Economics & Finance

U$D 9 billion drop in foreign reserves projected

NOMURA projects a U$D 9 billion drop in Venezuela's reserves in 2012, and a ceiling of U$D 20 billion as a result of falling oil prices. It adds there will be added pressure on reserves due to lower gold prices. The firm points out diminished import authorizations by CADIVI due to increased government imports and pressure on reserves, whereas SITME has increased authorizations for buying abroad: "We therefore suspect this instrument is a substitute, not a complement to CADIVI". It also doubts 48% growth in imports registered during the first semester can be sustained for the remainder of the year. "The difficulty with this strategy is possible scarcity". More in Spanish: (El Nacional, 06-29-2012; http://www.el-nacional.com/)

BCV expands foreign currency supply through SITME by 32%

Last week, the Central Bank's SITME (Transaction System for Foreign Currency Denominated Securities) disbursed the highest amount since the beginning of its operations in June 2009. Thus the process accelerates for the official exchange rate at VEB 4.30 per US dollar to lose weight in the economy, while the exchange rate of VEB 5.30 per US dollar gets stronger, which is slow motion devaluation. Reports show that by June 22, the accrued amount for this year is U$D 4.93 billion, a 32% hike relative to the same term in 2011. (El Universal, 06-27-2012; http://www.eluniversal.com/economia/120627/bcv-expands-by-32-foreign-currency-supply-through-sitme)

Investment in development can continue despite oil prices

President Hugo Chavez says that Venezuela has sufficient resources to continue investing on the country's development, even though oil process drop. "The Bolivarian Republic of Venezuela still has a high ceiling to extend debt. The ratio between foreign debt and GDP is over 20%," he said. (AVN, 06-27-2012; http://www.avn.info.ve/contenido/venezuela-can-continue-investing-development-despite-oil-prices)

Commodities

Venezuela wants OPEC price band restored, will maintain production through 2012

Venezuela on Wednesday proposed that OPEC set an oil price band of U$D 80 to U$D 120 a barrel, Energy Minister Rafael Ramirez told Reuters, bidding to restore a policy the cartel tried 12 years ago in a failed attempt to control prices in a tight range by adjusting supply. The Organization of the Petroleum Exporting Countries in 2000 adopted a U$D $22 to U$D $28 price band, requiring its members to cut or raise output in an effort to keep prices in that range for an OPEC basket of crudes. The policy quickly proved unworkable, however, and increasing demand from China pushed prices irreversibly through U$D 30 in 2004. "We need to restore the band system, says Ramirez." It could be between U$D 80 and U$D 120 right now that would be sufficiently wide to allow flexibility." He also said Venezuela will maintain an average production level of 3.011 million BPD through 2012. (Reuters, 06-27-2012; http://www.reuters.com/article/2012/06/27/us-venezuela-oil-idUSBRE85Q0TX20120627; and more in Spanish: AVN, 06-29-2012; http://www.avn.info.ve/contenido/venezuela-mantendrá-producción-promedio-crudo-3-millones-11-mil-bd-2012)

Harvest says Venezuela supports asset sale to Indonesia

Harvest Natural Resources Inc. (HNR), the U.S. oil producer seeking to shed Venezuelan assets, has had support from the Venezuelan government to sell a joint-venture stake to Indonesia, Chief Executive Officer James Edmiston said.

The Houston-based company sees no reason why the U$D 725 million deal won’t be approved by officials and state oil company Petroleos de Venezuela SA, known as PDVSA, Edmiston said today on a conference call with investors and analysts. (Bloomberg, 06-27-2012; http://www.bloomberg.com/news/2012-06-27/harvest-says-venezuela-supports-asset-sale-to-indonesia.html)

Amuay refinery reported to be partially halted

Various plants at Venezuela's largest refinery, the 645,000-barrel-per-day (BPD) Amuay complex, have been paralyzed by a fault in the cooling system, sources at state oil company PDVSA said on Thursday. The plants' operations were halted late on Wednesday after the problem was detected, one source said. "There is a fault. Some of the units are down," the source said, without giving more details of how much of the refinery was affected. (Reuters, 06-28-2012; http://www.reuters.com/article/2012/06/28/venezuela-refinery-idUSL2E8HS2KE20120628)

Hyundai E&C says it wins U$D 1.35 billion order in Venezuela

Hyundai Engineering & Construction announced that it had won a 1.56 trillion Korean won (U$D1.35 billion) order to expand and improve the structure of an oil factory in Puerto La Cruz, Venezuela, from Petroleos de Venezuela S.A.

