August 31th, 2012

Economics & Finance

Venezuela's internal debt up 40% in the first half of 2012

Although the crude oil price is about U$D 100, due to an official policy of extensive indebtedness internal and external debt rose by 18% during the first semester of 2012, according to data from the Finance and Planning Ministry which reflects it rose from U$D 79.2 billion in December 2011 to U$D 93.5 billion by the end of June this year. (El Universal, 08-30-2012; http://www.eluniversal.com/economia/120830/venezuelas-internal-debt-up-40-in-the-first-half-of-2012)

Government has U$D 6 billion available in the Chinese Fund

China and Venezuela contributed U$D 6 billion to establish the China Fund as a way for the government to increase its liquid assets. The China Development Bank disbursed U$D 4 billion and the Venezuelan National Development Fund (FONDEN) U$D 2 billion. President Chávez has said the fund is already activated and the Ministry of Foreign Affairs stated that the resources were already deposited, stated AFP. (El Universal, 08-29-2012; http://www.eluniversal.com/economia/120829/venezuelas-government-has-usd-6-billion-in-the-chinese-fund)

Commodities

Venezuela in ‘no hurry’ to restart oil refinery after fires

Venezuela is carrying out an “exhaustive” inspection of its biggest refinery before attempting to restart processing after extinguishing a four-day fire yesterday caused by an explosion that killed 48 people. State-owned Petroleos de Venezuela, S.A. is “in no hurry” to restart the Amuay refinery and will allow for at least a one-day cooling-down period, Oil Minister Rafael Ramirez told reporters in Falcon state near the plant. (Bloomberg, 08-29-2012; http://www.bloomberg.com/news/2012-08-29/venezuela-in-no-hurry-to-restart-refinery-after-four-day-fire.html; Reuters, http://www.reuters.com/article/2012/08/30/venezuela-refinery-idUSL2E8JU0O120120830; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=31892&idc=4; CNN, http://edition.cnn.com/2012/08/29/world/americas/venezuela-refinery-problems/index.html?iref=allsearch)

Refinery disaster reveals weaknesses in Venezuela oil company, financial hit expected

The deadly blast and fire at Venezuela’s biggest refinery are prompting critics to question whether the state oil company has been neglecting maintenance while helping fund government programs under President Hugo Chavez.

Analysts say the disaster at the Amuay refinery could also mean a financial hit for state-run Petroleos de Venezuela SA by forcing it to further increase imports of fuel for domestic consumption. (The Washington Post, 08-29-2012; http://www.washingtonpost.com/world/the_americas/refinery-disaster-reveals-weaknesses-in-venezuela-oil-company-financial-hit-expected/2012/08/29/c627c7da-f24e-11e1-b74c-84ed55e0300b_story.html)

Oil spill reported at Venezuelan refinery in Curacao

Curacao's local press has reported a spill of hydrocarbons at the Venezuelan Isle refinery, located in Curacao, and that PDVSA officials responded ten days after the spill occurred. The Local newspaper reported that the Coastguard noticed the spill on August 17, and informed Harbor Safety Inspection (HVI). Nonetheless, responses did not come until August 25. "It's incomprehensible that Pdvsa waited until Saturday to send a cleaning team to the area and let the situation get worse" said Peter van Leeuwen,  chairman of Clean Environment on Curacao (SMOC). (El Universal, 08-29-2012; http://www.eluniversal.com/economia/120829/oil-spill-reported-at-venezuelan-refinery-in-curacao)

PETROBRAS sees first of new refineries starting up November 2014

The first processing train of the refinery joint venture with Venezuela's Petroleo de Venezuela SA, or PDVSA, will be followed by a second line in May 2015. The refinery will add 230,000 barrels of daily processing capacity, Petrobras said. PETROBRAS currently processes about 2 million barrels per day at 12 refineries, Downstream Director Jose Carlos Cosenza said during a presentation. PETROBRAS will invest U$D71.6 billion in its downstream operations through 2016. The investments are part of the company's U$D237 billion spending plan for 2012-2016. (Fox Business; 08-29-2012; http://www.foxbusiness.com/news/2012/08/29/petrobras-sees-first-new-refineries-starting-up-november-2014/)

Logistics & Transport

Port delays cost U$D 16,000 per day

Ismael Pérez Vigil, Executive President of CONINDUSTRIA, the National Federation of Industries, says port inefficiency increases costs as well as the risk for goods, all of which lowers productivity, increases inflation and loses international markets. At the same time, Carabobo state legislator Neidy Rosal reports "There are approximately 15 grain carriers at bay waiting to be offloaded because average stays are now 3 to 4 weeks, and each day costs around U$D 16,000. In the past offloading was done in 72 hours." More in Spanish: (Tal Cual, 08-30-2012; http://www.talcualdigital.com/index.html)

Politics

Chavez faces new election threats

It’s been a rough month for President Hugo Chávez. In less than two weeks, he has had to deal with a deadly prison riot, a collapsing bridge, flooding, an embarrassing confrontation with steel workers on live TV and the country’s worst oil-industry disaster, which killed at least 41 and still has families digging through the rubble looking for loved ones. The avalanche of bad news would be hard on any leader, but this train of troubles comes as Chávez, 58, is heading into an Oct. 7 presidential race that polls suggest is getting tighter. For the last 14 years in office, Chávez has played the roll of an energetic leader with a common touch. Even when his administration had missteps, voters rarely held their charismatic comandante accountable. But the scale of this month’s calamities might change that dynamic, said Xavier Rodríguez Franco with Entorno Parlamentario, a legislative watchdog group. “The events the country has had to face recently clearly show a breakdown in the government’s ability to manage,” he said “And that breakdown is dragging down the president’s image.” (Miami Herald, 08-30-2012; http://www.miamiherald.com/2012/08/30/2976134_p2/venezuelas-chavez-faces-new-election.html=)

Government Spins On Amuay Disaster, Evidence Mounts Of Insufficient Maintenance

Although the Government is trying to convince Venezuelans that the Amuay disaster is something normal and has little to do with bad management or bad maintenance, evidence seems to show the opposite and is mounting fast. The leak of the report by the refinery's underwriter is quite damming. The report says on page 8, that while US$1 billion was budgeted for maintenance, only US$314 million was actually spent. Less than US$ 2 billion was spent in the last four years. So, when PDVSA's Asdrubal Chavez boasts that US$ 4 billion were spent on maintenance in the same period, he clearly is talking about how much was budgeted, not spent. Part of the problem is that Bariven, the PDVSA affiliate in charge of imports, is now in charge of all the food imports of PDVAL, thus it's just in time ability of yesteryear is no longer there. The result, even if maintenance needs to be done, there are no materials for it. The report also says that the target of PDVSA was to have 80% of the maintenance be preventive and 20% corrective. However, the report concludes that it ended up being 69% corrective, 31% preventive. (The Devils Excrement, 08-30-2012; http://devilsexcrement.com/2012/08/30/venezuelan-governmentt-spins-on-amuay-disaster-evidence-mounts-of-insufficient-maintenance/)