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; http://www.eluniversal.com/economia/120607/gobierno-retarda-alza-de-bienes-regulados-y-represa-la-inflacion;
Últimas Noticias; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/subsidios-de-mercal-reducen-impacto-de-la-inflacio.aspx)
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; http://www.veneconomy.com/site/index.asp?ids=44&idt=30804&idc=2)
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$D10.300 billion at the official exchange rate.
(El
Universal, 06-07-2012; http://www.eluniversal.com/economia/120607/pdvsa-prepares-issue-of-agricultural-bonds-for-usd-697-million)
Chavez losing grip on ‘Benjamin’ as
U.S. dollars sought
The Bolivar is tumbling to a record low in the
unregulated street markets of Caracas as individuals and companies seek to buy
a shrinking number of dollars, adding to the region’s highest inflation rate.
The local currency has weakened 6.4% this year to 9.23 per dollar, after
falling to a record low 9.27 on June 5, according to the blog Lechuga Verde, or
Green Lettuce, which cites traders. Individuals seeking to buy U.S. currency
consult websites and Twitter accounts that call money Fresh Avocado or Your
Benjamin, a reference to Benjamin Franklin, whose face appears on the U$D100
bill. The government prohibits local newspapers and broadcasters from
mentioning the black-market exchange rate. (Bloomberg, 06-07-2012; http://www.bloomberg.com/news/2012-06-07/chavez-losing-out-to-benjamin-as-venezuela-seek-dollar.html)
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; http://www.talcualdigital.com/index.html)
Commodities
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; http://www.eluniversal.com/economia/120608/la-fed-no-indica-que-habra-estimulo-y-cae-el-petroleo)
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; http://www.reuters.com/article/2012/06/06/venezuela-guyana-idUSL1E8H6FM720120606;
The Washington Post, http://www.washingtonpost.com/world/the_americas/guyanas-government-rebuffs-venezuelan-oppositions-complaint-about-offshore-oil-exploration/2012/06/07/gJQAv2vILV_story.html;
Fox News, http://www.foxnews.com/world/2012/06/07/guyana-rebuffs-venezuela-opposition-complaint/;
Veneconomy, 06-06-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=30814&idc=4)
More in Spanish: (El Nacional; http://www.el-nacional.com/)
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; http://www.bloomberg.com/news/2012-06-06/cuba-shifts-oil-exploration-after-repsol-s-unsuccessful-search.html)
Politics
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; http://www.el-nacional.com/)
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; http://www.avn.info.ve/contenido/presidente-chávez-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; http://www.washingtonpost.com/world/the_americas/venezuelan-opposition-leader-leaves-post-as-governor-to-campaign-against-chavez-for-presidency/2012/06/06/gJQApzyNJV_story.html;
Fox News, http://www.foxnews.com/world/2012/06/06/chavez-opponent-sets-aside-post-for-venezuela-race/)
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; http://www.avn.info.ve/contenido/alba-member-states-quit-rio-treaty)
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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