July 31th, 2012

Economics & Finance

Market points to Venezuela as riskier than Spain

Although Spain is the epicenter of the euro zone, the market considers Venezuela more likely to default.
CDS (Credit Default Swap) is the thermometer that measures the risk of insolvency and operates as insurance in global financial markets which bondholders purchase to shield themselves from noncompliance at maturity. Based on the price of the CDS, Venezuela is now placed as the third riskiest country in the world, only after Cyprus and Argentina, while Spain ranks fifth. (El Universal, 07-30-2012; http://www.eluniversal.com/economia/120730/for-the-market-venezuela-is-at-more-risk-of-default-than-spain)

Finance Ministry plans VEB 18.2 bond issues this quarter

The Planning and Finance Ministry plans to issue VEB 18.2 billion in bonds during this quarter. According to a press release they say the strategy "will further propel financial markets and support the Central Bank in managing monetary policy". More in Spanish: (El Universal, 07-31-2012; http://www.eluniversal.com/economia/120731/finanzas-preve-colocar-bonos-por-bs-182-millardos-en-este-trimestre)

Experts anticipate higher inflation

Inflation has being contained so far through controls on the economy, but they have failed to eliminate the problem.

Experts say the scenario in which the private sector agrees under pressure to keep prices down suppresses is merely a temporary situation which hides real inflation. More in Spanish: (Tal Cual, 07-30-2012; http://www.talcualdigital.com/index.html)

Industrial production slows to 1.3% growth rate

Public spending has accelerated economic growth rates, but private industry is showing very weak signs. According to Central Bank numbers industrial production for the first third of this year has grown only by 1.3%, which is down from 5.24% for the same period last year. Experts say this is due to difficulties in accessing foreign exchange, unfair competition from cheap imports bought through an overvalued currency and a hostile environment. More in Spanish: (El Universal, 07-31-2012; http://www.eluniversal.com/economia/120731/la-produccion-industrial-se-desacelera-y-solo-crece-13)

Basic industries are operating in the red

Deputy Julio Borges says production at basic industries has fallen by 25% and warns that the information is based on figures published by the Central Bank of Venezuela and released this year by the Planning and Finance Ministry. He says SIDOR's production has dropped by 40%, VENALUM by 17% and BAUXILUM by 14%, among others. More in Spanish: (Tal Cual, 07-30-2012; http://www.talcualdigital.com/index.html)

Expropriations have created a vast government industrial infrastructure

It is a government priority to establish state control over the means of production, particularly in the food production area. Over the past 10 years it has developed a considerable agribusiness infrastructure, in some areas as important as the private sector. This structure has been developed mainly through interventions, expropriations and direct acquisition of processing plants, storage centers and distribution networks. The government now controls 62.2% of the food supply, including 119 agribusiness industries, 52% of the gathering and storage of raw material, and over 22,000 outlets throughout the country, although distribution depends mainly on imports. More in Spanish: (El Universal, 07-31-2012; http://www.eluniversal.com/economia/120731/estado-creo-su-infraestructura-industrial-con-expropiaciones)

Commodities

PDVSA-YPF pact announced

Upon his arrival at Brasilia, President Hugo Chavez said the Venezuelan state oil company PDVSA will sign an agreement with its Argentine counterpart YPF. He claimed alliances with state oil companies in Brazil and Argentina "will lead to the creation of a PETROSUR". More in Spanish: (AVN, 07-31-2012; http://www.avn.info.ve/contenido/presidente-chávez-anuncia-firma-convenio-energético-estatal-argentina-ypf)

PDVSA increases US fuel purchases by 65%, crude sales to US drop by 12.8%

According to numbers from the US Department of Energy, fuel exports to Venezuela in January-May 2012 increased by 65% over the same period last year, for a total 37,600 BPD. The report also shows PDVSA dispatches to the US, basically crude oil. Fell by 12.8% PDVSA imports over 1.9 million liters of gasoline per day. More in Spanish: (El Nacional, 07-31-2012; http://www.el-nacional.com/)

El Palito refinery expansion project will take 3.5 years to complete

PDVSA has signed engineering, procurement and construction contract to expand the El Palito refinery, with the TFY&V group, which is made up by Japan's Toyo Engineering Construction, Foster Wheeler Italy, Spanish partners and Venezuela's Y&V. The project aims to reach international quality standards and optimize crude oil from the Orinoco oil belt. The project will take almost 50 months to complete and would increase crude oil processing capacity from 140,000 to 280,000 BPD. More in Spanish: (El Nacional, 07-31-2012; http://www.el-nacional.com/)

