June 07, 2013

Economics & Finance

President denies currency devaluation rumor

President Nicolas Maduro has denied rumors that he is preparing another adjustment of the local Bolivar currency, which has been devalued five times in the last decade. (Reuters, 06-05-2013; http://www.reuters.com/article/2013/06/06/us-venezuela-economy-idUSBRE95503120130606; El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/venezuelan-president-rules-out-forex-adjustment)

TELEFONICA said to plan for another devaluation

TELEFONICA SA plans to boost spending in Venezuela to avoid sitting on cash that may lose a third of its value as speculation mounts that the government may devalue the Bolivar for a second time this year, according to a person familiar with the matter. The Spanish phone company’s headquarters in Madrid will be asked this week to sign off on additional spending of 1.3 billion bolivars (U$D 207 million) this year on its mobile-phone network in Venezuela, said the person, asking not to be identified because the proposal is confidential. TELEFONICA earlier this year approved a 78% increase in its budget to 3.9 billion Bolivars with an additional 600 million Bolivars earmarked for acquiring high-speed wireless spectrum. TELEFONICA wants to spend as much as possible of an estimated U$D 3 billion that it can’t take out of Venezuela amid speculation of a devaluation of the bolivar to 9.3 per dollar from 6.3, the person said. Overseas companies may hold U$F 12 billion in dividends in Venezuela that they can’t repatriate, according to an April estimate by Caracas-based researcher ECOANALITICA. (Bloomberg, 06-06-2013; http://www.bloomberg.com/news/2013-06-05/telefonica-said-to-forge-venezuela-plan-for-devaluation-scenario.html)

Government seeks mechanism to secure funds

The Central Bank's quarterly report reflects an economic slowdown, a drought of foreign currency, skyrocketing inflation, spiralling shortages of staples, and an imbalance in public accounts. Under this scenario, the government has been devising ways to speed up the sale of US dollars and boost domestic production, while securing additional funds to meet overwhelming public expenditure. In the meantime, concerns have arisen as the yearly inflation goal of 14-16% seems hard to meet. In four months, inflation hit 12.5% and shortages 21.3%. (El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/venezuelan-government-seeks-mechanism-to-secure-funds)

PDVSA continues discussing U$D 4 billion loan with Chinese Eximbank

Rafael Ramírez, Minister of Petroleum and Mining and President of state-run oil holding Petróleos de Venezuela (PDVSA) has headed for Beijing to review some Venezuela-China projects on hydrocarbons and infrastructure, and also to seek US dollar financing for the government, through PDVSA. Ramírez met with Li Rougu, president of the board of directors of the Export-Import Bank of China and a PDVSA release later said: "The possibility of signing a borrowing facility for U$D 4 billion was discussed for the procurement of oil equipment, necessary to increase the oil output envisaged in the Oil Sowing Plan." He also said: "Eximbank reasserted its commitment to finance a PEQUIVEN dock in Morón, Carabobo state." Ramírez also met with Chinese Vice-President Li Yuanchao who said energy cooperation was "essential" for bilateral economic relations and added that the two nations "need to develop current agreements and bring China-Venezuela relations to a higher level.". (El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/pdvsa-sharpens-usd-4-billion-loan-with-chinese-eximbank and http://www.eluniversal.com/economia/130605/venezuela-china-to-bring-their-relations-to-a-higher-level)

May inflation hits new high of 6.1%, 35.2% annual projection

Consumer prices rose 6.1% percent in May according to the Central Bank, in the highest monthly rise under a new measurement system introduced in 2008. The May figure, which compared with 4.3% the previous month, took the nation's annualized inflation rate to 35.2%, the highest in the Americas. Food prices rose 49.9% in the past twelve months. (Reuters, 06-06-2013; http://www.reuters.com/article/2013/06/06/venezuela-economy-idUSL1N0EG0JG20130606; and more in Spanish: El Universal, http://www.eluniversal.com/economia/130607/en-12-meses-los-precios-de-los-alimentos-aumentaron-499; AVN; http://www.avn.info.ve/contenido/inflaci%C3%B3n-se-ubic%C3%B3-61-mayo)

Rationing of 20 basic food products to begin in Venezuela’s most populous state next week

In a sign Venezuela’s food shortages could be worsening, restrictions on the sale of 20 basic items subject to price controls, including toilet paper and chicken, are set to begin next week in its most populous state, officials said Tuesday. A spokesman for President Nicolas Maduro’s government said it is incorrect to call the plan rationing because it is meant to fight smuggling of price-controlled food across the border into Colombia. He said there are no plans to extend the program nationally. Zulia State Governor Francisco Arias Cárdenas said that citizens would be able to buy anything they wanted. "The idea is that people can buy anything they need without any sort of restrictions other than their own purchasing power," the governor remarked. He said the plan proposed would prevent an individual from buying the same products for a given period of time. (The Washington Post, 06-04-2013; http://www.washingtonpost.com/business/rationing-of-20-basic-food-products-to-begin-in-venezuelas-most-populous-state-next-week/2013/06/04/e8eadcd2-cd61-11e2-8573-3baeea6a2647_story.html; Fox News, http://www.foxnews.com/world/2013/06/04/rationing-20-products-to-begin-in-venezuelan-state-next-week/; and more in Spanish: El Universal, 06-06-2013; http://www.eluniversal.com/economia/130606/venezuelan-executive-to-decide-on-food-rationing-in-major-state)

