February 07th, 2012

Economics & Finance

International reserves down 8% due to transfers to FONDEN

International reserves have dropped 8% so far this year due to fund transfers from the Central Bank to the National Development Fund (FONDEN). Bank reports show it transferred U$D 500 billion to FONDEN, which adds up to U$D 1 billion this year. Reserves now stand at U$D 27.5 billion, down from U$D 29.8 billion at the close of 2012. More in Spanish: (El Universal, 02-07-2012; http://www.eluniversal.com/economia/120207/caen-8-las-reservas-internacionales-por-traspasos-al-fonden)

Venezuelan dollar bonds outperform region as yields plunge

Venezuela’s bonds gained, pushing yields relative to Treasuries to the lowest level in a year, as signs U.S. economic growth is accelerating fueled demand for higher-yielding emerging-market assets. The extra yield that investors demand to hold Venezuelan dollar debt instead of Treasuries shrank 56 basis points, or 0.56 percentage point, at 4:58 p.m. in New York to 1,073 basis points, the lowest since Feb. 8, 2011, according to JPMorgan Chase & Co.’s EMBI Global index. The yield differential has narrowed 80 basis points in the past week, compared with 33 for Latin American government debt, the index showed. (Bloomberg, 02-03-2012; http://www.bloomberg.com/news/2012-02-03/venezuelan-dollar-bonds-outperform-region-as-yields-plunge-caracas-mover.html)

ECONOMETRICA projects scenarios for Venezuela’s economy in 2012

The ECONOMETRICA economic analysis firm is projecting three scenarios for Venezuela’s economic performance in 2012. The base or average scenario says GDP will grown 2.1% in 2012, with oil averaging U$D 100 per barrel. A more positive scenario would have oil prices at U$D 120 per barrel and GDP at 2.7%. It says a negative scenario is unlikely. It also expects an increase in oil exports to be between 1.3% and 2.3%, More in Spanish: (El Mundo, 02-07-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/posibles-escenarios-para-la-economia-venezolana-en.aspx)

Food production stalled because of expropriations

Based on the numbers supplied by the Executive Office, from 2004 to date, government authorities have requisitioned around 3,600,000 hectares, which does not translate into raising food output. (El Universal, 02-04-2012; http://www.eluniversal.com/economia/120204/claims-of-arrested-production-because-of-expropriations)

Ten companies per week were expropriated during 2011

El proceso de expropiaciones emprendido por el Gobierno no corresponde con el número de indemnizaciones a los que obliga la Ley de Expropiaciones. The estimation was made by the National Council of Industry (CONINDUSTRIA), the National Association of Property Owners, the Federation of Spanish Centers in Venezuela, the National Confederation of Agricultural Producers and other NGO’s, which indicate only 10% of expropriated assets, have seen any sort of compensation. More in Spanish: (El Mundo, 02-07-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/diez-empresas-por-semana-expropio-el-gobierno-en-2.aspx)

Minister Ramirez: 86% of housing estimated this year to be ready in the first half of 2012

Rafael Ramirez, territorial vice-president and coordinator of the High Authority of the National Housing And Habitat System, claimed that 86% of construction projects currently in execution are expected to be finished in 2012 shall be ready in the first half of the year. This is estimated to benefit about 25,722 families currently living in about 572 makeshift shelters. (AVN, 02-06-2012; http://www.avn.info.ve/contenido/minister-ramirez-86-housing-estimated-year-be-ready-first-half-2012)

Commodities

PDVSA faces a growing challenges and mounting responsibilities

State oil- company PDVSA has seen its production and exports decrease as debt obligations and other commitments mount. It now faces the challenge of raising the volume of extraction to 3.5 million bpd, up from the current average of 2.9 million bpd, in the face of declining oilfields, a cut in the output by the Organization of Petroleum Exporting Countries (OPEC) and issues concerning the crude oil upgraders at Orinoco oil Belt. (El Universal, 02-04-2012; http://www.eluniversal.com/economia/120204/pdvsa-faces-a-growth-challenge-with-multiple-responsibilities-to-meet)

PDVSA oil pipeline explosion, leak shut down services

A Petroleos de Venezuela, S.A. oil pipeline at Monagas state’s Jusepin complex suffered an explosion and leak, which reached a dam and forced the shut-down of a water plant and power station, reducing the electricity supply, the Monagas governor’s office said. The “crude oil leak” reached the San Vicente dam and forced the indefinite stoppage of the Bajo Guarapiche water plant, the Monagas governor’s office said on its Twitter account. The leak also forced the stoppage of the Jusepin power station. (Bloomberg, 02-04-2012; http://www.bloomberg.com/news/2012-02-04/pdvsa-controls-jusepin-oil-pipeline-crack-company-says.html)