The South Korean builder said in a regulatory filing that the construction is slated to be completed in 42 months. The company did not say when construction will begin. (Reuters, 06-28-2012; http://www.reuters.com/article/2012/06/28/hyundai-ec-deal-idUSL3E8HS1L120120628)

China's Wison wins Venezuela refinery upgrade project

China's Wison Engineering Ltd said on Wednesday it won a contract to upgrade Venezuela's 210,000 barrel per day Puerto la Cruz refinery to process heavy crude. The project, which is expected to be completed within 42 months after it is launched, also calls for the expansion of the refinery's facilities that produce gasoline, diesel and jet fuel, Wison said in a press release. The release did not specify when the project would begin or further details of the project. (Reuters, 06-28-2012; http://www.reuters.com/article/2012/06/27/venezuela-wison-refinery-idUSL2E8HRGYL20120627)

Venezuela to seek oil in Cuba

According to Oil and Mining Minister Rafael Ramírez, Venezuela will invest around U$D 40 million to drill an exploratory well in Cuba's deep waters after Malasia's PETRONAS ends work there. More in Spanish: (Ultimas Noticias, 06-29-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-explorara-petroleo-en-cuba.aspx)

International Trade

Venezuela, Belarus sign accords in strategic areas

The governments of Venezuela and Belarus have signed over 20 agreements in areas such as mining, petroleum and energy, habitat, food security, technology and communications during a meeting in Miraflores Palace between President Hugo Chavez and Belarus president Alexander Lukashenko. Agreements include memorandum of understanding between Venezuela and Belarus to design and construct a gas pipeline to create a national gas development plan. (AVN, 06-27-2012; http://www.avn.info.ve/node/119603)

Logistics & Transport

Government admits BOLIPUERTOS delays delivery of imports

The Ministry of Planning and Finance and the Central Bank have acknowledged in a note to the Executive Vice President, that operations are "challenged by high levels of deliveries of imported inputs ". The report, also notes that there are obstacles to manufacturing certain foods because of "delays in the settlement of foreign exchange operations generates problems with suppliers." The report also points out problems in some industries due to lack of approval of import licenses by the Ministry for Food. More in Spanish: (Entorno Inteligente, 06-27-2012; http://www.entornointeligente.com/articulo/1283168/Gobierno-admite-que-Bolipuertos-demora-entrega-de-importaciones-27062012)

Politics

CONSULTORES 21 polls show Chavez and Capriles in a dead heat

The well known CONSULTORES 21 polling firm says its research at the beginning of the campaign shows President Chavez and candidate Henrique Capriles in a technical tie with voters for the first time. Another firm known as HINTERENLACES is claiming that the President leads by over 20%, More in Spanish: (El Universal, 06-29-2012; http://www.eluniversal.com/nacional-y-politica/120629/sondeos-encienden-inicio-de-campana-consultores-21-afirma-que-hay-un-e)

Supreme Tribunal embargoes GLOBOVISION assets

The Supreme Tribunal has decreed an executive embargo of the assets of the GLOBOVISION television network for VEB 24.425 million, which is double the amount of an outstanding fine, plus execution costs estimated at 30% of the total. The fine - which is challenged by the private media operator - was imposed by the government's National Telecommunications Council (CONATEL), for covering prisoner riots at El Rodeo prison in mid 2011. GLOBOVISION has said it will pay the fine, but had appealed. More in Spanish: (AVN, 06-29-2012; http://www.avn.info.ve/contenido/tsj-decretó-embargo-ejecutivo-bienes-globovisión; El Universal, http://www.eluniversal.com/nacional-y-politica/120629/tsj-ordeno-embargar-a-globovision-por-no-pagar-multa)

Chavez and Putin review military agreements

The presidents of Venezuela and Russia, Hugo Chávez and Vladimir Putin, reviewed the economic, trade, and military agreements between the two countries over the phone, according to the Foreign Ministry. "They reviewed various issues on the common agenda of both countries, especially in matters related to energy, agri-business, commercial and residential construction, and most of all, energy and military technology." (El Universal, 06-27-2012, http://www.eluniversal.com/nacional-y-politica/120627/chavez-and-putin-review-military-agreements)

VENAMCHAM calls on government to dialogue

The Venezuelan American Chamber of Commerce and Industry (VENAMCHAM) have called for an "open dialogue" between the government and the private sector. Executive Director Carlos Tejera expressed concern over diminished domestic production and the rise in imports. He said "no one wants scarcity, we all want job creation, so we have to work together". More in Spanish: (El Universal, 06-29-2012; http://www.eluniversal.com/economia/120629/venamcham-llama-al-gobierno-a-mayor-dialogo; El Mundo, http://www.elmundo.com.ve/noticias/negocios/empresas/restricciones-de-repatriacion-de-capital-ahuyentan.aspx)

June 26th, 2012

Economics & Finance

Chavez claims Venezuela can withstand oil price drop into 2013

President Hugo Chavez said the fall in oil prices won’t affect the economy because the country has savings and funds to withstand the drop into 2013. (Bloomberg, 06-24-2012; http://www.bloomberg.com/news/2012-06-24/chavez-says-venezuela-can-withstand-oil-price-drop-into-2013.html)

BANESCO takes over failed US bank

Security Bank, National Association, North Lauderdale, Florida, was closed in May by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with BANESCO USA, Coral Gables, Florida, to assume all of the deposits of Security Bank, National Association. (Latin American Herald Tribune, 06-24-2012; http://www.laht.com/article.asp?ArticleId=525522&CategoryId=10717)

Increased insecurity spurs armored vehicle business

Vehicle armoring business has soared in Venezuela: From 12 companies in the industry five years ago, there are now 47 in operation. A Bloomberg survey of clients for the service indicates that what once seemed a high price item is now a necessary expense. Eduardo Ibarra, a representative for the multinational CARAT operation, said the agency shields 20 cars per month, a volume greater than that served by the company in Brazil. More in Spanish: (Descifrado, 06-22-2012; http://www.descifrado.com/index.php?id=11)

