April 27, 2012

Economics & Finance

Washington Post: Chavez’s mysterious ailment fuels a run on Venezuelan stocks

What is the hottest global market so far in 2012? How about socialist Venezuela — where stocks rose 99% between Jan. 1 and this week. That might seem like an improbable surge in a country wracked by double-digit inflation, shortages of water, power and staple foods, and a dearth of investment — not to mention one of the world’s highest murder rates. But Venezuela’s markets are being moved by a strange but powerful force: the absence of reliable information about the health of President Hugo Chavez — and the growing speculation that his condition is rapidly deteriorating. According to Russell M. Dallen Jr., a banker who produces a newsletter on Venezuela, a rumor that a prominent journalist had tweeted the news of Mr. Chavez’s death caused Venezuelan bond prices to spike by as much as 5% Friday. (Washington Post, 04-24-2012; http://www.washingtonpost.com/opinions/chavezs-mysterious-ailment-fuels-a-run-on-venezuelan-stocks/2012/04/24/gIQAWJySfT_story.html)

Barclays: Signs of Chavez deterioration

BARCLAY's Emerging Markets Research publication for Monday, April 23 dissects information on the health of President Hugo Chavez, its political implications and possible effects on the economy. "Venezuela: President signs of impairment" refers to the recent absence of the Chief of State for over a week which. along with the shift of forces within the government, "increases the likelihood that Chavez continues to have severe limitations to continue and finish their campaign to designate a successor." More in Spanish: (El Universal, 04-25-2012; http://www.eluniversal.com/nacional-y-politica/120425/barclays-signos-del-deterioro-del-presidente-chavez)

World  Bank indicates Venezuela squanders oil boom

Rodrigo Chaves, World Bank director for Poverty Reduction and Economic Management in Latin America and the Caribbean says that whereas countries like Brazil, Colombia, Peru, Chile and Mexico "have managed well the supercycle" of raw materials, others "have squandered the boom, causing permanent damage to their economies." In his view, should there be a slowdown in China and a fall in raw materials, "there will be countries that have very high fiscal reserves, such as Peru and Chile," and others like Venezuela, which have a deficit "will suffer dramatically, because, like Aesop's grasshopper, they spent the summer singing." More in Spanish: (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/bm-advierte-despilfarro-de-la-bonanza-petrolera-en-venezuela)

CITI forecasts that PDVSA will issue bonds soon

In a report dated April 24, US banking giant Citigroup said that it is highly likely that state-run oil company Petróleos de Venezuela (PDVSA) will issue bonds next month that will be purchased by the Central Bank of Venezuela (BCV) and other state-run financial institutions. These bonds will eventually feed the System for Foreign Currency Denominated Securities Transactions (SITME), a system through which companies buy US dollar-denominated bonds with bolivars and then resell them abroad to obtain US dollars. (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/citi-forecasts-that-pdvsa-is-to-issue-bonds-soon)

Venezuela in the last places of competitiveness in Latin America

Venezuela is ranked second lowest in a study of competitiveness in Latin America by the Aden 0international business school..Chile and Panama topped the index every six months. Chile scored 81.4 points out of a maximum of 100 vs. 82.9 the previous measurement (November 2011) and Panama managed 76 points, up from 76.5 the previous semester. Venezuela is the second lowest in the region with 57.7 points, just ahead of Bolivia which recorded 54.9 points. More in Spanish: (El Mundo, 04-26-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-en-los-ultimos-lugares-de-competitividad.aspx)

BCV: Retail sales drop 1.37% in January

Sales remain sluggish despite public spending to boost consumption in an election year.  According to data released by the Central Bank of Venezuela (BCV), both wholesale and retail sales grew 1.76% in January, compared to a 3.87% increase in the first month of 2011. Only retail sales posted a 1.37% decline in the first month of the year. (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/bcv-venezuelas-retail-sales-fall-137-in-january)

