March 19, 2013

Economics & Finance

Limited SICAD exchange system officially announced

Finance and Planning Minister Jorge Giordani has announced the creation of a Complementary FOREX System (SICAD), which will tender foreign currency to companies already registered within the existing system. He made it clear these companies will not access currency; payments will be made directly by the Central Bank to foreign suppliers. Registered companies that require FOREX for their business must submit requests to local banks, which in turn will send all requests to the Central Bank. Authorities will then decide which companies can enter a FOREX tender, and which cannot. Giordani told media: "At no time will authorized companies have access to currency", in order to obtain "absolute transparency" and they monitor operations to check that requests "match imports, in terms of quality, quantity and price". No base exchange rate was set, other than VEB 6.30 per U$D. More in Spanish: (El Universal, 03-19-2013; http://www.eluniversal.com/economia/130319/sustituto-del-sitme-consistira-en-una-subasta-de-divisas)

Economist Francisco Rodríguez says GDP to drop 3.6% and inflation will exceed 33% in 2013, with high and increasing shortage levels. He said the Venezuelan economy is behaving pretty much like Communist economies before the fall of the Berlin Wall, when governments decided they would not allow price increases but as costs increased products ended up vanishing. (Veneconomy, 03-18-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34056&idc=2)

Private employers in Venezuela down 44.5% in 12 years

Data from the National Statistics Institute (INE) shows a steady shrinkage in the number of private employers, who have dropped 13.6% in the last 12 months and 44.5% over the last 12 years. The number of private employers has plummeted from 672,642 in 2001 to 373,204 today, according to the INE. (El Universal, 03-18-2013; http://www.eluniversal.com/economia/130318/private-employers-in-venezuela-down-445-in-12-years)

Rating agencies FITCH and MOODY's will not change Venezuela status before elections

The agencies, which have a negative outlook on Venezuela's future, are awaiting results of the April1 4th election to select a replacement for President Chavez. Both agree the nation will face a very difficult transition. Shelly Shetty, who directs Latin American sovereign risk rating at Fisk is saying "the scope of political and social instability is lower, but the risks are now due to concerns over governance in a post-Chavez era". More in Spanish: (El Universal, 03-19-2013; http://www.eluniversal.com/economia/130319/calificadoras-de-riesgo-ven-poco-probable-modificar-nota-venezolana)

Commodities

Venezuela to request cutback in OPEC oil production

Venezuela is producing 2.8 million BPD, 5.7% under the quota assigned to it by the oil cartel, and according to analyst Rafael Quiroz Serrano, when OPEC meets again at Vienna on 31 may, a number of nations including Venezuela, Qatar and Kuwait, will request a slight cut in oil production.  More in Spanish: (El Mundo, 03-19-2013; http://www.elmundo.com.ve/Noticias/Economia/Energia/Preven-que-Venezuela-planteara-recorte-de-la-produ.aspx)

Russia obtains Venezuelan oil for pennies per barrel

Russia's ROSNEFT and Venezuela's PDVSA, both state owned, have joined to work an oil field with reserves estimated at 40 billion barrels. The Russians will have 40% of the project, worth U$D for a project they estimate will produce 400,000 barrels per day. Oil expert Victor Poleo says: "It is very attractive to ROSNEFT to acquire or have access to reserves at an extremely low price. That 40% will bring them 16 billion barrels at a unit cost of U$D 0.10 per barrel." More in Spanish: (El Mundo, 03-19-2013; http://www.elmundo.com.ve/Noticias/Petroleo/Industria/Rusia-accede-a-petroleo-venezolano-a-centavos-de-d.aspx)

Oil income dependency increased over the past decade

Despite the largest and longest oil price boom of all time little has been done to improve the country's economic independence and Venezuela increasingly relies on oil prices. As the domestic industry ails, constantly increasing demand can only be satisfied through imports paid for with petrodollars from the oil industry (El Universal, 03-16-2013; http://www.eluniversal.com/economia/130316/reliance-on-oil-income-deepened-over-past-decade)

International Trade

Schlumberger to reduce Venezuela work on unpaid bills

Schlumberger Ltd. (SLB), the world’s largest oil-services company, is reducing work in Venezuela because of trouble getting paid by state-owned Petroleos de Venezuela SA. “We are temporarily reducing activity due to our previously highlighted collection issues,” Chief Executive Officer Paal Kibsgaard said at the Howard Weil Energy Conference in New Orleans today. “We have decided to only recognize revenue in line with our collections in the first quarter.” (Bloomberg, 03-18-2013; http://www.bloomberg.com/news/2013-03-18/schlumberger-to-reduce-venezuela-work-on-unpaid-bills.html)

