March 26, 2013

Economics & Finance

Venezuela launches first auction of new FOREX system

Venezuela offered U$D 200 million to local businesses yesterday in the first auction of a new foreign currency system that will bring another partial devaluation of the Bolivar. The government devalued the fixed rate of the local bolivar currency from 4.3 to 6.3 against the dollar last month. Monday's formal launch of the previously-announced Complementary System for Foreign Currency Administration (SICAD) sets up a parallel mechanism for businesses unable to cover all their dollar needs at that rate via state currency board Cadivi. (Reuters, 03-25-2013; http://www.reuters.com/article/2013/03/25/venezuela-economy-idUSL2N0CH0G820130325; AVN, 03-25-2013; http://www.avn.info.ve/contenido/convened-private-business-sicad-foreign-currency-auction; El Universal, http://www.eluniversal.com/economia/130325/venezuelan-finance-ministry-calls-for-first-us-dollar-bid)

SICAD is doomed to fail

According to financial analysts, the SICAD system is doomed to failure since it calls for compulsory use of letters of credit in order to access FOREX, and due to the insistence by Finance and Planning Minister Jorge Giordani in having the Central Bank pay foreign exporters directly. Experts say the procedure is not possible since letters of credit are regulated internationally and establish that banks undertake these obligations on behalf of clients, not third parties such as the Central Bank. Within the international system payments must be made within a set time frame, and any delays on the part of SICAD would make the Central Bank liable. Businessmen report the entire system is complicated because "purchase orders must be made through a pro forma invoice", along with a certification by the national importers registry (RUSAD) and another certificate that planned imports are not domestically produced. In addition the company must register electronically with the Finance and Planning Ministry and fill out customs information in items to be imported, all of which must be presented overnight.  More in Spanish: (Tal Cual, 03-26-2012; http://www.talcualdigital.com/index.html; El Nacional; http://www.el-nacional.com/)

CANTV turned VEB 1.8 billion profits over to the Government for social programs. Last week a group of workers from the national company delivered a check for this amount to acting President Nicolas Maduro. More in Spanish: (AVN, 03-26-2013; http://www.avn.info.ve/contenido/dividendos-generados-cantv-2012-se-destinar%C3%A1n-grandes-misiones)

Economy shows signs of slowdown

After the Venezuelan economy gained 5.5% in Q4 2012, authorities predicted vigorous growth would take place this year, but actual results are flashing warning signs. Automotive production for the first two months this year has dropped 53.5% from the same term in 2012; and the banking sector is also showing weakness.
Data from consulting firm Softline Consultores shows that overall loans through the end of February have increased 1.2%, versus 2.5% for the same period in 2012. (El Universal, 03-23-2013; http://www.eluniversal.com/economia/130323/venezuelan-economy-shows-signs-of-slowdown)

Lack of industry limits growth

Figures from the Central Bank of Venezuela (BCV) indicate that 96% of the country's income stems from oil activity, and that manufacturing rose a mere 1.8%, lagging behind commerce, telecoms, and financial institutions. (El Universal, 03-25-2013; http://www.eluniversal.com/economia/130325/lack-of-industrial-policies-limits-venezuelas-domestic-output)

Venezuela’s minimum wage now ranks 10th in Latin America, well below Argentina ($600), Costa Rica ($500), Panamá, Chile, Uruguay, Paraguay and Colombia ($400), and Honduras and Brazil which exceed Venezuela’s ($325), says Primero Justicia national coordinator Julio Borges. He explains that the comparison that really matters is what is called “the buying power” in each country and there “we are doing much worse”. (Veneconomy, 03-25-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=34156&idc=2)

Officials claim unemployment is 7.6%

According to the National Statistics Institute (INE) 1,027,994 were out of the labor market in February, either because they lost their jobs or because they failed to find their first job. This is a 7.6% unemployment rate, a drop of 1.6% from 9.2% (1,210,964 people) in February 2012. (El Universal, 03-25-2013; http://www.eluniversal.com/economia/130325/unemployment-rate-in-venezuela-at-76)

