June 26th, 2012

Economics & Finance

Chavez claims Venezuela can withstand oil price drop into 2013

President Hugo Chavez said the fall in oil prices won’t affect the economy because the country has savings and funds to withstand the drop into 2013. (Bloomberg, 06-24-2012; http://www.bloomberg.com/news/2012-06-24/chavez-says-venezuela-can-withstand-oil-price-drop-into-2013.html)

BANESCO takes over failed US bank

Security Bank, National Association, North Lauderdale, Florida, was closed in May by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with BANESCO USA, Coral Gables, Florida, to assume all of the deposits of Security Bank, National Association. (Latin American Herald Tribune, 06-24-2012; http://www.laht.com/article.asp?ArticleId=525522&CategoryId=10717)

Increased insecurity spurs armored vehicle business

Vehicle armoring business has soared in Venezuela: From 12 companies in the industry five years ago, there are now 47 in operation. A Bloomberg survey of clients for the service indicates that what once seemed a high price item is now a necessary expense. Eduardo Ibarra, a representative for the multinational CARAT operation, said the agency shields 20 cars per month, a volume greater than that served by the company in Brazil. More in Spanish: (Descifrado, 06-22-2012; http://www.descifrado.com/index.php?id=11)

Commodities

Venezuela´s oil drops to U$D90.09, JP Morgan lowers oil price projections

Venezuela's Ministry of Energy and Petroleum reports that the average price of Venezuelan crude sold by Petroleos de Venezuela S.A. (PDVSA) during the week ending June 22 fell to U$D 90.09 a barrel from the previous week's U$D 92.06. For the second time this year, JP Morgan lowered their oil price projection for 2012 and 2013 due to weak economic growth and increased OPEC production. (Latin American Herald Tribune, 06-22-2012; http://www.laht.com/article.asp?ArticleId=524011&CategoryId=10717; and more in Spanish: El Mundo, 06-25-2012; http://www.elmundo.com.ve/noticias/economia/mercados/jpmorgan-rebajo-su-perspectiva-de-precios-del-petr.aspx)

PDVSA given until November to fund Brazilian refinery

Brazil's government-run oil company Petroleo Brasileiro SA expects its Venezuelan peer Petroleos de Venezuela SA to remain as a partner in the construction of a huge refinery in northeastern Brazil, Petrobras Chief Executive Maria das Gracas Silva Foster said Monday. Petroleos de Venezuela, or PDVSA, still needs to come up with the appropriate financial guarantees to be able to partner with Petrobras in construction of the Abreu e Lima refinery in Brazil's northeast Pernambuco state, Ms. Foster told reporters during a presentation on the company's latest five-year business plan. "We're not thinking of another partner that isn't PDVSA," Ms. Foster said. Petrobras said that it "understands that PDVSA will resolve the problems it has and will be our partner." She added that Venezuela has been given through November to provide the requisite guarantees. (Fox Business, 06-25-2012; http://www.foxbusiness.com/news/2012/06/25/brazil-petrobras-expects-venezuela-pdvsa-to-be-refinery-partner/; and more in Spanish: El Universal; http://www.eluniversal.com/economia/120626/petrobras-abre-nuevo-plazo-para-concretar-refineria-con-venezuela)

PDVSA turns to traders to sustain Ecuador oil deal

Venezuelan state oil giant PDVSA has had to buy dozens of extra fuel cargoes from countries as far away as Estonia and Saudi Arabia to keep up its side of a 2008 oil supply deal with leftist ally Ecuador, according to traders and sales documents. In an examination of shipping data that highlights the practical risks of political trade deals, Reuters found that half the fuel Venezuela sent to Ecuador, which cannot process its own heavy crude, came from third countries, often via trading companies including GLENCORE. What was meant to be an example of cooperation between ideologically aligned states, with President Chavez importing Ecuadorean crude in return for refined fuel, has instead become another sign of problems in PDVSA's refining network and a profitable niche for foreign traders. (Reuters, 06-24-2012; http://www.reuters.com/article/2012/06/25/venezuela-ecuador-oil-idUSL2E8HP2JY20120625)

Government will acquire 106 new motorcycle oil drills from China

President Chavez says the government will soon acquire 106 motorcycle oil drills, thanks to agreements signed with the Republic of China. More in Spanish: (AVN, 06-25-2012; http://www.avn.info.ve/contenido/gobierno-adquirirá-106-nuevos-moto-taladros-petroleros-provenientes-china)

International Trade

Oil shipments to Paraguay suspended, PETROPAR owes almost U$D 300 million, seeks other sources 

President Chavez has ordered a freeze on the 7500 BPD PDVSA has been shipping to Paraguay, for an average around 28.5% of Paraguayan consumption. The standing bilateral agreement calls for shipments up to 25000 BPD with financed repayment at subsidized 2% interest rates. PETROPAR President Sergio Escobar says the Venezuelan embargo will have little effect as Venezuela supplies 25% of fuel the South American nation receives and will call for bidding to allocate other sources. PETROPAR owed PDVSA U$D269 million by year end 2011, and its debt to Venezuela is up to around U$D 300 million this year. (El Universal, 06-25-2012; http://www.eluniversal.com/economia/120625/petropar-owes-venezuela-over-usd-260-million; and more in Spanish: El Universal; http://www.eluniversal.com/economia/120626/petropar-buscara-otro-proveedor-para-reemplazar-a-pdvsa; El Nacional; http://www.el-nacional.com/)

