 89,000 bpd unit shut down last Monday due to a failure in a valve of steam equipments.

"Getting back to normal can take more than six hours," said an oil worker who preferred not to be identified by name, as quoted by Reuters. (El Universal, 02-23-2012; http://www.eluniversal.com/economia/120222/catalytic-cracking-unit-starts-up-in-venezuelan-refinery)

Around 80 CVG Alcasa workers chained themselves to the gates of the company to demand payment of insurance premiums, food tickets and severance, among others. Protestors say their bargaining collective agreement expired four years ago. (Veneconomy, 02-23-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29527&idc=3)

Venezuelan government would need six years to reach the 500,000 barrels a day production increase offered for this year if it continues with the present oil policies. Tax conditions for investment in Venezuelan oil are poorly perceived and the State cannot face the increasing needs for capital to dynamize the industry on its own. (Veneconomy, 02-22-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29511&idc=4)

HOVENSA: St Croix refinery shutdown completed

HOVENSA LLC completed the shutdown of its 350,000 barrel-a-day refinery on the U.S. Virgin Island of St. Croix, the company said. On Jan. 18, the company announced the refinery shutdown and said the complex will be operated as an oil storage terminal going forward. That plan is subject to the completion of negotiations with the government of the Virgin Islands, the company said. (Fox Business, 02-22-2012; http://www.foxbusiness.com/news/2012/02/22/hovensa-st-croix-refinery-shutdown-completed/)

International Trade

Lack of technology raises shipping costs, according to specialists, who say that as long as there is no modernization costs of shipping to Venezuela will remain above other ports in the region. As an example, shipping a 40 foot container from Shanghai to Colón, in Panama, costs an average U$D 2.600 dollars, yet costs to Puerto Cabello or La Guaira rise to some U$D 4.200 dollars, due to technology shortcomings unloading. More in Spanish: (Notitarde, 02-24-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1567529&idcat=9849&tipo=2; El Carabobeño, http://www.el-carabobeno.com/litoral/articulo/29471/comunidad-martima-preocupada-por-incremento-de-fletes)

Politics

Chavez surgery rocks Venezuela ahead of election

Venezuelan President Hugo Chavez's imminent departure for more cancer surgery in Cuba has thrown his re-election campaign into uncertainty and once again shaken the socialist leader's passionate supporters.

Though the 57-year-old former soldier looked stoic and played down the dangers of his latest condition, the announcement inevitably raises questions over his ability to stand for the Oct. 7 presidential vote - or rule beyond it. (Reuters, 02-22-2012; http://www.reuters.com/article/2012/02/22/venezuela-chavez-idUSL2E8DM2EM20120222; Fox News, http://www.foxnews.com/world/2012/02/22/chavez-surgery-throws-venezuela-into-uncertainty/; The Wall Street Journal, http://online.wsj.com/article/SB10001424052970203960804577239753236433604.html?KEYWORDS=venezuela; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=472213&CategoryId=10717)

President Chavez is fully fit to govern the country

Executive Vice-President Elias Jaua says that President Hugo Chavez, has full capacity to continue heading the National Government, and denied that there would be a temporary absence which would make him assume the presidency. (AVN, 02-23-2012; http://www.avn.info.ve/node/100444; Bloomberg, http://www.bloomberg.com/news/2012-02-23/venezuela-s-jaua-says-won-t-hold-presidency-in-chavez-s-absence.html; El Universal, http://www.eluniversal.com/nacional-y-politica/120223/vp-jaua-no-need-to-act-in-president-chavezs-stead))

PSUV ratifies Chávez as its presidential candidate

National Assembly President and PSUV Vice President Diosdado Cabello has announced that President Chávez has been ratified as their presidential candidate. “Chávez is and will continue being our candidate,” he said. He announced the National Assembly approved President Chávez’ request to travel to Cuba to undergo surgery. (Veneconomy, 02-23-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29524&idc=1)

"Telling the truth is a democratic duty"

In a short statement, Venezuela's opposition umbrella group Unified Democratic Panel (MUD) lashed out at Hugo Chávez's administration for the "secrecy, lack of accurate, clear and reliable medical information" about the president's health. The MUD commented that due to the government's attitude lots of rumors have spread about the president's health. "The harmful consequences of the lack of transparency in reporting this information can be substantially blunted with responsible, clear and timely reporting," the text cited. (El Universal, 02-23-2012; http://www.eluniversal.com/nacional-y-politica/120223/telling-the-truth-is-a-democratic-duty)

