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, July 2, 2013

July 02, 2013

Economics & Finance

Multinationals taking hit on weaker Bolivar
U.S. companies from Procter & Gamble Co. to Pfizer Inc. are facing a hit to earnings as Venezuela’s government limits access to dollars and the currency falls further. BlackBerry said yesterday that currency restrictions in the Latin American country contributed to a surprise loss in the quarter ended June 1. Venezuela’s government has limited access to dollars because of currency controls during the past decade, making it difficult for companies with foreign headquarters to repatriate cash at the official exchange rate. The losses are likely to continue as analysts surveyed by Bloomberg estimate the Bolivar will fall an additional 16% against the dollar by the end of 2014. Clorox Co. and Pfizer have said their earnings will continue to show the impact in the coming quarters. Consumer-products companies with a large presence in the market are recording losses. Cincinnati-based P&G said in February that it would record a charge of as much as U$D 275 million to revalue its Venezuelan balance sheet after the devaluation that month. Avon Products Inc., the beauty products manufacturer, saw revenue in Venezuela decline 15% in part because of the devaluation in the first quarter. Clorox is projecting losses in its Venezuela business in its fiscal 2014. Energy companies operating in the oil-producing nation are also facing losses. Schlumberger Ltd. reported a U$D 92 million pretax cost in the first quarter due the currency devaluation, and service provider Baker Hughes Inc. said it had a U$D 23 million loss. Merck & Co. in February said it had U$D 140 million of exchange losses in its Venezuelan business in the first quarter. Pfizer reported an U$D 80 million loss from the devaluation and said it expects the currency to have an ongoing impact on earnings. (Bloomberg, 07-01-2013;

Foreign reserves down U$D 4.4 billion YTD
Data published by the Central Bank of Venezuela (BCV) indicates foreign reserves have dropped U$D 4.4 billion so far this year. As of December 2012, Central Bank assets were U$D 29.8 billion and by June 20th, they were down to U$D 25.4 billion, apparently due to FOREX allocations for imports as the Bank has not reported transfers to the National Development Fund (FONDEN). Bank Director Armando León recently said: "The economy runs on the flow of foreign currency and different funds. Reserves are also aimed at commitments and later replenished." (El Universal, 06-29-2013;

Gold reserve value drops U$D 2 billion as the price of gold drops worldwide from U$D 1.687 in December 2012 to U$D 1.342 in June 2013. This change can strongly impact Venezuelan international reserves, 65% of which are held in gold bullion. More in Spanish. (El Universal, 07-02-2013;

Allies owed Venezuela U$D20.5 billion for oil in 2012, up 40% from the U$D 14.6 billion they owed in 2011, according to PDVSA’s audited documents published in its web page. The non-current bills to charge (that is those long-term bills corresponding to agreements with the allied countries) in 2012 are also included in the report and amount to $5.3 billion, up 64.5% from 2011 ($3.2 billion). (Veneconomy, 07-01-2013;

Liquidity grew 66% in one year
Official Central Bank data shows monetary liquidity grew 66% over the past year, and was 829.295 billion Bolivars on June 21, as compared to 500.549 billion Bolivars last year. More in Spanish: (El Mundo, 07-02-2013;

Venezuela stock market up 144%
Venezuela's stock market continued rising during the week ending 28 June, with the index gaining 17.4% this week to close at 1,114,640, making it by far the best performing stock market in the world for the first half of the year.  Banking stocks continued their relentless rise, with MERCANTIL SERVICIOS FINANCIEROS A rising 15.25% at Bs. 140, BANCO PROVINCIAL gaining 13.3% at Bs. 340. MERCANTIL SERVICIOS FINANCIEROS B rose 13.3% at Bs. 340 and container-maker ENVASES VENEZOLANOS lost 10.2% at Bs. 140. The Venezuela Stock Market closed the first six months of the year up 143.96% in Bolivar terms, making it number one in the world. However, because of official rate devaluation in February, the market was only up 66.52% in official rate US dollar terms, but still the best in the world to Japan's 32% and Nigeria's 29% rise. (The Latin American Herald Tribune;

