Economics &
Finance
Liquidity to increase uncontrolled
through October 7th elections, oil dependence increases
The market here considers public expenditures will
continue to increase circulating currency supply in order to create a general
feeling of wellbeing. Monetary liquidity has been increasing rapidly,
particularly because of public sector spending, in order to speed economic
growth. According to the Central Bank, to date there are VBF 165.125 billion
more than last year, after the numbers rose 52.8% in mid May. This is 20 points
above last year. The bad news is that, instead of diversifying, Venezuela is
deeper into the renter model which means scarce formal employment,
overdependence on oil and the inability to create sustained prosperity.
Official numbers point to deindustrialization, with the country exporting oil
only. Oil income promotes massive imports. More in Spanish: (El Mundo,
05-29-2012, http://www.elmundo.com.ve/noticias/economia/banca/liquidez-monetaria-aumentara-sin-freno-hasta-las-e.aspx,
El Universal, 05-26-2012; http://www.eluniversal.com/economia/120526/venezuelan-economy-grows-but-rentier-model-deepens)
Falling oil prices turn on alarms
Economist Luis Oliveros says that if the average price for
Venezuela's oil basket falls below U$D 80 a barrel there will be severe fiscal
problems because the economy has become untenable with an income below U$D 100
a barrel. He said: "I predict that
the short term is more likely to bring prices down instead of up." More
in Spanish: (El Mundo, 05-28-2012; http://www.elmundo.com.ve/noticias/petroleo/industria/caida-de-precios-petroleros-enciende-alarmas-en-ma.aspx)
To report barriers on the private
sector: FEDECAMARAS President Jorge Botti
is scheduled to speak at the 101st International Labor Conference of the International
Organization of Employers (IOE) to be held in Geneva starting May 30th. More in
Spanish: (Tal Cual, 05-28-2012; http://www.talcualdigital.com/index.html)
Commodities
PDVSA sees no cash for 43% of its
exports
Petroleos de Venezuela (PDVSA), the bastion of "bolivarian" diplomacy and the
economic pillar for the Venezuelan Government, has slowly seen its cash flow
dry up due to unorthodox trade practices that compromise thousands of barrels
of crude oil and associated products, according to a REUTERS report. The state
oil company produces around 3 million BPD, including liquid natural gas, and it
is estimated 2.4 million BPD are exported. But official operations reports for
2011 prove that PDVSA did not receive a single cash dollar on 43% of its sales,
a slice that is up considerably from 32% in 2009. Barter agreements for medical
services, cattle, and even nutmeg are drying up cash for the largest enterprise
in the nation, which is besieged by increased debt, backed up payments to
suppliers and contractors, and delays in productive projects. More in Spanish: (El
Universal, 05-29-2012; http://www.eluniversal.com/economia/120529/pdvsa-no-cobra-la-entrega-de-13-millones-de-barriles-al-dia
and Ultimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/canjes-petroleros-secan-caja-de-pdvsa.aspx)
PDVSA budget insuffient to meet
collective bargaining obligations
A hurdle facing upcoming oil industry collective
bargaining discussions is a budget deficit within the state oil company, PDVSA:
Personnel expenditures were estimated at 43.7 billion VBF (around U$D 10.1
billion) before negotiations began. Preliminary figures now show that the
proposed agreement presented by the United Oil and Gas Workers Federation mean
an increase in personnel expenditures of around 35-40%, which would force PDVSA
to seek an additional 15.2 billion VBF. More in Spanish: (El Nacional,
05-29-2012; http://www.el-nacional.com/)
Analyst estimates that price of gold
is to keep a high floor
Economist Angel García Banchs says problems and uncertainties
facing the global economy, particularly the debt crisis in Europe, have hit the
prices of commodities, which have declined in the past weeks. Gold is one of
these commodities and, in the case of Venezuela, it accounts for 73% of
international reserves held by the Central Bank of Venezuela (BCV). As a
result, when the price of gold falls, Venezuelan international reserves tumble
as well. International reserves are used by the government to pay imports and
debt obligations. Therefore, when the price of gold sinks, Venezuela s capacity
to meet those commitments dwindles. However, he says that despite the uncertain
world economic outlook the price of commodities will not see a sharp decline in
the next few months. "Drops in the
price of gold and oil are limited. (These commodities) have a high price
floor". (El Universal, 05-28-2012; http://www.eluniversal.com/economia/120528/analyst-estimates-that-price-of-gold-is-to-keep-a-high-floor)
PDVSA tanker has repairs in Bahamas
after incident
A tanker operated by Venezuela's state oil company PDVSA damaged its
hull hitting a sandbank in the Caribbean and is undergoing emergency repairs at
a shipyard in the Bahamas, maritime sources said. The sources said no oil spill
had been caused by the accident involving the Aframax-class tanker Yare, which
was delivered to a subsidiary of PDVSA by shipbuilders in Japan a year ago.
(Reuters, 05-28-2012; http://www.reuters.com/article/2012/05/28/venezuela-tanker-idUSL1E8GS2PW20120528)
International Trade
FTA between Colombia and the United
States also helps Venezuela
The North American Free Trade Agreement between Colombia
and the United States indirectly favors Venezuela due to improvements in the
economic atmosphere in the neighboring country, says Moisés Bittan, former
President of the Colombo-Venezuelan Chamber of Commerce. More in Spanish: (El
Mundo, 05-28-2012; http://www.elmundo.com.ve/noticias/economia/internacional/tlc-entre-colombia-y-estados-unidos-tambien-favore.aspx)
Politics
Cabello says a Chavez nomination
could be presented by Internet to Election Board
Candidates for the presidential elections in Venezuela, scheduled for
October 7th 2012, can register starting June 1st through 11th, according to
Tania D'Amelio a Director at the National Election Board (CNE). National
Assembly and PSUV President Diosdado Cabello has stirred up further controversy
by saying President Chavez could be nominated via Internet, while avoiding a
specific date for the enrollment of his nomination. More in Spanish: (El
Universal, 05-28-2012; http://www.eluniversal.com/nacional-y-politica/120528/cabello-anuncia-que-chavez-puede-postularse-a-la-reeleccion-por-intern;
AVN, 05-28-2012; http://www.avn.info.ve/node/114562)
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.