Supreme Court fines opposition for burning voter registries

The Supreme Court fined the head of the opposition coalition’s election body 15,200 bolivars ($3,500) for defying an order to hand over voter lists compiled during a Feb. 12 primary and instead burning the register to preserve voter anonymity. The Supreme Court ruled that Teresa Albanes allowed the registry books to be burned in spite of the ruling that followed a candidate’s complaint, according to a statement. The attorney general’s office is studying whether Albanes could be imprisoned, the court said in the statement. (Bloomberg, 02-23-2012; http://www.bloomberg.com/news/2012-02-23/venezuela-court-fines-opposition-for-burning-voter-registries.html)

As others isolate Syria, Chávez ships fuel to It

A day before the United Nations General Assembly voted overwhelmingly to condemn President Bashar al-Assad of Syria this month for his bloody crackdown on the uprising in his country, President Hugo Chávez of Venezuela was conducting a very different kind of diplomacy on his own. A ship owned by the Venezuelan state oil company sailed into the Syrian port of Baniyas, its location captured by a satellite system that tracks ship movements. The ship, making its second trip to Baniyas since December, appeared to be carrying fuel to help prop up the embattled Mr. Assad. The Venezuelan shipment flies in the face of international efforts to isolate Mr. Assad and pressure him to step down, but Mr. Chávez is no stranger to such controversy. Last month, he played host to another Middle Eastern ally, President Mahmoud Ahmadinejad of Iran, ridiculing Western claims that Iran was seeking to be able to produce nuclear weapons. (The New York Times, 02-23-2012; http://www.nytimes.com/2012/02/23/world/americas/chavez-appears-to-use-venezuelan-fuel-to-help-syrias-assad.html?_r=1; UPI; http://www.upi.com/Business_News/Energy-Resources/2012/02/23/Caracas-defends-Syrian-oil-shipment/UPI-39191330002676/)

Census: preliminary count at 27.150.095

Venezuela has a population of 27.150.095 habitants, according to preliminary results from the latest census, and adjusted results could come to 28.800.000, which would be 1.6% annual growth since 2001. 66.6% of the population is calculated to be at working age, between 15 y 64 years old; 27.6% under 14 years of age; and 5.8% over 65 years old. More in Spanish: (AVN, 02-24-2012; http://www.avn.info.ve/node/100456)

February 21th, 2012

Economics & Finance

Government expands funding sources

In order to obtain added revenue, President Hugo Chavez does not just pressure state-run oil Petroleos de Venezuela (PDVSA) and the Internal Revenue Service (SENIAT): Public banks and state-run companies must also render extra funds in order to meet expanding public spending. At a council of ministers held last Wednesday, Chavez showed a wide array of funding sources. Here claimed to have "a little book" for Finance Minister Jorge Giordani, showing availability of funds and a breakdown of the “Socialist Efficiency Fund”, a facility designed to manage earnings from public companies. (El Universal, 02-18-2012; http://www.eluniversal.com/economia/120218/venezuelan-government-expands-funding-sources)

Commodities

Venezuela ships fuel to war-torn Syria

The government of Venezuela's Hugo Chavez is emerging as a rare supplier of diesel to Syria, potentially undermining Western sanctions and helping the Syrian government fuel its military in the middle of a bloody crackdown on civilian protests. A cargo of diesel, which can be used to fuel army tanks or as heating fuel, was expected to arrive at Syria's Mediterranean port of Banias this week, according to two traders and shipping data. The cargo could be worth up to $50 million. (Reuters, 02-18-2012; http://www.reuters.com/article/2012/02/18/us-venezuela-syria-idUSTRE81F2AU20120218; The Washington Post, http://www.washingtonpost.com/business/chavez-says-venezuela-free-to-sell-oil-to-any-nations-it-wishes-amid-reports-of-sales-to-syria/2012/02/16/gIQAd7UZIR_story.html)

Crude oil cleanup Monagas river said to be 95% completed

Cleanup work on the crude oil spill into the Guarapiche river in the state of Monagas, has been 95% completed, according to the executive director for environment at PDVSA, Ramiro Ramirez. As for other areas hit by the accident which took place at the Jusepin Operational Complex, Ramirez said that the state company has installed permanent monitor points in the area and that intense cleansing work continues. (AVN, 02-19-2012; http://www.avn.info.ve/node/100083)

