Venezuelan Daily Brief

Published in association with The DVA Group and The Selinger Group, the Venezuelan Daily Brief provides bi-weekly summaries of key news items affecting bulk commodities and the general business environment in Venezuela.

Tuesday, June 25, 2013

June 25, 2013

Economics & Finance

Venezuela to ease foreign exchange regime. Venezuela will make its foreign currency system more flexible by reviving a stalled dollar auction scheme in July and after that allowing a revival of a free-floating secondary currency mechanism, a source in the government's economic team said on Sunday. Venezuela has operated currency controls for a decade, and restricted access to dollars at the official rate of 6.3 bolivars are a major gripe for local businesses and a cause of the OPEC member's slowing growth rate. The Finance Ministry source said the government of newly-elected President Nicolas Maduro will in July allow a renewal of the so-called SICAD system. In a first round in March of this year, dollars were sold to businesses for reportedly as much as 14 bolivars apiece. After another SICAD auction, authorities will then allow a revival of a system prohibited since 2010, under which dollars are sold by private brokers at a floating rate determined by a complicated formula linked to bond prices, the source added. That system is known locally as a "swap" mechanism. Both those methods would run alongside the fixed exchange rate system, under which businesses are allowed to access dollars at 6.3 bolivars for some priority goods, such as medicines and essential foods. "The idea is to go with SICAD in July," said the official, who asked not to be named. "Then what we want is to move to a secondary market, a 'swap' market, with the private players." Next month's revival of SICAD is unlikely to bring quick relief. Only U$D 200 million was sold at the auction in March, while economists estimate that the Venezuelan economy needs around U$D 100 million per day to cover the imports it needs. (Reuters, 06-23-2013;

Imports down 11.3% in January-April
Venezuelan imports slumped 11.3% in January-April, according to a report compiled by Bank of America. More in Spanish: (El Universal, 06-24-2013;

70% of Venezuelans support entreunership, private enterprise and aspire to have their own business,” says NEGOCIOS PYME Director Alfredo Sánchez. He said this tendency remains the same in all socio-economic strata and in people of all political tendencies because it “is a Venezuelan vocation very much associated with the desiral component and the wish to live better.” (Veneconomy, 06-21-2013;

Official proposes "cutting supplies" to street vendors to fight "speculation"
The newly appointed head of the Consumer Protection Agency, Eduardo Samán, has said "we are going to cut supplies to street vendors because they buy from wholesalers at an inflated price. We will cut the supply so that those goods and services are sold at controlled prices". Venezuela has thousands of street vendors who work unhampered within the informal economy. Mr. Samán says these people "can make a living without having to speculate". More in Spanish: (Ultimas Noticias, 06-25-2013;


PDVSA’s first offshore gas output to assist heavy oil production
Initial natural gas volumes from offshore Venezuela will likely assist in the production of heavy crude oil rather than be used for exports. Output from the offshore La Perla field is expected to reach 300 million cubic feet a day by the end of 2013 when it begins production, according to the website of Venezuela’s state oil company Petroleos de Venezuela, or PDVSA. The nation plans to invest U$D 22 billion from 2013 to 2019 to develop gas projects. “Initial gas production offshore Venezuela will likely be used to increase the production of heavy crudes,” Rebecca Fitz, an analyst with Washington-based PFC Energy, said in a phone interview Friday. (Bloomberg, 06-24-213;

Petrol smugglers outwit existing controls
Years of frozen petrol and diesel prices have distorted the local liquid-fuel market to the extent that, in the border region with Colombia, fuel transactions in Special Border Fuel Supply (SBFS) stations have been suspended. Sales were brought to a standstill three weeks ago amid official references to possible controls on fuel smuggling, which has been fueled by a profit of VEB 23 per liter vs. prices across the border. Rafael Ramírez, Minister of Petroleum and Mining, said "we are assessing and enhancing our supply in the border zone because we have to prevent the domestic market from growing at its current rate." Ramírez defended the Automated Fuel Supply Plan and called it a success. The core of the plan is its tag or electronic label, which controls fuel volumes sold to each driver. (El Universal, 06-22-2013;

International Trade

Venezuela-Colombia tension hits companies
Tensions between the governments of Venezuela and Colombia have raised concerns among businessmen in both countries. The latest poll conducted by the National Association of Colombian Entrepreneurs found that tensions between Venezuela and Colombia are among the 12 major obstacles to do business. Other obstacles are low demand, high competition, cost and supply of raw material, foreign exchange rate, and smuggling. (El Universal, 06-24-2013;

Logistics & Transport

Drug cartel infiltrates Maiquetía Airport
The Sinaloa Cartel, Mexico's biggest drug cartel has been using the Simón Bolívar International Airport at Maiquetía, for landings and takes offs with no problem: they even had set up an aerial bridge on flight ramp 7 of the auxiliary terminal for their activities. (El Universal, 06-22-2013;

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.

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