February 01st, 2013

Economics & Finance

China refuses new financing

An unofficial source confirmed that a request by the Bank of Economic and Social Development (BANDES) to sign a new agreement for U$D 15 billion was rejected by China. The Chinese Government is refusing to sign a new financing agreement based on Venezuelan oil, arguing they have complied with the provisions of the Fund contracts Large Volume I and II and Heavy or Binational Fund. More in Spanish: (El Nacional, 01-31-2013; http://www.el-nacional.com/)

Venezuela seen delaying devaluation amid Chavez’s cancer

President Hugo Chavez’s battle with cancer will defer an expected devaluation by three months as his convalescence in a Cuban hospital delays economic decision-making, according to a survey of analysts. Venezuela will weaken the official Bolivar rate 33% to 6.4 per dollar in the second quarter, generating more revenue in local currency from each dollar of crude exports, according to the median estimate of 12 analysts surveyed by Bloomberg. In a poll taken in July, economists expected a devaluation of the same size in the first quarter. (Bloomberg, 01-31-2013; http://www.bloomberg.com/news/2013-01-31/venezuela-seen-delaying-33-devaluation-as-chavez-treats-cancer.html)

Central Bank told to transfer U$D 3.4 billion to FONDEN this year. The National Development Fund's 2013 budget sets an initial income of U$D 13 billion, of which a third - U$D 3.4. billion - must come from the Central Bank. More in Spanish: (El Universal, 02-01-2013; http://www.eluniversal.com/economia/130201/34-millardos-aportara-el-bcv-al-fonden-este-ano)

"There is a 30% scarcity index in the country which is the high point of an irregular situation in food distribution that has been recurrent since 2012 and has grown in 2013,” says DATANÁLISIS Director Luis Vicente León. He explains that one cause for shortages is reduction and delay in FOREX allocations. (Veneconomy, 01-30-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=33575&idc=3)

Petrodollars to raise FOREX supply in Venezuela by U$D 10 million per day

The Government has raised by U$D 2.47 billion the amount of petrodollars that state-run oil company Pdvsa will transfer to the Central Bank of Venezuela (BCV). By doing this, the BCV will be able to sell more US dollars to companies through the Foreign Exchange Administration Commission (CADIVI). Although the move is a relief, a lot more is required. Think tank ECOANALÍTICA's CEO Luis Saboin explains that with this decision, CADIVI can increase its daily US dollar sales for imports, travel, and remittances by U$D 10 million daily, which is certainly not a significant change. (El Universal, 01-30-2013; http://www.eluniversal.com/economia/130130/petrodollars-to-raise-forex-supply-in-venezuela-by-usd-10-million-per-)

SITME U$D supply down 57.55% in January from last year, according to Central Bank data The System for Transactions in FOREX denominated certificates dropped from a daily average of U$D 37.1 million to U$D 15.7 million January to January. More in Spanish: (El Nacional, 02-01-2013; http://www.el-nacional.com/)

66-67% businessmen believe they will have "some problems in supplying goods and services in the next 6 months", according to a poll taken by the Venezuelan American Chamber of Commerce and Industry (VENAMCHAM). Key causes mentioned are "input shortages" and "labor issues"; and pointed to "lack of legal protection and judicial inefficiency",  "foreign exchange management", "difficulties in repatriating capital and  dividends", and "price controls" as conditions that influence corporate policy making. More in Spanish: (El Universal, 02-01-2013; http://www.eluniversal.com/economia/130201/empresarios-temen-problemas-para-abastecer-al-mercado)

Inflation could be 25-30% this year says economist Pedro Palma, with devaluation, more price adjustments, increased taxes - such as income, value added and bank operations; unless the government takes other steps such as reducing subsidies for production costs and gasoline and lowering public spending. More in Spanish: (El Nacional, 02-01-2013; http://www.el-nacional.com/)

Chavez’s 681% returns mean Socialism buoys Goldman

Since taking office in 1999, Hugo Chavez has spread his socialist revolution in Venezuela by seizing more than 1,000 companies. For bondholders that stuck by him, he’s also delivered returns that are double the emerging- market average. The 681% advance, equal to 14.7% annually, has enriched investors from Oppenheimer Funds Inc. to Goldman Sachs Asset Management LP that counted on Chavez’s willingness to siphon the country’s oil wealth to pay its creditors in the face of start-stop growth and falling reserves. While his policies drove away enough investors to keep Venezuela’s borrowing costs over 12% on average during his tenure, or 4 percentage points higher than those of developing nations, he’s never missed a bond payment. (Bloomberg, 01-30-2013; http://www.bloomberg.com/news/2013-01-30/chavez-s-681-bond-returns-buoy-goldman-andes-credit-correct-.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=666746&CategoryId=10717)

Commodities

46% of gold producing areas reserved for private companies.

