March 06, 2012

Economics & Finance

Foreign debt grew 90% over the past three years, reaches U$D 79.2 billion in 2011

In 2009, drop in oil prices led the Venezuelan government to borrow in order to cover the oil revenue gap and, although the barrel price recovered over the following years, the government has continued to issue further debt.

Laws have been reformed over the last three years with a view to endorsing increased borrowing, which corresponds not only to the central government, but also to official entities. Bond issues and loans are reflected in the balance of the foreign debt of the public sector, which grew 90% in 2008-2011. Based on figures from the Ministry of Finance central government domestic and foreign debt came to U$D 79.2 billion, up from U$D 71.1 billion in 2010. This figure does not include the liabilities of oil holding Petróleos de Venezuela (PDVSA), state-owned companies and borrowing from foreign countries, such as China and Russia. (El Universal, 03-03-2012; http://www.eluniversal.com/economia/120303/in-three-years-venezuelas-foreign-debt-grew-90 and http://www.eluniversal.com/economia/120303/debt-of-the-central-government-in-2011-finishes-at-usd-792-billion)

Operating reserves sink to lowest level in 15 years

Venezuela's operating reserves, that is, currency deposited with banks for imports and foreign-debt payments have plummeted to their lowest level in 15 years. By the end of 2011, operating reserves held by the Central Bank amounted to U$D 5.58 billion, which is less than two months' worth of the balance needed to cover imports. This is a severe decline of 82.6% since 2008 and the lowest level since 1997. The drop is basically due to the way the country's wealth is managed. Last year, Venezuela's petroleum revenues generated income of U$D 88.13 billion, but most went directly into the funds managed by the government, while only a small portion found its way to the central bank. (El Universal, 03-03-2012; http://www.eluniversal.com/economia/120303/venezuelas-operating-reserves-sink-to-lowest-level-in-15-years)

PDVSA debts crimps ambitious oil output plans

The increasingly heavy debts of Venezuela's state oil company PDVSA are hindering the OPEC nation's efforts to meet ambitious goals to boost its crude production this year. President Hugo Chavez's government aims to increase output to 3.5 million barrels per day (bpd) in 2012, from 3 million bpd last year. It would be the biggest annual rise during the socialist leader's 13 years in power. Much of the new production is slated to come from the vast Orinoco belt. But several executives at companies working with PDVSA said delays by PDVSA in paying its partners were creating severe bottle-necks. (Reuters, 03-02-2012; http://www.reuters.com/article/2012/03/02/venezuela-oil-pdvsa-idUSL2E8E19OZ20120302)

A new government may face bankruptcy

Economic experts analyzing possible scenarios for a new government emerging from upcoming elections on October 7 find it important to offer a credible social and economic proposal of the country. But according to Robert Bottome of VENECONOMY, it is important to consider that a new government "would inherit a bankrupt country with repressed inflation, with its institutions, its infrastructure, its farms, its factories in state of ruin." More in Spanish: (Tal Cual, 03-05-2012; http://www.talcualdigital.com/index.html)

Sale prices higher in Venezuela

A study by the office of the Price and Cost Superintendent has established a price comparison on 19 items and shows sale prices in Venezuela carry a surcharge. The comparison was made with countries such as Colombia, Ecuador, Brazil, México and Argentina, and is based on reference prices used by the National Tax Authority (SENIAT) and the fluctuation of import prices. Karlin Granadillos, Cost and Price Superintendent claims high prices on products such as juices, preserves, soap, diapers and sanitary towels, among others, is due to “transactional accounting” as opposed to normal cost accounting. She says “transactional accounting” establishes the price of products according to the place they are destined to and use the term “hidden costs” to add items such as losses due to government regulations and added taxes. More in Spanish: (Últimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/en-venezuela-se-vende-mas-caro-que-en-otros-paises.aspx)

Commodities

Export oil barrel averaged U$D 117.10/bbl. this week, up U$D 2.51 from last week when it traded at U$D 114.59/bbl. The average-to-date this year is UI$D 110.00. (Veneconomy, 03-03-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=29635&idc=4)

