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)