June 28, 2013

Economics & Finance

Analysts say Venezuela to devalue Bolivar by stealth

Venezuela will look to weaken the bolivar this year without making an official devaluation of the currency, as it tries to boost revenue and narrow the budget deficit, according to a survey of analysts. The nation will step back from formally devaluing the bolivar for the sixth time in nine years, said eight out of 11 analysts surveyed by Bloomberg. The government could instead restart an internal swap market for dollar-denominated bonds after October, said Efrain Velazquez, partner in economic consultancy Azpurua Garcia-Palacios & Velazquez. In that market, companies would be allowed to trade bonds for dollars at a weaker rate to finance imports, he said. Caracas-based Ecoanalitica calculates an alternative market could trade at about 15 bolivars per dollar, more than double the official rate of 6.3 per dollar. “Such a market would be an implicit devaluation, as it would improve the fiscal accounts of the government and state oil company,” said Jose Luis Saboin, an economist at ECOANALITICA. (Bloomberg, 06-26-2013; http://www.bloomberg.com/news/2013-06-26/venezuela-to-devalue-bolivar-by-stealth-analyst-survey.html)

Finance ministry: Second sale of US dollars through SICAD will take place in July

Authorities have announced both a reduction in the waiting time for acquiring US dollars and a re-launch of the Ancillary Foreign Currency Administration System (SICAD). According to Finance Minister Nelson Merentes says the waiting time for acquiring US dollars was cut in June from 223 days to 103 days, approximately. Merentes said key economic areas will be a priority within the revamped SICA system, which can be allocated by geographic and economic areas. (El Universal, 06-27-2013; http://www.eluniversal.com/economia/130627/finance-ministry-second-sale-of-us-dollars-through-sicad-in-july; and more in Spanish: El Mundo, http://www.elmundo.com.ve/noticias/economia/politicas-publicas/merentes-ratifica-que-en-julio-se-pondra-de-nuevo-.aspx#ixzz2XVUOGZIK)

U$D 10 billion needed to reactivate Venezuela's economy

Outgoing FEDECÁMARAS President Jorge Botti says announcements by Minister Merentes are "positive", but adds that the economy needs FOREX to go back to normal. "We need to inject much more FOREX into the economy to get it started." He estimated at at least U$D 10 billion will be needed to pay foreign creditors, restart imports, and increase production. More in Spanish: (El Universal, 06-28-2013; http://www.eluniversal.com/economia/130628/se-requieren-10-millardos-para-reactivar-la-economia)

Venezuela's capital outflows in 14 years estimated at U$D 200 billion

During Hugo Chávez's 14 year tenure in office (1999-2012) and despite almost 10 years of foreign exchange controls (2003-2012), capital outflow from Venezuela amount to some U$D 200 billion, according to Economist Humberto García Larralde. He says price controls have historically failed. Referring to the foreign exchange control policy, he said, "It does not aim at avoiding the outflow of foreign currencies or protecting international reserves, but at the discretionary use of such reserves in the hands of the public sector." (El Universal, 06-27-2013; http://www.eluniversal.com/economia/130627/venezuelas-capital-outflow-in-14-years-estimated-at-usd-200-billion)

Central Bank of Venezuela to define optimum level of liquid reserves

Finance Minister Nelson Merentes says the Central Bank and the Finance Ministry are establishing the adequate level of liquid international reserves used to pay for imports, debts, and other liabilities. "We are working on the reserves. The reserves must be above a certain amount," Merentes said. Over 70% of total reserves are held in gold, and the rest in cash. Based on Central Bank data, reserves were U$D 25.7 billion by May, U$D 1.7 billion of them in cash. Official figures also indicate that assets have continued diminishing and by June 25 international reserves were U$D 24.9 billion. (El Universal, 06-27-2013; http://www.eluniversal.com/economia/130627/central-bank-of-venezuela-to-define-optimum-level-of-liquid-reserves)

Foreign exchange for tourists discussed

Tourism Minister Andrés Izarra is meeting officials from the Central Bank and the Foreign Exchange Administration Commission (CADIVI) to “fine tune” the foreign exchange processes for tourists visiting the country. (Veneconomy, 06-26-2013; http://www.veneconomy.com/site/index.asp?ids=44&idt=35245&idc=2)

Commodities

PDVSA cut to B from B+ by S&P - "Outlook Negative"

Standard & Poor's Ratings Services lowered its long-term corporate credit and senior unsecured debt ratings on Petroleos de Venezuela S.A. (PDVSA) to 'B' from 'B+'. The outlook remains negative. "Prior to this rating action we assessed the company's stand- alone credit profile (SACP) at 'b+'. "We will reassess PDVSA's SACP during the next 60 days in light of the recent sovereign downgrade but the outcome will not affect our 'B' rating on PDVSA due to the company's GRE (Government Related Entity) status and the likelihood of negative government intervention under a sovereign distress scenario," said Standard & Poor's credit analyst Fabiola Ortiz. (Latin American Herald Tribune, 06-25-2013; http://www.laht.com/article.asp?ArticleId=820587&CategoryId=10717)