Government names temporary board at steelmaker SIDETUR

The Government has named a temporary state- run board at steelmaker Siderurgica del Turbio, S.A. after the government seized the company’s assets in 2010, according to a resolution by the Industry Ministry published today in the Official Gazette. SIDETUR’s management had continued to operate the company since the seizure as it waited to conclude compensation talks with the government. Ramon Ernesto Perdomo was named as the head of the board, according to the resolution. (Bloomberg, 02-17-2012; http://www.bloomberg.com/news/2012-02-17/venezuela-names-temporary-board-at-steelmaker-sidetur-1-.html)

Venezuelan oil rises to U$D110.82

Venezuela's weekly oil basket rose to U$D 110.82 as oil prices rose in international markets on concerns over attacks on Iran's nuclear facilities and on good growth numbers from the US. According to figures released by the Ministry of Energy and Petroleum, the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending February 17 rose to U$D110.82 from the previous week's U$D108.39. (Latin American Herald Tribune, 02-17-2012; http://www.laht.com/article.asp?ArticleId=471323&CategoryId=10717)

Politics

Chavez says he’ll undergo another operation in coming days, Venezuelan bonds rally

President Hugo Chavez said he’ll undergo another operation as part of his battle with cancer in the “coming days” after tests in Cuba showed a “wound” in the same area where a tumor was removed in June. Chavez, 57, said he traveled to Cuba on Feb. 18 for a routine check up and that tests showed a lesion of about 2 centimeters in diameter. He said he’s still evaluating where to have the operation and that doctors will remove the lesion to see if it’s malignant or not. Venezuelan bonds rallied on the prospect of a change in government and policies that have fueled the region’s highest inflation rate and dried up investment amid nationalizations. The yield on Venezuela’s benchmark 9.25% bonds maturing in 2027 fell 23 basis points, or 0.23 percentage point, to 11.66% today at 2:45 p.m. in New York, according to data compiled by Bloomberg. The bond’s price rose 1.38 cents to 82.88 cents on the dollar. (Business Week, 02-21-2012; http://www.businessweek.com/news/2012-02-21/chavez-says-he-ll-undergo-another-operation-in-coming-days.html)

Hugo Chavez faces an uprising at the ballot box

On Feb. 12, Henrique Capriles Radonski, a 39-year-old Venezuelan state governor, won a primary election to become the opposition’s candidate against Hugo Chavez in October’s presidential election. He won 1.8 million of an astonishing 3 million votes — double the turnout predicted by most analysts. The next day, Capriles, a devout Catholic, was greeted by a commentary on the government-run Web site of Venezuelan National Radio titled “The Enemy Is Zionism.” Capriles, it explained, is the descendant of Jews. “In order to understand the interests embodied” by Capriles, the commentary declared, “it’s important to know what is Zionism, the Israeli ideology that he sneakily represents.. . . It is, without doubt, an ideology of terror, of the most putrefied sentiments of humanity; its supposedly patriotic impetus is based in greed.” And so on. Thus began the latest — and what will surely be the ugliest — political campaign by Chavez, a ruler who has served as a friend in need to Moammar Gaddafi, Bashar al-Assad and Mahmoud Ahmadinejad — and who now is facing his own homegrown democratic uprising. But Venezuela’s spring differs from those of Libya, Syria or Iran: Instead of pouring into the streets, Venezuelans — fed up with the chaos and violence of Chavez’s 13 years in power — are marching to the polls and trying to restore the country’s crippled and compromised institutions. (Washington Post, 02-17-2012; http://www.washingtonpost.com/opinions/venezuelas-hugo-chavez-faces-an-uprising-at-the-ballot-box/2012/02/17/gIQAfApFOR_story.html)

February 17th, 2012

Economics & Finance

Nation’s economy grew 4,2% in 2011

Venezuela’s GDP registered 4,2% growth in 2011, according to a Central Bank report which says the result doubled the 2% estimate it had placed in the budget. Last year’s GDP growth was driven by a 4,9% rise in the fourth quater. More in Spanish: (Agencia Venezolana de Noticias, 02-17-2012; http://www.avn.info.ve/node/99679)