Commodities

Venezuela´s oil drops to U$D90.09, JP Morgan lowers oil price projections

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending June 22 fell to U$D 90.09 a barrel from the previous week's U$D 92.06. For the second time this year, JP Morgan lowered their oil price projection for 2012 and 2013 due to weak economic growth and increased OPEC production. (Latin American Herald Tribune, 06-22-2012; http://www.laht.com/article.asp?ArticleId=524011&CategoryId=10717; and more in Spanish: El Mundo, 06-25-2012; http://www.elmundo.com.ve/noticias/economia/mercados/jpmorgan-rebajo-su-perspectiva-de-precios-del-petr.aspx)

PDVSA given until November to fund Brazilian refinery

Brazil's government-run oil company Petroleo Brasileiro SA expects its Venezuelan peer Petroleos de Venezuela SA to remain as a partner in the construction of a huge refinery in northeastern Brazil, Petrobras Chief Executive Maria das Gracas Silva Foster said Monday. Petroleos de Venezuela, or PDVSA, still needs to come up with the appropriate financial guarantees to be able to partner with Petrobras in construction of the Abreu e Lima refinery in Brazil's northeast Pernambuco state, Ms. Foster told reporters during a presentation on the company's latest five-year business plan. "We're not thinking of another partner that isn't PDVSA," Ms. Foster said. Petrobras said that it "understands that PDVSA will resolve the problems it has and will be our partner." She added that Venezuela has been given through November to provide the requisite guarantees. (Fox Business, 06-25-2012; http://www.foxbusiness.com/news/2012/06/25/brazil-petrobras-expects-venezuela-pdvsa-to-be-refinery-partner/; and more in Spanish: El Universal; http://www.eluniversal.com/economia/120626/petrobras-abre-nuevo-plazo-para-concretar-refineria-con-venezuela)

PDVSA turns to traders to sustain Ecuador oil deal

Venezuelan state oil giant PDVSA has had to buy dozens of extra fuel cargoes from countries as far away as Estonia and Saudi Arabia to keep up its side of a 2008 oil supply deal with leftist ally Ecuador, according to traders and sales documents. In an examination of shipping data that highlights the practical risks of political trade deals, Reuters found that half the fuel Venezuela sent to Ecuador, which cannot process its own heavy crude, came from third countries, often via trading companies including GLENCORE. What was meant to be an example of cooperation between ideologically aligned states, with President Chavez importing Ecuadorean crude in return for refined fuel, has instead become another sign of problems in PDVSA's refining network and a profitable niche for foreign traders. (Reuters, 06-24-2012; http://www.reuters.com/article/2012/06/25/venezuela-ecuador-oil-idUSL2E8HP2JY20120625)

Government will acquire 106 new motorcycle oil drills from China

President Chavez says the government will soon acquire 106 motorcycle oil drills, thanks to agreements signed with the Republic of China. More in Spanish: (AVN, 06-25-2012; http://www.avn.info.ve/contenido/gobierno-adquirirá-106-nuevos-moto-taladros-petroleros-provenientes-china)

International Trade

Oil shipments to Paraguay suspended, PETROPAR owes almost U$D 300 million, seeks other sources 

President Chavez has ordered a freeze on the 7500 BPD PDVSA has been shipping to Paraguay, for an average around 28.5% of Paraguayan consumption. The standing bilateral agreement calls for shipments up to 25000 BPD with financed repayment at subsidized 2% interest rates. PETROPAR President Sergio Escobar says the Venezuelan embargo will have little effect as Venezuela supplies 25% of fuel the South American nation receives and will call for bidding to allocate other sources. PETROPAR owed PDVSA U$D269 million by year end 2011, and its debt to Venezuela is up to around U$D 300 million this year. (El Universal, 06-25-2012; http://www.eluniversal.com/economia/120625/petropar-owes-venezuela-over-usd-260-million; and more in Spanish: El Universal; http://www.eluniversal.com/economia/120626/petropar-buscara-otro-proveedor-para-reemplazar-a-pdvsa; El Nacional; http://www.el-nacional.com/)

Legislator says Venezuela may have an easier way into MERCOSUR

A pro Chavez member of the Andean Parliament, Roy Daza claims MERCOSUR Presidents scheduled to meet this month in Mendoza, Argentina, will take important decisions on the status of Paraguay, which he anticipates will be suspended, and may pave the way for Venezuela's entry into the regional agreement. The Paraguay Senate has repeatedly blocked Venezuela's incorporation on the grounds that it violates the regional democratic charter. More in Spanish: (El Universal, 06-26-2012; http://www.eluniversal.com/economia/120626/se-abre-opcion-para-el-pais-de-ingresar-al-mercosur)

Venezuela to get U$D4 billion loan from Russia, Chavez says

President Hugo Chavez said a delegation has traveled to Moscow to sign a $U4D billion loan agreement to purchase Russian military equipment. Chavez made the announcement on state television without disclosing what the equipment will be. He didn’t provide details of the loan. (Bloomberg, 06-24-2012; http://www.bloomberg.com/news/2012-06-24/venezuela-to-get-4-billion-loan-from-russia-chavez-says.html)

