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/)