Post-election hangover looms for Venezuela economy

From new homes in slums to cash for struggling mothers, Venezuela's Hugo Chavez is unleashing a flood of state spending to try to tip the balance in what looks like the toughest presidential election of his political career. The spending campaign may help win over wavering supporters and overwhelm the good looks and yes-we-can optimism of opposition candidate Henrique Capriles. Yet Chavez's cash-driven push ahead of the vote in October will come with a heavy post-election hangover for the OPEC nation's economy. Inflation could hit 35%, the debt burden looks set to rise, and a third currency devaluation in as many years is looking inevitable. All of that would force Venezuela to slam on the monetary and fiscal brakes in 2013. (Reuters, 02-14-2012; http://www.reuters.com/article/2012/02/14/us-venezuela-economy-election-idUSTRE81D0RA20120214)

Forex board increases foreign currency allocations for food imports

In light of persistent shortages, the Foreign Exchange Administration Board (CADIVI) has escalated allocations of US dollars to import basic food items in order to fight the lack of products in supermarkets and grocery stores.

Cadivi allocated U$D 600 million in January for food imports, a large amount for the first month of the year, which is 43% of the total authorized for this sector in the first quarter of 2011. (El Universal, 02-15-2012; http://www.eluniversal.com/economia/120215/forex-board-increases-foreign-currency-allocations-for-food-imports)

Government to begin presenting regulated price caps to companies

Venezuela will begin to present regulated prices to about 385 companies that produce personal care and cleaning products including Colgate-Palmolive Co. (CL), Procter & Gamble Co. and Unilever NV (UNA) today. The government’s price regulation agency, which froze the price of 19 goods ranging from deodorant to toilet paper in November, said in a statement late yesterday that the companies can retrieve documents detailing the new regulated price and the government calculations for profit margins on the goods beginning today until Feb. 18. (Bloomberg, 02-15-2012; http://www.bloomberg.com/news/2012-02-15/venezuela-to-begin-presenting-regulated-price-caps-to-companies.html)

Top local firm files arbitration against Chavez

A Barbados-based holding company led by executives of Venezuelan food and beer maker Empresas Polar has filed an international arbitration claim against President Hugo Chavez's government over its nationalization of a fertilizer project, documents show. The move may set a precedent for Venezuelan companies seeking access to international courts to settle disputes with the socialist government that otherwise would be litigated by local judges, who critics say are controlled by Chavez. The case is highly delicate as Chavez has repeatedly threatened to nationalize Polar, the South American nation's largest private employer. Its products range from beer to corn flour and reach nearly all of Venezuela's 29 million people. (Reuters, 02-16-2012; http://www.reuters.com/article/2012/02/16/us-venezuela-arbitration-idUSTRE81F0SO20120216)

"There is no policy to reduce country risk"

Alejandro Grisanti, director for Latin America at Barclays Capital: "During the government of President Hugo Chavez, the country risk has been below 200 basis points (2 percentage points) and more recently has come to be almost 1,500 basis points. This increase has not been precisely due to international crises, but rather to neglect", referring to the financial benchmark, which is based on the difference between the interest rate paid by the Venezuelan debt bonds and that offered by US Treasury bills. (El Nacional, 02-15-2012; http://www.el-nacional.com/)

"Our system is not based on free competition"

"The road to socialism has no place free competition," said Rep. Jesus Faria, Vice President of the Finance Committee of the National Assembly, which replaced the Law to Promote and Protect Free Competition, a text that was enacted in 1992, the government of Carlos Andres Perez. (El Mundo, 02-15-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/-nuestro-sistema-no-se-basa-en-la-libre-competenci.aspx)

Commodities

Venezuela says payment to Exxon Mobil puts an end to arbitration dispute

Venezuela’s state-run oil company announced Wednesday that an arbitration dispute with Exxon Mobil Corp. has been settled because the U.S. oil giant has received a payment topping U$D 250 million. Exxon Mobil sought arbitration after the government of President Hugo Chavez nationalized an oil project in the South American nation’s oil-rich Orinoco region in 2007. The International Chamber of Commerce awarded Exxon more than U$D 907 million in compensation for its nationalized assets. But PDVSA said Wednesday the dispute had been settled following a payment of U$D 250,897,799. (Washington Post, 02-15-2012; http://www.washingtonpost.com/business/venezuela-says-payment-to-exxon-mobil-puts-an-end-to-arbitration-dispute/2012/02/15/gIQApJrpGR_story.html; AVN, 02-16-2012; http://www.avn.info.ve/node/99581; Bloomberg, http://www.bloomberg.com/news/2012-02-15/pdvsa-says-it-paid-exxon-compensation-for-seized-assets.html; and Reuters, http://www.reuters.com/article/2012/02/16/venezuela-exxonmobil-idUSL2E8DG07520120216)

