October 05th, 2012

Economics & Finance

Chávez pulls purse strings in election bid

In facing a tough re-election fight on Sunday, President Hugo Chávez is trying to improve his odds by repeating his past formula for electoral success: lavish government spending to pull support. With a weak economy and rampant crime, many voters are reconsidering their support for Mr. Chávez after nearly 14 years in charge, and leaning toward his rival, 40-year-old state Gov. Henrique Capriles. Yet, thanks to big government spending, Mr. Chávez is a slim favorite to win another six-year term in the Oct. 7 vote. "I think that's been his formula," said Michael Shifter, president of the Inter-American Dialogue, a Washington think tank. "Whether that works for him this time around is another question." Analysts wonder whether the spending spree will buy as many votes this time around as in past elections, particularly given double-digit inflation and homicide rate that reached a record 19,000 last year, according to the nonprofit Venezuelan Violence Observatory.(The Wall Street Journal, 10-04-2012; http://online.wsj.com/article/SB10000872396390444138104578030700356304858.html)

Brazil is covering Venezuela's back

In 2003, the trade between the two countries amounted to U$D 800m. By 2011, this figure had gone up to U$D 5bn. The two countries tightened institutional links through consultancy on public policies and training courses for leaders. However, the main goals of Lula and Chávez were geopolitical. Samuel Pinheiro Guimarães, the most influential diplomat in the Brazilian chancellery, explained that Brazil's strategy sought to prevent the "removal" of Chávez through a coup, to block the reincorporation of Venezuela into the North American economy, to extend Mercosur with the inclusion of Bolivia and Ecuador and to hinder the US project to consolidate the Pacific Alliance, which includes Chile, Colombia, Mexico and Peru. (The Guardian, 10-02-2012; http://www.guardian.co.uk/commentisfree/2012/oct/02/brazil-has-venezuela-back?newsfeed=true)

BOFA says Chavez defeat bets are overdone in bond market

Bank of America Corp. recommended selling Venezuelan bonds, saying that their rally shows investors are overestimating the chances that President Hugo Chavez will lose this month’s election. It told clients to sell dollar bonds due in 2028 and 2034, saying they’ve become expensive. Yields on the bonds due 2028 have plunged 2.25 percentage points since the end of June to 10.62% and touched a four-year low of 10.54% yesterday. Bank of America analysts led by Jane Brauer wrote in a report that Chavez is likely to defeat opposition candidate Henrique Capriles Radonski in the Oct. 7 vote and could win by a wide enough margin to give him room to pursue “more radical policies". It said its “central scenario” is Chavez winning by between seven to 10 percentage points. (Business Week, 10-02-2012; http://www.businessweek.com/news/2012-10-02/bofa-cuts-venezuela-bonds-as-chavez-odds-of-defeat-overestimated)

Hyundai stops assembling cars in Venezuela

Jorge Díaz Del Castillo, senior commercial vice-president of MMC Automotriz, a joint venture established with Venezuelan and Japanese capital for the assembling of Hyundai, Mitsubishi, and Fuso cars, announced that the enterprise would stop assembling Hyundai cars in its facilities, located in Anzoátegui state, northeast Venezuela. "Hyundai has not renewed the technology license agreement, in complying with a corporate strategy," Del Castillo informed. (El Universal, 10-04-2012; http://www.eluniversal.com/economia/121004/hyundai-stops-assembling-cars-in-venezuela)

Commodities

Gas leak in Pdvsa refinery was detected more than one hour before the blast

Authorities have not publicly revealed official details and explanations of what really caused the explosion of an olefin cloud at Pdvsa-owned Amuay refinery, on August 25, which killed 42 and injured over a hundred. A task force comprised by 11 deputies of the Venezuelan National Assembly and a group of nine people, including ex-managers, workers and specialists from Paraguaná Refining Complex (CRP) declared that operational reports from Cardón refinery showed, "On August 24 at 11:30 p.m. olefins were being transferred from Amuay refinery to an alkylation plant in Cardón refinery when a loss of pressure and flow occurred." Therefore, there were signs of gas leaking at least one hour and forty minutes before the explosion. (El Universal, 10-04-2012; http://www.eluniversal.com/economia/121004/gas-leak-in-pdvsa-refinery-was-detected-more-than-one-hour-before-the-)

