December 14th, 2012

Economics & Finance

Experts: Devaluation in Venezuela is a pressing need

The ECONOMÉTRICA think tank says in its latest report that "an adjustment in the foreign exchange rate cannot wait" even despite the President's health and the fact that elections may be held in the medium term. It says "A FOREX adjustment is necessary to partially reduce the accumulated fiscal and monetary imbalances, but on top of all, the adjustment is vital to avoid excessive shortage of US dollars and goods". Members of the Venezuelan economic cabinet agree on the need to devaluate the local currency due to both excessive demand of US dollars at an artificially cheap foreign exchange rate and the advantages of obtaining more local currency for each petrodollar so that the Government can fill the gaps in public accounts. Finance Minister Jorge Giordani, a highly orthodox Marxist seems to be the only one that does not concur. (El Universal, 12-13-2012; http://www.eluniversal.com/economia/121213/experts-devaluation-in-venezuela-is-a-pressing-need; http://www.eluniversal.com/economia/121212/lack-of-consensus-over-devaluation-in-venezuela)

Barclays vindicated as blown Chavez call redeemed: Andes Credit

When Barclays Plc recommended investors buy Venezuelan bonds on the bet President Hugo Chavez would lose his re-election bid in October, the bank said his cancer battle could drive him out of office even if he won. While Chavez rolled to an 11 percentage point victory that sparked the worst one-day bond rout in four years, the call is now rewarding investors with a 7% return this month that is more than 20 times the average for emerging-market debt. The surge pushed returns to 49% this year as Chavez’s cancer recurrence fuels speculation he’ll be replaced by a president who seeks to lure the investment he drove away. Barclays’s New York-based analysts, led by Venezuelan-born Alejandro Grisanti, say the rally isn’t over because the government’s debt remains cheap versus developing-nation peers. Venezuela’s dollar bonds due 2020 yield 8.76%, compared with yields below 5.5% on similar-maturity notes issued by Vietnam and Mongolia, countries that share the South American nation’s B+ credit rating from Fitch Ratings. (Bloomberg, 12-13-2012; http://www.bloomberg.com/news/2012-12-13/barclays-vindicated-as-blown-chavez-call-redeemed-andes-credit.html)

Harmonized public policies in Mercosur suggested

Carlos Larrazábal, president of the Venezuelan Confederation of Industries (CONINDUSTRIA) called for "harmonizing public policies" in all member states of the Common Market of the South (MERCOSUR) so as to guarantee its viability as regional bloc. He also reports that the Argentinean Industrial Association has said: "The success of MERCOSUR will depend on the similar development of its Member States." (El Universal, 12-12-2012; http://www.eluniversal.com/economia/121212/harmonized-public-policies-in-mercosur-suggested)

VenAmCham: Uncertainty will prevail in 2013

Gustavo Marturet, President of the Venezuelan-American Chamber of Trade and Industry (VENAMCHAM), says 2013 will be a year of "expectations and uncertainty." Venezuela's outlook "is complicated," he noted as he added that a similar situation is taking place at the international level. "We are going through a global situation. I mean, five years ago, we would not have foresee that Europe would be crippled from the economic standpoint or that the United States would face a recession, even though it appears to be near the end; or that emerging economies would perform so well." (El Universal, 12-13-2012; http://www.eluniversal.com/economia/121213/venamchams-chair-uncertainty-will-prevail-in-2013-in-venezuela)

Commodities

OPEC keeps output quota as El-Badri stays in top job

OPEC kept its production target unchanged for a second time this year as the group’s members judged prices are sufficiently high amid forecasts that supply will outpace demand for their crude in 2013. “Everything will stay as it is,” Saudi Arabian Oil Minister Ali al-Naimi said in Vienna. “We respond to customer demand. Whatever the customers want, we will give them.” The Organization of Petroleum Exporting Countries, which pumps 40% of the world’s oil, maintained its official quota at 30 million barrels a day, a level it now exceeds by about 1 million barrels a day. It failed to elect a new secretary-general. Brent crude, a benchmark contract for more than half the world’s oil, is heading for its highest-ever annual price, averaging U$D 111.78 a barrel this year. (Bloomberg, 12-12-2012; http://www.bloomberg.com/news/2012-12-12/opec-keeps-output-quota-as-el-badri-stays-in-top-job.html)

Venezuela's oil exports to the US will drop 15% this year

Statistics from the Venezuelan American Chamber of Commerce and Industry (VENAMCHAM) show oil exports from Venezuela to the US are much lower in 2012 than last year. It says its projection is for U$D 35.3 billion this year, which is 15.8% less than 2011. More in Spanish: (El Universal, 12-14-2012; http://www.eluniversal.com/economia/121214/preven-que-la-factura-petrolera-con-estados-unidos-caera-158)