PDVSA delaying investments in oil production

President Hugo Chavez’s reliance on state oil company Petroleos de Venezuela SA to finance government budgets and social spending is forcing the company to delay investments and lose billions of dollars of export revenue. PDVSA, as the Caracas-based company is called, planned to produce 5.8 million barrels a day this year, according to a 2007 bond prospectus. Since then, output has remained little changed at around 2.5 million barrels a day, according to the International Energy Agency. The 3.3 million barrel-a-day gap between the five-year business plan and actual result costs the company around U$D10 billion a month in unrealized revenue at current oil prices. (Bloomberg, 02-15-2012; http://www.bloomberg.com/news/2012-02-15/chavez-missing-10-billion-a-month-by-curbing-state-oil-investment-energy.html)

Politics

Hugo Chavez calls opposition candidate a 'low-life pig'

President Hugo Chavez on Thursday called the opposition's presidential candidate a "low-life pig", signaling a caustic start to Venezuela's election campaign. The socialist leader vowed to crush Henrique Capriles in October's vote, branding him an agent of imperialism and oligarchy hiding behind a mask of moderation. "Now we have the loser, welcome! We're going to pulverize you," he told an audience of medical students. "You have a pig's tail, a pig's ears, you snort like a pig, you're a low-life pig. You're a pig, don't try and hide it." He avoided calling Capriles by name, referring instead to "el majunche", slang for "the crappy one". Hollywood actor and activist Sean Penn also spoke at the president's event. (The Guardian, 02-16-2012; http://m.guardian.co.uk/world/2012/feb/16/hugo-chavez-opposition-low-life-pig?cat=world&type=article)

Credit Suisse: Chavez Could Win

Despite the economic problems, one of the world’s highest inflation rates and soaring crime, Venezuelan President Hugo Chavez will more likely win re-election in October than not, according to Credit Suisse, the second- biggest Swiss bank. “We think there is a greater than 50 percent chance that President Chavez will be reelected,” it says in a research paper today. The reason? Massive fiscal and monetary expansion, which should increase economic growth. However, that same expansion is expected to result in higher inflation and a wider fiscal deficit in 2012. Credit Suisse believes that the gap “should be comfortably covered with bolivar and dollar denominated debt sales and accumulated fiscal assets.” (Latin Business Chronicle, http://www.latinbusinesschronicle.com/app/article.aspx?id=5469)

Venezuela ships fuel to war-torn Syria

The government of Venezuela's Hugo Chavez is emerging as a rare supplier of diesel to Syria, potentially undermining Western sanctions and helping the Syrian government fuel its military in the middle of a bloody crackdown on civilian protests. A cargo of diesel, which can be used to fuel army tanks or as heating fuel, was expected to arrive at Syria's Mediterranean port of Banias this week, according to two traders and shipping data. The cargo could be worth up to U$D 50 million. The Venezuelan tanker was last seen off the coast of Cyprus with a destination of Banias and the estimated arrival date of Wednesday, AIS ship tracking on Reuters showed. (Chicago Tribune, 02-16-2012; http://www.chicagotribune.com/news/sns-rt-us-venezuela-syriatre81f2au-20120216,0,6027063.story)

Venezuela on money laundering watch list

According to Rick McDonell, of the International Financial Action Group, Venezuela, Argentina, Nicaragua and Ecuador are the countries in the region most deficient in strategies when it comes to complying with Money laundering procedures. He said these nations are on a “grey list” among nations that have adapted legislation to international standards. In the case of Venezuela he said that the government has made an effort to comply since October 2010, but it has been insufficient. More in Spanish: (El Nacional, 02-17-2012; http://www.el-nacional.com/)

