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.

Friday, August 17, 2012

August 17th, 2012


Economics & Finance

Financial system income grew 88% during the first semester 2012 from acquisitions of bond and Treasury bills from the Ministry of Finance, which rose to VEB 8.524 billion, as the government continues to increase its debt with the banking system in order to meet the deficit amid the reelection campaign. More in Spanish; (El Universal, 08-17-2012; http://www.eluniversal.com/economia/120817/crecen-88-ingresos-de-la-banca-por-compra-de-bonos)

Government will pay 18% interest on new bond on the so-called Petro-Orinoco, which has been designed to repay debts outstanding with public employees. Petroleum and Mining Minister Rafael Ramirez says buyers will receive 18% interest rates, "far above the rate we paid before." (AVN, 08-15-2012; http://www.avn.info.ve/node/127438)

Study shows 70% perceive scarcity, according to a study by the DATOS firm shows 70% of the entire population perceives there is scarcity in the market, particularly in milk, cooking oil, coffee, sugar, butter, and cornmeal. More in Spanish: (El Universal, 08-17-2012; http://www.eluniversal.com/economia/120817/estudio-revela-que-70-de-las-personas-percibe-que-hay-escasez)

"Bond issues regulate the flow of US dollars through SITME", says Rafael Ramírez, Minister for Petroleum and Mining and President of the state-oil company PDVSA, in reference to the parallel currency trading system. He also claims that U$D 100 per oil barrel is a "comfortable and fair" price, and added that "Venezuela must maximize profits." Ramírez emphasized that PDVSA has relied on the international and national banking systems to develop its investment programs, and stated that additional debt issue has not been ruled out. (El Universal, 08-15-2012; http://www.eluniversal.com/economia/120815/issuance-of-bonds-regulates-us-dollars-through-sitme)



Commodities

PDVSA has transferred U$D 32.2 billion to special "missions" over the past 9 and a half years, as ordered by the national government. During the first semester of 2012 it has transferred U$D 1.5 billion, and industry data shows that the Housing Mission alone has received U$D 8 billion over the years. More in Spanish: (El Universal, 08-17-2012; http://www.eluniversal.com/economia/120817/322-millardos-destino-pdvsa-a-las-misiones-en-9-anos-y-medio)

Ramírez claims oil sold to China is U$D 10 per barrel above price on sales to the US. The Oil and Mining Minister, who is also President of PDVSA, told government media that the price of crude oil "revalues more" in growing Asian markets than in the North American market which is being "hit by internal economic crisis and the devaluation of the dollar". More in Spanish: (AVN, 08-17-2012; http://www.avn.info.ve/contenido/ramírez-barril-que-se-vende-china-es-diez-dólares-mayor-al-que-se-negocia-ee-uu)

Output in the Orinoco Oil Belt now said to start during Q3 2012
Early oil output from the new business operations in the Orinoco Oil Belt will not take place until the third quarter of 2012, said Rafael Ramírez, Minister of Petroleum and Mining, and president of Venezuelan state-run oil company Petróleos de Venezuela (PDVSA). He added that the Junín 10 and Junín 2 blocs within the Orinoco Oil Belt operated by PDVSA and PETROMACAREO, respectively, "will be leading" early production. PETROMACAREO is a joint venture owned 60% by PDVSA and 40% by Vietnam's state-run oil company PETROVIETNAM.  A start in production had been expected in June, and that had been originally scheduled early in May. (El Universal, 08-16-2012; http://www.eluniversal.com/economia/120816/early-oil-output-in-the-orinoco-oil-belt-starts-in-the-third-quarter)

PDVSA expects to hit Perla gas output target in 4Q 2013
PDVSA in June pushed back the estimated start of production at Perla to the first quarter of 2013 from its earlier estimate of the end of this year. It didn't cite a reason for the delay. Located in Venezuela's Cardon IV bloc, Perla holds 16.3 trillion cubic feet of natural gas and is considered one of Latin America's largest fields. PDVSA signed a contract in December with Italy's ENI SPA and Spain's REPSOL SA to develop the field. The Perla project is expected to help Venezuela overcome power shortages that have plagued the country in recent years. It is slated to receive around U$D4.5 billion in investment. (Fox Business, 08-16-2012; http://www.foxbusiness.com/news/2012/08/16/petroleos-de-venezuela-expects-to-hit-perla-gas-output-target-in-4q-2013/; El Universal, 08-16-2012; http://www.eluniversal.com/economia/120816/approved-off-shore-gas-operations-north-venezuela)