The Energy Journal: Chávez defeat could spark Venezuelan oil comeback

Could the potential election defeat of Hugo Chávez lead to lower oil prices? That is the tantalizing question raised by an article in the FT that reviews Mr. Chávez’s negative legacy on Venezuelan oil production and posits that a victory by challenger Henrique Capriles could boost Venezuela’s sagging oil output. Both candidates vow to boost output to 6 million barrels a day, but Mr. Capriles has more credibility in the market, the story notes. Such a jump in Venezuelan output would also have consequences for OPEC, of which Venezuela is a member. The prospects for a Venezuelan boost under Mr. Capriles is an intriguing possibility, but would be more a medium-term play given that a turnover would also lead to new faces in top oil jobs in Venezuela. (The Wall Street Journal, 10-03-2012; http://blogs.wsj.com/marketbeat/2012/10/03/the-energy-journal-chavez-defeat-could-spark-venezuelan-oil-comeback/)

RIL signs agreement with Venezuela for heavy oil project

Reliance Industries today said it has signed an agreement with Venezuela for a project to produce heavy oil. RIL signed a Memorandum of Understanding with Venezuelan state oil monopoly Petroleos de Venezuela, or PDVSA, to develop a project in the Orinoco extra heavy crude belt, the company said in a statement here. Also, the firm signed a new agreement to buy more Venezuelan oil for its twin refineries at Jamnagar in Gujarat. "PDVSA will supply between 300,000 and 400,000 barrels per day of Venezuelan heavy crude oil to RIL's two refineries in Jamnagar under a 15-year crude oil supply contract," the statement said. (India Times; http://economictimes.indiatimes.com/news/news-by-industry/energy/oil-gas/ril-signs-areement-with-venezuela-for-heavy-oil-project/articleshow/16658723.cms)

Politics

Hugo Chávez: a strongman's last stand

Amid rumors of failing health and with the country's infrastructure crumbling, Hugo Chávez faces an election that will decide the fate of the Venezuelan revolution. No one ever accused Hugo Chávez of thinking small. He casts politics as an existential contest between good and evil, the oppressed and the oppressor. The next battle is on Sunday, when he seeks a third term to extend his 14-year rule to 2019. There is a clenched tension in the streets, for no one knows what will happen. Some polls give the president a wide lead, others show him trailing. The election will decide the fate of Chávez, 58, and his revolution. Lose, and the revolution dies. Win, and it survives, but only for as long as the leader has a pulse. Cancer treatment has bloated and debilitated the "comandante". Few believe his claims to be cured of a disease whose exact nature and location remains a closely guarded secret. Some palace insiders whisper it is terminal. The revolution hangs by a thread. There appears to be no plan B, no successor. Chávez surrounded himself mostly with mediocrities, valuing loyalty over competence or, it turned out, honesty. Last week a Reuters investigation detailed how more than half of public investment churns into secretive funds controlled by Chávez with no oversight by auditors or congress. With the chief ailing they look lost. Chávez's absence from many rallies has given him the air of Banquo's ghost.  After a recent spate of bad news – a prison riot, a collapsed bridge, an oil refinery accident – Chávez reached for a telling metaphor. "The show must go on." Maybe it will, maybe he will win, and live to rule. But what cost the spectacle? (The Guardian, 10-02-2012; http://www.guardian.co.uk/world/2012/oct/02/hugo-chavez-strongmans-last-stand)

Chavez, Capriles Rally Thousands as Venezuela Campaign Ends

President Hugo Chavez and his rival Henrique Capriles Radonski addressed thousands of supporters today as the official campaign period ended before the Oct. 7 election. Chavez spoke for about 30 minutes heavy rains that left his clothing completely drenched. “I won’t talk long because of the circumstances,” said Chavez, who also sang and danced on the wet stage. “I’m here, just as I said I would be. Thanks to you and thanks to God.” Capriles, the 40-year-old former governor of Miranda state, filled the widest and longest avenue in the city of Barquisimeto in central Lara state, spoke for 55 minutes, thanked his supporters and said Chavez’s government was “tired” after almost 14 years. “President Chavez, your time is over, I want to thank you from the bottom of my heart for showing me the direction to take, it’s love not hate, light not darkness,” Capriles said. “You were a good contender without a doubt, you abused of your position of authority, but this was always a spiritual fight, David against Goliath, and we all know David wins.” (Bloomberg, 10-04-2012; http://www.bloomberg.com/news/2012-10-05/chavez-capriles-rally-thousands-as-venezuela-campaign-ends-3-.html)