February 14th, 2012

Economics & Finance

Venezuela bonds gain as Chavez rival wins primary landslide

Venezuelan bonds rallied after opposition candidate Henrique Capriles Radonski won more than 60% of the vote in a nationwide primary, a margin of victory that analysts said could strengthen his bid to unseat President Hugo Chavez in October elections. The yield on Venezuela’s benchmark 9.25% bonds due in 2027 fell 30 basis points, or 0.30% point, to 11.80%, the lowest since April 2010, at 3:30 p.m. in New York, according to data compiled by Bloomberg. The bond’s price rose 1.75 cents to 82 cents on the dollar. (Bloomberg. 02-13-2012; http://www.bloomberg.com/news/2012-02-13/venezuela-bonds-rally-as-capriles-wins-presidential-primary-caracas-mover.html)

Government gives Pepsi venture 4 Days to provide water receipts

Pepsi-Cola Venezuela, C.A. has four days to provide receipts to the government after the country’s price control agency received complaints that the company raised its price for mineral water ahead of price caps. The company, a joint venture between PepsiCo Inc. and the country’s largest foodmaker, Empresas Polar, must provide receipts for the November-to-January period showing what it has been charging for the water, according to a government statement sent by e-mail today. (Business Week, 02-13-2012; http://www.businessweek.com/news/2012-02-13/venezuela-gives-pepsi-venture-4-days-to-provide-water-receipts.html)

New controlled prices of several hygiene and basic products will come into effect on March 1st, according to Vice President Elías Jaua. He said businessmen will have the right to appeal to what was reviewed and that the government would be willing to go over decisions “if there were something convincing.” (Veneconomy, 02-11-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29400&idc=3)

Commodities

PETROBRAS gives PDVSA till 2013 to enter refinery

Brazil's PETROBRAS will allow its Venezuelan counterpart PDVSA to assume its stake in the Abreu e Lima refinery as late as 2013 when operations are expected to begin, Petrobras' supply director Paulo Roberto Costa said on Monday. Venezuela's state oil company PDVSA said last week it had managed to extend until the end of March a deadline to make its contribution to a long-delayed refinery project in northeast Brazil. PDVSA had failed earlier in February to secure a U$D10 billion loan from Brazil's state-development bank BNDES that it was counting on to pay its 40% stake in the Abreu e Lima facility. This was the latest of several deadlines that the Venezuelan company had missed in a six-year saga. (Reuters, 02-13-2012; http://www.reuters.com/article/2012/02/13/petrobras-pdvsa-refinery-idUSL2E8DDEC420120213)

PDVSA spilled 60,000 barrels of crude into river, lawmaker says

Venezuelan opposition lawmaker Hiram Gaviria said state oil company Petroleos de Venezuela SA spilled 60,000 barrels of crude oil from a pipeline into almost 140 kilometers (87 miles) of the Guarapiche River in eastern Monagas state. About 70% of the residents of Maturin, the state capital, have lost their drinking water supply since the oil spill occurred last week, said Gaviria. Members of congress’s environmental committee, which Gaviria heads, will visit Maturin Feb. 13, Union Radio reported. (Bloomberg, 02-11-2012; http://www.bloomberg.com/news/2012-02-11/pdvsa-spilled-60-000-barrels-of-crude-into-river-lawmaker-says.html)

Oil spill has been contained, Environment minister says

Environment Minister Alejandro Hitcher said that the oil spill in the eastern state of Monagas has been brought under control after an emergency was declared due to a pipeline rupture at the Jusepin Complex operated by state-owned Petroleos de Venezuela, or PDVSA. “We already have complete control of the oil spill. Ninety percent of the crude is already confined by the containment barriers and is being extracted with the different systems the petroleum industry has to deal with this type of accident,” said Hitcher. (Latin American Herald Tribune, 02-12-2012; http://www.laht.com/article.asp?ArticleId=470342&CategoryId=10717; El Universal, 02-13-2012; http://www.eluniversal.com/economia/120213/ninety-percent-of-oil-spill-in-venezuela-reportedly-collected)

Gold law curbs local mining

The reform of the decree on the Organic Law which Reserves the State the Activities of Gold Exploration and Exploitation, effective since December 15, 2011, "curbs the local mining development," according to Luis Rojas Machado, president of the Venezuelan Mining Chamber (CAMIVEN). Currently, "the sector does not show the best numbers in production, investment, employment and maintenance of equipment," he underlined. The legal framework, even with recent amendments, "does not provide incentives for companies to improve such conditions." (El Universal, 02-13-2012; http://www.eluniversal.com/economia/120213/gold-law-curbs-local-mining)

