January 08, 2012

Economics & Finance

CREDIT SUISSE terms presidential continuity unconstitutional

Venezuela's debt value dropped yesterday after it became known there will be no swearing in ceremony next Thursday. A report by Credit Suisse says the Venezuelan Constitution clearly states that the current presidential term expires on January 10th, along with the mandate of Vice President Nicolás Maduro."If the Government tries to postpone the inauguration, this could imply an extension of the current presidential term. We do not believe the Venezuelan Constitution provides any clear mechanism that allows this"; and adds that any such strategy could potentially be rejected as unconstitutional locally and internationally, and "raises the risk of political instability". More in Spanish: (El Nacional, 01-08-2013; http://www.el-nacional.com/)

PDVSA bonds plunge amid mounting concern about Chavez succession

Bonds of Petroleos de Venezuela SA, the state oil company, plunged the most in six months amid concern that there will be a succession crisis if President Hugo Chavez is unable to be sworn for a third term on Jan. 10. PDVSA’s debt due 2017 plunged 2.38 cents to 98.59 cents on the dollar at 1:27 p.m. in New York. The U$D 6.15 billion of securities yield 8.86%, data compiled by Bloomberg show. The notes are the most actively traded emerging market corporate bonds today, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority. (Bloomberg, 01-07-2013; http://www.bloomberg.com/news/2013-01-07/pdvsa-bonds-plunge-amid-mounting-concern-about-chavez-succession.html)

More China credit sought

Unbalanced national accounts at the start of 2013 are leading the Government to seek financing and one option under study is to seek increased funding from China in order to stem devaluation. Through negotiations begun in late 2012, the Government could obtain an additional U$D 8 billion from the Joint China-Venezuela Fund. During the next few weeks China's Development Bank may disburse U$D 4 billion negotiated during the first quarter of 2012, and another U$D 4 billion could be negotiated during this semester. More in Spanish: (El Universal, 01-08-2013; http://www.eluniversal.com/economia/130108/ejecutivo-gestiona-mas-fondos-a-traves-de-creditos-con-china)

Venezuela faces covert devaluation

Economist Asdrúbal Oliveros says devaluation projected for this year is a decision still in the hands of the government and the Central Bank, but "economic decisions will seek to avoid the unpopular impact of devaluation, and disguise devaluation by keeping the official rate and setting a more expensive dollar through SITME". More in Spanish: (Tal Cual, 01-08-2013; http://www.talcualdigital.com/index.html)

FEDECÁMARAS calls for an end to economic distortions

Jorge Botti, President of FEDECÁMARAS has called for an end to obstacles that do not allow the private sector produce and supply the market. He said there is a "political crisis" which distracts authorities but that the economy also demands attention, and identified lack of access to foreign currency as a cause for shortages in some areas. On the other hand Ricardo Menendez, Vice President for Production is scheduled to meet with industry representatives to seek an increase in food production and processing, as well as to reduce hoarding. He announced that authorities will meet with representatives of sugar, chicken, corn, wheat, meat and oil producers; and that there will be inspections of private processing plants, warehouses, silos, deposits and stores nationwide in order to eliminate hoarding and speculation in staple goods. (AVN, 01-07-2013; http://www.avn.info.ve/contenido/govt-businesspeople-meet-reduce-hoarding-boost-food-production; and more in Spanish: El Universal, 01-08-2013; http://www.eluniversal.com/economia/130108/fedecamaras-exige-atender-distorsiones-de-la-economia)

Enlarged reserves aim at feeding FONDEN

On 31 December 2012 international reserves rose 14.2% to U$D 29.888 billion, a first step toward injecting more dollars into FONDEN, the fund directly managed by the government. According to policies set in 2012, if reserves go above the "optimum level" of U$D 26.8 billion the remainder must be transferred to FONDEN. This means the government uses the same dollars twice, which can bring more inflationary pressure. More in Spanish. (El Universal, 01-08-2013; http://www.eluniversal.com/economia/130108/alza-de-las-reservas-anticipa-traspasos-al-fonden)

