January 25th, 2013

Economics & Finance

114% adjustment in FOREX rate needed to correct overvaluation

The combination of a fixed official FOREX rate and inflation four times that in the US and the rest of Latin America, have caused an overvaluation of Venezuela's Bolivar, leading to skyrocketing imports as imported products are cheaper than domestic products.  As it is virtually impossible to meet the demand for US dollars for imports, companies have cut down production and the Government has no other choice but to devalue the currency. As imbalances due to currency overvaluation become critical, ECOANALÍTICA's CEO Asdrúbal Oliveros believes that an 114%  adjustment in the FOREX rate is required,  going from VEB 4.30 to VEB 9.22 per U$D. (El Universal, 01-23-2013; http://www.eluniversal.com/economia/130123/experts-114-adjustment-in-forex-rate-is-vital-to-correct-overvaluation)

80% of local companies are hit by delays in obtaining US

Carlos Tejera, General Manager of the Venezuelan-American Chamber of Commerce and Industry is calling for an agreement between government and the private sector to jointly overcome difficulties in food production, distribution. He says 70-80% of VENAMCHAM affiliates are reporting delays and a reduction in the amount of US dollars they are allocated by the FOREX Administration Commission (CADIVI), and that additional delays in import permits have also hit the food trade chain. "Some firms report delays from three to six months." (El Universal, 01-24-2013; http://www.eluniversal.com/economia/130124/delays-in-sale-of-us-dollars-lash-some-80-of-venezuelan-companies)

PDVSA debt jumped 150% in five years

Venezuelan state-run oil company PDVSA is under significant pressure from its obligations with the Government and the need to invest in core activities, all of which translates into higher debt. By the end of 2012, PDVSA's debt was U$D 40 billion, which is up 150% from U$D 16 billion in 2007. Corporate debt increased 15% in 2012. (El Universal, 01-23-2013; http://www.eluniversal.com/economia/130123/pdvsas-debt-spikes-150-in-five-years)

“70% of the beef consumed in Venezuela is domestic,” claims Agriculture and Lands Minister Juan Carlos Loyo who added this figure is backed by statistics and the records of control slaughter houses in the country, even as he admitted beef is being imported in order to meet demand and population growth. (Veneconomy, 01-23-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=33464&idc=3)

FONDEN has received U$D 102.2 billion since its creation in September 2005 through the close of 2012, according to a report published in El Nacional. According to the report, PDVSA has transferred U$D 56.9 billion to the National Development Fund and the Central Bank (BCV) another U$D 45.3 billion. Although the fund was established in order to carry out infrastructure projects, analysts say the government has used part of the funds to meet public sector day to day spending. (Veneconomy, 01-23-2013;

http://www.veneconomy.com/site/index.asp?ids=44&idt=33462&idc=2)

IMF forecasts drop in Venezuela's oil revenues

In its World Economic Outlook Update report for 2013, the International Monetary Fund (IMF) cut its growth projection for Latin America and the Caribbean by 0.3%, and estimated growth in the region at 3.6%.
IMF's Research Department Division Chief Thomas Helbling said that economic growth forecasts for Venezuela may be cut, yet refused to disclose the estimated adjustment before the IMF issues its Global Economic Outlook.

The multilateral body also estimated that the price of the oil basket may drop 5% in 2013 and 3% in 2014 to U$D 100 and U$D 97, respectively. (El Universal, 01-24-2013; http://www.eluniversal.com/economia/130124/imf-forecasts-drop-in-venezuelas-oil-revenues)

Commodities

Oil imports from the US soar 474.96% in 2011-2012

Venezuela's oil-related imports jumped by 474.96% in January-November 2012 over the same period in 2011, according to data revealed by the Venezuelan-American Chamber of Commerce and Industry (VENAMCHAM).
In 2012, Venezuela's imports from the US were U$D 2.79 billion, far above 2011 (U$D 486 billion), for oil and oil byproducts. Non-oil imports also soared 21.9% in January-November 2012, from U$D 10.75 billion in 2011 to U$D 13.10 billion. Venezuela's oil exports were U$D 34.49 billion in 2012, down 11.35% from 2011 (U$D 38.91 billion). (El Universal, 01-24-2013; http://www.eluniversal.com/economia/130124/venezuelan-oil-imports-from-the-us-soar-47496-in-2011-2012)

