May 18th, 2012

Economics & Finance

Venezuela´s economy grew 5.6% in the first quarter 2012, according to a joint announcement by Jorge Giordani, Minister for Planning and Finance, and Central Bank President Nelson Merentes. Giordani says this shows growth for six consecutive semesters and the highest level in the last 15 quarter and stressed that the growth estimate in this year's budget was 5%. Petroleum industry growth was pegged at 2.2%. More in Spanish: (AVN, 05-18-2012; http://www.avn.info.ve/contenido/economía-venezolana-creció-56-primer-trimestre-2012; http://www.avn.info.ve/contenido/crecimiento-económico-actividad-petrolera-se-ubicó-25; El Universal, http://www.eluniversal.com/economia/120518/economia-recupera-lo-perdido-en-la-recesion-y-crece-56; http://www.eluniversal.com/economia/120518/pib-petrolero-alcanzo-un-crecimiento-de-22-en-primer-trimestre)

Imports increased 48,5% during Q1 2012, according to a Central Bank report, up to U$D 13.190 billion from U$D 8.883 billion in Q1 2011. More in Spanish: (AVN, 05-18-2012; http://www.avn.info.ve/contenido/importaciones-se-incrementaron-485-al-cierre-del-primer-trimestre)

Private construction drops for nine quarters in a row

Construction in Venezuela grew by 29.6% in Q1 2012 but this was entirely due to public investment, as private activity continued to recede. Central Bank figures show private sector construction contracted by 10.6% and has been dropping for nine consecutive quarters. More in Spanish (El Universal, 05-18-2012; http://www.eluniversal.com/economia/120518/nueve-trimestres-de-caida-lleva-la-construccion-privada)

Nation's debts increased 22.5% in the first quarter of 2012

Venezuela's debts as a nation increased by 22.5% and closed Q1 2012 at U$D 93.3 billion. The increase is due to new loans from China, new bonds issued by the Government and PDVSA, renegotiations with expropriated companies and market variations. More in  Spanish: (El Nacional, 05-18-2012; http://www.el-nacional.com/)

International reserves at lowest point this year

International reserves reached their lowest point this year and closed at U$D 25.651 according to Central Bank official figures. The drop in reserves has increased by constant transfers to the National Development Fund (FONDEN). More in Spanish: (El Mundo, 05-18-2012, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/reservas-internacionales-cierran-en-su-nivel-mas-b.aspx)

VEB 5.30 per U$ dollar exchange rate gains ground

Financial authorities have set a new strategy: On the one hand, they will increase the amount of imports made with the VEB 5.30 per US dollar exchange rate used by the System for Foreign Currency Denominated Securities Transactions (SITME), a mechanism created by the Central Bank for companies that do not receive US dollars through the Foreign Exchange Board (CADIVI). On the other hand, they have cut more highly subsidized imports channeled through CADIVI at an exchange rate of VEB 4.30 per US dollar.  As transactions through SITME gain ground there is a gradual devaluation of the Venezuelan currency. Official data show that CADIVI authorized U$D 4.9 billion for imports, the lowest amount in the last six years and a 9% decline compared to the same period in 2011. (El Universal, 05-16-2012; http://www.eluniversal.com/economia/120516/veb-530-per-us-dollar-gains-ground-in-the-economy)

Over-budget loan appropriations soar 103.5% in a year

The government estimated FY2012 at VEB 297.8 billion (U$D 69.25 billion), but this amount has not been enough to meet the financial requirements of government agencies and state-run companies, thus leading the government to request additional loans. The National Assembly has approved extraordinary appropriations amounting to U$D 6.63 billion - at the official exchange rate of VEB 4.30 per US dollar - to date this year. This exceeds by 103.5% appropriations authorized for the same period in 2011, which were U$D 3.25 billion. (El Universal, 05-16-2012; http://www.eluniversal.com/economia/120516/extra-budget-loans-soar-1035-in-a-year)

