May 17, 2013

Economics & Finance

Operating reserves can cover imports for only 15 days

Financial consulting firms say Venezuela's international operating reserves are down to around U$D 3 billion. According to FEDECAMARAS First Vice President Jorge Roig this amount can only cover some 15 days worth of imports. “Official data shows imports were some U$D 60 billion last year. A simple calculation is that monthly imports were around U$D 6 billion". He says total FOREX indebtedness is around U$D 8 billion. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Reservas-operativas-alcanzan-dias-importaciones_0_191381146.html)

FOREX allocations down 35% year to date 2013

According to Juan Socías López, an economist with the Soluciones Group, the government has allocated 35% less FOREX to the private sector to date this year. He says there has been a downward trend over the past 4 years, but it has become acute in the last few months. More in Spanish: (El Nacional; http://www.el-nacional.com/economia/Liquidacion-divisas-va_0_191381155.html)

Maligned dollar flourishes in Venezuela

Losing value for years, U.S. dollar is flourishing in fast-wilting economy President Hugo Chavez left behind. Black-market dealers operating on the thriving underground market sell greenbacks at more than four times the official, government-set rate of 6.3 bolivars to the dollar. And the price they’re getting these days — 28 per dollar — is more than three times what it was worth just eight months ago. Because the Bolivar is artificially overvalued and practically worthless outside of Venezuela, everyone here is desperate for dollars, from auto-part importers to supermarkets to ordinary Venezuelans planning to travel abroad. Even government officials and the politically connected businessmen who have made fortunes off the free-spending state search out and trade in dollars. (The Washington Post; http://www.washingtonpost.com/world/the_americas/maligned-dollar-flourishes-in-venezuela/2013/05/16/7ce637fc-bdbc-11e2-b537-ab47f0325f7c_story.html)

Finance Minister: Inflation target is hard to meet in 2013

Finance Minister Nelson Merentes says "it is difficult to meet the goal" of inflation this year and did not rule out the possibility of revising the forecast 14% to 16% estimated in the 2013 official budget.
"I will not give numbers. There is a goal and we will try to meet it. If we do not, we will revise it", said Merentes.
After a meeting with more than 400 businessmen, Merentes announced that allocation of US dollars to 1,500 companies out of the 3,000 firms that reported delays in FOREX allocation by the Foreign Exchange Administration Commission (CADIVI) has been restored to normal. He acknowledged, however, that the period of time for FOREX allocation under CADIVI needs to be shortened. (El Universal, 05-15-2013; http://www.eluniversal.com/economia/130515/venezuelan-finance-minister-inflation-target-is-hard-to-meet-in-2013)

Govt. working with private sector to increase productivity

The Government announced that next Monday, 12 working groups will be set up with private sector companies to discuss adjustments in legal and financial affairs and seek to increase local production of goods and services. Finance Minister Nelson Merentes, led a second meeting with representatives of 400 companies from 24 sectors of the economy, held at the Central Bank. "They expressed problems in various sectors and I can say that in the case of delivery of currencies for small and medium industry waiting times were reduced to almost zero. More than 1,500 entrepreneurs already have their situation normalized," he said at a press conference after the meeting. (AVN, 05-16-2013; http://www.avn.info.ve/contenido/govt-works-private-sector-increase-production-goods; El Universal, http://www.eluniversal.com/economia/130516/venezuelan-government-seeks-funds-to-bridge-forex-gap)

Venezuela may allow companies to repatriate some dividends

Venezuela may allow foreign companies operating in the country to repatriate some of their profits in exchange for increased investment in the Latin American nation, said Pedro Cortez, head of Telefonica SA (TEF)’s local unit. Cortez made the comments to reporters in Caracas today after a “positive” meeting with Finance Minister Nelson Merentes. Merentes declined to give a timetable for any changes. “Once we come to an agreement, we’ll draw up a timetable for payment,” Merentes told a news conference at the central bank. (Bloomberg, 05-15-2013; http://www.bloomberg.com/news/2013-05-15/venezuela-may-allow-companies-to-repatriate-some-dividends.html)