The Oil Ministry has authorized trading on the Cardon IV gas bloc, after several months delay. PDVSA has said that this step will allow them to move ahead on planning for field operations that will lead to supplying the domestic market with natural gas. They anticipate initial production at 300 million cubic feet per day by the Q4 2013, rising up to 1.200 million daily cubic feet by 2019. More in Spanish: (El Universal, 08-17-2012; http://www.eluniversal.com/economia/120817/menpet-aprobo-comercialidad-del-bloque-gasifero-cardon-iv)



International Trade

Entry into MERCOSUR reopens doors for arbitration
Venezuela's entry into the Common Market of the South (MERCOSUR) is bringing out official contradictions in economic policy. Although the government has moved against international against arbitration, by joining the South American trade bloc it implicitly "embraces" new arbitration mechanisms, says Diana Droulers, executive director of the Caracas Chamber of Commerce Arbitration Center. "The contradiction is that the State criticizes arbitration, as it broadens the basis for it," says Droulers. (El Universal, 08-16-2012; http://www.eluniversal.com/economia/120816/venezuelas-entry-into-mercosur-opens-the-door-to-arbitration)




Logistics & Transport

Bridge collapses on highway connecting Eastern Venezuela to Caracas
A bridge on the main highway connecting Caracas to the eastern part of the country has collapsed, restricting transit to cities including Puerto La Cruz. Five vehicles, including a cargo truck were on the bridge when it fell into a river due to an excess of weight at the town of Cupira in Miranda state, 85 miles east of Caracas, the Transport Ministry said in a statement. The government is working to establish temporary bridges and alternative routes, Vice President Elias Jaua said. (Bloomberg, 08-16-2012; http://www.bloomberg.com/news/2012-08-16/venezuela-bridge-collapses-on-highway-from-caracas-to-east-1-.html)


Politics

UNASUR to support Electoral Council
Venezuela's National Electoral Council (CNE) and the Union of South American Nations (UNASUR) are signing an agreement allowing the group's first mission to support Oct. 7 presidential elections. CNE President Tibisay Lucena said it will be Unasur's debut as an international participant in a presidential vote. Further, the event will be attended by Peru's Foreign Minister Rafael Roncagliolo, empowered to initial the agreement on behalf of the regional body. (El Universal, 08-16-2012; http://www.avn.info.ve/contenido/unasur-sign-support-agreement-electoral-council)

Prison violence rises, report says
The number of killings inside Venezuela's notoriously violent prisons has increased this year even as President Hugo Chavez faces mounting pressure to curtail the violence as he campaigns for re-election, according to a human rights group. Riots and clashes between rival gangs in Venezuelan prisons left 304 dead inmates during the first half of 2012, a 15% increase compared to the same period last year, according the Venezuelan Prisons Observatory, which tracks the violence. Prison violence killed 264 inmates in the first six months of 2011, and a total of 476 prisoners in all of 2010, according to the watchdog group. (Huff Post World, 08-13-2012; http://www.huffingtonpost.com/2012/08/13/venezuela-prison-violence_n_1773848.html)

Sex, cocaine and murder
Venezuela’s new Ambassador to Kenya, veteran diplomat Olga Fonseca, was discovered strangled in her bed in the official residence in Nairobi only 12 days after assuming her new post. She had replaced former Ambassador Gerardo Carrillo Silva, who fled Kenya last March after he was accused of sexual harassment by three male Kenyan domestic employees. Kenyan police officially charged the Embassy’s First Secretary, Dwight Sagaray with the murder of Ambassador Fonseca, and believe he murdered her because she discovered that cocaine was being smuggled from Venezuela to Kenya in Venezuelan diplomatic pouches prepared and dispatched from Caracas by Foreign Ministry officials. (Caracas Gringo, 08-07-2012;  http://caracasgringo.wordpress.com/2012/08/07/sex-cocaine-and-murder/)

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