Commodities

Strike continuing in iron ore operations

A strike by workers in CVG Ferrominera Orinoco mines and railroads is into its fourth day with no response from company authorities in order to restore iron ore supplies to SIDOR and briquette producing plants. The company alleges lack of funds in order to pay the second half of special payments due because of delays in collective contracting. More in Spanish: (El Universal, http://www.eluniversal.com/economia/130607/dialogo-en-fmo-ha-sido-infructuoso-para-levantar-huelga)

Politics

Venezuela, United States pledge to improve bilateral relations

"We have not done this for some time," US Secretary of State John Kerry told Venezuelan Foreign Minister Elías Jaua, who replied in Spanish, "It is good that we can do it." In fact, it was eight years since the foreign ministers of the two countries held their last meeting. After greeting before journalists and photographers, the diplomats met for 40 minutes in private, on the sidelines of the General Assembly of the Organization of American States (OAS) in Antigua (Guatemala). After the meeting Kerry said: "I felt it was a very, very positive meeting. We agreed to have a continuing dialogue to try to set an agenda, start to change the dialogue between our two nations. We agreed Venezuela and the US that we would like to find a way forward for our countries to establish a more positive relationship". He also expressed satisfaction at the release of US filmmaker Timothy Tracy. (El Universal, 06-06-2013; http://www.eluniversal.com/nacional-y-politica/130606/venezuela-united-states-pledge-to-improve-bilateral-relations; The New York Times, http://www.nytimes.com/2013/06/06/world/americas/venezuela-frees-tim-tracy-jailed-us-filmmaker-and-expels-him.html?_r=0; The Washington Post, http://www.washingtonpost.com/world/the_americas/kerry-explores-improvement-in-badly-strained-us-relations-with-venezuela/2013/06/05/65cc4cec-cde7-11e2-8573-3baeea6a2647_story.html; Fox News, http://www.foxnews.com/world/2013/06/05/kerry-explores-improvement-in-badly-strained-us-relations-with-venezuela/; and more in Spanish: INFOLATAM)

Government deports U.S. filmmaker accused of being spy

Venezuela deported a U.S. filmmaker who had been arrested in April on accusations he was working as a spy for Washington and advising opposition student groups on how to destabilize the South American OPEC nation. "The gringo Timothy Hallet Tracy, who was captured while spying in our country, has been expelled," Interior and Justice Minister Miguel Rodriguez Torres said on Twitter on Wednesday. Tracy's lawyer, Daniel Rosales, said the charges against his client had been dropped, and that the 35-year-old filmmaker was put on a flight to Miami. (Reuters, 06-05-2013; http://www.reuters.com/article/2013/06/05/us-venezuela-usa-idUSBRE9540SP20130605; Bloomberg, http://www.bloomberg.com/news/2013-06-05/venezuela-expels-u-s-spy-ahead-of-meeting-with-john-kerry-1-.html; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=797837&CategoryId=10717; The Washington Post, http://www.washingtonpost.com/world/the_americas/us-filmmaker-held-by-venezuela-on-espionage-allegations-freed-from-jail-and-expelled-to-us/2013/06/06/0de12b10-ce69-11e2-8573-3baeea6a2647_story.html; CNN, http://edition.cnn.com/2013/06/05/world/americas/venezuela-us-filmmaker/index.html?iref=allsearch; Fox News, http://www.foxnews.com/world/2013/06/05/jailed-us-filmmaker-reportedly-freed-in-venezuela/)

Experts say Maduro won’t last

As Venezuelan president Nicolas Maduro struggles with an economic free-fall and increased opposition within government ranks, most experts predict he won’t complete his six-year term. “Unless Maduro takes some dramatic measures to improve the economy, it is hard to see how he can complete his term,” says Michael Shifter, president of the Inter-American Dialogue.  “The current situation is unsustainable.” Even his main benefactor, Cuba, may drop him if convenient, argues Otto J. Reich, President, Otto Reich Associates and former US Ambassador to Venezuela and former Assistant Secretary of State for Western Hemisphere Affairs. (LATINVEX: http://latinvex.com/app/article.aspx?id=787)

Capriles charges Maduro with provoking the "highest" inflation in Latin America
Opposition lader Henrique Capriles Radonski has accused President Nicolás Maduro of leading the nation into the highest inflation in Latin America. "Since Maduro is in office (December 2012), inflation has been 23.56%, more than in any Latin American nation in all of 2012", he said. Capriles added that this is "the highest inflation in the last 14 years", and "don't be surprised if they not begin to doctor the numbers". More in Spanish: (El Mundo, http://www.elmundo.com.ve/noticias/economia/mercados/acusan-a-maduro-de-provocar-la-inflacion--mas-alta.aspx#ixzz2VWut7pBA)

Assembly President Cabello in Cuba for meetings

President Nicolás Maduro announced that National Assembly President Diosdado Cabello is travelling to Cuba and later to China, Russia and Vietnam. "Diosdado for the world", he exclaimed saying that he and Cabello share an "unbreakable brotherhood" as they are "joined by blood" through their love for the late President Chávez. Cabello was said to be staying in Havana for a three day working visit within which he will meet with both Fidel and Raúl Castro, as well as representatives of Cuba's Communist Party. Maduro said Cabello would also visit Assembly Vice President Dario Vivas, who is in Cuba recovering from an unspecified ailment. More in Spanish: (INFOLATAM)


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.