President faces first real threat

Henrique Capriles is a skinny marathon runner and opposition governor who has done something no Venezuelan politician has managed in the past 14 years: pose a serious threat to President Hugo Chávez. This Sunday, Venezuelans vote in presidential elections that will be the first time since Mr. Chávez won power in 1998 that the outcome isn't a foregone conclusion. Opinion polls vary widely, partly because Venezuelans mistrust pollsters. Some surveys show Mr. Chávez with a 10- or even 20-point lead. Others show the race neck-and-neck. Respected local pollster Consultores 21 said Tuesday its last pre-election survey shows Mr. Capriles ahead ... (The Wall Street Journal; http://online.wsj.com/article/SB10000872396390443862604578032722399157826.html?KEYWORDS=venezuela)

Will Venezuelans oust Chavez? Miracles do happen, by Enrique Krauze

If Henrique Capriles Radonski triumphs in Venezuela’s elections on Oct. 7, it will be a democratic feat without precedent in Latin American history. It is possible that an opposition candidate has never faced a force like that represented by Hugo Chavez. His government doesn’t employ physical violence as a state policy, but it exercises another kind of coercive and menacing violence, manifold and oppressive. Its power comes from the ballot box under the tight control of arms -- his arms. Anything can happen, including an outbreak of the endemic violence that has plagued Venezuelan history. I have faith in - (a Capriles victory as a) - civic miracle. And I hope that such a victory will herald not only the return of democracy but something much more important and necessary: the reconciliation of the Venezuelan family, divided today by an ideological hatred that is alien to it, that has poisoned it for almost 15 years, and that has choked all possibility of harmony. (Bloomberg, 10-03-2012; http://www.bloomberg.com/news/2012-10-03/will-venezuelans-oust-chavez-miracles-do-happen.html)

Younger candidate challenges Hugo Chavez

Hugo Chavez shows no sign that he's facing the strongest challenge to his 13-year rule in Venezuela. Chavez's opponents are confident that this Sunday, Capriles will unseat the long-ruling leftist leader, a refrain previously heard before eventual defeats. The incumbent is a political survivor and remains popular at home. But there are signals, observers say, that this time Chavez really is on the ropes. Observers say Capriles, 40, represents a moderate alternative. As expected, both sides claim they will be victorious -- and both sides have polls to back up those claims. Part of the problem is "an inherent bias in polling companies," according to Inaki Sagarzazu, a Venezuelan professor of politics at the University of Glasgow in Scotland, who has taken a closer look at the pollsters. Capriles, he noted, also must believe it is a close race, as evidenced by a speech this summer in which he spoke directly to the military, assuring them and other institutions that things will be OK if he wins. The back-and-forth accusations can only mean one thing, according to analyst Sagarzazu: "All the shenanigans that have been happening point in the direction that the government knows that things are close." (CNN, 10-03-2012; http://edition.cnn.com/2012/10/03/world/americas/venezuela-elections/index.html?hpt=ila_c1)

Win or lose, Capriles may win in Venezuela, by Andres Oppenheimer

Anything is possible in Venezuela’s elections Sunday, but there is a good chance that opposition candidate Henrique Capriles Radonski will do better than any of his predecessors in the polls, and that — win or lose — he will put President Hugo Chavez’s 14-year-old regime against the ropes. There is a plausible scenario that even if Capriles loses by a narrow margin, a good showing in Sunday’s election will allow him to keep the opposition unified, and to become a viable alternative to a president who may have terminal cancer, and who has no successor who could beat Capriles. Many analysts see change in the air. In a Sept. 26 report entitled “Now or in a little while,” Barclays bank told its clients that “even in the event of a Chavez victory, we think that given the signs of his weak health conditions, if not now, political change could come in just a little while.” The odds are against Capriles, but he has better chances than any previous opposition leader to succeed Chavez. Win or lose on Sunday, he could still win in the end. Read more here: (The Miami Herald, 10-03-2012; http://www.miamiherald.com/2012/10/03/3033066/win-or-lose-capriles-may-win-in.html#storylink=cpy)

Defense minister claims Chavez opponent would dismantle armed forces

Venezuela's defense minister is claiming that opposition presidential candidate Henrique Capriles plans to dismantle the country's armed forces. Gen. Henry Rangel made the claim Tuesday in a TV interview after Capriles announced that an active general had agreed to be his defense minister. Capriles didn't name the general, but Rangel said he didn't believe any Venezuelan general would betray President Hugo Chavez's socialist government by accepting the appointment. Venezuela's military is constitutionally neutral but Chavez has packed its leadership with loyalists. That has raised questions about whether the armed forces would remain neutral if the results of Sunday's elections are in dispute. Read more: (FOX NEWS, 10-02-2012; http://www.foxnews.com/world/2012/10/02/venezuela-defense-minister-claims-chavez-opponent-would-dismantle-armed-forces/#ixzz28LQls3dG)