Politics

Ahmadinejad meets with Chavez as nuclear talks in Moscow falter

Iranian President Mahmoud Ahmadinejad arrived in Venezuela to meet with President Hugo Chavez after talks stalled in Moscow over his country’s nuclear program. The Iranian leader arrived yesterday from stops in Brazil, where he attended the United Nations Rio+20 conference in Rio de Janeiro, and Bolivia. Ahmadinejad is making his sixth trip to the region since 2006 as he seeks to capitalize on a surge in anti-American sentiment spearheaded by Chavez and his eight-nation Bolivarian Alliance for the Americas. The visit comes as pressure grows on Iran to cooperate with the international community on its nuclear ambitions. (Bloomberg, 06-23-2012; http://www.bloomberg.com/news/2012-06-23/ahmadinejad-meets-with-chavez-as-nuclear-talks-in-moscow-falter.html)

Byelorussian President Alexandr Lukashenko in Venezuela, to meet with President Chavez and strengthen bilateral cooperation. He will travel to Barinas to launch a truck assembly line within the Santa Ines Industrial Complex. The two nations signed over 70 agreements, in every, industry, agriculture, social affairs, education and sports. Byelorussis is reported to be doing over U$D 2 billion in trade with Venezuela, up from U$D 6 million in 2006; a joint venture between both nations is designed to promote crude oil production in the Orinoco Oil Belt, and assorted industrial projects. More in Spanish: (El Nacional, 06-26-2012; http://www.el-nacional.com/; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/acuerdos-bielorrusia-contribuyen-crecimiento- and http://www.avn.info.ve/contenido/venezuela-proyecta-producir-25-millones-bloques-al-año-alianza-bielorrusia)

Chavez says Venezuela won’t recognize new Paraguayan government

President Hugo Chavez says his country will cut off oil shipments to Paraguay to protest the ouster of Fernando Lugo.

Chavez says Lugo’s removal as president last week was illegal and his insists Venezuela will not recognize the new government of Federico Franco. The Paraguayan senate’s swift decision to oust Lugo has drawn condemnation around Latin America. (The Washington Post, 06-24-2012; http://www.washingtonpost.com/business/chavez-says-venezuela-will-cut-oil-supplies-to-paraguay-wont-recognize-new-government/2012/06/24/gJQAPGIszV_story.html; AVN, 06-25-2012; http://www.avn.info.ve/contenido/venezuela-withdraws-envoy-cut-oil-supply-paraguay; El Universal, http://www.eluniversal.com/nacional-y-politica/120625/chavez-recalls-ambassador-stops-oil-shipment-to-paraguay; Fox News, http://www.foxnews.com/world/2012/06/24/chavez-venezuela-cutting-oil-for-paraguay/)

UNASUR says a threat is posed to Paraguay's democratic order

The new Secretary General of the Union of South American Nations (UNASUR),Venezuela's Ali Rodriguez Araque, read a statement on Friday in which foreign ministers and representatives of the bloc affirmed that "there is a threat to break the democratic order" in Paraguay, since the due process of law was not guaranteed for president Fernando Lugo. (AVN; 06-22-2012; http://www.avn.info.ve/contenido/unasur-threat-posed-paraguay039s-democratic-order)

Key "Bolivarian Axis" allies face serious issues

In a crucial year for the government of President Hugo Chávez, his stranglehold on power is imitated closely by his regional allies, some of which are dealing with tough times themselves, without having Venezuela as an example for political advantage or - even worse - as a lending hand. Venezuela's huge debt no longer allows Chavez to provide relief for the crumbling Argentine economy, and it has become more difficult to uphold subsidies to Bolivia and Ecuador, both ALBA partner. In the meantime Cuba branches out to diversify its partners in 2013, in fear that it may soon lose the bailout it gets from Caracas. (El Universal, 06-23-2012; http://www.eluniversal.com/nacional-y-politica/120623/key-bolivarian-axis-allies-face-serious-issues)

REUTERS Insight: Can "Chavismo" outlast Venezuela's Chavez?

Twenty years ago, Hugo Chavez launched the most powerful movement in Venezuela's history with an improvised speech of just 90 seconds. Bound for prison after a failed February 4, 1992, coup that was the culmination of years of conspiring within the military, the then-lieutenant colonel was allowed by his captors to address the nation to exhort fellow dissident soldiers to surrender. Wearing what would become his trademark costume of red beret and green military fatigues, Chavez took advantage of their mistake... More in: (Reuters, 06-25-2012; http://www.reuters.com/article/2012/06/25/us-venezuela-election-chavez-idUSBRE85O07U20120625)

June 22th, 2012

Economics & Finance

MOODY's warns Venezuela is vulnerable as oil prices continue to drop

Brent oil opened today at U$D 89.23 amid growing signs of economic deceleration in key nations such as the United States, China and India. In the meantime MOODY's Investors Service, one of the most important risk assessment agencies has warned of the "nation's growing external vulnerability due to a clear drop in foreign currency reserves along with an increase in external debt". It also underscored an "accelerated increase in spending"; as well as very weak institutions marked by an absence of checks and balances on executive authority and "lack of transparency in the government's accounts coupled with significant extra-budgetary spending and borrowing; heavy dependence of both the economy as a whole and government finances in particular on the oil sector; and a consequent vulnerability to a drop in oil prices.". (Latin American Herald Tribune, 06-21-2012; http://www.laht.com/article.asp?ArticleId=523326&CategoryId=10717, and more in Spanish: El Universal, 06-22-2012; http://www.eluniversal.com/economia/120622/crece-la-desaceleracion-global-y-el-petroleo-cae-hasta-8926)