International Trade

Colombia will sell food to Venezuela at no tariff

According to Colombian authorities, the Partial Trade Agreement reached between Colombia and Venezuela provides that 91% of items traded between 2006 and 2010 will be exempt from any tariff once the agreement comes into force. More in Spanish: (El Universal, 02-14-2012; http://www.eluniversal.com/economia/120214/colombia-vendera-alimentos-al-pais-con-cero-arancel; El Nacional; http://www.el-nacional.com/)

Dangerous liaisons

Venezuela's exports to Iran are just a fraction of its imports from Iran, which in 2009 were nearly U$D 90 million. In 2010, Venezuela and Iran agreed to establish a joint development bank with an initial capital of U$D 200 million. Both countries have signed dozens of trade agreements which on paper are worth millions of dollars. Iran is also helping Venezuela build houses and raised milk factories and cars in our country. According to TAL CUAL daily, the issue that concerns all Venezuelans is if both nations can benefit from this relationship and whether we can lose many of our natural allies if the Bolivarian government continues to emphasize this relationship. More in Spanish: (Tal Cual, 02-13-2012; http://www.talcualdigital.com/index.html)

Politics

Henrique Capriles will face Hugo Chavez in race

Presidential candidate Henrique Capriles easily won Sunday's primary vote to become the single challenger against President Hugo Chavez, setting the stage for an intense campaign season leading to the general election in October. Capriles, the governor of Miranda state, was declared the winner late Sunday with about 95% of the votes counted, officials said. Zulia state Gov. Pablo Perez came in a distant second. Speaking to thousands of supporters in east Caracas on Sunday night, Capriles thanked voters who "overcame obstructions and intimidation" to vote for him. Capriles was joined at his victory speech by his four opponents in the primary race, all of whom pledged to support him in the presidential race. (Los Angeles Times, 02-12-2012; http://www.latimes.com/news/nationworld/world/la-fg-venezuela-election-20120213,0,5226846.story; Reuters, 02-13-2012; http://www.reuters.com/article/2012/02/13/us-venezuela-election-opposition-idUSTRE81B0ET20120213)

Luis Vicente León: moderation triumphed

DATANALISIS director Luis Vicente Leon said that the primary results and the triumph of Henrique Capriles show that the population favored moderate opposition political discourse versus more radical approaches. More in Spanish: (Ultimas Noticias, 02-13-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/politica/luis-vicente-leon--triunfo-la-moderacion.aspx)

US calls primary vote “just one step” in democratic process

Mike Hammer, US Assistant Secretary of State for Public Affairs Estates called Venezuela’s primary vote “just one step” in the democratic process; adding that the democratic process must allow Venezuelans to cho0se their leaders in “free and fair” elections, More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/primarias-2012/120214/eeuu-senala-que-primarias-son-un-paso-en-el-proceso-democratico)/

Capriles: the government speaks of the past, we talk about the future

Opposition presidential candidate Henrique Capriles Radonski said that "the government is stuck in the past, while our vision is the future. This is a closure." The governor of the state of Miranda said that the support he received from his opponents after the primaries is real. "All of those who were in the race... recognized the results and went immediately to our campaign team's headquarters to offer their support." (El Universal, 02-13-2012; http://www.eluniversal.com/nacional-y-politica/primarias-2012/120213/capriles-the-government-talks-about-the-past-we-talk-about-the-future)

Venezuela is world´s worst for legal disputes

Venezuela is the worst country in the world when it comes to having a legal framework that can help private businesses settle disputes, according to a Latin Business Chronicle analysis of an executive opinion survey from the Swiss-based World Economic Forum (WEF). Many foreign companies have had to take their disputes with the government of Venezuela to international for a like The World Bank's International Centre for Settlement of Investment Disputes (ICSID) in Washington, D.C. and the Paris-based ICC (International Chamber of Commerce). (Latin Business Chronicle, 02-13-2012; http://www.latinbusinesschronicle.com/app/article.aspx?id=5476)

Chavez: New satellite to contribute with technological development

The new satellite named “Generalissimo Francisco de Miranda” will be a great jump for Venezuela's independence and technological development, according to president Hugo Chavez at the farewell ceremony for a group of Venezuelan engineers leaving for China to be trained for the earth observation satellite project. This satellite is expected to contribute with the scientific, human and economic development of Venezuela, Chavez added. (AVN, 02-10-2012; http://www.avn.info.ve/node/98845)

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.