October 26th, 2012

Economics & Finance

Venezuela cut gold holdings by 3.7 metric tons in August; more gold sales expected in December

Venezuela cut its gold holdings by 3.733 tons in August, data from the International Monetary Fund showed on Thursday, while Brazil added just under two tons of bullion to its reserves the following month. UBS expects tjhe nation will sell more gold in December, and says in a report that "Venezuela is a net seller of gold, 119000 ounces were sold in July and a larger sale is expected in December", (Reuters, 10-25-2012; http://www.reuters.com/article/2012/10/25/us-gold-central-banks-idUSBRE89O10L20121025; El Universal; http://www.eluniversal.com/economia/121025/imf-confirms-gold-sales-made-by-venezuelas-central-bank-in-august; and more in Spanish: El Universal; http://www.eluniversal.com/economia/121026/afirman-que-venezuela-preve-vender-mas-oro-en-diciembre)

2013 indebtedness estimated at U$D 27.1 billion

Planning and Finance Minister Jorge Giordani presented the National Assembly with both a draft Indebtedness Law and a draft Budget Law for fiscal year 2013, both of which aim at "furthering the transition towards the socialist productive model." Expenditure for next year was estimated at U$D 92.1 billion, while indebtedness was calculated at U$D 27.1 billion. Such estimates are based on "prudent and rational" macroeconomic premises, according to Giordani. The oil average price was calculated at U$D 55 per barrel; inflation at 14-16%; and economic growth at 6% of GDP. The foreign exchange rate will remain unchanged at VEB 4.30 per US dollar, the minister explained. (El Universal, 10-24-2012; http://www.eluniversal.com/economia/121024/venezuelas-indebtedness-estimated-at-usd-271-billion-in-2013)

An estimated 50% exchange adjustment is envisioned for 2013, according to Barclays and ECOANALÍTICA. Both firms anticipate a devaluation of at least 46% during the first quarter 2013. José Luis Saboin, Senior Economist with ECOANALÍTICA says "there is a fiscal deficit that is 15% of GDP, which is around U$D 40 billion, around half of oil income" He says an enlarged government role, along with patronage lead to spending more than comes in, we are referring to the "missions" and the housing programs". More in Spanish: (El Universal, 10-26-2012; http://www.eluniversal.com/economia/121026/pronostican-ajuste-cambiario-cercano-a-50-para-2013)

Over VEB 3.13 billion to keep prices down

The proposed 2013 fiscal budget, the resources allocated to the Ministry of Food 10% increase, from VEB 4.05 billion in 2012 to VEB 4.45 billion. More in Spanish: (El Nacional, 10-25-2012; http://www.el-nacional.com/)

Venezuela among nations placing most obstacles on investment

Venezuela is among the countries that place the most obstacles for opening a business, according to a study prepared by the World Bank entitled "Doing Business 2013." The survey measured indicators concerning the businesses environment. Venezuela ranks 180 out of 185 countries, just ahead of the Democratic Republic of Congo, Eritrea, the Republic of Congo, Chad, and the Central African Republic. Venezuela ranked 179 in 2011. The study measured several indicators, namely: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, and trading across borders. (El Universal, 10-24-2012; http://www.eluniversal.com/economia/121024/venezuela-among-the-countries-with-more-obstacles-to-investments)

Banks’ non-performing loans stood at 1.08% at the close of September, down 0.8 percentage points over the past 12 months, announced the Banking Superintendent's office SUDEBAN. It pointed out that since 1994 (the year of the banking crisis), the sector’s non-performing loans have been diminishing, going from 20% at the end of that year to 1.4% at the end of 2011. (Veneconomy, 10-24-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=32515&idc=2)

Dividend repatriation backlog reported; companies expect exchange rate adjustment

According to a yearly poll by the Venezuelan American Chamber of Commerce and Industry (VenAmCham) 80% out of 238 respondents expect an exchange rate adjustment. 62% of those polled say they are enrolled with the Exchange Board (CADIVI) and 70% say they operate within international markets. Companies polled reported backed up dividend repatriation applications, on the order of U$$ 8 to 9 billion dollars. More in Spanish: (El Universal, 10-26-2012; http://www.eluniversal.com/economia/121026/empresas-aguardan-por-repatriacion-de-dividendos)

Commodities

Curacao wants PDVSA to invest U$D1.5 billion in Isla refinery

Curacao could extend or renegotiate a lease of its Isla refinery to Venezuelan state oil company PDVSA if the latter agrees to invest U$D1.5 billion to upgrade the World War One-era facility, one of the Caribbean island's top politicians said. The 335,000 barrel per day (bpd) Isla refinery, which is crucial to the Dutch island nation's economy, has faced years of complaints from residents and environmental activists over pollution, but PDVSA has been reluctant to invest in it. "It is important to extend PDVSA's contract, but under certain conditions," Helmin Wiels, leader of the Sovereign People party which won the largest block at last week's parliamentary elections, told Reuters on Wednesday. (Reuters, 10-24-2012; http://www.reuters.com/article/2012/10/24/us-curacao-refinery-idUSBRE89N1GZ20121024)

VENALUM alumina inventory down to 8 days

The drop in alumina production by state CVG BAUXILUM company has lowered delivery of material to state owned aluminum processing companies, ALCASA and VENALUM. VENALUM has inventory available for just 8 days, according to members of the Workers Council, and this could lead to an even greater drop in the company's production levels, which are currently at 30% of capacity. More in Spanish: (El Universal, 10-26-2012; http://www.eluniversal.com/economia/121026/venalum-tiene-inventarios-de-alumina-solo-para-8-dias)

International Trade

Colombia-Venezuela border integration on hold

The agenda on Colombia-Venezuela border issues remains on hold after two meetings between both countries' foreign ministers were called off in the past few months. The appointment has been rescheduled for early November 2012. The electricity interconnection between Apure state (southwest Venezuela) and the Arauca department (Colombia), binational security, health and economy, and the construction of the National Border Assistance Center are the pending topics on the agenda, as stated in August by the governor of the Arauca department, José Facundo Castillo Cisneros. (El Universal, 10-25-2012; http://www.eluniversal.com/nacional-y-politica/121025/colombia-venezuela-border-integration-put-on-hold)

Logistics & Transport

Expropriated La Guaira port machinery lies idle

After the Government took over the assets of 26 private companies that operated the La Guaira Port Terminal it has yet to pay compensation and machinery remains idle. Port sources report this includes high value equipment from HYSTER, KALMAR and CATERPILLAR, which was used to offload vessels, as well as small pay loaders, trucks, and other equipment used to carry merchandise from the port to warehouses, all remain idle. More in Spanish: (El Nacional, 10-26-2012; http://www.el-nacional.com/)

Politics

In Latin America, incumbents winning and dominating as term limits are increasingly loosened

After four election wins, Venezuelan President Hugo Chavez is on track to completing at least 20 years in power, and supporters say they’re glad to have him in charge. City streets are still lined with campaign posters emblazoned with the president’s image. In a region where military dictators ruled by force for decades, millions of Latin Americans are backing a new crop of leaders extending their rule and dominating power through the ballot box. (The Washington Post, 10-24-2012; http://www.washingtonpost.com/world/the_americas/in-latin-america-incumbents-winning-and-dominating-as-term-limits-are-increasingly-loosened/2012/10/24/525e4106-1e01-11e2-8817-41b9a7aaabc7_story.html)



The following brief is a synthesis of the news as reported by a variety of media sources. As such, the views and opinions expressed do not necessarily reflect those of Duarte Vivas & Asociados and The Selinger Group.