Small and medium business endangered

The impact of new regulations imposed by the Government on Small and Medium Enterprises (SMEs) could result in closure or disinvestment of these enterprises, according to an alert issued by the National Council of Trade and Services (CONSECOMERCIO). The new Labor Law (LOT), along with recent minimum wage increase and prices regulated by the SUNDECOP seriously compromise the future of SMEs operating in trade and services throughout the country. More in Spanish: (Tal Cual, 05-16-2012; http://www.talcualdigital.com/index.html)

Overall business climate index for Latin America recovers, except for Venezuela

According to the quarterly study by Brazil's Getulio Vargas Foundation and the University of Munich, which consulted 149 experts from 18 countries, the Latin American Economic Climate Index was up to 5.2 points in April, its best level since July 2011. Venezuela went from 4.5 to 3.4 points. (Veneconomy, 05-16-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30528&idc=2; El Universal, 05-16-2012; http://www.eluniversal.com/economia/120516/brazilian-foundation-venezuelas-business-climate-deteriorates)

Commodities

Iron, steel and aluminum production falling

Mining has dropped 3.2% in Q1 2012, within an apparently growing and expanding economy, as compared to last year. In his report on the economy, Planning and Finance Minister Jorge Giordani admitted a drop in production in iron, steel and aluminum industries concentrated in the Guayana region. More in Spanish: (El Universal, 05-18-2012; http://www.eluniversal.com/economia/120518/se-contrae-la-produccion-de-hierro-acero-y-aluminio)

Aluminum industry paralyzed

For the first time in over three decades, almost all of the domestic industry in Guyana aluminum processing is paralyzed, with some companies in "technical closure" having sent their workers home and others trying to "stretch" inventory - and all because of the almost total lack of aluminum due to the crisis VENALUM and ALCASA. More in Spanish: (Tal Cual; 05-16-2012; http://www.talcualdigital.com/index.html)

Stalled mining in Guyana

Canadian, Russian, Iranian and Chinese have landed in the southern state of Bolivar interested in gold mining, metal largest southern municipalities of the entity and of which live 90% of the population.

Two months after the expiry of the extension of the Order of Strength, and Value Range number 8413, which restricts the production and sale of gold to the State, the industry remains stagnant with no prospect of recovery. Rusoro Mining companies such as Promotora Minera de Guayana, are administered by the state after the expiration Minerven extension to form joint ventures. More in Spanish: (El Nacional, 05-16-2012; http://www.el-nacional.com/)

International Trade

Trade with Colombia rises by 18%

The exchange of goods and services between Colombia and Venezuela grew 18% in the first quarter, compared with the same period in 2011. Luis Alberto Russián, chief executive of the Chamber of Venezuelan-Colombian Integration, said that bilateral trade closed the first 3 months at U$D 564 million: U$D 449 million in Colombian imports and U$D 115 million in Venezuelan exports, mostly fuel from the El Vigía plant in Mérida state. The trade balance for the country shows a deficit of U$D 334 million. More in Spanish: (El Nacional, 05-17-2012; http://www.el-nacional.com/) and Ultimas Noticias, 05-17-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/colombia-recibio-14,6-millones-de-litros-de-combus.aspx)

Politics

In Venezuela, top diplomat steps into the void while cancer forces lower profile for Chavez

After nearly a year of cancer treatment that has forced President Hugo Chavez to step back from the spotlight, a burly former bus driver with a dark mustache and affable smile is emerging more than ever as the president’s stand-in. In recent weeks, Foreign Minister Nicolas Maduro has led news conferences, touted a new labor law and criticized the U.S. government with gusto. He even rallied a crowd of supporters while wearing a track suit emblazoned with the yellow, blue and red of Venezuela’s flag, just like one Chavez sometimes wears. (The Washington Post, 05-16-2012; http://www.washingtonpost.com/world/the_americas/in-venezuela-top-diplomat-steps-into-the-void-while-cancer-forces-lower-profile-for-chavez/2012/05/16/gIQAU7YBUU_story.html)

Brazil is following Chavez illness closely, according to a statement by Brazilian Foreign Minister Brasil Antonio Patriota, who wished the Venezuelan President a rapid recovery. More in Spanish: (Tal Cual, 05-18-2012; http://www.talcualdigital.com/index.html)





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.