Oil and Mining Minister Rafael Ramírez announced 46% of gold producing areas nationwide have been reserved for local and international private producers. More in Spanish: (Ultimas Noticias, 02-01-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/venezuela-reserva-a-empresas-privadas-46-de-las-ar.aspx)

Guayana region basic industries operate at 23-32% capacity, according to Leonardo Calderón, Claims Secretary at the United Aluminum Workers Union. VENALUM is operating at under 27% capacity. More in Spanish: (El Universal, 02-01-2013; http://www.eluniversal.com/economia/130201/empresas-basicas-operan-a-32-de-su-capacidad)

International Trade

Finance Ministry extends expedited import procedures, for capital goods, supplies and raw material up to U$D 50,000. The number of customs items covered by the expedited procedure remains at 2,176, covering a broad range of supplies, machinery and products. Industry sources indicate this will only benefit small and medium companies as this amount is insignificant for large companies. More in Spanish: (El Universal, 02-01-2013; http://www.eluniversal.com/economia/130201/finanzas-mantiene-condiciones-para-importacion-rapida)

Agriculture related exports have dropped 90% over past 10 years, according to Antonio Pestana, Vice President of the national Agriculture Producers Federation. The drop in Venezuelan exports contrasts sharply with a 304% increase in agriculture related exports in other MERCOSUR nations, he says this "should make us open our eyes and realize things aren't working". More in Spanish: (Ultima Hora Digital, 02-01-2013; http://ultimahoradigital.com/ultimahora/detalles_noticias.php?id=36790)

Venezuela-Colombia trade up 40.4% in 2012, according to preliminary data from Colombian statistics and tax authorities. U$D 3.289 billion was traded, 81.8% of which were Colombian exports to Venezuela. More in Spanish. (AVN, 02-01-2013; http://www.avn.info.ve/contenido/intercambio-comercial-entre-venezuela-y-colombia-creci%C3%B3-404-2012)

Venezuela and Russia signed a contract for the largest Russian drill company to supply oil drills to Venezuela, according to Oil and Mining Minister Rafael Ramírez, speaking after a meeting with a delegation from Russian State company ROSNEFT, headed by its CEO Igor Sechin. A memorandum of understanding was also signed for development off-shore gas. (Veneconomy, 01-30-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=33557&idc=4; AVN, http://www.avn.info.ve/contenido/russia-venezuela-ink-new-accords-oil-matters; El Universal, http://www.eluniversal.com/economia/130129/venezuela-signs-new-oil-cooperation-agreements-with-russia; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=666708&CategoryId=10718)

Asian markets have been consolidated, says Oil and Mining Minister Rafael Ramírez, who points out China and India are growing at 6-7% yearly, while the US has been in a significant crisis since 2008. He says Venezuela is also selling oil to India and Japan, and that "based on this reality and situation we have created, we have structured financing plans for our development programs." More in Spanish: (AVN, 02-01-2013; http://www.avn.info.ve/contenido/ministro-ram%C3%ADrez-hemos-podido-establecer-nuevo-mercado-pa%C3%ADses-asi%C3%A1ticos)

Logistics & Transport

Carriers raise bulk freight cost 50%

Freight charges will increase 50% as per a new rate approved by members of the Association of Smallholders and Container Freight Drivers and Allied Puerto Cabello (ASOTRACONTAINER). More in Spanish: (El Universal, 01-31-2013; http://www.eluniversal.com/economia/130131/transportistas-elevan-50-el-precio-de-fletes-de-carga)

Politics

Chavez improving, official says

President Hugo Chavez is gradually recovering and handling more presidential duties, a government official said Tuesday. "He's constantly thinking, making decisions, in meetings he's been giving out orders," the Minister of Science, Technology and Innovation Jorge Arreaza, who is also the President's son-in-law. (CNN, 01-30-2013; http://edition.cnn.com/2013/01/30/world/americas/venezuela-chavez/index.html?iref=allsearch)

Maduro says an alliance with Russia will empower Venezuela

After a meeting with a delegation of Russian businesspeople in Caracas, Executive Vice President Nicolas Maduro said that the second socialist government plan of the nation "perfectly matches the goals of our full alliance, in energy, industrial, technological, agrifood, commercial, technical-military, financial matters." (AVN, 01-30-2013; http://www.avn.info.ve/contenido/alliance-russia-empower-venezuela; http://www.avn.info.ve/contenido/russia-venezuela-relations-based-alliance-reach-world-peace-equilibrium)

Municipal elections scheduled for July 14

National Electoral Board (CNE) chair Tibisay Lucena has announced that municipal elections will be held on Sunday, July 14. Nomination of candidates will be 11-15 and the campaign, from June 12 to July 11. The Board also decided to extend registration through February 15 as well as obligation to serve for polling station members 2012. (Veneconomy, 01-30-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=33559&idc=1; El Universal, http://www.eluniversal.com/nacional-y-politica/130129/nomination-of-municipal-candidates-on-april-11-15)

Canada closes Visa and Immigration section in Caracas

The Visas and Immigration section at the Embassy of Canada in Venezuela shut down on January 29, 2013. According to a press release by the Canadian government, the action is part of a plan to streamline related operations. Canada's consulates in Detroit and Seattle will be closed as well. Ongoing applications for visas or provisional residence permits previously filed at the Caracas office will be handled by the Canadian consulate in Mexico. (El Universal, 01-30-2013; http://www.eluniversal.com/nacional-y-politica/130130/canada-closes-visas-and-immigration-section-in-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.