SIDOR rudderless and without support for the past 18 months

Steelmaker SIDOR –the second largest company in Venezuela - has gone without a stockholder meeting since September 10, 2009, and the latest Board of Directors meeting was August 5, 2010, 18 months ago, and even then most directors – political appointees – did not show, nor have most of them ever set foot in SIDOR. The company’s Executive President, Carlos D’Oliveira, continues to act without having his signature validated, while the Chairman of the Board still appears to be Rodolfo Sanz, current Ambassador to Ecuador, who left his position in April 2010. More in Spanish: (Tal Cual, 02-06-2012; http://www.talcualdigital.com/index.html)

Politics

ALBA Summit closed with new special members, stressing defense of sovereignty

The 11^th Summit of the Bolivarian Alliance for the Peoples of America (ALBA), held this weekend in Caracas, closed stressing the defense of sovereignty and people's self-determination, besides the adhesion of Suriname and Saint Lucia as special members of the bloc and Haiti as full member. "We have changed from three to six Caricom members in the ALBA and, though we did not realize it, they represent more than half the population (of that Caribbean organization)," said Prime Minister of Saint Vincent and the Grenadines, Ralph Gonsalves. The next ALBA meeting will take place in Dominica next August. (AVN, 02-05-2012; http://www.avn.info.ve/contenido/alba-summit-closed-new-special-members-stressing-defense-sovereignty; http://www.avn.info.ve/contenido/suriname-saint-lucia-request-full-alba-membership; and http://www.avn.info.ve/contenido/next-alba-summit-take-place-dominica)

ALBA economic independence depends on Venezuelan oil

During the second session of the 11th Summit of Heads of State of the Bolivarian Alliance for the Peoples of Our America (ALBA), President Hugo Chavez said the Orinoco Oil Belt "is the main engine for the integral development of Venezuela and to cooperate with the economic independence" of the members of the regional bloc. Chavez warned his counterparts that the United States wants to take possession of the Orinoco Oil Belt "because it has oil for 200 years." The President estimated crude oil production to 2014 at 4 billion barrels per day. According to him, it would allow "more flexibility in all these programs" of cooperation with Caribbean countries. (AVN, 02-05-2012; http://www.avn.info.ve/contenido/venezuela-boost-alba-economic-independence-oil)

Giordani ranked the worst Finance Minister in Latin America

A survey carried out by Chilean magazine America Economía ranked Jorge Giordani last among Finance Ministers in 18 Latin American nations. The magazine says Giordani “is considered responsible for the lowest institutional development in Venezuela´s economic management, least transparency, the promotion of policies that stifle investment and the creation of wealth, creating an economy that is ever more dependent on the price of oil and State decisions”. The best ranked minister was Juan Carlos Echeverry, of Colombia. More in Spanish: (Ultimas Noticias, 02-06-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/ponen-a-giordani-como-el-peor-ministro-de-finanzas.aspx)

Opposition angered as Chavez celebrates coup

President Hugo Chavez mounted a lavish celebration on Saturday to mark the 20th anniversary of the failed coup that helped launch his political career, as opposition leaders slammed the event as a blemish on the country's democracy. (Reuters, 02-05-2012; http://www.reuters.com/article/2012/02/05/us-venezuela-chavez-idUSTRE8130RA20120205)

American oil worker murdered in Venezuela

A U.S. citizen employed by Intermoor Inc., a closely held Houston-based oil-services provider, was fatally shot in Venezuela on Jan. 27, according to the attorney general’s office. Craig Dwayne Cormier, 36, was caught in crossfire at 11:30 p.m. in the city of Carupano in eastern Sucre state, the attorney general’s office said in a statement today. He had arrived in Venezuela two days earlier to conduct repair work on the Turquoise vessel that services an offshore platform owned by state-oil company Petroleos de Venezuela SA, according to the statement. The murder rate has almost tripled to 67 per 100,000 inhabitants, the highest in South America, since President Hugo Chavez took power in 1999, according to the Venezuelan Violence Observatory. (Bloomberg, 02-06-2012; http://www.bloomberg.com/news/2012-02-06/american-oil-worker-murdered-in-venezuela-government-says.html)

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.