International Trade

Imports from the US rose 41% this year, according to US Charge d'affairs in Caracas, James Derham. He said purchases from the US overtook the 2008 record, and added: "Demand has risen for different types of imports, and the situation is being driven by the macroeconomic situation, not a political decision. More in Spanish: (Tal Cual, 12-14-2012; http://www.talcualdigital.com/index.html)

Politics

Government says President Chavez is making progress and having a favorable recovery

After successfully going through surgery last Tuesday in Havana, Cuba, President Hugo Chavez is reported to be making a favorable and progressive recovery. In a statement issued Thursday, Information Minister Ernesto Villegas said that the recovery process, nevertheless, "will require a certain time as a consequence of the complexity of the surgery performed and complications occurred during the operation due to a bleeding that required corrective measures to control it." (AVN, 12-13-2012; http://www.avn.info.ve/contenido/president-chavez-makes-progressive-favorable-recovery; El Universal, http://www.eluniversal.com/nacional-y-politica/121213/communication-minister-chavez-is-in-progressive-favorable-recovery; Bloomberg, http://www.bloomberg.com/news/2012-12-13/chavez-suffered-complications-during-cancer-surgery.html; http://www.bloomberg.com/news/2012-12-11/chavez-undergoing-cancer-surgery-today-minister-says.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=656233&CategoryId=10717; Reuters, http://www.reuters.com/article/2012/12/13/us-venezuela-chavez-idUSBRE8BB0XY20121213; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuelan-government-says-hugo-chavezs-cancer-operation-under-way/2012/12/11/e2b286fa-43f3-11e2-8c8f-fbebf7ccab4e_story.html; http://www.washingtonpost.com/world/the_americas/venezuela-information-minister-says-chavez-may-not-return-in-time-for-jan-10-inauguration/2012/12/12/cc44a226-44bc-11e2-8c8f-fbebf7ccab4e_story.html; CNN, http://edition.cnn.com/2012/12/11/world/americas/venezuela-chavez/index.html?iref=allsearch)

Vice President Nicolás Maduro should open a dialogue with opposition sectors, said the coalition (MUD) Deputy Secretary Executive Ramón José Medina. He expressed his concern not only for President Chávez health but also for the institutional health of the country. “We are waiting,” he says. (Veneconomy, 12-13-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=33206&idc=1)

US expects compliance with the Constitution in a Chávez succession

In referring to President Chavez's recent cancer operation, US Department Spokesperson Victoria Nuland says "We would obviously like any succession to meet the terms of the Venezuelan Constitution. We are obviously watching the events (in Venezuela) carefully,", DPA cited. (El Universal, 12-11-2012; http://www.eluniversal.com/nacional-y-politica/121211/us-expects-compliance-with-the-constitution-in-case-of-chavezs-success)

Eighteen countries to take part on Venezuelan regional elections

Representatives of 18 nations will attend the upcoming regional elections this Sunday, as guests of National Electoral Council (CNE). Council President Tibisay Lucena announced that there will be representatives of 12 countries from South and North America and six European nations. (AVN, 12-13-2012; http://www.avn.info.ve/contenido/electoral-body-welcomes-international-accompaniment)

Capriles candidacy depends on local vote

Venezuela’s opposition alliance will probably choose Henrique Capriles Radonski as its presidential candidate should elections be called soon, provided he wins re-election as governor of Miranda state on Dec. 16, Ultimas Noticias reported, citing opposition officials. If Capriles loses to government candidate Elias Jaua in the vote for governor, the opposition alliance would consider a different candidate in the event of a presidential election, said Pedro Benitez and Simon Calzadilla, according to the Caracas-based newspaper. (Bloomberg, 12-13-2012; http://www.bloomberg.com/news/2012-12-13/capriles-candidacy-depends-on-venezuela-local-vote-ultimas-says.html)

Santos says Chavez is key to peace talks with FARC

Colombian President Juan Manuel Santos said Thursday that Hugo Chavez is essential to the ongoing peace conversations between his government and Colombian terrorist FARC guerrilla. He declared: "I must acknowledge that President Hugo Chávez Frías has been a key player in this getting together and peace process we have undertaken with FARC". More in Spanish: (AVN. 12-14-2012; http://www.avn.info.ve/contenido/santos-hugo-ch%C3%A1vez-es-fundamental-para-paz-colombia)



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.