China Fund to finance new SIDOR plant

The Orinoco Iron and Steel Industry (SIDOR) plans to build a new plant to process 870,000 of semi prepared material for he oil industry and housing construction, thanks to a U$D 250 million investment from the China-Venezuela Fund. The project is due for completion by the end of 2014. More in Spanish: (AVN, 07-31-2012; http://www.avn.info.ve/contenido/sidor-instalará-nueva-planta-recursos-del-fondo-pesado-chino-venezolano; El Universal, http://www.eluniversal.com/economia/120731/sidor-espera-invertir-250-millones-en-nueva-maquina-de-colada)

International Trade

MERCOSUR experts meet to discuss Venezuela's accession dates

MERCOSUR technicians are meeting in working groups in Brasilia to define dates for Venezuela's gradual accession, by adopting the Common Foreign Tariff and the Common Nomenclature. Venezuela still uses the system of the Community of Andean Nations, from which pulled out in April 2011. According to the protocol of adhesion, adopting the regulations will be carried out "gradually within four months since the date of the entry into force." (AVN, 07-30-2012; http://www.avn.info.ve/contenido/mercosur-experts-meet-brazil-discuss-venezuela039s-accession-dates)

Venezuela's auto industry seeks exclusion from MERCOSUR

Local business has alerted the government of the risks of entering MERCOSUR, and the auto industry is the most highly concerned. The association of auto parts manufacturers (FAVENPA) has written to Foreign Minister Nicolas Maduro, asking that the auto industry be excluded from Venezuela's entry as a full member of MERCOSUR. They also urged the government not to negotiate rules of origin and tariff advantages in this area. The automotive industry argues that Venezuela has a plan in place since 2007 to increase production and reach 50% locally supplied parts in auto assembly by 2013. They say there is no way the Venezuelan auto industry can compete or avoid being displaced by industries in Argentina and Brazil because of the enormous differences in scale. The domestic auto industry argues it will require a transition of five to ten years to increase local competitiveness. More in Spanish: (El Universal, 07-31-2012; http://playball.eluniversal.com/economia/120731/solicitan-excluir-a-la-industria-automotriz-de-reglas-mercosur)

Expert says MERCOSUR entry will favor foreign companies

Eduardo Porcarelli says "there will be an increase in the variety and prices of products available to consumers". He warns this will have a serious impact on domestic production which could lose domestic markets due to higher production and distribution costs internally, as well as price regulations. More in Spanish: (El Nacional, 07-31-2012; http://www.el-nacional.com/)

Venezuela purchases 20 aircraft from Brazil

Government sources say Venezuela's official airline CONVIASA will purchase 20 EMBRAER Model E190 aircraft this week. The contract will be signed this week, during President Chavez's visit to Brasilia. More in Spanish: (Ultimas Noticias, 07-31-2012; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-firmara-en-brasil-la-compra-de-20-avione.aspx)

Logistics & Transport

More scales needed at Puerto Cabello

Puerto Cabello, the country's main sea terminal, has only two scales for weighing at the entrance and two for the output process, which results in delays in processing bulk products. Durvelle Jonathan, second vice president of the government CASA Transportation Center, says there should be at least five for entry and the same number for output, especially at least 80% of bulk cargo comes to this port. More in Spanish: (Notitarde, 07-30-2012; http://www.notitarde.com/notitarde/plantillas/notitarde/inota.aspx?idart=1708633&idcat=9849&tipo=2)

Politics

Chavez in Brazil for MERCOSUR summit

President Hugo Chavez is in Brasilia to attend a meeting of the Common Market of the South (MERCOSUR), where Venezuela's accession to the bloc will come into effect. He is also expected to meet with his counterparts from Argentina, Cristina Fernandez, Uruguay's Jose Mujica and Brazil's Dilma Rousseff. (AVN, 07-30-2012; http://www.avn.info.ve/contenido/chavez-travels-brazil-mercosur-summit; El Universal, http://www.eluniversal.com/economia/120730/president-chavez-heads-for-brazil-apropos-mercosur)

Formation of the Bolivarian Militia speeds up

According to experts consulted and documents obtained by El Nuevo Herald reveal the important role the militias would have under the political-economic model leading to a totalitarian regime President Chávez has designed for Venezuela and whose implementation would take full force as of next year if he is re-elected in the October 7 presidential elections. His militia would have some 125,000 troops already. (Veneconomy, 07-30-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=31476&idc=1)

Israeli Ambassador says Venezuela's should be of concern to MERCOSUR

Israel's ambassador to Uruguay, Dori Goren says the entry of Venezuela into MERCOSUR "should be a major concern for member countries" because "there are plenty of Iranian agents operating terror networks on the continent with coverage provided by Venezuela." More in Spanish: (El Mundo, 07-30-2012; http://www.elmundo.com.ve/noticias/economia/internacional/embajador-de-israel-afirma-que-ingreso-de-venezuel.aspx; El Universal, http://www.eluniversal.com/internacional/120730/israel-rechaza-comercio-binacional-con-venezuela)