Maduro says there will be a "price policy", adding that "prices will not be freed as sectors within the oligarchy want, but we will have a policy on price formation...one must think big, and who knows whether by adding technology one can produce more and lower cost, and thus surprise the country and lower consumer prices". More in Spanish: (El Universal, 05-17-2013; http://www.eluniversal.com/economia/130517/maduro-dijo-que-habra-una-politica-de-formacion-de-precios)

Swiss bank accounts were used for bribery

US authorities have unveiled a scheme in which the CFO of the Economic and Social Development Bank of Venezuela (BANDES), María de los Angeles González, accepted or expected to receive a bribe of at least U$D 9 million for transactions that brought huge earnings to  Direct Access Partners (DAP), a financial services enterprise based in New York. DAP sold overpriced bonds to the Venezuelan bank or bought them below the market value, with a return of U$D 66 million, according to the US Exchange and Securities Commission (SEC).

González would get a chunk of the proceeds through Cartagena International INC, a front firm incorporated in Panama, including Jorge González, apparently a relative of the BANDES CEO. (El Universal, 05-16-2013; http://www.eluniversal.com/economia/130516/swiss-bank-accounts-were-used-for-bribery)

Commodities

PDVSA increases oil shipments to China by 18% in 2013

China continues to gain ground as the top buyer of Venezuelan oil, and is likely to replace the United States as the major client for Venezuelan oil and byproducts. State-run oil giant PDVSA has increased oil shipments to China by 18%, to an average of 626,000 barrels per day, said Minister of Petroleum and Mining and President of Pdvsa, Rafael Ramírez. "From 49,000 bpd of oil in 2005, Venezuela is sending 626,000 bpd of oil to China this year," said Ramírez at the Orinoco Oil Belt, during a joint visit to Venezuela-China oil joint venture PETROSINOVENSA with Chinese Vice President Li Yuanchao. (El Universal, 05-16-2013; http://www.eluniversal.com/economia/130516/pdvsa-increases-oil-shipments-to-china-by-18-in-2013)

As shortages grow at home, CITGO to pay record U$D 461 million to Venezuela

CITGO Petroleum Corporation, an indirect wholly owned subsidiary of Petroleos de Venezuela, S. A. (PDVSA), has declared a U$D 461 million dividend to its parent for the first quarter of 2013. The amount, to be paid on May 20, is a record for a single quarter since 2009. “The payment of this dividend reflects the strength of our operations and our continued alignment with our parent company,” said Alejandro Granado, chairman, president and CEO of CITGO. “We have achieved a strong financial performance without sacrificing what really matters, remaining focused on leading the refining industry for safe operations and continuing our commitment to environmental stewardship and social responsibility.” (The Latin American Herald Tribune, 05-16-2013; http://www.laht.com/article.asp?ArticleId=778002&CategoryId=10717; Reuters, http://www.reuters.com/article/2013/05/16/venezuela-citgo-idUSL2N0DX1T720130516)

Venezuela to 'saturate the market' with 50 million rolls of imported toilet paper

To avoid getting caught with their pants down, officials here say they will confront a toilet paper shortage by importing 50 million rolls to meet demand. Toilet paper is just one of the basic goods and foodstuffs that have been disappearing from store shelves over the past few months, as the government and private companies blame each other for the scarcity. Minister Alejandro Fleming announced the toilet paper measure on Tuesday. Repeating the government's stance, he blamed the media for provoking fear in consumers, who in turn begin hoarding items. But Venezuelans say the shortages are very real, as staples such as rice and cooking oil are scarce. Venezuela's monthly demand for toilet paper is about 125 million rolls a month, Fleming said. Businessmen say government policies, including price controls on basic goods and tight restrictions on foreign currency, are to blame. Other hygiene products, such as tooth paste and soap, might also be imported in bulk to meet demand, Fleming said. (CNN: http://edition.cnn.com/2013/05/15/world/americas/venezuela-tp-shortage/; Fox News, http://www.foxnews.com/world/2013/05/16/already-short-some-foods-venezuela-is-facing-toilet-paper-crisis-government/)