Legislator says Venezuela may have an easier way into MERCOSUR

A pro Chavez member of the Andean Parliament, Roy Daza claims MERCOSUR Presidents scheduled to meet this month in Mendoza, Argentina, will take important decisions on the status of Paraguay, which he anticipates will be suspended, and may pave the way for Venezuela's entry into the regional agreement. The Paraguay Senate has repeatedly blocked Venezuela's incorporation on the grounds that it violates the regional democratic charter. More in Spanish: (El Universal, 06-26-2012; http://www.eluniversal.com/economia/120626/se-abre-opcion-para-el-pais-de-ingresar-al-mercosur)

Venezuela to get U$D4 billion loan from Russia, Chavez says

President Hugo Chavez said a delegation has traveled to Moscow to sign a $U4D billion loan agreement to purchase Russian military equipment. Chavez made the announcement on state television without disclosing what the equipment will be. He didn’t provide details of the loan. (Bloomberg, 06-24-2012; http://www.bloomberg.com/news/2012-06-24/venezuela-to-get-4-billion-loan-from-russia-chavez-says.html)

Politics

Ahmadinejad meets with Chavez as nuclear talks in Moscow falter

Iranian President Mahmoud Ahmadinejad arrived in Venezuela to meet with President Hugo Chavez after talks stalled in Moscow over his country’s nuclear program. The Iranian leader arrived yesterday from stops in Brazil, where he attended the United Nations Rio+20 conference in Rio de Janeiro, and Bolivia. Ahmadinejad is making his sixth trip to the region since 2006 as he seeks to capitalize on a surge in anti-American sentiment spearheaded by Chavez and his eight-nation Bolivarian Alliance for the Americas. The visit comes as pressure grows on Iran to cooperate with the international community on its nuclear ambitions. (Bloomberg, 06-23-2012; http://www.bloomberg.com/news/2012-06-23/ahmadinejad-meets-with-chavez-as-nuclear-talks-in-moscow-falter.html)

Byelorussian President Alexandr Lukashenko in Venezuela, to meet with President Chavez and strengthen bilateral cooperation. He will travel to Barinas to launch a truck assembly line within the Santa Ines Industrial Complex. The two nations signed over 70 agreements, in every, industry, agriculture, social affairs, education and sports. Byelorussis is reported to be doing over U$D 2 billion in trade with Venezuela, up from U$D 6 million in 2006; a joint venture between both nations is designed to promote crude oil production in the Orinoco Oil Belt, and assorted industrial projects. More in Spanish: (El Nacional, 06-26-2012; http://www.el-nacional.com/; Agencia Venezolana de Noticias; http://www.avn.info.ve/contenido/acuerdos-bielorrusia-contribuyen-crecimiento- and http://www.avn.info.ve/contenido/venezuela-proyecta-producir-25-millones-bloques-al-año-alianza-bielorrusia)

Chavez says Venezuela won’t recognize new Paraguayan government

President Hugo Chavez says his country will cut off oil shipments to Paraguay to protest the ouster of Fernando Lugo.

Chavez says Lugo’s removal as president last week was illegal and his insists Venezuela will not recognize the new government of Federico Franco. The Paraguayan senate’s swift decision to oust Lugo has drawn condemnation around Latin America. (The Washington Post, 06-24-2012; http://www.washingtonpost.com/business/chavez-says-venezuela-will-cut-oil-supplies-to-paraguay-wont-recognize-new-government/2012/06/24/gJQAPGIszV_story.html; AVN, 06-25-2012; http://www.avn.info.ve/contenido/venezuela-withdraws-envoy-cut-oil-supply-paraguay; El Universal, http://www.eluniversal.com/nacional-y-politica/120625/chavez-recalls-ambassador-stops-oil-shipment-to-paraguay; Fox News, http://www.foxnews.com/world/2012/06/24/chavez-venezuela-cutting-oil-for-paraguay/)

UNASUR says a threat is posed to Paraguay's democratic order

The new Secretary General of the Union of South American Nations (UNASUR),Venezuela's Ali Rodriguez Araque, read a statement on Friday in which foreign ministers and representatives of the bloc affirmed that "there is a threat to break the democratic order" in Paraguay, since the due process of law was not guaranteed for president Fernando Lugo. (AVN; 06-22-2012; http://www.avn.info.ve/contenido/unasur-threat-posed-paraguay039s-democratic-order)

Key "Bolivarian Axis" allies face serious issues

In a crucial year for the government of President Hugo Chávez, his stranglehold on power is imitated closely by his regional allies, some of which are dealing with tough times themselves, without having Venezuela as an example for political advantage or - even worse - as a lending hand. Venezuela's huge debt no longer allows Chavez to provide relief for the crumbling Argentine economy, and it has become more difficult to uphold subsidies to Bolivia and Ecuador, both ALBA partner. In the meantime Cuba branches out to diversify its partners in 2013, in fear that it may soon lose the bailout it gets from Caracas. (El Universal, 06-23-2012; http://www.eluniversal.com/nacional-y-politica/120623/key-bolivarian-axis-allies-face-serious-issues)

REUTERS Insight: Can "Chavismo" outlast Venezuela's Chavez?

Twenty years ago, Hugo Chavez launched the most powerful movement in Venezuela's history with an improvised speech of just 90 seconds. Bound for prison after a failed February 4, 1992, coup that was the culmination of years of conspiring within the military, the then-lieutenant colonel was allowed by his captors to address the nation to exhort fellow dissident soldiers to surrender. Wearing what would become his trademark costume of red beret and green military fatigues, Chavez took advantage of their mistake... More in: (Reuters, 06-25-2012; http://www.reuters.com/article/2012/06/25/us-venezuela-election-chavez-idUSBRE85O07U20120625)