CADIVI lowers allocation of currency by 14%

The first quarter of 2012 reflects a drop in allocation of foreign currency, despite government assurances that the supply of foreign currency for price-controlled items will improve. An ECONOANALITICA report shows uneven currency distribution by the currency board, with a decrease of 37% and 39% for the health and automotive sectors; and increases of 64% for food, and 40% for general trade. More in Spanish: (Tal Cual, 04-27-2012; http://www.talcualdigital.com/index.html)

Minimum wage increase now official

A presidential decree fixed a mandatory 30% monthly minimum wage increase for workers in the private and public sectors. The increase is scheduled in two 15% parts, one in May and the other in September. More in Spanish: (Tal Cual, 04-26-2012;  http://www.talcualdigital.com/index.html)

Commodities

PDVSA eyes exports to India

As China shows signs of a slowdown in oil and fuel consumption, PDVSA is looking to India to take up the slack. Dispatches to India in the first two months of 2012 indicate that shipments to that country could balance or surpass supplies to China. More in Spanish: (El Nacional, 04-26-2012; http://www.el-nacional.com/)

Japan grants U$D 1 billion in loans to PDVSA for oil projects

A new financing of 1 billion dollars have been granted by Japan to the Venezuelan state-oil company PDVSA, through the Japan Bank for International Cooperation.  The agreement was signed by Venezuela's Petroleum and Mining minister, Rafael Ramirez, and Japanese Economy, Commerce and Industry minister, Yukio Edano in Tokyo. (AVN, 04-25-2012; http://www.avn.info.ve/node/109534; El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/pdvsa-secures-usd-1-billion-in-loan-from-japan)

Venezuela resumes nationwide power-rationing

Venezuelans residing in the central, western, southern and eastern regions of the country complain through social networks about the lack of electricity. They assume that partial power outages have been implemented or power failures are hitting their regions again due to faulty power distribution and transmission networks. But beyond that, the government is implementing a nationwide "scheduled and rotating power rationing plan." (El Universal, 04-25-2012; http://www.eluniversal.com/economia/120425/venezuela-resumes-nationwide-power-rationing-plans)

Venezuela opposes increase in OPEC output target

Energy minister Rafael Ramirez says OPEC should not raise production targets when it meets in June. "We are against it, I think there is plenty of oil available in the market," he responded when asked whether he was in favor of increasing targets. "We think the oil price should be at a minimum $100 (a barrel). The reason the price is up now is because the market is reacting very nervously to the European economic crisis and the disturbing moves in the Middle East." (Reuters, 04-24-2012; http://www.reuters.com/article/2012/04/24/venezuela-opec-targets-idUSL3E8FO6ID20120424)

Venezuela iron ore output up 6% in Q1 - paper

Venezuela increased iron ore production by 6% in the first quarter of 2012 to its highest level in five years, the president of the country's primary iron producer Ferrominera Orinoco said. Iron ore output rose to 4.27 million tons in the first three months of this year, compared with 4.03 million tons in the same period of 2011, Radwan Sabbagh said in an interview published on Tuesday by the state newspaper Correo del Orinoco. (Reuters, 04-24-2012; http://www.reuters.com/article/2012/04/24/venezuela-iron-idUSL2E8FO5QM20120424)

Sugar supply guaranteed

The head of the Venezuelan Foods Corporation Henry Silva emphasized that as part of the National Sugar Plan there will be no price increase of the food staple this year that according to it, its current price is far for the whole of the productive chain. Also, he guaranteed there is enough stock of the product for the country’s demand. (Veneconomy, 04-25-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30270&idc=3)