Commodities

2013 starting with a crisis in aluminum industries

Aluminum industries ended 2012 with production lower than 2011 or even 2010, when an electricity crisis led to reduced operations. During 2012 labor protests provided no respite and operations were hit by a shortage of supplies and spare parts, and the 2013 has not begun on better terms. More in Spanish: (El Universal, 01-07-2013; http://www.eluniversal.com/economia/130107/industrias-del-aluminio-inician-el-2013-en-crisis)

2012 liquid steel production lowest since 1996

Liquid steel production at SIDOR was 1.716 million tons in 2012, the lowest level since 1996, and down from 4.307 tons in 2007 when the company was operated by TERNIUM. More in Spanish: (El Mundo, 01-08-2013; http://www.elmundo.com.ve/noticias/economia/politicas-publicas/produccion-2012--de-acero-liquido--es-la-mas-baja-.aspx)

Oil refining slipped 0.8% in 2012

Operations failures and problems at several refineries, including the explosion at Amuay in northwestern Falcón state, in August 2012, led to an 0.8% setback in refining operations by state-run oil company PDVSA in 2012, according to data from the Central Bank of Venezuela (BCV). The report states that the explosion in Amuay brought "temporary suspension of the operations and an inter-annual drop of 2.9% of the value added of this activity throughout the third quarter". (El Universal, 01-07-2013; http://www.eluniversal.com/economia/130107/venezuelas-oil-refining-slips-08-in-2012)

International Trade

Venezuelan exports exempted from MERCOSUR tariffs

Venezuela can now export to Brazil, Argentina and Uruguay with no tariff after its full admission into the Common Market of the South (MERCOSUR). As of January 1, several trade agreements came into effect, so that "any type of product may be exported to Brazil, Argentina and Uruguay without being subject to export tariffs throughout MERCOSUR, which has waived 100% in trade fees and tariffs on behalf of Venezuela." (El Universal, 01-05-2013; http://www.eluniversal.com/economia/130105/venezuelan-exports-exempt-from-mercosur-tariff)

Logistics & Transport

24 vessels still at bay in Puerto Cabello

24 vessels remain at bay at the start of activities at Puerto Cabello port, which receives 80% of local consumption. Dock operators unofficially confirmed that there are 13 ships docked as processing for paying services, taxes and other charges are underway, with some difficulties due to failures in the cyber platform at the BOLIPUERTOS port authority. More in Spanish: (El Carabobeño, 01-08-2013; http://www.el-carabobeno.com/impreso/articulo/45087/-24-buques-permanecen-fondeados-en-baha-de-puerto-cabello)

Politics

Catholic leaders warn that stability at risk amid uncertainty about ailing Chavez

Leaders of the Roman Catholic Church in Venezuela are warning that the country's stability is at risk due to President Hugo Chavez's complications after cancer surgery in Cuba. Catholic leaders in the Venezuelan Bishops Conference are criticizing the government for not providing more details about Chavez's state nearly a month after his Dec. 11 operation. The Bishops' Conference said in a statement that the country faces a potentially dangerous situation amid uncertainty about Chavez's condition and that "the nation's political and social stability is at serious risk." They added that "changing the Constitution with a political objective is unacceptable"; and that the Government is not telling the entire truth about President Chavez's condition. (Fox News, 01-07-2013; http://www.foxnews.com/world/2013/01/07/catholic-leaders-warn-that-venezuela-stability-at-risk-amid-uncertainty-about/#ixzz2HKJBOaE0; and more in Spanish: El Nacional, 01-08-2013; http://www.el-nacional.com/)

Minister reports Chavez remains in "stationary" condition

Communications and Information Minister Ernesto Villegas said yesterday that President Chavez remains in "stationary" condition and is assimilating medical treatment. More in Spanish: (AVN, , 01-08-2013 http://www.avn.info.ve/contenido/presidente-ch%C3%A1vez-asimila-tratamiento-aplicado-equipo-m%C3%A9dico; El Universal, http://www.eluniversal.com/nacional-y-politica/130108/estado-de-salud-del-primer-mandatario-es-estacionario)