Maduro summons PROTINAL

President Nicolás Maduro has ordered Agriculture Minister Yván Gil to "immediately" summon representatives of PROTINAL so that the respond "within 24 hours, for their behavior toward Venezuelan farmers ". He added: "if they need to rectify, and are able to rectify, we welcome them, and let them obey the instruction and command of the national government". Maduro made his statement during a meeting with farm leaders who charged the firm is "displacing" them in corn and soy production. He then added: "we must tell them what needs to be said and act legally. And if it does not comply, that capital must leave the country." More in Spanish: (Últimas Noticias, 05-17-2013; http://www.ultimasnoticias.com.ve/noticias/actualidad/economia/maduro-mando-a-llamar-a-los-representantes-de-prot.aspx)

International Trade

13,000 houses built with China's cooperation

Venezuela is now building 13,000 houses at Ciudad Tiuna, a housing complex in Fuerte Tiuna fort, in Caracas, in cooperation with the People's Republic of China. The houses are expected to be finished by 2014. (AVN, 05-16-2013; http://www.avn.info.ve/contenido/13000-houses-built-china039s-cooperation)

Venezuela-Colombia trade over U$D 800 million

Luis Alberto Russian, President of the Venezuelan-Colombian Economic Integration Chamber (CAVECOL) says that in the first four months of this year bilateral trade was above U$D 800 million, counting U$D 724 million in Venezuelan imports from Colombia and only U$D 133 million Venezuelan exports to Colombia. He said "Great expectations emerged whenavecolela
 President of Peru Ollanta Humala has denied reports that Rafael Roncagliolo resigned as Foreign Affairs Minister because of a diplomatic impasse earlier this month with Venezuela. In response to claims by dissenters, who said that Roncagliolo left office on Wednesday after a clash with Venezuelan President Nicolás Maduro, Humala confirmed that Roncagliolo resigned for health reasons, Efe reported. (El Universal, 05-16-2013; http://www.eluniversal.com/nacional-y-politica/130516/humala-denies-that-fm-resignation-was-due-to-tensions-with-venezuela)

Logistics & Transport

Venezuela suspends Curacao-based DAE airline

Venezuela has suspended operations in its territory by the small Curacao-based airline Dutch Antilles Express (DAE) due to alleged breaches of security. A statement by Venezuela's Civil Aviation authority (INAC) said it had repeatedly sanctioned the airline for lapses over itineraries and times, as well as service quality failings. "INAC agrees to suspend, as a cautionary measure, the operations of the DAE airline in the territory of the Bolivarian Republic of Venezuela, as a result of the presumed non-observance of aeronautical security norms," it said in the statement late on Tuesday. (Reuters, 05-15-2013; http://www.reuters.com/article/2013/05/15/venezuela-airline-idUSL2N0DW1XZ20130515)

Politics

Report recommends Venezuela must overcome division

"Venezuela is ill-prepared for the post-Chávez transition and urgently needs to reconstruct its social and political fabric," said NGO International Crisis Group in a report called Venezuela: A House Divided. The immediate efforts need to focus on avoiding escalation of extreme polarization into political violence, "complemented by a strong push for a basic understanding on how to coexist without Chávez," the document added. A country already deeply polarized is now clearly divided into two almost equal halves that appear irreconcilable, the report added. According to International Crisis Group, "national dialogue must prevail over confrontation and consensus over partisan violence" in order to address the governance crisis and tackle serious economic and social problems. (El Universal, 05-16-2013; http://www.eluniversal.com/nacional-y-politica/130516/report-recommends-venezuela-to-overcome-division)

Humala denies Roncagliolo departs over Venezuela

 President of Peru Ollanta Humala has denied reports that Rafael Roncagliolo resigned as Foreign Affairs Minister because of a diplomatic impasse earlier this month with Venezuela. In response to claims by dissenters, who said that Roncagliolo left office on Wednesday after a clash with Venezuelan President Nicolás Maduro, Humala confirmed that Roncagliolo resigned for health reasons, Efe reported. (El Universal, 05-16-2013; http://www.eluniversal.com/nacional-y-politica/130516/humala-denies-that-fm-resignation-was-due-to-tensions-with-venezuela)

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.