May 29, 2012

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)

Chavez says Venezuela has 30 million hectares of arable land and that one of the priorities of the Bolivarian revolution makes it a true power in the continent through production of rice, corn and soybean crops. More in Spanish: (AVN, 05-28-2012; http://www.avn.info.ve/contenido/venezuela-cuenta-30-millones-hectáreas-cultivables)

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)

Container freight prices increase 20-30% starting June 1st, according to destination. The announcement was made by the board of the Puerto Cabello Association of Cargo Container Operators (ASOTRACONTAINER), which explained spare part prices and general maintenance costs were behind the move. More in Spanish: (Notitarde, 05-29-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1651818&idcat=9849&tipo=2; El Carabobeño; http://www.el-carabobeno.com/litoral/articulo/35057/a-partir-de-junio-aumentarn-tarifas-para-fletes-portuarios)

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.