May 15th, 2012

Economics & Finance

Venezuelan bonds tumble due to Bank of America report 

The price of Venezuelan bonds came down sharply after release of a report by Bank of America Merrill Lynch, which says the high level of electoral support for president Hugo Chavez "limits the possibility of a change toward more market friendly policies in the near future".  Government and PDVSA bonds fell an average 3.5 points. More in Spanish: (El Nacional, 05-15-2012; http://www.el-nacional.com/)

Liquid reserves lowest since 1997

Despite oil prices averaging U$D 112 per barrel, increased income is not showing in the level of international reserves, which stood at U$D 26.2 billion on May 11th, down from U$D 29.8 billion at the start of 2012 due to transfers to the National Development Fund.  The Bank of America report on Venezuela estimates that liquid reserves have dropped to U$D 2.7 billion, the lowest level since 1997, and says this situation has made it difficult for the government to supply hard currency to the private sector. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/estiman-que-reservas-liquidas-son-las-mas-bajas-desde-1997)

PDVSA U$D 43.3 billion in debt for loans and bonds

PDVSA's financial indebtedness rose 24% over the past five months due to additional financing from China and Japan, plus a new bond issue. The industry closed 2011 with a financial debt of U$D 38.4 billion, and it now stands at U$D 43.3 billion. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/a-433-millardos-se-eleva-deuda-de-pdvsa-por-prestamos-y-bonos)

Real wages in the public sector soar 31%, and only 3.3% in the private sector

Thanks to the large inflow of petrodollars, Hugo Chávez's government is increasing public spending and the economy has again started growing. Yet in terms of wage increases, the benefits are not being distributed equally and there is an enormous gap between those working in the public and private sectors. In comparing the first quarter of 2012 with the first three months of 2011, the wage index calculated by the Central Bank (BCV) shows that when the latest increases are taken into account and inflation is discounted, the purchasing power for an average public sector wage has increased by 31% whereas it has only grown 3,3% in the private sector. (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/real-wages-in-the-public-sector-soar-31-and-33-in-the-private-sector)

Commodities

OPEC reports 2.8% rise in Venezuelan oil production

According to the monthly report by the oil cartel, Venezuela is sixth among 12 member countries.  The report on extraction, based on secondary sources, indicates that oil production in Venezuela during April stood at 2.37 million BPD, which is 2.8% more than production reported for March. More in Spanish: (El Universal, 05-15-2012; http://www.eluniversal.com/economia/120515/opep-reporta-alza-de-28-en-produccion-de-venezuela)

At least nine oil spills and leakages to date in 2012

Reports and complaints about spills and leakages of oil and related substances have been multiplied during the first half of 2012. A tally of incidents reported by the state oil holding Petróleos de Venezuela (PDVSA) and its workers shows that the breakup of a diesel pipeline and an oil spill this week brings the number of significant spills or leakages of oil or chemical products to nine, so far this year (El Universal, 05-11-2012; http://www.eluniversal.com/economia/120511/at-least-nine-oil-spills-and-leakages-recorded-in-2012)

Venezuela adapts refining to process crude oil refiner in the Orinoco Oil Belt

PDVSA is advancing projects to adapt refining processes to the crude oil from the Orinoco oil belt. The director of  state refining, Jesus Luongo says there will be an investment of approximately U$D 5.3 billion to expand the Puerto La Cruz refinery in the state of Anzoátegui, in Northeastern Venezuela; and that they are moving over 5 million cubic meters of ground. More in Spanish: (AVN; 05-14-2012; http://www.avn.info.ve/contenido/venezuela-adecúa-su-parque-refinador-para-procesar-crudo-fpo)

SIDOR assets down almost U$D 3 billion

SIDOR has not presented legally required financial statements and balance sheets for 2009, 2010 and 2011 to its Board or shareholders. The company is owned 80% by the Government through CVG, and 20% by 15 000 small shareholders who are former employees and active workers, who are not taken into account. In 2012 to date, SIDOR has produced 587.000 tons of liquid steel, a huge setback from 2011, which in turn was not good. Production for this quarter was 213.000 tons in 2011, as opposed to 846 000 tons in 2007, which was the last year under the private administration of TERNIUM. More in Spanish: (Tal Cual, 05-14-2012; http://www.talcualdigital.com/index.html)