International Trade

Imports from Colombia up 77.6% in January

Venezuela’s imports from neighboring Colombia rose 77,6% in January compared to the same month last year, according to data from Colombia´s National Statistics Department (DANE)  The total for imports rose to U$D 136.24 million compared to U$D 76.73 million the same month in 2010. Fuel and mineral oil imports took the larger part, U$D 44.9 million, up 215%. More in Spanish: (El Mundo, 03-06-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/importaciones-desde-colombia-subieron-77,6--en-ene.aspx)

U$D 13.1 million paid to Nicaragua for coffee

According to Nicaragua’s Export Center (CETREX), Venezuela paid U$D 13.1 million to purchase Nicaragun beans, which along with the beef is the first export commodity for the Central American country. More in Spanish: (El Universal, 03-05-2012; http://www.eluniversal.com/economia/120305/venezuela-pago-131-millones-por-cafe-de-nicaragua)

Politics

Chavez says tumor extracted in Cuba was cancerous

President Hugo Chávez said a tumor recently removed from his pelvic region was of the same type of cancer as a previous tumor extracted from that part of his body about seven months ago. Speaking at his first television appearance in nine days, Chávez said the surgery and follow-up tests showed the tumor was "a recurrence of the initially diagnosed cancer." He said "the tumor was totally extracted" and noted "the absence of lesions suggestive of cancer neither locally, neither in nearby organs, neither far away ... neither metastasis, none of this thanks to God, to the diagnosis and rapid intervention." He verified the date of the recording by displaying a Saturday copy of the Cuban government newspaper Granma and a similar copy of the Venezuelan government paper Correo del Orinoco. (Fox News, 03-04-2012; Reuters; http://www.reuters.com/article/2012/03/04/us-venezuela-chavez-idUSTRE8230FB20120304; AVN, 02-05-2012; http://www.avn.info.ve/node/101897; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuelas-hugo-chavez-appears-on-tv-for-1st-time-in-9-days-after-tumor-surgery/2012/03/04/gIQAR3KhqR_story.html)

…and defends Syrian President Bashar Al-Assad, who has tried to violently crush a popular revolt in much of the Middle Eastern country. Venezuela has at least twice sent shipments of diesel oil to Syria over the past months. "We continue lamenting the aggressions against Syria," Chávez said, "and the pressure of the United States government and many European countries, failing to recognize the sovereignty of a people such as the Syrian people." (Fox News, 03-04-2012; http://latino.foxnews.com/latino/news/2012/03/04/hugo-chavez-says-tumor-extracted-in-cuba-was-cancerous/#ixzz1oFwnmYNJ)

President Santos to meet Chavez and Castro in Cuba

Colombian President Juan Manuel Santos will meet this week in Havana with his Cuban and Venezuelan counterparts, Raúl Castro and Hugo Chavez, to discuss Cuba’s attendance in the Summit of The Americas, and to sign a trade agreement with Mr. Chavez. Santos says: “it is a chance to talk as all good friends, with the Cuban Government, with Castro, the matter of Cuba in the upcoming Summit”. More in Spanish: (El Universal; http://www.eluniversal.com/nacional-y-politica/120306/presidente-santos-se-reunira-con-chavez-y-castro-en-cuba)

Expert says Executive decisions made from Cuba are void and could be challenged

Alberto Arteaga, a prominent attorney and criminal law authority says the Government’s refusal to allow Vice President Jaua to govern is political. “One may think that it is to avoid the 90 consecutive day absence period, after which the National Assembly must declare a permanent absence”. He says temporary absences have a limitation and that the current predicament is abnormal, as there is a designated person that can cover for Chavez. More in Spanish: (El Nacional, 03-05-3012; http://www.el-nacional.com)  

Venezuela suspends gun imports for a year

Venezuelan authorities have established a moratorium on importing guns for sale to the general public, while banning the marketing of munitions and all other armaments in an attempt to “put order” in that sector and exercise some control over the nation’s widespread violence. The technical secretary of the Presidential Commission for the Control of Arms, Munitions and Disarmament, Pablo Fernandez, said Friday in an interview on state channel VTV that since Feb. 29 “the importing of weapons to Venezuela has been suspended.” (Latin American Herald Tribune, 03-03-2012; http://www.laht.com/article.asp?ArticleId=474839&CategoryId=10717)



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.