December 18th, 2012

Economics & Finance

BARCLAY's reports Giordani may be on the way out

A report by BARCLAY's Capital says there may be significant changes in economic policies, "including the possible departure of Finance and Planning Minister Jorge Giordani, who has serious differences with the pragmatic sector of the Chavez movement. Giordani has been a strong advocate of the severe exchange controls that have distorted the FOREX market and increased the fiscal deficit". Also, although Giordani has tried to stop new bond issues, current policies have forced the nation and PDVSA to issue bonds at a much higher cost." More in Spanish: (El Nacional, 12-18-2012; http://www.el-nacional.com/)

Central Bank seeks "rational" exchange policy

Central Bank President Nelson Merentes says "this market is too complicate to predict". He adds that exchange concerns have "disturbed the economy" during the past months and said the Bank is meeting "with the different Ministries in order to seek options and a rational exchange policy, and seek a favorable outcome for the economy". Asked about the black market he said: "This market is very complex. Some sectors become speculative and nothing can be anticipated because too many agents play rough with this type of gains". He refused to answer on a possible devaluation, saying it "is not a media matter". More in Spanish: (El Mundo, 12-18-2012; http://www.elmundo.com.ve/noticias/economia/banca/bcv-busca-con-ministerios-una--racionalidad--cambi.aspx)

Cost of underwriting Venezuela's debt rises after gubernatorial election

The cost of underwriting Venezuelan government debt in the event of default surged on Monday to reverse a portion of recent profits, following the landslide victory of the followers of President Hugo Chávez in the gubernatorial election, according to numbers provided by Markit. Credit default swaps (CDS) had dropped since President Chávez appointed a successor on December 8. The action raised the expectations about his stepping down after 14 years in office, Reuters cited. (El Universal, 12-17-2012; http://www.eluniversal.com/economia/121217/cost-of-underwriting-venezuelas-debt-rises-after-gubernatorial-electio)

Chavez's cancer may put Venezuela devaluation on hold

President Hugo Chavez's battle with cancer and the possibility of a new presidential election look likely to delay key economic policy decisions including a sharp currency devaluation needed to shore up public finances. Chavez spent heavily this year in giving new apartments, home appliances and cash payments to poor Venezuelans to ensure his re-election, weakening the nation's fiscal position. Economists have widely predicted the devaluation would come this month or in early 2013 because the spending spree expanded a yawning fiscal deficit. Devaluing eases fiscal pressure by giving the government more local bolivar currency for each dollar brought in by oil exports. (Reuters, 12-17-2012; http://www.reuters.com/article/2012/12/17/venezuela-chavez-economy-idUSL1E8NH0P020121217)

Postponing devaluation will result in shortages

Fedecámaras Chief Jorge Botti insisted on the need to have adjustments in terms of foreign currency rates that ease access to businessmen. Botti said that if an adjustment in the rate is not decreed “immediately, it could result in shortages at the beginning of 2013.” (Veneconomy, 12-14-2012; http://www.veneconomy.com/site/index.asp?ids=44&idt=33251&idc=2)

Financial system profits rose by 93% this year, according to a report by the Banking Superintendent for the close of November. Bank profits rose to VEB 13.555 billion, which is U$D 3.152 billion at the official exchange rate, far above last year. Benefits derive primarily from investments in public bonds, commissions on FOREX provided by SITME and a rise in credits. The Government has triggered public spending during the election year to levels far above oil income and tax collections, so it continuously sells the banking system bonds that offer tax free dividends. More in Spanish: (El Universal, 12-18-2012; http://www.eluniversal.com/economia/121218/aumentan-93-ganancias-del-sistema-financiero)

Venezuela is among the 20 nations with highest flow of illicit capital, according to a Global Financial Integrity report which indicates that the flow of illicit capital from crime, corruption, tax evasion and overpricing are estimated around U$D 3.790 billion from 2001 to 2010. The total amount of illicit capital going to fiscal havens or banks in developed nation was almost U$D 6 billion. More in Spanish: (El Mundo, 12-18-2012; http://www.elmundo.com.ve/noticias/economia/internacional/venezuela-entre-los-20-paises-con-mayores-flujos-d.aspx)

Commodities

Basic staple sales dropped by 1% in November, according to the Food Industry Chamber (CAVIDEA). Lower sales, as compared to 2011, were reported in wheat flour (32,04%), pasteurized milk (17,49%), rice (12,73%), corn wheat (5,98%), margarine (8,78%) and tomato sauce (0,42%). More in Spanish: (El Universal, 12-18-2012; http://www.eluniversal.com/economia/121218/1-cayeron-ventas-de-alimentos-basicos-durante-noviembre)