Logistics & Transport

Port workers face lowered income due to fewer imports

A 1000 workforce at shipping agencies, plus 2000 temporary workers at La Guaira port are facing lower incomes due to a drop in imports and exports during the Q1 2012, according to Hugo Mijares, who heads the National Association of Customs Brokers. He says imports have fallen off due to delayed FOREX supply by CADIVI. Eduardo Quintana, President of FEDECÁMARAS in Vargas state says "the terminal looks forlorn since the start of the year. Spaces that were packed in December are now somber and with no work."More in Spanish: (El Nacional; http://www.el-nacional.com/)

Politics

Maduro "grief" support is volatile

According to a DATANÁLISIS poll quoted by BARCLAY's Finance Services is showing a 14.4 point gap between official candidate Nicolás Maduro (49.2%) and opposition candidate Henrique Capriles (34.8%). The study shows Maduro rose a mere 2.8% in telephone the poll conducted on March 11-13. BARCLAY's points out that although a 14 point lead appears significant, "Maduro's popularity is volatile and depends on the emotional support he received from Chavez." More in Spanish: (El Universal, 03-19-2013; http://www.eluniversal.com/nacional-y-politica/130319/senalan-que-el-efecto-apoyo-a-maduro-por-duelo-tiene-un-limite)

Maduro charges US plans to kill opposition leader

Acting president and ruling party presidential candidate Nicolás Maduro has charged that two former US officials - Roger Noriega and Otto Reich - are planning the assassination of opposition presidential candidate Henrique Capriles Radonski in order to blame his regime. In turn, State Department spokesperson Victoria Nuland told reporters Monday “the United States categorically rejects allegations of any U.S. government involvement in any plot to destabilize the Venezuelan government or to harm anyone in Venezuela.” (El Universal, 03-18-2013; http://www.eluniversal.com/nacional-y-politica/130318/venezuelas-maduro-warns-about-plans-against-life-of-opposition-leader; The Washington Post, http://www.washingtonpost.com/world/the_americas/us-rejects-venezuelan-govt-charge-its-targeting-opposition-candidate/2013/03/18/8ab36928-9002-11e2-9173-7f87cda73b49_story.html; Fox News, http://www.foxnews.com/world/2013/03/18/us-rejects-venezuelan-govt-charge-it-targeting-opposition-candidate/)

Election Board head rejects US states, calls them "intrusive and disrespectful"

Election Board Chairperson Tibisay Lucena, termed statements by  Roberta Jacobson, US Assistant Secretary of State for Latin America, as "sad". Jacobson had said it would be "a bit difficult" for "fair and transparent elections" to take place in Venezuela on April 14th. "We strongly reject the unfortunate statements of Ms. Roberta Jacobson, for their interventionist and disrespectful nature," says Lucena. (AVN, 03-17-2013; http://www.avn.info.ve/contenido/lucena-disavows-intrusive-and-disrespectful-us-statements)

Venezuela election rivals clash over crime

Moments after he registered to run in Venezuela's April 14 election, acting President Nicolas Maduro vowed to go on foot, unarmed, into the toughest slums of Caracas and ask the gangs there to lay down their guns. Maduro and his opponent, Henrique Capriles, have clashed over a top campaign issue: the daily murders, armed robberies and kidnappings that make the country one of the most dangerous in the world. (Reuters, 03-18-2013; http://www.reuters.com/article/2013/03/18/us-venezuela-election-crime-idUSBRE92H0IM20130318)

Henrique Capriles vows to reverse economic moves in Venezuela

Opposition presidential candidate Henrique Capriles has pledged to adjust the minimum wage upwards by 40% and reverse the economic package approved by acting president and ruling party presidential candidate Nicolás Maduro. (El Universal, 03-18-2013; http://www.eluniversal.com/nacional-y-politica/130318/henrique-capriles-vows-to-reverse-economic-moves-in-venezuela; Reuters, http://www.reuters.com/article/2013/03/18/us-venezuela-election-idUSBRE92H0TW20130318)

"Capriles must bring Maduro down to earth"

DATANALISIS President Luis Vicente León says the core of this campaign is that while acting President Nicolás Maduro strives to incarnate the late President Hugo Chávez, in a semi-religious magic context in order to act as proxy for the absent leader; it is up to his opponent, Miranda state governor Henrique Capriles Radonksi, to bring down Maduro to his earthly level, which is not precisely the best. (El Universal, 03-16-2013; http://www.eluniversal.com/nacional-y-politica/130316/capriles-needs-to-put-maduro-down-to-the-earthly-life)

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.