Capital flight up to $177.5 billion in the last 14 years despite the restrictions imposed by the government, according to an article published in the daily La Verdad. A report by Barclays Capital indicates an amount equal to 27% of oil revenues was taken out of the country during 10 years of controls. (Veneconomy, 07-01-2013;

As of today: fines for employers who fail to comply with the Labor Organic Law and its partial norms concerning the enforcement of the new work day. Fines will range from Bs.3,210 to Bs.6,420, equivalent to 30 and 60 tax units. The Venezuelan Labor Ministry will begin inspections nationwide and employers who refuse to pay the fine will have their labor certificate (solvencia laboral) revoked. (Veneconomy, 07-01-2013;


Venezuela proposes finance fund for gas exporting countries
Within the framework of the Second Gas Summit of the Heads of State and Government of Gas Exporting Countries Forum (GECF) held in Russia, Venezuelan President Nicolás Maduro proposed the incorporation of either a finance fund or a bank comprising gas exporting countries aimed at boosting investments in the area. He stressed that one of the main goals of the summit should be consolidation of the forum as a common platform to exchange experiences and policies for bettering the management of gas resources. Maduro spoke of the need to discuss the principles of gas international trade, including joint mechanisms, and strengthen a common ground to finance large-scale projects in the long term. Another proposal made by the Venezuelan president was to boost scientific research to improve gas production and exports. (El Universal, 07-01-2013;

Oil minister regrets environmental damages caused by non-conventional oil
Development of non-conventional oil, also known as shale oil, was criticized by Venezuelan Minister of Petroleum and Mining Rafael Ramírez, who claimed the United States, is causing an environmental "disaster." Ramírez said the production of shale oil "bears a very high environmental cost." Hence, "what is going on in North Dakota is a disaster." He added: "That society faces the dilemma of resorting to such production (of shale oil) in order to sustain its consumption mode," Ramírez said. A technique called hydraulic fractioning is used to drill the shale oil. (El Universal, 07-01-2013;

BP estimates domestic oil consumption up 2.5%: Venezuela's domestic consumption of gasoline and related products increased by 17,000 barrels to 781,000 barrels per day, according to estimated by British Petroleum in their 2013 Yearly Statistical Report. More in Spanish: (El Universal, 07-02-2013;

Pdvsa budgets 12.8% more domestic sales
Venezuela's fuel market keeps on rising in a scenario of increasing needs of thermoelectric power generation and frozen gasoline and diesel prices. PDVSA's 2013 shows domestic sales day of refined products and natural gas projected at 1.11 million barrels per day. This is a 12.8% hike over 986,000 barrels per day in the 2012 budget. Growth is higher in liquid fuels, including gasoline, diesel for vehicles and electricity, and fuel oil, among others. Based on the FY2013 budget, Pdvsa will trade some 766,000 bpd of byproducts, or 16% over 660,000 bpd estimated in 2012. (El Universal, 07-01-2013;

International Trade

PETROCARIBE leaders agree to focus efforts on boosting trade
Delegations from over a dozen countries that are members of the Venezuelan-led oil alliance PETROCARIBE agreed on Saturday to adopt a framework for promoting trade within the block. At the close of the eighth-annual PETROCARIBE summit hosted by Nicaraguan President Daniel Ortega in this Central American capital, leaders agreed to focus efforts on boosting trade in regional transportation, communication, agriculture, tourism and social service projects. "The journey has been very encouraging because in short order ... we have organized the essential components of a PETROCARIBE economic zone," said Venezuelan President Nicolas Maduro at the close of the summit. (Reuters, 06-29-2013;; Fox News,; The Washington Post,

Logistics & Transport

Modernization works at La Guaira port estimated at 45% completed, according an official publication by the BOLIPUERTOS Port Authority. More in Spanish: (Bolipuertos, 07-01-2013;

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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