Energy subsidies add up to 9.67% of GDP in 2011

Venezuela is one of the few countries in the world that has "a high subsidy on energy products, such as gasoline, diesel, liquefied petroleum gas (LPG), natural gas and electricity," says Nelson Hernández, a Professor at the Graduate School of Economics and Energy Policy, at the Metropolitan University in Caracas. "There is a subsidy when the difference between the prices per unit of energy delivered to the public is lower than a reference price that shows the real cost or opportunity cost of the commodity. In the case of goods, such as gasoline, that are traded in international markets, the reference or benchmark price is the price in the global market." (El Universal, 05-14-2012; http://www.eluniversal.com/economia/120514/energy-subsidy-accounts-for-967-of-gdp-in-2011)

Politics

Back in Venezuela, Chávez says he completed radiation therapy

President Hugo Chavez arrived late Friday into Simon Bolívar International Airport after spending 11 days in Havana, Cuba, where he underwent the fifth and sixth cycles of radiation therapy sessions. (El Universal, 05-12-2012; http://www.eluniversal.com/nacional-y-politica/120512/back-in-venezuela-chavez-says-he-completed-radiation-therapy)

Maduro: The US has no choice but to hand over Aponte

Foreign Affairs Minister Nicolas Maduro calls Eladio Aponte, a former justice in the Supreme Tribunal of Justice (TSJ), a "criminal" and strongly urged the US government to deport him to Venezuela. According to Maduro: "Aponte is sought under a red alert by INTERPOL as a result of his direct links to drug-trafficking mafias and, further, because in Venezuela there is a court proceeding related to an inquest prior to his remarks. The United States has only one possibility: to hand him over; otherwise, it will be a direct accomplice of these mafias."(El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/maduro-the-us-only-choice-is-handing-over-aponte-aponte)

Former negotiator: Guyana is to argue that Venezuela has not interest

Guyana has said in a letter to Ban Ki-moon, Secretary-General of the United Nations (UN), that it has no territorial dispute with Venezuela. For its part, the Caribbean Community (CARICOM) issued a communiqué last week supporting the Guyanese position. Venezuela's Foreign Ministry remains silent on the issue. "The Guyanese are very clear. They are preparing a case of estoppel," says Emilio Figueredo, a former Venezuelan Ambassador to the UN in Geneva and former negotiator in the dispute with Guyana. Estoppel is "a legal bar to alleging or denying a fact because of one's own previous actions or words to the contrary." It is used in international law and is related to the term acquiescence, which means agreement or consent by silence or without objection. (El Universal, 05-14-2012; http://www.eluniversal.com/nacional-y-politica/120514/former-negotiator-guyana-is-to-argue-that-venezuela-has-not-interest)

Uribe accuses Chavez of being a dictator, Capriles says hands off Venezuelan politics

Former Colombian President Alvaro Uribe launched strong comments against President Hugo Chavez in his Twitter account, and took the opportunity to express support for Henrique Capriles. Uribe called for vigilance so that "Chavez does not steal the election because in Venezuela there are complaints of manipulation of elections." Uribe hopes for a "defeat of the dictatorship and a Capriles win in the October 7th elections". He said he was baffled by statements by President Juan Manuel Santos, who has said that Chavez is a factor of stability in the region. Venezuelan Presidential candidate Henrique Capriles urged both Uribe and Santos not to meddle in Venezuelan politics. More in Spanish: (El Nacional, 05-14-2012; http://www.el-nacional.com/ and El Universal, 05-15-2012; http://www.eluniversal.com/nacional-y-politica/120515/exhortan-a-uribe-y-a-santos-a-no-inmiscuirse-en-proceso-electoral)

Gas mega-project proposed for Venezuela, Ecuador and Colombia

The Foreign Ministers of Ecuador and Venezuela, Ricardo Patiño and Nicolás Maduro, will propose to their governments a plan to develop a binational gas project, adding on to agreements between Colombia and Venezuela in the same area, in order to develop the gas duct of the South, uniting the three nations in this area.  More in Spanish: (AVN, 05-15-2012; http://www.avn.info.ve/contenido/plantean-unir-venezuela-ecuador-y-colombia-megaproyecto-gasífero)





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.