Basic products in short supply

Roberto León Parilli, President of the ANAUCO consumers union, reports that from the Central Bank's own data by December 2012 there was 78.8% scarcity in sugar, 43.3% in cornmeal; and 34.9% in ground coffee. More in Spanish: (Tal Cual, 01-25-2013; http://www.talcualdigital.com/index.html)

Politics

Officials again claim Chavez improving, active

Ernesto Villegas, Minister for Communications and Information, has again said President Chavez is evolving positively. He says the President is fully active, making decisions and issuing instructions to his government, but he said the government does not "want to create expectations over a date for his return". At the same time Foreign Minister Elias Jaua remarked that Chavez is "facing the most complex and deep battle against the disease". Jaua said that the President's brother, Adán Chávez, governor of Barinas State, Oil and Mining Minister Rafael Ramírez, Attorney General Cilia Flores and Vice President Nicolás Maduro held a meeting with the President "dealing with economic and political affairs, the workings of the pro government PSUV party, and the upcoming mayoralty elections". Still no photos or even taped messages directly from the President have been issued. More in Spanish: (AVN, 01-25-2013; http://www.avn.info.ve/contenido/villegas-evoluci%C3%B3n-del-presidente-ch%C3%A1vez-es-positiva; and El Universal; http://www.eluniversal.com/nacional-y-politica/130125/jaua-asegura-que-chavez-librara-una-batalla-mas-compleja)

Maduro charges he is target of assassination plot

Vice President Nicolas Maduro is claiming unidentified groups have entered the country in order to assassinate both him and National Assembly President Diosdado Cabello, while Hugo Chavez recovers from cancer in Cuba. He provided no proof of the claim, but he said action would be taken shortly. "For several weeks we've been following groups that have infiltrated the country with the aim of making attempts on the life of (Assembly head) Diosdado Cabello and my own," Maduro told a crowd of red-shirted "Chavista" supporters. (Reuters, 01-23-2013; http://www.reuters.com/article/2013/01/24/us-venezuela-chavez-idUSBRE90M1EM20130124; The Washington Post, http://www.washingtonpost.com/world/the_americas/venezuela-vice-president-says-plot-uncovered-announces-new-trip-to-cuba-to-see-chavez/2013/01/23/23101410-65c8-11e2-889b-f23c246aa446_story.html; CNN, http://edition.cnn.com/2013/01/23/world/americas/venezuela-maduro/index.html?iref=allsearch)

Opposition will choose presidential candidate by consensus

Ramón G. Aveledo, Executive Secretary of opposition Unified Democratic Panel (MUD) has presented a twelve point manifesto about the nation's current political uncertainty. According to the document, should a presidential vote be held any time soon, the MUD will present a candidate chosen by consensus. (El Universal, 01-23-2013; http://www.eluniversal.com/nacional-y-politica/130123/venezuelan-dissenters-to-choose-presidential-candidate-by-consensus)

Improved Venezuela-US relations possible

Senator John Kerry, President Obama's nominee for Secretary of State, told a Senate committee that "Depending on what happens in Venezuela there could be a real opportunity for a transition". At the same time, Vice President Nicolás Maduro has confirmed that Venezuela's OAS Ambassador Roy Chaderton is a "special envoy" to advance with the US. He said "we have no problem in maintaining respectful relations, in order to normalize diplomatic relations at whatever level possible". More in Spanish: (Tal Cual, 01-25-2013; http://www.talcualdigital.com/index.html; El Universal, http://www.eluniversal.com/nacional-y-politica/130125/kerry-ve-posible-un-cambio-de-rumbo-con-venezuela; and  http://www.eluniversal.com/nacional-y-politica/130125/buscan-regular-relaciones-con-eeuu-al-nivel-que-sea-posible)



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.