Bonds issued for VEB 5.8 billion

In order to fund an ambitious housing program, the government has begun placing bonds - called "Bolivarian Values for Housing" in a first lot for around VEB 5.800 billion at a 4.66% annual interest rate, due in eight years. It reports the private banking system acquired VEB 4.568 billion. This is a first step as the government plans to issue VEB 14.600 billion for its housing projects. More in Spanish: (El Universal, 06-22-2012; http://www.eluniversal.com/economia/120622/gobierno-concreta-emision-de-deuda-por-58-millardos)

Official statistics show 30,805 fewer employers since last year

According to figures from the National Statistics Institute (INE), the number of employers has dropped 7.2% over the past year, which means 30,805 less employers. It also claims unemployment dropped from 8.6% in April to 7.9% in May, according to a report from the official news agency AVN. (El Universal, 06-22-2012; http://www.eluniversal.com/economia/120622/ine-registra-30805-empleadores-menos-que-hace-un-ano; more in Spanish: AVN, 06-21-2012; http://www.avn.info.ve/contenido/unemployment-venezuela-dropped-79-may)

Industry in "precarious" situation

Carlos Larrazabal, President of the Venezuelan Federation of Industries (CONINDUSTRIA) says the Chavez economic model has placed the industrial sector in a precarious state of survival. "It is a reality that differs sharply from the rest of Latin America." He stressed that the ideological-political scheme that has been in place since 1998 has transformed the state into the "owner, promoter, and regulator of all forms of productive activity." (El Universal, 06-20-2012; http://www.eluniversal.com/economia/120620/venezuelan-industry-situation-is-precarious)

The Caracas Chamber of Commerce criticized the Anti-Monopoly Bill for considering it “does not include the promotion and protection of free competence or the promotion of economic efficiency to benefit consumers and producers. Its objective is NOT to promote an extension of the markets but to be a political instrument that an essentially economic law in nature to regulate and control conducts in the markets of goods and services." (Veneconomy, 06-21-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30995&idc=3)

Military to withdraw deposits from private banks

After President Chavez criticized military institutions for keeping deposits in private banks, the managers of military funds have started conversations with the head of government owned Banco de Venezuela in order to transfer funds from private institutions to publicly owned banks. More in Spanish: (El Universal, 06-21-2012; http://www.eluniversal.com/economia/120621/fuerzas-armadas-retiraran-depositos-de-la-banca-privada)

Commodities

Venezuela spends 5.1% of GDP on gasoline price subsidies

According to a report to the Río+20 meeting on energy subsidies in the region by the UN Economic Committee for Latin America (ECLA-CEPAL), "countries such as Venezuela apply 5.1% to subsidizing gasoline prices and spend 1.8% on health". More in Spanish: (El Mundo, 06-21-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/cepal--venezuela-destina-5,1--del-pib-a-subsidio-d.aspx)

Indonesia to Acquire Harvest’s Oil Reserves in Venezuela

PT Pertamina, Indonesia’s state- owned oil company, will buy Houston-based Harvest Natural Resources Inc.’s oil assets in Venezuela for U$D 725 million in cash as it sets out to acquire reserves in South America. Harvest will sell its 32% stake in PETRODELTA SA, a joint venture with Petroleos de Venezuela SA. PETRODELTA’s six fields hold gross proved reserves of 195 million barrels of oil and 235 billion cubic feet of gas, according to Harvest Natural’s website. Harvest Natural has had trouble getting regular payments from PDVSA, as its Caracas-based state oil company is known, and its assets in the South American country are undervalued because of political risk, John Malone, a senior analyst at Global Hunter Securities LLC in New York, said on March 6. “An American company does not have any leverage whatsoever in terms of getting their capital out of the country,” Zachary Prensky, an analyst with Little Bear Research in New York, said yesterday in a telephone interview. “The people getting in to Venezuela are governments.” (Bloomberg/Business Week, 06-21-2012; http://www.businessweek.com/news/2012-06-21/harvest-natural-to-sell-venezuela-stake-to-pertamina)

Chavez approves SIDETUR expropriation funds

President Hugo Chavez approved funds to finalize the expropriation of Siderurgica del Turbio SA, a steel products company known as Sidetur. Chavez said today he agreed a loan of U$D 21 million from the off-budget development fund known as Fonden and 298 million bolivars (U$D 69 million) from state banks to fund the nationalization. The company’s assets have a book value of 1.2 billion bolivars (U$D 288 million), Oscar Sahmkow, finance director of Caracas-based SIVENSA S.A.C.A., SIDETUR’s parent company, said in December. (Latin American Herald Tribune, 06-21-2012; http://www.laht.com/article.asp?ArticleId=523335&CategoryId=10717)