Commodities

PDVSA revenue slips on domestic fuel sales, net profits down 6.1%

State oil company PDVSA's 2012 revenue slipped 0.2% from the year before despite an increase in oil prices as the company sold more fuel on the subsidized domestic market, the oil minister said Friday. The nation's fuel subsidy leaves the cost of gasoline and gas oil for power generation at less than 10 cents per gallon, which creates consistent losses for the state oil giant. The company paid U$D 43.9 billion to finance social programs and a development fund created by the late Hugo Chavez. Under his leadership, PDVSA evolved from a profit-oriented company into the financial engine of anti-poverty efforts. "This is not a company designed to generate profits. This is a national company. We're not here to provide benefits to private individuals," Oil Minister Rafael Ramirez, who is also PDVSA president, said in comments to reporters. The oil giant's revenues were U$D 124.75 billion in 2011, with average oil prices at U$D 101.06 per barrel. 2012 income was US$D 124.45 billion. Net profits tumbled 6.1%, from U$D 4.49 billion in 2011 to USD 4.21 billion in 2012 (Reuters, 03-22-2013; http://www.reuters.com/article/2013/03/22/venezuela-pdvsa-idUSL1N0CEB7U20130322; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=722412&CategoryId=10717; El Universal, 03-23-2013; http://www.eluniversal.com/economia/130322/venezuelan-oil-giant-pdvsas-net-profit-down-61-in-2012)

Oil Ministry reports 1.4% hike in oil output

Increase in oil and gas output was reported in 2012, According to a report submitted by the Ministry of Oil and Mining to the National Assembly oil and gas output increased in 2012. The preliminary report (since operating and financial results from the audit on Pdvsa are not disclosed) indicates Venezuela's oil output averaged 3.03 million barrels per day in 2012, 1.4% above the 2.99 million recorded a year earlier. The Ministry claims "production levels are in keeping with the 364,000 bpd cut in output agreed by OPEC (Organization of Petroleum Exporting Countries) to stop the drop in prices and bring them up again." (El Universal, 03-25-2013; http://www.eluniversal.com/economia/130325/venezuelan-oil-ministry-reports-14-hike-in-oil-output)

SIDOR production down 50% in 2012

Workers at the SIDOR Orinoco steel plant have stopped work there for the past five days, and have paralyzed the entire production chain. Liquid steel production in 2012 was 1510220 tons, 50% less than had been budgeted for the entire year, according to the annual report by the Ministry for Industries. The report says the drop was due to "lack of equipment and spare parts, delays in special maintenance, lack of working capital, and continuous labor stoppages". More in Spanish: (El Nacional, 03-26-2013; http://www.el-nacional.com/)

International Trade

Maduro proposes ALBA-MERCOSUR economic alliance

Acting President Nicolás Maduro is calling for broadened economic integration, exchange and complementariness mechanisms among member states of the Bolivarian Alliance for the Peoples of our America (ALBA) and the Common Market of the South (MERCOSUR). (AVN, 03-25-2013; http://www.avn.info.ve/contenido/venezuela-proposes-alba-mercosur-economic-alliance)

Politics

Electoral Council, UNASUR agree on attendance for election

The National Electoral Council (CNE) has entered into an agreement with the Union for South American Nations for their attendance during Presidential elections to be held next April 14. The agreement was signed by the principal director of the Council, Tibisay Lucena, and the pro tempore president of Unasur's Electoral Council, Francisco Tavara Córdoba. (El Universal, 03-25-2013; http://www.eluniversal.com/nacional-y-politica/130325/venezuelas-electoral-council-unasur-agree-on-accompaniment-for-electio)

HR advocate says 4,500 people killed in Venezuela under Nicolás Maduro

Lawyer and human rights advocate Alfredo Romero says some 4,500 people have been killed in the first 100 days of acting President Nicolás Maduro's government. He charged this is the result of inefficiency and anarchy due to the government's lack of political will to cope with crime, one of the main problems facing Venezuelans. "Twenty security plans have been implemented, yet violent crime continues escalating. This will go on as long as anarchy prevails in the legal system, and hatred and death are encouraged," Romero outlined. According to the United Nations Report on Human Development and Violence, Venezuela is in the top-five list of violent countries in the world. (El Universal, 03-23-2013; http://www.eluniversal.com/nacional-y-politica/130323/hr-advocate-4500-people-killed-in-venezuela-under-nicolas-maduro)

Paris refuses to name location after "Hugo Chávez"

The Paris Mayoralty refuse to name a location there after Hugo Chávez, after the proposal was made by Communist aldermen and their allies. More in Spanish: (Tal Cual, 03-26-2013; http://www.talcualdigital.com/index.html)

A study shows "chavismo" polarizes Latin America

A study by Spain's International Perspectives Institute shows Latin America, in general, does not support the continuation of support for the system established by the late Hugo Chavez, but reflects deep divisions within Latin American public opinion in this matter. According to the study there is "intense and general" support for the movement in Bolivia, Cuba, Ecuador and Nicaragua; and "general rejection for it in Chile, Colombia, Guatemala, Haiti, Panama and Paraguay. Polarization is not as strong in Brazil and Mexico. More in Spanish: (El Universal, 03-26-2013; http://www.eluniversal.com/nacional-y-politica/130326/un-estudio-revela-que-el-chavismo-polariza-a-america-latina)

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.