April 02, 2013

Economics & Finance

Post-Chavez rout deepens on bond sale speculation

Venezuelan bonds are extending losses as investors bet the government will be forced to resume dollar debt offerings this year to arrest a record decline in the bolivar in the black market and maintain high spending. Oil exports won’t provide enough greenbacks to supply a new exchange system started last week and meet U$D 8 billion in payments on outstanding debt, said Jorge Piedrahita, the president of Torino Capital LLC. Venezuela’s dollar debt lost 2.7% in March compared to returns of 0.6% for Argentina, 0.7% for Ecuador and 1.4% for Bolivia, according to JPMorgan Chase & Co.’s EMBIG index. (Bloomberg, 04-01-2013; http://www.twitlonger.com/show/n_1rjhimc)

Tough times ahead in post-Chavez Venezuela as dollar scarcity takes its toll

Doing business in post-Hugo Chavez Venezuela is not for the faint of heart. Thousands of companies suffer under currency controls that all but deny them the U.S. dollars they need to import vital items into this oil-rich country, from food to cars to spare parts — even gasoline. Venezuelan firms must sell their wares at state-controlled prices that don’t reflect the 22% inflation rate, the highest in Latin America. Even Venezuela’s socialist government admits the controls don’t work — but its attention is focused on the April 14 election to replace the late President Hugo Chavez. (The Washington Post, 04-01-2013; http://www.washingtonpost.com/business/tough-times-ahead-in-post-chavez-venezuela-as-dollar-scarcity-takes-its-toll/2013/04/01/f164becc-9b08-11e2-9219-51eb8387e8f1_story.html)

Fiscal deficit leads to second devaluation in five weeks

With an accelerated rise in expenditures, increasing losses in state-run oil companies, and costly subsidies, Venezuela's income is not enough for the Government, which currently faces a serious fiscal imbalance although the oil basket averages a record high of U$D 103 per barrel. As a result, two devaluations have been implemented in the past five weeks so as to obtain more bolivars per petrodollars. However, despite the significant adjustment in the foreign exchange rate, which will spur the cost of imports and therefore will hit the people, the fiscal crisis will continue. Although SICAD did not reveal the price of the US dollars sold in the bid launched on March 26, financial sources have said that companies paid VEB 11-14 per US dollar, that is, twice the rate in SITME. (El Universal, 04-01-2013; http://www.eluniversal.com/economia/130401/venezuelas-fiscal-deficit-leads-to-second-devaluation-in-five-weeks)

National Treasury gains VEB 164.5 billion through devaluation

According to estimates by ECOANALÍTICA, the National Treasury will gain VEB 164.5 billion through devaluation and the new SICAD alternate FOREX sale system, which translates into 6.3% GDP. More in Spanish: (El Universal, 04-02-2013; http://www.eluniversal.com/economia/130402/bs-1645-millardos-extra-recibira-el-fisco-por-ajustes-cambiarios)

Devaluation aggravates imbalance in controlled prices, increases scarcity

According to a report by ECOANALÍTICA, authorities have kept the price of rice frozen for 55 months; different cooking oils between 17 and 23 months; chicken for 19 months and milk anywhere from 17 to 36 months, depending on its type. This maladjustment has translated in diminished production and scarcity levels, which Central Bank data estimates at 19.7%. More in Spanish: (El Universal, 04-02-2013; http://www.eluniversal.com/economia/130402/devaluacion-eleva-desajuste-de-los-precios-controlados)

Russia´s RUSORO is suing Venezuela for U$D 3.030 billion

RUSORO Mining has formally sued Venezuela at the World Bank's  International Center for Settlement of Investment Disputes under the Canada-Venezuela Bilateral Investment Treaty for U$D 3.030 billion, based on alleged treaty violation by Venezuela by expropriating their holdings here without adequate compensation and not allowing the unfettered transfer of their investments and profits. More in Spanish: (El Mundo, 04-02-2013; http://www.elmundo.com.ve/Noticias/Petroleo/Mineria/Rusoro-exige-a-Venezuela-compensacion-por--3-030-m.aspx; El Universal, http://www.eluniversal.com/economia/130402/rusoro-presento-demanda-contra-venezuela-ante-ciadi; and Tal Cual; http://www.talcualdigital.com/index.html)