Rousseff advisor believes Chavez could take office within 180 days

Marco Aurelio García, Special Advisor for International Affairs to Brazilian President Dilma Rosseff, and close friend to Hugo Chavez has claimed the Venezuelan Constitution grants President Chavez 90 days, that can be extended another 90 days, to begin his new term as long as there is no decision about his inability to hold office. García said he was sent by President Rousseff to spend New Year's eve in Havana and had lengthy meetings with Vice President Nicolás Maduro, Cuban President Raúl Castro and his brother Fidel in order to obtain information on Chavez's health. García said the Brazilian government is "shocked" by the Chavez's health condition, which is "serious" and "unpredictable"; and added that "the Brazilian Government does not see political instability in Venezuela". More in Spanish: (Tal Cual, 01-08-2013; http://www.talcualdigital.com/index.html)

Attorney General claims Chavez is a reelected president, not an elected candidate

Attorney General Cilia Flores, the life companion of Executive Vice President Nicolás Maduro, is claiming that President Hugo Chavez is a reelected president not an elected candidate, which makes a "big difference in understanding and interpreting article 231 of the National Constitution" which refers to the inauguration of the President-elect on January 10 of his first year in office. Mrs. Flores claims the operation undergone by President Hugo Chavez in Havana, Cuba, last December 11, is an unforeseen reason, and that there is "a continuity with the period that is ending"; Vice President Maduro has also spoken of "continuity", a term which is not within the Venezuelan constitution. (AVN, 01-07-2013; http://www.avn.info.ve/contenido/attorney-general-chavez-reelected-president-not-elected-candidate; El Universal, http://www.eluniversal.com/nacional-y-politica/130107/maduro-chavez-is-acting-in-full-capacity-as-president; and more in Spanish: El Universal; http://www.eluniversal.com/nacional-y-politica/130108/el-termino-continuidad-no-figura-en-la-carta-magna)

Primero Justicia recalls Chavez left clear orders to abide the Constitution in his absence

Tomás Guanipa, Secretary General of the Primero Justicia opposition party, says President Chavez left clear instructions on what to do if he were not able to take office on January 10th. He read from Chavez's last speech on December 8th in which he clearly said the Constitution must be abided. More in Spanish: (El Universal, 01-08-2013; http://www.eluniversal.com/nacional-y-politica/130108/pj-recuerda-que-en-tv-chavez-instruyo-que-hacer-si-no-venia)

Capriles: Venezuela's government that does not govern

Miranda states reelected and opposition leader Henrique Capriles insists that a presidential term ends and a new one begins on January 10th; and that Hugo Chávez should take an oath as the president of Venezuela on that date. According to Capriles "the government does not govern" due to Chavez's health condition. (El Universal, 01-07-2013; http://www.eluniversal.com/nacional-y-politica/130107/capriles-venezuela-has-a-government-that-does-not-govern)

Diosdado Cabello says there will be no power vacuum, calls pro-Chavez rally

Recently reelected National Assembly President Diosdado Cabello says there will be no power vacuum and no inaugural ceremony, and called for a pro-Chavez rally at Miraflores Presidential Palace on Thursday, January 10th. He said "we (the National Assembly) cannot determine there is an absolute absence". More in Spanish: (AVN, 01-08-2013; http://www.avn.info.ve/contenido/psuv-convoca-al-pueblo-venezolano-concentrarse-10-enero-apoyo-ch%C3%A1vez; El Universal, http://www.eluniversal.com/nacional-y-politica/130108/10e-no-habra-falta-temporal-ni-absoluta-ni-posesion)

Uruguay's Mujica to attend pro-Chávez rally

Uruguayan President José Mujica will travel next Wednesday to take párt in a pro-Chavez rally on Thursday. Mujica will travel with Deputy Minister Roberto Conde, said the source, who would not elaborate on the trip. (El Universal, 01-07-2013; http://www.eluniversal.com/nacional-y-politica/130107/uruguays-mujica-to-attend-possible-chavezs-inauguration and more in Spanish: AVN; http://www.avn.info.ve/contenido/presidente-mujica-participar%C3%A1-concentraci%C3%B3n-apoyo-ch%C3%A1vez-caracas)



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.