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/)