Commodities

Venezuelan oil up to U$D 103.50 last week, for a gain of U$D 1.5 (1.475),  More in Spanish: (Últimas Noticias, 04-02-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/petroleo-venezolano-sube-hasta-los-103-5-por-barri.aspx; AVN; http://www.avn.info.ve/contenido/barril-petr%C3%B3leo-venezolano-subi%C3%B3-semana-pasada-10350-d%C3%B3lares)

Schlumberger CEO: Venezuela debt collections improving

Oil services giant Schlumberger Ltd has improved its ability to collect the money it is owed by Venezuela's state oil company PDVSA and will now be able to recognize all revenue associated with its first-quarter operations in the country, Schlumberger's CEO said on Sunday. Schlumberger Chief Executive Officer Paul Kibsgaard's announcement, published in a press release, follows a warning from the company earlier in March that Venezuelan customers' rates of payment had dropped sharply."After meetings with PDVSA, the collections have improved to the point that we will recognize all revenue associated with our first-quarter operations," Kibsgaard said in the release. (Reuters, 03-31-2013; http://www.reuters.com/article/2013/03/31/us-schlumberger-venezuela-payments-idUSBRE92U08120130331)

International Trade

Venezuela's BANDES funds electric projects in Cuba and Gambia

In 2012, funding by the Venezuelan Economic and Social Development Bank (BANDES) to other countries rose. According to reports from the Finance Ministry, U$D 56.6 million were used to fund two electric projects in Cuba and Gambia. The money was used to "build a fuel oil hydroelectric power plant of 175 megawatts (MW) in Cuba, and for the streamlining, refurbishment and expansion of the low voltage network in Gran Banjul, Gambia." (El Universal, 03-30-2013; http://www.eluniversal.com/economia/130330/venezuelan-bandes-funds-electric-projects-in-cuba-and-gambia)

Politics

Ghost of Chavez dominates election campaign

Weeks after his death, Venezuelan socialist leader Hugo Chavez still leads supporters in singing the national anthem.

The late president's recorded voice booms over rallies for his protégé, acting President Nicolas Maduro, who stands under billboards of Chavez's face and waves to crowds carrying signs emblazoned with his name. Maduro, who is favored to win a snap election triggered by Chavez's death last month, rarely misses a chance to lionize the man many Venezuelans know as "El Comandante". (Reuters, 04-01-2013; http://www.reuters.com/article/2013/04/01/us-venezuela-election-chavez-idUSBRE9300BN20130401)

Opposition leader says "25% of Chávez's supporters would not vote Maduro"

Carlos Ocariz, National Chairman for the Simón Bolívar pro Capriles campaign has the tough task of consolidating an organizational mechanism, developing a strategy and bolstering Henrique Capriles' presidential candidacy within one month - which would be impossible if it were not for the structure built for last year's campaign. Ocariz says fully one quarter of Chavez voters will not vote for Maduro (El Universal, 03-30-2013; http://www.eluniversal.com/nacional-y-politica/130330/25-of-chavezs-supporters-would-not-vote-maduro)

Maduro calls Venezuela opposition "heirs of Hitler"

Acting President Nicolas Maduro on Saturday called the country's opposition "heirs of Hitler," accusing them of persecuting Cuban doctors working here the way Jews were persecuted in Nazi Germany. His barbs added to weeks of insults in the run-up to the April 14 presidential elections. (Reuters, 03-30-2013; http://www.reuters.com/article/2013/03/30/us-venezuela-election-idUSBRE92T0AR20130330)

"Do not aggravate emotions", says Elections Board

Elections Board President Tibisay Lucena says this Presidential campaign has begun in a "sensitive emotional state" and called on candidates and parties to avoid excess, unnecessary aggravation, and to "eliminate expressions that may set the election process on edge". More in Spanish: (El Nacional, 04-02-2013; http://www.el-nacional.com/)

1,364 people dead in Caracas so far this year

A total of 1,364 corpses have been taken to the morgue in Caracas, over the past three months, a number 7% above that recorded in 2012 (1,265). Official sources said off the record that at least 65% of the cases (886) were murder victims, while the remaining 35% was related to car accidents, occupational accidents, death investigations and natural deaths. (El Universal, 04-01-2013; http://www.eluniversal.com/nacional-y-politica/130401/1364-people-dead-in-caracas-so-far-this-year)

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.