International Trade

CNPC makes second bonus payment toward developing oil block

China National Petroleum Corp., the country’s largest energy company, made a second payment toward a U$D 900 million signing bonus it must make to develop the Junin 4 oil block in Venezuela, Petroleos de Venezuela SA said today. It paid U$D 180 million, PDVSA said. The bonus will be paid in several installments and is in addition to capital needed to produce and refine crude at the Orinoco Belt field. State-run PDVSA and CNPC signed an accord in April 2010 to invest U$D 16.3 billion in a joint venture that will produce 400,000 barrels a day in 2016. CNPC will be a minority partner. (Bloomberg, 12-15-2012; http://www.bloomberg.com/news/2012-12-15/cnpc-makes-second-bonus-payment-toward-developing-oil-block.html)

Politics

Maduro has not spoken to Chávez

Vice President Nicolás Maduro said yesterday: "We have not been in direct communication with him. We are respectful of his treatment and as soon as we have the first reaction we will report it". More in Spanish: (Tal Cual, 12-18-2012; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/maduro-no-ha-conversado-directamente-con-chavez)

"His illness is terminal and those close to him know it", says Dr. José Rafael Marquina, a Naples, Florida, based physician and specialist in internal medicine and intensive care medicine. "He will not return, at least not in his previous condition". Dr. Marquina has been openly reporting to media on President Chavez's illness for over a year, often anticipating information that is later confirmed officially. More in Spanish: (Tal Cual, 12-18-2012; http://www.talcualdigital.com/index.html)

Chávez's candidates win 20 governor's offices; opposition obtains three

The ruling United Socialist Party of Venezuela (PSUV) has won 20 governor's offices, compared to 3 obtained by the opposition Unified Democratic Panel (MUD), according to Tibisay Lucena, head of the National Elections Board. MUD candidates retained the governor's offices in the states of Lara, Miranda and Amazonas. Pro-government candidates won in the remaining states. Lucena said late on Sunday that the results in Bolívar state indicated that ruling party candidate Francisco Rangel Gómez had obtained 43.57% of the votes against 42.34% won by opposition leader Andrés Velásquez. (El Universal, 12-16-2012; http://www.eluniversal.com/nacional-y-politica/121216/chavezs-candidates-win-20-governors-offices-dissenters-obtain-three; AVN, http://www.avn.info.ve/contenido/gubernatorial-election-results-graphics; Reuters, http://www.reuters.com/article/2012/12/17/venezuela-chavez-idUSL1E8NH1R320121217; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=657223&CategoryId=10717)

Velásquez condemns militarization at the National Elections Board, challenges results

Andrés Velásquez, opposition candidate for the Unified Democratic Panel (MUD) in Bolívar state, went to the state office of the National Electoral Board to challenge results of the gubernatorial election held on December 16. He held voting logs in his hands and was joined by local residents: "Allow me to tell the country that we formally declare a fraudulent process in the specific case of Bolívar state. We cannot accept this election result; therefore, we will proceed to challenge it," exclaimed the leader of opposition Causa R party - who also protested that the military did not allow him access to Board offices. Velásquez claims 126 polling stations have not yet been counted. (El Universal, 12-17-2012; http://www.eluniversal.com/nacional-y-politica/121217/velasquez-regrets-militarization-due-to-protests-against-cne; http://www.eluniversal.com/nacional-y-politica/121217/military-detachment-shields-cne-office-in-ciudad-bolivar; and more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/velasquez-asegura-que-faltan-126-actas-por-contabilizar)

Capriles: We will eventually defeat the abuse of power

"I'm extremely happy for the people of Miranda state," said Henrique Capriles Radonski in his first speech after his reelection as governor of Miranda state. He congratulated Henri Falcón (Lara state) and Liborio Guarulla (Amazonas state) on their victory. However, he said he could not feel happy for Venezuela, as pro-government candidates won 20 out of 23 gubernatorial offices. Henrique Capriles, who was reelected in Miranda state, will have to contend with a pro-government majority of one in the State Assembly, as will Henri Falcón in Lara. (El Universal, 12-16-2012; http://www.eluniversal.com/nacional-y-politica/121216/capriles-we-will-defeat-the-abuse-of-power-eventually; Bloomberg, http://www.bloomberg.com/news/2012-12-17/capriles-defeats-chavez-candidate-in-venezuela-regional-vote-1-.html; more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/capriles-y-falcon-con-trabas-legislativas)

Opposition leaders not satisfied with the election results, will continue the fight

Ramón Guillermo Aveledo, Executive secretary of opposition Unified Democratic Panel (MUD) said the results of the gubernatorial vote held on Sunday show that "no one will surrender." He noted that the opposition campaign was conducted under "very difficult circumstances". Metropolitan Caracas Mayor Antonio Ledezma, who was the group's national coordinator, said they will continue to wage battle, and that unity was more necessary than ever. (El Universal, 12-16-2012; http://www.eluniversal.com/nacional-y-politica/121216/opposition-leader-we-are-not-satisfied-with-the-election-results; and more in Spanish: Tal Cual; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/ledezma-dice-que-resultado-del-16d-obliga-a-reinventarse; http://www.eluniversal.com/nacional-y-politica/elecciones-2012/121218/la-mesa-de-la-unidad-se-revisa-y-se-recompone-a-la-luz-del-16-d)



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.