International Trade

National Assembly passed customs agreement between Venezuela and Ecuador

The National Assembly passed the Agreement between Venezuela and Ecuador in Matters of Mutual Assistance and Cooperation in Customs Issues Bill in its first reading this Tuesday. (Veneconomy, 06-20-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30979&idc=3)

Politics

New laws support Chavez plan for 2013-2017

The economic law package signed by President Hugo Chávez just before the lapse of his enabling powers for rulemaking supports his socialist government plan for 2013-2017. Nine laws in the economic field were published in the Official Gazette this week for prompt enforcement. They stipulate, among others, provisions for new types of partnership among private parties, communes and the State. In addition to promoting such partnerships, conditions are set that give the State increasing control. (El Universal, 06-20-2012; http://www.eluniversal.com/nacional-y-politica/120620/law-package-backs-plan-chavez-2013-2017)

June 19th, 2012

Economics & Finance

Market value will not be considered in expropriations, according to the new law on just valuation in cases of expropriation just enacted by President Chavez under the Enabling Law. Article 2 in the law reads "just valuation will be set by using the latest purchase value of the property as the basis for calculation, as indicated by the officially registered deed". More in Spanish: (El Universal, 06-19-2012; http://www.eluniversal.com/economia/120619/valor-de-mercado-no-se-contempla-en-caso-de-expropiaciones)

New arbitration suit against Venezuela

The International Center for Investment Disputes has taken up a new lawsuit against Venezuela brought by Saint-Gobain Performance Plastics Europe, after local assets were expropriated by the government in 2010 when President Chavez ordered the takeover of a bauxite producing subsidiary of NORPRO held in association with France´s Saint Gobain. More in Spanish: (El Universal, 06-19-2012; http://www.eluniversal.com/economia/120619/interponen-demanda-de-arbitraje-en-el-ciadi-contra-venezuela)

Funds approved for SIDETUR nationalization

President Chavez has approved two special credits to close nationalization of Siderúrgica del Turbio (SIDETUR), a manufacturer and distributor of steel products. The company was taken over in November 2010 after Chavez argued that it was strategic because the company accounted for 40% of domestically produced structural steel. One of the credits is for U$D 21 million from the National Development Fund (FONDEN) and another VEB 298 million will be provided by government owned banks. More in Spanish: (AVN, 06-19-2012; http://www.avn.info.ve/contenido/chávez-aprobó-recursos-para-concluir-nacionalización-sidetur)

Joint ventures to be considered public sector companies

Although the government insists it promotes new joint venture forms the new law on public assets just signed by President Chavez states in article 4 that "companies in which the Republic or other entities referred to herein hold 50% or more" will be considered public sector entities. As a consequence, joint ventures undertaken with the national government, states, municipalities and public entities are now part of the public sector. More in Spanish: (El Universal, 06-19-2012; http://www.eluniversal.com/economia/120619/empresas-mixtas-son-calificadas-como-entes-del-sector-publico)

Incentives for "socialist enterprises"

Under a new law just enacted by President Chavez to "promote and regulate new forms of joint association by the State and community and private initiative, the government will take part in many companies that will have special incentives and must help change "the metabolism of capital" to get away from "market logic" in order to substitute imports and promote non traditional exports. The government will hold at least 40% stock in these "new forms of association". More in Spanish: (El Universal, 06-19-2012; http://www.eluniversal.com/economia/120619/ofrecen-incentivos-para-crear-empresas-socialistas)

Giordani admits lower oil prices can hamper growth

In an interview on state television, Planning and Finance Minister Jorge Giordani admitted lower oil prices can hamper growth: "Of course it matters, because this is an economy that is very dependent on that natural resource". He also guaranteed that falling prices would not lower investment in the social area. More in Spanish: (El Mundo, 06-19-2012, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/venezuela-admite-que-caida-de-precios-del-crudo-pu.aspx#)

Five main obstacles to the private sector

According to FEDECAMARAS President Jorge Botti, the five main problems now facing local business are:

1.- Allocation of foreign exchange. 2.- Acquisition of inputs and raw materials. 3.- Port bureaucracy. 4.- Excess controls. 5.- Expropriations and nationalizations. More in Spanish: (El Mundo, 06-18-2012; http://www.elmundo.com.ve/noticias/economia/empresas/los-cinco-principales-obstaculos-del-sector-privad.aspx#)

Commodities

Why Venezuela won’t pass Saudi Arabia as the world’s biggest oil power anytime soon

Venezuela has 18% of the world’s proven oil reserves, according to BP’s 2012 Statistical Review of World Energy, out this week. That’s more than Saudi Arabia (16%) and Canada (11%). So does this mean Venezuela is now the world’s biggest oil power?  No — far from it. As Steve LeVine points out in Foreign Policy, there’s a huge difference between having gargantuan oil reserves underground and actually pumping out that oil. Saudi Arabia still exports more oil to the rest of the world than anyone else, sending out 10.1 million barrels per day in April. Venezuela pumped out only 2.1 million barrels of oil per day. Even if the country doubles production in the next decade, as President Hugo Chavez has planned, Venezuela will still lag well behind the Saudis. (The Washington Post; 06-15-2012; http://www.washingtonpost.com/blogs/ezra-klein/post/why-venezuela-wont-pass-saudi-arabia-as-the-worlds-biggest-oil-power-anytime-soon/2012/06/15/gJQAxJ2EfV_blog.html)

