Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Friday, June 8, 2012

June 08th, 2012

Economics & Finance

Government reins in prices, provides subsidies to mask inflation
Although the Central Bank claims success in holding back inflation during the first five months of 2012, all indications point to the fact that this relief is due to delays in adjusting prices on regulated goods and services, and devaluation. So far this year is has not authorized increased prices on such items as cornmeal, cheese, and rice, which bear heavily on inflation rates. The MERCAL official food distribution system also provides subsidies that cushion the impact of inflation. According to pro-Government Assemblyman Jesús Faría, the system provides price subsidies ranging from 40-60%. More in Spanish: (El Universal, 06-07-2012;; Últimas Noticias;

Inflation 1.6% in May, twice that of last month and breaking the deceleration trend of the last five months. The annualized rate is 22.6%, announced Tuesday by the Central Bank (BCV). The May Scarcity Index was 14.4%, similar to April’s 14.8%. (Veneconomy, 06-05-2012;

PDVSA planning 3 billion VEB agricultural bond issue
President Chavez is creating new debt through so-called "special" bonds in order to increase public spending. The next operation has been assigned to PDVSA, which is to place 3 billion VEB in the financial system in order to assign credit to farmers. Such "special" operations are at significant levels as this latest issue would bring the total to 44.600 VEB, which is around U$D10.300 billion at the official exchange rate. (El Universal, 06-07-2012;

Chavez losing grip on ‘Benjamin’ as U.S. dollars sought
The Bolivar is tumbling to a record low in the unregulated street markets of Caracas as individuals and companies seek to buy a shrinking number of dollars, adding to the region’s highest inflation rate. The local currency has weakened 6.4% this year to 9.23 per dollar, after falling to a record low 9.27 on June 5, according to the blog Lechuga Verde, or Green Lettuce, which cites traders. Individuals seeking to buy U.S. currency consult websites and Twitter accounts that call money Fresh Avocado or Your Benjamin, a reference to Benjamin Franklin, whose face appears on the U$D100 bill. The government prohibits local newspapers and broadcasters from mentioning the black-market exchange rate. (Bloomberg, 06-07-2012;

Venezuela is the second riskiest nation in the Hemisphere
JP Morgan counts Venezuela among the riskiest nations in the Hemisphere, with 1.209 base points. This places it next to Argentina´s 1.236 points, at of the list. Ecuador ranks third, at 948 points. Venezuela's country risk has risen 306 points over the past three months. 1.209 base points mean 12.09% additional interest cost on bonds issued. More in Spanish: (Tal Cual, 06-07-2012;


Oil prices drop with no FED stimulus in sight
Brent oil prices picked up above U$D 100 following a decision by China´s Central Bank to cut back interest rates in order to spur credit and curb the slump, but the recovery vanished very quickly as Ben Bernanke, head of the US Federal Reserve gave no sign of stimulus for the US economy. More in Spanish: (El Universal, 06-08-2012;

Guyana oil exploration stirs up Venezuela border dispute
Venezuela's opposition accused the government on Wednesday of turning a blind eye to neighboring Guyana's oil exploration in a border region claimed by Venezuela, potentially inflaming a territorial dispute that dates back more than a century. The conflict was stirred up in recent days by local media reports that Exxon Mobil Corp, in partnership with Royal Dutch Shell, is exploring for crude off the coast of the disputed Essequibo region. The Guyanese government has denied it is engaging in offshore oil exploration in the area. Venezuelan Navy has orders to patrol the country’s Atlantic front and not to allow the presence of any foreign agent. So far, the military component has found no evidence of exploration in the Stabroek oil bloc, granted by the Guyanese government to Exxon Mobil and Shell. Drilling would require the presence of big ships in the area. (Reuters, 06-06-2012;; The Washington Post,; Fox News,; Veneconomy, 06-06-2012; More in Spanish: (El Nacional;

Cuba shifts oil exploration after REPSOL’s unsuccessful search
Cuba began exploring for oil at another offshore site after a first attempt by Spain’s REPSOL YPF SA (REP) proved unsuccessful. A subsidiary of Kuala Lumpur-based Petroliam Nasional Bhd., or PETRONAS, started drilling for oil off Cuba’s northern coast on May 24 with the same Scarabeo-9 rig REPSOL had used, according to a statement today by Cubapetroleo in government-run newspaper Granma. Petroleos de Venezuela SA will begin exploring for oil following the drilling by PETRONAS, Cubapetroleo said in the statement. REPSOL spokesman Kristian Rix said May 18 that the company was abandoning its wells off the Cuban coast because they weren’t successful. (Bloomberg, 06-06-2012;


Chavez days "are numbered", according to World Bank President Robert Zoellick, who adds that without his support the governments of Cuba and Nicaragua will find it difficult to survive. Zoellick said: "The days of Chavez are numbered, and if his subsidies to Cuba and Nicaragua end, those regimes will be in trouble". He added: "Pro democracy forces in Latin America, to the left, center and right, must prepare. Democratic calls to put an end to bullies that intimidate, and to defend human rights, fair elections and the rule of law should come from all capitals." More in Spanish: (El Nacional, 06-08-2012;

Chavez scheduled to register his candidacy next Monday
Pro Chavez campaign chief Jorge Rodriguez has announced that President Chavez will register his candidacy for reelection with the National Election Board on Monday, June 11th, at 4 PM. He says he is certain a "sea of people" will accompany Chavez in this move. More in Spanish: (Agencia Venezolana de Noticias;ávez-inscribirá-candidatura-lunes-11)

Opposition leader leaves post as governor to campaign against Chavez for presidency
Opposition leader Henrique Capriles stepped down from his post as a state governor Wednesday to campaign against Hugo Chavez for the presidency. Capriles is trailing in the polls in a race that so far has been dominated by speculation about Chavez’s health. The president has scaled back his public appearances after finishing his latest cancer treatments in Cuba, and it remains to be seen how active Chavez will be during the campaign. (The Washington Post, 06-06-2012;; Fox News,

ALBA member states quit Rio Treaty
Ecuador, Bolivia, Nicaragua and Venezuela, member states of the Bolivarian Alliance for the Peoples of Our America (ALBA), announced that they are withdrawing from the Inter-American Treaty of Reciprocal Assistance (Rio Treaty).
"We have decided "to trash something that's no longer useful," said Ecuadorean Foreign Minister Ricardo Patino at a news conference with his counterparts from Venezuela, Nicolas Maduro; Bolivia, David Choquehuanca; and Nicaragua, Samuel Santos. The decision was announced at the Forty-Second General Assembly of the Organization of American States (OAS) meeting in Cochabamba, Bolivia. (AVN, 06-06-2012;

Vatican Nuncio Pietro Parolin met with Vice President Elías Jaua in order to maintain and strengthen Venezuela's relations with the Holy See. More in Spanish: (El Universal;

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.

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