Processing at Amuay back at 77% of installed capacity

Amuay, Venezuela's largest refinery with a processing capacity of 645,000 barrels daily, has finally recovered its usual operational levels after an explosion 10 months ago that claimed 40 lives and caused severe physical damages. Facilities are operating at 77% capacity, which is within average for the past few years, according to a report from the Paraguaná Refining Center (CRP). (El Universal, 06-27-2013;

http://www.eluniversal.com/economia/130627/processing-in-amuay-up-to-77-of-the-installed-capacity)

Gas stations on Venezuela-Colombia border remain out of service

Gas stations within the Special Border Fuel Supply System (Safec) in Táchira state remain closed after fuel sales were suspended almost a month ago. Normal gas stations in the state are crowded with drivers trying to fill tanks, but additional fuel is not provided. (El Universal, 06-26-2013; http://www.eluniversal.com/economia/130626/gas-stations-on-venezuela-colombia-border-still-out-of-service)

International Trade

Venezuela surpasses Brazil in 2012 weapons purchases

An IHS Jane's study called "The Balance of Trade" reports weapons imports soared 16% in South America in 2008-2012, climbing from U$D 3.42 billion to U$D 3.96 billion annually.
The report says Venezuela bought some U$D 1.2 billion in 2012, surpassing Brazil, the country with the largest defense budget in the region. The study indicates the trend may continue even after the death of President Hugo Chávez. (El Universal, 06-26-2013; http://www.eluniversal.com/nacional-y-politica/130626/venezuela-surpasses-brazil-in-purchases-of-weapons-in-2012)

Politics

Elections Board bars opposition presence at downloading of data from polling machines

There has been a new clash between Venezuela's opposition and the Election Board because the institution has refused to let opposition technicians in during the downloading of data stored in voting machines used during the April 14th Presidential election. Data stored in voting machines and their memory sticks is being transferred to a closed server within the Board, and opposition technicians do not know who has access to this data. More in Spanish: (El Universal, 06-28-2013; http://www.eluniversal.com/nacional-y-politica/130628/cne-se-niega-a-aceptar-observaciones-de-la-mesa)

Capriles says taping Machado's conversation was a crime

Opposition leader Henrique Capriles Radonski says it is "incredible" that Information Minister Ernesto Villegas and Caracas Mayor Jorge Rodríguez have presented a tape recording as "proof of a conspiracy". He says the only crime is that a conversation between two people at the home of historian German Carrera Damas was taped by the government. Capriles says the audio shows "Maria Corina Machado speaking of her vision on the ongoing process". Government supporters presented a tape of Assemblywoman Machado telling the historian that Democratic Unity Conference Executive Secretary Ramón Guillermo Aveledo had told the US State Department that the only way out of the current political impasse in Venezuela was a crisis, "a coup d'etat or a self coup (by the government)". Capriles says "Ramón Guillermo Aveledo would never propose a way out that is not established within the Constitution, which is absolutely democratic"; and called "a violent way out" the "worst scenario" for Venezuela. More in Spanish: (Infolatam)

Venezuela, U.S. begin talks on restoring relations

As a first step to rebuild bilateral relations, Venezuelan Charge d'Affaires Calixto Ortega has met with US Assistant Secretary of State for Latin America Roberta Jacobson. The meeting took place three weeks after Foreign Minister Elias Jaua met with U.S. Secretary of State, John Kerry, in Guatemala. State Department spokesman William Ostick confirmed that Washington has a strong interest in continuing high level contacts to bring bilateral relations back to normal.  (AVN, 06-26-2013; http://www.avn.info.ve/contenido/venezuela-us-initiated-dialog-restore-relations; Latin American Herald Tribune, http://www.laht.com/article.asp?ArticleId=821415&CategoryId=10717; and more in Spanish: El Nacional; http://www.el-nacional.com/)

Maduro reasserts Venezuela's commitment to Latin America

During a visit to Haiti, President Nicolás Maduro said Venezuela will continue "playing its role as liberating and uniting engine of a continent which will be great and will have people living in prosperity. "Our people, all of them, shall start counterbalancing each other to overcome living conditions, education, health, culture. They have to be prosperous nations which live in real, participatory, leading and people's democracy," said Maduro at the end of a meeting with his Haitian counterpart Michel Martelly. (AVN, 06-26-2013; http://www.avn.info.ve/contenido/maduro-reaffirms-venezuela039s-commitment-latin-america)

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.