Venezuela’s export barrel continued its downward trend for the sixth consecutive week when it averaged U$D 92.06/bbl. last week, down U$D 1.99/bbl., in a market concerned over the global economic outlook, as confirmed by the government last Friday. In the last six weeks, the Venezuelan export barrel has lost U$D 21.97/bbl. The average in June is U$D 93.39/bbl. and the average-to-year is U$D 109.51/bbl. after it posted an average U$D 101.06/bbl. in 2011. (Veneconomy, 06-17-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30929&idc=4)

REUTERS analysts say nationalized oil can deliver output growth in an essay on operations in Saudi Arabia, Russia, Argentina and Venezuela. The essay points out that although Venezuela boasts the biggest oil reserves in the world, after 13 years of Chavez in power and the nationalization of almost all the nation's oil assets, critics say PDVSA is languishing under tight control by officials, with production slowly declining. International energy organizations including OPEC routinely give lower estimates for Venezuela's crude production, and the jury is out on a PDVSA output success story. (Reuters, 06-15-2012; http://www.reuters.com/article/2012/06/15/oil-nationalisations-idUSL5E8HF6MI20120615)

Northeast Pipeline predicted to transport the first 300 million cubic feet at year end, according to President Chavez during a satellite contact to inspect progress in construction of Northeast Pipeline G / J Jose Francisco Bermudez, Sucre state, which is the longest in South America, because it has an area of 740 miles over water and land. More in Spanish: (PDVSA, 06-15-2012; http://www.pdvsa.com/)

International Trade

Nicaragua gets 89% of its oil from Venezuela, for a total U$D 383 million per year, according to the Nicaraguan Central Bank. More in Spanish: (El Universal, 06, 18-2012; http://www.eluniversal.com/economia/120618/383-millones-suman-compras-de-crudo-de-nicaragua-a-venezuela)

Politics

Chavez's government plan to be central point of his election campaign

The government plan presented by president Hugo Chavez during his nomination to run for reelection is to become the central point of his campaign, according to Foreign Minister Nicolás Maduro, who is also a member of the national directorate of the United Socialist Party of Venezuela (PSUV)" (AVN; 06-18-2012; http://www.avn.info.ve/node/117936)

June 15th, 2012

Economics & Finance

Deep recession predicted for Venezuela in 2013

According to Bank of America Merrill Lynch, the country will enter a "deep recession" in 2013 due to falling oil prices and the costs involved in the Chavez reelection. The report reflects projections made by economist Francisco Rodriguez that GDP will contract by 3.5%, and adds that the government will be forced to devalue the Bolivar 74%. More in Spanish: (El Mundo, 06-14-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/afirman-que-venezuela-entrara-en--profunda-recesio.aspx#)

ECLAC reports Venezuela's economic growth above regional average in 2012

The UN's Economic Commission for Latin America and the Caribbean (ECLAC) projects Venezuela's economy will grow 5% in 2012, which is above the 3.7% average growth rate for the entire region. The report says the economy will accelerate due to "greater fiscal and monetary stimulus which will result in expanded public and private consumption". More in Spanish: (AVN, 06-15-2012; http://www.avn.info.ve/contenido/cepal-crecimiento-económico-venezuela-superará-promedio-regional-2012)

Government says it has invested over 20 billion bolivars in the agricultural sector

The Government claims it has invested over 20 billion bolivars in Venezuela's agricultural sector. The statement came from the Vice President and Minister of Popular Power for Agriculture and Lands, Elías Jaua. More in Spanish: (AVN, 06-14-2012; http://www.avn.info.ve/contenido/gobierno-nacional-ha-invertido-más-20-mil-millones-bolívares-sector-agrícola)

Government aims at preventing monopolies

The draft Antitrust law passed this week by the National Assembly's Committee on Finance and Economic Development, calls for the establishment of a National Superintendence against Trusts and Alike (SUNAM). The law aims at countering any restraint on the effective participation of producers, distributors and traders of goods and services. (El Universal, 06-13-2012; http://www.eluniversal.com/economia/120613/venezuelan-govt-aims-at-preventing-monopolies)

Commodities

Venezuela surpasses Saudis in world's largest oil reserves, consumes over 30% of its production

Venezuela surpassed Saudi Arabia to become the world’s largest holder of proven oil. The country’s deposits were at 296.5 billion barrels at the end of last year, data from BP Plc (BP/) show. Saudi Arabia held 265.4 billion barrels, BP said yesterday in its annual Statistical Review of World Energy. The 2010 estimate for Venezuela increased from 211.2 billion in the previous report. The BP report warned that Venezuela's increased domestic consumption was at 30.5% of production at the close of 2011. It also said that three quarters of Venezuelan oil reserves are heavy and ultra heavy oil in the Orinoco belt, while Saudi reserves are light oil. (Bloomberg, 06-14-2012; http://www.bloomberg.com/news/2012-06-13/venezuela-overtakes-saudis-for-largest-oil-reserves-bp-says-1-.html; and more in Spanish: El Nacional; 06-15-2012; http://www.el-nacional.com/)

OPEC meeting ratifies output at 30 million BPD, while Saudis remain largest producer

