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.

Tuesday, June 19, 2012

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;

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;

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;ávez-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;

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;

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,

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;


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;

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;

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;

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;

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;


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;

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