September 25th, 2012

Economics & Finance

MORGAN STANLEY: Venezuela risks default if Chavez wins

Venezuela could default on its debt as early as the second half of 2013 if President Hugo Chavez wins re-election next month and fails to shore up the oil-producing nation's "increasingly fragile" balance sheet, Morgan Stanley said in a report by Charlie Devereux published by Bloomberg. One "tipping point" could be the U$D 4.3 billion in external debt payments that come due between August and November 2013, Morgan Stanley analyst Daniel Volberg wrote in a note to clients. (El Universal, 09-22-2012; http://www.eluniversal.com/economia/120922/venezuela-risks-default-if-chavez-wins-morgan-stanley-says)

ConocoPhillips confirms that an international arbitration court ruled PDVSA must pay a U$D 66.8 million compensation for oil production cuts between 2006 and 2007. The International Trade Chamber Court, located in Paris, concluded PDVSA “violated” the agreements of the Petrozuata project in which ConocoPhillips participated “when it applied the project OPEC production cuts.” PDVSA has announced that it plans to appeal the ruling. (Veneconomy, 09-22-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32185&idc=4; and more in Spanish: El Universal; http://www.eluniversal.com/economia/120925/pdvsa-presentara-alegatos-antes-de-efectuar-pago-a-conoco; El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/pdvsa-presentara-nuevos-argumentos-antes-de-pagar-.aspx)

Finance Ministry has used up 84% of planned debt for 2012

Although the price of crude oil remains above U$D 100 and petroleum industry flows remain high, the government continued to acquire debt in order to raise cash for the elections. Finance and Planning Ministry data shows that by 21 September bonds had been issued for VEB 79.4 billion, which is 84% of planned credit operations for the year, which are pegged at VEB 94.5 billion. More in Spanish: (El Universal, 09-25-2012; http://www.eluniversal.com/economia/120925/finanzas-ya-coloco-84-de-la-deuda-prevista-para-2012)

Venezuela has the most controlled banking system in the Andean Region

A recent FITCH report shows that the local banking system faces an "uphill" battle to improve efficiency in a difficult environment It reveals that efficiency rates for Venezuelan banks are poor as compared to the rest of the region due to "high inflation and intense regulation and intervention" on the part of government. More in Spanish:  (Tal Cual, 09-25-2012; http://www.talcualdigital.com/index.html)

15% inflation projected in 2013 budget

As the government analyzes macroeconomic premises for the 2013 budget, it appears the exchange rate will remain unchanged for next year, according to a report being prepared for the national budget, according to sources within the Planning and Finance Ministry. The same sources report the rate of inflation projected is 15%, far below that used for 2012, which was 20-22%. More in Spanish: (El Mundo, 09-25-2012; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/presupuesto-de-2013-preve-15--de-inflacion.aspx)

Hugo Chavez’s record: A gusher of oil money in Venezuela, and some ask where it’s gone

Nearly 14 years after President Hugo Chavez took office, and despite the biggest oil bonanza in Venezuela’s history, there’s little outward sign of the nearly one trillion petrodollars that have flowed into the country. The populist president has used the oil wealth to buttress his support through cash handouts, state-run grocery stores and a gamut of other social programs. With more money in the economy, incomes are higher and the number of people living in poverty has fallen. Yet some experts say Chavez could have done much more to improve the country’s infrastructure, boost its economy and invest in the very oil industry that keeps Venezuela afloat.  Venezuela now ranks among the most violent and corrupt places on earth. (The Washington Post, 09-25-2012; http://www.washingtonpost.com/business/hugo-chavezs-record-a-gusher-of-oil-money-in-venezuela-and-some-ask-where-its-gone/2012/09/22/c332fe5e-04c9-11e2-9132-f2750cd65f97_story.html)

Commodities

Amuay refinery not fully back after one month, explosion cause still a mystery.

Thirty days after the explosion at the Amuay refinery which killed 42 people, and damaged nine crude oil storage tanks and adjacent facilities and housing, causes for the accident have not been divulged, nor has refining activity recovered fully at the Paraguana Refining Complex, the second largest in the world. Labor leader Wills Rangel, president of the United Oil Workers Federation estimates recovery at 80%, but Yvan Freites, Secretary General of the United Oil Workers of Falcón State, which operates the refinery at Cardon says three key units remain paralyzed and adds that "the plant will not be ready this year". Freites presumes there is no gasoline being processed at Amuay or it is being produced with components imported by PDVSA. Authorities have yet to provide information on the real causes for the explosion, and reinsurance firms are on the ground evaluating the situation. PDVSA President Rafael Ramírez has announced the damaged refinery currently processed 330.000 barrels per day of crude oil, which is 51% of what it refined prior to the explosion. (El Universal, 09-25-2012; http://www.eluniversal.com/economia/120925/a-un-mes-de-la-tragedia-amuay-no-recupera-su-plena-capacidad; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/petroleo/pdvsa/disminucion-en--almacenaje-obliga-a-pdvsa-a-reprog.aspx)

UBS: PDVSA must issue more bonds to meet debt

According to Swiss bank USB if PDVSA really wants to raise crude oil production it will need another bond issue to meet accumulated debt before the year is up. More in Spanish: (El Nacional, 09-25-2012; http://www.el-nacional.com/)