The Organization of Petroleum Exporting Countries (OPEC) has resolved to keep unchanged its joint production quota at 30 million barrels per day (bpd), said a delegate who asked not to be named. "It remains as it is," the source said after confirming the decision of the OPEC ministers during a conference behind closed doors, Efe cited. One out of every three barrels of crude oil produced by OPEC countries comes from Saudi Arabia, which gives it clout within the 12 member organization to act according to its own interests. After the decision to maintain production at current levels, any action to preserve oil prices - which have fallen 29% since march - will remain in Saudi hands. (El Universal, 06-14-2012; http://www.eluniversal.com/economia/120614/opec-meeting-ratifies-output-at-30-million-bpd; Bloomberg, http://www.bloomberg.com/news/2012-06-14/opec-leaves-quota-unchanged-as-price-drop-forces-compromise.html; and more in Spanish: El Universal, 06-15-2012; http://www.eluniversal.com/economia/120615/opep-sigue-atada-a-los-intereses-de-arabia-saudi)

Dropping oil prices lead to increasing debt

By the end of last week, the Venezuelan oil basket stood at U$D 94.05 a barrel, a 19% drop from March and the lowest level since August 2011. Oil provides 95 out of 100 incoming US dollars and is crucial to efforts by the Chavez regime to keep up spending around 28% in real terms. Thanks to this spending, the domestic economy rose by 5.6% in the first quarter. The head of the National Economic Council, Efrain Velasquez, says: "while we do not foresee traumatic situations because oil over U$D 90 provides substantial income, it appears that to spend more than 30% requires a more expensive barrel". (El Universal, 06-12-2012; http://www.eluniversal.com/economia/120612/shedding-oil-prices-lead-to-increasing-debt)

Venezuela Sees Production at Perla Gas Field Starting in 2013

Venezuela expects early production from its large offshore Perla gas field within the first three months of 2013, pushing back its initial estimate for output to begin by the end of this year, a spokeswoman at state energy company Petróleos de Venezuela, or PDVSA, confirmed Wednesday. (Fox Business, 06-13-2012; http://www.foxbusiness.com/news/2012/06/13/venezuela-sees-production-at-perla-gas-field-starting-in-2013/)

PDVSA awards contracts worth U$D 2.9 billion in Puerto La Cruz refinery

South Korean Hyundai Engineering & Construction and Chinese Wison Engineering have been retained to expand and modernize a refinery in Venezuela, for a total value of U$D 2.9 billion, the former company reported. The project to expand the Puerto La Cruz refinery is scheduled to be completed in 42 months, the South Korean corporation mentioned in a press release. According to the company, state-run oil holding Petróleos de Venezuela (PDVSA) already issued the order for the works. "Construction will start as soon as the company signs the formal contracts, probably at the end of June", a Hyundai spokesman told AFP. (El Universal, 06-14-2012; http://www.eluniversal.com/economia/120614/pdvsa-awards-contracts-for-usd-29-billion-in-puerto-la-cruz-refinery)

Politics

Chávez launches re-election bid, outlines socialist goals, downplays private enterprise

President Hugo Chávez has presented the country with a plan to deepen his push for socialism and entrench his movement in power as he runs for another six-year term amid questions of whether he will overcome cancer. Chavez’s 23-page “Bolivarian Socialist” proposal was distributed online after he presented it to elections. The document lays out broad goals such as pledges to keep “building 21st century Bolivarian socialism,” while also detailing mundane specifics on pig farms, oil drilling, neighborhood committees and fertilizer output. The plan basically ignores private enterprise and underlines the need for "radically suppressing capitalist logic which must be carried out step by step", and will promote "socialist enterprises" and "social property". It does call for providing "stimulus to develop small and medium enterprises", as well as a private banking system that allocates credit "under the direction of the Bolivarian Government". (The Washington Post, 06-12-2012; http://www.washingtonpost.com/world/the_americas/up-against-younger-rival-venezuelas-chavez-exhibits-energy-as-he-launches-re-election-bid/2012/06/12/gJQAhUCaWV_story.html; and more in Spanish: El Universal, 06-15-2012; http://www.eluniversal.com/economia/120615/plan-chavez-otorga-un-minimo-espacio-a-la-empresa-privada)

Chavez says Venezuela has started making Iranian drones, US to remain vigilant

President Hugo Chavez announced that Venezuela has begun to assemble Kalashnikov assault rifles with assistance from Russia and started producing Iranian surveillance drones. Venezuela has spent billions of dollars for Russian arms and military aircraft since 2005, including 24 Sukhoi fighter jets, dozens of attack helicopters and 100,000 Kalashnikov assault rifles. State Department spokesperson Victoria Nuland called the Chavez statements "extravagant", and said the US will remain very vigilant on the manufacture of drone aircraft with Iranian technology. "Our main concern is the possibility they may violate sanctions imposed by the international community on this activity, and we will be very vigilant to see how this develops". (The Washington Post, 06-13-2012; http://www.washingtonpost.com/world/the_americas/chavez-says-venezuela-has-started-making-drones-assembling-kalashnikov-rifles/2012/06/13/gJQAH7E1aV_story.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=519260&CategoryId=10717; and more in Spanish: El Nacional, 06-15-2012; http://www.el-nacional.com/)