International Trade

South Korea plans for U$D 11.14 billion projects in Venezuela

South Korea and Venezuela have signed non-binding agreements for five heavy industry projects estimated at U$D 11.14 billion. According to Korea’s Knowledge Economy Ministry an U$D 8.8 billion crude oil project, involving PDVSA and a group including DAEWOO Engineering & Construction Co., will build a pipeline linking the Orinoco oil fields in the Junín area southwest of Caracas the capital to oil storage tanks and a harbor to be built in the coastal area of Araya. PDVSA and HYUNDAI Engineering & Construction Co. plan to build a U$D 1 billion, 900-megawatt petroleum coke-fired power plant in Carabobo, and a U$D 800 million refinery capable of processing 60,000 barrels a day in Junín. PDVSA will also build a U$D 500 million heavy oil storage facility with SK Engineering & Construction Co. PEQUIVEN and SK Engineering will construct a U$D 35 million petrochemical plant with a capacity to produce 800,000 tons of ethylene and other products a year, the ministry said. (Bloomberg, 04-24-2012; http://www.bloomberg.com/news/2012-04-24/south-korea-says-it-plans-11-14-billion-projects-in-venezuela.html)

Politics

Chavez returns ailing; still ahead in polls

President Hugo Chávez arrived early on Thursday in Venezuela, after spending 12 days in Cuba, where he underwent a fourth cycle of radiotherapy sessions to treat an undisclosed form of cancer. His failure to make his usual rounds on television and radio sparked speculation that his health had taken a turn for the worse and that he might have even died. But Chavez’s health problems don’t seem to be hurting his presidential aspirations. A series of recent polls show that the 57-year-old leader is still ahead of his rival Henrique Capriles, even as he’s been running his campaign from a Cuban hospital ward. “A key to understanding this phenomenon is that most people don’t think he is very sick,” said John Magdaleno, with the Polity political consulting firm in Caracas. “They recognize that he’s ill but they believe he will be able to compete in the race.”  (El Universal, 04-26-2012; http://www.eluniversal.com/nacional-y-politica/120426/chavez-arrives-in-venezuela-no-formal-address-delivered; The Miami Herald,  http://www.miamiherald.com/2012/04/26/2769833/chavez-returns-to-venezuela-ailing.html#storylink=cpy<9

Prepare scenarios with Chavez, without him, or a suspension of elections; Chavez calls for unity

At a meeting of the group that issues guidelines for regional election campaigns, Wilmer Castro, who coordinates the unit for planning and evaluation presented three scenarios for the next 5 months leading to the October 7th elections: "With a weakened Chavez, without Chavez, and the suspension of the elections due to the political climate". Higher PSUV officials later disavowed the presentation by Castro and ordered cadres to present Chavez in campaign mode and the opposition plotting violence to suspend the elections. In a telephone call, Chavez himself called to followers to promote "national unity to defeat opposition psychological warfare". (El Nacional, 04-25-2012; http://www.el-nacional.com/, More in Spanish: Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/chávez-convocó-unidad-nacional-para-derrocar-guerra-psicológica-oposición; El Universal, http://www.eluniversal.com/nacional-y-politica/120427/chavez-hay-que-construir-la-victoria-todos-los-dias)

Colombia's former President Alvaro Uribe will campaign along the border against a Chavez reelection, and has called Venezuela a haven for Colombian terrorists and drug trafficking. More in Spanish: (El Nacional, 04-27-2012; http://www.el-nacional.com/)

US supports OAS sending observers to Venezuela's elections

Roberta Jacobson, Assistant Secretary of State for the Western Hemisphere told the Latin America Subcommittee of the House Foreign Affairs Committee that the US would roundly support the OAS sending observers to the October Presidential elections in Venezuela, but cautioned that in order to do so the OAS must receive a request from the Venezuelan Government. More in Spanish: (El Nacional, 04-27-2012; http://www.el-nacional.com/)

Greater Caracas reported as the third most violent area in the world

Mexican NGO Citizens Council for Public Safety (CCSP) has published a report showing the 50 most violent areas in the world during 2011. According to this report, the Greater Caracas area was the third most violent in the world with 2215 homicides. This was 105.31 homicides per 100,000 populations. Only the Cortés and Yoro areas of Honduras are ahead in violence. More in Spanish: (El Universal, 04-27-2012; http://www.eluniversal.com/sucesos/120427/distrito-capital-es-el-tercero-mas-violento-del-mundo)

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.