Venezuela’s export barrel dropped U$D 2.31 to average U$D 102.76/bbl. this week, mostly due to a greater than expected increase of crude inventories in the United States, according to the Venezuelan Oil and Mining Ministry. The average for September is U$D 103.96/bbl. and the average for the year-to-date is U$D 105.30/bbl. after posting an average of U$D 101.06/bbl. in 2011. (Veneconomy, 09-22-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32182&idc=4)

“In the 90’s PDVSA had one of the best lightning rod systems in the world,” former PDVSA Refining manager Javier Larrañaga told El Nacional. He explained he was surprised at fire at El Palito Refinery. PDVSA admitted the lightning rod systems at the El Palito Refinery cannot withstand high discharges despite the fact that the north of Carabobo state is considered as one of the regions in the country with the most lighting discharges. (Veneconomy, 09-22-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32178&idc=4)

China backs giant Venezuela goldmine

Chinese and Venezuelan officials have signed an agreement to jointly develop one of the world's biggest gold mines, the Las Cristinas asset near a town bearing the name of the mythical golden city of El Dorado. The agreement to develop the Las Cristinas gold mine was signed by officials of the Venezuelan Government and Chinese company China International Trust and Investment Corp (CITIC) at the weekend. It comes as a blow to Western mining companies that had eyed the massive deposit, such as Canada's Crystallex International Corp, which has appealed to the World Bank arbitration body for U$D 3.7 billion in compensation after its development permit was cancelled. The Las Cristinas ore body, in southern Bolivar state, is estimated to contain 17 million ounces of gold. (The West Australian, 09-24-2012; http://au.news.yahoo.com/thewest/business/a/-/world/14939199/china-backs-giant-venezuela-goldmine/;  AVN, 09-22-2012; http://www.avn.info.ve/contenido/venezuela-and-china-sign-agreements-mining-projects; Veneconomy, http://www.veneconomy.com/site/index.asp?ids=44&idt=32181&idc=3)

International Trade

Trade from Colombia to Venezuela up to U$D 1.5 billion

Exports from Colombia to Venezuela reached U$D 1.5 billion, according to Colombia's National Statistics Department (DANE). This represents an overall trade growth of 65.4% compared with the same period last year, when exports were U$D 907 million. The figures were far from favorable to Venezuela as it sold only U$D 403 million to Colombia during the first seven months of this year. (El Universal, 09-22-2012; http://www.eluniversal.com/economia/120922/trade-from-colombia-to-venezuela-amounts-to-usd-15-billion)

Politics

DATANALISIS: Capriles edges toward Chavez as vote nears

Opposition candidate Henrique Capriles edged closer to President Hugo Chavez in a recent DATANALISIS poll, according to two sources that have seen the poll. The recent poll shows support for Capriles, growing in the waning days of the campaign as he continues campaigning across the country. The survey showed Capriles with 37.2% of the vote compared with 47.3% for Chavez, closer than the 12.5% difference registered in their last survey. The poll, which had a margin of error of 2.4 percent, was conducted between August 25 and September 5, the sources said. This leaves 15.5% undecided. DATANALISIS did not immediately respond to requests for confirmation of the details, and another well-known pollster, CONSULTORES 21, has the candidate’s neck-and-neck. (REUTERS, 09-24-2012;  http://www.reuters.com/article/2012/09/24/us-venezuela-election-idUSBRE88N11F20120924)

Key PSUV leader says if Chavez loses he will concede

Aristóbulo Istúriz, vice president of the pro government United Socialist Party promises to control extremists and in exchange asks that Capriles do the same with "nuts" in the opposition. He said: "If Chavez loses, he will concede, as he did with state governments, mayoralties and congressional elections"; and added "We must abandon triumphalism and turn polls into votes. Zero smugness. In order to guarantee peace and harmony on October 8 we need to win with a broad margin. The problem is not to win but rather the advantage in favor. Victory must be decisive to avoid destabilization". (El Nacional, 09-25-2012; http://www.el-nacional.com/)

UNASUR confirms Venezuela's electoral system is reliable

The heads of both campaigns and authorities at Venezuela's National Electoral Council (CNE) all confirm that country's electoral system is reliable, the Union of South American Nations (UNASUR) said in a statement released Sunday. "None of the spokespeople questioned the system's technological strength," says the communique issued from Quito by regional bloc. (AVN, 09-23-2012; http://www.avn.info.ve/contenido/unasur-confirms-venezuela039s-electoral-system-reliable; El Universal, http://www.eluniversal.com/nacional-y-politica/120920/unasur-not-to-supervise-venezuelan-presidential-election)

"Ghetto Chavez" and the battle for Venezuela's youth vote

In Venezuela's biggest slum, a graffiti artist stencils a painting of President Hugo Chavez dunking a basketball.

Another has him rapping to hip-hop music, and another doing a wheelie on a motorcycle. "Chavez el mio" ("My Chavez") reads a slogan on one of the series of striking campaign images ahead of the October 7 election.

It is a new look for the 58-year-old president, who is seeking another six-year term in a tight race despite undergoing cancer surgery three times since June 2011. (Reuters, 09-23-2012; http://www.reuters.com/article/2012/09/23/us-venezuela-election-ghetto-idUSBRE88M01F20120923)